FORM 10-K/A
AMENDMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-20058
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
California 33-0316953
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
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PART I.
Item 1. Business
Organization
WNC California Housing Tax Credits, L.P. ("CHTC" or the "Partnership") is a
California Limited Partnership formed under the laws of the State of California
on September 15, 1988. The Partnership was formed to acquire limited partnership
interests in other limited partnerships or limited liability companies ("Local
Limited Partnerships") which own multifamily housing complexes that are eligible
for low-income housing federal and in certain cases, California income tax
credits ("Low Income Housing Credits").
The general partners of the Partnership are WNC & Associates, Inc.
("Associates") and Wilfred N. Cooper, Sr. (collectively, the "General Partner"
or "General Partners"). Wilfred N. Cooper, Sr., through the Cooper Revocable
Trust, owns 66.8% of the outstanding stock of Associates. John B. Lester, Jr.
was the original limited partner of the Partnership and owns, through the Lester
Family Trust, 28.6% of the outstanding stock of Associates. The business of the
Partnership is conducted primarily through Associates, as the Partnership has no
employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission, on March 16, 1989, the Partnership commenced a public offering of
10,000 Units of Limited Partnership Interest ("Units") at a price of $1,000 per
Unit. As of the close of the public offering on October 31, 1990, a total of
7,450 Units representing $7,450,000 had been sold. Holders of Units are referred
to herein as "Limited Partners".
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended by Supplement No. 1 thru Supplement No. 9 thereto (the
"Partnership Agreement"), will be able to be accomplished promptly at the end of
the 15-year period. If a Local Limited Partnership is unable to sell its Housing
Complex, it is anticipated that the local general partner ("Local General
Partner") will either continue to operate such Housing Complex or take such
other actions as the Local General Partner believes to be in the best interest
of the Local Limited Partnership. Notwithstanding the preceding, circumstances
beyond the control of the General Partner or the Local General Partners may
occur during the Compliance Period, which would require the Partnership to
approve the disposition of an Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.
As of December 31, 1998, the Partnership had invested in eleven Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit and eight of them
were eligible for the California Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
3
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The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are subject to mortgage
indebtedness. If a Local Limited Partnership does not makes its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member of
the Local Limited Partnerships, the Partnership will have very limited rights
with respect to management of the Local Limited Partnerships, and will rely
totally on the general partners or managing members of the Local Limited
Partnerships for management of the Local Limited Partnerships. The value of the
Partnership's investments will be subject to changes in national and local
economic conditions, including unemployment conditions, which could adversely
impact vacancy levels, rental payment defaults and operating expenses. This, in
turn, could substantially increase the risk of operating losses for the Housing
Complexes and the Partnership. In addition, each Local Limited Partnership is
subject to risks relating to environmental hazards and natural disasters, which
might be uninsurable. Because the Partnership's operations will depend on these
and other factors beyond the control of the General Partner and the Local
General Partners, there can be no assurance that the anticipated Low Income
Housing Credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the Low Income Housing Credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the Low
Income Housing Credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
limited partnership interests in the Housing Complexes. The following table
reflects the status of the eleven Housing Complexes as of December 31, 1998, and
for the periods indicated:
4
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<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
As of December 31, 1998
-----------------------------------------------------------------------------------------------
Partnership's Estimated Encumbrances
General Number Total Investment Amount of Low Income of Local
Partner of in Local Limited Investment Housing Limited
Partnership Name Location Name Units Occupancy Partnerships Paid to Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alta Vista Investors Orosi, Philip R. Hammond,
California Jr. and Diane M.
Hammond 42 98% $ 583,000 $ 583,000 $ 1,274,000 $ 1,440,000
BCA Associates Anderson, Douglas W. Young 40 100% 514,000 514,000 1,105,000 1,429,000
California
Cloverdale Garden Cloverdale, David J. Michael,
Apartments California Patrick R.
Sabelhaus and
Professional
Apartment
Management 34 100% 617,000 617,000 1,387,000 1,642,000
Countryway Associates Mendota, Philip R. Hammond,
California Jr. and Diane M.
Hammond 41 95% 571,000 571,000 1,162,000 1,481,000
East Garden Apartments Jamestown, David J. Michael
California and Professional
Apartment
Management 51 100% 770,000 770,000 1,772,000 2,161,000
HPA Shafter, Douglas W. Young 42 98% 538,000 538,000 1,223,000 1,516,000
California
Knights Landing Harbor Knights Douglas W. Young
Landing, and Diane L. Young 25 96% 275,000 275,000 446,000 986,000
California
</TABLE>
5
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<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
As of December 31, 1998
-----------------------------------------------------------------------------------------------
Partnership's Estimated Encumbrances
General Number Total Investment Amount of Low Income of Local
Partner of in Local Limited Investment Housing Limited
Partnership Name Location Name Units Occupancy Partnerships Paid to Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>>
Midland Manor Associates Mendota, Philip R. Hammond,
California Jr. and Diane M.
Hammond 40 98% $ 383,000 $ 383,000 $ 668,000 $ 1,431,000
San Jacinto Associates San Jacinto, Richard Parasol
California and Richard A.
Gullota 38 74% 469,000 469,000 830,000 1,790,000
Woodlake Manor Woodlake, Thomas G. Larson,
California William H. Larson
and Raymond L.
