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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-21494
WNC HOUSING TAX CREDIT FUND III, L.P.
(Exact name of registrant as specified in its charter)
California 33-0463432
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17782 Sky Park Cir 92614-6404
Irvine, CA (Zip Code)
(Address of principal executive offices)
(714) 662-5565
(Telephone number)
Securities registered pursuant to Section12(b) of the Act:
NONE
Securities registered pursuant to section12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
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
UNIT I.
Item 1. Business
Organization
WNC Housing Tax Credit Fund III, L.P. ("the Partnership") is a California
Limited Partnership formed under the laws of the State of California on May 10,
1991. The Partnership was formed to acquire limited partnership interests or
membership interest in other limited partnerships or limited liability companies
("Local Limited Partnerships") which own multi-family apartment complexes that
are eligible for Federal low-income housing and, in certain cases, California
low-income housing tax credits (the "Low Income Housing Credit").
The general partner of the Partnership is WNC Tax Credit Partners, L.P. (the
"General Partner"). WNC & Associates, Inc. ("Associates") and Wilfred N. Cooper,
Sr. are the general partners of WNC Tax Credit Partners, L.P. The chairman and
president of Associates own substantially all of the outstanding stock of
Associates. The business of the Partnership is conducted primarily through
Associates, as the Partnership and General Partner has no employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on January 2, 1992, the Partnership commenced a public offering of
15,000 Units of Limited Partnership Interest ("Units") at a price of $1,000 per
Unit. As of the close of the public offering on September 30, 1993, a total of
15,000 Units representing $15,000,000 had been sold. Holders of Units are
referred to herein as "Limited Partners."
The Partnership shall continue in full force and effect until December 31, 2050
unless terminated prior to that date pursuant to the partnership agreement.
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 owns and operates a multi-family
housing complex (the "Housing Complexes") which qualify for the Low Income
Housing Credits. 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 California 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 May 10, 1991 (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, 2004, the Partnership had invested in forty-eight Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the Federal 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. An
individual Limited Partner's ability to use tax credits is limited. In most
cases, the annual amount of Low Income Housing Credits that an individual
Limited Partner can use is limited to the tax liability due on the person's last
$25,000 of taxable income. Low Income Housing Credits may be the only material
benefit from the Partnership because Limited Partners may not get back their
capital. Any transactions between the Partnership, the General Partner and
Associates and its affiliates will entail conflicts of interest.
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
Low Income Housing Credits, and a fractional recapture of prior Low Income
Housing Credits would occur. At any time, a foreclosure would result in a loss
of the Partnership's investment in the Housing Complex. 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 limited partners 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.
There are limits on the transferability of units, including a prohibition on the
transfer of more than 50% of the Units in a 12-month period. No trading market
for the Units exists or is expected to develop. Limited partners may be unable
to sell their Units except at a discount and should consider their Units to be a
long-term investment. Individual limited partners will have no recourse if they
disagree with actions authorized by a vote of the majority of Limited Partners.
Substantially all of the Low Income Housing Credits anticipated to be realized
from the Local Limited Partnerships have been realized. The Partnership does not
anticipate being allocated a significant amount of Low Income Housing Credits
from the Local Limited Partnerships in the future. Until the Local Limited
Partnerships have completed the 15 year Low Income Housing Credit compliance
period risks exist for potential recapture of prior low Income Housing Credits.
4
Anticipated future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership are payable to
the General Partner and /or its affiliates. Though the amounts payable to the
General Partner and/or its affiliates are contractually currently payable, the
Partnership anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual obligations until capital reserves are
in excess of the aggregate of the existing contractual obligations and the
anticipated future foreseeable obligations of the Partnership. The Partnership
would be adversely affected should the General Partner and/or its affiliates
demand current payment of the existing contractual obligations and/or suspend
services for this or any other reason.
Exit Strategy
The IRS compliance period for low-income housing tax credit properties is
generally 15 years following construction or rehabilitation completion.
Associates was one of the first in the industry to offer syndicated investments
in Low Income Housing Credits. The initial programs are completing their
compliance periods.
With that in mind, the Partnership is continuing its review of the Partnership's
holdings, with special emphasis on the more mature properties including those
that have satisfied the IRS compliance requirements. The review considers 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 Limited Partners 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 objective is to maximize the limited
partners' return wherever possible and, ultimately, to wind down the Partnership
when it no longer provides tax benefits to limited partners. However, Local
Limited Partnership interests may be disposed at any time by Associates in its
discretion. To date no properties in the Partnership have been selected for
disposition.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
indirect ownership interests in the Housing Complexes. The following table
reflects the status of the forty-eight Housing Complexes as of the dates and for
the periods indicated:
5
------------------------------ --------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------ --------------------------------------------------
Partnership's Original
Total Original Amount of Estimated Mortgage
General Investment in Investment Aggregate Low Balances of
Local Limited Partner Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnerships Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Beaumont Beaumont, Donald W.
Elderly Mississippi Sowell
Housing, L.P. $ 229,000 $ 229,000 30 97% $ 462,000 $ 919,000
Brownfield Brownfield, Winston
Seniors Texas Sullivan
Community,
Ltd. 147,000 147,000 24 100% 292,000 705,000
Buffalo Buffalo, Donald W.
Apartments, Texas Sowell
Ltd. 91,000 91,000 24 96% 177,000 402,000
Cambridge Court Grottoes, The
Associates Limited Virginia Humphrey
Partnership Companies 254,000 254,000 39 100% 557,000 1,302,000
Candleridge Bondurant, Eric A.
