CONTENTS

		Page
INDEPENDENT AUDITOR’S REPORT		F-2
FINANCIAL STATEMENTS:
	Balance Sheets	F-3
	Statements of Operations and Changes in Partners’ Equity	F-5
	Statements of Cash Flows	F-6
	Notes to Financial Statements	F-8
SUPPLEMENTARY INFORMATION:		F-13
	Supplemental Schedule of Expenses	F-14
	Supplemental Schedule of Changes in Partners’ Equity

F-1

Partners

Blessed Rock of El Monte

Costa Mesa, California

INDEPENDENT AUDITOR’S REPORT

I have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership as of December 31, 2005 and 2006, and the related statements of operations and changes in partners’ equity, and operating cash flows for the years then ended. These financial statements are the responsibility of the partnership’s management. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with auditing standards generally accepted in the United States. Those standards require that I 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. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2005 and 2006 and the results of its operations and its operating cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

My audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information shown on page 12 and 13 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of Blessed Rock of El Monte. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

March 7, 2007 33-0724657

F-2

BLESSED ROCK OF EL MONTE

(A California Limited Partnership)

BALANCE SHEETS, DECEMBER 31, 2005 AND 2006

ASSETS

	2006			2005
Current Assets:
Operating cash and equivalents	$	584,149		$	459,783
Security deposit cash		25,522			25,801
Tenant accounts receivable		1,625			370
Other accounts receivable		6,281			6,281
Prepaid expenses		51,682			61,945
Total current assets		669,259			554,180
Property, Building, and Equipment, At Cost:
Land		1,271,162			1,271,162
Building and improvements		8,030,159			7,992,586
Equipment		54,657			54,657
		9,355,978			9,318,405
Accumulated depreciation		(1,933,378	)		(1,728,013	)
Property, building, and equipment - net		7,422,600			7,590,392
Other Assets:
Replacement reserve		134,830			156,909
Tax and insurance restricted accounts		33,152			22,073
Total other assets		167,982			178,982
	$	8,259,841		$	8,323,554

See the accompanying notes to financial statements.

F-3

Blessed Rock of El Monte

Balance Sheets, December 31, 2005 and 2006

Page 2

LIABILITIES AND PARTNERS’ EQUITY

	2006		2005
Current Liabilities:
Current portion of long-term debt	$	49,737	$	46,361
Accounts payable		11,556		6,667
Security trust liability		23,635		23,635
Accrued interest		14,175		14,175
Accrued asset management fees		17,810		32,880
Other accruals		37,712		6,025
Unearned rental income		696		1,054
Total current liabilities		155,321		130,797
Long-term Debt:
Mortgage payable, less current portion included above		2,363,046		2,412,783
Notes payable		681,525		681,525
Accrued interest payable		230,335		199,995
Grant loan payable		400,000		400,000
Total long-term debt		3,674,906		3,694,303
Partners’ equity		4,429,614		4,498,454
	$	8,259,841	$	8,323,554

See the accompanying notes to financial statements.

F-4

BLESSED ROCK OF EL MONTE

(A California Limited Partnership)

STATEMENTS OF OPERATIONS AND CHANGES

IN PARTNERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006

	2006			2005
Revenue:
Gross potential rents	$	723,570		$	745,260
Excess rents		149,429			117,337
Less vacancies		(918	)		(1,442	)
Net rental income		872,081			861,155
Laundry and vending		9,684			13,410
Tenant charges		2,040			1,482
Interest income		3,488			2,490
Other income		-			886
Total revenues		887,293			879,423
Expenses:
Administrative		211,138			200,758
Utilities		80,904			74,145
Operating and maintenance		106,694			128,436
Taxes and insurance		53,138			56,579
Interest		204,853			202,230
Depreciation and amortization		205,365			204,844
Total expenses		859,469			869,615
Net income (loss)		27,824			9,808
Partners’ equity - beginning		4,498,454			4,510,646
Partners’ distributions		(96,664	)		(22,000	)
Partners’ equity - ending	$	4,429,614		$	4,498,454

See the accompanying notes to financial statements.

F-5

BLESSED ROCK OF EL MONTE

(A California Limited Partnership)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006

	2006			2005
Cash flows from operating activities:
Rental receipts	$	858,180		$	848,544
Operating interest receipts		2,261			1,704
Other operating receipts		11,724			90,578
Payments to suppliers and employees:
Administrative expenses		(91,469	)		(47,918	)
Management fees		(37,407	)		(99,011	)
Utilities		(79,498	)		(71,596	)
Salaries and wages		(35,402	)		(43,358	)
Operating and maintenance		(94,059	)		(115,758	)
Real estate taxes		(7,371	)		(7,643	)
Payroll taxes		(5,371	)		(5,062	)
Property insurance		(36,328	)		(45,120	)
Miscellaneous taxes and insurance		(17,257	)		(17,907	)
Interest on mortgage		(175,545	)		(171,384	)
Funding security deposit account		279			33
Net cash provided by operating activities		292,737			316,102
Cash flows from investing activities:
Net tax and insurance impounds		(11,079	)		1,843
Net reserve activity, including interest		22,079			(21,330	)
Reserve interest		1,227			786
Capital expenditures		(37,573	)		-
Net cash used in investing activities		(25,346	)		(18,701	)
Cash flows from financing activities:
Mortgage principal payments		(46,361	)		(43,214	)
Partner distributions		(96,664	)		(22,000	)
Net cash used in financing activities		(143,025	)		(65,214	)
Net increase (decrease) in cash		124,366			232,187
Cash at beginning of year		459,783			227,596
Cash at end of year	$	584,149		$	459,783

See the accompanying notes to financial statements.

F-6

Blessed Rock of El Monte

Statements of Cash Flows, December 31, 2005 and 2006

Page 2

Reconciliation of Net Income (Loss)

to Net Cash Provided by Operating Activities

	2006			2005
Net income (loss)	$	27,824		$	9,808
Adjustments to reconcile net income (loss) to net cash Provided by operating activities:
Depreciation and amortization		205,365			204,844
Decrease (increase) in:
Security deposit cash		279			168
Receivables		(1,255	)		74,430
Prepaids		10,263			(10,048	)
Increase (decrease) in:
Payables		8,543			(1,522	)
Security deposit liability		-			(135	)
Accrued expenses		43,303			39,296
Unearned rental income		(358	)		47
Reserve interest earned		(1,227	)		(786	)
Net cash provided by operating activities	$	292,737		$	316,102

See the accompanying notes to financial statements.

F-7

BLESSED ROCK OF EL MONTE

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	Organization: Blessed Rock of El Monte, a California limited partnership, was formed on November 22, 1995 by and between Everland, Inc., a California Corporation, as the general partner and Tom Y. Lee as the limited partner. The Partnership Agreement was amended and restated on December 29, 2000 defining the various partners of the partnership as the General Partner, the Managing General Partner, the Limited Partners and the Special Limited Partner.
	The Partnership was formed to acquire, construct, own and operate a 137-unit elderly facility apartment complex for low income residents in El Monte, California. The Partnership also generates tax credits to the partners in accordance with the provisions of the code and applicable Treasury regulations. The Partnership has qualified for low income housing tax credits as currently allowable under Section 42 of the Internal Revenue Code.
	The Partnership received HOME funds from the City of El Monte and redevelopment funds from the El Monte Community Redevelopment Agency as part of a public program to ensure affordable housing for senior citizen tenants. In addition, the El Monte Community Redevelopment Agency paid various project impact fees to the City of El Monte associated with the construction and development of the Project on behalf of the Partnership.
	Capitalization and Depreciation: Assets are recorded at cost and depreciated for financial accounting purposes using the straight-line method over their estimated useful lives. The principal estimated useful lives used in computing the depreciation provisions are 10 to 40 years for building and improvements, and 3 to 10 years for equipment The policy of the project is to charge amounts expended for maintenance, repairs, and minor replacements to expense, and to capitalize expenditures for major replacements and betterments.
	Cash and Cash Equivalents: For purposes of reporting cash flows, cash includes unrestricted cash in bank, cash on hand, savings accounts, and all certificates of deposit with original maturities of three months or less.
	The Partnership maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents.
	Deferred Costs: Deferred costs, comprised of tax credit fees and organization costs are being amortized over five years.

F-8

Blessed Rock of El Monte

Notes to Financial Statements, December 31, 2006

Page 2

	Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements, and (2) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
	Rental Income and Unearned Rents: The Partnership rents apartment units on a month to month basis and recognizes revenues when earned. Advance receipts of rents are classified as liabilities until earned.
	Income Taxes: No provision is made for income taxes since such taxes, if any, are the liability of the individual partners.
2.	RESTRICTED FUNDS
	The Partnership is required to make monthly impound deposits to cover insurance premiums, property taxes and to maintain a reserve for replacements. These restricted funds are held by, and expenditures are subject to supervision and approval by, GMAC Commercial Mortgage.
3.	MORTGAGE PAYABLE

Mortgage payable consists of a 7.05% real estate mortgage, payable to GMAC Commercial Mortgage, collateralized by a deed of trust on the real property. The obligation is payable in aggregate monthly principal and interest installments of $18,188 beginning July 1, 1998 with a balloon payment in the amount of $2,017,000 payable June 1, 2013.	$	2,412,783
Less current portion		(49,737	)
	$	2,363,046

The amounts maturing for the next five years are:

2007	$	49,737
2008		53,360
2009		57,245
2010		61,414
2011		65,887

F-9

Blessed Rock of El Monte

Notes to Financial Statements, December 31, 2006

Page 3

4. NOTES PAYABLE

Notes payable at December 31, 2005 consist of the following:
4% note payable with a term of 15 years, payable to El Monte Community Redevelopment Agency (RDA), secured by deed of trust and rents from Project. Note subject to prepayment in whole or in part based on events constituting default under terms of promissory note agreement. Payments of interest and principal made annually beginning on April 1, 2003, and thereafter on April 1 until outstanding principal balance of note and all accrued interest paid in full. Payments paid from 50% of the residual rental income, as defined in the promissory note agreement. Payments, if any, applied first to accrued interest and second to principal of note. At December 31, 2006, accrued interest on note was $41,105.	$	250,878
1% note payable with a term of 30 years beginning April 3, 1996, payable to RDA for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on April 3 for the following 6 succeeding years, payment of $4,239 due each year. Payment increases to $8,478 April 3, 2004 and continues the next 7 succeeding years. April 3, 2012, payment increases to $32,534 and continues the next 14 succeeding years, or until paid in full. Payments to be paid from 50% of residual rental income, as defined in promissory note agreement. Payments first applied to interest. At December 31, 2006, accrued interest on note was $17,230.		430,647
	$	681,525

F-10

Blessed Rock of El Monte

Notes to Financial Statements, December 31, 2006

Page 4

5.	GRANT LOAN PAYABLE
	The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. Loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. Accrued interest at December 31, 2006 was $172,000.
6.	RELATED PARTY TRANSACTIONS
	Project or Loss Allocations: All items included in the calculation of income or loss not arising from a sale or refinancing, and all tax credits, shall be allocated 98.99% equally to the limited partners, .01% to the special limited partner, .99% to the general partner, and .01% to the managing general partner.
	Management Fee: A monthly property management fee in an amount computed at 5% of the collected gross revenue is payable to the management agent. Property management services to the Partnership are provided by an affiliate of the limited partners. Property management fees were $43,206 and $43,333 for the years 2005 and 2006, respectively.
	Incentive Management and Other Fees: Under the terms of the Limited Partnership Agreement, incentive management fees shall be paid to the general partner for services incidental to the administration of the business and affairs of the Partnership. Reporting fees shall be paid to the limited partners for services performed in monitoring the operations of the Partnership, services in connection with the Partnership’s accounting matters and assisting with the preparation of tax returns. The limited partners earned $46,889 in reporting fees for 2005 and $68,279 for 2006.
	The managing general partner earned $16,440 annually for an operational asset management fee for the years 2001 through 2006. Balance of accrued operational asset management fee at December 31, 2006 is $17,810.

F-11

Blessed Rock of El Monte

Notes to Financial Statements, December 31, 2006

Page 5

7. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Partnership’s sole asset is a 137-unit apartment complex. The Partnership’s operations are concentrated in the multifamily real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the project are subject to the administrative directives, rules and regulations of local regulatory agencies. Such administrative directives, rules and regulations are subject to change. Such changes may occur with little notice or inadequate funding to pay for related costs, including the additional administrative burden, to comply with a change.

F-12

SUPPLEMENTARY INFORMATION

F-13

BLESSED ROCK OF EL MONTE

(A California Limited Partnership)

SUPPLEMENTAL SCHEDULE OF EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2005 and 2006

	2006		2005
Site management payroll	$	34,027	$	30,830
Manager's rent-free apartment		12,288		12,288
Management fee		43,333		43,206
Reporting/asset management fee		68,823		63,329
Audit fee		6,700		6,000
Legal fees		-		424
Telephone and answering service		5,675		4,731
Office supplies		4,050		4,528
Educational and social programs		8,640		11,520
Health insurance and other employee benefits		4,226		4,349
Payroll taxes		5,371		5,062
Workers' compensation		8,029		8,536
Other administration		9,976		5,955
Subtotal administrative expenses		211,138		200,758
Electricity		30,475		22,412
Water and sewer		23,862		23,294
Fuel		20,816		24,196
Garbage and trash removal		5,751		4,243
Subtotal utilities		80,904		74,145
Maintenance and repairs payroll		12,785		12,528
Maintenance and repairs supply		8,715		7,472
Maintenance and repairs contract		29,582		19,337
Painting and decorating		17,753		25,216
Grounds		8,693		10,519
Services		1,430		2,195
Furniture and furnishings replacement		27,736		51,169
Subtotal maintenance expenses		106,694		128,436
Property taxes		7,371		7,644
Other taxes and licenses		3,930		3,995
Property and liability insurance		40,765		43,913
Other insurance		1,072		1,027
Subtotal tax and insurance		53,138		56,579
Interest		202,230		204,853
Depreciation and amortization		205,365		204,844
Total expenses	$	859,469	$	869,615

F-14

 

FINANCIAL STATEMENTS AND
INDEPENDENT ACCOUNTANTS’ REPORT

BLESSED ROCK OF EL MONTE 

(A CALIFORNIA LIMITED PARTNERSHIP)

DECEMBER 31, 2007

Blessed Rock of El Monte

(A California Limited Partnership)

TABLE OF CONTENTS

	PAGE
INDEPENDENT AUDITOR’S REPORT	3
FINANCIAL STATEMENTS:
BALANCE SHEET	5
STATEMENT OF OPERATIONS	7
STATEMENT OF CHANGES IN PARTNERS’ EQUITY (DEFICIT)	9
STATEMENT OF CASH FLOWS	10
NOTES TO FINANCIAL STATEMENTS	11

  Reznick Group, RC. 7700 Old Georgetown Road Suite 400 Bethesda, MD 20814-6224 Tel: (301) 652-9100
Fax: (301) 652-1848 www.reznickgroup.com

INDEPENDENT AUDITOR’S REPORT

To the Partners

Blessed Rock of El Monte

We have audited the accompanying balance sheet of Blessed Rock of El Monte (a California Limited Partnership) as of December 31, 2007, and the related statements of operations, changes in partners’ equity (deficit), 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.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2007, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed more fully in note 8 of the financial statements, certain errors resulting principally in the overstatement of depreciation and amortization due to misallocation of building, deferred fees and organization cost, in prior years, were discovered by management of the Partnership during the current year. Accordingly, adjustments have been made to partners’ equity (deficit) as of January 1, 2007, to correct the errors.

