Back to GetFilings.com
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, 2003
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|
Indicate by check mark whether the registrant is an accelerated filer.
Yes No X
----------- ----------------
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
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"). 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 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 Complexes") 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. Each
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, dated September 15, 1988 (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, 2003, the Partnership had invested in eleven Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
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.
3
Certain Risks and Uncertainties
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low Income Housing Credit rules are extremely complicated. Noncompliance
with these rules results in the loss of future Low Income Housing Credits and
the fractional recapture of Low Income Housing Credits already taken. In most
cases the annual amount of Low Income Housing Credits that an individual can use
is limited to the tax liability due on the person's last $25,000 of taxable
income. The Local Limited Partnerships may be unable to sell the Housing
Complexes at a profit. Accordingly, the Partnership may be unable to distribute
any cash to its investors. Low Income Housing Credits may be the only benefit
from an investment in the Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships.
Such limited diversity means that the results of operation of each single
Housing Complex will have a greater impact on the Partnership. With limited
diversity, poor performance of one Housing Complex could impair the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If
foreclosure were to occur during the first 15 years, the loss of any remaining
future Low Income Housing Credits, a fractional recapture of prior Low Income
Housing Credits, and a loss of the Partnership's investment in the Housing
Complex would occur. The Partnership is a limited partner or non-managing member
of each Local Limited Partnership. Accordingly, the Partnership will have very
limited rights with respect to management of the Local Limited Partnerships. The
Partnership will rely totally on the Local General Partners. Neither the
Partnership's investments in Local Limited Partnerships, nor the Local Limited
Partnerships' investments in Housing Complexes, are 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 interests
in Local Limited Partnerships; limitations on removal of Local General Partners;
limitations on subsidy programs; and possible changes in applicable regulations.
Uninsured casualties could result in loss of property and Low Income Housing
Credits and recapture of Low Income Housing Credits previously taken. The value
of real estate is subject to risks from fluctuating economic conditions,
including employment rates, inflation, tax, environmental, land use and zoning
policies, supply and demand of similar properties, and neighborhood conditions,
among others.
The ability of Limited Partners to claim tax losses from the Partnership is
limited. The IRS may audit the Partnership or a Local Limited Partnership and
challenge the tax treatment of tax items. The amount of Low Income Housing
Credits and tax losses allocable to the investors could be reduced if the IRS
were successful in such a challenge. The alternative minimum tax could reduce
tax benefits from an investment in the Partnership. Changes in tax laws could
also impact the tax benefits from an investment in the Partnership and/or the
value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Investors may
be unable to sell their Units except at a discount and should consider their
Units to be a long-term investment. Individual investors will have no recourse
if they disagree with actions authorized by a vote of the majority of Limited
Partners.
Exit Strategy
The IRS compliance period for low-income housing tax credit properties is
generally 15 years from occupancy following construction or rehabilitation
completion. WNC was one of the first in the industry to offer investments using
the tax credit. Now these very first programs are completing their compliance
period.
With that in mind, we are continuing our review of the Partnership's holdings,
with special emphasis on the more mature properties such as any that have
satisfied the IRS compliance requirements. Our review will consider many factors
including extended use requirements on the property (such as those due to
mortgage restrictions or state compliance agreements), the condition of the
property, and the tax consequences to the investors from the sale of the
property.
4
Upon identifying those properties with the highest potential for a successful
sale, refinancing or syndication, we expect to proceed with efforts to liquidate
those properties. Our objective is to maximize the investors' return wherever
possible and, ultimately, to wind down those funds that no longer provide tax
benefits to investors. To date, no properties in the Partnership have been
selected.
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:
5
---------------------------------- -----------------------------------------------
As of March 31, 2003 As of December 31, 2002
---------------------------------- -----------------------------------------------
Partnership's Estimated Low Encumbrances
Total Investment Amount of Income of Local
General Partner in Local Limited Investment Number of 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 $ 1,423,000
BCA Anderson, Douglas W.
Associates California Young 514,000 514,000 40 100% 1,105,000 1,412,000
David J. Michael,
Patrick R.
Sabelhaus and
Cloverdale Professional
Garden Cloverdale, Apartment
Apartments California Management 617,000 617,000 34 100% 1,387,000 1,625,000
Philip R. Hammond,
Countryway Mendota, Jr. and Diane M.
Associates California Hammond 571,000 571,000 41 98% 1,162,000 1,463,000
David J. Michael
and Professional
East Garden Jamestown, Apartment
Apartments California Management 770,000 770,000 51 100% 1,772,000 2,138,000
Shafter, Douglas W.
HPA California Young 538,000 538,000 42 100% 1,223,000 1,500,000
Knights Knights
Landing Landing, Douglas W. Young
Harbor California and Diane L. Young 275,000 275,000 25 100% 446,000 974,000
6
---------------------------------- -----------------------------------------------
As of March 31, 2003 As of December 31, 2002
---------------------------------- -----------------------------------------------
Partnership's Estimated Low Encumbrances
Total Investment Amount of Income of Local
General Partner in Local Limited Investment Number of 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 1,417,000
Richard Parasol
San Jacinto San Jacinto, and Richard A.
Associates California Gullota 469,000 469,000 38 100% 830,000 1,770,000
Thomas G. Larson,
William H. Larson
Woodlake Woodlake, and Raymond L.
Manor California Tetzlaff 545,000 545,000 44 97% 1,146,000 1,442,000
Yreka Investment Yreka, Ronald D.
