FORM 10-K
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 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
o 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: 0-20056
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0433017
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
Title of Securities Exchanges on which Registered
NONE NONE
Securities registered pursuant to section 12(g) of the Act:
NONE
<PAGE>
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
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
2
<PAGE>
Item 1. Business
Organization
- ------------
WNC California Tax Credits II, L.P. ("CHTC II" or the "Partnership") is a
California limited partnership formed under the laws of the State of California
on September 13, 1990. The Partnership was formed to acquire limited partnership
interests ("Local Limited Partnership Interests") in local limited partnerships
("Local Limited Partnerships") which own multifamily apartment complexes that
are eligible for low-income housing federal and California income tax credits
("the Low Income Housing Credit").
The general partner of the Partnership is WNC Tax Credit Partners, L.P. (the
"General Partner"). WNC & Associates, Inc. ("Associates") and Wilfred N. Cooper,
Sr. are the general partners of WNC Tax Credit Partners, L.P. The business of
the Partnership is conducted primarily through Associates as CHTC II has no
employees of its own.
On January 22, 1991, the Partnership commenced a public offering of 20,000 units
of limited partnership interest ("Units"), at a price of $1,000 per Unit. As of
the close of the public offering, January 21, 1993 a total of 17,726 Units
representing $17,726,000 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 in Local Limited
Partnerships each of which will own and operate an apartment complex ("Apartment
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 against 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 Apartment Complex is
subject to a fifteen-year compliance period(the "Compliance Period").
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its Local Limited
Partnership Interests or approve the sale by a Local Limited Partnership of any
Apartment Complex prior to the end of the applicable 15 year Compliance Period.
Because of (i) the nature of the Apartment Complexes, (ii) the difficulty of
predicting the resale market for low-income housing 15 or more year in the
3
<PAGE>
future, and (iii) the inability of the Partnership to directly cause the sale of
Apartment Complexes by the general partners of the respective Local Limited
Partnerships ("Local General Partners"), but generally only to require such
Local General Partners to use their respective best efforts to find a purchaser
for the Apartment Complexes, it is not possible at this time to predict whether
the liquidation of substantially all of the Partnership's assets and the
disposition of the proceeds, if any, in accordance with 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 an Apartment Complex,
it is anticipated that the Local General Partner will either continue to operate
such Apartment Complex or take such other actions as the Local General Partner
believes to be in the best interest of the Local Limited Partnership. In
addition, circumstances beyond the control of the General Partner may occur
during the Compliance Period which would require the Partnership to approve the
disposition of an Apartment Complex prior to the end thereof.
As of December 31, 1997, CHTC II has invested in fifteen Local Limited
Partnerships. Each of these Local Limited Partnerships own an Apartment Complex
that is eligible for the Federal Low Income Housing Credit. Twelve of the these
fifteen Apartment Complexes are eligible for the California Low Income Housing
Credit. All of the Local Limited Partnerships also benefit from government
programs promoting low or moderate income housing.
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 multifamily residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and neither the
Partnership's investments nor the Apartment Complexes owned by Local Limited
Partnerships will be readily marketable. Additionally, there can be no assurance
that the Partnership will be able to dispose of its interests in Local Limited
Partnerships at the end of the Compliance Period. 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 Apartment
Complexes and the Partnership. The Apartment Complexes could be subject to loss
through foreclosure. In addition, each Local Limited Partnership is subject to
risks relating to environmental hazards which might be uninsurable. Because the
Partnership's ability to control its 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 Partnership operations will be
profitable or that the anticipated Low Income Housing Credits will be available
to Limited Partners.
4
<PAGE>
Each of the Local Limited Partnerships has received financial assistance from
the FmHA. The Partnership's ability to exercise the voting rights granted it
under the Local Limited Partnership Agreements and to transfer its Local Limited
Partnership Interests is subject to restrictions which would not be present if
assistance were received. In this regard, FmHA approval generally will be
required in connection with the removal of a Local General Partner, the sale of
an Apartment Complex or the sale of a Local Limited Partnership Interest. Any
such approval may be withheld upon the discretion of FmHA.
As of December 31, 1997, the fifteen Apartment Complexes acquired by CHTC II
were completed and in operation. The Apartment Complexes owned by the Local
Limited Partnerships in which CHTC II has invested were developed by Local
General Partners who acquired the sites and applied for applicable mortgages and
subsidies. CHTC II became the principal limited partner in these Local Limited
Partnerships pursuant to arm's-length negotiations with the Local General
Partner. As a limited partner, CHTC II liability for obligations of the Local
Limited Partnership is limited to its investment. The Local General Partner of
the Local Limited Partnership retains responsibility for developing,
constructing, maintaining, operating and managing the Apartment Complex.
The following is a schedule of the status as of December 31, 1997, of the
fifteen Apartment Complexes owned by Local Limited Partnerships in which CHTC II
is a limited partner.
The following is a schedule of the status as of December 31, 1997, of the
fifteen Apartment Complexes owned by Local Partnerships in which CHTC II is a
limited partner.
5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH THE PARTNERSHIP HAS AN INVESTMENT
AS OF DECEMBER 31, 1997
No. of Units Units Percentage of Total
Name & Location Apts. Completed Occupied Units Occupied
<S> <C> <C> <C> <C>
601 Main Street Investors 156 156 147 94
Stockton, California
ADI Development Partners, Ltd. 31 31 29 94
Delhi, California
Bayless Garden Apartments 46 46 44 95
Red Bluff, California
Blackberry Oaks, Ltd. 42 42 41 98
Lodi, California
Jacob's Square 45 45 44 98
Exeter, California
Mecca Apartments II 60 60 56 93
Mecca, California
Nevada Meadows 34 34 34 100
Grass Valley, California
Northwest Tulare Associates 54 54 50 93
Ivanhoe, California
Orland Associates, Ltd. 39 39 39 100
Orland, California
Pinegate 56 56 56 100
Ahoskie, North Carolina
Silver Birch 35 35 33 94
Huron, California
Twin Pines Apartments Association 39 39 30 77
Groveland, California
Ukiah Terrace 42 42 42 100
Ukiah, California
Woodlake Garden Apts. 48 48 47 98
Woodlake, California
Yucca Warren Vista, Ltd. 50 50 47 94
Joshua Tree, California
--- --- --- ---
TOTAL 777 777 739 95
=== === === ==
</TABLE>
Item 2. Properties
Through its investment in Local Limited Partnerships CHTC II holds an interest
in Apartment Complexes. See Item 1 for information pertaining to these Apartment
Complexes.