Skokie, Illinois	Taxpayer Identification Number
December 17, 2008	52-1088612
Lead Auditor: Jeff Dowd

Atlanta ● Austin ● Baltimore ● Bethesda ● Birmingham ● Charlotte ● Chicago ● Los Angeles ● Sacramento ● Tysons Corner

Blessed Rock of El Monte

(A California Limited Partnership)

BALANCE SHEET

December 31, 2007

Current assets
Cash and cash equivalents	$	742,805
Accounts receivable - tenants		697
Accounts receivable - other		6,281
Prepaid expenses		16,709
Total rental property		766,492
Deposits held in trust - funded
Tenant security deposits		23,710
Restricted deposits and funded reserves
Mortgage escrow deposits		21,386
Replacement reserve (note 3)		156,559
Total restricted deposits and funded reserves		177,945
Property and equipment (note 1)
Land and land improvements		1,271,162
Buildings		8,099,384
Furnishings		57,645
		9,428,191
Less accumulated depreciation		(2,159,703	)
Total property and equipment		7,268,488
Other assets
Deferred fees, net		35,780
Total other assets		35,780
Total assets	$	8,272,415

(continued)

Blessed Rock of El Monte

(A California Limited Partnership)

BALANCE SHEET - CONTINUED

December 31, 2007

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities
Accounts payable	$	11,404
Accrued management fee		3,882
Accrued mortgage loan interest		13,883
Accrued interest		72,677
Miscellaneous current liabilities		13,700
Prepaid rent		4,122
Current maturities of long term liabilities (note 3)		53,360
Total current liabilities		173,028
Deposit liabilities
Tenant security deposits		23,710
Long-term liabilities
Mortgage loan payable, net of current maturities (note 3)		2,309,685
Notes payable (note 4)		681,525
Grant loan payable		400,000
Accrued interest		188,000
Total long-term liabilities		3,579,210
Total liabilities		3,775,948
Contingency (note 7)
Partners’ equity (note 6)		4,496,467
Total liabilities and Partners’ equity	$	8,272,415

See notes to financial statements

Blessed Rock of El Monte

(A California Limited Partnership)

STATEMENT OF OPERATIONS

Year ended December 31, 2007

Income from rental operations
Rental income - tenant, net	$	927,076
Laundry and vending		10,417
Interest income		7,330
Miscellaneous revenue		5,184
Tenant charges		1,313
Total income from rental operations		951,320
Administrative expenses
Advertising and marketing		294
Office expenses		22,266
Other renting expenses		960
Management fee Manager salaries		44,489 41,261
Legal expenses - Project		4,316
Bookkeeping fees		1,000
Audit expenses		9,950
Bad debts		38
Miscellaneous administrative expenses		14,451
Total administrative expenses		139,025
Utilities expense
Electricity		27,360
Water		25,609
Gas		20,664
Total utilities expense		73,633
Operating and maintenance expenses
Payroll		16,857
Supplies		40,304
Contracts		46,163
Miscellaneous operating expenses		355
Garbage and trash removal		6,229
Total operating and maintenance expenses		109,908

(continued)

Blessed Rock of El Monte

(A California Limited Partnership)

STATEMENT OF OPERATIONS - CONTINUED

Year ended December 31, 2007

Taxes and insurance
Real estate taxes		11,816
Payroll taxes		7,355
Property and liability insurance		37,439
Fidelity bond insurance		615
Workers’ compensation		9,514
Health benefits and other employee benefits		5,865
Miscellaneous		4,864
Property tax administrative cost		-
Total taxes and insurance		77,468
Income before financial expenses, depreciation and amortization		551,286
Financial expenses
Interest on mortgage loan payable		169,156
Interest on notes payable		14,342
Interest on grant loan payable		16,000
Asset management fee		108,926
Total financial expenses		308,424
Income before depreciation and amortization		242,862
Depreciation		212,807
Amortization		6,899
Net income	$	23,156

See notes to financial statements

Blessed Rock of El Monte

(A California Limited Partnership)

STATEMENT OF CHANGES IN PARTNERS’ EQUITY (DEFICIT)

Year ended December 31, 2007

	Managing General Partner			General Partner			Special Limited Partner			Limited Partners			Total
Partners’ equity (deficit), December 31, 2006, as previously stated	$	(1,975	)	$	(895	)	$	(81,036	)	$	4,513,520		$	4,429,614
Prior period adjustment		9			9			906			90,568			91,492
Partners’ equity (deficit), December 31, 2006, as restated		(1,966	)		(886	)		(80,130	)		4,604,088			4,521,106
Distributions		(23,897	)		-			-			(23,898	)		(47,795	)
Net income		2			2			229			22,923			23,156
Partners’ equity (deficit), December 31, 2007	$	(25,861	)	$	(884	)	$	(79,901	)	$	4,603,113		$	4,496,467

See notes to financial statements

Blessed Rock of El Monte

(A California Limited Partnership)

STATEMENT OF CASH FLOWS

Year ended December 31, 2007

Cash flow from operating activities
Net income	$	23,156
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		212,807
Amortization		6,899
Changes in:
Tenant security deposits		1,812
Tenant accounts receivable		928
Prepaid expenses		2,093
Tenant security deposits liability		75
Accounts payable		(151	)
Accrued mortgage loan interest		(292	)
Accrued liabilities		(8,942	)
Accrued management fee		3,882
Accrued interest payable on second mortgage		30,342
Prepaid rent		3,426
Net cash provided by operating activities		276,035
Cash flows from investing activities
Purchase of property and equipment		(9,883	)
Net change in escrow deposits		11,766
Net change in replacement reserve		(21,729	)
Net cash used in investing activities		(19,846	)
Cash flows from financing activities
Principal payments on mortgage payable		(49,738	)
Distributions		(47,795	)
Net cash used in financing activities		(97,533	)
Net change in cash and cash equivalents		158,656
Cash and cash equivalents, beginning		584,149
Cash and cash equivalents, ending	$	742,805

See notes to financial statements

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

December 31, 2007

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Blessed Rock of El Monte (a California Limited Partnership) was organized on February 14, 1996 to acquire, construct, own and operate a 137-unit apartment project (the “Project”) known as Blessed Rock of El Monte located in El Monte, California.

The Project is eligible and qualifies for low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code (the “Code”) of 1986. Generally, the low-income housing credit is computed as a percentage of the qualified basis of the property including the rehabilitation and is allowed annually during a period of ten years commencing with the years the building is placed into service. In addition, in order to qualify for the credit, the Partnership must conform with certain occupancy standards as set forth in the Code.

The following is a summary of significant accounting policies followed in the preparation of these financial statements:

Property and equipment

Property and equipment is recorded at cost. The assets are being depreciated using the straight-line method over the estimated useful lives. The cost of maintenance and repairs is charged to income as incurred. Significant renewals and betterments are capitalized.

Assets are depreciated over their estimated useful lives. The estimated service lives of the assets for depreciation purposes may be different than their actual economic useful lives.

	Method	Estimated lives
Buildings	Straight-line	40 years
Land improvements	Straight-line	15 years
Furnishings	Straight-line	5 years

Management of the Partnership assesses the recoverability of property and equipment by determining whether the depreciation of such assets over their remaining lives can be recovered through projected undiscounted cash flows. The amount of impairment, if any, is measured based on fair value (projected discounted cash flows) and is charged to operations in the period in which such impairment is determined by management. To date, management has not identified any impairment of property and equipment.

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS – CONTINUED

December 31, 2007

Deferred fees and Amortization

Loan fees are amortized over the term of the mortgage loan using the straight-line method. Accounting principles generally accepted in the United States of America require that the effective yield method be used to amortize financing costs; however, the effect of using the straight-line method is not materially different from the results that would have been obtained under the effective yield method. Tax credit fees are amortized over 15 years using the straight-line method.

Rental income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.

Tenant receivable and bad debt

Delinquent receivables are written off and included in bad debt expense in the period the balances are deemed to be uncollectible, which is generally after the tenant vacates.

Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method.

Property taxes

Property taxes are expensed in the year of lien on the property such that twelve months of expense is charged to operations each period.

Cash and cash equivalents

For purposes of the statement of cash flows, the Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. At December 31, 2007, cash and cash equivalents consist of two unrestricted checking accounts and a petty cash fund.

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Income taxes

Blessed Rock of El Monte is a Partnership, and thus income, losses, and credits are recognized for federal income tax purposes by the individual Partners. Accordingly, no provision for federal or state taxes on revenue and income has been recognized in the accompanying financial statements.

Advertising costs

Advertising costs are expensed as incurred. Advertising expense totaled $294 for the year ended December 31, 2007.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These reclassifications had no effect on the reported net loss of the Partnership.

Concentration of credit risk

The Partnership deposits its cash in financial institutions. At times, deposits may exceed federally insured limits. The Partnership has not experienced any losses in such accounts.

The Partnership’s operations are concentrated in the multifamily real estate market. In addition, the Partnership operated in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies. Such administrative directives, rules and regulations are subject to change by an act of Congress. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, if any, to comply with a change.

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

NOTE 2 - DEFERRED FEES AND AMORTIZATION

The costs incurred to obtain financing and tax credits have been capitalized and are being amortized. The balance of such costs at December 31, 2007 is as follows:

	Amortization
	Period
Loan fees		16 years	$	40,800
Tax credit fees		15 years		65,241
				106,041
Less: Accumulated amortization				(70,261	)
Net capitalized costs			$	35,780

As a result of a reevaluation of accumulated amortization through December 31, 2007 it was determined that excess amortization had been taken in prior years and a correction was made resulting in a net recovery amount of $9,256 for 2007.

NOTE 3 - MORTGAGE LOAN

The Partnership has entered into a mortgage loan agreement in the original amount of $2,720,000. The loan agreement provides, among other things, for the following:

a.	An interest rate of 7.05% per annum;
b.	Monthly principal and interest payments of $18,188;
c.	A balloon payment of $2,017,000 payable June 1, 2013;
d.	A maturity date of June 1, 2013; and
e.	The funding of a reserve fund for replacing assets of the Project

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

Mortgage loan principal payments for each of the next five years and thereafter are estimated as follows:

2008	$	53,360
2009		57,245
2010		61,414
2011		65,887
2012		70,686
Thereafter		2,054,453
	$	2,363,045

The liability of the Partnership under the mortgage loan is limited to the underlying value of the property and equipment collateral in addition to other amounts deposited with the lender. For the year ended December 31, 2007, interest expense was $169,156, and accrued interest was $13,883 as of December 31, 2007.

Replacement reserve

In accordance with the Partnership Agreement, the Partnership is required to establish and maintain a replacement reserve account for the purpose of capital improvements. The reserve account is to be funded in the amount of $20,544 per year. As of December 31, 2007, the balance of the replacement reserve was $156,559.

NOTE 4 - NOTES PAYABLE

Notes payable at December 31, 2007 consist of the following:

A 4% note payable in the amount of $250,878, with a term of 15 years, is payable to El Monte Community Redevelopment Agency (RDA), secured by a deed of trust and rents from the Project. Payments of interest and principal are made annually beginning on April 1, 2003, and thereafter each April 1, until the outstanding principal balance of the note and all accrued interest are paid in full. Payments are to be paid from 50% of the residual rental income, as defined in the promissory note agreement. Payments, if any, are applied first to accrued interest and second to principal on the note. At December 31, 2007, accrued interest on the note was $51,141.

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

A 1% note payable in the amount of $430,647, with a term of 30 years beginning April 3, 1996, is payable to RDA for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on each April 3 for the following six succeeding years, payments of $4,239 were due. Payments increased to $8,478 April 3, 2004 and continue for the next seven succeeding years. On April 3, 2012, payments increase to $32,534 and continue for the next 14 succeeding years, or until paid in full. Payments to be paid from 50% of residual rental income, as defined in promissory note agreement. Payments first applied to interest. At December 31, 2007, accrued interest on the note was $21,536.

Cash held for payment of notes

The Partners’ calculation of 50% of residual rental income for 2006 was $72,677. This amount was not confirmed by RDA, nor was the required payment made during 2007. The agent is currently attempting to confirm the amount due and forward the payment to RDA.

Grant loan payable

The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. The loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. Accrued interest at December 31, 2007 was $188,000

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

Accrued interest at December 31, 2007, is as follows:

4% note payable	$	51,141
1% note payable		21,536
Grant loan		188,000
		260,677
Cash held		(72,677	)
Accrued interest on second mortgage	$	188,000

NOTE 5 - RELATED PARTY TRANSACTIONS

Operational asset management fee

The Partnership Agreement provides for an asset management fee equal to $10 per unit per month, to accrue to the Managing General Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2007, $6,233 of operational asset management fees were incurred and paid. At December 31, 2007, no amounts remained payable.

Asset management fee

.

The Partnership Agreement provides for an asset management fee equal to 30% of Remaining Cash, as defined, to accrue to the Limited Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2007, $68,279 was incurred and paid.

Incentive management fee

The Partnership shall pay to the General Partner an incentive management fee equal to 40% of Remaining Cash, as defined. The incentive management fee shall be paid from available cash flow and does not accrue from year to year. For the year ended December 31, 2007, incentive management fees of $31,864 were incurred and paid.

