UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
Commission File Number 33-24537
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4178283
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
1 East Stow Road
Marlton, NJ 08053
(Address of principal executive offices) (Zip Code)
(856)596-3008
(Registrant's telephone number, including area code)
No Change
(Former name or former address, if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
1
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements and Supplementary Data ........ 3
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ............ 11
Item 3 Quantitative and Qualitative Disclosures
About Market Risk .............................. 11
Item 4 Controls and Procedures ............................ 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings .................................. 12
Item 2 Unrestricted Sales of Equity Securities and Use of
Proceeds ....................................... 12
Item 3 Defaults Upon Senior Securities .................... 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information .................................. 12
Item 6 Exhibits and Reports on Form 8-K ................... 12
SIGNATURE
CERTIFICATIONS
EXHIBITS
2
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
BALANCE SHEETS
June 30, March 31,
2004 2004
(Unaudited) (Audited)
----------- -----------
ASSETS
Advance to General Partners $ 871 $ 871
Investments in Limited Partnerships
(Note 5) 0 0
----------- -----------
$ 871 $ 871
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Accounts Payable and Accrued Expenses $ 5,800 $ 5,800
Amounts Payable to Related Parties
(Note 4) 2,319,395 2,309,995
Advance from Affiliates 40,594 40,594
----------- -----------
2,365,789 2,356,389
----------- -----------
Commitments and Contingencies
Partners' Deficit, per accompanying
statement
General Partners (72,703) (72,609)
Limited Partners, $1,000 stated value
per unit, 25,000 units authorized,
5,754 units issued and outstanding (2,292,215) (2,282,909)
----------- -----------
(2,364,918) (2,355,518)
----------- -----------
$ 871 $ 871
=========== ===========
The accompanying notes are an integral part of this financial statement.
3
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
2004 2003
------- -------
EXPENSES:
General & Adm. (Note 4) $ 9,400 $ 9,400
Equity in Net Losses of
Operating Partnership
(Note 5) 0 0
------- -------
9,400 9,400
------- -------
Net Loss $(9,400) $(9,400)
======= =======
Allocation of Net Loss
General Partners $ (94) $ (94)
Limited Partners (9,306) (9,306)
------- -------
$(9,400) $(9,400)
======= =======
Net Loss Per Unit of Limited
Partnership Interest $ (1.62) $ (1.62)
======= =======
Average Number of Units
Outstanding 5,754 5,754
======= =======
The accompanying notes are an integral part of this financial statement.
4
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
STATEMENTS OF PARTNERS' DEFICIT
June 30, 2004
(Unaudited)
General Limited
Partners Partners Total
----------- ----------- -----------
Balance at April 1, 2003 $ (72,200) $(2,242,418) $(2,314,618)
Net Loss (409) (40,491) (40,900)
----------- ----------- -----------
Balance at March 31, 2004 (72,609) (2,282,909) (2,355,518)
Net Loss (94) (9,306) (9,400)
----------- ----------- -----------
Partners' Deficit at
June 30, 2004 $ (72,703) $(2,292,215) $(2,364,918)
=========== =========== ===========
Percentage Interest
June 30, 2004 1% 99% 100%
=========== =========== ===========
The accompanying notes are an integral part of this financial statement.
5
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
2004 2003
------- -------
Cash Flow from Operating
Activities:
Net Loss $(9,400) $(9,400)
Adjustments to reconcile net loss
to net cash provided by/(used in)
operating activities:
Increase in due to affiliates 9,400 9,400
------- -------
Net Cash Provided by/(Used in)
Operating Activities $ - $ -
------- -------
Net Increase/(Decrease) in Cash - -
Cash at Beginning of Period - -
------- -------
Cash at End of Period $ - $ -
======= =======
The accompanying notes are an integral part of this financial statement.
6
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
a California limited partnership
JUNE 30, 2004
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PARTNERSHIP AND ITS ORGANIZATION:
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 and selling limited partnership interests and then
acquiring limited partnership interests in partnerships (the "Operating
Partnerships") owning and operating existing residential apartment properties.
As of June 30, 2004, the Partnership has a limited partnership interest of 60%
in Laurel-Clayton Limited Partnership, which owns one apartment rental property
in Massachusetts (the "Property"). As of December 31, 2004, the Partnership
divested of its one remaining interest in an Operating Partnership which sold
its apartment rental property in Massachusetts. As of December 31, 2004, the
Partnership is no longer active.
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 4).
The Property qualifies for the "Low-Income Housing Tax Credit" established by
Section 42 of the Tax Reform Act of 1986 (the "Low-Income Housing Tax Credit").