Apartments of Iowa Sheldahl
Bondurant L.P. 99,000 99,000 23 100% 222,000 586,000
Candleridge Waukee, Eric A.
Apartments of Iowa Sheldahl
Waukee L.P. 101,000 101,000 23 91% 227,000 640,000
Carlinville Carlinville, Kenneth M.
Associates I, L.P. Illinois Vitor 105,000 105,000 20 75% 208,000 494,000
Cherokee Cedar Bluff, Thomas H.
Housing, Alabama Cooksey
Ltd. and Apartment
Developers,
Inc. 110,000 110,000 19 100% 272,000 613,000
Chester Associates Chester, Kenneth M.
I, a Limited Illinois Vitor
Partnership 159,000 159,000 24 92% 358,000 683,000
Clinton Terrace Albany, Eddie C.
Apartments, Ltd. Kentucky Dalton 138,000 138,000 24 100% 290,000 756,000
6
------------------------------ --------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------ --------------------------------------------------
Partnership's Original
Total Original Amount of Estimated Mortgage
General Investment in Investment Aggregate Low Balances of
Local Limited Partner Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnerships Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Coffeeville Coffeeville, Thomas H.
Housing, Alabama Cooksey and
Ltd. Apartment
Developers,
Inc. 103,000 103,000 19 89% 239,000 535,000
Coosa County Rockford, Thomas H.
Housing, Alabama Cooksey and
Ltd. Apartment
Developers,
Inc. 103,000 103,000 19 95% 265,000 550,000
Crockett Manor, Crockett, Jean
Ltd. Texas Johnson 184,000 184,000 40 100% 383,000 872,000
Crockett Manor Crockett, Jean
Senior Citizens Texas Johnson
Complex, Ltd. 203,000 203,000 36 94% 446,000 1,008,000
Delta Manor, Techula, Glenn D.
L.P. Mississippi Miller
227,000 227,000 36 97% 499,000 1,221,000
Eupora Eupora, Richard
Apartments, Mississippi Tenhet and
L.P. Geraldine
Tenhet 138,000 138,000 36 100% 310,000 1,190,000
Fairview Carroll, Kevin A.
Village V, Iowa Bierl
Limited
Partnership 119,000 119,000 20 85% 273,000 581,000
Fox Lake Fox Lake, William E.
Manor Wisconsin Paschke,
Limited Jr. and
Partnership Robert E.
Campbell 84,000 84,000 12 58% 161,000 367,000
Ft. Deposit Fort Thomas H.
Housing, Deposit, Cooksey and
Developers, Alabama Apartment
Developers,
Inc. 127,000 127,000 23 100% 330,000 695,000
7
------------------------------ --------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------ --------------------------------------------------
Partnership's Original
Total Original Amount of Estimated Mortgage
General Investment in Investment Aggregate Low Balances of
Local Limited Partner Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnerships Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Gulf Coast Gulfport, Philip
Apartments, Mississippi Napier
L.P. 320,000 320,000 60 90% 698,000 1,398,000
Gulf Coast Long Beach, Philip
Apartments Mississippi Napier
of Long Beach, L.P. 315,000 315,000 59 90% 685,000 1,413,000
Heritage Colonial Blackshear, Robert J.
Homes, L.P. Georgia Deharder and
Jacqueline F.
McPhillips 115,000 115,000 20 100% 126,000 519,000
HOI Limited Benson, Housing
Partnership North Opportunities,
of Benson Carolina Inc. 269,000 269,000 50 98% 577,000 1,140,000
HOI Limited Dallas, Housing
Partnership North Opportunities,
of Dallas Carolina Inc. 366,000 366,000 60 97% 787,000 1,670,000
HOI Limited Dunn, Housing
Partnership North Opportunities,
of Dunn Carolina Inc. 170,000 170,000 34 100% 366,000 802,000
HOI Limited Kings Housing
Partnership Mountain, Opportunities,
of Kings Mt. North Inc.
Carolina 262,000 262,000 46 100% 563,000 1,204,000
HOI Limited Sanford, Housing
Partnership North Opportunities,
of Lee Carolina Inc. 419,000 419,000 78 94% 901,000 1,935,000
HOI Limited Sanford, Housing
Partnership North Opportunities,
of Sanford Carolina Inc. 277,000 277,000 50 98% 594,000 1,191,000
8
------------------------------ --------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------ --------------------------------------------------
Partnership's Original
Total Original Amount of Estimated Mortgage
General Investment in Investment Aggregate Low Balances of
Local Limited Partner Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnerships Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
HOI Limited Selma, Housing
Partnership North Opportunities,
of Selma Carolina Inc. 271,000 271,000 58 95% 582,000 1,144,000
Killbuck Killbuck, Georg E.
Limited Ohio Maharg
Partnership 151,000 151,000 24 92% 338,000 740,000
Lake Ridge Tiptonville, Lewis
Apartments, Tennessee Beasley, Jr.
L.P. and Carol
Beasley 317,000 317,000 44 100% 647,000 1,444,000
Levelland Levelland, 1600
Manor, Texas Capital
L.P. Company 175,000 175,000 36 100% 393,000 894,000
Logan Park Caldwell, Riley J.
Associates Idaho Hill
Limited
Partnership 571,000 571,000 50 98% 1,281,000 2,251,000
Meadow Run Gordonsville, The Humphrey
Associates Virginia Companies
Limited
Partnership 302,000 302,000 43 98% 662,000 1,477,000
Oakdale Senior Oakdale, Oakdale
Housing California Senior
Limited Housing
Partnership Corporation 919,000 919,000 80 100% 2,110,000 2,871,000
Orange Orange Thomas H.
