UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 0-20164
Krupp Government Income Trust II
Massachusetts 04-3073045
(State or other jurisdiction (IRS employer identification no.)
of incorporation or organization)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(617) 523-0066
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
<TABLE>
<CAPTION>
KRUPP GOVERNMENT INCOME TRUST II
BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
Participating Insured Mortgage Investments
("PIMIs")(Note 2):
<S> <C> <C>
Insured mortgages $ 122,245,357 $ 131,750,452
Additional Loans, net of impairment provision
of $2,994,000 21,298,351 21,298,351
Participating Insured Mortgages ("PIMs")(Note 2) 37,906,200 37,994,412
Mortgage-Backed Securities ("MBS")(Note 3) 20,370,179 21,127,474
Total mortgage investments 201,820,087 212,170,689
Cash and cash equivalents 7,124,929 8,653,673
Prepaid acquisition fees and expenses, net of
accumulated amortization of $7,968,612 and
$8,093,170, respectively 5,827,225 6,522,092
Prepaid participation servicing fees, net of
accumulated amortization of $2,374,766 and
$2,262,659, respectively 2,120,953 2,233,060
Interest receivable and other assets 1,476,945 1,629,549
Total assets $ 218,370,139 $ 231,209,063
LIABILITIES AND SHAREHOLDERS' EQUITY
Deferred income on Additional Loans $ 2,846,447 $ 2,692,976
Other liabilities 141,934 150,025
Total liabilities 2,988,381 2,843,001
Shareholders' equity (Note 4):
Common stock, no par value; 25,000,000
Shares authorized; 18,371,477 Shares
issued and outstanding 215,970,925 228,920,012
Accumulated comprehensive loss (589,167) (553,950)
Total Shareholders' equity 215,381,758 228,366,062
Total liabilities and Shareholders' equity $ 218,370,139 $ 231,209,063
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
KRUPP GOVERNMENT INCOME TRUST II
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Months
Ended March 31,
2000 1999
Revenues:
Interest income - PIMs and PIMIs:
<S> <C> <C>
Basic interest $ 2,826,118 $ 3,010,589
Additional Loan interest (Note 5) 459,608 528,028
Participation income (Note 2) 1,105,235 -
Interest income - MBS 377,053 642,107
Interest income - other 140,051 229,496
Total revenues 4,908,065 4,410,220
Expenses:
Asset management fee to an affiliate 383,171 436,223
Expense reimbursements to affiliates 63,878 39,423
Amortization of prepaid fees and expenses 806,974 490,328
General and administrative 68,799 63,205
Total expenses 1,322,822 1,029,179
Net income 3,585,243 3,381,041
Other comprehensive income:
Net change in unrealized loss
on MBS (35,217) (36,105)
Total comprehensive income $ 3,550,026 $ 3,344,936
Basic earnings per Share $ .20 $ .18
Weighted average Shares outstanding 18,371,477 18,371,477
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
KRUPP GOVERNMENT INCOME TRUST II
STATEMENTS OF CASH FLOWS
For The Three Months Ended
March 31,
2000 1999
Operating activities:
<S> <C> <C>
Net income $ 3,585,243 $ 3,381,041
Adjustments to reconcile net income to net
cash provided by operating activities:
Premium amortization, net 18,149 62,968
Amortization of prepaid fees and expenses 806,974 490,328
Changes in assets and liabilities:
Decrease in interest receivable
and other assets 152,604 386,089
Increase in deferred income
on Additional Loans 153,471 62,437
Decrease in other liabilities (8,091) (4,605)
Net cash provided by operating activities 4,708,350 4,378,258
Investing activities:
Principal collections on MBS 703,872 3,270,087
Principal collections on PIMs
and Insured Mortgages 9,593,364 417,236
Net cash provided by investing activities 10,297,236 3,687,323
Financing activity:
Dividends (16,534,330) (5,741,099)
Net (decrease) increase in cash and cash equivalents (1,528,744) 2,324,482
Cash and cash equivalents, beginning of period 8,653,673 18,010,578
Cash and cash equivalents, end of period $ 7,124,929 $20,335,060
Non cash activities:
Decrease in Fair Value of MBS $ (35,217) $ (36,105)
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
KRUPP GOVERNMENT INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this report on Form 10-Q pursuant to the Rules
and Regulations of the Securities and Exchange Commission. However, in the
opinion of Berkshire Mortgage Advisors Limited Partnership, the "Advisor" to
Krupp Government Income Trust II (the "Trust"), the disclosures contained in
this report are adequate to make the information presented not misleading. See
Notes to Financial Statements in the Trust's Form 10-K for the year ended
December 31, 1999 for additional information relevant to significant accounting
policies followed by the Trust. In the opinion of the Advisor of the Trust, the
accompanying unaudited financial statements reflect all adjustments (consisting
primarily of normal recurring accruals) necessary to present fairly the Trust's
financial position as of March 31, 2000 and the results of its operations and
its cash flows for the three months ended March 31, 2000 and 1999. The results
of operations for the three months ended March 31, 2000 are not necessarily
indicative of the results, which may be expected for the full year. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this report.
