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: 0-20057
WNC HOUSING TAX CREDIT FUND II, L.P.
California 33-0391979
(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
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 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 II, 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' 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.........................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk...15
Item 4. Procedures and Controls.....................................15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................15
Item 5. Other Information............................................15
Item 6. Exhibits and Reports on Form 8-K.............................15
Signatures ..........................................................16
Certifications.......................................................17
2
WNC HOUSING TAX CREDIT FUND II, L.P.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 2002 March 31, 2002
---------------------- ----------------------
(unaudited)
ASSETS
Cash and cash equivalents $ 112,973 $ 127,554
Investments in limited partnerships, net (Note 2) 390,292 418,246
---------------------- ----------------------
$ 503,265 $ 545,800
====================== ======================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accrued fees and expenses due to
General Partner and affiliates (Note 3) $ 1,539,401 $ 1,473,564
---------------------- ----------------------
Partners' deficit:
General Partner (69,904) (68,820)
Limited Partners (12,000 units authorized and 7,000
units issued and outstanding) (966,232) (858,944)
---------------------- ----------------------
Total partners' deficit (1,036,136) (927,764)
---------------------- ----------------------
$ 503,265 $ 545,800
====================== ======================
See accompanying notes to financial statements
3
WNC HOUSING TAX CREDIT FUND II, 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 Six Three Six
Months Months Months Months
------------------ ------------------- ------------------ ------------------
Interest income $ 471 $ 1,026 $ 790 $ 1,886
Distribution income 6,547 6,547 - -
------------------ ------------------- ------------------ ------------------
7,018 7,573 790 1,886
------------------ ------------------- ------------------ ------------------
Operating expenses:
Amortization (Note 2) 2,896 5,792 17,316 20,212
Asset management fees (Note 3) 36,226 72,452 36,225 72,451
Legal and accounting 11,820 15,498 12,922 14,626
Other - 1,777 8 1,783
------------------ ------------------- ------------------ ------------------
Total operating expenses 50,942 95,519 66,471 109,072
------------------ ------------------- ------------------ ------------------
Loss from operations (43,924) (87,946) (65,681) (107,186)
Equity in losses of
limited partnerships (Note 2) (11,373) (20,426) (19,264) (36,452)
------------------ ------------------- ------------------ ------------------
Net loss $ (55,297) $ (108,372) $ (84,945) $ (143,638)
================== =================== ================== ==================
Net loss allocated to:
General Partner $ (553) $ (1,084) $ (849) $ (1,436)
================== =================== ================== ==================
Limited Partners $ (54,744) $ (107,288) $ (84,096) $ (142,202)
================== =================== ================== ==================
Net loss per weighted limited
partner unit $ (8) $ (15) $ (12) $ (20)
================== =================== ================== ==================
Outstanding weighted limited
partner units 7,000 7,000 7,000 7,000
================== =================== ================== ==================
See accompanying notes to financial statements
4
WNC HOUSING TAX CREDIT FUND II, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' DEFICIT
For the Six Months Ended September 30, 2002
(unaudited)
General Limited
Partner Partners Total
------------------- ---------------- --------------
Partners' deficit at March 31, 2002 $ (68,820) $ (858,944) $ (927,764)
Net loss (1,084) (107,288) (108,372)
------------------- ---------------- --------------
Partners' deficit at September 30, 2002 $ (69,904) $ (966,232) $ (1,036,136)
=================== ================ ==============
See accompanying notes to financial statements
5
WNC HOUSING TAX CREDIT FUND II, 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 $ (108,372) $ (143,638)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in losses of limited partnerships 20,426 36,452
Amortization 5,792 20,212
Change in accrued fees and expenses due to
General Partner and affiliates 65,837 64,520
-------------------- ------------------
Net cash used in operating activities (16,317) (22,454)
-------------------- ------------------
Cash flows from investing activities:
Distributions from limited partnerships 1,736 13,941
-------------------- ------------------
Net decrease in cash and cash equivalents (14,581) (8,513)
-------------------- ------------------
Cash and cash equivalents, beginning of period 127,554 136,626
-------------------- ------------------
Cash and cash equivalents, end of period $ 112,973 $ 128,113
==================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Tax Paid $ 800 $ 800
==================== ==================
See accompanying notes to financial statements
6
WNC HOUSING TAX CREDIT FUND II, 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 II, L.P., a California Limited Partnership (the
"Partnership"), was formed on January 19, 1990 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
multifamily 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. ("Associates") and Wilfred N. Cooper, Sr. are the general
partners of the Partnership (the "General Partners"). The chairman and president
own substantially all of the outstanding stock of Associates. The business of
the Partnership is conducted primarily through the General Partners as the
Partnership has no employees of its own.
