FORM 10-K/A
AMENDMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
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 33-0563307
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
1
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
2
<PAGE>
PART I.
Item 1. Business
Organization
WNC California Housing Tax Credits III, L.P. ("CHTC III" or the "Partnership")
is a California limited partnership formed under the laws of the State of
California on October 5, 1992. The Partnership was formed to acquire limited
partnership interests in other limited partnerships or limited liability
companies ("Local Limited Partnerships") which own multifamily housing complexes
that are eligible for low-income housing federal and, in certain cases,
California income tax credits ("Low Income Housing Credits").
The general partner of the Partnership is WNC Tax Credit Partners III, L.P. (the
"General Partner" or "TCP III"). The general partner of TCP III is WNC &
Associates, Inc. ("Associates"). Wilfred N. Cooper, Sr., through the Cooper
Revocable Trust, owns 66.8% of the outstanding stock of Associates. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of Associates.
The business of the Partnership is conducted primarily through Associates, as
TCP III and the Partnership have no employees of their own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission, on February 17, 1993, the Partnership commenced a public offering of
30,000 Units of Limited Partnership Interest ("Units") at a price of $1,000 per
Unit. As of the close of the offering on July 22, 1994, a total of 18,000 Units
representing $18,000,000 had been sold. Holders of Units are referred to herein
as "Limited Partners."
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended by Supplement No. 1 thru Supplement No. 9 thereto (the
"Partnership Agreement"), will be able to be accomplished promptly at the end of
the 15-year period. If a Local Limited Partnership is unable to sell its Housing
Complex, it is anticipated that the local general partner ("Local General
Partner") will either continue to operate such Housing Complex or take such
other actions as the Local General Partner believes to be in the best interest
of the Local Limited Partnership. Notwithstanding the preceding, circumstances
beyond the control of the General Partner or the Local General Partners may
occur during the Compliance Period, which would require the Partnership to
approve the disposition of an Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.
3
<PAGE>
As of December 31, 1998, the Partnership had invested in eighteen Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit and eight of them
were eligible for the California Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are subject to mortgage
indebtedness. If a Local Limited Partnership does not makes its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member of
the Local Limited Partnerships, the Partnership will have very limited rights
with respect to management of the Local Limited Partnerships; and will rely
totally on the general partners or managing members of the Local Limited
Partnerships for management of the Local Limited Partnerships. The value of the
Partnership's investments will be subject to changes in national and local
economic conditions, including unemployment conditions, which could adversely
impact vacancy levels, rental payment defaults and operating expenses. This, in
turn, could substantially increase the risk of operating losses for the Housing
Complexes and the Partnership. In addition, each Local Limited Partnership is
subject to risks relating to environmental hazards and natural disasters, which
might be uninsurable. Because the Partnership's operations will depend on these
and other factors beyond the control of the General Partner and the Local
General Partners, there can be no assurance that the anticipated Low Income
Housing Credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the Low Income Housing Credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the Low
Income Housing Credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
limited partnership interests in the Housing Complexes. The following table
reflects the status of the eighteen Housing Complexes as of December 31, 1998,
and for the periods indicated:
4
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
As of December 31, 1998
----------------------------------------------------------------------------------------------------------
Partnership's
Total Amount of Estimated Encumbrances
General Number Investment in Investment Low Income of Local
Partnership Location Partner Name of Occupancy Local Limited Paid to Housing Limited
Name Units Partnerships Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Almond Garden Delhi, Anthony Donovan 34 94% $ 391,000 $ 391,000 $ 807,000 $ 1,394,000
Apartment California
Associates
Almond View Stockton, Daniel C. Logue and
Apartments, Ltd. California Cyrus Youssefi 72 97% 1,639,000 1,639,000 3,523,000 1,774,000
Buccaneer Fernandia Clifford E. Olsen 48 94% 365,000 365,000 768,000 1,482,000
Associates, Beach,
Limited Florida
Candleridge Perry, Eric A. Sheldahl 24 100% 126,000 126,000 245,000 705,000
Apartments of Iowa
Perry L.P. II
Colonial Village Roseville, S.P. Thomas Company of
Roseville Calfornia Northern California Inc.
and Project Go, Inc. 56 86% 2,811,000 2,811,000 5,872,000 2,128,000
Dallas County Orrville, Thomas H. Cooksey and
Housing, Ltd. Alabama Apartment Developers, Inc. 19 100% 130,000 130,000 287,000 617,000
La Paloma del Sol Deming, Dean Greenwalt 38 94% 254,000 254,000 625,000 1,438,000
Limited New Mexico
Partnership
Memory Lane Yankton, Skogen - Peterson, Inc. 18 100% 151,000 151,000 295,000 688,000
Limited South
Partnership Dakota
Nueva Sierra Richgrove, Self-Help Enterprises,
Vista Associates California Inc. and Nueva Sierra
Vista Corporation 35 91% 1,688,000 1,688,000 3,516,000 1,805,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
As of December 31, 1998
----------------------------------------------------------------------------------------------------------
Partnership's
Total Amount of Estimated Encumbrances
General Number Investment in Investment Low Income of Local
Partnership Location Partner Name of Occupancy Local Limited Paid to Housing Limited
Name Units Partnerships Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Old Fort Limited Hidalgo, Alan Deke Noftsker and
Partnership Texas ABO Corporation 40 97% $ 249,000 $ 249,000 $ 547,000 $ 1,282,000
Orosi Apartments, Orosi, Douglas W. Young 42 100% 461,000 461,000 902,000 1,966,000
Ltd. California
Parlier Garden Parlier, David J. Micheal and
Apts. California Proffesional Apartment
Management, Inc. 41 100% 453,000 453,000 917,000 1,715,000
Rosewood Superior, Duffy Development
Apartments Wisconsin Company, Inc. 20 75% 185,000 168,000 375,000 518,000
Limited
Partnership
Sun Manor, L.P. Itta Bena, Glenn D. Miller 36 97% 230,000 230,000 464,000 1,061,000
Mississippi
Tahoe Pines South Lake David J. Michael, Bucky
Apartments Tahoe, Fong, Dean Pearson, Coy
California Elvis and Dr. Patricia
Hatton 28 100% 1,633,000 1,633,000 3,171,000 1,702,000
Venus Retirement Venus, W. Joseph Chamy 24 96% 161,000 161,000 318,000 728,000
Village, Ltd. Texas
Walnut - Pixley, Orange, Walnut - Pixley, Inc. 22 100% 1,078,000 1,078,000 2,309,000 1,742,000
L.P. California
Winters Winters, John P. Casper 38 100% 531,000 531,000 1,072,000 1,842,000
Investment Group California ----- ---- ---------- ---------- ---------- ----------
635 96% $ 12,536,000 $ 12,519,000 $ 26,013,000 $ 24,587,000
===== ==== ========== ========== ========== ==========
</TABLE>
6
<PAGE>
------------------------------------------
For the year ended December 31, 1998
------------------------------------------
Low Income Housing
Rental Net Credits Allocated
Partnership Name Income Loss to Partnerships
- --------------------------------------------------------------------------------
Almond Garden Apartment
Associates $ 155,000 $ (59,000) 99%
Almond View
Apartments, Ltd. 185,000 (233,000) 99%
Buccaneer Associates,
Limited 200,000 (34,000) 99%
Candleridge Apartments of
Perry L.P. II 139,000 (11,000) 99%
Colonial Village Roseville 380,000 (155,000) 99%
Dallas County Housing, Ltd. 62,000 (12,000) 99%
La Paloma del Sol Limited
Partnership 134,000 (11,000) 99%
Memory Lane Limited
Partnership 65,000 (30,000) 99%
Nueva Sierra Vista
Associates 141,000 (119,000) 99%
Old Fort Limited
Partnership 163,000 (3,000) 99%
Orosi Apartments, Ltd. 184,000 (24,000) 99%
Parlier Garden Apts. 191,000 (28,000) 95%
Rosewood Apartments
Limited Partnership 71,000 (9,000) 99%
Sun Manor, L.P. 139,000 (15,000) 99%
Tahoe Pines Apartments 180,000 (101,000) 99%
Venus Retirement Village,
Ltd. 83,000 (24,000) 99%
Walnut - Pixley, L.P. 136,000 (49,000) 99%
Winters Investment Group 185,000 (41,000) 99%
--------- --------
$ 2,793,000 $ (958,000)
========= ========
7
<PAGE>
Item 3. Legal Proceedings
NONE.