Beach Beach, Cooksey and
Housing, Alabama Apartment
Ltd. Developers,
Inc. 208,000 208,000 31 94% 472,000 1,075,000
Parks I Chatham, Sallie B.
Limited Virginia Garst and
Partnership Lillien S.
Brown 253,000 253,000 39 100% 568,000 1,226,000
Post Manor, Post, 1600 Capital
L.P. Texas Company 122,000 122,000 24 79% 263,000 625,000
9
------------------------------ --------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------ --------------------------------------------------
Partnership's Original
Total Original Amount of Estimated Mortgage
General Investment in Investment Aggregate Low Balances of
Local Limited Partner Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnerships Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Red Bud Red Bud, Kenneth M.
Associates I, Illinois Vitor
a Limited
Partnership 135,000 135,000 20 90% 303,000 592,000
Steeleville Steeleville, Kenneth M.
Associates I, Illinois Vitor
a Limited
Partnership 110,000 110,000 16 88% 247,000 544,000
Tanglewood Frankfurt, Georg E.
Limited Ohio Maharg and
Partnership Maharg Realty,
Inc. 212,000 212,000 36 100% 475,000 1,054,000
Village Lane Farmington, ERC
Properties, Arkansas Properties,
a Limited Inc.
Partnership 168,000 168,000 36 100% 370,000 876,000
Whitted Hillsborough, Hillsborough
Forest North Affordable
Limited Carolina Housing
Partnership Corporation 685,000 685,000 35 97% 1,572,000 951,000
Wilcam Camden, Thomas H.
Housing, Alabama Cooksey and
Ltd. Apartment
Developers,Inc. 106,000 106,000 19 100% 299,000 614,000
Wills Point Wills Point, 1600
Manor, Texas Capital
L.P. Company 124,000 124,000 24 100% 277,000 622,000
Windmere Lexington, The
Associates Virginia Humphrey
Limited Companies
Partnership 291,000 291,000 38 100% 539,000 1,471,000
Woodlands Mount 1600
Apartments, Pleasant, Capital
L.P. Texas Company 239,000 239,000 48 85% 537,000 1,239,000
10
------------------------------ --------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------ --------------------------------------------------
Partnership's Original
Total Original Amount of Estimated Mortgage
General Investment in Investment Aggregate Low Balances of
Local Limited Partner Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnerships Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Woodview Chillicothe, Michael K.
Limited Illinois and Moore
Partnership Glassford,
Illinois 269,000 269,000 36 98% 362,000 1,182,000
---------- ------------ ------ --- ------------ -----------
$10,862,000 $ 10,862,000 1,685 95% $ 23,565,000 $48,283,000
=========== ============ ====== === ============= ===========
(1) Represents aggregate expected to be received if Housing Complexes are
retained and rented in compliance with credit rules for the 15-year
compliance period. Approximately 97% of the anticipated Low Income Housing
Credits have been received from the Local Limited Partnerships and are no
longer available to the Partnerships Limited Partners.
11
--------------------------------------------------------------------------------
For the year ended December 31, 2003
--------------------------------------------------------------------------------
Low Income
Housing Credits
Allocated to
Partnership Name Rental Income Net Income/(loss) Partnership
- -------------------------------------------------------------------------------------------------------------------
Beaumont Elderly Housing, L.P. $ 125,000 $ (30,000) 99%
Brownfield Seniors Community, Ltd. 128,000 (19,000) 99%
Buffalo Apartments, Ltd. 112,000 (4,000) 99%
Cambridge Court Associates
Limited Partnership 144,000 (29,000) 99%
Candleridge Apartments of
Bondurant L.P. 125,000 (9,000) 99%
Candleridge Apartments of Waukee
L.P. 134,000 (4,000) 99%
Carlinville Associates I, L.P. 64,000 (13,000) 99%
Cherokee Housing, Ltd. 75,000 (14,000) 99%
Chester Associates I, a Limited
Partnership 83,000 (20,000) 99%
Clinton Terrace Apartments, Ltd. 88,000 (3,000) 99%
Coffeeville Housing, Ltd. 63,000 (11,000) 99%
Coosa County Housing, Ltd. 71,000 (4,000) 99%
Crockett Manor, Ltd. 170,000 3,000 99%
Crockett Manor Senior Citizens
Complex, Ltd. 143,000 (6,000) 99%
Delta Manor, L.P. 155,000 (50,000) 99%
Eupora Apartments, L.P. 130,000 (27,000) 99%
Fairview Village V, Limited
Partnership 65,000 3,000 99%
Fox Lake Manor Limited Partnership 28,000 (13,000) 99%
Ft. Deposit Housing, Ltd. 81,000 (19,000) 99%
Gulf Coast Apartments, L.P. 224,000 (27,000) 99%
12
--------------------------------------------------------------------------------
For the year ended December 31, 2003
--------------------------------------------------------------------------------
Low Income
Housing Credits
Allocated to
Partnership Name Rental Income Net Income/(loss) Partnership
- -------------------------------------------------------------------------------------------------------------------
Gulf Coast Apartments of Long
Beach, L.P. 229,000 (22,000) 99%
Heritage Colonial Homes, L.P. 67,000 (33,000) 99%
HOI Limited Partnership of Benson 218,000 (28,000) 99%
HOI Limited Partnership of Dallas 254,000 (41,000) 99%
HOI Limited Partnership of Dunn 139,000 (22,000) 99%
HOI Limited Partnership of Kings
Mt. 171,000 (31,000) 99%
HOI Limited Partnership of Lee 322,000 (97,000) 99%
HOI Limited Partnership of Sanford 284,000 1,000 99%
HOI Limited Partnership of Selma 254,000 (18,000) 99%
Killbuck Limited Partnership 83,000 (22,000) 99%
Lake Ridge Apartments, L.P. 164,000 (33,000) 99%
Levelland Manor, L.P. 132,000 (18,000) 99%
Logan Park Associates Limited
Partnership 415,000 (35,000) 99%
Meadow Run Associates Limited
Partnership 178,000 (42,000) 99%
Oakdale Senior Housing Limited
Partnership 384,000 (180,000) 99%
Orange Beach Housing, Ltd. 121,000 (17,000) 99%
Parks I Limited Partnership 216,000 (23,000) 99%
Post Manor, L.P. 72,000 (40,000) 99%
Red Bud Associates I, a Limited
Partnership 74,000 (17,000) 99%
13
--------------------------------------------------------------------------------
For the year ended December 31, 2003
