UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESx
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-16817
Krupp Insured Plus-II Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-2955007
(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)
(Registrant's telephone number, including area code) (617) 423-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Depositary
R e c e i p t s
representing
Units of Limited
Partner Interests
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable, as securities are non-voting.
Documents incorporated by reference: See Part IV, Item 14
The exhibit index is located on pages 10-15.
<PAGE>
PART I
This form 10-k 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.
ITEM 1. BUSINESS
Krupp Insured Plus-II Limited Partnership (the "Partnership") is a
Massachusetts limited partnership which was formed on October 29, 1986.
The Partnership raised approximately $292 million through a public offering
of limited partner interests evidenced by units of depositary receipts
("Units") and used the investable proceeds primarily to acquire
participating insured mortgages ("PIMs") and mortgage-backed securities
("MBS"). The Partnership considers itself to be engaged only in the
industry segment of investment in mortgages.
The Partnership's investments in PIMs on multi-family residential
properties consist of a MBS or an insured mortgage loan (collectively, the
"insured mortgage") guaranteed or insured as to principal and basic
interest. These insured mortgages were issued or originated under or in
connection with the housing programs of the Federal National Mortgage
Association ("FNMA"), the Government National Mortgage Association ("GNMA")
or the Department of Housing and Urban Development ("HUD"). PIMs provide
the Partnership with monthly payments of principal and interest and also
provide for Partnership participation in the current revenue stream and in
residual value, if any, from a sale or other realization of the underlying
property. The borrower conveys these rights to the Partnership through a
subordinated promissory note and mortgage. The participation features are
neither insured nor guaranteed.
The Partnership also acquired MBS and insured mortgages collateralized
by single-family or multi-family mortgage loans issued or originated by
GNMA, FNMA, HUD or the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA and FHLMC guarantee the principal and basic interest of the FNMA and
FHLMC MBS, respectively. GNMA guarantees the timely payment of principal
and interest on its MBS, and HUD insures the pooled mortgage loans
underlying the GNMA MBS and its own direct mortgage loans.
Although the Partnership will terminate no later than December 31, 2026
it is expected that the value of the PIMs generally will be realized by the
Partnership through repayment or sale as early as ten years from the dates
of the closings of the permanent loans and that the Partnership will
realize the value of all of its other investments within that time frame
thereby resulting in a dissolution of the Partnership significantly prior
to December 31, 2026.
The Partnership's investments are not expected to be subject to seasonal
fluctuations. Any ultimate realization of the participation features of
the PIMs are subject to similar risks associated with equity real estate
investments, including: reliance on the owner's operating skills, ability
to maintain occupancy levels, control operating expenses, maintain the
properties and provide adequate insurance coverage; adverse changes in
general economic conditions, adverse local conditions, and changes in
governmental regulations, real estate zoning laws, or tax laws; and other
circumstances over which the Partnership may have little or no control.
The requirements for compliance with federal, state and local
regulations to date have not had an adverse effect on the Partnership's
operations, and no adverse effect is anticipated in the future.
<PAGE>
As of December 31, 1996, there were no personnel directly employed by
the Partnership.
ITEM 2. PROPERTIES
None
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership
is a party or to which any of its investments is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There currently is no established trading market for the Units.
The number of investors holding Units as of December 31, 1996 was
approximately 15,000. One of the objectives of the Partnership is to
provide quarterly distributions of cash flows generated by its investments
in mortgages. The Partnership anticipates that future operations will
continue to generate cash available for distribution. Adjustments may be
made to the distribution rate in the future due to realization and payout
of the existing mortgages.
The Partnership made the following distributions, in quarterly
installments, to its Partners during the two years ended December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
Amount Per Unit Amount Per Unit
Quarterly Distributions:
<S> <C> <C> <C> <C>
Limited Partners $16,414,171 $1.12 $16,414,173 $1.12
General Partners 432,214 430,359
$16,846,385 $16,844,532
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding
the Partnership's financial position and operating results. This
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Financial
Statements and Supplementary Data, which are included in Item 7 and Item 8,
(Appendix A) of this report, respectively.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total revenues $ 15,855,280 $ 16,366,468 $ 18,874,538 $ 19,209,240 $ 20,151,063
Net income 12,331,212 12,656,200 14,147,772 14,525,508 15,501,205
Net income allocated to:
Limited Partners 11,961,276 12,276,514 13,723,339 14,089,743 15,036,169
Average per Unit .82 .84 .94 .96 1.03
General Partners 369,936 379,686 424,433 435,765 465,036
Total assets at
December 31 207,552,419 212,789,466 215,697,082 241,054,891 253,077,218
Distributions to:
Limited Partners
Quarterly 16,414,171 16,414,173 21,738,336 23,432,667 23,464,971
Average per Unit 1.12 1.12 1.48 1.60 1.60
Special - - 17,293,504 2,637,993 -
Average per Unit - - 1.18 .18 -
General Partners 432,214 430,359 476,952 472,189 542,367
</TABLE>
ITEM 7. 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 $4.1
million. Funds used for investor distributions are generated from interest
income received on the PIMs, MBS, cash and short-term investments, and the
principal collections received on the PIMs and MBS. 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
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 the cash available for distribution, the General Partners may
adjust the distribution rate or distribute funds through a special
distribution.
The General Partners believe the Partnership can maintain the current
distribution rate for the near future. 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.
During the first quarter of 1996, the borrower of the Lily Flagg Apartments
PIM approached the Partnership about a potential sale of the property and
the prepayment of the PIM. Since then, the borrower has informed the
General Partners that a sale most likely will not occur until 1998 but
requested a discharge of the loan s participation feature to improve the
marketability of the property. The General Partners have agreed in
principal to the borrower s request in exchange for a full payment of all
additional interest earned through the date of the discharge, which is
expected to occur during the second quarter of 1997.
The borrower of the Colonial Park Apartments PIM sold the property
during 1996 to a buyer who assumed the first mortgage loan and future
obligations arising from the participation features. In addition, the
Partnership received $35,000 of participation interest from the borrower
accumulated through the date of sale. This assumption will preserve a
favorable coupon interest rate for the Partnership and provide an
opportunity to receive additional participation interest from the future
operations and sale or refinancing of the property. The buyer intends to
make capital improvements at the property that should enhance its
operations and value, and could ultimately increase the participation
interest the Partnership receives from this investment.
Many of the other properties in the portfolio had solid performances
during 1996. Average occupancy at most of the properties exceeded 90%, and
moderate increases in market rental rates were achieved at many of the
properties. Seven properties generated sufficient operating cash flow to
reach the threshold for payment of participation interest to the
Partnership during 1996.
The Harbor House Apartments PIM has experienced operating deficits,
however, property operations improved this year as a result of a new
management team that is controlling operating expenses. The General
Partners will continue to monitor this situation. In the event the
improved property operations do not continue, the borrower may not be able
to meet debt service payments. Should the borrower default, the insured
mortgage would be repaid through an insurance claim. While the Partnership
would receive principal and basic interest on the insured mortgage, it
would not receive any participation interest income.
The General Partners are closely monitoring the bankruptcy proceedings
of the borrower of the Greenhouse Apartments PIM. Upon resolution of the
bankruptcy, the Partnership will receive the outstanding principal of the
Greenhouse Apartments PIM either as a prepayment or an insurance claim and
then distribute these proceeds to investors as a special distribution. The
General Partners do not anticipate receiving any participation interest
income from this PIM.