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

Reporting fee

The Partnership shall pay to each Limited Partner a reporting fee equal to 15% of the Cash Flow from Operations, as defined, but should not be less than $6,000 for each Limited Partner. The reporting fee shall be paid from available cash flow and accrues from year to year. For the year ended December 31, 2007, a reporting fee of $2,550 was incurred and paid.

Management Fee

For the period January 1, 2006 through July 18, 2007, the Partnership’s management agent was WNC Management, an affiliate of the General Partner (the “Former Agent”). Effective July 19, 2007, the Partnership entered into an agreement with Professional Property Management, LLC (“PPM”), an unrelated party (the “Agent”), in connection with the management of the Project’s rental operations. For the year ended December 31, 2007, management fees expensed were $44,489, of which $3,882 remained payable.

NOTE 6 - PARTNERS’ PROFIT, LOSSES, AND DISTRIBUTIONS

In general, income (loss), tax credits and cash flow from operations are allocated 98.99% to the Limited Partners, .99% to the Special Limited Partner, .01% to the General Partner and .01% to the Managing General Partner.

Income (loss) and cash flow from sources other than operations will be allocated pursuant to the terms of the Partnership Agreement regarding such.

NOTE 7 - CONTINGENCY

The Project’s low-income housing credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct non-compliance within a specified time period could result in recapture of previously taken tax credits plus interest. In addition, such potential noncompliance may require an adjustment to the contributed capital by the Investor Limited Partner.

Blessed Rock of El Monte

(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

December 31, 2007

NOTE 8 - RESTATEMENT OF BEGINING PARTNERS EQUITY (DEFICIT)

During 2007 management determined that original costs related to building, deferred fees, and organization costs had been incorrectly allocated. As a result building costs and deferred fees were understated by $62,330 and $106,041, respectively, while organization costs had been overstated. After adjusting building, deferred fees and organization costs to reflect the correct allocations it was determined accumulated depreciation and amortization had been overstated in prior years by $79,927 and $11,565, respectively. As a result, net adjustments totaling $91,492 have been made to beginning partners’ equity as of January 1, 2007, to correct for these errors.

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

BLESSED ROCK OF EL MONTE

DECEMBER 31, 2008

1

BLESSED ROCK OF EL MONTE

TABLE OF CONTENTS

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		3
FINANCIAL STATEMENTS:
BALANCE SHEET		4
STATEMENT OF OPERATIONS		6
STATEMENT OF CHANGES IN PARTNERS’ CAPITAL		7
STATEMENT OF CASH FLOWS		8
NOTES TO FINANCIAL STATEMENTS		9
ACCOMPANYING INFORMATION:
INDEPENDENT AUDITOR’S REPORT ON INFORMATION ACCOMPANYING THE BASIC FINANCIAL STATEMENTS		16
SUPPLEMENTAL INFORMATION		17

2

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Blessed Rock of El Monte

We have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership, as of December 31, 2008 and the related statements of operations, changes in partners’ capital 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.

We conducted our audit in accordance with the Standards of the Public 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. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2008 and the results of its operations, changes in partners’ capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Metairie, Louisiana

March 1, 2009  

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

3

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2008

ASSETS
Current Assets
Cash	$	563,168
Accounts Receivable		6,281
Total Current Assets		569,449
Restricted Reserves and Escrows
Tax and Insurance Escrow		45,199
Replacement Reserve		178,178
Tenant Security Deposits		23,823
Total Restricted Reserves and Escrows		247,200
Property and Equipment
Land		1,322,838
Buildings and Improvements		8,129,484
Furniture and Equipment		124,266
Total Property and Equipment		9,576,588
Less: Accumulated Depreciation		(2,375,206	)
Property and Equipment, Net		7,201,382
Other Assets
Deferred Fees, Net		28,881
TOTAL ASSETS	$	8,046,912

See auditor’s report and accompanying notes to the financial statements.

4

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2008

LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts Payable	$	2,107
Accrued Management Fees		3,954
Accrued Interest		13,569
Accrued Expenses		13,700
Current Portion Mortgage Payable		57,245
Prepaid Rents		2,487
Total Current Liabilities		93,062
Deposits & Prepayment Liabilities
Tenants’ Security Deposits		23,725
Long Term Liabilities
Mortgage Payable		2,309,686
Less: Current Portion		(57,245	)
Notes Payable		637,331
Grant Payable		400,000
Accrued Interest, Long Term		230,516
Total Long Term Liabilities		3,520,288
Total Liabilities		3,637,075
Partners’ Equity
Partners’ Equity		4,409,837
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	8,046,912

See auditor’s report and accompanying notes to the financial statements.

5

BLESSED ROCK OF EL MONTE

STATEMENT OF OPERATIONS

DECEMBER 31, 2008

Revenue
Rental Income	$	946,624
Tenant Charges		1,147
Miscellaneous revenue		13,727
Total Revenue		961,498
Operating expenses
General and administrative		69,444
Management fee		47,399
Legal and other professional fees		46,865
Utilities		77,026
Tax and insurance		94,650
Repairs and maintenance		93,973
Financial expenses		343,524
Total Operating Expenses		772,881
Operating Income (Loss)		188,617
Other Income and (Expenses)
Interest income		7,442
Depreciation and amortization		(222,402	)
Net Other Income and (Expenses)		214,960
Net Income (Loss)	$	(26,343	)

See auditor’s report and accompanying notes to the financial statements.

6

BLESSED ROCK OF EL MONTE

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

DECEMBER 31, 2008

							Total
	General			Limited			Partners’
	Partners			Partners			Capital
Balance - January 1, 2008	$	(26,745	)	$	4,523,212		$	4,496,467
Net Income (Loss)		(263	)		(26,080	)		(26,343	)
Distributions to Members		-			(60,287	)		(60,287	)
Balance - December 31, 2008	$	(27,008	)	$	4,436,845		$	4,409,837
Percentages		1	%		99	%		100	%

See auditor’s report and accompanying notes to the financial statements.

7

BLESSED ROCK OF EL MONTE

STATEMENT OF CASH FLOWS

DECEMBER 31, 2008

Cash flows from operating activities:
Net Loss	$	(26,343	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization		222,402
(Increase) decrease in accounts receivable		697
(Increase) decrease in prepaid expenses		16,709
Increase (decrease) in accounts payable		(9,297	)
Increase (decrease) in security deposits payable		15
Increase (decrease) in accrued management fee		72
Increase (decrease) in prepaid rent		(1,635	)
Increase (decrease) in accrued interest payable		(30,475	)
Total adjustments		198,488
Net cash provided (used) by operating activities		172,145
Cash flows from investing activities:
Purchase of property and equipment		(148,397	)
(Deposit) withdrawal tax and insurance escrows		(23,813	)
(Deposit) withdrawal reserve		(21,619	)
(Deposit) withdrawal security deposit account		(113	)
Net cash provided (used) by investing activities		(193,942	)
Cash flows from financing activities:
Principal payments on mortgage payable		(44,194	)
Principal payments on notes payable		(53,359	)
Distributions		(60,287	)
Net cash provided (used) by financing activities		(157,840	)
Net increase (decrease) in cash and equivalents		(179,637	)
Cash and equivalents, beginning of year		742,805
Cash and equivalents, end of year	$	563,168

See auditor’s report and accompanying notes to the financial statements.

8

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE A - NATURE OF OPERATIONS

Blessed Rock of El Monte, a California Limited Partnership, was organized on February 14, 1996 to acquire, construct, own and operate a 137-unit apartment project known as Blessed Rock of El Monte (“the Project”) located in El Monte, California.

The Project is eligible and qualifies for low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code of 1986. Generally, the low-income housing credit is computed as a percentage of the qualified basis of the property including rehabilitation and is allowed annually during a period of ten years commencing with the years the building is placed into service. In addition, in order to qualify for the credit, the Partnership must conform with certain occupancy standards as set forth in the Code.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of three months or less at the acquisition date. At December 31, 2008, cash and cash equivalents consist of two unrestricted checking accounts and a petty cash fund. Restricted cash is not considered cash equivalents.

Concentration of Credit Risk

The Partnership deposits its cash in financial institutions. At times, the account balances may exceed the institution’s federally insured limits. The Partnership has not experienced any losses in such accounts.

Tenant Accounts Receivable and Bad Debt Expense

Delinquent rent receivables are written off and included in bad debt expense in the period the balances are deemed to be uncollectible, which is generally after the tenant vacates.

Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method.

9

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. The rental property is depreciated over estimated service lives as follows:

Buildings	27.5 years	Straight-Line
Land Improvements	15 years	Straight-Line
Furnishings & Equipment	5 years	Straight-Line

Other Assets

Other assets consist of Loan Fees and Tax Credit Fees which have been recorded at cost. These costs will be amortized using the straight-line method over a period of 15 and 16 years, respectively.

Property Taxes

Property taxes are expensed in the year of lien on the property such that twelve months of expense is charged to operations each period.

Rental Income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.

Income Taxes

Incomes taxes on Partnership income are levied on the partners at the partner level. Accordingly, no income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

10

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE C - MORTGAGE PAYABLE

The Partnership has entered into a mortgage loan agreement in the original amount of $2,720.000. The terms are set forth below:

a. An interest rate of 7.05% per annum;

b. Monthly principal and interest payments of $18,188;

c. A balloon payment of $2,017,000 payable June 1, 2013;

d. A maturity date of June 1, 2013; and

e. The funding of a reserve fund for replacing assets of the Project.

Future minimum principal payments of the mortgage payable over each of the next five years are as follows:

Year ending December 31,
2009	$	57,245
2010		61,414
2011		65,887
2012		70,686
2013		75,835
Thereafter		1,978,619
	$	2,309,686

The liability of the Partnership under the mortgage loan is limited to the underlying value of the property and equipment collateral in addition to other amounts deposited with the lender. For the year ended December 31, 2008, interest expense was $164,579 and accrued interest was $13,569.

Replacement Reserve

In accordance with the Partnership Agreement, the Partnership is required to establish and maintain a replacement reserve account for the purpose of capital improvements. The reserve account is to be funded in the amount of $20,544 per year. As of December 31, 2008, the balance of the replacement reserve was $178,178.

11

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE D - NOTES PAYABLE

Notes payable at December 31, 2008 consist of the following:

A 4% note payable in the amount of $250,878 with a term of 15 years, is payable to El Monte Community Redevelopment Agency (“RDA”), secured by a deed of trust and rents from the Project. Payments of interest and principal are made annually beginning on April 1, 2003, and thereafter each April 1, until the outstanding principal balance of note and all accrued interest are paid in full. Payments are to be paid from 50% of the residual rental income, as defined in the promissory note agreement. Payments, if any, are applied first to accrued interest and second to principal on the note. As of December 31, 2008, the balance of the note payable was $206,684. At December 31, 2008, accrued interest on the note was $9,151.

A 1% note payable in the amount of $430,647 with a term of 30 years beginning April 3, 1996, is payable to RDA for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on each April 3 for the following six succeeding years, payments of $4,239 were due. Payments increase to $8,478 April 3, 2004 and continue for the next seven succeeding years. On April 3, 2012, payments increase to $32,534 and continue for the next 14 succeeding years, or until paid in full. Payments to be paid from 50% of residual rental income, as defined in promissory note agreement. Payments are applied first to interest. As of December 31, 2008, the balance of the development fee note payable was $430,647. At December 31, 2008, accrued interest on the note was $17,365.

Grant loan payable

The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. The loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. Accrued interest at December 31, 2008 was $204,000.

Accrued interest at December 31, 2008 is as follows:

4% note payable	$	9,151
1% note payable		17,365
Grant loan		204,000
Total accrued interest on second mortgage	$	230,516

12

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE E - RELATED PARTY TRANSACTIONS

Operational Asset Management Fee

The Partnership Agreement provides for an asset management fee equal to $10 per unit per month, to accrue to the Managing General Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2008, $6,233 of operational asset management fees were incurred. No amounts remained payable at December 31, 2008.

Incentive Management Fee

The Partnership shall pay to the General Partner an incentive management fee equal to 40% of Remaining Cash, as defined. The incentive management fee shall be paid from available cash flow and does not accrue from year to year. For the year ended December 31, 2008, incentive management fees of $41,525 were paid.

NOTE F - MANAGEMENT FEE

Effective July 19, 2007, the Partnership entered into an agreement with Professional Property Management, LLC (“PPM”), an unrelated party, in connection with the management of the Project’s rental operations. For the year ended December 31, 2008, management fees expensed totaled $47,399 of which $3,954 remained payable.

NOTE G - PROFITS, LOSSES AND DISTRIBUTIONS

In general, income (loss), tax credits and cash flow from operations are allocated 98.99% to the Limited Partners, .01% to the Special Limited Partner, .99% to the General Partner and .01% to the Managing General Partner.

Income (loss) and cash flow from sources other than operations will be allocated pursuant to the terms of the Partnership Agreement regarding such.

NOTE H – ADVERTISING

The Partnership expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2008 amounted to $227.

13

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE I – CONTINGENCIES

Housing Tax Credits

As incentive for investment equity, the Partnership applied for and received an allocation certificate for housing tax credits established by the Tax Reform Act of 1986. To qualify for the tax credits, the Partnership must meet certain requirements, including attaining a qualified basis sufficient to support the credit allocation. In addition, tenant eligibility and rental charges are restricted in accordance with Internal Revenue Code Section 42. Management has certified that each tax credit unit has met these qualifications to allow the credits allocated to each unit to be claimed. Compliance with these regulations must be maintained in each of the ten consecutive years of the compliance period. Failure to maintain compliance with occupant eligibility, unit gross rent, or to correct noncompliance within a reasonable time period could result in recapture of previously claimed tax credits plus interest.

NOTE J - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Partnership’s sole asset is the apartment complex. The Partnership’s operations are concentrated in the affordable housing real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies. Such administrative directives, rules and regulations are subject to change by an act of Congress. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

14

ACCOMPANYING INFORMATION

15

 

INDEPENDENT AUDITOR’S REPORT ON INFORMATION

ACCOMPANYING THE BASIC FINANCIAL STATEMENTS

To the Partners

Blessed Rock of El Monte

Our audit of the 2008 financial statements presented in the preceding section of this report was for the purpose of forming an opinion on such financial statements taken as a whole. The accompanying information shown on the following pages is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the 2008 basic financial statements taken as a whole.