--------------------------------------------------------------------------------
Low Income
Housing Credits
Allocated to
Partnership Name Rental Income Net Income/(loss) Partnership
- -------------------------------------------------------------------------------------------------------------------
Steeleville Associates I, a
Limited Partnership 58,000 (15,000) 99%
Tanglewood Limited Partnership 115,000 (36,000) 99%
Village Lane Properties, a
Limited Partnership 173,000 (34,000) 99%
Whitted Forest Limited Partnership 188,000 (17,000) 99%
Wilcam Housing, Ltd. 74,000 (18,000) 99%
Wills Point Manor, L.P. 88,000 (7,000) 99%
Windmere Associates Limited
Partnership 176,000 (33,000) 99%
Woodlands Apartments, L.P. 177,000 (42,000) 99%
Woodview Limited Partnership 186,000 (23,000) 99%
---------- -------------
$7,220,000 $ (1,239,000) 99%
========== =============
14
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, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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, 2004, there were 966 Limited Partners and 16 assignees of
Units who were not admitted as 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. Any such distributions would be
made in accordance with the terms of the Partnership Agreement.
(d) No securities are authorized for issuance by the Partnership under equity
compensation plans.
(e) No unregistered securities were sold by the Partnership during the year
ended March 31, 2004.
Item 5b. Use of Proceeds
NOT APPLICABLE
Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
NONE
15
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31
-----------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ---------- ----------- ----------- ------------
ASSETS
Cash and cash equivalents $ 226,870 $ 251,056 $ 294,946 $ 310,526 $ 330,386
Investments in limited
partnerships, net 514,148 1,358,412 1,816,995 2,387,646 3,533,290
----------- ---------- ----------- ----------- ------------
$ 741,018 $ 1,609,468 $ 2,111,941 $ 2,698,172 $ 3,863,676
=========== ========== =========== =========== ============
LIABILITIES
Payables to limited
partnerships $ - $ - $ - $ 50,818 $ 50,818
Accrued fees and expenses
due to General Partner
and affiliates 2,660,187 2,392,085 2,122,532 1,850,328 1,581,300
PARTNERS' (DEFICIT) EQUITY (1,919,169) (782,617) (10,591) 797,026 2,231,558
----------- ---------- ----------- ----------- ------------
$ 741,018 $ 1,609,468 $ 2,111,941 $ 2,698,172 $ 3,863,676
=========== ========== =========== =========== ============
16
Selected results of operations, cash flows, and other information for the
Partnership are as follows:
For the Years Ended March 31
---------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
Loss from operations
(Note 1) $ (868,336)$ (362,294) $ (312,218) $ (353,285) $ (354,817)
Equity in losses of
limited
partnerships (268,216) (409,732) (495,399) (1,081,247) (959,660)
----------- ----------- ----------- ----------- -----------
Net loss $ (1,136,552)$ (772,026) $ (807,617) $(1,434,532) $(1,314,477)
=========== =========== =========== =========== ===========
Net loss allocated to:
General partner $ (11,366)$ (7,720) $ (8,076) $ (14,345) $ (13,145)
=========== =========== =========== =========== ===========
Limited partners $ (1,125,186)$ (764,306) $ (799,541) (1,420,187) (1,301,332)
=========== =========== =========== =========== ===========
Net loss per limited
partner unit $ (75.01)$ (50.95) $ (53.30) $ (94.68) $ (86.76)
=========== =========== =========== =========== ===========
Outstanding weighted
limited partner
units 15,000 15,000 15,000 15,000 15,000
=========== =========== =========== =========== ===========
Note 1 - Loss from operations for the year ended March 31, 2004 includes a
charge for impairment losses on investments in limited partnerships of $549,216.
(See Note 2 to the audited financial statements)
For the Years Ended March 31
---------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ---------- ----------
Net cash provided by
(used in):
Operating activities $ (25,711) $ (63,801) $ (14,092) $ (37,009) $ (21,505)
Investing activities 1,525 19,911 (1,488) 17,149 16,145
----------- ----------- ----------- ---------- ----------
Net change in cash and
cash equivalents (24,186) (43,890) (15,580) (19,860) (5,360)
Cash and cash
equivalents,
beginning of period 251,056 294,946 310,526 330,386 335,746
----------- ----------- ----------- ---------- ----------
Cash and cash
equivalents,
end of period $ 226,870 $ 251,056 $ 294,946 $ 310,526 $ 330,386
=========== =========== =========== ========== ==========
Low Income Housing Credits per Unit were as follows for the years ended December 31:
2003 2002 2001 2000 1999
------------- --------------- --------------- ------------- --------------
Federal $ 125 $ 136 $ 157 $ 157 $ 157
State - - - - -
------------- --------------- --------------- ------------- --------------
Total $ 125 $ 136 $ 157 $ 157 $ 157
============= =============== =============== ============= ==============
17
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 Company believes that the following discussion addresses the Partnership's
most significant accounting policies, which are the most critical to aid in
fully understanding and evaluating the Company'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 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 the estimated value derived by
management, generally consisting of the sum of the remaining future Low-Income
Housing Credits estimated to be allocable to the Partnership and the estimated
residual value to the Partnership. If an investment is considered to be
impaired, the Partnership reduces the carrying value of its investment in any
such Local Limited Partnership. The accounting policies of the Local Limited
Partnerships, generally, are expected to be 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 (Notes 2 and 3 to the audited financial statements).
