UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 30, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
0-19217
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(Commission File Number)
American Tax Credit Properties III L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3545006
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(State or other jurisdiction of organization) (I.R.S. Employer
Identification No.)
Richman Tax Credit Properties III L.P.
599 West Putnam Avenue, 3rd floor
Greenwich, Connecticut 06830
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
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Securities registered pursuant to Section 12(b) of the Act:
None None
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(Title of each Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
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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
requirement for the past 90 days. Yes X No___
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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 a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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Registrant has no voting stock.
Documents incorporated by reference:
Part I - pages 20 through 31 and 44 through 66 of the prospectus dated February
7, 1990, as supplemented by Supplement No. 1, Supplement No. 2, Supplement No.
3, Supplement No. 4, Supplement No. 5 and Supplement No. 6 dated June 6, 1990,
November 21, 1990, December 20, 1990, October 30, 1991, December 26, 1991 and
January 15, 1992, respectively, filed pursuant to Rule 424(b)(3) under the
Securities Act of 1933.
PART I
Item 1. Business
Formation
American Tax Credit Properties III L.P. ("Registrant"), a Delaware limited
partnership, was formed on September 21, 1989 to invest primarily in leveraged
low-income multifamily residential complexes (the "Property" or "Properties")
which qualify for the low-income tax credit in accordance with Section 42 of the
Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition of
limited partnership equity interests in partnerships (the "Local Partnership" or
"Local Partnerships") that are the owners of the Properties. Registrant
considers its activity to constitute a single industry segment.
Richman Tax Credit Properties III L.P. (the "General Partner"), a Delaware
limited partnership, was formed on September 21, 1989 to act as the general
partner of Registrant. The general partner of the General Partner is Richman
Housing Credits Inc. ("Richman Housing"), a Delaware corporation that is wholly
owned by Richard Paul Richman. Richman Housing is an affiliate of The Richman
Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard Paul
Richman in 1988.
The Amendment No. 2 to the Registration Statement on Form S-11 was filed with
the Securities and Exchange Commission (the "Commission") on February 1, 1990
pursuant to the Securities Act of 1933 under Registration Statement File No.
33-31390 and was declared effective on February 2, 1990. Reference is made to
the prospectus dated February 7, 1990, as supplemented by Supplement No. 1,
Supplement No. 2, Supplement No. 3, Supplement No. 4, Supplement No. 5 and
Supplement No. 6 dated June 6, 1990, November 21, 1990, December 20, 1990,
October 30, 1991, December 26, 1991 and January 15, 1992, respectively, filed
with the Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933
(the "Prospectus"). Pursuant to Rule 12b-23 of the Commission's General Rules
and Regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the description of Registrant's business set forth
under the heading "Investment Objectives and Policies" at pages 44 through 66 of
the Prospectus is incorporated herein by reference.
On March 12, 1990, Registrant commenced, through Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), the offering of up to 150,000 units of
limited partnership interest ("Unit") at $1,000 per Unit to investors. On June
13, 1990, December 27, 1990, December 31, 1991 and January 23, 1992 the closings
for 19,730, 9,622, 5,227 and 1,304 Units, respectively, took place, amounting to
aggregate limited partners' capital contributions of $35,883,000.
Competition
Pursuant to Rule 12b-23 of the Commission's General Rules and Regulations
promulgated under the Exchange Act, the description of Registrant's competition,
general risks, tax risks and partnership risks set forth under the heading "Risk
Factors" at pages 20 through 31 of the Prospectus is incorporated herein by
reference.
Employees
Registrant employs no personnel and incurs no payroll costs. All management
activities of Registrant are conducted by the General Partner. An affiliate of
the General Partner employs individuals who perform the management activities of
Registrant. This entity also performs similar services for other affiliates of
the General Partner.
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue
Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget
Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget
Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and Trade Relief
Extension Act of 1998, Tax and Trade Relief Extension Act of 1999, Community
Renewal Tax Relief Act of 2000, Economic Growth and Tax Relief Reconciliation
Act of 2001 and Job Creation and Worker Assistance Act of 2002 (collectively the
"Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax
entity that does not, itself, pay federal income tax. However, the partners of
Registrant who are subject to federal income tax may be affected by the Tax
Acts. Registrant will consider the effect of certain aspects of the Tax Acts on
the partners when making decisions regarding its investments. Registrant does
not anticipate that the Tax Acts will currently have a material adverse impact
on Registrant's business operations, capital resources and plans or liquidity.
2
Item 2. Properties
The executive offices of Registrant and the General Partner are located at 599
West Putnam Avenue, 3rd floor, Greenwich, Connecticut 06830. Registrant does not
own or lease any properties. Registrant pays no rent; all charges for leased
space are borne by an affiliate of the General Partner.
Registrant's primary objective is to provide Low-income Tax Credits to limited
partners generally over a ten year period. The relevant state tax credit agency
has allocated each of Registrant's Local Partnerships an amount of Low-income
Tax Credits, which are generally available for a ten year period from the year
the Property is placed in service (the "Ten Year Credit Period"). The Ten Year
Credit Period is expected to be fully exhausted by the Local Partnerships as of
December 31, 2003. The required holding period of each Property, in order to
avoid Low-income Tax Credit recapture, is fifteen years from the year in which
the Low-income Tax Credits commence on the last building of the Property (the
"Compliance Period"). In addition, certain of the Local Partnerships have
entered into agreements with the relevant state tax credit agencies whereby the
Local Partnerships must maintain the low-income nature of the Properties for a
period which exceeds the Compliance Period, regardless of any sale of the
Properties by the Local Partnerships after the Compliance Period. The Properties
must satisfy various requirements including rent restrictions and tenant income
limitations (the "Low-income Tax Credit Requirements") in order to maintain
eligibility for the recognition of the Low-income Tax Credit at all times during
the Compliance Period. Once a Local Partnership has become eligible for the
Low-income Tax Credit, it may lose such eligibility and suffer an event of
recapture if its Property fails to remain in compliance with the Low-income Tax
Credit Requirements. Through December 31, 2002, none of the Local Partnerships
have suffered an event of recapture of Low-income Tax Credits.
Although Registrant generally owns a 98.9%-99% limited partnership interest
("Local Partnership Interest") in the Local Partnerships, Registrant and
American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited
partnership and an affiliate of Registrant, together, in the aggregate, own a
99% Local Partnership Interest in the following Local Partnerships:
Registrant ATCP II
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Batesville Family, L.P. 61.75% 37.25%
Bruce Housing Associates, L.P. 61.75 37.25
Carrington Limited Dividend Housing
Association Limited Partnership 65.95 33.05
Ivy Family, L.P. 61.75 37.25
Lawrence Road Properties, Ltd. 61.75 37.25
Mirador del Toa Limited Partnership 59.06 39.94
Purvis Heights Properties, L.P. 61.75 37.25
Queen Lane Investors 48.50 50.50
Many of the Local Partnerships receive rental subsidy payments, including
payments under Section 8 of Title II of the Housing and Community Development
Act of 1974 ("Section 8") (see descriptions of subsidies on page 7). The subsidy
agreements expire at various times during and after the Compliance Periods of
the Local Partnerships. Since October 1997, the United States Department of
Housing and Urban Development ("HUD") has issued a series of directives related
to project based Section 8 contracts that define owners' notification
responsibilities, advise owners of project based Section 8 properties of what
their options are regarding the renewal of Section 8 contracts, provide guidance
and procedures to owners, management agents, contract administrators and HUD
staff concerning renewal of Section 8 contracts, provide policies and procedures
on setting renewal rents and handling renewal rent adjustments and provide the
requirements and procedures for opting-out of a Section 8 project based
contract. Registrant cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program. Such changes could adversely
affect the future net operating income before debt service and debt structure of
any or all Local Partnerships currently receiving such subsidy or similar
subsidies. One Local Partnership's Section 8 contracts are currently subject to
renewal under applicable HUD guidelines.
3
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2002 footnotes)
- -------------------------- --------- ------------ ------------------- ----------
April Gardens Apartments II
Limited Partnership
April Gardens Apartments
Las Piedras, Puerto Rico 48 $ 485,581 $1,980,296 (1b&d)
Ashland Park Apartments, L.P.
Ashland Park Apartments
Ashland, Nebraska 24 235,732 1,028,823 (1b&d)
Auburn Family, L.P.
Auburn Apartments
Louisville, Mississippi 16 95,412 461,511 (1b&d)
Batesville Family, L.P.
Westridge Apartments
Batesville, Mississippi 48 239,716 (2) 1,428,095 (1b)
Bay Springs Elderly, L.P.
Bay Springs Manor
Bay Springs, Mississippi 24 208,820 670,554 (1b&d)
Brisas del Mar Apartments
Limited Partnership
Brisas del Mar Apartments
Hatillo, Puerto Rico 66 668,172 2,629,597 (1b&d)
Bruce Housing Associates, L.P.
Bruce Family Apartments
Bruce, Mississippi 40 183,155 (2) 1,096,634 (1b&d)
Carrington Limited Dividend
Housing Association Limited
Partnership
Carrington Place
Farmington Hills, Michigan 100 2,174,720 (2) 3,313,001 (1c)
Chestnut Park Associates, L.P.
Chestnut Park Apartments
East Orange, New Jersey 59 4,204,576 4,936,911 (1a)
Chowan Senior Manor Associates
Limited Partnership
Azalea Garden Senior Manor
Apartments
Murfreesboro, North Carolina 33 278,405 1,242,244 (1b&d)
Christian Street Commons
Associates
Christian Street Commons
Apartments
Philadelphia, Pennsylvania 18 581,645 590,264 (1a&b)
4
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2002 footnotes)
- -------------------------- --------- ------------ ------------------- ----------
Country View Apartments
Country View Apartments
Pembroke, Maine 16 $ 279,183 $ 929,391 (1b&d)
Desarrollos de Belen Limited
Partnership
Vista de Jagueyes II Apartments
Aguas Buenas, Puerto Rico 41 422,929 1,863,565 (1b&d)
Desarrollos de Emaus Limited
Partnership
Hucares II Apartments
Naguabo, Puerto Rico 72 631,404 3,167,700 (1b&d)
Ellinwood Heights Apartments, L.P.
Ellinwood Heights Apartments
Ellinwood, Kansas 24 156,261 682,238 (1b&d)
Fulton Street Houses Limited
Partnership
Fulton Street Townhouse
Apartments
New York, New York 35 1,948,081 3,869,930 (1a&b)
Hayes Run Limited Partnership
Mashburn Gap Apartments
Marshall, North Carolina 34 322,074 1,413,949 (1b&d)
Howard L. Miller Sallisaw
Apartments II, L.P.
Sallisaw II Apartments
Sallisaw, Oklahoma 24 130,158 610,844 (1b&d)
Hurlock Meadow Limited
Partnership
Hurlock Meadow Apartments
Hurlock, Maryland 30 284,218 1,259,122 (1b&d)
Ivy Family, L.P.
Ivy Apartments
Louisville, Mississippi 32 135,528 778,437 (1b&d)
Justin Associates
Locust Tower Apartments
Philadelphia, Pennsylvania 40 1,809,723 2,312,477 (1b&e)
LaBelle Commons, Ltd.
LaBelle Commons
LaBelle, Florida 32 253,580 1,004,428 (1b&d)
Lawrence Road Properties, Ltd.
Hillcrest Apartments
Newton, Mississippi 24 123,799 752,561 (1b&d)
5
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2002 footnotes)
- -------------------------- --------- ------------ ------------------- ----------
Loma Del Norte Limited
Partnership
Loma Del Norte Apartments
Anthony, New Mexico 40 $ 314,865 $1,426,203 (1b&d)
Long Reach Associates Limited
Partnership
Oak Ridge Apartments
Bath, Maine 30 448,922 1,466,875 (1b&d)
Mirador del Toa Limited
Partnership
Mirador del Toa Apartments
Toa Alta, Puerto Rico 48 284,847 (2) 1,864,895 (1b&d)
Moore Haven Commons, Ltd.
Moore Haven Commons
Moore Haven, Florida 28 213,402 920,328 (1b&d)
NP-89 Limited Dividend Housing
Association Limited Partnership
Newport Apartments
Clinton Township, Michigan 168 2,372,292 3,850,171 (1a,b&g)
Nash Hill Associates, Limited
Partnership
Nash Hill Place
Williamsburg, Massachusetts 28 302,575 1,456,772 (1b,d&f)
North Calhoun City, L.P.
North Calhoun City Apartments
Calhoun City, Mississippi 18 146,565 479,097 (1b&d)
Orange City Plaza, Limited
Partnership
Orange City Plaza Apartments
Orange City, Iowa 32 456,090 425,929 (1a)
Puerta del Mar Limited Partnership
Puerta del Mar Apartments
Hatillo, Puerto Rico 66 630,570 2,502,210 (1b&d)
Purvis Heights Properties, L.P.
