FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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: 0-21494
WNC HOUSING TAX CREDIT FUND III, L.P.
California 33-0463432
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 622-5565
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- -------------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes No X
--------- --------------
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 2002
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets,
September 30, 2002 and March 31, 2002............................3
Statements of Operations
For the three and six months ended September 30, 2002 and 2001...4
Statement of Partners' Equity (Deficit)
For the six months ended September 30, 2002 .....................5
Statements of Cash Flows
For the six months ended September 30, 2002 and 2001.............6
Notes to Financial Statements.....................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................12
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......14
Item 4. Procedures and Controls.........................................14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................14
Item 4. Submission of Matters to a Vote of Security Holders..............14
Item 5. Other Information................................................14
Item 6. Exhibits and Reports on Form 8-K.................................14
Signatures...............................................................15
Certifications...........................................................16
2
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 2002 March 31, 2002
----------------------- ------------------
(unaudited)
ASSETS
Cash and cash equivalents $ 271,251 $ 294,946
Investments in limited partnerships, net (Note 2) 1,656,338 1,816,995
----------------------- ------------------
$ 1,927,589 $ 2,111,941
======================= ==================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accrued fees and expenses due to
General Partner and affiliates (Note 3) 2,261,273 2,122,532
----------------------- ------------------
Total liabilities 2,261,273 2,122,532
----------------------- ------------------
Commitments and contingencies
Partners' equity (deficit):
General Partner (43,858) (40,627)
Limited Partners (15,000 units authorized and 15,000
units issued and outstanding) (289,826) 30,036
----------------------- ------------------
Total partners' deficit (333,684) (10,591)
----------------------- ------------------
$ 1,927,589 $ 2,111,941
======================= ==================
See accompanying notes to financial statements
3
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 2002 and 2001
(unaudited)
2002 2002 2001 2001
Three months Six months Three months Six months
------------------- ------------------- ----------------- -----------------
Interest income $ 1,120 $ 2,298 $ 2,491 $ 5,484
Distribution income 6,664 6,664 17,151 17,151
------------------- ------------------- ----------------- -----------------
7,784 8,962 19,642 22,635
------------------- ------------------- ----------------- -----------------
Operating expenses:
Amortization (Note 2) 7,235 14,470 7,235 14,470
Asset management fees (Note 3) 74,757 149,514 74,747 149,514
Legal and accounting 14,975 20,950 16,553 21,057
Other 916 4,113 931 4,391
------------------- ------------------- ----------------- -----------------
Total operating expenses 97,883 189,047 99,466 189,432
------------------- ------------------- ----------------- -----------------
Loss from operations (90,099) (180,085) (79,824) (166,797)
Equity in losses of
limited partnerships (Note 2) (74,503) (143,008) (203,073) (325,158)
------------------- ------------------- ----------------- -----------------
Net loss $ (164,602) $ (323,093) $ (282,897) $ (491,955)
=================== =================== ================= =================
Net loss allocated to:
General Partner $ (1,646) $ (3,231) $ (2,829) $ (4,920)
=================== =================== ================= =================
Limited Partners $ (162,956) $ (319,862) $ (280,068) $ (487,035)
=================== =================== ================= =================
Net loss per limited
partner unit $ (11) $ (21) $ (19) $ (33)
=================== =================== ================= =================
Outstanding weighted limited
partner units 15,000 15,000 15,000 15,000
=================== =================== ================= =================
See accompanying notes to financial statements
4
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For the Six Months Ended September 30, 2002
(unaudited)
General Limited
Partner Partners Total
--------------- ---------------- ------------------
Partners' equity (deficit) at March 31, 2002 $ (40,627) $ 30,036 $ (10,591)
Net loss (3,231) (319,862) (323,093)
--------------- ---------------- ------------------
Partners' deficit at September 30, 2002 $ (43,858) $ (289,826) $ (333,684)
=============== ================ ==================
See accompanying notes to financial statements
5
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2002 and 2001
(unaudited)
2002 2001
-------------- ---------------
Cash flows from operating activities:
Net loss $ (323,093) $ (491,955)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 14,470 14,470
Equity in losses of limited partnerships 143,008 325,158
Change in accrued fees and expenses due to
General Partner and affiliates 138,741 121,350
-------------- ---------------
Net cash used in operating activities (26,874) (30,977)
-------------- ---------------
Cash flows from investing activities:
Investments in limited partnerships - (5,000)
Distributions from limited partnerships 3,179 14,228
-------------- ---------------
Net cash provided by investing activities 3,179 9,228
-------------- ---------------
Net decrease in cash and cash equivalents (23,695) (21,749)
Cash and cash equivalents, beginning of period 294,946 310,526
-------------- ---------------
Cash and cash equivalents, end of period $ 271,251 $ 288,777
============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Taxes paid $ 800 $ 800
============== ===============
See accompanying notes to financial statements
6
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2002
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
General
- -------
The accompanying condensed unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act
of 1934. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
months ended September 30, 2002 are not necessarily indicative of the results
that may be expected for the fiscal year ending March 31, 2003. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-K for the fiscal year ended March 31,
2002.