Metairie, Louisiana

March 1, 2009  

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

16

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2008

A. SCHEDULES OF EXPENSES
		2008
General and Administrative:
Administrative - Salaries	$	33,901
Training		407
Marketing and Advertising		227
Credit Reports		292
Office Supplies		10,745
Telephone Expenses		10,577
Social Programming		12,538
Bad Debts		619
Miscellaneous		138
Total	$	69,444
Utilities:
Electricity	$	25,581
Gas		23,557
Water & Sewer		27,888
Total	$	77,026
Repairs and Maintenance:
Maintenance - Contracts	$	16,215
Maintenance - Salaries		16,763
Maintenance - Supplies		7,899
Painting and Decorating		16,124
Garbage and Trash Removal		15,248
Exterminating		1,940
Grounds Maintenance		19,784
Total	$	93,973

17

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2008

	2008
Tax and Insurance:
Real Estate Taxes	$	19,578
Property & Liability Insurance		43,846
Payroll Taxes		7,397
Worker’s Compensation		11,508
Health Insurance and other Employee Benefits		5,809
Other Taxes and Insurance		6,512
Total	$	94,650
Financial Expenses:
Interest on Mortgages	$	194,036
MIP/Service Charges		140
Bank Fees		2,401
Operational Asset Management Fee		16,440
Asset Management Fee		88,982
Partnership Management Fee		41,525
Total	$	343,524

18

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

BLESSED ROCK OF EL MONTE

DECEMBER 31, 2009

BLESSED ROCK OF EL MONTE

TABLE OF CONTENTS

		PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2
	FINANCIAL STATEMENTS:
	BALANCE SHEET	F-3
	STATEMENT OF OPERATIONS	F-5
	STATEMENT OF CHANGES IN PARTNERS’ CAPITAL	F-6
	STATEMENT OF CASH FLOWS	F-7
	NOTES TO FINANCIAL STATEMENTS	F-8

F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Blessed Rock of EI Monte

We have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership, as of December 31, 2009 and the related statements of operations, changes in partners’ capital 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.

We conducted our audit in accordance with the Standards of the Public 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. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2009 and the results of its operations, changes in partners’ capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Metairie, Louisiana

February 19, 2010

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

F-2

 BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2009

ASSETS
Current Assets
Cash	$	569,007
Prepaid expenses		41,116
Total Current Assets		610,123
Restricted Reserves and Escrows
Tax and Insurance Escrow		9,530
Replacement Reserve		164,751
Tenant Security Deposits		23,845
Total Restricted Reserves and Escrows		198,126
Property and Equipment
Land		1,324,238
Buildings and Improvements		8,130,654
Furniture and Equipment		144,029
Total Property and Equipment		9,598,921
Less: Accumulated Depreciation		(2,599,615	)
Property and Equipment, Net		6,999,306
Other Assets
Deferred Fees, Net		21,982
TOTAL ASSETS	$	7,829,537

See auditor’s report and accompanying notes to the financial statements.

F-3

 BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2009

LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts Payable	$	4,000
Accrued Management Fees		4,165
Accrued Property Tax Exemption Compliance Fee		1,591
Accrued Interest		13,233
Accrued Expenses		13,700
Current Portion Mortgage Payable		61,414
Prepaid Rents		5,362
Total Current Liabilities		103,465
Deposits & Prepayment Liabilities
Tenants’ Security Deposits		23,683
Long Term Liabilities
Mortgage Payable		2,252,440
Less: Current Portion		(61,414	)
Notes Payable		434,024
Grant Payable		400,000
Accrued Interest, Long Term		221,111
Total Long Term Liabilities		3,246,161
Total Liabilities		3,373,309
Partners’ Equity
Partners’ Equity		4,456,228
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	7,829,537

See auditor’s report and accompanying notes to the financial statements.

F-4

 BLESSED ROCK OF EL MONTE

STATEMENT OF OPERATIONS

DECEMBER 31, 2009

Revenue
Rental Income	$	956,056
Tenant Charges		859
Miscellaneous revenue		13,822
Total Revenue		970,737
Operating expenses
General and administrative		75,894
Management fee		48,379
Utilities		64,208
Repairs and maintenance		93,743
Tax and insurance		97,754
Financial expenses		299,301
Total Operating Expenses		679,279
Operating Income (Loss)		291,458
Other Income and (Expenses)
Interest income		842
Depreciation and amortization		(231,308	)
Net Other Income and (Expenses)		230,466
Net Income (Loss)	$	60,992

See auditor’s report and accompanying notes to the financial statements.

F-5

 BLESSED ROCK OF EL MONTE

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

DECEMBER 31, 2009

	General Partners			Limited Partners			Total Partners’ Capital
Balance - January 1, 2009	$	(27,008	)	$	4,436,845		$	4,409,837
Net Income (Loss)		610			60,382			60,992
Distributions to Members		(14,601	)		-			(14,601	)
Balance - December 31, 2009	$	(40,999	)	$	4,497,227		$	4,456,228
Percentages		1	%		99	%		100	%

See auditor’s report and accompanying notes to the financial statements.

F-6

 BLESSED ROCK OF EL MONTE

STATEMENT OF CASH FLOWS

DECEMBER 31, 2009

Cash flows from operating activities:
Net Loss	$	60,992
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		231,308
(Increase) decrease in accounts receivable		6,281
(Increase) decrease in prepaid expenses		(41,116	)
Increase (decrease) in accounts payable		3,484
Increase (decrease) in security deposits payable		(42	)
Increase (decrease) in accrued management fee		211
Increase (decrease) in prepaid rent		2,875
Increase (decrease) in accrued interest payable		(9,741	)
Total adjustments		193,260
Net cash provided (used) by operating activities		254,252
Cash flows from investing activities:
Purchase of property and equipment		(22,333	)
(Deposit) withdrawal tax and insurance escrows		35,669
(Deposit) withdrawal reserve		13,427
(Deposit) withdrawal security deposit account		(22	)
Net cash provided (used) by investing activities		26,741
Cash flows from financing activities:
Principal payments on mortgage payable		(57,246	)
Principal payments on notes payable		(203,307	)
Distributions		(14,601	)
Net cash provided (used) by financing activities		(275,154	)
Net increase (decrease) in cash and equivalents		5,839
Cash and equivalents, beginning of year		563,168
Cash and equivalents, end of year	$	569,007
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest Expense	$	161,006

See auditor’s report and accompanying notes to the financial statements.

F-7

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - NATURE OF OPERATIONS

Blessed Rock of El Monte, a California Limited Partnership, was organized on February 14, 1996 to acquire, construct, own and operate a 137-unit apartment project known as Blessed Rock of El Monte (“the Project”) located in El Monte, California.

The Project is eligible and qualifies for low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code of 1986. Generally, the low-income housing credit is computed as a percentage of the qualified basis of the property including rehabilitation and is allowed annually during a period of ten years commencing with the years the building is placed into service. In addition, in order to qualify for the credit, the Partnership must conform with certain occupancy standards as set forth in the Code.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of three months or less at the acquisition date. At December 31, 2009, cash and cash equivalents consist of two unrestricted checking accounts and a petty cash fund. Restricted cash is not considered cash equivalents.

Concentration of Credit Risk

The Partnership deposits its cash in financial institutions. At times, the account balances may exceed the institution’s federally insured limits. The Partnership has not experienced any losses in such accounts.

Tenant Accounts Receivable and Bad Debt Expense

Delinquent rent receivables are written off and included in bad debt expense in the period the balances are deemed to be uncollectible, which is generally after the tenant vacates.

Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method.

F-8

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. The rental property is depreciated over estimated service lives as follows:

Buildings	27.5 years	Straight-Line
Land Improvements	15 years	Straight-Line
Furnishings & Equipment	5 years	Straight-Line

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification 360-10-05-4, Accounting for the Impairment or Disposal of Long-Lived Assets, the partnership reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recovered. If the fair value is less than the carrying amount for the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized during the year ended December 31, 2009.

Other Assets

Other assets consist of Loan Fees and Tax Credit Fees which have been recorded at cost. These costs will be amortized using the straight-line method over a period of 15 and 16 years, respectively.

Property Taxes

Property taxes are expensed in the year of lien on the property such that twelve months of expense is charged to operations each period.

Rental Income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.

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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

F-9

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Income taxes on Partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on its respective tax return. The Partnership has adopted provisions of FASB Accounting Standards Codification Topic ASC 740-10 (previously Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes), on January 1, 2009. The implementation of this standard had no impact on the financial statements. As of both the date of adoption, and as of December 31, 2009, the unrecognized tax benefit accrual was zero. The Partnership will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense, if incurred. The Partnership’s tax filings are subject to audit by various taxing authorities, and the open audit periods are 2006 through 2008.

Fair Value

In 2009, the Partnership adopted the Fair Value Measurement topic of the FASB Accounting Standards Codification (ASC) 820 which provides guidance for assets and liabilities which are required to be measured at fair value and requires expanded disclosure for fair value measurement. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value and does not require any new fair value measurements. The implementation of Fair Value Measurement did not have a material impact on the Partnership’s financial statements for the year ended December 31, 2009.

The standard establishes a fair value hierarchy based on three levels:

●	Level 1 -	Quoted prices in active markets for identical assets or liabilities.
●	Level 2 -	Quoted prices for similar assets or liabilities in active markets.
●	Level 3 -	Unobservable inputs for the asset or liability based on the best available information

Affordable housing projects operate in a heavily regulated environment which typically includes restrictions such as land use restrictions, rent restrictions, government subsidies in the form of rental assistance through either rent subsidy or tenant vouchers, subsidized interest mortgage interest rates, and restrictions on selling or transferring the projects.

A summary of the methods and significant assumptions used to estimate the fair values of financial instruments is as follows:

Short-term financial instruments - The fair value of short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate the carrying value in the accompanying financial statements due to the short maturity of such instruments.

Long-term liabilities - The fair value of long-term liabilities approximates the carrying value in the accompanying financial statements based on current borrowing rates.

F-10

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE C - INTANGIBLE ASSETS

Intangible assets at December 31, 2009 were net of accumulated amortization of $84,059. Amortization expense for the same year ended was $6,899. Estimated aggregated amortization expense for each of the next four years is:

2010	$	6,899
2011		6,899
2012		6,899
2013		1,285
Total	$	21,982

NOTE D - MORTGAGE PAYABLE

The Partnership has entered into a mortgage loan agreement in the original amount of $2,720.000. The terms are set forth below:

a.	An interest rate of 7.05% per annum;
b.	Monthly principal and interest payments of $18,188;
c.	A balloon payment of $2,017,000 payable June 1, 2013;
d.	A maturity date of June 1, 2013; and
e.	The funding of a reserve fund for replacing assets of the Project.

Future minimum principal payments of the mortgage payable over each of the next five years are as follows:

Year ending December 31,
2010	$	61,414
2011		65,887
2012		70,686
2013		75,835
2014		81,359
Thereafter		1,897,259
	$	2,252,440

The liability of the Partnership under the mortgage loan is limited to the underlying value of the property and equipment collateral in addition to other amounts deposited with the lender. For the year ended December 31, 2009, interest expense was $160,670 and accrued interest was $13,233.

F-11

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE D - MORTGAGE PAYABLE (CONTINUED)

Replacement Reserve

In accordance with the Partnership Agreement, the Partnership is required to establish and maintain a replacement reserve account for the purpose of capital improvements. The reserve account is to be funded in the amount of $20,544 per year. As of December 31, 2009, the balance of the replacement reserve was $164,751.

NOTE E - NOTES PAYABLE

Notes payable at December 31, 2009 consist of the following:

A 4% note payable in the amount of $250,878 with a term of 15 years, is payable to El Monte Community Redevelopment Agency (“RDA”), secured by a deed of trust and rents from the Project. Payments of interest and principal are made annually beginning on April 1, 2003, and thereafter each April 1, until the outstanding principal balance of note and all accrued interest are paid in full. Payments are to be paid from 50% of the residual rental income, as defined in the promissory note agreement. Payments, if any, are applied first to accrued interest and second to principal on the note. As of December 31, 2009, the balance of the note payable was $3,377. At December 31, 2009, accrued interest on the note was $33.

A 1% note payable in the amount of $430,647 with a term of 30 years beginning April 3, 1996, is payable to RDA for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on each April 3 for the following six succeeding years, payments of $4,239 were due. Payments increase to $8,478 April 3, 2004 and continue for the next seven succeeding years. On April 3, 2012, payments increase to $32,534 and continue for the next 14 succeeding years, or until paid in full. Payments to be paid from 50% of residual rental income, as defined in promissory note agreement. Payments are applied first to interest. As of December 31, 2009, the balance of the development fee note payable was $430,647. At December 31, 2009, accrued interest on the note was $1,078.

Grant loan payable

The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. The loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. Accrued interest at December 31, 2009 was $220,000.

F-12

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE E - NOTES PAYABLE (CONTINUED)

Accrued interest at December 31, 2009 is as follows:

4% note payable	$	33
1% note payable		1,078
Grant loan		220,000
Total accrued interest on second mortgage	$	221,111

NOTE F - RELATED PARTY TRANSACTIONS

Operational Asset Management Fee

The Partnership Agreement provides for an asset management fee equal to $10 per unit per month, to accrue to the Managing General Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2009, an operational asset management fee of $16,440 was expensed and paid.

Asset Management Fee

The Partnership Agreement provides for am asset management fee equal to 30% of Remaining Cash, as defined, to accrue to the Limited Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee is cumulative if not paid each year. During the year ended December 31, 2009, $50,417 was expensed and paid.

Incentive Management Fee

The Partnership shall pay to the General Partner an incentive management fee equal to 40% of Remaining Cash, as defined. The incentive management fee shall be paid from available cash flow and does not accrue from year to year. For the year ended December 31, 2009, an incentive management fee of $23,528 was expensed and paid.

Reporting Fee

The Partnership shall pay to the Limited Partner a reporting fee equal to 15% of the Cash Flow from Operations, as defined, but should not be less than $6,000 for each Limited Partner. The reporting fee shall be paid from available cash flow and accrued from year to year. During the year ended December 31, 2009, a reporting fee of $17,646 was earned and paid.

F-13

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE F - RELATED PARTY TRANSACTIONS (CONTINUED)

Property Tax Exemption Compliance Fee

Pursuant to the Partnership Agreement, the Partnership shall pay to the Managing General Partner an annual fee of $1,500 for ensuring the Partnership is in compliance with the Property Tax Exemption requirements. The annual fee shall be increased by 3% each year, beginning in 2007 and continuing each year thereafter. For the year ended December 31, 2009, $4,636 was expensed of which $1,591 remained payable at year-end.

