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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESx
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (IRS Employer
incorporation or organization) Identification No.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (617) 423-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Depositary 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 contained,
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. [ ].
Aggregate market value of voting securities held by non-affiliates: Not
applicable.
Documents incorporated by reference: See Part IV Item 14.
The exhibit index is located on pages 9-13.
PART I
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 investments in PIMs consist of a securitized first
mortgage loan or a sole participation interest in a Department of Housing
and Urban Development ("HUD") 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 either a securitized first
mortgage loan ("MBS"), originated under the lending programs of the
Federal National Mortgage Association ("FNMA") or Government National
Mortgage Association ("GNMA"), or a sole participation interest in a first
mortgage loan originated under the Federal Housing Administration ("FHA")
lending program (collectively the "insured mortgages"). The Partnership
received 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,
which provided the borrower with a below market interest rate on the first
mortgage loan. The borrower conveyed the participation interests to the
Partnership through either a subordinated promissory note and mortgage or a
shared income and appreciation agreement. FNMA guarantees the principal
and interest payments for the FNMA MBS and GNMA guarantees the timely
payment of principal and interest for the GNMA MBS. HUD insures the first
mortgage loan underlying the GNMA MBS and any 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 acquired MBS backed by single-family or multi-
family mortgage loans issued or originated by GNMA, FNMA or the Federal
Home Loan Mortgage Corporation ("FHLMC"). FNMA and FHLMC guarantee the
principal and basic interest of these FNMA and FHLMC MBS, respectively.
GNMA guarantees the timely payment of principal and interest of GNMA MBS,
and HUD insures the pooled first 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 PIMs through
repayment as early as ten years from the closing dates of the permanent
loans. In addition, the Partnership expects to receive a significant
portion of the value of its MBS within a ten year holding period.
Therefore, dissolution of the Partnership should occur significantly prior
to December 31, 2025, the stated termination date of the Partnership.
The Partnership's investments are not subject to seasonal fluctuations.
However, the realization of the participation features of the PIMs are
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 requirements for compliance with federal, state and local
regulations to date have not adversely effected the Partnership's
operations and the Partnership anticipates no adverse effect in the future.
As of December 31, 1995, there were no personnel 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 is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
HOLDER MATTERS
There currently is no established trading market for the Units.
The number of investors holding Units as of December 31, 1995 was
approximately 7,100. One of the objectives of the Partnership is to
provide quarterly distributions of cash flow generated by its investments
in mortgages. The Partnership 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 1994, the Partnership made a special distribution consisting
primarily of principal collections on MBS. The Partnership may make
special distributions in the future if PIMs prepay 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, 1995 and 1994:
1995 1994
Amount Per Unit Amount Per Unit
Quarterly Distributions:
Limited Partners $9,000,119 $1.20 $ 9,554,686 $1.28
General Partners 187,157 192,551
9,187,276 9,747,237
Special Distributions:
Limited Partners - 7,950,105 $1.06
Total Distributions $9,187,276 $17,697,342
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.
1995 1994 1993 1992 1991
Total revenues $ 7,097,154 $ 7,688,593 $ 7,698,364 $ 8,697,559 $ 9,616,484
Net income 5,247,543 5,682,819 5,642,527 5,413,709 7,719,518
Net income allocated to:
Limited Partners 5,090,117 5,512,334 5,473,251 5,251,298 7,487,932
Average Per Unit .68 .73 .73 .70 1.00
General Partners 157,426 170,485 169,276 162,411 231,586
Total assets at
December 31 93,784,033 96,561,305 108,566,470 117,967,380 131,567,597
Distributions to:
Limited Partners 9,000,119 9,554,686 9,873,378 10,509,149 10,650,140
Quarterly
Average per Unit 1.20 1.28 1.32 1.40 1.42
Special - 7,950,105 4,950,065 8,250,090 -
Average per Unit - 1.06 .66 1.10 -
General Partners 187,157 192,551 203,481 228,198 260,279
ITEM 7. 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 $2.3 million.
Funds used for investor distributions come from interest received on the
PIMs, MBS, cash and cash equivalents and the principal collections received
on the PIMs and MBS and cash reserves. The Partnership funds a portion of
the distribution from principal collections and 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 quarterly distributions
paid to investors.
During the last half of 1994 and the first nine months of 1995
prepayments on the Partnership's MBS portfolio decreased dramatically as
compared to the level of prepayments during 1993 and the beginning of 1994.
The high level of MBS prepayments during 1993 and early 1994 caused such an
increase in available cash that the Partnership made a special distribution
of $1.06 per Unit during 1994. Also during 1994, the Partnership adjusted
its distribution to $1.20 per Unit per year to reflect the anticipated cash
inflows that would be available to fund distributions in the near term.
During the year ended December 31, 1995, the Partnership received MBS
principal collections of approximately $1.8 million as compared to $5
million during 1994, reflecting a significantly lower level of prepayments.
To date, this decrease in MBS principal collections has not adversely
affected the Partnership's liquidity or its ability to maintain the current
distribution rate of $1.20 per Unit per year. However, as the portion of
distributions funded with principal collections on MBS and PIMs reduces the
asset base of the Partnership, future cash inflows will decrease.
The General Partners periodically review the distribution rate to
determine whether an adjustment to the distribution rate 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 do
not fully utilize the cash available for distribution and cash balances
increase, the General Partners may adjust the distribution rate or
distribute such funds through a special distribution.
