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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the year ended March 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number: 0-20058
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
California 33-0316953
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
2
PART I.
Item 1. Business
Organization
WNC California Housing Tax Credits, L.P. ("CHTC" or the "Partnership") is a
California Limited Partnership formed under the laws of the State of California
on September 15, 1988. The Partnership was formed to acquire limited partnership
interests in other limited partnerships or limited liability companies ("Local
Limited Partnerships") which own multifamily housing complexes that are eligible
for low-income housing federal and, in certain cases, California income tax
credits ("Low Income Housing Credits").
The general partners of the Partnership are WNC & Associates, Inc.
("Associates") and Wilfred N. Cooper, Sr. (collectively, the "General Partner"
or "General Partners"). Wilfred N. Cooper, Sr., through the Cooper Revocable
Trust, owns 66.8% of the outstanding stock of Associates. John B. Lester, Jr.
was the original limited partner of the Partnership and owns, through the Lester
Family Trust, 28.6% of the outstanding stock of Associates. Wilfred N. Cooper,
Jr., President of Associates, owns 2.1% of the outstanding stock of Associates.
The business of the Partnership is conducted primarily through Associates, as
the Partnership has no employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission, on March 16, 1989, the Partnership commenced a public offering of
10,000 Units of Limited Partnership Interest ("Units") at a price of $1,000 per
Unit. As of the close of the public offering on October 31, 1990, a total of
7,450 Units representing $7,450,000 had been sold. Holders of Units are referred
to herein as "Limited Partners".
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended by Supplement No. 1 through Supplement No. 9 thereto
(the "Partnership Agreement"), will be able to be accomplished promptly at the
end of the 15-year period. If a Local Limited Partnership is unable to sell its
Housing Complex, it is anticipated that the local general partner ("Local
General Partner") will either continue to operate such Housing Complex or take
such other actions as the Local General Partner believes to be in the best
interest of the Local Limited Partnership. Notwithstanding the preceding,
circumstances beyond the control of the General Partner or the Local General
Partners may occur during the Compliance Period, which would require the
Partnership to approve the disposition of a Housing Complex prior to the end
thereof, possibly resulting in recapture of Low Income Housing Credits.
As of March 31, 2001, the Partnership had invested in eleven Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
3
that is eligible for the federal Low Income Housing Credit and eight of them
were eligible for the California Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are subject to mortgage
indebtedness. If a Local Limited Partnership does not make its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member of
the Local Limited Partnerships, the Partnership will have very limited rights
with respect to management of the Local Limited Partnerships, and will rely
totally on the general partners or managing members of the Local Limited
Partnerships for management of the Local Limited Partnerships. The value of the
Partnership's investments will be subject to changes in national and local
economic conditions, including unemployment conditions, which could adversely
impact vacancy levels, rental payment defaults and operating expenses. This, in
turn, could substantially increase the risk of operating losses for the Housing
Complexes and the Partnership. In addition, each Local Limited Partnership is
subject to risks relating to environmental hazards and natural disasters, which
might be uninsurable. Because the Partnership's operations will depend on these
and other factors beyond the control of the General Partner and the Local
General Partners, there can be no assurance that the anticipated Low Income
Housing Credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the Low Income Housing Credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the Low
Income Housing Credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
limited partnership interests in the Housing Complexes. The following table
reflects the status of the eleven Housing Complexes as of the dates and for the
periods indicated:
4
---------------------------- --------------------------------------------------
As of March 31, 2001 As of December 31, 2000
---------------------------- --------------------------------------------------
Partnership's Encumbrances
Total Investment Amount of Number Estimated Low of Local
General Partner in Local Limited Investment of Income Housing Limited
Partnership Name Location Name Partnerships Paid to Date Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Philip R. Hammond,
Alta Vista Orosi, Jr. and Diane M.
Investors California Hammond $ 583,000 $ 583,000 42 95% $ 1,274,000 $ 1,432,000
BCA Anderson, Douglas W.
Associates California Young 514,000 514,000 40 100% 1,105,000 1,421,000
David J. Michael,
Patrick R.
Sabelhaus and
Cloverdale Professional
Garden Cloverdale, Apartment
Apartments California Management 617,000 617,000 34 100% 1,387,000 1,634,000
Philip R. Hammond,
Countryway Mendota, Jr. and Diane M.
Associates California Hammond 571,000 571,000 41 90% 1,162,000 1,473,000
David J. Michael
and Professional
East Garden Jamestown, Apartment
Apartments California Management 770,000 770,000 51 100% 1,772,000 2,150,000
HPA Shafter, Douglas W.
California Young 538,000 538,000 42 93% 1,223,000 1,508,000
Knights Knights Douglas W.
Landing Landing, Young
Harbor California and Diane L. Young 275,000 275,000 25 92% 446,000 981,000
5
---------------------------- --------------------------------------------------
As of March 31, 2001 As of December 31, 2000
---------------------------- --------------------------------------------------
Partnership's Encumbrances
Total Investment Amount of Number Estimated Low of Local
General Partner in Local Limited Investment of Income Housing Limited
Partnership Name Location Name Partnerships Paid to Date Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Philip R. Hammond,
Midland Manor Mendota, Jr. and Diane M.
Associates California Hammond 383,000 383,000 40 90% 668,000 1,425,000
Richard Parasol
San Jacinto San Jacinto, and Richard A.
Associates California Gullota 469,000 469,000 38 97% 830,000 1,781,000
William H. Larson
Thomas G. Larson,
Woodlake Woodlake, and Raymond L.
Manor California Tetzlaff 545,000 545,000 44 91% 1,146,000 1,452,000
Yreka Investment Yreka, Ronald D.
Group California Bettencourt 538,000 538,000 36 100% 1,174,000 1,467,000
------------ ----------- ------- ------- -------------- -------------
$ 5,803,000 $ 5,803,000 433 95% $ 12,187,000 $ 16,724,000
============ ============ ======= ======= ============== =============
6
---------------------------
For the Year Ended
December 31, 2000
---------------------------
---------------------------
Low Income Housing
Credits Allocated
Partnership Name Rental Income Net Loss to Partnership
- --------------------------------------------------------- ------------------
Alta Vista Investors $ 160,000 $ (48,000) 99%
BCA Associates 145,000 (45,000) 99%
Cloverdale Garden Apartments 190,000 (20,000) 99%
Countryway Associates 151,000 (56,000) 99%
East Garden Apartments 229,000 (34,000) 99%
HPA Investors 155,000 (59,000) 99%
Knights Landing Harbor 124,000 (5,000) 99%
Midland Manor Associates 143,000 (51,000) 99%
San Jacinto Associates 164,000 (54,000) 99%
Woodlake Manor 183,000 (63,000) 99%
Yreka Investment Group 155,000 (31,000) 99%
------------ ------------
$ 1,799,000 $ (466,000)
============ ============
7
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At March 31, 2001, there were 687 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during the year
ended March 31, 2001.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31 December 31
------------------------- ------------------------------------------------------
2001 2000 1999 1998 1997 1996
----------- ----------- ------------ ----------- ----------- -----------
ASSETS
Cash and cash
equivalents $ 44,172 $ 47,877 $ 61,123 $ 66,028 $ 78,109 $ 83,943
Investments in limited
partnerships, net 809,249 1,187,690 1,508,351 1,595,464 2,001,822 2,442,547
----------- ----------- ------------ ----------- ----------- -----------
$ 853,421 $1,235,567 $ 1,569,474 $1,661,492 $2,079,931 $2,526,490
=========== =========== ============ =========== =========== ===========
LIABILITIES
Accrued fees and
expenses due to
general partner and
affiliates $1,080,521 $ 957,395 $ 848,503 $ 820,365 $ 705,925 $ 594,248
PARTNERS' EQUITY
(DEFICIT) (227,100) 278,172 720,971 841,127 1,374,006 1,932,242
----------- ----------- ------------ ----------- ----------- -----------
$ 853,421 1,235,567 $ 1,569,474 $1,661,492 $2,079,931 $2,526,490
=========== =========== ============ =========== =========== ===========
8
Selected results of operations, cash flows and other information for the
Partnership are as follows for the periods indicated:
For the Years Ended For the Three Months For the Years Ended
March 31 Ended March 31 December 31
------------------------ ------------------------- -----------------------------------------
2001 2000 1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Unaudited)
Loss from operations $(146,597) $(142,543) $ (37,519) $ (32,603) $(144,721) $(137,368) $(135,167)
Equity in loss from
limited partnerships (358,675) (300,256) (82,637) (104,625) (388,158) (420,868) (476,567)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss $(505,272) $(442,799) $(120,156) $(137,228) $(532,879) $(558,236) $(611,734)
=========== =========== =========== =========== =========== =========== ===========
Net loss allocated to:
General partners $ (5,053) $ (4,428) $ (1,202) $ (1,372) $ (5,329) $ (5,582) $ (6,117)
=========== =========== =========== =========== =========== =========== ===========
Limited partners $(500,219) $(438,371) $(118,954) $(135,856) $(527,550) $(552,654) $(605,617)
=========== =========== =========== =========== =========== =========== ===========
Net loss per limited
partner unit $ (67.14) $ (58.84) $ (15.97) $ (18.24) $ (70.81) $ (74.18) (81.29 )
=========== =========== =========== =========== =========== =========== ===========
Outstanding weighted
limited partner units 7,450 7,450 7,450 7,450 7,450 7,450 7,450
=========== =========== =========== =========== =========== =========== ===========
For the Years Ended For the Three Months For the Years Ended
March 31 Ended March 31 December 31
------------------------ ------------------------- -----------------------------------------
2001 2000 1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Unaudited)
Net cash provided by
(used in):
Operating activities $ (8,569) $ (18,747) $ (5,655) $ 546 $ (15,377) $ (10,787) $ (9,595)
Investing activities 4,864 5,501 750 535 3,296 4,953 9,034
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net change in cash and
cash equivalents (3,705) (13,246) (4,905) 1,081 (12,081) (5,834) (561)
Cash and cash
equivalents,
beginning of period 47,877 61,123 66,028 78,109 78,109 83,943 84,504
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents, end of
period $ 44,172 $ 47,877 $ 61,123 $ 79,190 $ 66,028 $ 78,109 $ 83,943
=========== =========== =========== =========== =========== =========== ===========
Low Income Housing Credit per Unit was as follows for the years ended December
31:
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
Federal $ 59 $ 99 99 $ 99 $ 99
State - - - - -
----------- ----------- ----------- ----------- -----------
Total $ 59 $ 99 $ 99 $ 99 $ 99
=========== =========== =========== =========== ===========
9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Partnership's assets at March 31, 2001 consisted primarily of $44,000 in
cash and aggregate investments in the eleven Local Limited Partnerships of
$809,000. Liabilities at March 31, 2001 primarily consisted of $1,081,000 of
accrued annual management fees due to the General Partners.