NOTE G - MANAGEMENT FEE

Effective July 19, 2007, the Partnership entered into an agreement with Professional Property Management, LLC (“PPM”), an unrelated party, in connection with the management of the Project’s rental operations. For the year ended December 31, 2009, management fees expensed totaled $48,379 of which $4,165 remained payable.

NOTE H - PROFITS, LOSSES AND DISTRIBUTIONS

In general, income (loss), tax credits and cash flow from operations are allocated 98.99% to the Limited Partners, .01% to the Special Limited Partner, .99% to the General Partner and .01% to the Managing General Partner.

Income (loss) and cash flow from sources other than operations will be allocated pursuant to the terms of the Partnership Agreement regarding such.

NOTE I - ADVERTISING

The Partnership expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2009 amounted to $175.

F-14

 BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE J - CONTINGENCIES

Housing Tax Credits

As incentive for investment equity, the Partnership applied for and received an allocation certificate for housing tax credits established by the Tax Reform Act of 1986. To qualify for the tax credits, the Partnership must meet certain requirements, including attaining a qualified basis sufficient to support the credit allocation. In addition, tenant eligibility and rental charges are restricted in accordance with Internal Revenue Code Section 42. Management has certified that each tax credit unit has met these qualifications to allow the credits allocated to each unit to be claimed. Compliance with these regulations must be maintained in each of the ten consecutive years of the compliance period. Failure to maintain compliance with occupant eligibility, unit gross rent, or to correct noncompliance within a reasonable time period could result in recapture of previously claimed tax credits plus interest.

NOTE K - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Partnership’s sole asset is the apartment complex. The Partnership’s operations are concentrated in the affordable housing real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies. Such administrative directives, rules and regulations are subject to change by an act of Congress. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

NOTE L - SUBSEQUENT EVENTS

FASB ASC 855, Subsequent Events, addresses events which occur after the balance sheet date but before the issuance of financial statements. An entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that existed after the balance sheet date. Additionally, Topic 855 requires disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued or were available to be issued. Management evaluated the activity of Blessed Rock of El Monte through February 19, 2010, the date the financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.

F-15

ACCOMPANYING INFORMATION

F-16

INDEPENDENT AUDITOR’S REPORT ON INFORMATION

ACCOMPANYING THE BASIC FINANCIAL STATEMENTS

To the Partners

Blessed Rock of El Monte

Our audit of the 2009 financial statements presented in the preceding section of this report was for the purpose of forming an opinion on such financial statements taken as a whole. The accompanying information shown on the following pages is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the 2009 basic financial statements taken as a whole.

 

Metairie, Louisiana

February 19, 2010

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

F-17

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2009

A. SCHEDULES OF EXPENSES
		2009
General and Administrative:
Administrative - Salaries	$	35,355
Marketing and advertising		175
Legal Fees		628
Audit Expense		5,205
Training		1,742
Credit Reports		334
Office Supplies		10,062
Telephone Expenses		8,869
Social Programming		12,924
Miscellaneous		600
Total	$	75,894
Utilities:
Electricity	$	20,313
Gas		15,442
Water & Sewer		28,453
Total	$	64,208
Repairs and Maintenance:
Maintenance - Contracts	$	32,083
Maintenance - Salaries		16,832
Maintenance - Supplies		6,936
Painting and Decorating		5,547
Garbage and Trash Removal		16,798
Exterminating		3,635
Grounds Maintenance		11,912
Total	$	93,743

F-18

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2009

		2009
Tax and Insurance:
Real Estate Taxes	$	24,500
Property & Liability Insurance		42,489
Payroll Taxes		9,063
Worker’s Compensation		10,138
Health Insurance and other Employee Benefits		4,719
Other Taxes and Insurance		6,845
Total	$	97,754
Financial Expenses:
Interest on Mortgages	$	185,372
Service Charges		182
Bank Fees		1,080
Reporting Fee		17,646
Operational Asset Management Fee		16,440
Property Tax Exemption Compliance Fee		4,636
Asset Management Fee		50,417
Partnership Management Fee		23,528
Total	$	299,301

F-19

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

BLESSED ROCK OF EL MONTE

DECEMBER 31, 2010

BLESSED ROCK OF EL MONTE

TABLE OF CONTENTS

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
FINANCIAL STATEMENTS:
BALANCE SHEET	F-3
STATEMENT OF OPERATIONS	F-5
STATEMENT OF CHANGES IN PARTNERS’ CAPITAL	F-6
STATEMENT OF CASH FLOWS	F-7
NOTES TO FINANCIAL STATEMENTS	F-8
ACCOMPANYING INFORMATION:
INDEPENDENT AUDITOR’S REPORT ON INFORMATION ACCOMPANYING THE BASIC FINANCIAL STATEMENTS	F-17
SUPPLEMENTAL INFORMATION	F-18

F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Blessed Rock of El Monte

We have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership, as of December 31, 2010 and the related statements of operations, changes in partners’ capital 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.

We conducted our audit in accordance with the Standards of the Public 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. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2010 and the results of its operations, changes in partners’ capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

Metairie, Louisiana

February 4, 2011

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

F-2

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2010

ASSETS
Current Assets
Cash	$	465,732
Prepaid Operational Asset Management Fees		8,220
Prepaid Expenses		40,979
Total Current Assets		514,931
Restricted Reserves and Escrows
Tax and Insurance Escrow		10,618
Replacement Reserve		185,580
Tenant Security Deposits		24,109
Total Restricted Reserves and Escrows		220,307
Property and Equipment
Land and Improvements		1,333,738
Buildings		8,158,504
Furniture and Equipment		179,205
Total Property and Equipment		9,671,447
Less: Accumulated Depreciation		(2,828,737	)
Property and Equipment, Net		6,842,710
Other Assets
Deferred Fees, Net		15,083
TOTAL ASSETS	$	7,593,031

See auditor’s report and accompanying notes to the financial statements.

F-3

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2010

LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts Payable	$	3,062
Accrued Management Fees		4,043
Accrued Interest		12,872
Accrued Expenses		13,700
Current Portion Mortgage Payable		65,887
Prepaid Rents		63
Total Current Liabilities		99,627
Deposits & Prepayment Liabilities
Tenants’ Security Deposits		23,955
Long Term Liabilities
Mortgage Payable		2,191,026
Less: Current Portion		(65,887	)
Notes Payable		251,515
Grant Payable		400,000
Accrued Interest, Long Term		236,000
Total Long Term Liabilities		3,012,654
Total Liabilities		3,136,236
Partners’ Equity
Partners’ Equity		4,456,795
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	7,593,031

See auditor’s report and accompanying notes to the financial statements.

F-4

BLESSED ROCK OF EL MONTE

STATEMENT OF OPERATIONS

DECEMBER 31, 2010

Revenue
Rental Income	$	978,070
Tenant Charges		1,785
Miscellaneous revenue		11,954
Total Revenue		991,809
Operating expenses
General and administrative		72,703
Management fee		48,614
Utilities		64,911
Repairs and maintenance		147,707
Tax and insurance		93,287
Financial expenses		259,844
Total Operating Expenses		687,066
Operating Income (Loss)		304,743
Other Income and (Expenses)
Interest income		395
Depreciation and amortization		(236,021	)
Net Other Income and (Expenses)		235,626
Net Income (Loss)	$	69,117

See auditor’s report and accompanying notes to the financial statements.

F-5

BLESSED ROCK OF EL MONTE

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

DECEMBER 31, 2010

							Total
	General			Limited			Partners’
	Partners			Partners			Capital
Balance - January 1, 2010	$	(40,999	)	$	4,497,227		$	4,456,228
Net Income (Loss)		691			68,426			69,117
Distributions to Members		(34,275	)		(34,275	)		(68,550	)
Balance - December 31, 2010	$	(74,583	)	$	4,531,378		$	4,456,795
Percentages		1	%		99	%		100	%

See auditor’s report and accompanying notes to the financial statements.

F-6

BLESSED ROCK OF EL MONTE

STATEMENT OF CASH FLOWS

DECEMBER 31, 2010

Cash flows from operating activities:
Net Income (Loss)	$	69,117
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		236,021
(Increase) decrease in prepaid operational asset management fees		(8,220	)
(Increase) decrease in prepaid expenses		137
Increase (decrease) in accounts payable		(938	)
Increase (decrease) in security deposits payable		272
Increase (decrease) in accrued management fee		(122	)
Increase (decrease) in accrued property tax exemption compliance fee		(1,591	)
Increase (decrease) in prepaid rent		(5,299	)
Increase (decrease) in accrued interest payable		18,230
Total adjustments		238,490
Net cash provided (used) by operating activities		307,607
Cash flows from investing activities:
Purchase of property and equipment		(72,526	)
(Deposit) withdrawal tax and insurance escrows		(1,088	)
(Deposit) withdrawal reserve		(20,829	)
(Deposit) withdrawal security deposit account		(264	)
Net cash provided (used) by investing activities		(94,707	)
Cash flows from financing activities:
Principal payments on mortgage payable		(61,414	)
Principal payments on notes payable		(182,509	)
Accrued interest payment - notes payable		(3,702	)
Distributions		(68,550	)
Net cash provided (used) by financing activities		(316,175	)
Net increase (decrease) in cash and equivalents		(103,275	)
Cash and equivalents, beginning of year		569,007
Cash and equivalents, end of year	$	465,732
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest Expense	$	160,540

See auditor’s report and accompanying notes to the financial statements.

F-7

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE A - NATURE OF OPERATIONS

Blessed Rock of El Monte, a California Limited Partnership, (“the Partnership”) was organized on February 14, 1996 to acquire, construct, own and operate a 137-unit apartment project known as Blessed Rock of El Monte (“the Project”) located in El Monte, California (“the Project”). The term of the Partnership shall extend until December 31, 2047, unless sooner terminated as provided in the Partnership Agreement.

The Project is eligible and qualifies for low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code of 1986. Generally, the low-income housing credit is computed as a percentage of the qualified basis of the property including rehabilitation and is allowed annually during a period of ten years commencing with the years the building is placed into service. In addition, in order to qualify for the credit, the Partnership must conform with certain occupancy standards as set forth in the Code.

The General Partner is Everland, Inc. The Managing General Partner is Community Housing Assistance Program, Inc., a non-profit corporation. The Limited Partners are WNC Housing Tax Credit Fund V, L.P., Series 3, and WNC Housing Tax Credit Fund V, L.P., Series 4. The Special Limited Partner is WNC Housing, L.P.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of three months or less at the acquisition date. At December 31, 2010, cash and cash equivalents consist of two unrestricted checking accounts and a petty cash fund. Restricted cash is not considered cash equivalents.

Tenant Accounts Receivable and Bad Debt Expense

Tenant rent charges for the current month are due on the first of the month. Tenants who are evicted or move-out are charged with damages or cleaning fees, if applicable. Tenant receivable consists of amounts due from rental income, security deposit or the charges for damages and cleaning fees. The Partnership does not accrue interest on the tenant receivable balances.

F-8

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Tenant receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review or the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. Bad debts expensed for the year ended December 31, 2010 totaled $185.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. The rental property is depreciated over estimated service lives as follows:

Buildings	27.5 - 40 years	Straight-Line
Land Improvements	15 - 20 years	Straight-Line
Furnishings & Equipment	5 - 10 years	Straight-Line

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification 360-10-05-4, Accounting for the Impairment or Disposal of Long-Lived Assets, the partnership reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recovered. If the fair value is less than the carrying amount for the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized during the year ended December 31, 2010.

Other Assets

Financing costs are amortized over the term of the mortgage loan using the straight-line method. Generally accepted accounting principles require that the effective yield method be used to amortize financing costs; however, the effect of using the straight-line method is not material to the financial statements for the year ended December 31, 2010.

Property Taxes

Property taxes are expensed in the year of lien on the property such that twelve months of expense is charged to operations each period.

F-9

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Rental Income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.

Fair Value

In 2009, the Partnership adopted the Fair Value Measurement topic of the FASB Accounting Standards Codification (ASC) 820 which provides guidance for assets and liabilities which are required to be measured at fair value and requires expanded disclosure for fair value measurement. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value and does not require any new fair value measurements. The implementation of Fair Value Measurement did not have a material impact on the Partnership’s financial statements for the year ended December 31, 2010.

The standard establishes a fair value hierarchy based on three levels:

● Level 1- Quoted prices in active markets for identical assets or liabilities.

● Level 2- Quoted prices for similar assets or liabilities in active markets.

● Level 3- Unobservable inputs for the asset or liability based on the best available information.

Affordable housing projects operate in a heavily regulated environment which typically includes restrictions such as land use restrictions, rent restrictions, government subsidies in the form of rental assistance through either rent subsidy or tenant vouchers, subsidized interest mortgage interest rates, and restrictions on selling or transferring the projects.

A summary of the methods and significant assumptions used to estimate the fair values of financial instruments is as follows:

Short-term financial instruments - The fair value of short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate the carrying value in the accompanying financial statements due to the short maturity of such instruments.

Long-term liabilities - The fair value of long-term liabilities approximates the carrying value in the accompanying financial statements based on current borrowing rates.

F-10

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Income taxes on Partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on its respective tax return. The Partnership has adopted provisions of FASB Accounting Standards Codification Topic ASC 740-10 (previously Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes), on January 1, 2009. The implementation of this standard had no impact on the financial statements. As of both the date of adoption, and as of December 31, 2010, the unrecognized tax benefit accrual was zero. The Partnership will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense, if incurred. The Partnership’s tax filings are subject to audit by various taxing authorities, and the open audit periods are 2007 through 2009.

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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Concentration of Credit Risk

The Partnership deposits its cash in financial institutions. At times, the account balances may exceed the institution’s federally insured limits. The Partnership has not experienced any losses in such accounts.

The Partnership’s sole asset is the apartment complex. The Partnership’s operations are concentrated in the affordable housing real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies. Such administrative directives, rules and regulations are subject to change by an act of Congress. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

F-11

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE C - INTANGIBLE ASSETS

Intangible assets at December 31, 2010 consist of financing costs which were net of accumulated amortization of $90,958. Amortization expense for the same year ended was $6,899. Estimated aggregated amortization expense for each of the next three years is:

2011	$	6,899
2012		6,899
2013		1,285
Total	$	15,083

NOTE D - MORTGAGE PAYABLE

The Partnership has entered into a mortgage loan agreement in the original amount of $2,720.000. The terms are set forth below:

a. An interest rate of 7.05% per annum;

b. Monthly principal and interest payments of $18,188;

c. A balloon payment of $2,017,000 payable June 1, 2013;

d. A maturity date of June 1, 2013; and

e. The funding of a reserve fund for replacing assets of the Project.