Group California Bettencourt 538,000 538,000 36 97% 1,174,000 1,457,000
------------ ------------ ------- ---- -------------- -------------
$ 5,803,000 $ 5,803,000 433 98% $ 12,187,00 $ 16,621,000
============ ============ ======= ==== ============== =============
7
----------------------------------------------
For the Year Ended December 31, 2002
----------------------------------------------
Low Income Housing Credits
Partnership Name Rental Income Net Income (Loss) Allocated to Partnership
- -------------------------------------------------------------------------------- --------------------------------
Alta Vista Investors $ 168,000 $ (78,000) 99%
BCA Associates 163,000 (30,000) 99%
Cloverdale Garden Apartments 208,000 4,000 99%
Countryway Associates 170,000 (72,000) 99%
East Garden Apartments 249,000 (44,000) 99%
HPA Investors 177,000 (38,000) 99%
Knights Landing Harbor 125,000 (21,000) 99%
Midland Manor Associates 157,000 (58,000) 99%
San Jacinto Associates 213,000 (14,000) 99%
Woodlake Manor 187,000 (52,000) 99%
Yreka Investment Group 171,000 (33,000) 99%
------------ -----------
$ 1,988,000 $ (436,000)
============ ===========
8
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, 2003, there were 688 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, 2003.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31 December 31
-------------------------------------------------------------------- ---------------
2003 2002 2001 2000 1999 1998
----------- ----------- ----------- ------------ ----------- ---------------
ASSETS
Cash and cash
equivalents $ 734 $ 12,170 $ 44,172 $ 47,877 $ 61,123 $ 66,028
Investments in limited
partnerships, net 453,314 600,843 809,249 1,187,690 1,508,351 1,595,464
----------- ----------- ----------- ------------ ----------- ---------------
$ 454,048 $ 613,013 $ 853,421 $ 1,235,567 $ 1,569,474 $ 1,661,492
=========== =========== =========== ============ =========== ===============
LIABILITIES
Accrued fees and
expenses due to
general partner and
affiliates $ 1,300,219 $ 1,180,524 $ 1,080,521 $ 957,395 $ 848,503 $ 820,365
PARTNERS' EQUITY
(DEFICIT) (846,171) (567,511) (227,100) 278,172 720,971 841,127
----------- ----------- ----------- ------------ ----------- ---------------
$ 454,048 $ 613,013 $ 853,421 $ 1,235,567 $ 1,569,474 $ 1,661,492
=========== =========== =========== ============ =========== ===============
9
Selected results of operations, cash flows and other information for the
Partnership are as follows:
For the Year
For the Years Ended For the Three Months Ended Ended
March 31 March 31 December 31
---------------------------------------------------- ---------------------------- -------------
2003 2002 2001 2000 1999 1998 1998
---------- ---------- ---------- ----------- ------------ ------------- -------------
(Unaudited)
Loss from operations $ (139,721)$ (139,316)$ (146,597)$ (142,543)$ (37,519)$ (32,603) $ (144,721)
Equity in loss from
limited partnerships (138,939) (201,095) (358,675) (300,256) (82,637) (104,625) (388,158)
---------- ---------- ---------- ----------- ------------ ------------- -------------
Net loss $ (278,660)$ (340,411)$ (505,272)$ (442,799)$ (120,156)$ (137,228) $ (532,879)
========== ========== ========== =========== ============ ============= =============
Net loss allocated to:
General partners $ (2,787)$ (3,404)$ (5,053)$ (4,428)$ (1,202)$ (1,372) $ (5,329)
========== ========== ========== ========== ========== ============= =============
Limited partners $ (275,873)$ (337,007)$ (500,219)$ (438,371)$ (118,954)$ (135,856) $ (527,550)
========== ========== ========== ========== ========== ============= =============
Net loss per limited
partner unit $ (37.03)$ (45.24)$ (67.14)$ (58.84)$ (15.97)$ (18.24) $ (70.81)
========== ========== ========== ========== ========== ============= =============
Outstanding weighted 7,450 7,450 7,450 7,450 7,450 7,450 7,450
limited partner units ========== ========== ========== =========== ============ ============= =============
For the Year
For the Years Ended For the Years Ended Ended
March 31 Ended March 31 December 31
------------------------------------------------------ ---------------------------- ------------
2003 2002 2001 2000 1999 1998 1998
----------- ---------- ---------- ----------- ------------- ------------ ------------
(Unaudited)
Net cash provided by
(used in):
Operating activities $ (14,602)$ (34,751)$ (8,569)$ (18,747)$ (5,655) $ 546 $ (15,377)
Investing activities 3,166 2,749 4,864 5,501 750 535 3,296
----------- ---------- ---------- ----------- ------------- ------------ ------------
Net change in cash and
cash equivalents (11,436) (32,002) (3,705) (13,246) (4,905) 1,081 (12,081)
Cash and cash
equivalents,
beginning of period 12,170 44,172 47,877 61,123 66,028 78,109 78,109
----------- ---------- ---------- ----------- ------------- ------------ ------------
Cash and cash
equivalents, end of
period $ 734 $ 12,170 $ 44,172 $ 47,877 $ 61,123 $ 79,190 $ 66,028
=========== ========== ========== =========== ============= ============ ============
Low Income Housing Credit per Unit was as follows for the years ended December 31:
2002 2001 2000 1999 1998
------------ ------------ ------------ ------------ ------------
Federal $ 1 $ 16 $ 59 $ 99 99
State - - - - -
------------ ------------ ------------ ------------ ------------
Total $ 1 $ 16 $ 59 $ 99 $ 99
============ ============ ============ ============ ============
10
Item 7. 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-K 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-K and in other reports we filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Financial Statements and the Notes thereto included
elsewhere in this filing.
Critical Accounting Policies and Certain Risks and Uncertainties
The Partnership believes that the following discussion addresses its most
significant accounting policies, which are the most critical to aid in fully
understanding and evaluating the Partnership's reported financial results, and
certain of the Partnership's risks and uncertainties.
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.
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 Partnerships' results of operations
and for any contributions made or distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by a comparison of the carrying
amount to future undiscounted net cash flows expected to be generated. If an
investment is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the investment exceeds
fair value. The accounting policies of the Local Limited Partnerships are
generally 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.
Equity in losses of the Local Limited Partnerships for each year ended March 31
have been recorded by the Partnership based on nine months of reported results
provided by the Local Limited Partnerships for each year ended December 31 and
on three months of results estimated by management of the Partnership for each
three-month period ended March 31. Management's estimate for the three-month
period is based on either actual unaudited results reported by the Local Limited
Partnerships or historical trends in the operations of the Local Limited
Partnerships. Equity in losses of the Local Limited Partnerships are 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.
11
Distributions received from the Local Limited Partnerships are accounted for as
a reduction of the investment balance. Distributions received after the
investment has reached zero are recognized as income.
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.
Certain Risks and Uncertainties
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low Income Housing Credit rules are extremely complicated. Noncompliance
with these rules results in the loss of future Low Income Housing Credits and
the fractional recapture of Low Income Housing Credits already taken. In most
cases the annual amount of Low Income Housing Credits that an individual can use
is limited to the tax liability due on the person's last $25,000 of taxable
income. The Local Limited Partnerships may be unable to sell the Housing
Complexes at a profit. Accordingly, the Partnership may be unable to distribute
any cash to its investors. Low Income Housing Credits may be the only benefit
from an investment in the Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships.
Such limited diversity means that the results of operation of each single
Housing Complex will have a greater impact on the Partnership. With limited
diversity, poor performance of one Housing Complex could impair the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If
foreclosure were to occur during the first 15 years, the loss of any remaining
future Low Income Housing Credits, a fractional recapture of prior Low Income
Housing Credits, and a loss of the Partnership's investment in the Housing
Complex would occur. The Partnership is a limited partner or non-managing member
of each Local Limited Partnership. Accordingly, the Partnership will have very
limited rights with respect to management of the Local Limited Partnerships. The
Partnership will rely totally on the Local General Partners. Neither the
Partnership's investments in Local Limited Partnerships, nor the Local Limited
Partnerships' investments in Housing Complexes, are 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 interests
in Local Limited Partnerships; limitations on removal of Local General Partners;
limitations on subsidy programs; and possible changes in applicable regulations.
