-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MbHIa2K4c1MNDl6vphDUns8YPsrkxYgK/f82iuZz7dI/IMTltT+oStd5rvCtV3QT tjFujYMHLtB+dvotHATucg== 0001169232-04-001863.txt : 20040324 0001169232-04-001863.hdr.sgml : 20040324 20040324113604 ACCESSION NUMBER: 0001169232-04-001863 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP INSURED PLUS LTD PARTNERSHIP CENTRAL INDEX KEY: 0000786622 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 042915281 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15815 FILM NUMBER: 04686503 BUSINESS ADDRESS: STREET 1: ONE BEACON ST CITY: BOSTON STATE: MA ZIP: 02108 BUSINESS PHONE: 6175230066 MAIL ADDRESS: STREET 1: ONE BEACON ST CITY: BOSTON STATE: MA ZIP: 02108 FORMER COMPANY: FORMER CONFORMED NAME: KRUPP NATIONAL INSURED MARTGAGE FUND LTD PARTNERSHIP DATE OF NAME CHANGE: 19860702 10-K 1 d58979_10-k.txt FORM 10-K ---------------------------- OMB APPROVAL ---------------------------- OMB Number: 3235-0063 Expires: July 31, 2006 Estimated average burden hours per response: 1,196.00 ---------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________ Commission file number 0-15815 Krupp Insured Plus Limited Partnership (Exact name of registrant as specified in its charter) Massachusetts 04-2915281 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Beacon Street, Boston, Massachusetts 02108 (Address of principal executive offices) (Zip Code) (617) 523-0066 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Depository Receipts 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 continued, 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. |_| SEC 1673 (11-03) Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| Aggregate market value of voting securities held by non-affiliates: Not applicable. Documents incorporated by reference: see Item 15 The exhibit index is located on pages 13-14. -1- PART I This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 On December 20, 1985, The Krupp Corporation and The Krupp Company Limited Partnership-IV (the "General Partners") formed Krupp Insured Plus Limited Partnership (the "Partnership"), a Massachusetts Limited Partnership. The Partnership raised approximately $149 million through a public offering of limited partner interests evidenced by units of depositary receipts ("Units") and used the net proceeds primarily to acquire participating insured mortgages ("PIMs") and mortgage backed securities ("MBS"). The Partnership considers itself to be engaged in the industry segment of investment in mortgages. The Partnership's remaining PIM investment is a sole participation interest in a Department of Housing and Urban Development ("HUD") multi-family insured first mortgage loan and participation interests in the current revenue stream of the mortgaged property and any increase in the mortgaged property's value above certain specified base levels. The Partnership provided the funds for the first mortgage loan made to the borrower by acquiring a sole participation interest in a first mortgage loan originated under the Federal Housing Administration ("FHA") lending program. The Partnership receives the participation interests in the mortgaged property as additional consideration for providing the funds for the first mortgage loan and accepting a below market interest rate on the insured mortgage. The borrower conveyed the participation interests to the Partnership through a subordinated promissory note. HUD insures the first mortgage loan originated under the FHA lending program. The participation interests conveyed to the Partnership by the borrower are neither insured nor guaranteed. The Partnership also has investments in MBS backed by single-family mortgage loans issued or originated by the Government National Mortgage Association ("GNMA"), Fannie Mae or the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC guarantee the principal and interest on the Fannie Mae 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. Although the Partnership will terminate no later than December 31, 2025 the Partnership anticipates realizing the value of the remaining PIM through repayment well before this date. Therefore, dissolution of the Partnership should occur significantly prior to December 31, 2025. The Partnership's investments are not subject to seasonal fluctuations. However, the realization of the participation features of the remaining PIM is 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 property 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 Partnership anticipates that there will be sufficient cash flow from the mortgages to meet cash requirements. To the extent that the Partnership's cash flow is insufficient to meet the Partnership's operating expenses and liabilities, it will be necessary for the Partnership to obtain additional funds by liquidating its investment in one or more mortgages or by borrowing. The Partnership may borrow money on an unsecured or secured basis to further the purposes of the Partnership. The Partnership may pledge mortgages as security for any permitted borrowing. The Partnership, under some circumstances, may borrow funds from any general partner or an affiliate of any general partner. However, the transaction must include interest rates and other finance charges and fees not in excess of the amounts that are charged by unaffiliated lenders for comparable loans and must satisfy other conditions specified in the partnership agreement. The Partnership has not borrowed any funds during the past and does not intend to do so in the future. The FHA coinsurance loan program under Section 221(d)(4) of the National Housing Act provides for loans with 40 year terms. However, this program allows for a call option at any time after ten years, upon one year's notice. The subordinated promissory note and subordinated mortgage of the PIM provides for acceleration of maturity at the earlier of the sale of the underlying property or the call date, typically expected to be a date ten years after the date of final endorsement for mortgage insurance. From time to time, the Partnership expects that it may realize the principal and participation in residual value, if any, of its mortgages before maturity. It was expected that the mortgages would be repaid after a period of ownership of -2- approximately ten years from the dates of the closings of permanent loans. Realization of the value of mortgages, however, have been made at earlier and later dates. The Partnership will not underwrite securities of other issuers, offer securities in exchange for property, invest in securities of other issuers for the purpose of exercising control or issue senior securities, and the Partnership has not engaged in any of these activities during the past. The Partnership has not repurchased or reacquired any of the partner interests from partners or Units from Unit holders in the past and does not intend to do so in the future. The Partnership may not make loans to any general partner or any affiliate of any general partner and will not make loans to any other persons, other than mortgage investments of the type described above. The requirements for compliance with federal, state and local regulations to date have not adversely effected the Partnership's operations and the Partnership does not presently anticipate adverse effects in the future. As of December 31, 2003, no personnel were 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 are the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR 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, 2003 was approximately 3,300. One of the objectives of the Partnership is to provide quarterly distributions of cash flow generated by its investments in mortgages. The Partnership presently 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 the realization and payout of the existing mortgages. During July 2003, the Partnership made a special distribution of $0.75 per Limited Partnership interest from the principal proceeds received from the Briar Ridge Apartments MBS. During May 2003, the Partnership made a special distribution of $0.25 per Limited Partnership interest from the principal proceeds received from the Mission Terrace Apartments MBS. During March 2002, the Partnership made a special distribution of $0.80 per Limited Partnership interest from the principal proceeds and Shared Appreciation Interest received from the Royal Palm Place PIM. The Partnership may make special distributions in the future if MBS or the remaining PIM prepays or a sufficient amount of cash is available from MBS and PIM principal collections. The Partnership made the following distributions, in quarterly installments and special distributions, to its Partners during the two years ended December 31, 2003 and 2002:
2003 2002 ------------------------ ----------------------- Amount Per Unit Amount Per Unit ------ -------- ------ -------- Distributions: Limited Partners $ 1,200,015 $ 0.16 $ 3,000,042 $ 0.40 General Partners 35,703 51,344 -- ------------ ------------ 1,235,718 3,051,386 Special Distributions: Limited Partners 7,500,099 $ 1.00 6,000,079 $ 0.80 ------------ ------------ Total Distributions $ 8,735,817 $ 9,051,465 ============ ============
-3- 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.
