Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
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 0-16817
Krupp Insured Plus-II Limited Partnership
(Exact name of registrant as specified in its charter)
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)
(Registrant's telephone number, including area code) (617) 523-0066
------------------------
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, as securities are non-voting.
Documents incorporated by reference: See Part IV, Item 14
The exhibit index is located on pages 9-12.
-13-
PART I
This form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21e of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
ITEM 1. BUSINESS
Krupp Insured Plus-II Limited Partnership (the "Partnership") is a
Massachusetts limited partnership which was formed on October 29, 1986. The
Partnership raised approximately $292 million through a public offering of
limited partner interests evidenced by units of depositary receipts ("Units")
and used the investable proceeds primarily to acquire participating insured
mortgages ("PIMs") and mortgage-backed securities ("MBS"). The Partnership
considers itself to be engaged only in the industry segment of investment in
mortgages.
The Partnership's investments in PIMs on multi-family residential properties
consist of a MBS (the "insured mortgage") guaranteed as to principal and basic
interest. These insured mortgages were issued or originated under or in
connection with the housing programs of Fannie Mae and the Government National
Mortgage Association ("GNMA"). PIMs provide the Partnership with monthly
payments of principal and basic interest and also provide for Partnership
participation in the current revenue stream and in residual value, if any, from
a sale or other realization of the underlying property. The borrower conveys
these rights to the Partnership through a subordinated promissory note and
mortgage. The participation features are neither insured nor guaranteed.
The Partnership also acquired MBS and insured mortgages collateralized by
single-family or multi-family mortgage loans issued or originated by GNMA,
Fannie Mae, HUD or the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie
Mae and FHLMC guarantee the principal and basic interest of the Fannie Mae and
FHLMC MBS, respectively. GNMA guarantees the timely payment of principal and
basic interest on its MBS, and HUD insures the pooled mortgage loans underlying
the GNMA MBS and its own direct mortgage loans.
Although the Partnership will terminate no later than December 31, 2026 it is
expected that the value of the PIMs generally will be realized by the
Partnership through repayment or sale as early as ten years from the dates of
the closings of the permanent loans and that the Partnership will realize the
value of all of its other investments within that time frame thereby resulting
in a dissolution of the Partnership significantly prior to December 31, 2026.
The Partnership's investments are not expected to be subject to seasonal
fluctuations. Any ultimate 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 properties 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 had an adverse effect on the Partnership's operations, and no
adverse effect is anticipated in the future.
As of December 31, 1998, 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 STOCKHOLDER MATTERS
There currently is no established trading market for the Units.
The number of investors holding Units as of December 31, 1998 was
approximately 15,000. 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 realization and payout of the existing mortgages.
During 1998, the Partnership made special distributions consisting primarily
of principal proceeds from the Walden Village, Longwood Villas, Harbor House,
Westbrook Manor, Fallwood and Greenbrier PIM prepayments and the repayment of
the Brookside and Lily Flagg multi-family MBS's.
During 1997, the Partnership made special distributions consisting primarily
of principal proceeds from the Lakeside, Colonial Park and Pine Ridge PIM
prepayments, 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, to its Partners during the
two years ended December 31, 1998 and 1997:
1998 1997
--------------------- -------------
Amount Per Unit Amount Per Unit
Distributions:
Limited Partners $16,414,173 $1.12 $16,414,173 $1.12
General Partners 385,355 436,626
----------- -----------
$16,799,528 $16,850,799
----------- -----------
Special Distributions:
Limited Partners 56,716,830 $3.87 24,767,815 $1.69
----------- -----------
Total Distributions $73,516,358 $41,618,614
=========== ===========
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.
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total revenues $15,335,618 $ 16,672,558 $ 15,855,280 $ 16,366,468 $18,874,538
Net income 12,017,670 12,972,600 12,331,212 12,656,200 14,147,772
Net income allocated to:
Limited Partners 11,657,140 12,583,422 11,961,276 12,276,514 13,723,339
Average per Unit .80 .86 .82 .84 .94
General Partners 360,530 389,178 369,936 379,686 424,433
Total assets at
December 31 117,626,762 180,126,977 207,552,419 212,789,466 215,697,082
Distributions to:
Limited Partners 16,414,173 16,414,173 16,414,171 16,414,173 21,738,336
Average per Unit 1.12 1.12 1.12 1.12 1.48
Special 56,716,830 24,767,815 - - 17,293,504
Average per Unit 3.87 1.69 - - 1.18
General Partners 385,355 436,626 432,214 430,359 476,952
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding the future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
The General Partners of the Partnership have conducted an assessment of the
Partnership's core internal and external computer information systems and have
taken the further necessary steps to understand the nature and extent of the
work required to make its systems Year 2000 ready in those situations in which
it is required to do so. The Year 2000 readiness issue concerns the inability of
computerized information systems to accurately calculate, store or use a date
after 1999. This could result in a system failure or miscalculations causing
disruptions of operations. The Year 2000 issue effects virtually all companies
and all organizations.
In this regard, the General Partners of the Partnership, along with certain
affiliates, began a computer systems project in 1997 to significantly upgrade
its existing hardware and software. The General Partners completed the testing
and conversion of the financial accounting operating systems in February 1998.
As a result, the General Partners have generated operating efficiencies and
believe their financial accounting operating systems are Year 2000 ready. The
General Partners of the Partnership incurred hardware costs as well as
consulting and other expenses related to the infrastructure and facilities
enhancements necessary to complete the upgrade and prepare for the Year 2000.
There are no other significant internal systems or software that the Partnership
is using at the present time.
The General Partners of the Partnership are in the process of evaluating the
potential adverse impact that could result from the failure of material
third-party service providers (including but not limited to its banks and
telecommunications providers) and significant vendors to be Year 2000 ready.
The Trust is in the process of surveying these third party providers and
assessing their readiness with year 2000. To date, the Partnership is not
aware of any problems that would materially impact its results of operations,
liquidity or capital resources. However, the Partnership has not yet obtained
all written assurances that these providers would be Year 2000, ready.
The Partnership currently does not have a contingency plan in the event of a
particular provider or system not being Year 2000 ready. Such plan will be
developed if it becomes clear that a provider is not going to achieve its
scheduled readiness objectives by June 30, 1999. The inability of one of these
providers to complete its Year 2000 resolution process could impact the
Partnership. In addition, the Partnership is also subject to external forces
that might generally affect industry and commerce, such as utility and
transportation company Year 2000 readiness failures and related service
interruptions. To date, the Partnership has not incurred any cost associated
with being Year 2000 ready. All costs have been incurred by the General
Partners and it is estimated that any future Year 2000 readiness costs will be
borne by the General Partners.
Liquidity and Capital Resources
The most significant demands on the Partnership's liquidity are the regular
quarterly distributions paid to investors, approximately $4.2 million each
quarter. Funds for the investor distributions come from the monthly
principal and basic interest payments received on the PIMs and the MBS, the
principal prepayments of the PIMs and MBS, and interest earned on the
Partnership's cash and cash equivalents. 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 that
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.
The portion of distributions attributable to the principal collections
reduces the capital resources of the Partnership. As the capital resources
decrease, the total cash flows to the Partnership also will decrease and
over time will result in periodic adjustments to the distributions paid to
investors. The General Partners periodically review the distribution rate to
determine whether an adjustment is necessary based on projected future cash
flows. At this time the General Partners have determined that the
Partnership can maintain its current distribution rate of $1.12 per Unit per
year.
