<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
COMMISSION FILE NUMBER 33-11194
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-4178283
1925 CENTURY PARK EAST, SUITE 1760, LOS ANGELES, CA 90067
(310) 208-1888
Securities registered pursuant to Section 12(b) or 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K (X) [ ] Yes [X] No
No documents are incorporated into the text by reference.
Exhibit Index is located on Page 14
Registrant's Prospectus dated January 4, 1989, as amended (the "Prospectus") and
the Registrant's Supplement No. 2 dated November 21, 1989 to Prospectus dated
January 4, 1989 ("Supplement No. 2") but only to the extent expressly
incorporated by reference in Parts I through IV hereof. Capitalized terms,
which are not defined herein, have the same meaning as in the Prospectus.
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . .4
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . .5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . .5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS. . . . . . .6
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . .6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . .7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . 10
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE COMPENSATION OF THE REGISTRANT . . . 11
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 12
ITEM 12. PARTNERSHIP INTEREST OWNERSHIP OF CERTAIN BENEFCIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I
ITEM 1. BUSINESS
Century Pacific Housing Tax Credit Fund-II ("CPTCHF-II "or the "Partnership")
was formed on September 2, 1988 as a limited partnership under the laws of
the State of California to invest in multi-family housing developments (the
"Properties"). The Partnership's business is to invest primarily in other
limited partnerships ("Operating Partnerships") that are organized for the
purpose of either constructing or acquiring and operating existing affordable
multi-family rental apartments (the "Properties") that are eligible for the
Low-Income Housing Tax Credit, or to a lesser extent, the Rehabilitation Tax
Credit, both enacted by the Tax Reform Act of 1986 (sometimes referred to as
"Credits" or "Tax Credits"). The Partnership invested in two Properties,
each of which qualifies for the Low-Income Housing Tax Credit. Both of these
Properties receive one or more forms of assistance from Federal, state or
local governments. A summary of the Partnership's objectives and a summary
of the Tax Credits are provided in the Prospectus under "Investment
Objectives and Policies" and "Federal Income Tax Aspects" on pages 45 and 79,
respectively, and are incorporated herein by reference.
The Partnership does not employ any persons. Alternatively, the Partnership
reimburses an affiliate for allocated overhead, consisting primarily of
payroll costs.
In order to stimulate private investment in low and moderate income housing
of the types in which the Partnership has invested, the federal government,
through the Department of Housing and Urban Development (HUD), has provided
investors with significant ownership incentives intended to reduce the risks
and provide investors/owners with certain tax benefits, limited cash
distributions and the possibility of long-term capital gains. The ownership
incentives include interest subsidies, rent subsidies, and mortgage insurance
and other measures. Long-term investments in real estate limit the ability of
the Partnership to vary its portfolio in response to changing economic,
financial and investment conditions, and such investments are subject to
changes in economic circumstances and housing patterns, rising operating
costs and vacancies, rent controls and collection difficulties, costs and
availability of energy, as well as other factors which normally affect real
estate values. In addition, these Properties usually are rent restricted and
are subject to government agency programs, which may or may not require prior
consent to transfer ownership.
The Partnership acquired the Properties by investing as the limited partner
in the Operating Partnership, which owns the Properties. As a limited
partner, the Partnership's liability for obligations of the Operating
Partnership is limited to its investment. The Partnership made capital
contributions to the Operating Partnerships in amounts sufficient to pay the
Operating Partnership's expenses and to reimburse the General Partners for
their costs incurred in forming the Operating Partnership, if any, and
acquiring the Properties. For each acquisition, this typically included a
cash down payment (in one or more installments), acceptance of the Property's
mortgage indebtedness, and execution of a Purchase Money Note in favor of the
seller of the Property. For a summary of the acquisition financing
activities for each Property, see the financial information contained under
ITEM 2.
The Partnership's primary objective is to provide Low-Income Housing Tax
credits to limited partners generally over a 10-year period. Each of the
Partnership's Operating Partnerships has been allocated, by the relevant
state tax credit agency, an amount of the Low-Income Housing Tax Credit for
10 years from the date the Property is placed-in-service. The required
holding period of the Properties is 15 years (the "Compliance Period"). The
Properties must satisfy rent restrictions, tenant income limitations and
other requirements (the "Low-Income Housing Tax Credit Requirements") in
order to maintain eligibility for recognition of the Low-Income Housing Tax
Credit at all times during the Compliance Period. Once an
3
<PAGE>
Operating Partnership has become eligible for the Low-Income Housing Tax
Credit, it may lose such eligibility and suffer an event of recapture if its
Property fails to remain in compliance with the Low-Income Housing Tax Credit
Requirements. To date, neither of the Operating Partnerships has suffered an
event of recapture of the Low-Income Housing Tax Credit.
ITEM 2. PROPERTIES
As of March 31, 1998, the Partnership had acquired equity interests in the
Operating Partnerships set forth in the table below. Each of the Properties
acquired by the Operating Partnerships receives benefits under government
assistance programs provided by HUD and the Illinois Housing Development
Authority (IHDA). The table set forth below summarizes the Operating
Partnerships acquired and the government assistance programs benefiting each
Property. Further information concerning these Properties may be found in
Supplement No. 2 to the Prospectus, pages 4 through 66, which information is
incorporated herein by reference and is summarized below.
<TABLE>
<CAPTION>
CAPITAL
CONTRIBUTION OBLIGATION DECEMBER 31, 1997
----------------------- ------------------------------------
DATE OF PERCENT PAID
PROPERTY NAME, AVERAGE ACQUISITION INTEREST IN TOTAL AT THROUGH GOVERNMENT
LOCATION AND OCCUPANCY OF OPERATING MARCH 31, MARCH 31, MORTGAGE RESIDUAL PURCHASE OTHER ASSISTANCE
RENTAL UNITS 1997 INTEREST PARTNERSHIP 1997 1997 NOTE NOTE NOTE NOTE PROGRAM
- ----------------- --------- ----------- ----------- --------- ---------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Washington Courts 98% 5/1/89 90% $2,743,413 $2,743,413 $5,033,083 $0 $0 $0 HUD
Chicago, IL Section
103 Residential Units 221(d)(4)
IHDA
Plumley Village 96% 8/1/89 60% 1,648,026 1,648,026 7,851,152 4,451,913 6,111,448 405,895 HUD
Boston, MA Section
236
430 Residential Units Section
8
$4,391,439 $4,391,439 $12,884,235 $4,451,913 $6,111,448 $405,895
--------- --------- ---------- --------- --------- -------
--------- --------- --------- --------- --------- -------
</TABLE>
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
As of June 15, 1998, there were no pending legal proceeding against the
Partnership or any Operating Partnership in which it has invested.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no submissions of matters to a vote of security holders during the
year ended March 31, 1998.
