-----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, KwcltjwyA4nI+x5IAN0jftCIdeQlTRe2qcR9L1qdd5qbuMZesRlaZkpLcbGCXDFS ocEYXRAY0r1VO4ANnC58vg== 0000805297-97-000015.txt : 19970815 0000805297-97-000015.hdr.sgml : 19970815 ACCESSION NUMBER: 0000805297-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97663097 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 June 30, 1997 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 ( I R S 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 This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP BALANCE SHEETS
ASSETS June 30, December 31, 1997 1996 Participating Insured Mortgages ("PIMs") $141,149,037 $151,717,926 (Note 2) Mortgage-Backed Securities and multi-family insured mortgages("MBS") (Note 3) 40,476,582 41,283,769 Total mortgage investments 181,625,619 193,001,695 Cash and cash equivalents 8,466,911 7,921,270 Interest receivable and other assets 1,296,080 1,604,301 Prepaid acquisition fees and expenses, net of accumulated amortization of $8,106,629 and $8,279,914, respectively 3,139,751 3,888,963 Prepaid participation servicing fees, net of accumulated amortization of $2,619,056 and $2,629,406, respectively 894,486 1,136,190 Total assets $195,422,847 $207,552,419 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 12,810 $ 18,900 Partners' equity (deficit) (Note 4): Limited Partners 194,999,836 207,196,050 (14,655,512 Limited Partner interests outstanding) General Partners (230,067) (217,867) Unrealized gain on MBS 640,268 555,336 Total Partners' equity 195,410,037 207,533,519 Total liabilities and partners' equity $195,422,847 $207,552,419
-2- KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF INCOME For the Three Months For the Six Months Ended June 30, Ended June 30, 1997 1996 1997 1996 Revenues: Interest income - PIMs: Base interest $2,931,125 $3,072,256 $5,934,754 $6,099,956 Participation interest 783,195 - 783,195 16,010 Interest income - MBS 794,547 850,168 1,599,138 1,716,123 Other interest income 125,272 90,899 228,792 180,003 Total revenues 4,634,139 4,013,323 8,545,879 8,012,092 Expenses: Asset management fee to an affiliate 351,761 363,490 707,213 728,908 Expense reimbursements to affiliates 42,576 48,729 77,117 107,564 Amortization of prepaid expenses and fees 554,296 436,620 990,916 873,239 General and administrative 66,968 31,038 155,906 84,019 Total expenses 1,015,601 879,877 1,931,152 1,793,730 Net income $ 3,618,538 $3,133,446 $6,614,727 $6,218,362 Allocation of net income (Note 4): Limited Partners $ 3,509,982 $3,039,442 $6,416,285 $6,031,811 Average net income per Limited Partner interest (14,655,512 Limited Partner interests outstanding) $ .24 $ .21 $ .44 $ .41 General Partners $ 108,556 $ 94,004 $ 198,442 $ 186,551
-4- The accompanying notes are an integral part of the financial statements. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1997 1996 Operating activities: Net income $ 6,614,727 $ 6,218,362 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of discounts on short-term Investments - (10,829) Amortization of prepaid expenses and fees 990,916 873,239 Shared appreciation income (334,250) - Changes in assets and liabilities: Decrease in interest receivable and other assets 308,221 318,130 Decrease in liabilities (6,090) (6,736) Net cash provided by operating activities 7,573,524 7,392,166 Investing activities: Principal collections on PIMs including shared appreciation income of $334,250 in 1997 10,903,139 594,561 Principal collections on MBS 892,119 1,396,934 Maturity of short-term investment - 500,000 Short-term investment - (488,210) Net cash provided by investing activities 11,795,258 2,003,285 Financing activities: Special distributions (10,405,413) - Quarterly distributions (8,417,728) (8,418,654) Net cash provided by financing activities (18,823,141) (8,418,654) Net increase in cash and cash equivalents 545,641 976,797 Cash and cash equivalents, beginning of period 7,921,270 5,963,681 Cash and cash equivalents, end of period $ 8,466,911 $ 6,940,478
-6- 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, 1996 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 of only normal recurring accruals) necessary to present fairly the Partnership's financial position as of June 30, 1997, its results of operations for the three and six months ended June 30, 1997 and 1996 and its cash flows for the six months ended June 30, 1997 and 1996. The results of operations for the three and six months ended June 30, 1997 are not necessarily indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. 2. PIMs On June 17, 1997, the Partnership received a prepayment of the Lakeside Apartments PIM. The Partnership received the outstanding principal balance of $9,935,167, a prepayment penalty of $99,000, shared appreciation interest of $235,000 and prior shared interest income of $335,000. As a result of the prepayment, the Partnership has fully amortized the remaining prepaid fees and expenses associated with this PIM and retired them. On June 27, 1997, the Partnership made a special distribution of $.71 per Limited Partner interest with the proceeds from the outstanding principal proceeds, the prepayment penalty and the shared appreciation. At June 30, 1997, the Partnership's PIM portfolio has a fair value of $144,508,154 and gross unrealized gains and losses of $3,475,401 and $116,284, respectively. The Partnership's PIMs have maturities ranging from 2009 to 2031. 3. MBS At June 30, 1997, the Partnership's MBS portfolio has an amortized cost of $39,836,314 and gross unrealized gains and losses of $862,505 and $222,237, respectively. The Partnership's MBS have maturities ranging from 2007 to 2033. KRUPP INSURED PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued 4. Changes in Partners' Equity A summary of changes in Partners' Equity for the six months ended June 30, 1997 is as follows: Total
Limited General Unrealized Partners' Partners Partners Gain Equity Total Balance at December 31, 1996 $207,196,050 $(217,867) $ 555,336 $207,533,519 Net income 6,416,285 198,442 - 6,614,727 Quarterly distributions (8,207,086) (210,642) - (8,417,728) Special distributions (10,405,413) - - (10,405,413) Change in unrealized gain on MBS - - 84,932 84,932 Balance at June 30, 1997 $194,999,836 $(230,067) $ 640,268 $195,410,037
