FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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: 0-23908
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
California 33-0531301
(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
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.
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
September 30, 1999 and March 31, 1999...............................3
Statements of Operations
For the three and six months ended September 30, 1999 and 1998.....4
Statement of Partners' Equity
For the six months ended September 30, 1999.........................5
Statements of Cash Flows
For the six months ended September 30, 1999 and 1998................6
Notes to Financial Statements...........................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................13
Item 3. Quantitative and Qualitative Disclosures About Market Risks........14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................14
Item 6. Exhibits and Reports on Form 8-K...................................14
Signatures ................................................................15
2
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ --------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 506,519 $ 509,695
Investment in limited partnerships - Note 2 8,675,580 9,164,197
------------------- ----------------
$ 9,182,099 $ 9,673,892
=================== ================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships -Note 4 $ 16,836 $ 16,836
Accrued fees and expenses due to
general partner and affiliates - Note 3 640,861 552,257
------------------- ----------------
657,697 569,093
------------------- ----------------
Partners' equity (deficit):
General partner (84,887) (79,083)
Limited partners (30,000 units
authorized, 18,000 units issued
and outstanding) 8,609,289 9,183,882
------------------- ----------------
Total partners' equity 8,524,402 9,104,799
------------------- ----------------
$ 9,182,099 $ 9,673,892
=================== ================
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------------------------- --------------------------------
Three Six Three Six
Months Months Months Months
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income $ 5,059 $ 10,046 $ 5,261 $ 10,173
----------- ------------ ----------- -----------
Operating expenses:
Amortization 15,116 30,232 15,116 30,232
Asset management fees - Note 3 45,346 90,692 46,542 93,083
Legal and accounting 971 10,602 - 5,250
Other 6,487 4,867 2,724 16,364
----------- ------------ ----------- -----------
Total operating expenses 67,920 136,393 64,382 144,929
----------- ------------ ----------- -----------
Loss from operations (62,861) (126,347) (59,121) (134,756)
Equity in loss from
limited partnerships (224,354) (454,050) (244,400) (489,863)
----------- ------------ ----------- -----------
Net loss $ (287,215) $ (580,397) $ (303,521) $ (624,619)
=========== ============ =========== ===========
Net loss allocated to:
General partner $ (2,872) $ (5,804) $ (3,035) $ (6,246)
=========== ============ =========== ===========
Limited partners $ (284,343) $ (574,593) $ (300,486) $ (618,373)
=========== ============ =========== ===========
Net loss per limited
partner unit (18,000 units
issued and outstanding) $ (16) $ (32) $ (17) $ (83)
=========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Six Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Partners' equity (deficit), March 31, 1999 $ (79,083) $ 9,183,882 $ 9,104,799
Net loss for the six months ended
September 30, 1999 (5,804) (574,593) (580,397)
-------------- ------------- -------------
Partners' equity (deficit), September 30, 1999 $ (84,887) $ 8,609,289 $ 8,524,402
============== ============= =============
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
---- ----
Cash flows from operating activities:
Net loss $ (580,397) $ (624,619)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in loss from limited partnerships 454,050 489,863
Amortization 30,232 30,232
Asset management fees 90,692 93,083
Accrued fees and expenses due to
general partner and affiliates (2,088) (509)
------------ -----------
Net cash used in operating activities (7,511) (11,950)
------------ -----------
Cash flows from investing activities:
Distributions from limited partnerships 4,335 3,838
------------ -----------
Net cash provided in investing activities 4,335 3,838
------------ -----------
Net decrease in cash and cash equivalents (3,176) (8,112)
------------ -----------
Cash and cash equivalents, beginning of period 509,695 563,949
------------ -----------
Cash and cash equivalents, end of period $ 506,519 $ 555,837
============ ===========
See accompanying notes to financial statements
6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's Annual Report on Form 10-K for the year ended March 31, 1999.
In the opinion of the Partnership, the unaudited financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of September 30, 1999 and the results
of operations and changes in cash flows for the six months then ended.
Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year end. The results of operations for the interim period
presented are not necessarily indicative of the results for the entire year.