During 1998, the Partnership made six special distributions and during the
first quarter of 1999 the Partnership anticipates making an additional
special distribution due to PIM prepayments and an insured mortgage
prepayment. The Partnership made special distributions of $.94, $1.63 and
$1.30 per Unit in March 1998, July 1998 and December 1998, respectively. The
March 1998 special distribution consisted of the prepayment proceeds from
the Fallwood, Greenbrier and Westbrooks PIMs. The July 1998 special
distributions consisted of the prepayment proceeds from the Longwood Villas
and Harbor House PIMs and the prepayment proceeds from the Brookside insured
mortgage. The December 1998 special distributions consisted of the
prepayment proceeds from the Walden Village PIM and the Lily Flagg insured
mortgage. The Partnership anticipates making a $1.97 per Unit special
distribution during the first quarter of 1999 with the prepayment proceeds
of the Carlyle, Hillside, Stanford and Waterford Court PIMs. The General
Partners expect that there will be more prepayments during 1999. The owners
of Country Meadows and Saratoga have both notified the General Partners of
their intentions to refinance their properties if favorable refinancing
conditions persist. The General Partners also expect the Greenhouse PIM will
be prepaid during the fourth quarter 1999. The first mortgage lender
foreclosed on the property during January 1999 as a result of a continuing
default. The first mortgage lender expects to sell the property by year-end
when the Partnership will receive the entire principal balance remaining on
the PIM but will not receive any participation income. The Partnership has
received its full principal and basic interest payments due on the PIM while
the underlying first mortgage loan has been in default because those
payments are guaranteed by GNMA.In the event of further PIM prepayments, the
General Partners may determine that an adjustment to the distribution rate
will be necessary to reflect the reduced future cash flows from the
remaining mortgage investments.
In addition to providing insured or guaranteed monthly principal and basic
interest payments, the Partnership's PIM investments also may provide
additional income through its participation feature in the underlying
properties if they operate successfully. The Partnership may receive a share
in any operating cash flow that exceeds debt service obligations and capital
needs or a share in any appreciation in value when the properties are sold
or refinanced. However, this participation is neither guaranteed nor
insured, and it is dependent upon whether property operations or its
terminal value meet certain criteria. During 1998, the Partnership received
a total of $1,361,968 in participation income from operating cash flow that
exceeded the established thresholds from eight of its PIM investments:
Carlyle Court, Longwood Villas, Stanford Court, Walden Village, Westbrook,
Fallwood, Greenbrier and Waterford Court. The Partnership also received a
total of $2,390,707 in prepayment penalties and participation income related
to sale or refinance value from Carlyle Court, Fallwood, Greenbrier, Harbor
House, Hillside Court, Longwood Villas, Stanford Court, Walden Village,
Westbrook and Waterford Court PIM's and the Lily Flagg and Brookside MBS.
Most of the properties had stable operating results during 1998. High
occupancy rates were maintained at most of the properties due to stable or
improving markets. However, as many of the properties have aged, rental rate
increases have not kept pace with the increasing costs of maintenance,
repairs and replacements. Consequently, the General Partners do not expect
that the Partnership will receive significant participation income from the
operations of the properties that remain in the portfolio.
During the first five years, owners are prohibited from prepaying the first
mortgage loans underlying the PIMs. During the second five years, owners may
prepay the loans by incurring a prepayment penalty. The Partnership has the
option to call certain PIMs by accelerating their maturity if they are not
prepaid by the tenth year after permanent funding. The General Partners 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, the interest rate environment and availability of financing will
affect those decisions.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by the
Government National Mortgage Association ("GNMA"), "Fannie Mae", the Federal
Home Loan Mortgage Corporation ("FHLMC") or the United States Department of
Housing and Urban Development ("HUD") and therefore the certainty of their
cash flows and the risk of material loss of the amounts invested depends on
the creditworthiness of these entities.
Fannie Mae is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally chartered
corporation that guarantees obligations originated under its programs and is
wholly-owned by the twelve Federal Home Loan Banks. These obligations are
not guaranteed by the U.S. Government or the Federal Home Loan Bank Board.
GNMA guarantees the timely payment of principal and basic interest on the
securities it issues, which represents interest in pooled mortgages insured
by HUD. Obligations insured by HUD, an agency of the U.S. Government, are
backed by the full faith and credit of the U.S. Government.
Operations
The following discussion relates to the operation of the Partnership
during the years ended December 31, 1998, 1997 and 1996.
(Amounts in thousands)
1998 1997 1996
Interest income on PIMs:
Basic interest $7,417 $11,090 $12,070
Participation income 3,753 1,816 32
Interest income on MBS
and insured mortgages 3,083 3,099 3,366
Other interest income 1,083 668 387
Partnership expenses (1,287) (1,793) (1,778)
Amortization of prepaid fees and
expenses (2,031) (1,907) (1,746)
------- ------- -------
Net Income $12,018 $12,973 $12,331
======= ======= =======
Net income decreased by approximately $955,000 during 1998 as compared to 1997.
This decrease was due primarily to significantly lower basic interest on PIMs of
approximately $3,673,000. This was partially offset by increases in
participation income of approximately $1,937,000, other interest income of
approximately $415,000 and a decrease in Partnership expenses of approximately
$506,000. The significant decrease in basic interest on PIMs was caused by the
prepayments of the Westbrook Manor, Fallwood, Greenhouse, Harbor House, Walden
Village and Longwood Villas PIMs during 1998 and Lakeside, Colonial Park and
Pine Ridge PIMs during 1997. The Partnership realized a significant increase in
participation income due primarily to Shared Appreciation Income and prepayment
premiums realized from the 1998 PIM prepayments of the Harbor House, Westbrook
Manor, Fallwood, Greenbrier, Walden Village and Longwood Villas Apartment PIMs,
and the Brookside and Lily Flagg MBS as compared to the 1997 Lakeside PIM
prepayment. The Partnership also realized Shared Income Interest from the
Fallwood, Greenbrier, Westbrook Manor, Stanford, Carlyle, Waterford and Walden
Village Apartment PIMs which exceeded the amount of participation income
realized during the same period of 1997. Interest income on cash and cash
equivalents increased due to the Partnership having higher average short-term
investment balances as a result of the prepayments mentioned above. The decrease
in Partnership expenses was due to a decrease in asset management fees which
were a result of the 1998 PIM prepayments mentioned above that reduced the asset
base. Also, the Partnership received a rebate for expense reimbursements related
to 1997 during the second quarter of 1998. Interest income on MBS and basic
interest income on PIMs will continue to decline as principal collections reduce
the outstanding balance of these investments. As the Partnership distributes
principal collections on MBS and PIMs through quarterly or special
distributions, the invested assets of the Partnership will decline which should
result in a continuing decline in net income.
Net income increased during 1997 as compared to 1996 by approximately $642,000.
This increase was primarily due to higher participation income, offset partially
by lower basic interest and higher amortization expense directly related to the
prepayments of the Lakeside, Colonial and Pine Ridge Apartment PIMs. Basic
interest income on PIMs decreased by approximately $980,000 in 1997 as compared
to 1996 as a result of prepayments on three PIMs and a general reduction in the
invested assets in the Partnership attributed to the receipt of principal
payments. Subsequently, special distributions were made from the Partnership
using the prepayment proceeds. An increase in participation income of $1,784,000
was primarily a result of receiving Shared Appreciation Interest and prepayment
penalities totaling $603,000, Shared Income Interest of $507,000 from the
prepayments of the Lakeside, Colonial Park and Pine Ridge Apartments PIMs and
Shared Income Interest of $706,000 from seven of the Partnership's remaining
PIMs.