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At December 31, 1998, there were 942 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during 1998.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows as of
December 31:
<TABLE>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 561,751 $ 1,451,071 $ 1,498,036 $ 1,916,200 $ 2,799,487
Cash in escrow - - - - 2,090,570
Investments in limited
partnerships, net 9,415,032 10,400,720 11,447,928 13,032,752 14,368,908
Due from affiliates - - - - 216,645
Other assets - 2,242 5,419 - 19,960
--------- ---------- ---------- ---------- ----------
$ 9,976,783 $ 11,854,033 $ 12,951,383 $ 14,948,952 $ 19,495,570
========= ========== ========== ========== ==========
LIABILITIES
Payables to limited
partnerships $ 16,836 $ 16,836 $ 16,836 $ 651,094 $ 4,400,927
Due to General Partner and
affiliates 561,391 370,223 233,380 240,188 -
Due to limited partners - 900,000 - - -
PARTNERS' EQUITY 9,398,556 10,566,974 12,701,167 14,057,670 15,094,643
--------- ----------- ---------- ---------- ----------
$ 9,976,783 $ 11,854,033 $ 12,951,383 $ 14,948,952 $ 19,495,570
========= ========== ========== ========== ==========
</TABLE>
8
<PAGE>
Selected results of operations, cash flows and other information for the
Partnership are as follows for the years ended December 31:
<TABLE>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loss from operations $ (249,631) $ (205,576) $ (197,723) $ (105,423) $ 28,208
Equity in income(loss) from
limited partnerships (918,787) (1,028,617) (1,132,216) (1,155,114) (352,511)
---------- ---------- ---------- ---------- ---------
Net income(loss) $ (1,168,418) $ (1,234,193) $ (1,329,939) $ (1,260,537) $ (324,303)
========== ========== ========== ========== =========
Net income(loss) allocated
to:
General partner $ (11,684) $ (12,342) $ (13,300) $ (12,605) $ (3,243)
========== ========== ========== ========== =========
Limited partners $ (1,156,734) $ (1,221,851) $ (1,316,639) $ (1,247,932) $ (321,060)
========== ========== ========== ========== =========
Net income(loss) per limited
partner unit $ (64.26) $ (67.88) $ (73.15) $ (69.33) $ (48.71)
========== ========== ========== ========== =========
Outstanding weighted limited
partner units 18,000 18,000 18,000 18,000 6,591
========== ========== ========== ========== =========
</TABLE>
<TABLE>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities $ 4,243 $ (6,960) $ (143,337) $ 437,400 $ (225,005)
Investing activities 6,437 (40,005) (248,263) (1,535,687) (9,018,582)
Financing activities (900,000) - (26,564) 215,000 9,736,196
--------- --------- --------- --------- ---------
Net change in cash and cash
equivalents (889,320) (46,965) (418,164) (883,287) 492,609
Cash and cash equivalents,
beginning of period 1,451,071 1,498,036 1,916,200 2,799,487 2,306,878
--------- --------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 561,751 $ 1,451,071 $ 1,498,036 $ 1,916,200 $ 2,799,487
========= ========= ========= ========= =========
</TABLE>
<TABLE>
Low Income Housing Credit per Unit was as follows for the years ended December 31:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Federal $ 113 $ 113 $ 113 $ 95 $ 32
State 17 66 85 48 85
--------- --------- --------- --------- ---------
Total $ 130 $ 179 $ 198 $ 143 $ 117
========= ========= ========= ========= =========
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Condition
The Partnership's assets at December 31, 1998 consisted primarily of $562,000 in
cash and aggregate investments in the eighteen Local Limited Partnerships of
$9,415,000. Liabilities at December 31, 1998 primarily consisted of $556,000 of
accrued annual management fees due to the General Partners.
9
<PAGE>
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. The
Partnership's net loss for 1998 was $(1,168,000), reflecting a decrease of
$66,000 from the net loss experienced in 1997. The decline in net loss is
primarily due to equity in losses from limited partnerships which declined to
$(919,000) in 1998 from $(1,029,000) in 1997. This decrease was partially as a
result of the Partnership not recognizing certain losses of the Local Limited
Partnerships. The investments in such Local Limited Partnerships reached $0
during 1998. Since the Partnership's liability with respect to its investments
is limited, losses in excess of investment are not recognized. The reduction in
equity losses recognized was partially offset by an increase in loss from
operations of $(44,000) in 1998 to $(250,000), from $(206,000) in 1997, due to a
comparable increase in operating expense allocations and a decrease in interest
income.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. The
Partnership's net loss for 1997 was $(1,234,000), reflecting a decrease of
$96,000 from the net loss experienced in 1996. The decline in net loss is
primarily due to equity in losses from limited partnerships which declined to
$(1,029,000) in 1997 from $(1,132,000) in 1996, because of improved operations
of certain investments and that the investments in certain Local Limited
Partnerships reached $0 during 1997. Losses from operations were essentially
unchanged between years.
Cash Flows
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. Net cash
used in 1998 was $(889,000), compared to net cash used in 1997 of $(47,000). The
change was due primarily to an increase in financing activities, which consisted
of a return of capital to the limited partners of $50 per unit or $900,000.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. Net cash
used in 1997 was $(47,000), compared to $(418,000) in 1996. The change was due
primarily to a decrease in investments in Limited partnerships and a decrease in
the payment of management fees.
During 1998 accrued payables, which consist primarily of related party
management fees due to the General Partner, increased by $(191,000). The General
Partner does not anticipate that these accrued fees will be paid until such time
as capital reserves are in excess of future forseeable working capital
requirements of the partnership.
The Partnership expects its future cash flows, together with its net available
assets at December 31, 1998, to be sufficient to meet all currently forseeable
future cash requirements.
Impact of Year 2000
The General Partner has assessed the Partnership's exposure to date sensitive
computer systems that may not be operative subsequent to 1999. As a result of
this assessment, the General Partner has executed a plan to minimize the
Partnership's exposure to financial loss and/or disruption of normal business
operations that may occur as a result of Year 2000 non-compliant computer
systems.
10
<PAGE>
Business Computer Systems
These systems include both computer hardware and software applications relating
to operations such as financial reporting. The Partnership does not maintain its
own systems and thus utilizes the computer systems of the General Partner. The
General Partner developed a compliance plan for each of its business computer
systems, with particular attention given to critical systems. The General
Partner contracted with an outside vendor to evaluate, test and repair such
systems. The assessment consisted of determining the compliance with Year 2000
of critical computer hardware and software. Incidences of non-compliance were
found with respect to computer software applications and were corrected. The
vendor found no instances of non-compliance with respect to computer hardware.
The amount expended and to be expended by the General Partner is nominal.
The Local General Partners or property managers maintain the business computer
systems that relate to the operations of the Local Limited Partnerships. The
General Partner is in the process of obtaining completed questionnaires from
such Local General Partners and property management companies to assess their
respective Year 2000 readiness. The General Partner intends to identify those
Local General Partners and property management companies that have systems
critical to the operations of the Local Limited Partnerships that are not Year
2000 compliant. For those Local General Partners and property management
companies which have business computer systems which will not be Year 2000
compliant prior to the Year 2000 and where the lack of such compliance is
determined to have a potential material effect on the Partnership's financial
condition and results of operations, the General Partner intends to develop
contingency plans which may include changing property management companies.
Outside Vendors
The General Partner has obtained assurances from its suppliers of electrical
power and banking and telecommunication services that their critical systems are
all Year 2000 compliant. There exists, however, inherent uncertainty that all
systems of outside vendors or other third parties on which the General Partner,
and thus the Partnership, and the Local General Partners and property management
companies, and thus the Local Limited Partnerships rely will be Year 2000
compliant. Therefore, the Partnership remains susceptible to the consequences of
third party critical computer systems being non-compliant.