Organization
WNC California Housing Tax Credits III, L.P. a California Limited Partnership
(the "Partnership"), was formed on October 5, 1992 under the laws of the state
of California and began operations on July 19, 1993. 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 credits. The local
general partners (the "Local General Partners") of each Local Limited
Partnership retain responsibility for maintaining, operating and managing the
Housing Complex.
The general partner is WNC Tax Credit Partners III, L.P. (the "General
Partner"). WNC & Associates, Inc. ("WNC") is the general partner of WNC Tax
Credit Partners III, L.P. Wilfred N. Cooper Sr., through the Cooper Revocable
Trust owns 66.8% of the outstanding stock of WNC. 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 WNC.
The Partnership Agreement authorized the sale of up to 30,000 units at $1,000
per Unit ("Units"). The offering of Units concluded in July 1994 at which time
17,990 Units, representing subscriptions in the amount of $17,990,000, had been
accepted. During 1995, an additional 10 units amounting to $10,000 was collected
on subscriptions accepted and previously deemed uncollectible. The General
Partner has a 1% interest in operating profits and losses, taxable income and
losses, cash available for distribution from the Partnership and tax credits of
the Partnership. The limited partners will be allocated the remaining 99% of
these items 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 proceeds
equal to its capital contribution and a subordinated disposition fee (as
described in Note 4) from the remainder, 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.
7
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local 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 make 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 on 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 account and are being amortized over 30 years.
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 partners' capital and amounted to $2,366,564 at the end of all
periods presented.
8
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 1 - 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.
Cash and Cash Equivalents
The Partnership considers 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 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.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership had acquired limited partnership
interests in eighteen Local Limited Partnerships, each of which owns one Housing
Complex consisting of an aggregate of 635 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, taxable income and
losses and tax credits of the Limited Partnerships.
Equity in losses of the Local 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.
9
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIP, CONTINUED
The following is a summary of the equity method activity of the investment in
Local Limited Partnerships for the six months ended September 30, 1999 and the
three months ended March 31, 1999:
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Investment balance, beginning of period $ 9,164,197 $ 9,415,032
Equity in loss from limited partnership (454,050) (229,696)
Distributions from limited partnership (4,335) (6,023)
Amortization of capitalized acquisition costs (30,232) (15,116)
------------------ --------------
Investment balance, end of period $ 8,675,580 $ 9,164,197
================== ==============
</TABLE>
Selected operating information from the financial statements of the seventeen
twelve limited partnerships with operations and three limited partnerships with
operations for the period ended September 30 is presented below:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Total revenue $ 1,490,000 $ 1,449,000
-------------------- ------------------
Interest expense 474,000 507,000
Depreciation 594,000 597,000
Operating expenses 900,000 859,000
-------------------- ------------------
Total expenses 1,968,000 1,963,000
-------------------- ------------------
Net loss $ (478,000) $ (514,000)
==================== ==================
Net loss allocable to the Partnership $ (473,200) $ (508,900)
==================== ==================
Net loss recorded by the Partnership $ (454,050) $ (489,863)
==================== ==================
</TABLE>
NOTE 3 - RELATED PARTY TRANSACTIONS
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:
(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 Partnership Interests and the Partnership's allocable share of the
amount of the mortgage loans on and other debts related to, the Housing
Complexes owned by such Local Limited Partnerships. Fees of $90,692 and
10
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS, CONTINUED
$93,083 were incurred during the six months ended September 30, 1999 and
1998, respectively. The Partnership paid the General Partner or its
affiliates $0 of those fees during the six months ended September 30, 1999
and 1998.
(b) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of a Housing 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 Return on
Investment to the Limited Partners. "Return on Investment" 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, 2003, and (ii) 6% for the balance of the Partnerships
term. No disposition fees have been paid.
(c) Interest in Partnership. The General Partner receives 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$24,000 for the General Partner for the year ended December 31, 1998. The
General Partner is also entitled to receive 1% of cash distributions. There
were no distributions of cash to the General Partner during the six months
ended September 30, 1999 or 1998.
