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 or an insured mortgage loan (collectively, the "insured mortgage") guaranteed or insured as to principal and basic interest. These insured mortgages were issued or originated under or in connection with the housing programs of the Federal National Mortgage Association ("FNMA"), the Government National Mortgage Association ("GNMA") or the Department of Housing and Urban Development ("HUD"). PIMs provide the Partnership with monthly payments of principal and 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, FNMA, HUD or the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA and FHLMC guarantee the principal and basic interest of the FNMA and FHLMC MBS, respectively. GNMA guarantees the timely payment of principal and 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, 1995, there were no personnel directly employed by the Partnership.
ITEM 2.

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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.

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, 1995 was approximately 15,000. One of the objectives of the Partnership is to provide quarterly distributions of cash flows 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.
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:
ITEM 6.

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

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 $4.1 million. Funds used for investor distributions are generated from interest income received on the PIMs, MBS, cash and short-term investments, and the principal collections received on the PIMs and MBS. The Partnership funds a portion of the distribution from principal collections, 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 distributions paid to investors.
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.
Based on current projections, the General Partners believe the Partnership can maintain the current distribution rate for the foreseeable future. However, in the event of PIM prepayments the Partnership would be required to distribute any proceeds from the prepayments as a special distribution which may cause an adjustment to the distribution rate to reflect the anticipated future cash inflows from the remaining mortgage investments.
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 GNMA, FNMA, FHLMC and HUD and therefore the certainty of their cash flows and the risk of material loss of the amounts invested depends on the creditworthiness of these entities.
FNMA is a federally chartered private corporation that guarantees obligations originated under its programs. FHLMC is a federally chartered corporation that guarantees obligations originated under its programs and is wholly-owned by the twelve Federal Home Loan Banks. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. GNMA guarantees the timely payment of principal and basic interest on the securities it issues, which represents interest in pooled mortgages insured by HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by the full faith and credit of the U.S. Government.
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 in Section 17 of the Partnership Agreement, and the source of cash distributions for the year ended December 31, 1995 and the period from inception to 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)
(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 $4.13 [$13.76 - $9.63] 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.
Net income decreased approximately $1,492,000 during 1995 as compared to 1994 due primarily to lower interest income that resulted from a reduction in the invested assets in the Partnership. The reduction in assets was a result of a payoff of the Mediterranean Village PIM during September 1994. Subsequently, a special distribution was made from the Partnership using the payoff proceeds and a portion of the available cash. The decline in net income from 1994 to 1995 is also related to participation income recognized in 1994 from the payoff of the Mediterranean Village PIM and the payment of participation income related to the Longwood Villas PIM which together totalled approximately $1.1 million. Interest income on MBS decreased in 1995 versus 1994 and will continue to decline as principal collections decrease the Partnership's MBS portfolio. The Partnership will continue to see a decline in base interest income on its PIMs based on the amortization of the underlying mortgages. Expenses decreased approximately $1,017,000 in 1995 versus 1994 primarily resulting from reduced amortization expense. As a result of the repayment of the Mediterranean Village PIM, the Partnership fully amortized its associated prepaid fees and expenses which increased amortization expense in 1994 as compared to 1995. During 1995, the Partnership experienced a decrease in expense reimbursements to affiliates and a decrease in the asset management fee due to declining asset base as compared to 1994.
The Partnership's net income for 1994 declined as compared to 1993, primarily because net income in 1993 included a $377,000 gain on the sale of MBS. Overall, total interest income did not change significantly from 1993 to 1994. However, payoffs of the Fox Valley and Pinecrest PIMs in 1993 and the Mediterranean Village PIM in 1994 resulted in lower interest income on PIMs in 1994 as compared to 1993. Participation income increased significantly in 1994 as compared to 1993 due primarily to the participation income provided from the Mediterranean Village PIM payoff and the payment of participation income from the Longwood Villas PIM. The Partnership saw an increase in interest income on MBS in 1994 versus 1993 due primarily to the reinvestment of the proceeds from the payoff of the Fox Valley PIM in MBS. The Partnership's expenses did not change significantly from 1993 to 1994, because the Partnership fully amortized certain prepaid fees and expenses associated with the PIMs that paid off during each of these years.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None. PART III
ITEM 10.

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 (49) Co-Chairman of the Board George Krupp (51) Co-Chairman of the Board Laurence Gerber (39) President Peter F. Donovan (42) Senior Vice President Robert A. Barrows (38) Vice President and Treasurer
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 serves as 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 billion under management for institutional and individual clients. Mr. Krupp attended the University of Pennsylvania and Harvard University. Mr. Krupp also serves as Chairman of the Board and Trustee of Krupp Government Income Trust and Krupp Government Income Trust II.
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.
Peter F. Donovan is President of Berkshire Mortgage Finance and directs the underwriting, servicing and asset management of a $2.5 billion multi- family loan portfolio. Previously, he was Senior Vice President of Berkshire Mortgage Finance and was responsible for all 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.
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.

ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers.
ITEM 12.

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 14,655,412 outstanding Units. The only interests held by management or its affiliates consist of its General Partner and Corporate Limited Partner Interests.
ITEM 13.

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.

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 to this report.