During December 1995, the Partnership agreed to a modification of the
Royal Palm PIM. The Partnership received a reissued Federal National
Mortgage Association ("FNMA") mortgage-backed security ("MBS") and
increased its participation percentage in income and appreciation from 25%
to 30%. During December 1995, the Partnership received its pro-rata share
of a $90,644 principal payment and will receive interest only payments on
the FNMA MBS at interest rates ranging from 6.25% to 8.775% per annum
through maturity. Also, the Partnership will receive its pro-rata share of
the $250,000 principal payments due on December 1 of each of the next four
years. As a result of the modification, the Royal Palm PIM will continue
to provide the Partnership with a competitive yield, potential
participation in future income and appreciation, and principal and interest
from the FNMA MBS will continue to be guaranteed by FNMA.
For the first five years of the PIMs the borrowers are prohibited from
repaying. For the second five years, the borrower can repay the loans
incurring a prepayment penalty. 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
FNMA, the Government National Mortgage Association ("GNMA"), the 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 by Section 17 of the
Partnership Agreement, and the source of cash distributions for the year
ended December 31, 1995 and the period from inception through December 31,
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)
Year Inception
Ended Through
12/31/95 12/31/95
Distributable Cash Flow:
Income for tax purposes $ 6,072 $ 67,096
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid fees and expenses 134 4,761
Amortization of MBS premiums - 284
Acquisition expenses paid from offering
proceeds charged to operations - 1,098
Gain on sale of MBS - (114)
Total Distributable Cash Flow ("DCF") $ 6,206 $ 73,125
Limited Partners Share of DCF $ 6,020 $ 70,931
Limited Partners Share of DCF per Unit $ .80 $ 9.46 (c)
General Partners Share of DCF $ 186 $ 2,194
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 549 $ 46,432
Principal collections on MBS 1,785 38,787
Insurance claim proceeds and principal
collections on PIMs and MBS reinvested
in PIMs and MBS - (40,775)
Gain on sale of MBS - 114
Total Net Proceeds from Capital
Transactions $ 2,334 $ 44,558
Cash available for distribution
(DCF plus Net Proceeds from Capital
Transactions) $ 8,540 $117,683
Distributions: (includes special distributions)
Limited Partners $ 9,000 (a) $114,837 (b)
Limited Partners Average per Unit $ 1.20 (a) $ 15.31 (b)(c)
General Partners 186 (a) 2,194 (b)
Total Distributions $ 9,186 $117,031
(a) Represents all distributions paid in 1995 except the February 1995
distribution and includes an estimate of the distribution to be
paid in February 1996.
(b) Includes an estimate of the distribution to be paid in February
1996.
(c) Limited Partners average per Unit return of capital as of February
1996 is $5.85 [$15.31 - $9.46]. 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 years ended December 31, 1995, 1994 and 1993.
(Amounts in thousands)
1995 1994 1993
Interest income on PIMs $ 4,471 $ 4,515 $ 4,350
Interest income on MBS 2,473 2,662 3,097
Other interest income 153 262 307
Partnership expenses (891) (1,048) (1,128)
Distributable Cash Flow 6,206 6,391 6,626
Participation income receivable - 265 -
Amortization of MBS premium - (15) (55)
Amortization of prepaid fees
and expenses (958) (958) (928)
Net income $ 5,248 $ 5,683 $ 5,643
Net income decreased approximately $435,000 in 1995 as compared to 1994
due primarily to lower participation income accrued in 1995, interest
income on MBS, and interest income on cash and short-term investments. In
general, the income generated by the Partnership's invested assets will
decrease in the future as its investments in mortgages amortize and
principal proceeds are distributed to investors through quarterly or
special distributions. The decline in interest income on MBS from 1994 to
1995 decreased as compared to the decline from 1993 to 1994 due to a lower
rate of prepayments on the MBS portfolio during the last half of 1994 and
1995.
Net income for 1994 did not change significantly from 1993. Interest
income related to PIMs increased approximately $430,000 in 1994 as compared
to 1993 as a result of participation income recognized in 1994 and a
retroactive interest rate reduction in 1993 that lowered interest income on
PIMs in 1993. In November 1993, the Partnership entered into an agreement
with the borrower of the FHA PIM reducing the interest rate from 8.875% to
7.375% per annum retroactive to January 1, 1992, which reduced interest
income on PIMs in 1993. Interest income on MBS decreased approximately
$450,000 in 1994 as compared to 1993 due primarily to significant
prepayments of the underlying mortgages as a result of refinancings due to
lower interest rates. During 1994, the Partnership's expenses decreased
approximately $80,000 as compared to 1993 as a result of lower asset
management fees and expense reimbursements to affiliates. The asset
management fee will continue to decline as the asset base of the
Partnership decreases.
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.
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 a 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
Douglas Krupp (49) Co-Chairman of the Board
George Krupp (51) Co-Chairman of the Board
Laurence Gerber (39) President
Robert A. Barrows (38) Vice President and Chief Accounting
Officer
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for the more than $3 billion under management for institutional
and individual clients. Mr. Krupp is a graduate of Bryant College. In
1989 he received an honorary Doctor of Science in Business Administration
from this institution and was elected trustee in 1990. Mr. Krupp is
Chairman of the Board and Director of Berkshire Realty Company, Inc. (NYSE-
BRI).