The "accrued fees and expenses due to general partner and affiliates" presented
on the balance sheets consists of the following:
September 30, 1999 March 31, 1999
------------------ --------------
Asset management fee payable $ 639,586 $ 548,894
Reimbursement for expenses
paid by an affiliate 1,275 3,363
------------------ --------------
$ 640,861 $ 552,257
================== ==============
NOTE 4 - PAYABLE TO LIMITED PARTNERSHIPS
Payable to limited partnerships at September 30, 1999 represents amounts which
are due at various times based on conditions specified in the respective local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited partnership achieving certain operating
benchmarks, and are generally expected to be paid within two years of the
Partnership's initial investment.
NOTE 5 - INCOME TAXES
No provisions for income taxes has been recorded in the financial statements or
any liabilities for income taxes, an obligation of the partners of the
Partnership.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Condition
The Partnership's assets at September 30, 1999 consisted primarily of $507,000
in cash and aggregate investments in the eighteen Local Limited Partnerships of
$8,676,000. Liabilities at September 30, 1999 primarily consisted of $640,000 of
accrued annual management fees due to the General Partners.
Results of Operations
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998. The Partnership's net loss for the three months ended September 30,
1999 was $(287,000), reflecting a decrease of $16,000 from the net loss
experienced for the three months ended September 30, 1998. The decline in net
loss is primarily due to equity in losses from limited partnerships which
declined by $20,000 to $(224,000) for the three months ended September 30, 1999
from $(244,000) for the three months ended September 30, 1998. This decrease was
a result of the Partnership not recognizing certain losses of the Local Limited
Partnerships. The investments in such Local Limited Partnerships had reached $0
at September 30, 1999. Since the Partnership's liability with respect to its
investments is limited, losses in excess of investment are not recognized. Along
with the decrease in equity in losses from limited partnerships there was a
increase in loss from operations of $4,000 for the three months ended September
30, 1999 to $(63,000), from $(59,000) for the three months ended September 30,
1998, due to a comparable increase in operating expense allocations.
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998. The Partnership's net loss for the six months ended September 30, 1999 was
$(580,000), reflecting a decrease of $45,000 from the net loss experienced for
the six months ended September 30, 1998. The decline in net loss is primarily
due to equity in losses from limited partnerships which declined by $36,000 to
$(454,000) for the six months ended September 30, 1999 from $(490,000) for the
tsix months ended September 30, 1998. This decrease was a result of the
Partnership not recognizing certain losses of the Local Limited Partnerships.
The investments in such Local Limited Partnerships had reached $0 at September
30, 1999. Since the Partnership's liability with respect to its investments is
limited, losses in excess of investment are not recognized. Along with the
decrease in equity in losses from limited partnerships there was a decrease in
loss from operations of $9,000 for the six months ended September 30, 1999 to
$(126,000), from $(135,000) for the six months ended September 30, 1998, due to
a comparable increase in operating expense allocations.
Cash Flows
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998. Net cash used in during the six months ended September 30, 1999 was
$(3,000) compared to a net decrease in cash for the six months ended September
30, 1998 of $(8,000). The change was due primarily to a decrease in operating
costs of $4,000 offset by an increase in distributions from limited partnerships
of $1,000.
During the six months ended September 30, 1999 and 1998, accrued payables, which
consist primarily of related party management fees due to the General Partner,
increased by $91,000 and $93,000, respectively. 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.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 1999, to be sufficient to meet all currently foreseeable
future cash requirements.
12
<PAGE>
Impact of Year 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology (IT) Systems. The Partnership relies on the IT systems of
WNC, its general partner. IT systems include computer hardware and software used
to produce financial reports and tax return information. This information is
then used to generate reports to investors and regulatory agencies, including
the Internal Revenue Service and the Securities and Exchange Commission. The IT
systems of WNC are year 2000 compliant.
Non-IT Systems. The Partnership also relies on the non-IT systems of WNC. Non-IT
systems include machinery and equipment such as telephones, voice mail and
electronic postage equipment. Except for one telephone system, the non-IT
systems of WNC are year 2000 compliant. The one telephone system will require
the replacement of one computer and one software application, both of which will
be completed on or before December 15, 1999.