Uninsured casualties could result in loss of property and Low Income Housing
Credits and recapture of Low Income Housing Credits previously taken. The value
of real estate is subject to risks from fluctuating economic conditions,
including employment rates, inflation, tax, environmental, land use and zoning
policies, supply and demand of similar properties, and neighborhood conditions,
among others.
The ability of Limited Partners to claim tax losses from the Partnership is
limited. The IRS may audit the Partnership or a Local Limited Partnership and
challenge the tax treatment of tax items. The amount of Low Income Housing
Credits and tax losses allocable to the investors could be reduced if the IRS
were successful in such a challenge. The alternative minimum tax could reduce
tax benefits from an investment in the Partnership. Changes in tax laws could
also impact the tax benefits from an investment in the Partnership and/or the
value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Investors may
be unable to sell their Units except at a discount and should consider their
Units to be a long-term investment. Individual investors will have no recourse
if they disagree with actions authorized by a vote of the majority of Limited
Partners.
To date, 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 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
12
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.
Financial Condition
The Partnership's assets at March 31, 2003 consisted primarily of $700 in cash
and aggregate investments in the eleven Local Limited Partnerships of $453,000.
Liabilities at March 31, 2003 primarily consisted of $1,291,000 of accrued
annual management fees due to the General Partners.
Results of Operations
Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. The
Partnership's net loss for the year ended March 31, 2003 was $(279,000),
reflecting a decrease of $61,000 from the net loss experienced for the year
ended March 31, 2002. The decrease in net loss is primarily due to equity in
losses from limited partnerships which decreased by $62,000 to $(139,000) for
the year ended March 31, 2003 from $(201,000) for the year ended March 31, 2002.
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, 2003. Since the Partnership's liability
with respect to its investments is limited, losses in excess of investment are
not recognized. Equity in losses of limited partnerships included a portion
relating 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, 2002 Compared to Year Ended March 31, 2001. The
Partnership's net loss for the year ended March 31, 2002 was $(340,000),
reflecting a decrease of $165,000 from the net loss experienced for the year
ended March 31, 2001. The decrease in net loss is primarily due to equity in
losses from limited partnerships which decreased by $158,000 to $(201,000) for
the year ended March 31, 2002 from $(359,000) for the year ended March 31, 2001.
Equity in losses of limited partnerships included a portion relating 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.
Liquidity and Capital Resources
Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. Net cash used
during the year ended March 31, 2003 was $(11,000), compared to net cash used
for the year ended March 31, 2002 of $(32,000). The net cash used primarily
represents cash used for operating expenses net of minimal cash distributions
from Local Limited Partnerships.
Year Ended March 31, 2002 Compared to Year Ended March 31, 2001. Net cash used
during the year ended March 31, 2002 was $(32,000), compared to net cash used
for the year ended March 31, 2001 of $(4,000). The net cash used primarily
represents cash used for operating expenses net of minimal cash distributions
from Local Limited Partnerships.
During the years ended March 31, 2003, 2002 and 2001, accrued payables, which
consist primarily of related party management fees due to the General Partner,
increased by $120,000, $100,000 and $123,000, 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 currently has insufficient working capital to fund its
operations. Associates has agreed to continue providing advances sufficient
enough to fund the operations and working capital requirements of the
Partnership through June 30, 2004.
13
Future Contractual Cash Obligations
The following table summarizes the Partnership's future contractual cash
obligations as of March 31, 2003:
2004 2005 2006 2007 2008 Thereafter Total
---------- --------- --------- --------- --------- ------------ ----------
Asset Management Fees (1) $ 1,412,074 $ 111,855 $ 111,855 $ 111,855 $ 111,855 $ 3,243,795 $ 5,103,289
Capital Contributions Payable
to Lower Tier Partnerships - - - - - - -
---------- --------- --------- --------- --------- ------------ ----------
Total contractual cash
obligations $ 1,412,074 $ 111,855 $ 111,855 $ 111,855 $ 111,855 $ 3,243,795 $ 5,103,289
========== ========= ========= ========= ========= ============ ==========
(1) Asset Management Fees are payable annually until termination of the
Partnership, which is to occur no later than 2037. The estimate of the fees
payable included herein assumes the retention of the Partnership's interest in
all Housing Complexes until 2037. Amounts due to the General Partner as of March
31, 2003 have been included in the 2004 column. The General Partner does not
anticipate that these fees will be paid until such time as capital reserves are
in excess of the future foreseeable working capital requirements of the
Partnership.
For additional information on our Asset Management Fees and Capital
Contributions Payable to Lower Tier Partnerships, see Notes 2 and 3 to the
financial statements included elsewhere herein.
Exit Strategy
The IRS compliance period for low-income housing tax credit properties is
generally 15 years from occupancy following construction or rehabilitation
completion. WNC was one of the first in the industry to offer investments using
the tax credit. Now these very first programs are completing their compliance
period.
With that in mind, we are continuing our review of the Partnership's holdings,
with special emphasis on the more mature properties such as any that have
satisfied the IRS compliance requirements. Our review will consider many factors
including extended use requirements on the property (such as those due to
mortgage restrictions or state compliance agreements), the condition of the
property, and the tax consequences to the investors from the sale of the
property.
Upon identifying those properties with the highest potential for a successful
sale, refinancing or syndication, we expect to proceed with efforts to liquidate
those properties. Our objective is to maximize the investors' return wherever
possible and, ultimately, to wind down those funds that no longer provide tax
benefits to investors. To date, no properties in the Partnership have been
selected.
Impact of New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations", which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with the associated asset retirement costs being capitalized as a part
of the carrying amount of the long-lived asset. SFAS No. 143 also includes
disclosure requirements that provide a description of asset retirement
obligations and reconciliation of changes in the components of those
obligations. The statement is effective for fiscal years beginning after June
15, 2002. The Partnership does not expect the adoption of SFAS No. 143 to have a
material effect on the Partnership's financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which addresses accounting and financial reporting for the
impairment or disposal of long-lived assets. This standard was effective for the
Partnership's financial statements beginning January 1, 2002. The implementation
of SFAS No. 144 did not have a material impact on the Partnership's financial
position or results of operations.
14
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinded three previously issued statements and amended SFAS No.