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
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<PAGE>
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Units are not traded on a public exchange but are being sold through a
public offering. It is not anticipated that any public market will develop for
the purchase and sale of any Unit. Units can be assigned only if certain
requirements in CHTC II's Agreement of Limited Partnership ("Partnership
Agreement") are satisfied.
At December 31, 1997, there were 1,273 registered holders of Units in CHTC II
("Limited Partners"). The Partnership was not designed to provide cash
distributions to Limited Partners in circumstances other than refinancing or
disposition of its investments in Local Partnerships. The Limited Partners
invested in the Partnership received Housing Tax Credits per Limited Partnership
Interest as follows:
1997 1996
---- ----
Federal $117 $116
California 27 37
---- ----
Total $144 $153
==== ====
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $13,218 $24,231 $52,399 $61,226 $133,580
Partnership operating
expenses (298,207) (289,038) (306,261) (403,236) (210,562)
Equity in loss of
Local Partnerships (1,155,586) (1,128,793) (1,579,652) (1,194,095) (1,081,114)
---------- ---------- ---------- ---------- ----------
Net loss $(1,440,575) $(1,393,600) $(1,833,514) $(1,536,105) ($1,158,096)
=========== =========== =========== =========== ===========
Net loss per Limited
Partnership interest $(80) $(78) $(102) $(86) $(65)
=== === ==== === ===
Total assets $7,668,973 $8,976,925 $10,788,485 $12,876,510 $16,332,339
========== ========== =========== =========== ===========
Net investment in
Limited Partnerships $7,291,595 $8,447,282 $9,640,622 $11,178,031 $12,182,746
========== ========== ========== =========== ===========
</TABLE>
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Liquidity and Capital Resources
- -------------------------------
Since inception, the Partnership has received $17,726,000 in cash from the sale
of Units. Substantially all of the $17,726,000 has been committed to the
purchase price and acquisition fees and costs of investments in Local Limited
Partnerships, reserves and expenses of the offering. Although not presently the
case, the Partnership previously had identified its investments in advance of
receipt of sufficient cash capital to fund the investments. As of December 31,
1997, the Partnership had made capital contributions to Local Limited
Partnerships in the amount of approximately $12,914,000.
As of December 31, 1997 and 1996 the Partnership was indebted to the General
Partner or affiliates in the amounts of approximately $836,300 and $703,700. The
component items of such indebtedness were as follows: accrued asset management
fees of approximately $834,900 and $699,800, respectively, and advances for
operation expense of $1,400 and $3,900, respectively.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $139,800 for the period
ended December 31, 1997. This decrease in cash resulted from uses by investing
activities, and from operations. Cash used by investing activities consisted
primarily of capital contributions to limited partnerships of approximately
$75,500 and cash provided by investing activities consisted of cash from
distributions of $22,400 from Local Limited Partnerships and the collection of
loans receivable of $8,500. Cash provided by operating activities consisted of
interest income. Cash used in operating activities consisted primarily of
payments for operating fees and expenses. The major components of all these
activities are discussed in greater detail below.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $596,400 for the period
ended December 31, 1996. This decrease in cash resulted primarily from uses by
investing activities, and secondarily from operations. Cash used by investing
activities consisted of capital contributions to limited partnerships, changes
in loans receivable of approximately $555,000 and $6,600 respectively and cash
provided by investing activities from distributions of $11,300 from Local
Limited Partnerships. Cash provided and used by the operating activities of the
Partnership was minimal compared to its other activities. Cash provided
consisted primarily of interest received on cash deposits and cash used
consisted primarily of payments for operating fees and expenses. The major
components of all these activities are discussed in greater detail below.
8
<PAGE>
Prior to sale of the Apartment Complexes, it is not expected that any of the
Local Limited Partnerships in which the Partnership has invested or will invest
will generate cash sufficient to provide distributions to The Partnership of any
material amount. Distributions to the Partnership would first by used to meet
operating expenses of the Partnership, including the payment of the Asset
Management Fee to the General Partner. See Item 11 hereof. As a result, it is
not anticipated that the Partnership will provide distributions to the Limited
Partners prior to the same of the Apartment Complexes.
The Partnership's investments are not readily marketable and may be affected by
adverse general economic conditions which, in turn, could substantially increase
the risk of operating losses for the Apartment Complexes, the Local Limited
Partnerships and the Partnership. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Limited Partnership Interests is sufficient to fund the Partnership's
operations.
Subsequent to the close of its public offering, the Partnership established
working capital reserves of approximately 3.1% of capital contributions (or
approximately $546,000, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership including payment of the asset management fee as well as expenses
attendant to the preparation of tax returns and reports to the limited partners
and other investor servicing obligations of the Partnership. To the extent that
working capital reserves are insufficient to satisfy the cash requirements of
the Partnership, it is anticipated that additional funds would be sought through
bank loans or other institutional financing. The General Partner may also apply
any cash distributions received from the Local Limited Partnerships for such
purposes or to replenish or increase working capital reserves.
