Item 1. Business
The Interpublic Group of Companies, Inc. was incorporated in Delaware in September 1930 under the name of McCann-Erickson Incorporated as the successor to the advertising agency businesses founded in 1902 by A.W. Erickson and in 1911 by Harrison K. McCann. It has operated under the Interpublic name since January 1961. As used in this Annual Report, the "Registrant" or "Interpublic" refers to The Interpublic Group of Companies, Inc. while the "Company" refers to Interpublic and its subsidiaries.
The advertising agency business is the primary business of the Company. This business is conducted throughout the world through three advertising agency systems, McCann-Erickson Worldwide, Ammirati Puris Lintas and The Lowe Group. The Company also offers advertising agency services through association arrangements with local agencies in various parts of the world. Other activities conducted by the Company within the area of "marketing communications" include market research, sales promotion, product development, product design, direct marketing, telemarketing and other related services.
The principal functions of an advertising agency are to plan and create advertising programs for its clients and to place advertising in various media such as television, cable, radio, magazines, newspapers, transit, direct response media and outdoor. The planning function involves analysis of the market for the particular product or service, evaluation of alternative methods of distribution and choice of the appropriate media to reach the desired market most efficiently. The advertising agency then creates an advertising program, within the limits imposed by the client's advertising budget, and places orders for space or time with the media that have been selected. Interpublic also carries on a media buying business through its ownership of Western International Media and its affiliates.
The principal advertising agency subsidiaries of Interpublic operating within the United States directly or through subsidiaries and the locations of their respective corporate headquarters are: PAGE
McCann-Erickson USA, Inc.......... New York, New York
Campbell-Ewald Company.......................... Detroit (Warren), Michigan
Ammirati Puris Lintas Inc......... New York, New York
Dailey & Associates............... Los Angeles, California
Lowe & Partners Inc............... New York, New York
Campbell Mithun Esty LLC.......... Minneapolis, Minnesota
In addition to domestic operations, the Company provides advertising services for clients whose business is international in scope as well as for clients whose business is restricted to a single country or a small number of countries. It has offices in Canada as well as in one or more cities in each of the following countries:
EUROPE, AFRICA AND THE MIDDLE EAST
Austria Germany Namibia South Africa Belgium Greece Netherlands Spain Croatia Hungary Norway Sweden Czech Republic Ireland Poland Switzerland Denmark Italy Portugal Turkey Finland Ivory Coast Romania United Arab Emirates France Kenya Russia United Kingdom Malawi Slovak Zimbabwe Republic
LATIN AMERICA AND THE CARIBBEAN
Argentina Costa Rica Honduras Peru Barbados Dominican Republic Jamaica Puerto Rico Bermuda Ecuador Mexico Trinidad Brazil El Salvador Panama Uruguay Chile Guatemala Paraguay Venezuela Colombia
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ASIA AND THE PACIFIC
Australia Japan People's Republic South Korea Hong Kong Malaysia of China Taiwan India Nepal Philippines Thailand New Zealand Singapore
Operations in the foregoing countries are carried on by one or more operating companies, at least one of which is either wholly owned by Interpublic or a subsidiary or is a company in which Interpublic or a subsidiary owns a 51% interest or more, except in Malawi and Nepal, where Interpublic or a subsidiary holds a minority interest.
The Company also offers advertising agency services in Aruba, the Bahamas, Bahrain, Belize, Bolivia, Bulgaria, Cambodia, Cameroon, Egypt, Gabon, Ghana, Grand Cayman, Guadeloupe, Guam, Guyana, Haiti, Reunion, Indonesia, Iran, Israel, Ivory Coast, Jordan, Kuwait, Lebanon, Martinique, Mauritius, Morocco, Nicaragua, Nigeria, Oman, Pakistan, Paraguay, Saudi Arabia, Senegal, Sri Lanka, Surinam, Tunisia, Uganda, United Arab Emirates (Dubai), Vietnam and Zaire through association arrangements with local agencies operating in those countries.
For information concerning revenues, operating profits and identifiable assets on a geographical basis for each of the last three years, reference is made to Note 13: Geographic Areas of the Notes to the Consolidated Financial Statements in the Company's Annual Report to Stockholders for the year ended December 31, 1995, which Note is hereby incorporated by reference.
Developments in 1995
The Company completed several acquisitions within the United States and abroad in 1995.
Effective November 10, 1995, Anderson & Lembke,Inc. was acquired. Anderson & Lembke, Inc. is an advertising agency with headquarters in New York City and San Francisco.
As of June 29, 1995, the Company acquired a 50% interest in a limited liability company, Campbell Mithun Esty LLC. The other 50% is owned by former employees of Campbell Mithun Esty Inc. which are employed by the LLC. PAGE
In 1995, the Company completed its integration of Ammirati & Puris (acquired in 1994) with its Lintas Agency System. In 1995, Ammirati & Puris Holdings, Inc. and Ammirati & Puris Inc. were merged into Lintas, Inc. and the name of the surviving corporation has been changed to Ammirati Puris Lintas Inc. Ammirati Puris Lintas Inc. continues to be headquartered in New York City. The Company also is in the process of changing the names of the corporations comprising the Lintas Worldwide Agency System to reflect the "Ammirati Puris Lintas" name.
See Note 3 to the Consolidated Financial Statements incorporated by reference in this Report on Form 10-K for discussion of additional acquisitions.
Income from Commissions, Fees and Publications
The Company generates income from planning, creating and placing advertising in various media. Historically, the commission customary in the industry was 15% of the gross charge ("billings") for advertising space or time; more recently lower commissions have been negotiated, but often with additional incentives for better performance. For example, an incentive component is frequently included in arrangements with clients based on increases in a client's sales of the products or services being advertised. Under commission arrangements, media bill the Company at their gross rates. The Company bills these amounts to its clients, remits the net charges to the media and retains the balance as its commission. Some clients, however, prefer to compensate the Company on a fee basis, under which the Company bills its client for the net charges billed by the media plus an agreed-upon fee. These fees usually are calculated to reflect the Company's salary costs and out-of-pocket expenses incurred on the client's behalf, plus proportional overhead and a profit mark-up.
Normally, the Company, like other advertising agencies, is primarily responsible for paying the media with respect to firm contracts for advertising time or space. This is a problem only if the client is unable to pay the Company because of insolvency or bankruptcy. The Company makes serious efforts to reduce the risk from a client's insolvency, including (1) carrying out credit clearances, (2) requiring in some cases payment of media in advance, or (3) agreeing with the media that the Company will be solely liable to pay the media only after the client has paid the Company for the media charges. PAGE
The Company also receives commissions from clients for planning and supervising work done by outside contractors in the physical preparation of finished print advertisements and the production of television and radio commercials and infomercials. This commission is customarily 17.65% of the outside contractor's net charge, which is the same as 15% of the outside contractor's total charges including commission. With the spread of negotiated fees, the terms on which outstanding contractors' charges are billed are subject to wide variations and even include in some instances the elimination of commissions entirely provided that there are adequate negotiated fees.
The Company derives income in many other ways, including the planning and placement in media of advertising produced by unrelated advertising agencies; the maintenance of specialized media placement facilities; the creation and publication of brochures, billboards, point of sale materials and direct marketing pieces for clients; the planning and carrying out of specialized marketing research; managing special events at which clients' products are featured; and designing and carrying out interactive programs for special uses.
The five clients of the Company that made the largest contribution in 1995 to income from commissions and fees accounted individually for 2% to 11% of such income and in the aggregate accounted for over 31% of such income. Twenty clients of the Company accounted for approximately 45% of such income. Based on income from commissions and fees, the three largest clients of the Company are General Motors Corporation, Unilever and The Coca-Cola Company. General Motors Corporation first became a client of one of the Company's agencies in 1916 in the United States. Predecessors of several of the Lintas agencies have supplied advertising services to Unilever since 1893. The client relationship with The Coca-Cola Company began in 1942 in Brazil and in 1955 in the United States. While the loss of the entire business of one of the Company's three largest clients might have a material adverse effect upon the business of the Company, the Company believes that it is very unlikely that the entire business of any of these clients would be lost at the same time, because it represents several different brands or divisions of each of these clients in a number of geographical markets - in each case through more than one of the Company's agency systems.
Representation of a client rarely means that the Company handles advertising for all brands or product lines of the client in all geographical locations. Any client may transfer its
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business from an advertising agency within the Company to a competing agency, and a client may reduce its advertising budget at any time. The Company's advertising agencies in many instances have written contracts with their clients.