Two other properties experienced operating difficulties over the past
year, primarily due to soft markets. Country Meadows physical occupancy
fell to the mid-80% range during 1996. Rental rates at the property
compete unfavorably with the cost of home ownership in blue-collar Laurel,
Maryland. Consequently, deep rental concessions are offered to encourage
prospective residents, but with little success. Denrich Apartments
average occupancy also was in the mid-80% range during 1996. The
Philadelphia neighborhood where the property is located has many other
apartment communities that are offering rental rate concessions. The
property is in need of significant repairs which the borrower is unable to
address due to limited operating cash flow. The property currently is
operating under a workout plan which expires in December 1997; however, it
is unlikely that operations will improve enough to support the contracted
debt service. The General Partners are monitoring both of these properties
closely.
For the first five years of the PIMs the borrowers are prohibited from
prepaying. For the second five years, the borrowers can prepay the loans
and pay the greater of a prepayment penalty or all participation interest
that would be due as of the date of prepayment. The participation features
of the PIMs are neither insured nor guaranteed and if prepayment of a PIM
results from an insurance claim the Partnership would not receive any
prepayment penalty nor any participation interest. 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. Factors such 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 Government National Mortgage Association ( GNMA ), the Federal
National Mortgage Association ( FNMA ), 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 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 year
ended December 31, 1996 and the period from inception through December 31,
1996. 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.
<TABLE>
(Amounts in thousands, except per Unit amounts)
<PAGE>
Inception
Year Ended Through
12/31/96 12/31/96
Distributable Cash Flow:
<S> <C> <C>
Income for tax purposes $13,886 $153,657
Items not requiring (not providing) the use of
operating funds:
Amortization of prepaid expenses, fees and
organization costs 578 8,020
Acquisition expenses paid from offering
proceeds charged to operations - 690
Shared appreciation income/prepayment penalties - (2,001)
Gain on sale of MBS - (377)
Total Distributable Cash Flow ("DCF") $14,464 $159,989
Limited Partners Share of DCF $14,030 $155,189
Limited Partners Share of DCF per Unit $ .96 $ 10.59
General Partners Share of DCF $ 434 $ 4,800
Net Proceeds from Capital Transactions:
Principal collections on PIMs and PIM sale proceeds
including Shared Appreciation Income/Prepayment
Penalties $ 1,211 $ 47,913
Principal collections on MBS and MBS sale proceeds 2,587 61,868
Reinvestment of MBS and PIM principal collections
and sale proceeds - (41,966)
Gain on sale of MBS - 377
Total Net Proceeds from Capital Transactions $ 3,798 $ 68,192
Cash available for distribution
(DCF plus proceeds from Capital Transactions) $18,262 $228,181
Distributions:
Limited Partners $16,414(a) $218,096(b)
Limited Partners Average per Unit $ 1.12(a) $ 14.88(b)(c)
General Partners $ 434(a) $ 4,800(b)
Total Distributions $16,848 $222,896
</TABLE>
(a) Represents all distributions paid in 1996 except the February 1996
distribution and includes an estimate of the distribution to be paid
in February 1997.
(b) Includes an estimate of the distribution to be paid in February 1997.
(c) Limited Partners average per Unit return of capital as of February
1997 is $4.29 [$14.88 - $10.59] 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.
Operations
The following discussion relates to the operation of the Partnership
during the years ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
(Amounts in thousands)
1996 1995 1994
Interest income on PIMs:
<S> <C> <C> <C>
Base interest $12,070 $12,198 $13,109
Participation interest received 419 250 271
Interest income on MBS
and insured mortgages 3,366 3,573 4,031
Other interest income 387 346 374
Partnership expenses (1,778) (1,964) (2,335)
Distributable Cash Flow 14,464 14,403 15,450
Shared Appreciation Income/
Prepayment Penalties - - 988
Accrued Participation interest
income/(Accrued Participation
interest received) (387) - 102
Amortization of prepaid fees,
expenses and organization costs (1,746) (1,747) (2,392)
Net Income $12,331 $12,656 $14,148
</TABLE>
Net income decreased slightly in 1996 as compared to 1995 due primarily
to lower PIM base interest and MBS interest income and lower Partnership
expenses. The Partnership funds a portion of distributions with MBS and
PIM principal collections which reduces the invested assets generating
interest income for the Partnership. As invested assets decline so will
interest income on MBS, base interest income on PIMs and other interest
income Partnership expenses declined due to lower general and
administrative expenses and a reduction in reimbursements paid to
affiliates in connection with maintaining the books and records of the
Partnership as well as the preparation and mailing of investor
communications.
Net income decreased approximately $1,492,000 during 1995 as compared to
1994
due primarily to lower interest income that resulted from a reduction in
the invested assets in the Partnership. The reduction in assets was a
result of a payoff of the Mediterranean Village PIM during September 1994.
Subsequently, a special distribution was made from the Partnership using
the payoff proceeds and a portion of the available cash. The decline in
net income from 1994 to 1995 is also related to participation income
recognized in 1994 from the payoff of the Mediterranean Village PIM and the
payment of participation income related to the Longwood Villas PIM which
together totaled approximately $1.1 million. Interest income on MBS
decreased in 1995 versus 1994 and will continue to decline as principal
collections decrease the Partnership's MBS portfolio. The Partnership will
continue to see a decline in base interest income on its PIMs based on the
amortization of the underlying mortgages. Expenses decreased approximately
$1,017,000 in 1995 versus 1994 primarily resulting from reduced
amortization expense. As a result of the repayment of the Mediterranean
Village PIM, the Partnership fully amortized its associated prepaid fees
and expenses which increased amortization expense in 1994 as compared to
1995. During 1995, the Partnership experienced a decrease in expense
reimbursements to affiliates and a decrease in the asset management fee due
to a reduced asset base when compared to 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as
to the directors and executive officers of Krupp Plus Corporation which is
a General Partner of the Partnership and is the general partner of Mortgage
Services Partners Limited Partnership, which is the other General Partner
of the Partnership, is as follows:
Position with
Name and Age Krupp Plus Corporation
Douglas Krupp (50) Co-Chairman of the Board
George Krupp (52) Co-Chairman of the Board
Laurence Gerber (40) President
Peter F. Donovan (43) Senior Vice President
Robert A. Barrows (39) Vice President and Treasurer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for the more than $3 billion under management for institutional
and individual clients. Mr. Krupp is a graduate of Bryant College. In
1989 he received an honorary Doctor of Science in Business Administration
from this institution and was elected trustee in 1990. Mr. Krupp serves as
Chairman of the Board and Director of Berkshire Realty Company, Inc. (NYSE-
BRI). Mr. Krupp also serves as Chairman of the Board and Trustee of Krupp
Government Income Trust and Krupp Government Income Trust II.
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for more than $3 billion under management for institutional and
individual clients. Mr. Krupp attended the University of Pennsylvania and
Harvard University.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a Certified
Public Accountant. Mr. Gerber also serves as President and a Director of
Berkshire Realty Company, Inc. (NYSE-BRI) and President and Trustee of
Krupp Government Income Trust and Krupp Government Income Trust II.
Peter F. Donovan is President of Berkshire Mortgage Finance and directs
the underwriting, servicing and asset management of a $3.9 billion multi-
family loan portfolio. Previously, he was Senior Vice President of
Berkshire Mortgage Finance and was responsible for all mortgage
originations. Before joining the firm in 1984, he was Second Vice
President, Real Estate Finance for Continental Illinois National Bank &
Trust, where he managed a $300 million construction loan portfolio of
commercial properties. Mr. Donovan received a B.A. from Trinity College
and an M.B.A. degree from Northwestern University.
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of Berkshire Mortgage Finance and The Berkshire Group. Mr. Barrows has
held several positions within The Berkshire Group since joining the company
in 1983 and is currently responsible for accounting and financial
reporting, treasury, tax, payroll and office administrative activities.
