-----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, D04S51BASd0ynsC4Lj2C/dFUZ5ZUlgAM1hhis2r2S6fAz5LtFq6/nustZz9Md/bf r6q6XJAIr7bGpIp4eZNpqg== 0000805297-95-000003.txt : 19951107 0000805297-95-000003.hdr.sgml : 19951107 ACCESSION NUMBER: 0000805297-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951106 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUPP INSURED PLUS II LTD PARTNERSHIP CENTRAL INDEX KEY: 0000805297 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 042955007 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16817 FILM NUMBER: 95587532 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THEx SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 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 0-16817 Krupp Insured Plus-II Limited Partnership Massachusetts 04-2955007 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS KRUPP INSURED PLUS-II LIMITED PARTNERSHIP BALANCE SHEETS ASSETS
September 30, December 31, 1995 1994 Participating Insured Mortgages ("PIMs") (Note 2) $153,213,749 $154,042,671 Mortgage-Backed Securities ("MBS") (Note 3) 44,138,503 45,499,166 Total mortgage investments 197,352,252 199,541,837 Cash and cash equivalents 5,632,750 5,453,210 Other investment (Note 1) 491,107 - Interest receivable and other assets 1,949,162 2,183,929 Prepaid acquisitions expenses, net of accumulated amortization of $6,623,231 and $5,629,220, respectively 5,545,646 6,539,657 Prepaid participation servicing fees, net of accumulated amortization of $2,102,994 and $1,787,147, respectively 1,662,602 1,978,449 Total assets $212,633,519 $215,697,082 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 22,438 $ 15,394 Partners' equity (deficit) (Note 4): Limited Partners (14,655,512 Limited Partner interests outstanding) 212,751,192 215,786,604 General Partners (140,111) (104,916) Total Partners' equity 212,611,081 215,681,688 Total liabilities and Partners' equity $212,633,519 $215,697,082
The accompanying notes are an integral part of the financial statements. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENTS OF INCOME
For the Three Months Ended For the Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Interest income - PIMs: Base interest $3,035,989 $3,566,486 $ 9,153,682 $ 9,959,471 Participation interest 95,283 861,319 249,812 1,108,519 Interest income - MBS 893,700 925,650 2,699,414 3,140,128 Other interest income 86,636 60,294 254,452 243,484 Total revenues 4,111,608 5,413,749 12,357,360 14,451,602 Expenses: Asset management fee to an affiliate 374,401 401,390 1,115,092 1,201,267 Expense reimbursements to affiliates 62,082 129,996 186,246 389,988 Amortization of prepaid expenses and fees 436,619 462,059 1,309,858 1,392,799 General and administrative 65,044 36,186 184,081 146,660 Total expenses 938,146 1,029,631 2,795,277 3,130,714 Net income $3,173,462 $4,384,118 $ 9,562,083 $11,320,888 Allocation of net income (Note 4): Limited Partners $3,078,259 $4,252,594 $ 9,275,221 $10,981,261 Average net income per Limited Partner interest (14,655,512 Limited Partner interests outstanding) $ .21 $ .29 $ .63 $ .75 General Partners $ 95,203 $ 131,524 $ 286,862 $ 339,627
The accompanying notes are an integral part of the financial statements. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1995 1994 Operating activities: Net income $ 9,562,083 $ 11,320,888 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of other investment discount (920) - Amortization of prepaid expenses and fees 1,309,858 1,392,799 Shared appreciation income - (737,235) Changes in assets and liabilities: Decrease in interest receivable and other assets 234,767 173,496 Increase in liabilities 7,044 3,044 Net cash provided by operating activities 11,112,832 12,152,992 Investing activities: Principal collections on PIMs 828,922 790,796 Principal collections on MBS 1,360,663 5,403,382 Other investment (490,187) - PIM prepayment including shared appreciation income of $737,235 - 11,863,000 Investment in MBS - (139,480) Net cash provided by investing activities 1,699,398 17,917,698 Financing activities: Quarterly distributions (12,632,690) (17,984,690) Special distributions - (5,129,430) Net cash used for financing activities (12,632,690) (23,114,120) Net increase in cash and cash equivalents 179,540 6,956,570 Cash and cash equivalents, beginning of period 5,453,210 10,395,094 Cash and cash equivalents, end of period $ 5,632,750 $ 17,351,664
The accompanying notes are an integral part of the financial statements. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 1. Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of the General Partners, Krupp Plus Corporation and Mortgage Services Partners Limited Partnership, (collectively the "General Partners") of Krupp Insured Plus-II Limited Partnership (the "Partnership"), the disclosures contained in this report are adequate to make the information presented not misleading. See Notes to Financial Statements included in the Partnership's Form 10-K for the year ended December 31, 1994 for additional information relevant to significant accounting policies followed by the Partnership. In the opinion of the General Partners of the Partnership, the accompanying unaudited financial statements reflect all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the Partnership's financial position as of September 30, 1995, its results of operations for the three and nine months ended September 30, 1995 and 1994 and its cash flows for the nine months ended September 30, 1995 and 1994. The results of operations for the three and nine months ended September 30, 1995 are not indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. Other Investment Other investment consists of a banker's acceptance with an original maturity greater than three months. The Partnership carries the other investment at amortized cost, which approximates fair value, due to the short period of time to maturity. Reclassification Certain prior period balances have been reclassified to be consistent with current year presentation. 2. PIMs On June 28, 1995, the Partnership entered into a temporary interest rate reduction agreement on the Denrich Apartments PIM. Beginning July 1, 1995, the interest rate will decrease from 8% per annum to 6.25% per annum for thirty months, then increase to 6.75% per annum for the following thirty-six month period and then increase to the original interest rate of 8% per annum. The difference between interest at the original interest rate and the reduced interest rates will accumulate and be payable from surplus cash or from the net proceeds of a sale or refinancing. These accumulated amounts will be due and payable prior to any distributions to the borrower or payment of participation interest to the Partnership. Also under the agreement, the base level for calculating Shared Appreciation Interest decreased from $4,025,000 to $3,500,000. Continued KRUPP INSURED PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued 3. MBS At September 30, 1995, the Partnership's MBS portfolio has a market value of approximately $44,808,000 and unrealized gains and losses of approximately $1,027,000 and $358,000, respectively, and maturities ranging from 2007 to 2033. 4. Changes in Partners' Equity A summary of changes in Partners' Equity for the nine months ended September 30, 1995 is as follows: Total
Limited General Partners' Partners Partners Equity Balance at December 31, 1994 $215,786,604 $(104,916) $215,681,688 Net income 9,275,221 286,862 9,562,083 Quarterly distributions (12,310,633) (322,057) (12,632,690) Balance at September 30, 1995 $212,751,192 $(140,111) $212,611,081
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The most significant demands on the Partnership's liquidity are regular quarterly distributions paid to investors of approximately $4.1 million. Funds used for investor distributions are generated from interest income received on the PIMs, MBS, cash and short-term investments, and the principal collections received on the PIMs and MBS. The Partnership funds a portion of the distribution from principal collections, as a result the capital resources of the Partnership will continually decrease. As a result of this decrease, the total cash inflows to the Partnership will also decrease, which will result in periodic adjustments to the distributions paid to investors. Based on current projections, the General Partners believe the Partnership can maintain the current distribution rate both on a short and long term basis. However, in the event of a PIM prepayment the Partnership would distribute any proceeds from the prepayment as a special distribution and adjust the distribution rate to reflect the anticipated future cash inflows from the remaining mortgages. The General Partners do not anticipate any PIMs prepaying in the near future. Assessment of Credit Risk The Partnership's investments in mortgages are guaranteed or insured by the Federal National Mortgage Association ("FNMA"), Government National Mortgage Association ("GNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") and the Department of Housing and Urban Development ("HUD") and therefore the certainty of their cash flows and the risk of material loss of the amounts invested depends on the creditworthiness of these entities. FNMA is a federally chartered private corporation that guarantees obligations originated under its programs. FHLMC is a federally chartered corporation that guarantees obligations originated under its programs and is wholly-owned by the twelve Federal Home Loan Banks. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. GNMA guarantees the 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. Distributable Cash Flow and Net Cash Proceeds from Capital Transactions Shown below is the calculation of Distributable Cash Flow and Net Cash Proceeds from Capital Transactions, as defined in Section 17 of the Partnership Agreement, and the source of cash distributions for the nine months ended September 30, 1995 and the period from inception to September 30, 1995. The General Partners provide certain of the information below to meet requirements of the Partnership Agreement and because they believe that it is an appropriate supplemental measure of operating performance. However, Distributable Cash Flow and Net Cash Proceeds from Capital Transactions should not be considered by the reader as a substitute to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity. (amounts in thousands, except per Unit amounts)