As is customary in the industry, these contracts provide for termination by either party on relatively short notice, usually 90 days but sometimes shorter or longer. In 1995, however, 42% of income from commissions and fees was derived from clients that had been associated with one or more of the Company's agencies or their predecessors for 20 or more years.
Personnel
As of January 1, 1996, the Company employed approximately 19,700 persons, of whom approximately 5,900 were employed in the United States. Because of the personal service character of the marketing communications business, the quality of personnel is of crucial importance to continuing success. There is keen competition for qualified employees. Interpublic considers its employee relations to be satisfactory.
The Company has an active program for training personnel. The program includes meetings and seminars throughout the world. It also involves training personnel in its offices in New York and in its larger offices worldwide.
Competition and Other Factors
The advertising agency and other marketing communications businesses are highly competitive. The Company's agencies and media services must compete with other agencies, both large and small, and also with other providers of creative or media services which are not themselves advertising agencies, in order to maintain existing client relationships and to obtain new clients. Competition in the advertising agency business depends to a large extent on the client's perception of the quality of an agency's "creative product". An agency's ability to serve clients, particularly large international clients, on a broad geographic basis is also an important competitive consideration. On the other hand, because an advertising agency's principal asset is its people, freedom of entry into the business is almost unlimited and quite small agencies are, on occasion, able to take all or some portion of a client's account from a much larger competitor. PAGE
Moreover, increasing size brings limitations to an agency's potential for securing new business, because many clients prefer not to be represented by an agency that represents a competitor. Also, clients frequently wish to have different products represented by different agencies. The fact that the Company owns three separate worldwide agency systems and interests in other advertising agencies gives it additional competitive opportunities.
The advertising business is subject to government regulation, both domestic and foreign. There has been an increasing tendency in the United States on the part of advertisers to resort to the courts to challenge comparative advertising on the grounds that the advertising is false and deceptive. Through the years, there has been a continuing expansion of specific rules, prohibitions, media restrictions, labeling disclosures and warning requirements with respect to the advertising for certain products. Representatives within state governments and the federal government as well as foreign governments continue to initiate proposals to ban the advertising of specific products and to impose taxes on or deny deductions for advertising which, if successful, may have an adverse effect on advertising expenditures.
Some countries are relaxing commercial restrictions as part of their efforts to attract foreign investment. However, with respect to other nations, the international operations of the Company still remain exposed to certain risks which affect foreign operations of all kinds, such as local legislation, monetary devaluation, exchange control restrictions and unstable political conditions. In addition, international advertising agencies are from time to time exposed to the threat of forced divestment in favor of local investors because they are considered an integral factor in the communications process. A provision of the present constitution in the Philippines is an example.
Item 2.

Item 2. Properties
Most of the advertising operations of the Company are conducted in leased premises, and its physical property consists primarily of leasehold improvements, furniture, fixtures and equipment. These facilities are located in various cities in
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which the Company does business throughout the world. However, subsidiaries of the Company own office buildings in Louisville, Kentucky; Warren, Michigan; Frankfurt, Germany; Sao Paulo, Brazil; Lima, Peru; and Brussels, Belgium and own office condominiums in Buenos Aires, Argentina; Bogota, Colombia; Manila, the Philippines; in England, subsidiaries of the Company own office buildings in London, Manchester, Birmingham and Stoke-on-Trent.
The Company's ownership of the office building in Frankfurt is subject to three mortgages which became effective on or about February 1993. These mortgages terminate at different dates, with the last to expire in February 2003. Reference is made to Note 15: Commitments and Contingent Liabilities - of the Notes to the Consolidated Financial Statements in the Company's Annual Report to Stockholders for the year ended December 31, 1995, which Note is hereby incorporated by reference.
Item 3.

Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries are subject to any pending material legal proceedings.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
There follows the information disclosed in accordance with Item 401 of Regulation S-K of the Securities and Exchange Commission (the "Commission") as required by Item 10 of Form 10-K with respect to executive officers of the Registrant.
Name Age Office
Philip H. Geier, Jr. (1) 61 Chairman of the Board, President and Chief Executive Officer
Eugene P. Beard (1) 60 Vice Chairman-Finance and Operations, Chief Financial Officer PAGE
John J. Dooner, Jr. (1) 47 Chairman of McCann-Erickson Worldwide, Inc.
Nicholas J. Camera 49 Vice President, Secretary and General Counsel
Frank B. Lowe (1) 54 Chairman of The Lowe Group
C. Kent Kroeber 57 Senior Vice President-Human Resources
Martin F. Puris (1) 57 Chairman, Chief Executive Officer and Chief Creative Officer of Ammirati Puris Lintas Worldwide
Thomas J. Volpe 60 Senior Vice President-Financial Operations
Joseph M. Studley 43 Vice President and Controller
(1) Also a Director
There is no family relationship among any of the executive officers.
The employment histories for the past five years of Messrs. Geier, Beard, Dooner, Puris and Lowe are incorporated by reference to the Proxy Statement for Interpublic's 1996 Annual Meeting of Stockholders.
Mr. Camera joined Interpublic on May 17, 1993. He was elected Vice President, Assistant General Counsel and Assistant Secretary on June 1, 1994 and Vice President, General Counsel and Secretary on December 15, 1995.
Mr. Kroeber joined Interpublic in January 1966 as Manager of Compensation and Training. He was elected a Vice President in 1970 and Senior Vice President in May 1980.
Mr. Volpe joined Interpublic on March 3, 1986. He was appointed Senior Vice President-Financial Operations on March 18, 1986. He served as Treasurer from January 1, 1987 through May 17, 1988 and the Treasurer's office continues to report to him. He was Vice President and Treasurer of Colgate-Palmolive Company
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from February 1981 to February 1986 and Assistant Corporate Controller prior thereto.
Mr. Studley was elected as Vice President and Controller of Interpublic effective as of April 1, 1994, formerly he was Senior Vice President and Chief Financial Officer of E.C. Television, a division of Interpublic, since January 1, 1990. He was a Vice President of Lintas New York, a division of one of Interpublic's subsidiaries, from August 1, 1987 until December 31, 1989.
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PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
The response to this Item is incorporated by reference to the Registrant's Annual Report to Stockholders for the year ended December 31, 1995. See Note 12: Results by Quarter (Unaudited), of the Notes to the Consolidated Financial Statements and information under the heading Transfer Agent and Registrar for Common Stock.
Item 6.

Item 6. Selected Financial Data
The response to this Item is incorporated by reference to the Registrant's Annual Report to Stockholders for the year ended December 31, 1995 under the heading Selected Financial Data for Five Years.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The response to this Item is incorporated by reference to the Registrant's Annual Report to Stockholders for the year ended December 31, 1995 under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 8.

Item 8. Financial Statements and Supplementary Data
The response to this Item is incorporated in part by reference to the Registrant's Annual Report to Stockholders for the year ended December 31, 1995 under the headings Financial Statements and Notes to the Consolidated Financial Statements. Reference is also made to the Financial Statement Schedules listed under Item 14(a) of this Report on Form 10-K.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable. PAGE
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is incorporated by reference to the Registrant's Proxy Statement for its 1996 Annual Meeting of Stockholders (the "Proxy Statement"), to be filed not later than 120 days after the end of the 1995 calendar year, except for the description of Interpublic's Executive Officers which appears in Part I of this Report on Form 10-K under the heading Executive Officers of the Registrant.
Item 11.

Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the Proxy Statement. Such incorporation by reference shall not be deemed to incorporate specifically by reference the information referred to in Item 402(a)(8) of Regulation S-K.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the Proxy Statement.
Item 13.

Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the Proxy Statement. Such incorporation by reference shall not be deemed to incorporate specifically by reference the information referred to in Item 402(a)(8) of Regulation S-K.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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(a) Listed below are all financial statements, financial statement schedules and exhibits filed as part of this Report on Form 10-K.
1. Financial Statements:
See the Index to Financial Statements on page.
2. Financial Statement Schedules:
See the Index to Financial Statement Schedules on page.
3. Exhibits:
(Numbers used are the numbers assigned in Item 601 of Regulation S-K and the EDGAR Filer Manual. An additional copy of this exhibit index immediately precedes the exhibits filed with this Report on Form 10-K and the exhibits transmitted to the Commission as part of the electronic filing of the Report.)
Exhibit No. Description
3 (i) The Restated Certificate of Incorporation of the Registrant, as amended is incorporated by reference to its Report on Form 10-Q for the quarter ended June 30, 1995. See Commission file number 1-6686.
