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 THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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
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<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>
<CAPTION>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $29,241,955 $ 37,769,835
(Note 2)
Mortgage-Backed Securities ("MBS") (Note 3) 25,504,177 25,897,592
Total mortgage investments 54,746,132 63,667,427
Cash and cash equivalents 11,749,714 3,100,615
Interest receivable and other assets 375,995 534,178
Prepaid acquisition fees and expenses, net of
accumulated amortization of $539,069 and
$522,080 respectively 305,183 322,172
Prepaid participation servicing fees, net of
accumulated amortization of $168,285 and
$160,008,respectively 162,767 171,044
Total assets $67,339,791 $67,795,436
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 21,411 $ 21,117
Partners' equity (deficit):
Limited Partners 66,359,791 66,774,981
(7,500,099 Limited Partner interests
outstanding)
General Partners (238,853) (224,493)
Unrealized gain on MBS 1,197,442 1,223,831
Total Partners' equity 67,318,380 67,774,319
Total liabilities and Partners' equity $67,339,791 $67,795,436
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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<PAGE>
<TABLE>
<CAPTION>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the Three Months
Ended March 31,
1998 1997
<S>
Revenues:
<S> <C> <C>
Interest income - PIMs $ 649,078 $ 798,959
Interest income - MBS 505,848 550,841
Other interest income 65,333 25,016
Total revenues 1,220,259 1,374,816
Expenses:
Asset management fee to an affiliate 109,342 126,471
Expense reimbursements to affiliates 20,132 16,337
Amortization of prepaid fees and expenses 25,266 188,184
General and administrative 24,458 47,395
Total expenses 179,198 378,387
Net income $1,041,061 $ 996,429
Allocation of net income (Note 4):
Limited Partners $1,009,829 $ 966,536
Average net income per Limited Partner
interest (7,500,099 Limited Partners
interests outstanding) $ .13 $ .13
General Partners $ 31,232 $ 29,893
</TABLE>
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<PAGE>
The accompanying notes are an integral
part of the financial statements.
<TABLE>
<CAPTION>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
1998 1997
<S>
Operating activities:
<S> <C> <C>
Net income $ 1,041,061 $ 996,429
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 25,266 188,184
Premium amortization MBS 1,471 2,768
Changes in assets and liabilities:
Decrease in interest receivable and other assets 158,183 41,654
Increase (decrease) in liabilities 294 (15,186)
Net cash provided by operating activities 1,226,275 1,213,849
Investing activities:
Principal collections on MBS 365,555 444,987
Principal collections on PIMs 8,527,880 153,834
Net cash provided by investing activities 8,893,435 598,821
Financing activity:
Quarterly distributions (1,470,611) (1,490,301)
Net increase in cash and cash equivalents 8,649,099 322,369
Cash and cash equivalents, beginning of period 3,100,615 1,757,197
Cash and cash equivalents, end of period $11,749,714 $2,079,566
</TABLE>
<PAGE>
The accompanying notes are an integral
part of the financial statements.
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 31,1997 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, 1998 and its results of operations and cash
flows for the three months ended March 31, 1998 and 1997.
The results of operations for the three months ended March 31, 1998 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.
PIMs
The borrower on the Greentree PIM defaulted on the first mortgage
obligation. The Partnership had continued to receive its full principal and
interest payments due on the PIM because GNMA had guaranteed those payments
to the Partnership. In March 1998, the GNMA mortgagee exercised the right
to prepay the GNMA because of the continuing default of the first mortgage
loan, and the Partnership received proceeds from the prepayment in the
amount of $8,362,336. In April 1998, the Partnership will make a special
distribution to the investors of $1.12 per Limited Partner interest. There
was no participation income related to the Greentree Apartment PIM
prepayment due to the default.
At March 31, 1998, the Partnership's PIMs have a fair value of $29,248,707 and
gross unrealized gains and losses of $28,130 and $21,378, respectively.
The PIMs have maturities ranging from 2006 to 2033.
3. MBS
At March 31,1998, the Partnership's MBS portfolio has an amortized cost of
$24,306,735 and gross unrealized gains of $1,197,442 with maturities from
2004 to 2033.