Under its partnership agreement the Partnership does not have the ability to
assess its partners for additional capital contributions to provide capital if
needed by the Partnership or Local Limited Partnerships. Accordingly, if
circumstances arise that cause the Local Limited Partnerships to require capital
in addition to that contributed by the Partnership and any equity of the Local
General Partners, the only sources from which such capital needs will be able to
be satisfied (other than the limited reserves available at the Partnership
level) will be (i) third-party debt financing (which may not be available, if,
as expected, the Apartment Complexes owned by the Local Limited Partnerships are
already substantially leveraged), (ii) additional equity contributions or
advances of the Local General Partners, (iii) other equity sources (which could
adversely affect the Partnership's interest in tax credits, cash flow and/or
proceeds of sale or refinancing of the Apartment Complexes and result in adverse
tax consequences to the limited partners), or (iv) the sale or disposition of
the Apartment Complexes (which could have the same adverse effects as discussed
in (iii) above). There can be no assurance that funds from any of such sources
would be readily available in sufficient amounts to fund the capital requirement
of the Local Limited Partnerships in question. If such funds are not available,
the Local Limited Partnerships would risk foreclosure on their Apartment
Complexes if they were unable to renegotiate the terms of their first mortgages
and any other debt secured by the Apartment Complexes to the extent the capital
requirements of the Local Limited Partnerships relate to such debt.
9
<PAGE>
Results of Operations
- ---------------------
As reflected on its Statements of Operations, the Partnership had losses of
$1,440,575, 1,393,600 and 1,833,514 for December 31, 1997, 1996 and 1995,
respectively. The component items of revenue and expense are discussed below.
Revenue. Partnership revenues consisted entirely of interest earned on cash
deposits held in financial institutions as Reserves. Interest revenue in future
years will be a function of prevailing interest rates and the amount of cash
balances.
Expenses. The most significant component of operating expenses is expected to be
the Asset Management Fee. The Asset Management Fees is equal to 0.5% of Invested
asset in local Limited Partnerships: accordingly the amount to be incurred in
the future is a function of the level of such invested assets (i.e., the sum of
the Partnerships' capital contributions to the Local Limited Partnerships plus
the Partnership's share of the debts related to the Apartment Complexes owned by
such Local Limited Partnerships). The annual management fee incurred was
approximately $210,000, $210,000, and $200,000, for the years ended December 31,
1997, 1996 and 1995, respectively.
Amortization expense consists of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of Local
Limited Partnership Interests.
Office expense consists of the Partnership's administrative expenses, such as
accounting and legal fees, bank charges and investor reporting expenses.
Equity in losses from Limited Partnerships. The Partnership's equity in losses
from Limited Partnerships is equal to 99% of the aggregate net loss of the
Limited Partnerships. After rent-up, the Limited Partnerships are expected to
generate losses during each year of operations; this is so because, although
rental income is expected to exceed cash operating expenses, depreciation and
amortization deductions claimed by the Limited Partnerships are expected to
exceed net rental income.
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<PAGE>
Item 8. Financial Statements and Supplementary Data
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
FINANCIAL STATEMENTS
For The Years Ended
December 31, 1997, 1996 and 1995
with
INDEPENDENT AUDITORS' REPORT THEREON
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
WNC California Housing Tax Credits II, L.P.
We have audited the accompanying balance sheets of WNC California Housing Tax
Credits II, L.P. (a California Limited Partnership) (the "Partnership") as of
December 31, 1997 and 1996, and the related statements of operations, partners'
equity (deficit) and cash flows for the years ended December 31, 1997, 1996 and
1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of the
limited partnerships in which WNC California Housing Tax Credits II, 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 95% and 94% of the total assets of WNC
California Housing Tax Credits II, L.P., at December 31, 1997 and 1996,
respectively. 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 II, L.P. (a
California Limited Partnership) as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995 in conformity with generally accepted accounting principles.
/s/Corbin & Wertz
-----------------
CORBIN & WERTZ
Irvine, California
April 1, 1998
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 377,378 $ 517,151
Investments in limited partnerships (Note 2) 7,291,595 8,447,282
Other assets - 12,492
------------------ -----------------
$ 7,668,973 $ 8,976,925
================ =================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities -
Accrued fees and expenses due to General Partner and
affiliates (Note 3) $ 836,316 $ 703,693
- ---------------- -----------------
Partners' equity (deficit):
General partner (96,935) (82,529)
Limited partners (20,000 units authorized; 17,726
units issued and outstanding at December 31, 1997
and 1996) 6,929,592 8,355,761
---------------- -----------------
Total partners' equity 6,832,657 8,273,232
---------------- -----------------
$ 7,668,973 $ 8,976,925
================ =================
</TABLE>
See accompanying notes to financial statements
FS-2
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ---------------- ----------------
<S> <C> <C> <C>
Interest income $ 13,218 $ 24,231 $ 52,399
-------------- -------------- ---------------
Operating expenses:
Amortization 54,445 54,836 54,836
Partnership management fees (Note 3) 210,084 209,807 199,751
Other 33,678 24,395 51,674
-------------- -------------- ---------------
Total operating expenses 298,207 289,038 306,261
-------------- -------------- ---------------
Loss from operations (284,989) (264,807) (253,862)
Equity in losses from limited partnerships
(Note 2) (1,155,586) (1,128,793) (1,579,652)
-------------- -------------- ---------------
Net loss $ (1,440,575) $ (1,393,600) $ (1,833,514)
============== ============== ===============
Net loss allocable to:
General partner $ (14,406) $ (13,936) $ (18,335)
============== ============== ===============
Limited partners $ (1,426,169) $ (1,379,664) $ (1,815,179)
============== ============== ===============
Net loss per weighted number of limited
partner units $ (80.46) $ (77.83) $ (102.40)
============== ============= ==============
Outstanding weighted number of limited
partner units 17,726 17,726 17,726
============== ============= ==============
</TABLE>
See accompanying notes to financial statements
FS-3
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance (deficit), January 1, 1995 $ (50,258) $ 11,550,604 $ 11,500,346
Net loss (18,335) (1,815,179) (1,833,514)