(ii) The By-Laws of the Registrant, amended as of February 19, 1991, are incorporated by reference to its Report on Form 10-K for the year ended December 31, 1990. See Commission file number 1-6686.
4 Instruments Defining the Rights of Security Holders.
(i) Indenture, dated as of April 1, 1992, between Interpublic and Morgan Guaranty Trust Company of New York is not included as an Exhibit to this Report but will be furnished to the Commission upon its request.
(ii) The Preferred Share Purchase Rights Plan as adopted on July 18, 1989 is incorporated by reference to Registrant's Registration Statement on Form 8-A dated August 1, 1989 (No. 00017904) and, as amended, by reference to Registrant's Registration Statement on Form 8 dated October 3, 1989 (No. 00106686).
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10 Material Contracts.
(a) Underwriting Agreement, dated March 30, 1992, by and between Interpublic and Goldman Sachs International Limited is incorporated by reference to Registrant's Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(b) Employment, Consultancy and other Compensatory Arrangements with Management.
Employment and Consultancy Agreements and any amendments or supplements thereto and other compensatory arrangements filed with the Registrant's Reports on Form 10-K for the years ended December 31, 1980 through December 31, 1994, inclusive, or filed with the Registrant's Reports on Form 10-Q for the periods ended March 31, 1995, June 30, 1995 and September 30, 1995 are incorporated by reference in this Report on Form 10-K. See Commission file number 1-6686. Listed below are agreements or amendments to agreements between the Registrant and its executive officers which remain in effect on and after the date hereof or were executed during the year ended December 31, 1995 and thereafter, unless previously submitted, which are filed as exhibits to this Report on Form 10-K.
(i) John J. Dooner, Jr.
(a) Employment Agreement made as of August 1, 1984.
(b) Supplemental Agreement made as of June 1, 1985 to an Employment Agreement made as of August 1, 1984.
(c) Supplemental Agreement made as of December 1, 1985 to an Employment Agreement made as of August 1, 1984.
(d) Supplemental Agreement made as of June 1, 1986 to an Employment Agreement made as of August 1, 1984. PAGE
(e) Executive Special Benefit Agreement made as of July 1, 1986.
(f) Deferred Bonus Agreement made as of November 12, 1986.
(g) Supplemental Agreement made as of June 1, 1987 to an Employment Agreement made as of August 1, 1984.
(h) Executive Severance Agreement made as of August 10, 1987.
(i) Supplemental Agreement made as of April 1, 1988 to an Employment Agreement made as of August 1, 1984.
(j) Supplemental Agreement made as of November 1, 1988 to an Employment Agreement made as of August 1, 1984.
(k) Supplemental Agreement made as of July 1, 1989 to an Employment Agreement made as of August 1, 1984.
(l) Supplemental Agreement made as of May 23, 1990 to an Executive Special Benefit Agreement made as of July 1, 1986.
(m) Supplemental Agreement made as of July 1, 1990 to an Employment Agreement made as of August 1, 1984.
(n) Supplemental Agreement made as of October 1, 1991 to an Employment Agreement made as of August 1, 1984.
(o) Supplemental Agreement made as of May 1, 1992 to an Employment Agreement made as of August 1, 1984.
(p) Supplemental Agreement made as of August 10, 1992 to an Executive Severance Agreement made as of August 10, 1987.
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(q) Executive Special Benefit Agreement made as of July 1, 1992.
(r) Employment Agreement made as of January 1, 1994.
(s) Executive Special Benefit Agreement made as of June 1, 1994.
(t) Supplemental Agreement made as of July 1, 1995 to an Employment Agreement made as of January 1, 1994.
(ii) Frank B. Lowe
(a) Employment Agreement made as of January 1,1996.
(b) Executive Special Benefit Agreement made as of January 1, 1996.
(iii) Martin F. Puris
Employment Agreement made as of August 11, 1994.
(c) Executive Compensation Plans.
(i) Trust Agreement, dated as of June 1, 1990 between The Interpublic Group of Companies, Inc., Lintas Campbell-Ewald Company, McCann-Erickson USA, Inc., McCann-Erickson Marketing, Inc., Lintas, Inc. and Chemical Bank, as Trustee, is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. See Commission file number 1-6686.
(ii) The Stock Option Plan (1988) and the Achievement Stock Award Plan of the Registrant are incorporated by reference to Appendices C and D of the Prospectus dated May 4, 1989 forming part of its Registration Statement on Form S-8 (No. 33-28143).
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(iii) The Management Incentive Compensation Plan of the Registrant is incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1995. See Commission file number 1-6686.
(iv) The 1986 Stock Incentive Plan of the Registrant is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. See Commission file number 1-6686.
(v) The 1986 United Kingdom Stock Option Plan of the Registrant is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(vi) The Employee Stock Purchase Plan (1985) of the Registrant, as amended, is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. See Commission file number 1-6686.
(vii) The Long-Term Performance Incentive Plan of the Registrant is incorporated by reference to Appendix A of the Prospectus dated December 12, 1988 forming part of its Registration Statement on Form S-8 (No. 33-25555).
(viii) Resolution of the Board of Directors adopted on February 16, 1993, amending the Long-Term Performance Incentive Plan is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(ix) Resolution of the Board of Directors adopted on May 16, 1989 amending the Long-Term Performance Incentive Plan is incorporated by reference to Registrant's Report on Form 10-K for the year ended December 31, 1989. See Commission file number 1-6686.
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(d) Loan Agreements.
(i) Credit Agreement dated as of July 3, 1995, between Interpublic and Lloyds Bank Plc.
(ii) Credit Agreement dated and effective December 21, 1995 between Interpublic and NBD Bank.
(iii)Note dated as of December 21, 1995 between Interpublic and NBD Bank pursuant to the Credit Agreement dated and effective as of December 21, 1995.
(iv) Other Loan and Guaranty Agreements filed with the Registrant's Annual Report on Form 10-K for the years ended December 31, 1988 and December 31, 1986 are incorporated by reference in this Report on Form 10-K. Other Credit Agreements, amendments to various Credit Agreements, Supplemental Agreements, Termination Agreements, Loan Agreements, a Note Purchase Agreement, dated August 20, 1991, Guarantee, dated December 17, 1991, Notification dated March 14, 1991 by Registrant and Intercreditor Agreements filed with the Registrant's Report on Form 10-K for the years ended December 31, 1989 through December 31, 1994, inclusive and filed with Registrant's Reports on Form 10-Q for the periods ended March 31, 1995, June 30, 1995 and September 30, 1995 are incorporated by reference into this Report on Form 10-K. See Commission file number 1-6686.
(e) Leases.
Material leases of premises are incorporated by reference to the Registrant's Annual Report on Form 10-K for the years ended December 31, 1980 and December 31, 1988. See Commission file number 1-6686. PAGE
(f) Acquisition Agreement for Purchase of Real Estate.
(i) Acquisition Agreement (in German) between Treuhandelsgesellschaft Aktiengesellschaft & Co. Grundbesitz OHG and McCann-Erickson Deutschland GmbH & Co. Management Property KG ("McCann-Erickson Deutschland") and the English translation of the Acquisition Agreement are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(g) Mortgage Agreements and Encumbrances.
(i) Summaries In German and English of Mortgage Agreements between McCann-Erickson Deutschland and Frankfurter Hypothekenbank Aktiengesellschaft ("Frankfurter Hypothekenbank"), Mortgage Agreement, dated January 22, 1993, between McCann-Erickson Deutschland and Frankfurter Hypothekenbank, Mortgage Agreement, dated January 22, 1993, between McCann-Erickson Deutschland and Hypothekenbank are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. See Commission file number 1-6686. Summaries In German and English of Mortgage Agreement, between McCann-Erickson Deutschland and Frankfurter Sparkasse and Mortgage Agreement, dated January 7, 1993, between McCann-Erickson Deutschland and Frankfurter Sparkasse are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(ii) Summaries In German and English of Documents Creating Encumbrances In Favor of Frankfurter Hypothekenbank and Frankfurter Sparkasse In Connection With the Aforementioned Mortgage Agreements, Encumbrance, dated January 15, 1993, In Favor Of Frankfurter Hypothekenbank, and Encumbrance, dated January 15, 1993, In Favor of Frankfurter Sparkasse are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
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(iii) Loan Agreement (in English and German), dated January 29, 1993 between Lintas Deutschland GmbH and McCann-Erickson Deutschland is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
11 Computation of Earnings Per Share.
13 This Exhibit includes: (a) those portions of the Annual Report to Stockholders for the year ended December 31, 1995 which are included therein under the following headings: Financial Highlights; Management's Discussion and Analysis of Financial Condition and Results Of Operations; Consolidated Balance Sheet; Consolidated Statement of Income; Consolidated Statement of Cash Flows; Consolidated Statement of Stockholders' Equity; Notes to Consolidated Financial Statements (the aforementioned consolidated financial statements together with the Notes to Consolidated Financial Statements hereinafter shall be referred to as the "Consolidated Financial Statements"); Report of Independent Accountants; Selected Financial Data For Five Years; Report of Management; and Stockholders' Information; and (b) Appendix to Exhibit 13.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney to sign Form 10-K and resolution of Board of Directors re Power of Attorney.