Prior to joining The Berkshire Group, he was an audit supervisor for
Coopers & Lybrand L.L.P. in Boston. He received a B.S. degree from Boston
College and is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1996, no person owned of record or was known by the
General Partners to own beneficially more than 5% of the Partnership's
14,655,412 outstanding Units. The only interests held by management or its
affiliates consist of its General Partner and Corporate Limited Partner
Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in Note F to the
Partnership's Notes To Financial Statements presented in Appendix A to this
report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements - see Index to Financial Statements and
Schedule included under Item 8, Appendix A, page F-2 to this report.
2. Financial Statement Schedule - see Index to Financial
Statements and Schedule included under Item 8, Appendix A, page
F-2 to this report. All other schedules are omitted as they
are not applicable, not required or the information is provided
in the Financial Statements or the Notes thereto.
(b) Exhibits:
Number and Description
Under Regulation S-K
The following reflects all applicable Exhibits required under Item
601 of Regulation S-K:
(4) Instruments defining the rights of security holders including
indentures:
(4.1) Amended and Restated Agreement of Limited Partnership
dated as of May 29, 1987 [Exhibit A to Prospectus
included in Post Effective Amendment No. 1 of
Registrant's Registration Statement on Form S-11 dated
June 18, 1987 (File No. 33-9889)].*
(4.2) Second Amendment to Agreement of Limited Partnership
dated as of June 17, 1987 [Exhibit 4.6 in Post Effective
Amendment No. l of Registrant's Registration Statement
on Form S-11 dated June 18, 1987 (File No. 33-9889)].*
(4.3) Subscription Agreement whereby a subscriber agrees to
purchase Units and adopts the provisions of the Amended
and Restated Agreement of Limited Partnership [Exhibit D
to Prospectus included in Post Effective Amendment No. 1
of Registrant's Registration Statement on Form S-11
dated June 18, 1987 (File No. 33-9889)].*
(4.4) Copy of Amended Certificate of Limited Partnership filed
with the Massachusetts Secretary of State on April 28,
1987. [Exhibit 4.4 in Amendment No. 1 of Registrant's
Registration Statement on Form S-11 dated May 14, 1987
(File No. 33-9889)].*
(10) Material Contracts:
(10.1) Form of agreement between the Partnership and Krupp
Mortgage Corporation. [Exhibit 10.3 in Amendment No. 1
of Registrant's Registration Statement on Form S-11
dated May 14, 1987 (File No. 33-9889)].*
Colonial Park Apartments
(10.2) Prospectus for GNMA Pool No. 248521 (PL). [Exhibit
19.1 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1988 (File No. 0-16817)].*
(10.3) Subordinated Open-End Multi-Family Mortgage (including
Subordinated Promissory Note) dated March 30, 1988
between Euclid Creek Company, and York Associates, Inc.
[Exhibit 19.2 to Registrant's Report on Form 10-Q for
the quarter ended June 30, 1988 (File No. 0-16817)].*
(10.4) Assignment of Subordinated Mortgage dated March 30,
1988 between York Associates, Inc. and Krupp Insured
Plus-II Limited Partnership. [Exhibit 19.3 to
Registrant's Report on Form 10-Q for the quarter ended
June 30, 1988 (File No. 0-16817)].*
Westbrook Manor Apartments
(10.5) Prospectus for GNMA Pool No. 256059 (PL). [Exhibit
19.6 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1988 (File No. 0-16817)].*
(10.6) Subordinated Multi-Family Deed of Trust (including
Subordinated Promissory Note) dated April 19, 1988
between Wiston XXIII Limited Partnership and Krupp
Insured Plus-II Limited Partnership. [Exhibit 19.7 to
Registrant's Report on Form 10-Q for the quarter ended
June 30, 1988 (File No. 0-16817)].*
Lakeside Apartments
(10.7) Prospectus for GNMA Pool No. 255955. [Exhibit 19.8 to
Registrant's Report on Form 10-Q for the quarter ended
June 30, 1988 (File No. 0-16817)].*
(10.8) Subordinated Multi-Family Deed of Trust (including
Subordinated Promissory Note) dated May 5, 1988 between
Lakeside Apartments Partnership and Krupp Insured Plus-
II Limited Partnership. [Exhibit 19.9 to Registrant's
Report on Form 10-Q for the quarter ended June 30, 1988
(File No. 0-16817)].*
Le Coeur du Monde Apartments
(10.9) Prospectus for GNMA Pools No. 257721 (CS) and 257722
(PN). [Exhibit 19.10 to Registrant's Report on Form 10-
Q for the quarter ended June 30, 1988 (File No. 0-
16817)].*
(10.10) Subordinated Multi-Family Open-End Deed of Trust
(including Subordinated Promissory Note) dated May 11,
1988 between Le Coeur du Monde Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
19.11 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1988 (File No. 0-16817)].*
Harbor House Apartments
(10.11) Prospectus for GNMA Pools No. 257723 (CS) and 257724
(PN). [Exhibit 19.12 to Registrant's Report on Form
10-Q for the quarter ended June 30, 1988 (File No. 0-
16817)].*
(10.12) Subordinated Multi-family Mortgage (including
Subordinated Promissory Note) dated May 11, 1988
between Harbor House Apartment Homes Limited
Partnership and Krupp Insured Plus-II Limited
Partnership. [Exhibit 19.13 to Registrant's Report on
Form 10-Q for the quarter ended June 30, 1988 (File
No. 0-16817)].*
Fallwood Apartments
(10.13) Prospectus for GNMA Pool No. 260300 (PL). [Exhibit
19.14 to Registrant's Report on Form 10-Q for the
quarter ended September 30, 1988 (File No. 0-16817)].*
(10.14) Multifamily Mortgage (including Subordinated
Promissory Note) dated June 23, 1988 between Wiston
XVIII Limited Partnership and Krupp Insured Plus-II
Limited Partnership. [Exhibit 19.15 to Registrant's
Report on Form 10-Q for the quarter ended September
30, 1988 (File No. 0-16817)].*
Greenbrier Apartments
(10.15) Prospectus for GNMA Pool No. 260301 (PL). [Exhibit
19.16 to Registrant's Report on Form 10-Q for the
quarter ended September 30, 1988 (File No. 0-16817)].*
(10.16) Multifamily Mortgage (including Subordinated
Promissory Note) dated August 16, 1988 between Wiston
XVI Limited Partnership and Krupp Insured Plus-II
Limited Partnership. [Exhibit 19.17 to Registrant's
Report on Form 10-Q for the quarter ended September
30, 1988 (File No. 0-16817)].*
Country Meadows Apartments
(10.17) Prospectus for GNMA Pools No. 260733 (CL) and 260734
(PN). [Exhibit 19.18 to Registrant's Report on Form
10-Q for the quarter ended September 30, 1988 (File
No. 0-16817)].*
(10.18) Subordinated Multifamily Deed of Trust (including
Subordinated Promissory Note) dated June 15, 1988
between Country Meadows Limited Partnership and Krupp
Insured Plus-II Limited Partnership. [Exhibit 19.19
to Registrant's Report on Form 10-Q for the quarter
ended September 30, 1988 (File No. 0-16817)].*
Pine Ridge Apartments
(10.19) Prospectus for GNMA Pool No. 259436(PL). [Exhibit
10.27 to Registrant's Report on Form 10-K for the year
ended December 31, 1988 (File No. 0-16817)]*
(10.20) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated October 18, 1988