Personal Computers
The General Partner has determined that its personal computers and related
software critical to the operations of the Partnership are Year 2000 compliant.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
11
<PAGE>
Report of Independent Certified Public Accountants
To the Partners
WNC California Housing Tax Credits III, L.P.
We have audited the accompanying balance sheet of WNC California Housing Tax
Credits III, L.P. (a California Limited Partnership) (the "Partnership") as of
December 31, 1998, and the related statements of operations, partners' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit. A
significant portion of the financial statements of the limited partnerships in
which the Partnership is a limited partner were audited by other auditors whose
reports have been furnished to us. As discussed in Note 2 to the financial
statements, the Partnership accounts for its investments in limited partnerships
using the equity method. The portion of the Partnership's investment in limited
partnerships audited by other auditors represented 78% of the total assets of
the Partnership at December 31, 1998. Our opinion, insofar as it relates to the
amounts included in the financial statements for the limited partnerships which
were audited by others, is based solely on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC California Housing Tax Credits III, L.P. (a
California Limited Partnership) as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
BDO SEIDMAN, LLP
Orange County, California
April 12, 1999
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
WNC California Housing Tax Credits III, L.P.
We have audited the accompanying balance sheet of WNC California Housing Tax
Credits III, L.P. ( a California Limited Partnership) (the "Partnership") as of
December 31, 1997, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the two-year period ended
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of the limited partnerships in which WNC California Housing Tax
Credits III, 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 88% of the total assets of
WNC California Housing Tax Credits II, L.P. at December 31, 1997. Substantially
all of 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 those 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 III, L.P. (a
California Limited Partnership) as of December 31, 1997, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 1997, in conformity with generally accepted accounting principles.
CORBIN & WERTZ
Irvine, California
April 6, 1998
13
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 561,751 $ 1,451,071
Investments in limited
partnerships, net (Note 2) 9,415,032 10,400,720
Other assets - 2,242
--------- ----------
$ 9,976,783 $ 11,854,033
========= ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 4) $ 16,836 $ 16,836
Accrued fees and expenses due to General
Partner and affiliates (Note 3) 561,391 370,223
Due to limited partners (Note 5) - 900,000
--------- ----------
Total liabilities 578,227 1,287,059
--------- ----------
Commitments and contingencies
Partners' equity (deficit):
General partner (76,145) (64,461)
Limited partners (30,000 units authorized;
18,000 units issued and outstanding at
December 31, 1998 and 1997) 9,474,701 10,631,435
--------- ----------
Total partners' equity 9,398,556 10,566,974
--------- ----------
$ 9,976,783 $ 11,854,033
========= ==========
See accompanying notes to financial statements
14
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Interest income $ 26,577 $ 57,279 $ 74,947
----------- ----------- -----------
Operating expenses:
Amortization (Note 2) 60,464 58,596 57,933
Asset management fees
(Note 3) 186,167 186,166 186,422
Bad debt expense - - 8,680
Other 29,577 18,093 19,635
----------- ----------- -----------
Total operating expenses 276,208 262,855 272,670
----------- ----------- -----------
Loss from operations (249,631) (205,576) (197,723)
Equity in losses from limited
partnerships (Note 2) (918,787) (1,028,617) (1,132,216)
----------- ----------- -----------
Net loss $ (1,168,418) $ (1,234,193) $ (1,329,939)
=========== =========== ===========
Net loss allocated to:
General partner $ (11,684) $ (12,342) $ (13,300)
=========== =========== ===========
Limited partners $ (1,156,734) $ (1,221,851) $ (1,316,639)
=========== =========== ===========
Net loss per limited
partner unit $ (64.26) $ (67.88) $ (73.15)
=========== =========== ===========
Outstanding weighted limited
partner units 18,000 18,000 18,000
=========== =========== ===========
See accompanying notes to financial statements
15
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
------- -------- -----
Partners' equity (deficit)
at January 1, 1996 $ (38,553) $ 14,096,223 $ 14,057,670
Offering costs (266) (26,298) (26,564)
Net loss (13,300) (1,316,639) (1,329,939)
----------- ----------- -----------
Partners' equity (deficit)
at December 31, 1996 (52,119) 12,753,286 12,701,167
Return of capital (Note 5) - (900,000) (900,000)
Net loss (12,342) (1,221,851) (1,234,193)
----------- ----------- -----------
Partners' equity (deficit)
at December 31, 1997 (64,461) 10,631,435 10,566,974
Net loss (11,684) (1,156,734) (1,168,418)
----------- ----------- -----------
Partners' equity (deficit)
at December 31, 1998 $ (76,145) $ 9,474,701 $ 9,398,556
=========== =========== ===========
See accompanying notes to financial statements
16
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1998, 1997 and 1996
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,168,418) $ (1,234,193) $ (1,329,939)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization 60,464 58,596 57,933
Bad debt - - 8,680
Equity in loss of limited partnerships 918,787 1,028,617 1,132,216
Change in other assets 2,242 3,177 (5,419)
Increase in accrued fees and expenses due
to General Partner and affiliates 191,168 136,843 (6,808)
----------- ----------- -----------
Net cash (used in) provided by operating
activities 4,243 (6,960) (143,337)
----------- ----------- -----------
Cash flows from investing activities:
Investments in limited partnerships, net - - (220,733)
Capitalized acquisition costs and fees - (55,994) (33,906)
Distributions from limited partnerships 6,437 15,989 6,376
----------- ----------- -----------
Net cash provided by (used in) investing
activities 6,437 (40,005) (248,263)
----------- ----------- -----------
Cash flows from financing activities:
Return of capital (900,000) - -
Offering costs - - (26,564)
----------- ----------- -----------
Net cash used in financing activities (900,000) - (26,564)
----------- ----------- -----------
Net decrease in cash and cash equivalents (889,320) (46,965) (418,164)
Cash and cash equivalents, beginning of year 1,451,071 1,498,036 1,916,200
----------- ----------- -----------
Cash and cash equivalents, end of year $ 561,751 $ 1,451,071 $ 1,498,036
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
17
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
During 1996, the Partnership had $422,205 of investments in limited
partnerships returned through tax credit adjustments reflected as a
reduction in the payables to limited partnerships.
During 1996, the Partnership adjusted offering costs and accrued fees and
expenses due to General Partner and affiliates by $(26,564).
See accompanying notes to financial statements
18
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 is the original
limited partner of the Partnership and owns, through the Lester Family Trust,
28.6% of the outstanding stock of WNC.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership Agreement authorized the sale of up to 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
loss and in cash available for distribution from 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 sale or refinancing equal
to their capital contributions and their return on investment (as defined in the
Partnership's 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.
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
19
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS -CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
to changes in national and local economic conditions, including unemployment
conditions, which could adversely impact vacancy levels, rental payment defaults
and operating expenses. This, in turn, could substantially increase the risk of
operating losses for the Housing Complexes and the Partnership. In addition,
each Local Limited Partnership is subject to risks relating to environmental
hazards and natural disasters which might be uninsurable. Because the
Partnership's operations will depend on these and other factors beyond the
control of the General Partner and the Local General Partners, there can be no
assurance that the anticipated low income housing credits will be available to
Limited Partners.
In addition Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits in the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting For Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (see Note 2).
Losses from Local Limited Partnerships allocated to the Partnership are not
recognized to the extent that the investment balance would be adjusted below
zero.
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 as of December 31,
1998 and 1997.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers highly liquid investments with remaining maturities of
three months or less when purchased to be cash equivalents. As of December 31,
1998 and 1997, the Partnership had cash equivalents totaling $0 and $942,685,
respectively.
20
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS -CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Concentration of Credit Risk
At December 31, 1998, the Partnership maintained cash balances at certain
financial institutions in excess of the maximum federally insured amounts.
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.
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the years
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of December 31, 1998, 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 of the Limited
Partnerships.