Results of Operations
Year Ended March 31, 2001 Compared to Year Ended March 31, 2000. The
Partnership's net loss for the year ended March 31, 2001 was $(505,000),
reflecting an increase of $62,000 from the net loss experienced for the year
ended March 31, 2000. The increase in net loss is primarily due to equity in
losses from limited partnerships which increased by $59,000 to $(359,000) for
the year ended March 31, 2001 from $(300,000) for the year ended March 31, 2000.
Equity in losses of limited partnerships increased due to the reduction of the
net acquisition fee component of investments in Local Limited Partnerships to
zero for those Local Limited Partnerships which would otherwise be below a zero
balance.
Year Ended March 31, 2000 Compared to Year Ended December 31, 1998. The
Partnership's net loss for the year ended March 31, 2000 was $(443,000),
reflecting a decrease of $90,000 from the net loss experienced for the year
ended December 31, 1998. The decline in net loss is primarily due to equity in
losses from limited partnerships which declined by $88,000 to $(300,000) for the
year ended March 31, 2000 from $(388,000) for the year ended December 31, 1998.
This decrease was a result of the Partnership not recognizing certain losses of
the Local Limited Partnerships. The investments in such Local Limited
Partnerships had reached $0 at March 31, 2000. Since the Partnership's liability
with respect to its investments is limited, losses in excess of investment are
not recognized.
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
The Partnership's net loss for the three months ended March 31, 1999 was
$(120,000), reflecting a decrease of $17,000 from the net loss experienced for
the three months ended March 31, 1998. The decline in net loss is primarily due
to equity in losses from limited partnerships which declined by $22,000 to
$(83,000) for the three months ended March 31, 1999 from $(105,000) for the
three months ended March 31, 1998. This decrease was a result of the Partnership
not recognizing certain losses of the Local Limited Partnerships. The
investments in such Local Limited Partnerships had reached $0 at March 31, 1999.
Since the Partnership's liability with respect to its investments is limited,
losses in excess of investment are not recognized. The reduction in equity
losses recognized was partially offset by an increase in loss from operations of
$5,000 for the three months ended March 31, 1999 to $(37,000), from $(32,000)
for the three months ended March 31, 1998, due to a comparable increase in
operating expense allocations.
Cash Flows
Year Ended March 31, 2001 Compared to Year Ended March 31, 2000. Net cash used
during the year ended March 31, 2001 was $(4,000), compared to net cash used for
the year ended March 31, 2000 of $(13,000). The net cash used primarily
represents cash used for operating expenses net of minimal cash distributions
from Local Limited Partnerships.
Year Ended March 31, 2000 Compared to Year Ended December 31, 1998. Net cash
used during the year ended March 31, 2000 was $(13,000), compared to net cash
used for the year ended December 31, 1998 of $(12,000). The net cash used
primarily represents cash used for operating expenses net of minimal cash
distributions from Local Limited Partnerships.
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
Net cash used during the three months ended March 31, 1999 was $(5,000),
compared to a net increase in cash for the three months ended March 31, 1998 of
$1,000. The change was due primarily to an increase in operating costs paid to
third parties.
During the years ended March 31, 2001 and 2000 and the three months ended March
31, 1999, accrued payables, which consist primarily of related party management
fees due to the General Partner, increased by $123,000, $109,000 and $28,000,
10
respectively. The General Partner does not anticipate that these accrued fees
will be paid until such time as capital reserves are in excess of future
foreseeable working capital requirements of the partnership.
The Partnership expects its future cash flows, together with its net available
assets at March 31, 2001, to be sufficient to meet all currently foreseeable
future cash requirements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
11
Report of Independent Certified Public Accountants
To the Partners
WNC California Housing Tax Credits, L.P.
We have audited the accompanying balance sheets of WNC California Housing Tax
Credits, L.P. (a California Limited Partnership) (the "Partnership") as of March
31, 2001 and 2000, and the related statements of operations, partners' equity
(deficit) and cash flows for the years ended March 31, 2001 and 2000, the three
months ended March 31, 1999 and the year ended December 31, 1998. 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. A significant portion of the financial statements of the limited
partnerships in which the Partnership is a limited partner were audited by other
auditors whose reports have been furnished to us. As discussed in Note 2 to the
financial statements, the Partnership accounts for its investments in limited
partnerships using the equity method. The portion of the Partnership's
investment in limited partnerships audited by other auditors represented 78% and
77% of the total assets of the Partnership at March 31, 2001 and 2000,
respectively. Our opinion, insofar as it relates to the amounts included in the
financial statements for the limited partnerships which were audited by others,
is based solely on the reports of the other auditors.