The property is a leveraged low-income multifamily residential complex, and
receives 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. The limited partnership offering
closed as of December 31, 1989, with 5,754 units subscribed and issued.
Effective March 31, 2005, the Partnership has been dissolved (see Note 6).
Basis of Presentation
The accompanying unaudited financial statements of Century Pacific Tax Credit
Housing Fund II as of June 30, 2004 and March 31, 2004 (the March 31, 2004
financial information included herein has been extracted from the Partnership's
audited financial statements on Form 10-K) and for the three months ended June
30, 2004 and 2003 have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X under the Securities and Exchange Act of 1934. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of the Partnership's management, all adjustments
(consisting of only normal recurring adjustments) considered necessary to fairly
present the financial statements have been made.
The statement of operations for the three months ended June 30, 2004 and 2003
are not necessarily indicative of the results that may be expected for the
entire year. These statements should be read in conjunction with the financial
statements and related notes thereto included on Form 10-K for the years ended
March 31, 2004 and 2003.
7
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
a California limited partnership
JUNE 30, 2004
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Investments in Operating Partnerships
The Partnership uses the equity method to account for its investment in the
Operating Partnership in which it has invested (Note 5). Under the equity method
of accounting, the investment is carried at cost and adjusted for the
Partnership's share of the Operating Partnership's results of operations and by
cash distributions received. Equity in the loss of the Operating Partnership
allocated to the Partnership is not recognized to the extent that the investment
balance would become negative.
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
the financial statements to reflect accounting principles generally accepted in
the United States of America.
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 Partnership, for financial reporting purposes, has a
calendar year. The Partnership, as well as the Operating Partnership, has a
calendar year for income tax purposes.
Estimates and Assumptions
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 reported period. Actual results could differ from those estimates.
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
Credits 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.
8
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
a California limited partnership
JUNE 30, 2004
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Partnership as a going concern. The
Partnership's Operating Partnership has not achieved the operating results
required to provide the Partnership with sufficient cash distributions to fund
the Partnership's administrative costs. Additionally, as of June 30, 2004, the
Partnership has incurred allocated losses from its Operating Partnership to the
extent of the Partnership's cash contributions. As a result of the foregoing,
the Partnership is dependent upon the general partners and affiliates for
continued financial support.
Management maintains that the general partners and affiliates, though not
required to do so, will continue to fund current operations by deferring payment
to related parties of allocated overhead expenses, and by funding any
Partnership operating costs. Unpaid allocated overhead expenses will accrue and
become payable when the Operating Partnerships either generate sufficient cash
distributions to the Partnership to cover such expenses or when the Operating
Partnerships is sold. In December 2004, the General Partner completed the sale
of the Property. Proceeds from the sale were used to repay related party
payables. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. See also Note 6.
NOTE 4 - 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 the Operating Partnership. The
General Partners have an aggregate one percent interest in the Partnership. CPRC
has a one-half percent interest in the Operating Partnership.
The General Partners and their Affiliates receive compensation and reimbursement
of expenses from the Partnership, as set forth in the limited partnership
agreement, for their services in managing the Partnership 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
affairs of the Partnership. The annual Management Fee is equal to .5% of
Invested Assets (as defined by the partnership agreement). CPII has waived this
fee for the three-months ended June 30, 2004 and 2003. The General Partners and
Affiliates also receive compensation and reimbursement of expenses from the
Operating Partnerships. This compensation and reimbursement include services
provided to the Partnership during its offering stage, acquisition stage and
operational stage. For the three months ended June 30, 2004 and 2003, the
Partnership reported $9,400 in each period, for general and administrative
expenses payable to the General Partners and their Affiliates.
At June 30, 2004 and March 31, 2004, unsecured non-interest bearing amounts due
to Affiliates consist of fees and certain general and administrative costs
payable to the General Partners and Affiliates totaling $1,751,141 and
$1,741,741, respectively.
9
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
a California limited partnership
JUNE 30, 2004
NOTES TO FINANCIAL STATEMENTS (Continued)
At June 30, 2004 and March 31, 2004, CPII was owed $568,254 for an unsecured
non-interest bearing, demand cash advance made to the Partnership.
The general partners may advance funds to the Partnership to fund operating
deficits, but are not obligated to do so. All such loans shall be repaid prior
to any distributions of net cash flow. At June 30, 2004 and March 31, 2004, the
Partnership had no outstanding advances due to the general partners.
NOTE 5 - INVESTMENTS IN LIMITED PARTNERSHIPS:
At June 30, 2004 and March 31, 2004, the Partnership owned a limited partnership
interest in one Operating Partnership, which invested in one property (see Note
6). At June 30, 2003, the Partnership owned interests in two Operating
Partnerships. In December 2003, an Operating Partnership sold a property located
in Chicago, Illinois for a gain of $984,694.