George Krupp is the Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm
expanded over the years within its areas of expertise including investment
program sponsorship, property and asset management, mortgage banking and
healthcare facility ownership. Today, The Berkshire Group is an integrated
real estate, mortgage and healthcare company which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for more than $3.0 billion under management for institutional
and individual clients. Mr. Krupp attended the University of Pennsylvania
and Harvard University. Mr. Krupp serves as Chairman of the Board and
Trustee of Krupp Government Income Trust II and Krupp Government Income
Trust.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group. Prior to becoming President and Chief Executive Officer
in 1991, Mr. Gerber held various positions with The Berkshire Group which
included overall responsibility at various times for: strategic planning
and product development, real estate acquisitions, corporate finance,
mortgage banking, syndication and marketing. Before joining The Berkshire
Group in 1984, he was a management consultant with Bain & Company, a
national consulting firm headquartered in Boston. Prior to that, he was a
senior tax accountant with Arthur Andersen & Co., an international
accounting and consulting firm. Mr. Gerber has a B.S. degree in Economics
from the University of Pennsylvania, Wharton School and an M.B.A. degree
with high distinction from Harvard Business School. He is a Certified
Public Accountant. Mr. Gerber also serves as President and a Director of
Berkshire Realty Company, Inc. (NYSE-BRI), and President and Trustee of
Krupp Government Income Trust and Krupp Government Income Trust II.
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of Berkshire Mortgage Finance and Corporate Controller of The Berkshire
Group. Mr. Barrows has held several positions within The Berkshire Group
since joining the company in 1983 and is currently responsible for
accounting and financial reporting, treasury, tax, payroll and office
administrative activities. Prior to joining The Berkshire Group, he was an
audit supervisor for Coopers & Lybrand L.L.P. in Boston. He received a
B.S. degree from Boston College and is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995 no person owned of record or was known by the
General Partners to own beneficially more than 5% of the Partnership's
7,499,999 outstanding Units. The only interests held by management or its
affiliates consist of its General Partner and Corporate Limited Partner
Interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in Note F to the
Partnership's financial statements presented in Appendix A to this report.
PART IV
ITEM 14. 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) 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:
La Costa Apartments
(10.1) Prospectus for GNMA Pool No. 168416 (PL). [Exhibit 19.1 to
Registrant's Report on Form 10-Q for the quarter ended March
31, 1987 (File No. 33-2520)].*
(10.2) Shared Income and Appreciation Agreement, dated March 18,
1987 between International Plaza Associates, Ltd., A
Florida limited partnership, and DRG Funding Corporation, a
Delaware corporation. [Exhibit 19.2 to Registrant's Report
on Form 10-Q for the quarter ended March 31, 1987 (File No.
33-2520)].*
(10.3) Multifamily Mortgage, Assignment of Rents and Security
Agreement, dated March 18, 1987 between International Plaza
Associates, Ltd., a Florida limited partnership, and DRG
Funding Corporation, a Delaware corporation. [Exhibit 19.3
to Registrant's Report on Form 10-Q for the quarter ended
March 31, 1987 (File No. 33-2520)].*
(10.4) Assignment of Mortgage, dated March 18, 1987, between DRG
Funding Corporation, a Delaware corporation, (Mortgagee) and
Krupp Insured Plus Limited Partnership, a Massachusetts
limited partnership, (Assignee). [Exhibit 19.4 to
Registrant's Report on Form 10-Q for the quarter ended March
31, 1987 (File No. 33-2520)].*
Mandalay Apartments
(10.5) Prospectus for GNMA Pool No. 228812 (PL). [Exhibit 1 to
Registrant's Report on Form 8-K dated August 11, 1987 (File
No. 0-15815)].*
(10.6) Shared Income and Appreciation Agreement, dated July 1,
1987, between First Florida Bank, N.A., as Trustee under
Trust No. 48-1990-00 and DRG Funding Corporation. [Exhibit
2 to Registrant's Report on Form 8-K dated August 11, 1987
(File No. 0-15815)].*
(10.7) Assignment of Mortgage, dated July 1, 1987, between DRG
Funding Corporation (as "Mortgagee") and Krupp Insured Plus
Limited Partnership (as "Assignee"). [Exhibit 3 to
Registrant's Report on Form 8-K dated August 11, 1987 (File
No. 0-15815)].*
Greentree Apartments
(10.8) Prospectus for GNMA Pool No. 238744-(PL). [Exhibit 1 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
(10.9) Mortgage Note, dated October 22, 1987, between Greentree
Associates, Ltd. and DRG Funding Corporation. [Exhibit 2 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No.0-15815)].*
(10.10) Mortgage, dated October 22, 1987, between Greentree
Associates, Ltd. and DRG Funding Corporation. [Exhibit 3 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
(10.11) Shared Income and Appreciation Agreement, dated October 22,
1987, between Greentree Associates, Ltd. and DRG Funding
Corporation. [Exhibit 4 to Registrant's Report on Form 8-K
dated December 10, 1987 (File No. 0-15815)].*
(10.12) Assignment of Shared Income and Appreciation Agreement,
dated October 22, 1987, between DRG Funding Corporation and
Krupp Insured Plus Limited Partnership (as "Assignee").