Tetzlaff 44 93% 545,000 545,000 1,146,000 1,460,000
Yreka Investment Group Yreka, Ronald D.
California Bettencourt 36 100% 538,000 538,000 1,174,000 1,475,000
--- ---- ---------- --------- ----------- -----------
433 96% 5,803,000 5,803,000 $ 12,187,000 $ 16,811,000
=== ==== ========== ========= =========== ===========
</TABLE>
6
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<TABLE>
<CAPTION>
------------------------------------------
For the year ended December 31, 1998
------------------------------------------
Low Income Housing Credits
Partnership Name Rental Income Net Loss Allocated to Partnership
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Alta Vista
Investors $ 153,000 $ (47,000) 99%
BCA Associates 151,000 (16,000) 99%
Cloverdale
Garden Apartments 176,000 (25,000) 99%
Countryway
Associates 167,000 (34,000) 99%
East Garden
Apartments 218,000 (42,000) 99%
HPA Investors 161,000 (63,000) 99%
Knights
Landing Harbor 118,000 (21,000) 99%
Midland Manor
Associates 151,000 (45,000) 99%
San Jacinto
Associates 118,000 (80,000) 99%
Woodlake Manor 170,000 (45,000) 99%
Yreka Investment
Group 154,000 (7,000) 99%
--------- --------
$ 1,737,000 (425,000)
========= ========
</TABLE>
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Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At December 31, 1998, there were 681 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during 1998.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows as of
December 31:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
ASSETS
Cash and cash
equivalents $ 66,028 $ 78,109 $ 83,943 $ 84,504 $ 93,726
Investments in
limited
partnerships, net 1,595,464 2,001,822 2,442,547 2,943,052 3,376,715
Other assets - - - 358 74
--------- --------- --------- --------- ---------
$1,661,492 $2,079,931 $2,526,490 $3,027,914 $3,470,515
========= ========= ========= ========= =========
LIABILITIES
Accrued fees and
expenses due to
general partner
and affiliates $ 820,365 $ 705,925 $ 594,248 $ 483,938 $ 372,353
PARTNERS' EQUITY 841,127 1,374,006 1,932,242 2,543,976 3,098,162
--------- --------- --------- --------- ---------
$1,661,492 $2,079,931 $2,526,490 $3,027,914 $3,470,515
========= ========= ========= ========= =========
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<TABLE>
<CAPTION>
Selected results of operations, cash flows and other information for the
Partnership are as follows for the years ended December 31:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loss from operations $ (144,721) $ (137,368) $ (135,167) $ (141,895) $ (142,872)
Equity in loss from limited
partnerships (388,158) (420,868) (476,567) (412,291) (437,264)
--------- --------- --------- --------- ---------
Net loss $ (532,879) $ (558,236) $ (611,734) $ (554,186) $ (580,136)
========= ========= ========= ========= =========
Net loss allocated to:
General partner $ (5,329) $ (5,582) $ (6,117) $ (5,542) $ (5,801)
========= ========= ========= ========= =========
Limited partners $ (527,550) $ (552,654) $ (605,617) $ (548,644) $ (574,335)
========= ========= ========= ========= =========
Net loss per limited partner unit $ (70.81) $ (74.18) $ (81.29) $ (73.64) $ (77.09)
========= ========= ========= ========= =========
Outstanding weighted limited
partner units 7,450 7,450 7,450 7,450 7,450
========= ========= ========= ========= =========
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net cash provided by (used in):
Operating activities $ (15,377) $ (10,787) $ (9,595) $ (14,624) $ (11,490)
Investing activities 3,296 4,953 9,034 5,402 7,402
--------- --------- --------- --------- ---------
Net change in cash and cash
equivalents (12,081) (5,834) (561) (9,222) (4,088)
Cash and cash equivalents,
beginning of period 78,109 83,943 84,504 93,726 97,814
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of
period $ 66,028 $ 78,109 $ 83,943 $ 84,504 $ 93,726
========= ========= ========= ========= =========
Low Income Housing Credit per Unit was as follows for the years ended December 31:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Federal 99 99 99 99 118
State - - - - -
--------- --------- --------- --------- ---------
Total $ 99 $ 99 $ 99 $ 99 $ 118
========= ========= ========= ========= =========
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Partnership's assets at December 31, 1998 consisted primarily of $66,000 in
cash and aggregate investments in the eleven Local Limited Partnerships of
$1,595,000. Liabilities at December 31, 1998 primarily consisted of $820,000 of
accrued annual management fees due to the General Partners.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. The
Partnership's net loss for 1998 was $(533,000), reflecting a decrease of $25,000
from the net loss experienced in 1997. The decline in net loss is primarily due
to equity in losses from limited partnerships which declined to $(388,000) in
1998 from $(421,000) in 1997. This decrease was a result of the Partnership not
recognizing certain losses of the Local Limited Partnerships. The investments in
such Local Limited Partnerships reached $0 during 1998. Since the Partnership's
liability with respect to its investments is limited, losses in excess of
investment are not recognized. The reduction in equity losses recognized was
partially offset by an increase in loss from operations of $(8,000) in 1998 to
$(145,000), from $(137,000) in 1997, due to a comparable increase in operating
expense allocations.