We conducted our 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 and the reports of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC California Housing Tax Credits, L.P. (A California
Limited Partnership) as of March 31, 2001 and 2000, and the results of its
operations and its cash flows for the years ended March 31, 2001 and 2000, the
three months ended March 31, 1999 and the year ended December 31, 1998 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
July 9, 2001
12
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
BALANCE SHEETS
March 31
------------------------------
2001 2000
-------------- -------------
ASSETS
Cash and cash equivalents $ 44,172 $ 47,877
Investments in limited partnerships,
net (Notes 2 and 3) 809,249 1,187,690
-------------- -------------
$ 853,421 $ 1,235,567
============== =============
LIABILITIES AND PARTNERS' EQUITY
(DEFICIT)
Liabilities:
Accrued fees and expenses due to
General Partner and
affiliates (Note 3) $ 1,080,521 $ 957,395
Commitments and contingencies
Partners' equity (deficit):
General partners (67,112) (62,059)
Limited partners (10,000 units
authorized; 7,450 units
issued and outstanding) (159,988) 340,231
-------------- -------------
Total partners' equity (deficit) (227,100) 278,172
-------------- -------------
$ 853,421 $ 1,235,567
============== =============
See accompanying notes to financial statements
13
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three For the Year
For the Years Ended March Months Ended Ended
31 March 31 December 31
----------------------------- ------------- -------------
2001 2000 1999 1998
------------- ------------- ------------- -------------
Interest income $ 1,836 $ 1,817 $ 465 $ 2,166
Distribution income 1,584 - - -
------------- ------------- ------------- -------------
Total income 3,420 1,817 465 2,166
Operating expenses:
Amortization (Note 2) 14,902 14,904 3,726 14,904
Asset management fees (Note 3) 111,856 111,855 27,923 111,691
Legal and accounting 17,995 12,807 4,553 4,000
Office 5,264 4,794 1,782 16,292
------------- ------------- ------------- -------------
Total operating expenses 150,017 144,360 37,984 146,887
------------- ------------- ------------- -------------
Loss from operations (146,597) (142,543) (37,519) (144,721)
Equity in losses of limited
partnerships (Note 2) (358,675) (300,256) (82,637) (388,158)
------------- ------------- ------------- -------------
Net loss $ (505,272) $ (442,799) $ (120,156) $ (532,879)
============= ============= ============= =============
Net loss allocated to:
General partners $ (5,053) $ (4,428) $ (1,202) $ (5,329)
============= ============= ============= =============
Limited partners $ (500,219) $ (438,371) $ (118,954) $ (527,550)
============= ============= ============= =============
Net loss per limited
partnership unit $ (67.14) $ (58.84) $ (15.97) $ (70.81)
============= ============= ============= =============
Outstanding weighted
limited partner units 7,450 7,450 7,450 7,450
============= ============= ============= =============
See accompanying notes to financial statements
14
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
General Limited
Partners Partners Total
--------------- --------------- ---------------
Partners' equity (deficit) at January 1, 1998 $ (51,100) $ 1,425,106 $ 1,374,006
Net loss (5,329) (527,550) (532,879)
--------------- --------------- ---------------
Partners' equity (deficit) at December 31, 1998 (56,429) 897,556 841,127
Net loss (1,202) (118,954) (120,156)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 1999 (57,631) 778,602 720,971
Net loss (4,428) (438,371) (442,799)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2000 (62,059) 340,231 278,172
Net loss (5,053) (500,219) (505,272)
--------------- --------------- --- ------------
Partners' deficit at March 31, 2001 $ (67,112) $ (159,988) $ (227,100)
=============== =============== ===============
See accompanying notes to financial statements
15
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three For the Year
For the Years Ended Months Ended Ended
March 31 March 31 December 31
----------------------------- ------------- -------------
2001 2000 1999 1998
------------- ------------- ------------- -------------
Cash flows from operating activities:
Net loss $ (505,272) $ (442,799) $ (120,156) $ (532,879)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 14,902 14,904 3,726 14,904
Equity in losses of limited partnerships 358,675 300,256 82,637 388,158
Change in accrued fees and expenses due to
General Partner and affiliates 123,126 108,892 28,138 114,440
------------- ------------- ------------- -------------
Net cash used in operating activities (8,569) (18,747) (5,655) (15,377)
------------- ------------- ------------- -------------
Cash flows provided by investing activities:
Distributions from limited partnerships 4,864 5,501 750 3,296
------------- ------------- ------------- -------------
Net decrease in cash and cash equivalents (3,705) (13,246) (4,905) (12,081)
Cash and cash equivalents, beginning of period 47,877 61,123 66,028 78,109
------------- ------------- ------------- -------------
Cash and cash equivalents, end of period $ 44,172 $ 47,877 $ 61,123 $ 66,028
============= ============= ============= =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ - $ 800
============= ============= ============= =============
See accompanying notes to financial statements
16
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
24
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC California Housing Tax Credits, L.P., a California Limited Partnership (the
"Partnership"), was formed on September 15, 1988 under the laws of the State of
California. The Partnership was formed to invest primarily in other limited
partnerships (the "Local Limited Partnerships") which own and operate
multi-family housing complexes (the "Housing Complex") that are eligible for low
income housing tax credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
WNC & Associates, Inc., a California corporation ("WNC"), and Wilfred N.
Cooper, Sr., are general partners of the Partnership (the "General Partners").
Wilfred N. Cooper, Sr., through the Cooper Revocable Trust owns 66.8% of the
outstanding stock of WNC. John B. Lester, Jr. was the original limited partner
of the Partnership and owns, through the Lester Family Trust, 28.6% of the
outstanding stock of WNC. Wilfred N. Cooper, Jr., President of WNC, owns 2.1% of
the outstanding stock of WNC.
The Partnership shall continue to be in full force and effect until December 31,
2037 unless terminated prior to that date pursuant to the partnership agreement
or law.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership Agreement authorized the sale of up to 10,000 units at $1,000
per Unit ("Units"). The offering of Units concluded in October 1990 at which
time 7,450 Units representing subscriptions in the amount of $7,450,000, had
been accepted. The General Partners have a 1% interest in operating profits and
losses, taxable income and losses, in cash available for distribution from the
Partnership and tax credits of the Partnership. The limited partners will be
allocated the remaining 99% of these items in proportion to their respective
investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partners have received proceeds
equal to their capital contributions from the remainder, any additional sale or
refinancing proceeds will be distributed 99% to the limited partners (in
proportion to their respective investments) and 1% to the General Partners.
Change in Reporting Year End
In 1999, the Partnership elected to change its year end for financial reporting
purposes from December 31 to March 31. All financial information reflected in
the financial statements and related footnotes has been adjusted for this change
in year end except for the combined condensed financial information relating to
the Local Limited Partnerships included in Note 2.
17
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not make its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partners.
Method of Accounting For Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment and are being amortized over 30 years (see Note 2).
Losses from limited partnerships for the year ended December 31, 1998 have been
recorded by the Partnership based on reported results provided by the Local
Limited Partnerships. Losses from limited partnerships for the three months
ended March 31, 1999 have been estimated by management of the Partnership.
Losses from Local Limited Partnerships for the years ended March 31, 2001 and
2000 have been recorded by the Partnership based on nine months of reported
results provided by the Local Limited Partnerships and on three months of
results estimated by management of the Partnership. Losses from limited
partnerships allocated to the Partnership are not recognized to the extent that
the investment balance would be adjusted below zero.
18
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. WNC is obligated to pay all offering
and organization costs in excess of 15% (including sales commissions) of the
total offering proceeds. Offering expenses are reflected as a reduction of
limited partners' capital and amounted to $946,704 at the end of all periods
presented.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with remaining
maturities of three months or less when purchased to be cash equivalents. As of
March 31, 2001 and 2000, the Partnership had no cash equivalents.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net loss per unit is not required.
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of Partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the periods
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
19
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership has acquired limited partnership
interests in eleven Local Limited Partnerships each of which owns one Housing
Complex consisting of an aggregate of 433 apartment units. The respective
general partners of the Local Limited Partnerships manage the day to day
operations of the entities. Significant Local Limited Partnership business
decisions require approval from the Partnership. The Partnership, as a limited
partner, is generally entitled to 99%, as specified in the Local Limited
Partnership agreements, of the operating profits and losses, taxable income and
losses, and tax credits of the Local Limited Partnerships.
The Partnership's investments in Local Limited Partnerships as shown in the
balance sheets at March 31, 2001 and 2000, are approximately $298,000 and
$208,000, respectively, greater than the Partnership's equity at the preceding
December 31 as shown in the Local Limited Partnerships' combined financial
statements presented below. This difference is primarily due to unrecorded
losses as discussed below, and acquisition, selection and other costs related to
the acquisition of the investments which have been capitalized in the
Partnership's investment account. The Partnership's investment is also lower
than the Partnership's equity as shown in the Local Limited Partnership's
combined financial statements due to the estimated losses recorded by the
Partnership for the three month period ended March 31.
Equity in losses of the Local Limited Partnerships is recognized in the
financial statements until the related investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income.
At March 31, 2001 and 2000, the investment accounts in certain Local Limited
Partnerships have reached a zero balance. Consequently, a portion of the
Partnership's estimate of its share of losses for the years ended March 31, 2001
and 2000 and the three month period ended March 31, 1999, amounting to
approximately $116,000, $103,000 and $23,000, respectively, have not been
recognized. The Partnership's share of losses for the year ended December 31,
1998 amounting to approximately $32,000 have not been recognized. As of March
31, 2001, the aggregate share of net losses not recognized by the Partnership
amounted to $274,000.