2. PIMs and PIMIs
At March 31, 2000, the Trust's PIMs and PIMIs have a fair value of approximately
$175,735,169 and gross unrealized losses of $5,714,739. The PIMs and PIMIs have
maturities ranging from 2006 to 2036. At March 31, 2000 there are no insured
mortgage loans within the Trust's portfolio that are delinquent of principal or
interest.
Oasis at Springtree and Windmill Lakes both have been adversely affected by the
competitive South Florida rental housing market. The Advisor recorded an
impairment provision of $2,994,000 in total against the two Additional Loans
during the fourth quarter of 1998. Based on its analyses of the property
operations underlying the PIMIs, it continues to maintain that allowance.
In March 2000, the Trust received $175,489 of participation income based on 1997
operating results for Falls at Hunters Pointe from borrower escrows controlled
by the Trust. The Advisor continues to pursue remedies to collect delinquent
participation income relating to 1998.
During the first quarter of 2000, the Trust received a prepayment of the Windsor
Lake PIMI consisting of a first mortgage with a remaining balance of $9,172,642.
The Trust had previously received the balance of $2,000,000 on the Additional
Loan, $40,000 of base interest on the Additional Loan and $792,907 of
Participation income in December 1999. On February 2, 2000, the Advisor declared
a special dividend of $.66 per Share that was paid on February 18, 2000 from the
payoff of the mortgage on the Windsor Lake PIMI.
During the first quarter the Trust received participation income of $686,165
from The Lakes PIMI, $346,514 from the Martin's Landing PIMI and $72,556 from
the Mequon Trails PIM. The Lakes and Martin's Landing payments related to 1998
and 1999 property operations while the Mequon Trails payment related to 1998
property operations. The 1998 billings were sent out in the fourth quarter of
1999 on these three properties.
Continued
<PAGE>
KRUPP GOVERNMENT INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS, Continued
3. MBS
At March 31, 2000, the Trust's MBS portfolio has an amortized cost of
$20,959,346 and gross unrealized gains and losses of $21,888 and $611,055,
respectively. The MBS portfolio has maturities ranging from 2009 to 2031.
4. Changes in Shareholder's Equity
A summary of changes in Shareholders' equity for the three months ended March
31, 2000 is as follows:
<TABLE>
<CAPTION>
Accumulated Total
Common Retained Comprehensive Shareholders'
Stock Earnings Loss Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1999 $ 228,920,012 $ - $ (553,950) $ 228,366,062
Net income - 3,585,243 - 3,585,243
Dividends (12,949,087) (3,585,243) (16,534,330)
Change in unrealized
loss on MBS - - (35,217) (35,217)
Balance at March 31, 2000 $ 215,970,925 $ - $ (589,167) $ 215,381,758
</TABLE>
5. Related Party Transactions
The Trust received $221,641 of Additional Loan Interest that was due from The
Seasons during the first quarter of 2000 in April 2000. For the three months
ended March 31, 1999, the Trust received $221,641 of Additional Loan Interest
from The Seasons.
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
At March 31, 2000 the Trust had liquidity consisting of cash and cash
equivalents, of approximately $7.1 million as well as the cash inflows provided
by PIMs, PIMIs, MBS, cash and cash equivalents. The Trust may also receive
additional cash flow from the participation features of its PIMs and PIMIs. The
Trust anticipates that these sources will be adequate to provide the Trust with
sufficient liquidity to meet its obligations, including providing dividends to
its investors.