The Partnership's equity in net operating losses in the Operating Partnership
has exceeded the investment balance. Consequently, the investment balance has
been reduced to zero in accordance with the equity method of accounting.
The following combined statements of operations are prepared in accordance with
accounting principles generally accepted in the United States of America and
summarize the operations of the Operating Partnerships for the three months
ended June 30, 2004 and June 30, 2003.
Three Months Ended
June 30,
2004 2003
----------- -----------
Revenues:
Rental Income $ 1,178,244 $ 1,372,842
Other 18,815 92,069
----------- -----------
1,197,059 1,464,911
Expenses:
Operating, General and
Administrative 763,139 1,128,133
Depreciation 212,025 283,562
Interest 157,616 169,230
----------- -----------
1,132,780 1,580,925
----------- -----------
Net Income (Loss) $ 64,279 $ (116,014)
=========== ===========
NOTE 6 - SUBSEQUENT EVENT
In December 2004, the General Partner completed the sale of the single remaining
Operating Partnership property located in Boston, Massachusetts. The Partnership
received proceeds of $657,693 from the underlying Operating Partnership which
was used to repay a portion of amounts due to related parties. The remaining
unpaid amounts payable to related parties and affiliates has been forgiven.
Effective March 18, 2005, the Partnership has been dissolved.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Results of Operations
For the three month periods ended June 30, 2004 and 2003, the Partnership
recorded net losses of $9,400. The net losses are equal to the reimbursement
paid to Century Pacific Equity Corporation (CPEC), an affiliate, for overhead
allocations.
In accordance with the equity method of accounting for limited partnership
interests, the Partnership does not recognize losses from investment properties
when losses exceed the Partnership's equity method basis in these properties.
All of the Partnership's investments have an equity method basis of zero at June
30, 2004.
The average occupancy level of the Operating Partnership remained relatively
constant for the three months ended June 30, 2004 and 2003.
Liquidity and Capital Resources
Prior to the sale of the last Operating Partnership investment property, the
Partnership experienced a liquidity problem.
However, with the sale of the remaining property in December 2004, the
Partnership has divested of its investments thereby eliminating the speculation
as to future liquidity issues. Proceeds received from the sale of approximately
$657,000 were used to repay certain liabilities.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis of financial condition and results of
operations are based upon our unaudited financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States. Such financial statement preparation requires management to make
judgments and use estimates regarding significant accounting policies. We
consider an accounting policy to be significant if it is important to our
financial condition and results, and requires significant judgment and estimates
on the part of management in its application. A summary of our significant
accounting policies is included in Note 2 to our financial statements for the
year ended March 31, 2004, which are included in the Form 10-K. Our significant
accounting estimates and the related assumptions are evaluated periodically as
conditions warrant, and changes to such estimates are recorded as new
information or changed conditions require revision. Application of the critical
accounting policies requires management's significant judgments, often as the
result of the need to make estimates for matters that are inherently uncertain.
If actual results were to differ materially from the estimates made, the
reported results could be materially affected. There have been no significant
changes in the application of the critical accounting policies, or in the
assumptions or estimates relating thereto, since March 31, 2004.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Due to the nature of our foregoing operations, we have concluded that there is
no material market risk exposure and, therefore, no quantitative tabular
disclosures are required.
11
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Partnership's Chief Executive Officer and Chief Financial Officer have
reviewed and evaluated the effectiveness of the Partnership's disclosure
controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and
15d-14(c)) as of the end of the period covered by this report. Based on that
evaluation, they have concluded that the Partnership's current disclosure
controls and procedures are effective in timely providing them with material
information relating to the Partnership required to be disclosed in the reports
the Partnership files or submits under the Exchange Act.
(b) Changes in Internal Controls
During the period covered by this report, there have not been any significant
changes in the Partnership's internal controls or in other factors that could
significantly affect these controls. There were no significant deficiencies or
material weaknesses, and, therefore, no corrective actions were taken.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
We have listed the exhibits by numbers corresponding to the Exhibit Table of
Item 601 in Regulation S-K on the Exhibit list attached to this report.
(b) Reports on Form 8-K
None
12
* * * SIGNATURE * * *
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: July 5, 2005
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
a California limited partnership
By: Century Pacific Capital II Corporation,
a California Corporation
General Partner
By: /s/ Irwin J. Deutch
--------------------------
Irwin J. Deutch, President
13
Exhibit
Number Description
- ------- -----------
31.1 Certification Pursuant to 15 U.S.C. Section 7241, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 Certification Pursuant to 15 U.S.C. Section 7241, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
* Filed herewith