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<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, continued
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the three months ended March 31,
1998 is as follows:
Total
Limited General Unrealized Partners'
Partners Partners Gain Equity
Balance at December 31, 1997 $ 66,774,981 $(224,493) $1,223,831 $67,774,319
Net income 1,009,829 31,232 - 1,041,061
Quarterly distributions (1,425,019) (45,592) - (1,470,611)
Decrease in unrealized gain
on MBS - - (26,389) (26,389)
Balance at March 31, 1998 $ 66,359,791 $(238,853)$1,197,442 $67,318,380
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Managements Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Managements 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.
The borrower on the Greentree PIM defaulted on the first mortgage
obligation during the third quarter of 1997 when he did not make the
July 1997 payment until August. During the remainder of 1997, payments
continued to be late or funded with withdrawals from reserves held for
replacements. As of the end of the first quarter 1998, the GNMA mortgagee had
received no payments for January, February or March. However, the
Partnership had continued to receive its full principal and interest
payments due on the PIM because GNMA had guaranteed those payments to the
Partnership. In March, the GNMA mortgagee exercised its right to prepay
the GNMA because of the continuing default of the first mortgage loan, and
the Partnership received prepayment proceeds of $8,362,336 when the PIM was
paid off. The Partnership did not receive any participation interest as
a result of the PIM prepayment. In April 1998, the Partnership will make a
special distribution to the investors of $1.12 per Limited Partner interest.
Based on current projections,the General Partners believe,the Partnership can
maintain the current distribution rate through 1998. 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 Partnerships 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 1998, 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.
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 f
inancing 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.
The Partnership includes in cash and cash equivalents approximately
$2 million of commercial paper, which is issued by entities with a credit
rating equal to one of the top two rating categories of a nationally recognized
statistical rating organization.
Operations
The following discussion relates to the operations of the Partnership during
the three months ended March 31, 1998 and 1997.
Net income increased approximately $45,000 for the three months ended March 31,
1998 as compared to the same period in 1997, due primarily to a reduction in
amortization and general and administrative expenses and an increase in other
interest income which offset a decline in interest income on PIMS.
Amortization expense decreased as all the prepaid fees and expenses associated
with all the remaining PIMs, except Vista Montana were fully amortized.
General and administrative expenses decreased due to was primarily due to
lower transfer agent costs of approximately $23,000 for the three months
ended March 31, 1998 as compared to the same period in 1997. Other
interest income increased due to higher average short-term investment
balances during the first quarter of 1998 when compared to the same period
in 1997.PIM interest income was lower due primarily to the prepayment of the
Pine Hills Apartments PIM in November of 1997 and the Greentree PIM prepayment
in March 1998.
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.
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<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
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<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, 1998
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<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 LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,749,714
<SECURITIES> 54,746,132<F1>
<RECEIVABLES> 375,995
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 467,950<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,339,791
<CURRENT-LIABILITIES> 21,411
<BONDS> 0
0
0
<COMMON> 66,120,938<F3>
<OTHER-SE> 1,197,442<F4>
<TOTAL-LIABILITY-AND-EQUITY> 67,339,791
<SALES> 0
<TOTAL-REVENUES> 1,220,259<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 179,198<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,041,061
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,041,061
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,041,061
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMs") of $29,241,995 and
Mortgage-Backed Securities ("MBS") of $25,504,177.
<F2>Includes prepaid acquisition fees and expenses of $844,252 net of accumulated
amortization of $539,069 and prepaid participation servicing fees of $331,052
net accumulated amortization of $168,285.
<F3>Represents total equity of General Partners and Limited Partners. General
Partners deficit of ($238,853) and Limited Partners equity of $66,359,791.
<F4>Unrealized gain on MBS.
<F5>Represents interest income on investments in mortgages and cash.
<F6>Includes $25,266 of amortization of prepaid fees and expenses.
<F7>Net income allocated $31,232 to the General Partners and $1,009,829 to the
Limited Partners. Average net income per Limited Partner interest is $.13 on
7,500,099 Limited Partner interests outstanding.
</FN>
</TABLE>