The Partnership's investments in Local Limited Partnerships as shown in the
balance sheets at December 31, 1998 and 1997 are approximately $1,602,000 and
$1,640,000, greater than the Partnership's equity as shown in the Local Limited
Partnerships' financial statements. This difference is primarily due to
unrecorded losses, as discussed below, acquisition, selection and other costs
related to the acquisition of the investments which have been capitalized in the
Partnership's investment account and to capital contributions payable to the
limited partnerships which were netted against partner capital in the Local
Limited Partnership's financial statements (see Note 4).
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.
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.
21
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS -CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
At December 31, 1998, the investment accounts in certain Local Limited
Partnerships have reached a zero balance. Consequently, the Partnership's share
of losses during the year ended December 31, 1998 amounting to approximately
$29,226 have not been recognized. As of December 31, 1998, the aggregate share
of net losses not recognized by the Partnership amounted to $44,553.
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the years ended December 31:
1998 1997
---- ----
Investments per balance
sheet, beginning of year $ 10,400,720 $ 11,447,928
Capitalized acquisition
fees and costs - 55,994
Equity in losses of
limited partnerships (918,787) (1,028,617)
Distributions paid (6,437) (15,989)
Amortization of paid
acquisition fees and costs (60,464) (58,596)
--------------- ---------------
Investments per balance
sheet, end of year $ 9,415,032 $ 10,400,720
=============== ===============
22
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS -CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted in
interest expense. Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
1998 1997
---- ----
ASSETS
Buildings and improvements,
net of accumulated depreciation
for 1998 and 1997 of $5,360,000
and $4,188,000, respectively, $ 30,690,000 $ 31,657,000
Land 2,213,000 2,380,000
Other assets 1,958,000 1,746,000
------------ ------------
$ 34,861,000 $ 35,783,000
============ ============
LIABILITIES
Mortgage and construction
loans payable $ 24,587,000 $ 24,528,000
Other liabilities (including due
to related parties of $792,000 and
$715,000 as of December 31, 1998
and 1997, respectively. 1,453,000 1,495,000
------------ ------------
Total liabilities 26,040,000 26,023,000
------------ ------------
PARTNERS' CAPITAL
WNC California Housing Tax
Credits III, L.P 7,813,000 8,761,000
Other partners 1,008,000 999,000
------------ ------------
8,821,000 9,760,000
------------ ------------
$ 34,861,000 $ 35,783,000
============ ============
23
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS -CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1998 1997 1996
---- ---- ----
Revenues $ 2,901,000 $ 2,895,000 $ 2,786,000
Expenses:
Operating expenses 1,800,000 1,779,000 1,689,000
Interest expense 871,000 950,000 968,000
Depreciation and
amortization 1,188,000 1,220,000 1,273,000
---------- ---------- ----------
Total expenses 3,859,000 3,949,000 3,930,000
---------- ---------- ----------
Net loss $ (958,000) $ (1,054,000) $ (1,144,000)
========== ========== ==========
Net loss allocable
to the Partnership $ (948,000) $ (1,044,000) $ (1,132,000)
========== ========== ==========
Net loss recorded
by the Partnership $ (919,000) $ (1,029,000) $ (1,132,000)
========== ========== ==========
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partner may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
impaired.
NOTE 3 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership is obligated to
the General Partner or its affiliates for the following items:
Acquisition fees of up to 9% of the gross proceeds from the sale of
Units as compensation for services rendered in connection with the
acquisition of Local Limited Partnerships. As of December 31, 1998 and
1997 the Partnership incurred acquisition fees of $1,620,000.
Accumulated amortization of these capitalized costs was $257,025 and
$203,029 as of December 31, 1998 and 1997, respectively.
Reimbursement of costs incurred by the General Partner in connection
with the acquisition of Local Limited Partnerships. These
reimbursements have not exceeded 1.5% of the gross proceeds. As of
December 31, 1998 and 1997, the Partnership incurred acquisition costs
of $194,019, which have been included in investments in limited
partnerships. Accumulated amortization was $19,191 and $12,723 as of
December 31, 1998 and 1997, respectively.
24
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS -CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
An annual management fee equal to 0.5% of the invested assets of the
Local Limited Partnerships, including the Partnership's allocable share
of the mortgages. Management fees of $186,167, $186,166 and $186,422
were incurred for 1998, 1997 and 1996, respectively, of which, $0,
$50,000 and $200,000 were paid during 1998, 1997 and 1996,
respectively.
A subordinated disposition fee in an amount equal to 1% of the sales
price of real estate sold. Payment of this fee is subordinated to the
limited partners receiving a preferred return of 16% through December
31, 2003 and 6% thereafter (as defined in the Partnership Agreement)
and is payable only if the General Partner or its affiliates render
services in the sales effort.
The accrued fees and expenses due to General Partner and affiliates as of
December 31, 1998 and 1997 consist of the following:
1998 1997
---- ----
Reimbursement for expenses
paid by an affiliate of
the General Partner $ 5,690 $ 688
Asset management fee payable 555,701 369,535
------- -------
$ 561,391 $ 370,223
======= =======
The General Partner does not anticipate that these accrued fees will be paid
until such time as capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the limited partnership agreements. These
contributions are payable in installments and are due upon the limited
partnerships achieving certain operating and development benchmarks (generally
within two years of the Partnership's initial investment).
NOTE 5 - DUE TO LIMITED PARTNERS
Due to limited partners at December 31, 1997, represents a return of capital to
Unit holders of $50 per Unit. Such amounts were paid in January 1998.
NOTE 6 - INCOME TAXES
No provision for income taxes has been recorded in the financial statements as
any liability for income taxes is the obligation of the partners of the
Partnership.
25
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
(a)(1)
(i) On December 16, 1998, Corbin & Wertz, Irvine, California was dismissed as
the Partnership's principal independent accountant.
(ii) During the last two fiscal years of the Partnership, the reports of Corbin
& Wertz respecting the financial statements of the Partnership did not
contain an adverse opinion or a disclaimer of opinion, nor were any such
reports qualified or modified as to uncertainty, audit scope or accounting
principles.
(iii) The decision to change accountants was approved by the board of directors
of WNC & Associates, Inc., the general partner of the Partnership.
(iv) During the last two fiscal years and subsequent interim period of the
Partnership there were no disagreements between Corbin & Wertz and the
Partnership on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure of the nature
described in Item 304(a)(1)(iv) of Securities and Exchange Commission
Regulation S-K.
(v) During the last two fiscal years and subsequent interim period of the
Partnership there were no reportable events of the nature described in
Item 304(a)(1)(v) of Securities and Exchange Commission Regulation S-K.
(a)(2)
On December 16, 1998, BDO Seidman, LLP, Costa Mesa, California was engaged as
the Partnership's principal independent accountant. During the last two fiscal
years and subsequent interim period of the Partnership, the Partnership did not
consult BDO Seidman, LLP regarding (i) either, the application of accounting
principles to a specified transaction; or the type of audit opinion that might
be rendered on the Partnership's financial statements, or (ii) any matter that
was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Securities and Exchange Commission Regulation S-K) or was a reportable event (as
defined in Item 304(a)(1)(v) of Securities and Exchange Commission Regulation
S-K).
PART III.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc.
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who serves
as Chairman of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N.
Cooper, Jr. and Kay L. Cooper. The principal shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.
Wilfred N. Cooper, Sr., age 68, is the founder, Chief Executive Officer and a
Director of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a
general partner in some of the programs previously sponsored by the Sponsor. Mr.
Cooper has been involved in real estate investment and acquisition activities
since 1968. Previously, during 1970 and 1971, he was founder and principal of
Creative Equity Development Corporation, a predecessor of WNC & Associates,
Inc., and of Creative Equity Corporation, a real estate investment firm. For 12
26
<PAGE>
years prior to that, Mr. Cooper was employed by Rockwell International
Corporation, last serving as its manager of housing and urban developments where
he had responsibility for factory-built housing evaluation and project
management in urban planning and development. Mr. Cooper is a Director of the
National Association of Home Builders (NAHB) and a National Trustee for NAHB's
Political Action Committee, a Director of the National Housing Conference (NHC)
and a member of NHC's Executive Committee and a Director of the National
Multi-Housing Council (NMHC). Mr. Cooper graduated from Pomona College in 1956
with a Bachelor of Arts degree.