2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Total revenues $ 1,264,765 $ 2,360,613 $ 3,022,454 $ 3,587,833 $ 4,215,833 Net income 919,130 1,934,160 2,540,547 3,038,185 3,610,232 Net income allocated to: Limited Partners 891,556 1,876,135 2,464,331 2,947,039 3,501,925 Average Per Unit 0.12 0.25 0.33 0.39 0.47 General Partners 27,574 58,025 76,216 91,146 108,307 Total assets at December 31 14,555,264 22,993,526 29,901,042 39,651,355 54,564,577 Distributions to: Quarterly to Limited Partners 1,200,015 3,000,042 3,000,040 5,700,076 5,700,076 Average per Unit 0.16 0.40 0.40 0.76 0.76 Special to Limited Partners 7,500,999 6,000,079 9,375,124 12,225,162 -- Average per Unit 1.00 0.80 1.25 1.63 -- General Partners 35,703 51,344 78,220 97,014 112,626
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report on Form 10-K constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Partnership's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, federal, state or local regulations; adverse changes in general economic or local conditions; pre-payments of mortgages; failure of borrowers to pay participation interests due to poor operating results at properties underlying the mortgages; uninsured losses and potential conflicts of interest between the Partnership and its Affiliates, including the General Partners. Liquidity and Capital Resources At December 31, 2003 the Partnership had liquidity consisting of cash and cash equivalents of approximately $900,000 as well as the cash flow provided by its investments in its remaining PIM and MBS. The Partnership anticipates that these sources will be adequate to provide the Partnership with sufficient liquidity to meet its obligations as well as to provide distributions to its investors. The most significant demand on the Partnership's liquidity is the quarterly distribution paid to investors of approximately $225,000, which represents the current quarterly distribution rate of $0.03 per Limited Partner interest. Funds for the quarterly distributions come from interest income received on the remaining PIM and MBS and cash and cash equivalent, net of operating expenses, and the principal collection received on the remaining PIM and MBS. The portion of distributions attributable to the principal collections and cash reserves reduces the capital resources of the Partnership. As the capital resources decrease, the total cash flows to the Partnership will also decrease and over time will result in periodic adjustments to the distributions paid to investors. The General Partners periodically review the distribution rate to determine whether an adjustment is necessary based on projected future cash flows. In general, the General Partners try to set a distribution rate that provides for level quarterly distributions. To the extent that quarterly distributions do not fully utilize the cash available for distributions and cash balances increase, the General Partners may adjust the distribution rate or distribute such funds through a special distribution. Based on current projections, the General Partners have determined that the Partnership will continue to pay a distribution rate of $0.03 per Limited Partner interest per quarter for the near future. -4- On June 16, 2003, the Partnership received a prepayment of the Briar Ridge Apartments MBS. The Partnership received $5,558,394, representing the principal proceeds on the first mortgage. A prepayment premium was not required from the payoff of the MBS as the prepayment provisions of the MBS expired at the end of April 2003. On July 24, 2003, the Partnership paid a special distribution of $0.75 per Limited Partner interest from the proceeds received. On February 18, 2003, the Partnership received a prepayment of the Mission Terrace Apartments MBS. The Partnership received $1,873,040 representing the principal proceeds on the first mortgage. A prepayment premium was not required from the payoff of the MBS as the prepayment provisions of the MBS expired in April of 1997. On May 5, 2003, the Partnership paid a special distribution of $0.25 per Limited Partner interest from the proceeds received. During the first quarter of 2002, the Partnership received a prepayment of the Royal Palm Place PIM. On January 2, 2002, the Partnership received $378,480 of Shared Appreciation Interest and $126,159 of Minimum Additional Interest. On February 27, 2002, the Partnership received $5,563,531 representing the principal proceeds on the first mortgage. On March 19, 2002, the Partnership paid a special distribution of $0.80 per Limited Partner interest from the principal proceeds and Shared Appreciation Interest received. The Partnership received a payoff of the Boulders Apartments MBS on July 9, 2001 for $9,054,042. The Partnership also received a prepayment premium of $306,000 from this payoff. On August 17, 2001, the Partnership paid a special distribution of $1.25 per Limited Partner interest from the proceeds received. In addition to providing insured monthly principal and basic interest payments from the insured first mortgage portion of the PIM, the Partnership's investment in the remaining PIM also may provide additional income through a participation interest in the underlying property. The Partnership may receive a share in any operating cash flow that exceeds debt service obligations and capital needs or a share in any appreciation in value when the property is sold or refinanced. However, this payment is not insured and is dependent upon whether property operations or its terminal value meet certain criteria. The Partnership's only remaining PIM investment is backed by the first mortgage loan on Vista Montana. Due to the declining economic conditions currently affecting the Phoenix, Arizona sub-market, the occupancy rate at the property is currently 84% which is average for the sub-market. The owner has lowered rents and is offering move-in concessions in an effort to increase occupancy. Presently, the General Partners do not expect Vista Montana to pay the Partnership any participation interest during 2004. The borrower has indicated that they are considering refinancing the property in 2004. There are no contractual obligations remaining that would prevent a prepayment of the underlying first mortgage. In the event that the Vista Montana PIM is paid off, the Partnership would then commence an orderly liquidation of the remaining assets of the Partnership and subsequently pay a liquidation distribution. In the event that the remaining PIM does not payoff as discussed above, the Partnership does have the option to call this PIM by accelerating the maturity. If the call feature is exercised for the whole PIM then the insurance feature of the loan would be canceled. Therefore, the Partnership will determine the merits of exercising the call option as economic conditions warrant. Such factors as the condition of the asset, local market conditions, interest rates and available financing will have an impact on this decision. Critical Accounting Policies The Partnership's critical accounting policies relate primarily to revenue recognition related to the Partnership's remaining PIM investment, the amortization of Prepaid Fees and Expenses and the carrying value of the MBS. The Partnership's policies are as follows: The Partnership holds the insured mortgage portion of its Federal Housing Administration PIM (FHA PIM) at amortized cost and does not establish loan loss reserves as this investment is fully insured by the FHA. Basic interest on PIMs is recognized at the stated rate of its Federal Housing Administration insured mortgage (less the servicer's fee). The Partnership recognizes interest related to the participation features when the amount becomes fixed and the transaction that gives rise to such amount is finalized, cash is received and all contingencies are resolved. This could be the sale or refinancing of the underlying real estate, which results in a cash payment to the Partnership or a cash payment made to the Partnership from surplus cash relative to the participation feature. The Partnership accounts for its MBS portfolio in accordance with Financial Accounting Standards Board's Statement 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115") under the classification of available-for-sale. The Partnership classifies its MBS portfolio as available-for-sale as a portion of the MBS portfolio may remain after all of the PIMs pay off and that it will be necessary to then sell the remaining MBS portfolio at that time in order to close out the Partnership. In addition, other situations such as liquidity needs could arise which would necessitate the sale of a -5- portion of the MBS portfolio. As such, the Partnership carries its MBS at fair market value and reflects any unrealized gains (losses) as a separate component of Partners' equity. The Partnership amortizes purchase premiums or discounts over the life of the underlying mortgages using the effective interest method. Prepaid fees and expenses represented prepaid acquisition fees and expenses and prepaid participation servicing fees paid for the acquisition and servicing of PIMs. The Partnership amortized the prepaid acquisition fees and expenses using a method that approximated the effective interest method over a period of ten to twelve years, which represented the estimated life of the underlying mortgage. The Partnership amortized the prepaid participation servicing fees using a method that approximated the effective interest method over a ten year period beginning from the acquisition of the Fannie Mae MBS or final endorsement of the FHA loan. Upon the repayment of a PIM, any unamortized acquisition fees and expenses and unamortized participation servicing fees related to such loan were expensed. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Assessment of Credit Risk The Partnership's investments in its insured mortgage portion of its PIM and its MBS are guaranteed and/or insured by GNMA, Fannie Mae, FHLMC or HUD and therefore the certainty of their cash flows and the risk of material loss of the amounts invested depends on the creditworthiness of these entities. Fannie Mae is a federally chartered private corporation that guarantees obligations originated under its programs. FHLMC is a federally chartered corporation that guarantees obligations originated under its programs. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. However, Fannie Mae and FHLMC are two of the largest corporations in the United States and both have significant experience in mortgage securitizations. In addition, their MBS carry the highest credit rating given to financial instruments. GNMA guarantees the full and timely payment of principal and basic interest on the securities it issues, which represents interest in pooled mortgages insured by HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by the full faith and credit of the U.S. Government. At December 31, 2003, the Partnership includes in cash and cash equivalents approximately $600,000 of commercial paper, which is issued by entities with a credit rating equal to one of the top two rating categories of a nationally recognized statistical rating organization. Interest Rate Risk The Partnership's primary market risk exposure is to interest rate risk, which can be defined as the exposure of the Partnership's net income, comprehensive income or financial condition to adverse movements in interest rates. At December 31, 2003, the Partnership's remaining PIM and MBS comprise the majority of the Partnership's assets. Decreases in interest rates may accelerate the prepayment of the Partnership's investments. Increases in interest rates may decrease the proceeds from a sale of the MBS. The Partnership does not utilize any derivatives or other instruments to manage this risk as the Partnership plans to hold its remaining PIM investment to expected maturity, while it is expected that substantially all of the MBS will prepay over the same time period, thereby mitigating any potential interest rate risk to the disposition value of any remaining MBS. The Partnership monitors prepayments and considers prepayment trends, as well as distribution requirements of the Partnership, when setting regular distribution policy. For MBS, the fund forecasts prepayments based on trends in similar securities as reported by statistical reporting entities such as Bloomberg. For its remaining PIM, the Partnership incorporates prepayment assumptions into planning as the property notifies the Partnership of the intent to prepay or as it matures. -6- The table below provides information about the Partnership's financial instruments that are sensitive to changes in interest rates. For mortgage investments, the table presents principal cash flows and related weighted average interest rates ("WAIR") by expected maturity dates. The expected maturity date is contractual maturity adjusted for expectations of prepayments.
