INDEPENDENT AUDITORS' REPORT
Partners
Century Pacific Tax Credit Housing Fund II
St. Louis, Missouri
We have audited the accompanying balance sheet of Century
Pacific Tax Credit Housing Fund-II as of March 31, 1996 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. The financial
statements of Century Pacific Tax Credit Housing Fund-II
as of March 31, 1995 and 1994, were audited by other auditors,
whose reports dated June 16, 1995 and June 17, 1994,
respectively, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally
accepted auditing standards. 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 the significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present faily, in all material respects, the financial
position of Century Pacific Tax Credit Fund-II as of March
31, 1996 and the results of its operation and its cash
flows for the year then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the partnership will continue as a going
concern. As discussed in Notes 2, 3 and 4 to the financial
statements, the Partnership has suffered recurring losses
from operations and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going
concern. Management's plans regarding these matters are
described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
May 30, 1996
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
STATEMENT OF PARTNERS' EQUITY
For the Years Ended March 31, 1996, 1995 and 1994
General Limited
Partners Partners Total
_________ ___________ ___________
Partners'Equity(Deficit)
-April 1,1993 $(32,761) $1,662,024 $1,629,263
Net Loss (4,511) (446,579) (451,090)
__________________________________
Partners'Equity(Deficit)
-March 31, 1994 (37,272) (1,215,445) $1,178,173
Net Loss (4,195) (415,336) (419,531)
__________________________________
Partners'Equity(Deficit)
-March 31, 1995 (41,467) 800,109 758,642
Net Loss (3,311) (327,774) (331,085)
__________________________________
Partners'Equity(Deficit)
-March 31, 1996 $(44,778) $472,335 $427,557
=============================================================
Percentage Interest
-March 31, 1996 1% 99% 100%
=============================================================
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
Statement of Cash Flows
For the Years Ended March 31,
_______________________________
1996 1995 1994
_________ _________ _________
Cash Flows From Operating
Activities
Net Loss $(331,085) $(419,531) $(451,090)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Amortization of organ-
ization costs - 14,155 50,934
Equity in net losses
of Operating Part. 158,170 226,083 228,942
Change in Assets and
liabilities:
Incr(decr) in accounts
payable and acrued exp (5,718) 5,744 (16,232)
Incr in due to
affiliates 169,697 174,214 187,361
Incr in loan payable-
affiliate 9,918 - -
_____________________________________________________________
Net Cash Provided By (Used in)
Operating Activities 982 665 (85)
_____________________________________________________________
Net Increase(Decrease) in Cash 982 665 (85)
Cash, Beginning Of Year 1,196 531 616
_____________________________________________________________
Cash, End Of Year $2,178 $1,196 $531
=============================================================
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
NOTES TO FINANCIAL STATEMENTS
March 31, 1996, 1995 And 1994
1. Summary Of Significant Accounting Policies
Basis Of Accounting
The Partnership maintains its financial records on the
tax basis. Memorandum entries, while not recorded in
the records of the Partnership, have been made in
order to prepare the financial statements in
accordance with generally accepted accounting
principles.
On August 7, 1991, management of the Partnership changed from
a calendar year end to a fiscal year end of March 31 for
financial reporting purposes. Accordingly, the Partnership's
quarterly periods end June 30, September 30 and December 31.
The Operating Partnerships, for financial reporting purposes,
have a calendar year. The Partnership, as well as the
Operating Partnerships, have a calendar year for income tax
purposes.
Estimates And Assumptions
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities
at the date of the financial statements and the
reported amounts of revenues and expenses during
the reported period. Actual results could differ
from those estimates.
Investments In Operating Partnerships
The Partnership uses the equity method to account
for its investment in the Operating Partnerships
in which it has invested (Note 4). Under the equity
method of accounting, the investment is carried
at cost and adjusted for the Partnership's
share of the Operating Partnerships' results
of operations and by cash distributions received.
Equity in the loss of each Operating Partnership
allocated to the Partnership is not recognized to
the extent that the investment balance would
become negative.
Syndication Costs
Public offering costs have been recorded as a
direct reduction to the capital accounts of the
Limited Partners.
Income Taxes
No provision has been made for income taxes in the
accompanying financial statements since such
taxes and/or the recapture of the Low-Income Housing
Tax Credit benefits received, if any, are the
liability of the individual partners. The
Partnership uses the accrual method of accounting for
tax purposes.