13, "Accounting for Leases." The statement provides reporting standards for debt
extinguishments and provides accounting standards for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
The statement is effective for certain lease transactions occurring after May
15, 2002 and all other provisions of the statement shall be effective for
financial statements issued on or after May 15, 2002. The implementation of SFAS
No. 145 did not 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," which updates accounting and reporting
standards for personnel and operational restructurings. The Partnership adopted
SFAS No. 146 for exit, disposal or other restructuring activities initiated
after December 31, 2002. The adoption of SFAS No. 146 did not have a material
effect on the Partnership's financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The adoption of FIN 45 did not have a
material impact on the Partnership's financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123." SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method on accounting for stock-based employee compensation. The
implementation of SFAS No. 148 is not expected to have a material effect on the
Partnership's financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." The adoption of FIN 46 did not
have a material impact on the Partnership's financial position or results of
operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
15
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, 2003 and 2002, and the related statements of operations, partners' deficit
and cash flows for the years ended March 31, 2003, 2002 and 2001. 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 80% and
79% of the total assets of the Partnership at March 31, 2003 and 2002,
respectively, and 83%, 88% and 78% of the Partnership's equity in losses of
limited partnerships for the years ended March 31, 2003, 2002 and 2001,
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, 2003 and 2002, and the results of its
operations and its cash flows for the years ended March 31, 2003, 2002 and 2001,
in conformity with accounting principles generally accepted in the United States
of America.
The Partnership currently has insufficient working capital to fund its
operations. As discussed in Note 3 to the financial statements, WNC and
Associates, Inc., the general partner of the Partnership, has agreed to continue
providing advances sufficient enough to fund the operations and working capital
requirements of the Partnership through June 30, 2004.
/s/ BDO SEIDMAN, LLP
Costa Mesa, California
May 2, 2003
16
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
BALANCE SHEETS
March 31
------------------------------
2003 2002
-------------- -------------
ASSETS
Cash and cash equivalents $ 734 $ 12,170
Investments in limited partnerships, net (Notes 2 and 3) 453,314 600,843
-------------- -------------
$ 454,048 $ 613,013
============== =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accrued fees and expenses due to General Partner and
affiliates (Note 3) $ 1,300,219 $ 1,180,524
Commitments and contingencies
Partners' deficit:
General partners (73,303) (70,516)
Limited partners (10,000 units authorized; 7,450 units
issued and outstanding) (772,868) (496,995)
-------------- -------------
Total partners' deficit (846,171) (567,511)
-------------- -------------
$ 454,048 $ 613,013
============== =============
See accompanying notes to financial statements
17
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended March 31
----------------------------------------------
2003 2002 2001
-------------- ------------ ------------
Interest income $ 46 $ 720 $ 1,836
Distribution income 1,584 1,584 1,584
-------------- ------------ ------------
Total income 1,630 2,304 3,420
-------------- ------------ ------------
Operating expenses:
Amortization (Notes 2 and 3) 5,424 4,562 14,902
Asset management fees (Note 3) 111,855 111,854 111,856
Legal and accounting 18,795 18,957 17,995
Office 5,277 6,247 5,264
-------------- ------------ ------------
Total operating expenses 141,351 141,620 150,017
-------------- ------------ ------------
Loss from operations (139,721) (139,316) (146,597)
Equity in losses of limited
partnerships (Note 2) (138,939) (201,095) (358,675)
-------------- ------------ ------------
Net loss $ (278,660) $ (340,411) $ (505,272)
============== ============ ============
Net loss allocated to:
General partners $ (2,787) $ (3,404) $ (5,053)
============== ============ ============
Limited partners $ (275,873) $ (337,007) $ (500,219)
============== ============ ============
Net loss per limited partnership unit $ (37.03) $ (45.24) $ (67.14)
============== ============ ============
Outstanding weighted limited partner units 7,450 7,450 7,450
============== ============ ============
See accompanying notes to financial statements
18
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended March 31, 2003, 2002 and 2001
General Limited Total
Partners Partners
--------------- --------------- ---------------
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)
Net loss (3,404) (337,007) (340,411)
--------------- --------------- ---------------
Partners' deficit at March 31, 2002 (70,516) (496,995) (567,511)
Net loss (2,787) (275,873) (278,660)
--------------- --------------- ---------------
Partners' deficit at March 31, 2002 $ (73,303) $ (772,868) $ (846,171)
=============== =============== ===============
See accompanying notes to financial statements
19
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended March 31
-------------------------------------------
2003 2002 2001
------------ ------------ -----------
Cash flows from operating activities:
Net loss $ (278,660) $ (340,411) $ (505,272)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 5,424 4,562 14,902
Equity in losses of limited partnerships 138,939 201,095 358,675
Change in accrued fees and expenses due to
General Partner and affiliates 119,695 100,003 123,126
------------ ------------ -----------
Net cash used in operating activities (14,602) (34,751) (8,569)
------------ ------------ -----------
Cash flows provided by investing activities:
Distributions from limited partnerships 3,166 2,749 4,864
------------ ------------ -----------
Net decrease in cash and cash equivalents (11,436) (32,002) (3,705)
Cash and cash equivalents, beginning of period 12,170 44,172 47,877
------------ ------------ -----------
Cash and cash equivalents, end of period $ 734 $ 12,170 $ 44,172
============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
============ ============ ===========
See accompanying notes to financial statements
20
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2003, 2002 and 2001
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 Complexes") 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"). 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 Partnership has no employees of its own.
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.
21
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
Risks and Uncertainties
- -----------------------
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low Income Housing Credit rules are extremely complicated. Noncompliance
with these rules results in the loss of future Low Income Housing Credits and
the fractional recapture of Low Income Housing Credits already taken. In most
cases the annual amount of Low Income Housing Credits that an individual can use
is limited to the tax liability due on the person's last $25,000 of taxable
income. The Local Limited Partnerships may be unable to sell the Housing
Complexes at a profit. Accordingly, the Partnership may be unable to distribute
any cash to its investors. Low Income Housing Credits may be the only benefit
from an investment in the Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships.
Such limited diversity means that the results of operation of each single
Housing Complex will have a greater impact on the Partnership. With limited
diversity, poor performance of one Housing Complex could impair the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If
foreclosure were to occur during the first 15 years, the loss of any remaining
future Low Income Housing Credits, a fractional recapture of prior Low Income
Housing Credits, and a loss of the Partnership's investment in the Housing
Complex would occur. The Partnership is a limited partner or non-managing member
of each Local Limited Partnership. Accordingly, the Partnership will have very
limited rights with respect to management of the Local Limited Partnerships. The
Partnership will rely totally on the Local General Partners. Neither the
Partnership's investments in Local Limited Partnerships, nor the Local Limited
Partnerships' investments in Housing Complexes, are 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 interests
in Local Limited Partnerships; limitations on removal of Local General Partners;
limitations on subsidy programs; and possible changes in applicable regulations.
Uninsured casualties could result in loss of property and Low Income Housing
Credits and recapture of Low Income Housing Credits previously taken. The value
of real estate is subject to risks from fluctuating economic conditions,
including employment rates, inflation, tax, environmental, land use and zoning
policies, supply and demand of similar properties, and neighborhood conditions,
among others.