27 Financial Data Schedules
99 No reports on Form 8-K were filed during the quarter ended December 31, 1995. PAGE
SIGNATURES
Pursuant to the requirements of Section 13 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.
THE INTERPUBLIC GROUP OF COMPANIES, INC. (Registrant)
March 28, 1996 BY: Philip H. Geier, Jr. Philip H. Geier, Jr., Chairman of the Board, President and Chief Executive Officer
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.
Name Title Date
Frank J. Borelli Director March 28, 1996 Frank J. Borelli
Philip H. Geier, Jr. Chairman of the Board, March 28, 1996 Philip H. Geier, Jr. President and Chief Executive Officer (Principal Executive Officer) and Director
Eugene P. Beard Vice Chairman March 28, 1996 Eugene P. Beard -Finance and Operations (Principal Financial Officer) and Director
John J. Dooner, Jr. Director March 28, 1996 John J. Dooner, Jr
Frank B. Lowe Director March 28, 1996 Frank B. Lowe
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Leif H. Olsen Director March 28, 1996 Leif H. Olsen
Martin F. Puris Director March 28, 1996 Martin F. Puris
J. Phillip Samper Director March 28, 1996 J. Phillip Samper
Joseph J. Sisco Director March 28, 1996 Joseph J. Sisco
Joseph M. Studley Vice President and March 28, 1996 Joseph M. Studley Controller (Principal Accounting Officer)
Allen Questrom Director March 28, 1996 Allen Questrom
By Philip H. Geier, Jr. Philip H. Geier, Jr. Attorney-in-fact
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The Financial Statements appearing under the headings: Financial Highlights, Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements, Notes to Consolidated Financial Statements, Report of Independent Accountants, Selected Financial Data for Five Years and Report of Management accompanying Annual Report to Stockholders for the year ended December 31, 1995, together with the report thereon of Price Waterhouse LLP dated February 13, 1996 appearing on page 40 thereof, are incorporated by reference in this report on Form 10-K. With the exception of the aforementioned information and the information incorporated in Items 5, 6 and 7, no other data appearing in the Annual Report to Stockholders for the year ended December 31, 1995 is deemed to be filed as part of this report on Form 10-K.
The following financial statement schedule should be read in conjunction with the financial statements in such Annual Report to Stockholders for the year ended December 31, 1995. Financial statement schedules not included in this report on Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
Separate financial statements for the companies which are 50% or less owned and accounted for by the equity method have been omitted because, considered in the aggregate as a single subsidiary, they do not constitute a significant subsidiary.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page Report of Independent Accountants on Financial Statement Schedules
Consent of Independent Accountants
Financial Statement Schedules Required to be filed by Item 8 of this form:
VIII Valuation and Qualifying Accounts
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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of The Interpublic Group of Companies, Inc.
Our audits of the consolidated financial statements referred to in our report dated February 13, 1996 appearing in the 1995 Annual Report to Stockholders of The Interpublic Group of Companies, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14 (a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP New York, New York February 13, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 of The Interpublic Group of Companies, Inc. (the "Company"), of our report dated February 13, 1996, appearing in the 1995 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K: Registration Statements No. 2-79071; No. 2-43811; No. 2-56269; No. 2-61346; No. 2-64338; No. 2-67560; No. 2-72093; No. 2-88165; No. 2-90878, No. 2-97440 and No. 33-28143, relating variously to the Stock Option Plan (1971), the Stock Option Plan (1981), the Stock Option Plan (1988) and the Achievement Stock Award Plan of the Company; Registration Statements No. 2-53544; No. 2-91564, No. 2-98324, No. 33-22008, No. 33-64062 and No. 33-61371, relating variously to the Employee Stock Purchase Plan (1975), the Employee Stock Purchase Plan (1985) and the Employee Stock Purchase Plan of the Company (1995); Registration Statements No. 33-20291 and No. 33-2830 relating to the Management Incentive Compensation Plan of the Company; Registration Statement No. 33-5352 and No. 33-21605 relating to the 1986 Stock Incentive Plan and 1986 United Kingdom Stock Option Plan of the Company; and Registration Statement No. 33-10087 and No. 33-25555 relating to the Long-Term Performance Incentive Plan of the Company. We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-37346) of the Interpublic Group of Companies, Inc. of our report dated February 13, 1996, appearing in the 1995 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears above.
PRICE WATERHOUSE LLP New York, New York March 28, 1996
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INDEX TO DOCUMENTS
Exhibit No. Description
3 (i) The Restated Certificate of Incorporation of the Registrant, as amended is incorporated by reference to its Report on Form 10-Q for the quarter ended June 30, 1995. See Commission file number 1-6686.
(ii) The By-Laws of the Registrant, amended as of February 19, 1991, are incorporated by reference to its Report on Form 10-K for the year ended December 31, 1990. See Commission file number 1-6686.
4 Instruments Defining the Rights of Security Holders.
(i) Indenture, dated as of April 1, 1992, between Interpublic and Morgan Guaranty Trust Company of New York is not included as an Exhibit to this Report but will be furnished to the Commission upon its request.
(ii) The Preferred Share Purchase Rights Plan as adopted on July 18, 1989 is incorporated by reference to Registrant's Registration Statement on Form 8-A dated August 1, 1989 (No. 00017904) and, as amended, by reference to Registrant's Registration Statement on Form 8 dated October 3, 1989 (No. 00106686).
10 Material Contracts.
(a) Underwriting Agreement, dated March 30, 1992, by and between Interpublic and Goldman Sachs International Limited is incorporated by reference to Registrant's Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(b) Employment, Consultancy and other Compensatory Arrangements with Management.
PAGE
Employment and Consultancy Agreements and any amendments or supplements thereto and other compensatory arrangements filed with the Registrant's Reports on Form 10-K for the years ended December 31, 1980 through December 31, 1994, inclusive, or filed with the Registrant's Reports on Form 10-Q for the periods ended March 31, 1995, June 30, 1995 and September 30, 1995 are incorporated by reference in this Report on Form 10-K. See Commission file number 1-6686. Listed below are agreements or amendments to agreements between the Registrant and its executive officers which remain in effect on and after the date hereof or were executed during the year ended December 31, 1995 and thereafter, unless previously submitted, which are filed as exhibits to this Report on Form 10-K.
(i) John J. Dooner, Jr.
(a) Employment Agreement made as of August 1, 1984.
(b) Supplemental Agreement made as of June 1, 1985 to an Employment Agreement made as of August 1, 1984.
(c) Supplemental Agreement made as of December 1, 1985 to an Employment Agreement made as of August 1, 1984.
(d) Supplemental Agreement made as of June 1, 1986 to an Employment Agreement made as of August 1, 1984.
(e) Executive Special Benefit Agreement made as of July 1, 1986.
(f) Deferred Bonus Agreement made as of November 12, 1986.
(g) Supplemental Agreement made as of June 1, 1987 to an Employment Agreement made as of August 1, 1984.
(h) Executive Severance Agreement made as of August 10, 1987.
PAGE
(i) Supplemental Agreement made as of April 1, 1988 to an Employment Agreement made as of August 1, 1984.
(j) Supplemental Agreement made as of November 1, 1988 to an Employment Agreement made as of August 1, 1984.
(k) Supplemental Agreement made as of July 1, 1989 to an Employment Agreement made as of August 1, 1984.
(l) Supplemental Agreement made as of May 23, 1990 to an Executive Special Benefit Agreement made as of July 1, 1986.
(m) Supplemental Agreement made as of July 1, 1990 to an Employment Agreement made as of August 1, 1984.
(n) Supplemental Agreement made as of October 1, 1991 to an Employment Agreement made as of August 1, 1984.