[Exhibit 5 to Registrant's Report on Form 8-K dated December
10, 1987 (File No. 0-15815)].*
(10.13) Multifamily Mortgage, Assignment of Rents and Security
Agreement, dated October 22, 1987, between Greentree
Associates, Ltd. and DRG Funding Corporation. [Exhibit 6 to
Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
(10.14) Assignment of Mortgage (the Multifamily Mortgage, Assignment
of Rents and Security Agreement), dated November 23, 1987,
between DRG Funding Corporation (as "Mortgagee") and Krupp
Insured Plus Limited Partnership (as "Assignee"). [Exhibit
7 to Registrant's Report on Form 8-K dated December 10, 1987
(File No. 0-15815)].*
Pine Hills Apartments
(10.15) Prospectus for GNMA Pool No. 238825-(PL). [Exhibit 10.27 to
Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1987 (File No. 0-15815)].*
(10.16) Subordinated Promissory Note, dated November 20, 1987,
between Pine Hill Partners ("Maker" or "Mortgagor") and
York Associates, Inc., ("Holder" or "First-Mortgagee") as
assigned to Krupp Insured Plus Limited Partnership. [Exhibit
10.28 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No. 0-15815)].*
(10.17) Subordinated Multifamily Mortgage, Assignment of Rents and
Security Agreement, dated November 20, 1987, between Pine
Hill Partners ("Borrower") and York Associates, Inc.,
("Lender"). [Exhibit 10.29 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1987 (File No.
0-15815)].*
(10.18) Assignment of Subordinated Mortgage, dated November 23, 1987
between York Associates, Inc., ("Assignor") and Krupp
Insured Plus Limited Partnership ("Assignee"). [Exhibit
10.30 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No. 0-15815)].*
(10.19) Modification to the loan and participation workout
agreement, dated March 31, 1992, by and between Krupp
Insured Plus Limited Partnership and Pine Hill Partners.
[Exhibit 10.19 to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1994 (File No. 0-15815)].*
Vista Montana
(10.20) 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)].*
(10.21) 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)].*
(10.22) 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)].*
(10.23) 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)].*
(10.24) 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)].*
(10.25) 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)].*
(10.26) 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)].*
(10.27) 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)].*
(10.28) 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)].*
(10.29) 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)].*
Royal Palm Place
(10.30) Supplement to Prospectus for FNMA Pool No. MB-109057.+
(10.31) Subordinated Multifamily Mortgage dated March 20, 1991
between Royal Palm Place, Ltd., a Florida limited
partnership (the "Mortgagor") and Krupp Insured Plus-III
Limited Partnership (the "Mortgagee"). [Exhibit 19.2 to
Registrant's Report on Form 10-Q for the Quarter Ended June
30, 1991 (File No. 0-15815)].*
(10.32) Amended and Restated Subordinated Promissory Note dated
December 1, 1995 between Royal Palm Place, Ltd., a Florida
limited partnership (the "Mortgagor") and Krupp Insured
Plus-III Limited Partnership (the "Holder").+
(10.33) Modification Agreement dated March 20, 1991 by and between
Royal Palm Place, Ltd., a Florida limited partnership and
Krupp Insured Plus-III Limited Partnership. [Exhibit 19.4 to
Registrant's Report on Form 10-Q for the Quarter Ended June
30, 1991 (File No. 0-15815)].*
(10.34) Participation Agreement dated March 20, 1991 between Krupp
Insured Plus-III Limited Partnership and Krupp Insured Plus
Limited Partnership. [Exhibit 19.1 to Registrant's Report
on Form 10-Q for the Quarter Ended September 30, 1991 (File
No. 0-15815)].*
* Incorporated by reference.
+ Filed herein.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1995 the
Partnership did not file any reports on Form 8-K.
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 26th day of February, 1996.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
By: The Krupp Corporation,
a General Partner
By: /s/ George Krupp
George Krupp, Co-Chairman
(Principal Executive Officer) and
Director of The Krupp Corporation
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 26th day of February,
1996.
Signatures Title(s)
/s/ Douglas Krupp Co-Chairman (Principal Executive Officer)
Douglas Krupp and Director of The Krupp Corporation, a
General Partner of the Registrant.
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of The Krupp Corporation, a
General Partner of the Registrant.
/s/Laurence Gerber President of The Krupp Corporation, a
Laurence Gerber General Partner of the Registrant.
/s/ Robert A. Barrows Vice President and Chief Accounting
Robert A. Barrows Officer of The Krupp Corporation, a
General Partner of the Registrant.