between LaSalle National Bank and Krupp Insured Plus-
II Limited Partnership. [Exhibit 10.28 to
Registrant's Report on Form 10-K for the year ended
December 31, 1988 (File No. 0-16817)]*
Denrich Apartments
(10.21) Prospectus for GNMA Pool No. 267075 (PL). [Exhibit
10.29 to Registrant's Report on Form 10-K for the year
ended December 31, 1988 (File No. 0-16817)].*
(10.22) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated November 3, 1988
between Arthur J. Stagnaro and Krupp Insured Plus-II
Limited Partnership. [Exhibit 10.30 to Registrant's
Report on Form 10-K for the year ended December 31,
1988 (File No. 0-16817)].*
(10.23) Modification Agreement dated June 28, 1995 between
Arthur J. Stagnaro and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.1 to Registrant's Report on
Form 10-Q for the quarter ended June 30, 1995 (File
No. 0-16817)].*
The Greenhouse
(10.24) Prospectus for GNMA Pools No. 259233(CS) and
259234(PN) [Exhibit 19.1 to Registrant's Report on
Form 10-Q for the quarter ended March 31, 1989 (File
No. 0-16817)].*
(10.25) Subordinated Multifamily Deed of Trust (including
Subordinated Promissory Note) dated January 5, 1989
between Farnam Associates Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
19.2 to Registrant's Report on Form 10-Q for the
quarter ended March 31, 1989 (File No. 0-16817)].*
Walden Village Apartments
(10.26) Subordinated Multifamily Open-End Mortgage (including
Subordinated Promissory Note) dated February 23, 1989
between The Walden Village Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
19.3 to Registrant's Report on Form 10-Q for the
quarter ended March 31, 1989 (File No. 0-16817)].*
(10.27) Participation Agreement dated February 23, 1989
between The Centralbanc Mortgage Company and Krupp
Insured Plus-II Limited Partnership. [Exhibit 19.4 to
Registrant's Report on Form 10-Q for the quarter ended
March 31, 1989 (File No. 0-16817)].*
Longwood Villas Apartments
(10.28) Prospectus for GNMA Pool No. 272539(PL). [Exhibit
19.7 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1989 (File No. 0-16817)].*
(10.29) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated March 29, 1989
between Daniel Properties XI Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
19.8 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1989 (File No. 0-16817)].*
(10.30) Guaranty Agreement dated April 19, 1994 between SCA-
Florida Holdings (I) Incorporated and Krupp Insured
Plus-II Limited Partnership. [Exhibit 10.29 to
Registrant's Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-16317)]*
(10.31) Agreement of Release, Assumption and Modification of
Subordinated Promissory Note and Subordinated Mortgage
by and among Daniel Properties XI Limited Partnership,
SCA-Florida Holdings (I) Incorporated and Krupp
Insured Plus-II Limited Partnership. [Exhibit 10.30 to
Registrant's Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-16817)].*
Lily Flagg Station
(10.32) Prospectus for GNMA Pool No 272540(PL). [Exhibit 19.9
to Registrant's Report on Form 10-Q for the quarter
ended June 30, 1989 (File No. 0-16817)].*
(10.33) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) date March 29, 1989
between Daniel Properties I Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
19.10 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1989 (File No. 0-16817)].*
Richmond Park Apartments
(10.34) Prospectus for GNMA Pool No. 260865 (PL) [Exhibit 1 to
Registrant's Report on Form 8-K dated August 30, 1989
(File No. 0-16817)].*
(10.35) Subordinated Multifamily Open-Ended Mortgage
(including Subordinated Promissory Note) dated July
14, 1989 between Carl Milstein, Trustee, Irwin
Obstgarten, Al Simon and Krupp Insured Plus-II Limited
Partnership. [Exhibit 2 to Registrant's Report on
Form 8-K dated August 30, 1989 (File No. 0-16817)]*
(10.36) Participation Agreement dated July 31, 1989 between
Krupp Insured Mortgage Limited Partnership and Krupp
Insured Plus-II Limited Partnership. [Exhibit 3 to
Registrant's Report on Form 8-K dated August 30, 1989
(File No. 0-16817)].*
Saratoga Apartments
(10.37) Prospectus for GNMA Pool No. 280643 (Pl) [Exhibit 4 to
Registrant's Report on Form 8-K dated August 30, 1989
(File No. 0-16817)].*
(10.38) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated July 27, 1989
between American National Bank and Trust Company of
Chicago, as Trustee and Krupp Insured Mortgage Limited
Partnership. [Exhibit 5 to Registrant's Report on
Form 8-K dated August 30, 1989 (File No. 0-16817)].*
(10.39) Participation Agreement dated July 31, 1989 between
Krupp Insured Plus-II Limited Partnership and Krupp
Insured Mortgage Limited Partnership. [Exhibit 6 to
Registrant's Report on Form 8-K dated August 30, 1989
(File No. 0-16817)].*
Carlyle Court
(10.40) Prospectus for FNMA Pool No. MX-073004 [Exhibit 10.50
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (file No. 0-
16817)].*
(10.41) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 26, 1989
between Carlyle-XI, L.P. an Indiana limited
partnership and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.51 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989 (File No. 0-16817)].*
Hillside Court
(10.42) Prospectus for FNMA Pool No. MX-073003 [Exhibit 10.52
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
16817)].*
(10.43) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 16, 1989
between Hillside Limited Partnership-IX, an Indiana
limited partnership and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.53 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989 (File No. 0-16817)].*
Stanford Court
(10.44) Prospectus for FNMA Pool No. MX-073002 [Exhibit 10.54
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
16817)].*
(10.45) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 26, 1989
between Hillside Limited Partnership-IX, an Indiana
limited partnership and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.55 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989 (File No. 0-16817)].*
Waterford Court
(10.46) Prospectus for FNMA Pool No. MX-073005 [Exhibit 10.56
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No. 0-
16817)].*
(10.47) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 26, 1989
between Waterford-VIII, an Indiana limited partnership
and Krupp Insured Plus-II Limited Partnership [Exhibit
10.57 to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 (File No. 0-
16817)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1996,
the Partnership did not file any reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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,
on the 5th day of February, 1997.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
By: Krupp Plus Corporation,
a General Partner
By: /s/ Douglas Krupp
Douglas Krupp, Co-Chairman
(Principal Executive Officer) and
Director of Krupp Plus Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 5th day of February,
1997.
