FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-21895
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-6163848
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ____ No X
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet, June 30, 1997 and December 31, 1996...............3
Statement of Operations For the Three months and Six
months Ended June 30, 1997 and 1996 ........................4
Statement of Partners' Equity For the Six months Ended
June 30, 1997 and 1996......................................5
Statement of Cash Flows For the Six months Ended
June 30, 1997 and 1996......................................6
Notes to Financial Statements....................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .......................16
Signatures......................................................17
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
BALANCE SHEETS
June 30, 1997 and December 31, 1996
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 3,021,834 $ 2,567,217
Subscriptions receivable - Note 7
- 2,195,000
Loans Receivable - Note 2
- 522,190
Investment in limited
partnerships - Note 3
14,477,579 12,782,751
Other assets
3,072 105,998
------------ ------------
$ 17,502,485 $ 18,173,156
============= ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships - $ $
Note 5 2,253,455 2,822,885
Accrued fees and expenses due to
general partner and affiliates -
Note 4 131,947 43,807
--------- ---------
2,385,402 2,866,692
--------- ---------
Commitments and contingencies - Note 8
Partners' equity (deficit):
General partner
(24,020) (21,876)
Limited partners (25,000 units
authorized, 18,000 units issued
and outstanding)
15,141,103 15,328,340
---------- ----------
Total partners' equity
15,117,083 15,306,464
----------- ----------
$ 17,502,485 $ 18,173,156
============= ============
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30, 1997 and 1996
1997 1996
---- ----
Three Six Three Six
Months Months Months Months
------ ------ ------ ------
Interest income $ 22,966 $ 70,711 $ 30,910 $ 36,504
------ ------- ------- -------
Operating expenses:
Amortization 8,989 17,978 3,768 8,155
Asset management fees
(Note 4) 12,375 24,751 19,883 24,750
Legal and accounting 2,453 2,500 1,864 1,864
Other 8,278 8,784 3,242 3,247
------ ------ ------ ------
Total operating expenses 32,095 54,013 28,757 38,016
------ ------ ------ ------
Income (loss) from
operations (9,129) 16,698 2,153 (1,512)
Equity in loss from
limited partnerships (47,900) (223,400) (43,666) (45,200)
-------- -------- -------- --------
Net loss $(57,029) $(206,702) $(41,513) $(46,712)
======== ======== ======== ========
Net loss allocated to:
General partner $ (570) $ (2,067) $ (415) $ (467)
===== ======= ===== =====
Limited partners $(56,459) $(204,635) $(41,098) $(46,245)
======== ======== ======== ========
Net loss per weighted
limited partner unit
(18,000and 9,009) $ (3.14) $ (11.37) $ (4.56) $ (5.13)
====== ======= ====== ======
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Six Months Ended June 30, 1997 and 1996
For the Six Months Ended June 30, 1997
- ---------------------------------------
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit),
December 31, 1996 $ (21,876) $ 15,328,340 $ 15,306,464
Offering expenses (77) (7,602) (7,679)
Net loss for the six
months ended June 30, 1997 (2,067) (204,635) (206,702)
------- --------- ---------
Equity (deficit),
June 30, 1997 $ (24,020) $ 15,141,103 $ 15,117,083
======== ========== ==========
For the Six Months Ended June 30, 1996
- ---------------------------------------
Equity (deficit),
December 31, 1995 $ (6,029) $ 3,852,212 $ 3,846,183
Capital contributions 13,060,580 13,060,580
Offering expenses (13,637) (1,350,089) (1,363,726)
Capital issued for notes
receivable (2,221,315) (2,221,315)
Net loss for the six months
ended June 30, 1996 (467) (46,245) (46,712)
----- -------- --------
Equity (deficit),
June 30, 1996 $ (20,133) $ 13,295,143 13,275,010
======== =========== ==========
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
1997 1996
---- ----
Cash flows provided by operating activities:
Net loss $ (206,702) $ (46,712)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Equity in loss of limited
partnerships 223,400 45,200
Amortization 17,978 8,155
Asset management fee 24,751 24,750
Change in other assets 102,926 (18,461)
Accrued fees and expense due
to general partner and affiliates (121) (734)
------- -------
Net cash provided by operating
activities 162,232 12,198
------- ------
Cash flows used by investing activities:
Investment in limited partnerships (1,990,496) (1,710,386)
Distribution from local limited
partnership 8,340
Acquisition fees (1,290) (664,382)
------ --------
Net cash used by investing
activities (1,983,446) (2,374,768)
---------- ----------
Cash flows provided by financing activities:
Capital contributions from partners 2,220,000 9,638,135
Offering costs and sales commissions (12,679) (1,345,638)
Receipts of advances from affiliates 68,510 -
-------- -----------
Net cash provided by
financing activities 2,275,831 8,292,497
---------- ----------
Net increase in cash and cash
equivalents 454,617 5,929,927
Cash and cash equivalents, beginning
of period 2,567,217 660,999
---------- ---------
Cash and cash equivalent, end of period $ 3,021,834 $ 6,590,926
========= =========
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
STATEMENT OF CASH FLOWS (CONTINUED)
For the Six months Ended June 30,1997 and 1996
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the six months ended June 30,1997, the Partnership's payables to limited
partnerships; (in connection with its investments in limited partnerships) (see
Note 3 had non-cash transactions as follows:
Increases due to acquisition of limited $2,272,426
partnership interests
Application of loans receivable to acquisitions (522,190)
Decreases due to various price adjuster
provisions in the respective limited
partnership agreements (329,170)
---------
Net non-cash adjustments to the Partnership's
payable to limited partnerships $1,421,066
==========
During the six months ended June 30,1997, the Partnership incurred, but did not
pay, $24,751 in management fees. (see Note 4).