2. Financial Statement Schedule - see Index to Financial Statements and Schedule included under Item 8, Appendix A, page 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)].*
Colonial Park Apartments
(10.2) Prospectus for GNMA Pool No. 248521 (PL). [Exhibit 19.1 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0- 16817)].*
(10.3) Subordinated Open-End Multi-Family Mortgage (including Subordinated Promissory Note) dated March 30, 1988 between Euclid Creek Company, and York Associates, Inc. [Exhibit 19.2 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
(10.4) Assignment of Subordinated Mortgage dated March 30, 1988 between York Associates, Inc. and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.3 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
Westbrook Manor Apartments
(10.5) Prospectus for GNMA Pool No. 256059 (PL). [Exhibit 19.6 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0- 16817)].*
(10.6) Subordinated Multi-Family Deed of Trust (including Subordinated Promissory Note) dated April 19, 1988 between Wiston XXIII Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.7 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
Lakeside Apartments
(10.7) Prospectus for GNMA Pool No. 255955. [Exhibit 19.8 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
(10.8) Subordinated Multi-Family Deed of Trust (including Subordinated Promissory Note) dated May 5, 1988 between Lakeside Apartments Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.9 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
Le Coeur du Monde Apartments
(10.9) 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)].*
(10.10) 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)].*
Harbor House Apartments
(10.11) Prospectus for GNMA Pools No. 257723 (CS) and 257724 (PN). [Exhibit 19.12 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
(10.12) Subordinated Multi-family Mortgage (including Subordinated Promissory Note) dated May 11, 1988 between Harbor House Apartment Homes Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.13 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1988 (File No. 0-16817)].*
Fallwood Apartments
(10.13) Prospectus for GNMA Pool No. 260300 (PL). [Exhibit 19.14 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1988 (File No. 0-16817)].*
(10.14) Multifamily Mortgage (including Subordinated Promissory Note) dated June 23, 1988 between Wiston XVIII Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.15 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1988 (File No. 0-16817)].*
Greenbrier Apartments
(10.15) Prospectus for GNMA Pool No. 260301 (PL). [Exhibit 19.16 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1988 (File No. 0-16817)].*
(10.16) Multifamily Mortgage (including Subordinated Promissory Note) dated August 16, 1988 between Wiston XVI Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.17 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1988 (File No. 0- 16817)].*
Country Meadows Apartments
(10.17) 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)].*
(10.18) 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)].*
Pine Ridge Apartments
(10.19) Prospectus for GNMA Pool No. 259436(PL). [Exhibit 10.27 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 0-16817)]*
(10.20) Subordinated Multifamily Mortgage (including Subordinated Promissory Note) dated October 18, 1988 between LaSalle National Bank and Krupp Insured Plus-II Limited Partnership. [Exhibit 10.28 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 0-16817)]*
Denrich Apartments
(10.21) 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)].*
(10.22) 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)].*
(10.23) 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
(10.24) 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)].*
(10.25) 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)].*
Walden Village Apartments
(10.26) Subordinated Multifamily Open-End Mortgage (including Subordinated Promissory Note) dated February 23, 1989 between The Walden Village Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.3 to Registrant's Report on Form 10-Q for the quarter ended March 31, 1989 (File No. 0-16817)].*
(10.27) Participation Agreement dated February 23, 1989 between The Centralbanc Mortgage Company and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.4 to Registrant's Report on Form 10-Q for the quarter ended March 31, 1989 (File No. 0-16817)].*
Longwood Villas Apartments
(10.28) Prospectus for GNMA Pool No. 272539(PL). [Exhibit 19.7 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1989 (File No. 0-16817)].*
(10.29) Subordinated Multifamily Mortgage (including Subordinated Promissory Note) dated March 29, 1989 between Daniel Properties XI Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.8 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1989 (File No. 0- 16817)].*
(10.30) Guaranty Agreement dated April 19, 1994 between SCA-Florida Holdings (I) Incorporated and Krupp Insured Plus-II Limited Partnership. [Exhibit 10.29 to Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 0-16317)]*
(10.31) Agreement of Release, Assumption and Modification of Subordinated Promissory Note and Subordinated Mortgage by and among Daniel Properties XI Limited Partnership, SCA-Florida Holdings (I) Incorporated and Krupp Insured Plus-II Limited Partnership. [Exhibit 10.30 to Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 0- 16817)].*
Lily Flagg Station
(10.32) Prospectus for GNMA Pool No 272540(PL). [Exhibit 19.9 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1989 (File No. 0-16817)].*
(10.33) Subordinated Multifamily Mortgage (including Subordinated Promissory Note) date March 29, 1989 between Daniel Properties I Limited Partnership and Krupp Insured Plus-II Limited Partnership. [Exhibit 19.10 to Registrant's Report on Form 10-Q for the quarter ended June 30, 1989 (File No. 0- 16817)].*
Richmond Park Apartments
(10.34) 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)].*
(10.35) 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)]*
(10.36) 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
(10.37) 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)].*
(10.38) 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)].*
(10.39) 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
(10.40) 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)].*
(10.41) 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
(10.42) 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)].*
(10.43) 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
(10.44) 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)].*
(10.45) 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
(10.46) 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)].*
(10.47) 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, 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-II LIMITED PARTNERSHIP
By: Krupp Plus Corporation, a General Partner
By: /s/ George Krupp George Krupp, 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 26th day of February, 1996.