The following is a summary of the equity method activity of the investments in
Local Limited Partnerships for the periods presented:
For the Three For the Year
For the Years Ended Months Ended Ended
March 31 March 31 December 31
----------------------------- ------------- -------------
2001 2000 1999 1998
------------- ------------- ------------- -------------
Investments per balance sheet, beginning of period $ 1,187,690 $ 1,508,351 $ 1,595,464 $ 2,001,822
Equity in losses of limited partnerships (358,675) (300,256) (82,637) (388,158)
Distributions received (4,864) (5,501) (750) (3,296)
Amortization of paid acquisition fees and costs (14,902) (14,904) (3,726) (14,904)
------------- ------------- ------------- -------------
Investments per balance sheet, end of period $ 809,249 $ 1,187,690 $ 1,508,351 $ 1,595,464
============= ============= ============= =============
20
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted against
interest expense. Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
2000 1999
--------------- ---------------
ASSETS
Buildings and improvements (net of accumulated
depreciation for 2000 and 1999 of $6,668,000
and $6,043,000, respectively) $ 14,964,000 $ 15,564,000
Land 1,484,000 1,484,000
Other assets 1,606,000 1,510,000
--------------- ---------------
$ 18,054,000 $ 18,558,000
=============== ===============
LIABILITIES
Mortgage loans payable $ 16,724,000 $ 16,769,000
Due to related parties 373,000 347,000
Other liabilities 165,000 163,000
--------------- ---------------
17,262,000 17,279,000
--------------- ---------------
PARTNERS' CAPITAL
WNC California Housing Tax Credits, L.P. 511,000 980,000
Other partners 281,000 299,000
--------------- ---------------
792,000 1,279,000
--------------- ---------------
$ 18,054,000 $ 18,558,000
=============== ===============
21
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2000 1999 1998
--------------- --------------- ---------------
Revenues $ 1,891,000 $ 1,849,000 $ 1,828,000
--------------- --------------- ---------------
Expenses:
Operating expenses 1,336,000 1,237,000 1,251,000
Interest expense 396,000 401,000 400,000
Depreciation and
amortization 625,000 622,000 602,000
--------------- --------------- ---------------
Total expenses 2,357,000 2,260,000 2,253,000
--------------- --------------- ---------------
Net loss $ (466,000) $ (411,000) $ (425,000)
=============== =============== ===============
Net loss allocable
to the Partnership $ (461,000) $ (407,000) $ (420,000)
=============== =============== ===============
Net loss recorded
by the Partnership (359,000) $ (300,000) $ (388,000)
=============== =============== ===============
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partners may be
required to sustain operations of such Local Limited Partnerships. If additional
capital contributions are not made when they are required, the Partnership's
investment in certain of such Local Limited Partnerships could be impaired, and
the loss and recapture of the related tax credits could occur.
NOTE 3 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partners or their affiliates for the following items:
Acquisition fees equal to 6% of the gross proceeds from the sale of
Units as compensation for services rendered in connection with the
acquisition of Local Limited Partnerships. As of the end of all
periods presented, the Partnership incurred acquisition fees of
$447,060. Accumulated amortization of these capitalized costs was
$300,629 and $205,587, as of March 31, 2001 and 2000, respectively. Of
the accumulated amortization recorded on the balance sheet at March
31, 2001 $80,140 of the related expense was reflected as equity in
losses of limited partnerships on the statement of operations during
the fourth quarter of the year ended March 31, 2001 to reduce the
respective net acquisition fee component of investments in local
limited partnerships to zero for those Local Limited Partnerships
which would otherwise be below a zero balance.
Reimbursement of costs incurred by the General Partners or an
affiliate in connection with the acquisition of the Local Limited
Partnerships. These reimbursements have not exceeded 3% of the gross
proceeds. As of the end of all periods presented, the Partnership
incurred acquisition costs of $32,018 which have been included in
investments in limited partnerships. Such costs were fully amortized
at December 31, 1997.
An annual management fee equal to 0.5% of the invested assets of the
Local Limited Partnerships, including the Partnerships allocable share
of the mortgages. Management fees of $111,856 and $111,855 were
incurred during the years ended March 31, 2001 and 2000, respectively,
and $27,923 during the three months ended March 31, 1999, and $111,691
were incurred for 1998, of which $0 was paid during the years ended
March 31, 2001 and 2000, the three months ended March 31, 1999 and the
year ended December 31, 1998.
22
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
The accrued fees and expenses due to the General Partners and affiliates consist
of the following as of the dates indicated:
March 31
-----------------------------
2001 2000
------------ --------------
Reimbursement for expenses
paid by the General Partners
or an affiliate $ 11,271 $ -
Asset management fee payable 1,069,250 957,395
------------ --------------
Total $ 1,080,521 $ 957,395
============ ==============
The General Partners do not anticipate that these accrued fees will be paid
until such time as capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
NOTE 4 - INCOME TAXES
No provision for income taxes has been recorded in the financial statements as
any liability for income taxes is the obligation of the partners of the
Partnership.
NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly operations for the years ended March
31, 2001 and 2000 (in thousands, except for per share data).
June 30 September 30 December 31 March 31
-------------- -------------- -------------- --------------
2001
Income $ - $ 1,000 $ - $ 2,000
Operating
expenses (35,000) (36,000) (33,000) (46,000)
Equity in
losses of
limited
partnerships (64,000) (63,000) (63,000) (168,000)
Net loss (99,000) (98,000) (96,000) (212,000)
Loss available
to limited
partner (98,000) (97,000) (95,000) (210,000)
Loss per limited
partner unit (13) (13) (13) (28)
23
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued
June 30 September 30 December 31 March 31
-------------- -------------- -------------- --------------
2000
Income $ - $ 1,000 $ - $ 1,000
Operating
expenses (38,000) (36,000) (36,000) (34,000)
Equity in
losses of
limited
partnerships (83,000) (82,000) (73,000) (62,000)
Net loss (121,000) (118,000) (108,000) (96,000)
Loss available
to limited
partner (120,000) (116,000) (107,000) (95,000)
Loss per limited
partner unit (16) (16) (14) (13)
24
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
PART III.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc.
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who
serves as Chief Executive Officer, Chairman of the Board, John B. Lester, Jr.,
David N. Shafer, Wilfred N. Cooper, Jr. and Kay L. Cooper. The principal
shareholders of WNC & Associates, Inc. are trusts established by Wilfred N.
Cooper, Sr. and John B. Lester, Jr.
Wilfred N. Cooper, Sr., age 70, is the founder, Chief Executive Officer,
Chairman and a Director of WNC & Associates, Inc., a Director of WNC Capital
Corporation, and a general partner in some of the programs previously sponsored
by the Sponsor. Mr. Cooper has been involved in real estate investment and
acquisition activities since 1968. Previously, during 1970 and 1971, he was
founder and principal of Creative Equity Development Corporation, a predecessor
of WNC & Associates, Inc., and of Creative Equity Corporation, a real estate
investment firm. For 12 years prior to that, Mr. Cooper was employed by Rockwell
International Corporation, last serving as its manager of housing and urban
developments where he had responsibility for factory-built housing evaluation
and project management in urban planning and development. Mr. Cooper is a
Director of the National Association of Home Builders (NAHB) and a National
Trustee for NAHB's Political Action Committee, a Director of the National
Housing Conference (NHC) and a member of NHC's Executive Committee and a
Director of the National Multi-Housing Council (NMHC). Mr. Cooper graduated from
Pomona College in 1956 with a Bachelor of Arts degree.
John B. Lester, Jr., age 67, is Vice Chairman, a Director, Secretary and a
member of the Acquisition Committee of WNC & Associates, Inc., and a Director of
WNC Capital Corporation. Mr. Lester has 27 years of experience in engineering
and construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 38, is President, Chief Operating Officer, a
Director and a member of the Acquisition Committee of WNC & Associates, Inc. He
is President of, and a registered principal with, WNC Capital Corporation, a
member firm of the NASD, and is a Director of WNC Management, Inc. He has been
involved in investment and acquisition activities with respect to real estate
since he joined the Sponsor in 1988. Prior to this, he served as Government
Affairs Assistant with Honda North America in Washington, D.C. Mr. Cooper is a
member of the Advisory Board for LIHC Monthly Report, a Director of NMHC and an
Alternate Director of NAHB. He graduated from The American University in 1985
with a Bachelor of Arts degree.
David N. Shafer, age 49, is Executive Vice President, a Director, General
Counsel, and a member of the Acquisition Committee of WNC & Associates, Inc.,
and a Director and Secretary of WNC Management, Inc. Mr. Shafer has been
involved in real estate investment and acquisition activities since 1984. Prior
to joining the Sponsor in 1990, he was practicing law with a specialty in real
estate and taxation. Mr. Shafer is a Director and President of the California
Council of Affordable Housing and a member of the State Bar of California. Mr.
Shafer graduated from the University of California at Santa Barbara in 1978 with
a Bachelor of Arts degree, from the New England School of Law in 1983 with a
Juris Doctor degree (cum laude) and from the University of San Diego in 1986
with a Master of Law degree in Taxation.
25
Thomas J. Riha, age 46, became Chief Financial Officer effective January 2001.