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, 1995
KRUPP INSURED PLUS LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Accountants F-3
Balance Sheets at December 31, 1995 and 1994 F-4
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-5
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1995, 1994 and 1993 F-6
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 F-7
Notes to Financial Statements F-8 - F-14
Schedule IV - Mortgage Loans on Real Estate F-15 - F-16
All other schedules are omitted as they are not applicable or not required,
or the information is provided in the financial statements or the notes
thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Krupp Insured Plus Limited Partnership:
We have audited the financial statements and the financial statement
schedule of Krupp Insured Plus Limited Partnership (the "Partnership")
listed in the index on page F-2 of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
General Partners of the Partnership. Our responsibility is to express an
opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Krupp Insured
Plus Limited Partnership as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 27, 1996
KRUPP INSURED PLUS LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
Participating Insured Mortgages
("PIMs") (Notes B, C and H) $ 59,289,135 $ 59,837,946
Mortgage-Backed Securities and insured
mortgage ("MBS") (Notes B, D and H) 29,026,838 29,648,678
Total mortgage investments 88,315,973 89,486,624
Cash and cash equivalents (Notes B and H) 2,394,592 2,931,523
Interest receivable and other assets 871,942 983,130
Prepaid acquisition fees and expenses, net of
accumulated amortization of $4,423,897 and
$3,658,625, respectively (Note B) 1,696,611 2,461,883
Prepaid participation servicing fees, net of
accumulated amortization of $1,895,084 and
$1,701,854, respectively (Note B) 504,915 698,145
Total assets $ 93,784,033 $ 96,561,305
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 14,454 $ 14,734
Partners' equity (deficit) (Notes A and E):
Limited Partners 92,779,548 96,689,550
(7,500,099 Limited Partner interests
outstanding)
General Partners (172,710) (142,979)
Unrealized gain on MBS (Note B) 1,162,741 -
Total Partners' equity 93,769,579 96,546,571
Total liabilities and Partners' equity $ 93,784,033 $ 96,561,305
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Revenues:
Interest income - PIMs
Base interest $4,470,937 $4,517,722 $4,349,745
Participation Income - 262,069 -
Interest income - MBS 2,472,826 2,647,031 3,097,129
Other interest income 153,391 261,771 251,490
Total revenues 7,097,154 7,688,593 7,698,364
Expenses:
Asset management fee to an
affiliate (Note F) 665,051 686,828 751,490
Expense reimbursements to affiliates
(Note F) 107,019 222,785 244,702
Amortization of prepaid expenses and
fees (Note B) 958,502 958,502 928,187
General and administrative expenses 119,039 137,659 131,458
Total expenses 1,849,611 2,005,774 2,055,837
Net income (Note G) $5,247,543 $5,682,819 $5,642,527
Allocation of net income (Note E):
Limited Partners $5,090,117 $5,512,334 $5,473,251
Average net income per Limited
Partner interest $ .68 $ .73 $ .73
(7,500,099 Limited Partner
interests outstanding)
General Partners $ 157,426 $ 170,485 $ 169,276
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
Limited General Unrealized Partners'
Partners Partners Gain Equity
Balance at December 31, 1992 $118,032,199 $ (86,708) $ - $117,945,491
Net income 5,473,251 169,276 - 5,642,527
Quarterly distributions (9,873,378) (203,481) - (10,076,859)
Special distributions (4,950,065) - - (4,950,065)
Balance at December 31, 1993 108,682,007 (120,913) - 108,561,094
Net income 5,512,334 170,485 - 5,682,819
Quarterly distributions (9,554,686) (192,551) - (9,747,237)
Special distributions (7,950,105) - - (7,950,105)
Balance at December 31, 1994 96,689,550 (142,979) - 96,546,571
Net income 5,090,117 157,426 - 5,247,543
Quarterly distributions (Note E) (9,000,119) (187,157) - (9,187,276)
Unrealized gain on MBS - - 1,162,741 1,162,741
Balance at December 31, 1995 $ 92,779,548 $(172,710) $ 1,162,741 $ 93,769,579
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Operating activities:
Net income $ 5,247,543 $ 5,682,819 $ 5,642,527
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 958,502 958,502 928,187
Premium amortization on MBS - 14,986 55,441
Changes in assets and liabilities:
Decrease (increase) in interest receivable
and other assets 111,188 (285,736) 1,449,206
Increase (decrease) in liabilities (280) 9,358 (16,513)
Net cash provided by operating activities 6,316,953 6,379,929 8,058,848
Investing activities:
Principal collections on PIMs 548,811 484,586 407,385
Principal collections on MBS 1,784,581 4,988,553 9,688,312
Decrease in other investments - - 6,000,000
Investment in PIMs - - (68,757)
Investments in MBS - - (6,154,086)
Proceeds from insurance claims on PIMs - - 475,727
Net cash provided by investing activities 2,333,392 5,473,139 10,348,581
Financing activities:
Quarterly distributions (9,187,276) (9,747,237) (10,076,859)
Special distributions - (7,950,105) (4,950,065)
Net cash used for financing activities (9,187,276) (17,697,342) (15,026,924)
Net increase (decrease) in cash and cash
equivalents (536,931) (5,844,274) 3,380,505
Cash and cash equivalents, beginning
of period 2,931,523 8,775,797 5,395,292
Cash and cash equivalents, end of period $ 2,394,592 $ 2,931,523 $ 8,775,797
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A. Organization
Krupp Insured Plus Limited Partnership (the "Partnership") is a
Massachusetts Limited Partnership. 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.
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):
PIMs
The Partnership carries its investments in PIMs at amortized cost
as it has the ability and intention to hold these investments.
Basic interest is recognized at the stated rate of the Department
of Housing and Urban Development ("HUD") insured mortgage (less
the servicer's fee) or the stated coupon rate of the Government
National Mortgage Association ("GNMA") or Federal National
Mortgage Association ("FNMA") MBS. The Partnership recognizes
interest related to the participation features as earned and when
it deems these amounts as collectible.