Signatures Title(s)
/s/ Douglas Krupp Co-Chairman (Principal Executive Douglas Krupp Officer) and Director of Krupp Plus Corporation, a General Partner
/s/ George Krupp Co-Chairman (Principal Executive George Krupp Officer) and Director of Krupp Plus Corporation, a General Partner
/s/ Laurence Gerber President of Krupp Plus Laurence Gerber Corporation, a General Partner
/s/ Peter F. Donovan Senior Vice President of Krupp Peter F. Donovan Plus Corporation, a General Partner
/s/ Robert A. Barrows Treasurer and Chief Accounting Robert A. Barrows Officer of Krupp Plus Corporation, a G e n e r a l Partner
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, 1995
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Accountants
Balance Sheets at December 31, 1995 and 1994
Statements of Income for the Years Ended December 31, 1995, 1994 and 1993
Statements of Changes in Partners' Equity for the Years Ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993
Notes to Financial Statements -
Schedule IV - Mortgage Loans on Real Estate -
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:
We have audited the financial statements and the financial statement schedule of Krupp Insured Plus-II Limited Partnership (the "Partnership") listed in the index on page 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-II 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-II LIMITED PARTNERSHIP
The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
The accompanying notes are an integral part of the financial statements.
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
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 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).
PIMs
PIMs are carried at amortized cost as the Partnership has the ability and intention to hold them. Basic interest is recognized based on the stated rate of the Federal Housing Administration ("FHA") first mortgage loan (less the servicer's fee) or the stated coupon rate or reduced rate of the Government National Mortgage Association ("GNMA") or Federal National Mortgage Association ("FNMA") MBS. To the extent interest rate reductions provide for payment of unpaid base interest from surplus cash or the net proceeds from a sale or refinancing, the Partnership will recognize such interest payments as income when received. Participation interest is recognized as earned and when deemed collectible by the Partnership.
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
Short-term investments represent 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 deposits and money market funds with a commercial bank and has not experienced any loss to date on its invested cash.
Short-term Investment
Short-term investment consists of a banker's acceptance with an original maturity greater than three months. The Partnership carries the short-term investment at amortized cost, which approximates fair value, due to the short period of time to maturity. The Partnership intends to hold its short-term investment until maturity.
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 call date of the underlying mortgage. Acquisition expenses incurred on potential acquisitions which were not consummated were charged to operations.
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 Department of Housing and Urban Development ("HUD") loan and at closing if a FNMA 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 twenty PIMs. Of the twenty PIMs, seven funded the construction of multi-family housing. The Partnership's PIMs consist of 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 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 first mortgage loan underlying the GNMA MBS and the FHA first mortgage loan.
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 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" at the 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 FNMA 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 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.
On September 30, 1994, the Partnership received a repayment on the Mediterranean Village PIM totaling $12,581,806. The repayment consisted of outstanding principal of $11,125,765, a prepayment penalty of $861,319 and accrued and delinquent base interest of $594,722. The prepayment penalty received by the Partnership was in excess of what the Partnership would have received if the Shared Appreciation calculation had been performed. Under that calculation, the Partnership would have received approximately $525,000 in Shared Appreciation and $215,000 of accrued Shared Income or Minimum Additional Interest.
In April 1994, the Partnership received $240,022 of participation income on the Longwood Villas PIM resulting from the sale of the property by the borrower. Of the total participation income received $126,231 represented Shared Appreciation Income with the remaining $113,791 representing Shared Interest Income and Minimum Additional Interest. The buyer acquired the property by assuming the insured mortgage from the borrower, so the Partnership will continue to receive principal and interest payments on the insured mortgage. The buyer also entered into an agreement with the Partnership modifying the participation features.
Under the agreement with the buyer, the Partnership will be entitled to additional interest calculated monthly and payable semiannually at the rate of .5% per annum on the unpaid principal balance of the insured mortgage. An affiliate of the buyer guarantees the semiannual payment of additional interest. The Partnership will not receive either Shared Appreciation or Shared Income or Minimum Additional interest from the buyer in the future.
Listed in the chart is a summary of the Partnership's PIM investments. The Partnership's PIMs consisted of the following at December 31, 1995 and 1994:
(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) The Partnership agreed to temporarily reduce the interest rate on the Harbor House PIM effective on March 1, 1992, for a period of thirty months at rates ranging from 6.75% to 7.75% per annum and thereafter is 8.25% per annum. As consideration for this reduction, the Partnership increased its Minimum Additional Interest from .5% to .75% as well as reduced the Shared Appreciation Interest Base to $13,000,000 from $13,750,000.
(c) In May 1993, the Partnership agreed to temporarily reduce the interest rate of the Le Couer 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 interest rate is 8.25% per annum. Any unpaid 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. (d) On June 28, 1995, the Partnership entered into a temporary interest rate reduction agreement on the Denrich Apartments PIM. Beginning July 1, 1995, the interest rate decreased from 8% per annum to 6.25% per annum for thirty months, then 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 interest at the original interest rate and the reduced interest 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 interest to the Partnership. Also under the agreement, the base level for calculating Shared Appreciation Interest decreased from $4,025,000 to $3,500,000.
The underlying mortgages of the PIMs are collateralized by multi-family apartment complexes located in 11 states. The apartment complexes range in size from 80 to 736 units.