Expected maturity dates ($ in thousands) --------------------------------------------------------------------------------------------------- Total Face Fair 2004 2005 2006 2007 2008 Thereafter Value Value (1) --------------------------------------------------------------------------------------------------- Interest-sensitive assets: MBS $ 556 $ -- $ -- $ -- $ -- $ -- $ 556 $ 599 WAIR 8.76% PIMs 13,002 -- -- -- -- -- 13,002 13,002 WAIR 7.38% 7.38% ------- -------- ------- ------- --------- -------- ------- ------- Total Interest- sensitive assets $13,558 $ -- $ -- $ -- $ -- $ -- $13,558 $13,601 ======= ======== ======= ======= ========= ======== ======= =======
(1) The methodology used by the Partnership to estimate the fair value of each class of financial instrument is described in Note H to the Partnership's financial statements presented in Appendix A to this report. As described in that note, the Partnership does not include an estimate of value for the participation interest associated with its PIM investment. Also included in the Partnership's assets are cash and cash equivalents. Due to the short-term maturity of these investments, generally less than three months, the Partnership is not exposed to significant interest rate risk on these investments. Results of Operations The following discussion relates to the operation of the Partnership during the years ended December 31, 2003, 2002 and 2001. (Amounts in thousands) 2003 2002 2001 ------- ------- ------- Interest income on PIMs: Basic interest $ 963 $ 1,009 $ 1,446 Participation interest -- 505 306 Interest income on MBS 276 728 1,171 Other interest income 26 118 100 Partnership expenses (346) (328) (390) Amortization of prepaid fees and expenses -- (98) (92) ------- ------- ------- Net income $ 919 $ 1,934 $ 2,541 ======= ======= ======= Net income decreased for 2003 when compared to 2002. This decrease is primarily due to decreases in participation interest, MBS interest income, other interest income and an increase in expense reimbursement to affiliates. These are partially offset by decreases in asset management fees and amortization expense. Participation interest was greater in 2002 due to the collection of Shared Appreciation Interest and Minimum Additional Interest from the Royal Palm Place PIM payoff in 2002. MBS interest income decreased due to the prepayments of the Mission Terrace Apartments MBS and the Briar Ridge Apartments MBS in 2003. Other interest income decreased due to lower average cash balances available for short-term investing and lower interest rates earned on those balances during 2003 when compared to 2002. Expense reimbursement to affiliates increased primarily due to a change in the cost of services provided to the Partnership in 2002 that was paid in 2003 and an increase in the cost of 2003's services associated with the wind-down of the Partnership's activities and the expected liquidation of the Partnership's assets. Asset management fees decreased due to principal -7- collections and prepayments. Amortization expense decreased due to the prepaid fees and expenses associated with the Vista Montana PIM being fully amortized as of the end of 2002. Net income decreased for 2002 when compared with 2001 primarily due to decreases in basic interest income on PIMs and interest income on MBS. This is partially offset by an increase in participation interest and a decrease in asset management fees. Basic interest income on PIMs decreased due to the payoff of the Royal Palm Place PIM in February 2002. Interest income on MBS decreased due to the payoff of the Boulders Apartments MBS in July 2001. Participation interest increased due to the collection of Shared Appreciation Interest and Share Interest Income from the Royal Palm Place payoff. The decrease in asset management fees is due to the decline in the Partnership's asset base as a result of principal collections and prepayments. 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. ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Within the 90 days prior to the date of this Annual Report on Form 10-K, the Senior Vice President and Chief Accounting Officer of The Krupp Corporation, a general partner of the Partnership, carried out an evaluation of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures. Based upon that evaluation, the Senior Vice President and the Chief Accounting Officer concluded that the Partnership's disclosure controls and procedures were effective as of the date of their evaluation in timely alerting them to material information relating to the Partnership required to be included in this Annual Report on Form 10-K. (b) Changes in Internal Controls There were no significant changes in the Partnership's internal controls or in other factors that could significantly affect such internal controls subsequent to the date of the evaluation described in paragraph (a) above. 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 The Krupp Corporation, which is a General Partner of the Partnership and is the General Partner of The Krupp Company Limited Partnership-IV, the other General Partner of the Partnership, is as follows: Position with Name and Age The Krupp Corporation ------------ --------------------- Peter F. Donovan (50) Senior Vice President Douglas Krupp (57) Co-Chairman, President and Director George Krupp (59) Co-Chairman, President and Director Alan Reese (50) Vice President and Chief Accounting Officer Peter F. Donovan is Chief Executive Officer of Berkshire Mortgage Finance which position he has held since January of 1998 and in this capacity, he oversees the strategic growth plans of this mortgage banking firm. Berkshire Mortgage Finance is the 12th largest servicer of commercial mortgage loans in the United States with a servicing and asset management portfolio of $18.3 billion. Previously he served as President of Berkshire Mortgage Finance from January of 1993 to January of 1998 and in that capacity he directed the production, underwriting, servicing and asset management activities of the firm. Prior to that, he was Senior Vice President of Berkshire Mortgage Finance and was responsible for all participating 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. Mr. Donovan is currently a member of the Advisory Council for Fannie Mae. -8- Douglas Krupp co-founded and serves as Co-Chairman and Chief Executive Officer of The Berkshire Group, an integrated real estate financial services firm engaged in real estate acquisition and property management, investment sponsorship, venture capital investing, mortgage banking, financial management, and ownership of one operating company through private equity investments. Mr. Krupp has held the position of Co-Chairman since The Berkshire Group was established as The Krupp Companies in 1969 and he has served as the Chief Executive Officer since 1992. He is a graduate of Bryant College where he also received an honorary Doctor of Science in Business Administration in 1989. George Krupp is the Co-Founder and Co-Chairman of The Berkshire Group, an integrated real estate financial services firm engaged in real estate acquisitions, property management, investment sponsorship, venture capital investing, mortgage banking and financial management, and ownership of one operating company through private equity investments. Mr. Krupp has held the position of Co-Chairman since The Berkshire Group was established as The Krupp Companies in 1969. Mr. Krupp attended the University of Pennsylvania and Harvard University and holds a Master's Degree in History from Brown University. Alan Reese is the Executive Vice President, Corporate Operations and Chief Financial Officer of Berkshire Mortgage Finance. Mr. Reese joined Berkshire Mortgage Finance in February of 2003 and is currently responsible for the accounting, financial planning and reporting, treasury, mortgage trading desk and loan servicing functions. Prior to joining Berkshire Mortgage Finance, Mr. Reese was the Chief Financial Officer of Visible Markets, Inc. from 2000 to 2001 and was engaged in business as a consultant from 2001-January, 2003. Prior to Visible Markets, Inc., he was the Senior Vice President and Chief Financial Officer of Mortgage Lenders Network USA, Inc. from 1998-2000. Mr. Reese held several positions with BankBoston Corporation from 1990 to 1998 and most recently held the position of Director of Operations, National Consumer Lending from 1996-1998. In addition, Mr. Reese was employed with Coopers & Lybrand from 1976 to 1990, and was a partner from 1987-1990. Mr. Reese presently serves on the Board of Trustees for Berklee College of Music. He received a B.B.A. degree from the University of Wisconsin - Eau Claire and is a Certified Public Accountant. ITEM 11. EXECUTIVE COMPENSTATION The Partnership has no directors or executive officers. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 2003, the following were known by the General Partners to own beneficially more than 5% of the Partnership's 7,500,099 outstanding Limited Partner interests. In addition to those noted below, the only other interests held by management or its affiliates consist of the 2.5% general partner interest held by The Krupp Corporation, the 97.5% general partner interest held by The Krupp Company Limited Partnership - IV and the 100 limited partner interests (0.0013% of the total outstanding) held by Krupp Depositary Corporation, an affiliate of the General Partners. The amounts and percentages of Limited Partner interests beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities.
