-----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, DyCeW5MBV18NSyOso7gIe73BJyy2Gq9zpI2cWpiurxSADit0zUBuBXGum2VZj4A/ uM2muXsjoIlrvdzmOWmt6g== 0000805297-98-000006.txt : 19980813 0000805297-98-000006.hdr.sgml : 19980813 ACCESSION NUMBER: 0000805297-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: SEC FILE NUMBER: 000-16817 FILM NUMBER: 98683142 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 KRUPP INSURED PLUS II LTD PARTNERSHIP UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 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, 1998 1997 Participating Insured Mortgages ("PIMs") $ 89,648,463 $122,048,053 (Note 2) Mortgage-Backed Securities and multi-family insured mortgages("MBS") (Note 3) 38,601,615 44,727,693 ------------ ------------ Total mortgage investments 128,250,078 166,775,746 Cash and cash equivalents 33,234,357 9,052,480 Interest receivable and other assets 950,240 1,180,660 Prepaid acquisition fees and expenses, net of accumulated amortization of $6,749,952 and $8,293,080, respectively 1,476,002 2,481,160 Prepaid participation servicing fees, net of accumulated amortization of $2,190,410 and $2,707,314, respectively 353,413 636,931 ----------- ----------- Total assets $164,264,090 $180,126,977 ============ ============ LIABILITIES AND PARTNERS' EQUITY Liabilities $ 18,797 $ 25,588 ------------ ------------ Partners' equity (deficit) (Note 4): Limited Partners 163,150,602 178,597,484 (14,655,512 Limited Partner interests outstanding) General Partners (282,162) (265,315) Unrealized gain on MBS 1,376,853 1,769,220 ------------ ------------------ Total Partners' equity 164,245,293 180,101,389 ------------ ------------ Total liabilities and partners' equity $164,264,090 $180,126,977 ============ ============ The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENTS OF INCOME
For the Three Months For the Six Months Ended June 30, Ended June 30, ---------------------- ------------------- 1998 1997 1998 1997 ---------- ---------- ----------- ------- Revenues: Interest income - PIMs: Base interest $1,872,864 $2,931,125 $4,114,931 $5,934,754 Participation interest 1,018,517 783,195 2,148,257 783,195 Interest income - MBS 1,021,379 794,547 1,871,304 1,599,138 Other interest income 369,565 125,272 576,500 228,792 ---------- --------- ---------- ---------- Total revenues 4,282,325 4,634,139 8,710,992 8,545,879 ---------- ---------- ---------- ---------- Expenses: Asset management fee to an affiliate 251,499 351,761 539,996 707,213 Expense reimbursements to affiliates (33,980) 42,576 8,596 77,117 Amortization of prepaid expenses and fees 861,467 554,296 1,288,676 990,916 General and administrative 85,402 66,968 135,181 155,906 ---------- --------- ---------- ---------- Total expenses 1,164,388 1,015,601 1,972,449 1,931,152 ---------- --------- ---------- -------------- Net income $3,117,937 $3,618,538 $6,738,543 $6,614,727 Net change in unrealized gain on (334,005) 466,092 (392,367) 84,932 ---------- ---------- ---------- ---------- Total comprehensive income $2,783,932 $4,084,630 $6,346,176 $6,699,659 ========== ========== ========== ========== Allocation of net income (Note 4): Limited Partners $3,024,399 $3,509,982 $6,536,387 $6,416,285 ========== ========== ========== ========== Average net income per Limited Partner interest (14,655,512 Limited Partner interests outstanding) $ .21 $ .24 $ .45 $ .44 ========== ========== ========== ========== General Partners $ 93,538 $ 108,556 $ 202,156 $ 198,442 ========== ========== ========== ========== The accompanying notes are an integral part of thefinancial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 1997 Operating activities: Net income $6,738,543 $ 6,614,727 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid expenses and fees 1,288,676 990,916 Shared appreciation income (1,247,726) (334,250) Changes in assets and liabilities: Decrease in interest receivable and other assets 230,420 308,221 Decrease in liabilities (6,791) (6,090) ---------- ------------- Net cash provided by operating activities 7,003,122 7,573,524 ---------- --------- Investing activities: Principal collections on PIMs including shared appreciation income and prepayment penalties of $1,229,426 in 1998 and shared appreciation income of $334,250 in 1997 33,629,016 10,903,139 Principal collections on MBS including a prepayment penalty of $18,300 in 1998 5,752,011 892,119 ----------- ---------- Net cash provided by investing activities 39,381,027 11,795,258 ----------- ----------- Financing activities: Special distributions (13,776,181) (10,405,413) Quarterly distributions (8,426,091) (8,417,728) ----------- ----------- Net cash used for financing activities (22,202,272) (18,823,141) ----------- ----------- Net increase in cash and cash equivalents 24,181,877 545,641 Cash and cash equivalents, beginning of period 9,052,480 7,921,270 ----------- --------------- Cash and cash equivalents, end of period $33,234,357 $ 8,466,911 =========== =========== 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, 1997 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, 1998, its results of operations for the three and six months ended June 30, 1998 and 1997 and its cash flows for the six months ended June 30, 1998 and 1997. The results of operations for the three and six months ended June 30, 1998 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 