D. MBS
At December 31, 1995, the Partnership's MBS portfolio has an amortized cost of approximately $43,316,000 and unrealized gains and losses of approximately $1,285,000 and $4,000, respectively. At December 31, 1994, the Partnership's MBS portfolio had a market value of approximately $44,236,000 and unrealized gains and losses of approximately $475,000 and $1,738,000, respectively. The Partnership's MBS have maturities ranging from 2007 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 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 1995, the Partnership made quarterly distributions totaling $1.12 per unit. During 1994 and 1993 the Partnership made quarterly distributions totaling $1.48 and $1.60 per Unit and special distributions of $1.18 and $.18 per Unit, respectively.
As of December 31, 1995, the following cumulative partner contributions and allocations have been made since the inception of the Partnership:
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 1995 federal income tax return is as follows:
Net income per statement of income $12,656,200
Add: Book to tax difference for amortization of prepaid expenses and fees 75,532
Net income for federal income tax purposes $12,731,732
The allocation of the 1995 net income for federal income tax purposes is as follows:
Portfolio Income
Unitholders $12,349,696 Corporate Limited Partner 84 General Partners 381,952
$12,731,732
For the years ended December 31, 1995, 1994 and 1993 the average per unit income to the Unitholders for federal income tax purposes was $.84, $1.05 and $.96, 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 and Short-term Investment
The carrying amount approximates fair value because of the short maturity of those instruments.
MBS
The Partnership estimates the fair value and 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 as the insured mortgages 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 Trust's investments in PIMs had gross unrealized gains of $5,606,000 at December 31, 1995 and gross unrealized losses of $9,073,000 at December 31, 1994.
At December 31, 1995 and 1994, the estimated fair values of the Partnership's financial instruments are as follows:
1995 1994 Cash and cash equivalents and short-term investment $ 6,454 $ 5,453 MBS 44,597 44,236 PIMs 158,535 144,970
$209,586 $194,659
KRUPP INSURED PLUS-II LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE December 31, 1995
(a) The Participating Insured Mortgages ("PIMs") consist of either a mortgage-backed security guaranteed by the Federal National Mortgage Association ( FNMA ) or the Government National Mortgage Association ( GNMA ), or a direct mortgage insured by the United States Department of Housing and Urban Development ("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 specified base levels. (b) Represents the permanent interest rate of the GNMA or FNMA MBS or the HUD direct mortgage. 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 30% of any increase in the value of the project over the specified base value. (j) Shared appreciation interest is based on 35% of any increase in the value of the project over the specified base value. (k) The Partnership's GNMA MBS and HUD direct mortgages have call provisions, which allow the Partnership to accelerate their respective maturity date. (l) The normal monthly payment consisting of principal and interest is payable monthly at level amounts over the term of the GNMA MBS and the HUD direct mortgages. The GNMA MBS, FNMA MBS and HUD-insured first mortgage loan 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 interest for FNMA MBS is payable at level amounts based on a 35-year amortization. All unpaid principal and accrued interest is due at the end of year ten. (m) The Partnership agreed to temporarily reduce the interest rate on the Harbor House PIM. The reduction, which was effective on March 1, 1992, lasted for a period of thirty months and ranged from 6.75% to 7.75% per annum and thereafter is 8.25% per annum. As consideration for this reduction, the Partnership increased its Minimum Additional Interest from .5% to .75% as well as reduced the Shared Appreciation Interest Base from $13,750,000 to $13,000,000.
(n) The Partnership agreed to temporarily reduce the interest rate on the Le Couer du Monde PIM. The reduction is 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. (o) 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
(p) The Partnership permitted the borrower to sell the property and allowed the buyer to assume the first mortgage loan. In addition, this buyer entered into an agreement with the Partnership to pay additional interest calculated monthly and payable semiannually at a rate of .5% per annum on the unpaid principal balance of the insured mortgage loan.
(q) On June 28, 1995, the Partnership entered into a temporary interest rate reduction agreement on the Denrich Apartments PIM. Beginning July 1, 1995, the 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 interest rate of 8% per annum. The difference between interest at the original interest rate and the reduced interest 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 interest to the Partnership. Also under the agreement, the base level for calculating Shared Appreciation Interest decreased from $4,025,000 to $3,500,000. (r) The aggregate cost of PIMs for federal income tax purposes is $152,929,361.
A reconciliation of the carrying value of PIMs for each of the three years in the period ended December 31, 1995 is as follows:


ITEM 1. BUSINESS - -----------------
Fastenal Company ("Fastenal Company" and, together with its wholly owned subsidiary, Fastenal Canada Company, collectively, the "Company") began as a partnership in 1967, and was incorporated under the laws of Minnesota in 1968. As of December 31, 1995, the Company sold approximately 41,000 different types of threaded fasteners and other industrial and construction supplies through 366 stores located in 45 states and in Canada which were operated by the Company under the Fastenal(R) name/1/, and approximately 8,000 different types of tools and safety supplies through 37 stores located in 18 states which were operated by the Company under the FastTool(R) name. As of December 31, 1995, the Company also operated nine combined Fastenal/FastTool stores in smaller communities located in nine states, all nine of which stores were opened in 1995. The Company maintains seven distribution centers from which the Company distributes products to its stores, and operates a facility in Memphis, Tennessee to receive and package goods coming from suppliers outside of the United States.