Pineview Apartments
Purvis, Mississippi 40 191,512 (2) 1,136,111 (1b)
Queen Lane Investors
Queen's Row
Philadelphia, Pennsylvania 29 597,050 (2) 1,532,919 (1b&e)
Somerset Manor, Ltd.
Somerset Manor
Central City, Pennsylvania 24 208,465 890,588 (1b&d)
Sugar Cane Villas, Ltd.
Sugar Cane Villas
Pahokee, Florida 87 751,560 3,281,591 (1b&d)
6
Item 2. Properties (continued)
Mortgage
Name of Local Partnership Number loans payable as of Subsidy
Name of apartment complex of rental Capital December 31, (see
Apartment complex location units contribution 2002 footnotes)
- -------------------------- --------- ------------ ------------------- ----------
Summerfield Apartments Limited
Partnership
Summerfield Apartments
Charlotte, North Carolina 52 $ 1,088,667 $ 1,677,183 (1b)
Sydney Engel Associates L.P.
(formerly known as Sydney Engel
Associates) The Castle
New York, New York 224 3,201,874 16,682,455 (1b)
Union Valley Associates Limited
Partnership
Union Valley Apartments
Union Township, Pennsylvania 36 371,589 1,435,626 (1b)
Walnut Grove Family, L.P.
Walnut Grove Apartments
Walnut Grove, Mississippi 24 191,695 840,843 (1b&d)
Waynesboro Apartments Limited
Partnership
Waynesboro Apartments
Waynesboro, Pennsylvania 36 360,859 1,470,625 (1b)
West Calhoun City, L.P.
West Calhoun City Apartments
Calhoun City, Mississippi 28 230,212 745,254 (1b&d)
Westminster Apartments Limited
Partnership
Westminster Apartments
Philadelphia, Pennsylvania 42 1,047,993 1,607,972 (1b&e)
----------- -------------
$29,264,476 $ 83,716,219
=========== =============
(1) Description of subsidies:
(a) Section 8 of Title II of the Housing and Community Development Act of
1974 allows qualified low-income tenants to pay thirty percent of
their monthly income as rent with the balance paid by the federal
government.
(b) The Local Partnership's debt structure includes a principal or
interest payment subsidy.
(c) The Michigan State Housing Development Authority allows tenants, who
would otherwise pay more than 40% of their income for rent and
utilities, to receive rental subsidies.
(d) The Rural Housing Service (formerly the Farmers Home Administration)
of the United States Department of Agriculture Rental Assistance
Program allows qualified low-income tenants to receive rental
subsidies.
(e) The City of Philadelphia Housing Authority allows qualified low-income
tenants to receive rental certificates.
(f) The Commonwealth of Massachusetts participates in a rental assistance
program.
(g) The Local Partnership's Section 8 contracts are currently subject to
renewal under applicable HUD guidelines.
(2) Reflects amount attributable to Registrant only.
7
Item 3. Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the limited partners of Registrant
during the fourth quarter of the fiscal year covered by this report.
8
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters
Market Information and Holders
There is no established public trading market for Registrant's Units.
Accordingly, accurate information as to the market value of a Unit at any given
date is not available. The number of owners of Units as of May 31, 2003 was
approximately 1,633, holding 35,883 Units.
Merrill Lynch follows internal guidelines for providing estimated values of
limited partnerships and other direct investments reported on client account
statements. Pursuant to such guidelines, estimated values for limited
partnership interests reported on Merrill Lynch client account statements (such
as Registrant's Units) are provided to Merrill Lynch by independent valuation
services. These estimated values are based on financial and other information
available to the independent services (i) on the prior August 15th for reporting
on December year-end and subsequent client account statements through the
following May's month-end client account statements and (ii) on March 31st for
reporting on June month-end and subsequent client account statements through the
November month-end client account statements of the same year. In addition,
Registrant may provide an estimate of value to Unit holders from time to time in
Registrant's reports to limited partners. The estimated values provided by the
independent services and Registrant, which may differ, are not market values and
Unit holders may not be able to sell their Units or realize either amount upon a
sale of their Units. In addition, Unit holders may not realize such estimated
values upon the liquidation of Registrant.
Distributions
Registrant owns a limited partnership interest in Local Partnerships that are
the owners of Properties that are leveraged and receive government assistance in
various forms of rental and debt service subsidies. The distribution of cash
flow generated by the Local Partnerships may be restricted, as determined by
each Local Partnership's financing and subsidy agreements. Accordingly,
Registrant does not anticipate that it will provide significant cash
distributions to its partners. There were no cash distributions to the partners
during the years ended March 30, 2003 and 2002.
Low-income Tax Credits, which are subject to various limitations, may be used by
partners to offset federal income tax liabilities. The Low-income Tax Credits
per Unit generated by Registrant and allocated to the limited partners for the
tax years ended December 31, 2002 and 2001 and the cumulative Low-income Tax
Credits allocated from inception through December 31, 2002 are as follows:
Low-income
Tax Credits
-----------
Tax year ended December 31, 2002 $ 21.61
Tax year ended December 31, 2001 $ 87.38
Cumulative totals $1,555.22
Notwithstanding future circumstances which may give rise to recapture or loss of
future benefits (see Part I, Item 2 - Properties, herein), Registrant expects to
generate total Low-income Tax Credits from investments in Local Partnerships of
approximately $1,558 per Unit through December 31, 2003.
9
Item 6. Selected Financial Data
The information set forth below presents selected financial data of Registrant.
Additional detailed financial information is set forth in the audited financial
statements included under Part II, Item 8 herein.
Years Ended March 30,
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2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Interest and other revenue $ 224,254 $ 215,927 $ 235,418 $ 247,106 $ 252,224
=========== =========== =========== =========== ===========
Equity in loss of investment in
local partnerships $ (536,158) $(1,193,807) $(1,228,135) $(1,764,816) $(2,453,590)
=========== =========== =========== =========== ===========
Net loss $ (875,199) $(1,509,355) $(1,519,430) $(2,035,647) $(2,756,082)
=========== =========== =========== =========== ===========
Net loss per unit of limited
partnership interest $ (24.15) $ (41.64) $ (41.92) $ (56.16) $ (76.04)
=========== =========== =========== =========== ===========
Years Ended March 30,
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2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Total assets $ 4,153,964 $ 4,744,278 $ 6,512,494 $ 7,579,955 $ 9,511,546
=========== =========== =========== =========== ===========
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Capital Resources and Liquidity
Registrant admitted limited partners in four closings with aggregate limited
partners' capital contributions of $35,883,000. In connection with the offering
of the sale of units, Registrant incurred organization and offering costs of
approximately $4,419,000 and established a working capital reserve of
approximately $2,153,000. The remaining net proceeds of approximately
$29,311,000 (the "Net Proceeds") were available to be applied to the acquisition
of limited partnership interests in local partnerships (the "Local
Partnerships") that own low-income multifamily residential complexes (the
"Property" or "Properties") that qualify for the low-income tax credit in
accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax
Credit"). The Net Proceeds were utilized in acquiring an interest in forty-three
Local Partnerships.
As of March 30, 2003, Registrant has cash and cash equivalents and investments
in bonds totaling $2,896,108, which is available for operating expenses of
Registrant and circumstances which may arise in connection with the Local
Partnerships. As of March 30, 2003, Registrant's investments in bonds represent
corporate bonds of $1,198,059 and U.S. Treasury debt securities of $1,588,499
with various maturity dates ranging from 2003 to 2008. Registrant acquired such
investments in bonds with the intention of utilizing proceeds generated by such
investments to meet its annual obligations. Future sources of Registrant funds
are expected to be primarily from interest earned on working capital and limited
cash distributions from Local Partnerships.
During the year ended March 30, 2003, Registrant received cash from interest
revenue, maturity/redemption and sale of bonds and distributions from Local
Partnerships and utilized cash for operating expenses. Cash and cash equivalents
and investments in bonds decreased, in the aggregate, by approximately $33,000
during the year ended March 30, 2003 (which includes a net unrealized gain on
investments in bonds of approximately $226,000, the amortization of net premium
on investments in bonds of approximately $3,000 and the accretion of zero coupon
bonds of approximately $86,000). Notwithstanding circumstances that may arise in
connection with the Properties, Registrant does not expect to realize
significant gains or losses on its investments in bonds, if any.
During the year ended March 30, 2003, the investment in local partnerships
decreased as a result of Registrant's equity in the Local Partnerships' net loss
for the year ended December 31, 2002 of $536,158 (including an adjustment to
Registrant's carrying value of its investment in three Local Partnerships of
$103,063 in accordance with applicable accounting guidelines) (see discussion
below under Results of Operations) and cash distributions received from Local
Partnerships of $15,639 (exclusive of distributions from Local Partnerships of
$21,713 classified as other income). Payable to general partner and affiliate in
the accompanying balance sheet as of March 30, 2003 represents deferred
management and administration fees.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Results of Operations
10
Registrant's operating results are dependent upon the operating results of the
Local Partnerships and are significantly impacted by the Local Partnerships'
policies. In addition, the operating results herein are not necessarily the same
for tax reporting. Registrant accounts for its investment in local partnerships
in accordance with the equity method of accounting. Accordingly, the investment
is carried at cost, and is adjusted for Registrant's share of each Local
Partnership's results of operations and by cash distributions received. Equity
in loss of each investment in Local Partnership allocated to Registrant is
recognized to the extent of Registrant's investment balance in each Local
Partnership. Equity in loss in excess of Registrant's investment balance in a
Local Partnership is allocated to other partners' capital in any such Local
Partnership. As a result, the reported equity in loss of investment in local
partnerships is expected to decrease as Registrant's investment balances in the
respective Local Partnerships become zero. The combined statements of operations
of the Local Partnerships reflected in Note 5 to Registrant's financial
statements include the operating results of all Local Partnerships, irrespective
of Registrant's investment balances.
Cumulative losses and cash distributions in excess of investment in local
partnerships may result from a variety of circumstances, including a Local
Partnership's accounting policies, subsidy structure, debt structure and
operating deficits, among other things. In addition, the carrying value of
Registrant's investment in local partnerships may be reduced if the book value
(the "Local Partnership Carrying Value") is considered to exceed the estimated
value derived by management. Accordingly, cumulative losses and cash
distributions in excess of the investment or an adjustment to a Local
Partnership's Carrying Value are not necessarily indicative of adverse operating
results of a Local Partnership. See discussion below under Local Partnership
Matters regarding certain Local Partnerships currently operating below economic
break even levels.
Registrant's operations for the years ended March 30, 2003, 2002, and 2001
resulted in net losses of $875,199, $1,509,355, and $1,519,430, respectively.
The decrease in net loss from fiscal 2002 to fiscal 2003 is primarily
attributable to a decrease in equity in loss of investment in local partnerships
of approximately $658,000. Equity in loss of investment in local partnerships
has fluctuated over the last three years as a result of (i) Registrant adjusting
the Local Partnership Carrying Value in connection with its investments in
certain Local Partnerships during the each of the three years ended March 30,
2003 as reflected in Note 5 to the financial statements, changes in the
nonrecognition of losses in accordance with the equity method of accounting and
(ii) changes in the net operating losses of those Local Partnerships in which
Registrant continues to have an investment balance.
The Local Partnerships' net loss of approximately $3,253,000 for the year ended
December 31, 2002 includes depreciation and amortization expense of
approximately $4,100,000 and interest on non-mandatory debt of approximately
$361,000, and does not include required principal payments on permanent
mortgages of approximately $754,000. The Local Partnerships' net loss of
approximately $3,262,000 for the year ended December 31, 2001 includes
depreciation and amortization expense of approximately $4,125,000 and interest
on non-mandatory debt of approximately $356,000, and does not include principal
payments on permanent mortgages of approximately $722,000. The Local
Partnerships' net loss of approximately $3,365,000 for the year ended December
31, 2000 includes depreciation and amortization expense of approximately
$4,088,000, interest on non-mandatory debt of approximately $357,000, and does
not include principal payments on permanent mortgages of approximately $667,000.
Local Partnership Matters
Registrant's primary objective is to provide Low-income Tax Credits to limited
partners generally over a ten year period. The relevant state tax credit agency
has allocated each of Registrant's Local Partnerships an amount of Low-income
Tax Credits, which are generally available for a ten year period from the year
the Property is placed in service (the "Ten Year Credit Period"). The Ten Year
Credit Period is expected to be fully exhausted by the Local Partnerships as of
December 31, 2003. The required holding period of each Property, in order to
avoid Low-income Tax Credit recapture, is fifteen years from the year in which
the Low-income Tax Credits commence on the last building of the Property (the
"Compliance Period"). In addition, certain of the Local Partnerships have
entered into agreements with the relevant state tax credit agencies whereby the
Local Partnerships must maintain the low-income nature of the Properties for a
period which exceeds the Compliance Period, regardless of any sale of the
Properties by the Local Partnerships after the Compliance Period. The Properties
must satisfy various requirements including rent restrictions and tenant income
limitations (the "Low-income Tax Credit Requirements") in order to maintain
eligibility for the recognition of the Low-income Tax Credit at all times during
the Compliance Period. Once a Local Partnership has become eligible for the
Low-income Tax credit, it may lose such eligibility and suffer an event of
recapture if its Property fails to remain in compliance with the Low-income Tax
Credit Requirements. Through December 31, 2002, none of the Local Partnerships
have suffered an event of recapture of Low-income Tax Credits.