Nine Months Ended Inception through September 30, 1995 September 30, 1995 Distributable Cash Flow: Income for tax purposes $10,414 $137,453 Items not requiring (not providing) the use of operating funds: Amortization of prepaid expenses, fees and organization costs 458 6,229 Acquisition expenses paid from offering proceeds charged to operations - 690 Shared appreciation income - (2,001) Gain on sale of MBS - (377) Total Distributable Cash Flow ("DCF") $10,872 $141,994 Limited Partners Share of DCF $10,546 $137,734 Limited Partners Share of DCF per Unit $ .72 $ 9.40 (b) General Partners Share of DCF $ 326 $ 4,260 Net Proceeds from Capital Transactions: Principal collections on PIMs and PIM sale proceeds including Shared Appreciation Income $ 829 $ 46,418 Principal collections on MBS and MBS sale proceeds 1,361 58,487 Reinvestment of MBS and PIM principal collections and sale proceeds - (41,994) Gain on sale of MBS - 377 Total Net Proceeds from Capital Transactions $ 2,190 $ 63,288 Cash available for distribution (DCF plus proceeds from Capital Transactions) $13,062 $205,282 Distributions: Limited Partners $12,311 (a) $197,579 (a) Limited Partners Average per Unit $ .84 (a) $ 13.48 (a)(b) General Partners $ 327 (a) $ 4,261 (a) Total Distributions $12,638 $201,840
(a) Includes an estimate of the November 1995 distribution. (b) Limited Partners average per Unit return of capital as of November 1995 is $4.08 [$13.48 - $9.40]. Return of capital represents that portion of distributions which is not funded from DCF such as proceeds from the sale of assets and substantially all of the principal collections received from MBS and PIMs. Operations The following discussion relates to the operation of the Partnership during the three and nine months ended September 30, 1995 and 1994 (amounts in thousands).
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1995 1994 1995 1994 Interest income on PIMs: Base interest $3,036 $3,566 $ 9,154 $ 9,959 Shared Income and Minimum Additional interest 96 125 250 372 Interest income on MBS 893 926 2,699 3,140 Other interest income 86 60 254 243 Partnership expenses (501) (568) (1,485) (1,737) Distributable Cash Flow 3,610 4,109 10,872 11,977 Shared Appreciation Interest - 737 - 737 Amortization of prepaid fees and expenses (437) (462) (1,310) (1,393) Net income $3,173 $4,384 $ 9,562 $11,321
Net income decreased for the three and nine months ended September 30, 1995 as compared to the corresponding periods in 1994 due primarily to the payoff of the Mediterranean Village PIM of $11 million in September 1994, which caused a decrease in base interest income on PIMs in 1995 and provided $250,000 of Shared Income and Minimum Additional Interest and $611,000 of Shared Appreciation Interest in 1994. During the second quarter of 1994, the Partnership received $240,000 of participation interest income from the Longwood Villas PIM consisting of $126,000 of Shared Appreciation Interest and $114,000 of Shared Income and Minimum Additional Interest. Interest income on MBS declined during the three and nine months ended September 30, 1995 versus the corresponding periods in 1994 as a result of the significant prepayments that occurred during the first half of 1994, which reduced the outstanding MBS balance. Net income benefitted in 1995, as compared to 1994, from lower Partnership expenses resulting from lower expenses reimbursements to affiliates and lower asset management fees due to a declining asset base. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Changes in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote Security Holders Response: None Item 5. Other information Response: None Item 6. Exhibits and Reports on Form 8-K Response: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Krupp Insured Plus-II Limited Partnership (Registrant) BY: /s/Robert A. Barrows Robert A. Barrows Treasurer and Chief Accounting Officer of Krupp Plus Corporation, a General Partner of the Registrant. Date: October 24, 1995 EX-27 2
5 The schedule contains summary financial information extracted from the Balance Sheet and Statement of Income and is qualified in its entirety by reference to such financial statements. 0000805297 KRUPP INSURED PLUS-II LTD PARTNERSHIP 9-MOS DEC-31-1995 SEP-30-1995 5,632,750 197,843,359 1,949,162 0 0 7,208,248 0 0 212,633,519 22,438 0 212,611,081 0 0 0 212,633,519 0 12,357,360 0 0 2,795,277 0 0 9,562,083 0 9,562,083 0 0 0 9,562,083 0 0 Includes the following investments: Participting Insured Mortgages ("PIMs") $153,213,749 & Mortgage-Backed Securities ("MBS") $44,629,610 Includes the following prepaid acquisition fees & expenses of $5,545,646 net of accumulated amortization of $6,623,231 and prepaid participaing servicing of $1,662,602 net of accumulated amortization of $2,102,994 Represents total equity of General Partners & Limited partners of $(140,111) and $212,751,192 Represents interest income on investments in mortgages & cash Includes $1,309,858 of amortization related to prepaid fees 7 expenses Net income allocated $286,862 to the General Partners & $9,275,221 to the Limited Partners. Average net income per unit of Limited Partners interest is $.63 on 14,655,512 units outstanding.
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