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 Krupp Plus Corporation which is a General
Partner of the Partnership and is the general partner of Mortgage Services
Partners Limited Partnership, which is the other General Partner of the
Partnership, is as follows:
Position with
Name and Age Krupp Plus Corporation
Douglas Krupp (52) President, Co-Chairman of
the Board and Director
George Krupp (54) Co-Chairman of the Board and Director
Peter F. Donovan (45) Senior Vice President
Ronald Halpern (57) Senior Vice President
Carol Mills (49) Vice President
Robert A. Barrows (41) Vice President and Treasurer
Douglas Krupp co-founded and serves as Co-Chairman and Chief Executive
Officer of The Berkshire Group, an integrated real estate financial services
firm engaged in real estate acquisition and property management, mortgage
banking and financial management. The Berkshire Group's interests include
ownership of a mortgage company specializing in commercial mortgage financing
with a portfolio of approximately $6.0 billion. In addition, The Berkshire Group
has a significant ownership interest in Berkshire Realty Company, Inc.
(NYSE-BRI), a real estate investment trust specializing in apartment
investments. Mr. Krupp has held the position of Co-Chairman since The Berkshire
Group was established as The Krupp Companies in 1969 and he has served as the
Chief Executive Officer since 1992. Mr. Krupp serves as Chairman of the Board
and Director of Berkshire Realty Company, Inc. (NYSE-BRI) and he is also a
member of the Board of Trustees at Brigham & Women's Hospital. He is a graduate
of Bryant College where he received an honorary Doctor of Science in Business
Administration in 1989 and was elected trustee in 1990. Mr. Krupp also serves as
Chairman of the Board and Trustee of Krupp Government Income Trust and Krupp
Government Income Trust II.
George Krupp is the Co-Founder and Co-Chairman of The Berkshire Group, an
integrated real estate financial services firm engaged in real estate
acquisition, mortgage banking, investment sponsorship, venture capital investing
and financial management. Mr. Krupp has held the position of Co-Chairman since
The Berkshire Group was established as The Krupp Companies in 1969. Mr. Krupp
has been an instructor of history at the New Jewish High School in Waltham,
Massachusetts since September of 1997. Mr. Krupp attended the University of
Pennsylvania and Harvard University and holds a Master's Degree in History from
Brown University.
Peter F. Donovan is Chief Executive Officer of Berkshire Mortgage Finance
which position he has held since January of 1998 and in this capacity, he
oversees the strategic growth plans of this mortgage banking firm. Berkshire
Mortgage Finance is the 16th largest in the United States based on servicing and
asset management of a $6.0 billion loan portfolio. Previously he served as
President of Berkshire Mortgage Finance from January of 1993 to January of 1998
and in that capacity he directed the production, underwriting, servicing and
asset management activities of the firm. Prior to that, he was Senior Vice
President of Berkshire Mortgage Finance and was responsible for all
participating mortgage originations. Before joining the firm in 1984, he was
Second Vice President, Real Estate Finance for Continental Illinois National
Bank & Trust, where he managed a $300 million construction loan portfolio of
commercial properties. Mr. Donovan received a B.A. from Trinity College and an
M.B.A.
degree from Northwestern University.
Ronald Halpern (age 57) is President and COO of Berkshire Mortgage
Finance. He has served in these positions since January of 1998 and in this
capacity, he is responsible for the overall operations of the Company. Prior to
January of 1998, he was Executive Vice President, managing the underwriting,
closing, portfolio management and servicing departments for Berkshire Mortgage
Finance. Before joining the firm in 1987, he held senior management positions
with the Department of Housing and Urban Development in Washington D.C. and
several HUD regional offices. Mr. Halpern has over 30 years of experience in
real estate finance. He is currently a member of the Advisory Council for Fannie
Mae and Freddie Mac and was prior Chairman of the MBA Multifamily Housing
Committee. He holds a B.A. degree from the University of the City of New York
and J.D. degree from Brooklyn Law School.
Robert A. Barrows is Senior Vice President and Chief Financial Officer
of Berkshire Mortgage Finance. Mr. Barrows has held several positions
within The Berkshire Group since joining the company in 1983 and is currently
responsible for accounting, financial reporting, treasury and management
information systems for Berkshire Mortgage Finance.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.
Carol J.C. Mills is Senior Vice President for Loan Management of Berkshire
Mortgage Finance and in this capacity, she is responsible for the Loan
Servicing and Asset Management functions of the Boston, Bethesda and Seattle
offices of Berkshire Mortgage Finance. She manages the estimated $6 billion
portfolio of loans. Ms.Mills joined Berkshire in December 1997 as Vice President
and was promoted to Senior Vice President in January 1999. From January 1989
through November 1997, Ms. Mills was Vice President of First Winthrop
Corporation and Winthrop Financial Associates, in Cambridge, MA. Ms. Mills
earned a B.A.degree from Mount Holyoke College and a Master of Architecture
degree from Harvard University. Ms. Mills is a member of the Real Estate
Finance Association, New England Women in Real Estate and the Mortgage Bankers
Association.
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, 1998, no person owned of record or was known by the
General Partners to own beneficially more than 5% of the Partnership's
14,655,512 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 Notes To Financial Statements presented in Appendix A to
this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements - see Index to Financial Statements and
Schedule included under Item 8, Appendix A, page F-2 to this report.
2. Financial Statement Schedule - see Index to Financial Statements and
Schedule included under Item 8, Appendix A, page F-2 to 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 and Restated Agreement of Limited Partnership
dated as of May 29, 1987 [Exhibit A to Prospectus
included in Post Effective Amendment No. 1 of
Registrant's Registration Statement on Form S-11 dated
June 18, 1987 (File No. 33-9889)].*
(4.2) Second Amendment to Agreement of Limited Partnership
dated as of June 17, 1987 [Exhibit 4.6 in Post Effective
Amendment No. l of Registrant's Registration Statement
on Form S-11 dated June 18, 1987 (File No. 33-9889)].*
(4.3) Subscription Agreement whereby a subscriber agrees to
purchase Units and adopts the provisions of the Amended
and Restated Agreement of Limited Partnership [Exhibit D
to Prospectus included in Post Effective Amendment No. 1
of Registrant's Registration Statement on Form S-11
dated June 18, 1987 (File No. 33-9889)].*
(4.4) Copy of Amended Certificate of Limited Partnership
filed with the Massachusetts Secretary of State on
April 28, 1987. [Exhibit 4.4 in Amendment No. 1 of
Registrant's Registration Statement on Form S-11
dated May 14, 1987 (File No. 33-9889)].*
(10) Material Contracts:
(10.1) Form of agreement between the Partnership and Krupp
Mortgage Corporation. [Exhibit 10.3 in Amendment
No. 1 of Registrant's Registration Statement on Form
S-11 dated May 14, 1987 (File No. 33-9889)].*
Le Coeur du Monde Apartments
(10.2) Prospectus for GNMA Pools No. 257721 (CS) and 257722
(PN). [Exhibit 19.10 to Registrant's Report on
Form 10-Q for the quarter ended June 30, 1988 (File No.
0-16817)].*
(10.3) Subordinated Multi-Family Open-End Deed of Trust
(including Subordinated Promissory Note) dated May 11,
1988 between Le Coeur du Monde Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
19.11 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1988 (File No.