5
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS
There is at present no public market for the units of limited partnership
interests (the "Units"), and it is unlikely that any public market for the Units
will develop. See the Prospectus under "Transferability of Interest" on pages
24 and 52 of the Prospectus, which information is incorporated herein by
reference. The number of owners of Units as of June 15, 1998 was approximately
508, holding 5,754 units.
As of June 15, 1998, there were no cash distributions.
ITEM 6. SELECTED FINANCIAL DATA
The following summary of selected financial data should be read in conjunction
with ITEM 14, herein, which also includes a summary of the Partnership's
significant accounting policies.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------------
OPERATIONS 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 200 $ 1,200 $ 2,200 $ 1,500 $ 1,000
Operating Expenses (182,183) (178,611) (175,115) (194,948) (223,148)
Equity in Net Losses of
Operating Partnerships (247,924) (146,872) (158,170) (226,083) (228,942)
--------- --------- --------- -------- --------
Net Loss $(429,907) $(324,283) $(331,085) $(419,531) $(451,090)
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Net Loss per Unit of
Limited Partnership Interest $ (75) $ (56) $ (57) $ (72) $ (78)
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
MARCH 31,
---------------------------------------------------------------------
FINANCIAL POSITION 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $1,001,485 $1,249,411 $1,398,015 $1,555,203 $1,794,776
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
</TABLE>
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership offered limited partnership interests to the public during
calendar year 1989, pursuant to a Registration Statement filed under the
Securities Act of 1933. The Partnership raised $5,754,000 in equity capital
and, thereafter, invested in Operating Partnerships, which own multifamily
Properties located in Illinois and Massachusetts representing approximately
$25,000,000 of Property value. These Properties under Section 42 of the
Internal Revenue Code earn low-income housing tax credits, which are passed
through to the individual partners of the Partnership. Low-Income housing tax
credits earned by the Partnership for calendar years 1997, 1996, and 1995 were
$860,539, $861,187, and $859,233, respectively.
As of March 31, 1998, the Partnership's portfolio consists of two Properties
totaling 533 units. For a summary of the combined financial status of the
Operating Partnerships and the Properties, see the financial information
contained under ITEM 14.
The market for multifamily residential properties throughout the country
continued to show signs of improvement in 1997, as the ongoing absence of
significant new construction activity further improved the market's supply and
demand characteristics. Management believes that overall real estate market
conditions will improve further in 1998 along with the continued improvement in
general economic conditions. In addition, the recent increases in market
interest rate levels will make new construction more expensive to finance, which
should continue to limit the addition of new multifamily units to the existing
supply. However, the effects of the gradually improving market conditions on
the Partnership's operating property investments, while positive, are limited by
the government restrictions on rental real estate increases. A substantial
amount of the revenue generated by these properties comes from rental subsidy
payments made by federal or state housing agencies. These features, which are
characteristic of all low-income housing properties, limit the pool of potential
buyers for these real estate assets. As a limited partner of the Operating
Partnerships, the Partnership does not control property disposition decisions,
and management is not aware of any plans or intentions of the general partners
of these partnerships to sell any of the investment properties in the near
future.
The Partnership is currently experiencing a liquidity problem. Under the
Partnership Agreement, the Partnership is entitled to receive distributions of
surplus cash from the Operating Partnerships, which are to provide the funds
necessary for the Partnership to meet its administrative expenses and pay the
Partnership management fee. To date, the Operating Partnerships have not
provided sufficient cash distributions to enable the Partnership to meet its
current obligations. As a result of the foregoing, the Partnership has been
dependent upon its General Partners and affiliates for continued financial
support to meet its operating costs. Management maintains that the General
Partners and/or affiliates, though not required to do so, will continue to fund
operations of the Partnership by continuing to fund operating costs and by
deferring payment of allocated overhead expenses and repayment of operating cash
advances. Allocated administrative expenses paid or accrued to affiliates and
the General Partners represent reimbursement of the actual costs of goods and
materials used for or by the Partnership, salaries, related payroll costs and
other administrative items incurred or allocated, and direct expenses incurred
in rendering legal, accounting/bookkeeping, computer, printing and public
relations services. Items excluded from the overhead allocation include
overhead expenses of the General Partners, including rent and salaries of
employees not specifically performing the services described above. Unpaid
allocated administrative expenses and partnership management fees, an annual
amount up to .5% of invested assets, will accrue for payment in future operating
years.
7
<PAGE>
The Partnership is not expected to have access to any significant sources of
financing. Accordingly, if unforeseen contingencies arise that cause an
Operating Partnership to require additional capital to sustain operations, in
addition to that previously contributed by the Partnership, the source of the
required capital needs may be from (i) limited reserves from the Partnership
(which may include distributions received from the Operating Partnerships that
would otherwise be available for distribution to partners), (ii) debt financing
at the Operating Partnership level (which may not be available), or (iii)
additional equity contributions from the general partner of the Operating
Partnerships (which may not be available). There can be no assurance that any
of these sources would be readily available to provide for possible additional
capital requirements, which may be necessary to sustain the operations of the
Operating Partnerships.
TAX REFORM ACT OF 1986, OMNIBUS BUDGET RECONCILIATION ACT OF 1987, TECHNICAL AND
MISCELLANEOUS REVENUE ACT OF 1988, OMNIBUS BUDGET RECONCILIATION ACT OF 1989 AND
OMNIBUS BUDGET RECONCILIATION ACT OF 1990
The Partnership is organized as a limited partnership and is a "pass through"
tax entity which does not, itself, pay federal income tax. However, the
partners of the Partnership, who are subject to federal income tax, may be
affected by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of
1987, the Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget
Reconciliation Act of 1989 and the Omnibus Budget Reconciliation Act of 1990
(collectively the "Tax Acts"). The Partnership will consider the effect of
certain aspects of the Tax Acts on the partners when making investment
decisions. The Partnership does not anticipate that the Tax Acts will have a
material adverse impact on the Partnership's business operations, capital
resources, plans or liquidity.