The Partnership shall continue to be in full force and effect until December 31,
2045 unless terminated prior to that date pursuant to the partnership agreement
or law.
The Partnership Agreement authorized the sale of up to 12,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on December 31, 1992, at
which time 7,000 Units representing subscriptions in the amount of $7,000,000
had been accepted. The General Partner has 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 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 95% to the limited partners (in proportion to their
respective investments) and 5% to the General Partner.
7
WNC HOUSING TAX CREDIT FUND II, 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
- --------------------------------------------------------------
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 Partner.
Method of Accounting for Investments in Limited Partnerships
- ------------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (see Note 2).
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 $1,036,840 at the end of all
periods presented.
8
WNC HOUSING TAX CREDIT FUND II, 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 accepted 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
September 30, 2002 and March 31, 2002, the Partnership had no cash equivalents.
Concentration of Credit Risk
- ----------------------------
At September 30, 2002, the Partnership maintained cash balances at certain
financial institutions in excess of the federally insured maximum.
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 the periods presented, as defined by SFAS No. 130.
New Accounting Pronouncements
- -----------------------------
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 II, 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 had acquired limited partnership
interests in twenty-seven Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 784 apartment units. The
respective general partners of the Local Limited Partnerships manage the
day-to-day operations of the entities. Significant Local Limited Partnership's
business decisions, as defined, require the approval of 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 would be recognized as income.
The following is a summary of the equity method activity of the investments in
Local Limited Partnerships for the periods presented below:
For the Six Months For the Year
Ended Ended
September 30, 2002 March 31, 2002
---------------------- ------------------
Investments per balance sheet, beginning of period $ 418,246 $ 622,522
Equity in losses of limited partnerships (20,426) (188,049)
Distributions received (1,736) (7,886)
Amortization of capitalized acquisition fees and costs (5,792) (8,341)
---------------------- ------------------
Investments per balance sheet, end of period $ 390,292 $ 418,246
====================== ==================
10
WNC HOUSING TAX CREDIT FUND II, 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
-------------------------------------------------------
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:
2002 2001
---- ----
Revenues $ 1,557,000 $ 1,550,000
------------------- -----------------
Expenses:
Interest expense 339,000 348,000
Depreciation & amortization 418,000 426,000
Operating expenses 1,111,000 1,080,000
------------------- -----------------
Total expenses 1,868,000 1,854,000
------------------- -----------------
Net loss $ (311,000) $ (304,000)
=================== =================
Net loss allocable to the Partnership $ (307,000) $ (301,000)
=================== =================
Net loss recorded by the Partnership $ (20,000) $ (36,000)
=================== =================
Certain Local Limited Partnerships incurred significant operating losses and
have working capital deficiencies. In the event these Local Limited Partnerships
continue to incur significant operating losses, additional capital contributions
by the Partnership and/or the Local General Partner may be required to sustain
the operations of such Local Limited Partnerships. If additional capital
contributions are not made when they are required, the Partnership's investment
in certain of such Local Limited Partnerships could be impaired, 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 Partner or its affiliates for the following items:
(a) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.5% of invested assets (the sum of the Partnership's Investment
in Local Limited Partnership Interests and the Partnership's allocable
share of the amount of the mortgage loans on and other debts related to,
the Housing Complexes owned by such Local Limited Partnerships). Fees of
$72,452 and $72,451 were incurred during the six months ended September 30,
2002 and 2001, respectively. The partnership paid $5,250 to the General
Partner or its affiliates for those fees during the six months ended
September 30, 2002 and $4,916 during the six months ended September 30,
2001.
(b) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% the sales price of any real estate sold. Payment of this fee is
subordinated to the limited partners who receive a 6% preferred return (as
defined in the Partnership Agreement) and is payable only if the General
Partner or its affiliates render services in the sales effort.