During the second quarter of 1998, the Partnership received prepayments of the Harbor House and Longwood Villas Apartments PIMs. The Partnership received the outstanding principal balance of $12,146,408 and shared appreciation income of $750,000 from the Harbor House PIM and the outstanding principal balance of $6,261,587 from the Longwood Villas PIM. During the first quarter of 1998, the Partnership received a prepayment penalty $62,616 from the Longwood Villas PIM. The Partnership made a special distribution of $.43 per Limited Partner interest relating to the Longwood Villas Apartments PIM on July 17, 1998 and a special distribution of $.88 per Limited Partner interest for the Harbor House Apartment PIM prepayment was made on July 24, 1998. During the first quarter of 1998, the Partnership received prepayments of the Westbrook Manor, Fallwood and Greenbrier Apartment PIMs in the amounts of $4,841,446, $6,505,922, and $2,196,031, respectively. In addition to the prepayments, the Partnership received $416,810 of Shared Appreciation Interest and $632,002 of Minimum Additional Interest and Shared Income Interest. On March 27, 1998, the Partnership made a special distribution to the investors of $.94 per Limited Partner interest. At June 30, 1998, the Partnership's PIM portfolio has a fair value of $90,156,536 and gross unrealized gains of $508,073. The Partnership's PIMs have maturities ranging from 2009 to 2031. At June 30, 1998 there are no insured mortgage loans within the Partnership's portfolio that are delinquent with respect to principal or interest payments. Continued KRUPP INSURED PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 3. MBS On June 19, 1998, the Partnership received a prepayment of the Brookside insured mortgage in the amount of $4,605,549, representing the outstanding principal balance and a prepayment penalty of $18,300. The Partnership made a special distribution of $.32 per limited partner interest on July 24, 1998. At June 30, 1998, the Partnership's MBS portfolio has an amortized cost of $37,224,762 and gross unrealized gains of $1,376,853. The Partnership's MBS have maturities ranging from 2007 to 2033. In June 1997, Statement of Financial Accounting Standards No. 130, 'Reporting Comprehensive Income' (FASB 130), was issued establishing standards for reporting and displaying comprehensive income and its components effective January 1, 1998. FASB 130 requires comprehensive income and its components, as recognized under accounting standards, to be displayed in a financial statement with the same prominence as other financial statements, if material. Accordingly, unrealized gains (losses) on the Partnership's available-for sale securities have been included in other comprehensive income. 4. Changes in Partners' Equity A summary of changes in Partners' Equity for the six months ended June 30, 1998 is as follows:
Total Limited General Unrealized Partners Partners Partners Gain Equity Balance at December 31, 1997 $178,597,484 $(265,315) $1,769,220 $180,101,389 Net income 6,536,387 202,156 - 6,738,543 Quarterly distributions (8,207,088) (219,003) - (8,426,091) Special distributions (13,776,181) - - (13,776,181) Change in unrealized gain on MBS - - (392,367) (392,367) ------------- ---------- ---------- ------------ Balance at June 30, 1998 $163,150,602 $(282,162) $1,376,853 $164,245,293 ============ ========= ========== ============
5. Subsequent Event Lily Flagg On July 15, 1998, the Partnership received a partial repayment on the Lily Flagg MBS of approximately $651,000. The remaining balance is scheduled for payment in the third quarter of 1998. At that time, the Partnership will receive a 1% prepayment penalty. 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 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. During the second quarter of 1998, the Partnership received prepayments of the Harbor House and Longwood Villas Apartments PIMs and the Brookside insured mortgage, along with Additional Interest. On July 17, 1998 and July 24, 1998, the Partnership made special distributions in the amounts of $.43 and $1.20 per Limited Partner interest, relating to the Longwood Villas Apartment PIM, and the Harbor House PIM and Brookside Apartments insured mortgage, respectively. During the first quarter of 1998, the Partnership received prepayments of the Westbrook Manor, Fallwood and Greenbrier Apartment PIMs along with Additional Interest. On March 27, 1998, the Partnership made a special distribution to the investors of $.94 per Limited Partner interest. The Partnership received a partial repayment on the Lily Flagg MBS of approximately $651,000 on July 15, 1998. The remaining balance is scheduled for payment in the third quarter of 1998. At that time, the Partnership will receive a 1% prepayment penalty. In addition to the Lily Flagg prepayment, the Partnership has also been notified of potential payoffs on the Le Couer du Monde, Walden Village, Carlyle Court, Hillside Court and Waterford Court Apartments PIMs during 1998. If any of these transactions take place, the Partnership would receive unpaid participation interest earned on prior years operations and either its share of any increase in the properties' value or a prepayment penalty. Any repayment proceeds and prepayment penalties would be distributed to the Limited Partners through a special distribution. Based on current projections, the General Partners believe the Partnership can maintain the current distribution rate for the foreseeable future. However, in the event of additional 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. 