UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THEx
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15815
Krupp Insured Plus Limited Partnership
Massachusetts 04-2915281
(State or other jurisdiction of (IRS employer
incorporation or organization) identification
no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(617) 423-2233
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
BALANCE SHEETS
<PAGE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $ 42,591,956 $ 42,745,790
(Note 2)
Mortgage-Backed Securities and insured
mortgage ("MBS") (Note 3) 26,505,242 27,147,213
Total mortgage investments 69,097,198 69,893,003
Cash and cash equivalents 2,079,566 1,757,197
Interest receivable and other assets 475,822 517,476
Prepaid acquisition fees and expenses, net of
accumulated amortization of $3,807,461 and
$4,196,787, respectively 678,458 832,838
Prepaid participation servicing fees, net of
accumulated amortization of $836,445 and
$802,641,respectively 239,205 273,009
Total assets $ 72,570,249 $ 73,273,523
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 3,282 $ 18,468
Partners' equity (deficit):
Limited Partners 71,990,180 72,448,679
(7,500,099 Limited Partner interests
outstanding)
General Partners (229,381) (194,008)
Unrealized gain on MBS 806,168 1,000,384
Total Partners' equity 72,566,967 73,255,055
Total liabilities and Partners' equity $ 72,570,249 $ 73,273,523
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF INCOME
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Revenues:
Interest income - PIMs $ 798,959 $1,108,558
Interest income - MBS 550,841 591,094
Other interest income 25,016 30,931
Total revenues 1,374,816 1,730,583
-2-
<PAGE>
Expenses:
Asset management fee to an affiliate 126,471 162,502
Expense reimbursements to affiliates 16,337 27,752
Amortization of prepaid fees and expenses 188,184 239,625
General and administrative 47,395 27,105
Total expenses 378,387 456,984
Net income $ 996,429 $1,273,599
Allocation of net income (Note 4):
Limited Partners $ 966,536 $1,235,391
Average net income per Limited Partner
interest (7,500,099 Limited Partners
interests outstanding) $ .13 $ .16
General Partners $ 29,893 $ 38,208
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Operating activities:
Net income $ 996,429 $ 1,273,599
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 188,184 239,625
Premium amortization MBS 2,768 870
Changes in assets and liabilities:
Decrease in interest receivable and
other assets 41,654 16,982
Decrease in liabilities (15,186) (9,233)
Net cash provided by operating activities 1,213,849 1,521,843
Investing activities:
Principal collections on MBS 444,987 435,605
Principal collections on PIMs 153,834 127,124
Net cash provided by investing activities 598,821 562,729
Financing activity:
Quarterly distributions (1,490,301) (2,295,752)
Net increase (decrease) in cash and cash equivalents 322,369 (211,180)
Cash and cash equivalents, beginning of period 1,757,197 2,394,592
-3-
<PAGE>
Cash and cash equivalents, end of period $2,079,566 $ 2,183,412
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this report on
Form 10-Q pursuant to the Rules and Regulations of the Securities and
Exchange Commission. However, in the opinion of the general partners,
The Krupp Corporation and The Krupp Company Limited Partnership-IV
(collectively the "General Partners"), of Krupp Insured Plus Limited
Partnership (the "Partnership") the disclosures contained in this
report are adequate to make the information presented not misleading.
See Notes to Financial Statements included in the Partnership's Form
10-K for the year ended December 31, 1996 for additional information
relevant to significant accounting policies followed by the
Partnership.
In the opinion of the General Partners of the Partnership, the
accompanying unaudited financial statements reflect all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the Partnership's financial position as of March 31, 1997 and
its results of operations and cash flows for the three months ended
March 31, 1997 and 1996.
The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results which may be expected for the
full year. See Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this report.
2. PIMs
At March 31, 1997, the Partnership's PIMs have a fair value of
$41,894,535 and gross unrealized gains and losses of $299,886 and
$997,307, respectively. The PIMs have maturities ranging from 2006 to
2033.
