<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED OCTOBER 31, 1999
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: 0-18076
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3038480
-------- ----------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
BALANCE SHEETS
October 31, 1999 and July 31, 1999 (Unaudited)
(In thousands)
ASSETS
October 31 July 31
---------- -------
Investments in Debt Securities:
Mortgage-Backed Securities
available for sale $ 2,528 $ 2,715
Participating Insured Mortgage Loans
available for sale 17,958 17,930
-------- --------
20,486 20,645
Cash and cash equivalents 1,548 1,420
Interest and other receivables 143 145
Deferred expenses, net 133 177
-------- --------
$ 22,310 $ 22,387
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 26 $ 25
Accounts payable and accrued expenses 36 39
Partners' capital 22,248 22,323
-------- --------
$ 22,310 $ 22,387
======== ========
See accompanying notes.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended October 31, 1999 and 1998 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended
October 31,
------------------------
1999 1998
---- ----
Revenues:
Interest income - Debt Securities $ 418 $ 442
Interest income - Money Market 20 26
------- -------
438 468
Expenses:
Management fees 45 49
General and administrative 38 43
Amortization expense 44 44
------- -------
127 136
------- -------
Net income 311 332
Other comprehensive income (loss):
Unrealized holding gains and (losses)
on debt securities 64 (249)
------- -------
Comprehensive income $ 375 $ 83
======= =======
Net income per Unit of Depositary Receipt $ 0.56 $ 0.60
======= =======
Cash distributions per Unit of
Depositary Receipt $ 0.81 $ 0.86
======= =======
The above net income and cash distributions per Unit of Depositary Receipt
are based upon the 551,604 Units outstanding for each period.
See accompanying notes.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended October 31, 1999 and 1998 (Unaudited)
(In thousands)
Corporate Limited
General Partner and
Partner Unitholders
------- -----------
Balance at July 31, 1998 $ (4) $ 24,764
Comprehensive income:
Net income 3 329
Net unrealized holding losses
on debt securities - (249)
------ --------
3 80
Cash distributions (4) (474)
------ --------
Balance at October 31, 1998 $ (5) $ 24,370
====== ========
Balance at July 31, 1999 $ (6) $ 22,329
Comprehensive income:
Net income 3 308
Net unrealized holding gain
on debt securities - 64
------ --------
3 372
Cash distributions (4) (446)
------ --------
Balance at October 31, 1999 $ (7) $ 22,255
====== ========
See accompanying notes.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended October 31, 1999 and 1998
Increase (Decrease) in Cash and Cash Equivalents (Unaudited)
(In thousands)
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 311 $ 332
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization expense 44 44
Amortization of discount/premium on debt
securities 16 19
Changes in assets and liabilities:
Interest and other receivables 2 3
Accounts payable - affiliates 1 -
Accounts payable and accrued expenses (3) (10)
------ ------
Total adjustments 60 56
------ ------
Net cash provided by operating activities 371 388
------ ------
Cash flows from investing activities:
Principal collections on Mortgage-Backed
Securities 183 326
Principal collections on Participating Insured
Mortgage Loans 24 22
------ ------
Net cash provided by investing activities 207 348
------ ------
Cash flows from financing activities:
Distributions to Unitholders and partners (450) (478)
------ ------
Net increase in cash and cash equivalents 128 258
Cash and cash equivalents, beginning of period 1,420 1,702
------ ------
Cash and cash equivalents, end of period $1,548 $1,960
====== ======
See accompanying notes.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
Notes to Financial Statements
(Unaudited)
1. General
-------
The accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in the
Partnership's Annual Report for the year ended July 31, 1999. In the opinion of
management, the accompanying financial statements, which have not been audited,
reflect all adjustments necessary to present fairly the results for the interim
period. All of the accounting adjustments reflected in the accompanying interim
financial statements are of a normal recurring nature.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles
which requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of October 31, 1999 and July 31, 1999 and revenues and
expenses for each of the three-month periods ended October 31, 1999 and 1998.
Actual results could differ from the estimates and assumptions used.
The Partnership is currently analyzing potential disposition strategies for
its remaining investments. As part of these efforts, the Partnership is
evaluating the current economic benefits it would receive if the owners of the
Emerald Cove Apartments and the Quarter Mill Apartments were to prepay their
participating loans in the near term. The current strength of the national real
estate market and the favorable interest rate environment for the sale or
refinancing of multi-family apartment properties make the prospect of a
prepayment transaction a potentially attractive option for the property owners.