0-16817)].*
Country Meadows Apartments
(10.4) Prospectus for GNMA Pools No. 260733 (CL) and 260734
(PN). [Exhibit 19.18 to Registrant's Report on
Form 10-Q for the quarter ended September 30, 1988
(File No. 0-16817)].*
(10.5) Subordinated Multifamily Deed of Trust (including
Subordinated Promissory Note) dated June 15, 1988
between Country Meadows Limited Partnership and Krupp
Insured Plus-II Limited Partnership. [Exhibit 19.19 to
Registrant's Report on Form 10-Q for the quarter ended
September 30, 1988 (File No. 0-16817)].*
Denrich Apartments
(10.6) Prospectus for GNMA Pool No. 267075 (PL). [Exhibit
10.29 to Registrant's Report on Form 10-K for the
year ended December 31, 1988 (File No. 0-16817)].*
(10.7) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated November 3, 1988
between Arthur J. Stagnaro and Krupp Insured
Plus-II Limited Partnership. [Exhibit 10.30 to
Registrant's Report on Form 10-K for the year ended
December 31, 1988 (File No. 0-16817)].*
(10.8) Modification Agreement dated June 28, 1995 between
Arthur J. Stagnaro and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.1 to Registrant's Report on Form
10-Q for the quarter ended June 30, 1995 (File No.
0-16817)].*
The Greenhouse
(10.9) Prospectus for GNMA Pools No. 259233(CS) and
259234(PN) [Exhibit 19.1 to Registrant's Report on
Form 10-Q for the quarter ended March 31, 1989 (File No.
0-16817)].*
(10.10) Subordinated Multifamily Deed of Trust (including
Subordinated Promissory Note) dated January 5, 1989
between Farnam Associates Limited Partnership and Krupp
Insured Plus-II Limited Partnership. [Exhibit 19.2 to
Registrant's Report on Form 10-Q for the quarter ended
March 31, 1989 (File No. 0-16817)].*
Richmond Park Apartments
(10.11) Prospectus for GNMA Pool No. 260865 (PL) [Exhibit 1 to
Registrant's Report on Form 8-K dated August 30,
1989 (File No. 0-16817)].*
(10.12) Subordinated Multifamily Open-Ended Mortgage (including
Subordinated Promissory Note) dated July 14, 1989
between Carl Milstein, Trustee, Irwin Obstgarten, Al
Simon and Krupp Insured Plus-II Limited Partnership.
[Exhibit 2 to Registrant's Report on Form 8-K dated
August 30, 1989 (File No. 0-16817)]*
(10.13) Participation Agreement dated July 31, 1989 between
Krupp Insured Mortgage Limited Partnership and
Krupp Insured Plus-II Limited Partnership. [Exhibit
3 to Registrant's Report on Form 8-K dated August
30, 1989 (File No. 0-16817)].*
Saratoga Apartments
(10.14) Prospectus for GNMA Pool No. 280643 (Pl) [Exhibit 4 to
Registrant's Report on Form 8-K dated August 30,
1989 (File No. 0-16817)].*
(10.15) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated July 27, 1989
between American National Bank and Trust Company of
Chicago, as Trustee and Krupp Insured Mortgage Limited
Partnership. [Exhibit 5 to Registrant's Report on Form
8-K dated August 30, 1989 (File No. 0-16817)].*
(10.16) Participation Agreement dated July 31, 1989 between
Krupp Insured Plus-II Limited Partnership and Krupp
Insured Mortgage Limited Partnership. [Exhibit 6 to
Registrant's Report on Form 8-K dated August 30,
1989 (File No. 0-16817)].*
Carlyle Court
(10.17) Prospectus for FNMA Pool No. MX-073004 [Exhibit 10.50 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989 (file No. 0-16817)].*
(10.18) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 26, 1989
between Carlyle-XI, L.P. an Indiana limited partnership
and Krupp Insured Plus-II Limited Partnership [Exhibit
10.51 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No.
0-16817)].*
Hillside Court
(10.19) Prospectus for FNMA Pool No. MX-073003 [Exhibit 10.52 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989 (File No. 0-16817)].*
(10.20) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 16, 1989
between Hillside Limited Partnership-IX, an Indiana
limited partnership and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.53 to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989
(File No. 0-16817)].*
Stanford Court
(10.21) Prospectus for FNMA Pool No. MX-073002 [Exhibit 10.54 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989 (File No. 0-16817)].*
(10.22) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 26, 1989
between Hillside Limited Partnership-IX, an Indiana
limited partnership and Krupp Insured Plus-II Limited
Partnership [Exhibit 10.55 to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989
(File No. 0-16817)].*
Waterford Court
(10.23) Prospectus for FNMA Pool No. MX-073005 [Exhibit 10.56 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989 (File No. 0-16817)].*
(10.24) Subordinated Multifamily Mortgage (including
Subordinated Promissory Note) dated September 26, 1989
between Waterford-VIII, an Indiana limited partnership
and Krupp Insured Plus-II Limited Partnership [Exhibit
10.57 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (File No.
0-16817)].*
* Incorporated by reference.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1998, 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 5th day of
February, 1999.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
By: Krupp Plus Corporation,
a General Partner
By: /s/Douglas Krupp
Douglas Krupp, President, Co-Chairman
(Principal Executive Officer) and
Director of Krupp Plus 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 5th day of February, 1999.
Signatures Title(s)
/s/Douglas Krupp President, Co-Chairman (Principal Executive
Douglas Krupp Officer) and Director of Krupp Plus Corporation,
a General Partner
/s/George Krupp Co-Chairman (Principal Executive Officer)
George Krupp and Director of Krupp Plus Corporation, a
General Partner
/s/Peter F. Donovan Senior Vice President of Krupp Plus
Peter F. Donovan Corporation, a General Partner
/s/Robert A. Barrows Treasurer and Chief Accounting Officer of
Robert A. Barrows Krupp Plus Corporation, a General Partner
F-19
APPENDIX A
KRUPP INSURED PLUS-II 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, 1998
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants F-3
Balance Sheets at December 31, 1998 and 1997 F-4
Statements of Income and Comprehensive Income for
the Years Ended December 31, 1998, 1997 and 1996 F-5
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1998, 1997 and 1996 F-6
Statements of Cash Flows for the Years Ended December 31, 1998,
1997 and 1996 F-7
Notes to Financial Statements F-8 - F-16
Schedule IV - Mortgage Loans on Real Estate F-17 - F-19
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-II Limited Partnership:
In our opinion, the accompanying Financial Statements listed on the index on
Page F-2 of this Form 10-K present fairly, in all material respects, the
financial position of Krupp Insured Plus-II Limited Partnership
(the "Partnership")at December 31, 1998 and 1997 and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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,assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion express
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 12, 1999,
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
---- ----
Participating Insured Mortgages ("PIMs")
(Notes B, C, H and I) $ 82,258,207 $122,048,053
Mortgage-Backed Securities and multi-family insured
mortgages("MBS") (Notes B, D and H) 24,792,352 44,727,693
------------ ------------
Total mortgage investments 107,050,559 166,775,746
Cash and cash equivalents (Notes B, H and I) 8,758,737 9,052,480
Interest receivable and other assets 730,829 1,180,660
Prepaid acquisition fees and expenses, net of
accumulated amortization of $6,024,495 and $8,293,080
respectively (Note B) 889,863 2,481,160
Prepaid participation servicing fees, net of
accumulated amortization of $1,876,746 and $2,707,314,
respectively (Note B) 196,774 636,931
------------ ------------
Total assets $117,626,762 $180,126,977
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 252,769 $ 25,588
------------ ------------
Partners' equity (deficit) (Notes A, E and I):
Limited Partners 117,123,621 178,597,484
(14,655,512 Units outstanding)
General Partners (290,140) (265,315)
Accumulated comprehensive income(Note B) 540,512 1,769,220
------------ -----------
Total Partners' equity 117,373,993 180,101,389
------------ ------------
Total liabilities and Partners' equity $117,626,762 $180,126,977
============ ============