- -------------------------------------------------------------------------------
During the six months ended June 30, 1996, the Partnership incurred, but did not
pay, $17,688 of payables to affiliates for acquisitions costs and offering
expenses.
During the six months ended June 30, 1996, the Partnership incurred, but did not
pay, $3,159,708 of payables to limited partnerships; the Partnership applied
cash in escrow of $1,873,262 and loans receivable of $630,765 (in connection
with its investments in limited partnerships.
During the six months ended June 30, 1996, $1,201,130 of capital contributions
were recorded as subscriptions receivable.
During the six months ended June 30, 1996, the Partnership incurred, but did not
pay, $24,750 in management fees.
UNAUDITED
See Accompanying Notes to Financial Statements
7
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund, V, L.P., Series 3 (the "Partnership") was formed
under the California Revised Limited Partnership Act on March 28, 1995 and
commenced operations on October 23, 1995. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's Annual Report for the year ended December 31, 1996.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of June 30,1997,
the results of operations and changes in cash flows for the six months ended
June 30,1997 and 1996. Accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The results of
operations for the interim period presented are not necessarily indicative of
the results for the entire year.
The general partner of the Partnership is WNC Tax Credit Partners V, L.P. (the
"General Partner"), a California limited partnership. WNC & Associates, Inc. is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 70% of the outstanding stock of WNC & Associates,
Inc. John B. Lester, Jr. is the original limited partner of the Partnership and
owns, through the Lester Family Trust, 30% of the outstanding stock of WNC &
Associates, Inc.
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
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 sale or refinancing proceeds equal to
their capital contributions and their preferred return (as defined in the
Partnership's Agreement of Limited Partnership) and the general partner has
received a subordinated disposition fee 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.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------
Method of Accounting For Investment in Limited Partnerships
- -----------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
- -------------------------
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
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.
Organization Costs
- ------------------
Organization costs will be amortized on the straight-line method over 60 months.
NOTE 2 - LOANS RECEIVABLE
- -------------------------
Loans receivable represent amounts loaned by the Partnership to certain limited
partnerships in which the Partnership may invest. These loans will be applied
against the first capital contribution due if the Partnership ultimately
acquires a limited partnership interest. In the event that the Partnership does
not acquire a limited partnership interest, the loans are to be repaid with
interest with at a rate of prime plus 1% per annum (10.5 % at March 31,1997).
Loans receivable of $245,581 and $276,609 at December 31, 1996 were applied to
capital contributions due for limited partnership interests acquired in January
1997 and April 1997, respectively. (See Note 8)
9
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
As of June 30, 1997, the Partnership had acquired limited partnership interests
in eighteen limited partnerships each of which owns one apartment complex. As of
June 30, 1997, construction and rehabilitation of 14 of the apartment complexes
had been completed. The remaining four have started construction. The
Partnership, as a limited partner, is a 99% owner and is entitled to 99% of the
operating profits and losses of the limited partnerships.