11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. Many of the Local Partnerships receive rental subsidy payments,
including payments under Section 8 of Title II of the Housing and Community
Development Act of 1974 ("Section 8"). The subsidy agreements expire at various
times during and after the Compliance Periods of the Local Partnerships. Since
October 1997, the United States Department of Housing and Urban Development
("HUD") has issued a series of directives related to project based Section 8
contracts that define owners' notification responsibilities, advise owners of
project based Section 8 properties of what their options are regarding the
renewal of Section 8 contracts, provide guidance and procedures to owners,
management agents, contract administrators and HUD staff concerning renewal of
Section 8 contracts, provide policies and procedures on setting renewal rents
and handling renewal rent adjustments and provide the requirements and
procedures for opting-out of a Section 8 project based contract. Registrant
cannot reasonably predict legislative initiatives and governmental budget
negotiations, the outcome of which could result in a reduction in funds
available for the various federal and state administered housing programs
including the Section 8 program. Such changes could adversely affect the future
net operating income before debt service and debt structure of any or all Local
Partnerships currently receiving such subsidy or similar subsidies. One Local
Partnership's Section 8 contracts are currently subject to renewal under
applicable HUD guidelines.
The Local Partnerships have various financing structures which include (i)
required debt service payments ("Mandatory Debt Service") and (ii) debt service
payments which are payable only from available cash flow subject to the terms
and conditions of the notes, which may be subject to specific laws, regulations
and agreements with appropriate federal and state agencies ("Non-Mandatory Debt
Service or Interest"). In the event rents are not sufficient to cover operating
expenses, Mandatory Debt Service requirements and other charges, certain general
partners of the Local Partnerships (the "Local General Partners") are obligated
to provide advances to cover deficits for a certain period of time up to certain
amounts (the "Deficit Guarantee"). A Local General Partner's funding of such
Deficit Guarantee is dependent on its liquidity or ability to borrow the
required funds. During the year ended December 31, 2002, revenue from operations
of the Local Partnerships have generally been sufficient to cover operating
expenses and Mandatory Debt Service. Substantially all of the Local Partnerships
are effectively operating at or above break even levels, although certain Local
Partnerships' operating information reflects operating deficits that do not
represent cash deficits due to their mortgage and financing structure and the
required deferral of property management fees. However, as discussed below,
certain Local Partnerships' operating information indicates an operating deficit
after taking into account their mortgage and financing structure and any
required deferral of property management fees.
The terms of the partnership agreement of Westminster Apartments Limited
Partnership ("Westminster") require the Local General Partner to advance funds
to cover operating deficits through the Compliance Period. As of December 31,
2002, Westminster was in default under the terms of its first mortgage; payments
of principal, interest and replacement reserve deposits are approximately four
years in arrears, representing an arrearage of approximately $400,000. Although
Westminster has been involved in negotiating a restructuring of its mortgage
debt, a final resolution has not been reached and documented. There can be no
assurance that the issues will be resolved and the mortgage remains in default
without a formal forbearance as of June 2003. Westminster incurred an operating
deficit of approximately $53,000 for the year ended December 31, 2002, which
amount includes a provision for replacement reserve deposits of $1,184 per month
and debt service payments of $6,245 per month. Registrant's investment balance
in Westminster, after cumulative equity losses, became zero during the year
ended March 30, 1999. Westminster will have generated approximately $6.3 per
Unit per year to the limited partners upon the expiration of its Low-income Tax
Credit allocation in 2003.
The terms of the partnership agreement of Sydney Engel Associates L.P. ("Sydney
Engel") require the Local General Partners to advance funds to cover operating
deficits up to $1,000,000 through April 2003 and to cause the management agent
to defer property management fees in order to avoid a default under the
mortgage. Sydney Engel incurred an operating deficit of approximately $118,000
for the year ended December 31, 2002, which includes property management fees of
approximately $102,000. Payments on the mortgage are current and the Property
does not incur real estate taxes. Sydney Engel withdrew approximately $61,000
from its operating reserve during the year ended December 31, 2002. Such reserve
has a balance of approximately $122,000 as of December 31, 2002. Registrant's
investment balance in Sydney Engel, after cumulative equity losses, became zero
during the year ended March 30, 1997. Sydney Engel generated approximately $14.5
per Unit per year to the limited partners upon the expiration of its Low-income
Tax Credit allocation in 2001.
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Fulton Street Houses Limited Partnership ("Fulton Street") has an escrow of
approximately $317,000 as of December 31, 2002 to cover operating deficits and
there are no Mandatory Debt Service payments or real estate taxes required
during the Compliance Period. Fulton Street incurred an operating deficit of
approximately $45,000 for the year ended December 31, 2002. Registrant's
investment balance in Fulton Street, after cumulative equity losses, became zero
during the year ended March 30, 2002. Fulton Street generated approximately
$11.7 per Unit per year to the limited partners upon the expiration of its
Low-income Tax Credit allocation in 2001.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's
operations during its period of ownership of the Local Partnership Interests.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which requires Registrant to
make certain estimates and assumptions. A summary of significant accounting
policies is provided in Note 1 to the financial statements. The following
section is a summary of certain aspects of those accounting policies that may
require subjective or complex judgments and are most important to the portrayal
of Registrant's financial condition and results of operations. Registrant
believes that there is a low probability that the use of different estimates or
assumptions in making these judgments would result in materially different
amounts being reported in the financial statements.
o Registrant accounts for its investment in local partnerships in
accordance with the equity method of accounting since Registrant does
not control the operations of a Local Partnership.
o If the book value of Registrant's investment in a Local Partnership
exceeds the estimated value derived by management, Registrant reduces
its investment in any such Local Partnership and includes such
reduction in equity in loss of investment in local partnerships.
Recently Issued Accounting Standards
In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a
liability for the fair value of an obligation assumed under a guarantee. FIN 45
also requires additional disclosures by a guarantor in its interim and annual
financial statements about the obligations associated with guarantees issued.
The recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 did not have a material effect on Registrant's
financial position, results of operations or cash flows.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). FIN 46
addresses the consolidation by business enterprises of variable interest
entities as defined. FIN 46 applies immediately to variable interests in
variable interest entities created after January 31, 2003. For public
enterprises with a variable interest entity created before February 1, 2003, FIN
46 applies to that enterprise no later than the beginning of the first interim
or annual reporting period beginning after June 15, 2003. The adoption of FIN 46
is not expected to have a material effect on Registrant's financial position,
results of operations or cash flows.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
Registrant has invested a significant portion of its working capital reserves in
corporate bonds and U.S. Treasury instruments. The market value of such
investments is subject to fluctuation based upon changes in interest rates
relative to each investment's maturity date and the associated bond rating.
Since Registrant's investments in bonds have various maturity dates through
2008, the value of such investments may be adversely impacted in an environment
of rising interest rates in the event Registrant decides to liquidate any such
investment prior to its maturity. Although Registrant may utilize reserves to
assist an under performing Property, it otherwise intends to hold such
investments to their respective maturities. Therefore, Registrant does not
anticipate any material adverse impact in connection with such investments.
13
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 8. Financial Statements and Supplementary Data
Table of Contents
Page
----
Independent Auditors' Report..................................................15
Balance Sheets................................................................16
Statements of Operations......................................................17
Statements of Changes in Partners' Equity (Deficit)...........................18
Statements of Cash Flows......................................................19
Notes to Financial Statements.................................................21
No financial statement schedules are included because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or the notes thereto.
14
Independent Auditors' Report
To the Partners
American Tax Credit Properties III L.P.
We have audited the accompanying balance sheets of American Tax Credit
Properties III L.P. as of March 30, 2003 and 2002, and the related statements of
operations, partners' equity (deficit) and cash flows for each of the three
years in the period ended March 30, 2003. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Tax Credit
Properties III L.P. as of March 30, 2003 and 2002, and the results of its
operations, changes in partners' equity (deficit) and its cash flows for each of
the three years in the period ended March 30, 2003, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
June 17, 2003
15
AMERICAN TAX CREDIT PROPERTIES III L.P.
BALANCE SHEETS
MARCH 30, 2003 AND 2002
Notes 2003 2002
----- ---------- -----------
ASSETS
Cash and cash equivalents 3,9 $ 109,550 $ 51,896
Investments in bonds 4,9 2,786,558 2,877,273
Investment in local partnerships 5,8 1,235,573 1,787,370
Interest receivable 9 22,283 27,739
----------- -----------
$ 4,153,964 $ 4,744,278
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses 8 $ 864,971 $ 950,974
Payable to general partner and affiliate 6,8 1,683,190 1,538,043
----------- -----------
2,548,161 2,489,017
----------- -----------
Commitments and contingencies 8
Partners' equity (deficit) 2,4
General partner (301,815) (293,063)
Limited partners (35,883 units of limited
partnership interest outstanding) 1,649,958 2,516,405
Accumulated other comprehensive income, net 257,660 31,919
----------- -----------
1,605,803 2,255,261
----------- -----------
$ 4,153,964 $ 4,744,278
=========== ===========
See Notes to Financial Statements.
16
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 30, 2003, 2002 AND 2001
Notes 2003 2002 2001
----- ----------- ----------- -----------
REVENUE
Interest $ 202,541 $ 204,436 $ 226,667
Other income from local partnerships 21,713 11,491 8,751
----------- ----------- -----------
TOTAL REVENUE 224,254 215,927 235,418
----------- ----------- -----------
EXPENSES
Administration fees 6,8 230,571 230,571 230,571
Management fees 6,8 230,571 230,571 230,571
Professional fees 53,730 53,037 47,601
Printing, postage and other 48,423 17,296 17,970
----------- ----------- -----------
TOTAL EXPENSES 563,295 531,475 526,713
----------- ----------- -----------
Loss from operations (339,041) (315,548) (291,295)
Equity in loss of investment in
local partnerships 5 (536,158) (1,193,807) (1,228,135)
----------- ----------- -----------
NET LOSS (875,199) (1,509,355) (1,519,430)
Other comprehensive income (loss) 4 225,741 (55,166) 194,488
----------- ----------- -----------
COMPREHENSIVE LOSS $ (649,458) $(1,564,521) $(1,324,942)
=========== =========== ===========
NET LOSS ATTRIBUTABLE TO 2
General partner $ (8,752) $ (15,094) $ (15,194)
Limited partners (866,447) (1,494,261) (1,504,236)
----------- ----------- -----------
$ (875,199) $(1,509,355) $(1,519,430)
=========== =========== ===========
NET LOSS per unit of limited
partnership
Interest (35,883 units of limited
partnership interest) $ (24.15) $ (41.64) $ (41.92)
=========== =========== ===========
See Notes to Financial Statements.
17
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 30, 2003, 2002 AND 2001
Accumulated Other
General Limited Comprehensive
Partner Partners Income (Loss), Net Total
------- -------- ------------------ -----
Partners' equity (deficit), March 30, 2000 $ (262,775) $ 5,514,902 $ (107,403) $ 5,144,724
Net loss (15,194) (1,504,236) (1,519,430)
Other comprehensive income, net 194,488 194,488
----------- ----------- ----------- -----------
Partners' equity (deficit), March 30, 2001 (277,969) 4,010,666 87,085 3,819,782
Net loss (15,094) (1,494,261) (1,509,355)
Other comprehensive loss, net (55,166) (55,166)
----------- ----------- ----------- -----------
Partners' equity (deficit), March 30, 2002 (293,063) 2,516,405 31,919 2,255,261
Net loss (8,752) (866,447) (875,199)
Other comprehensive income, net 225,741 225,741
----------- ----------- -------- --------
Partners' equity (deficit), March 30, 2003 $ (301,815) $ 1,649,958 $ 257,660 $ 1,605,803
=========== =========== =========== ===========
See Notes to Financial Statements.