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Revenues:
Interest income - PIMs:
Basic interest $ 7,416,814 $11,089,440 $12,070,443
Participation interest 3,752,675 1,816,364 31,948
Interest income - MBS 3,083,259 3,098,699 3,366,026
Other interest income 1,082,870 668,055 386,863
----------- ----------- -----------
Total revenues 15,335,618 16,672,558 15,855,280
----------- ----------- -----------
Expenses:
Asset management fee to an affiliate
(Note F) 981,223 1,365,013 1,458,207
Expense reimbursement to affiliates
(Note F) 57,448 162,269 155,091
Amortization of prepaid expenses and
fees (Note B) 2,031,454 1,907,062 1,746,476
General and administrative 247,823 265,614 164,294
----------- ----------- -----------
Total expenses 3,317,948 3,699,958 3,524,068
----------- ----------- -----------
Net income (Notes E and G) 12,017,670 12,972,600 12,331,212
Other Comprehensive Income:
Net change in unrealized gain/(loss)
on MBS (1,228,708) 1,213,884 (726,014)
----------- --------- -----------
Total Comprehensive Income $ 10,788,962 $ 14,186,484 $ 11,605,198
============ ============ ============
Allocation of net income (Notes E and G.):
Limited Partners $11,657,140 $12,583,422 $11,961,276
=========== =========== ===========
Average net income per Limited Partner
interest $ .80 $ .86 $ .82
=========== =========== ===========
(14,655,512 Limited Partner
interests outstanding)
General Partners $ 360,530 $ 389,178 $ 369,936
=========== =========== ===========
The accompanying notes are an
integral part of the financial
statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the Years Ended December 31, 1998, 1997 and 1996
Accumulated Total
Limited General Comprehensive Partners'
Partners Partners Income Equity
Balance at December 31, 1995 $211,648,945 $ (155,589) $ 1,281,350 $ 212,774,706
Net income 11,961,276 369,936 - 12,331,212
Distributions (16,414,171) (432,214) - (16,846,385)
Change in unrealized gain - - (726,014) (726,014)
------------- --------- ---------- ----------
Balance at December 31, 1996 207,196,050 (217,867) 555,336 207,533,519
Net income 12,583,422 389,178 - 12,972,600
Distributions (16,414,173) (436,626) - (16,850,799)
Special distributions (24,767,815) - - (24,767,815)
Change in unrealized gain - - 1,213,884 1,213,884
------------ --------- ---------- ------------
Balance at December 31, 1997 178,597,484 (265,315) 1,769,220 180,101,389
Net income 11,657,140 360,530 - 12,017,670
Distributions (16,414,173) (385,355) - (16,799,528)
Special distributions (56,716,830) - - (56,716,830)
Change in unrealized gain - - (1,228,708) (1,228,708)
------------ --------- ----------- ------------
Balance at December 31, 1998 $117,123,621 $(290,140) $ 540,512 $117,373,993
============ ========== ========== ============
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
----- ----- -----
Operating activities:
Net income $ 12,017,670 $ 12,972,600 $ 12,331,212
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of premiums - 231,706 -
Amortization of short-term investment
discount - - (13,630)
Amortization of prepaid expenses and
fees 2,031,454 1,907,062 1,746,476
Shared Appreciation Income and prepayment
penalties (2,390,707) (602,856) -
Changes in assets and liabilities:
Decrease in interest receivable
and other assets 449,831 423,641 425,062
Increase in liabilities 227,181 6,688 4,140
------------ ----------- ------------
Net cash provided by operating
activities 12,335,429 14,938,841 14,493,260
------------ ------------ ------------
Investing activities:
Short-term investment - - (488,210)
Principal collections on
PIMs including Shared Appreciation Income
and prepayment premiums of $2,255,077 in
1998 and $602,856 in 1997, respectively 42,044,923 18,422,260 1,211,435
Principal collections on MBS including
prepayment premiums of $135,630 in 1998 18,842,263 9,388,723 2,587,489
Proceeds from sale of investment - - 1,000,000
------------ ------------ ------------
Net cash provided by investing
activities 60,887,186 27,810,983 4,310,714
------------------ ------------ ------------
Financing activities:
Distributions (16,799,528) (16,850,799) (16,846,385)
Special distributions (56,716,830) (24,767,815) -
------------------- ------------ ------
Net cash used for financing
activities (73,516,358) (41,618,614) (16,846,385)
------------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (293,743) 1,131,210 1,957,589
Cash and cash equivalents, beginning of year 9,052,480 7,921,270 5,963,681
------------ ------------ ------------
Cash and cash equivalents, end of year $ 8,758,737 $ 9,052,480 $ 7,921,270
================= ============ ============
Supplemental disclosure of non-cash investing
activities:
Reclassification of investment in a PIM to a MBS $ - $ 11,850,469 $ -
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
A. Organization
Krupp Insured Plus-II Limited Partnership (the "Partnership") was formed
on October 29, 1986 by filing a Certificate of Limited Partnership in
The Commonwealth of Massachusetts. The Partnership was organized for the
purpose of investing in commercial and multi-family loans and mortgage
backed securities. The Partnership issued all of the General Partner
Interests to Krupp Plus Corporation and Mortgage Services Partners
Limited Partnership in exchange for capital contributions aggregating
$3,000. The Partnership terminates on December 31, 2026, 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 May 29, 1987
and completed its public offering having sold 14,655,412 Units for
$292,176,381 net of purchase volume discounts of $931,859 as of May 27,
1988.
B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial
reporting purposes, which may differ in certain respects from those used
for federal income tax purposes (Note G).
MBS
The Partnership, in accordance with Financial Accounting Standards
Board's Statement 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("FAS 115"), classifies its MBS portfolio as
available-for-sale. As such the Partnership carries its MBS at fair
market value and reflects any unrealized gains (losses) as a
separate component of Partners' Equity. The Partnership amortizes
purchase premiums or discounts over the life of the underlying
mortgages using the effective interest method.
Effective January 1, 1998 the Partnership adopted the, Statement of
Financial Accounting Standards No. 130, 'Reporting Comprehensive
Income' (FAS 130). FAS 130 was issued establishing standards for reporting
and displaying comprehensive income and its components. FAS 130
requires comprehensive income and its components, as recognized
under accounting standards, to be displayed in a financial
statement with the same prominence as other financial statements,
if material. Accordingly, unrealized gains (losses) on the
Partnership's available-for sale securities have been included in
other comprehensive income.
The Federal Housing Administration MBS is carried at amortized cost
unless the General Partner of the Partnership believes there is an
impairment in value, in which case a valuation allowance would be
established in accordance with Financial Accounting Standards No.
114, "Accounting by Creditors for impairment of a Loan," and
Financial Accounting Standard No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." The
Partnership also has insured non-participating mortgage loans. Such
loans are carried at amortized cost.
PIMs
The Partnership accounts for the MBS portion of its PIM in
accordance with FAS 115 under the classification of held to
maturity. The Partnership carries the Government National Mortgage
Association ("GNMA") or Fannie Mae MBS at amortized cost.
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
B. Significant Accounting Policies, continued
Basic interest on PIMs is recognized based on the stated coupon
rate of the GNMA or Fannie Mae MBS. Participation income is
recognized as earned and when deemed collectible by the
Partnership.
Cash and Cash Equivalents
The Partnership includes all short-term investments with maturities
of three months or less at the date of acquisition in cash and cash
equivalents. The Partnership invests its cash primarily in
commercial paper and money market funds with a commercial bank and
has not experienced any loss to date on its invested cash.