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Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. The
Partnership's net loss for 1997 was $(558,000), reflecting a decrease of $54,000
from the net loss experienced in 1996. The decline in net loss is primarily due
to equity in losses from limited partnerships which declined to $(421,000) in
1997 from $(477,000) in 1996, because the investments in certain Local Limited
Partnerships reached $0 during 1997. Losses from operations were essentially
unchanged between years.
Cash Flows
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. Net cash
used in 1998 was $(12,000), compared to net cash used in 1997 of $(6,000). The
change was due primarily to an increase in operating costs paid to third parties
and a decline in distributions from Local Limited Partnerships.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. Net cash
used in 1997 was $(6,000), compared to $(1,000) in 1996. The change was due
primarily to a decrease in distributions from limited partnerships.
During 1998 accrued payables, which consist of related party management fees due
to the General Partner, increased by $(115,000). The General Partner does not
anticipate that these accrued fees will be paid until such time as capital
reserves are in excess of future forseeable working capital requirements of the
partnership,
The Partnership expects its future cash flows, together with its net available
assets at December 31, 1998, to be sufficient to meet all currently forseeable
future cash requirements.
Impact of Year 2000 Issue
The General Partner has assessed the Partnership's exposure to date sensitive
computer systems that may not be operative subsequent to 1999. As a result of
this assessment, the General Partner has executed a plan to minimize the
Partnership's exposure to financial loss and/or disruption of normal business
operations that may occur as a result of Year 2000 non-compliant computer
systems.
Business Computer Systems
These systems include both computer hardware and software applications relating
to operations such as financial reporting. The Partnership does not maintain its
own systems and thus utilizes the computer systems of the General Partner. The
General Partner developed a compliance plan for each of its business computer
systems, with particular attention given to critical systems. The General
Partner contracted with an outside vendor to evaluate, test and repair such
systems. The assessment consisted of determining the compliance with Year 2000
of critical computer hardware and software. Incidences of non-compliance were
found with respect to computer software applications and were corrected. The
vendor found no instances of non-compliance with respect to computer hardware.
The amount expended and to be expended by the General Partner is nominal.
The Local General Partners or property managers maintain the business computer
systems that relate to the operations of the Local Limited Partnerships. The
General Partner is in the process of obtaining completed questionnaires from
such Local General Partners and property management companies to assess their
respective Year 2000 readiness. The General Partner intends to identify those
Local General Partners and property management companies that have systems
critical to the operations of the Local Limited Partnerships that are not Year
2000 compliant. For those Local General Partners and property management
companies which have business computer systems which will not be Year 2000
compliant prior to the Year 2000 and where the lack of such compliance is
determined to have a potential material effect on the Partnership's financial
condition and results of operations, the General Partner intends to develop
contingency plans which may include changing property management companies.
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Outside Vendors
The General Partner has obtained assurances from its suppliers of electrical
power and banking and telecommunication services that their critical systems are
all Year 2000 compliant. There exists, however, inherent uncertainty that all
systems of outside vendors or other third parties on which the General Partner,
and thus the Partnership, and the Local General Partners and property management
companies, and thus the Local Limited Partnerships rely will be Year 2000
compliant. Therefore, the Partnership remains susceptible to the consequences of
third party critical computer systems being non-compliant.
Personal Computers
The General Partner has determined that its personal computers and related
software critical to the operations of the Partnership are Year 2000 compliant.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
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Report of Independent Certified Public Accountants
To the Partners
WNC California Housing Tax Credits, L.P.
We have audited the accompanying balance sheet of WNC California Housing Tax
Credits, L.P. (a California Limited Partnership) (the "Partnership") as of
December 31, 1998, and the related statements of operations, 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. A
significant portion of the financial statements of the limited partnerships in
which the Partnership is a limited partner were audited by other auditors whose
reports have been furnished to us. As discussed in Note 2 to the financial
statements, the Partnership accounts for its investments in limited partnerships
using the equity method. The portion of the Partnership's investment in limited
partnerships audited by other auditors represented 80% of the total assets of
the Partnership at December 31, 1998. Our opinion, insofar as it relates to the
amounts included in the financial statements for the limited partnerships which
were audited by others, is based solely on the reports of the other auditors.
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 and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC California Housing Tax Credits, L.P. (A California
Limited Partnership) as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Orange County, California
March 31, 1999
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INDEPENDENT AUDITORS' REPORT
To the Partners
WNC California Housing Tax Credits, L.P.
We have audited the accompanying balance sheet of WNC California Housing Tax
Credits, L.P. ( a California Limited Partnership) (the "Partnership") as of
December 31, 1997, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the two-year period ended
December 31, 1997. 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 the limited partnerships in which WNC California Housing Tax
Credits, L.P. is a limited partner. These investments, as discussed in Note 2 to
the financial statements, are accounted for by the equity method. The
investments in these limited partnerships represented 96% of the total assets of
WNC California Housing Tax Credits, L.P. at December 31, 1997. The financial
statements of the limited partnerships were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to the
amounts included for these limited partnerships, is based solely on the reports
of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC California Housing Tax Credits, L.P. (a California
Limited Partnership) as of December 31, 1997, and the results of its operations
and its cash flows for each of the years in the two-year period ended December
31, 1997, in conformity with generally accepted accounting principles.