Signatures Title(s)
/s/ Douglas Krupp Co-Chairman (Principal Executive Officer)
Douglas Krupp and Director of Krupp Plus Corporation, a
General Partner
/s/ George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of Krupp Plus Corporation, a
General Partner
/s/ Laurence Gerber President of Krupp Plus Corporation, a
Laurence Gerber General Partner
/s/ Peter F. Donovan Senior Vice President of Krupp Plus
Peter F. Donovan Corporation, a General Partner
/s/ Robert A. Barrows Treasurer and Chief Accounting Officer of
Robert A. Barrows Krupp Plus Corporation, a General Partner
<PAGE>
APPENDIX A
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
ITEM 8 of FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1996
<PAGE>
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Balance Sheets at December 31, 1996 and 1995 F-4
Statements of Income for the Years Ended December 31,
1996, 1995 and 1994 F-5
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-6
Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994 F-7
Notes to Financial Statements F-8 - F-14
Schedule IV - Mortgage Loans on Real Estate F-15 - F-18
All other schedules are omitted as they are not applicable or not required,
or the information is provided in the financial statements or the notes
thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Insured Plus-II Limited Partnership:
We have audited the financial statements and the financial statement
schedule of Krupp Insured Plus-II Limited Partnership (the "Partnership")
listed in the index on page F-2 of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
General Partners of the Partnership. Our responsibility is to express an
opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Krupp Insured
Plus-II Limited Partnership as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1997
<PAGE>
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
<TABLE>
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
<CAPTION>
1996 1995
<S> <C> <C>
Participating Insured Mortgages ("PIMs") (Notes B, C and H) $151,717,926 $152,929,361
Mortgage-Backed Securities and multi-family insured
mortgages("MBS") (Notes B, D and H) 41,283,769 44,597,272
Total mortgage investments 193,001,695 197,526,633
Cash and cash equivalents (Notes B and H) 7,921,270 5,963,681
Short-term investment - 498,160
Interest receivable and other assets 1,604,301 2,029,363
Prepaid acquisition fees and expenses, net of
accumulated amortization of $8,279,914 and
$6,954,567, respectively (Note B) 3,888,963 5,214,310
Prepaid participation servicing fees, net of
accumulated amortization of $2,629,406 and
$2,208,277, respectively (Note B) 1,136,190 1,557,319
Total assets $207,552,419 $212,789,466
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 18,900 $ 14,760
Partners' equity (deficit) (Notes A and E ):
Limited Partners 207,196,050 211,648,945
(14,655,512 Units outstanding)
General Partners (217,867) (155,589)
Unrealized gain on MBS (Note B) 555,336 1,281,350
Total Partners' equity 207,533,519 212,774,706
Total liabilities and Partners' equity $207,552,419 $212,789,466
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
Revenues:
Interest income - PIMs:
<S> <C> <C> <C>
Base interest $12,070,443 $12,198,330 $13,108,877
Participation interest 31,948 249,812 1,360,047
Interest income - MBS 3,366,026 3,572,641 4,031,477
Other interest income 386,863 345,685 374,137
Total revenues 15,855,280 16,366,468 18,874,538
Expenses:
Asset management fee to an affiliate
(Note F) 1,458,207 1,487,312 1,579,713
Expense reimbursement to affiliates
(Note F) 155,091 227,167 467,986
Amortization of prepaid expenses and
fees (Note B) 1,746,476 1,746,477 2,391,571
General and administrative 164,294 249,312 287,496
Total expenses 3,524,068 3,710,268 4,726,766
Net income (Note G) $12,331,212 $12,656,200 $14,147,772
Allocation of net income (Note E):
Limited Partners $11,961,276 $12,276,514 $13,723,339
Average net income per Limited Partner
interest $ .82 $ .84 $ .94
(14,655,512 Limited Partner
interests outstanding)
General Partners $ 369,936 $ 379,686 $ 424,433
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
Total
Limited General Unrealized Partners'
Partners Partners Gains Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 241,095,105 $ (52,397) - $ 241,042,708
Net income 13,723,339 424,433 - 14,147,772
Quarterly distributions (21,738,336) (476,952) - (22,215,288)
Special distributions (17,293,504) - - (17,293,504)
Balance at December 31, 1994 215,786,604 (104,916) - 215,681,688
Net income 12,276,514 379,686 - 12,656,200
Distributions (16,414,173) (430,359) - (16,844,532)
Unrealized gain on MBS - - 1,281,350 1,281,350
Balance at December 31, 1995 211,648,945 (155,589) 1,281,350 212,774,706
Net income 11,961,276 369,936 - 12,331,212
Quarterly distributions (16,414,171) (432,214) - (16,846,385)
Change in unrealized gain - - (726,014) (726,014)
Balance at December 31, 1996 $ 207,196,050 $(217,867) $ 555,336 $ 207,533,519
</TABLE>
The accompanying notes are an integral
part of the financial statments
<PAGE>
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
Operating activities:
<S> <C> <C> <C>
Net income $ 12,331,212 $ 12,656,200 $ 14,147,772
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of short-term investment
discount (13,630) (7,973) -
Amortization of prepaid expenses and
fees 1,746,476 1,746,477 2,391,571
Shared appreciation income/prepayment
penalties - - (987,550)
Changes in assets and liabilities:
Decrease (increase) in interest receivable
and other assets 425,062 154,566 (3,939)
Increase (decrease) in liabilities 4,140 (634) 3,211
Net cash provided by operating
activities 14,493,260 14,548,636 15,551,065
Investing activities:
Short-term investment (488,210) (490,187) -
Principal collections on MBS 2,587,489 2,155,335 5,991,565
Principal collections on PIMs 1,211,435 1,113,310 1,057,016
Proceeds from sale of PIM and PIM
prepayment including shared
appreciation income of $987,550
in 1994 - - 12,113,315
Investment in MBS - 27,909 (146,053)
Proceeds from sale of investment 1,000,000 - -
Net cash provided by investing
activities 4,310,714 2,806,367 19,015,843
Financing activities:
Quarterly distributions (16,846,385) (16,844,532) (22,215,288)
Special distributions - - (17,293,504)
Net cash used for financing
activities (16,846,385) (16,844,532) (39,508,792)
Net increase (decrease) in cash and
cash equivalents 1,957,589 510,471 (4,941,884)
Cash and cash equivalents, beginning of year 5,963,681 5,453,210 10,395,094
Cash and cash equivalents, end of year $ 7,921,270 $ 5,963,681 $ 5,453,210
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A. Organization
Krupp Insured Plus-II Limited Partnership (the "Partnership") was
formed on October 29, 1986 by filing a Certificate of Limited
Partnership in The Commonwealth of Massachusetts. The Partnership
issued all of the General Partner Interests to Krupp Plus Corporation
and Mortgage Services Partners Limited Partnership in exchange for
capital contributions aggregating $3,000. The Partnership terminates
on December 31, 2026, unless terminated earlier upon the occurrence of
certain events as set forth in the Partnership Agreement.
The Partnership commenced the public offering of Units on May 29, 1987
and completed its public offering having sold 14,655,412 Units for
$292,176,381 net of purchase volume discounts of $931,859 as of May 27,
1988.
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those
used for federal income tax purposes (Note G).
PIMs
PIMs are carried at amortized cost as the Partnership has the ability
and intention to hold them. Basic interest is recognized based on
the stated rate of the Federal Housing Administration ("FHA") first
mortgage loan (less the servicer's fee) or the stated coupon rate or
reduced rate of the Government National Mortgage Association ("GNMA")
or Federal National Mortgage Association ("FNMA") MBS. To the extent
interest rate reductions provide for payment of unpaid base interest
from surplus cash or the net proceeds from a sale or refinancing, the
Partnership will recognize such interest payments as income when
received. Participation interest is recognized as earned and when
deemed collectible by the Partnership.
MBS
At December 31, 1995, the Partnership in accordance with the
Financial Accounting Standards Board's Special Report on Statement
115,"Accounting for Certain Investments in Debt and Equity
Securities", reclassified its MBS portfolio from held-to-maturity to
available-for-sale. The Partnership carries its MBS at fair market
value and reflects any unrealized gains (losses) as a separate
component of Partners' Equity. Prior to December 31, 1995, the
Partnership carried its MBS portfolio at amortized cost. The
Partnership amortizes purchase premiums or discounts over the life of
the underlying mortgages using the effective interest method.
Cash Equivalents
Short-term investments represent investments with maturities of three
months or less at the date of acquisition in cash and cash
equivalents. The Partnership invests its cash primarily in deposits
and money market funds with a commercial bank and has not experienced
any loss to date on its invested cash.
Prepaid Expenses and Fees
Prepaid expenses and fees consist of acquisition fees and expenses
and participation servicing fees paid for the acquisition and
servicing of PIMs. The Partnership amortizes prepaid acquisition
fees and expenses using a method that approximates the effective
interest method over a period of ten to twelve years, which
represents the actual maturity or anticipated call date of the
underlying mortgage. Acquisition expenses incurred on potential
acquisitions which were not consummated were charged to operations.