Organization
- ------------
WNC Housing Tax Credit Fund III, L.P., a California Limited Partnership (the
"Partnership"), was formed on May 10, 1991 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 credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner of the Partnership is WNC Tax Credit Partners, L.P. (the
"General Partner"). WNC & Associates, Inc. ("Associates") and Wilfred N. Cooper,
Sr. are the general partners of the General Partner. The chairman and president
own substantially all of the outstanding stock of Associates. The business of
the Partnership is conducted primarily through Associates as the General Partner
and the Partnership has no employees of their own.
The Partnership shall continue in full force and effect until December 31, 2050
unless terminated prior to that date pursuant to the partnership agreement and
law.
The partnership agreement authorized the sale of up to 15,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on December 31, 1993, at
which time 15,000 Units representing subscriptions in the amount of $15,000,000
had been accepted. The General Partner has 1% interest in operating profits and
losses, taxable income and losses, cash available for distribution from the
Partnership and tax credits. The limited partners will be allocated the
remaining 99% of these items in proportion to their respective investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partner has received proceeds
equal to its capital contribution and a subordinated disposition fee (as
described in Note 3) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
7
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2002
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Risks and Uncertainties
- -----------------------
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low-income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships would 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 Limited Local
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's
decisions will be made by the General Partner.
Method of Accounting for Investments in Limited Partnerships
- ------------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership's are consistent with those of the Partnership. Costs incurred by
the Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (Note 2).
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital and amounted to $2,250,000 at the end of all
periods presented.
8
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2002
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities 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 maturity
of three months or less when purchased to be cash equivalents. As of September
30, 2002 and March 31, 2002, the Partnership had no cash equivalents.
Concentration of Credit Risk
- ----------------------------
At September 30, 2002, the Partnership maintained a cash balance at a certain
financial institution in excess of the maximum federally insured amounts.
Net Loss Per Limited Partner Unit
- ---------------------------------
Net loss per limited partner unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
Reporting Comprehensive Income
- ------------------------------
The Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income established standards for the reporting and display of
comprehensive income (loss) and its components in a full set of general-purpose
financial statements. The Partnership had no items of other comprehensive income
for all periods presented, as defined by SFAS No. 130.
New Accounting Pronouncement
- ----------------------------
In October 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), which addresses accounting and financial reporting for the impairment or
disposal of long-lived assets. SFAS 144 is effective for fiscal years beginning
after December 15, 2001, and generally, is to be applied prospectively. SFAS 144
is not expected to have a material impact on the Partnership's financial
position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value when the liability is incurred. SFAS No.
146 is effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. The Company does not
expect the adoption of this statement to have a material effect on the Company's
financial statements.
9
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2002
(unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of the periods presented, the Partnership has acquired limited partnership
interests in 48 Local Limited Partnerships, each of which owns one Housing
Complex consisting of an aggregate of 1,685 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.
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.
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the periods presented below:
For the Six For the Year
Months Ended Ended
September 30, 2002 March 31, 2002
--------------------- ------------------
Investments per balance sheet, beginning of period $ 1,816,995 $ 2,387,646
Capital contribution - 5,000
Capital contribution payable - (50,818)
Equity in losses of limited partnerships (143,008) (495,399)
Distributions received from limited partnerships (3,179) (3,512)
Amortization of capitalized acquisition fees and
costs (14,470) (25,922)
--------------------- ------------------
Investments per balance sheet, end of period $ 1,656,338 $ 1,816,995
===================== ==================
Selected financial information for the six months ended September 30, 2002 and
2001 from the unaudited combined condensed financial statements of the limited
partnerships in which the Partnership has invested as follows:
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2002 2001
---------------------- ------------------
Revenues $ 3,501,000 $ 3,308,000
---------------------- ------------------
Expenses:
Operating expenses 2,291,000 2,176,000
Interest expense 929,000 892,000
Depreciation and amortization 955,000 951,000
---------------------- ------------------
Total expenses 4,175,000 4,019,000
---------------------- ------------------
Net loss $ (674,000) $ (711,000)
====================== ==================
$ (668,000) $ (704,000)
Net loss allocable to the Partnership
====================== ==================
$ (143,000) $ (325,000)
Net loss recorded by the Partnership
====================== ==================
10
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2002
(unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- ------------------------------------------------------
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 may be required to sustain the operations of
such Local Limited Partnerships. If additional capital contributions are not
made when they are required, the Partnership's investment in certain of such
Local Limited Partnerships could be impaired and the loss and recapture of the
related tax credits could occur.