Equity in losses of 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. 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. In subsequent annual financial
statements, upon receiving the actual annual results reported by the Local
Limited Partnerships, management reverses its prior estimate and records the
actual results reported by the Local Limited Partnerships. Equity in losses from
the Local Limited Partnerships allocated to the Partnership are not 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 are accelerated to the extent of losses available.
18
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. 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.
Income Taxes
No provision for income taxes has been recorded in the financial statements as
any liability and/or benefits for income taxes flows to the partners of the
Partnership and is their obligation and/or benefit. For income tax purposes the
Partnership reports on a calendar year basis.
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 Credit s 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 limited partners. 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
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 limited partners 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.
19
Substantially all of the Low Income Housing Credits anticipated to be realized
from the Local Limited Partnerships have been realized. The Partnership does not
anticipate being allocated a significant amount of Low Income Housing Credits
from the Local Limited Partnerships in the future. Until the Local Limited
Partnerships have completed the 15 year Low Income Housing Credit compliance
period risks exist for potential recapture of prior low Income Housing Credits.
No trading market for the Units exists or is expected to develop. Limited
partners may be unable to sell their Units except at a discount and should
consider their Units to be a long-term investment. Individual limited partners
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
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.
Anticipated future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership are payable to
the General Partner and /or its affiliates. Though the amounts payable to the
General Partner and/or its affiliates are contractually currently payable, the
Partnership anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual obligations until capital reserves are
in excess of the aggregate of the existing contractual obligations and the
anticipated future foreseeable obligations of the Partnership. The Partnership
would be adversely affected should the General Partner and/or its affiliates
demand current payment of the existing contractual obligations and/or suspend
services for this or any other reason.
Financial Condition
The Partnership's assets at March 31, 2004 consisted primarily of $227,000 in
cash and aggregate investments in the forty-eight Local Limited Partnerships of
$514,000. Liabilities at March 31, 2004 primarily consisted of $2,660,000 of
accrued annual management fees and operating expenses due to the General
Partner.
Results of Operations
Year Ended March 31, 2004 Compared to Year Ended March 31, 2003. The
Partnership's net loss for the year ended March 31, 2004 was $(1,137,000),
reflecting an increase of $(365,000) from the net loss experienced for the year
ended March 31, 2003 of $(772,000). The increase in net loss is due to an
increase in the loss from operations of $(506,000). The increase in loss from
operations was primarily caused by a $(549,000) increase in impairment loss. The
impairment loss is due to the fact that the net investment balance exceeded the
remaining tax credits, along with any residual value in seven limited
partnerships. This loss is offset by a $3,000 decrease in other operating
expenses, a $3,000 decrease in amortization and an increase of $37,000 in total
income. In addition the loss is also offset by a reduction in the equity in
losses of Local Limited Partnerships by $141,000. The decrease in equity in
losses of Local Limited Partnerships is primarily due to the Partnership not
recognizing certain losses of Local Limited Partnerships. The investments in
such Local Limited Partnerships had reached $0 at March 31, 2004. Since the
Partnership's liability with respect to its investments is limited, losses in
excess of investment are not recognized.
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 $(772,000),
reflecting a decrease of $36,000 from the net loss experienced for the year
ended March 31, 2002. The decline in net loss is due to a reduction in the
equity in losses of Local Limited Partnerships by $85,000. The decrease in
equity in losses of Local Limited Partnerships is primarily due to the
Partnership not recognizing certain losses of 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. The decrease in equity in
losses of limited partnerships is offset by an increase in loss from operations
by $50,000 due to a decrease in total income by $46,000 and an increase in
operating expenses by $4,000.
20
Liquidity and Capital Resources
Year Ended March 31, 2004 Compared to Year Ended March 31, 2003. Net cash used
during the year ended March 31, 2004 was $(24,000), compared to net cash used
for the year ended March 31, 2003 of $(44,000). The change was due primarily to
a decrease of $38,000 in net cash used by operating activities due to the fact
that there was an increase of $30,000 in reporting fees along with an $8,000
increase in distribution income which was offset by a decrease of $(18,000) in
distributions received from Local Limited Partnerships.
Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. Net cash used
during the year ended March 31, 2003 was $(44,000), compared to a net cash
decrease for the year ended March 31, 2002 of $(16,000). The change was due
primarily to an increase of $49,000 in net cash used by operating activities,
which was offset by an increase of $16,000 in distributions.
During the years ended March 31, 2004, 2003 and 2002, accrued payables, which
consist primarily of related party management fees due to the General Partner,
increased by $268,000, $270,000 and 272,000, respectively. The General Partner
does not anticipate that these accrued fees will be paid in full until such time
as capital reserves are in excess of future foreseeable working capital
requirements of the Partnership.