The most significant demand on the Trust's liquidity is quarterly dividends,
paid to investors of approximately $4.4 million, and special distributions.
Funds for dividends come from interest income received on PIMs, PIMIs, MBS and
cash and cash equivalents net of operating expenses, and the principal
collections received on PIMs, PIMIs and MBS. The portion of dividends funded
from principal collections reduces the capital resources of the Trust. As the
capital resources of the Trust decrease, the total cash flows to the Trust will
also decrease which may result in periodic adjustments to the dividends paid to
the investors.
The Advisor periodically reviews the dividend rate to determine whether an
adjustment is necessary based on projected future cash flows. The current
dividend rate is $.24 per Share per quarter. In general, the Advisor tries to
set a dividend rate that provides for level quarterly distributions. To the
extent quarterly dividends do not fully utilize the cash available for
distribution and cash balances increase, the Advisor may adjust the dividend
rate or distribute such funds through a special distribution.
In addition to providing guaranteed or insured monthly principal and interest
payments, the Trust's investments in the PIMs and PIMIs also may provide
additional income through the interest on the Additional Loan portion of the
PIMIs as well as participation income based on operating cash flow and increase
in the value realized upon the sale or refinance of the underlying properties.
However, these payments are neither guaranteed nor insured and depend on the
successful operations of the underlying properties.
The Trust received the first installment of Additional Loan interest from six of
the PIMI investments during the first quarter. The first installment for The
Seasons was received subsequent to the end of the quarter due to HUD financial
compliance requirements. The Trust received a payment from the borrower on the
Windmill Lakes PIMI, which was applied to delinquent Additional Loan interest.
The Advisor determined that the borrower on the Norumbega PIMI had paid
Additional Loan interest from other than surplus cash, which resulted in
overpayments during the previous three years; consequently, the Trust will not
receive any Additional Loan interest until the overpayment has been reversed.
The Trust received participation income totaling $1,105,235 during the first
quarter. The Trust collected $72,556 of participation income based on 1998
operating results for Mequon Trails; $346,514 of participation income based on
both 1998 and 1999 operating results for Martins Landing; and $686,165 of
participation income based on both 1998 and 1999 operating results for The Lakes
at Vinings. The 1998 billings were sent out in the fourth quarter of 1999 on
these three properties. Subsequent to the end of the first quarter, the Trust
also received $175,968 of participation income based on the second half of 1999
operations for The Seasons. The Trust expects to collect participation income
based on successful 1999 operating results from four other investments during
2000: Crossings Village, Mequon Trails, Sunset Summit and Mill Pond II. Three
other properties, Norumbega, Fountains and Rivergreens II, are well-occupied and
generate sufficient revenue to meet all cash requirements for operations and
maintenance, but do not generate Surplus Cash under HUD's definition for payment
of participation income to the Trust.
There are significant payment issues relating to the PIMI's on three other
properties that are being closely monitored by the Advisor. Operating results at
both Windmill Lakes and Oasis at Springtree have deteriorated over the past
several years, and the payment of Additional Loan interest is an outstanding
issue for both deals. The borrower on the Falls at Hunters Pointe PIMI was
declared to be in default under the terms of the participation and Additional
Loan documents for non-payment of participation income due on 1997 and 1998
operations.
<PAGE>
The strength of the South Florida economy, bolstered by an expanding business
environment and in-migration coupled with low interest rates and available
building sites, has fostered aggressive development of both single family homes
and new apartments. Oasis at Springtree is located in the Sunrise submarket, an
established market that has seen some major rehab activity as well as new infill
construction in the multifamily sector. Occupancy at Oasis has remained stable
over the past three years in the low 90% range; however, occupancy has become
increasingly more expensive to achieve. Because Oasis must compete with newer or
rehabilitated properties, maintenance costs have risen as the standards that
apartment communities are judged by continue to rise. However, as an older
property, Oasis has not been able to command the commensurate rental rate
increases it needs to be able to pay for improvements that will enhance its
appeal in the market. Consequently, the Advisor agreed to defer Additional Loan
interest payments for 1999 to free up funds for some major capital projects. As
a result of the factors described above, the Advisor determined that the
Additional Loan collateralized by the Oasis at Springtree asset was impaired,
and the Trust recorded a valuation allowance of $994,000 in the fourth quarter
of 1998 and continues to maintain that allowance. The modification agreement for
the debt service relief is currently being negotiated between the Advisor and
the borrower.