During fiscal year 1999, the Partnership continued to have discussions with the
owners of the Emerald Cove Apartments and the Quarter Mill Apartments about the
possibility of a prepayment of their loans before the end of calendar year 1999
or in early calendar year 2000. While, to date, the discussions with the owners
have not led to an agreement for the prepayment of the participating loans, the
Partnership continues to have discussions with the owner of Emerald Cove. While
the Partnership cannot require either of the owners to prepay their loans in the
near term, the Partnership could possibly sell one or both of the participating
loans and some or all of the non-participating mortgage-backed security pools on
the secondary market. In this regard, a key consideration is the strength of the
buying markets for these types of investments. Also, as part of any sale of its
two participating mortgage loans, the Partnership would expect to receive fair
value for its entitlement to participate in potential cash flow increases and
capital appreciation from each property as well as for its entitlement to
receive prepayment penalties if either of the participating loans were prepaid
by the property owners. As discussed further below, as of the present date the
amounts of the prepayment penalties which could be received on the two remaining
participating loans range from 4% to 2% of the outstanding loan balances
depending on the date of the prepayment. The prepayment penalties would apply if
the participating loans were prepaid before June 2001 for its Quarter Mill
investment and May 2002 for its Emerald Cove investment. With respect to the
Quarter Mill investment, subsequent to the quarter ended October 31, 1999 the
Partnership engaged the services of a nationally recognized mortgage brokerage
firm to market the participating loan for sale. Initial marketing materials have
been distributed to over 100 buyers of these types of investments in the
secondary market. All offers are due by January 15, 2000 and a sale is expected
to close shortly thereafter if the offers equal or exceed a specified minimum
price. Regardless of whether the Partnership decides to pursue secondary market
sales of its debt securities or chooses to pursue prepayments of the
participating loans, a liquidation of the Partnership will not be completed
until the first quarter of calendar year 2000 at the earliest. There can be no
assurances, however, that the disposition of the remaining investments and a
liquidation of the Partnership will be completed within this time frame.
2. Mortgage-Backed Securities
--------------------------
At October 31, 1999 and July 31, 1999, the Partnership held
non-participating mortgage-backed securities ("MBS") backed by single-family or
multi-family mortgage loans issued or originated in connection with the housing
programs of the Government National Mortgage Association ("GNMA"), and
guaranteed by GNMA, as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
October 31, 1999 July 31, 1999
-------------------------------- ---------------------------------
Estimated Estimated
Market Face Amortized Market Face Amortized
Description Value Value Cost Value Value Cost
------------ ------ ----- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
9.5% GNMA Pool $ 965 $ 900 $ 897 $ 1,056 $ 986 $ 982
9.0% GNMA Pool 70 66 69 78 76 79
8.0% GNMA Pool 1,386 1,356 1,388 1,469 1,437 1,480
7.5% GNMA Pool 107 106 105 112 112 111
------- ------- ------- ------- ------- -------
$ 2,528 $ 2,428 $ 2,459 $ 2,715 $ 2,611 $ 2,652
======= ======= ======= ======= ======= =======
</TABLE>
The Partnership's investments in MBS are carried at fair value as of
October 31, 1999 and July 31, 1999. Investments in MBS are valued based on
quoted market prices. The amortized cost of the MBS represents the face value of
the securities net of unamortized premium or discount. Beginning in fiscal 1998,
the premiums and discounts are being amortized on a straight-line basis over the
expected remaining holding periods of the investments of three years. Prior to
fiscal 1998, the premium and discounts were being amortized over an original
estimated holding period of fifteen years. Investments in non-participating MBS
were limited to no more than 30% of the original net offering proceeds per the
terms of the Partnership's offering prospectus.
The 9.5% MBS, which were purchased at a discount on December 14, 1988,
carry a coupon interest rate of 9.5% per annum and include loans with scheduled
maturities between June 2009 and December 2009. The 9.0% MBS, which were
purchased at a premium on November 16, 1989, carry a coupon interest rate of
9.0% per annum and include loans with scheduled maturities between June 2001 and
September 2002. The 8.0% MBS, which were purchased at a premium on July 30,
1992, carry a coupon interest rate of 8.0% per annum and include loans with
scheduled maturities in June 2022. The 7.5% MBS, which were purchased at a
discount on October 30, 1992, carry a coupon interest rate of 7.50% per annum
and include loans with scheduled maturities in March 2022. The loans included in
these GNMA pool programs may be prepaid, without penalty, at any time.
