-----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, UhuleOwxwn5EzpeGHBOcSgdIg5a2O4YfBPb4g8BNoFXcW4/c8GBGfznmcaynSqft PJiXnKKpHux7u5ny9c7YaA== 0001169232-03-003629.txt : 20030513 0001169232-03-003629.hdr.sgml : 20030513 20030513161400 ACCESSION NUMBER: 0001169232-03-003629 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 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: 03695771 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 10-Q 1 d55654_10q.txt FORM 10-Q 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 March 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 0-16817 Krupp Insured Plus-II Limited Partnership Massachusetts 04-2955007 (State or other jurisdiction of (IRS 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) 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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |_| No |X| -1- 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. When used in this Form 10-Q, the words "believes," "anticipates," "expects," "plans," "intends," "estimates," "continue," "may" or "will" (or the negative of such words) and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties, including but not limited to the following: federal, state or local regulations; adverse changes in general economic or local conditions; prepayments of mortgages; failure of borrowers to pay participation interests due to poor operating results of properties underlying the mortgages; uninsured losses and potential conflicts of interest between the Partnership and its Affiliates, including the General Partners. The Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2002, contain additional information concerning such risk factors. Actual results in the future could differ materially from those described in any forward-looking statements as a result of the risk factors set forth above, and the risk factors described in the Annual Report. -2- KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENT OF NET ASSETS IN LIQUIDATION
ASSETS March 31, December 31, 2003 2002 ------------ ------------ Mortgage-Backed Securities and insured mortgage ("MBS") (Notes 2 and 4) $ 1,971,998 $ 13,681,978 Cash and cash equivalents 12,534,727 1,339,659 Interest receivable and other assets 23,240 95,673 ------------ ------------ Total assets $ 14,529,965 $ 15,117,310 ============ ============ LIABILITIES AND PARTNERS' EQUITY Liabilities $ 47,169 $ 44,509 ------------ ------------ Partners' equity (deficit) (Note 3): Limited Partners (14,655,512 Limited Partner interests outstanding) 14,673,372 15,236,577 General Partners (351,774) (346,173) Accumulated comprehensive income 161,198 182,397 ------------ ------------ Total Partners' equity 14,482,796 15,072,801 ------------ ------------ Total net assets in liquidation $ 14,529,965 $ 15,117,310 ============ ============
The accompanying notes are an integral part of the financial statements. -3- KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (In Liquidation as of December 31, 2002) For the Three Months Ended March 31, ------------------------- 2003 2002 --------- --------- Revenues: Interest income - PIMs: Basic interest $ -- $ 61,852 Interest income - MBS 299,201 583,569 Other interest income 28,655 5,675 --------- --------- Total revenues 327,856 651,096 --------- --------- Expenses: Asset management fee to an affiliate 17,411 59,589 Expense reimbursements to affiliates 73,985 24,477 General and administrative 61,645 22,479 --------- --------- Total expenses 153,041 106,545 --------- --------- Net income 174,815 544,551 Other comprehensive income: Net change in unrealized gain on MBS (21,199) (21,140) --------- --------- Total comprehensive income $ 153,616 $ 523,411 ========= ========= Allocation of net income (Note 3): Limited Partners $ 169,571 $ 528,214 ========= ========= Average net income per Limited Partner interest (14,655,512 Limited Partner interests outstanding) $ .01 $ .04 ========= ========= General Partners $ 5,244 $ 16,337 ========= ========= The accompanying notes are an integral part of the financial statements. -4- KRUPP INSURED PLUS-II LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (In Liquidation as of December 31, 2002)
For the Three Months Ended March 31, ------------------------------- 2003 2002 ------------ ------------ Operating activities: Net income $ 174,815 $ 544,551 Prepayment premium (113,638) -- Adjustments to reconcile net income to net cash provided by operating activities: Changes in assets and liabilities: Decrease in interest receivable and other assets 72,433 6,810 Increase in liabilities 2,660 8,712 ------------ ------------ Net cash provided by operating activities 136,270 560,073 ------------ ------------ Investing activities: Principal collections on PIMs -- 12,619 Principal collections on MBS including a prepayment premium of $113,638 in 2003 11,802,419 932,576 ------------ ------------ Net cash provided by investing activities 11,802,419 945,195 ------------ ------------ Financing activity: Quarterly distributions (743,621) (748,127) ------------ ------------ Net increase in cash and cash equivalents 11,195,068 757,141 Cash and cash equivalents, beginning of period 1,339,659 933,678 ------------ ------------ Cash and cash equivalents, end of period $ 12,534,727 $ 1,690,819 ============ ============ Non cash activities: Decrease in unrealized gain on MBS $ (21,199) $ (21,140) ============ ============