Fox Lake Limited Partnership is a 12-unit senior property financed by Rural
Development located in Fox Lake, Wisconsin. The property is at 50% occupancy.
The general partner is paying operating deficits by deferring his management
fee. The operating deficit guarantee period has expired.
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of the Partnership Agreement the Partnership has paid or is
obligated to the General Partner or its affiliates for the following fees:
(a) Annual Asset Management Fee. An annual asset management fee equal to 0.5%
of the invested assets of the Local Limited Partnerships. Invested Assets
means the sum of the Partnership's Investment in Local Limited Partnership
Interests and the Partnership's allocable share of the amount of the
mortgage loans on and other debts related to, the Apartment Complexes owned
by such Local Limited Partnerships. Fees of $149,514 were incurred during
each of the six months ended September 30, 2002 and 2001, respectively. The
Partnership paid the General Partner $22,500 and $28,501 of those fees
during the six months ended September 30, 2002 and 2001, respectively.
(b) Subordinated disposition fee. A subordinated disposition fee in an amount
equal to 1% of the sales price of real estate sold. Payment of this fee is
subordinated to the limited partners receiving a preferred return of 16%
through December 31, 2002 and 6% thereafter (as defined in the Partnership
Agreement) and is payable only if the General Partner or its affiliates
render services in the sales effort.
The accrued fees and expenses due to General Partner and affiliates consisted of
the following at:
September 30, 2002 March 31, 2002
------------------ --------------
Asset management fee payable $ 2,247,869 $ 2,120,855
Advances from WNC & Associates 13,404 1,677
---------------------- -------------------
$ 2,261,273 $ 2,122,532
====================== ===================
The General Partners do not anticipate that the accrued fees will be paid until
such time as capital reserves are in excess of the future foreseeable working
capital requirements.
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.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
With the exception of the discussion regarding historical information,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other discussions elsewhere in this Form 10-Q contain
forward-looking statements. Such statements are based on current expectations
subject to uncertainties and other factors, which may involve known and unknown
risks that could cause actual results of operations to differ materially from
those projected or implied. Further, certain forward-looking statements are
based upon assumptions about future events, which may not prove to be accurate.
Risks and uncertainties inherent in forward-looking statements include, but are
not limited to, our future cash flows and ability to obtain sufficient
financing, level of operating expenses, conditions in the low-income housing tax
credit property market and the economy in general, as well as legal proceedings.
Historical results are not necessarily indicative of the operating results for
any future period.
Subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by
cautionary statements in this Form 10-Q and in other reports we filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this filing.
The following discussion and analysis compares the results of operations for the
three and six months ended September 30, 2002 and 2001, and should be read in
conjunction with the condensed financial statements and accompanying notes
included within this report.
Financial Condition
The Partnership's assets at September 30, 2002 consisted primarily of $271,000
in cash and aggregate investments in the forty-eight Local Limited Partnerships
of $1,656,000. Liabilities at September 30, 2002 primarily consisted of
$2,248,000 of accrued asset management fees due to the General Partner and
affiliates.