CORBIN & WERTZ
Irvine, California
March 18, 1998
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WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 66,028 $ 78,109
Investments in limited
partnerships, net (Note 2) 1,595,464 2,001,822
--------------- ----------------
$ 1,661,492 $ 2,079,931
=============== ================
LIABILITIES AND PARTNERS'
EQUITY (DEFICIT)
Liabilities:
Accrued fees and expenses
due to General Partner and
affiliates (Note 3) $ 820,365 $ 705,925
--------------- ----------------
Commitments and contingencies
Partners' equity (deficit):
General partners (56,429) (51,100)
Limited partners; (10,000 units
authorized; 7,450 units
issued and outstanding
at December 31, 1998 and 1997) 897,556 1,425,106
--------------- ----------------
Total partners' equity 841,127 1,374,006
--------------- ----------------
$ 1,661,492 $ 2,079,931
=============== ================
See accompanying notes to financial statements
14
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Interest income $ 2,166 $ 2,227 $ 3,549
------------- ------------- -------------
Operating expenses:
Amortization (Note 2) 14,904 14,904 14,904
Partnership management
fees (Note 3) 111,691 111,691 111,691
Legal and accounting 4,000 5,339 5,175
Office 16,292 7,661 6,946
------------- ------------- -------------
Total operating expenses 146,887 139,595 138,716
------------- ------------- -------------
Loss from operations (144,721) (137,368) (135,167)
Equity in losses from limited
partnerships (Note 2) (388,158) (420,868) (476,567)
------------- ------------- -------------
Net loss $ (532,879) $ (558,236) $ (611,734)
============= ============= =============
Net loss allocated to:
General partners $ (5,329) $ (5,582) $ (6,117)
============= ============= =============
Limited partners $ (527,550) $ (552,654) $ (605,617)
============= ============= =============
Net loss per limited
partnership unit $ (70.81) $ (74.18) $ (81.29)
============= ============ =============
Outstanding weighted
limited partner units 7,450 7,450 7,450
============= ============= =============
See accompanying notes to financial statements
15
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1998, 1997 and 1996
General Limited
Partners Partners Total
-------- -------- -----
Partners' equity (deficit)
at January 1, 1996 $ (39,401) $ 2,583,377 $ 2,543,976
Net loss (6,117) (605,617) (611,734)
---------- ---------- ----------
Partners' equity (deficit)
at December 31, 1996 (45,518) 1,977,760 1,932,242
Net loss (5,582) (552,654) (558,236)
---------- ---------- ----------
Partners' equity (deficit)
at December 31, 1997 (51,100) 1,425,106 1,374,006
Net loss (5,329) (527,550) (532,879)
---------- ---------- ----------
Partners' equity (deficit)
at December 31, 1998 $ (56,429) $ 897,556 $ 841,127
========== ========== ==========
See accompanying notes to financial statements
16
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Cash flows from operating
activities:
Net loss $ (532,879) $ (558,236) $ (611,734)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Amortization 14,904 14,904 14,904
Equity in losses of
limited partnerships 388,158 420,868 476,567
Change in other assets - - 358
Change in accrued fees
and expenses due to
General Partner and
affiliates 114,440 111,677 110,310
---------- ---------- ----------
Net cash used in operating
activities (15,377) (10,787) (9,595)
---------- ---------- ----------
Cash flows provided by
investing activities:
Distributions from
limited partnerships 3,296 4,953 9,034
---------- ---------- ----------
Net decrease in cash
and cash equivalents (12,081) (5,834) (561)
Cash and cash equivalents,
beginning of year 78,109 83,943 84,504
---------- ---------- ----------
Cash and cash equivalents,
end of year $ 66,028 $ 78,109 $ 83,943
========== =========== ==========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
========== =========== ==========
See accompanying notes to financial statements
17
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC California Housing Tax Credits, L.P., a California Limited Partnership (the
"Partnership"), was formed on September 15, 1988 under the laws of the State of
California. The Partnership was formed to invest primarily in other limited
partnerships (the "Local Limited Partnerships") which own and operate
multi-family housing complexes (the "Housing Complex") that are eligible for low
income housing tax credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
WNC & Associates, Inc., a California corporation ("WNC"), and Wilfred N. Cooper,
Sr., are general partners of the Partnership (the "General Partners"). Wilfred
N. Cooper, Sr., through the Cooper Revocable Trust owns 66.8% of the outstanding
stock of WNC.
The Partnership shall continue to be in full force and effect until December 31,
2037 unless terminated prior to that date pursuant to the partnership agreement
or law.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership Agreement authorized the sale of up to 10,000 units of Limited
Partnership Interests at $1,000 per Unit ("Units"). The offering of Units
concluded in October 1990 at which time 7,450 Units representing subscriptions
in the amount of $7,450,000, had been accepted. The General Partners have a 1%
interest in operating profits and losses of the Partnership. The limited
partners will be allocated the remaining 99% interest in proportion to their
respective investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) any additional sale or refinancing proceeds will
be distributed 99% to the limited partners (in proportion to their respective
investments) and 1% to the General Partners.
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
18
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not makes its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits in the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting For Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment and are being amortized over 30 years (see Note 2).
Losses from limited partnerships allocated to the Partnership are not recognized
to the extent that the investment balance would be adjusted below zero.
19
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. WNC is obligated to pay all offering
and organization costs in excess of 15% (including sales commissions) of the
total offering proceeds. Offering expenses are reflected as a reduction of
limited partners' capital and amounted to $946,704 at December 31, 1998 and
1997.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with remaining
maturities of three months or less when purchased to be cash equivalents.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing income (loss) available to
limited partners by the weighted average number of units outstanding during the
period. Calculation of diluted net income per unit is not required.