Net Loss Per Unit Of Limited Partnership Interest
Net loss per unit of limited partnership interest is
calculated based upon the weighted average number
of units of limited partnership interest (units)
outstanding, which is 5,754 for the years ending
March 31, 1996, 1995 and 1994.
2. Operations
Century Pacific Tax Credit Housing Fund-II, a California
limited partnership, (the Partnership or CPTCHF-II), was
formed on September 2, 1988 for the purpose of raising
capital by offering and selling limited partnership
interests and then acquiring limited partnership
interests in partnerships (the Operating Partnerships)
owning and operating existing residential apartment
rental properties (the Properties).
The general partners of the Partnership are Century Pacific
Capital II Corporation, a California corporation (CPII),
and Irwin Jay Deutch, an individual (collectively,
the general partners). The general partners and
affiliates of the general partners (the general partners
and affiliates) have interests in the Partnership and
receive compensation from the Partnership and the
Operating Partnerships (Note 3).
The Properties qualify for the Low-Income Housing Tax
Credit established by Section 42 of the Tax Reform Act
of 1986 (the Low-Income Housing Tax Credit). These
properties are leveraged low-income multifamily
residential complexes and receive one or more forms
of assistance from federal, state or local governments,
or agencies (the Government Agencies).
In September 1988, the Partnership began raising
capital from sales of limited partnership interests,
at $1,000 per unit, to limited partners. The Partner-
ship authorized the issuance of a maximum of 25,000
Partnership Units of which 5,754 were subscribed
and issued. The limited partnership interest offering
closed as of December 31, 1989.
As of March 31, 1996, the Partnership has acquired limited
partnership interests of 90% in Washington Courts Limited
Partnership and 60% in Laurel-Clayton Limited Partnership,
two existing Operating Partnerships which own apartment
rental properties.
The Partnership is currently experiencing a liquidity
problem as the Partnership's Operating Partnerships
have not achieved operating results required to provide
the Partnership with sufficient cash distributions to
fund the Partnership's administrative costs.
As a result of the foregoing, the Partnership has
been dependent upon its affiliates and the general
partners for continued financial support to meet
its expenses. Though there can be no assurance,
management believes that affiliates and or the
general partners, though not required to do so,
will continue to fund operations of the Partnership
and defer receipt of payment on management fees and
allocated overhead expenses. Unpaid management fees
and allocated overhead expenses will accrue for payment
in future operating years. Management believes that
these factors do not permanently impair the net carrying
value of the Partnership's investment in the Operating
Partnerships.
3. Transactions With The General Partners And Affiliates
Of The General Partners
The General Partners of the Partnership are CPII and
Irwin Jay Deutch. Century Pacific Placement
Corporation (CPPC), an affiliate of the general
partners, served as the broker-dealer-manager for
sales of the limited partnership interests in the
Partnership. Century Pacific Realty Corporation
(CPRC), an affiliate of CPII, is a general partner
in each of the Operating Partnerships.
The general partners have an aggregate one percent
interest in the Partnership. CPRC has a one-half
percent interest in each of the Operating Partnerships.
The general partners and affiliates receive
compensation and reimbursement of expenses from the
Partnership, as set forth in the limited partnership
agreement, for their services in managing the Partner-
ship and its business. Pursuant to the partnership
agreement, the Partnership is required to pay CPII
an annual management fee for its services in connection
with the management of the affairs of the Partnership.
The annual management fee is equal to .5% of invested
assets (as defined by the partnership agreement). The
general partners and affiliates also receive compensation
and reimbursement of expenses from the Operating
Partnerships. This compensation and reimbursement
includes services provided to the Partnership during
its offering stage, acquisition stage and operational
stage.
The general partners and affiliates earned the following
fees for services provided to the Partnership and
were entitled to reimbursement for costs incurred
by the general partners and affiliates on behalf of
the Partnership and the Operating Partnerships for
the years ended March 31, 1996, 1995 and 1994 as follows:
1996 1995 1994
_______ _______ ______
Fees and reimbursement from the
Partnership:
Reimbursement for overhead
allocated from Century
Pacific Investment Corp. $37,600 $37,600 $37,600
Partnership management
fee (CPII) 132,097 132,814 131,867
____________________________
169,697 170,414 169,467
===============================================================
At March 31, 1996 and 1995, amounts due to affiliates
consist of fees and certain general and administrative
costs payable by the Partnership to the general partners
and affiliates totalling $919,214 and $749,517, res-
pectively.
At March 31, 1996 and 1995, CPII owed the Partnership
for an unsecured, noninterest bearing advance of $770.