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of June 30,1997 and
December 31, 1996:
1997 1996
---- ----
Investment Balance - Beginning of period $ 12,782,751 $ 1,046,532
Capital contributions to limited partnerships 756,146 8,693,189
Distributions from limited partners (8,340)
Capital contributions payable to
limited partnerships 1,187,110 2,513,033
Capitalized acquisition fees and costs 1,290 738,504
Equity in loss of limited partnerships (223,400) (185,071)
Amortization of capitalized acquisition costs (17,978) (23,436)
---------- ----------
Investment Balance - End of period $ 14,477,579 $ 12,782,751
========== ==========
Selected financial information for the six months ended June 30,1997 and 1996
from the combined financial statements of the limited partnerships in which the
partnership has invested is as follows:
1997 1996
---- ----
Total revenue $ 2,324,000 $ 278,000
--------- -------
Interest expense 680,000 67,000
Depreciation 429,000 77,000
Operating expenses 1,440,000 180,000
--------- -------
Total expenses 2,549,000 324,000
--------- -------
Net loss $ (225,000) $ (46,000)
========= ========
Net loss allocable to the Partnership $ (223,400) $ (45,200)
======== ========
10
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees up to 7.5% of the gross proceeds from the sale of
Partnership units. No acquisition fees were incurred for the six months ended
March 31,1997.
Reimbursement for organizational, offering and selling expenses advanced
by the General Partner or affiliates on behalf of the Partnership. These
reimbursements plus all other organizational and offering expenses inclusive
of sales commissions will not exceed 14.5% of the gross proceeds. During the
six months ended June 30,1997 the Partnership incurred organizational,
offering and selling expenses of $0, $1,904, and $5,775, respectively.
An annual management fee equal to the greater of (i) $2,000 for each
apartment complex or (ii) .275% of the gross proceeds, in either case
increased or decreased based on annual changes in the Consumer Price Index.
However, the maximum fee may not exceed .2% of the invested assets (defined
as the Partnership's capital contributions plus its allocable percentage of
the permanent financing) of the local limited partnerships. The Partnership
has incurred fees of $24,751 for the six months ended June 30,1997.
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 return on investment (as defined in the Partnership's
Agreement of Limited Partnership) and is payable only if services are
rendered in the sales effort.
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheet consists of the following at June 30,1997 and
December 31, 1996:
1997 1996
---- ----
Acquisition fees $ 42,551 $ 42,551
Advances made for acquisition costs,
organizational, offering and selling 2,778 7,899
expenses
Asset management fees 86,618 61,867
Advance for acquisition of property 0 (68,510)
-------- --------
$ 131,947 $ 43,807
======== ========
11
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 5 - PAYABLE TO LIMITED PARTNERSHIPS
- ----------------------------------------
Payable to limited partnerships at June 30, 1997 represents amounts which are
due at various times based on conditions specified in the respective local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited partnership achieving certain operating
benchmarks, and are generally expected to be paid within two years of the
Partnership's initial investment.
NOTE 6 - INCOME TAXES
- ---------------------
The Partnership will not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their respective
returns.
NOTE 7 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
- ---------------------------------------------------
During the six months ended March 31,1997, the Partnership collected the
$2,195,000 in subscriptions receivable at December 31, 1996.
Limited partners who subscribe for ten or more units of limited partnership
interest ($10,000) may elect to pay 50% of such purchase price in cash upon
subscription and the remaining 50% by the delivery of a promissory note payable
bearing interest at the rate of 8% per annum. Principal and interest are due (i)
January 31, 1997 if the investor subscribes between January 1, 1996 and June 1,
1996 or (ii) the later of the date of subscription or June 30,1997 if the
investor subscribes after June 1, 1996. This amount is presented as a reduction
in partners' equity.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- ----------------------------------------
Subsequent to December 31, 1996, the Partnership acquired two limited
partnership interests which require capital contributions totaling approximately
$2,272,426, of which $522,190 had been made and are reflected as loans
receivable in the accompanying balance sheet as of December 31, 1996 (see Note
2).
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
WNC Housing Tax Credit Fund V, L.P., Series 3 ("the Partnership") is a
California Limited Partnership formed under the laws of the State of California
on March 28, 1995, and commenced operations on October 24, 1995 to acquire
limited partnership interests in limited partnerships ("Limited Partnerships")
which own multifamily apartment complexes that are eligible for low-income
housing federal income tax credits (the "Low Income Housing Credit").
As of June 30, 1997, the Partnership had received subscriptions for 18,000 Units
consisting of cash, notes receivable and subscriptions receivable of $17,528,985
and $30,000, and $0, respectively.