Mortgage loan principal payments for each of the next three years are estimated as follows:

2011	$	65,887
2012		70,686
2013		2,054,453
	$	2,191,026

The liability of the Partnership under the mortgage loan is limited to the underlying value of the property and equipment collateral in addition to other amounts deposited with the lender. For the year ended December 31, 2010, interest expense was $156,477 and accrued interest was $12,872.

Replacement Reserve

In accordance with the Partnership Agreement, the Partnership is required to establish and maintain a replacement reserve account for the purpose of capital improvements. The reserve account is to be funded in the amount of $20,544 per year. As of December 31, 2010, the balance of the replacement reserve was $185,580.

F-12

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE E - NOTES PAYABLE

Notes payable at December 31, 2010 consist of the following:

A 4% note payable in the amount of $250,878 with a term of 15 years, is payable to El Monte Community Redevelopment Agency (“RDA”), secured by a deed of trust and rents from the Project. Payments of interest and principal are made annually beginning on April 1, 2003, and thereafter each April 1, until the outstanding principal balance of note and all accrued interest are paid in full. Payments are to be paid from 50% of the residual rental income, as defined in the promissory note agreement. Payments, if any, are applied first to accrued interest and second to principal on the note. During 2010, all accrued interest and principal was paid in full. As of December 31, 2010, the balance of the note payable and the accrued interest on the note was $0.

A 1% note payable in the amount of $430,647 with a term of 30 years beginning April 3, 1996, is payable to RDA for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on each April 3 for the following six succeeding years, payments of $4,239 were due. Payments increase to $8,478 April 3, 2004 and continue for the next seven succeeding years. On April 3, 2012, payments increase to $32,534 and continue for the next 14 succeeding years, or until paid in full. Payments to be paid from 50% of residual rental income, as defined in promissory note agreement. Payments are applied first to interest. As of December 31, 2010, the balance of the development fee note payable was $251,515. At December 31, 2010, accrued interest on the note was $0.

Grant loan payable

The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. The loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. Accrued interest at December 31, 2010 was $236,000.

NOTE F - RELATED PARTY TRANSACTIONS

Operational Asset Management Fee

The Partnership Agreement provides for an asset management fee equal to $10 per unit per month, to accrue to the Managing General Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2010, an operational asset management fee of $16,440 was expensed, of which $8,220 remained payable at year-end.

F-13

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE F - RELATED PARTY TRANSACTIONS (CONTINUED)

Asset Management Fee

The Partnership Agreement provides for am asset management fee equal to 30% of Remaining Cash, as defined, to accrue to the Limited Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee is cumulative if not paid each year. No asset management fee was expensed and paid during the year ended December 31, 2010.

Incentive Management Fee

The Partnership shall pay to the General Partner an incentive management fee equal to 40% of Remaining Cash, as defined. The incentive management fee shall be paid from available cash flow and does not accrue from year to year. For the year ended December 31, 2010, an incentive management fee of $45,700 was expensed and paid.

Reporting Fee

The Partnership shall pay to the Limited Partner a reporting fee equal to 15% of the Cash Flow from Operations, as defined, but should not be less than $6,000 for each Limited Partner. The reporting fee shall be paid from available cash flow and accrued from year to year. During the year ended December 31, 2010, a reporting fee of $20,162 was earned and paid.

Property Tax Exemption Compliance Fee

Pursuant to the Partnership Agreement, the Partnership shall pay to the Managing General Partner an annual fee of $1,500 for ensuring the Partnership is in compliance with the Property Tax Exemption requirements. The annual fee shall be increased by 3% each year, beginning in 2007 and continuing each year thereafter. For the year ended December 31, 2010, $1,639 was expensed of which $0 remained payable at year-end.

NOTE G - MANAGEMENT FEE

Effective July 19, 2007, the Partnership entered into an agreement with Professional Property Management, LLC (“PPM”), an unrelated party, in connection with the management of the Project’s rental operations. In accordance with the management agreement, PPM earns fees of 5% of monthly gross collections. Fees earned for services rendered in connection with the leasing and operation of the Project amounted to $48,614 for the year ended December 31, 2010. At December 31, 2010, $4,043 in management fees remained payable.

F-14

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010

NOTE H - PROFITS, LOSSES AND DISTRIBUTIONS

In general, income (loss), tax credits and cash flow from operations are allocated 98.99% to the Limited Partners, .01% to the Special Limited Partner, .99% to the General Partner and .01% to the Managing General Partner.

Income (loss) and cash flow from sources other than operations will be allocated pursuant to the terms of the Partnership Agreement regarding such.

NOTE I – ADVERTISING

The Partnership expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2010 amounted to $840.

NOTE J – CONTINGENCIES

Housing Tax Credits

As incentive for investment equity, the Partnership applied for and received an allocation certificate for housing tax credits established by the Tax Reform Act of 1986. To qualify for the tax credits, the Partnership must meet certain requirements, including attaining a qualified basis sufficient to support the credit allocation. In addition, tenant eligibility and rental charges are restricted in accordance with Internal Revenue Code Section 42. Management has certified that each tax credit unit has met these qualifications to allow the credits allocated to each unit to be claimed. Compliance with these regulations must be maintained in each of the ten consecutive years of the compliance period. Failure to maintain compliance with occupant eligibility, unit gross rent, or to correct noncompliance within a reasonable time period could result in recapture of previously claimed tax credits plus interest.

NOTE K - SUBSEQUENT EVENTS

FASB ASC 855, Subsequent Events, addresses events which occur after the balance sheet date but before the issuance of financial statements. An entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that existed after the balance sheet date. Additionally, Topic 855 requires disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued or were available to be issued. Management evaluated the activity of Blessed Rock of El Monte through February 4, 2011, the date the financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.

F-15

ACCOMPANYING INFORMATION

F-16

INDEPENDENT AUDITOR’S REPORT ON INFORMATION

ACCOMPANYING THE BASIC FINANCIAL STATEMENTS

To the Partners

Blessed Rock of El Monte

Our audit of the 2010 financial statements presented in the preceding section of this report was for the purpose of forming an opinion on such financial statements taken as a whole. The accompanying information shown on the following pages is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the 2010 basic financial statements taken as a whole.

 

Metairie Louisiana

February 4, 2011

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

F-17

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2010

A. SCHEDULES OF EXPENSES
		2010
General and Administrative:
Administrative - Salaries	$	35,260
Marketing and advertising		840
Audit Expense		6,033
Training		152
Credit Reports		274
Office Supplies		7,030
Telephone Expenses		9,405
Social Programming		13,492
Bad Debts		185
Miscellaneous		32
Total	$	72,703
Utilities:
Electricity	$	18,535
Gas		16,481
Water & Sewer		29,895
Total	$	64,911
Repairs and Maintenance:
Maintenance - Contracts	$	50,054
Maintenance - Salaries		15,992
Maintenance - Supplies		12,322
Painting and Decorating		31,481
Garbage and Trash Removal		17,395
Exterminating		1,750
Grounds Maintenance		18,713
Total	$	147,707

F-18

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2010

	2010
Tax and Insurance:
Real Estate Taxes	$	25,423
Property & Liability Insurance		42,499
Payroll Taxes		9,937
Worker’s Compensation		10,146
Health Insurance and other Employee Benefits		2,858
Other Taxes and Insurance		2,424
Total	$	93,287
Financial Expenses:
Interest on Mortgages	$	175,068
Service Charges		748
Bank Fees		87
Reporting Fee		20,162
Operational Asset Management Fee		16,440
Property Tax Exemption Compliance Fee		1,639
Partnership Management Fee		45,700
Total	$	259,844

F-19

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

BLESSED ROCK OF EL MONTE

DECEMBER 31, 2011

BLESSED ROCK OF EL MONTE

TABLE OF CONTENTS

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
FINANCIAL STATEMENTS:
BALANCE SHEET	F-3
STATEMENT OF OPERATIONS	F-5
STATEMENT OF CHANGES IN PARTNERS’ CAPITAL	F-6
STATEMENT OF CASH FLOWS	F-7
NOTES TO FINANCIAL STATEMENTS	F-8
ACCOMPANYING INFORMATION:
INDEPENDENT AUDITOR’S REPORT ON INFORMATION ACCOMPANYING THE BASIC FINANCIAL STATEMENTS	F-17
SUPPLEMENTAL INFORMATION	F-18

F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners
Blessed Rock of El Monte

We have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership, as of December 31, 2011 and the related statements of operations, changes in partners’ capital 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.

We conducted our audit in accordance with the Standards of the Public 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. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2011 and the results of its operations, changes in partners’ capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

Metairie, Louisiana

January 27, 2012

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board
AICPA Centers . Center for Public Company Audit Firms (SEC)
Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

F-2

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2011

ASSETS
Current Assets
Cash	$	504,935
Prepaid Operational Asset Management Fees		8,220
Total Current Assets		513,155
Restricted Reserves and Escrows
Tax and Insurance Escrow		51,562
Replacement Reserve		156,955
Tenant Security Deposits		24,208
Total Restricted Reserves and Escrows		232,725
Property and Equipment
Land and Improvements		1,333,738
Buildings		8,158,505
Furniture and Equipment		229,170
Total Property and Equipment		9,721,413
Less: Accumulated Depreciation		(3,059,645	)
Property and Equipment, Net		6,661,768
Other Assets
Deferred Fees, Net		8,184
TOTAL ASSETS	$	7,415,832

See auditor’s report and accompanying notes to the financial statements.

F-3

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2011

LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts Payable	$	3,231
Accrued Management Fees		4,071
Accrued Interest		12,485
Accrued Expenses		13,700
Current Portion Mortgage Payable		70,686
Prepaid Rents		742
Total Current Liabilities		104,915
Deposits & Prepayment Liabilities
Tenants’ Security Deposits		24,032
Long Term Liabilities
Mortgage Payable		2,125,140
Less: Current Portion		(70,686	)
Notes Payable		79,225
Grant Payable		400,000
Accrued Interest, Long Term		252,000
Total Long Term Liabilities		2,785,679
Total Liabilities		2,914,626
Partners’ Equity
Partners’ Equity		4,501,206
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	7,415,832

See auditor’s report and accompanying notes to the financial statements.

F-4

BLESSED ROCK OF EL MONTE

STATEMENT OF OPERATIONS

DECEMBER 31, 2011

Revenue
Rental Income	$	973,875
Tenant Charges		1,410
Laundry and Vending		11,549
Total Revenue		986,834
Operating expenses
General and administrative		130,360
Utilities		64,585
Repairs and maintenance		160,813
Tax and insurance		97,331
Interest on financing		168,816
Total Operating Expenses		621,905
Operating Income (Loss)		364,929
Other Income and (Expenses)
Interest income		268
Depreciation and amortization		(237,808	)
Operational asset management fee		(16,440	)
Property tax exemption compliance fee		(1,688	)
Reporting fee		(21,140	)
Incentive management fee		(12,000	)
Net Other Income and (Expenses)		288,808
Net Income (Loss)	$	76,121

See auditor’s report and accompanying notes to the financial statements.

F-5

BLESSED ROCK OF EL MONTE

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

DECEMBER 31, 2011

	General Partners			Limited Partners			Total Partners’ Capital
Balance - January 1, 2011	$	(74,583	)	$	4,531,378		$	4,456,795
Net Income (Loss)		761			75,360			76,121
Distributions to Members		(15,855	)		(15,855	)		(31,710	)
Balance - December 31, 2011	$	(89,677	)	$	4,590,883		$	4,501,206
Percentages		1	%		99	%		100	%

See auditor’s report and accompanying notes to the financial statements.

F-6

BLESSED ROCK OF EL MONTE

STATEMENT OF CASH FLOWS

DECEMBER 31, 2011

Cash flows from operating activities:
Net Income (Loss)	$	76,121
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		237,808
(Increase) decrease in prepaid expenses		40,979
Increase (decrease) in accounts payable		169
Increase (decrease) in security deposits payable		77
Increase (decrease) in accrued management fee		28
Increase (decrease) in prepaid rent		678
Increase (decrease) in accrued interest payable		16,451
Total adjustments		296,190
Net cash provided (used) by operating activities		372,311
Cash flows from investing activities:
Purchase of property and equipment		(49,966	)
(Deposit) withdrawal tax and insurance escrows		(40,944	)
(Deposit) withdrawal reserve		28,625
(Deposit) withdrawal security deposit account		(99	)
Net cash provided (used) by investing activities		(62,384	)
Cash flows from financing activities:
Principal payments on mortgage payable		(65,886	)
Principal payments on notes payable		(172,290	)
Accrued interest payment - notes payable		(838	)
Distributions		(31,710	)
Net cash provided (used) by financing activities		(270,724	)
Net increase (decrease) in cash and equivalents		39,203
Cash and equivalents, beginning of year		465,732
Cash and equivalents, end of year	$	504,935
Supplemental disclosures of cash flow information:
Cash paid during the year for: Interest Expense	$	153,204

See auditor’s report and accompanying notes to the financial statements.

F-7

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE A - NATURE OF OPERATIONS

Blessed Rock of El Monte, a California Limited Partnership, (“the Partnership”) was organized on February 14, 1996 to acquire, construct, own and operate a 137-unit apartment project known as Blessed Rock of El Monte (“the Project”) located in El Monte, California (“the Project”). The term of the Partnership shall extend until December 31, 2047, unless sooner terminated as provided in the Partnership Agreement.

The Project is eligible and qualifies for low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code of 1986. Generally, the low-income housing credit is computed as a percentage of the qualified basis of the property including rehabilitation and is allowed annually during a period of ten years commencing with the years the building is placed into service. In addition, in order to qualify for the credit, the Partnership must conform with certain occupancy standards as set forth in the Code.

The General Partner is Everland, Inc. The Managing General Partner is Community Housing Assistance Program, Inc., a non-profit corporation. The Limited Partners are WNC Housing Tax Credit Fund V, L.P., Series 3, and WNC Housing Tax Credit Fund V, L.P., Series 4. The Special Limited Partner is WNC Housing, L.P.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of three months or less at the acquisition date. At December 31, 2011, cash and cash equivalents consist of two unrestricted checking accounts and a petty cash fund. Restricted cash is not considered cash equivalents.