(o) Supplemental Agreement made as of May 1, 1992 to an Employment Agreement made as of August 1, 1984.
(p) Supplemental Agreement made as of August 10, 1992 to an Executive Severance Agreement made as of August 10, 1987.
(q) Executive Special Benefit Agreement made as of July 1, 1992.
(r) Employment Agreement made as of January 1, 1994.
(s) Executive Special Benefit Agreement made as of June 1, 1994.
(t) Supplemental Agreement made as of July 1, 1995 to an Employment Agreement made as of January 1, 1994. PAGE
(ii) Frank B. Lowe
(a) Employment Agreement made as of January 1,1996.
(b) Executive Special Benefit Agreement made as of January 1, 1996.
(iii) Martin F. Puris
Employment Agreement made as of August 11, 1994.
(c) Executive Compensation Plans.
(i) Trust Agreement, dated as of June 1, 1990 between The Interpublic Group of Companies, Inc., Lintas Campbell-Ewald Company, McCann-Erickson USA, Inc., McCann-Erickson Marketing, Inc., Lintas, Inc. and Chemical Bank, as Trustee, is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. See Commission file number 1-6686.
(ii) The Stock Option Plan (1988) and the Achievement Stock Award Plan of the Registrant are incorporated by reference to Appendices C and D of the Prospectus dated May 4, 1989 forming part of its Registration Statement on Form S-8 (No. 33-28143).
(iii) The Management Incentive Compensation Plan of the Registrant is incorporated by reference to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1995. See Commission file number 1-6686.
(iv) The 1986 Stock Incentive Plan of the Registrant is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. See Commission file number 1-6686.
(v) The 1986 United Kingdom Stock Option Plan of the Registrant is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686. PAGE
(vi) The Employee Stock Purchase Plan (1985) of the Registrant, as amended, is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. See Commission file number 1-6686.
(vii) The Long-Term Performance Incentive Plan of the Registrant is incorporated by reference to Appendix A of the Prospectus dated December 12, 1988 forming part of its Registration Statement on Form S-8 (No. 33-25555).
(viii) Resolution of the Board of Directors adopted on February 16, 1993, amending the Long-Term Performance Incentive Plan is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(ix) Resolution of the Board of Directors adopted on May 16, 1989 amending the Long-Term Performance Incentive Plan is incorporated by reference to Registrant's Report on Form 10-K for the year ended December 31, 1989. See Commission file number 1-6686.
(d) Loan Agreements.
(i) Credit Agreement dated as of July 3, 1995 between Interpublic and Lloyds Bank Plc.
(ii) Credit Agreement dated and effective December 21, 1995 between Interpublic and NBD Bank.
(iii) Note dated as of December 21, 1995 between Interpublic and NBD Bank pursuant to the Credit Agreement dated and effective as of December 21, 1995.
(iv) Other Loan and Guaranty Agreements filed with the Registrant's Annual Report on Form 10-K for the years ended December 31, 1988 and December 31, 1986 are incorporated by reference in this Report on Form 10-K. Other Credit Agreements, amendments to various Credit Agreements, Supplemental Agreements, Termination Agreements, Loan PAGE
Agreements, a Note Purchase Agreement, dated August 20, 1991, Guarantee, dated December 17, 1991, Notification dated March 14, 1991 by Registrant and Intercreditor Agreements filed with the Registrant's Report on Form 10-K for the years ended December 31, 1989 through December 31, 1994, inclusive and filed with Registrant's Reports on Form 10-Q for the periods ended March 31, 1995, June 30, 1995 and September 30, 1995 are incorporated by reference into this Report on Form 10-K. See Commission file number 1-6686.
(e) Leases.
Material leases of premises are incorporated by reference to the Registrant's Annual Report on Form 10-K for the years ended December 31, 1980 and December 31, 1988. See Commission file number 1-6686.
(f) Acquisition Agreement for Purchase of Real Estate.
Acquisition Agreement (in German) between Treuhandelsgesellschaft Aktiengesellschaft & Co. Grundbesitz OHG and McCann-Erickson Deutschland GmbH & Co. Management Property KG ("McCann-Erickson Deutschland") and the English translation of the Acquisition Agreement are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(g) Mortgage Agreements and Encumbrances.
(i) Summaries In German and English of Mortgage Agreements between McCann-Erickson Deutschland and Frankfurter Hypothekenbank Aktiengesellschaft ("Frankfurter Hypothekenbank"), Mortgage Agreement, dated January 22, 1993, between McCann-Erickson Deutschland and Frankfurter Hypothekenbank, Mortgage Agreement, dated January 22, 1993, between McCann-Erickson Deutschland and Hypothekenbank are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
PAGE
See Commission file number 1-6686. Summaries In German and English of Mortgage Agreement, between McCann-Erickson Deutschland and Frankfurter Sparkasse and Mortgage Agreement, dated January 7, 1993, between McCann-Erickson Deutschland and Frankfurter Sparkasse are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(ii) Summaries In German and English of Documents Creating Encumbrances In Favor of Frankfurter Hypothekenbank and Frankfurter Sparkasse In Connection With the Aforementioned Mortgage Agreements, Encumbrance, dated January 15, 1993, In Favor Of Frankfurter Hypothekenbank, and Encumbrance, dated January 15, 1993, In Favor of Frankfurter Sparkasse are incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
(iii) Loan Agreement (in English and German), dated January 29, 1993 between Lintas Deutschland GmbH and McCann-Erickson Deutschland is incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. See Commission file number 1-6686.
11 Computation of Earnings Per Share.
13 This Exhibit includes: (a) those portions of the Annual Report to Stockholders for the year ended December 31, 1995 which are included therein under the following headings: Financial Highlights; Management's Discussion and Analysis of Financial Condition and Results Of Operations; Consolidated Balance Sheet; Consolidated Statement of Income; Consolidated Statement of Cash Flows; Consolidated Statement of Stockholders' Equity; Notes to Consolidated Financial Statements (the aforementioned consolidated financial Statements together with the Notes to Consolidated Financial Statements hereinafter shall be referred to as the "Consolidated Financial Statements"); Report of Independent Accountants; Selected Financial Data For Five Years; Report of Management; and Stockholders' Information; and (b) Appendix to Exhibit 13. PAGE
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney to sign Form 10-K and resolution of Board of Directors re Power of Attorney.
27 Financial Data Schedules
99 No reports on Form 8-K were filed during the quarter ended December 31, 1995.


ITEM 1. BUSINESS
Krupp Associates 1980-1("KRLP-I") is a limited partnership formed on July 31, 1980, pursuant to the provisions of the Massachusetts Uniform Limited Partnership Act. The Krupp Company and The Krupp Corporation serve as the General Partners of KRLP-I. Chivas Square Associates serves as the Original Limited Partner of KRLP-I. On November 10, 1980, KRLP-I commenced an offering of $4,000,000 of Class A Limited Partner Interests in Units of $1,000 each, which was successfully completed on April 30, 1981. (For further details see Note A of Notes to Consolidated Financial Statements included in Item 8 (Appendix A) of this report). The primary business of KRLP-I has been to invest in, operate, refinance, and ultimately dispose of fully developed, income producing residential properties and related assets. KRLP-I considers itself to be engaged in the industry segment of investment in real estate.
On January 20, 1988, the General Partners formed Krupp Associates Riverside Limited Partnership ("Realty-I") as a prerequisite for the refinancing of Riverside Apartments. At the same time, the General Partners transferred ownership of the property to Realty-I. The General Partner of Realty-I is The Krupp Corporation ("Krupp Corp."). The Limited Partner of Realty-I is KRLP-I. Krupp Corp. has beneficially assigned its interest in Realty-I to KRLP-I. KRLP-I and Realty-I are collectively known as Krupp Realty Limited Partnership-I (collectively the "Partnership").
The Partnership's remaining real estate investment, Riverside I Apartments ("Riverside"), is a 140-unit apartment complex with approximately 30,000 square feet of commercial retail space located in Evansville, Indiana. Riverside is subject to some seasonal fluctuations due to changes in utility consumption and seasonal maintenance expenditures. However, the future performance of the Partnership will depend upon factors which cannot be predicted. Such factors include general economic and real estate market conditions, both on a national basis and in those areas where the Partnership's investments are located, real estate tax rates, operating expenses, energy costs, government regulations, and federal and state income tax laws. 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.