MBS
At December 31, 1995, the Partnership in accordance with the
Financial Accounting Standards Board s Special Report on Statement
115, "Accounting for Certain Investments in Debt and Equity
Securities", reclassified its MBS portfolio from held-to-maturity
to available-for-sale. The Partnership carries its MBS at fair
market value and reflects any unrealized gains (losses) as a
separate component of Partners' Equity. Prior to December 31,
1995, the Partnership carried its MBS portfolio at amortized cost.
The Partnership amortizes purchase premiums or discounts over the
life of the underlying mortgages using the effective interest
method.
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 Partnership invests its cash
primarily in deposits and money market funds with a commercial
bank and has not experiencedany loss to date on its invested cash.
Prepaid Fees and Expenses
Prepaid fees and expenses represent prepaid acquisition expenses
and prepaid participation servicing fees paid for the acquisition
and servicing of PIMs. The Partnership amortizes the prepaid
acquisition fees and expenses using a method that approximates the
effective interest method over a period of ten to twelve years,
which represents the actual maturity or anticipated call date of
the underlying mortgage.
The Partnership amortizes the prepaid participation servicing fees
using a method that approximates the effective interest method
over a ten year period beginning from the acquisition of the GNMA
or FNMA MBS or final endorsement of the FHA loan.
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
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the period.
Actual results could differ from those estimates.
C. PIMs
The Partnership has investments in six PIMs. The Partnership's PIMs
consist of (a) a GNMA or FNMA MBS representing the securitized first
mortgage loan on the underlying property or a sole participation
interest in a first mortgage loan originated under the FHA lending
program on the underlying property (collectively the "insured
mortgages"), and (b) participation interests in the revenue stream and
appreciation of the underlying property above specified base levels.
The borrower conveys these participation features to the Partnership
generally through a subordinated promissory note and mortgage (the
"Agreement"). The Partnership receives guaranteed monthly payments of
principal and
interest on the GNMA and FNMA MBS and HUD insures the mortgage loan
underlying the GNMA MBS and the FHA mortgage loan. The Partnership
may receive interest related to its participation interests in the
underlying property, however, these amounts are neither insured nor
guaranteed.
Generally, the participation features consist of the following: (i)
"Minimum Additional Interest" which is at the rate of .5% per annum
calculated on the unpaid principal balance of the first mortgage on
the underlying property, (ii) "Shared Income Interest" which is 25% of
the monthly gross rental income generated by the underlying property
in excess of a specified base, but only to the extent that it exceeds
the amount of Minimum Additional Interest earned during such month,
(iii) "Shared Appreciation Interest" which is 25% of any increase in
the value of the underlying property in excess of a specified base.
Payment of participation interest from the operations of the property
is limited to 50% of net revenue or surplus cash as defined by FNMA or
HUD, respectively. The aggregate amount of Minimum Additional
Interest, 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. However,
generally any net proceeds from a sale or refinancing of the property
will be available to satisfy any accrued but unpaid Shared Income or
Minimum Additional Interest.
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.
The borrower usually cannot prepay the first mortgage loan during the
first five years and may prepay the first mortgage loan thereafter
subject to a 9% prepayment penalty in years six through nine, a 1%
prepayment penalty in year ten and no prepayment penalty thereafter.
Under the Agreement, the Partnership, upon giving twelve months
written notice, 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 1993, the Partnership received an insurance claim on the
following PIM and subsequently distributed the net proceeds to the
Unitholders of record on the date the net proceeds were received:
PIM Date Received Net Proceeds
Abbey Terrace March 12, 1993 $ 475,727
The Partnership's PIMs consist of the following at December 31, 1995
and 1994:
Issuer Aggregate Range of Range of Investment Basis at
Original Number Interest Maturity December 31,
Principal of PIMs Rates Dates(a) 1995 1994
GNMA $42,450,020
(b)(c)(d) 4 7 - 8% 4/22-12/22 $39,754,953 $40,178,312
FHA 13,814,400
(e) 1 7.375% 12/33 13,696,501 13,757,653
FNMA 6,021,258
(f) 1 6.25%
(g) 4/06 5,837,681 5,901,981
$62,285,678 6 $59,289,135 $59,837,946
(a) The range of maturity dates for PIMs issued by GNMA and FHA represent
the stated maturity date of the security or insured mortgage, however,
the Partnership anticipates realizing amounts due under these PIMs
well before these stated maturity dates.
(b) Includes a PIM with a prepayment penalty of 9% in year 6 through 7, 3%
in year 8 and 9, with no penalty thereafter.
(c) Includes a PIM having an original face value of $17,850,000 that was
purchased for $17,403,750 (a $446,250 discount). The prepayment
penalty for this PIM is 9% in year 6, declining by 1% each year
thereafter through year 9, with no penalty thereafter.
(d) On January 1, 1992, the Partnership entered into an agreement which
provided for a reduction in the permanent interest rate on a GNMA PIM
having an original face value of $4,900,000, which reduced the
interest rate from 8.5% to 7% for a period of four years. The
reduction in the permanent interest rate was granted in exchange for a
reduction of the Shared Appreciation Interest Base from $5,700,000 to
$4,900,000.
(e) On November 30, 1993, the Partnership entered into an agreement with
the underlying borrower of the FHA PIM for a permanent interest rate
reduction from 8.875% per annum to 7.375% per annum, retroactive to
January 1, 1992. In exchange for the interest rate reduction, the
Partnership received an increase in Shared Appreciation Income from
25% in excess of the base amount of $15,410,000 to 25% of the net
sales proceeds over the outstanding indebtedness ($13,696,501 as of
December 31, 1995). In the event of a refinancing, Shared
Appreciation Income is 25% of the appraised value over the outstanding
indebtedness. In addition, Shared Income Interest increased from 25%
of rental income in excess of the base amount of $175,000 to 25% of
all distributable surplus cash. On December 1, 1993, the underlying
first mortgage loan received final endorsement.