Through 1995 the Company counted as a new store the addition of two employees at a site dedicated to the sale of a new product line. By way of example, each FastTool store is located in a store site housing an existing Fastenal store, but has been counted as a separate store because of the addition of two people at the site to sell the FastTool product line. The Company plans to begin adding product lines to some existing sites with only one additional employee or, in some cases, no additional employees. In the future, therefore, the Company's reports relating to growth will include data about total store sites, average sales at these sites, total employment at these sites, and average sales per marketing employee. The Company will also report total Company sales by major product classification, but will not report sales or profits by product class for individual sites. As of January 1, 1996, the Company had 375 store sites and 1,310 people employed at these sites.
DEVELOPMENT OF THE BUSINESS
Fastenal Company began in 1967 with a marketing strategy of supplying threaded fasteners to customers in small to medium-sized cities. The Company believes its success can be attributed to its ability to offer such customers a full line of products at convenient locations, and to the high quality of the Company's employees.
The Company opened its first store in Winona, Minnesota, a city with a population of approximately 25,000. The following table shows the growth in the number of Company stores during the last ten years, and the related increases in the Company's consolidated net sales during that period:
- ----------------------- /1/ Fastenal(R), FastTool(R), SharpCut(TM) and PowerFlow(TM) are trademarks and/or service marks of the Company.
As of December 31, 1995, the Company operated 412 stores located in Minnesota (11 stores), Wisconsin (22 stores), Iowa (16 stores), Illinois (23 stores), Indiana (18 stores), Ohio (31 stores), Michigan (18 stores), Kentucky (7 stores), Pennsylvania (16 stores), New York (14 stores), Nebraska (4 stores), Missouri (10 stores), Kansas (8 stores), South Dakota (4 stores), West Virginia (6 stores), Arkansas (5 stores), Maryland (4 stores), North Dakota (3 stores), North Carolina (16 stores), Oklahoma (5 stores), Tennessee (11 stores), Texas (33 stores), South Carolina (5 stores), Colorado (7 stores), Virginia (8 stores), Louisiana (3 stores), Georgia (12 stores), Alabama (11 stores), Utah (3 stores), Washington (10 stores), Oregon (6 stores), Mississippi (5 stores), California (12 stores), Idaho (4 stores), Massachusetts (7 stores), Florida (5 stores), Connecticut (4 stores), Arizona (2 stores), Montana (4 stores), Nevada (1 store), New Hampshire (4 stores), New Mexico (2 stores), Maine (2 stores), Delaware (1 store), Vermont (1 store) and Canada (8 stores). The Company has closed only three stores in its history.
The Company selects new locations for its stores based on their proximity to the Company's distribution network, population statistics, and employment data for manufacturing and construction. The Company currently intends to continue opening new stores at the rate experienced over the last several years, subject to market and general economic conditions. The Company believes that approximately 135 additional markets in the United States have sufficient potential to justify a stand-alone Fastenal store.
Since 1993 the Company has developed a new store concept, opening 37 FastTool stores which sell tools and safety supplies. Each such store is located in a store site housing an existing Fastenal store, but has been counted as a separate store because of the addition of two employees at the site dedicated to the sale of the FastTool product line. The Company plans to open between 25 and 35 additional FastTool stores in 1996. The Company believes that most cities with Fastenal stores have sufficient market potential for a FastTool store. However, in the aggregate, the existing FastTool stores currently operate at a loss.
In 1995 the Company opened nine experimental stores in communities which are smaller (populations of approximately 8,000 to 25,000) than those in which regular Fastenal stores are located. These stores, each of which starts operations with two full-time employees, combine the Fastenal and FastTool product lines in single stores. The Company plans to open between 25 and 40 of these combination stores in 1996. Although the Company cannot be sure of the success of these stores, the Company believes that their success potentially could lead to 500 more store sites in the United States.
In 1995 the Company announced plans to begin marketing an expanded line of metal cutting blades and new lines of fluid flow products and materials handling equipment and systems. The Company started selling the expanded line of cutting blades from certain existing Fastenal locations in January 1996, and plans to begin adding each of the other new product lines later in 1996.
In 1994 the Company began to sell products into Mexico from its existing McAllen, Texas store. In 1995 similar operations were begun from stores in El Paso and Brownsville, Texas. The Company opened two Fastenal stores in
Canada in 1994 and six in 1995, and plans to open between five and ten additional Canadian stores in 1996.
No assurance can be given that any of the expansion plans described above will be achieved, or that new stores, once opened, will be profitable.
It has been the Company's experience that near-term profitability has been adversely affected by new store openings, due to the related start-up costs and the time necessary to generate a customer base. A new store generates its sales from direct sales calls, a slow process involving repeated contacts. As a result of this process, sales volume builds slowly and it typically requires nine to 15 months for a new stand-alone Fastenal store to achieve its first profitable month. Of the 15 Fastenal stores, five FastTool stores and two combination stores opened in the first quarter of 1995, 12 Fastenal stores, one FastTool store and two combination stores were profitable in the fourth quarter of 1995.
For 1995 annual sales volumes of stores operating at least five years ranged between approximately $398,000 and $3,386,000, with 75% of these stores having annual sales volumes within the range of approximately $630,000 to $1,495,000. The data in the following table shows the growth in the average sales of the Company's stores from 1994 to 1995 based on each store's age. The stores opened in 1995 contributed $8.6 million (or approximately 3.9%) of the Company's consolidated sales in 1995, with the remainder coming from existing stores.