18
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 30, 2003, 2002 AND 2001
2003 2002 2001
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 105,058 $ 125,328 $ 153,508
Cash used for local partnerships for deferred
expenses (2,200) (4,750)
Cash paid for administration fees (132,195) (388,645) (100,000)
management fees (299,800) (274,000) (100,000)
professional fees (53,730) (53,037) (47,601)
printing, postage and other expenses (18,426) (17,288) (16,881)
--------- --------- ---------
Net cash used in operating activities (399,093) (609,842) (115,724)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from local partnerships 37,352 18,020 29,578
Maturity/redemption and sale of bonds 419,395 100,000 367,065
Investment in bonds (includes accrued interest
of $14,838) (610,910)
--------- --------- ---------
Net cash provided by (used in) investing
activities 456,747 118,020 (214,267)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 57,654 (491,822) (329,991)
Cash and cash equivalents at beginning of year 51,896 543,718 873,709
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 109,550 $ 51,896 $ 543,718
========= ========= =========
Significant Non-Cash Investing Activities
Unrealized gain (loss) on investments in bonds, net $ 225,741 $ (55,166) $ 194,488
========= ========= =========
- -------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities on page
20.
See Notes to Financial Statements.
19
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS - (Continued)
YEARS ENDED MARCH 30, 2003, 2002 AND 2001
2003 2002 2001
----------- ----------- -----------
RECONCILIATION OF NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES
Net loss $ (875,199) $(1,509,355) $(1,519,430)
Adjustments to reconcile net loss to net cash
used in operating activities
Equity in loss of investment in local
partnerships 536,158 1,193,807 1,228,135
Distributions from local partnerships
classified as other income (21,713) (11,491) (8,751)
Loss (gain) on redemption and sale of bonds (19,434) 4,167
Amortization of net premium on investments
in bonds 2,986 5,747 7,074
Accretion of zero coupon bonds (86,491) (86,491) (86,491)
Decrease in interest receivable 5,456 1,636 2,091
Increase in payable to general partner and 145,147 30,497 261,142
affiliate
Increase (decrease) in accounts payable and (86,003) (231,992) 1,089
accrued expenses
Decrease in other liabilities (2,200) (4,750)
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES $ (399,093) $ (609,842) $ (115,724)
=========== =========== ===========
See Notes to Financial Statements.
20
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 30, 2003, 2002 AND 2001
1. Organization, Purpose and Summary of Significant Accounting Policies
American Tax Credit Properties III L.P. (the "Partnership") was formed on
September 21, 1989 and the Certificate of Limited Partnership of the
Partnership was filed under the Delaware Revised Uniform Limited
Partnership Act. There was no operating activity until admission of the
limited partners on June 13, 1990. The Partnership was formed to invest
primarily in leveraged low-income multifamily residential complexes (the
"Property" or "Properties") which qualify for the low-income tax credit in
accordance with Section 42 of the Internal Revenue Code (the "Low-income
Tax Credit"), through the acquisition of limited partnership equity
interests (the "Local Partnership Interests") in partnerships (the "Local
Partnership" or "Local Partnerships") that are the owners of the
Properties. Richman Tax Credit Properties III L.P. (the "General Partner")
was formed on September 21, 1989 to act as the general partner of the
Partnership.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting
for both financial reporting and tax purposes. For financial reporting
purposes, the Partnership's fiscal year ends March 30 and its quarterly
periods end June 29, September 29 and December 30. The Local Partnerships
have a calendar year for financial reporting purposes. The Partnership and
the Local Partnerships each have a calendar year for income tax purposes.
Investment in Local Partnerships
The Partnership accounts for its investment in local partnerships in
accordance with the equity method of accounting, under which the investment
is carried at cost and is adjusted for the Partnership's share of each
Local Partnership's results of operations and by cash distributions
received. Equity in loss of each investment in Local Partnership allocated
to the Partnership is recognized to the extent of the Partnership's
investment balance in each Local Partnership. Equity in loss in excess of
the Partnership's investment balance in a Local Partnership is allocated to
other partners' capital in any such Local Partnership. Previously
unrecognized equity in loss of any Local Partnership is recognized in the
fiscal year in which equity in income is earned by such Local Partnership
or additional investment is made by the Partnership. Distributions received
subsequent to the elimination of an investment balance for any such
investment in a Local Partnership are recorded as other income from local
partnerships.
The Partnership regularly assesses the carrying value of its investments in
local partnerships. If the carrying value of an investment in a Local
Partnership exceeds the estimated value derived by management, the
Partnership reduces its investment in any such Local Partnership and
includes such reduction in equity in loss of investment in local
partnerships.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with an
original maturity of three months or less at the date of acquisition to be
cash equivalents. Cash and cash equivalents are stated at cost, which
approximates market value.
Income Taxes
No provision for income taxes has been made because all income, losses and
tax credits are allocated to the partners for inclusion in their respective
tax returns. In accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," the Partnership has
included in Note 7 disclosures related to differences in the book and tax
bases of accounting.
21
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
1. Organization, Purpose and Summary of Significant Accounting Policies
(continued)
Investments in Bonds
Investments in bonds are classified as available-for-sale and represent
investments that the Partnership intends to hold for an indefinite period of
time but not necessarily to maturity. Any decision to sell an investment
would be based on various factors, including significant movements in
interest rates and liquidity needs. Investments in bonds are carried at
estimated fair value and unrealized gains or losses are included as items of
comprehensive income (loss) and are reported as a separate component of
partners' equity (deficit).
Premiums and discounts on investments in bonds are amortized (accreted) using
the effective yield method over the life of the investment. Amortized
premiums offset interest revenue, while the accretion of discounts and zero
coupon bonds are included in interest revenue. Realized gain (loss) on
redemption or sale of investments in bonds are included in, or offset
against, interest revenue on the basis of the adjusted cost of each specific
investment redeemed or sold.
Recently Issued Accounting Standards
In November 2002, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, a
guarantor must recognize a liability for the fair value of an obligation
assumed under a guarantee. FIN 45 also requires additional disclosures by a
guarantor in its interim and annual financial statements about the
obligations associated with guarantees issued. The recognition provisions of
FIN 45 are effective for any guarantees issued or modified after December 31,
2002. The disclosure requirements are effective for financial statements of
interim or annual periods ending after December 15, 2002. The adoption of FIN
45 did not have a material effect on the Partnership's financial position,
results of operations or cash flows.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46").
FIN 46 addresses the consolidation by business enterprises of variable
interest entities as defined. FIN 46 applies immediately to variable
interests in variable interest entities created after January 31, 2003. For
public enterprises with a variable interest entity created before February 1,
2003, FIN 46 applies to that enterprise no later than the beginning of the
first interim or annual reporting period beginning after June 15, 2003. The
adoption of FIN 46 is not expected to have a material effect on the
Partnership's financial position, results of operations or cash flows.
2. Capital Contributions
On March 12, 1990, the Partnership commenced the offering of units (the
"Units") through Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Selling Agent"). On June 13, 1990, December 27, 1990, December 31, 1991 and
January 23, 1992, under the terms of the Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), the
General Partner admitted limited partners to the Partnership in four
closings. At these closings, subscriptions for a total of 35,883 Units
representing $35,883,000 in limited partners' capital contributions were
accepted. In connection with the offering of Units, the Partnership incurred
organization and offering costs of $4,418,530, of which $75,000 was
capitalized as organization costs and $4,343,530 was charged to the limited
partners' equity as syndication costs. The Partnership received a capital
contribution of $100 from the General Partner.
Net loss is allocated 99% to the limited partners and 1% to the General
Partner in accordance with the Partnership Agreement.
3. Cash and Cash Equivalents
As of March 30, 2003, the Partnership has cash and cash equivalents of
$109,550 that are deposited in interest bearing accounts with an institution
that is not insured by the Federal Deposit Insurance Corporation.
22
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
4. Investments in Bonds
The Partnership carries its investments in bonds as available-for-sale
because such investments are used to facilitate and provide flexibility for
the Partnership's obligations, including the providing of operating
advances resulting from circumstances that may arise in connection with the
Local Partnerships. Investments in bonds are reflected in the accompanying
balance sheets at estimated fair value.
As of March 30, 2003, certain information concerning investments in bonds
is as follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
Description and maturity cost gains losses value
------------------------ ---------- ---------- ---------- ----------
Corporate debt securities
After one year through five years $ 784,039 $ 47,212 $ -- $ 831,251
After five years through ten years 319,549 47,259 -- 366,808
---------- ---------- ---------- ----------
1,103,588 94,471 -- 1,198,059
---------- ---------- ---------- ----------
U.S. Treasury debt securities
After one year through five years 752,158 85,427 -- 837,585
After five years through ten years 673,152 77,762 -- 750,914
---------- ---------- ---------- ----------
1,425,310 163,189 -- 1,588,499
---------- ---------- ---------- ----------
$2,528,898 $ 257,660 $ -- $2,786,558
========== ========== ========== ==========
As of March 30, 2002, certain information concerning investments in bonds
is as follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
Description and maturity cost gains losses value
------------------------ ---------- ---------- ---------- ----------
Corporate debt securities
Within one year $ 199,466 $ 6,848 $ -- $ 206,314
After one year through five years 797,906 19,896 -- 817,802
After five years through ten years 504,386 14,820 (4,489) 514,717
----------- ----------- ----------- -----------
1,501,758 41,564 (4,489) 1,538,833
U.S. Treasury debt securities
After five years through ten years 1,343,596 335 (5,491) 1,338,440
----------- ----------- ----------- -----------
$ 2,845,354 $ 41,899 $ (9,980) $ 2,877,273
=========== =========== =========== ===========
23
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships
As of March 30, 2003, the Partnership owns a limited partnership interest
in the following Local Partnerships:
1. April Gardens Apartments II Limited Partnership;
2. Ashland Park Apartments, L.P.;
3. Auburn Family, L.P.;
4. Batesville Family, L.P.;
5. Bay Springs Elderly, L.P.;
6. Brisas del Mar Apartments Limited Partnership;
7. Bruce Housing Associates, L.P.;
8. Carrington Limited Dividend Housing Association Limited Partnership;
9. Chestnut Park Associates, L.P.*;
10. Chowan Senior Manor Associates Limited Partnership;
11. Christian Street Commons Associates;
12. Country View Apartments ("Country View");
13. Desarrollos de Belen Limited Partnership;
14. Desarrollos de Emaus Limited Partnership;
15. Ellinwood Heights Apartments, L.P.;
16. Fulton Street Houses Limited Partnership;
17. Hayes Run Limited Partnership;
18. Howard L. Miller Sallisaw Apartments II, L.P.;
19. Hurlock Meadow Limited Partnership;
20. Ivy Family, L.P.;
21. Justin Associates ("Justin");
22. LaBelle Commons, Ltd.;
23. Lawrence Road Properties, Ltd.;
24. Loma Del Norte Limited Partnership;
25. Long Reach Associates Limited Partnership;
26. Mirador del Toa Limited Partnership;
27. Moore Haven Commons, Ltd.;
28. NP-89 Limited Dividend Housing Association Limited Partnership;
29. Nash Hill Associates, Limited Partnership;
30. North Calhoun City, L.P. ("North Calhoun");
31. Orange City Plaza, Limited Partnership ("Orange City");
32. Puerta del Mar Limited Partnership;
33. Purvis Heights Properties, L.P.;
34. Queen Lane Investors;
35. Somerset Manor, Ltd.;
36. Sugar Cane Villas, Ltd.;
37. Summerfield Apartments Limited Partnership ("Summerfield");
38. Sydney Engel Associates L.P. (formerly known as Sydney Engel
Associates)*;
39. Union Valley Associates Limited Partnership;
40. Walnut Grove Family, L.P.;
41. Waynesboro Apartments Limited Partnership;
42. West Calhoun City, L.P. ("West Calhoun"); and
43. Westminster Apartments Limited Partnership ("Westminster").
*An affiliate of the General Partner is a general partner of and/or
provides services to the Local Partnership.
24
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
Although the Partnership generally owns a 98.9%-99% limited partnership
interest in the Local Partnerships, the Partnership and American Tax Credit
Properties II L.P. ("ATCP II"), a Delaware limited partnership and an
affiliate of the Partnership, together, in the aggregate, own a 99% Local
Partnership Interest in the following Local Partnerships:
The
Partnership ATCP II
----------- -------
Batesville Family, L.P. 61.75% 37.25%
Bruce Housing Associates, L.P. 61.75 37.25
Carrington Limited Dividend
Housing Association Limited
Partnership 65.95 33.05
Ivy Family, L.P. 61.75 37.25
Lawrence Road Properties, Ltd. 61.75 37.25
Mirador del Toa Limited
Partnership 59.06 39.94
Purvis Heights Properties, L.P. 61.75 37.25
Queen Lane Investors 48.50 50.50
The Properties are principally comprised of subsidized and leveraged
low-income multifamily residential complexes located throughout the United
States and Puerto Rico. The required holding period of each Property, in
order to avoid Low-income Tax Credit recapture, is fifteen years from the
year in which the Low-income Tax Credits commence on the last building of the
Property (the "Compliance Period"). The rents of the Properties are
controlled by federal and state agencies pursuant to applicable laws and
regulations. Under the terms of each of the Local Partnership's partnership
agreements, the Partnership committed to make capital contribution payments
in the aggregate amount of $29,264,476, all of which has been paid as of
March 30, 2003. As of December 31, 2002, the Local Partnerships have
outstanding mortgage loans payable totaling approximately $83,716,000 and
accrued interest payable on such loans totaling $4,027,000, which are secured
by security interests and liens common to mortgage loans on the Local
Partnerships' real property and other assets.