At March 31, 1996 and 1995, CPRC was owed $39,918 and
$30,000, respectively, for a noninterest bearing,
demand, cash advance to the Partnership.
The general partners may advance funds to the Part-
nership to fund operating deficits, but are not obligated
to do so. Such advances shall be evidenced by a
promissory note of a term no more than 12 months
in length and at a rate of interest no lower than the
prime rate. All such loans shall be repaid prior to
any distributions of net cash. At March 31, 1996 and
1995, the Partnership had no outstanding advances
due to the general partners.
4. Investments In Operating Partnerships
At March 31, 1996 and 1995, the Partnership owned
limited partnership interests in two Operating
Partnerships, each of which has invested in a Property.
Investments in Operating Partnerships consist of the
following:
1996 1995
________ ________
Cash contributions to Operating
Partnerships to fund purchase
of properties and acquisition
and organization costs 4,536,020 4,536,020
Equity in net losses of Operating
Partnerships (3,140,953) (2,982,783)
__________ __________
$1,395,067 $1,553,237
===========================================================
The names and locations of the Properties in which
the Operating Partnerships hold beneficial interests
are as follows:
Name of Name and
Operating Partnerships Location of Property
________________________ ___________________
Washington Courts Limited Washington Courts
Partnership Chicago, Illinois
Laurel-Clayton Limited Plumley Village
Partnership Boston, Massachusetts
A summary of the combined balance sheet as of December 31,
1995 and 1994 and statements of operations of the afore-
mentioned Operating Partnerships for the years then ended
follows:
Combined Balance Sheet
Assets
1995 1994
_________ ________
Cash $304,030 $594,933
Reserve for replacements 652,506 319,492
Land and buildings 19,352,591 20,570,605
Other Assets 1,214,799 1,221,155
_______________________
$21,523,926 $22,706,185
=======================
Liabilities and Stockholders' Equity (Deficit)
Notes Payable $23,026,415 $22,875,785
Other Liabilities 646,699 777,762
________________________
23,673,114 $23,653,547
Partners' Equity (Deficit) (2,149,188) (947,362)
_______________________
$21,523,926 $22,706,185
==============================================================
Combined Statement of Operations
1995 1994
_______________________
Revenues
Rental Income $5,146,633 $4,704,243
Other Income 755,470 837,604
________________________
Total Revenues $5,902,103 $5,541,847
Expenses
Utilities 792,073 826,249
Repairs & Maintenance 1,601,491 1,553,271
Management Fees 308,007 277,111
Other Operating Expenses 1,356,755 1,228,086
Interest 1,803,167 1,826,897
Depreciation and Amortization 1,074,633 997,195
_______________________
Total Expenses 6,967,580 6,708,809
_______________________
Net Loss $(1,034,023) $(1,166,962)
=======================
Allocation of Loss
General Partners and other limited $(342,014) $(392,216)
CPTCHF-II (692,009) (774,746)
_______________________
$(1,034,023) $(1,166,962)
==============================================================
Restrictive Covenants And Agreements Involving The Operating
Partnerships
The Federal Housing Administration (FHA) and the Housing
and Urban Development (HUD) exercise control over the
projects through provisions of Regulatory Agreements
(the Agreements). The Agreements restrict the Projects,
without prior written approval from HUD, from encumbering,
acquiring, altering or disposing of land, buildings
and equipment; using the Property for any purpose other
than the use originally intended; engaging in any other
business or activity; and paying distributions to
partners, compensation to officers or directors, or
for any purpose other than reasonable operating expenses.
The Agreements also stipulate that FHA and HUD shall
control the rental rates, rate of return on investment
and method of operation.
In addition, the Agreements require Properties to make
cash deposits on a monthly basis into a reserve fund
for replacements. The respective mortgagees are the
designated custodians of the reserve funds and withdrawals
can only be made with HUD approval.
5. Fair Value Of Financial Instruments
The following methods and assumptions were used to
estimate the fair value of each class of financial
instruments:
Cash
The carrying amount approximates fair value.
Accounts Payable And Accrued Expenses
The carrying amount approximates fair value.
Loan Payable - Affiliate
The carrying amount approximates the fair value due to
the short-term nature of the note.
Estimated fair values of the Company's financial
instruments, all of which are held for nontrading
purposes, are as follows:
1996
Carrying Fair
Amount Value
______ _______
Cash $2,178 $2,178
Accounts Payable and
accrued expenses (11,326) (11,326)
Loan Payable - affiliate (39,918) (39,918)
The estimated fair value amounts presented herein have
been determined using available market information
and appropriate valuation methodologies and are
not necessarily indicative of the amounts the Company
could realize in a current market exchange.