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of Partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the years
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
Reclassifications
Certain prior year balances have been reclassified to conform to the 1998
presentation.
20
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of December 31, 1998 and 1997, the Partnership has acquired limited
partnership interests in eleven Local Limited Partnerships which owns one
Housing Complex consisting of an aggregate of 433 apartment units. The
respective general partners of the Local Limited Partnerships manage the day to
day operations of the entities. Significant Local Limited Partnership business
decisions require approval from the Partnership. The Partnership, as a limited
partner, is generally entitled to 99%, as specified in the Local Limited
Partnership agreements, of the operating profits and losses of the Local Limited
Partnerships.
The Partnership's investments in Local Limited Partnerships as shown in the
balance sheets at December 31, 1998 and 1997, are approximately $205,000 and
$208,000, respectively, greater than the Partnership's equity as shown in the
Local Limited Partnerships' financial statements. This difference is primarily
due to unrecorded losses as discussed below, and acquisition, selection and
other costs related to the acquisition of the investments which have been
capitalized in the Partnership's investment account, and to capital
contributions payable to the limited partnerships which were netted against
partner capital in the limited partnerships' financial statements (see Note 3).
Equity in losses of limited partnerships is recognized in the financial
statements until the related investment account is reduced to a zero balance.
Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income.
At December 31, 1998, the investment accounts in certain Local Limited
Partnerships have reached a zero balance. Consequently, the Partnership's share
of losses during the year ended December 31, 1998 amounting to approximately
$32,000 have not been recognized.
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the years ended December 31:
1998 1997
---- ----
Investments per balance sheet,
beginning of year $ 2,001,822 $ 2,442,547
Equity in losses of limited
partnerships (388,158) (420,868)
Distributions paid (3,296) (4,953)
Amortization of acquisition
fees and costs (14,904) (14,904)
--------------- ----------------
Investments per balance sheet,
end of year $ 1,595,464 $ 2,001,822
=============== ================
21
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted in
interest expense. Approximate combined condensed financial information from the
individual financial statements of the limited partnerships as of December 31
and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
1998 1997
---- ----
ASSETS
Buildings and improvements,
(net of accumulated
depreciation for 1998 and
1997 of $5,420,000 and
$4,818,000, respectively) $ 16,079,000 $ 16,617,000
Land 1,484,000 1,484,000
Other assets 1,465,000 1,387,000
--------------- ----------------
$ 19,028,000 $ 19,488,000
=============== ================
LIABILITIES
Mortgage loans payable $ 16,811,000 $ 16,854,000
Other liabilities 506,000 483,000
--------------- ----------------
17,317,000 17,337,000
--------------- ----------------
PARTNERS' CAPITAL
WNC California Housing
Tax Credits, L.P. 1,390,000 1,794,000
Other partners 321,000 357,000
--------------- ----------------
1,711,000 2,151,000
--------------- ----------------
$ 19,028,000 $ 19,488,000
=============== ================
22
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1998 1997 1996
---- ---- ----
Revenues $ 1,828,000 $ 1,802,000 $ 1,771,000
------------- ------------- -------------
Expenses:
Operating expenses 1,251,000 1,199,000 1,236,000
Interest expense 400,000 410,000 406,000
Depreciation and
amortization 602,000 618,000 611,000
------------- ------------- -------------
Total expenses 2,253,000 2,227,000 2,253,000
------------- ------------- -------------
Net loss $ (425,000) $ (425,000) $ (482,000)
============= ============= =============
Net loss allocable
to the Partnership $ (420,000) $ (421,000) $ (477,000)
============= ============= =============
Net loss recorded
by the Partnership $ (388,000) $ (421,000) $ (477,000)
============= ============= =============
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partners may be
required to sustain operations of such Local Limited Partnerships. If additional
capital contributions are not made when they are required, the Partnership's
investment in certain of such Local Limited Partnerships could be impaired.
NOTE 3 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partners or their affiliates for the following items:
Acquisition fees equal to 6% of the gross proceeds from the sale of
Units as compensation for services rendered in connection with the
acquisition of Local Limited Partnerships. As of December 31, 1998 and
1997, the Partnership incurred acquisition fees of $447,060.
Accumulated amortization of these capitalized costs was $186,957 and
$172,053 as of December 31, 1998 and 1997, respectively.
Reimbursement of costs incurred by an affiliate of WNC in connection
with the acquisition of the Local Limited Partnerships. These
reimbursements have not exceeded 3% of the gross proceeds. As of
December 31, 1998 and 1997, the Partnership incurred acquisition costs
of $32,018 which have been included in investments in limited
partnerships. Such costs were fully amortized at December 31, 1998 and
1997.
23
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
An annual management fee equal to 0.5% of the invested assets of the
Local Limited Partnerships, including the Partnerships allocable share
of the mortgages. Management fees of $111,691 were incurred for 1998,
1997 and 1996. No fees were paid during 1998, 1997 or 1996.