- --------------------
/(1)/ Average sales includes sales of stores open for less than the full fiscal year.
The Company currently maintains distribution centers in or near Winona, Minnesota; Indianapolis, Indiana; Dallas, Texas; Atlanta, Georgia; Scranton, Pennsylvania; Fresno, California; and Kent, Washington. Distribution centers are located so as to permit twice-a-week delivery to Company stores using Company trucks and overnight delivery by surface common carrier. As the number of stores increases, the Company intends to add new distribution centers. The Company plans to open a distribution center in Ohio in 1996.
In December 1994 the Company opened a packaging facility in Memphis, Tennessee. This facility receives freight containers from foreign suppliers and repackages the items in standard packages using high speed equipment. This packaging facility serves five of the Company's distribution centers.
The Company operates a UNIX/terminal-based computer system allowing automatic data exchange between the stores and the distribution centers during regular business hours. The use of client/server technology allows the Company's network of UNIX-based machines to serve networked personal computers and workstations. During 1995 the Company continued to improve its point of sale hardware and software.
PRODUCTS
Fastenal Stores ---------------
The Company distributes approximately 41,000 different items through its Fastenal stores which may be divided into two broad categories: threaded fasteners, such as bolts, nuts, screws, studs and related washers; and other industrial and construction supplies, such as cutting tools, paints, chains, various pins and machinery keys, concrete anchors, masonry drills, flashlights and batteries, sealants, metal framing systems, wire rope and related accessories.
Threaded fasteners are used in most manufactured products and building projects, and in the maintenance and repair of machines and structures. Although some aspects of the threaded fastener market are common to all cities, the Company feels that each city's market is to some extent unique. Therefore, the Company opens each Fastenal store with minimal base stocks of inventory, and then tailors the growing inventory to the local market demand as it develops. Threaded fasteners accounted for approximately 68% of the Company's consolidated sales in 1993 and 1994, and approximately 65% of consolidated sales in 1995.
The remainder of the Company's products sold through the Fastenal stores consists primarily of other supplies used in construction and industrial maintenance. Many of the same marketing methods used with regard to threaded fasteners also apply to the marketing of these items. The Company currently believes that it will continue to add to the number of supply items it distributes. With the exception of limited lines of chemical anchors, paints and sealants, the Company does not distribute chemical supplies. The Company also avoids selling supplies that have limited shelf lives.
The Company has added certain supplies, such as cutting tools, paints, brass fittings, flashlights and batteries, chains and various pins and machinery keys, to its product line to improve a marketing strategy targeted toward industrial maintenance accounts. These accounts improve their buying efficiency by purchasing large orders of maintenance items from a single source.
Concrete anchors make up the largest portion of supply items used in construction. Most concrete anchors use threaded fasteners as part of the completed anchor assembly. Most of the other supplies distributed by the Company through the Fastenal stores to construction firms are items that are consumed as construction takes place, such as cutting tools and blades.
FastTool Stores ---------------
In 1993 the Company began a new FastTool division which sells power and hand tools and safety supplies to the same customer base serviced by its existing Fastenal stores. The inventory of tools and safety supplies in the FastTool stores is comprised of approximately 8,000 different items. The Company opened three FastTool stores in 1993, six FastTool stores in 1994, and 28 FastTool stores in 1995. The Company uses its current distribution system
for the FastTool division, but store personnel are specialists in tool marketing. FastTool stores are located in store sites housing existing Fastenal stores.
Smaller Community Combination Stores ------------------------------------
In 1995 the Company opened nine experimental stores in communities which are smaller (populations of approximately 8,000 to 25,000) than those in which current Fastenal stores are located. These stores, each of which started operations with two full-time employees, combine the Fastenal and FastTool product lines in single stores. Although the Company cannot be sure of the success of these stores, the Company believes that their success potentially could lead to 500 more store sites in the United States.
Additional Product Lines ------------------------
In 1995 the Company announced plans to begin selling an expanded line of metal cutting blades and blade regrinding services under the SharpCut(TM) name, to begin selling fluid transmission products under the PowerFlow(TM) name, and to begin selling materials handling products and systems. The Company began the regrinding service in September 1995, started selling the expanded line of cutting blades from select Fastenal sites in January 1996, and plans to begin adding the other new products later in 1996.
INVENTORY CONTROL
The Company controls inventory by using computer systems to preset desired stock levels. The data used for this purpose are derived from reports showing sales activity by item for the previous three years. Computers then convert this data to typical store maximum-minimum inventory levels for each item. Stores can deviate from preset inventory levels as deemed appropriate by their district managers. Inventories in distribution centers are established from computerized sales data for the stores served by the respective centers.
MANUFACTURING OPERATIONS
In 1995 approximately 95.9% of the Company's consolidated sales were attributable to products manufactured by other companies to industry standards. The remaining approximately 4.1% of the Company's consolidated sales for 1995 related to products manufactured by, or modified in, the Company's machining shop. These manufactured products consist primarily of non-standard sizes of threaded fasteners made to customers' specifications. The Company engages in manufacturing activity primarily as a service to its customers and does not expect any significant growth in the foreseeable future in the proportion of the Company's consolidated sales attributable to manufacturing.