Liquidity and Capital Resources
- -------------------------------
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
increase in cash and cash equivalents of approximately $455,000 for the six
months ended June 30, 1997. This increase in cash was provided by The
Partnership's financing activities, including the proceeds from the offering.
Cash from financing activities for the period ended June 30, 1997 of
approximately $2,276,000 was sufficient to fund the investing activities of the
Partnership during such period in the aggregate amount of approximately
$1,983,000, which consisted primarily of capital contributions to Limited
Partnerships. Cash provided and used by the operating activities of the
Partnership was minimal compared to its other activities. Cash provided from
operations consisted primarily of interest received on cash deposits, and cash
used in operations consisted primarily of payments for operating fees and
expenses. The major components of all these activities are discussed in greater
detail below.
As of June 30, 1997 and December 31, 1996 the Partnership was indebted to WNC &
Associates, Inc. in the amount of approximately $132,000 and $44,000,
respectively. The component items of such indebtedness were as follows: accrued
acquisition fees of approximately $43,000 and $ 43,000, respectively, advances
to pay front-end fees of approximately $3,000 and $8,000, respectively, accrued
asset management fees of approximately $87,000 and $62,000 respectively and due
to an affiliate of the general partner approximately $0 and $(69,000).
As of June 30, 1997, the Partnership has received and accepted subscriptions
funds in the amount of $17,559,000, of which $30,000 currently is represented by
Promissory Notes. As of August 8, 1997, as of June 30, 1997 and as of December
31, 1996, the Partnership had made capital contributions to Limited Partnerships
in the amount of approximately $11,891,000, $11,603,000 and $9,091,000,
respectively, and had commitments for additional capital contributions of
approximately $1,965,000, $2,253,000 and $2,823,000, respectively. Further, the
Partnership had loans outstanding to Limited Partnerships as of August 8, 1997,
as of June 30, 1997 and as of December 31, 1996, of approximately $0, $0 and
$522,200, respectively. Of the amount outstanding as of December 31, 1996,
approximately $245,600 and $277,000 were loaned to ESCATAWPA and BROADWAY,
respectively and were applied to the Partnership's purchase price upon
acquisition of those Limited Partnership Interests in January 1997 and April
1997, respectively.
Prior to sale of the Apartment Complexes, it is not expected that any of the
Limited Partnerships in which the Partnership has invested or will invest will
generate cash from operations sufficient to provide distributions to the Limited
Partners in any material amount. Such cash from operations, if any, would first
be used to meet operating expenses of the Partnership, including payment of the
asset management fee to the General Partner. As a result, it is not anticipated
that the Partnership will provide distributions to the Limited Partners prior to
the sale of the Apartment Complexes.
13
<PAGE>
The Partnership's investments will not be readily marketable and may be affected
by adverse general economic conditions which, in turn, could substantially
increase the risk of operating losses for the Apartment Complexes, the Limited
Partnerships and the Partnership. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Units will be sufficient to fund the Partnership's investment commitments
and proposed operations.
The Partnership will establish working capital reserves of at least 3% of
capital contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership excluding payment of the asset management fee as well as expenses
attendant to the preparation of tax returns and reports to the Limited Partners
and other investor servicing obligations of the Partnerships. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnership's liquidity could also be affected by defaults
or delays in payment of the Limited Partners' promissory notes, from which a
portion of the working capital reserves is expected to be funded. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
of the Partnership, it is anticipated that additional funds would be sought
through bank loans or other institutional financing. The General Partner may
also apply any cash distributions received from the Limited Partnerships for
such purposes or to replenish or increase working capital reserves.
Under the Partnership Agreements the Partnerships do not have the ability to
assess the Limited Partners for additional capital contributions to provide
capital if needed by the Partnership or Limited Partnerships. Accordingly, if
circumstances arise that cause the Limited Partnerships to require capital in
addition to that contributed by the Partnership and any equity contributed by
the general partners of the Limited Partnerships, the only sources from which
such capital needs will be able to be satisfied (other than the limited reserves
available at the Partnership level) will be (i) third-party debt financing
(which may not be available, if, as expected, the Apartment Complexes owned by
the Limited Partnerships are already substantially leveraged), (ii) additional
equity contributions or advances of the general partners of the Limited
Partnerships (in this regard, each local general partner is required to fund
operating deficits, but only for a period of two years following construction
completion), (iii) other equity sources (which could adversely affect the
Partnership's interest in Low Income Housing Credits, cash flow and/or proceeds
of sale or refinancing of the Apartment Complexes and result in adverse tax
consequences to the Limited Partners), or (iv) the sale or disposition of the
Apartment Complexes (which could have the same adverse effects as discussed in
(iii) above). There can be no assurance that funds from any of such sources
would be readily available in sufficient amounts to fund the capital requirement
of the Limited Partnerships in question. If such funds are not available, the
Limited Partnerships would risk foreclosure on their Apartment Complexes if they
were unable to re-negotiate the terms of their first mortgages and any other
debt secured by the Apartment Complexes to the extent the capital requirements
of the Limited Partnerships relate to such debt.