The accrued fees and expenses due to the General Partners and affiliates consist
of the following at December 31:
1998 1997
---- ----
Reimbursement for expenses
paid by an affiliate
of the General Partner $ 2,748 $ -
Asset management fee payable 817,617 705,925
--------------- ----------------
Total $ 820,365 $ 705,925
=============== ================
The General Partner does not anticipate that these accrued fees will be paid
until such time as capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
NOTE 4 - INCOME TAXES
No provision for income taxes has been recorded in the financial statements as
any liability for income taxes is the obligation of the partners of the
Partnership.
24
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
(a)(1)
(i) On December 16, 1998, Corbin & Wertz, Irvine, California was dismissed as
the Partnership's principal independent accountant.
(ii) During the last two fiscal years of the Partnership, the reports of Corbin
& Wertz respecting the financial statements of the Partnership did not
contain an adverse opinion or a disclaimer of opinion, nor were any such
reports qualified or modified as to uncertainty, audit scope or accounting
principles.
(iii) The decision to change accountants was approved by the board of directors
of WNC & Associates, Inc., the general partner of the Partnership.
(iv) During the last two fiscal years and subsequent interim period of the
Partnership there were no disagreements between Corbin & Wertz and the
Partnership on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure of the nature
described in Item 304(a)(1)(iv) of Securities and Exchange Commission
Regulation S-K.
(v) During the last two fiscal years and subsequent interim period of the
Partnership there were no reportable events of the nature described in
Item 304(a)(1)(v) of Securities and Exchange Commission Regulation S-K.
(a)(2)
On December 16, 1998, BDO Seidman, LLP, Costa Mesa, California was engaged as
the Partnership's principal independent accountant. During the last two fiscal
years and subsequent interim period of the Partnership, the Partnership did not
consult BDO Seidman, LLP regarding (i) either, the application of accounting
principles to a specified transaction; or the type of audit opinion that might
be rendered on the Partnership's financial statements, or (ii) any matter that
was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Securities and Exchange Commission Regulation S-K) or was a reportable event (as
defined in Item 304(a)(1)(v) of Securities and Exchange Commission Regulation
S-K).
PART III.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc.
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who serves
as Chairman of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N.
Cooper, Jr. and Kay L. Cooper. The principal shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.
25
<PAGE>
Wilfred N. Cooper, Sr., age 68, is the founder, Chief Executive Officer and a
Director of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a
general partner in some of the programs previously sponsored by the Sponsor. Mr.
Cooper has been involved in real estate investment and acquisition activities
since 1968. Previously, during 1970 and 1971, he was founder and principal of
Creative Equity Development Corporation, a predecessor of WNC & Associates,
Inc., and of Creative Equity Corporation, a real estate investment firm. For 12
years prior to that, Mr. Cooper was employed by Rockwell International
Corporation, last serving as its manager of housing and urban developments where
he had responsibility for factory-built housing evaluation and project
management in urban planning and development. Mr. Cooper is a Director of the
National Association of Home Builders (NAHB) and a National Trustee for NAHB's
Political Action Committee, a Director of the National Housing Conference (NHC)
and a member of NHC's Executive Committee and a Director of the National
Multi-Housing Council (NMHC). Mr. Cooper graduated from Pomona College in 1956
with a Bachelor of Arts degree.
John B. Lester, Jr., age 65, is President, a Director, Secretary and a member of
the Acquisition Committee of WNC & Associates, Inc., and a Director of WNC
Capital Corporation. Mr. Lester has 27 years of experience in engineering and
construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 36, is Executive Vice President, a Director and a
member of the Acquisition Committee of WNC & Associates, Inc. He is President
of, and a registered principal with, WNC Capital Corporation, a member firm of
the NASD, and is a Director of WNC Management, Inc. He has been involved in
investment and acquisition activities with respect to real estate since he
joined the Sponsor in 1988. Prior to this, he served as Government Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Advisory Board for LIHC Monthly Report, a Director of NMHC and an Alternate
Director of NAHB. He graduated from The American University in 1985 with a
Bachelor of Arts degree.
David N. Shafer, age 46, is Senior Vice President, a Director, General Counsel,
and a member of the Acquisition Committee of WNC & Associates, Inc., and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been involved in
real estate investment and acquisition activities since 1984. Prior to joining
the Sponsor in 1990, he was practicing law with a specialty in real estate and
taxation. Mr. Shafer is a Director and President of the California Council of
Affordable Housing and a member of the State Bar of California. Mr. Shafer
graduated from the University of California at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor degree (cum laude) and from the University of San Diego in 1986 with a
Master of Law degree in Taxation.
Michael L. Dickenson, age 42, is Vice President and Chief Financial Officer, and
a member of the Acquisition Committee of WNC & Associates, Inc., and Chief
Financial Officer of WNC Management, Inc. He has been involved with acquisition
and investment activities with respect to real estate since 1985. Prior to
joining the Sponsor in March 1999, he was the Director of Financial Services at
TrizecHahn Centers Inc., a developer and operator of commercial real estate,
from 1995 to 1999, a Senior Manager with E&Y Kenneth Leventhal Real Estate
26
<PAGE>
Group, Ernst & Young, LLP, from 1988 to 1995, and Vice President of Finance with
Great Southwest Companies, a commercial and residential real estate developer,
from 1985 to 1988. Mr. Dickenson is a member of the Financial Accounting
Standards Committee for the National Association of Real Estate Companies and
the American Institute of Certified Public Accountants, and a Director of
HomeAid Southern California, a charitable organization affiliated with the
building industry. He graduated from Texas Tech University in 1978 with a
Bachelor of Business Administration - Accounting degree, and is a Certified
Public Accountant in California and Texas.