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management s expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources The most significant demands on the Partnership's liquidity are regular quarterly distributions paid to investors of approximately $4.2 million. Funds used for investor distributions are generated from interest income received on the PIMs, MBS, cash and short-term investments, and the principal collections received on the PIMs and MBS. The Partnership funds a portion of the distribution from principal collections causing the capital resources of the Partnership to continually decrease. As a result of this decrease, the total cash inflows to the Partnership will also decrease, which will result in periodic downward adjustments to the distributions paid to investors. The General Partners periodically review the distribution rate to determine whether an adjustment is necessary based on projected future cash flows. In general, the General Partners try to set a distribution rate that provides for level quarterly distributions of cash available for distribution. To the extent quarterly distributions differ from the cash available for distribution, the General Partners may adjust the distribution rate or distribute funds through a special distribution. In June, the Lakeside Apartments PIM was repaid when the borrower refinanced the property. In addition to the outstanding balance due on the first mortgage, the Partnership received approximately $570,000 of additional interest earned both on property operations and as a result of an increase in appreciation and a $99,000 prepayment penalty. In June, the Partnership made a special distribution of $.71 per limited partner interest resulting from the repayment of the Lakeside Apartments PIM. Based on current projections, the General Partners believe the Partnership can maintain the current quarterly distribution rate for the foreseeable future. However, in the event of PIM prepayments the Partnership would be required to distribute any proceeds from the prepayments as a special distribution which may cause an adjustment to the distribution rate to reflect the anticipated future cash inflows from the remaining mortgage investments. During the first quarter of 1996, the borrower of the Lily Flagg Apartments PIM approached the Partnership about a potential sale of the property and the prepayment of the PIM. Since then, the borrower has informed the General Partners that a sale most likely will not occur until 1998. The borrower s request for discharge of the loan s participation feature to improve the marketability of the property has been granted by the General Partners in exchange for a full payment of all additional interest earned through the date of the discharge of approximately $425,000, which is expected to occur during the third quarter of 1997. For the first five years of the PIMs the borrowers were prohibited from prepaying. For the second five years, the borrowers can prepay the loans and pay the greater of a prepayment penalty or all participation interest. The Partnership has the option to call certain PIMs by accelerating their maturity if the loans are not prepaid by the tenth year after permanent funding. The Partnership will determine the merits of exercising the call option for each PIM as economic conditions warrant. Such factors as the condition of the asset, local market conditions, interest rates and available financing will have an impact on this decision. Assessment of Credit Risk The Partnership's investments in mortgages are guaranteed or insured by the Government National Mortgage Association ( GNMA ), the Federal National Mortgage Association ( FNMA ), the Federal Home Loan Mortgage Corporation ( FHLMC ) or the United States Department of Housing and Urban Development ( HUD ) and therefore the certainty of their cash flows and the risk of material loss of the amounts invested depends on the creditworthiness of these entities. FNMA is a federally chartered private corporation that guarantees obligations originated under its programs. FHLMC is a federally chartered corporation that guarantees obligations originated under its programs and is wholly-owned by the twelve Federal Home Loan Banks. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. GNMA guarantees the timely payment of principal and basic interest on the securities it issues, which represents interest in pooled mortgages insured by HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by the full faith and credit of the U.S. Government. Operations The following discussion relates to the operation of the Partnership during the three and six months ended June 30, 1997 and 1995 (Amounts in thousands). Net income increased for the three months ended June 30, 1997, as compared to same period in 1996 by approximately $486,000. This resulted from an increase in participation interest and other interest income of $783,000 and $35,000, respectively. The Partnership received approximately $235,000 in Shared Appreciation Interest, $335,000 for prior years Shared Income Interest and a $99,000 prepayment penalty from the repayment of the Lakeside Apartments PIM. During the first six months of 1997, the Partnership has received participation income from six properties totalling $297,000. This was offset by decreases in base interest of $141,000 and interest income on MBS of $56,000 and increases in amortization expense and general and adminstrative expense of $118,000 and $17,000, rspectively. Net income increased for the six months ended June 30, 1997, as compared to the same period in 1996 by approximately $397,000. The six month variances were similar to the three month variances discussed above. The Partnership funds a portion of distributions with MBS and PIM principal collections which reduces the invested assets generating interest income for the Partnership. 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. Date: August 5, 1997 -15- 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 LIMITED PARTNERSHIP 6-MOS DEC-31-1997 JUN-30-1997 8,466,911 181,625,619 1,296,080 0 0 4,034,237 0 0 195,422,847 12,810 0 0 0 194,769,769 640,268 195,422,847 0 8,545,879 0 0 1,931,152 0 0 6,614,727 0 6,614,727 0 0 0 6,614,727 0 0 Includes Participating Insured Mortgages ("PIMs") of $141,149,037 and Mortgage-Backed Securities ("MBS") of $40,476,582. Includes prepaid acquisition fees and expenses of $11,246,380 net of accumulated amortization of $8,106,629 and prepaid participation servicing fees of $3,513,542 net of accumulated amortization of $2,619,056. Represents total equity of General Partners and Limited Partners. General Partners deficit of ($230,067) and Limited Partners equity of $194,999,836. Unrealized gain on MBS. Represents interest income on investments in mortgages and cash. Includes $990,916 of amortization of prepaid fees and expenses. Net income allocated $198,442 to the General Partners and $6,416,285 to the Limited Partners. Average net income per Limited Partner interest is $.44 on 14,655,512 Limited Partner interests outstanding.
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