Class of Name of Beneficial Amount and Nature of Percent Stock Owner Beneficial Interest of Class - -------- ------------------ -------------------- -------- Units of Berkshire Income Realty - OP, L.P. ("BIR - OP") 2,224,451 Interests (1) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108 Units of Berkshire Income Realty, Inc. ("BIR") 2,224,451 Interests (1) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108 Units of BIR GP, L.L.C. 2,224,451 Interests (2) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108
-9- Units of KRF Company, L.L.C. 2,224,451 Interests (3) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108 Units of The Krupp Family Limited Partnership - 94 2,224,451 Interests (4) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108 Units of The George Krupp 1980 Family Trust 2,224,451 Interests (5) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108 Units of The Douglas Krupp 1980 Family Trust 2,224,451 Interests (5) 29.66% Depositary One Beacon Street, Suite 1500 Receipts Boston, MA 02108 Units of George D. Krupp 2,224,451 Interests (6) 29.66% Depositary c/o Berkshire Income Realty, Inc. Receipts One Beacon Street, Suite 1500 Boston, MA 02108 Units of Douglas Krupp 2,224,451 Interests (6) 29.66% Depositary c/o Berkshire Income Realty, Inc. Receipts One Beacon Street, Suite 1500 Boston, MA 02108
(1) In connection with the April 4, 2003 closing of BIR's offer to exchange shares of it's 9% Series A Cumulative Redeemable Preferred Stock, liquidation value $25 per share ("Preferred Stock") for units of depositary receipts representing units of limited partner interests ("Interests") in Krupp Insured Plus Limited Partnership ("the Partnership"), BIR acquired 2,224,451 Interests of the Partnership. On April 4, 2003, BIR contributed such shares to BIR - OP in exchange for 100% of the preferred limited partnership interest in BIR - OP. BIR also owns 100% of the limited liability company interests of BIR GP, L.L.C., the general partner of BIR - OP. By virtue of such interests, BIR may be deemed to beneficially own indirectly the Interests of the Partnership owned by BIR - OP. (2) BIR GP, L.L.C. owns 100% of the general partnership interests in BIR - OP, and by virtue of such interest, BIR GP, L.L.C. may be deemed to beneficially own indirectly the Interests of the Partnership owned by BIR - OP. (3) KRF Company, L.L.C. owns 100% of the common limited partnership interests in BIR - OP and 100% of the common stock of BIR, and by virtue of such interests, KRF Company, L.L.C. may be deemed to beneficially own indirectly the Interests of the Partnership owned by BIR - OP. (4) The Krupp Family Limited Partnership - 94 owns 100% of the limited liability company interests in KRF company, L.L.C., and by virtue of such interest, The Krupp Family Limited Partnership - 94 may be deemed to beneficially own indirectly the Interests of the Partnership owned by BIR - OP. (5) Each of the Douglas Krupp 1980 Family Trust and The George Krupp 1980 Family Trust owns 50% of the limited partnership interests in the Krupp Family Limited Partnership - 94, and by virtue of such interests, The Douglas Krupp 1980 Family Trust and The George Krupp 1980 Family Trusts each may be deemed to beneficially own indirectly the Interests of the Partnership owned by BIR - OP. The trustees of The Douglas Krupp 1980 Family Trust are Paul Krupp, Lawrence Silverstein and Vincent O'Reilly, and the trustees of the George Krupp 1980 Family Trust are Paul Krupp and Lawrence Silverstein. Each of the trustees of The Douglas Krupp 1980 Family Trust and The George Krupp 1980 Family Trust disclaims beneficial ownership of any such Interests of the Partnership that are or may be deemed to be beneficially owned by Douglas Krupp, George D. Krupp, The Douglas Krupp 1980 Family Trust or The George Krupp 1980 Family Trust. (6) The general partners of The Krupp Family Limited Partnership - 94 are George D. Krupp and Douglas Krupp, each of whom owns 50% of the general partner interests in the Krupp Family Limited Partnership - 94, and by virtue of such interests, George D. Krupp and Douglas Krupp each may be deemed to beneficially own indirectly the Interests of the Partnership owned by BIR - OP. 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. -10- 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 10% 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. Upon the occurrence of a Terminating Capital Transaction, as defined in the Partnership Agreement, profits from the Terminating Capital Transaction shall be allocated first to the Limited Partners and General Partners to the extent of any then existing negative account balances or if in an amount insufficient to reduce those negative capital account balances to zero, then in proportion to any negative account balances, second, to the Limited Partners until their capital account is equal to their Invested Capital, third, to the General Partners until their capital account is equal to their Invested Capital, fourth, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners have been allocated profits equal to the Cumulative Return on Invested Capital less the sum of all amounts of cash distributed to the Limited Partners from Distributable Cash Flow and from Capital Transaction Proceeds, fifth, to the General Partners until they have received profits whenever allocated pursuant to Section 8.1(b) Third and Fourth and Section 8.1(c) Fourth equals 4% of all amounts distributed of the Net Cash Proceeds of the Terminating Capital Transaction and all other Capital Transactions whenever occurring, and sixth, any remaining profits shall be allocated 96% to the Limited Partners and 4% to the General Partners. Losses from a Terminating Capital Transaction shall be allocated to the Limited Partners and the General Partners to the extent of, and any excess in proportion to, the positive balances in their capital accounts. The net cash proceeds of a Terminating Capital Transaction will be allocated among the Partners first, to each class of Partners in the amount equal to, or if less than, in proportion to, the positive balance in the Partner's capital accounts, second, to the Limited Partners until they have received a return of their total Invested Capital, third, to the General Partners until they have received a return of their total Invested Capital, fourth, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners have received any deficiency in the 11% cumulative return on their Invested Capital that exists through fiscal years prior to the date of the Terminating Capital Transaction, fifth, to the General Partners until they have received an amount equal to 4% of all amounts of cash distributed under all Capital Transactions and sixth, 96% to the Limited Partners and 4% to the General Partners. Upon the dissolution and termination of the Partnership, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or the excess of 1.01% of the total Capital Contributions of the Limited Partners over the amount of capital previously contributed by the General Partners. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Under the terms of the Partnership Agreement, the General Partners receive an Asset Management Fee equal to 0.75% per annum of the value of the Partnership's total invested assets payable quarterly. The General Partners may also receive an incentive management fee in an amount equal to 0.3% per annum on the Partnership's Total Invested Assets providing the Unitholders receive a specified non-cumulative annual return on their Invested Capital. Total fees payable to the General Partners for asset management and incentive management fees shall not exceed 10% of distributable cash flow over the life of the Partnership. During 2003 The Krupp Company Limited Partnership IV, a General Partner, received $121,838 related to the Asset Management Fee. Additionally, the Partnership reimburses affiliates of the General Partners for certain expenses incurred in connection with maintaining the books and records of the Partnership, the preparation and mailing of financial reports, tax information and other communications to investors and legal fees and expenses. During 2003, The Berkshire Companies Limited Partnership and Berkshire Mortgage Finance Limited Partnership, affiliates of the General Partners, received a total of $120,141 in reimbursements. During 2003, the General Partners received distributions totaling $35,703 related to their 3% share of Distributable Cash Flow. -11- ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following is a summary of the fees billed to the Partnership by PricewaterhouseCoopers LLP for professional services rendered for the fiscal years ended December 31, 2003 and December 31, 2002: Fee Category Fiscal 2003 Fees Fiscal 2002 Fees - ------------ ---------------- ---------------- Audit Fees $ 17,500 $ 17,500 Audit-Related Fees -- 2,901 Tax Fees 2,205 2,100 ---------- ---------- Total Fees $ 19,705 $ 22,501 ========== ========== Audit Fees. Consists of fees billed for professional services rendered for the audit of the Partnership's annual financial statements and for the reviews of the unaudited financial statements included in the Partnership's Quarterly Reports on Form 10-Q during 2003. Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit of the Partnership's annual financial statements and for the reviews of the unaudited quarterly financial statements and are not reported under "Audit Fees." For 2002, represents fees for S-11 research and SEC Comment Letter response in connection with the BIR exchange offer. Tax Fees. Consists of fees billed for professional services for tax compliance. -12- PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a) 1. Financial Statements - see Index to Financial Statements and Schedule included under Item 8, Appendix A, on page F-2 of this report. 2. Financial Statement Schedule - see Index to Financial Statements and Schedule included under Item 8, Appendix A, on page F-2 of 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) Reports on Form 8-K During the last quarter of the year ended December 31, 2003 the Partnership did not file any reports on Form 8-K. (c) 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 Agreement of Limited Partnership dated as of June 27, 1986 [Exhibit A to Prospectus included in Amendment No. 1 of Registrant's Registration Statement on Form S-11 dated July 2, 1986 (File No. 33-2520)].* (4.2) Subscription Agreement whereby a subscriber agrees to purchase Units and adopts the provisions of the Amended Agreement of Limited Partnership [Exhibit D to Prospectus included in Amendment No. 1 of Registrant's Registration Statement on Form S-11 dated July 2, 1986 (File No. 33-2520)].* (4.3) Eighth Amendment and Restatement of Certificate of Limited Partnership filed with the Massachusetts Secretary of State on February 6, 1987 [Exhibit 4.3 to Registrant's Report on Form 10-K for the year ended December 31, 1986 (File No. 33-2520)].* (10) Material Contracts: Vista Montana (10.1) Subordinated Promissory Note, dated March 31, 1988, between VM Associates Limited Partnership, an Arizona Limited Partnership and GMAC Mortgage Corporation of PA. [Exhibit 19.7 to Registrant's Report on Form 10-Q for the Quarter Ended March 31, 1988 (File No. 0-15815)].* (10.2) Subordinated Multi-family Deed of Trust, dated March 31, 1988, between VM Associates Limited Partnership, an Arizona Limited Partnership, and GMAC Mortgage Corporation of PA [Exhibit 19.8 to Registrant's Report on Form 10-Q for the Quarter Ended March 31, 1988 (File No. 0-15815)].* (10.3) Assignment of Subordinated Deed of Trust, dated March 31, 1988, between GMAC Mortgage Corporation of PA, and Krupp Insured Plus-II Limited Partnership, a Massachusetts Limited Partnership. [Exhibit 19.9 to Registrant's Report on Form 10-Q for the Quarter Ended March 31, 1988 (File No. 0-15815)].* (10.4) Assignment of Closing Documents, dated July 12, 1988 by and between Krupp Insured Plus-II Limited Partnership ("KIP-II"), a Massachusetts limited partnership, and Krupp Insured Plus Limited Partnership ("KIP-I"), a Massachusetts limited partnership. [Exhibit 19.10 to Registrant's Report on Form 10-Q for the Quarter Ended June 30, 1988 (File No. 0-15815)].* (10.5) Deed of Trust, dated March 31, 1988 between VM Associates Limited Partnership, an Arizona limited partnership and Transamerica Title Insurance Company, a California corporation. [Exhibit 19.11 to Registrant's Report on Form 10-Q for the Quarter Ended September 30, 1988 (File No. 0-15815)].* -13- (10.6) Deed of Trust Note, dated March 31, 1988, between VM Associates Limited Partnership, an Arizona limited partnership and GMAC Mortgage Corporation of PA, a Pennsylvania corporation. [Exhibit 19.12 to Registrant's Report on Form 10-Q for the Quarter Ended September 30, 1988 (File No. 0-15815)].* (10.7) Assignment of Mortgage and Collateral Documents, dated March 31, 1988 by and between Krupp Insured Plus-II Limited Partnership, a Massachusetts limited partnership and GMAC Mortgage Corporation of PA, a Pennsylvania corporation. [Exhibit 19.13 to Registrant's Report on Form 10-Q for the Quarter Ended September 30, 1988 (File No. 0-15815)].* (10.8) Servicing Agreement, dated March 31, 1988 by and between Krupp Insured Plus-II Limited Partnership, a Massachusetts limited partnership and GMAC Mortgage Corporation of PA, a Pennsylvania corporation. [Exhibit 19.14 to Registrant's Report on Form 10-Q for the Quarter Ended September 30, 1988 (File No. 0-15815)].* (10.9) Modification to the First mortgage loan and subordinated Promissory Note, dated June 7, 1993, by and between Krupp Insured Plus-II Limited Partnership and V.M. Associates Limited Partnership. [Exhibit 10.28 to Registrant's Report on Form 10-K for the Year Ended December 31, 1994 (File No. 0-15815)].* (10.10) Assignment of interest from Krupp Insured Plus Limited Partnership II to Krupp Insured Plus Limited Partnership, dated February 6, 1995. [Exhibit 10.29 to Registrant's Report on Form 10-K for the Year Ended December 31, 1994 (File No. 0-15815)].* (31) Other (31.1) Senior Vice President Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ (31.2) Chief Accounting Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ (32) Other (32.1) Senior Vice President Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+ (32.2) Chief Accounting Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+ * Incorporated by reference. + Filed herewith -14- 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 18th day of March, 2004. KRUPP INSURED PLUS LIMITED PARTNERSHIP By: The Krupp Corporation, a General Partner By: /s/ Peter F. Donovan --------------------------------------- Peter F. Donovan, Senior Vice President 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 18th day of March, 2004. Signatures Title(s) - ---------- -------- /s/ Peter F. Donovan Senior Vice President of The Krupp Corporation - ----------------------- Peter F. Donovan /s/ Douglas Krupp Co-Chairman (Principal Executive Officer) and - ----------------------- Director of The Krupp Corporation, Douglas Krupp a General Partner of the Registrant /s/ George Krupp Co-Chairman (Principal Executive Officer) and - ----------------------- Director of The Krupp Corporation, George Krupp a General Partner of the Registrant /s/ Alan Reese Vice-President (Chief Accounting Officer) - ----------------------- of The Krupp Corporation, Alan Reese a General Partner of the Registrant -15- APPENDIX A KRUPP INSURED PLUS 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, 2003 F-1 KRUPP INSURED PLUS LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS AND SCHEDULES ------------------------- Report of Independent Auditors F-3 Balance Sheets at December 31, 2003 and 2002 F-4 Statements of Income and Comprehensive Income for the Years Ended December 31, 2003, 2002 and 2001 F-5 Statements of Changes in Partners' Equity for the Years Ended December 31, 2003, 2002 and 2001 F-6 Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001 F-7 Notes to Financial Statements F-8 - F-14 All schedules are omitted as they are not applicable or not required, or the information is provided in the financial statements or the notes thereto. F-2 REPORT OF INDEPENDENT AUDITORS ------------------------- To the Partners of Krupp Insured Plus Limited Partnership: In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Krupp Insured Plus Limited Partnership (the "Partnership") at December 31, 2003 and 2002 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts March 18, 2004 F-3 KRUPP INSURED PLUS LIMITED PARTNERSHIP BALANCE SHEETS December 31, 2003 and 2002 -------------------------
ASSETS 2003 2002 ------------ ------------ Participating Insured Mortgage ("PIMs") (Notes B, C and H) $ 13,001,521 $ 13,112,739 Mortgage-Backed Securities and insured mortgages ("MBS") (Notes B, D, and H) 598,579 9,164,511 ------------ ------------ Total mortgage investments 13,600,100 22,277,250 Cash and cash equivalents (Notes B and H) 869,608 573,389 Interest receivable and other assets 85,556 142,887 ------------ ------------ Total assets $ 14,555,264 $ 22,993,526 ============ ============ LIABILITIES AND PARTNERS' EQUITY Liabilities $ 70,194 $ 34,942 ------------ ------------ Partners' equity (deficit) (Notes A, and E): Limited Partners 14,700,952 22,509,510 (7,500,099 Limited Partner interests outstanding) General Partners (250,667) (242,538) Accumulated comprehensive income (Note B) 34,785 691,612 ------------ ------------ Total Partners' equity 14,485,070 22,958,584 ------------ ------------ Total liabilities and Partners' equity $ 14,555,264 $ 22,993,526 ============ ============