RESULTS OF OPERATIONS
The fiscal year of the Partnership ends on March 31 of each year, however, the
fiscal year of each Operating Partnership ends on December 31. Therefore, the
earnings and losses of the Operating Partnerships reflected on the equity method
in the Partnership's financial statements for its current fiscal year are for
the calendar year ended December 31, 1997.
1998 COMPARED TO 1997
For the fiscal year ended March 31, 1998, the Partnership recorded a net loss of
approximately $430,000, as compared to a net loss of approximately $324,000 for
the prior fiscal year. The increase in net loss is the result of an increase in
the Partnership's equity in net losses of the Operating Partnerships of
approximately $101,000 and an increase in the expenses of approximately $3,500
for the current fiscal year. General and administrative expenses, namely
allocated administrative expenses and partnership management fees, continue each
fiscal year to comprise an increasing portion of the Partnership's net loss.
In accordance with the equity method of accounting for limited partnership
interests, the Partnership does not recognize losses from investment properties
when losses exceed the Partnership's equity method basis in these properties.
One of the two investments has had an equity method basis of zero since March
31, 1993. The Partnership's recorded share of the Operating Partnership's
losses in the current fiscal period consists of losses of approximately $248,000
from the Washington Courts Limited Partnership. In the prior fiscal year,
losses of approximately $147,000 from the operations of Washington Courts were
recorded. The carrying value of the Partnership's investment in Laurel-Clayton
was reduced to zero during fiscal 1993.
8
<PAGE>
In the aggregate, combined rental revenue of the Operating Partnerships
increased during the current calendar year. The combined total rental
revenue increased by approximately $144,000 in the current calendar year,
with the largest increase occurring at Laurel-Clayton. The average occupancy
levels remained at or above 96% in both calendar years in both properties.
Such results reflect the generally improving market conditions referred to
above. In addition to the improvement of revenue, the combined total
expenses of the two operating properties decreased by approximately $147,000
in the current year primarily due to a decrease in repairs and maintenance.
1997 COMPARED TO 1996
For the fiscal year ended March 31, 1997, the Partnership recorded a net loss of
approximately $324,000, as compared to a net loss of approximately $331,000 for
the prior fiscal year. The decrease in net loss is the result of an decrease in
the Partnership's equity in net losses of the Operating Partnerships of
approximately $11,000 and an increase in the expenses of approximately $3,000
for the current fiscal year. General and administrative expenses, namely
allocated administrative expenses and partnership management fees, continue each
fiscal year to comprise an increasing portion of the Partnership's net loss.
This trend results primarily from a decrease in the Partnership's recognition of
equity losses from the Operating Partnerships in each subsequent fiscal year.
In accordance with the equity method of accounting for limited partnership
interests, the Partnership does not recognize losses from investment properties
when losses exceed the Partnership's equity method basis in these properties.
One of the two investments has had an equity method basis of zero since March
31, 1993. The Partnership's recorded share of the Operating Partnership's
losses in the current fiscal period consists of losses of approximately $147,000
from the Washington Courts Limited Partnership. In the prior fiscal year,
losses of approximately $158,000 from the operations of Washington Courts were
recorded. The carrying value of the Partnership's investment in Laurel-Clayton
was reduced to zero during fiscal 1993.
In the aggregate, combined rental revenue of the Operating Partnerships
increased during the current calendar year. The combined total rental revenue
increased by approximately $63,000 in the current calendar year, with the
largest increase occurring at Laurel-Clayton. The average occupancy levels
remained at or above 96% in both calendar years in both properties. Such
results reflect the generally improving market conditions referred to above. In
addition to the improvement of revenue, the combined total expenses of the two
operating properties decreased by approximately $410,000 in the current year
primarily due to certain nonrecurring maintenance projects that were completed
in 1995 and no expenses were recorded for the projects in 1996.
1996 COMPARED TO 1995
For the fiscal year ended March 31, 1996, the Partnership recorded a net loss of
approximately $331,000, as compared to a net loss of approximately $420,000 for
the prior fiscal year. The decrease in net loss is the result of a decrease in
the Partnership's equity in net losses of the Operating Partnerships of
approximately $68,000 and a decrease in the expenses of approximately $20,000
for the current fiscal year. General and administrative expenses, namely
allocated administrative expenses and partnership management fees, continue each
fiscal year to comprise an increasing portion of the Partnership's net loss.
This trend results primarily from a decrease in the Partnership's recognition of
equity losses from the Operating Partnerships in each subsequent fiscal year.
In accordance with the equity method of accounting for limited partnership
interests, the Partnership does not recognize losses from investment properties
when losses exceed the Partnership's equity method basis in these properties.
One of the two investments has had an equity method basis of zero since March
31, 1993.
9
<PAGE>
The Partnership's recorded share of the Operating Partnership's losses in the
current fiscal period consists of losses of approximately $158,000 from the
Washington Courts Limited Partnership. In the prior fiscal year, losses of
approximately $226,000 from the operations of Washington Courts were
recorded. The carrying value of the Partnership's investment in
Laurel-Clayton was reduced to zero during fiscal 1993.
In the aggregate, combined rental revenue of the Operating Partnerships
increased during the current calendar year. The combined total rental revenue
increased by approximately $442,000 in the current calendar year, with the
largest increase occurring at Laurel-Clayton. The average occupancy levels
remained at or above 97% in both calendar years in both properties. Such
results reflect the generally improving market conditions referred to above. In
addition to the improvement of revenue, the combined total expenses of the two
operating properties increased by approximately $227,000 in the current year
primarily due to an increase in repairs and maintenance, management fees,
depreciation and other operating expenses.
INFLATION
Inflation is not expected to have a material adverse impact on the Partnership's
operations during its period of ownership of the Properties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements at March 31, 1998 and 1997 together with the report of
the independent auditors thereon are incorporated by reference from the
Registrant's Financial Statements on the pages indicated in ITEM 14.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On September 30, 1997, the prior auditors, Rubin, Brown, Gornstein & Co., LLP,
were dismissed as auditors for the Partnership. The decision to change
accountants was approved by the Partnership's Board of Directors. Rubin, Brown,
Gornstein & Co., LLP's report on the Partnership's financial statements for the
years ended March 31, 1997 and 1996 contained a modification as to uncertainty
of the Partnership to continue as a going concern. Rubin, Brown, Gornstein &
Co., LLP's report on the above mentioned financial statements contained no
adverse opinions or disclaimer of opinions, and was not qualified as to
uncertainty, audit scope or accounting principles, other than those previously
discussed.