Equity in loss of investment in local partnerships is limited to the
Partnership's investment balance in each Local Partnership; any such excess
is applied to other partners' capital in any such Local Partnership (see Note
1). The amount of such excess losses applied to other partners' capital was
$2,586,565, $2,440,940, and $2,468,205 for the years ended December 31, 2002,
2001 and 2000, respectively, as reflected in the combined statements of
operations of the Local Partnerships reflected herein Note 5.
As of December 31, 2002, Westminster was in default under the terms of its
first mortgage; payments of principal, interest and replacement reserve
deposits are approximately four years in arrears, representing an arrearage
of approximately $400,000. Although Westminster has been involved in
negotiating a restructuring of its mortgage debt, a final resolution has not
been reached and documented. There can be no assurance that the issues will
be resolved and the mortgage remains in default without a formal forbearance.
As a result of management's assessment of the carrying value of the
investment in local partnerships under applicable accounting guidelines (see
Note 1), the Partnership reduced its investment in Country View, North
Calhoun and West Calhoun by $34,787, $29,765 and $38,511 respectively for the
year ended March 31, 2003. The partnership reduced the investment in Justin,
Orange City, and Summerfield by $234,362, $194,862, and $205,205
respectively, for the year ended March 31, 2002, and by $230,000, $155,000,
and $186,000 respectively, for the year ended March 31, 2001. Such losses are
included in the equity in loss of investment in local partnerships in the
accompanying statements of operations of the Partnership for the years
indicated.
The combined balance sheets of the Local Partnerships as of December 31, 2002
and 2001 and the combined statements of operations of the Local Partnerships
for the years ended December 31, 2002, 2001 and 2000 are reflected on pages
26 and 27, respectively.
25
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of December 31,
2002 and 2001 are as follows:
2002 2001
------------ ------------
ASSETS
Cash and cash equivalents $ 1,339,340 $ 1,315,560
Rents receivable 481,854 436,887
Escrow deposits and reserves 5,297,817 5,116,763
Land 3,910,215 3,910,215
Buildings and improvements (net of
accumulated depreciation of $47,186,840 and $43,134,422) 67,320,566 71,063,036
Intangible assets (net of accumulated
amortization of $503,495 and $461,704) 545,454 587,246
Other assets 1,024,189 952,741
------------ ------------
$ 79,919,435 $ 83,382,448
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,045,598 $ 971,643
Due to related parties 5,092,769 5,021,765
Mortgage loans 83,716,219 84,445,613
Accrued interest 4,026,656 3,620,621
Other liabilities 691,048 673,666
------------ ------------
94,572,290 94,733,308
------------ ------------
Partners' equity (deficit)
American Tax Credit Properties III L.P.
Capital contributions, net of distributions 28,866,952 28,894,128
Cumulative loss (26,164,890) (25,731,795)
------------ ------------
2,702,062 3,162,333
------------ ------------
General partners and other limited partners
Capital contributions, net of distributions (267,633) (245,667)
Cumulative loss (17,087,284) (14,267,526)
------------ ------------
(17,354,917) (14,513,193)
------------ ------------
(14,652,855) (11,350,860)
------------ ------------
$ 79,919,435 $ 83,382,448
============ ============
26
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
years ended December 31, 2002, 2001 and 2000 are as follows:
2002 2001 2000
------------ ------------ ------------
REVENUE
Rental $ 11,188,578 $ 10,917,485 $ 10,778,097
Interest and other 343,487 376,528 400,732
------------ ------------ ------------
Total Revenue
11,532,065 11,294,013 11,178,829
------------ ------------ ------------
EXPENSES
Administrative 2,295,834 2,305,944 2,400,469
Utilities 1,184,078 1,223,442 1,080,099
Operating and maintenance 2,671,075 2,511,755 2,552,119
Taxes and insurance 1,461,674 1,273,886 1,237,907
Financial 3,072,036 3,115,247 3,185,319
Depreciation and amortization 4,100,221 4,125,260 4,088,150
------------ ------------ ------------
Total Expenses
14,784,918 14,555,534 14,544,063
------------ ------------ ------------
NET LOSS $ (3,252,853) $ (3,261,521) $ (3,365,234)
============ ============ ============
NET LOSS ATTRIBUTABLE TO
American Tax Credit $ (433,095) $ (559,378) $ (657,135)
Properties III L.P.
General partners and other limited
partners, which includes $2,586,565,
$2,444,940 and $2,468,205 of
Partnership loss in excess
of investment (2,819,758) (2,702,143) (2,708,099)
------------ ------------ ------------
$ (3,252,853) $ (3,261,521) $ (3,365,234)
============ ============ ============
27
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended
March 30, 2003 is as follows:
Partnership's Cash Cash
Investment equity in Adjustment to distributions distributions Investment
in Local income (loss) carrying value received classified as in Local
Partnership for the during the during the other income Partnership
balance as of year ended year ended year ended during the year balance as
March 30, December 31, March 30, March 30, 2003 ended March 30, of March 30,
Name of Local Partnership 2002 2002 2003 2003 2003
April Gardens Apartments II Limited
Partnership $ -- $ --(2) $ -- $ (960) $ 960 $ --
Ashland Park Apartments, L.P. -- --(2) -- -- -- --
Auburn Family, L.P. -- --(2) -- -- -- --
Batesville Family, L.P. -- --(2) -- -- -- --
Bay Springs Elderly, L.P. -- --(2) -- -- -- --
Brisas del Mar Apartments Limited
Partnership -- --(2) -- (1,320) 1,320 --
Bruce Housing Associates, L.P. -- --(2) -- -- -- --
Carrington Limited Dividend Housing
Association Limited Partnership 461,757 (124,962) -- -- -- 336,795
Chestnut Park Associates, L.P. -- --(2) -- -- -- --
Chowan Senior Manor Associates
Limited Partnership -- --(2) -- (1,580) 1,580 --
Christian Street Commons Associates -- --(2) -- -- -- --
Country View Apartments 47,058 (11,521) (34,787)(3) (750) -- --
Desarrollos de Belen Limited
Partnership -- --(2) -- -- -- --
Desarrollos de Emaus Limited
Partnership -- --(2) -- -- -- --
Ellinwood Heights Apartments, L.P. 20,606 5,279 -- -- -- 25,885
Fulton Street Houses Limited
Partnership -- --(2) -- -- -- --
Hayes Run Limited Partnership -- --(2) -- (1,785) 1,785 --
Howard L. Miller Sallisaw
Apartments II, L.P. 4,115 (2,912) -- -- -- 1,203
Hurlock Meadow Limited
Partnership -- --(2) -- (3,176) 3,176 --
Ivy Family, L.P. -- --(2) -- -- -- --
Justin Associates -- -- -- -- -- --
LaBelle Commons, Ltd. -- --(2) -- -- -- --
Lawrence Road Properties, Ltd. -- --(2) -- -- -- --
Loma Del Norte Limited Partnership 9,220 (5,220)(1) -- (4,000) -- --
Long Reach Associates Limited
Partnership -- --(2) -- -- -- --
Mirador del Toa Limited Partnership -- --(2) -- (572) 572 --
Moore Haven Commons, Ltd. -- --(2) -- -- -- --
NP-89 Limited Dividend Housing
Association Limited Partnership 1,082,233 (212,730) -- (10,000) -- 860,503
Nash Hill Associates, Limited
Partnership 42,781 (40,602) -- -- -- 2,179
North Calhoun City, L.P. 37,012 (7,247) (29,765)(3) -- -- --
Orange City Plaza, Limited
Partnership -- --(2) -- -- -- --
Puerta del Mar Limited Partnership -- --(2) -- (1,320) 1,320 --
Purvis Heights Properties, L.P. 32,896 (22,999) -- (889) -- 9,008
Queen Lane Investors -- --(2) -- -- -- --
Somerset Manor, Ltd. -- --(2) -- -- -- --
Sugar Cane Villas, Ltd. -- --(2) -- -- -- --
Summerfield Apartments Limited
Partnership -- --(2) -- (10,000) 10,000 --
Sydney Engel Associates L.P. -- --(2) -- (1,000) 1,000 --
Union Valley Associates Limited
Partnership -- --(2) -- -- -- --
Walnut Grove Family, L.P. -- --(2) -- -- -- --
Waynesboro Apartments Limited
Partnership -- --(2) -- -- -- --
West Calhoun City, L.P. 48,692 (10,181) (38,511)(3) -- -- --
Westminster Apartments Limited
Partnership -- --(2) -- -- -- --
----------- --------- --------- -------- ---------- ----------
$ 1,787,370 $(433,095) $(103,063) $(37,352) $ 21,713 $1,235,573
=========== ========= ========= ======== ========== ==========
(1) The Partnership's equity in loss of an investment in a Local Partnership is
limited to the remaining investment balance.
(2) Additional equity in loss of investment is not allocated to the Partnership
until equity in income is earned or additional investment is made by the
Partnership.
(3) The Partnership has adjusted the investment's carrying value in accordance
with applicable accounting guidelines.
28
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended
March 30, 2002 is as follows:
Cash
Partnership's Cash distributions Investment
Investment equity in Adjustment to distributions classified as in Local
in Local income (loss) carrying value received other income Partnership
Partnership for the during the during the during the balance
balance as of year ended year ended year ended year ended as of
March 30, December 31, March 30, March 30, March 30, March 30,
Name of Local Partnership 2001 2001 2002 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
April Gardens Apartments II
Limited Partnership $ -- $ --(2) $ -- $ (960) $ 960 $ --
Ashland Park Apartments, L.P. -- --(2) -- -- -- --
Auburn Family, L.P. 8,160 (8,160) -- -- -- --
Batesville Family, L.P. -- --(2) -- (390) 390 --
Bay Springs Elderly, L.P. 11,177 (11,177)(1) -- -- -- --
Brisas del Mar Apartments
Limited Partnership -- --(2) -- (1,320) 1,320 --
Bruce Housing Associates, L.P. -- --(2) -- -- -- --
Carrington Limited Dividend
Housing Association Limited
Partnership 610,103 (148,346) -- -- -- 461,757
Chestnut Park Associates, L.P. -- --(2) -- -- -- --
Chowan Senior Manor Associates
Limited Partnership -- --(2) -- (1,580) 1,580 --
Christian Street Commons
Associates -- --(2) -- -- -- --
Country View Apartments 81,954 (34,146) -- (750) -- 47,058
Desarrollos de Belen Limited
Partnership -- --(2) -- -- -- --
Desarrollos de Emaus Limited
Partnership -- --(2) -- -- -- --
Ellinwood Heights Apartments, L.P. 14,394 6,212 -- -- -- 20,606
Fulton Street Houses Limited
Partnership -- --(2) -- -- -- --
Hayes Run Limited Partnership -- --(2) -- (1,785) 1,785 --
Howard L. Miller Sallisaw
Apartments II, L.P. 8,284 (4,169) -- -- -- 4,115
Hurlock Meadow Limited
Partnership -- --(2) -- -- -- --
Ivy Family, L.P. -- --(2) -- -- -- --
Justin Associates 368,047 (133,685) (234,362)(3) -- -- --
LaBelle Commons, Ltd. -- --(2) -- -- -- --
Lawrence Road Properties,
Ltd. -- --(2) -- (565) 565 --
Loma Del Norte Limited
Partnership 31,623 (18,403) -- (4,000) -- 9,220
Long Reach Associates Limited
Partnership 35,757 (35,757)(1) -- -- -- --
Mirador del Toa Limited
Partnership -- --(2) -- (572) 572 --
Moore Haven Commons, Ltd. -- --(2) -- -- -- --
NP-89 Limited Dividend
Housing Association
Limited Partnership 1,150,934 (67,701) -- -- -- 1,083,233
Nash Hill Associates, Limited
Partnership 81,001 (38,220) -- -- -- 42,781
North Calhoun City, L.P. 41,469 (4,457) -- -- -- 37,012
Orange City Plaza, Limited
Partnership 211,001 (16,139) (194,862) -- -- --
Puerta del Mar Limited
Partnership -- --(2) -- (1,320) 1,320 --
Purvis Heights Properties,
L.P. 45,979 (11,304) -- (1,779) -- 32,896
Queen Lane Investors -- --(2) -- (2,999) 2,999 --
Somerset Manor, Ltd. -- --(2) -- -- -- --
Sugar Cane Villas, Ltd. -- --(2) -- -- -- --
Summerfield Apartments
Limited Partnership 228,444 (23,239) (205,205) -- -- --
Sydney Engel Associates L.P. -- --(2) -- -- -- --
Union Valley Associates
Limited Partnership -- --(2) -- -- -- --
Walnut Grove Family, L.P. -- --(2) -- -- -- --
Waynesboro Apartments
Limited Partnership -- --(2) -- -- -- --
West Calhoun City, L.P. 59,379 (10,687) -- -- -- 48,692
Westminster Apartments
Limited Partnership -- --(2) -- -- -- --
---------- --------- --------- -------- -------- -----------
$2,987,706 $(559,378) $(634,429) $(18,020) $ 11,491 $ 1,787,370
========== ========= ========= ======== ======== ===========
(1) The Partnership's equity in loss of an investment in a Local Partnership is
limited to the remaining investment balance.