The Partnership amortizes prepaid participation servicing fees using
a method that approximates the effective interest method over a ten-
year period beginning at final endorsement of the loan if a
Department of Housing and Urban Development ("HUD") loan and at
closing if a FNMA loan.
Income Taxes
The Partnership is not liable for federal or state income taxes
because Partnership income is allocated to the partners for income
tax purposes. If the Partnership's tax returns are examined by the
Internal Revenue Service or state taxing authority and such an
examination results in a change in Partnership taxable income, such
change will be reported to the partners.
Estimates and Assumptions
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities, contingent assets and liabilities and revenues and
expenses during the period. Actual results could differ from those
estimates.
C. PIMs
The Partnership has investments in twenty PIMs. Of the twenty PIMs,
seven funded the construction of multi-family housing. The
Partnership's PIMs consist of a GNMA or FNMA MBS representing the
securitized first mortgage loan on the underlying property or a sole
participation interest in a first mortgage loan originated under the
FHA lending program on the underlying property (collectively the
"insured mortgages"), and participation interests in the revenue stream
and appreciation of the underlying property above specified base
levels. The borrower conveys these participation features to the
Partnership generally through a subordinated promissory note and
mortgage (the "Agreement"). The Partnership receives guaranteed monthly
payments of principal and interest on the GNMA and FNMA MBS and HUD
insures the first mortgage loan underlying the GNMA MBS and the
FHA first mortgage loan.
The borrower usually cannot prepay the first mortgage loan during the
first five years and usually may prepay the first mortgage loan
thereafter subject to a 9% prepayment penalty in years six through
nine, a 1% prepayment penalty in year ten and no prepayment penalty
thereafter.
The Partnership may receive interest related to its participation
interests in the underlying property, however, these amounts are
neither insured nor guaranteed.
Generally, the participation features consist of the following: (i)
"Minimum Additional Interest" rates ranging from .5% to .75% per annum
calculated on the unpaid principal balance of the first mortgage on the
underlying property , (ii) "Shared Income Interest" ranging from 25% to
30% of the monthly gross rental income generated by the underlying
property in excess of a specified base, but only to the extent that it
exceeds the amount of Minimum Additional Interest received during such
month, (iii) "Shared Appreciation Interest" ranging from 25% to 30% of
any increase in the value of the underlying property in excess of a
specified base. Payment of Minimum Additional Interest and Shared
Income Interest will be from the operations of the property and is
limited to 50% of net revenue or surplus cash as defined by FNMA or
HUD, respectively.
The total amount of Minimum Additional Interest, Shared Income Interest
and Shared Appreciation interest payable by the underlying borrower
usually can not exceed 50% of any increase in Value of the property.
However, generally any net proceeds from a sale or refinancing will be
available to satisfy any accrued but unpaid Shared Income or Minimum
Additional Interest.
Shared Appreciation Interest is payable when one of the following
occurs: (1) the sale of the underlying property to an unrelated third
party on a date which is later than five years from the date of the
Agreement, (2) the maturity date or accelerated maturity date of the
Agreement, or (3) prepayment of amounts due under the Agreement and the
insured mortgage.
Under the Agreement, the Partnership, upon giving twelve months written
notice, can accelerate the maturity date of the Agreement and insured
mortgage to a date not earlier than ten years from the date of the
Agreement for (a) the payment of all participation interest due under
the Agreement as of the accelerated maturity date, or (b) the payment
of all participation interest due under the Agreement plus all amounts
due on the first mortgage note on the property.
During the fourth quarter of 1996, the borrower of the Colonial Park
Apartments PIM sold the property to a buyer that assumed the first
mortgage loan and future obligations arising from the participation
features. The Partnership received $35,000 as a discounted payoff of
the accumulated participation interest then due from the original
borrower. By permitting the sale, the Partnership will retain a
favorable coupon rate and the potential to realize future participation
income.
On September 30, 1994, the Partnership received a prepayment on the
Mediterranean Village PIM totaling $12,581,806. The repayment
consisted of outstanding principal of $11,125,765, a prepayment penalty
of $861,319 and accrued and delinquent base interest of $594,722. The
prepayment penalty received by the Partnership was in excess of what
the Partnership would have received under the Shared Appreciation
calculation. Under that calculation, the Partnership would have
received approximately $525,000 in Shared Appreciation and $215,000 of
accrued Shared Income or Minimum Additional Interest.
Listed in the chart is a summary of the Partnership's PIM investments.
The Partnership's PIMs consisted of the following at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
Aggregate Number Permanent
Original of PIMs Interest Maturity Investment Basis
Issuer Principal at 12/31/96 Rate Range Date Range at December 31,
1996 1995
<S> <C> <C> <C> <C> <C> <C>
GNMA $121,422,795 15 (a) 6.25%-8.5% 4/23 - 4/31 $116,109,644 $117,026,510
(b)(c)(d)
FNMA 30,015,000 4 7.25%-7.75% 10/99 28,552,155 28,810,803
FHA 7,220,800 1 8.55% 11/30 7,056,127 7,092,048
$158,658,595 20 $151,717,926 $152,929,361
</TABLE>
(a) Includes two PIMs - Richmond Park and Saratoga - in which the
Partnership holds a 62% and 50% interest, respectively, and the
remaining portion is held by an affiliate of the Partnership.
(b) The Partnership agreed to temporarily reduce the interest rate on the
Harbor House PIM effective on March 1, 1992, for a period of thirty
months at rates ranging from 6.75% to 7.75% per annum. Since then the
rate has been 8.25% per annum. As consideration for this reduction,
the Partnership increased its Minimum Additional Interest from .5% to
.75% as well as reduced the Shared Appreciation Interest Base to
$13,000,000 from $13,750,000.
(c) In May 1993, the Partnership agreed to temporarily reduce the interest
rate of the Le Couer du Monde PIM, retroactive to October 1, 1992.
The reduction lasted for thirty-six months and ranged from 6.375% to
8.125% per annum. The current interest rate is 8.25% per annum. Any
unpaid interest is payable from the net proceeds from a sale or
refinancing of the property. As consideration for this reduction, the
Partnership increased its Shared Appreciation Interest rate from 30%
to 35% and decreased the base value used for this calculation from
$10,795,260 to $9,814,200.
(d) On June 28, 1995, the Partnership entered into a temporary interest
rate reduction agreement on the Denrich Apartments PIM. Beginning
July 1, 1995, the interest rate decreased from 8% per annum to 6.25%
per annum for thirty months, then will increase to 6.75% per annum for
the following thirty-six month period and then increase to the
original interest rate of 8% per annum. The difference between
interest at the original interest rate and the reduced interest rates
will accumulate and be payable from surplus cash or from the net
proceeds of a sale or refinancing. These accumulated amounts will be
due and payable prior to any distributions to the borrower or payment
of participation interest to the Partnership. Also under the
agreement, the base level for calculating Shared Appreciation Interest
decreased from $4,025,000 to $3,500,000.
The underlying mortgages of the PIMs are collateralized by multi-
family apartment complexes located in 12 states. The apartment
complexes range in size from 80 to 736 units.
D. MBS
At December 31, 1996, the Partnership's MBS portfolio has an amortized
cost of $40,728,433 and unrealized gains and losses of approximately
$830,000 and $275,000, respectively. At December 31, 1995, the
Partnership's MBS portfolio had an unamortized cost of $43,315,922 and
unrealized gains and losses of approximately $1,285,000 and $4,000,
respectively. The Partnership's MBS have maturities ranging from 2007 to
2033.