Thomas J. Riha, age 44, is Vice President - Asset Management and a member of the
Acquisition Committee of WNC & Associates, Inc. and a Director and Chief
Executive Officer of WNC Management, Inc. Mr. Riha has been involved in
acquisition and investment activities with respect to real estate since 1979.
Prior to joining the Sponsor in 1994, Mr. Riha was employed by Trust Realty
Advisor, a real estate acquisition and management company, last serving as Vice
President - Operations. Mr. Riha graduated from the California State University,
Fullerton in 1977 with a Bachelor of Arts degree (cum laude) in Business
Administration with a concentration in Accounting and is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
Sy P. Garban, age 53, is Vice President - National Sales of WNC & Associates,
Inc. and has been employed by the Sponsor since 1989. Mr. Garban has been
involved in real estate investment activities since 1978. Prior to joining the
Sponsor he served as Executive Vice President by MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
N. Paul Buckland, age 36, is Vice President - Acquisitions of WNC & Associates,
Inc. He has been involved in real estate acquisitions and investments since 1986
and has been employed with WNC & Associates, Inc. since 1994. Prior to that, he
served on the development team of the Bixby Ranch that constructed apartment
units and Class A office space in California and neighboring states, and as a
land acquisition coordinator with Lincoln Property Company where he identified
and analyzed multi-family developments. Mr. Buckland graduated from California
State University, Fullerton in 1992 with a Bachelor of Science degree in
Business Finance.
David Turek, age 44, is Vice President - Originations of WNC & Associates, Inc.
He has been involved with real estate investment and finance activities since
1976 and has been employed by WNC & Associates, Inc. since 1996. From 1995 to
1996, Mr. Turek served as a consultant for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties. From 1990 to 1995, he was involved in the development of
conventional and tax credit multi-family housing. He is a Director with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.
Kay L. Cooper, age 62, is a Director of WNC & Associates, Inc. Mrs. Cooper was
the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates during the current or future years for the following
fees:
27
<PAGE>
(a) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.5% of the Invested Assets of the Partnership, as defined.
"Invested Assets" means the sum of the Partnership's investment in Local
Limited Partnerships and the Partnership's allocable share of the amount of
the indebtedness related to the Housing Complexes. Fees of $112,000 were
incurred during the year ended December 31, 1998. No annual asset
management fees have been paid during the same period.
(b) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $3,000 during the year
ended December 31, 1998.
(c) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$6,700 for Associates and $750 for Mr. Cooper for the year ended December
31, 1998. The General Partners are also entitled to receive 1% of cash
distributions. There were no distributions of cash to the General Partners
during the year ended December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
No person is known to the General Partner to own beneficially in
excess of 5% of the outstanding Units.
(b) Security Ownership of Management
Neither the General Partners, their affiliates, nor any of the officers
or directors of the corporate General Partner or its affiliates own
directly or beneficially any Units in the Partnership.
(c) Changes in Control
The management and control of the corporate General Partner may be
changed at any time in accordance with its organizational documents,
without the consent or approval of the Limited Partners. In addition,
the Partnership Agreement provides for the admission of one or more
additional and successor General Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of
any other General Partner or the Limited Partners, (i) substitute in
its stead as General Partner any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets,
stock or other evidence of equity interest and continued its business,
or (ii) cause to be admitted to the Partnership an additional General
Partner or Partners if it deems such admission to be necessary or
desirable so that the Partnership will be classified a partnership for
Federal income tax purposes. Finally, a majority-in-interest of the
Limited Partners may at any time remove the General Partner of the
Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partners manage all of the Partnership's affairs. The transactions
with the General Partners are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interests in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
28
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Independent Auditors' Report
Balance Sheets, December 31, 1998 and 1997
Statements of Operations for the years ended December 31, 1998, 1997
and 1996
Statements of Partners' Equity(Deficit) for the years ended December
31, 1998, 1997 and 1996
Statements of Cash Flows for the years ended December 31, 1998, 1997 and
1996
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial
Statement Schedule
Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K.
1. A Form 8-K dated December 16, 1998 was filed on December 22, 1998
reporting the dismissal of the Partnership's former auditors and the
engagement of new auditors. No financial statements were included.
(c) Exhibits.
3.1 Agreement of Limited Partnership dated September 15, 1988; included as
Exhibit B to the Prospectus, which was filed as Exhibit 28.1 to Form 10-K
for the year ended December 31, 1992 is hereby incorporated herein as
Exhibit 3.1.
10.1 Amended and Restated Agreement of Limited Partnership of Countryway
Associates filed as exhibit 10.1 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.1.
10.2 Amended and Restated Agreement of Limited Partnership of Alta Vista
Investors filed as exhibit 10.2 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.2.
10.3 Amended and Restated Agreement of Limited Partnership of Yreka Investment
Group filed as exhibit 10.3 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.3.
10.4 Amended and Restated Agreement of Limited Partnership of BCA Associates
filed as exhibit 10.7 on Form 10-K dated December 31, 1992 is hereby
incorporated herein as exhibit 10.4.
10.5 Amended and Restated Agreement of Limited Partnership of HPA Investors
filed as exhibit 10.8 on Form 10-K dated December 31, 1992 is hereby
incorporated herein as exhibit 10.5.