11
WNC HOUSING TAX CREDIT FUND II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2002
(unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
The accrued fees and expenses due to General Partner and affiliates consists of
the following at:
September 30, 2002 March 31, 2002
----------------------- -----------------------
Asset management fee payable $ 1,539,401 $ 1,472,199
Advances from WNC - 1,365
----------------------- -----------------------
Total accrued fees and expenses due to
General Partner and affiliates $ 1,539,401 $ 1,473,564
======================= =======================
The General Partner does not anticipate that these accrued fees will be paid in
full 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.
12
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 Condensed Financial Statements and the Notes thereto
included elsewhere in this filing.
The following discussion and analysis compares the results of operations for the
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 of $113,000 in cash and
aggregate investments in the twenty-seven Local Limited Partnerships of
$390,000. Liabilities at September 30, 2002 consisted of $1,539,000 of accrued
fees and expenses 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 $(55,000), reflecting a decrease of $30,000 from the net loss for the
three months ended September 30, 2001 of $(85,000). The decrease in net loss is
due to a decrease in equity in losses of limited partnerships of $8,000 to
$(11,000) for the three months ended September 30, 2002 from approximately
$(19,000) for the three months ended September 30, 2001. The decrease in equity
in losses of limited partnerships is due to 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
Partnerships liability with respect to its investments is limited, losses in
excess of investments are not recognized. Along with the decrease in equity in
losses of limited partnerships, loss from operations decreased by $22,000 from
$(66,000) for the three months ended September 30, 2001, to $(44,000) for the
three months ended September 30, 2002 due to an increase in total income of
$6,000 and a decrease in operating expenses of $16,000, which arose primarily
due to a nonrecurring write off of the basis in syndication fees of Lake View
and Idalou Manor in 2001.
13
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
$(108,000), reflecting a decrease of $36,000 from the net loss for the six
months ended September 30, 2001 of $(144,000). The decrease in net loss is due
to a decrease in equity in losses of limited partnerships of $16,000 to
$(20,000) for the six months ended September 30, 2002 from approximately
$(36,000) for the six months ended September 30, 2001. The decrease in equity in
losses of limited partnerships is due to 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 Partnerships
liability with respect to its investments is limited, losses in excess of
investments are not recognized. Along with the decrease in equity in losses of
limited partnerships, loss from operations decreased by $19,000 from $(107,000)
for the three months ended September 30, 2001, to $(88,000) for the three months
ended September 30, 2002 due to an increased in total income by $6,000 and a
decrease in operating expenses of $13,000, which arose primarily due to a
nonrecurring write off of the basis in syndication fees of Lake View and Idalou
Manor in 2001.
Cash Flows
Six Months Ended September 30, 2002 Compared to Six Months Ended September 30,
2001. Net cash used during the six months ended September 30, 2002 was $15,000,
reflecting an increase of approximately $(6,000), compared to net cash used for
the six months ended September 30, 2001 of $9,000. The change is due to a
decrease in distributions of $(12,000) and offset by a decrease in cash used for
operating activities of $6,000.
During the six months ended September 30, 2002, accrued payables, which
consisted primarily of asset management fees due to the General Partner,
increased by $66,000. The General Partner does not anticipate that these accrued
fees will be paid until such time as capital reserves are in excess of future
foreseeable working capital requirements of the partnership.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 2002, to be sufficient to meet all currently foreseeable
future cash requirements.
14
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 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.
15
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 II, L.P.
By: WNC Financial Group, L.P. General Partner of the Registrant
By: WNC & Associates, Inc. General Partner of WNC Housing
Tax Credit Fund II, L.P.
By: /s/ Wilfred N. Cooper, Jr.
- ------------------------------
Wilfred N. Cooper, Jr.
President and Chief Executive Officer of WNC & Associates, Inc.
Date: November 14, 2002
By: /s/ Thomas J. Riha
- -----------------------
Thomas J. Riha
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: November 14, 2002
16
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 II, 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 14, 2002
/s/ Wilfred N. Cooper, Jr.
--------------------------
[Signature]
Chairman and Chief Executive Officer of WNC & Associates, Inc.
CERTIFICATIONS*
I, Thomas J. Riha, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX
CREDITS FUND II, 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:
(d) 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;
(e) 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
(f) 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):
(c) 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
(d) 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 14, 2002
/s/ Thomas J. Riha
-------------------
[Signature]
Vice-President - Chief Financial Officer of WNC & Associates, Inc.