UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 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
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
BALANCE SHEETS
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $29,187,070 $ 37,769,835
(Note 2)
Mortgage-Backed Securities and insured
mortgage ("MBS") (Note 3) 25,249,424 25,897,592
------------ ------------
Total mortgage investments 54,436,494 63,667,427
Cash and cash equivalents 3,415,503 3,100,615
Interest receivable and other assets 704,749 534,178
Prepaid acquisition fees and expenses, net of
accumulated amortization of $556,057 and
$522,080, respectively 288,195 322,172
Prepaid participation servicing fees, net of
accumulated amortization of $176,561 and
$160,008, respectively 154,491 171,044
----------- ------------
Total assets $ 58,999,432 $ 67,795,436
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 10,129 $ 21,117
------------ ------------
Partners' equity (deficit):
Limited Partners 57,846,713 66,774,981
(7,500,099 Limited Partner interests
outstanding)
General Partners (230,308) (224,493)
Unrealized gain on MBS 1,372,898 1,223,831
------------ ------------
Total Partners' equity 58,989,303 67,774,319
------------ ------------
Total liabilities and Partners' equity $ 58,999,432 $ 67,795,436
============ ============
Theaccompanying notes are an
integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Interest income - PIMs
<S> <C> <C> <C> <C>
Base interest $ 620,540 $ 805,709 $1,269,618 $1,604,668
Participation interest 250,000 - 250,000 -
Interest income - MBS 536,255 549,766 1,042,103 1,100,607
Other interest income 97,564 29,910 162,897 54,926
---------- ------------- ---------- ---------
Total revenues 1,504,359 1,385,385 2,724,618 2,760,201
----------- ------------- ---------- ----------
Expenses:
Asset management fee to an affiliate 99,404 126,990 208,746 253,461
Expense reimbursements to affiliates (15,873) 20,130 4,259 36,467
Amortization of prepaid expenses and
fees 25,264 154,600 50,530 342,784
General and administrative 42,934 38,485 67,392 85,880
---------- ----------- ---------- ----------
Total expenses 151,729 340,205 330,927 718,592
---------- ----------- ---------- ----------
Net income $1,352,630 $1,045,180 $2,393,691 $2,041,609
Net change in unrealized gain
on MBS 175,456 806,168 149,067 31,575
----------- ----------- ----------- ---------
Total comprehensive income $1,528,086 $1,851,348 $2,542,758 $2,073,184
========== ========== ========== ==========
Allocation of net income (Note 4):
Limited Partners $1,312,051 $1,013,824 $2,321,880 $1,980,360
========== ========== ========== ==========
Average net income per Limited
Partner interest
(7,500,099 Limited Partner
interests outstanding) $ .17 $ .13 $ .31 $ .26
========== ========== ========== ==========
General Partners $ 40,579 $ 31,356 $ 71,811 $ 61,249
========== ========== ========== ==========
The accompanying notes are an integral
part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
Operating activities:
<S> <C> <C>
Net income $2,393,691 $ 2,041,609
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid expenses and fees 50,530 342,784
Prepayment penalty (250,000) -
Changes in assets and liabilities:
Decrease in interest receivable
and other assets (170,571) 43,340
Decrease in liabilities (10,988) (8,025)
----------- -----------
Net cash provided by operating activities 2,012,662 2,419,708
----------- -----------
Investing activities:
Principal collections on PIMs including
prepayment penalty of $250,000 in 1998 8,832,765 240,959
Principal collections on MBS 797,235 825,295
----------- -----------
Net cash provided by investing activities 9,630,000 1,066,254
----------- -----------
Financing activity:
Special distributions (8,400,111) -
Quarterly distributions (2,927,663) (2,950,942)
----------- -----------
Net cash used for financing activities (11,327,774) (2,950,942)
Net increase in cash and cash equivalents 314,888 535,020
Cash and cash equivalents, beginning of period 3,100,615 1,757,197
----------- -----------
Cash and cash equivalents, end of period $ 3,415,503 $2,292,217
=========== ===========
The accompanying notes are an integral
part of the financial statements.
</TABLE>
<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, 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 June 30, 1998, its results of operations for the three
and six months ended June 30, 1998 and 1997 and its cash flows for the six
months ended June 30, 1998 and 1997.
The results of operations for the three and six months ended June 30, 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.
2. PIMs
At June 30, 1998, the Partnership's PIMs have a fair value of $29,193,721 and
gross unrealized gains and losses of $28,029 and $21,378, respectively. The PIMs
have maturities ranging from 2006 to 2033. At June 30, 1998 there are no insured
mortgage loans within the Partnership's portfolio that are delinquent with
respect to principal or interest payments.