Prepaid Expenses and Fees
Prepaid expenses and fees consist of acquisition fees and expenses
and participation servicing fees paid for the acquisition and
servicing of PIMs. The Partnership amortizes 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 payoff of the
underlying mortgage.
The Partnership amortizes prepaid participation servicing fees using
a method that approximates the effective interest method over a
ten-year period beginning at final endorsement of the loan if a GNMA
loan and at closing if a Fannie Mae 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, contingent assets and liabilities and revenues and
expenses during the period. Actual results could differ from those
estimates.
C. PIMs
At December 31, 1998, the Partnership has investments in ten PIMs. The
Partnership's PIMs consist of a GNMA or Fannie Mae MBS representing the
securitized first mortgage loan on the underlying property (collectively
the "insured mortgages"), and 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 basic interest on the GNMA and Fannie Mae MBS
and HUD insures the first mortgage loan underlying the GNMA MBS.
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
C. PIMs, continued
The borrower usually cannot prepay the first mortgage loan during the
first five years and usually 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. The Partnership may receive income 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" rates ranging from .5% to .75% per annum
calculated on the unpaid principal balance of the first mortgage on the
underlying property , (ii) "Shared Income Interest" ranging from 25% to
30% 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 received during such
month, (iii) "Shared Appreciation Interest" ranging from 25% to 30% of
any increase in the value of the underlying property in excess of a
specified base. Payment of Minimum Additional Interest and Shared Income
Interest will be from the operations of the property and is limited to
50% of net revenue or surplus cash as defined by Fannie Mae or HUD,
respectively.
The total amount of Minimum Additional Interest, Shared Income Interest
and Shared Appreciation interest payable by the underlying borrower
usually can not exceed 50% of any increase in value of the property.
However, generally any net proceeds from a sale or refinancing 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.
Under the Agreement, the Partnership, upon giving twelve months written
notice, can accelerate the maturity date of the Agreement and insured
mortgage to a date not earlier than ten years from the date of the
Agreement for (a) the payment of all participation income due under the
Agreement as of the accelerated maturity date, or (b) the payment of all
participation income due under the Agreement plus all amounts due on the
first mortgage note on the property.
On October 19, 1998, the Partnership received a prepayment on the Walden
Village Apartment's PIM of $6,990,486. Also, the Partnership received a
prepayment penalty of $165,599. On December 4, 1998, the Partnership
made a special distribution to the investors of $.49 per Limited Partner
interest.
During the second quarter of 1998, the Partnership received prepayments
of the Harbor House and Longwood Villas Apartments PIMs. The Partnership
received the outstanding principal balance of $12,146,408 and a
prepayment penalty of $750,000 from the Harbor House PIM and the
outstanding principal balance of $6,261,587 from the Longwood Villas
PIM. During the first
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
---------------
C. PIMs, continued
quarter of 1998, the Partnership received a prepayment penalty of
$62,616 from the Longwood Villas PIM. The Partnership made a special
distribution of $.43 per Limited Partner interest relating to the
Longwood Villas Apartments PIM on July 17, 1998 and a special
distribution of $.88 per Limited Partner interest for the Harbor House
Apartment PIM prepayment was made on July 24, 1998.
During the first quarter of 1998, the Partnership received prepayments
of the Westbrook Manor, Fallwood and Greenbrier Apartment PIMs in the
amounts of $4,841,446, $6,505,922, and $2,196,031, respectively. In
addition to the prepayments, the Partnership received $416,810 of Shared
Appreciation Interest and $632,002 of Minimum Additional Interest and
Shared Income Interest. On March 27, 1998, the Partnership made a
special distribution to the investors of $.94 per Limited Partner
interest.
In November 1997, the Pine Ridge Apartments PIM was repaid by the
borrower. In addition to the outstanding balance due on the first
mortgage of $4,161,080, the Partnership received approximately $243,000
of Shared Appreciation Interest and $284,000 of Shared Income Interest.
On December 19, 1997, the Partnership made a special distribution of
$.30 per Unit to the Limited Partners with proceeds from the outstanding
principal proceeds and the Share Appreciation Interest.
During the third quarter of 1997, the Partnership received a $437,963
payment for all additional interest earned on the Lily Flagg Apartments
PIM through the date of release of participation rights. The Partnership
then converted the investment in the PIM to an multi-family insured
mortgage.
On June 17, 1997, the Partnership received a prepayment of the Lakeside
Apartments PIM. The Partnership received the outstanding principal
balance of $9,935,167, a prepayment penalty of $99,000, Shared
Appreciation Income of $235,000 and Shared Income Interest of $335,000.
On June 27, 1997, the Partnership made a special distribution of $.71
per Unit to the Limited Partners with the proceeds from the outstanding
principal proceeds,the prepayment penalty and the Shared Appreciation
Interest.
During the fourth quarter of 1996, the borrower of the Colonial Park
Apartments PIM sold the property to a buyer that assumed the first
mortgage loan and future obligations arising from the participation
features. The Partnership received $35,000 as a discounted payoff of the
accumulated participation interest then due from the original borrower.
On October 15, 1997, the Partnership received a prepayment of The
Colonial Park Apartments PIM. The Partnership received the outstanding
first mortgage principal balance of $2,520,805. The Partnership
collected a prepayment penalty of approximately $25,000 and Shared
Income Interest of $14,000 during the fourth quarter of 1997. On
November 21, 1997, the Partnership made a special distribution of $.17
per unit to the Limited Partners with the proceeds from the outstanding
principal proceeds and the prepayment penalty.
At December 31, 1998 and 1997 there were no loans within the
Partnership's portfolio that were delinquent as to principal or
interest.
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
----------------
C. PIMs, continued
Listed in the chart is a summary of the Partnership's PIM investments.
The Partnership's PIMs consisted of the following at December 31, 1998
and 1997:
Aggregate Number Permanent
Original of PIMs Interest Maturity Investment
Basis
Issuer Principal at 12/31/98 Rate Range Date Range at December 31,
- - - ------ ------------ ----------- ---------- ----------- --------------------
1998 1997
---- ----
GNMA $ 57,350,100 6 6.75%-8.5% 12/23 - 10/30 $54,290,923 $86,756,622
(a) (b)(c)
Fannie
Mae 30,015,000 4 7.25%-7.75% 10/99 27,967,284 28,271,601
FHA 7,220,800 (d) - - - 7,019,830
------------------ -- ----------------- ------------------
$ 94,585,900 10 $82,258,207 $122,048,053
============ == =========== ============
(a) Includes two PIMs - Richmond Park and Saratoga - in which the
Partnership holds a 62% and 50% interest, respectively, and the
remaining portion is held by an affiliate of the Partnership.
(b) In May 1993, the Partnership agreed to temporarily reduce the
basic interest rate of the LeCouer du Monde PIM, retroactive to
October 1, 1992. The reduction lasted for thirty-six months and
ranged from 6.375% to 8.125% per annum. The current basic interest
rate is 8.25% per annum. Any unpaid basic interest is payable from
the net proceeds from a sale or refinancing of the property. As
consideration for this reduction, the Partnership increased its
Shared Appreciation Interest rate from 30% to 35% and decreased
the base value used for this calculation from $10,795,260 to
$9,814,200.
(c) On June 28, 1995, the Partnership entered into a temporary basic
interest rate reduction agreement on the Denrich Apartments PIM.