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"), Fannie Mae, 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. 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 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, 1998 and 1997. Net income decreased for the three months ended June 30, 1998 as compared to the same period in 1997 by approximately $501,000. This decrease was due primarily to prepayments of PIMs, which caused a decrease in base interest on PIMs and an increase in amortization of prepaid expenses and fees. This was offset in part by an increase in participation interest, which resulted from such prepayments. The significant decrease in base interest on PIMs was caused primarily by prepayments of the Harbor House, Fallwood, Westbrook, Greenbrier and Longwood Villas PIMs during the first half of 1998 and the Lakeside, Colonial and Pine Ridge PIMs in 1997. In addition, base interest on PIMs decreased and interest on MBS increased due to the conversion of the Lily Flagg PIM from a PIM into a multi-family insured mortgage during the third quarter of 1997. The Partnership realized an increase in participation income of approximately $235,000 in the second quarter of 1998 as compared to 1997 due primarily to $750,000 of shared appreciation income realized from the Harbor House Apartment PIM. The Partnership realized an additional $269,000 from the Stanford, Carlyle and Waterford Apartment PIMs and the Brookside MBS which exceeded the amount of participation income realized during the same period of 1997. Other interest income increased due to the Partnership having higher average short-term investment balances as a result of the prepayments mentioned above during the three months ended June 30, 1998 as compared to the same period in 1997. During the second quarter of 1998, the Partnership received a rebate for expense reimbursements related to 1997. The decrease in asset management fees of $100,000 resulted from the 1998 PIM prepayments reducing the asset base. Net income increased for the six months ended June 30, 1998 as compared to the same period in 1997 by approximately $124,000. This increase was due primarily to participation interest received on PIM prepayments. This was offset by lower base interest on PIMs and an increase in amortization of prepaid expenses and fees. The increase in participation interest of approximately $1,365,000 is from the additional interest received from the prepayment of the Harbor House, Fallwood, Westbrook, Greenbrier and Longwood Villas PIMs and the Brookside insured mortgage totaling $1,248,000. In addition, other interest income significantly increased due to the Partnership having higher average short-term investment balances during the six months ended June 30, 1998 as compared to the same period in 1997 caused by the prepayment activity during the first half of 1998. Also contributing to the decrease in base interest on PIMs was the conversion of the Lily Flagg PIM in 1997 into an insured mortgage. This resulted in higher interest income on MBS in 1998 as compared to 1997. During the six months ended June 30 1998, the Partnership received a rebate for expense reimbursements related to 1997. Asset management fees decreased $167,000 as a result of the prepayments described above. Interest income on PIMs and MBS will continue to decline as principal collections reduce the outstanding balance of the portfolios. The Partnership funds a portion of distributions with MBS and PIM principal collections, which reduces the invested assets generating income for the Partnership. As the invested assets decline so will interest income on MBS, base interest income on PIMs and other interest income. 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, 1998 EX-27 2 FDS --
5 The schedule contains summary financial infomation extracted from the balance sheet and statement if income and is qualified in its entirety by reference to such financial statements. 0000805297 Krupp Insured Plus II LTD Partnership 6-MOS Jun-30-1998 Jun-30-1998 33,234,357 128,250,078 950,240 0 0 1,829,415 0 0 164,264,090 18,797 0 0 0 162,868,440 1,376,853 164,264,090 0 8,710,992 0 0 1,972,449 0 0 6,738,543 0 6,738,543 0 0 0 6,738,543 0 0 Includes Participating Insured Mortgages ("PIMs") of $89,648,463 and Mortgage-Backed Securities ("MBS") of $38,601,615. Includes prepaid acquisition fees and expenses of $8,225,954 net of accumulated amortization of $6,749,952 and prepaid participation servicing fees of $2,543,823 netof accumulated amortization of $2,190,410. Represents total equity of General Partners and Limited Partners. General Partners deficit of ($282,162) and Limited Partners equity of $163,150,602. Unrealized gains on MBS. Represents interest income on investments in mortgages and cash. Includes $1,288,676 of amortization of prepaid fees and expenses. Net income allocated $202,156 to the General Partners and $6,536,387 to the Limited Partners. Average net income per Limited Partner interest is $.45 on 14,655,512 Limited Partner interests outstanding.
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