29
<PAGE>
10.6 Amended and Restated Agreement of Limited Partnership of Cloverdale
Garden Apartments filed as exhibit 10.11 on Form 10-K dated December 31,
1992 is hereby incorporated herein as exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of Knights Landing
Harbor filed as exhibit 10.13 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Woodlake Manor
filed as exhibit 10.16 on Form 10-K dated December 31, 1992 is hereby
incorporated herein as exhibit 10.8.
10.9 Amended and Restated Agreement of Limited Partnership of East Garden
Apartments filed as exhibit 10.18 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.9.
10.10 Amended and Restated Agreement of Limited Partnership of Midland Manor
Associates filed as exhibit 10.26 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.10.
10.11 Amended and Restated Agreement of Limited Partnership of San Jacinto
Associates filed as exhibit 10.27 on Form 10-K dated December 31, 1992 is
hereby incorporated herein as exhibit 10.11.
(d) Financial statement schedule follows, as set forth in subsection (a)(2)
hereof.
30
<PAGE>
Report of Independent Certified Public Accountants
on Financial Statement Schedule
To the Partners
California Housing Tax Credits, L.P.
The audit referred to in our report dated March 31, 1999, relating to the 1998
financial statements of WNC California Housing Tax Credits, L.P. (the
"Partnership"), which is contained in Item 8 of this Form 10-K, included the
audit of the accompanying financial statement schedule. The financial statement
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the financial information set forth therein.
BDO SEIDMAN, LLP
Orange County, California
March 31, 1999
31
<PAGE>
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
As of December 31, 1998
--------------------------------------------------------------------------------------------------------------
Total Investment Amount of Encumbrances of
in Local Limited Investment Local Limited Property and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alta Vista Orosi,
Investors California $ 583,000 $ 583,000 $ 1,440,000 $ 2,038,000 $ 636,000 $ 1,402,000
BCA Associates Anderson,
California 514,000 514,000 1,429,000 2,014,000 471,000 1,543,000
Cloverdale Garden Cloverdale,
Apartments California 617,000 617,000 1,642,000 2,136,000 375,000 1,761,000
Countryway Mendota,
Associates California 571,000 571,000 1,481,000 2,085,000 668,000 1,417,000
East Garden Jamestown,
Apartments California 770,000 770,000 2,161,000 2,886,000 499,000 2,387,000
HPA Investors Shafter,
California 538,000 538,000 1,516,000 2,158,000 489,000 1,669,000
Knights Landing Knights
Harbor Landing,
California 275,000 275,000 986,000 1,345,000 312,000 1,033,000
Midland Manor Mendota,
Associates California 383,000 383,000 1,431,000 1,821,000 512,000 1,309,000
San Jacinto San Jacinto,
Associates California 469,000 469,000 1,790,000 2,349,000 374,000 1,975,000
Woodlake Manor Woodlake,
California 545,000 545,000 1,460,000 2,108,000 667,000 1,441,000
Yreka Investment Yreka,
Group California 538,000 538,000 1,475,000 2,043,000 417,000 1,626,000
----------- ----------- ----------- ----------- ----------- -----------
$ 5,803,000 $ 5,803,000 $ 16,811,000 $ 22,983,000 $ 5,420,000 $ 17,563,000
=========== =========== =========== =========== =========== ===========
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
----------------------------------------------------------------------------------------------------
For the year ended December 31, 1998
----------------------------------------------------------------------------------------------------
Year Investment Estimated Useful
Partnership Name Rental Income Net Loss Acquired Status Life (Years)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alta Vista Investors $ 153,000 $ (47,000) 1989 Completed 27.5
BCA Associates 151,000 (16,000) 1989 Completed 40
Cloverdale Garden Apartments 176,000 (25,000) 1989 Completed 40
Countryway Associates 167,000 (34,000) 1989 Completed 27.5
East Garden Apartments 218,000 (42,000) 1989 Completed 40
HPA Investors 161,000 (63,000) 1989 Completed 40
Knights Landing Harbor 118,000 (21,000) 1989 Completed 40
Midland Manor Associates 151,000 (45,000) 1990 Completed 27.5
San Jacinto Associates 118,000 (80,000) 1990 Completed 50
Woodlake Manor 170,000 (45,000) 1989 Completed 30
Yreka Investment Group 153,000 (7,000) 1989 Completed 50
---------- ----------
$ 1,736,000 $ (425,000)
========== ==========
</TABLE>
33
<PAGE>
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.
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
By: WNC & Associates, Inc., General Partner
By: /s/ John B. Lester, Jr.
John B. Lester, Jr.,
President of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., General Partner
Date: August 23, 1999
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.
By /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., Chairman of the Board of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., Director of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ David N. Shafer
David N Shafer, Director of WNC & Associates, Inc.
Date: August 23, 1999
34
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000845750
<NAME> WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 66,028
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,028
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,661,492
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 841,127
<TOTAL-LIABILITY-AND-EQUITY> 1,661,492
<SALES> 0
<TOTAL-REVENUES> 2,166
<CGS> 0
<TOTAL-COSTS> 146,887
<OTHER-EXPENSES> 388,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (532,879)
<INCOME-TAX> 0
<INCOME-CONTINUING> (532,879)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (532,879)
<EPS-BASIC> (70.81)
<EPS-DILUTED> 0
</TABLE>