Beginning July 1, 1995, the basic interest rate decreased from 8%
per annum to 6.25% per annum for thirty months, then will
increase to 6.75% per annum for the following thirty-six month
period and then increase to the original interest rate of 8% per
annum. The difference between basic interest at the original rate
and the reduced rates will accumulate and be payable from surplus
cash or from the net proceeds of a sale or refinancing. These
accumulated amounts will be due and payable prior to any
distributions to the borrower or payment of participation income
to the Partnership. Also under the agreement, the base level for
calculating Shared Appreciation Interest decreased from
$4,025,000 to $3,500,000.
(d) The Partnership had one FHA PIM as of December 31, 1997. During
1998 the Parnership received a prepayment of the Walden Village
Apartments PIM.
The underlying mortgages of the PIMs are collateralized by
multi-family apartment complexes located in 7 states. The
apartment complexes range in size from 91 to 736 units.
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
----------------
D. MBS
On October 15, 1998, the Partnership received a repayment on the Lily
Flagg MBS of approximately $11,721,863. A prepayment penalty of $117,330
was received on September 17, 1998. On December 2, 1998, the Partnership
made a special distribution to investors of $.81 per Limited Partner
interest.
On June 19, 1998, the Partnership received a prepayment of the Brookside
insured mortgage in the amount of $4,605,549, representing the outstanding
principal balance, and a prepayment penalty of $18,300. The Partnership
made a special distribution of $.32 per limited partner interest on July
24, 1998.
During the third and fourth quarter of 1997, the Partnership received
prepayments on three multi-family MBS in the amounts of $2,318,901,
$2,425,094 and $2,824,583. The Partnership made special distribution of
$.33 per unit per Limited Partner for the first two MBS prepayments and
$.19 per unit per Limited Partner interest for the third MBS prepayment.
At December 31, 1998, the Partnership's MBS portfolio has an amortized
cost of $12,380,666 and unrealized gains of approximately $540,512. At
December 31, 1997, the Partnership's MBS portfolio had an amortized cost
of $14,760,303 and unrealized gains of approximately $1,769,220. The
Partnership's MBS have maturities ranging from 2007 to 2033. At December
31, 1998 and 1997 the Partnership's Insured Mortgage Portfolio had an
amortized cost of $11,871,174 and $28,198,170,respectively.
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 11% 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 1998, 1997 and 1996, the Partnership made quarterly distributions
totaling $1.12 per Unit. The partnership made special distributions of
$3.87 and $1.69 per Unit in 1998 and 1997, respectively.
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
----------------
E. Partners' Equity, continued
As of December 31, 1997, the following cumulative partner contributions
and allocations have been made since the inception of the Partnership:
Corporate
Limited General Unrealized
Unitholders Partner Partners Gain Total
Capital $292,176,381 $ 2,000 $ 3,000 $ - $292,181,381
contributions
Syndication
costs (15,580,734) - - - (15,580,734)
Quarterly
Distributions (226,888,098) (1,584) (5,514,741) (232,404,423)
Special
Distributions (101,415,450) (692) - - (101,416,142)
Net income 168,830,618 1,180 5,221,601 174,053,399
Unrealized
gain on MBS - - - 540,512 540,512
------------ ------- ---------- ----------- ------------
Total at
December 31
1998 $117,122,717 $ 904 $ (290,140) $ 540,512 $117,373,993
============ ======== ========== ========= ============
F. Related Party Transactions
Under the terms of the Partnership Agreement, the General Partners or
their affiliates are entitled to an asset management fee for the
management of the Partnership's business, equal to .75% per annum of the
value of the Partnership's actual and committed mortgage 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 provided the Unitholders have received their specified
non-cumulative annual return on their Invested Capital. Total fees
payable to the General Partners for management services shall not exceed
10% of cash available for distribution over the life of the Partnership.
Additionally, the Partnership reimburses affiliates of the General
Partners for certain costs 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 income reported in the accompanying financial
statements with the income reported in the Partnership's 1998 federal
income tax return is as follows:
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
----------------
G. Federal Income Taxes, continued
Net income per statement of income $ 12,017,670
Less:Book to tax difference for amortization of
prepaid expenses and fees (1,777,218)
Net income for federal income tax purposes $ 10,240,452
============
The allocation of the 1998 net income for federal income tax purposes is
as follows:
Portfolio
Income
Unitholders $ 10,004,891
Corporate Limited Partner 68
General Partners 235,493
-----------
$ 10,240,452
For the years ended December 31, 1998, 1997 and 1996 the average per unit
income to the Unitholders for federal income tax purposes was $.68, $.86
and $.95 respectively.
The basis of the Partnership's assets for financial reporting purposes is
less than its tax basis by approximately $2,344,000 and $2,892,000 at
December 31, 1998 and 1997, respectively. The basis of the Partnership?s
liabilities for financial reporting purposes are the same as its tax basis
at December 31, 1998 and 1997, respectively.
H. Fair Value Disclosures of Financial Instruments
The Partnership uses 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 estimates the fair value of MBS based on quoted market
prices. Insured Mortgage loans are valued in a manner consistent with PIMs
as described below:
PIMs
There is no active 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. Management does not include any
participation income in the Partnership's estimated fair value arising
from the properties, because Management does not believe it can predict
the time of realization of the feature with any certainty. Based on the
estimated fair value determined using these methods and assumptions, the
Trust's investments in PIMs had gross unrealized gains of approximately
$2,099,000
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
----------------
H. Fair Value Disclosures of Financial Instruments, continued
at December 31, 1998 and gross unrealized gains of approximately $822,000
at December 31, 1997.
At December 31, 1998 and 1997, the estimated fair values of the
Partnership's financial instruments are as follows:
1998 1997
---- ----
Fair Carrying Fair Carrying
Value Value Value Value
Cash and cash
equivalents $ 8,759 $ 8,759 $ 9,052 $ 9,052
MBS 24,792 24,792 44,728 44,728
PIMs 84,357 82,258 122,870 122,048
-------- -------- -------- --------
$117,908 115,809 $176,650 $175,828
======== ======= ======== ========
I. Subsequent Events
On January 25, 1999, the Partnership received proceeds from the prepayment
of the Waterford Apartments PIM. The Partnership received the outstanding
principal balance of $9,394,386 plus Minimum and Shared Income Interest of
$262,429, and Shared Appreciation Interest and prepayment penalty of
$226,291. The Partnership plans on distributing $.66 per Limited Partner
Interest in February, 1999 from the principal proceeds and prepayment
penalty income received on this loan.
On January 25, 1999, the Partnership received proceeds from the prepayment
of the Carlyle Apartments PIM. The Partnership received the outstanding
principal balance of $7,696,897 plus Minimum and Shared Income Interest of
$145,448, and Shared Appreciation Interest and prepayment penalty of
$525,000. The Partnership plans on distributing $.56 per Limited Partner
Interest in February, 1999 from the principal proceeds and prepayment
penalty income received on this loan.
On January 25, 1999, the Partnership received proceeds from the prepayment
of the Stanford Court Apartments PIM. The Partnership received the
outstanding principal balance of $6,609,242 plus Minimum and Shared Income
Interest of $25,000 and a prepayment penalty of $66,093. The Partnership
plans on distributing $.46 per Limited Partner Interest in February, 1999
from the principal proceeds and prepayment penalty income received on this
loan.