3. MBS
At March 31, 1997, the Partnership's MBS portfolio has an amortized
cost of $25,699,074 and gross unrealized gains of $806,168 with
maturities from 2004 to 2033.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the three months ended
March 31, 1997 is as follows:
<TABLE>
Total
<CAPTION>
Limited General Unrealized Partners'
Partners Partners ain Equity
-4-
<PAGE>
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 72,448,679 $(194,008) $1,000,384 $73,255,055
Net income 966,536 29,893 - 996,429
Quarterly distributions (1,425,035) (65,266) - (1,490,301)
Decrease in unrealized gain
on MBS - - (194,216) (194,216)
Balance at March 31, 1997 $ 71,990,180 $(229,381) $ 806,168 $72,566,967
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management s Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements including those
concerning Management s expectations regarding the future financial
performance and future events. These forward-looking statements involve
significant risk and uncertainties, including those described herein.
Actual results may differ materially from those anticipated by such
forward-looking statements.
Liquidity and Capital Resources
The most significant demands on the Partnership's liquidity are
regular quarterly distributions paid to investors of approximately $1.5
million. Funds used for investor distributions come from (i)interest
received on the PIMs, MBS, cash and cash equivalents, (ii) the principal
collections received on the PIMs and MBS and (iii) cash reserves. The
Partnership funds a portion of the distribution from principal
collections and as a result the capital resources of the Partnership
will continually decrease. As a result of this decrease, the total cash
inflows to the Partnership will also decrease which will result in
periodic adjustments to the quarterly distributions paid to investors.
The General Partners periodically review the distribution rate to
determine whether an adjustment to the distribution rate is necessary
based on projected future cash flows. In general, the General Partners
try to set a distribution rate that provides for level quarterly
distributions of cash available for distribution. To the extent
quarterly distributions differ from cash available for distribution, the
General Partners may adjust the distribution rate or distribute funds
through a special distribution.
Based on current projections, the General Partners believe the
Partnership can maintain the current distribution rate through 1997.
However, in the event of PIM prepayments, the Partnership would be
required to distribute any proceeds from the prepayments as a special
distribution, which may cause an adjustment to the distribution rate to
reflect the anticipated future cash inflows from the remaining mortgage
investments.
As an ongoing result of the Partnership s agreement to a modification
of the Royal Palm PIM in December of 1995, the Partnership will receive
interest only payments on the FNMA MBS at an interest rate of 6.5% in
1997, thereafter interest rates will range from 7.0% to 8.775% per annum
through maturity. Also, the Partnership received its pro-rata share of
the principal payment totaling $250,000 due in January.
-5-
<PAGE>
For the first five years of the PIMs the borrowers were prohibited
from prepaying. For the second five years, the borrower can prepay the
loan incurring a prepayment penalty. The Partnership has the option to
call certain PIMs by accelerating their maturity if the loans are not
prepaid by the tenth year after permanent funding. The Partnership will
determine the merits of exercising the call option for each PIM as
economic conditions warrant. Such factors as the condition of the
asset, local market conditions, interest rates and available financing
will have an impact on this decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured
by the Federal National Mortgage Association ( FNMA ), the Government
National Mortgage Association ("GNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") or the United States Department of Housing and
Urban Development ("HUD") and therefore the certainty of their cash
flows and the risk of material loss of the amounts invested depends on
the creditworthiness of these entities.
FNMA is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally
chartered corporation that guarantees obligations originated under its
programs and is wholly-owned by the twelve Federal Home Loan Banks.
These obligations are not guaranteed by the U.S. Government or the
Federal Home Loan Bank Board. GNMA guarantees the full and timely
payment of principal and basic interest on the securities it issues,
which represents interest in pooled mortgages insured by HUD.
Obligations insured by HUD, an agency of the U.S. Government, are backed
by the full faith and credit of the U.S. Government.
Distributable Cash Flow and Net Cash Proceeds From Capital Transactions
Shown below is the calculation of Distributable Cash Flow and Net
Cash Proceeds from Capital Transactions, as defined by Section 17 of the
Partnership Agreement, and the source of cash distributions for the
three months ended March 31, 1997 and the period from inception through
March 31, 1997. The General Partners provide certain of the information
below to meet requirements of the Partnership Agreement and because they
believe that it is an appropriate supplemental measure of operating
performance. However, Distributable Cash Flow and Net Cash Proceeds
from Capital Transactions should not be considered by the reader as a
substitute to net income as an indicator of the Partnership's operating
performance or to cash flows as a measure of liquidity. (Amounts in
thousands, except per Unit amounts).