3. Investments in Participating Insured Mortgage Loans
---------------------------------------------------
Participating Insured Mortgage Loans secured by GNMA securities
outstanding at October 31, 1999 and July 31, 1999 are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
October 31, 1999 July 31, 1999
----------------------- -------------------------
GNMA Estimated Estimated
Certificate Interest Market Amortized Market Amortized
Number Property Rate Value Cost Value Cost
------ -------- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
279985 Quarter Mill 8.50% $ 7,226 $ 7,084 $ 7,236 $ 7,094
279119 Emerald Cove 8.75% 10,732 10,485 10,694 10,504
-------- -------- -------- --------
$ 17,958 $ 17,569 $ 17,930 $ 17,598
======== ======== ======== ========
</TABLE>
The Partnership's investments in Participating Insured Mortgage Loans are
carried at fair value as of October 31, 1999 and July 31, 1999. Investments in
Participating Insured Mortgage Loans, for which quoted market prices are not
available, are valued by a pricing service which determines the valuations based
on a comparison of recent market trades of securities with similar
characteristics. Because of the inherent uncertainty of valuations, estimated
values, as reflected herein, may differ from the values that would have been
used had a ready market for the securities existed. Descriptions of the
properties financed by the Partnership's loans and the loan agreements
themselves are summarized below:
<PAGE>
Quarter Mill Apartments
-----------------------
The Partnership acquired a Participating Insured Mortgage Loan with
respect to a 266-unit apartment complex known as Quarter Mill Apartments located
in Richmond, Virginia (the "Virginia Project"). Construction of the Virginia
Project was completed in November of 1990. Initial closing of this Participating
Insured Mortgage loan took place on August 2, 1989. The project owner is Amurcon
Corporation. The Base Component of this Participating Insured Mortgage Loan is
coinsured by FHA and represented by GNMA Securities with an initial face value
of $7,316,600, which GNMA Securities bore interest at the rate of 10.25% during
construction of the Virginia Project and 8.50% thereafter. Effective May 1,
1991, the construction loan was converted to a permanent loan with a principal
balance of $6,525,000. On June 21, 1991 an additional $791,600 was funded,
completing the Partnership's investment of $7,316,600. Monthly payments of
principal and interest totalling approximately $53,553 are due through maturity,
on October 15, 2031. Scheduled principal repayments of $232,820 have been
received through October 31, 1999.
Emerald Cove Apartments
-----------------------
The Partnership acquired a Participating Insured Mortgage Loan with
respect to a 276-unit apartment complex known as Emerald Cove Apartments in
Charlotte, North Carolina (the "North Carolina Project"). Initial closing of
this Participating Insured Mortgage Loan took place on October 16, 1989. The
project owners are Ronald Curry and Ralph Abercia. The Base Component of this
Participating Insured Mortgage Loan is coinsured by FHA and represented by GNMA
Securities with an initial face value of $10,783,900 at closing, which GNMA
Securities bore interest at the rate of 10.25% during construction of the North
Carolina Project and 8.75% thereafter. During fiscal 1992, the Partnership
funded its remaining commitment on the investment of approximately $1,184,000
and, effective May 1, 1992, the investment was converted to a permanent loan
with a principal balance of $10,776,500. The Partnership paid a premium of
$107,840 to the GNMA issuer to obtain the original loan commitment due to the
fact that the permanent loan interest rate was higher than comparable market
rates at the time of the initial closing. Prior to fiscal 1998, the premium had
been amortized on the straight-line method over a 15-year amortization period.
Beginning in fiscal 1998, the amortization rate has been increased to reflect a
reduction in the expected remaining holding period of the investment. Monthly
payments of principal and interest totalling approximately $81,141 are due
through maturity, on August 15, 2031. Scheduled principal repayments of $313,278
have been received through October 31, 1999.
4. Related Party Transactions
---------------------------
Management fees earned by the General Partner and its affiliates for
services rendered in managing the business of the Partnership aggregated $45,000
and $49,000 for the three months ended October 31, 1999 and 1998, respectively.