On January 25, 1999, the Partnership received proceeds from the prepayment
of the Hillside Apartments PIM. The Partnership received the outstanding
principal balance of $4,266,759 plus a prepayment penalty of $42,668. The
Partnership plans on distributing $.29 per Limited Partner Interest in
February, 1999 from the principal proceeds and prepayment penalty income
received on this loan.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1998
Normal
Monthly Carrying
Interest Maturity Payment Original Current Amount at
PIMs (a) Rate (b) Date (j) (k) Face Amount Face Amount 12/31/98(o)
- - - -------- -------- -------- ------- ----------- ----------- -----------
GNMA
Country Meadows 8.25% 10/15/30 89,100 $12,475,000 $12,040,163 $12,040,163
Apts (c)(e)(h)
Savage, MD
Denrich Aparts 6.75% 12/15/23 24,900 3,500,000 3,233,836 3,233,836
Philadelphia, PA (c)(e)
(h)(n)
Le Coeur du
Monde 8.25% 10/15/30 70,100 9,814,200 9,467,257 9,467,257
Apts (c)(f)
St. Louis, MO (l)
Richmond Park 7.50% 8/15/24 107,900 16,000,000 14,787,106 14,787,106
Richmond Heights,(c)(e)(h)
OH
Saratoga Apts. 7.875% 8/15/24 47,300 6,750,000 6,274,105 6,274,105
Rolling Meadows,(c)(e)(h)
IL
The Greehouse 8.50% 2/15/30 64,600 8,810,900 8,488,456 8,488,456
----------- ----------- ------------
Omaha, NE (d)(e)(h)
57,350,100 54,290,923 54,290,923
---------- ----------- -----------
FNMA
Carlyle Court 7.25% 10/1/99 54,600 8,280,000 7,696,897 7,696,897
Indianapolis, IN(c)(e)(h) (m)
Hillside Court 7.25% 10/1/99 30,000 4,590,000 4,266,759 4,266,759
Centerville, OH (c)(e)(h) (m)
Stanford Court 7.25% 10/1/99 46,700 7,110,000 6,609,242 6,609,242
Speedway, IN (c)(e)(h) (m)
Waterford Court 7.75% 10/1/99 69,500 10,035,000 9,394,386 9,394,386
----------- ------------ ------------
Lafayette, IN (c)(g)(i) (m)
30,015,000 27,967,284 27,967,284
----------- ------------ ------------
$87,365,100 $82,258,207 $82,258,207
=========== =========== ===========
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE, continued
December 31, 1998
-----------------
(a) The Participating Insured Mortgages ("PIMs") consist of either a
mortgage-backed security guaranteed by the Fannie Mae or the
Government National Mortgage Association ("GNMA") 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 specified base levels.
(b) Represents the permanent interest rate of the GNMA or Fannie Mae MBS.
In addition, the Partnership receives additional 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 extent it exceeds the amount of Minimum
Additional Interest received during such month), (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.
(c) Minimum Additional Interest is at a rate of .5% per annum calculated on
the unpaid principal balance of the
first mortgage note.
(d) Minimum Additional Interest is at a rate of .75% per annum calculated on
the unpaid principal balance of the first mortgage note.
(e) Shared Income Interest is based on 25% of monthly gross rental income over a
specified base amount.
(f) Shared Income Interest is based on 30% of monthly gross rental income over a
specified base amount.
(g) Shared Income Interest is based on 35% of monthly gross rental income
over a specified base amount.
(h) Shared Appreciation Interest is based on 25% of any increase in the value of
the project over the specified base value.
(i) Shared Appreciation Interest is based on 35% of any increase in the value of
the project over the specified base value.
(j) The Partnership's GNMA MBS have call provisions,which allow the Partnership
to accelerate their respective maturity date.
(k) The normal monthly payment consisting of principal and basic interest
is payable monthly at level amounts over the term of the GNMA MBS. The
GNMA MBS and Fannie Mae MBS generally may not be prepaid during the
first five years and may 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. The normal monthly payment
consisting of principal and basic interest for a Fannie Mae MBS is
payable at level amounts based on a 35-year amortization. All unpaid
principal and accrued basic interest is due at the end of year ten.
Continued
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE, Continued
-------------
(l) The Partnership agreed to temporarily reduce the interest rate on the
Le Couer du Monde PIM. The reduction was retroactive to October 1,
1992, and ranged from 6.375% to 8.125% per annum through October 1,
1995 and thereafter is at 8.25% per annum. As consideration for this
reduction, the Partnership increased its Shared Appreciation Interest
rate from 30% to 35% and decreased the Base Value used for this
calculation from $10,795,620 to $9,814,200.
(m) The approximate principal balance due at maturity for each PIM,
respectively, is as follows:
PIM Amount
Carlyle Court $7,620,000
Hillside Court $4,224,000
Stanford Court $6,543,000
Waterford Court $9,308,000
(n) On June 28, 1995, the Partnership entered into a temporary basic
interest rate reduction agreement on the Denrich Apartments PIM.
Beginning July 1,1995, the basic interest rate decreased from 8% per
annum to 6.25% per annum for thirty months, then increases to 6.75%
per annum for the following thirty-six month period and then
increases to the original rate of 8% per annum. The difference
between basic interest at the original interest rate and the
reduced rates will accumulate and be payable from surplus cash or from
the net proceeds of a sale or refinancing. These accumulated amounts
will be due and payable prior to any distributions to the borrower or
payment of participation income to the Partnership. Also under the
agreement, the Base Value for calculating Shared Appreciation
Interest decreased from $4,025,000 to $3,500,000.
(o) The aggregate cost of PIMs for federal income tax purposes is $82,258,207.
A reconciliation of the carrying value of PIMs for each of the three years in
the period ended December 31, 1998 is as follows:
1998 1997 1996
---- ---- ----
Balance at beginning of period $122,048,053 $151,717,926 $152,929,361
Deductions during period:
Reclassification - (11,850,469) -
Prepayments and
principal collections 39,789,846 (17,819,404) (1,211,435)
------------ ------------- ------------
Balance at end of period $ 82,258,207 $122,048,053 $151,717,926
============ ============ ============
Unaudited
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,
1998 and the period from inception through December 31, 1998. 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)
Inception
Year Ended Through
12/31/98 12/31/98
Distributable Cash Flow:
Income for tax purposes $10,240 $176,938
Items not requiring (not providing) the use of operating funds:
Amortization of prepaid expenses and fees 3,809 13,851
Acquisition expenses paid from offering
proceeds charged to operations - 690
Shared appreciation income/prepayment penalties (2,391) (4,995)
Gain on sale of MBS - (377)
------- --------
Total Distributable Cash Flow ("DCF") $11,658 $186,107
======= ========
Limited Partners Share of DCF $11,308 $180,524
======= ========
Limited Partners Share of DCF per Unit $ .77 $ 12.32
======= ========
General Partners Share of DCF $ 350 $ 5,583
======= ========
Net Proceeds from Capital Transactions:
Principal collections on PIMs and PIM sale proceeds
including Shared Appreciation Income/Prepayment
Penalties $42,045 $108,380
Principal collections on MBS and MBS sale proceeds 18,842 90,330
Reinvestment of MBS and PIM principal collections
and sale proceeds - (41,966)
Gain on sale of MBS - 377
------- --------
Total Net Proceeds from Capital Transactions $60,887 $157,121
======= ========
Cash available for distribution
(DCF plus proceeds from Capital Transactions) $72,545 $343,228
======= ========
Distributions:
Limited Partners $73,131(a) $332,409(b)
------- --------
Limited Partners Average per Unit $ 4.99(a) $ 22.68(b)(c)
======= ========
General Partners $ 355(a) $ 5,583(b)
======= ========
Total Distributions $73,486 $337,992
======= ========
(a) Represents all distributions paid in 1998 except the February 1998
distribution and includes an estimate of the distribution to be paid in
February 1999.
(b) Includes an estimate of the distribution to be paid in February 1999.
(c) Limited Partners average per Unit return of capital as of February 1999
is $10.36 [$22.68 - $12.32] 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.