The Partnership's capital needs and resources are expected to undergo major
changes during their first several years of operations as a result of the
completion of their offerings of Units and their acquisition of investments.
Thereafter, the Partnership's capital needs and resources are expected to be
relatively stable over the holding periods of the investments except to the
extent of proceeds received in payment of promissory notes and disbursed to fund
the deferred obligations of the Partnership.
14
<PAGE>
Results of Operations
As of June 30, 1997 and December 31, 1996 the Partnership had acquired 18 and 16
Limited Partnership Interests, respectively. Each of the 18 Limited Partnerships
receives or is expected to receive government assistance and each of them has
received a reservation for Housing Tax Credits. As of June 30, 1997, 14 of the
Apartment Complexes in the Partnership had commenced operations. Accordingly,
the "Equity in losses from limited partnerships" for the periods ended December
31, 1996 and June 30, 1997 reflected in the Statement of Operations of the
Partnership is not indicative of the amounts to be reported in future years.
As reflected on its Statements of Operations, the Partnership had a loss of
approximately $207,000 for the six months ended June 30, 1997. The component
items of revenue and expense are discussed below.
Revenue. The Partnership's revenues consisted entirely of interest earned on
promissory notes and cash deposits held in financial institutions (i) as
reserves, or (ii) pending investment in Limited Partnerships. Interest revenue
in future years will be a function of prevailing interest rates and the amount
of cash balances. It is anticipated that the Partnership will maintain cash
Reserves in an amount not materially in excess of the minimum amount required by
its Partnership Agreement, which is 3% of capital contributions.
Expenses. The most significant component of operating expenses was and is
expected to be the Asset Management Fee. The Asset Management Fee is equal to
the greater of (i) $2,000 for each Apartment Complex or (ii) 0.275% of gross
proceeds, and will be decreased or increased annually based on changes to the
Consumer Price Index.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of
Limited Partnership Interests.
Because of the amounts of the Asset Management Fee and amortization expense
primarily are determined by the gross proceeds from the offering, the number and
size of Apartment Complexes and the number of investors, until termination of
the Offering and investment of the net proceeds therefrom the Partnership cannot
predict with any accuracy what these amounts will be.
Equity in Losses from Limited Partnership. The Partnership's equity in losses
from Limited Partnerships is equal to 99% of the aggregate net losses of each
Limited Partnership incurred after admission of the Partnership as a limited
partner thereof.
After rent-up all Limited Partnerships are expected to generate losses during
each year of operations; this is so because, although rental income is expected
to exceed cash operating expenses, depreciation and amortization deductions
claimed by the Limited Partnerships are expected to exceed net rental income.
The Partnership accounts for its investments in Local Partnerships using the
equity method of accounting, whereby the Partnership reduces its investment
balance for its share of Local Partnerships' losses and distributions. Losses
are not recognized to the extent that the investment balance would be adjusted
below zero.
15
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
1. None.
A current report on Form 8-K dated April 10, 1997 was filed during the
quarter ended June 30, 1997. The current report set forth information pertaining
to the acquisition by the Series 4 of one Limited Partnership interests under
Item 2 thereof required by Article 11 of Regulation S-X were provided by the
current report.
Amendment No. 1 to current report on Form 8-K dated April 10, 1997 was filed
during the quarter ended June 30, 1997. The current report set forth information
pertaining to the acquisition by the Series 4 of one Limited Partnership
interests under Item 2 thereof and proforma financial information required by
Article 11 of Regulation S-X were provided by the current report.
16
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND V, L.P., Series 3
By:_____________________________________________________
WNC & ASSOCIATES, INC. General Partner
Date: June 14, 1997
By:_____________________________________________________
John B. Lester, Jr President
Date: June 14, 1997
By:_____________________________________________________
Theodore M. Paul Vice President - Finance
Date: June 14, 1997
17
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<ARTICLE> 5
<CIK> 0000943904
<NAME> WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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0
0
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