Tenant Accounts Receivable and Bad Debt Expense

Tenant rent charges for the current month are due on the first of the month. Tenants who are evicted or move-out are charged with damages or cleaning fees, if applicable. Tenant receivable consists of amounts due from rental income, security deposit or the charges for damages and cleaning fees. The Partnership does not accrue interest on the tenant receivable balances.

F-8

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Tenant receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review or the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. Bad debts expensed for the year ended December 31, 2011 totaled $433.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. The rental property is depreciated over estimated service lives as follows:

Buildings	27.5 - 40 years	Straight-Line
Land Improvements	15 - 20 years	Straight-Line
Furnishings & Equipment	5 - 10 years	Straight-Line

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification 360-10-05-4, Accounting for the Impairment or Disposal of Long-Lived Assets, the partnership reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recovered. If the fair value is less than the carrying amount for the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized during the year ended December 31, 2011.

Other Assets

The Partnership incurred financing costs in connection with the mortgage. These costs have been capitalized and are being amortized using the straight-line method over the 16-year terms of the mortgages. In addition, the Partnership incurred costs in connection with obtaining the tax credits, which are being amortized over a term of 15 years. Generally accepted accounting principles require that the effective yield method be used to amortize financing costs; however, the effect of using the straight-line method is not material to the financial statements for the year ended December 31, 2011.

Property Taxes

Property taxes are expensed in the year of lien on the property such that twelve months of expense is charged to operations each period.

F-9

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Rental Income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.

Income Taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a Partnership. Accordingly, the Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has not other tax positions which it must consider for disclosure. There has been no interest or penalties recognized in the statement of income or balance sheet for the year ended December 31, 2011. The Partnership’s tax filings are subject to audit by various taxing authorities, and the open audit periods are 2008 through 2010.

Fair Value

In 2009, the Partnership adopted the Fair Value Measurement topic of the FASB Accounting Standards Codification (ASC) 820 which provides guidance for assets and liabilities which are required to be measured at fair value and requires expanded disclosure for fair value measurement. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value and does not require any new fair value measurements. The implementation of Fair Value Measurement did not have a material impact on the financial statements for the year ended December 31, 2011.

Accounting Standards Codification

The Financial Accounting Standards Board (“FASB ASC”) became the sole authoritative source of generally accepted accounting principles in the United States of America for periods ending after September 15, 2009. The FASB ASC incorporates all authoritative literature previously issued by a standard setter. Adoption of the FASB ASC has no effect on the Partnership’s financial position, results from operations, partners’ equity, or cash flows. References to the authoritative accounting literature in the notes to the financial statements are to the FASB ASC.

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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

F-10

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentration of Credit Risk

The Partnership deposits its cash in financial institutions. At times, the account balances may exceed the institution’s federally insured limits. The Partnership has not experienced any losses in such accounts.

The Partnership’s sole asset is the apartment complex. The Partnership’s operations are concentrated in the affordable housing real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies. Such administrative directives, rules and regulations are subject to change by an act of Congress. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

NOTE C - INTANGIBLE ASSETS

Intangible assets are amortized over the term of the mortgage loan using the straight line method and, at December 31, 2011, were net of accumulated amortization of $97,857. Amortization expense for the same year ended was $6,899. Estimated aggregated amortization expense for each of the next two years is:

2012	$	6,899
2013		1,285
Total	$	8,184

NOTE D - MORTGAGE PAYABLE

The Partnership has entered into a mortgage loan agreement in the original amount of $2,720.000. The terms are set forth below:

a.	An interest rate of 7.05% per annum;
b.	Monthly principal and interest payments of $18,188;
c.	A balloon payment of $2,017,000 payable June 1, 2013;
d.	A maturity date of June 1, 2013; and
e.	The funding of a reserve fund for replacing assets of the Project.

F-11

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE D - MORTGAGE PAYABLE (CONTINUED)

Mortgage loan principal payments for each of the next two years are estimated as follows:

2012	$	70,686
2013		2,054,454
	$	2,125,140

The liability of the Partnership under the mortgage loan is limited to the underlying value of the property and equipment collateral in addition to other amounts deposited with the lender. For the year ended December 31, 2011, interest expense was $151,978 and accrued interest was $12,485.

Replacement Reserve

In accordance with the Partnership Agreement, the Partnership is required to establish and maintain a replacement reserve account for the purpose of capital improvements. The reserve account is to be funded in the amount of $20,544 per year. As of December 31, 2011, the balance of the replacement reserve was $156,955.

NOTE E - NOTES PAYABLE

Notes payable at December 31, 2011 consist of the following:

A 4% note payable in the amount of $250,878 with a term of 15 years, is payable to El Monte Community Redevelopment Agency (“RDA”), secured by a deed of trust and rents from the Project. Payments of interest and principal are made annually beginning on April 1, 2003, and thereafter each April 1, until the outstanding principal balance of note and all accrued interest are paid in full. Payments are to be paid from 50% of the residual rental income, as defined in the promissory note agreement. Payments, if any, are applied first to accrued interest and second to principal on the note. During 2010, all accrued interest and principal was paid in full.

A 1% note payable in the amount of $430,647 with a term of 30 years beginning April 3, 1996, is payable to RDA for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on each April 3 for the following six succeeding years, payments of $4,239 were due. Payments increase to $8,478 April 3, 2004 and continue for the next seven succeeding years. On April 3, 2012, payments increase to $32,534 and continue for the next 14 succeeding years, or until paid in full. Payments to be paid from 50% of residual rental income, as defined in promissory note agreement. Payments are applied first to interest. As of December 31, 2011, the balance of the development fee note payable was $79,225. At December 31, 2011, accrued interest on the note was $0.

F-12

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE E - NOTES PAYABLE (CONTINUED)

Grant loan payable

The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. The loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. Accrued interest at December 31, 2011 was $252,000.

NOTE F - RELATED PARTY TRANSACTIONS

Operational Asset Management Fee

The Partnership Agreement provides for an asset management fee equal to $10 per unit per month, to accrue to the Managing General Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2011, an operational asset management fee of $16,440 was expensed and paid. $8,220 remained prepaid at year-end.

Incentive Management Fee

The Partnership shall pay to the General Partner an incentive management fee equal to 40% of Remaining Cash, as defined. The incentive management fee shall be paid from available cash flow and does not accrue from year to year. For the year ended December 31, 2011, an incentive management fee of $12,000 was expensed and paid. No incentive management fee was payable at year-end.

Reporting Fee

The Partnership shall pay to the Limited Partner a reporting fee equal to 15% of the Cash Flow from Operations, as defined, but should not be less than $6,000 for each Limited Partner. The reporting fee shall be paid from available cash flow and accrued from year to year. During the year ended December 31, 2011, a reporting fee of $21,140 was earned and paid, and $0 was payable at year-end.

Property Tax Exemption Compliance Fee

Pursuant to the Partnership Agreement, the Partnership shall pay to the Managing General Partner an annual fee of $1,500 for ensuring the Partnership is in compliance with the Property Tax Exemption requirements. The annual fee shall be increased by 3% each year, beginning in 2007 and continuing each year thereafter. For the year ended December 31, 2011, $1,688 was expensed and paid, and $0 was payable at year-end.

F-13

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE G - MANAGEMENT FEE

Effective July 19, 2007, the Partnership entered into an agreement with Professional Property Management, LLC (“PPM”), an unrelated party, in connection with the management of the Project’s rental operations. In accordance with the management agreement, PPM earns fees of 5% of monthly gross collections. Fees earned for services rendered in connection with the leasing and operation of the Project amounted to $48,405 for the year ended December 31, 2011. At December 31, 2011, $4,071 in management fees remained payable.

NOTE H - PROFITS, LOSSES AND DISTRIBUTIONS

In general, income (loss), tax credits and cash flow from operations are allocated 98.99% to the Limited Partners, .01% to the Special Limited Partner, .99% to the General Partner and .01% to the Managing General Partner.

Income (loss) and cash flow from sources other than operations will be allocated pursuant to the terms of the Partnership Agreement regarding such.

NOTE I - ADVERTISING

The Partnership expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2011 amounted to $804.

NOTE J - CONTINGENCIES

Housing Tax Credits

As incentive for investment equity, the Partnership applied for and received an allocation certificate for housing tax credits established by the Tax Reform Act of 1986. To qualify for the tax credits, the Partnership must meet certain requirements, including attaining a qualified basis sufficient to support the credit allocation. In addition, tenant eligibility and rental charges are restricted in accordance with Internal Revenue Code Section 42. Management has certified that each tax credit unit has met these qualifications to allow the credits allocated to each unit to be claimed. Compliance with these regulations must be maintained in each of the ten consecutive years of the compliance period. Failure to maintain compliance with occupant eligibility, unit gross rent, or to correct noncompliance within a reasonable time period could result in recapture of previously claimed tax credits plus interest.

F-14

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE K - SUBSEQUENT EVENTS

FASB ASC 855, Subsequent Events, addresses events which occur after the balance sheet date but before the issuance of financial statements. An entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that existed after the balance sheet date. Additionally, Topic 855 requires disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued or were available to be issued. Management evaluated the activity of Blessed Rock of El Monte through January 27, 2012, the date the financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.

F-15

ACCOMPANYING INFORMATION

F-16

INDEPENDENT AUDITOR’S REPORT ON INFORMATION

ACCOMPANYING THE BASIC FINANCIAL STATEMENTS

To the Partners

Blessed Rock of El Monte

Our audit of the 2011 financial statements presented in the preceding section of this report was for the purpose of forming an opinion on such financial statements taken as a whole. The accompanying information shown on the following pages is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the 2011 basic financial statements taken as a whole.

 

Metairie, Louisiana

January 27, 2012

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

F-17

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2011

A. SCHEDULES OF EXPENSES
		2011
General and Administrative:
Administrative - Salaries	$	35,246
Management Fee		48,805
Marketing and Advertising		804
Legal Fees		1,679
Audit Expense		6,154
Training		2,271
Credit Reports		324
Office Supplies		8,748
Bank Fees		2,084
Telephone Expenses		9,789
Social Programming		13,871
Bad Debts		433
Miscellaneous		152
Total	$	130,360
Utilities:
Electricity	$	18,571
Gas		16,535
Water & Sewer		29,479
Total	$	64,585
Repairs and Maintenance:
Maintenance - Contracts	$	68,193
Maintenance - Salaries		17,358
Maintenance - Supplies		18,095
Painting and Decorating		17,708
Garbage and Trash Removal		17,596
Exterminating		2,230
Grounds Maintenance		19,633
Total	$	160,813

F-18

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2011

	2011
Tax and Insurance:
Real Estate Taxes	$	26,570
Property & Liability Insurance		42,364
Payroll Taxes		9,279
Worker’s Compensation		10,146
Health Insurance and other Employee Benefits		5,357
Other Taxes and Insurance		3,615
Total	$	97,331

F-19

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR’S REPORT

BLESSED ROCK OF EL MONTE

DECEMBER 31, 2012

BLESSED ROCK OF EL MONTE

TABLE OF CONTENTS  

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
FINANCIAL STATEMENTS:
BALANCE SHEET	F-2
STATEMENT OF OPERATIONS	F-4
STATEMENT OF CHANGES IN PARTNERS’ CAPITAL	F-5
STATEMENT OF CASH FLOWS	F-6
NOTES TO FINANCIAL STATEMENTS	F-7
ACCOMPANYING INFORMATION:
INDEPENDENT AUDITOR’S REPORT ON INFORMATION ACCOMPANYING THE BASIC FINANCIAL STATEMENTS	F-16
SUPPLEMENTAL INFORMATION	F-17

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Blessed Rock of El Monte

We have audited the accompanying financial statements of Blessed Rock of El Monte, as of December 31, 2012 and the related statements of operations, changes in partners’ equity and cash flows for the year ended December 31, 2012. Blessed Rock of El Monte’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blessed Rock of El Monte as of December 31, 2012 and the result of its operations and its cash flows for the year ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

 

Metairie, Louisiana

January 25, 2013

F-2

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2012

ASSETS
Current Assets
Cash	$	555,742
Accounts Receivable, Tenants		43
Accounts Receivable, Other		1,380
Prepaid Operational Asset Management Fees		8,220
Total Current Assets		565,385
Restricted Reserves and Escrows
Tax and Insurance Escrow		52,655
Replacement Reserve		177,578
Tenant Security Deposits		23,959
Total Restricted Reserves and Escrows		254,192
Property and Equipment
Land and Improvements		1,333,738
Buildings		8,235,645
Furniture and Equipment		229,170
Total Property and Equipment		9,798,553
Less: Accumulated Depreciation		(3,304,124	)
Property and Equipment, Net		6,494,429
Other Assets
Deferred Fees, Net		1,285
TOTAL ASSETS	$	7,315,291

See auditor’s report and accompanying notes to the financial statements.

F-3

BLESSED ROCK OF EL MONTE

BALANCE SHEET

DECEMBER 31, 2012

LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accrued Management Fees	$	4,113
Accrued Interest		12,070
Accrued Expenses		13,700
Current Portion Mortgage Payable		2,054,455
Prepaid Rents		104
Total Current Liabilities		2,084,442
Deposits & Prepayment Liabilities
Tenants’ Security Deposits		23,897
Long Term Liabilities
Grant Payable		400,000
Accrued Interest, Long Term		268,000
Total Long Term Liabilities		668,000
Total Liabilities		2,776,339
Partners’ Equity
Partners’ Equity		4,538,952
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	7,315,291

See auditor’s report and accompanying notes to the financial statements.

F-4

BLESSED ROCK OF EL MONTE

STATEMENT OF OPERATIONS

DECEMBER 31, 2012

Revenue
Rental Income	$	986,848
Tenant Charges		2,130
Laundry and Vending		9,805
Miscellaneous Revenue		356
Total Revenue		999,139
Operating expenses
General and administrative		133,508
Utilities		69,276
Repairs and maintenance		149,901
Tax and insurance		98,451
Interest on financing		163,152
Total Operating Expenses		614,288
Operating Income (Loss)		384,851
Other Income and (Expenses)
Interest income		122
Depreciation and amortization		(251,378	)
Operational asset management fee		(16,440	)
Property tax exemption compliance fee		(1,739	)
Reporting fee		(26,268	)
Incentive management fee		(12,000	)
Net Other Income and (Expenses)		307,703
Net Income (Loss)	$	77,148

See auditor’s report and accompanying notes to the financial statements.