-------------- -------------- ---------------
Balance (deficit), December 31, 1995 (68,593) 9,735,425 9,666,832
Net loss (13,936) (1,379,664) (1,393,600)
-------------- -------------- ---------------
Balance (deficit), December 31, 1996 (82,529) 8,355,761 8,273,232
Net loss (14,406) (1,426,169) (1,440,575)
-------------- -------------- ---------------
Balance (deficit), December 31, 1997 $ (96,935) $ 6,929,592 $ 6,832,657
============== ============== ===============
</TABLE>
See accompanying notes to financial statements
FS-4
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,440,575) $ (1,393,600) $ (1,833,514)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 54,445 54,836 54,836
Equity in losses of limited partnerships 1,155,586 1,128,793 1,579,652
Change in other assets 2,706 26,757 (27,977)
Increase in accrued fees and expenses
due to General Partner and affiliates 132,623 137,040 158,082
-------------- -------------- ---------------
Net cash used in operating activities (95,215) (46,174) (68,921)
-------------- -------------- ---------------
Cash flows from investing activities:
Investments in limited partnerships (75,526) (555,000) (512,103)
Distributions from limited partnerships 22,399 11,319 4,039
Change in loans receivable 8,569 (6,569) (2,000)
-------------- -------------- ---------------
Net cash used in investing activities (44,558) (550,250) (510,064)
-------------- -------------- ---------------
Net decrease in cash and cash equivalents (139,773) (596,424) (578,985)
Cash and cash equivalents, beginning of
year 517,151 1,113,575 1,692,560
-------------- -------------- ---------------
Cash and cash equivalents, end of year $ 377,378 $ 517,151 $ 1,113,575
============== ============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid $ - $ - $ -
============== ============== ===============
Income taxes paid $ 800 $ 800 $ 800
============== ============== ===============
</TABLE>
See accompanying notes to financial statements
FS-5
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
Organization
- ------------
WNC California Housing Tax Credits II, L.P. (A California Limited Partnership)
(the "Partnership") was formed on September 13, 1990 under the laws of the State
of California. The Partnership was formed to invest primarily in other limited
partnerships which own and operate multifamily housing complexes that are
eligible for low income housing tax credits.
The general partner is WNC Tax Credit Partners, L.P. WNC & Associates, Inc. and
Wilfred N. Cooper are the general partners of WNC Tax Credit Partners, L.P. The
Cooper Revocable Trust owns 70% of the stock of WNC & Associates, Inc.
The Partnership shall continue in full force and effect until December 31, 2045
unless terminated prior to that date pursuant to the partnership agreement or
law.
The Partnership Agreement authorized the sale of up to 20,000 units of Limited
Partnership Interest at $1,000 per Unit ("Units"). The offering of Units
concluded in January 1993 at which time 17,726 Units, representing subscriptions
in the amount of $17,726,000, had been accepted. The General Partner has 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) and the General Partner has received a
subordinated disposition fee (as described in Note 3), any additional sale or
refinancing proceeds will be distributed 90% to the limited partners (in
proportion to their respective investments) and 10% to the General Partner.
The Partnership's investments in limited partnerships are subject to the risks
incident to the management and ownership of multifamily residential real estate,
and include the risks that neither the Partnership's investments nor the
apartment complexes owned by the limited partnerships will be readily
marketable. Additionally there can be no assurance that the Partnership will be
able to dispose of its interests in the 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
apartment complexes and the Partnership. The apartment complexes could be
subject to loss through foreclosure. In addition, each limited partnership is
subject to risks relating to environmental hazards which might be uninsurable.
Because the Partnership's ability to control its operations will depend on these
and other factors beyond the control of the General Partner and the general
partners of the limited partnerships, there can be no assurance that Partnership
operations will be profitable or that the anticipated housing tax credits will
be available to limited partners.
FS-6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
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 each limited partnership's results of operations and
for any distributions received. The limited partnership's accounting policies
are consistent with those of the Partnership. Costs incurred by the Partnership
in acquiring the investments in limited partnerships are capitalized as part of
the investment account and are being amortized over 30 years (see Note 2).
Losses from operating partnerships allocated to the Partnership are not
recognized to the extent that the investment balance would be adjusted below
zero.
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.
Concentration of Credit Risk
- ----------------------------
At December 31, 1997, the Partnership maintained cash balances at certain
financial institutions in excess of the federally insured maximum.
Other Assets
- ------------
Other assets include organization costs of $8,039 which are presented net of
accumulated amortization of $8,039 and $6,822 at December 31, 1997 and 1996,
respectively.
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. The General Partner 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 $2,389,519 as of
December 31, 1997 and 1996.
FS-7
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
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.
Net Loss Per Weighted Number of Limited Partner Units
- -----------------------------------------------------
Net loss per weighted number of limited partner units is computed by dividing
the limited partners' share of net loss by the weighted number of limited
partner units outstanding during the year.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of December 31, 1997, the Partnership has acquired limited partnership
interests in fifteen limited partnerships which own and operate apartment
complexes consisting of 777 apartment units. The respective general partners of
the limited partnerships manage the day to day operations of the limited
partnerships. Significant limited partner business decisions, as defined,
require Partnership approval. The Partnership, as a limited partner, is
generally entitled to 99% of the operating profits and losses of the limited
partnerships.
The Partnership's investment in limited partnerships as shown in the
accompanying balance sheets at December 31, 1997 and 1996 are approximately
$1,328,000 and $1,301,000, respectively, greater than the Partnership's equity
as shown in the limited partnerships' combined financial statements. This
difference is due to unrecorded losses, as discussed below, and acquisition,
selection and other costs related to the acquisition of the limited partnerships
which were 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).