The accompanying notes are an integral part of the financial statements. F-4 KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF INCOME & COMPREHENSIVE INCOME For the Years Ended December 31, 2003, 2002 and 2001 -------------------------
2003 2002 2001 ----------- ----------- ----------- Revenues: Interest income - PIMs Basic interest $ 962,672 $ 1,009,429 $ 1,446,220 Participation interest -- 504,640 306,000 Interest income - MBS 275,947 728,106 1,170,585 Other interest income 26,146 118,438 99,649 ----------- ----------- ----------- Total revenues 1,264,765 2,360,613 3,022,454 ----------- ----------- ----------- Expenses: Asset management fee to an affiliate (Note F) 121,838 166,992 243,650 Expense reimbursements to affiliates (Note F) 118,308 55,725 53,989 Amortization of prepaid fees and expenses (Note B) -- 97,781 92,263 General and administrative 105,489 105,955 92,005 ----------- ----------- ----------- Total expenses 345,635 426,453 481,907 ----------- ----------- ----------- Net income (Note G) 919,130 1,934,160 2,540,547 Other comprehensive income: Net increase (decrease) in unrealized gain on MBS (656,827) 192,724 162,297 ----------- ----------- ----------- Total comprehensive income $ 262,303 $ 2,126,884 $ 2,702,844 =========== =========== =========== Allocation of net income (Notes E and G): Limited Partners $ 891,556 $ 1,876,135 $ 2,464,331 =========== =========== =========== Average net income per Limited Partner Interest $ 0.12 $ 0.25 $ 0.33 (7,500,099 Limited Partner interests outstanding) =========== =========== =========== General Partners $ 27,574 $ 58,025 $ 76,216 =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-5 KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the Years Ended December 31, 2003, 2002 and 2001 -------------------------
Accumulated Total Limited General Comprehensive Partners' Partners Partners Income Equity ------------ ------------ ------------- ------------ Balance at December 31, 2000 $ 39,544,329 $ (247,215) $ 336,591 $ 39,633,705 Net income 2,464,331 76,216 -- 2,540,547 Quarterly distributions (3,000,040) (78,220) -- (3,078,260) Special distribution (9,375,124) -- -- (9,375,124) Change in unrealized gain on MBS -- -- 162,297 162,297 ------------ ------------ ------------ ------------ Balance at December 31, 2001 29,633,496 (249,219) 498,888 29,883,165 Net income 1,876,135 58,025 -- 1,934,160 Quarterly distributions (3,000,042) (51,344) -- (3,051,386) Special Distribution (6,000,079) -- -- (6,000,079) Change in unrealized gain on MBS -- -- 192,724 192,724 ------------ ------------ ------------ ------------ Balance at December 31, 2002 22,509,510 (242,538) 691,612 22,958,584 Net income 891,556 27,574 -- 919,130 Quarterly distributions (1,200,015) (35,703) -- (1,235,718) Special distributions (7,500,099) -- -- (7,500,099) Change in unrealized gain on MBS -- -- (656,827) (656,827) ------------ ------------ ------------ ------------ Balance at December 31, 2003 $ 14,700,952 $ (250,667) $ 34,785 $ 14,485,070 ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. F-6 KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2003, 2002 and 2001 -------------------------
2003 2002 2001 ------------ ------------ ------------ Operating activities: Net income $ 919,130 $ 1,934,160 $ 2,540,547 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid fees and expenses -- 97,781 92,263 Shared Appreciation Interest and prepayment premiums -- (378,480) (306,000) Changes in assets and liabilities: Decrease in interest receivable and other assets 57,331 47,395 70,515 Increase in liabilities 35,252 17,065 227 ------------ ------------ ------------ Net cash provided by operating activities 1,011,713 1,717,921 2,397,552 ------------ ------------ ------------ Investing activities: Principal collections on MBS including a prepayment premium of $306,000 in 2001 7,909,105 439,133 9,921,857 Principal collections and prepayments on PIMs including Shared Appreciation Interest of $378,480 in 2002 111,218 6,045,218 95,771 ------------ ------------ ------------ Net cash provided by investing activities 8,020,323 6,484,351 10,017,628 ------------ ------------ ------------ Financing activities: Quarterly distributions (1,235,718) (3,051,386) (3,078,260) Special distributions (7,500,099) (6,000,079) (9,375,124) ------------ ------------ ------------ Net cash used for financing activities (8,735,817) (9,051,465) (12,453,384) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 296,219 (849,193) (38,204) Cash and cash equivalents, beginning of period 573,389 1,422,582 1,460,786 ------------ ------------ ------------ Cash and cash equivalents, end of period $ 869,608 $ 573,389 $ 1,422,582 ============ ============ ============ Non cash activities: Increase (decrease) in unrealized gain on MBS $ (656,827) $ 192,724 $ 162,297 ============ ============ ============
The accompanying notes are an integral part of the financial statements. F-7 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS ------------------------- A. Organization Krupp Insured Plus Limited Partnership (the "Partnership") is a Massachusetts Limited Partnership. The Partnership was organized for the purpose of investing in multi-family loans and mortgage-backed securities. The General Partners of the Partnership are The Krupp Corporation and The Krupp Company Limited Partnership-IV and the Corporate Limited Partner is Krupp Depositary Corporation. The Partnership terminates on December 31, 2025, 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 July 7, 1986 and completed its public offering having sold 7,499,999 Units for $149,489,830 net of purchase volume discounts of $510,150 as of January 27, 1987. In addition, Krupp Depositary Corporation owns 100 Units. B. Significant Accounting Policies The Partnership uses the following accounting policies for financial reporting purposes which differ in certain respects from those used for federal income tax purposes (Note G): Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). MBS The Partnership, in accordance with Financial Accounting Standards Board's Statement 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115"), classifies its MBS portfolio as available-for-sale. The Partnership classifies its MBS portfolio as available-for-sale as a portion of the MBS portfolio may remain after all of the PIMs pay off and it will then be necessary to sell the remaining MBS portfolio in order to close out the Partnership. In addition, other situations such as liquidity needs could arise which would necessitate the sale of a portion of the MBS portfolio. As such, the Partnership carries its MBS at fair market value and reflects any unrealized gains (losses) as a separate component of Partners' equity. The Partnership amortizes purchase premiums or discounts over the life of the underlying mortgages using the effective interest method. PIMs The Partnership holds the insured mortgage portion of the Federal Housing Administration PIM (FHA PIM) at amortized cost and does not establish loan loss reserves as this investment is fully insured by the FHA. Basic interest on the PIM is recognized at the stated rate of the Federal Housing Administration insured mortgage (less the servicer's fee). The Partnership recognizes interest related to the participation features when the amount becomes fixed and the transaction that gives rise to such amount is finalized, cash is received and all contingencies are resolved. This could be the sale or refinancing of the underlying real estate, which results in a cash payment to the Partnership or a cash payment made to the Partnership from surplus cash relative to the participation feature. Cash and Cash Equivalents The Partnership includes all short-term investments with maturities of three months or less from the date of acquisition in cash and cash equivalents. The majority of the Partnership's cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit of $100,000. The Partnership has not experienced any losses to date on its invested cash. Continued F-8 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued ------------------------- B. Significant Accounting Policies, continued Prepaid Fees and Expenses Prepaid fees and expenses represented prepaid acquisition fees and expenses and prepaid participation servicing fees paid for the acquisition and servicing of PIMs. The Partnership amortized the prepaid acquisition fees and expenses using a method that approximated the effective interest method over a period of ten to twelve years, which represented the estimated life of the underlying mortgage. The Partnership amortized the prepaid participation servicing fees using a method that approximated the effective interest method over a ten year period beginning from the acquisition of the Fannie Mae MBS or final endorsement of the FHA loan. Upon the repayment of a PIM, any unamortized acquisition fees and expenses and unamortized participation servicing fees related to such loan were expensed. 