Included in these two amounts is $7,000 and $9,000, respectively, representing
additional asset management fees paid to PWPI which are based on the
Partnership's cash distributions of operating income, as discussed further in
the Partnership's Annual Report. Accounts payable - affiliates at both October
31, 1999 and July 31, 1999 consist of management fees payable to the General
Partner and its affiliates.
Included in general and administrative expenses for the three months ended
October 31, 1999 and 1998 is $25,000 and $24,000, respectively, representing
reimbursements to an affiliate of the General Partner for providing certain
financial, accounting and investor communication services to the Partnership.
Also included in general and administrative expenses for the three-month
period ended October 31, 1999 and 1998 is $1,000 and $2,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information Relating to Forward-Looking Statements
- --------------------------------------------------
The following discussion of financial condition includes forward-looking
statements which reflect management's current views with respect to future
events and financial performance of the Partnership. These forward-looking
statements are subject to certain risks and uncertainties, including those
identified in Item 7 of the Partnership's Annual Report on Form 10-K for the
year ended July 31, 1999 under the heading "Certain Factors Affecting Future
Operating Results," which could cause actual results to differ materially from
historical results or those anticipated. The words "believe," "expect,"
"anticipate," and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which were made based on facts and conditions as they existed as of
the date of this report. The Partnership undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Liquidity and Capital Resources
- -------------------------------
The Partnership is currently analyzing potential disposition strategies for
its remaining investments. As part of these efforts, the Partnership is
evaluating the current economic benefits it would receive if the owners of the
Emerald Cove Apartments and the Quarter Mill Apartments were to prepay their
participating loans in the near term. The current strength of the national real
estate market and the favorable interest rate environment for the sale or
refinancing of multi-family apartment properties make the prospect of a
prepayment transaction a potentially attractive option for the property owners.
During fiscal year 1999, the Partnership continued to have discussions with the
owners of the Emerald Cove Apartments and the Quarter Mill Apartments about the
possibility of a prepayment of their loans before the end of calendar year 1999
or in early calendar year 2000. While, to date, the discussions with the owners
have not led to an agreement for the prepayment of the participating loans, the
Partnership continues to have discussions with the owner of Emerald Cove. While
the Partnership cannot require either of the owners to prepay their loans in the
near term, the Partnership could possibly sell one or both of the participating
loans and some or all of the non-participating mortgage-backed security pools on
the secondary market. In this regard, a key consideration is the strength of the
buying markets for these types of investments. Also, as part of any sale of its
two participating mortgage loans, the Partnership would expect to receive fair
value for its entitlement to participate in potential cash flow increases and
capital appreciation from each property as well as for its entitlement to
receive prepayment penalties if either of the participating loans were prepaid
by the property owners. As discussed further below, as of the present date the
amounts of the prepayment penalties which could be received on the two remaining
participating loans range from 4% to 2% of the outstanding loan balances
depending on the date of the prepayment. The prepayment penalties would apply if
the participating loans were prepaid before June 2001 for its Quarter Mill
investment and May 2002 for its Emerald Cove investment. With respect to the
Quarter Mill investment, subsequent to the quarter ended October 31, 1999 the
Partnership engaged the services of a nationally recognized mortgage brokerage
firm to market the participating loan for sale. Initial marketing materials have
been distributed to over 100 buyers of these types of investments in the
secondary market. All offers are due by January 15, 2000 and a sale is expected
to close shortly thereafter if the offers equal or exceed a specified minimum
price. Regardless of whether the Partnership decides to pursue secondary market
sales of its debt securities or chooses to pursue prepayments of the
participating loans, a liquidation of the Partnership will not be completed
until the first quarter of calendar year 2000 at the earliest. There can be no
assurances, however, that the disposition of the remaining investments and a
liquidation of the Partnership will be completed within this time frame.