The ability of Limited Partners to claim tax losses from the Partnership is
limited. The IRS may audit the Partnership or a Local Limited Partnership and
challenge the tax treatment of tax items. The amount of Low Income Housing
Credits and tax losses allocable to the investors could be reduced if the IRS
were successful in such a challenge. The alternative minimum tax could reduce
tax benefits from an investment in the Partnership. Changes in tax laws could
also impact the tax benefits from an investment in the Partnership and/or the
value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Investors may
be unable to sell their Units except at a discount and should consider their
Units to be a long-term investment. Individual investors will have no recourse
if they disagree with actions authorized by a vote of the majority of Limited
Partners.
22
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
Exit Strategy
- -------------
The IRS compliance period for low-income housing tax credit properties is
generally 15 years from occupancy following construction or rehabilitation
completion. WNC was one of the first in the industry to offer investments using
the tax credit. Now these very first programs are completing their compliance
period.
With that in mind, the Partnership is continuing to review the Partnership's
holdings, with special emphasis on the more mature properties such as any that
have satisfied the IRS compliance requirements. The Partnership's review will
consider many factors including extended use requirements on the property (such
as those due to mortgage restrictions or state compliance agreements), the
condition of the property, and the tax consequences to the investors from the
sale of the property.
Upon identifying those properties with the highest potential for a successful
sale, refinancing or syndication, the Partnership expects to proceed with
efforts to liquidate those properties. The Partnership's objective is to
maximize the investors' return wherever possible and, ultimately, to wind down
those funds that no longer provide tax benefits to investors. No properties in
the Partnership have been selected.
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 Partnerships' results of operations
and for any contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by a comparison of the carrying
amount to future undiscounted net cash flows expected to be generated. If an
investment is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the investment exceeds
fair value. The accounting policies of the Local Limited Partnerships are
generally 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 Notes 2 and 3).
Equity in losses of Local Limited Partnerships for the years ended March 31,
2003, 2002 and 2001 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. Management's
estimate for the three-month period is based on either actual unaudited results
reported by the Local Limited Partnerships or historical trends in the
operations of the Local Limited Partnerships. Equity in losses of limited
partnerships allocated to the Partnership will not be recognized to the extent
that the investment balance would be adjusted below zero. As soon as the
investment balance reaches zero, amortization of the related costs of acquiring
the investment is accelerated to the extent of losses available (see Note 3).
23
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
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 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
maturities of three months or less when purchased to be cash equivalents. As of
March 31, 2003 and 2002, the Partnership had no cash equivalents.
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 loss 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 years presented, as defined by SFAS No. 130.
New Accounting Pronouncements
- -----------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations", which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with the associated asset retirement costs being capitalized as a part
of the carrying amount of the long-lived asset. SFAS No. 143 also includes
disclosure requirements that provide a description of asset retirement
obligations and reconciliation of changes in the components of those
obligations. The statement is effective for fiscal years beginning after June
15, 2002. The Partnership does not expect the adoption of SFAS No. 143 to have a
material effect on the Partnership's financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which addresses accounting and financial reporting for the
impairment or disposal of long-lived assets. This standard was effective for the
Partnership's financial statements beginning January 1, 2002. The implementation
of SFAS No. 144 did not have a material impact on the Partnership's financial
position or results of operations.
24
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinded three previously issued statements and amended SFAS No.
13, "Accounting for Leases." The statement provides reporting standards for debt
extinguishments and provides accounting standards for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
The statement is effective for certain lease transactions occurring after May
15, 2002 and all other provisions of the statement shall be effective for
financial statements issued on or after May 15, 2002. The implementation of SFAS
No. 145 did not 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," which updates accounting and reporting
standards for personnel and operational restructurings. The Partnership adopted
SFAS No. 146 for exit, disposal or other restructuring activities initiated
after December 31, 2002. The adoption of SFAS No. 146 did not have a material
effect on the Partnership's financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The adoption of FIN 45 did not have a
material impact on the Partnership's financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123." SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method on accounting for stock-based employee compensation. The
implementation of SFAS No. 148 is not expected to have a material effect on the
Partnership's financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." The adoption of FIN 46 did not
have a material impact on the Partnership's financial position or results of
operations.
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 Local
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, 2003 and 2002, are approximately $891,000 and
$571,000, 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.
25
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
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 from the Local 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, 2003 and 2002, 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,
2003, 2002 and 2001, amounting to approximately $282,000, $276,000 and $116,000,
respectively, have not been recognized. As of March 31, 2002, the aggregate
share of net losses not recognized by the Partnership amounted to $832,000.
The following is a summary of the equity method activity of the investments in
Local Limited Partnerships for the periods presented:
For the Years
Ended March 31
-------------------------------------------
2003 2002 2001
------------ ----------- ------------
Investments per balance sheet, beginning of period $ 600,843 $ 809,249 $ 1,187,690
Equity in losses of limited partnerships (138,939) (201,095) (358,675)
Distributions received (3,166) (2,749) (4,864)
Amortization of paid acquisition fees and costs (5,424 (4,562) (14,902)
------------ ----------- ------------
Investments per balance sheet, end of period $ 453,314 $ 600,843 $ 809,249
============ =========== ============
26
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
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
2002 2001
--------------- ---------------
ASSETS
Buildings and improvements (net of accumulated
depreciation for 2002 and 2001 of $7,961,000 and
$7,304,000, respectively) $ 13,955,000 $ 14,501,000
Land 1,484,000 1,484,000
Other assets 1,556,000 1,513,000
--------------- ---------------
$ 16,995,000 $ 17,498,000
=============== ===============
LIABILITIES
Mortgage loans payable $ 16,621,000 $ 16,675,000
Due to related parties 347,000 347,000
Other liabilities 213,000 178,000
--------------- ---------------
17,181,000 17,200,000
--------------- ---------------
PARTNERS' CAPITAL
WNC California Housing Tax Credits, L.P. (438,000) 30,000
Other partners 252,000 268,000
--------------- ---------------
(186,000) 298,000
--------------- ---------------
$ 16,995,000 $ 17,498,000
=============== ===============
27
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2002 2001 2000
--------------- --------------- ---------------
Revenues $ 2,067,000 $ 1,936,000 $ 1,891,000
--------------- --------------- ---------------
Expenses:
Operating expenses 1,460,000 1,394,000 1,336,000
Interest expense 386,000 385,000 396,000
Depreciation and amortization 657,000 636,000 625,000
--------------- --------------- ---------------
Total expenses 2,503,000 2,415,000 2,357,000
--------------- --------------- ---------------
Net loss $ (436,000) $ (479,000) $ (466,000)
=============== =============== ===============
Net loss allocable to the Partnership $ (432,000) $ (474,000) $ (461,000)
=============== =============== ===============
Net loss recorded by the Partnership $ (139,000) $ (201,000) $ (359,000)
=============== =============== ===============
Certain Local Limited Partnerships have incurred significant operating losses
and/or 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
$359,107 and $329,564, as of March 31, 2003 and 2002, respectively. Of
the accumulated amortization recorded on the balance sheet at March
31, 2003, $24,119, $24,375 and $80,140 of the related expense was
reflected as equity in losses of limited partnerships during the years
ended March 31, 2003, 2002 and 2001, respectively, 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 had
incurred acquisition costs of $32,018 which have been included in
investments in limited partnerships and were fully amortized at March
31, 2003.