Effective September 30, 1997, the Partnership engaged Novogradac & Company LLP
to perform the audit of the Partnership's financial statements as of and for the
year ended March 31, 1998.
There are no known disagreements on any matter of accounting principles or
practices or financial statement disclosure with current or predecessor
auditors.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE COMPENSATION OF THE REGISTRANT
The Partnership has no officers or directors. Management of the Partnership
is vested in Irwin Jay Deutch and Century Pacific Capital Corporation
("CPCC") (the "general partners"). The general partners will involve
themselves in the day-to-day affairs of the Partnership as required to
protect the limited partners' investment and advance the Partnership's tax
investment objectives. Mr. Deutch, the managing general partner, has the
overall responsibility of the preparation and transmittal of periodic reports
to the limited partners, preparation and filing of the Partnership's tax
returns with the IRS and the appropriate state tax authorities, and the
preparation and filing of reports to HUD and other government agencies.
Following is biographical information on Mr. Deutch and the Executive Officers
of CPII:
IRWIN JAY DEUTCH
IRWIN JAY DEUTCH, age 57, is Chairman of the Board, President, and Chief
Executive Officer of Century Pacific Realty Corporation ("CPRC"), a general
partner of the Operating Partnerships that owns the Properties in which CPHF-I
has invested, and its affiliates. Mr. Deutch has been involved with low-income
housing investments since 1968. He is the individual general partner in 62
private limited partnerships and two public limited partnerships investing in
209 properties, including 196 multi-family properties with 33,700 apartment
units, 10 commercial projects, and 3 hotel properties. Fifty-eight of the 62
private limited partnerships have invested in affordable housing. In his
capacity as general partner and officer of CPRC, he oversees the management of
these partnerships and assumes overall responsibility for the development,
direction, and operation of all affiliated CPRC companies. Mr. Deutch is
recognized as an expert in the field of affordable housing and frequently
addresses professional groups on topics of real estate investment, syndication,
tax law, and the Low-Income Housing Tax Credit program.
Mr. Deutch received a B.B.A. with distinction from the University of Michigan
School of Business Administration in 1962 and a Juris Doctor degree with honors
from the University of Michigan Law School in 1965. He is a member of the Order
of the Coif. Mr. Deutch served in the Honors Program in the Office of the Chief
Counsel of the Internal Revenue Service from 1965 to 1967, where he was assigned
to the Interpretative Division in Washington, D.C. He attended Georgetown Law
Center and received his Masters of Law degree in taxation in 1967. Mr. Deutch
is a member of the State Bars of Michigan and California, as well as the
American, Federal, Los Angeles, and Beverly Hills Bar Associations.
KEY OFFICERS OF CPII AND AFFILIATES
ESSIE SAFAIE, age 49, is Chief Financial Officer and Chief Operating Officer
of CPRC. Prior to joining CPRC in 1988, from 1985 to 1988, he was Vice
President and Chief Financial Officer of Sunrise Investments, Inc., a real
estate syndication firm with $450 million of real estate under management.
During this period, Mr. Safaie was also President of an affiliated property
management firm, S&L Property Management, Inc., with over 12,000 residential
units and 800,000 square feet of commercial office space under direct
management. From 1982 to 1985, Mr. Safaie was assistant controller of
Standard Management Company, builder and managers of luxury hotels,
commercial offices and residential units. From 1980 to 1982, he served as
financial officer of Diamond "M" Drilling Company. Mr. Safaie received a
B.A. degree in Business Administration from California State University with
a major in accounting.
11
<PAGE>
CHARLES L. SCHWENNESEN, age 52, is Vice President of Acquisition Finance of CPRC
and is responsible for financial analysis and "due diligence" reviews of all
properties acquired by CPRC. Prior to joining CPRC in 1987, he was a consultant
to companies, which provided investment opportunities through private
placements. From 1984 to 1985, Mr. Schwennesen was Vice President of Cranston
Securities Company and was responsible for the structuring of more than $30
million of mortgage revenue bond financing for affordable housing projects.
From 1977 to 1984, Mr. Schwennesen was a manager with the accounting firm of
Price Waterhouse where he specialized in providing auditing and consulting
services to publicly held California real estate development companies involved
in the affordable housing industry. Mr. Schwennesen is a Certified Public
Accountant and holds a Masters degree in Business Administration from the UCLA
Graduate School of Management and a B.A. degree in Mathematics from UCLA.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. However, in connection with the
operations of the Partnership and the Operating Partnerships, the General
Partners and their affiliates will or may receive certain fees, compensation,
income and other payments which are described in the Prospectus under
"Compensation, Fees and Reimbursements" on page 17, the terms of which are
incorporated herein by reference.
During the fiscal years ended March 31, 1998, 1997 and 1996, CPII, a General
Partner of the Partnership, earned $140,708, $136,106 and $132,097,
respectively, of partnership management fees. During the fiscal years ended
March 31, 1998, 1997 and 1996, the Partnership accrued $37,600, $37,600 and
$37,600, respectively, for the reimbursement of overhead allocation from Century
Pacific Investment Corporation ("CPIC"). During fiscal year 1998, the General
Partners received no payments from the Operating Partnerships.
ITEM 12. PARTNERSHIP INTEREST OWNERSHIP OF CERTAIN BENEFCIAL OWNERS AND
MANAGEMENT
No partner in the Partnership owns more than 5% of the total number of
partnership interests outstanding. Irwin J. Deutch, the Managing General
Partner, holds a one-half percent General Partnership Interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Irwin J. Deutch is the Managing General Partner of the Partnership, and CPII is
also a General Partner. Irwin J. Deutch is the sole Director and President of
CPII, and the Deutch Family Trust solely owns the stock of CPII. Mr. Deutch is
also the President, sole Director and the Deutch Family trust is the sole
stockholder of CPRC, the General Partner of the Operating Partnerships that own
the Properties in which the Partnership is invested. The General Partners were
allocated their proportionate share of the Partnership's tax losses and
allocated tax credits. CPII received a partnership management fee for its
services in managing and advising the Partnership and its business. CPII, an
affiliate, provides all the services and materials necessary for the operation
of the Partnership and is reimbursed for actual costs. These transactions are
more particularly set forth in the financial statements found under ITEM 14.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits - See the Exhibit Index at page 14 of this report. The
exhibits listed in the accompanying index to exhibits are filed or
incorporated by reference as part of this annual report.