<TABLE>
<CAPTION>
Three Months Ended Inception through
March 31, 1997 March 31, 1997
Distributable Cash Flow:
<S> <C> <C>
Income for tax purposes $ 954 $ 73,476
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid expenses
and organization costs 230 6,255
Amortization of MBS premiums 3 287
-6-
<PAGE>
Acquisition expenses paid from
offering proceeds charged to operations - 1,098
Gain on sale of MBS - (114)
Total Distributable Cash Flow ("DCF") $1,187 $ 81,002
Limited Partners Share of DCF $1,151 $ 78,571
Limited Partners Share of DCF per
Limited Partner interest ( Unit ) $ .16 $ 10.48
General Partners Share of DCF $ 36 $ 2,431
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 154 $ 63,129
Principal collections on MBS 445 40,949
Insurance claim proceeds and
principal collections on PIMs and
MBS reinvested in PIMs and MBS - (40,775)
Gain on sale of MBS - 114
Total Net Proceeds from Capital
Transactions $ 599 $ 63,417
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $1,786 $144,419
Distributions: (includes special
distributions)
Limited Partners $1,425 (a) $140,938 (a)
Limited Partners Average per Unit $ .19 (a) $ 18.79 (a)(b)
General Partners 36 (a) 2,431 (a)
Total Distributions $1,461 $143,369
(a) Includes an estimate of the May 1997 distribution.
(b) Limited Partners average per Unit return of capital as of May 1997 is
$8.31 [$18.79 - $10.48]. Return of capital represents that portion of
distributions which is not funded from DCF such as proceeds from the
sale of assets and substantially all of the principal collections
received from MBS and PIMs.
</TABLE>
Operations
-7-
<PAGE>
The following discussion relates to the operations of the Partnership
during the three months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
(Amounts in thousands)
1997 1996
<S> <C> <C>
Interest income on PIMs $ 799 $ 1,109
Interest income on MBS 554 592
Other interest income 25 31
Partnership expenses (191) (218)
Distributable Cash Flow 1,187 1,514
Amortization of MBS Premium (3) -
Amortization of prepaid fees and
expenses (188) (240)
Net income $ 996 $ 1,274
</TABLE>
Net income decreased during the first three months of 1997 as
compared to the first three months of 1996 due primarily to lower
interest income on MBS and PIMS. PIM interest income was lower due
primarily to the distribution of the Mandalay PIM payoff proceeds in
November 1996 while MBS interest income was lower due to prepayment and
scheduled principal payments on MBS. Interest income on PIMs and MBS
will continue to decline as principal collections reduce the
outstanding balance of the portfolios. The Partnership funds a portion
of distributions with MBS and PIM principal collections which reduces
the invested assets generating income for the Partnership. As the
invested assets decline so will interest income on MBS, base interest
income on PIMs and other interest income.
-8-
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
-9-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Krupp Insured Plus Limited Partnership
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Vice President and Chief Mortgage
Accounting Officer of The Krupp
Corporation, a General Partner of
the Registrant.
DATE: April 23, 1997
-10-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheet and statement of income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000786622
<NAME> KRUPP INSURED PLUS LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,079,566
<SECURITIES> 69,097,198<F1>
<RECEIVABLES> 475,822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 917,663<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 72,570,249
<CURRENT-LIABILITIES> 3,282
<BONDS> 0
0
0
<COMMON> 71,760,799<F3>
<OTHER-SE> 806,168<F4>
<TOTAL-LIABILITY-AND-EQUITY> 72,570,249
<SALES> 0
<TOTAL-REVENUES> 1,374,816<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 378,387<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 996,429
<INCOME-TAX> 0
<INCOME-CONTINUING> 996,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 996,429
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMS") of $42,591,956 and
Mortgage-Backed Securities ("MBS") of $26,505,242.
<F2>Includes prepaid acquisition fees and expenses of $4,485,919 net of accumulated
amortization of $3,807,461 and prepaid participation servicing fees of
$1,075,650 net of accumulated amortization of $836,445.
<F3>Represents total equity of General Partners and Limited Partners. General
Partners deficit of ($229,381) and Limited Partners equity of $71,990,180.
<F4>Unrealized gain on MBS.
<F5>Represents interest income on investments in mortgages and cash.
<F6>Includes $188,184 of amortization of prepaid fees and expenses.
<F7>Net income allocated $29,893 to the General Partners and $966,536 to the
Limited Partners. Average net income per Limited Partner interest is $.13 on
7,500,099 Limited Partner interests outstanding.
</FN>
</TABLE>