John B. Lester, Jr., age 65, is President, a Director, Secretary and a member of
the Acquisition Committee of WNC & Associates, Inc., and a Director of WNC
Capital Corporation. Mr. Lester has 27 years of experience in engineering and
construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 36, is Executive Vice President, a Director and a
member of the Acquisition Committee of WNC & Associates, Inc. He is President
of, and a registered principal with, WNC Capital Corporation, a member firm of
the NASD, and is a Director of WNC Management, Inc. He has been involved in
investment and acquisition activities with respect to real estate since he
joined the Sponsor in 1988. Prior to this, he served as Government Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Advisory Board for LIHC Monthly Report, a Director of NMHC and an Alternate
Director of NAHB. He graduated from The American University in 1985 with a
Bachelor of Arts degree.
David N. Shafer, age 46, is Senior Vice President, a Director, General Counsel,
and a member of the Acquisition Committee of WNC & Associates, Inc., and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been involved in
real estate investment and acquisition activities since 1984. Prior to joining
the Sponsor in 1990, he was practicing law with a specialty in real estate and
taxation. Mr. Shafer is a Director and President of the California Council of
Affordable Housing and a member of the State Bar of California. Mr. Shafer
graduated from the University of California at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor degree (cum laude) and from the University of San Diego in 1986 with a
Master of Law degree in Taxation.
Michael L. Dickenson, age 42, is Vice President and Chief Financial Officer, and
a member of the Acquisition Committee of WNC & Associates, Inc., and Chief
Financial Officer of WNC Management, Inc. He has been involved with acquisition
and investment activities with respect to real estate since 1985. Prior to
joining the Sponsor in March 1999, he was the Director of Financial Services at
TrizecHahn Centers Inc., a developer and operator of commercial real estate,
from 1995 to 1999, a Senior Manager with E&Y Kenneth Leventhal Real Estate
Group, Ernst & Young, LLP, from 1988 to 1995, and Vice President of Finance with
Great Southwest Companies, a commercial and residential real estate developer,
from 1985 to 1988. Mr. Dickenson is a member of the Financial Accounting
Standards Committee for the National Association of Real Estate Companies and
the American Institute of Certified Public Accountants, and a Director of
HomeAid Southern California, a charitable organization affiliated with the
building industry. He graduated from Texas Tech University in 1978 with a
Bachelor of Business Administration - Accounting degree, and is a Certified
Public Accountant in California and Texas.
Thomas J. Riha, age 44, is Vice President - Asset Management and a member of the
Acquisition Committee of WNC & Associates, Inc. and a Director and Chief
Executive Officer of WNC Management, Inc. Mr. Riha has been involved in
acquisition and investment activities with respect to real estate since 1979.
Prior to joining the Sponsor in 1994, Mr. Riha was employed by Trust Realty
Advisor, a real estate acquisition and management company, last serving as Vice
President - Operations. Mr. Riha graduated from the California State University,
Fullerton in 1977 with a Bachelor of Arts degree (cum laude) in Business
Administration with a concentration in Accounting and is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
27
<PAGE>
Sy P. Garban, age 53, is Vice President - National Sales of WNC & Associates,
Inc. and has been employed by the Sponsor since 1989. Mr. Garban has been
involved in real estate investment activities since 1978. Prior to joining the
Sponsor he served as Executive Vice President by MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
N. Paul Buckland, age 36, is Vice President - Acquisitions of WNC & Associates,
Inc. He has been involved in real estate acquisitions and investments since 1986
and has been employed with WNC & Associates, Inc. since 1994. Prior to that, he
served on the development team of the Bixby Ranch that constructed apartment
units and Class A office space in California and neighboring states, and as a
land acquisition coordinator with Lincoln Property Company where he identified
and analyzed multi-family developments. Mr. Buckland graduated from California
State University, Fullerton in 1992 with a Bachelor of Science degree in
Business Finance.
David Turek, age 44, is Vice President - Originations of WNC & Associates, Inc.
He has been involved with real estate investment and finance activities since
1976 and has been employed by WNC & Associates, Inc. since 1996. From 1995 to
1996, Mr. Turek served as a consultant for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties. From 1990 to 1995, he was involved in the development of
conventional and tax credit multi-family housing. He is a Director with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.
Kay L. Cooper, age 62, is a Director of WNC & Associates, Inc. Mrs. Cooper was
the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates during the current or future years for the following
fees:
(a) Annual Asset Management Fee. 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 Housing Complexes owned by such Local Limited Partnerships). Fees of
$186,167 were incurred for 1998. The Partnership paid the General Partner
or its affiliates $0 of those fees in 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) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $6,000 during the year
ended December 31, 1998.
28
<PAGE>
(d) 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 year ended
December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
No person is known to the General Partner to own beneficially in excess
of 5% of the outstanding Units.
(b) Security Ownership of Management
Neither the General Partner, its affiliates, nor any of the officers or
directors of the General Partner or its affiliates own directly or
beneficially any Units in the Partnership.
(c) Changes in Control
The management and control of the General Partner may be changed at any
time in accordance with its organizational documents, without the
consent or approval of the Limited Partners. In addition, the
Partnership Agreement provides for the admission of one or more
additional and successor General Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of
any other General Partner or the Limited Partners, (i) substitute in
its stead as General Partner any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets,
stock or other evidence of equity interest and continued its business,
or (ii) cause to be admitted to the Partnership an additional General
Partner or Partners if it deems such admission to be necessary or
desirable so that the Partnership will be classified a partnership for
Federal income tax purposes. Finally, a majority-in-interest of the
Limited Partners may at any time remove the General Partner of the
Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interest in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
29
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Independent Auditors' Report
Balance Sheets, December 31, 1998 and 1997
Statements of Operations for the years ended December 31, 1998, 1997
and 1996
Statements of Partners' Equity (Deficit) for the years ended December
31, 1998, 1997 and 1996
Statements of Cash Flows for the years ended December 31, 1998, 1997
and 1996
Notes to Financial Statements
(a)(2) Financial statement schedule included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial
Statement Schedule
Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K.
1. A Form 8-K dated December 16, 1998 was filed on December 22, 1998
reporting the dismissal of the Partnership's former auditors and the
engagement of new auditors. No financial statements were included.
(c) Exhibits.
3.1 Agreement of Limited Partnership dated October 5, 1992; included as
Exhibit B to the Prospectus, which was filed as Exhibit 28.1 to Form 10-K
for the year ended December 31, 1994 is hereby incorporated herein as
Exhibit 3.1.
10.1 Amended and Restated Agreement of Limited Partnership of Colonial
Village Roseville (1) filed as exhibit 10.1 to Form 8-K/A Amendment
No. 1 to Current Report dated December 27, 1993 is hereby incorporated
herein by reference as exhibit 10.1.
10.2 Amended and Restated Agreement of Limited Partnership of Almond Garden
Apartment Associates filed as exhibit 10.2 to Form 8-K/A Amendment No. 1
to Current Report dated December 27, 1993 is hereby incorporated herein
by reference as exhibit 10.2.
10.3 Amended and Restated Agreement of Limited Partnership of Winters
Investment Group filed as exhibit 10.3 to Form 8-K/A Amendment No. 1 to
Current Report dated December 27, 1993 is hereby incorporated herein by
reference as exhibit 10.3.
10.4 Third Amended and Restate Articles of Limited Partnership of Buccaneer
Associates, Limited filed as exhibit 10.2 to Post-Effective Amendment No.
2 to Form S-11 dated September 17, 1993 is hereby incorporated herein
by reference as exhibit 10.4.
30
<PAGE>
10.5 Amended and Restated Agreement and Certificate of Limited Partnership of
Dallas County Housing, Ltd. filed as exhibit 10.3 to Post-Effective
Amendment No. 2 to Form S-11 dated September 17, 1993 is hereby
incorporated herein by reference as exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of La Paloma Del Sol
Phase II Limited Partnership filed as exhibit 10.4 to Post-Effective
Amendment No. 2 to Form S-11 dated September 17, 1993 is hereby
incorporated herein by reference as exhibit 10.6.