The accompanying notes are an integral part of the financial statements. -5- KRUPP INSURED PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (In Liquidation as of December 31, 2002) 1. Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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, 2002 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 March 31, 2003 and the results of operations and cash flows for the three months ended March 31, 2003 and 2002. The results of operations for the three months ended March 31, 2003 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. MBS On March 5, 2003, the Partnership received a payoff of the Hampton Place insured mortgage for $11,363,788. The Partnership also received a prepayment premium of $113,638 from this payoff. On May 5, 2003, the Partnership paid a special distribution of $0.79 per Limited Partner interest from the proceeds received. At March 31, 2003, the Partnership's MBS portfolio had an amortized cost of approximately $1,810,800 and unrealized gains of approximately $161,000. The portfolio has maturities ranging from 2008 to 2023. 3. Changes in Partners' Equity A summary of changes in Partners' Equity for the three months ended March 31, 2003 is as follows:
Accumulated Total Limited General Comprehensive Partners' Partners Partners Income Equity ------------ ------------ ------------- ------------ Balance at December 31, 2002 $ 15,236,577 $ (346,173) $ 182,397 $ 15,072,801 Net income 169,571 5,244 -- 174,815 Quarterly distributions (732,776) (10,845) -- (743,621) Change in unrealized gain on MBS -- -- (21,199) (21,199) ------------ ------------ ------------ ------------ Balance at March 31, 2003 $ 14,673,372 $ (351,774) $ 161,198 $ 14,482,796 ============ ============ ============ ============
4. Subsequent Event On April 16, 2003, the Partnership sold $1,689,593 its remaining MBS portfolio for $1,850,788. The gain from the sale was approximately $161,000. -6- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes contained in the Partnership's 2002 Annual Report on Form 10-K and in this Form 10-Q. Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-Q 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; uninsured losses and potential conflicts of interest between the Partnership and its Affiliates, including the General Partners. Liquidity and Capital Resources On March 5, 2003, the Partnership received a payoff of the Hampton Place insured mortgage for $11,363,788. The Partnership also received a prepayment premium of $113,638 from this payoff. On May 5, 2003, the Partnership paid a special distribution of $0.79 per Limited Partner interest from the proceeds received. At March 31, 2003, the Partnership had liquidity consisting of cash and cash equivalents of approximately $12.5 million as well as the cash flow provided by its investments in MBS and interest earned on the Partnership's cash and cash equivalents. The Partnership anticipates that these sources will be adequate to provide the Partnership with sufficient liquidity to meet its obligations during its liquidation. On April 16, 2003, the Partnership sold its remaining MBS portfolio for $1,856,266. The gain from the sale was approximately $161,000. The Partnership is in the process of winding up its business and expects to make a Terminating Capital Transaction distribution, as defined in the Partnership Agreement, to the partners in the second quarter of 2003. Upon the occurrence of a Terminating Capital Transaction, the Partnership Agreement provides that 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 the amount would be insufficient to reduce those negative capital account balances to zero, then in proportion to any negative account balances). The Advisor has estimated that the profits from the Terminating Capital Transaction will be approximately $200,000. As of December 31, 2002, the General Partners had deficit account balances of approximately $490,000 and the Limited Partners had positive account balances of approximately $15,380,000. Therefore, all estimated profits from the Terminating Capital Transaction will be allocated, for tax purposes, to the General Partners to reduce their negative capital accounts. Amounts available for distribution from the Terminating Capital Transaction, however, will be distributed to the Limited Partners. Upon the dissolution and termination of the Partnership, the General Partners will contribute to the Partnership an amount equal to the remaining deficit balance in their capital accounts. The General Partners have estimated that the deficit balance will be approximately $290,000, which, after satisfaction of any other obligations of the Partnership, will also be distributed to the Limited Partners. Critical Accounting Policy The Partnership's critical accounting policy relates to the Partnership's estimates included in its liquidation basis accounting statements. The Partnership's policy is as