(f) The total PIM on the underlying property is $22,000,000 of which 73%
or $15,978,742 is held by Krupp Insured Plus III Limited Partnership.
(g) During December 1995, the Partnership agreed to a modification of the
Royal Palm PIM. The Partnership received a reissued Federal National
Mortgage Association ("FNMA") mortgage-backed security ("MBS") and
increased its participation percentage in income and appreciation from
25% to 30%. During December 1995, the Partnership received its pro-
rata share of a $90,644 principal payment and will receive interest
only payments on the FNMA MBS at interest rates ranging from 6.25% to
8.775% per annum through maturity. Also, the Partnership will receive
its pro-rata share of the $250,000 principal payments due on December
1 of each of the next four years.
The underlying mortgages of the PIMs are collateralized by multi-family
apartment complexes located in five states. The apartment complexes range
in size from 103 to 386 units.
D. MBS
At December 31, 1995, the Partnership's MBS portfolio has an amortized
cost of approximately $27,864,000 and gross unrealized gains of
approximately $1,163,000. At December 31, 1994, the Partnership s MBS
portfolio had a market value of approximately $29,177,000 and gross
unrealized gains and losses of approximately $119,000 and $591,000,
respectively. The MBS portfolio has maturities ranging from 2004 to
2033.
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 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.
Profits arising from a capital transaction will be allocated in the
same manner as related cash distributions. Losses from a capital
transaction will be allocated 97% to the Limited Partners and 3% to
the General Partners.
During 1995, 1994 and 1993, the Partnership made quarterly
distributions totaling $1.20, $1.28 and $1.32 per Unit, respectively.
The Partnership made special distributions of $1.06 and $.66 per Unit
in 1994 and 1993, respectively.
As of December 31, 1995, the following cumulative partner contributions
and allocations have been made since inception of the Partnership:
Corporate
Limited General
Unitholders Partner Partners Total
Capital contributions $149,489,830 $ 2,000 $ 3,000 $149,494,830
Syndication costs (7,906,604) - - (7,906,604)
Quarterly distributions (91,436,031) (1,263) (2,148,347) (93,585,641)
Special distributions (21,149,978) (282) - (21,150,260)
Net income 63,781,016 860 1,972,637 65,754,513
Unrealized gains on MBS - - - 1,162,741
Balance at December 31, 1995 $ 92,778,233 $ 1,315 $ (172,710) $ 93,769,579
F. Related Party Transactions
Under the terms of the Partnership Agreement, the General Partners
receive an Asset Management Fee equal to .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 .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 and the preparation and mailing
of financial reports, tax information and other communications to
investors.
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
1995 federal income tax return is as follows:
Net income from statement of operations $ 5,247,543
Plus: Book to tax difference for amortization of
prepaid expenses and fees 824,953
Net income for federal income tax purposes $ 6,072,496
The allocation of the 1995 net income for federal income tax purposes
is as follows:
Portfolio
Income
Unitholders $5,890,242
Corporate Limited Partner 79
General Partners 182,175
$6,072,496
For the years Ended December 31, 1995, 1994 and 1993 the average per
unit net income to the Unitholders for federal income tax purposes was
$.79, $.81 and $.83, respectively.
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 instruments:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short
maturity of those instruments.
MBS
The Partnership estimated the fair value of MBS based on quoted
market prices.
PIMs
There is no established trading market for these investments.
Management estimates the fair value of the PIMs using quoted market
prices of MBS having the same stated coupon rate and the estimated
value of the participation features. Management estimates the fair
value of the participation features using the estimated fair value
of the underlying properties. Management does not include in the
estimated fair value of the participation features any fair value
estimate arising from appreciation of the properties, because
Management does not believe it can predict the time of realization
of the appreciation feature with any certainty. Based on the
estimated fair value determined using these methods and
assumptions, the Partnership's investments in PIMs had gross
unrealized gains and losses of approximately $1,628,000 and
$148,000 at December 31, 1995, respectively, and unrealized losses
of approximately $4,867,000 at December 31, 1994.
At December 31, 1995 and 1994, the Partnership estimates fair value
of its financial instruments as follows:
(Rounded to $1,000)
1995 1994
Cash and cash equivalents $ 2,395 $ 2,932
MBS 29,027 29,177
PIMs 60,769 54,971
$92,191 $87,080
KRUPP INSURED PLUS LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
PIMs (a)(b) Interest Maturity Normal Original Current Carrying
Rate Date(d) Monthly Face Amount Face Amount Amount at
(c) Maturity Payment 12/31/95
(e)(f) (j)
GNMA
La Costa Apts.
Miami, FL 7.5% 4/15/22 $ 74,500 $11,050,000 $10,294,142 $10,294,142
Mandalay Apts.
Clearwater Beach, FL 7.25% 8/15/22 117,200 17,850,000 16,634,032 16,218,181
Greentree Apts.
Hoover, AL 8% 11/15/22 64,600 9,096,270 8,587,974 8,587,974
Pine Hills Apts.