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 GAAP 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. Significant estimates include the unrealized gain on MBS investments. Actual results could differ from those estimates. C. PIMs At December 31, 2003 and 2002, the Partnership had an investment in one PIM. The Partnership's remaining PIM consists of a first mortgage loan originated under the FHA lending program on the underlying property. The Partnership also has participation interests in the revenue stream and appreciation of the underlying property above specified thresholds. The borrower conveys these participation features to the Partnership generally through a subordinated promissory note and mortgage (the "Agreement"). The Partnership receives monthly payments of principal and basic interest that are insured by HUD on the FHA mortgage loan. There are no contractual obligations remaining on the remaining PIM that would prevent a prepayment of the first mortgage loan. The Partnership may receive income related to its participation interests in the underlying property, however, these amounts are neither insured nor guaranteed. The participation feature consists of the following: (i) "Shared Income Interest" which is 25% of distributable surplus cash and (ii) "Shared Appreciation Interest" which is 25% of the net sales proceeds. Payment of participation interest from the operations of the property is limited to 50% of Surplus Cash as defined by HUD. The aggregate amount of Shared Income Interest and Shared Appreciation Interest payable by the underlying borrower on the maturity date generally cannot exceed 50% of any increase in value of the property over certain thresholds. 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. Continued F-9 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued ------------------------- C. PIMs, continued Under the Agreement, upon giving twelve months written notice, the Partnership can accelerate the maturity date of the Agreement 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 first quarter of 2002, the Partnership received a prepayment of the Royal Palm Place PIM. On January 2, 2002, the Partnership received $378,480 of Shared Appreciation Interest and $126,159 of Minimum Additional Interest. On February 27, 2002, the Partnership received $5,563,531 representing the principal proceeds on the first mortgage. On March 19, 2002, the Partnership paid a special distribution of $0.80 per Limited Partner interest from the principal proceeds and Shared Appreciation Interest received. At December 31, 2003 and 2002 there were no loans within the Partnership's portfolio that were delinquent as to principal or interest. The Partnership's remaining PIM investment consisted of the following at December 31, 2003 and 2002:
Approximate Original Interest Maturity Monthly Investment Basis at Face Amount Rate Date Payment December 31, ----------- -------- ---------- ------------ ---------------------------- 2003 2002 ----------- ----------- FHA Vista Montana Apts Val Vista Lakes, Az $13,814,400 7.375% 12/1/33 $ 90,000 $13,001,521 $13,112,739 =========== =========== =========== (a)(b) (c)
(a) Represents only the stated interest rate of the FHA mortgage loan less the servicing fee. In addition, the Partnership may receive participation income, consisting of (i) Shared Income Interest and (ii) Shared Appreciation Interest. (b) The Partnership is entitled to 25% of the net sales proceeds over the outstanding indebtedness at the time of sale. In the event of a refinancing, Shared Appreciation Interest is 25% of the appraised value over the outstanding indebtedness at the time of refinancing. In addition, Shared Income Interest is 25% of all distributable surplus cash. Presently, the General Partners do not expect Vista Montana to pay the Partnership any participation interest during 2004. (c) The aggregate cost of the PIM for federal income tax purposes is $13,001,521. A reconciliation of the carrying value of PIMs for each of the three years in the period ended December 31, 2003 is as follows:
2003 2002 2001 ------------ ------------ ------------ Balance at beginning of period $ 13,112,739 $ 18,779,477 $ 18,875,248 Deductions during period: Prepayment and principal collections (111,218) (5,666,738) (95,771) ------------ ------------ ------------ Balance at end of period $ 13,001,521 $ 13,112,739 $ 18,779,477 ============ ============ ============
The underlying mortgage of the Vista Montana PIM is collateralized by a multi-family apartment complex located in Val Vista Lakes, AZ. The apartment complex has 341 units. Continued F-10 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued ------------------------- D. MBS At December 31, 2003, the Partnership's MBS portfolio had an amortized cost of $563,794 and gross unrealized gains of $34,785. At December 31, 2002, the Partnership's MBS portfolio had an amortized cost of $8,472,899 and gross unrealized gains of $691,612. The portfolio has maturities ranging from 2007 to 2019. On June 16, 2003, the Partnership received a prepayment of the Briar Ridge Apartments MBS. The Partnership received $5,558,394, representing the principal proceeds on the first mortgage. A prepayment premium was not required from the payoff of the MBS as the prepayment provisions of the MBS expired at the end of April 2003. On July 24, 2003, the Partnership paid a special distribution of $0.75 per Limited Partner interest from the proceeds received. On February 18, 2003, the Partnership received a prepayment of the Mission Terrace Apartments MBS. The Partnership received $1,873,040, representing the principal proceeds on the first mortgage. A prepayment premium was not required from the payoff of the MBS as the prepayment provisions of the MBS expired in April of 1997. On May 5, 2003, the Partnership paid a special distribution of $0.25 per Limited Partner interest from the proceeds received. The Partnership's MBS Portfolio had the following contractual maturities as of December 31, 2003: Unrealized Maturity Date Fair Value Gain ------------- ------------- ----------- 2004 - 2008 $ 45,645 $ 4,006 2009 - 2013 113,841 8,573 2014 - 2019 439,093 22,206 ------------ ----------- Total $ 598,579 $ 34,785 ============ =========== 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 and profits 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 10% 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. Losses from a Capital Transaction will be allocated 97% to the Limited Partners and 3% to the General Partners. Upon the occurrence of a Terminating Capital Transaction, as defined in the Partnership Agreement, profits from the Terminating Capital Transaction shall be allocated first to the Limited Partners and General Partners to the extent of any then existing negative account balances or if in an amount insufficient to reduce those negative capital account balances to zero, then in proportion to any negative account balances, second, to the Limited Partners until their capital account is equal to their Invested Capital, third, to the General Partners until their capital account is equal to their Invested Capital, fourth, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners have been allocated profits equal to the Cumulative Return on Invested Capital less the sum of all amounts of cash distributed to the Limited Partners from Distributable Cash Flow and from Capital Transaction Proceeds, fifth, to the General Partners until they have received profits whenever allocated pursuant to Section 8.1(b) Third and Fourth and Section 8.1(c) Fourth equals 4% of all amounts distributed of the Net Cash Proceeds of the Terminating Capital Transaction and all other Capital Transactions whenever occurring, and sixth, any remaining profits shall be allocated 96% to the Limited Partners and 4% to the General Partners. Continued F-11 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued ------------------------- E. Partners' Equity, continued Losses from a Terminating Capital Transaction shall be allocated to the Limited Partners and the General Partners to the extent of, and any excess in proportion to, the positive balances in their capital accounts. The net cash proceeds of a Terminating Capital Transaction will be allocated among the Partners