follows: The Partnership is in the process of winding up its business, which it expects to complete in the second quarter of 2003. In connection therewith, the Partnership has changed its basis of accounting as of December 31, 2002 from the going-concern basis to the liquidation basis of accounting. The liquidation basis of accounting requires that assets and liabilities be stated at their estimated net realizable value and that estimated costs of liquidating the Partnership be provided to the extent that they are reasonably determinable. The Partnership estimates that the costs to liquidate will be approximately $2,500, which primarily relates to final tax preparation work including the issuance of final schedule K-1 statements to the partners. This amount has been included in the Partnership's liabilities at March 31, 2003. -7- Results of Operations Net income decreased in the first quarter of 2003 as compared to the first quarter of 2002 primarily due to decreases in MBS interest income and basic interest on PIMs. This decrease was also due to increases in expense reimbursements to affiliates and general and administrative expenses. MBS interest decreased primarily due to the payoff of the Richmond Park Apartments MBS in June 2002 and single-family MBS principal collections. Basic interest on PIMs decreased due to the payoff of the Denrich Apartments PIM in May 2002. Expense reimbursements to affiliates and general and administrative expenses increased for the period ended March 31, 2003 primarily due to a change in the estimated cost of services provided to the Partnership in 2002. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Assessment of Credit Risk The Partnership's investments in MBS are guaranteed and/or insured by Fannie Mae or the Federal Home Loan Mortgage Corporation ("FHLMC") 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 with significant experience in mortgage securitizations. In addition, their MBS instruments carry the highest credit rating given to financial instruments. At March 31, 2003 the Partnership includes in cash and cash equivalents approximately $12.3 million 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. Item 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Within the 90 days prior to the date of this Quarterly Report on Form 10-Q, the Principal Executive Officer and Chief Accounting Officer of Krupp Plus 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 Principal Executive Officer 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 Quarterly Report on Form 10-Q. (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. -8- KRUPP INSURED PLUS-II LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (99.1) Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (99.2) 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. (b) Reports on Form 8-K None -9- 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 / Alan Reese --------------------------------------------- Alan Reese Treasurer and Chief Accounting Officer of Krupp Plus Corporation, a General Partner. Date: April 28, 2003 -10- Certifications I, Douglas Krupp, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Krupp Insured Plus - II Limited Partnership; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; 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; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 28, 2003 /s/ Douglas Krupp ---------------------------- Douglas Krupp Principal Executive Officer -11- Certifications I, Alan Reese, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Krupp Insured Plus - II Limited Partnership; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures 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 quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; 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; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 28, 2003 /s/ Alan Reese --------------------------------- Alan Reese Chief Accounting Officer -12- EX-99.1 3 d55654_ex991.txt Exhibit 99.1 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 Quarterly Report of Krupp Insured Plus II Limited Partnership (the "Partnership") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas Krupp, Co-Chairman (Principal Executive Officer), President and Director of Krupp Plus Corporation, a General Partner of the Partnership, certify, pursuant to 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 March 31, 2003 (the last date of the period covered by the Report). / s / Douglas Krupp - ------------------------------ Douglas Krupp, Principal Executive Officer EX-99.2 4 d55654_ex992.txt Exhibit 99.2 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 Quarterly Report of Krupp Insured Plus II Limited Partnership (the "Partnership") on Form 10-Q for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan Reese, Chief Accounting Officer of Krupp Plus Corporation, a General Partner of the Partnership, certify, pursuant to 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 March 31, 2003 (the last date of the period covered by the Report). /s/ Alan Reese - ----------------------------- Alan Reese, Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----