Howell, MI 7%
(h) 12/15/22 36,600 4,900,000 4,654,656 4,654,656
42,896,270 40,170,804 39,754,953
FHA
Vista Montana Apts.
Val Vista Lakes, AZ 7.375%
(i) 12/1/33 86,000 13,814,400 13,696,501 13,696,501
FNMA
Royal Palm Place (g)
Kendall, FL 6.25%
(k) 4/1/06 (k) 6,021,258 5,837,681 5,837,681
$62,731,928 $59,704,986 $59,289,135
(a) The Participating Insured Mortgages ("PIMs") consist of either a
mortgage-backed security ("MBS") issued and guaranteed by the Federal
National Mortgage Association ("FNMA"), a securitized mortgage loan
insured by the Department of Housing and Urban Development ("HUD")
issued and guaranteed as to the timely payment of principal and
interest by the Government National Mortgage Association ("GNMA") or a
first mortgage issued by the Federal Housing Authority ("FHA") and
insured by HUD, and a subordinated promissory note and mortgage or
shared income and appreciation agreement with the underlying borrower
that conveys participation interests in the revenue stream and
appreciation of the underlying property above certain base levels.
(b) The GNMA MBS, FNMA MBS and FHA mortgage loans may not be prepaid
during the first five years and may generally be prepaid subject to a
9% prepayment penalty in years six through nine, a 1% prepayment
penalty in year ten and no prepayment penalty after year ten.
(c) Represents only the stated interest rate of the GNMA or FNMA MBS or
the stated interest rate of the FHA mortgage loan less the servicing
fee. In addition, the Partnership may receive participation interest,
consisting of (i) Minimum Additional Interest based on a percentage of
the unpaid principal balance of the first mortgage on the property,
(ii) Shared Income Interest based on a percentage of monthly gross
income generated by the underlying property in excess of a specified
base amount (but only to the intent it exceeds the amount of Minimum
Additional Interest received during such month) and (iii) Shared
Appreciation Interest based on a percentage of any increase in the
value of the underlying property in excess of a specified base value.
Minimum Additional Interest is at a rate of .5% per annum calculated
on the unpaid principal balance of the first mortgage note. Shared
Income Interest is generally based on 25% of the monthly gross rental
income generated by the underlying property in excess of a specified
base, but only to the extent it exceeds the amount of Minimum
Additional Interest earned during the month. Shared Appreciation
Interest is generally based on 25% of any increase in the value of the
project over the base value.
(d) The Partnership's GNMA MBS and FHA mortgage loan have call provisions,
which allow the Partnership to accelerate their respective maturity
dates to as early as ten years from the date of the loan.
(e) The normal monthly payment consisting of principal and interest is
payable monthly at level amounts over the term of the GNMA MBS and the
FHA direct mortgages.
(f) The normal monthly payment consisting of principal and interest for
FNMA MBS is payable at level amounts based on a 35-year amortization.
All unpaid principal and accrued interest is due at maturity.
(g) The total PIM on the underlying property is $22,000,000 of which
72.63% or $15,978,742 is held by Krupp Insured Plus-III Limited
Partnership. The Partnership's share of the principal balance due at
maturity for the Royal Palm PIM is approximately $5,564,000.
(h) On January 1, 1992, the Partnership entered into an agreement which
provided for a reduction in the permanent interest rate from 8% to 7%
per annum for a period of four years. The reduction in the permanent
interest rate was granted in exchange for a reduction of the Shared
Appreciation Interest Base from $5,700,000 to $4,900,000.
(i) On November 30, 1993, the Partnership entered into an agreement with
the underlying borrower for a permanent interest rate reduction from
8.75% per annum to 7.375% per annum retroactive to January 1, 1992.
In exchange for the interest rate reduction, the Partnership received
an increase in Shared Appreciation Income from 25% in excess of the
base amount of $15,410,000 to 25% of the net sales proceeds over the
outstanding indebtedness ($13,696,501 at December 31, 1995). In the
event of a refinancing, Shared Appreciation Income is 25% of the
appraised value over the outstanding indebtedness. In addition,
Shared Income Interest increased from 25% of rental income in excess
of the base amount of $175,000 to 25% of all distributable surplus
cash.
(j) The aggregate cost of PIMs for federal income tax purposes is
$59,289,135.
(k) During December 1995, the Partnership agreed to a modification of the
Royal Palm PIM. The Partnership received a reissued Federal National
Mortgage Association ("FNMA") mortgage-backed security ("MBS") and
increased its participation percentage in income and appreciation from
25% to 30%. During December 1995, the Partnership received its pro-
rata share of a $90,644 principal payment and will receive interest
only payments on the FNMA MBS at interest rates ranging from 6.25% to
8.775% per annum through maturity. Also, the Partnership will receive
its pro-rata share of the $250,000 principal payments due on December
1 of each of the next four years.
A reconciliation of the carrying value of Mortgages for each of the three
years in the period ended December 31, 1995 is as follows:
1995 1994 1993
Balance at beginning of period $ 59,837,946 $ 60,322,532 $61,136,887
Additions during period:
Investments in PIMs - - 68,757
Deductions during period:
Proceeds from insurance
claims - - (475,727)
Principal collections (548,811) (484,586) (407,385)
Balance at end of period $ 59,289,135 $ 59,837,946 $60,322,532