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.
On April 16, 1998, the Partnership made a special distribution to the investors
of $1.12 per Limited Partner interest. Subsequent to the payoff of GNMA, the
General Partners negotiated a $250,000 settlement with borrower to release the
Subordinated Promissory Note, which was received in July 1998.
3. MBS
At June 30, 1998, the Partnership's MBS portfolio has an amortized cost of
$23,876,526 and gross unrealized gains of $1,372,898 with maturities from 2004
to 2033.
In June 1997, Statement of Financial Accounting Standards No. 130, 'Reporting
Comprehensive Income' (FASB 130), was issued establishing standards for
reporting and displaying comprehensive income and its components effective
January 1, 1998. FASB 130 requires comprehensive income and its components, as
recognized under accounting standards, to be displayed in a financial statement
with the same prominence as other financial statements, if material.
Accordingly, unrealized gains (losses) on the Partnership's available-for sale
securities have been included in other comprehensive income.
Continued
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, continued
<CAPTION>
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the six months ended June 30, 1998
is as follows:
Total
Limited General Unrealized Partners'
Partners Partners Gain Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 66,774,981 $(224,493) $1,223,831 $ 67,774,319
Net income 2,321,880 71,811 - 2,393,691
Special Distributions (8,400,111) - - (8,400,111)
Quarterly distributions (2,850,037) (77,626) - (2,927,663)
Increase in unrealized gain
on MBS - - 149,067 149,067
------------ --------- ---------- -----------
Balance at June 30, 1998 $ 57,846,713 $(230,308) $1,372,898 $58,989,303
============ ========= ========== ===========
</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 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 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.
The Partnership 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 made a special distribution to the investors of $1.12 per Limited
Partner interest. Subsequent to the payoff of GNMA, the General Partners
negotiated a $250,000 settlement with borrower to release the Subordinated
Promissory Note, which was received in July 1998.
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 Fannie Mae MBS at an interest rate of 7.0% 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 paid 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 financing will have an
impact on this decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by Fannie
Mae, 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.
Fannie Mae 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 six months ended June 30, 1998 and 1997.
Net income increased approximately $307,000 and $352,000 for the three and six
months ended June 30, 1998 as compared to the same periods in 1997,
respectively. This increase was primarily due to higher participation interest
and other interest income and lower expenses in general, which was offset by
lower interest income on PIMs and MBS. The increase in participation income is
related to the Greentree PIM prepayment. The increase in other interest income
was due to the Partnership having higher short-term investment balances as well
as higher yields on those balances during the three and six months ended June
30, 1998 as compared to the same periods of 1997. Amortization expense decreased
as all the prepaid expenses and fees associated with all the remaining PIMs,
except Vista Montana were fully amortized. During the three and six months ended
June 30 1998, the Partnership received a rebate for expense reimbursements
related to 1997. PIM interest income decreased as did asset management fees paid
to an affiliate due primarily to the prepayments of the Pine Hills PIM in
November of 1997 and the Greentree PIM 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.
<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
<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 Officerof The Krupp
Corporation, a General Partner of the
Registrant.
DATE: August 5, 1998
<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> 6-MOS
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-END> Jun-30-1998
<CASH> 3,415,503
<SECURITIES> 54,436,494<F1>
<RECEIVABLES> 454,749
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 442,686<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,749,432
<CURRENT-LIABILITIES> 10,129
<BONDS> 0
0
0
<COMMON> 57,366,405<F3>
<OTHER-SE> 1,372,898<F4>
<TOTAL-LIABILITY-AND-EQUITY> 58,749,432
<SALES> 0
<TOTAL-REVENUES> 2,474,618<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 330,927<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,143,691
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,143,691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,143,691
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMs") of $29,187,070 and
Mortgage-Backed Securities ("MBS") of $25,249,424.
<F2>Includes prepaid acquisition fees and expenses of $844,252 net of
accumulated amortization of $556,057 and prepaid participation servicing fees
of $331,052 net of accumulated amortization of $176,561.
<F3>Represents total equity of General Partners and Limited Partners. General
Partners deficit of ($237,808) and Limited Partners equity of $57,604,213.
<F4>Unrealized gains on MBS.
<F5>Represents interest income on investments in mortgages and cash.
<F6>Includes $50,530 of amortization of prepaid fees and expenses.
<F7>Net income allocated $64,311 to the General Partners and $2,079,380 to the
Limited Partners. Average net income per Limited Partner interest is $.28 on
7,500,099 Limited Partner interests outstanding.
</FN>
</TABLE>