(2) Additional equity in loss of investment is not allocated to the Partnership
until equity in income is earned or additional investment is made by the
Partnership.
(3) The Partnership has adjusted the investment's carrying value in accordance
with applicable accounting guidelines.
29
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 2002 is
as follows:
Mortgage Buildings and Accumulated
Name of Local Partnership loans payable Land improvements depreciation
--------------------------------------------------------- -------------- ---------------- ---------------- ---------------
April Gardens Apartments II Limited Partnership $ 1,980,296 $ 39,984 $ 2,484,604 $ (1,198,472)
Ashland Park Apartments, L.P. 1,028,823 50,160 1,247,739 (547,591)
Auburn Family, L.P. 461,511 20,000 564,799 (239,518)
Batesville Family, L.P. 1,428,095 52,000 1,820,751 (705,028)
Bay Springs Elderly, L.P. 670,554 38,000 847,593 (354,876)
Brisas del Mar Apartments Limited Partnership 2,629,597 100,280 3,362,895 (1,623,278)
Bruce Housing Associates, L.P. 1,096,634 16,000 1,460,299 (675,664)
Carrington Limited Dividend Housing Association
Limited Partnership 3,313,001 200,000 6,576,478 (2,992,681)
Chestnut Park Associates, L.P. 4,936,911 781,700 8,654,778 (3,692,202)
Chowan Senior Manor Associates Limited Partnership 1,242,244 86,101 1,530,162 (675,850)
Christian Street Commons Associates 590,264 -- 7,545 (1,085)
Country View Apartments 929,391 35,698 1,238,033 (348,450)
Desarrollos de Belen Limited Partnership 1,863,565 96,190 2,534,399 (872,191)
Desarrollos de Emaus Limited Partnership 3,167,700 214,000 4,050,973 (1,318,784)
Ellinwood Heights Apartments, L.P. 682,238 10,000 892,848 (278,602)
Fulton Street Houses Limited Partnership 3,869,930 2 6,023,119 (2,402,631)
Hayes Run Limited Partnership 1,413,949 85,060 1,566,104 (475,651)
Howard L. Miller Sallisaw Apartments II, L.P. 610,844 39,000 735,346 (240,073)
Hurlock Meadow Limited Partnership 1,259,122 49,525 1,587,778 (671,775)
Ivy Family, L.P. 778,437 11,000 1,075,733 (501,620)
Justin Associates 2,312,477 27,472 4,369,992 (1,750,111)
LaBelle Commons, Ltd. 1,004,428 98,947 1,184,937 (458,923)
Lawrence Road Properties, Ltd. 752,561 50,000 947,764 (358,996)
Loma Del Norte Limited Partnership 1,426,203 84,874 1,814,082 (568,731)
Long Reach Associates Limited Partnership 1,466,875 118,446 1,878,410 (623,154)
Mirador del Toa Limited Partnership 1,864,895 105,000 2,341,013 (1,155,272)
Moore Haven Commons, Ltd. 920,328 73,645 1,197,000 (539,431)
NP-89 Limited Dividend Housing Association Limited
Partnership 3,850,171 150,000 7,536,598 (3,128,386)
Nash Hill Associates, Limited Partnership 1,456,772 123,876 1,695,582 (542,552)
North Calhoun City, L.P. 479,097 12,000 645,767 (270,259)
Orange City Plaza, Limited Partnership 425,929 53,904 1,045,306 (373,561)
Puerta del Mar Limited Partnership 2,502,210 115,000 3,201,130 (1,553,840)
Purvis Heights Properties, L.P. 1,136,111 47,000 1,506,005 (541,865)
Queen Lane Investors 1,532,919 60,301 2,781,754 (1,188,295)
Somerset Manor, Ltd. 890,588 53,383 1,107,954 (491,700)
Sugar Cane Villas, Ltd. 3,281,591 58,500 4,088,461 (1,819,665)
Summerfield Apartments Limited Partnership 1,677,183 195,411 2,708,470 (771,346)
Sydney Engel Associates L.P. 16,682,455 284,305 19,443,724 (8,540,801)
Union Valley Associates Limited Partnership 1,435,626 97,800 1,758,877 (540,318)
Walnut Grove Family, L.P. 840,843 30,000 1,041,805 (445,539)
Waynesboro Apartments Limited Partnership 1,470,625 76,000 1,790,894 (575,728)
West Calhoun City, L.P. 745,254 18,000 1,030,716 (435,562)
Westminster Apartments Limited Partnership 1,607,972 51,651 1,129,209 (696,783)
------------ ------------ ------------ -------------
$ 83,716,219 $ 3,910,215 $114,507,406 $ (47,186,840)
============ ============ ============ =============
30
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 2001 is
as follows:
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
Mortgage Buildings and Accumulated
Name of Local Partnership loans payable Land improvements depreciation
--------------------------------------------------------- -------------- ---------------- ---------------- ---------------
April Gardens Apartments II Limited Partnership $ 1,985,673 $ 39,984 $ 2,472,242 $ (1,102,091)
Ashland Park Apartments, L.P. 1,032,119 50,160 1,247,739 (502,430)
Auburn Family, L.P. 464,082 20,000 562,144 (218,849)
Batesville Family, L.P. 1,431,853 52,000 1,816,601 (656,198)
Bay Springs Elderly, L.P. 672,501 38,000 846,080 (324,486)
Brisas del Mar Apartments Limited Partnership 2,636,764 100,280 3,346,248 (1,491,564)
Bruce Housing Associates, L.P. 1,100,431 16,000 1,441,646 (622,106)
Carrington Limited Dividend Housing Association
Limited Partnership 3,349,699 200,000 6,524,793 (2,744,908)
Chestnut Park Associates, L.P. 5,008,787 781,700 8,654,778 (3,378,174)
Chowan Senior Manor Associates Limited Partnership 1,248,204 86,101 1,525,607 (612,810)
Christian Street Commons Associates 598,651 -- 7,545 (811)
Country View Apartments 932,315 35,698 1,234,700 (314,237)
Desarrollos de Belen Limited Partnership 1,873,153 96,190 2,533,351 (780,692)
Desarrollos de Emaus Limited Partnership 3,177,251 214,000 4,048,704 (1,180,684)
Ellinwood Heights Apartments, L.P. 684,342 10,000 882,871 (262,063)
Fulton Street Houses Limited Partnership 3,869,930 2 6,023,119 (2,170,387)
Hayes Run Limited Partnership 1,418,244 85,060 1,539,859 (431,255)
Howard L. Miller Sallisaw Apartments II, L.P. 612,583 39,000 735,346 (227,041)
Hurlock Meadow Limited Partnership 1,263,287 49,525 1,579,618 (612,430)
Ivy Family, L.P. 783,986 11,000 1,067,700 (459,469)
Justin Associates 2,351,775 27,472 4,369,992 (1,588,285)
LaBelle Commons, Ltd. 1,007,656 98,947 1,184,937 (415,876)
Lawrence Road Properties, Ltd. 754,841 50,000 943,132 (334,816)
Loma Del Norte Limited Partnership 1,430,362 84,874 1,805,709 (520,563)
Long Reach Associates Limited Partnership 1,471,185 118,446 1,878,409 (570,854)
Mirador del Toa Limited Partnership 1,870,929 105,000 2,335,743 (1,069,149)
Moore Haven Commons, Ltd. 923,166 73,645 1,197,000 (497,446)
NP-89 Limited Dividend Housing Association
Limited Partnership 3,958,572 150,000 7,503,004 (2,831,590)
Nash Hill Associates, Limited Partnership 1,461,265 123,876 1,694,743 (497,387)
North Calhoun City, L.P. 482,888 12,000 632,110 (247,167)
Orange City Plaza, Limited Partnership 433,606 53,904 1,045,306 (339,881)
Puerta del Mar Limited Partnership 2,510,534 115,000 3,184,214 (1,429,418)
Purvis Heights Properties, L.P. 1,139,573 47,000 1,498,309 (502,897)
Queen Lane Investors 1,543,391 60,301 2,778,023 (1,081,767)
Somerset Manor, Ltd. 893,214 53,383 1,107,954 (450,879)
Sugar Cane Villas, Ltd. 3,291,361 58,500 4,088,461 (1,674,400)
Summerfield Apartments Limited Partnership 1,707,117 195,411 2,694,742 (703,534)
Sydney Engel Associates L.P. 16,949,953 284,305 19,443,724 (7,831,633)
Union Valley Associates Limited Partnership 1,439,891 97,800 1,758,877 (496,625)
Walnut Grove Family, L.P. 843,113 30,000 1,034,054 (405,406)
Waynesboro Apartments Limited Partnership 1,475,235 76,000 1,790,894 (531,293)
West Calhoun City, L.P. 754,159 18,000 1,029,702 (397,136)
Westminster Apartments Limited Partnership 1,607,972 51,651 1,107,728 (623,735)
------------ ------------ ------------ ------------
$ 84,445,613 $ 3,910,215 $114,197,458 $ (43,134,422)
============ ============ ============ =============
31
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
5. Investment in Local Partnerships (continued)
The summary of property activity during the year ended December 31, 2002 is
as follows:
Net change
during the year
Balance as of ended Balance as of
December 31, 2001 December 31, 2002 December 31, 2002
----------------- ----------------- -----------------
Land $ 3,910,215 $ -- $ 3,910,215
Buildings and improvements 114,197,458 309,948 114,507,406
------------- ------------- -------------
118,107,673 309,948 118,417,621
Accumulated depreciation (43,134,422) (4,052,418) (47,186,840)
------------- ------------- -------------
$ 74,973,251 $ (3,742,470) $ 71,230,781
============= ============= =============
6. Transactions with General Partner and Affiliates
For the years ended March 30, 2003, 2002 and 2001, the Partnership paid
and/or incurred the following amounts to the General Partner and/or
affiliates in connection with services provided to the Partnership:
2003 2002 2001
---------------------- ----------------------- ----------------------
Paid Incurred Paid Incurred Paid Incurred
-------- -------- -------- --------- -------- ---------
Management fees (see Note 8) $299,800 $230,571 $274,000 $230,571 $100,000 $230,571
Administration fees (see Note 8) 16,195 230,571 156,645 230,571 100,000 230,571
For the years ended December 31, 2002, 2001 and 2000, the Local
Partnerships paid and/or incurred the following amounts to the General
Partner and/or affiliates in connection with services provided to the
Local Partnerships:
2002 2001 2000
---------------------- ----------------------- ----------------------
Paid Incurred Paid Incurred Paid Incurred
------- -------- -------- -------- ------- --------
Property management fees $32,851 $37,800 $30,585 $32,020 $ 7,387 $31,754
Insurance and other services 35,297 34,231 17,267 17,267 22,953 22,687
32
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
7. Taxable Loss
A reconciliation of the financial statement net loss of the Partnership for
the years ended March 30, 2003, 2002 and 2001 to the tax return net loss for
the years ended December 31, 2002, 2001 and 2000 is as follows:
2003 2002 2001
----------- ----------- -----------
Financial statement net loss for the years ended March 30,
2003, 2002, and 2001 $ (875,199) $(1,509,355) $(1,519,430)
Add (less) net transactions occurring between
January 1, 2000 and March 30, 2000 -- -- (64,238)
January 1, 2001 and March 30, 2001 -- (73,432) 73,342
January 1, 2002 and March 30, 2002 (72,489) 72,489 --
January 1, 2003 and March 30, 2003 59,193 -- --
----------- ----------- -----------
Adjusted financial statement net loss for the years ended
December 31, 2002, 2001 and 2000 (888,495) (1,510,298) (1,510,236)
Adjustment to management and administration fees
pursuant to Internal Revenue Code Section 267 145,147 143,797 263,465
Differences arising from equity in loss of investment
in local partnerships (2,773,921) (2,112,608) (2,035,429)
Other income from local partnerships (13,537) (16,877) (10,455)
Other differences (9,961) 11,184 (14,870)
----------- ----------- -----------
Tax return net loss for the years ended December 31,
2002, 2001 and 2000 $(3,540,767) $(3,484,802) $(3,307,525)
=========== =========== ===========
The differences between the investment in local partnerships for tax and
financial reporting purposes as of December 31, 2002 and 2001 are as
follows:
2002 2001
----------- -----------
Investment in local partnerships -
financial reporting $ 1,237,573 $ 1,788,120
Investment in local partnerships - tax (8,971,306) (5,633,301)
----------- -----------
$10,208,879 $ 7,421,421
=========== ===========
Payable to general partner and affiliate in the accompanying balance sheets
represents accrued management and administrative fees not deductible for
tax purposes pursuant to Internal Revenue Code Section 267.