(b)(1) Financial Statements:
The financial statements listed in the following index as set forth in
ITEM 8 of this report on Form 10-K are filed or incorporated by
reference as part of this annual report.
Report of Independent Auditors' F-1
Balance Sheets as of March 31, 1998 and 1997 F-2
Statements of Operations for the Years Ended March 31,
1998, 1997 and 1996 F-3
Statements of Partners' Equity (Deficit) for the Years Ended
March 31, 1998, 1997 and 1996 F-4
Statements of Cash Flows for the Years Ended March 31, 1998,
1997 and 1996 F-5
Notes to Financial Statements F-6
(2) Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation of
Operating Partnerships in which the Partnership has Limited
Partnership Interests F-12
Notes to Schedule III - Real Estate and Accumulated Depreciation
of Operating Partnerships in which the Partnership has Limited
Partnership Interests F-13
Schedule IV - Mortgage Loans on Real Estate of Operating
Partnerships in which the Partnership has Limited Partnership
Interests F-14
Notes to Schedule IV - Mortgage Loans on Real Estate of
Operating Partnerships in which the Partnership has Limited
Partnership Interests F-15
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
(c) Reports on Form 8-K
Registrant has not filed with the Securities and Exchange Commission a
Current Report on Form 8-K during the year ended March 31, 1998, as
there were no transactions that required the filing.
13
<PAGE>
EXHIBIT INDEX
These exhibits are numbered in accordance with the exhibit table of Item 601 of
Regulation S-K.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- ------------
<S> <C>
11 Omitted - inapplicable
12 Omitted - inapplicable
13 Omitted - inapplicable
16 Omitted - inapplicable
18 Omitted - inapplicable
21 Omitted - inapplicable
23 Omitted - inapplicable
27 Financial Data Schedule
</TABLE>
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
Date: 7-23-98 /s/ Irwin Jay Deutch
------------------- --------------------------------------------------
By: Irwin Jay Deutch, as Managing General Partner
and
Century Pacific Capital II Corporation, as
Corporate General Partner and as Attorney-in-Fact
for all Investor Limited Partners
Date: 7-23-98 /s/ Irwin Jay Deutch
------------------- --------------------------------------------------
By: Irwin Jay Deutch, President
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS'
To the Partners of
Century Pacific Tax Credit Housing Fund-II
We have audited the accompanying balance sheet of Century Pacific Tax Credit
Housing Fund-II (the "Partnership"), as of March 31, 1998, and the related
statements of operations, changes in partners' equity (deficit) and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit. We did not audit the financial
statements of Washington Courts Apartments and Plumley Village Apartments, which
statements reflect total assets and revenues constituting 100 percent of the
Operating Partnerships. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Washington Courts Apartments and Plumley Village
Apartments, is based solely on the report of the other auditors. The financial
statements of Century Pacific Tax Credit Housing Fund-II for the years ended
March 31, 1997 and 1996 were audited by other auditors, whose reports dated May
30, 1997 and June 13, 1996, respectively, included an explanatory paragraph
describing conditions that raised substantial doubt about the Partnership's
ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Century Pacific Tax Credit Housing Fund-II as of March
31, 1998, and the results of its operations, changes in partners' equity
(deficit), and cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 6 to the
financial statements, the Partnership's Operating Partnerships have suffered
recurring operating losses, have not provided sufficient cash distributions and
the Partnership has a net capital deficiency, which raises substantial doubt
about the Partnership's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 6. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
We have also audited, from information audited by us and other auditors, the
related financial statement schedules listed in Item 14(b)(2) as of December 31,
1997. In our opinion, the financial statement schedules present fairly, in all
material respects, the information required to be set forth therein.
Atlanta, Georgia
June 15, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
BALANCE SHEETS
MARCH 31,
ASSETS 1998 1997
---------- ----------
<S> <C> <C>
Cash $ 343 $ 346
Advance to a general partner (Note 3) 871 870
Investments in operating partnerships (Note 4) 1,000,271 1,248,195
---------- ----------
Total assets $1,001,485 $1,249,411
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses $ 3,300 $ 7,323
Due to affiliate (Note 3) 1,284,224 1,098,220
Loan payable - affiliate (Note 3) 40,594 40,593
---------- ----------
Total liabilities $1,328,118 $1,146,136
---------- ----------
Partners' equity (deficit)
General partners $ (52,320) $ (48,021)
Limited partners, $1,000 stated value per unit
25,000 units authorized, 5,754 units issued
and outstanding (274,313) 151,295
---------- ----------
Total partners' equity (deficit) $(326,633) $ 103,274
---------- ----------
Total liabilities and partners' equity
(deficit) $1,001,485 $1,249,410
---------- ----------
---------- ----------
</TABLE>
F-2
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Transfer fees $ 200 $ 1,200 $ 2,200
---------- ---------- ----------
EXPENSES
Partnership management fee - affiliate (Note 3) 140,708 136,106 132,097
Allocated overhead expenses - affiliate (Note 3) 37,600 37,600 37,600
Other general and administrative 3,875 4,905 5,418
---------- ---------- ----------
Total expenses 182,183 178,611 175,115
---------- ---------- ----------
Loss Before Equity In Net Losses Of
Operating Partnerships (181,983) (177,411) (172,915)
Equity In Net Losses Of Operating
Partnerships (Note 4) (247,924) (146,872) (158,170)
---------- ---------- ----------
NET LOSS $(429,907) $(324,283) $ (331,085)
---------- ---------- ----------
---------- ---------- ----------
Allocation Of Net Loss
General partners $ (4,299) $ (3,243) $ (3,311)
Limited partners (425,608) (321,040) (327,774)
---------- ---------- ----------
$(429,907) $(324,283) $ (331,085)
---------- ---------- ----------
---------- ---------- ----------
Net Loss Per Unit Of Limited Partnership
Interest $ (75) $ (56) $ (57)
---------- ---------- ----------
---------- ---------- ----------
Average Number Of Outstanding Units 5,754 5,754 5,754
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-3
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------- ---------- ------------
<S> <C> <C> <C>
Partners' Equity (Deficit) - March 31, 1995 $ (41,467) $ 800,109 $ 758,642
Net Loss (3,311) (327,774) (331,085)
--------- ---------- ------------
Partners' Equity (Deficit) - March 31, 1996 (44,778) 472,335 427,557
Net Loss (3,243) (321,040) (324,283)
--------- ---------- ------------
Partners' Equity (Deficit) - March 31, 1997 (48,021) 151,295 103,274
Net Loss (4,299) (425,608) (429,907)