SOURCES OF SUPPLY
The Company uses a large number of suppliers for the approximately 49,000 standard items it distributes. Most items distributed by the Company can be purchased from several sources, although preferred sourcing is used for some items to facilitate quality control. No single supplier accounted for more than 5.0% of the Company's purchases in 1995.
CUSTOMERS AND MARKETING
The Company believes its success can be attributed to its ability to offer customers in small to medium-sized cities a full line of products at convenient locations, and to the high quality of the Company's employees. Most of the Company's customers are in the construction and manufacturing markets. The construction market includes general, electrical, plumbing, sheet metal and road contractors. The manufacturing market includes both original equipment manufacturers and maintenance and repair operations. Other users of the Company's products include farmers, truckers, railroads, mining companies, municipalities, schools and certain retail trades. As of December 31, 1995, the Company's total number of active customer accounts (defined as accounts having purchase activity within the last 90 days) was approximately 53,000.
During each of the three years ended December 31, 1995, no one customer accounted for a significant portion of the Company's sales. The Company believes that the large number of its customers together with the varied markets that they represent provide some protection to the Company from economic downturns in a particular market.
A significant portion of the Company's sales are generated through direct calls on customers by store personnel. Because of the nature of the Company's business, the Company does not use the more expensive forms of mass media advertising such as television, radio and newspapers. Forms of advertising used by the Company include signs and catalogs.
COMPETITION
The Company's business is highly competitive. Competitors include both large distributors located primarily in large cities and smaller distributors located in many of the same cities in which the Company has stores. The Company believes that the principal competitive factors affecting the markets for the Company's products are customer service and convenience.
Some competitors use vans to sell their products in communities away from their main warehouses. The Company, however, believes that the convenience provided to customers by actually operating a number of stores in smaller markets, each carrying a full line of products, is a competitive selling advantage and that the large number of stores in a given area, taken together with the Company's ability to provide frequent deliveries to such stores from centrally located distribution centers, makes possible the prompt and efficient distribution of products. Having trained personnel at each store also enhances the Company's ability to compete (see "Employees" below).
EMPLOYEES
As of January 1, 1996, the Company employed a total of 2,045 full and part- time employees, 1,310 being store managers and store employees, and the balance being employed in the Company's distribution centers, packaging facility, manufacturing operations and home office.
The Company believes that the quality of its employees is critical to its ability to compete successfully in the markets it currently serves and to its ability to open new stores in new markets. The Company fosters the growth and education of skilled employees throughout the organization by operating training programs and by decentralizing decision making. Wherever possible, promotions are from within the Company. For example, most new store managers are promoted from an assistant manager's position at another store and
district managers (who supervise a number of stores) are usually former store managers.
The Company's sales personnel participate in incentive bonus arrangements which place emphasis on achieving increased sales on a store and regional basis, while still attaining targeted levels of gross profit. As a result, a significant portion of the Company's total employment cost varies with sales volume. The Company also pays incentive bonuses to other personnel for achieving pre-determined cost containment goals.
None of the Company's employees is subject to a collective bargaining agreement and the Company has experienced no work stoppages. The Company believes its employee relations are excellent.
ITEM 2.

ITEM 2. PROPERTIES - -------------------
The Company owns three facilities in Winona, Minnesota: a 98,000 square foot distribution center and home office building, a 50,000 square foot manufacturing facility, and a 23,000 square foot building that houses both the Company's Winona store and some operations departments. In 1995 the Company began construction of a 75,000 square foot addition to its distribution center and office building in Winona. The Company expects to occupy this facility in July 1996. The Company also owns a 60,000 square foot distribution center in Indianapolis, Indiana, a 54,000 square foot distribution center in Atlanta, Georgia, a 50,000 square foot distribution center in Dallas, Texas and a 50,000 square foot distribution center near Scranton, Pennsylvania. The buildings that house the Fastenal and FastTool stores in Waterloo and Mason City, Iowa; St. Joseph, Missouri; Wichita Falls and Texarkana, Texas; Topeka, Kansas; and Kokomo, Indiana are also owned by the Company.
All other buildings occupied by the Company are leased. Leased stores range from approximately 1,200 to 8,000 square feet, with lease terms of up to 48 months. The Company's leased distribution center in Kent, Washington, which opened in February 1994, is approximately 16,400 square feet. The term of the lease of the Washington facility expires on January 31, 1997, provided that the lease may be renewed at the Company's option for two additional one year periods. The Company's leased distribution center in Fresno, California, which opened in March 1995, is approximately 11,200 square feet. The term of the lease of the California facility expires on February 28, 1998. The Company's leased packaging facility in Memphis, Tennessee, which opened in December 1994, is approximately 37,500 square feet. The term of the lease of the Memphis facility expires on November 15, 1997.
If economic conditions are suitable, the Company will, in the future, consider purchasing store sites to house its older stores. All sites for new stores (other than new FastTool stores, which are located in sites housing existing Fastenal stores, some of which are or may be owned) will continue to be leased. It is the Company's policy to negotiate relatively short lease terms to facilitate relocation of particular store operations if deemed desirable by management. It has been the Company's experience that space suitable for its needs and available for leasing is more than sufficient.