The Partnership expects its future cash flows, together with its net available
assets at March 31, 2004, to be sufficient to meet all currently foreseeable
future cash requirements. This excludes amounts owed to Associates by the
Partnership disclosed below.
Future Contractual Cash Obligations
The following table summarizes our future contractual cash obligations as of
March 31, 2004:
2005 2006 2007 2008 2009 Thereafter Total
----------- --------- --------- --------- --------- ------------ -------------
Asset Management Fees (1) $ 2,959,215 $ 299,028 $ 299,028 $ 299,028 $ 299,028 $ 12,260,148 $ 16,415,475
Capital Contributions
Payable to Lower Tier
Partnerships - - - - - - -
----------- --------- --------- --------- --------- ------------ -------------
Total contractual cash
obligations $ 2,959,215 $ 299,028 $ 299,028 $ 299,028 $ 299,028 $ 12,260,148 $ 16,415,475
=========== ========= ========= ========= ========= ============ =============
(1) Asset Management Fees are payable annually until termination of the
Partnership, which is to occur no later than 2050. The estimate of the fees
payable included herein assumes the retention of the Partnership's interest
in all Housing Complexes until 2050. Amounts due to the General Partners as
of March 31, 2004 have been included in the 2005 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, see Note 3 to the
audited financial statements included elsewhere herein.
Off-Balance Sheet Arrangements
The Partnership has no off-balance sheet arrangements.
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.
21
With that in mind, we are continuing our review of the Partnership's holdings,
with special emphasis on the more mature properties including those 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 limited partners 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 limited partners' return
wherever possible and, ultimately, to wind down those funds that no longer
provide tax benefits to limited partners. To date no properties in the
Partnership have been selected.
Impact of New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation
of Variable Interest Entities." FIN 46 provides guidance on when a company
should include the assets, liabilities, and activities of a variable interest
entity ("VIE") in its financial statements and when it should disclose
information about its relationship with a VIE. A VIE is a legal structure used
to conduct activities or hold assets, which must be consolidated by a company if
it is the primary beneficiary because it absorbs the majority of the entity's
expected losses, the majority of the expected returns, or both.
In December 2003, the FASB issued a revision of FIN 46 ("FIN 46R") to clarify
some of its provisions. The revision results in multiple effective dates based
on the nature as well as the creation date of the VIE. VIEs created after
January 31, 2003, but prior to January 1, 2004, may be accounted for either
based on the original interpretations or the revised interpretations. However,
all VIEs must be accounted for under the revised interpretations as of March 31,
2004, when FIN 46R is effective for the Partnership.
This Interpretation would require consolidation by the Partnership of certain
Local Limited Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the Partnership was the "Primary Beneficiary." Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other Limited Partners. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the potential
consolidation effects of the Interpretation and concluded that the adoption of
the Interpretation does not have a material impact on the financial statements
of the Partnership.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
WNC Housing Tax Credit Fund III, L.P.
We have audited the accompanying balance sheet of WNC Housing Tax Credit
Fund III, L.P. (a California Limited Partnership) (the "Partnership") as of
March 31, 2004 and the related statements of operations, partners' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit. 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 $341,000 of the total assets
of the Partnership at March 31, 2004 and $174,000 of the Partnership's equity in
losses of limited partnerships for the year ended March 31, 2004. 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 audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit and the reports of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audit and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of WNC Housing Tax Credit Fund III, L.P. (a
California Limited Partnership) as of March 31, 2004, and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
The Partnership currently has insufficient working capital to fund
obligations to an affiliate of the General Partner for asset management
services. As discussed in Note 1 to the financial statements, the Partnership
would be adversely affected should the affiliate of the General Partner of the
Partnership, WNC and Associates, Inc., demand current payment of existing
contractual obligations and/or suspend services for this or any other reason.
/s/ Reznick Group, PC
Bethesda, Maryland
October 21, 2004
23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
WNC Housing Tax Credit Fund III, L.P.
We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund
III, L.P. (a California Limited Partnership) (the "Partnership") as of March 31,
2003 and the related statements of operations, partners' equity (deficit) and
cash flows for the years ended March 31, 2003 and 2002. 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 58% of
the total assets of the Partnership at March 31, 2003, and 58% and 64% of the
Partnership's equity in losses of limited partnerships for the years ended March
31, 2003 and 2002, 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 standards of the Public Company
Accounting Oversight Board (United States.) Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits 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 Housing Tax Credit Fund III, L.P. (a California
Limited Partnership) as of March 31, 2003 and the results of its operations and
its cash flows for the years ended March 31, 2003 and 2002, in conformity with
accounting principles generally accepted in the United States of America.