10.7 Second Amended and Restated Agreement of Limited Partnership of Old
Fort Limited Partnership filed as exhibit 10.5 to Post-Effective Amendment
No. 2 to Form S-11 dated September 17, 1993 is hereby incorporated herein
by reference as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Orosi Apartments,
Ltd. filed as exhibit 10.6 to Post-Effective Amendment No. 2 to Form S-11
dated September 17, 1993 is hereby incorporated herein by reference as
exhibit 10.8.
10.9 Amended and Restated Agreement of Limited Partnership of Sun Manor, L.P.
filed as exhibit 10.7 to Post-Effective Amendment No. 2 to Form S-11 dated
September 17, 1993 is hereby incorporated herein by reference as exhibit
10.9.
10.10 Amended and Restated Agreement of Limited Partnership of Venus Retirement
Village, Ltd. filed as exhibit 10.8 to Post-Effective Amendment No. 2 to
Form S-11 dated September 17, 1993 is hereby incorporated herein by
reference as exhibit 10.10.
10.11 Second Amended and Restated Agreement of Limited Partnership of
Walnut-Pixley, L.P. filed as exhibit 10.9 to Post-Effective Amendment No.
2 to Form S-11 dated September 17, 1993 is hereby incorporated herein
by reference as exhibit 10.11.
10.12 Amended and Restated Agreement of Limited Partnership of Almond View
Apartments, Ltd. filed as exhibit 10.11 to Form 10K dated December 31,
1993 is hereby incorporated herein by reference as exhibit 10.12.
10.13 Amended and Restated Agreement of Limited Partnership of Candleridge
Apartments of Perry, L.P. II filed as exhibit 10.1 to Form 8-K dated May
26, 1994 is hereby incorporated herein by reference as exhibit 10.13.
10.14 Second Amended and Restated Agreement of Limited Partnership of Parlier
Garden Apts. filed as exhibit 10.2 to Form 8-K dated May 26, 1994 is
hereby incorporated herein by reference as exhibit 10.14.
10.15 Agreement of Limited Partnership of Rosewood Apartments Limited
Partnership filed as exhibit 10.3 to Form 8-K dated May 26, 1994 is hereby
incorporated herein by reference as exhibit 10.15.
10.16 Agreement of Limited Partnership of Limited Partnership of Nueva Sierra
Vista Associates filed as exhibit 10.4 to Form 8-K/A Amendment No. 1 to
Current Report dated May 26, 1994 is hereby incorporated herein by
reference as exhibit 10.16.
10.17 Amended and Restated Agreement of Limited Partnership of Memory Lane
Limited Partnership filed as exhibit 10.1 to Form 8-K dated July 7, 1994
is hereby incorporated herein by reference as exhibit 10.17.
10.18 Second Amended and Restated Agreement of Limited Partnership of Tahoe
Pines Apartments filed as exhibit 10.1 to Form 8-K dated July 27, 1994 is
hereby incorporated herein by reference as exhibit 10.18.
21.1 Financial Statements of Colonial Village Roseville, for the years ended
December 31, 1998 and 1997 together with Independent auditors' report
thereon; a significant subsidiary of the partnership.
(d) Financial statement schedule follows, as set forth in subsection (a)(2)
hereof.
31
<PAGE>
Report of Independent Certified Public Accountants
on Financial Statement Schedule
To the Partners
California Housing Tax Credits III, L.P.
The audit referred to in our report dated April 12, 1999, relating to the 1998
financial statements of WNC California Housing Tax Credits III, L.P. (the
"Partnership"), which is contained in Item 8 of this Form 10-K, included the
audit of the accompanying financial statement schedule. The financial statement
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the financial information set forth therein.
BDO SEIDMAN, LLP
Orange County, California
April 12, 1999
32
<PAGE>
WNC Housing Tax Credit Fund III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
As of December 31, 1998
----------------------------------------------------------------------------------------------------
Total Investment Amount of Encumbrances of
in Local Limited Investment Local Limited Property and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Almond Garden Apartment Delhi,
Associates California $391,000 $391,000 $1,394,000 $1,756,000 $318,000 $1,438,000
Almond View Apartments, Stockton,
Ltd. California 1,639,000 1,639,000 1,774,000 3,525,000 552,000 2,973,000
Buccaneer Associates, Fernandia
Limited Beach, Florida 365,000 365,000 1,482,000 2,218,000 298,000 1,920,000
Candleridge Apartments Perry, Iowa 126,000 126,000 705,000 878,000 136,000 742,000
of Perry L.P. II
Colonial Village Roseville Roseville,
Calfornia 2,811,000 2,811,000 2,128,000 5,285,000 791,000 4,494,000
Dallas County Housing, Ltd. Orrville,
Alabama 130,000 130,000 617,000 760,000 116,000 644,000
La Paloma del Sol Limited Deming, New
Partnership Mexico 254,000 254,000 1,438,000 1,762,000 228,000 1,534,000
Memory Lane Limited Yankton,
Partnership South Dakota 151,000 151,000 688,000 874,000 257,000 617,000
Nueva Sierra Vista Richgrove,
Associates California 1,688,000 1,688,000 1,805,000 3,253,000 293,000 2,960,000
Old Fort Highway Limited Hidalgo, Texas 249,000 249,000 1,282,000 1,646,000 223,000 1,423,000
Partnership
</TABLE>
33
<PAGE>
WNC Housing Tax Credit Fund III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
As of December 31, 1998
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Total Investment Amount of Encumbrances of
in Local Limited Investment Local Limited Property and Accumulated Net Book
Partnership Name Location Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Orosi Apartments, Ltd. Orosi,
California 461,000 461,000 1,966,000 2,437,000 220,000 2,217,000
Parlier Garden Apts. Parlier,
California 453,000 453,000 1,715,000 2,187,000 265,000 1,922,000
Rosewood Apartments Superior,
Limited Partnership Wisconsin 185,000 168,000 518,000 767,000 96,000 671,000
Sun Manor, L.P. Itta Bena,
Mississippi 230,000 230,000 1,061,000 1,338,000 217,000 1,121,000
Tahoe Pines Apartments South Lake
Tahoe,
California 1,633,000 1,633,000 1,702,000 3,290,000 515,000 2,775,000
Venus Retirement Village, Venus, Texas 161,000 161,000 728,000 929,000 174,000 755,000
Ltd.
Walnut - Pixley, L.P. Orange,
California 1,078,000 1,078,000 1,742,000 2,766,000 401,000 2,365,000
Winters Investment Group Winters,
California 531,000 531,000 1,842,000 2,592,000 260,000 2,332,000
-------- -------- ---------- ---------- -------- ---------
$ 12,536,000 $ 12,519,000 $ 24,587,000 $ 38,263,000 $ 5,360,000 $ 32,903,000
================== ============== ============= ============== ============ =============
</TABLE>
34
<PAGE>
WNC Housing Tax Credit Fund III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
For the year ended December 31, 1998
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net Loss Acquired Status (Years)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Almond Garden Apartment
Associates $ 155,000 $ (59,000) 1994 Completed 27.5
Almond View Apartments, Ltd. 185,000 (233,000) 1994 Completed 27.5
Buccaneer Associates, Limited 200,000 (34,000) 1994 Completed 40
Candleridge Apartments of Perry
L.P. II 139,000 (11,000) 1994 Completed 27.5
Colonial Village Roseville 380,000 (155,000) 1993 Completed 27.5
Dallas County Housing, Ltd. 62,000 (12,000) 1993 Completed 40
La Paloma del Sol Limited
Partnership 134,000 (11,000) 1993 Completed 40
Memory Lane Limited Partnership
65,000 (30,000) 1994 Completed 25
Nueva Sierra Vista Associates 141,000 (119,000) 1994 Completed 40
Old Fort Limited Partnership 163,000 (3,000) 1993 Completed 40
Orosi Apartments, Ltd. 184,000 (24,000) 1993 Completed 50
Parlier Garden Apts. 191,000 (28,000) 1994 Completed 40
Rosewood Apartments Limited
Partnership 71,000 (9,000) 1994 Completed 40
Sun Manor, L.P. 139,000 (15,000) 1993 Completed 27.5
Tahoe Pines Apartments 180,000 (101,000) 1994 Completed 27.5
Venus Retirement Village, Ltd. 83,000 (24,000) 1993 Completed 25
Walnut - Pixley, L.P. 136,000 (49,000) 1993 Completed 40
Winters Investment Group 185,000 (41,000) 1994 Completed 50
---------- -----------
$ 2,793,000 $ (958,000)
=============== ============
</TABLE>
35
<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 III, L.P.