Riverside is also subject to such risks as (i) competition from existing and future projects held by other owners in the area in which the Partnership's property operates, (ii) possible reduction in rental income due to an inability to maintain high occupancy levels and rental rates, (iii) possible adverse changes in general economic and local conditions such as competitive over-building, increased unemployment, adverse changes in real estate zoning laws and the possible future adoption of rent control legislation which would not permit the full amount of increased costs to be passed on to tenants in the form of rent increases, and (iv) other circumstances over which the Partnership may have little or no control.
As of December 31, 1995, there were 8 full or part-time on-site project personnel employed by the Partnership.
ITEM 2.

ITEM 2. PROPERTIES
A summary of the Partnership's real estate investments is presented below. Schedule III included in Appendix A to this report contains additional detailed information with respect to the property.
Total Units/
ITEM 3.

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
The transfer of Units is subject to certain limitations contained in the Partnership Agreement. There is no public market for the Units and it is not anticipated that any such public market will develop.
The number of Class A Limited Partners as of December 31, 1995 was approximately 400.
One of the objectives of the Partnership is to generate cash available for distribution. However, there is no assurance that future operations will generate cash available for distribution. The Partnership has not made distributions since 1988 due to insufficient operating cash flow. The Partnership does not anticipate resuming distributions until the property generates sufficient operating cash flow.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information regarding the Partnership's consolidated financial position and operating results. The information is comparable and should be read in conjunction with Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations and the Financial Statements, which are included in Items 7 and 8 of this report, respectively.
(1) Includes demand notes payable, since the General Partners expect they will be long-term obligations.
Prior performance of the Partnership is not necessarily indicative of future operations.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the operating performance of Riverside. Such ability is also dependent upon the future sale of the asset. These sources of liquidity could be used by the Partnership for payment of expenses related to real estate operations, debt service and expenses. Cash Flow and Capital Transaction Proceeds, if any, as calculated under Section 8.2(a) ("Cash Flow") and 8.3(a) of the Partnership Agreement would then be available for distribution to the Partners. The Partnership has discontinued distributions due to insufficient operating cash flow.
The Partnership has experienced cash flow deficiencies for several years and currently has very limited liquidity. Expenditures are being monitored closely and capital improvements are made on an as-needed basis. To date, the General Partners have been able to arrange financing through borrowings, from an affiliate of the General Partners, to cover a substantial portion of these cash flow deficiencies. Also, one of the General Partners, The Krupp Company Limited Partnership ("The Krupp Company"), contributed an additional
$100,000 to the Partnership during 1991. In January 1993, The Krupp Company loaned an additional $135,000 to the Partnership in the form of a demand note to payoff a demand note from an unaffiliated bank. In addition, the affiliate lender has been willing to defer interest payments on the borrowings since late 1990. Furthermore, the General Partners, through annual negotiations, have continued to arrange for the waiver of property management fees and expense reimbursements payable to the management agent, also an affiliate of the General Partners.
The General Partners anticipate operating deficits to continue and cannot guarantee that they will be able to take actions that will cover any future deficits. If the property is unable to generate funds sufficient to cover these deficits, the Partnership could default on its mortgage payments and become subject to foreclosure proceedings. However, the Partnership is current on its mortgage payments.
In January 1996, the General Partners entered into a purchase and sale agreement for the sale of Riverside to an unaffiliated buyer scheduled in the second quarter of 1996 for the selling price of $4,500,000. In the event the property is ultimately sold, the Partnership would be liquidated. It is anticipated that all sale proceeds would be used to satisfy Partnership obligations and no funds would be available to investors for distribution.
Cash Flow (Deficit)
Shown below, as required by the Partnership Agreement, is the calculation of Cash Flow (Deficit) of the Partnership for the year ended 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, Cash Flow (Deficit) should not be considered by the reader as a substitute to net income/loss, as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity.
Operations
1995 compared to 1994
In comparing 1995 to 1994, increase in cash deficit is attributable to increased capital expenditures. Net income improved by $30,000, as increases in rental revenue more than offset the increase in expenses. Riverside showed a 7% increase in rental revenue due to increased occupancy and management's successful effort in leasing 100% of the commercial space in the fourth quarter of 1995.
Overall total expenses increased approximately 4%, with a decrease in operating expense offset by increases in maintenance and interest expenses. Operating expense decreased due to lower leasing costs resulting from higher occupancy levels, decreased utilities expense because of the warmer winter season and a reduction in insurance expense due to a favorable claim history. Maintenance expense increased as a result of painting interior stairways and pavement repairs made to the sidewalks. The increase in interest expense is attributable to a rise in the prime rate from an average 7.1% in 1994 to 8.8% in 1995.
1994 compared to 1993
In comparing 1994 to 1993, cash deficits decreased approximately $61,000 primarily as a result of lower capital expenditures and improvements in operating cash flow. The improvements in operating cash flow can be attributed to increases in revenue due to residential rental increases and the acquisition of three new commercial tenants during the fourth quarter of 1993.
Overall, total expenses increased 5% with increases in operating costs primarily due to increases in utility rates and leasing expenses. This is offset by a decrease in maintenance expense as a result of the commercial unit improvement program completed in 1993. Additionally, interest expense increased as a result of a rise in prime rate in 1994.
Riverside Apartments residential occupancy averaged 97%, 96% and 97% for the years ended December 31, 1995, 1994, and 1993, respectively. For the years ended December 31, 1995, 1994 and 1993, occupancy of the commercial space averaged 90%, 87% and 83%, respectively.
General
In accordance with Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which is effective for fiscal years beginning after December 15, 1995, the Partnership has implemented policies and practices for assessing impairment of its real estate asset.
The investment in the property is carried at cost less accumulated depreciation unless the General Partners believe there is a significant impairment in value, in which case a provision to write down investment in property to fair value will be charged against income. At this time, the General Partners do not believe that any assets of the Partnership are significantly impaired.
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 The Krupp Corporation, which is both a General Partner of KRLP-I and The Krupp Company, the other General Partner of KRLP-I, is as follows:
Position with Name and Age The Krupp Corporation
Douglas Krupp (49) Co-Chairman of the Board
George Krupp (51) Co-Chairman of the Board
Laurence Gerber (39) President
Robert A. Barrows (38) Senior Vice President and Corporate Controller
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, healthcare facility ownership and the management of the Company. 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 approximately 3,400 are responsible for the more than $4 billion under management for institutional and individual clients. Mr. Krupp is a graduate of Bryant College. In 1989 he received an honorary Doctor of Science in Business Administration from this institution and was elected trustee in 1990. Mr. Krupp is Chairman of the Board and a Director of Berkshire Realty Company, Inc. (NYSE-BRI). George Krupp is Douglas Krupp's brother.
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 approximately 3,400 are responsible for more than $4 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 as Chairman of the Board and Trustee of 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 Director of Berkshire Realty Company, Inc. (NYSE-BRI) and President and Trustee of Krupp Government Income Trust and President and Trustee of Krupp Government Income Trust II.
Robert A. Barrows is Senior Vice President and Chief Financial Officer of Berkshire Mortgage Finance and Corporate Controller of The Berkshire Group. Mr. Barrows has held several positions within The Berkshire Group since joining the company in 1983 and is currently responsible for accounting and financial reporting, treasury, tax, payroll and office administrative activities. Prior to joining The Berkshire Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in Boston. He received a B.S. degree from Boston College and is a Certified Public Accountant.
ITEM 11.

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 4,000 outstanding Units. On that date, the General Partners or their affiliates owned 80 Units (2% of the total outstanding) of the Partnership in addition to their General Partner interests and a portion of the Original Limited Partner interest.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership does not have any directors, executive officers or nominees for election as director. Additionally, as of December 31, 1995 no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - See Index to Consolidated Financial Statements included under Item 8 (Appendix A) on page
to this report.
2. Consolidated Financial Statement Schedule III is included under Item 8 (Appendix A) on page . Certain other schedules are omitted as they are not applicable, not required or the information is provided in the consolidated financial statements or the notes thereto.
(b) Exhibits:
Number and Description Under Regulation S-K
The following reflects all applicable exhibits required by Item 601 of Regulation S-K.