/s/ BDO SEIDMAN, LLP
Costa Mesa, California
June 24, 2003
24
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
BALANCE SHEETS
March 31
------------------------------
2004 2003
------------- --------------
ASSETS
Cash and cash equivalents $ 226,870 $ 251,056
Investments in limited partnerships, net (Notes 2 and 3) 514,148 1,358,412
------------- --------------
$ 741,018 $ 1,609,468
============= ==============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accrued fees and expenses due to General
Partner and affiliates (Note 3) $ 2,660,187 $ 2,392,085
Commitments and contingencies
Partners' deficit:
General partner (59,713) (48,347)
Limited partners (15,000 units authorized;
15,000 units issued and outstanding) (1,859,456) (734,270)
------------- --------------
Total partners' deficit (1,919,169) (782,617)
------------- --------------
$ 741,018 $ 1,609,468
============= ==============
See reports of independent registered public accounting firms and accompanying notes to financial statements
25
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended March 31
--------------------------------------------
2004 2003 2002
------------ ------------ -------------
Interest income $ 2,155 $ 4,018 $ 8,115
Reporting fee income 32,386 1,883 38,691
Distribution income 8,167 - 4,870
------------ ------------ -------------
Total income 42,708 5,901 51,676
------------ ------------ -------------
Operating expenses:
Amortization (Notes 2 and 3) 25,307 28,940 25,922
Asset management fees (Note 3) 299,462 299,028 299,028
Impairment loss (Note 2) 549,216 - -
Other expenses 37,059 40,227 38,944
------------ ------------ -------------
Total operating expenses 911,044 368,195 363,894
------------ ------------ -------------
Loss from operations (868,336) (362,294) (312,218)
Equity in losses of limited
partnerships (Note 2) (268,216) (409,732) (495,399)
------------ ------------ -------------
Net loss $ (1,136,552) $ (772,026) $ (807,617)
============ ============ =============
Net loss allocated to:
General partner $ (11,366) $ (7,720) $ (8,076)
============ ============ =============
Limited partners $ (1,125,186) $ (764,306) $ (799,541)
============ ============ =============
Net loss per limited partnership unit $ (75.01) $ (50.95) $ (53.30)
============ ============ =============
Outstanding weighted limited partner
units 15,000 15,000 15,000
============ ============ =============
See reports of independent registered public accounting firms and accompanying notes to financial statements
26
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended March 31, 2004, 2003 and 2002
General Limited
Partner Partners Total
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2001 $ (32,551) $ 829,577 $ 797,026
Net loss (8,076) (799,541) (807,617)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2002 (40,627) 30,036 (10,591)
Net loss (7,720) (764,306) (772,026)
--------------- --------------- ---------------
Partners' deficit at March 31, 2003 (48,347) (734,270) (782,617)
Net loss (11,366) (1,125,186) (1,136,552)
--------------- --------------- ---------------
Partners' deficit at March 31, 2004 $ (59,713) $ (1,859,456) $ (1,919,169)
=============== =============== ===============
See reports of independent registered public accounting firms and accompanying notes to financial statements
27
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended
March 31
------------------------------------------------
2004 2003 2002
------------- ------------- --------------
Cash flows from operating activities:
Net loss $ (1,136,552) $ (772,026) $ (807,617)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Amortization 25,307 28,940 25,922
Equity in losses of limited
partnerships 268,216 409,732 495,399
Impairment loss 549,216 - -
Increase in accrued fees and
expenses due to General Partner
and affiliates 268,102 269,553 272,204
------------- ------------- --------------
Net cash used in operating activities (25,711) (63,801 ) (14,092)
------------- ------------- --------------
Cash flows from investing activities:
Investments in limited partnerships - - (5,000)
Distributions from limited
partnerships 1,525 19,911 3,512
------------- ------------- --------------
Net cash provided by (used in)
investing activities 1,525 19,911 (1,488)
------------- ------------- --------------
Net decrease in cash and
cash equivalents (24,186) (43,890) (15,580)
Cash and cash equivalents, beginning
of period 251,056 294,946 310,526
------------- ------------- --------------
Cash and cash equivalents, end of
period $ 226,870 $ 251,056 $ 294,946
============= ============= ==============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
============= ============= ==============
See reports of independent registered public accounting firms and accompanying notes to financial statements
28
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund III, L.P., a California Limited Partnership (the
"Partnership"), was formed on May 10, 1991 under the laws of the State of
California. The Partnership was formed to invest primarily in other limited
partnerships (the "Local Limited Partnerships") which own and operate
multi-family housing complexes (the "Housing Complexes") that are eligible for
low income housing credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner of the Partnership is WNC Tax Credit Partners, L.P. (the
"General Partner"). WNC & Associates, Inc. ("Associates") and Wilfred N. Cooper,
Sr. are the general partners of WNC Tax Credit Partners, L.P. The chairman and
president of Associates own substantially all of the outstanding stock of
Associates. The business of the Partnership is conducted primarily through
Associates, as the Partnership and General Partner has no employees of its own.
The Partnership shall continue in full force and effect until December 31, 2050
unless terminated prior to that date pursuant to the partnership agreement 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 15,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on September 30, 1993 at
which time 15,000 Units representing subscriptions in the amount of $15,000,000
had been accepted. The General Partner has a 1% interest in operating profits
and losses, taxable income and losses, cash available for distribution from the
Partnership and tax credits. The limited partners will be allocated the
remaining 99% of these items in proportion to their respective investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partner has received proceeds
equal to its capital contribution and a subordinated disposition fee (as
described in Note 3) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
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 price which would result in the Partnership realizing cash
distributions or proceeds from the transaction. Accordingly, the Partnership may
be unable to distribute any cash to its limited partners. Low Income Housing
Credits may be the only benefit from an investment in the Partnership.
29
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
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
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 limited partners 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.
Substantially all of the Low Income Housing Credits anticipated to be realized
from the Local Limited Partnerships have been realized. The Partnership does not
anticipate being allocated a significant amount of Low Income Housing Credits
from the Local Limited Partnerships in the future. Until the Local Limited
Partnerships have completed the 15 year Low Income Housing Credit compliance
period risks exist for potential recapture of prior low Income Housing Credits.
No trading market for the Units exists or is expected to develop. Limited
partners may be unable to sell their Units except at a discount and should
consider their Units to be a long-term investment. Individual limited partners
will have no recourse if they disagree with actions authorized by a vote of the
majority of Limited Partners.