The capitalized costs are being amortized over 30 years.
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 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.
FS-8
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
At December 31, 1997, the investment accounts in certain limited partnerships
have reached a zero balance. Consequently, the Partnership's share of losses
during the year ended December 31, 1997 amounting to approximately $156,000 have
not been recognized. As of December 31, 1997, the aggregate share of net losses
not recognized by the Partnership amounted to $156,000.
The following is a summary of the equity method activity of the investments in
limited partnerships for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Investments per balance sheet, beginning of year $ 8,447,282 $ 9,640,622
Capital contributed 75,526 -
Distributions (22,399) (11,319)
Equity in losses of limited partnerships (1,155,586) (1,128,793)
Amortization of capitalized acquisition costs and fees (53,228) (53,228)
---------------- -----------------
Investments per balance sheet, end of year $ 7,291,595 $ 8,447,282
================ =================
</TABLE>
The financial information from the individual financial statements of the
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:
<TABLE>
<CAPTION>
COMBINED CONDENSED BALANCE SHEETS
1997 1996
----------------- ------------------
<S> <C> <C>
ASSETS
Buildings and improvements, net of accumulated depreciation
for 1997 and 1996 of $6,533,000 and $5,257,000,
respectively $ 32,347,000 $ 33,546,000
Land 2,465,000 2,465,000
Other assets 2,627,000 2,436,000
---------------- -----------------
Total assets $ 37,439,000 $ 38,447,000
================ =================
</TABLE>
FS-9
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED CONDENSED BALANCE SHEETS - CONTINUED
1997 1996
----------------- ------------------
<S> <C> <C>
LIABILITIES
Mortgage and construction loans payable $ 28,603,000 $ 28,490,000
Other liabilities (including due to related parties
of $536,000 and $762,000 as of December 31,
1997 and 1996, respectively) 2,413,000 2,227,000
---------------- -----------------
Total liabilities 31,016,000 30,717,000
---------------- -----------------
PARTNERS' CAPITAL
WNC California Housing Tax Credits II, L.P. 5,964,000 7,146,000
Other partners 459,000 584,000
---------------- -----------------
Total partners' capital 6,423,000 7,730,000
---------------- -----------------
$ 37,439,000 $ 38,447,000
================ =================
</TABLE>
<TABLE>
<CAPTION>
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1997 1996 1995
--------------- ---------------- ----------------
<S> <C> <C> <C>
Total revenues $ 3,021,000 $ 3,081,000 $ 2,649,000
-------------- -------------- ---------------
Expenses:
Operating expenses 2,137,000 2,043,000 1,969,000
Interest expense 935,000 875,000 992,000
Depreciation and amortization 1,276,000 1,305,000 1,285,000
-------------- -------------- ---------------
Total expenses 4,348,000 4,223,000 4,246,000
-------------- -------------- ---------------
Net loss $ 1,327,000 $ (1,142,000) $ (1,597,000)
============== ============== ===============
Net loss allocable to the Partnership $ 1,312,000 $ (1,129,000) $ (1,580,000)
============== ============== ===============
</TABLE>
FS-10
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
Certain limited partnerships have incurred significant operating losses and have
working capital deficiencies. In the event these limited partnerships continue
to incur significant operating losses, additional capital contributions by the
Partnership may be required to sustain the operations of such limited
partnerships. If additional capital contributions are not made when they are
required, the Partnership's investment in certain of such 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 Partner or its affiliates for the following items:
Acquisition fees equal to 9% of the gross proceeds from the sale of
partnership units as compensation to the General Partner for services
rendered to the Partnership in connection with the acquisition of
limited partnerships. As of December 31, 1997 and 1996, acquisition
fees of $1,595,340 have been incurred and included in the
Partnership's investment in limited partnerships. Accumulated
amortization amounted to $298,204 and $245,028 as of December 31, 1997
and 1996, respectively.
Reimbursement of costs incurred by an affiliate of the General Partner
in connection with the acquisition of limited partnerships. These
reimbursements have not exceeded 1.7% of the gross proceeds. As of
December 31, 1997 and 1996, acquisition costs of $1,520 have been
incurred and included in the Partnership's investment in partnerships.
Accumulated amortization was insignificant for 1997 and 1996.
An annual management fee equal to 0.5% of the invested assets of the
limited partnerships, including the Partnership's allocable share of
the mortgages. Management fees of $210,084, $209,807 and $199,751 were
incurred for 1997, 1996 and 1995, respectively, of which $75,000,
$75,000 and $43,000 were paid in 1997, 1996 and 1995, respectively.
A subordinated disposition fee in an amount equal to 1% of the sales
price of any property sold. Payment of this fee to the General Partner
is subordinated to the limited partners who receive a 6% preferred
return (as defined in the Partnership Agreement) and is payable only
if the General Partner or its affiliates render services.
FS-11
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1997, 1996 and 1995
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
The accrued fees and expenses due to General Partner and affiliates consist of
the following:
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Asset management fee payable $ 834,863 $ 699,779
Reimbursement for expenses paid by an affiliate 1,453 3,914
---------------- -----------------
$ 836,316 $ 703,693
================ =================
</TABLE>
NOTE 4 - INCOME TAXES
- ---------------------
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
FS-12
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NONE
Item 10. Directors and Executive Officers of the Registrant
Directors of 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 Associates 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. Substantially all of the shares of Associates are owned by
Wilfred N. Cooper, Sr., through the Cooper Revocable Trust, and John B. Lester,
Jr., through the Lester Family Trust.