(4) Instruments defining the rights of security holders including indentures:
(4.1) Amended Agreement of Limited Partnership dated as of May 15, 1981 [Exhibit 4.1 to Registrant's Report on Form 10-K for 1982 (File 2-68727)].*
(4.2) Fourth Amendment to Certificate of Limited Partnership filed with the Massachusetts Secretary of State on October 19, 1981 [Exhibit 4.2 to Registrant's Report on Form 10-K for 1982 (File 2-68727)].*
(10) Material contracts:
Riverside I Apartments
(10.1) Contract and Certificate of Limited Partnership of Krupp Associates Riverside Limited Partnership dated January 20, 1988 between The Krupp Corporation (the "General Partner") and Krupp Associates 1980-1 (the "Limited Partner")[Exhibit 10.1 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2-68727)].*
(10.2) Assignment dated January 20, 1988 between Krupp Associates 1980-1("Assignee") and The Krupp Corporation ("Assignor") [Exhibit 10.2 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2-68727)].*
(10.3) Bill of Sale dated January 20, 1988 between Krupp Associates 1980-1 (as "Seller") and Krupp Associates Riverside Limited Partnership (as "Buyer")[Exhibit 10.3 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2-68727)].*
(10.4) Special Warranty Deed dated January 20, 1988 between Krupp Associates 1980-1 ("Grantor") and Krupp Associates Riverside Limited Partnership ("Grantee")[Exhibit 10.4 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2-68727)].*
(10.5) Assignment dated January 20, 1988 between Krupp Associates 1980-1 ("Assignor") and
Krupp Associates Riverside Limited Partnership ("Assignee")[Exhibit 10.5 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2- 68727)].*
(10.6) Management Agreement dated January 28, 1988 between Krupp Associates Riverside Limited Partnership, as Owner, and Krupp Asset Management Company, now known as Berkshire Property Management, as Agent. [Exhibit 10.6 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2-68727)].*
(10.7) Regulatory Agreement for Multifamily Housing Projects Co-insured by HUD dated January 21, 1988 between Krupp Associates Riverside Limited Partnership (the "Owner") and DRG Funding Corporation (the "Mortgagee") [Exhibit 10.7 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2-68727)].*
(10.8) Mortgage Note dated January 21, 1988, from Krupp Associates Riverside Limited Partnership, an Indiana limited partnership, to DRG Funding Corporation, a Delaware corporation. [Exhibit 10.6 to Registrant's Report on Form 10-K for the year ended December 31, 1987 (File No. 2- 68727)].*
(10.9) Mortgage dated January 21, 1988, from Krupp Associates Riverside Limited Partnership, an Indiana limited partnership, to DRG Funding Corporation, a Delaware corporation. [Exhibit 10.7 to Registrant's Report on Form 10-K for the year ended December 31, 1987 (File No. 2- 68727)].*
(10.10) Security Agreement dated January 21, 1988 between Krupp Associates Riverside Limited Partnership ("Debtor") and DRG Funding Corporation ("Creditor") [Exhibit 10.10 to Registrant's Report on Form 10-K for the year ended December 31, 1988 (File No. 2- 68727)].*
(10.11) Escrow Deposit Agreement dated January 21, 1988, between Krupp Associates Riverside Limited Partnership, an Indiana limited partnership, and DRG Funding Corporation, a Delaware corporation. [Exhibit 10.8 to Registrant's Report on Form 10-K for the year ended December 31, 1987 (File No. 2-
68727)].*
(10.12) Purchase and Sale Agreement dated January 22, 1996, between Krupp Associates Riverside Limited Partnership, an Indiana Limited Partnership ("Seller") and BluSky, Inc., an Indiana Corporation ("Buyer"). (File No. 2-68727).+
* Incorporated by reference + Incorporated herein.
(c) Reports on Form 8-K
During the last quarter of the year ended December 31, 1995, the Partnership did not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 21st day of March, 1996.
KRUPP ASSOCIATES 1980-1
By: The Krupp Corporation, a General Partner
By: /s/Douglas Krupp Douglas Krupp, Co-Chairman (Principal Executive Officer) and Director of The Krupp Corporation
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on the 21st day of March, 1996.
Signatures Titles
/s/Douglas Krupp Co-Chairman (Principal Executive Officer) and Douglas Krupp Director of The Krupp Corporation, a General Partner.
/s/George Krupp Co-Chairman (Principal Executive Officer) George Krupp and Director of The Krupp Corporation, a General Partner.
/s/Laurence Gerber President of The Krupp Corporation, a Laurence Gerber General Partner.
/s/Robert A. Barrows Senior Vice President and Corporate Robert A. Barrows Controller of The Krupp Corporation, a General Partner.
APPENDIX A
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS ITEM 8 OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION For the Year Ended December 31, 1995 KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Operations For the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Partners' Deficit 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 -
Schedule III - Real Estate and Accumulated Depreciation
All other schedules are omitted as they are not applicable or not required, or the information is provided in the consolidated financial statements or the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Krupp Associates 1980-1 and Subsidiary:
We have audited the consolidated financial statements and consolidated financial statement schedule of Krupp Associates 1980-1 and subsidiary (the "Partnership") listed in the index on page of this Form 10-K. These consolidated financial statements and financial statement schedule are the responsibility of the Partnership's management. 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 consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management of the Partnership, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Krupp Associates 1980-1 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 consolidated financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be incurred therein.
The accompanying consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note K to the consolidated financial statements, the Partnership has experienced cash flow deficiencies in the past. In connection therewith the General Partners, to date, have been able to arrange financing to cover these deficits, and effective January 1, 1991 the General Partners obtained a waiver of management fees and expense reimbursements due to the affiliated management agent. The General Partners cannot guarantee that they will be able to continue to arrange for financing to cover deficits as they arise or that the arrangement with the management agent will continue. In addition, as disclosed in Note L, the Partnership's subsidiary entered into a purchase and sale agreement for the sale of the sole remaining property to an unaffiliated buyer for $4,500,000. In the event the property is ultimately sold, the Partnership would be liquidated. These factors raise substantial doubt about the ability of the Partnership to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Boston, Massachusetts COOPERS & LYBRAND L.L.P. February 1, 1996
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994
ASSETS
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1995, 1994 and 1993
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT For the Years Ended December 31, 1995, 1994 and 1993
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1995, 1994 and 1993
The accompanying notes are an integral part of the consolidated financial statements.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization
KRLP-I was formed on July 31, 1980 by filing a Certificate of Limited Partnership in The Commonwealth of Massachusetts. KRLP- I issued all of the General Partner Interests to two General Partners (The Krupp Company and The Krupp Corporation) in exchange for capital contributions totalling $5,000.
The Class B Limited Partner Interests were issued to Chivas Square Associates (the "Original Limited Partner"), in connection with the transfer by the Original Limited Partner to KRLP-I of the real estate property which it formerly owned, subject to the related mortgage note payable.
The purchasers of 4,000 Units of Class A Investor Limited Partner Interests at a price of $1,000 per Unit are the Investor Limited Partners.
On January 20, 1988, the General Partners formed Krupp Associates Riverside Limited Partnership ("Realty-I") as a prerequisite for the refinancing of Riverside Apartments. At the same time, the General Partners transferred ownership of the property to Realty-I. The General Partner of Realty-I is The Krupp Corporation ("Krupp Corp."). The Limited Partner of Realty-I is KRLP-I. Krupp Corp. has beneficially assigned its interest in Realty-I to KRLP-I. KRLP-I and Realty-I are collectively known as Krupp Realty Limited Partnership-I (collectively the "Partnership"). B. Significant Accounting Policies
The Partnership uses the following accounting policies for financial reporting purposes, which differ in certain respects from those used for federal income tax purposes (See Note J):
Basis of Presentation
The consolidated financial statements present the consolidated assets, liabilities and operations of the Partnership. All intercompany balances and transactions have been eliminated.
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and money market funds with commercial banks. The Partnership has not experienced any losses to date on its invested cash.
The preparation of financial statements in conformity 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 reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Partnership includes all short-term investments with maturities of three months or less from the date of acquisition in cash and cash equivalents. The cash equivalents are recorded at cost, which approximates current market values.
Rental Revenues
Leases require the payment of base rent monthly in advance. Rental revenues are recorded on the accrual basis. Leases generally contain provisions for additional rent based on a percentage of tenant sales and other provisions which are also recorded on the accrual basis, but are billed in arrears.
Depreciation
Depreciation is provided for by the use of the straight-line method over the estimated useful life of the related asset as follows:
Buildings and improvements 5-35 years Appliances, carpeting and equipment 3-5 years
Impairment of Long-Lived Asset
In accordance with Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which is effective for fiscal years beginning after December 15, 1995, the Partnership has implemented policies and practices for assessing impairment of its real estate asset.