--------- ---------- ------------
Partners' Equity (Deficit) - March 31, 1998 $ (52,320) $(274,313) $ (326,633)
--------- ---------- ------------
--------- ---------- ------------
Percentage Interest - March 31, 1998 1% 99% 100%
--------- ---------- ------------
--------- ---------- ------------
</TABLE>
F-4
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $(429,907) $(324,283) $(331,085)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Equity in net losses of Operating
Partnerships 247,924 146,872 158,170
Changes in assets and liabilities:
Increase in advance to a general
partner (1) (100) 0
Decrease in accounts payable
and accrued expenses (4,024) (4,002) (5,718)
Increase in due to affiliates 186,004 179,006 169,697
Increase in loan payable - affiliate 1 675 9,918
---------- --------- ---------
Net Cash Provided By (Used In) Operating
Activities (3) (1,832) 982
---------- --------- ---------
Net Increase (Decrease) In Cash (3) (1,832) 982
Cash - Beginning Of Year 346 2,178 1,196
---------- --------- ---------
Cash - End Of Year $ 343 $ 346 $ 2,178
---------- --------- ---------
---------- --------- ---------
</TABLE>
F-5
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Notes to the Financial Statements
For the years ended March 31, 1998, 1997 and 1996
1. ORGANIZATION
Century Pacific Tax Credit Housing Fund-II, a California limited
partnership (the "Partnership"), was formed on September 2, 1988 for the
purpose of raising capital by offering and selling limited partnership
interests and then acquiring limited partnership interests in partnerships
(the "Operating Partnerships"), owning and operating existing residential
apartment rental properties (the "Properties").
The general partners of the Partnership are Century Pacific Capital II
Corporation, a California corporation ("CPII"), and Irwin Jay Deutch, an
individual (collectively, the "general partners"). The general partners
and affiliates of the general partners (the "general partners and
affiliates") have interests in the Partnership and receive compensation
from the Partnership and the Operating Partnerships (Note 3).
The Properties qualify for the Low-Income Housing Tax Credit established by
Section 42 of the Tax Reform Act of 1986 (the "Low-Income Housing Tax
Credit"). The Properties are leveraged low-income multi-family residential
complexes and receive one or more forms of assistance from federal, state
or local government agencies (the "Government Agencies").
In September 1988, the Partnership began raising capital from sales of
limited partnership interests, at $1,000 per unit, to limited partners.
The Partnership authorized the issuance of a maximum of 25,000 units of
which 5,754 were subscribed and issued. The limited partnership interest
offering closed as of December 31, 1989.
As of March 31, 1998, the Partnership has acquired limited partnership
interests of 90% in Washington Courts Limited Partnership and 60% in
Laurel-Clayton Limited Partnership, two existing Operating Partnerships
which own apartment rental properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
BASIS OF ACCOUNTING
The Partnership prepares its financial statements on the tax basis of
accounting. Memorandum entries, while not recorded in the records of the
Partnership, have been made in order to prepare the financial statements in
accordance with generally accepted accounting principles.
On August 7, 1991, management changed from a calendar year end to a fiscal
year end of March 31 for financial reporting purposes. Accordingly, the
Partnership's quarterly periods end June 30, September 30 and December 31.
The Operating Partnerships, for financial reporting purposes, have a
calendar year end. The Partnership, as well as the Operating Partnerships,
has a calendar year-end for income tax purposes.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
F - 6
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Notes to the Financial Statements
For the years ended March 31, 1998, 1997 and 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
(CONTINUED)
INCOME TAXES
In accordance with federal and state income tax regulations, no income
taxes are levied on the Partnership. Federal and state income taxes on
partnership income are levied on the partners in their individual capacity.
The tax returns, the qualification of the Partnership as such for tax
purposes and the amount of distributable income or loss are subject to
examination by federal and state taxing authorities. If such examination
results in changes in the Partnership qualification or in distributable
income or loss, the tax liability of the partners could change.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash balances and highly liquid
investments with a maturity of three months or less. Restricted cash is
not considered a cash equivalent.
ECONOMIC CONCENTRATIONS
The Partnership operates Properties in Chicago, Illinois and Boston,
Massachusetts. Future operations could be affected by changes in the
economic or other conditions in that geographical area or by changes in
federal low-income housing subsidies or the demand for such housing.
CONCENTRATION OF CREDIT RISK
The Partnership deposits its cash in financial institutions. At times,
deposits may exceed federally insured limits. The Partnership has not
experienced losses in such accounts.
INVESTMENTS IN OPERATING PARTNERSHIPS
The Partnership uses the equity method to account for its investment in the
Operating Partnerships (Note 4). Under the equity method of accounting,
the investment is carried at cost and adjusted for the Partnership's share
of the Operating Partnerships' results of operations and by cash
distributions received. Equity in the loss of each Operating Partnership
allocated to the Partnership is not recognized to the extent that the
investment balance would become negative. Costs paid by the Partnership
for organization of the Operating Partnerships as well as direct costs of
acquiring Properties, including acquisition fees and reimbursable
acquisition expenses paid to the general partner, have been capitalized as
investments in Operating Partnerships.
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net loss per unit of limited partnership interest is calculated based upon
the weighted average number of units outstanding, which is 5,754 for the
years ended March 31, 1998, 1997 and 1996.
SYNDICATION COSTS
Public offering costs have been recorded as a direct reduction to the
capital accounts of the Limited Partners.
F - 7
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Notes to the Financial Statements
For the years ended March 31, 1998, 1997 and 1996
3. RELATED PARTY TRANSACTIONS
The General Partners of the Partnership are CPII and Irwin Jay Deutch.
Century Pacific Placement Corporation ("CPPC"), an affiliate of the general
partners, served as the broker-dealer-manager for sales of the limited
partnership interests in the Partnership. Century Pacific Realty
Corporation ("CPRC"), an affiliate of CPII, is a general partner in each of
the Operating Partnerships.