By: WNC California Tax Credit General Partner of the Registrant
Partners III, L.P.
By: WNC & Associates, Inc. General Partner of WNC California Tax Credit
Partners III, L.P.
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., President of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson, Vice-President - Chief Financial Officer of WNC &
Associates, Inc.
Date: August 23, 1999
By: /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., General Partner
Date: August 23, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., Chairman of the Board of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., Director of WNC & Associates, Inc.
Date: August 23, 1999
By: /s/ David N. Shafer
David N Shafer, Director of WNC & Associates, Inc.
Date: August 23, 1999
36
Exhibit
Number Exhibit Description
EX-21.1 Financial Statements of Colonial Village Roseville, for the years
ended December 31, 1998 and 1997 together with Independent auditors'
report thereon; a significant subsidiary of the partnership.
37
<PAGE>
Colonial Village Roseville
Table of Contents
Page
Independent Auditors' Report 39
Financial Statements
Balance Sheets 40
Statements of Operations 42
Statements of Changes in Partners Capital 46
Statements of Cash Flows 47
Notes to Financial Statements 49
38
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners
Colonial Village Roseville
(A California Limited Partnership)
Rocklin, California
I have audited the accompanying balance sheets of Colonial Village Roseville (A
California Limited Partnership), as of December 31, 1998 and 1997, and the
related statements of income, partners' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colonial Village Roseville (A
California Limited Partnership) as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Bernard E. Rea, CPA
Stockton, California
March 31, 1999
39
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS 1998 1997
----- ----
CURRENT ASSETS
Cash $ 10,495 $ 20,644
Rents receivable - - 773
Other receivables - - - -
Prepaid expense 2,909 2,662
-------- --------
Total current assets $ 13,404 $ 24,079
------------- ------------
RESTRICTED DEPOSITS AND FUNDED RESERVES
Tenants' security deposits $ 19,429 $ 18,935
Replacement reserve escrow 57,400 47,046
------- -------
$ 76,829 $ 65,981
------------- ------------
PROPERTY AND EQUIPMENT, AT COST
Land $ 315,303 $ 315,303
Building 4,802,723 4,795,583
Equipment 166,914 166,914
-------- -------
$ 5,284,940 $ 5,277,800
Less accumulated depreciation 791,063 595,478
-------- -------
$ 4,493,877 $ 4,682,322
------------- ------------
OTHER ASSETS
Deferred charges, less accumulated $ 114,973 $ 120,186
amortization of $18,449 ------------- ------------
and $13,236 $ 114,973 $ 120,186
------------- ------------
$ 4,699,083 $ 4,892,568
============= ============
See Notes to Financial Statements.
40
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
LIABILITIES AND PARTNERS' EQUITY 1998 1997
----- ----
CURRENT LIABILITIES
Current maturities of long-term debt $ 25,309 $ 23,446
Accounts payable 11,462 8,572
Accrued expense 800 800
Accrued property taxes - - - -
Developer fees payable 24,500 - -
Advances from general partner, without
interest, due date, or collateral 8,251 - -
Accrued interest 13,604 13,753
------- -------
Total current liabilities $ 83,926 $ 46,571
----------- ----------
DEPOSIT AND PREPAYMENT LIABILITIES
Tenants' security deposits $ 19,239 $ 21,614
Prepaid rents - - 280
-------- --------
$ 19,239 $ 21,894
----------- ----------
LONG-TERM DEBT
Mortgage payable, less current
maturities $ 2,103,030 $ 2,128,339
Developer fees payable 407,053 455,053
------------- ------------
$ 2,510,083 $ 2,583,392
------------- ------------
COMMITMENT
PARTNERS' EQUITY $ 2,085,835 $ 2,240,711
------------- ------------
$ 4,699,083 $ 4,892,568
============= ============
See Notes to Financial Statements.
41
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF INCOME
Years Ended December 31, 1998 and 1997
1998 1997
----- ----
RENTAL INCOME
Apartments $ 380,368 $ 386,950
Tenant assistance payments - - - -
Furniture and equipment - - - -
Commercial - - - -
Parking spaces - - - -
Subsidy income - - - -
Miscellaneous - - - -
---------- ----------
Net rental revenue $ 380,368 $ 386,950
------------- ------------
FINANCIAL REVENUE
Interest Income
- project operations $ 1,990 $ 556
Income from investments
- replacement reserve 1,020 916
Income from investments
- operating reserve 138 337
Income from investments
- miscellaneous - - - -
---------- ----------
Sub-total financial revenue $ 3,148 $ 1,809
------------- ------------
OTHER REVENUE
Laundry and vending $ 6,260 $ 7,140
NSF and late charges 1,050 1,950
Damage and cleaning fees 6,335 5,732
Forfeited tenant security deposits - - - -
Other revenue 1,384 1,496
-------- --------
Sub-total other revenue $ 15,029 $ 16,318
------------- ------------
Total revenues $ 398,545 $ 405,077
------------- ------------
See Notes to Financial Statements.
42
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
----- ----
OPERATING EXPENSES
Renting expenses
Advertising $ 7,111 $ 14,294
Miscellaneous renting expenses 2,798 2,440
-------- --------
Sub-total renting expenses $ 9,909 $ 16,734
----------- -----------
Administrative expenses
Office salaries $ 792 $ 196
Office supplies 4,835 2,629
Office rent - - - -
Management fee 17,729 19,414
Manager's salary 27,121 20,050
Manager rent free unit - - 6,400
Legal expense 242 1,558
Audit expense 4,168 3,978
Bookkeeping / accounting
services - - - -
Telephone and answering
service 2,771 2,562
Bad debts 628 1,426
Miscellaneous administrative
expenses 6,896 3,076
-------- --------
Sub-total administrative
expenses $ 65,182 $ 61,289
----------- -----------
Utilities expense
Fuel oil / coal $ - - $ - -
Electricity 6,377 5,488
Water 9,668 9,144
Gas 2,359 1,933
Sewer 15,636 15,500
------- -------
Sub-total utilities expense $ 34,040 $ 32,065
----------- -----------
See Notes to Financial Statements.
43
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
----- -----
Operating and maintenance expense
Janitor and cleaning payroll $ - - $ 33
Janitor and cleaning supplies 2,594 206
Janitor and cleaning contract 2,638 3,033
Exterminating payroll / contract 1,480 909
Exterminating supplies - - - -
Garbage and trash removal 8,174 11,037
Security payroll / contract - - - -
Grounds payroll 222 248
Grounds supplies 603 339
Grounds contract 5,903 6,800
Repairs payroll 18,758 15,358
Repairs material 4,472 3,990
Repairs contract 8,074 4,820
Elevator maintenance / contract - - - -
Heating / cooling repairs
and maintenance 1,021 407
Swim pool maintenance / contract - - - -
Snow removal - - - -
Decorating payroll / contract 1,670 1,580
Decorating supplies 1,552 214
Vehicle and maintenance equipment
o & r 153 112
Miscellaneous operating and maint.
expenses 8,037 - -
-------- ----------
Sub-total operating & maint.
expense $ 65,351 $ 49,086
------------- ------------
Taxes and insurance
Real estate taxes $ 500 $ 862
Payroll taxes 4,710 3,220
Miscellaneous taxes, licenses,
and permits 800 800
Property and liability
insurance 3,632 3,737
Fidelity bond insurance - - - -
Workman's compensation 1,886 2,999
Health insurance and other
employee benefits 2,533 1,628
Other insurance - - - -
---------- ----------
Sub-total taxes & insurance $ 14,061 $ 13,246
----------- -----------
Total operating expenses $ 188,543 $ 172,420
----------- -----------
See Notes to Financial Statements.