WILFRED N. COOPER, SR., age 67, has been the principal shareholder and a
Director of WNC & ASSOCIATES, INC. since its organization in 1971, of SHELTER
RESOURCE CORPORATION since its organization in 1981 and of WNC RESOURCES, INC.
from its organization in 1988 through its acquisition by WNC & ASSOCIATES, INC.
in 1991, serving as President of those companies until 1992 and as Chief
Executive Officer since 1992, and has been a Director of WNC CAPITAL CORPORATION
since its organization. He is also a general partner with WNC & ASSOCIATES, INC.
in WNC FINANCIAL GROUP, L.P. and WNC TAX CREDIT PARTNERS, L.P. During 1970 and
1971 he was a 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. Previously, he had responsibility for new business
development including factory-built housing evaluation and project management in
urban planning and development. Mr. Cooper is a Director of the Executive
Committee of the National Association of Home Builders (NAHB) and a past
Chairman of the NAHB's Rural Housing Council, a Director of the National Housing
Conference, a Director of the Affordable Housing Tax Credit Coalition, a past
President of the California Council of Affordable Housing (CCAH) (formerly Rural
Builders Council of California), and a past President of Southern California
Chapter II of the Real Estate Syndication and Securities Institute (RESSI) of
the National Association of Realtors (NAR). Mr. Cooper graduated from Pomona
College in 1956 with a Bachelor of Arts degree.
JOHN B. LESTER, JR., age 64, has been a shareholder, a Director and Secretary of
WNC & ASSOCIATES, INC. since 1986, Executive Vice President from 1986 to 1992,
and President and Chief Operating Officer since 1992, and has been a Director of
WNC CAPITAL CORPORATION since its organization. He was a shareholder, Executive
Vice President, Secretary and a Director of WNC RESOURCES, INC. from 1988
through its acquisition by WNC & ASSOCIATES, INC. in 1991. From 1973 to 1986 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 is a former
Director of the Los Angeles Chapter of the Associated General Contractors of
California. His responsibilities at WNC & ASSOCIATES, INC. include property
acquisitions and company operations. Mr. Lester graduated from the University of
Southern California in 1956 with a Bachelor of Science degree in Mechanical
Engineering.
12
<PAGE>
DAVID N. SHAFER, age 45, has been a Director of WNC & ASSOCIATES, INC. since
1997, a Senior Vice President since 1992, and General Counsel since 1990, and
served as Asset Management Director from 1990 to 1992, and has been a Director
and Secretary of WNC Management, Inc. since its organization. Previously he was
employed as an associate attorney by the law firms of Morinello, Barone, Holden
& Nardulli from 1987 until 1990, Frye, Brandt & Lyster from 1986 to 1987 and
Simon and Sheridan from 1984 to 1986. Mr. Shafer is a Director and President of
CCAH, a member of NAHB's Rural Housing Council, a past President of Southern
California Chapter II of RESSI, a past Director of the Council of Affordable and
Rural Housing and Development 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 and from the University of San Diego in 1986 with a Master
of Law degree in Taxation.
WILFRED N. COOPER, JR., age 35, has been employed by WNC & ASSOCIATES, INC.
since 1988 and has been a Director since 1997 Executive Vice President since
1998, and a Senior Vice President since 1992. Mr. Cooper heads the Acquisition
Originations department at WNC, has been President of, and a registered
principal with, WNC CAPITAL CORPORATION, a member firm of the NASD, since its
organization, and has been a Director of WNC Management Inc. since its
organization. Previously, he was employed as a government affairs assistant by
Honda North America from 1987 to 1988, and as a legal assistant with respect to
Federal legislative and regulatory matters by the law firm of Schwartz, Woods
and Miller from 1986 to 1987. Mr. Cooper is an alternate director and member of
NAHB's Rural Housing Council and serves as Chairman of its Membership Committee.
Mr. Cooper graduated from The American University in 1985 with a Bachelor of
Arts degree.
THEODORE M. PAUL, age 42, has been Vice President - Finance of WNC & ASSOCIATES,
INC. since 1992 and Chief Financial Officer since 1990, and has been a Director
and Chief Financial Officer of WNC Management Inc. since its organization.
Previously, he was a Vice President and Chief Financial Officer of National
Partnership Investments Corp., a sponsor and general partner of syndicated
partnerships investing in affordable rental housing qualified for tax credits,
from 1986 until 1990, and was employed as an associate by the accounting firms
of Laventhol & Horwath, during 1985, and Mann & Pollack Accountants, from 1979
to 1984. Mr. Paul is a member of the California Society of Certified Public
Accountants and the American Institute of Certified Public Accountants. His
responsibilities at WNC & ASSOCIATES, INC. include supervision of investor
partnership accounting and tax reporting matters and monitoring the financial
condition of the Local Limited Partnerships in which the Partnership will
invest. Mr. Paul graduated from the University of Illinois in 1978 with a
Bachelor of Science degree and is a Certified Public Accountant in the State of
California.
THOMAS J. RIHA, age 43, has been Vice President - Asset Management of WNC &
ASSOCIATES, INC. since 1994, and has been a Director and Chief Executive Officer
of WNC Management Inc. since its organization. He has more than 17 years'
experience in commercial and multi-family real estate investment and management.
Previously, Mr. Riha was employed by Trust Realty Advisor, a real estate
acquisition and management company, from 1988 to 1994, last serving as Vice
President - Operations. His responsibilities at WNC & ASSOCIATES, INC. include
monitoring the operations and financial performance of, and regulatory
compliance by, properties in the WNC portfolio. 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 in the State of California and a member of the
American Institute of Certified Public Accountants.
13
<PAGE>
SY P. GARBAN, age 52, has 20 years' experience in the real estate securities and
syndication industry. He has been associated with WNC & ASSOCIATES, INC., since
1989, serving as National Sales Director through 1992 and as Vice President -
National Sales since 1992. Previously, he was employed as Executive Vice
President by MRW, Inc., Newport Beach, California from 1980 to 1989, 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.