The Partnership's non-participating MBS have coupon interest rates ranging
from 7.5% to 9.5%. Based on current market interest rate levels, the aggregate
market value of these securities at the present time is slightly above both the
aggregate face value and amortized cost, which includes any unamortized
discounts or premiums. As of October 31, 1999, the Partnership's two remaining
Participating Insured Mortgage Loans, which carry coupon interest rates of 8.5%
and 8.75%, also had estimated market values slightly above their face values due
to a variety of factors, including the participation features. Increases in
market interest rates reduced the fair market values of both the participating
loans and the non-participating MBS during fiscal 1999. Further increases in
market interest rates and/or deterioration in general real estate market
conditions in the near term could cause the aggregate market value of the
Participating Insured Mortgage Loans and the portfolio of non-participating MBS
investments to fall below face value and/or amortized cost. In the event that
such circumstances were to occur, management is not prohibited from selling any
security at a loss and may do so if it is believed that such a sale would be in
the best interests of the Partnership.
As previously reported, generally low market interest rates have prompted
a high level of refinancing activity over the past several years, resulting in
significant prepayments on the Partnership's non-participating mortgage-backed
securities. Such prepayments had the effect of reducing the Partnership's
investment income and cash flows from operating activities and increasing the
outstanding balance of the Partnership's cash reserves. Regular quarterly
distributions are comprised of investment income and return of capital which
results from the scheduled amortization of mortgage principal on all of the debt
securities as well as principal prepayments from the non-participating GNMA
mortgage-backed securities. Such principal prepayments are unpredictable and, as
noted above, had been high during recent years but declined during fiscal 1997,
resulting in a reduction in cash flows from investing activities. Based on this
decline in the rate of principal prepayments and the expectation that this
decline would continue in the future, the Partnership had reduced the regular
quarterly distribution rate effective for the payment made on June 13, 1997 for
the third quarter of fiscal 1997. The distribution rate declined from 8.25% per
annum to 6.5%. During fiscal 1998 and fiscal 1999, however, actual principal
prepayment levels were higher than projected resulting in an increase in cash
flows from investing activities. As a result, the Partnership made a special
capital distribution of excess cash totaling approximately $552,000, or $10.00
per original $1,000 investment, to the Limited Partners on March 13, 1998
concurrent with the regular quarterly distribution for the period ended January
31, 1998. During fiscal 1999 a special distribution of $25.00 per original
$1,000 investment was paid to unit holders of record as of January 31, 1999.
This special capital distribution, which was made on March 15, 1999 and totalled
approximately $1,379,000, represented Partnership reserves that exceeded
expected future requirements. Distributions are expected to continue to be made
at a rate of 6.5% per annum on remaining invested capital throughout fiscal year
2000. Since the Partnership expects to be liquidated in the near term,
management does not currently plan to make any further special capital
distributions of excess cash reserves until the Partnership's investments have
been sold or prepaid.
The Partnership's two remaining Participating Insured Mortgage Loans are
secured by the Emerald Cove and Quarter Mill apartment complexes. The occupancy
level at Emerald Cove averaged 90% for the quarter ended October 31, 1999,
unchanged from the quarter ended July 31, 1999. This average occupancy level
still compares favorably to the average for the properties which compete with
Emerald Cove in the local market. When necessary, the property's leasing team is
matching the rental concessions offered by competing apartment communities.
These rental concessions range from $600 to $800, depending on the apartment
unit type, for those tenants signing a one year lease. There are four new
apartment communities with a total of 1,246 units under construction in Emerald
Cove's overall market. While these properties are not expected to compete
directly, the property's leasing team continues to monitor their leasing
progress. Prepayment of the Partnership's Emerald Cove Participating Insured
Mortgage Loan was restricted through March 1998 and then requires a prepayment
penalty which declines ratably, from 5% to 2%, from April 1998 through April
2002. During the quarter ended April 30, 1998, the Emerald Cove owner informed
the Partnership that the property was being actively marketed for sale and asked
that the Partnership specify the terms upon which it would accept prepayment of
the participating loan. During the quarter ended July 31, 1998, the owner of the
Emerald Cove Apartments approached the Partnership regarding a prepayment of the
participating mortgage loan as part of a potential sale of the Emerald Cove
property. However, during the first quarter of fiscal 1999, the Partnership was
informed that the potential buyer and the owner were not able to agree on final
terms and that a sale would not occur. As previously reported, the owner of the
Emerald Cove Apartments has initiated discussions of prepayment on several
occasions over the past five years, but none of those discussions have resulted
in a prepayment transaction. As a result, as noted above, the Partnership is
presently reviewing other potential disposition options for its Participating
Insured Mortgage Loan investments.