44
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
----- -----
OTHER EXPENSES
Interest expense - mortgage $ 164,080 $ 165,816
Interest expense - notes - - - -
Miscellaneous financial expense - - - -
Depreciation and amortization 200,798 208,818
Non project expenses - - - -
---------- ----------
Sub-total other expenses $ 364,878 $ 374,634
------------- ------------
Total expenses $ 553,421 $ 547,054
------------- ------------
Net income (loss) $ (154,876) $ (141,977)
============= =============
See Notes to Financial Statements.
45
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31, 1998 and 1997
General Limited
Total Partner Partner
Partners' equity
December 31, 1996 $ 2,333,643 $ (4,777) $ 2,338,420
Partners' capital
contributions 54,045 54,045 - -
Partners' capital
distributions (5,000) - - (5,000)
Net income (loss) (141,977) (1,420) (140,557)
--------- ------- ---------
Partners' equity
December 31, 1997 $ 2,240,711 $ 47,848 $ 2,192,863
Partners' capital
contributions - - - - - -
Partners' capital
distributions - - - - - -
Net income (loss) (154,876) (1,549) (153,327)
--------- ------- ---------
Partners' equity
December 31, 1998 $ 2,085,835 $ 46,299 $ 2,039,536
============= ============ ============
Percentage at
December 31, 1998 100% 1% 99%
===== === ===
See Notes to Financial Statements.
46
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
1998 1997
----- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (154,876) $ (141,977)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 200,798 208,818
Change in assets and liabilities:
Decrease (increase) in:
Prepaid expenses (247) 163
Tenants' security deposits (494) (439)
Rents receivable 773 (573)
Other receivables - - 199
Increase (decrease) in:
Accounts payable 2,890 8,572
Accrued expenses - - (1,464)
Accrued interest (149) (139)
Accrued property taxes - - (54,045)
Prepaid rents (280) 237
Tenants' security deposits (2,375) 535
------- --------
Net cash provided by (used in)
operating activities $ 46,040 $ 19,887
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of replacement reserve escrow $ (10,354) $ (17,715)
Withdrawals from replacement reserve
escrow - - - -
Acquisition of property and equipment (7,140) - -
---------- ----------
Net cash provided by (used in)
investing activities $ (17,494) $ (17,715)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Partner contributions $ - - $ 54,045
Partner distributions - - (5,000)
Advances from general partner 8,251 - -
Payment of development fees payable (23,500) (46,871)
Principal payments on long-term debt (23,446) (21,721)
-------- --------
Net cash provided by
(used in) financing
activities $ (38,695) $ (19,547)
------------- -------------
See Notes to Financial Statements.
47
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
----- -----
Increase (decrease) in cash and
cash equivalents $ (10,149) $ (17,375)
Cash and cash equivalents
Beginning 20,644 38,019
--------- ---------
Ending $ 10,495 $ 20,644
=============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year
for interest $ 164,229 $ 165,955
=============== ==============
See Notes to Financial Statements.
48
<PAGE>
COLONIAL VILLAGE ROSEVILLE
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Partnership's significant accounting policies
consistently applied in the preparation of the accompanying financial statements
follows.
CAPITALIZATION AND DEPRECIATION
Land, buildings and improvements are recorded at cost. Depreciation of
buildings and equipment is computed principally using the Modified
Accelerated Cost Recovery System which approximates straight-line for
buildings and double-declining balance for equipment over the following
estimated useful lives:
Years
-----
Buildings 27.5
Equipment 7
Improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred. Upon disposal of depreciable
property, the appropriate property accounts are reduced by the related
costs and accumulated depreciation. The resulting gains and losses are
reflected in the statement of operations.
CASH AND CASH EQUIVALENTS
For purposes of reporting the statements of cash flows, the Partnership
includes all cash accounts which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments
purchased with a maturity of three months or less as cash and cash
equivalents on the accompanying balance sheet.
AMORTIZATION
Deferred charges are amortized over the following estimated useful lives
using the straight-line method:
Years
-----
Deferred debt expense 30
Tax credit monitoring fee 15
INCOME TAXES
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and
is reportable by, the partners individually.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
PERSONAL ASSETS AND LIABILITIES
In accordance with the generally accepted method of presenting partnership
financial statements, the financial statements do not include the personal
assets and liabilities of the partners, including their obligation for
income taxes on their distributive shares of the net income of the
Partnership, nor any provision for income tax expense.
NOTE 2 - ORGANIZATION
Colonial Village Roseville is a California Limited Partnership which was
formed in April 1993, to develop, construct, own, maintain and operate a
56-unit multi-family apartment complex and is located in the city of
Roseville, California. The Partnership Agreement and the loan agreement
with the California Community Reinvestment Corporation (CCRC), a
California nonprofit public benefit corporation governs the major
activities of the Partnership. Under the agreements, the Partnership is
required to provide low cost housing to very low-income or lower-income
households.
The Partnership has one general partners, Project Go Inc., a 501(c)(3) tax
exempt, non-profit community service organization and one investing
limited partner, WNC Housing Tax Credits III, L.P., a California limited
partnership. Partnership transactions with the partners are described in
other notes to these financial statements.
NOTE 3 - DEFERRED CHARGES
Deferred charges as of December 31, 1998 and 1997, consists of the
following:
1998 1997
------------ -------------
Deferred debt expense $ 110,462 $ 110,462
Tax credit monitoring fee 22,960 22,960
------------- -------------
$ 133,422 $ 133,422
Less accumulated amortization 18,449 13,236
------------- -------------
$ 114,973 $ 120,186
============= =============
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RESTRICTED DEPOSITS AND FUNDED RESERVES
In accordance with the Partnership Agreement and the Rider to Multifamily
Instrument with CCRC, the Partnership is required to maintain a
replacement reserve account. The replacement reserve account is to be
funded annually in the amount of $16,800.
NOTE 5 - LONG-TERM DEBT
Long-Term debt consisted of a permanent loan with CCRC in face amount of
$2,200,000.
Under the terms of the 30-year Promissory Note with CCRC, the loan
provides for an initial interest rate of 7.67% and monthly payments of
$15,639.62 commencing on September 1, 1995, and continuing through August
2025. The interest rate and monthly payment will be adjusted at year
eleven (11) and year twenty-one (21), at which time the interest rate will
be adjusted based on the Current Index plus 2.75% and the payment will be
adjusted and determined by the amount of the monthly payment that would be
sufficient to repay the note within 360 months of the initial payment
date. As Of December 31, 1998, the current interest rate, and minimum
monthly payment due is 7.67% and $15,639.62, respectively.
The apartment complex is pledged as collateral for the mortgage and is
secured by deeds of trust, assignment of rents, security agreements and
fixture filings against the property.
Aggregate maturities of Long-term debt for the next five years are as
follows:
December 31, 1999 $ 25,309
2000 27,320
2001 29,491
2002 31,834
2003 34,364
Thereafter 1,980,021
-------------
TOTAL $ 2,128,339
=============
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
DEVELOPER FEES
In accordance with the Partnership Agreement, the Partnership agreed to
pay the general partner a development fee of $648,000 for services
rendered to the Partnership for overseeing the development and
construction of the project. However, during 1995, $3,526, of this amount
was waived by the general partner in accordance with the limitations
imposed by the California Tax Credit Allocation Committee.
Payment of the development fee is to be paid from future operational cash
flows.
The developer fee has been capitalized into the basis of the building.
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - COMMITMENT
The Partnership entered into a Regulatory Agreement with the Tax Credit
Allocation Committee (TCAC), established under Section 50185 of the Health
and Safety Code of the State of California. Under this Agreement, the
Partnership shall maintain the project as a Qualified Low-income Housing
Project for a period of 55 consecutive taxable years beginning with 1995,
the first taxable year of the Credit Period. In exchange for this
agreement, TCAC has authorized an allocation relating to the low-income
housing credit under the provisions of Section 42 of the Internal Revenue
Code.
NOTE 8 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Partnership's sole asset is Colonial Village Roseville Apartments. The
Partnership's operations are concentrated in the multifamily real estate
market.
52
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