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, for the life of the Partnership. Management fees of
$111,855, $111,854 and $111,856 were incurred during the years ended
March 31, 2003, 2002 and 2001, respectively, of which $0, $2,430 and
$0 was paid during the years ended March 31, 2003, 2002 and 2001,
respectively.
28
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
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
-----------------------------
2003 2002
------------ --------------
Reimbursement for expenses paid by the General Partners
or an affiliate $ 9,690 $ 1,850
Asset management fee payable 1,290,529 1,178,674
------------ --------------
Total $ 1,300,219 $ 1,180,524
============ ==============
The General Partners do not anticipate that these accrued fees will be paid
until such time as capital reserves are in excess of the future foreseeable
working capital requirements of the Partnership.
The Partnership currently has insufficient working capital to fund its
operations. WNC has agreed to continue providing advances sufficient enough to
fund the operations and working capital requirements of the Partnership through
June 30, 2004.
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, 2003 and 2002:
June 30 September 30 December 31 March 31
--------------- --------------- --------------- ---------------
2003
Income $ - $ 2,000 $ - $ -
Operating expenses (36,000) (40,000) (32,000) (33,000)
Equity in losses of limited
partnerships (39,000) (26,000) (26,000) (48,000)
Net loss (75,000) (64,000) (58,000) (81,000)
Loss available to limited partners (74,000) (64,000) (57,000) (81,000)
Loss per limited partner unit (10) (8) (8) (11)
29
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued
June 30 September 30 December 31 March 31
--------------- --------------- --------------- ---------------
2002
----
Income $ - $ - $ - $ 2,000
Operating expenses (33,000) (41,000) (33,000) (35,000)
Equity in losses of limited
partnerships (47,000) (67,000) (48,000) (39,000)
Net loss (80,000) (108,000) (81,000) (72,000)
Loss available to limited partners (79,000) (107,000) (80,000) (71,000)
Loss per limited partner unit (11) (14) (11) (10)
30
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
(a) Identification of Directors, (b) Identification of Executive Officers, (c)
---------------------------------------------------------------------------
Identification of Certain Significant Employees, (d) Family Relationships,
---------------------------------------------------------------------------
and (e) Business Experience
---------------------------
The Partnership has no directors, executive officers or employees of its own.
The following biographical information is presented for the directors, executive
officers and significant employees of Associates, which has principal
responsibility for the Partnership's affairs.
Associates is a California corporation which was organized in 1971. Its officers
and significant employees are:
Wilfred N. Cooper, Sr. Chairman of the Board
Wilfred N. Cooper, Jr. President and Chief Executive Officer
David N. Shafer, Esq. Executive Vice President and Director of Asset Management
Sylvester P. Garban Senior Vice President - Institutional Investments
David C. Turek Senior Vice President - Originations
Thomas J. Riha, CPA Vice President - Chief Financial Officer
Michael J. Gaber Vice President - Acquisitions
Diemmy T. Tran Vice President - Portfolio Management
J. Brad Hurlbut Director of Syndications
In addition to Wilfred N. Cooper, Sr., the directors of Associates are Wilfred
N. Cooper, Jr., David N. Shafer, and Kay L. Cooper. The principal shareholder of
Associates is a trust established by Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., age 72, is the founder and Chairman of the Board of
Directors of Associates, a Director of WNC Capital Corporation, and a general
partner in some of the partnerships previously sponsored by Associates Mr.
Cooper has been actively involved in the affordable housing industry since 1968.
Previously, during 1970 and 1971, he was founder and a principal of Creative
Equity Development Corporation, a predecessor of Associates, and of Creative
Equity Corporation, a real estate investment firm. For 12 years before 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. He has testified before committees of the U.S. Senate and the U.S.
House of Representatives. Mr. Cooper is a Life Director of the National
Association of Home Builders and a National Trustee for NAHB's Political Action
Committee, and the Chairman of NAHB's Multifamily Council. He is a Director of
the National Housing Conference and a member of NHC's Executive Committee, and a
founder and Director of the California Housing Consortium. He is the husband of
Kay Cooper and the father of Wilfred N. Cooper, Jr. Mr. Cooper graduated from
Pomona College in 1956 with a Bachelor of Arts degree.
Wilfred N. Cooper, Jr., age 40, is President, Chief Executive Officer, Secretary
and a Director and a member of the Acquisition Committee of Associates He is
President of, and a registered principal with, WNC Capital Corporation, and is a
Director of WNC Management, Inc. He has been involved in real estate investment
and acquisition activities since 1988 when he joined Associates Previously, he
served as a Government Affairs Assistant with Honda North America in Washington,
D.C. Mr. Cooper is a member of the Editorial Advisory Boards of Affordable
----------
Housing Finance and LIHC Monthly Report, a Steering Member of the Housing Credit
- --------------- -------------------
Group of the National Association of Home Builders, an Alternate Director of
NAHB, a member of the Advisory Board of the New York State Association for
Affordable Housing and a member of the Urban Land Institute. He is the son of
Wilfred Cooper, Sr. and Kay Cooper. Mr. Cooper graduated from The American
University in 1985 with a Bachelor of Arts degree.
31
David N. Shafer, age 50, is Executive Vice President, a Director, Director of
Asset Management and a member of the Acquisition Committee of Associates, and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been active in the
real estate industry since 1984. Before joining Associates in 1990, he was
engaged as an attorney in the private practice of 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.
Sylvester P. Garban, age 57, is Senior Vice President - Institutional
Investments of Associates Mr. Garban has been involved in real estate investment
activities since 1978. Before joining Associates in 1989, he served as Executive
Vice President with MRW, Inc., a real estate development and management firm.
Mr. Garban is a member of the National Association of Affordable Housing Lenders
and the Financial Planning Association. He graduated from Michigan State
University in 1967 with a Bachelor of Science degree in Business Administration.
David C. Turek, age 48, is Senior Vice President - Originations of Associates
His experience with real estate investments and finance has continued since
1976, and he has been employed by Associates since 1996. Previously, 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 1992 to 1995 he served as Executive Vice
President for Levcor, Inc., a multi-family development company, and from 1990 to
1992 he served as Vice President for the Paragon Group where he was responsible
for tax credit development activities. He is a Director of the National Housing
and Rehabilitation Association, the Rural Rental Housing Association of Texas,
and the Alabama Council of Affordable Rental Housing. Mr. Turek graduated from
Southern Methodist University in 1976 with a Bachelor of Business Administration
degree.
Thomas J. Riha, age 47, is Vice President - Chief Financial Officer and a member
of the Acquisition Committee of Associates and President, Treasurer and a
Director of WNC Management, Inc. He has been involved in real estate acquisition
and investment activities since 1979. Before joining Associates in 1994, Mr.