33
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
8. Commitments and Contingencies
Pursuant to the Partnership Agreement, the Partnership incurs an annual
management fee ("Management Fee") and an annual additional management fee
("Additional Management Fee") payable to the General Partner for its
services in connection with the management of the affairs of the
Partnership. The annual Management Fee is equal to .14% of all proceeds as
of December 31 of any year, invested or committed for investment in Local
Partnerships plus all debts of the Local Partnerships related to the
Properties ("Invested Assets"). The Partnership incurred a Management Fee
of $161,400 for each of the three years ended March 30, 2003. The annual
Additional Management Fee is equal to .06% of Invested Assets. The
Partnership incurred an Additional Management Fee of $69,171 for each of
the three years ended March 30, 2003. Such amounts are aggregated and
reflected under the caption management fees in the accompanying financial
statements. Unpaid Management Fees and Additional Management Fees in the
amount of $1,209,669 and $1,278,898 are included in payable to general
partner and affiliate in the accompanying balance sheets as of March 30,
2003 and 2002, respectively.
In addition, pursuant to the Partnership Agreement, the Partnership is
authorized to contract for administrative services provided to the
Partnership. From the inception of the Partnership through November 23,
1999, such administrative services were provided by ML Fund Administrators
Inc. ("MLFA"), an affiliate of the Selling Agent, pursuant to an
Administrative Services Agreement. MLFA resigned the performance of its
basic services under the Administrative Services Agreement effective
November 23, 1999, with certain transitional services continued through
April 30, 2000. The General Partner transitioned the administrative
services to an affiliate of the General Partner without any changes to the
terms of the Administrative Services Agreement. Pursuant to such agreement,
the Partnership incurs an annual administration fee ("Administration Fee")
and an annual additional administration fee ("Additional Administration
Fee") for administrative services provided to the Partnership. The annual
Administration Fee is equal to .14% of Invested Assets. The Partnership
incurred an Administration Fee of $161,400 for each of the three years
ended March 30, 2003. The annual Additional Administration Fee is subject
to certain provisions of the Partnership Agreement and is equal to .06% of
Invested Assets. The Partnership incurred an Additional Administration Fee
of $69,171 for each of the three years ended March 30, 2003. Such amounts
are aggregated and reflected under the caption administration fees in the
accompanying financial statements. Unpaid Administration Fees and
Additional Administration Fees due to MLFA in the amount of $788,673 and
$904,673 are included in accounts payable and accrued expenses in the
accompanying balance sheets as of March 30, 2003 and 2002, respectively.
Unpaid Administration Fees and Additional Administration Fees due to an
affiliate of the General Partner in the cumulative amount of $473,521 and
$259,145 are included in due to general partner and affiliate in the
accompanying balance sheets as of March 30, 2003 and 2002, respectively.
The rents of the Properties, many of which receive rental subsidy payments,
including payments under Section 8 of Title II of the Housing and Community
Development Act of 1974 ("Section 8"), are subject to specific laws,
regulations and agreements with federal and state agencies. The subsidy
agreements expire at various times during and after the Compliance Periods
of the Local Partnerships. Since October 1997, the United States Department
of Housing and Urban Development ("HUD") has issued a series of directives
related to project based Section 8 contracts that define owners'
notification responsibilities, advise owners of project based Section 8
properties of what their options are regarding the renewal of Section 8
contracts, provide guidance and procedures to owners, management agents,
contract administrators and HUD staff concerning renewal of Section 8
contracts, provide policies and procedures on setting renewal rents and
handling renewal rent adjustments and provide the requirements and
procedures for opting-out of a Section 8 project based contract. The
Partnership cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program. Such changes could
adversely affect the future net operating income before debt service and
debt structure of any or all Local Partnerships currently receiving such
subsidy or similar subsidies. One Local Partnership's Section 8 contracts
are currently subject to renewal under applicable HUD guidelines.
34
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
9. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined using available market information,
assumptions, estimates and valuation methodologies.
Cash and cash equivalents
The carrying amount approximates fair value.
Investments in Bonds
Fair value is estimated based on market quotes provided by an independent
service as of the balance sheet dates.
Interest receivable
The carrying amount approximates fair value due to the terms of the
underlying investments.
The estimated fair value of the Partnership's financial instruments as of
March 30, 2003 and 2002 are disclosed elsewhere in the financial
statements.
10. Quarterly Financial Information - Unaudited
The following is a summary of results of operations for each of the four
quarters for the years indicated:
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- -----------
2003
- ----
Total revenue $ 57,556 $ 48,609 $ 48,056 $ 70,033
Loss from operations (83,360) (79,110) (87,378) (89,193)
Equity in loss of investment
in local partnerships (103,853) (138,879) (135,450) (157,976)
Net loss (187,213) (217,989) (222,828) (247,169)
2002
- ----
Total revenue $ 62,265 $ 54,341 $ 52,769 $ 46,552
Loss from operations (70,677) (79,684) (92,698) (72,489)
Equity in loss of investment
in local partnerships (192,982) (156,563) (138,744) (705,518)
Net loss (263,659) (236,247) (231,442) (778,007)
35
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2003, 2002 AND 2001
10. Quarterly Financial Information - Unaudited (continued)
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- -----------
2003
- ----
2001
- ----
Total revenue $ 57,178 $ 59,978 $ 60,402 $ 57,860
Loss from operations (72,735) (73,954) (71,174) (73,432)
Equity in loss of investment
in local partnerships (206,251) (145,784) (126,502) (749,598)
Net loss (278,986) (219,738) (197,676) (823,030)
36
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Registrant has no officers or directors. The General Partner manages
Registrant's affairs and has general responsibility and authority in all matters
affecting its business. The responsibilities of the General Partner are
currently carried out by Richman Housing. The executive officers and directors
of Richman Housing are:
Served in present
Name capacity since(1) Position held
- ---- ----------------- -------------
Richard Paul Richman September 21, 1989 Director
David A. Salzman February 1, 2001 President
Neal Ludeke September 21, 1989 Vice President and Treasurer
Gina S. Dodge September 21, 1989 Secretary
- --------------------------------------------------------------------------------
(1) Director holds office until his successor is elected and qualified. All
officers serve at the pleasure of the Director.
Richard Paul Richman, age 55, is the sole Director of Richman Housing. Mr.
Richman is the Chairman and principal stockholder of Richman Group. Mr. Richman
is involved in the syndication, development and management of residential
property. Mr. Richman is also a director of Wilder Richman Resources Corp., an
affiliate of Richman Housing and the general partner of Secured Income L.P., a
director of Wilder Richman Historic Corporation, an affiliate of Richman Housing
and the general partner of Wilder Richman Historic Properties II, L.P., a
director of Richman Tax Credit Properties Inc., an affiliate of Richman Housing
and the general partner of the general partner of American Tax Credit Properties
L.P., a director of Richman Tax Credits Inc., an affiliate of Richman Housing
and the general partner of the general partner of American Tax Credit Properties
II L.P. and a director of Richman American Credit Corp., an affiliate of Richman
Housing and the manager of American Tax Credit Trust, a Delaware statutory
business trust.
David A. Salzman, age 42, is the President of Richman Housing and is a minority
stockholder and the President of Richman Group. Mr. Salzman is responsible for
the acquisition and development of residential real estate for syndication for
Richman Group.
Neal Ludeke, age 45, is a Vice President and the Treasurer of Richman Housing.
Mr. Ludeke, a Vice President and the Treasurer of Richman Group, is engaged
primarily in the syndication, asset management and finance operations of Richman
Group. In addition, Mr. Ludeke is a Vice President and the Treasurer of Richman
Asset Management, Inc. ("RAM"), an affiliate of Richman Housing. Mr. Ludeke's
responsibilities in connection with RAM include various partnership management
functions.
Gina S. Dodge, age 47, is the Secretary of Richman Housing. Ms. Dodge is a Vice
President and the Secretary of Richman Group. As the Director of Investor
Services, Ms. Dodge is responsible for communications with investors.
Item 11. Executive Compensation
Registrant has no officers or directors. Registrant does not pay the officers or
director of Richman Housing any remuneration. During the year ended March 30,
2003, Richman Housing did not pay any remuneration to any of its officers or its
director.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Affiliates of Everest Properties, Inc., having the mailing address 155 N. Lake
Avenue, Suite 1000, Pasadena, California 91101 are the owners of 2,125 Units,
representing approximately 5.9% of all such Units. As of May 31, 2003, no person
or entity, other than affiliates of Everest Properties, Inc., was known by
Registrant to be the beneficial owner of more than five percent of the Units.
Richman Housing is wholly owned by Richard Paul Richman.
37
Item 13. Certain Relationships and Related Transactions
The General Partner and certain of its affiliates are entitled to receive
certain fees and reimbursement of expenses and have received/earned fees for
services provided to Registrant as described in Notes 6 and 8 to the audited
financial statements included in Item 8 - "Financial Statements and
Supplementary Data" herein.
Transactions with General Partner and Affiliates
The net tax losses and Low-income Tax Credits generated by Registrant during the
year ended December 31, 2002 allocated to the General Partner were $35,408 and
$7,836, respectively. The net tax losses and Low-income Tax Credits generated by
the General Partner during the year ended December 31, 2002 (from the allocation
of Registrant discussed above) and allocated to Richman Housing were $28,620 and
$6,333, respectively.
Indebtedness of Management.
No officer or director of the General Partner or any affiliate of the foregoing
was indebted to Registrant at any time during the year ended March 30, 2003.
Item 14. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
a. Within the 90 days prior to the date of this report, Registrant's Chief
Executive Officer and Chief Financial Officer carried out an evaluation of
the effectiveness of Registrant's "disclosure controls and procedures" as
defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and
15(d)-14(c). Based on that evaluation, Registrant's Chief Executive Officer
and Principal Financial Officer have concluded that as of the date of the
evaluation, Registrant's disclosure controls and procedures were adequate and
effective in timely alerting them to material information relating to
Registrant required to be included in Registrant's periodic SEC filings.
Changes in Internal Controls
b. There were no significant changes in Registrant's internal controls or in
other factors that could significantly affect Registrant's internal controls
subsequent to the date of that evaluation.
38
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on form 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
See Item 8 - "Financial Statements and Supplementary Data."
(2) Financial Statement Schedules
No financial statement schedules are included because of the absence of
the conditions under which they are required or because the information
is included in the financial statements or the notes thereto.