The general partners have an aggregate one percent interest in the
Partnership. CPRC has a one-half percent interest in each of the Operating
Partnerships.
The general partners and affiliates receive compensation and reimbursement
of expenses from the Partnership, as set forth in the limited partnership
agreement, for their services in managing the Partnership and its business.
Pursuant to the partnership agreement, the Partnership is required to pay
CPII an annual management fee for its services in connection with the
management of the affairs of the Partnership. The annual management fee is
equal to .5% of invested assets (as defined by the partnership agreement).
The general partners and affiliates also receive compensation and
reimbursement of expenses for the Operating Partnerships. This
compensation and reimbursement includes services provided to the
Partnership during its offering stage, acquisition stage and operational
stage.
The general partners and affiliates earned the following fees for services
provided to the Partnership and were entitled to reimbursement for costs
incurred by the general partners and affiliates on behalf of the
Partnership and the Operating Partnerships for the years ended March 31,
1998, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Fees and reimbursement from the Partnership:
Reimbursement for overhead allocated from
Century Pacific Investment Corporation ("CPIC") $ 37,600 $ 37,600 $ 37,600
Partnership management fee ("CPII") 140,708 136,106 132,097
----------- ---------- ------------
Total $ 178,308 $ 173,706 $ 169,697
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
At March 31, 1998 and 1997, amounts due to affiliates consist of fees and
certain general and administrative costs payable by the Partnership to the
general partners and affiliates totaling $1,284,224 and $1,098,220,
respectively.
At March 31, 1998 and 1997, CPII owed the Partnership for an unsecured,
noninterest bearing advance of $871 and $870, respectively.
At March 31, 1998 and 1997, CPRC was owed $40,594 and $40,593,
respectively, for a noninterest bearing, demand, cash advance to the
Partnership.
F - 8
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Notes to the Financial Statements
For the years ended March 31, 1998, 1997 and 1996
3. RELATED PARTY TRANSACTIONS (CONTINUED)
The general partners may advance funds to the Partnership to fund operating
deficits, but are not obligated to do so. Such advances shall be evidenced
by a promissory note of a term no more than 12 months in length and at a
rate of interest no lower than the prime rate. All such loans shall be
repaid prior to any distributions of net cash flow. At March 31, 1998 and
1997, the Partnership had no outstanding advances due to the general
partners.
4. INVESTMENTS IN OPERATING PARTNERSHIPS
At March 31, 1998 and 1997, the Partnership owned limited partnership
interests in two Operating Partnerships, each of which has invested in a
multi-family rental property.
Investments in Operating Partnerships consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash contributions to Operating Partnerships
to fund purchase of Properties and $ 4,536,020 $ 4,536,020
acquisition and organization costs
Equity in net losses of Operating Partnerships (3,535,749) (3,287,825)
---------- ------------
$ 1,000,271 $ 1,248,195
---------- ------------
---------- ------------
</TABLE>
The names and locations of the Properties in which the Operating Partnerships
hold beneficial interests are as follows:
NAME OF NAME AND
OPERATING PARTNERSHIP LOCATION OF PROPERTY
Washington Courts Limited Partnership Washington Courts
Chicago, Illinois
Laurel-Clayton Limited Partnership Plumley Village
Boston, Massachusetts
F - 9
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Notes to the Financial Statements
For the years ended March 31, 1998, 1997 and 1996
4. INVESTMENTS IN OPERATING PARTNERSHIPS (CONTINUED)
A summary of the combined balance sheet as of December 31, 1997 and 1996
and statements of operations of the aforementioned Operating Partnerships
for the years then ended follows:
COMBINED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Cash $ 631,703 $ 520,489
Reserve for replacements 733,866 699,742
Land and buildings 19,060,724 19,130,953
Other assets 1,139,093 1,187,396
------------ ------------
Total assets $ 21,565,386 $ 21,538,580
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' DEFICIT
Notes payable $ 23,853,491 $ 23,443,651
Other liabilities 910,768 796,837
------------ ------------
Total liabilities 24,764,259 24,240,488
Partners' deficit (3,198,873) (2,701,908)
------------ ------------
Total liabilities and partners' deficit $ 21,565,386 $ 21,538,580
------------ ------------
------------ ------------
COMBINED STATEMENT OF OPERATIONS
1997 1996
------------ ----------
Revenues
Rental income $ 5,354,267 $ 5,209,890
Other income 577,812 772,398
------------ ------------
Total revenues 5,932,079 5,982,288
Expenses
Utilities 815,616 846,866
Repairs and maintenance 1,140,101 1,257,706
Management fees 303,688 310,821
Other operating expenses 1,327,698 1,297,157
Interest 1,831,665 1,819,923
Depreciation and amortization 990,504 1,023,530
------------ ------------
Total expenses 6,409,272 6,556,003
------------ ------------
Net loss $ (477,193) $ (573,715)
------------ ------------
------------ ------------
ALLOCATION OF NET LOSS
General partners and other limited partners $ (143,158) $ (180,530)
CPTCHF-II (334,035) (393,185)
------------ ------------
Total $ (477,193) $ (573,715)
------------ ------------
------------ ------------
</TABLE>
F - 10
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Notes to the Financial Statements
For the years ended March 31, 1998, 1997 and 1996
5. COMMITMENTS AND CONTINGENCIES
The Federal Housing Administration (FHA) and the Housing and Urban
Development (HUD) exercise control over the projects through provisions of
Regulatory Agreements (the "Agreements"). The Agreements restrict the
Projects, without prior written approval from HUD, from encumbering,
acquiring, altering or disposing of land, buildings and equipment; using
the Property for any other purpose other than the use originally intended;
engaging in any other business or activity; and paying distributions to
partners, compensation to officers or directors, or for any purpose other
than reasonable operating expenses. The Agreements also stipulate that FHA
and HUD shall control the rental rates, rate of return on investment and
method of operation.
In addition, the Agreements require Properties to make cash deposits on a
monthly basis into a reserve fund for replacements. The respective
mortgages are the designated custodians of the reserve funds and
withdrawals can only be made with HUD approval.
6. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Partnership as a going concern. However, the Partnership's
Operating Partnerships have not achieved the operating results required to
provide the Partnership with sufficient cash distributions to fund the
Partnership's administrative costs. Additionally, the Partnership has
incurred allocated losses from all but one of its Operating Partnerships to
the extent of the Partnership's cash contributions. As a result of the
foregoing, the Partnership is dependent upon the general partners and
affiliates for continued financial support.