Windmill Lakes is located in the Pembroke Pines submarket, a market that had
vast tracts of vacant land three years ago and has seen explosive construction
activity since then in single family, multifamily and retail sectors. Windmill
Lakes is a ten-year old, basic apartment community that has not been able to
compete against the influx of new apartment communities that have extensive
amenity packages. Builders use deep marketing concessions to fill the new
properties, lowering the cost of renting a new apartment and making it more
difficult for older properties like Windmill Lakes to attract residents.
Occupancy has dropped as low as 80%, although there has been a slight recovery
to the mid to high 80% range during the first quarter. The property's curb
appeal, a critical element in a competitive market, has suffered as well because
there has not been enough cash flow for adequate maintenance. Consequently, the
borrower has been delinquent in his obligation to pay Additional Loan interest
since March 1998. Although he has tried to sell the property, the borrower has
been unable to secure a purchase price that will cover the property's
outstanding liabilities. The Advisor has agreed to defer the delinquent
Additional Loan payments pending a sale of the property. In the mean time, the
borrower paid $25,000 towards the delinquent Additional Loan interest during the
first quarter. If it becomes apparent that a sale of the property at a mutually
acceptable price to both the Trust and the borrower will not be possible, the
Advisor will reassess the feasibility of extending long-term debt service relief
rather than risk the consequences of a default. As a result of the factors
described above, the Advisor determined that the Additional Loan collateralized
by the Windmill Lakes asset was impaired, and the Trust recorded a valuation
allowance of $2,000,000 in the fourth quarter of 1998 and continues to maintain
that allowance.
In November 1999, the Trust notified the borrower on the Falls at Hunters Pointe
PIMI that he was in default for non payment of Participating income due to the
Trust based on 1997 and 1998 operating results. The borrower has failed to cure
the default. Consequently, the Trust elected to use a portion of the borrower's
funds held in escrow to cure the 1997 portion of the default. The borrower
remains in default for 1998 operating results, and the Trust is pursuing its
legal remedies to recover the delinquent participating income.
Whether the operating performance of any of the properties mentioned above
provide sufficient cash flow from operations to pay either the Additional Loan
interest or participation income will depend on factors that the Trust has
little or no control over. Should the properties be unable to generate
sufficient cash flow to pay the Additional Loan interest, it would reduce the
Trust's distributable cash flow and could affect the value of the Additional
Loan collateral.
On December 16, 1999, the Trust received $2,832,907 from Windsor Lake;
consisting of $2,000,000 from the payoff of the Additional Loan, $40,000 of
Additional Loan interest, and $792,907 of Participation income. The payoff of
the balance on the insured mortgage, $9,172,642 was received on January 26,
2000. The Trust paid a special dividend of $.66 per Share from the prepayment
proceeds.
There are contractual restrictions on the prepayment of the PIMs and PIMIs.
During the first five years of the investment, borrowers are generally
prohibited from repayment. During the second five years, the PIM borrowers can
prepay the insured first mortgage by paying the greater of a prepayment premium
or the participation income due at the time of the prepayment. Similarly, the
PIMI borrowers can prepay the insured first mortgage and the Additional Loan by
satisfying the Preferred Return obligation. The participation features and the
Additional Loans are neither insured nor guaranteed. If the prepayment of the
PIM or PIMI results from the foreclosure on the underlying property or an
insurance claim, the Trust generally would not receive any participation income
or any amounts due under the Additional Loan.
<PAGE>
The Trust has the option to call certain PIMs and all the PIMIs by accelerating
their maturity if the loans are not prepaid by the tenth year after permanent
funding. The Advisor will determine the merits of exercising the call option for
each PIM and PIMI as economic conditions warrant. Such factors as the condition
of the asset, local market conditions, the interest rate environment and
available financing will have an impact on these decisions.