Anticipated future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership are payable to
the General Partner and /or its affiliates. Though the amounts payable to the
General Partner and/or its affiliates are contractually currently payable, the
Partnership anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual obligations until capital reserves are
in excess of the aggregate of the existing contractual obligations and the
anticipated future foreseeable obligations of the Partnership. The Partnership
would be adversely affected should the General Partner and/or its affiliates
demand current payment of the existing contractual obligations and/or suspend
services for this or any other reason.
30
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
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 including those
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 limited partners 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 limited partners' return wherever possible and, ultimately, to wind
down those funds that no longer provide tax benefits to limited partners. To
date 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 the estimated value derived by
management, generally consisting of the sum of the remaining future Low-Income
Housing Credits estimated to be allocable to the Partnership and the estimated
residual value to the Partnership. If an investment is considered to be
impaired, the Partnership reduces the carrying value of its investment in any
such Local Limited Partnership. The accounting policies of the Local Limited
Partnerships, generally, are expected to be consistent with those of the
Partnership. Costs incurred by the Partnership in acquiring the investments are
capitalized as part of the investment account and are being amortized over 30
years (see Notes 2 and 3).
Equity in losses of 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. 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. In subsequent annual financial
statements, upon receiving the actual annual results reported by the Local
Limited Partnerships, management reverses its prior estimate and records the
actual results reported by the Local Limited Partnerships. Equity in losses from
the Local Limited Partnerships allocated to the Partnership are not 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 are accelerated to the extent of losses available (see
Note 3). 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.
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.
31
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Cash and Cash Equivalents
- -------------------------
The Partnership considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents. As of March 31,
2004 and 2003, the Partnership had no cash equivalents.
Concentration of Credit Risk
- ----------------------------
At March 31, 2004, the Partnership has maintained cash balances at a certain
financial institution in excess of the maximum federally insured amounts.
Net Loss Per Limited Partner Unit
- ---------------------------------
Net loss per limited partner unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net 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
during the years presented, as defined by SFAS No. 130.
Income Taxes
- ------------
No provision for income taxes has been recorded in the accompanying financial
statements as any liability and/or benefits for income taxes as income taxes
flows to the partners of the Partnership and is their obligation and/or benefit.
For income tax purposes the Partnership reports on a calendar year basis.
New Accounting Pronouncements
- -----------------------------
In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation
of Variable Interest Entities." FIN 46 provides guidance on when a company
should include the assets, liabilities, and activities of a variable interest
entity ("VIE") in its financial statements and when it should disclose
information about its relationship with a VIE. A VIE is a legal structure used
to conduct activities or hold assets, which must be consolidated by a company if
it is the primary beneficiary because it absorbs the majority of the entity's
expected losses, the majority of the expected returns, or both.
In December 2003, the FASB issued a revision of FIN 46 ("FIN 46R") to clarify
some of its provisions. The revision results in multiple effective dates based
on the nature as well as the creation date of the VIE. VIEs created after
January 31, 2003, but prior to January 1, 2004, may be accounted for either
based on the original interpretations or the revised interpretations. However,
all VIEs must be accounted for under the revised interpretations as of March 31,
2004, when FIN 46R is effective for the Partnership.
32
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
This Interpretation would require consolidation by the Partnership of certain
Local Limited Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the Partnership was the "Primary Beneficiary." Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other Limited Partners. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the potential
consolidation effects of the Interpretation and concluded that the adoption of
the Interpretation does not have a material impact on the financial statements
of the Partnership.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
For all periods presented, the Partnership had acquired limited partnership
interests in forty-eight Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 1,685 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 reflected in the
balance sheets at March 31, 2004 and 2003, are approximately $4,356,000 and
$3,931,000, respectively, greater than the Partnership's combined 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, acquisition, selection, and other costs
related to the acquisition of the investments which have been capitalized in the
Partnership's investment account and impairment losses recorded 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 losses recorded by the Partnership for
the three month period ended March 31.
Equity in losses of the Local Limited Partnerships is recognized in the
financial statements until the related investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
A loss in value from a Local Limited Partnership other than a temporary decline
would be recorded as an impairment loss. Impairment is measured by comparing the
investment carrying amount to the sum of the total amount of the remaining tax
credits allocated to the fund and the estimated residual value of the
investment. Accordingly, the Partnership recorded an impairment loss of $549,216
during the year ended March 31, 2004.
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.
33
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
At March 31, 2004 and 2003, 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,
2004, 2003 and 2002 amounting to approximately $957,000, $928,000 and $823,000,
respectively, have not been recognized. As of March 31, 2004, the aggregate
share of net losses not recognized by the Partnership amounted to $4,115,000.
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
------------------------------------------------
2004 2003 2002
------------- -------------- --------------
Investments per balance sheet, beginning of period $ 1,358,412 $ 1,816,995 $ 2,387,646
Capital contributions paid - - 5,000
Capital contributions payable to limited partnerships - - (50,818)
Impairment loss (549,216) - -
Equity in losses of limited partnerships (268,216) (409,732) (495,399)
Distributions received from limited partnerships (1,525) (19,911) (3,512)
Amortization of paid acquisition fees and costs (25,307) (28,940) (25,922)
------------- -------------- --------------
Investments per balance sheet, end of period $ 514,148 $ 1,358,412 $ 1,816,995
============= ============== ==============
34
WNC HOUSING TAX CREDIT FUND III, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2004, 2003 and 2002
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
2003 2002
--------------- ---------------
ASSETS
Buildings and improvements, net of accumulated
depreciation for 2003 and 2002 of $20,391,000 and
$18,503,000, respectively $ 40,940,000 $ 42,602,000
Land 4,181,000 4,173,000
Other assets