F-5

BLESSED ROCK OF EL MONTE

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

DECEMBER 31, 2012

	General Partners			Limited Partners			Total Partners’ Capital
Balance - January 1, 2012	$	(89,677	)	$	4,590,883		$	4,501,206
Net Income (Loss)		772			76,376			77,148
Distributions to Members		(19,701	)		(19,701	)		(39,402	)
Balance - December 31, 2012	$	(108,606	)	$	4,647,558		$	4,538,952
Percentages		1	%		99	%		100	%

See auditor’s report and accompanying notes to the financial statements.

F-6

BLESSED ROCK OF EL MONTE

STATEMENT OF CASH FLOWS

DECEMBER 31, 2012

Cash flows from operating activities:
Net Income (Loss)	$	77,148
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		251,378
(Increase) decrease in accounts receivable		(1,423	)
Increase (decrease) in accounts payable		(3,231	)
Increase (decrease) in security deposits payable		(135	)
Increase (decrease) in accrued management fee		42
Increase (decrease) in prepaid rent		(638	)
Increase (decrease) in accrued interest payable		15,585
Total adjustments		261,578
Net cash provided (used) by operating activities		338,726
Cash flows from investing activities:
Purchase of property and equipment		(77,140	)
(Deposit) withdrawal tax and insurance escrows		(1,093	)
(Deposit) withdrawal reserve		(20,623	)
(Deposit) withdrawal security deposit account		249
Net cash provided (used) by investing activities		(98,607	)
Cash flows from financing activities:
Principal payments on mortgage payable		(70,685	)
Principal payments on notes payable		(79,225	)
Distributions		(39,402	)
Net cash provided (used) by financing activities		(189,312	)
Net increase (decrease) in cash and equivalents		50,807
Cash and equivalents, beginning of year		504,935
Cash and equivalents, end of year	$	555,742
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest Expense	$	147,567

See auditor’s report and accompanying notes to the financial statements.

F-7

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE A - NATURE OF OPERATIONS

Blessed Rock of El Monte, a California Limited Partnership, (“the Partnership”) was organized on February 14, 1996 to acquire, construct, own and operate a 137-unit apartment project known as Blessed Rock of El Monte (“the Project”) located in El Monte, California (“the Project”). The term of the Partnership shall extend until December 31, 2047, unless sooner terminated as provided in the Partnership Agreement.

The Project is eligible and qualifies for low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code of 1986 (“the Code”). Generally, the low-income housing credit is computed as a percentage of the qualified basis of the property including rehabilitation and is allowed annually during a period of ten years commencing with the years the building is placed into service. In addition, in order to qualify for the credit, the Partnership must conform with certain occupancy standards as set forth in the Code.

The General Partner is Everland, Inc. The Managing General Partner is Community Housing Assistance Program, Inc., a non-profit corporation. The Limited Partners are WNC Housing Tax Credit Fund V, L.P., Series 3, and WNC Housing Tax Credit Fund V, L.P., Series 4. The Special Limited Partner is WNC Housing, L.P.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of three months or less at the acquisition date. At December 31, 2012, cash and cash equivalents consist of two unrestricted checking accounts and a petty cash fund. Restricted cash is not considered cash equivalents.

Tenant Accounts Receivable and Bad Debt Expense

Tenant rent charges for the current month are due on the first of the month. Tenants who are evicted or move-out are charged with damages or cleaning fees, if applicable. Tenant receivable consists of amounts due from rental income, security deposit or the charges for damages and cleaning fees. The Partnership does not accrue interest on the tenant receivable balances.

F-8

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Tenant receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review or the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. Bad debts expensed for the year ended December 31, 2012 totaled $56.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. The rental property is depreciated over estimated service lives as follows:

Buildings	27.5 - 40 years	Straight-Line
Land Improvements	15 - 20 years	Straight-Line
Furnishings & Equipment	5 - 10 years	Straight-Line

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification 360-10-05-4, Accounting for the Impairment or Disposal of Long-Lived Assets, the partnership reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recovered. If the fair value is less than the carrying amount for the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized during the year ended December 31, 2012.

Other Assets

The Partnership incurred financing costs in connection with the mortgage. These costs have been capitalized and are being amortized using the straight-line method over the 16-year terms of the mortgages. In addition, the Partnership incurred costs in connection with obtaining the tax credits, which are being amortized over a term of 15 years. Generally accepted accounting principles require that the effective yield method be used to amortize financing costs; however, the effect of using the straight-line method is not material to the financial statements for the year ended December 31, 2012.

Property Taxes

Property taxes are expensed in the year of lien on the property such that twelve months of expense is charged to operations each period.

F-9

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Rental Income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.

Income Taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a Partnership. Accordingly, the Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has not other tax positions which it must consider for disclosure. There has been no interest or penalties recognized in the statement of income or balance sheet for the year ended December 31, 2012. The Partnership’s tax filings are subject to audit by various taxing authorities, and the open audit periods are 2009 through 2011.

Fair Value

In 2009, the Partnership adopted the Fair Value Measurement topic of the FASB Accounting Standards Codification (ASC) 820 which provides guidance for assets and liabilities which are required to be measured at fair value and requires expanded disclosure for fair value measurement. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value and does not require any new fair value measurements. The implementation of Fair Value Measurement did not have a material impact on the Partnership’s financial statements for the year ended December 31, 2012.

Accounting Standards Codification

The Financial Accounting Standards Board (“FASB ASC”) became the sole authoritative source of generally accepted accounting principles in the United States of America for periods ending after September 15, 2009. The FASB ASC incorporates all authoritative literature previously issued by a standard setter. Adoption of the FASB ASC has no effect on the Partnership’s financial position, results from operations, partners’ equity, or cash flows. References to the authoritative accounting literature in the notes to the financial statements are to the FASB ASC.

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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

F-10

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentration of Credit Risk

The Partnership maintains its cash balances and reserve balances in bank deposits that at times may exceed federally insured limits. The Partnership has not experienced any losses associated with these deposits. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents.

The Partnership’s sole asset is the apartment complex. The Partnership’s operations are concentrated in the affordable housing real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies. Such administrative directives, rules and regulations are subject to change by an act of Congress. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

NOTE C - INTANGIBLE ASSETS

Intangible assets are amortized over the term of the mortgage loan using the straight line method and, at December 31, 2012, were net of accumulated amortization of $104,756. Amortization expense for the same year ended was $6,899.

Estimated aggregated amortization expense for 2013 is $1,285.

NOTE D - MORTGAGE PAYABLE

The Partnership has entered into a mortgage loan agreement in the original amount of $2,720.000. The loan agreement provides, among other things, for the following:

a.	An interest rate of 7.05% per annum;
b.	Monthly principal and interest payments of $18,188;
c.	A balloon payment of $2,017,000 payable June 1, 2013;
d.	A maturity date of June 1, 2013; and
e.	The funding of a reserve fund for replacing assets of the Project.

The mortgage loan matures in 2013 and all principal is due.

The liability of the Partnership under the mortgage loan is limited to the underlying value of the property and equipment collateral in addition to other amounts deposited with the lender. For the year ended December 31, 2012, interest expense was $147,152 and accrued interest was $12,070.

F-11

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE D - MORTGAGE PAYABLE (CONTINUED)

Replacement Reserve

In accordance with the Partnership Agreement, the Partnership is required to establish and maintain a reserve for replacements account for the purpose of capital improvements. The reserve account is to be funded in the amount of $20,544 per year. As of December 31, 2012, the balance of the replacement reserve was $177,578.

NOTE E - OTHER LONG TERM LIABILITIES

Note payable

The Partnership entered into a 1% note payable in the amount of $430,647 with a term of 30 years beginning April 3, 1996, payable to El Monte Redevelopment Agency (“RDA”) for various development fees, secured by a deed of trust and rents from the Project. Commencing April 3, 1997, and thereafter on each April 3 for the following six succeeding years, payments of $4,239 were due. Payments increased to $8,478 on April 3, 2004 and continued for the next seven succeeding years. On April 3, 2012, payments increased to $32,534 and were to continue for the next 14 succeeding years, or until paid in full. Payments were to be paid from 50% of residual rental income, as defined in the promissory note agreement, applied first to interest. As of December 31, 2012, the balance of the development fee note payable was $0. At December 31, 2012, accrued interest on the note was $0.

Grant loan payable

The Partnership received a loan of $400,000 on April 3, 1996 from the City of El Monte as part of a public program to ensure affordable housing for senior citizen tenants. Interest accrues on the principal amount at 4%, with a term of 55 years. The loan is secured by a deed of trust and rents from the Project. At maturity, the principal amount of the loan and all accrued interest shall be deemed discharged and waived by the City unless there is an occurrence of an event of default, as specified under the loan agreement. If default occurs, the City of El Monte is entitled to exercise its rights and the entire principal amount outstanding and any accrued interest could become due and payable at the option of the City of El Monte. For the year ended December 31, 2012, interest expense was $16,000. Accrued interest at December 31, 2012 was $268,000.

NOTE F - RELATED PARTY TRANSACTIONS

Operational Asset Management Fee

The Partnership Agreement provides for an asset management fee equal to $10 per unit per month, to accrue to the Managing General Partner and is payable based on the cash flow provisions of the Partnership Agreement. The fee to be paid is cumulative if not paid each year. During the year ended December 31, 2012, an operational asset management fee of $16,440 was expensed and paid and $8,220 remained prepaid at year-end.

F-12

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE F - RELATED PARTY TRANSACTIONS (CONTINUED)

Incentive Management Fee

The Partnership shall pay to the General Partner an incentive management fee equal to 40% of Remaining Cash, as defined. The incentive management fee shall be paid from available cash flow and does not accrue from year to year. For the year ended December 31, 2012, an incentive management fee of $12,000 was expensed and paid. No incentive management fee was payable at year-end.

Reporting Fee

The Partnership shall pay to the Limited Partner a reporting fee equal to 15% of the Cash Flow from Operations, as defined, but should not be less than $6,000 for each Limited Partner. It shall be paid from available cash flow and accrued from year to year. During the year ended December 31, 2012, a reporting fee of $26,268 was earned and paid. No reporting fee was payable at year-end.

Property Tax Exemption Compliance Fee

Pursuant to the Partnership Agreement, the Partnership shall pay to the Managing General Partner an annual fee of $1,500 for ensuring the Partnership is in compliance with the Property Tax Exemption requirements. The annual fee shall be increased by 3% each year, beginning in 2007 and continuing each year thereafter. For the year ended December 31, 2012, $1,739 was expensed and paid. No property tax exemption compliance fee was payable at year-end.

NOTE G - MANAGEMENT FEE

Effective July 19, 2007, the Partnership entered into an agreement with Professional Property Management, LLC (“PPM”), an unrelated party, in connection with the management of the Project’s rental operations. In accordance with the management agreement, PPM earns fees of 5% of monthly gross collections. Fees earned for services rendered in connection with the leasing and operation of the Project amounted to $49,438 for the year ended December 31, 2012. At December 31, 2012, $4,113 in management fees remained payable.

NOTE H - ADVERTISING

The Partnership expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2012 amounted to $868.

F-13

BLESSED ROCK OF EL MONTE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012

NOTE I - PROFITS, LOSSES AND DISTRIBUTIONS

In general, income (loss), tax credits and cash flow from operations are allocated 98.99% to the Limited Partners, .01% to the Special Limited Partner, .99% to the General Partner and .01% to the Managing General Partner.

Income (loss) and cash flow from sources other than operations will be allocated pursuant to the terms of the Partnership Agreement regarding such.

NOTE J - CONTINGENCIES

Housing Tax Credits

As incentive for investment equity, the Partnership applied for and received an allocation certificate for housing tax credits established by the Tax Reform Act of 1986. To qualify for the tax credits, the Partnership must meet certain requirements, including attaining a qualified basis sufficient to support the credit allocation. In addition, tenant eligibility and rental charges are restricted in accordance with Internal Revenue Code Section 42. Management has certified that each tax credit unit has met these qualifications to allow the credits allocated to each unit to be claimed. Compliance with these regulations must be maintained in each of the ten consecutive years of the compliance period. Failure to maintain compliance with occupant eligibility, unit gross rent, or to correct noncompliance within a reasonable time period could result in recapture of previously claimed tax credits plus interest.

Mortgage Maturity

The Project’s senior debt matures during 2013. Ownership has not discussed a plan for refinancing this debt as of the reporting date of this financial statement.

NOTE K - SUBSEQUENT EVENTS

FASB ASC 855, Subsequent Events, addresses events which occur after the balance sheet date but before the issuance of financial statements. An entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that existed after the balance sheet date. Additionally, Topic 855 requires disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued or were available to be issued. Management evaluated the activity of Blessed Rock of El Monte through January 25, 2013, the date the financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.

F-14

ACCOMPANYING INFORMATION

F-15

INDEPENDENT AUDITOR’S REPORT ON INFORMATION

ACCOMPANYING THE BASIC FINANCIAL STATEMENTS

To the Partners

Blessed Rock of El Monte

We have audited the financial statements of Blessed Rock of El Monte as of and for the year ended December 31, 2012, and our report thereon dated January 25, 2013, which expressed an unmodified opinion on those financial statements, appears on page 3. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Supplemental Schedule of Expenses are presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

 

Metairie, Louisiana

January 25, 2013

 

F-16

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2012

A. SCHEDULES OF EXPENSES
		2012
General and Administrative:
Site Management Payroll	$	35,582
Management Fee		49,348
Marketing and Advertising		868
Legal Fees		910
Audit Expense		6,216
Training		5,839
Credit Reports		132
Office Supplies		9,112
Bank Fees		1,143
Telephone Expenses		10,214
Social Programming		14,067
Bad Debts		56
Miscellaneous		21
Total	$	133,508
Utilities:
Electricity	$	18,192
Gas		13,099
Water & Sewer		37,985
Total	$	69,276
Repairs and Maintenance:
Maintenance - Contracts	$	54,913
Maintenance - Salaries		16,728
Maintenance - Supplies		20,013
Painting and Decorating		15,384
Garbage and Trash Removal		18,043
Exterminating		2,430
Grounds Maintenance		22,390
Total	$	149,901

F-17

BLESSED ROCK OF EL MONTE

SUPPLEMENTAL INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2012

	2012
Tax and Insurance:
Real Estate Taxes	$	26,816
Property & Liability Insurance		42,496
Payroll Taxes		8,726
Worker’s Compensation		10,488
Health Insurance and other Employee Benefits		6,310
Other Taxes and Insurance		3,615
Total	$	98,451

F-18