CARL FARRINGTON, age 55, has been associated with WNC & ASSOCIATES, INC. since
1993, and has served as Director - Originations since 1994. Mr. Farrington has
more than 12 years' experience in finance and real estate acquisitions.
Previously, he served as Acquisitions Director for The Arcand Company from 1991
to 1993, and as Treasurer and Director of Finance and Administrator for Polytron
Corporation from 1988 to 1991. Mr. Farrington is a member and Director of the
Council of Affordable and Rural Housing and Development. Mr. Farrington
graduated from Yale University with a Bachelor of Arts degree in 1966 and from
Dartmouth College with a Master of Business Administration in 1970.
DAVID TUREK, age 43, has been Director - Originations of WNC & ASSOCIATES, INC.
since 1996. He has 23 years' experience in real estate finance and acquisitions.
Previously, from 1995 to 1996 Mr. Turek served as a consultant for a national
Low Income Housing Credit sponsor where he was responsible for on-site
feasibility studies and due diligence analyses of Low Income Housing Credit
properties, from 1992 to 1995 he served as Executive Vice President for Levcor,
Inc., a multi-family development company, and from 1990 to 1992 he served as
Vice President for the Paragon Group where he was responsible for Low Income
Housing Credit development activities. Mr. Turek graduated from Southern
Methodist University in 1976 with a Bachelor of Business Administration degree.
N. PAUL BUCKLAND, age 36, has been employed by WNC & ASSOCIATES, INC. since 1994
and currently serves as Vice President Acquisitions. He has 11 years' experience
in analysis pertaining to the development of multi-family and commercial
properties. Previously, from 1986 to 1994 he served on the development team of
the Bixby Ranch which constructed more than 700 apartment units and more than
one million square feet of "Class A" office space in California and neighboring
states, and from 1984 to 1986 he served 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.
MICHELE M. TAYLOR, age 43, has been employed by WNC & ASSOCIATES, INC. since
1986, serving as a paralegal and office manager, and currently is the Investor
Services Director. Previously she was self-employed between 1982 and 1985 in
non-financial services activities and from 1978 to 1981 she was employed as a
paralegal by a law firm which specialized in real estate limited partnership
transactions. Ms. Taylor graduated from the University of California, Irvine in
1976 with a Bachelor of Arts degree.
14
<PAGE>
THERESA I. CHAMPANY, age 40, has been employed by WNC & ASSOCIATES, INC. since
1989 and currently is the Marketing Services Director and a registered principal
with WNC CAPITAL CORPORATION. Previously, she was employed as Manager of
Marketing Services by August Financial Corporation from 1986 to 1989 and as
office manager and Assistant to the Vice President of Real Estate Syndications
by McCombs Securities Co., Inc. from 1979 to 1986. Ms. Champany attended
Manchester (Conn.) Community College from 1976 to 1978.
KAY L. COOPER, age 61, has been an officer and Director of WNC & ASSOCIATES,
INC. since 1971 and of WNC RESOURCES, INC. from 1988 through its acquisition by
WNC & ASSOCIATES, INC. in 1991. Mrs. Cooper has also been the sole proprietor of
Agate 108, a manufacturer and retailer of home accessory products, since 1975.
She is the wife of Wilfred N. Cooper, Sr., the mother of Wilfred N. Cooper, Jr.
and the sister of John B. Lester, Jr. Mrs. 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 for the following fees:
(a) Organization and Offering Expenses. The Partnership paid the General Partner
or its affiliates as of December 31, 1997 $2,397,558, consisting of organization
costs, commissions and other fees and expenses of the Partnership's offering of
Units of $8,039, $1,418,080 and $971,439, respectively. Of the total paid to the
General Partner or its affiliates, all of the amount of $2,397,588 was paid
(reallowed) to unaffiliated persons participating in the Partnership's offering
or rendering other services in connection with the Partnership's offering.
(b) Acquisition fees in an amount equal to 9% of the gross proceeds of the
Partnership's offering ("Gross Proceeds"). Through December 31, 1997, the
aggregate amount of acquisition fees of $1,595,340 have been paid to the General
Partner or its affiliates.
(c) The Partnership reimbursed the General Partner or its affiliates as of
December 31, 1997 for acquisition expenses expended by such persons on behalf of
the Partnership in the amounts $1,520.
(d) An annual asset management fee in an amount equal to 0.5% of invested assets
(the sum of the Partnership's Investment in Local Limited Partnership Interests
and the Partnership's allocable share of the amount of the mortgage loans on and
other debts related to, the Apartment Complexes owned by such Local Limited
Partnerships.). Fees of $210,084, $209,807 and $199,751 were incurred for 1997,
1996, and 1995, respectively. The Partnership paid the General Partner or its
affiliates $75,000, $75,000 and $43,000 of those fees in 1997, 1996 and 1995,
respectively.
15
<PAGE>
(e) A subordinated disposition fee in an amount equal to 1% of the sale price
received in connection with the sale or disposition of an Apartment Complex or
Local Limited Partnership Interest. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital contributions
and payment of the Preferred Return on investment to the Limited Partners.
"Preferred Return" means an annual, cumulative but not compounded, "return" to
the Limited Partners (including Low Income Housing Credits) as a class on their
adjusted capital contributions commencing for each Limited Partner on the last
day of the calendar quarter during which the Limited Partner's capital
contribution is received by the Partnership, calculated at the following rates:
(i) 16% through December 31, 2001, and (ii) 6% for the balance of the
Partnerships term. No disposition fees have been paid.
(f) The General Partner was allocated federal and California Housing Tax Credits
as follows:
1997 1996
----- -------
Federal $20,900 $20,798
California 4,918 6,561
------- -------
Total $25,188 $27,359
======= =======
Item 12. Security Ownership of Certain Beneficial Owners and Management
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.