Prior to his appointment as Chief Financial Officer he was Vice President -
Asset Management and a member of the Acquisition Committee of WNC & Associates,
Inc. and a Director and Chief Executive Officer of WNC Management, Inc. Mr. Riha
has been involved in acquisition and investment activities with respect to real
estate since 1979. Prior to joining the Sponsor in 1994, Mr. Riha was employed
by Trust Realty Advisor, a real estate acquisition and management company, last
serving as Vice President - Operations. Mr. Riha graduated from the California
State University, Fullerton in 1977 with a Bachelor of Arts degree (cum laude)
in Business Administration with a concentration in Accounting and is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants.
Sy P. Garban, age 55, is Vice President - National Sales of WNC &
Associates, Inc. and has been employed by the Sponsor since 1989. Mr. Garban has
been involved in real estate investment activities since 1978. Prior to joining
the Sponsor he served as Executive Vice President of MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
N. Paul Buckland, age 38, is Vice President - Acquisitions and a member of the
Acquisition Committee of WNC & Associates, Inc. He has been involved in real
estate acquisitions and investments since 1986 and has been employed with WNC &
Associates, Inc. since 1994. Prior to that, he served on the development team of
the Bixby Ranch that constructed apartment units and Class A office space in
California and neighboring states, and as a land acquisition coordinator with
Lincoln Property Company where he identified and analyzed multi-family
developments. Mr. Buckland graduated from California State University, Fullerton
in 1992 with a Bachelor of Science degree in Business Finance.
David Turek, age 46, is Vice President - Originations of WNC & Associates, Inc.
He has been involved with real estate investment and finance activities since
1976 and has been employed by WNC & Associates, Inc. since 1996. From 1995 to
1996, Mr. Turek served as a consultant for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties. From 1990 to 1995, he was involved in the development of
conventional and tax credit multi-family housing. He is a Director with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.
Kay L. Cooper, age 64, is a Director of WNC & Associates, Inc. Mrs. Cooper
was the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates during the current or future years for the following
fees:
(a) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.5% of the Invested Assets of the Partnership, as defined.
"Invested Assets" means the sum of the Partnership's investment in Local
Limited Partnerships and the Partnership's allocable share of the amount of
the mortgage loans on and other debts related to the Housing Complexes
owned by such Local Limited Partnerships. Fees of $112,000, $112,000,
$28,000 and $112,000 were incurred during the years and three months ended
March 31, 2001 and 2000 and 1999, and the year ended December 31, 1998,
respectively. The Partnership paid the General Partners and or their
affiliates $0 of those fees during the years ended March 31, 2001 and 2000,
the three months ended March 31, 1999, and the year ended December 31,
1998.
(b) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $4,000, $7,000, $6,000
and $3,000 during the years ended March 31, 2001 and 2000, the three months
ended March 31, 1999, and the year ended December 31, 1998, respectively.
26
(c) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$3,800, $6,700 and $6,700 for Associates and $420, $750 and $750 for Mr.
Cooper for the calendar years ended December 31, 2000, 1999 and 1998,
respectively. The General Partners are also entitled to receive 1% of cash
distributions. There were no distributions of cash to the General Partners
during the years ended March 31, 2001 and 2000 and the three months ended
March 31, 1999, and the year ended December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
No person is known to the General Partners to own beneficially in excess of
5% of the outstanding Units.
(b) Security Ownership of Management
Neither the General Partners, their affiliates, nor any of the officers or
directors of the corporate General Partner or its affiliates own directly
or beneficially any Units in the Partnership.
(c) Changes in Control
The management and control of the corporate General Partner may be changed
at any time in accordance with its organizational documents, without the
consent or approval of the Limited Partners. In addition, the Partnership
Agreement provides for the admission of one or more additional and
successor General Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of any
other General Partner or the Limited Partners, (i) substitute in its stead
as General Partner any entity which has, by merger, consolidation or
otherwise, acquired substantially all of its assets, stock or other
evidence of equity interest and continued its business, or (ii) cause to be
admitted to the Partnership an additional General Partner or Partners if it
deems such admission to be necessary or desirable so that the Partnership
will be classified a partnership for Federal income tax purposes. Finally,
a majority-in-interest of the Limited Partners may at any time remove the
General Partner of the Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partners manage all of the Partnership's affairs. The transactions
with the General Partners are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interests in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
27
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Balance Sheets, March 31, 2001 and 2000
Statements of Operations for the years ended March 31, 2001 and 2000,
the three months ended March 31, 1999 and the year ended December 31,
1998
Statements of Partners' Equity for the years ended March 31, 2001 and
2000, the three months ended March 31, 1999 and the year ended
December 31, 1998
Statements of Cash Flows for the years ended March 31, 2001 and 2000,
the three months ended March 31, 1999 and the year ended December 31,
1998
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial
Statement Schedules
Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K.
1. NONE.
(c) Exhibits.
3.1 Agreement of Limited Partnership dated September 15, 1988; included as
Exhibit B to the Prospectus, which was filed as Exhibit 28.1 to Form
10-K for the year ended December 31, 1992 is hereby incorporated herein
as Exhibit 3.1.
10.1 Amended and Restated Agreement of Limited Partnership of Countryway
Associates filed as exhibit 10.1 on Form 10-K dated December 31, 1992
is hereby incorporated herein as exhibit 10.1.
10.2 Amended and Restated Agreement of Limited Partnership of Alta Vista
Investors filed as exhibit 10.2 on Form 10-K dated December 31, 1992
is hereby incorporated herein as exhibit 10.2.
10.3 Amended and Restated Agreement of Limited Partnership of Yreka
Investment Group filed as exhibit 10.3 on Form 10-K dated December 31,
1992 is hereby incorporated herein as exhibit 10.3.
10.4 Amended and Restated Agreement of Limited Partnership of BCA Associates
filed as exhibit 10.7 on Form 10-K dated December 31, 1992 is hereby
incorporated herein as exhibit 10.4.
10.5 Amended and Restated Agreement of Limited Partnership of HPA Investors
filed as exhibit 10.8 on Form 10-K dated December 31, 1992 is hereby
incorporated herein as exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of Cloverdale
Garden Apartments filed as exhibit 10.11 on Form 10-K dated December
31, 1992 is hereby incorporated herein as exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of Knights
Landing Harbor filed as exhibit 10.13 on Form 10-K dated December 31,
1992 is hereby incorporated herein as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Woodlake Manor
filed as exhibit 10.16 on Form 10-K dated December 31, 1992 is hereby
incorporated herein as exhibit 10.8.
28
10.9 Amended and Restated Agreement of Limited Partnership of East Garden
Apartments filed as exhibit 10.18 on Form 10-K dated December 31, 1992
is hereby incorporated herein as exhibit 10.9.
10.10 Amended and Restated Agreement of Limited Partnership of Midland Manor
Associates filed as exhibit 10.26 on Form 10-K dated December 31, 1992
is hereby incorporated herein as exhibit 10.10.
10.11 Amended and Restated Agreement of Limited Partnership of San Jacinto
Associates filed as exhibit 10.27 on Form 10-K dated December 31, 1992
is hereby incorporated herein as exhibit 10.11.
21.1 Financial Statements of Yreka Investment Group, for the years ended
December 31, 1999 and 1998 together with Independent Auditors' Report
Thereon; a significant subsidiary of the Partnership.
21.2 Financial Statements of Yreka Investment Group, for the years ended
December 31, 2000 and 1999 together with Independent Auditors' Report
Thereon; a significant subsidiary of the Partnership.
(d) Financial statement schedules follow, as set forth in subsection (a)(2)
hereof.
29
Report of Independent Certified Public Accountants
on Financial Statement Schedule
To the Partners
California Housing Tax Credits, L.P.
The audits referred to in our report dated July 9, 2001, relating to the 2001,
2000, 1999 and 1998 financial statements of WNC California Housing Tax Credits,
L.P. (the "Partnership"), which are contained in Item 8 of this Form 10-K,
included the audit of the accompanying financial statement schedules. The
financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statement schedules based upon our audits.
