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 September 30, 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.
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<CAPTION>
BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $ 42,415,956 $ 42,745,790
Mortgage-Backed Securities and insured
mortgage ("MBS") (Note 2) 26,164,455 27,147,213
Total mortgage investments 68,580,411 69,893,003
Cash and cash equivalents 2,379,788 1,757,197
Interest receivable and other assets 467,005 517,476
Prepaid acquisition fees and expenses, net of
accumulated amortization of $3,392,683 and
$4,196,787, respectively 417,927 832,838
Prepaid participation servicing fees, net of
accumulated amortization of $620,310 and
$802,641, respectively 190,536 273,009
Total assets $ 72,035,667 $ 73,273,523
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 15,290 $ 18,468
Partners' equity (deficit)(Note 3)
Limited Partners 71,168,026 72,448,679
(7,500,099 Limited Partner interests
outstanding)
General Partners (238,194) (194,008)
Unrealized gain on MBS 1,090,545 1,000,384
Total Partners' equity 72,020,377 73,255,055
Total liabilities and Partners' equity $ 72,035,667 $ 73,273,523
</TABLE>
-2-
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<CAPTION>
STATEMENTS OF INCOME
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
<S>
Revenues:
<S> <C> <C> <C> <C>
Interest income - PIMs $ 799,175 $1,103,611 $2,403,843 $3,318,327
Interest income - MBS 543,961 574,453 1,644,568 1,748,249
Other interest income 31,611 25,282 86,537 83,230
Total revenues 1,374,747 1,703,346 4,134,948 5,149,806
Expenses:
Asset management fee to an affiliate 127,733 161,989 381,194 485,858
Expense reimbursements to affiliates 20,130 27,753 56,597 78,498
Amortization of prepaid expenses and
fees 154,600 239,625 497,384 718,876
General and administrative 26,861 22,827 112,741 70,260
Total expenses 329,324 452,194 1,047,916 1,353,492
Net income $1,045,423 $1,251,152 $3,087,032 $3,796,314
Allocation of net income (Note 3):
Limited Partners $1,014,061 $1,213,617 $2,994,421 $3,682,425
Average net income per Limited
Partner interest
(7,500,099 Limited Partner
interests outstanding) $ .14 $ .16 .40 $ .49
General Partners $ 31,362 $ 37,535 $ 92,611 $ 113,889
</TABLE>
-4-
<PAGE>
The accompanying notes are an integral
part of the financial statements.
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
1997 1996
<S>
Operating activities:
<S> <C> <C>
Net income $ 3,087,032 $ 3,796,314
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid expenses and fees 497,384 718,876
Changes in assets and liabilities:
Decrease in interest receivable
and other assets 50,471 29,360
Decrease in liabilities (3,178) (1,469)
Net cash provided by operating activities 3,631,709 4,543,081
Investing activities:
Principal collections on PIMs 329,834 388,901
Principal collections on MBS 1,072,919 1,430,660
Net cash provided by investing activities 1,402,753 1,819,561
Financing activity:
Quarterly distributions (4,411,871) (6,886,544)
Net increase (decrease) in cash and cash equivalents 622,591 (523,902)
Cash and cash equivalents, beginning of period 1,757,197 2,394,592
Cash and cash equivalents, end of period $ 2,379,788 $ 1,870,690
</TABLE>
-6-
<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 September 30, 1997,
its results of operations for the three and nine months ended September
30, 1997 and 1996 and its cash flows for the nine months ended September
30, 1997 and 1996.
The results of operations for the three and nine months ended September
30, 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. MBS
At September 30, 1997, the Partnership's MBS portfolio has an amortized
cost of $25,073,910 and gross unrealized gains of $1,090,545 with
maturities from 2004 to 2033.
3. Changes in Partners' Equity
A summary of changes in Partners' Equity for the nine months ended
September 30, 1997 is as follows:
<TABLE>
<CAPTION>
Limited General Unrealized T o t a l
Partners'
Partners Partners Gain Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 72,448,679 $(194,008) $1,000,384 $ 73,255,055
Net income 2,994,421 92,611 - 3,087,032
Quarterly distributions (4,275,074) (136,797) -
(4,411,871)
Increase in unrealized gain
on MBS - - 90,161 90,161
Balance at
September 30, 1997 $ 71,168,026 $(238,194) $1,090,545 $ 72,020,377
</TABLE>
<PAGE>
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 causing the
capital resources of the Partnership to continually decrease. As a result
of this decrease, the total cash inflows to the Partnership will also
decrease which will result in periodic downward adjustments to the
quarterly distributions paid to investors.
The General Partners periodically review the distribution rate to
determine whether an adjustment 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.
On July 11, 1997, the owner of the Pine Hills Apartments notified the
Partnership of its plan to refinance the property s debt and payoff the
$4.6 million PIM. The General Partners of the Partnership required the
owner to obtain an appraisal of the property to determine whether any SAI
has been earned. The Partnership anticipates the payoff will occur during
November 1997 and expects to receive both past accruals for additional
interest earned on property operations as well as additional interest
based on the appreciation of the property. The Partnership will
distribute the capital transaction proceeds from this prepayment to
investors through a special distribution. The General Partners will be
reviewing the anticipated cash flows from the remaining investments to
determine whether the current distribution rate will be sustainable or if
an adjustment is necessary.
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 by
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 impact
on this decision.
-10-
<PAGE>
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.
Operations
The following discussion relates to the operations of the Partnership
during the three and nine months ended September 30, 1997 and 1996:
Net income decreased during the three and nine months ended September
30, 1997 as compared to the three and nine months ended September 30, 1996
by $205,729 and $709,282, respectively, primarily due to lower interest
income on PIMs and MBS. 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.
-11-
<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
-12-
<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
Teasurer and Chief Accounting
Mortgage Officer of The Krupp Corporation,
a General Partner of the Registrant.
DATE: October 28, 1997
-13-
<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 it's entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000786622
<NAME> KRUPP INSURED PLUS LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,379,788
<SECURITIES> 68,580,411<F1>
<RECEIVABLES> 467,005
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 608,463<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 72,035,667
<CURRENT-LIABILITIES> 15,290
<BONDS> 0
0
0
<COMMON> 70,929,832<F3>
<OTHER-SE> 1,090,545<F4>
<TOTAL-LIABILITY-AND-EQUITY> 72,035,667
<SALES> 0
<TOTAL-REVENUES> 4,134,948<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,047,916<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,087,032
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,087,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,087,032
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMs") of $42,415,956 and
Mortgage-Backed Securities ("MBS") of $26,164,454.
<F2>Includes prepaid acquisition fees and expenses of $3,810,610 net of accumulated
amortization of $3,392,683 and prepaid participation servicing fees $810,846
net of accumulated amortization of $620,310.
<F3>Represent total equity of General Partners and Limited Partners. General
Partners deficit of ($238,194) and Limited Partners equity of $71,168,026.
<F4>Unrealized gain on MBS.
<F5>Represents interest income on investments in mortgages and cash.
<F6>Includes $497,384 of amortization of prepaid fees and expenses.
<F7>Net income allocated $92,611 to the General Partners and $2,994,421 to the
Limited Partners. Average net income per Limited Partner interest is $.40 on
7,500,099 Limited Partners interests outstanding.
</FN>
</TABLE>