first, to each class of Partners in the amount equal to, or if less than, in proportion to, the positive balance in the Partner's capital accounts, second, to the Limited Partners until they have received a return of their total Invested Capital, third, to the General Partners until they have received a return of their total Invested Capital, fourth, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners have received any deficiency in the 11% cumulative return on their Invested Capital that exists through fiscal years prior to the date of the Terminating Capital Transaction, fifth, to the General Partners until they have received an amount equal to 4% of all amounts of cash distributed under all Capital Transactions and sixth, 96% to the Limited Partners and 4% to the General Partners. Upon the dissolution and termination of the Partnership, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or the excess of 1.01% of the total Capital Contributions of the Limited Partners over the amount of capital previously contributed by the General Partners. During 2003, 2002 and 2001, the Partnership made quarterly distributions totaling $0.16, $0.40 and $0.40 per Limited Partner interest annually, respectively. The Partnership made special distributions of $1.00, $0.80 and $1.25 per Limited Partner interest in 2003, 2002 and 2001, respectively. As of December 31, 2003, the following cumulative partner contributions and allocations have been made since inception of the Partnership:
Corporate Accumulated Limited General Comprehensive Unitholders Partner Partners Income Total ------------- ------------- ------------- ------------- ------------- Capital contributions $ 149,489,830 $ 2,000 $ 3,000 $ -- $ 149,494,830 Syndication costs (7,906,604) -- -- -- (7,906,604) Quarterly distributions (130,436,047) (1,783) (3,014,895) -- (133,452,725) Special distributions (85,724,970) (1,143) -- -- (85,726,113) Net income 89,278,469 1,200 2,761,228 -- 92,040,897 Unrealized gains on MBS -- -- -- 34,785 34,785 ------------- ------------- ------------- ------------- ------------- Balance at December 31, 2003 $ 14,700,678 $ 274 $ (250,667) $ 34,785 $ 14,485,070 ============= ============= ============= ============= =============
Continued F-12 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued ------------------------- F. Related Party Transactions Under the terms of the Partnership Agreement, the General Partners receive an Asset Management Fee equal to 0.75% per annum of the value of the Partnership's total invested assets payable quarterly. The General Partners may also receive an incentive management fee in an amount equal to 0.3% per annum on the Partnership's Total Invested Assets providing the Unitholders receive a specified non-cumulative annual return on their Invested Capital. Total fees payable to the General Partners for asset management and incentive management fees shall not exceed 10% of distributable cash flow over the life of the Partnership. Additionally, the Partnership reimburses affiliates of the General Partners for certain expenses incurred in connection with maintaining the books and records of the Partnership, the preparation and mailing of financial reports, tax information and other communications to investors and legal fees and expenses. Included in general and administrative expenses are legal fees and expenses paid by the Partnership to an affiliate. During the three years ended December 31, 2003, 2002 and 2001, these fees totaled $1,833, $0 and $113, respectively. G. Federal Income Taxes The reconciliation of the net income reported in the accompanying statement of income with the net income reported in the Partnership's 2003 federal income tax return is as follows: Net income from statement of operations $ 919,130 Less: Book to tax difference related to amortization of prepaid fees and expenses (28,676) --------- Net income for federal income tax purposes $ 890,454 ========= The allocation of the 2003 net income for federal income tax purposes is as follows: Net Income --------- Unitholders $ 863,728 Corporate Limited Partner 12 General Partners 26,714 --------- $ 890,454 ========= For the years ended December 31, 2003, 2002 and 2001 the average per unit net income to the Unitholders for federal income tax purposes was $0.12, $0.26 and $0.34, respectively. The basis of the Partnership's assets for financial reporting purposes was less than its tax basis by approximately $749,000 and $121,000 at December 31, 2003 and 2002, respectively. At December 31, 2003 and 2002, the basis of the Partnership's liabilities for financial reporting purposes was the same as its tax basis. H. Fair Value Disclosures of Financial Instruments The Partnership used the following methods and assumptions to estimate the fair value of each class of financial instrument: Cash and Cash Equivalents The carrying amount approximates fair value because of the short maturity of those instruments. Continued F-13 KRUPP INSURED PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued ------------------------- H. Fair Value Disclosures of Financial Instruments, continued MBS The Partnership estimated the fair value of MBS based on quoted market prices. Based on the estimated fair value determined using these methods and assumptions, the Partnership's investments in MBS had gross unrealized gains of approximately $35,000 at December 31, 2003 and $692,000 at December 31, 2002. PIMs As there is no active trading market for these investments, management estimates the fair value of the PIMs using quoted market prices of MBS having a similar interest rate and similar expected maturity date. Management does not include any estimate of participation interest in the Partnership's estimated fair value, as Management does not believe it can predict the amount or timing of realization of any such feature with any certainty. Based on the estimated fair value determined using these methods and assumptions, the Partnership's investments in PIMs had no gains or losses at December 31, 2003 and an unrealized gain of $819,000 at December 31, 2002. At December 31, 2003 and 2002, the Partnership estimates the fair value of its financial instruments as follows (amounts rounded to the nearest thousand):
2003 2002 -------------------------- -------------------------- Fair Carrying Fair Carrying Value Value Value Value ---------- ---------- ---------- ---------- Cash and cash equivalents $ 870 $ 870 $ 573 $ 573 MBS and insured mortgages 599 599 9,165 9,165 PIMs 13,002 13,002 13,932 13,113 ---------- ---------- ---------- ---------- $ 14,471 $ 14,471 $ 23,670 $ 22,851 ========== ========== ========== ==========
F-14 EX-31.1 3 d58979_ex31-1.txt SECTION 302 SENIOR VICE PRESIDENT CERTIFICATION Exhibit 31.1 Certifications I, Peter F. Donovan, certify that: 1. I have reviewed this annual report on Form 10-K of Krupp Insured Plus Limited Partnership; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: March 18, 2004 /s/ Peter F. Donovan -------------------------- Peter F. Donovan Senior Vice President -16- EX-31.2 4 d58979_ex31-2.txt SECTION 302 CHIEF ACCOUNTING OFFICER CERT Exhibit 31.2 Certifications I, Alan Reese, certify that: 1. I have reviewed this annual report on Form 10-K of Krupp Insured Plus Limited Partnership; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 2. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 3. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: March 18, 2004 /s/ Alan Reese --------------------------- Alan Reese Chief Accounting Officer -17- EX-32.1 5 d58979_ex32-1.txt SECTION 906 SENIOR VICE PRESIDENT CERTIFICATION Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Krupp Insured Plus Limited Partnership (the "Partnership") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter F. Donovan, Senior Vice President of The Krupp Corporation, a General Partner of the Partnership, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership as of December 31, 2003 (the last date of the period covered by the Report). /s/ Peter F. Donovan - ------------------------------- Peter F. Donovan, Senior Vice President Date: March 18, 2004 -18- EX-32.2 6 d58979_ex32-2.txt SECTION 906 CHIEF ACCOUNTING OFFICER CERT Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Krupp Insured Plus Limited Partnership (the "Partnership") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan Reese, Chief Accounting Officer of The Krupp Corporation, a General Partner of the Partnership, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership as of December 31, 2003 (the last date of the period covered by the Report). /s/ Alan Reese - -------------------------- Alan Reese, Chief Accounting Officer Date: March 18, 2004 -19- -----END PRIVACY-ENHANCED MESSAGE-----