Results of Operations
The Trust's net income for the first quarter of 2000 increased by approximately
$204,000 as compared to the first quarter of 1999. This was primarily the result
of the participation income received from three mortgage investments totaling
$1,105,000 net of an increase in amortization expense of $317,000, which was
primarily due to writing off the remaining unamortized fees and expenses related
to Windsor Lake. Interest income on MBS decreased $265,000, which was primarily
related to The Estates payoff and on-going prepayment on the remaining
portfolio. Basic interest decreased $184,000, which primarily resulted from the
prepayment of the Windsor Lake PIMI.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Assessment of Credit Risk
The Trust's investments in mortgages, with the exception of the Additional
Loans, are guaranteed or insured by Fannie Mae, the Federal Home Loan Mortgage
Corporation (FHLMC), the Government National Mortgage Association (GNMA) or the
Department of Housing and Urban Development (HUD), and therefore, the risk of a
material loss of amounts invested is remote. The certainty of principal on the
Trust's investments primarily depends upon the creditworthiness of these
entities.
Fannie Mae is a federally chartered private corporation that guarantees
obligations originated under its programs. However, obligations of FNMA are not
backed by the U.S. Government. Fannie Mae is one of the largest corporations in
the United States and the Secretary of the Treasury of the United States has
discretionary authority to lend up to $2.25 billion to Fannie Mae at any time.
FHLMC is a federally chartered corporation that guarantees obligations
originated under its programs and is wholly-owned by the twelve Federal Home
Loan Banks. These obligations are not guaranteed by the U.S. Government or the
Federal Home Loan Bank Board. GNMA guarantees the full and timely payment of
principal and basic interest on the securities it issues, which represent
interests in pooled mortgages insured by HUD. HUD, an agency of the U.S.
Government, insures the obligations originated under its programs, which are
backed by the full faith and credit of the U.S. Government.
The Trust's Additional Loans have similar risks as those associated with higher
risk debt instruments, including: reliance on the owner's operating skills,
ability to maintain occupancy levels, control operating expenses, ability to
maintain the properties and obtain adequate insurance coverage. Operations also
may be effected by 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 Trust may have little or no
control.
The Trust includes in cash and cash equivalents approximately $6.8 million of
Agency paper.
Interest Rate Risk
The Trust's primary market risk exposure is to interest rate risk, which can be
defined as the exposure of the Trust's net income, comprehensive income or
financial condition to adverse movements in interest rates. At March 31, 2000,
the Trust's PIMs, PIMIs and MBS comprise the majority of the Trust's assets. As
such, decreases in interest rates may accelerate the prepayment of the Trust's
investments. The Trust does not utilize any derivatives or other instruments to
manage this risk as the Trust plans to hold all of its investments to expected
maturity.
The Trust monitors prepayments and considers prepayment trends, as well as
dividend requirements of the Trust, when setting regular dividend policy. For
MBS, the fund forecasts prepayments based on trends in similar securities as
reported by statistical reporting entities such as Bloomberg. For PIMs and
PIMIs, the Trust incorporates prepayment assumptions into planning as individual
properties notify the Trust of the intent to prepay or as they mature.
<PAGE>
KRUPP GOVERNMENT INCOME TRUST II
PART II - OTHER INFORMATION
_______________
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Krupp Government Income Trust II
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer
of Krupp Government Income Trust II.
Date: April 28, 2000
<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> 0000872467
<NAME> KRUPP GOVERNMENT INCOME TRUST II
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,124,929
<SECURITIES> 201,820,087<F1>
<RECEIVABLES> 1,476,945
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,948,178<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 218,370,139
<CURRENT-LIABILITIES> 2,988,381<F3>
<BONDS> 0
0
0
<COMMON> 215,970,925
<OTHER-SE> (589,167)<F4>
<TOTAL-LIABILITY-AND-EQUITY> 218,370,139
<SALES> 0
<TOTAL-REVENUES> 4,908,065<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,322,822<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,585,243
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,585,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,585,243
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> Includes Participating Insured Mortgage Investments ("PIMIs") (insured
mortgages of $122,245,357 and Additional Loans of $21,298,351), Participating
Insured Mortgages ("PIMs") of $37,906,200 and Mortgage-backed Securities ("MBS")
of $20,370,179.
<F2> Includes prepaid acquisition fees and expenses of $13,795,837 net of
accumulated amortization of $7,968,612 and prepaid participation servicing fees
of $4,495,719 net of accumulated amortization of $2,374,766.
<F3> Includes deferred income on Additional Loans of $2,846,447.
<F4> Unrealized loss on MBS.
<F5> Represents interest income on investments in mortgages and cash.
<F6> Includes $806,974 of amortization of prepaid fees and expenses.
</FN>
</TABLE>