The investment in the property is carried at cost less accumulated depreciation unless the General Partners believe there is a significant impairment in value, in which case a provision to write down the investment in property to fair value will be charged against income. At this time, the General Partners do not believe that any assets of the Partnership are significantly impaired.
Deferred Expenses
The Partnership is amortizing the costs associated with refinancing the property over the term of the related mortgage using the straight-line method.
Income Taxes
The Partnership is not liable for federal or state income
taxes as Partnership income or loss is allocated to the partners for income tax purposes. In the event that the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and the examination results in a change in the Partnership's taxable income or loss, such change will be reported to the partners.
Reclassifications
Certain prior year balances have been reclassified to conform with current year consolidated financial statement presentation.
C. Property
The Partnership purchased Riverside I Apartments ("Riverside"), a 140-unit apartment complex with approximately 30,000 square feet of commercial space located in Evansville, Indiana, on February 13, 1981. The total purchase price for Riverside was $3,518,000, of which $1,842,200 was paid in cash and $1,675,800 was financed with a 40-year non-recourse mortgage payable to the Department of Housing and Urban Development ("HUD").
On January 21, 1988, the Partnership refinanced Riverside under a $2,310,000 non-recourse first mortgage note payable between Realty-I (in which KRLP-I has a 100% beneficial interest) and HUD. (See below for additional information.) The note is collateralized by Riverside. The Partnership paid off the prior mortgage with a portion of the proceeds.
D. Mortgage Note Payable
The non-recourse first mortgage note is payable in equal monthly installments of $20,747 at an interest rate of 10.5% per annum based on a thirty-five year amortization schedule. The note matures on February 1, 2023, when the remaining principal and any accrued interest will be due and payable. Under the regulatory agreement with HUD, monthly deposits of $4,036 must be contributed to a reserve for replacements. The reserve for replacements is to be used to fund property improvements. In addition, the regulatory agreement requires HUD approval for any additional encumbrances or for transfer of title to the project, and limits distributions based on the project's operations to the extent of "surplus cash" as defined in the regulatory agreement.
Based on the borrowing rates currently available to the Partnership for bank loans with similar terms and average maturities, the fair value of long-term debt is approximately $4,000,000.
Principal payments due on the mortgage note payable are $15,302, $16,988, $18,860, $20,939 and $23,246 for the five years 1996 through 2000, respectively.
During 1995, 1994 and 1993, the Partnership paid $235,059, $236,169, and $238,090, respectively, of interest on its mortgage note payable.
E. Notes Payable
The Partnership had demand notes outstanding with both the General Partners and an affiliate of the General Partners at December 31, 1995 and 1994, respectively, in the amount of $1,257,385. Interest accrues monthly at the prime rate of an unaffiliated bank (8.5% at December 31, 1995) plus one percent per annum. During 1995, 1994 and 1993, no interest was paid on these notes. The carrying value of the notes approximate fair value.
F. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at December 31, 1995 and 1994 consisted of the following: 1995 1994
Accrued real estate taxes $133,334 $130,956 Tenant security deposits 32,004 33,191 Deferred income 4,230 7,102 Accrued expenses, other 60,731 56,678
$230,299 $227,927
G. Partners' Deficit
Under the terms of the Partnership Agreement, profits and losses from operations are allocated 90% to the Class A Limited Partners, 9% to the Original Limited Partner and 1% to the General Partners until such time that the Class A Limited Partners have received a return of their total invested capital. Thereafter, 40% shall be allocated to the Class A Limited Partners, 20% to the Original Limited Partner and 40% to the General Partners.
Under the terms of the Partnership Agreement, capital transactions are allocated 90% to the Class A Limited Partners, 9% to the Original Limited Partner and 1% to the General Partners, until such time that the Class A Limited Partners have received a return of their total invested capital and thereafter, allocated 40% to the Class A Limited Partners, 20% to the Original Limited Partner and 40% to the General Partners.
In general, the allocation of profits and losses are calculated based on the terms of the Partnership Agreement, as described above. However, the Internal Revenue Code contains rules which govern the allocation of tax losses among partners. For the years 1992 through 1995, the allocation of tax losses were calculated based on these rules. Under this code, tax losses are not allocated to a limited partner if a general partner bears the economic risk for that loss. Due to operating losses incurred during these years, the General Partners undertook additional liabilities on behalf of the Partnership. As a result, the Partnership allocated additional tax losses to the General Partners. In conjunction with the tax election referred to above, the financial statements presented herein reflect the allocation of net loss in accordance with the rules of the Internal Revenue Code.
As of December 31, 1995, the following cumulative partner contributions and allocations have been made since inception of the Partnership:
H. Related Party Transactions
Commencing with the date of acquisition of the Partnership's property, the Partnership entered into an agreement under which property management fees are paid to an affiliate of the General Partners for services as management agent. Such agreement provides for management fees payable monthly at a rate of 5% of the gross receipts from the property under management. The Partnership also reimburses affiliates of the General Partners for certain expenses incurred in connection with the operation of the Partnership and its property including accounting, computer, insurance, travel, legal and payroll costs relating to the preparation and mailing of reports and other communications to the Limited Partners. Since January 1, 1991, the General Partners arranged with the management agent for the annual waivers of management fees and expense reimbursements.
During 1995, 1994 and 1993, interest on borrowings accrued to the General Partners or affiliates of the General Partners were $125,279, $103,839 and $88,872, respectively.
During 1995, 1994 and 1993, amounts paid to the General Partners or their affiliates relating to disposition activities were $1,095, $8,711 and $0, respectively.
I. Future Base Rents Due Under Commercial Operating Leases
Future base rents due under commercial operating leases for the years 1996 through 2000 and thereafter are as follows:
1996 $260,677 1997 $266,328 1998 $269,608 1999 $272,252
2000 $272,710 Thereafter $ 0
J. Federal Income Taxes
For federal income tax purposes, the Partnership is depreciating its property using the accelerated cost recovery system ("ACRS") and the modified accelerated cost recovery system ("MACRS") depending on which is applicable.
The reconciliation of the net loss reported in the accompanying Consolidated Statement of Operations with the net loss reported in the Partnership's federal income tax return follows:
J. Federal Income Taxes - Continued
The allocation of net loss for federal income tax purposes for 1995 is as follows:
For the years ended December 31, 1995, 1994 and 1993, the per Unit net loss for the Class A Limited Partners for federal income tax purposes was $3.08, $19.75, and $10.87, respectively.
K. Operating Deficits
The Partnership has experienced cash flow deficiencies for several years. In connection therewith, the General Partners, to date, have been able to arrange financing through short-term borrowings from affiliates to cover a substantial portion of these deficits. Also, one of the General Partners, The Krupp Company, contributed an additional $100,000 to the Partnership during 1991, and the General Partners have arranged for the waiver of property management fees and expense reimbursements payable to the management agent. In January 1993, The Krupp Company loaned
$135,000 in the form of a demand note to the Partnership to payoff a demand note from an unaffiliated bank. The operating deficits could continue and the General Partners cannot guarantee that they will be able to take actions that will cover any future deficits. In that event, the Partnership could default on its mortgage payments and become subject to foreclosure proceedings. This would have a significant impact on the financial position and operations of the Partnership. However, the Partnership is current on its mortgage payments, and it cannot presently be determined if a foreclosure will occur in the future. Accordingly, the financial statements do not include any adjustments that might result from the outcome of these uncertainties, all of which raise substantial doubt about the ability of the Partnership to continue as a going concern.
In the event of the sale of Riverside, the Partnership would be liquidated. As a result of the liquidation, the partners would receive allocations of taxable income equivalent to any negative account balance they may have. In addition, there would be no cash available in connection with such income. Therefore, in the event that the partner does not have items which could offset such income, the partner would have to pay taxes with funds from other sources.
L. Subsequent Event
In January 1996, the General Partners entered into a purchase and sale agreement for the sale of Riverside to an unaffiliated buyer scheduled in the second quarter of 1996 for the selling price of $4,500,000. In the event the property is ultimately sold, the Partnership would be liquidated. It is anticipated that all sale proceeds would be used to satisfy Partnership obligations and no funds would be available to investors for distribution.
KRUPP ASSOCIATES 1980-1 AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1995
Gross Amounts Carried at End of Year
Reconciliation of Real Estate and Accumulated Depreciation for each of the three years in the period ended December 31, 1995:
The Partnership uses the cost basis for property valuation for both income tax and financial statement purposes. The aggregate cost for income tax purposes at December 31, 1995 is $4,730,796.