E. Partners' Equity
Profits and losses from Partnership operations and Distributable Cash
Flow are allocated 97% to the Unitholders and Corporate Limited Partner
(the "Limited Partners") and 3% to the General Partners.
Upon the occurrence of a capital transaction, as defined in the
Partnership Agreement, net cash proceeds will be distributed first, to
the Limited Partners until they have received a return of their total
invested capital, second, to the General Partners until they have
received a return of their total invested capital, third, 99% to the
Limited Partners and 1% to the General Partners until the Limited
Partners receive an amount equal to any deficiency in the 11% cumulative
return on their invested capital that exists through fiscal years prior
to the date of the capital transaction, fourth, to the class of General
Partners until they have received an amount equal to 4% of all amounts
of cash distributed under all capital transactions and fifth, 96% to the
Limited Partners and 4% to the General Partners.
Profits arising from a capital transaction, will be allocated in the
same manner as related cash distributions. Losses from a capital
transaction will be allocated 97% to the Limited Partners and 3% to the
General Partners.
During 1996 and 1995, the Partnership made quarterly distributions
totaling $1.12 per unit. During 1994, the Partnership made quarterly
distributions totaling $1.48 and special distributions of $1.18 per
Unit.
As of December 31, 1996, the following cumulative partner contributions
and allocations have been made since the inception of the Partnership:
<TABLE>
<CAPTION>
Corporate
Limited General Unrealized
Unitholders Partner Partners Gain Total
<S> <C> <C> <C> <C> <C>
Capital $292,176,381 $ 2,000 $ 3,000 $ - $292,181,381
contributions
Syndication
costs (15,580,734) - - - (15,580,734)
Quarterly (194,059,976) (1,360) (4,692,760) - (198,754,096)
distributions
Special (19,931,361) (136) - - (19,931,497)
distributions
Net income 144,590,222 1,014 4,471,893 - 149,063,129
Unrealized
gain on MBS - - - 555,336 555,336
Total at
December 31
1996 $207,194,532 $ 1,518 $ (217,867) $ 555,336 $207,533,519
</TABLE>
F. Related Party Transactions
Under the terms of the Partnership Agreement, the General Partners or
their affiliates are entitled to an asset management fee for the
management of the Partnership's business, equal to .75% per annum of
the value of the Partnership's actual and committed mortgage assets,
payable quarterly. The General partners may also receive an incentive
management fee in an amount equal to .3% per annum on the Partnership's
total invested assets provided the Unitholders have received their
specified non-cumulative annual return on their Invested Capital.
Total fees payable to the General Partners for management services
shall not exceed 10% of cash available for distribution over the life
of the Partnership.
Additionally, the Partnership reimburses affiliates of the General
Partners for certain costs incurred in connection with maintaining the
books and records of the Partnership and the preparation and mailing of
financial reports, tax information and other communications to
investors.
G. Federal Income Taxes
The reconciliation of the income reported in the accompanying financial
statements with the income reported in the Partnership's 1996 federal
income tax return is as follows:
<TABLE>
<S> <C>
Net income per statement of income $ 12,331,212
Add: Book to tax difference for participation
Income 387,293
Book to tax difference for amortization of
prepaid expenses and fees 1,167,946
Net income for federal income tax purposes $ 13,886,451
</TABLE>
The allocation of the 1996 net income for federal income tax purposes
is as follows:
<TABLE>
<CAPTION>
Portfolio
Income
<S> <C>
Unitholders $ 13,469,765
Corporate Limited Partner 92
General Partners 416,594
$ 13,886,451
</TABLE>
For the years ended December 31, 1996, 1995 and 1994 the
average per unit income to the Unitholders for federal income
tax purposes was $.95, $.84 and $1.05, respectively.
H. Fair Value Disclosures of Financial Instruments
The Partnership uses the following methods and assumptions to estimate
the fair value of each class of financial instruments:
Cash and Cash Equivalents and Short-term Investment
The carrying amount approximates fair value because of the short
maturity of those instruments.
MBS
The Partnership estimates the fair value of MBS based on quoted
market prices.
PIMs
There is no established trading market for these investments.
Management estimates the fair value of the PIMs using quoted market
prices of MBS having the same stated coupon rate. Management does
not include any participation income in the Partnership s estimated
fair value arising from appreciation of the properties, because
Management does not believe it can predict the time of realization
of the feature with any certainty. Based on the estimated fair
value determined using these methods and assumptions, the Trust's
investments in PIMs had gross unrealized gains and losses of
approximately $3,282,000 and $343,000 respectively, at December 31,
1996 and gross unrealized gains of approximately $5,606,000 at
December 31, 1995.
At December 31, 1996 and 1995, the estimated fair values of the
Partnership's financial instruments are as follows:
1996 1995
Cash and cash equivalents and
short-term investment $ 7,921 $ 6,454
MBS 41,284 44,597
PIMs 154,657 158,535
$203,862 $209,586
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
<TABLE>
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1996
<CAPTION>
Normal
Monthly Carrying
Interest Maturity Payment Original Current Amount at
PIMs (a) Rate (b) Date (k) (l) Face Amount Face Amount 12/31/96
GNMA
<S> <C> <C> <C> <C> <C> <C>
Colonial Park 8.25% 4/15/23 $ 19,700 $ 2,700,000 $ 2,540,874 $ 2,540,874
Apts
Euclid, OH
Country Meadows
Apts
Savage, MD 8.25%
(c)(e)(h) 10/15/30
89,100 12,475,000 12,175,878 12,175,878
Denrich Apartments
Philadelphia, PA 6.25%
(c)(e)
(h)(r) 12/15/23 24,900 3,500,000 3,305,836 3,305,836
Fallwood Apts.
Indianapolis, IN 8.00%
(c)(e)(h) 7/15/23 49,700 7,000,000 6,587,160 6,587,160
Greenbrier Apts.
Overland Park, KS 8.25%
(c)(e)(h) 9/15/23 17,100 2,350,000 2,220,556 2,220,556
Harbor House Apts.
Madison, WI 8.25%
(g)(h)(m)
4/12/31 89,200 12,484,304 12,230,830 12,230,830
Lakeside Apts.
Mountlake Terrace,
WA 8.00%
(c)(e)(h) 6/15/23 75,400 10,620,000 9,979,555 9,979,555
Le Coeur du Monde
Apts
St. Louis, MO 8.25%
(c)(f)
(n) 10/15/30 70,100 9,814,200 9,574,782 9,574,782
Lily Flagg Station
Huntsville, AL 8.00%
(c)(e)(h) 4/15/24 89,500 12,594,835 11,940,217 11,940,217
Longwood Villas
Apts
Orlando, FL 8.00%
(q) 4/15/24 47,500 6,690,456 6,342,718 6,342,718
Pine Ridge Apts.
Chicago, IL 8.25%
(c)(e)(h) 11/15/23 32,300 4,433,100 4,196,051 4,196,051
Richmond Park
Richmond Heights,
OH 7.50%
(c)(e)(h) 8/15/24 107,900 16,000,000 15,125,112 15,125,112
Saratoga Apts.
Rolling Meadows,
IL 7.875%
(c)(e)(h) 8/15/24 47,300
6,750,000 6,408,279 6,408,279
The Greenhouse
Omaha, NE 8.50%
(d)(e)(h) 2/15/30 64,600
8,810,900 8,584,527 8,584,527
Westbrook Manor
Apts.