The Quarter Mill Apartments continued its strong operating performance
during the quarter ended October 31, 1999, with an average occupancy level of
98%, which compared with 97% for the quarter ended July 31, 1999. Because
Quarter Mill Apartments participates in the Low Income Housing Tax Credit
Program, its rental rates are based on the metropolitan area's median family
income, rather than on market rent levels. A strong local rental market,
combined with below market rental rates at Quarter Mill, has resulted in
consistently high occupancy levels at the property. Property operations continue
to generate small amounts of excess cash flow, a portion of which is payable to
the Partnership as Contingent Interest. During fiscal 1999, 1998 and 1997, the
Partnership received approximately $27,000, $54,000 and $49,000, respectively,
representing its 30% share of the surplus cash, as defined. Construction of 484
new apartment units were completed in the property's local market area during
the past year and 236 new apartment units are under construction. While these
property are not expected to compete directly, the property's leasing teams is
closely monitoring their leasing progress. The Quarter Mill Participating
Insured Mortgage Loan became open to prepayment in May 1996 with a specified
prepayment penalty which declines ratably, from 10% to 2%, from May 1996 through
May 2001. During fiscal 1998 and 1999, the Partnership and the owner of Quarter
Mill engaged in very preliminary discussions concerning a potential prepayment
of the Participating Insured Mortgage Loan. However, to date no formal proposals
to prepay the loan have been received from the owner of Quarter Mill.
<PAGE>
At October 31, 1999, the Partnership had cash and cash equivalents of
approximately $1,548,000. Such amounts will be utilized for distributions to the
Unitholders and for the working capital requirements of the Partnership. The
source of future liquidity and distributions to the Unitholders is expected to
be primarily through interest income and principal repayments from the
Partnership's mortgage securities, money-market interest income from invested
cash reserves, and to a lesser extent from Contingent Interest from
Participating Insured Mortgage Loans and Net Project Residuals from the sale or
refinancing of the properties securing such investments. As noted above, the
Partnership expects to be liquidated in the near term. Notwithstanding this, the
Partnership believes that it has made all necessary modifications to its
existing systems to make them year 2000 compliant and does not expect that
additional costs associated with year 2000 compliance, if any, will be material
to the Partnership's results of operations or financial position.
Results of Operations
Three Months Ended October 31, 1999
- -----------------------------------
The Partnership reported net income of $311,000 for the three months ended
October 31, 1999, as compared to net income of $332,000 for the same period in
the prior year. This decrease in net income for the first quarter of fiscal 2000
resulted from a decrease in total revenues of $30,000 which was partially offset
by a decrease in total expenses of $9,000. The decrease in revenues was the
result of a $24,000 decline in interest income from debt securities and a
decrease of $6,000 in money market interest income. The decrease in interest
income from debt securities resulted from a reduction in the average outstanding
principal balances of Participating Insured Mortgage Loans and non-participating
MBS due to scheduled principal amortization on all of the debt securities and
prepayments on the MBS. The decrease in money market interest income resulted
from a decrease in the average outstanding balance of the Partnership's invested
cash reserves compared to the same period in the prior year as a result of the
special distribution of excess reserves which was made in March 1999, as
discussed further above. The decrease in total expenses was the result of a
$5,000 decline in general and administrative expenses and a $4,000 reduction in
management fee expense. General and administrative expenses decreased for the
current three-month period primarily due to a reduction in certain required
professional services. Management fee expense declined due to a decrease in the
outstanding balances of the debt securities upon which such fees are based.
<PAGE>
PART II
Other Information
Item 1. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
<PAGE>
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
By: FIRST INSURED MORTGAGE PARTNERS, INC.
-------------------------------------
Managing General Partner
Date: December 10, 1999 By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's unaudited financial statements for the quarter ended October 31,
1999 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jul-31-2000
<PERIOD-END> Oct-31-1999
<CASH> 1,548
<SECURITIES> 2,528
<RECEIVABLES> 18,101
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,691
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,310
<CURRENT-LIABILITIES> 62
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,248
<TOTAL-LIABILITY-AND-EQUITY> 22,310
<SALES> 0
<TOTAL-REVENUES> 438
<CGS> 0
<TOTAL-COSTS> 127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 311
<INCOME-TAX> 0
<INCOME-CONTINUING> 311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311
<EPS-BASIC> 0.56
<EPS-DILUTED> 0.56
</TABLE>