ITEM 3.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------
Not Applicable.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT - ---------------------------------------------
The executive officers of Fastenal Company are:
Mr. Kierlin has been the Chairman of the Board and President of Fastenal Company and has served as a director since Fastenal Company's incorporation in 1968.
Mr. Slaggie has been the Secretary and Treasurer of Fastenal Company and has served as a director since 1970. He became a full-time employee of Fastenal Company in December 1987, at which time he assumed the additional duties of Shareholder Relations Director and Insurance Risk Manager.
Neither of the above executive officers is related to the other or to any other director of Fastenal Company.
PART II -------
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------
Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995, Common Stock Data on page 7.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA - --------------------------------
Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995, page 2.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS - -------------
Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995, pages 5-6.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ----------------------------------------------------
Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995, Selected Quarterly Financial Data (Unaudited) on page 7 and Consolidated Financial Statements, Notes to Consolidated Financial Statements and Independent Auditors' Report on pages 8-16.
ITEM 9.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------
Incorporated herein by reference is the information appearing under the headings "Election of Directors - Nominees and Required Vote", pages 4-5, and "General", page 9, in Fastenal Company's Proxy Statement dated March 19, 1996. See also Part I hereof under the heading "Item X. Executive Officers of the Registrant".
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION - --------------------------------
Incorporated herein by reference is the information appearing under the headings "Election of Directors - Board and Committee Meetings", page 5, "Election of Directors - Executive Compensation - Summary of Compensation", page 5, and "Election of Directors - Executive Compensation - Compensation Committee Interlocks and Insider Participation", pages 5-6, in Fastenal Company's Proxy Statement dated March 19, 1996.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------
Incorporated herein by reference is the information appearing under the heading "Security Ownership of Principal Shareholders and Management", pages 2- 3, in Fastenal Company's Proxy Statement dated March 19, 1996.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - --------------------------------------------------------
Incorporated herein by reference is the information appearing under the heading "Election of Directors - Executive Compensation - Compensation Committee Interlocks and Insider Participation", pages 5-6, in Fastenal Company's Proxy Statement dated March 19, 1996.
PART IV -------
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - --------------------------------------------------------------------------
a) 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Earnings for the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
(Incorporated by reference to pages 8-16 of Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995)
2. Financial Statement Schedules:
Schedule VIII - Valuation and Qualifying Accounts
3. Exhibits:
3.1 Restated Articles of Incorporation of Fastenal Company, as amended (incorporated by reference to Exhibit 3.1 to Fastenal Company's Form 10-Q for the quarter ended September 30, 1993)
3.2 Restated By-Laws of Fastenal Company (incorporated by reference to Exhibit 3.2 to Registration Statement No. 33-14923)
13 Annual Report to Shareholders for the fiscal year ended December 31, 1995 (only those portions specifically incorporated by reference herein shall be deemed filed with the Commission)
21 List of Subsidiaries (incorporated by reference to Exhibit 21 to Fastenal Company's Form 10-K for the fiscal year ended December 31, 1994)
27 Financial Data Schedule
Copies of Exhibits will be furnished upon request and payment of the Company's reasonable expenses in furnishing the Exhibits.
b) Reports on Form 8-K
No report on Form 8-K was filed by Fastenal Company during the fourth quarter of the fiscal year ended December 31, 1995.
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Independent Auditors' Report on Schedule ----------------------------------------
The Board of Directors and Stockholders Fastenal Company:
Under date of January 29, 1996, we reported on the consolidated balance sheets of Fastenal Company and subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota January 29, 1996
FASTENAL COMPANY
Schedule VIII Valuation and Qualifying Accounts Years Ended December 31, 1995, 1994 and 1993 --------------------------------------------
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.
Date: March 18, 1996
FASTENAL COMPANY
By /s/Robert A. Kierlin -------------------------------- Robert A. Kierlin, President
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 and on the dates indicated.
Date: March 18, 1996 /s/Robert A. Kierlin ------------------------------------ Robert A. Kierlin, President (Principal Executive Officer) and Director
Date: March 18, 1996 /s/Stephen M. Slaggie ------------------------------------ Stephen M. Slaggie, Treasurer (Principal Financial Officer) and Director
Date: March 18, 1996 /s/Patrick J. Rice ------------------------------------ Patrick J. Rice, Controller (Principal Accounting Officer)
Date: March 18, 1996 /s/Michael M. Gostomski ------------------------------------ Michael M. Gostomski, Director
Date: March 18, 1996 /s/Henry K. McConnon ------------------------------------ Henry K. McConnon, Director
Date: March 18, 1996 /s/John D. Remick ------------------------------------ John D. Remick, Director
INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation of Fastenal Company, as amended (incorporated by reference to Exhibit 3.1 to Fastenal Company's Form 10-Q for the quarter ended September 30, 1993).
3.2 Restated By-Laws of Fastenal Company (incorporated by reference to Exhibit 3.2 to Registration Statement No. 33-14923).
13 Annual Report to Shareholders for the fiscal year ended December 31, 1995 (only those portions specifically incorporated by reference herein shall be deemed filed with the Commission)........................................Electronically Filed
21 List of Subsidiaries (incorporated by reference to Exhibit 21 to Fastenal Company's Form 10-K for the fiscal year ended December 31, 1994).
27 Financial Data Schedule ...........................Electronically Filed