In our opinion, such financial statement schedules present fairly, in all
material respects, the financial information set forth therein.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
July 9, 2001
30
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
------------------------------------- -------------------------------------------------------
As of March 31, 2001 As of December 31, 2000
------------------------------------- -------------------------------------------------------
Partnership's Total Amount of Encumbrances of
Investment in Local Investment Paid Local Limited Property and Accumulated Net Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors Orosi,
California $ 583,000 $ 583,000 $ 1,432,000 $ 2,044,000 $ 782,000 $ 1,262,000
BCA Associates Anderson,
California 514,000 514,000 1,421,000 2,025,000 563,000 1,462,000
Cloverdale Garden Cloverdale,
Apartments California 617,000 617,000 1,634,000 2,155,000 484,000 1,671,000
Countryway Associates Mendota,
California 571,000 571,000 1,473,000 2,090,000 814,000 1,276,000
East Garden Apartments Jamestown,
California 770,000 770,000 2,150,000 2,901,000 647,000 2,254,000
HPA Investors Shafter,
California 538,000 538,000 1,508,000 2,196,000 597,000 1,599,000
Knights Landing Harbor Knights
Landing,
California 275,000 275,000 981,000 1,351,000 374,000 977,000
Midland Manor Mendota,
Associates California 383,000 383,000 1,425,000 1,824,000 640,000 1,184,000
San Jacinto Associates San Jacinto,
California 469,000 469,000 1,781,000 2,349,000 459,000 1,890,000
Woodlake Manor Woodlake,
California 545,000 545,000 1,452,000 2,137,000 817,000 1,320,000
Yreka Investment Group Yreka,
California 538,000 538,000 1,467,000 2,044,000 491,000 1,553,000
------------- -------------- ------------- ------------- ------------- -------------
$ 5,803,000 $ 5,803,000 $ 16,724,000 $ 23,116,000 $ 6,668,000 $ 16,448,000
============= ============== ============= ============= ============= =============
31
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
-------------------------------------------------------------------------------------------
For the year ended December 31, 2000
-------------------------------------------------------------------------------------------
Year Investment Estimated Useful
Partnership Name Rental Income Net Loss Acquired Status Life (Years)
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors $ 160,000 $ (48,000) 1989 Completed 27.5
BCA Associates 145,000 (45,000) 1989 Completed 40
Cloverdale Garden Apartments 190,000 (20,000) 1989 Completed 40
Countryway Associates 151,000 (56,000) 1989 Completed 27.5
East Garden Apartments 229,000 (34,000) 1989 Completed 40
HPA Investors 155,000 (59,000) 1989 Completed 40
Knights Landing Harbor 124,000 (5,000) 1989 Completed 40
Midland Manor Associates 143,000 (51,000) 1990 Completed 27.5
San Jacinto Associates 164,000 (54,000) 1990 Completed 50
Woodlake Manor 183,000 (63,000) 1989 Completed 30
Yreka Investment Group 155,000 (31,000) 1989 Completed 50
----------- -----------
$1,799,000 $(466,000)
=========== ===========
32
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
------------------------------------- -------------------------------------------------------
As of March 31, 2000 As of December 31, 1999
------------------------------------- -------------------------------------------------------
Partnership's Total Amount of Encumbrances of
Investment in Local Investment Paid Local Limited Property and Accumulated Net Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors Orosi,
California $ 583,000 $ 583,000 $ 1,436,000 $ 2,044,000 $ 709,000 $ 1,335,000
BCA Associates Anderson,
California 514,000 514,000 1,425,000 2,017,000 517,000 1,500,000
Cloverdale Garden Cloverdale,
Apartments California 617,000 617,000 1,638,000 2,154,000 428,000 1,726,000
Countryway Associates Mendota,
California 571,000 571,000 1,478,000 2,085,000 741,000 1,344,000
East Garden Apartments Jamestown,
California 770,000 770,000 2,156,000 2,901,000 573,000 2,328,000
HPA Investors Shafter,
California 538,000 538,000 1,511,000 2,186,000 542,000 1,644,000
Knights Landing Harbor Knights
Landing,
California 275,000 275,000 984,000 1,350,000 343,000 1,007,000
Midland Manor Mendota,
Associates California 383,000 383,000 1,428,000 1,824,000 575,000 1,249,000
San Jacinto Associates San Jacinto,
California 469,000 469,000 1,786,000 2,349,000 417,000 1,932,000
Woodlake Manor Woodlake,
California 545,000 545,000 1,456,000 2,137,000 744,000 1,393,000
Yreka Investment Group Yreka,
California 538,000 538,000 1,471,000 2,044,000 454,000 1,590,000
------------- -------------- ------------- ------------- ------------- -------------
$ 5,803,000 $ 5,803,000 $ 16,769,000 $ 23,091,000 $ 6,043,000 $ 17,048,000
============= ============== ============= ============= ============= =============
33
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
-------------------------------------------------------------------------------------------
For the year ended December 31, 1999
-------------------------------------------------------------------------------------------
Year Investment Estimated Useful
Partnership Name Rental Income Net Loss Acquired Status Life (Years)
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors $ 161,000 $ (36,000) 1989 Completed 27.5
BCA Associates 150,000 (32,000) 1989 Completed 40
Cloverdale Garden Apartments 181,000 (30,000) 1989 Completed 40
Countryway Associates 165,000 (49,000) 1989 Completed 27.5
East Garden Apartments 227,000 (29,000) 1989 Completed 40
HPA Investors 158,000 (40,000) 1989 Completed 40
Knights Landing Harbor 120,000 (13,000) 1989 Completed 40
Midland Manor Associates 147,000 (44,000) 1990 Completed 27.5
San Jacinto Associates 130,000 (55,000) 1990 Completed 50
Woodlake Manor 178,000 (57,000) 1989 Completed 30
Yreka Investment Group 155,000 (26,000) 1989 Completed 50
------------ ------------
$ 1,772,000 $ (411,000)
============ ============
34
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
------------------------------------- -------------------------------------------------------
As of March 31, 1999 As of December 31, 1998
------------------------------------- -------------------------------------------------------
Partnership's Total Amount of Encumbrances of
Investment in Local Investment Paid Local Limited Property and Accumulated Net Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors Orosi,
California $ 583,000 $ 583,000 $ 1,440,000 $ 2,038,000 $ 636,000 $ 1,402,000
BCA Associates Anderson,
California 514,000 514,000 1,429,000 2,014,000 471,000 1,543,000
Cloverdale Garden Cloverdale,
Apartments, California 617,000 617,000 1,642,000 2,136,000 375,000 1,761,000
Countryway Associates Mendota,
California 571,000 571,000 1,481,000 2,085,000 668,000 1,417,000
East Garden Apartments, Jamestown,
California 770,000 770,000 2,161,000 2,886,000 499,000 2,387,000
HPA Investors Shafter,
California 538,000 538,000 1,516,000 2,158,000 489,000 1,669,000
Knights Landing Harbor, Knights
Landing,
California 275,000 275,000 986,000 1,345,000 312,000 1,033,000
Midland Manor Mendota,
Associates California 383,000 383,000 1,431,000 1,821,000 512,000 1,309,000
San Jacinto Associates San Jacinto,
California 469,000 469,000 1,790,000 2,349,000 374,000 1,975,000
Woodlake Manor Woodlake,
California 545,000 545,000 1,460,000 2,108,000 667,000 1,441,000
Yreka Investment Group Yreka,
California 538,000 538,000 1,475,000 2,043,000 417,000 1,626,000
------------- -------------- ------------- ------------- ------------ ------------
$ 5,803,000 $ 5,803,000 $16,811,000 $22,983,000 $ 5,420,000 $ 17,563,000
============= ============== ============= ============= ============ ============
35
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
-------------------------------------------------------------------------------------------
For the year ended December 31, 1998
-------------------------------------------------------------------------------------------
Year Investment Estimated Useful
Partnership Name Rental Income Net Loss Acquired Status Life (Years)
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors $ 153,000 $ (47,000) 1989 Completed 27.5
BCA Associates 151,000 (16,000) 1989 Completed 40
Cloverdale Garden Apartments 176,000 (25,000) 1989 Completed 40
Countryway Associates 167,000 (34,000) 1989 Completed 27.5
East Garden Apartments 218,000 (42,000) 1989 Completed 40
HPA Investors 161,000 (63,000) 1989 Completed 40
Knights Landing Harbor 118,000 (21,000) 1989 Completed 40
Midland Manor Associates 151,000 (45,000) 1990 Completed 27.5
San Jacinto Associates 118,000 (80,000) 1990 Completed 50
Woodlake Manor 170,000 (45,000) 1989 Completed 30
Yreka Investment Group 153,000 (7,000) 1989 Completed 50
------------ ------------
$ 1,736,000 $ (425,000)
============ ============
36
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
By: WNC & Associates, Inc., General Partner
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr., President -
Chief Executive Officer of WNC & Associates, Inc.
Date: July 13, 2001
By: /s/ Thomas J. Riha
Thomas J. Riha, Vice-President -
Chief Financial Officer of WNC & Associates, Inc.
Date: July 13, 2001
By: /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr., General Partner
Date: July 13, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr., Chairman of the
Board of WNC & Associates, Inc.
Date: July 13, 2001
By: /s/ John B. Lester, Jr.
-----------------------
John B. Lester, Jr., Director of
WNC & Associates, Inc.