(3) Exhibits
Incorporated by
Exhibit Reference to
------- ---------------
10.1 April Gardens Apartments II Limited Partnership (A Exhibit 10.1 to Form 10-Q Report
Delaware Limited Partnership) Amended and Restated dated December 30, 1990
Agreement of Limited Partnership (File No. 33-31390)
10.2 Ashland Park Apartments, L.P. Second Amended and Restated Exhibit 10.2 to Form 10-K Report
Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
10.3 Auburn Family, L.P. Amended and Restated Limited Exhibit 10.1 to Form 10-Q Report
Partnership Agreement and Certificate of Limited dated December 31, 1991
Partnership (File No. 0-19217)
10.4 Amended No. 2 to the Batesville Family, L.P. Amended and Exhibit 10.2 to Form 10-Q Report
Restated Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.5 Batesville Family, L.P. Amendment No. 3 to the Amended Exhibit 10.2 to Form 10-Q Report
and Restated Agreement of Limited Partnership dated December 31, 1991
(File No. 0-19217)
10.6 Bay Springs Elderly, L.P. (A Mississippi Limited Exhibit 10.1 to Form 10-Q Report
Partnership) Amended and Restated Limited Partnership dated September 29, 1991
Agreement and Certificate of Limited Partnership (File No. 0-19217)
10.7 Brisas del Mar Apartments Limited Partnership (A Delaware Exhibit 10.3 to Form 10-Q Report
Limited Partnership) Amended and Restated Agreement of dated December 30, 1990
Limited Partnership (File No. 33-31390)
10.8 Amendment No. 1 to the Bruce Housing Associates, L.P. Exhibit 10.8 to Form 10-K Report
Amended and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
39
Incorporated by
Exhibit Reference to
------- ---------------
10.9 Amendment No. 2 to the Bruce Housing Associates, L.P. Exhibit 10.4 to Form 10-Q Report
Amended and Restated Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.10 Bruce Housing Associates, L.P. Amendment No. 3 to the Exhibit 10.3 to Form 10-Q Report
Amended and Restated Agreement of Limited Partnership dated December 31, 1991
(File No. 0-19217)
10.11 Carrington Limited Dividend Housing Association Limited Exhibit 10.1 to Form 10-Q Report
Partnership Amended and Restated Agreement of Limited dated September 29, 1990
Partnership (File No. 33-31390)
10.12 Carrington Limited Dividend Housing Association Limited Exhibit 10.2 to Form 10-Q Report
Partnership Second Amended and Restated Agreement of dated September 29, 1990
Limited Partnership (File No. 33-31390)
10.13 Carrington Limited Dividend Housing Association Limited Exhibit 10.5 to Form 10-Q Report
Partnership Amendment No. 1 to the Second Amended and dated December 30, 1990
Restated Agreement of Limited Partnership (File No. 33-31390)
10.14 Chestnut Park Associates, L.P. Amended and Restated Exhibit 10.3 to Form 10-Q Report
Agreement of Limited Partnership dated September 29, 1990
(File No. 33-31390)
10.15 Chowan Senior Manor Associates Limited Partnership Exhibit 10.15 to Form 10-K Report
Amended and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.16 Christian Street Commons Associates Amended and Restated Exhibit 10.16 to Form 10-K Report
Limited Partnership Agreement and Certificate of Limited dated March 30, 1992
Partnership (File No. 33-31390)
10.17 Country View Apartments Second Amended and Restated Exhibit 10.17 to Form 10-K Report
Limited Partnership Agreement and Certificate of Limited dated March 30, 1992
Partnership (File No. 33-31390)
10.18 Desarrollos de Belen Limited Partnership Amended and Exhibit 10.18 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.19 Desarrollos de Emaus Limited Partnership Amended and Exhibit 10.19 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.20 Ellinwood Heights Apartments, L.P. Amended and Restated Exhibit 10.1 to Form 10-Q Report
Agreement of Limited Partnership dated June 29, 1991
(File No. 0-19217)
40
Incorporated by
Exhibit Reference to
------- ---------------
10.21 Fulton Street Houses Limited Partnership Amended and Exhibit 10.21 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.22 Hayes Run Limited Partnership Amended and Restated Exhibit 10.2 to Form 10-Q Report
Agreement of Limited Partnership dated June 29, 1991
(File No. 0-19217)
10.23 Howard L. Miller Sallisaw Apartments II, L.P. Third Exhibit 10.10 to Form 10-K Report
Amended and Restated Agreement and Certificate of Limited dated March 30, 1991
Partnership (File No. 33-31390)
10.24 Hurlock Meadow Limited Partnership Amended and Restated Exhibit 10.24 to Form 10-K Report
Limited Partnership Agreement dated March 30, 1992
(File No. 33-31390)
10.25 Amendment No. 1 to the Ivy Family, L.P. Amended and Exhibit 10.6 to Form 10-Q Report
Restated Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.26 Ivy Family, L.P. Amendment No. 3 to the Amended and Exhibit 10.4 to Form 10-Q Report
Restated Agreement of Limited Partnership dated December 31, 1991
(File No. 0-19217)
10.27 Justin Associates Amended and Restated Agreement and Exhibit 10.7 to Form 10-Q Report
Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.28 LaBelle Commons, Ltd. Amended and Restated Agreement of Exhibit 10.13 to Form 10-K Report
Limited Partnership dated March 30, 1991
(File No. 33-31390)
10.29 LaBelle Commons, Ltd. Amendment No. 1 to Amended and Exhibit 10.29 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.30 Amendment No. 2 to the Lawrence Road Properties, Ltd. Exhibit 10.8 to Form 10-Q Report
Amended and Restated Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.31 Lawrence Road Properties, Ltd. Amendment No. 3 to the Exhibit 10.5 to Form 10-Q Report
Amended and Restated Agreement of Limited Partnership dated December 31, 1991
(File No. 0-19217)
10.32 Loma Del Norte Limited Partnership Amended and Restated Exhibit 10.2 to Form 10-Q Report
Limited Partnership Agreement dated September 29, 1991
(File No. 0-19217)
10.33 Long Reach Associates Limited Partnership Sixth Amended Exhibit 10.15 to Form 10-K Report
and Restated Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
41
Incorporated by
Exhibit Reference to
------- ---------------
10.34 Mirador del Toa Limited Partnership Amended and Restated Exhibit 10.16 to Form 10-K Report
Agreement of Limited Partnership dated March 30, 1991
(File No. 33-31390)
10.35 Amendment No. 1 to the Mirador del Toa Limited Exhibit 10.17 to Form 10-K Report
Partnership Amended and Restated Agreement of Limited dated March 30, 1991
Partnership (File No. 33-31390)
10.36 Moore Haven Commons, Ltd. Amended and Restated Agreement Exhibit 10.9 to Form 10-Q Report
of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.37 NP-89 Limited Dividend Housing Association Limited Exhibit 10.3 to Form 10-Q Report
Partnership Second Restated and Amended Agreement of dated June 29, 1991
Limited Partnership (File No. 0-19217)
10.38 Nash Hill Associates, Limited Partnership Amended and Exhibit 10.37 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.39 North Calhoun City, L.P. (A Mississippi Limited Exhibit 10.3 to Form 10-Q Report
Partnership) Amended and Restated Limited Partnership dated September 29, 1991
Agreement and Certificate of Limited Partnership (File No. 0-19217)
10.40 Orange City Plaza, Limited Partnership Amended and Exhibit 10.40 to Form 10-K Report
Restated Partnership Agreement dated March 30, 1992
(File No. 33-31390)
10.41 Puerta del Mar Limited Partnership (A Delaware Limited Exhibit 10.10 to Form 10-Q Report
Partnership) Amended and Restated Agreement of Limited dated December 30, 1990
Partnership (File No. 33-31390)
10.42 Amendment No. 2 to the Purvis Heights Properties, L.P. Exhibit 10.11 to Form 10-Q Report
Amended and Restated Agreement of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.43 Purvis Heights Properties, L.P. Amendment No. 3 to the Exhibit 10.6 to Form 10-Q Report
Amended and Restated Agreement of Limited Partnership dated December 31, 1991
(File No. 0-19217)
10.44 Queen Lane Investors Amendment No. 1 to Amended and Exhibit 10.12 to Form 10-Q Report
Restated Agreement and Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.45 Somerset Manor, Ltd. Amended and Restated Agreement and Exhibit 10.13 to Form 10-Q Report
Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.46 Sugar Cane Villas, Ltd. Amended and Restated Agreement of Exhibit 10.23 to Form 10-K Report
Limited Partnership dated March 30, 1991
(File No. 33-31390)
42
Incorporated by
Exhibit Reference to
------- ---------------
10.47 Summerfield Apartments Limited Partnership Amended and Exhibit 10.47 to Form 10-K Report
Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
10.48 Amendment No.1 to the Summerfield Apartments Limited Exhibit 10.48 to Form 10-K Report
Partnership Amended and Restated Agreement of Limited dated March 30, 1999
Partnership (File No. 0-19217)
10.49 Sydney Engel Associates Second Amended and Restated Exhibit 10.4 to Form 10-Q Report
Agreement of Limited Partnership dated September 29, 1990
(File No. 33-31390)
10.50 First Amendment to Second Amended and Restated Agreement Exhibit 10.49 to Form 10-K Report
of Limited Partnership of Sydney Engel Associates dated March 30, 1997
(File No. 0-19217)
10.51 Second Amendment to Second Amended and Restated Agreement Exhibit 10.50 to Form 10-K Report
of Limited Partnership of Sydney Engel Associates L.P. dated March 30, 1997
(File No. 0-19217)
10.52 Third Amendment to Second Amended and Restated Agreement Exhibit 10.51 to Form 10-K Report
of Limited Partnership of Sydney Engel Associates L.P. dated March 30, 1997
(File No. 0-19217)
10.53 Fourth Amendment to Second Amended and Restated Agreement Exhibit 10.52 to Form 10-K Report
of Limited Partnership of Sydney Engel Associates L.P. dated March 30, 1997
(File No. 0-19217)
10.54 Union Valley Associates Limited Partnership Amended and Exhibit 10.14 to Form 10-Q Report
Restated Agreement and Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.55 Walnut Grove Family, L.P. (A Mississippi Limited Exhibit 10.4 to Form 10-Q Report
Partnership) Amended and Restated Limited Partnership dated September 29, 1991
Agreement and Certificate of Limited Partnership (File No. 0-19217)
10.56 Waynesboro Apartments Limited Partnership Amended and Exhibit 10.15 to Form 10-Q Report
Restated Agreement and Certificate of Limited Partnership dated December 30, 1990
(File No. 33-31390)
10.57 West Calhoun City, L.P. (A Mississippi Limited Exhibit 10.5 to Form 10-Q Report
Partnership) Amended and Restated Limited Partnership dated September 29, 1991
Agreement and Certificate of Limited Partnership (File No. 0-19217)
10.58 Westminster Apartments Limited Partnership Second Amended Exhibit 10.53 to Form 10-K Report
and Restated Agreement of Limited Partnership dated March 30, 1992
(File No. 33-31390)
43
Incorporated by
Exhibit Reference to
------- ---------------
28.0 Pages 20 through 31, 44 through 71 and 78 through 80 of Exhibit 28.0 to Form 10-K Report
Prospectus filed pursuant to Rule 424(b)(3) under dated March 30, 1990
Securities Act of 1933 (File No. 33-31390)
28.1 Pages 14 through 19 of Prospectus filed pursuant to Rule Exhibit 28.1 to Form 10-K Report
424(b)(3) under Securities Act of 1933 dated March 30, 1991
(File No. 33-31390)
28.2 Supplement No. 1 dated June 6, 1990 to Prospectus Exhibit 28.2 to Form 10-K Report
dated March 30, 1991
(File No. 33-31390)
28.3 Supplement No. 2 dated November 21, 1990 to Prospectus Exhibit 28.3 to Form 10-K Report
dated March 30, 1991
(File No. 33-31390)
28.4 Supplement No. 3 dated December 20, 1990 to Prospectus Exhibit 28.4 to Form 10-K Report
dated March 30, 1991
(File No. 33-31390)
28.5 Supplement No. 4 dated October 30, 1991 to Prospectus Exhibit 28.5 to Form 10-K Report
dated March 30, 1992
(File No. 33-31390)
28.6 Supplement No. 5 dated December 26, 1991 to Prospectus Exhibit 28.6 to Form 10-K Report
dated March 30, 1992
(File No. 33-31390)
28.7 Supplement No. 6 dated January 15, 1992 to Prospectus Exhibit 28.7 to Form 10-K Report
dated March 30, 1990
(File No. 33-31390)
99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 - David Salzman - Chief Executive Officer of
Richman Housing Credits Inc., general partner of Richman
Tax Credit Properties III L.P., General Partner of the
Company.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 - Neal Ludeke - Chief Financial Officer of
Richman Housing Credits Inc., general partner of Richman
Tax Credit Properties III L.P., General Partner of the
Company.
44
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Registrant during the last quarter of
the period covered by this report.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
See (a)(2) above.
45
SIGNATURES
----------
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.
AMERICAN TAX CREDIT PROPERTIES III L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties III L.P.,
General Partner
by: Richman Housing Credits Inc.,
general partner
Dated: June 30, 2003 /s/ David Salzman
------------- -----------------------------
by: David Salzman
Chief Executive Officer
Dated: June 30, 2003 /s/ Neal Ludeke
------------- ------------------------------
by: Neal Ludeke
Chief Financial Officer
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 in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ David Salzman Chief Executive Officer of June 30, 2003
- -------------------------- the general partner -------------
(David Salzman) of the General Partner
/s/ Neal Ludeke Chief Financial Officer of June 30, 2003
- -------------------------- the general partner -------------
(Neal Ludeke) of the General Partner
46
CERTIFICATIONS
I, David Salzman, certify that:
1. I have reviewed this annual report on Form 10-K of American Tax Credit
Properties III L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: June 30, 2003 /s/ David Salzman
------------------------------
by: David Salzman
Chief Executive Officer
of Richman Housing
Credits Inc., general
partner of Richman Tax
Credit Properties III
L.P., General Partner
of the Registrant
47
I, Neal Ludeke, certify that:
1. I have reviewed this annual report on Form 10-K of American Tax Credit
Properties III L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: June 30, 2003 /s/ Neal Ludeke
------------------------------
by: Neal Ludeke
Chief Financial Officer
of Richman Housing
Credits Inc., general
partner of Richman Tax
Credit Properties III
L.P., General Partner
of the Registrant
48