Riha was employed by Trust Realty Advisor, a real estate acquisition and
management company, last serving as Vice President - Operations. He is a
Director of the Task Force on Housing Credit Certification of the National
Association of Home Builders. 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.
Michael J. Gaber, age 37, is Vice President - Acquisitions and a member of the
Acquisition Committee of Associates Mr. Gaber has been involved in real estate
acquisition, valuation and investment activities since 1989 and has been
associated with Associates since 1997. Prior to joining Associates, he was
involved in the valuation and classification of major assets, restructuring of
debt and analysis of real estate taxes with H.F. Ahmanson & Company, parent of
Home Savings of America. Mr. Gaber graduated from the California State
University, Fullerton in 1991 with a Bachelor of Science degree in Business
Administration - Finance.
Diemmy T. Tran, age 37, is Vice President - Portfolio Management of Associates
She is responsible for overseeing portfolio management and investor reporting
for all WNC funds, and for monitoring investment returns for all WNC
institutional funds. Ms. Tran has been involved in real estate asset management
and finance activities for 12 years. Prior to joining Associates in 1998, Ms.
Tran served as senior asset manager for a national Tax Credit sponsor and as an
asset specialist for the Resolution Trust Corporation where she was responsible
for the disposition and management of commercial loan and REO portfolios. Ms.
Tran is licensed as a California real estate broker. She graduated from
California State University, Northridge in 1989 with a Bachelor of Science
degree in finance and a minor in real estate.
J. Brad Hurlbut, age 43, is Director of Syndications of Associates He is
responsible for the financial structuring of WNC's institutional funds. Mr.
Hurlbut has 20 years of experience in real estate investment and development.
Prior to joining WNC in 2000, he served as corporate controller for Great
Western Hotels Corporation. Mr. Hurlbut has been an enrolled agent licensed to
practice before the IRS since 1984. He graduated from the University of Redlands
in 1981 with a Bachelor of Science degree in business management and from
California State University, Fullerton in 1985 with a Master of Science degree
in taxation.
32
Kay L. Cooper, age 66, is a Director of Associates Mrs. Cooper was the sole
proprietor of Agate 108, a manufacturer and retailer of home accessory products,
from 1975 until its sale in 1998. She is the wife of Wilfred Cooper, Sr. and the
mother of Wilfred Cooper, Jr. Ms. Cooper graduated from the University of
Southern California in 1958 with a Bachelor of Science degree.
(f) Involvement in Certain Legal Proceedings
----------------------------------------
Inapplicable.
(g) Promoters and Control Persons
-----------------------------
Inapplicable.
(h) Audit Committee Financial Expert
--------------------------------
Neither the Partnership nor Associates has an audit committee.
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 were incurred
during each of the years ended March 31, 2003, 2002 and 2001. The
Partnership paid the General Partners and or their affiliates $0, $3,000
and $0 of those fees during the years ended March 31, 2003, 2002 and 2001,
respectively.
(b) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $15,000, $34,000 and
$4,000 during the years ended March 31, 2003, 2002 and 2001, respectively.
(c) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated $60,
$1,100 and $3,800 for Associates and $7, $120 and $420 for Mr. Cooper for
the calendar years ended December 31, 2002, 2001 and 2000, 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, 2003, 2002 and 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
(a) Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------
Inapplicable.
(b) 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.
33
(c) 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.
(d) Changes in Control
------------------
The management and control of the General Partner and of Associates may be
changed at any time in accordance with their respective 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, reimbursement of expenses,
and the General Partner's interests in the Partnership, as discussed in Item 11
and in the notes to the Partnership's financial statements.
Item 14. Controls and Procedures
Associates, on behalf of the Partnership, maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our periodic reports filed with the Securities and Exchange Commission
("SEC") is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC and that such information is
accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, our management recognized that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Based on their most recent evaluation, which was completed within 90 days of the
filing of this Annual Report on Form 10-K, our Principal Executive Officer and
Principal Financial Officer believe that our disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934,
as amended) are effective. There were no significant changes in internal
controls or in other factors that could significantly affect these internal
controls subsequent to the date of their most recent evaluation.
34
PART IV.
Item 15. 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, 2003 and 2002
Statements of Operations for the years ended March 31, 2003, 2002 and
2001
Statements of Partners' Equity (Deficit) for the years ended March 31,
2003, 2002 and 2001
Statements of Cash Flows for the years ended March 31, 2003, 2002 and
2001
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.
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.
35
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.
99.1 Certification of the Principal Executive Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
99.2 Certification of the Principal Financial Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
99.3 Financial Statements of Yreka Investment Group, as of and for the years
ended December 31, 2001 and 2000 together with Independent Auditors'
Report thereon; filed as exhibit 99.3 on Form 10-k dated March 31, 2002;
a significant subsidiary of the Partnership.
99.4 Financial Statements of Yreka Investment Group, as of and for the years
ended December 31, 2002 and 2001 together with Independent Auditors'
Report thereon; a significant subsidiary of the Partnership. (filed
herewith)
(d) Financial statement schedules follow, as set forth in subsection (a)(2)
hereof.
36
Report of Independent Certified Public Accountants on Financial Statement
Schedules
To the Partners
California Housing Tax Credits, L.P.