Omaha, NE 8.25%
(c)(e)(h) 5/15/23 37,900
5,200,000 4,897,269 4,897,269
121,422,795 116,109,644 116,109,644
FNMA
Carlyle Court
Indianapolis, IN
7.25%
(c)(e)(h)
10/1/99
54,400
(o)
8,280,000
7,862,659
7,862,659
Hillside Court
Centerville, OH 7.25%
(c)(e)(h) 10/1/99 30,000
(o)
4,590,000 4,358,648 4,358,648
Stanford Court
Speedway, IN 7.25%
(c)(e)(h) 10/1/99 46,700
(o)
7,110,000 6,751,581 6,751,581
Waterford Court
Lafayette, IN 7.75%
(c)(g)(j) 10/1/99 69,500
(o)
10,035,000 9,579,267 9,579,267
30,015,000 28,552,155 28,552,155
HUD
Walden Village
Apts.
Dayton, OH 8.55%
(c)(f)(i) 11/1/30 53,200
7,220,800 7,056,127 7,056,127
$158,658,595 $151,717,926 $151,717,926
(s)
</TABLE>
(a) The Participating Insured Mortgages ("PIMs") consist of either a
mortgage-backed security guaranteed by the Federal National Mortgage
Association ( FNMA ) or the Government National Mortgage Association
( GNMA ), or a direct mortgage insured by the United States
Department of Housing and Urban Development ("HUD") and a
subordinated promissory note and mortgage or shared income and
appreciation agreement with the underlying Borrower that conveys
participation interests in the revenue stream and appreciation of
the underlying property above certain specified base levels.
(b) Represents the permanent interest rate of the GNMA or FNMA MBS or the
HUD direct mortgage. In addition, the Partnership receives
additional interest consisting of (i) Minimum Additional Interest
based on a percentage of the unpaid principal balance of the first
mortgage on the property, (ii) Shared Income Interest based on a
percentage of monthly gross income generated by the underlying
property in excess of a specified base amount (but only to the extent
it exceeds the amount of Minimum Additional Interest received during
such month), (iii) Shared Appreciation Interest based on a percentage
of any increase in the value of the underlying property in excess of
a specified base value.
(c) Minimum additional interest is at a rate of .5% per annum calculated
on the unpaid principal balance of the first mortgage note.
(d) Minimum additional interest is at a rate of .75% per annum calculated
on the unpaid principal balance of the first mortgage note.
(e) Shared income interest is based on 25% of monthly gross rental income
over a specified base amount.
(f) Shared income interest is based on 30% of monthly gross rental income
over a specified base amount.
(g) Shared income interest is based on 35% of monthly gross rental income
over a specified base amount.
(h) Shared appreciation interest is based on 25% of any increase in the
value of the project over the specified base value.
(i) Shared appreciation interest is based on 30% of any increase in the
value of the project over the specified base value.
(j) Shared appreciation interest is based on 35% of any increase in the
value of the project over the specified base value.
(k) The Partnership's GNMA MBS and HUD direct mortgages have call
provisions, which allow the Partnership to accelerate their
respective maturity date.
(l) The normal monthly payment consisting of principal and interest is
payable monthly at level amounts over the term of the GNMA MBS and
the HUD direct mortgages. The GNMA MBS, FNMA MBS and HUD-insured
first mortgage loan generally may not be prepaid during the first
five years and may be prepaid subject to a 9% prepayment penalty in
years six through nine, a 1% prepayment penalty in year ten and no
prepayment penalty after year ten. The normal monthly payment
consisting of principal and interest for FNMA MBS is payable at level
amounts based on a 35-year amortization. All unpaid principal and
accrued interest is due at the end of year ten.
(m) The Partnership agreed to temporarily reduce the interest rate on the
Harbor House PIM. The reduction, which was effective on March 1,
1992, lasted for a period of thirty months and ranged from 6.75% to
7.75% per annum and thereafter is 8.25% per annum. As consideration
for this reduction, the Partnership increased its Minimum Additional
Interest from .5% to .75% as well as reduced the Shared Appreciation
Interest Base from $13,750,000 to $13,000,000.
(n) The Partnership agreed to temporarily reduce the interest rate on the
Le Couer du Monde PIM. The reduction is retroactive to October 1,
1992, and ranged from 6.375% to 8.125% per annum through October 1,
1995 and thereafter is at 8.25% per annum. As consideration for this
reduction, the Partnership increased its Shared Appreciation Interest
rate from 30% to 35% and decreased the base value used for this
calculation from $10,795,620 to $9,814,200.
(o) The approximate principal balance due at maturity for each PIM,
respectively, is as follows:
PIM Amount
Carlyle Court $7,620,000
Hillside Court $4,224,000
Stanford Court $6,543,000
Waterford Court $9,308,000
(p) The Partnership permitted the borrower to sell the property and
allowed the buyer to assume the first mortgage loan. The Partnership
received from the borrower $35,000 of participation interest
accumulated through the date of sale. In addition, this buyer
entered into an agreement with the Partnership to pay additional
interest calculated monthly and payable semiannually at a rate of
.5% per annum on the unpaid principal balance of the insured mortgage
loan.
(q) The Partnership permitted the borrower to sell the property and the
buyer assumed the first mortgage loan and any future obligations
arising under the participation features. The Partnership received
$35,000 as a discounted payoff of the accumulated participation
interest through the sale date.
(r) On June 28, 1995, the Partnership entered into a temporary interest
rate reduction agreement on the Denrich Apartments PIM. Beginning
July 1, 1995, the interest rate decreased from 8% per annum to 6.25%
per annum for thirty months, then increases to 6.75% per annum for
the following thirty-six month period and then increases to the
original interest rate of 8% per annum. The difference between
interest at the original interest rate and the reduced interest rates
will accumulate and be payable from surplus cash or from the net
proceeds of a sale or refinancing. These accumulated amounts will be
due and payable prior to any distributions to the borrower or payment
of participation interest to the Partnership. Also under the
agreement, the base level for calculating Shared Appreciation
Interest decreased from $4,025,000 to $3,500,000.
(s) The aggregate cost of PIMs for federal income tax purposes is
$151,717,926.
A reconciliation of the carrying value of PIMs for each of the three
years in the period ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of period $152,929,361 $154,042,671 $166,225,452
Deductions during period:
Sales proceeds and
principal prepayment - - (11,125,765)
Principal collections (1,211,435) (1,113,310) (1,057,016)
Balance at end of period $151,717,926 $152,929,361 $154,042,671
</TABLE>
<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> 0000805297
<NAME> KRUPP INSURED PLUS II LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,921,270
<SECURITIES> 193,001,695<F1>
<RECEIVABLES> 1,604,301
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,025,153<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 207,552,419
<CURRENT-LIABILITIES> 18,900
<BONDS> 0
0
0
<COMMON> 206,978,183<F3>
<OTHER-SE> 555,336<F4>
<TOTAL-LIABILITY-AND-EQUITY> 207,552,419
<SALES> 0
<TOTAL-REVENUES> 15,855,280<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,524,068<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,331,212
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,331,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,331,212
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMs") of $151,717,926 and
Mortgage-Backed Securities ("MBS") of $41,283,769.
<F2>Includes prepaid acquisition fees and expenses of $12,168,877 net of
accumulated amortization of $8,279,914 and prepaid participation servicing fees
of $3,765,596 net of accumulated amortization of $2,629,406
<F3>Represents total equity of General Partners and Limited Partners. General
Partners deficit of ($217,867) and Limited Partners equity of $207,196,050.
<F4>Unrealized gain on MBS
<F5>Represents interest income on investments in mortgages and cash
<F6>Includes $1,746,476 of amortization of prepaid fees and expenses.
<F7>Net income allocated $369,936 to the General Partners and $11,961,276 to the
Limited Partners. Average net income per Limited Partner interest is $.82 on
14,655,512 Limited Partner interests outstanding.
</FN>
</TABLE>