Date: July 13, 2001
By: /s/ David N. Shafer
David N Shafer, Director of
WNC & Associates, Inc.
Date: July 13, 2001
37
YREKA INVESTMENT GROUP
A California Limited Partnership
FINANCIAL STATEMENTS
December 31, 2000 and 1999
YREKA INVESTMENT GROUP
A California Limited Partnership
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT ON THE
FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3 - 5
Statements of Changes in Partners' Capital 6
Statements of Cash Flows 7 - 8
Notes to Financial Statements 9 - 14
INDEPENDENT AUDITORS' REPORT ON THE
SUPPORTING DATA REQUIRED BY USDA/RD 15
SUPPORTING DATA REQUIRED BY USDA/RD 16 - 24
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON
INTERNAL CONTROL OVER FINANCIAL REPORTING BASED
ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 25 - 26
INDEPENDENT AUDITORS' REPORT
To the Partners
Yreka Investment Group
A California Limited Partnership
We have audited the accompanying balance sheets of Yreka Investment
Group, a California Limited Partnership, as of December 31, 2000 and 1999, and
the related statements of operations, changes in partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards issued by the Comptroller General of
the United States. 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 Yreka Investment
Group as of December 31, 2000 and 1999, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
In accordance with Government Auditing Standards, we have also issued a
report dated January 12, 2001, on our consideration of Yreka Investment Group's
internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts and grants.
/s/ Tate, Propp, Beggs & Sugimoto
An Accountancy Corporation
January 12, 2001
Sacramento, California
YREKA INVESTMENT GROUP
A California Limited Partnership
BALANCE SHEETS
December 31, 2000 and 1999
ASSETS
2000 1999
------------- --------------
Current Project Assets:
Cash $ 8,830 $ 696
Restricted cash:
Tenant security deposits - Note 2 8,750 8,750
Taxes and insurance - Note 3 8,662 21,361
USDA/RD reserve - Note 4 133,138 124,813
Accounts receivable 2,022 4,861
Prepaid expenses 2,388 2,280
------------- -------------
Total current project assets 163,790 162,761
Property and equipment - Note 5 1,552,817 1,589,673
------------- -------------
Total Assets $ 1,716,607 $ 1,752,434
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current Project Liabilities:
Tenant security deposits - Note 2 $ 8,750 $ 8,750
Note payable, current portion - Note 6 4,718 4,324
------------- -------------
Total current project liabilities 13,468 13,074
Long-Term Project Liabilities:
Note payable, less current portion - Note 6 1,462,080 1,466,798
Non-Project Liabilities
Due to related parties - Note 7 2,400 2,400
------------- -------------
Total liabilities 1,477,948 1,482,272
Partners' Capital 238,659 270,162
------------- -------------
Total Liabilities and Partners' Capital $ 1,716,607 $ 1,752,434
============= =============
The accompanying notes are an integral part
of these financial statements
2
YREKA INVESTMENT GROUP
A California Limited Partnership
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000 and 1999
2000 1999
------------- --------------
Project Operating Income:
Gross rent $ 61,426 $ 69,801
Rental assistance 96,308 86,951
Less vacancies (2,462) (1,567)
------------- --------------
Net rent 155,272 155,185
Other project income:
Late charges 245 218
Laundry income 2,292 1,991
Tenant damages 1,866 2,241
Interest income 4,438 4,115
Miscellaneous income 114 -
------------- --------------
Total project operating income 164,227 163,750
------------- --------------
Project Operating Expenses:
Maintenance and operating:
Caretaker 7,384 5,561
Supplies 2,802 4,981
Painting and decorating 665 402
General maintenance and repairs 3,563 2,624
Snow removal 25 (400)
Elevator maintenance - -
Grounds maintenance 1,608 2,204
Services 429 484
Furniture and furnishings replacement 2,578 3,208
Other operating expenses - -
------------- --------------
Total maintenance and operating 19,054 19,064
------------- --------------
Utilities:
Electricity 1,548 1,205
Water 8,228 5,183
Sewer 7,074 6,534
Heating fuel/other 2,983 3,837
Garbage and trash removal 3,434 3,307
------------- --------------
Total utilities 23,267 20,066
------------- --------------
The accompanying notes are an integral part
of these financial statements
3
YREKA INVESTMENT GROUP
A California Limited Partnership
STATEMENTS OF OPERATIONS (CONTINUED)
For the Years Ended December 31, 2000 and 1999
2000 1999
------------- --------------
Project Operating Expenses (Continued):
Administrative:
Manager $ 11,628 $ 11,465
Management fees 17,064 17,712
Accounting/auditing 4,000 3,880
Bookkeeping 864 216
Legal 1,685 -
Advertising 352 931
Telephone 978 1,047
Office supplies 2,547 2,442
Office furniture and equipment 428 300
Training expense 467 231
Health insurance 2,073 1,508
Payroll taxes 1,712 1,712
Workers' compensation insurance 2,297 1,799
Other administrative expenses 938 1,332
------------- --------------
Total administrative 47,033 44,575
------------- --------------
Taxes and Insurance:
Real estate taxes 14,539 14,775
Special assessments - -
Other taxes, fees and permits 905 910
Property insurance 4,174 4,494
Other insurance 493 -
------------- --------------
Total taxes and insurance 20,111 20,179
------------- --------------
Total project operating expenses 109,465 103,884
------------- --------------
The accompanying notes are an integral part
of these financial statements
4
YREKA INVESTMENT GROUP
A California Limited Partnership
STATEMENTS OF OPERATIONS (CONTINUED)
For the Years Ended December 31, 2000 and 1999
2000 1999
------------- --------------
Other Project Income (Expenses)
Interest subsidy - PASS Credit $ 94,672 $ 94,672
Depreciation and amortization (36,856) (36,855)
Interest expense:
USDA/RD 1% interest (33,881) (34,242)
Interest subsidy (94,672) (94,672)
Authorized capital improvements
from USDA/RD reserve (11,832) (6,804)
Authorized capital improvements
from unrestricted cash - (4,864)
------------- --------------
Total other project income (expenses) (82,569) (82,765)
------------- --------------
Non-Project Expenses:
Partnership administration fee 2,400 2,400
Tax administration fee 800 800
------------- --------------
Total non-project expenses 3,200 3,200
------------- --------------
Net loss $ (31,007) $ (26,099)
============= ==============
The accompanying notes are an integral part
of these financial statements
5
YREKA INVESTMENT GROUP
A California Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 2000 and 1999
General Limited
Partner Partner
----------------- -------------------
WNC
California
Ronald D. Housing
Bettencourt Tax Credits Total
--------------- --------------- ---------------
Balance, December 31, 1998 $ 1,781 $ 294,976 $ 296,757
Return on investment - Note 8 (5) (491) (496)
Net loss (261) (25,838) (26,099)
--------------- --------------- ---------------
Balance, December 31, 1999 1,515 268,647 270,162
Return on investment - Note 8 (5) (491) (496)
Net loss (310) (30,697) (31,007)
--------------- --------------- ---------------
Balance, December 31, 2000 $ 1,200 $ 237,459 $ 238,659
=============== =============== ===============
The accompanying notes are an integral part
of these financial statements
6
YREKA INVESTMENT GROUP
A California Limited Partnership
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000 and 1999
Increase (Decrease) in Cash
2000 1999
------------- --------------
Cash Flows From Operating Activities:
Cash received from tenants for rent $ 158,111 $ 155,471
Cash paid to tenants for security deposits - -
Miscellaneous cash received 8,955 8,565
Cash paid to suppliers and employees and
for other restricted cash (111,106) (122,678)
Mortgage interest paid (33,881) (34,242)
Limited partnership tax (800) (800)
------------- --------------
Net cash provided by operating activities 21,279 6,316
------------- --------------
Cash Flows From Investing Activities:
Deposits to the USDA/RD reserve (24,311) (21,622)
Withdrawals from the USDA/RD reserve 15,986 10,426
------------- --------------
Net cash used by investing activities (8,325) (11,196)
------------- --------------
Cash Flows From Financing Activities:
Principal payments on note payable (4,324) (3,963)
Return on investment (496) (496)
------------- --------------
Net cash used by financing activities (4,820) (4,459)
------------- --------------
Increase (decrease) in cash 8,134 (9,339)
Cash, beginning of year 696 10,035
------------- --------------
Cash, end of year $ 8,830 $ 696
============= ==============
The accompanying notes are an integral part
of these financial statements
7
YREKA INVESTMENT GROUP
A California Limited Partnership
STATEMENTS OF CASH FLOWS (CONTINUED)
For the Years Ended December 31, 2000 and 1999
Increase (Decrease) in Cash
2000 1999
------------- --------------
Reconciliation of Net Loss to Net
Cash Provided By Operating Activities:
Net loss $ (31,007) $ (26,099)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 36,856 36,855
Decrease in accounts receivable 2,839 286
Increase in prepaid expenses (108) (66)
Decrease in other restricted cash 12,699 3,290
Decrease in accounts payable - (7,950)
------------- --------------
Net cash provided by operating activities $ 21,279 $ 6,316
============= ==============
The accompanying notes are an integral part
of these financial statements
8
YREKA INVESTMENT GROUP
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Yreka Investment Group, a California Limited Partnership, was
formed in October 1988 for the purpose of constructing and
operating a 36-unit rural rental housing project located in
Yreka, California, known as Siskiyou Valley Apartments. Project
construction began in February 1989 and was completed in
November 1989. Rental operations commenced in November 1989.