Service Providers. WNC also relies on the IT and non-IT systems of service
providers. Service providers include utility companies, financial institutions,
telecommunications carriers, municipalities, and other outside vendors. WNC has
obtained verbal assurances from its material service providers (electrical power
provider, financial institutions and telecommunications carriers) that their IT
and non-IT systems are year 2000 compliant. There can be no assurance that this
compliance information is correct. There also can be no assurance that the
systems of other, less-important service providers and outside vendors will be
year 2000 compliant.
Costs to Address Year 2000 Issues
The cost to address year 2000 issues for WNC has been less than $20,000. The
cost to replace the telephone system noted above will be less than $5,000. The
cost to deal with potential year 2000 issues of other outside vendors cannot be
estimated at this time.
Risk of Year 2000 Issues
The most reasonable and likely result from non-year 2000 compliance of systems
of the service providers noted above will be the disruption of normal business
operations for WNC. This disruption would, in turn, lead to delays in performing
reporting and fiduciary responsibilities on behalf of the Partnership. The worst
case scenario would be the replacement of a service provider. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Local Limited Partnerships
Status of Readiness
WNC is in the process of obtaining year 2000 certifications from each Local
General Partner of each Local Limited Partnership. Those certifications will
represent to the Partnership that the IT and non-IT systems critical to the
operation of the Housing Complexes and investor reporting to the Partnership are
year 2000 compliant. These certifications will also represent to the Partnership
that the IT and non-IT systems of property management companies, independent
accountants, electrical power providers, financial institutions and
telecommunications carriers used by the Local Limited Partnership are year 2000
compliant.
There can be no assurance that the representations in the certifications will be
correct. There also can be no assurance that the systems of other,
less-important service providers and outside vendors, upon which the Local
Limited Partnerships rely, will be year 2000 compliant.
13
<PAGE>
Costs to Address Year 2000 Issues
There will be no cost to the Partnership as a result of assessing year 2000
issues for the Local Limited Partnerships. The cost to deal with potential year
2000 issues of the Local Limited Partnerships cannot be estimated at this time.
Risk of Year 2000 Issues
There may be Local General Partners who indicate that they or their property
management company are not year 2000 compliant and do not have plans to become
year 2000 compliant before the end of 1999. There may be other Local General
Partners who are unwilling to respond to the certification request. The most
likely result of either non-compliance or failure to respond will be the removal
and replacement of the property management company and/or the Local General
Partner with year 2000 compliant operators.
Despite the efforts to obtain certifications, there can be no assurance that the
Partnership will be unaffected by year 2000 issues. The most reasonable and
likely result from non-year 2000 compliance will be the disruption of normal
business operations for the Local Limited Partnerships, including but not
limited to the possible failure to properly collect rents and meet their
obligations in a timely manner. This disruption would, in turn, lead to delays
by the Local Limited Partnerships in performing reporting and fiduciary
responsibilities on behalf of the Partnership. The worst-case scenario would
include the initiation of foreclosure proceedings on the property by mortgage
debt holders. Under these circumstances, WNC or its affiliates will take actions
necessary to minimize the risk of foreclosure, including the removal and
replacement of a Local General Partner by the Partnership. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
NONE
Part II. Other Information
Item 1. Legal Proceedings
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
14
<PAGE>
Pursuant to the requirements 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 III, L.P.
By: WNC California Tax Credit Partners III General Partner
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., President
WNC & Associates, Inc.
Date: November 17, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson, Vice-President - Chief Financial Officer
WNC & Associates, Inc.
Date: November 17, 1999
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000892997
<NAME> WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 506,519
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 506,519
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,182,099
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,524,402
<TOTAL-LIABILITY-AND-EQUITY> 9,182,099
<SALES> 0
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<INCOME-CONTINUING> (580,397)
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<CHANGES> 0
<NET-INCOME> (580,397)
<EPS-BASIC> (32)
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</TABLE>