Results of Operations
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. The Partnership's net loss for the three months ended September 30,
2002 was $(165,000), reflecting a decrease of $118,000 from the net loss for the
three months ended September 30, 2001 of $(283,000). This decrease primarily was
due to equity in losses of limited partnerships, which decreased by $128,000 to
$(75,000), for the three months ended September 30, 2002 compared to the
$(203,000) for the three months ended September 30, 2001. This decrease was a
result of the Partnership not recognizing certain losses of the Local Limited
Partnerships. The investments in such Local Limited Partnerships had reached $0
at September 30, 2002. Since the Partnership's liability with respect to its
investments is limited, losses in excess of investments are not recognized. The
decrease in equity in losses of limited partnerships was offset by an increase
in loss from operations of $10,000, from $(80,000) for the three months ended
September 30, 2001 to $(90,000) for the three months ended September 30, 2002,
caused primarily by a decrease in total income of $12,000 and a decrease in
comparable accounting and other expenses by $2,000 for the three months ended
September 30, 2002 compared to the three months ended September 30, 2001.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, continued
Six Months Ended September 30, 2002 Compared to Six Months Ended September 30,
2001. The Partnership's net loss for the six months ended September 30, 2002 was
$(323,000), reflecting a decrease of $169,000 from the net loss for the six
months ended September 30, 2001 of $(492,000). This decrease primarily was due
to equity in losses of limited partnerships, which decreased by $182,000 to
$(143,000), for the six months ended September 30, 2002 compared to the
$(325,000) for the six months ended September 30, 2001. This decrease was a
result of the Partnership not recognizing certain losses of the Local Limited
Partnerships. The investments in such Local Limited Partnerships had reached $0
at September 30, 2002. Since the Partnership's liability with respect to its
investments is limited, losses in excess of investments are not recognized. In
addition, there was a decrease in total income of $14,000 for the six months
ended September 30, 2002 compared to the six months ended September 30, 2001.
Cash Flows
Six Months Ended September 30, 2002 Compared to Six Months Ended September 30,
2001. Net cash and cash equivalents decreased by $(24,000) for the six months
ended September 30, 2002, compared to a $(22,000) decrease for the six months
ended September 30, 2001 reflecting a change of $(2,000). The change was
primarily due to a $(4,000) decrease in net cash used in operating activities to
$(27,000) for the six months ended September 30, 2002, compared to the $(31,000)
net cash used in operating activities for the six months ended September 30,
2001. In addition, cash provided by investing activities decreased by $6,000 to
$3,000 for the six months ended September 30, 2002 compared to $9,000 for the
six months ended September 30, 2001.
During the six months ended September 30, 2002, accrued asset management fees
payable and advances due to the General Partner increased by $139,000. The
General Partner does not anticipate that the accrued fees and advances will be
paid until such time as capital reserves are in excess of foreseeable working
capital requirements of the partnership.
13
Item 3: Quantitative and Qualitative Disclosures About Market Risks
NOT APPLICABLE
Item 4. Procedures and Controls
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation
of the Company's disclosure controls and procedures pursuant to Exchange
Act Rule 13a- 14. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective. There were no significant changes in
the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
The Consent Solicitation Statement dated August 15, 2002 was first sent to
the Limited Partners on or about August 15, 2002.
The General Partner has proposed that the Partnership cease reproduction
and mailing of quarterly and annual financial statements to the Limited
Partners, to reduce the expenses incurred by the Partnership. The
Partnership will continue to prepare quarterly and annual financial
statements so long as it is required to do so under the Securities and
Exchange Commission Act of 1934 and submit them to the Securities and
Exchange Commission. All votes were to be returned to the General Partner
by October 15, 2002 to be counted. The proposal was approved by the Limited
Partners and the results of the vote were 8,558 for the proposal, 1,115
against the proposal, and 108 abstentions.
Item 5. Other Information
Wilfred N. Cooper, Jr. has assumed the role of Chief Executive Officer of
WNC & Associates. Wilfred N. Cooper, Sr. who previously held the role of
Chief Executive Officer remains the Chairman of The Board.
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K.
--------------------
1. NONE
(b) Exhibits.
---------
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adapted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
14
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND III, L.P.
By: WNC Tax Credit Partners, L.P., General Partner of the Registrant
By: WNC & Associates, Inc., General Partner of
WNC Housing Tax Credit Fund III, L.P.
By: /s/ Wilfred N. Cooper, Jr.
----- ----------------------
Wilfred N. Cooper, Jr.
President and Chief Executive Officer of WNC & Associates, Inc.
Date: November 13, 2002
By: /s/ Thomas J. Riha
-------------------
Thomas J. Riha
Vice President-Chief Financial Officer of WNC & Associates, Inc.
Date: November 13, 2002
15
CERTIFICATIONS
I, Wilfred N. Cooper, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX
CREDITS FUND III, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Wilfred N. Cooper, Jr.
--------------------------
[Signature]
President and Chief Executive Officer of WNC & Associates, Inc.
16
CERTIFICATIONS
I, Thomas J. Riha, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX
CREDITS FUND III, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Thomas J. Riha
------------------
[Signature]
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
17