Schedule III
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING
PARTNERSHIPS IN WHICH CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1995
Washington Courts Apts. Plumley Village Apts.
Chicago, Illinois Boston, Massachus
103 Res. Units 430 Res. Units
___________________ _________________
Encumbrances $5,076,014 $17,950,401
Initial Cost to Operating
Partnership:
Land 75,300 1,100,000
Buildings & Improvements 1,720,666 17,383,785
Cost Capitalized Subsequent to
Acquisition:
Land --- ---
Buildings & Improvements 5,318,902 820,725
Gross Amount at Which Carried at
Close of Year:
Land 75,300 1,100,000
Buildings & Improvements 7,039,568 18,204,510
Total 7,114,868 19,304,510
Accumulated Depreciation:
Buildings and Improvem 1,570,414 5,496,373
Date of Construction 1991 1973
Date Acquired 1/89 9/89
Life Upon Which Depreciation
in Latest Income Statement
is Computed 27.5 years 27.5 years
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH
CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1995
NOTE 1 - DESCRIPTION OF PROPERTIES
The Properties held by the Operating Partnerships in
which CPTCHF-II has invested are housing projects,
primarily for families and elderly or handicapped
individuals of low and moderate income.
NOTE 2 - SCHEDULE OF ENCUMBRANCES
Operating Partnership Name and Property Name
____________________________________________
Washington Courts L/P Laurel-Clayton L/P
Washington Courts Plumley Village Total
__________________ ______________ __________
Mortgage Notes $5,076,014 $8,342,889 $13,418,903
Residual Notes - 4,047,488 4,047,488
Purchase Note - 5,154,129 5,154,129
Other Notes - 405,895 405,895
________________ _____________ __________
Total $5,076,014 $17,950,401 $23,026,415
================ ============= ==========
NOTE 3 - RECONCILIATION OF REAL ESTATE AND ACCUMULATED
DEPRECIATION
Accumulated
Cost Depreciation
___________ ____________
Balance at December 31, 1992 $26,052,427 $4,045,552
Additions during year:
Depreciation - 967,366
Improvements 16,161 -
__________ _________
Balance at December 31, 1993 26,068,588 5,012,918
Additions during year:
Depreciation - 979,236
Improvements 189,446 -
__________ __________
Balance at December 31, 1994 26,258,034 5,992,154
Additions during year:
Depreciation - 1,074,633
Improvements 161,344 -
___________ __________
$26,419,378 $7,066,787
=========== ==========
Schedule IV
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
MORTGAGE LOANS ON REAL ESTATE OF OPERATING
PARTNERSHIPS IN WHICH CPTCHF-II HAS
LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1995
Washington Courts Laurel-Clayton
Limited Partnership Limited Partnership
(Washington Courts) (Plumley Village) TOTAL
________________ ______________ ______
Interest Rate 9.25% 8.5%
Final Maturity Date 2031 2012
Monthly Payments to Maturity
(Net of HUD Subsidy) $40,841 $23,015 63,856
Original Face Amount of 5,165,400 10,635,000 15,800,400
Mortgage
Carrying Amount of
Mortgage 5,076,014 8,342,889 13,418,903
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL
ESTATE OF OPERATING PARTNERSHIPS IN WHICH
CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS
DECEMBER 31, 1995
NOTE 1 - DESCRIPTION
Each Operating Partnership has invested in a Property.
Laurel-Clayton Limited Partnership assumed a mortgage
loan obligation from the seller of the Property. The
mortgage loan obligation is insured by the United
States Department of Housing and Urban Development
and is secured by the land and buildings of the
Property.
Washington Courts Limited Partnership has obtained
permanent financing in the principal amount of
$5,165,400 which is insured by the Federal Housing
Administration. The loan bears interest at 9.25%
per annum. The note will be amortized over a period
of 40 years. Prepayment is prohibited during the
construction period and for ten years from the date
of completion of construction.
NOTE 2 - RECONCILIATION OF MORTGAGES
For the Year Ended
December 31, 1995
_______________________
Mortgage Residual
Loans Notes
__________ __________
Balance at beginning of year $13,656,358 $3,823,488
Additions during year:
Accrued Interest --- 224,000
Deductions during year:
Payments 237,455 ---
__________ _________
Balance at end of year $13,418,903 $4,047,488
========== ==========