The audits referred to in our report dated May 2, 2003, relating to the 2003,
2002 and 2001 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
Costa Mesa, California
May 2, 2003
37
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2003
------------------------------------------- ----------------------------------------------
As of March 31, 2003 As of December 31, 2002
------------------------------------------- ----------------------------------------------
Partnership's Total Amount of Encumbrances of Property
Investment in Local Investment Paid Local Limited and Accumulated Net Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista
Investors Orosi,
California $ 583,000 $ 583,000 $ 1,423,000 $ 2,124,000 $ 935,000 $ 1,189,000
BCA Associates Anderson,
California 514,000 514,000 1,412,000 2,049,000 662,000 1,387,000
Cloverdale Garden Cloverdale,
Apartments California 617,000 617,000 1,625,000 2,163,000 597,000 1,566,000
Countryway Mendota,
Associates California 571,000 571,000 1,463,000 2,175,000 978,000 1,197,000
East Garden Jamestown,
Apartments California 770,000 770,000 2,138,000 2,923,000 799,000 2,124,000
HPA Shafter,
Investors California 538,000 538,000 1,500,000 2,203,000 710,000 1,493,000
Knights Knights
Landing Landing,
Harbor California 275,000 275,000 974,000 1,371,000 440,000 931,000
Midland Manor Mendota,
Associates California 383,000 383,000 1,417,000 1,862,000 771,000 1,091,000
San Jacinto San Jacinto,
Associates California 469,000 469,000 1,770,000 2,349,000 542,000 1,807,000
Woodlake Woodlake,
Manor California 545,000 545,000 1,442,000 2,137,000 962,000 1,175,000
Yreka Investment Yreka,
Group California 538,000 538,000 1,457,000 2,044,000 565,000 1,479,000
------------- ------------ ------------- ------------ ----------- ------------
$ 5,803,000 $ 5,803,000 $ 16,621,000 $ 23,400,000 $ 7,961,000 $ 15,439,000
============= ============ ============= ============= ============ ===========
38
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2003
---------------------------------------------------------------------------------------------
For the year ended December 31, 2002
---------------------------------------------------------------------------------------------
Net Income Year Investment Estimated Useful
Partnership Name Rental Income (Loss) Acquired Status Life (Years)
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors $ 168,000 $ (78,000) 1989 Completed 27.5
BCA Associates 163,000 (30,000) 1989 Completed 40
Cloverdale Garden Apartments 208,000 4,000 1989 Completed 40
Countryway Associates 170,000 (72,000) 1989 Completed 27.5
East Garden Apartments 249,000 (44,000) 1989 Completed 40
HPA Investors 177,000 (38,000) 1989 Completed 40
Knights Landing Harbor 125,000 (21,000) 1989 Completed 40
Midland Manor Associates 157,000 (58,000) 1990 Completed 27.5
San Jacinto Associates 213,000 (14,000) 1990 Completed 50
Woodlake Manor 187,000 (52,000) 1989 Completed 30
Yreka Investment Group 171,000 (33,000) 1989 Completed 50
----------- -----------
$ 1,988,000 $ (436,000)
=========== ===========
39
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2002
------------------------------------------- ----------------------------------------------
As of March 31, 2002 As of December 31, 2001
------------------------------------------- ----------------------------------------------
Partnership's Total Amount of Encumbrances of Property
Investment in Local Investment Paid Local Limited and Accumulated Net Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista
Investors Orosi,
California $ 583,000 $ 583,000 $ 1,428,000 $ 2,092,000 $ 857,000 $ 1,235,000
BCA Associates Anderson,
California 514,000 514,000 1,416,000 2,040,000 611,000 1,429,000
Cloverdale Garden Cloverdale,
Apartments California 617,000 617,000 1,630,000 2,163,000 541,000 1,622,000
Countryway Mendota,
Associates California 571,000 571,000 1,469,000 2,142,000 890,000 1,252,000
East Garden Jamestown,
Apartments California 770,000 770,000 2,144,000 2,903,000 722,000 2,181,000
HPA Shafter,
Investors California 538,000 538,000 1,504,000 2,203,000 654,000 1,549,000
Knights Knights
Landing Landing,
Harbor California 275,000 275,000 978,000 1,363,000 406,000 957,000
Midland Manor Mendota,
Associates California 383,000 383,000 1,421,000 1,852,000 704,000 1,148,000
San Jacinto San Jacinto,
Associates California 469,000 469,000 1,776,000 2,349,000 501,000 1,848,000
Woodlake Woodlake,
Manor California 545,000 545,000 1,447,000 2,138,000 890,000 1,248,000
Yreka Investment Yreka,
Group California 538,000 538,000 1,462,000 2,044,000 528,000 1,516,000
------------- ------------ ------------- ------------ ----------- ------------
$ 5,803,000 $ 5,803,000 $ 16,675,000 $ 23,289,000 $ 7,304,000 $ 15,985,000
============= ============ ============= ============= ============ ===========
40
WNC California Housing Tax Credits, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2002
---------------------------------------------------------------------------------------------
For the year ended December 31, 2001
---------------------------------------------------------------------------------------------
Net Income Year Investment Estimated Useful
Partnership Name Rental Income (Loss) Acquired Status Life (Years)
- ------------------------------------------------------------------------------------------------------------------------------------
Alta Vista Investors $ 158,000 $ (43,000) 1989 Completed 27.5
BCA Associates 162,000 (25,000) 1989 Completed 40
Cloverdale Garden Apartments 190,000 (28,000) 1989 Completed 40
Countryway Associates 160,000 (70,000) 1989 Completed 27.5
East Garden Apartments 232,000 (34,000) 1989 Completed 40
HPA Investors 157,000 (58,000) 1989 Completed 40
Knights Landing Harbor 116,000 (25,000) 1989 Completed 40
Midland Manor Associates 152,000 (50,000) 1990 Completed 27.5
San Jacinto Associates 190,000 (16,000) 1990 Completed 50
Woodlake Manor 167,000 (114,000) 1989 Completed 30
Yreka Investment Group 166,000 (17,000) 1989 Completed 50
----------- -----------
$ 1,850,000 $ (479,000)
=========== ===========
41
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 Property
Investment in Local Investment Paid Local Limited 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 Mendota,
Associates California 571,000 571,000 1,473,000 2,090,000 814,000 1,276,000
East Garden Jamestown,
Apartments California 770,000 770,000 2,150,000 2,901,000 647,000 2,254,000
HPA Shafter,
Investors California 538,000 538,000 1,508,000 2,196,000 597,000 1,599,000
Knights Knights
Landing Landing,
Harbor 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 San Jacinto,
Associates California 469,000 469,000 1,781,000 2,349,000 459,000 1,890,000
Woodlake Woodlake,
Manor California 545,000 545,000 1,452,000 2,137,000 817,000 1,320,000
Yreka Investment Yreka,
Group 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
============= ============ ============= ============= ============ ===========
42
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
---------------------------------------------------------------------------------------------
Net Income Year Investment Estimated Useful
Partnership Name Rental Income (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)
=========== ===========
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
By: WNC & Associates, Inc.,
General Partner
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
President of WNC & Associates, Inc.
Date: June 24, 2003
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, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
Chief Executive Officer, President and Director of WNC & Associates,
Inc. (principal executive officer)
Date: June 24, 2003
By: /s/ Thomas J. Riha
-------------------
Thomas J. Riha,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
(principal financial officer and principal accounting officer)
Date: June 24, 2003
By: /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr.,
Chairman of the Board of WNC & Associates, Inc.
Date: June 24, 2003
By: /s/ David N. Shafer
-------------------
David N Shafer,
Director of WNC & Associates, Inc.
Date: June 24, 2003
44
CERTIFICATIONS
I, Wilfred N. Cooper, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of WNC CALIFORNIA
HOUSING TAX CREDITS, L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the periods covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying 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
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying 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 annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: June 24, 2003
/s/ Wilfred N. Cooper, Jr.
---------------------------
[Signature]
Chairman and Chief Executive Officer of WNC & Associates, Inc.
45
CERTIFICATIONS
I, Thomas J. Riha, certify that:
1. I have reviewed this annual report on Form 10-K of WNC CALIFORNIA
HOUSING TAX CREDITS, L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the periods covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying 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
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying 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 annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: June 24, 2003
/s/ Thomas J. Riha
-------------------
[Signature]
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
46