The major activities of the Project are governed by the
Partnership agreement and the United States Department of
Agriculture/Rural Development (USDA/RD) pursuant to Sections 515
and 521 of the Housing Act of 1949, as amended, which provide
for interest and rental subsidies, respectively. USDA/RD has
contracted with the Partnership to make rental assistance
payments to the Partnership on behalf of qualified tenants. The
contract terminates upon total disbursement of the assistance
obligation.
The following is a summary of significant accounting policies:
(a) The financial statements are prepared on the accrual
basis of accounting.
(b) The Partnership is not an income tax paying entity
although, as a limited partnership, it is subject to
a limited partnership tax. The net income or loss of
the Partnership passes through to and is reportable
by the partners individually. Therefore, no provision
for income taxes is reflected in these financial
statements.
(c) Property and equipment is stated at cost. Assets are
depreciated over their estimated useful lives using
the straight-line method. The estimated useful lives
range from 5 to 50 years.
(d) Loan acquisition costs and construction period
interest are amortized over 50 years using the
straight-line method.
(e) The Partnership maintains its cash balances in
institutions where they are insured, up to $100,000,
by the Federal Deposit Insurance Corporation (FDIC).
9
YREKA INVESTMENT GROUP
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) The presentation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2: TENANT SECURITY DEPOSITS
Tenant security deposits are maintained in a separate account at
a bank insured by the FDIC.
NOTE 3: TAXES AND INSURANCE RESERVE
A separate bank account has been established to accumulate cash
transfers for the payment of property taxes and insurance.
During 2000 and 1999, $15,900 and 3,300, respectively, of
unrestricted cash was transferred from this interest bearing
account.
NOTE 4: USDA/RD RESERVE
An amendment to the loan agreement with USDA/RD requires cash
transfers to a replacement reserve account each year until
$201,600 has been accumulated. Withdrawals from the reserve
account may be made only with the approval and countersignature
of the USDA/RD.
10
YREKA INVESTMENT GROUP
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 4: USDA/RD RESERVE (CONTINUED)
Changes in the reserve for the years ended December
31, 2000 and 1999, are as follows:
Balance, December 31, 1998 $ 113,617
Deposits 18,000
Interest earned 3,622
Withdrawals (6,804)
Interest withdrawn (3,622)
----------------
Balance, December 31, 1999 124,813
Deposits 20,160
Interest earned 4,151
Withdrawals (11,832)
Interest withdrawn (4,151)
Bank charges (3)
----------------
Balance, December 31, 2000 $ 133,138
================
This account was underfunded at December 31, 2000 by $470. The
underfunding of this account was corrected in 2001.
NOTE 5: PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2000 and 1999, was
comprised of the following:
2000 1999
---------------- ----------------
Land $ 157,378 $ 157,378
Building 1,786,004 1,786,004
Furniture and equipment 100,405 100,405
---------------- ----------------
2,043,787 2,043,787
Less accumulated
depreciation and
amortization 490,970 454,114
---------------- ----------------
Total property and
equipment $ 1,552,817 $ 1,589,673
================ ================
11
YREKA INVESTMENT GROUP
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 6: NOTE PAYABLE
The Partnership has a note payable to USDA/RD in monthly
installments of $11,073 including interest at 8.75% per annum,
due January 1, 2039. The note is secured by a deed of trust on
the apartment project.
The Partnership has entered into an interest subsidy agreement
with USDA/RD. USDA/RD provides a monthly interest subsidy in the
amount of $7,889, which reduces the effective interest rate to
approximately 1% over the term of the loan. The subsidy is
credited to subsidy income, and interest at 8.75% is included in
interest expense. The USDA/RD regulatory agreement provides for
USDA/RD to establish and control the allowable rents.
Principal payments for the succeeding five years and thereafter
are as follows:
Year Ending December 31:
------------------------
2001 $ 4,718
2002 5,148
2003 5,617
2004 6,128
2005 6,687
Thereafter 1,438,500
-----------------
Total $ 1,466,798
=================
NOTE 7: RELATED PARTY TRANSACTIONS
Ronald Bettencourt, general partner of the Project, is also a
shareholder in The CBM Group, Inc. The CBM Group, Inc. provides
management services to the Project. Other related entities include CBM
Diversified and Consolidated Building Maintenance, divisions of The CBM
Group, Inc., and Atlantic Vending Services, a division of Capital
Resources, Inc. The general partner of the Project is also a
shareholder in Capital Resources, Inc. Atlantic Vending Services is
responsible for laundry money collection and laundry facility
maintenance in accordance with USDA/RD procedures. During 2000, 50% of
total collections from laundry machines (amounting to $2,292 from
maintenance and operations were paid) were paid to Atlantic Vending
Services. Consolidated Building Maintenance was formed to provide
maintenance services with prior USDA/RD approval. The general partner
of the Project is also a partner in CBM Management Group.
12
YREKA INVESTMENT GROUP
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 7: RELATED PARTY TRANSACTIONS (CONTINUED)
Partnership Administration Fee
In accordance with the Partnership agreement, the Partnership
accrued, as a non-project expense, $2,400 for each of the years
ended December 31, 2000 and 1999, payable to the general partner
for services rendered in connection with the administration of
the business and affairs of the Partnership. At December 31,
2000 and 1999, $2,400 was payable under this agreement.
Tax Administration Fee
During 2000 and 1999, a portion of the 1999 and 1998 earned
return on investment, $800 each year, was used to pay a
non-project tax administration fee to The CBM Group, Inc.
Management Fees
Management fees paid to The CBM Group, Inc. during 2000 and 1999
totaled $17,064 and $17,712, respectively. The Project paid The
CBM Group, Inc. a ten cent per copy fee for bulk copies of forms
and $864 for automation services. During 2000, The Project paid
$408 and $988 to CBM Diversified, a division of The CBM Group,
Inc., for credit checking fees and property tax consulting fees,
respectively.
Insurance Premiums
The general partner also owns a less than 5% interest in the
surety company which provides the insurance coverage for the
Project. Insurance premiums paid to the surety company during
2000 and 1999, totaled $4,282 and $4,078.
NOTE 8: PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS
Profits and losses, as adjusted for certain provisions of the
Partnership agreement, are allocated 1% to the general partner
and 99% to the limited partner. Under USDA/RD regulations,
distributions to partners may be made from project operations
only to the extent funds exceed the required contributions to
the cash reserve account. Annual distributions are limited to 8%
of the Partnership's initial capital investment. If the return
on investment is not paid in a given year, any unpaid portion
may be carried forward for one year and paid if earned. During
2000 and 1999, a portion of the 1999 and 1998 earned return on
investment, $3,200 each year, was used to pay non-project
expenses and liabilities.
13
YREKA INVESTMENT GROUP
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 9: TAXABLE LOSS
A reconciliation of the financial statement net loss to the taxable
loss of the partnership at December 31, 2000 and 1999, is as follows:
2000 1999
---------------- ----------------
Financial statement net loss $ (31,007) $ (26,099)
Adjustments:
Excess of tax depreciation
and amortization over financial
statement depreciation and
amortization (29,609) (30,628)
Expenses reported on financial
statements in excess of tax
return expenses - 7,950
---------------- ----------------
Taxable loss $ (60,616) $ (48,777)
================ ================
NOTE 10: CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Project's operations are concentrated in the multifamily
real estate market. In addition, the Project operates in a
heavily regulated environment. The operations of the Project are
subject to the administrative directives, rules and regulations
of federal, state and local regulatory agencies, including, but
not limited to, USDA/RD. Such administrative directives, rules
and regulations are subject to change by an act of congress or
an administrative change mandated by USDA/RD. Such changes may
occur with little notice or inadequate funding to pay for the
related cost, including the additional administrative burden, to
comply with a change.
14