Security Ownership of Management
- --------------------------------
(a) Security Ownership of Certain Beneficial Owners
No person is known to own beneficially in excess of 5% of the outstanding
Limited Partnership Interests.
(b) Security Ownership of Management
Neither the General Partner, its affiliates nor any of the officers or
directors of Associates or its affiliates own directly or beneficially any
limited partnership interests in the Partnership.
(c) Changes in Control
The management and control of the General Partners may be changed at any time in
accordance with their respective 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.
16
<PAGE>
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 anytime remove the General
Partner of the Partnership and elect a successor General Partner
Item 13. Certain Relationships and Related Transactions
All of the Partnership's affairs are managed by the General Partner, through
Associates. The transactions with the General Partner and Associates are
primarily in the form of fees paid by the Partnership for services rendered to
the Partnership, as discussed in Item 11 and in the notes to the accompanying
financial statements.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Financial Statements:
Report of independent public accountants.
Balance sheet as of December 31, 1997 and 1996.
Statements of Operations for the years ended December 31, 1997, 1996, and 1995.
Statement of Partners' Equity for the years ended December 31, 1997, 1996, and
1995.
Statements of Cash Flows for the years ended December 31, 1997, 1996, and 1995.
Notes to Financial Statements.
Financial Statement Schedules:
N/A
Exhibits
(3): Articles of incorporation and by-laws: The registrant is not incorporated.
The Partnership Agreement is included as Exhibit B to the Prospectus, filed as
Exhibit 28.1 to Form 10 K for the year ended December 31, 1992.
Material contracts
10.1 Amended and Restated Agreement of Limited Partnership Orland Associates
dated June 15, 1991 filed as exhibit 10.1 to Form 10-K dated December 31, 1992
is hereby incorporated herein by reference as exhibit 10.1.
17
<PAGE>
10.2 Ukiah Terrace a California Limited Partnership, Amended and Restated
Agreement of Limited Partnership dated June 15, 1991 filed as exhibit 10.2 to
Form 10-K dated December 31, 1992 is hereby incorporated herein by reference as
exhibit 10.2.
10.3 Amended and Restated Agreement of Limited Partnership Northwest Tulare
Associates dated July 3, 1991 filed as exhibit 10.3 to Form 10-K dated December
31, 1992 is hereby incorporated herein by reference as exhibit 10.3.
10.4 Second Amended and Restated Agreement of Limited Partnership Yucca Warren
Vista, Ltd. dated July 15, 1991 filed as exhibit 10.4 to Form 10-K dated
December 31, 1992 is hereby incorporated herein by reference as exhibit 10.4.
10.5 Amended and Restated Agreement of Limited Partnership of Woodlake Garden
Apartments dated July 17, 1991 filed as exhibit 10.5 to Form 10-K dated December
31, 1992 is hereby incorporated herein by reference as exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of 601 Main Street
Investors dated December 22, 1991 filed as exhibit 10.6 to Form 10-K dated
December 31, 1992 is hereby incorporated herein by reference as exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of ADI Development
Partners dated January 2, 1992 filed as exhibit 10.7 to Form 10-K dated December
31, 1992 is hereby incorporated herein by reference as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Bayless Garden
Apartment Investors dated January 2, 1992 filed as exhibit 10.8 to Form 10-K
dated December 31, 1992 is hereby incorporated herein by reference as exhibit
10.8.
10.9 Third Amended and Restated Agreement of Limited Partnership of Twin Pines
Apartment Associates dated January 2, 1992 filed as exhibit 10.9 to Form 10-K
dated December 31, 1992 is hereby incorporated herein by reference as exhibit
10.9.
10.10 Amended and Restated Agreement of Limited Partnership of Blackberry Oaks,
Ltd. dated January 15, 1992 filed as exhibit 10.10 to Form 10-K dated December
31, 1992 is hereby incorporated herein by reference as exhibit 10.10.
10.11 Amended and Restated Agreement of Limited Partnership of Mecca Apartments
II dated January 15, 1992 filed as exhibit 10.11 to Form 10-K dated December 31,
1992 is hereby incorporated herein by reference as exhibit 10.11.
10.12 Amended and Restated Agreement of Limited Partnership of Silver Birch
Limited Partnership dated November 23, 1992 filed as exhibit 10.12 to Form 10-K
dated December 31, 1992 is hereby incorporated herein by reference as exhibit
10.12.
10.13 Amended and Restated Agreement of Limited Partnership of Jacob's Square
dated January 2, 1992 filed as exhibit 10.1 to Form 10-K dated December 31, 1993
is hereby incorporated herein by reference as exhibit 10.13.
10.14 Amended and restated limited partnership agreement of Nevada Meadows, A
California Limited Partnership as exhibit 10.2 to Form 10-K dated December 31,
1993 is hereby incorporated herein by reference as exhibit 10.14.
Statements of Operations for 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994
Notes to financial statements Statement of Partners Equity for December 31, 1997
and 1996
REPORTS ON 8-K.
No reports on Form 8-K were filed during the fourth quarter ended December 31,
1997.
18
<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 II, L.P.
By: WNC Tax Credit Partners, L.P. General Partner
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr.
- -----------------------------------------------------
John B. Lester, Jr. President of WNC & Associates, Inc.
Date: April 14, 1998
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice-President, Finance of WNC & Associates, Inc.
Date: April 14, 1998
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: April 14, 1998
By: /s/ John B. Lester, Jr.
- -----------------------------------------------------
John B. Lester, Jr. Director of WNC & Associates, Inc.
Date: April 14, 1998
By: /s/ David N. Shafer
- -----------------------------------------------------
David N. Shafer Director of WNC & Associates, Inc.
Date: April 14, 1998
19
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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0
0
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