Management maintains that the general partners and affiliates, though not
required to do so, will continue to fund operations by deferring payment to
related parties of allocated overhead expenses, and by funding any
Partnership operating costs. Unpaid allocated overhead expenses will
accrue and become payable when the Operating Partnerships generate
sufficient cash distributions to the Partnership to cover such expenses.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
F - 11
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
Schedule III
Page 1 of 1
REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING
PARTNERSHIPS IN WHICH CPTCHF-II HAS LIMITED PARTNERSHIP INTEREST
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INITIAL COST TO COST CAPITALIZED
OPERATING PARTNERSHIP SUBSEQUENT TO ACQUISITION
--------------------- -------------------------
Buildings And Buildings And
Description (1) Encumbrances (2) Land Improvements Land Improvements
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Washington Courts Apartments
Chicago, Illinois
103 Residential Units $5,033,083 $75,300 $1,720,666 $0 $5,393,094
Plumley Village Apartments
Boston, Massachusetts
430 Residential Units 18,820,408 1,100,000 17,383,785 0 2,468,700
---------- ------------------------ -----------------------
$23,853,491 $1,175,300 $19,104,451 $0 7,861,794
---------- ------------------------ -----------------------
---------- ------------------------ -----------------------
</TABLE>
<TABLE>
<CAPTION>
Life Upon
Which
GROSS AMOUNT AT WHICH ACCUMULATED Depreciation
CARRIED AT CLOSE OF YEAR DEPRECIATION In Latest
------------------------ ------------ Income
Buildings And Buildings And Date Of Date Statement Is
Description (2) Land Improvements Total Improvements Construction Acquired Computed
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Washington Courts Apartments
Chicago, Illinois
103 Residential Units $75,300 $7,113,760 $7,189,060 $2,093,234 1991 Jan-89 27.5 years
Plumley Village Apartments
Boston, Massachusetts
430 Residential Units 1,100,000 19,852,485 20,952,485 6,987,587 1973 Sep-89 27.5 years
------------------------------------ ---------
$1,175,300 $26,966,245 $28,141,545 $9,080,821
------------------------------------ ---------
------------------------------------ ---------
</TABLE>
F - 12
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH
CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1997
NOTE 1 - DESCRIPTION OF PROPERTIES
The Properties held by the Operating Partnerships in which CPTCHF-II has
invested are housing projects, primarily for families and elderly or handicapped
individuals of low and moderate income.
NOTE 2 - SCHEDULE OF ENCUMBRANCES
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP MORTGAGE RESIDUAL PURCHASE OTHER
NAME AND PROPERTY NAME NOTES NOTE NOTE NOTES TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Washington Courts LP
Washington Courts $5,033,083 $0 $0 $0 $5,033,083
Laurel-Clayton LP
Plumley Village 7,851,152 4,451,913 6,111,448 405,895 18,820,408
----------------------------------------------------------------------------
$12,884,235 $4,451,913 $6,111,448 $405,895 $23,853,491
----------------------------------------------------------------------------
----------------------------------------------------------------------------
</TABLE>
NOTE 3 - RECONCILIATION OF REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
-------------------------------------
<S> <C> <C>
Balance at December 31, 1994 $26,258,034 $5,992,154
Additions during year:
Depreciation 1,074,633
Improvements 161,344
-------------------------------------
Balance at December 31, 1995 26,419,378 7,066,787
Additions during year:
Depreciation 1,023,530
Improvements 801,892
-------------------------------------
Balance at December 31, 1996 27,221,270 8,090,317
Additions during year:
Depreciation 990,504
Improvements 920,275
-------------------------------------
$28,141,545 $9,080,821
-------------------------------------
-------------------------------------
</TABLE>
F - 13
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
MORTGAGE LOANS ON REAL ESTATE OF OPERATING
PARTNERSHIPS IN WHICH CPTCHF-II HAS
LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1997
Schedule IV
-----------
Page 1 of 1
<TABLE>
<CAPTION>
Monthly
Payments
to Maturity Original
(Net of Face Carrying
Final Maturity HUD Amount of Amount of
Description (1) Interest Rate Date Subsidy) Mortgage Mortgage (2)
- --------------- ------------- -------------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
First mortgages
assumed
by Operating
Partnerships:
Washington Courts
Limited Partnership
Washington Courts 9.25% 2031 $40,841 $5,165,400 $5,033,083
Laurel-Clayton
Limited Partnership
Plumley Village 8.50% 2012 77,965 10,635,000 7,851,152
--------- ---------- ----------
Total $118,806 $15,800,400 $12,884,235
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
F - 14
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND - II
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL
ESTATE OF OPERATING PARTNERSHIPS IN WHICH
CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1997
NOTE 1 - DESCRIPTION
Each Operating Partnership has invested in a Property.
Laurel-Clayton Limited Partnership assumed a mortgage loan obligation from the
seller of the Property. The mortgage loan obligation is insured by the United
States Department of Housing and Urban Development and is secured by the land
and buildings of the Property.
Washington Courts Limited Partnership has obtained permanent financing in the
principal amount of $5,165,400 which is insured by the Federal Housing
Administration. The loan bears interest at 9.25% per annum. The note will be
amortized over a period of 40 years. Prepayment is prohibited during the
construction period and for ten years from the date of completion of
construction.
NOTE 2 - RECONCILIATION OF MORTGAGES
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1997
----------------------------------
Mortgage Residual
Loans Notes
----------------------------------
<S> <C> <C>
Balance at beginning of year $13,161,989 $4,271,488
Additions during year:
Accrued interest 0 180,425
Deductions during year:
Payments 277,754 0
---------- ----------
Balance at end of year $12,884,235 $4,451,913
---------- ----------
---------- ----------
</TABLE>
F - 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND STATEMENT OF OPERATIONS FOUND ON PAGES F-2 AND F-3 OF
THE PARTNERSHIP'S FORM 10-K FOR THE YEAR END AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 1,000,271
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 1,214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,001,485
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,328,118
<TOTAL-LIABILITIES> 1,328,118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,274
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (429,907)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> (326,633)
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 200
<EXPENSES-NET> 182,183
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> (247,924)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> (429,907)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> (111,679)
<PER-SHARE-NAV-BEGIN> 17.95
<PER-SHARE-NII> (74.71)
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> (56.76)
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
