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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
O ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended _______________
OR
X TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from January 1, 1999 to March 31, 1999
Commission file number: 0-28370
WNC HOUSING TAX CREDIT FUND IV, L.P. - Series 2
California 33-0596399
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
1
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
2
PART I.
Item 1. Business
Organization
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") is a
California Limited Partnership formed under the laws of the State of California
on September 27, 1993. The Partnership was formed to acquire limited partnership
interests in other limited partnerships or limited liability companies ("Local
Limited Partnerships") which own multifamily housing complexes that are eligible
for low-income housing federal and, in some cases, California income tax credits
(the "Low Income Housing Credit").
The general partner of the Partnership is WNC Tax Credit Partners IV, L.P. (the
"General Partner"). The general partner of the General Partner is WNC &
Associates, Inc. ("Associates"). Wilfred N. Cooper, Sr., through the Cooper
Revocable Trust, owns 66.8% of the outstanding stock of Associates. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of Associates.
The business of the Partnership is conducted primarily through Associates, as
the Partnership has no employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on October 20, 1993, in July 1994 the Partnership commenced a public
offering of 20,000 Units of Limited Partnership Interests ("Units"), at a price
of $1,000 per Unit. As of the close of the public offering in July 1995, a total
of 15,600 Units representing approximately $15,241,000 had been sold. Holders of
Limited Partnership Interests are referred to herein as "Limited Partners."
Sempra Energy Financial, a California corporation, which is not an affiliate of
the Partnership or General Partner, has purchased 4,000 Units, which represents
25.6% of the Units outstanding for the Partnership. Sempra Energy Financial
invested $3,641,000. A discount of $359,000 was allowed due to a volume
discount. See Item 12(a) in this 10-K.
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended by Supplements to the Prospectus thereto (the
"Partnership Agreement"), will be able to be accomplished promptly at the end of
the 15-year period. If a Local Limited Partnership is unable to sell its Housing
Complex, it is anticipated that the local general partner ("Local General
Partner") will either continue to operate such Housing Complex or take such
other actions as the Local General Partner believes to be in the best interest
of the Local Limited Partnership. Notwithstanding the preceding, circumstances
beyond the control of the General Partner or the Local General Partners may
occur during the Compliance Period, which would require the Partnership to
approve the disposition of a Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.
3
As of March 31, 1999, the Partnership had invested in twenty-two Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are subject to mortgage
indebtedness. If a Local Limited Partnership does not makes its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member of
the Local Limited Partnerships, the Partnership will have very limited rights
with respect to management of the Local Limited Partnerships, and will rely
totally on the general partners or managing members of the Local Limited
Partnerships for management of the Local Limited Partnerships. The value of the
Partnership's investments will be subject to changes in national and local
economic conditions, including unemployment conditions, which could adversely
impact vacancy levels, rental payment defaults and operating expenses. This, in
turn, could substantially increase the risk of operating losses for the Housing
Complexes and the Partnership. In addition, each Local Limited Partnership is
subject to risks relating to environmental hazards and natural disasters, which
might be uninsurable. Because the Partnership's operations will depend on these
and other factors beyond the control of the General Partner and the Local
General Partners, there can be no assurance that the anticipated Low Income
Housing Credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the Low Income Housing Credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the Low
Income Housing Credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investment in Local Limited Partnerships the Partnership holds
limited partnership interests in Housing Complexes. The following table reflects
the status of the twenty-two Housing Complexes as of the dates and for the
periods indicated.
4
----------------------------- --------------------------------------------
As of March 31, 1999 As of December 31, 1998
----------------------------- --------------------------------------------
Partnership's Encumbrances
Total Investment Amount of Estimated Low of Local
General Partner in Local Limited Investment Number Occu- Income Housing Limited
Partnership Name Location Name Partnerships Paid to Date of Units pancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East Apartment Developers
East Brewton, Ltd. Brewton, Inc. and Thomas H.
Alabama Cooksey $ 1,255,000 $ 941,000 40 0% No Form 8609 $ 1,011,000
Autumn Trace Silsbee, Olsen Securities Corp. 412,000 412,000 58 100% $ 714,000 1,269,000
Associates, Ltd. Texas
Broken Bow Apartments Broken Bow, Retro Development,
I, Limited Partnership Nebraska Inc. 608,000 546,000 16 88% 1,127,000 750,000
Candleridge Apartments Waukee, Eric A. Sheldahl 125,000 125,000 23 100% 230,000 685,000
of Waukee L.P. II Iowa
Chadwick Limited Edan, North Boyd Management, Inc.
Partnership Carolina Gordon L. Blackwell
and Regency
Investment Associates 378,000 378,000 48 100% 735,000 1,571,000
Comanche Retirement Comanche, Max L. Rightmer 136,000 136,000 22 92% 265,000 594,000
Village, Ltd. Texas
Crossings II Limited Portage, Raymond T. Cato, Jr. 432,000 432,000 114 81% 739,000 6,074,000
Dividend Housing Michigan
Association Limited
Partnership
EW, a Wisconsin Evansville, Philip Wallis, James
Limited Partnership Wisconson Poehlman, Cynthia
Solfest Wallis, and
Anita Poehlman 164,000 164,000 16 100% 306,000 628,000
5
----------------------------- --------------------------------------------
As of March 31, 1999 As of December 31, 1998
----------------------------- --------------------------------------------
Partnership's Encumbrances
Total Investment Amount of Estimated Low of Local
General Partner in Local Limited Investment Number Occu- Income Housing Limited
Partnership Name Location Name Partnerships Paid to Date of Units pancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Garland Street Limited Malvarn, Conrad L. Beggs,
Partnership Arkansas Audrey D. Beggs,
Russell J. Altizer,
and Marjorie L. Beggs 164,000 164,000 18 100% 319,000 699,000
Hereford Seniors Hereford, Winston Sullivan 167,000 167,000 28 96% 330,000 804,000
Community, Ltd. Texas
Hickory Lane Newton, Olsen Securities Corp. 174,000 174,000 24 98% 320,000 597,000
Associates, Ltd Texas
Honeysuckle Court Vidor, Olsen Securities Corp 339,000 339,000 48 100% 622,000 1,168,000
Associates, Ltd. Texas
Klimpel Manor, Ltd Fullerton, Klimpel Manor
California Apartments 1,774,000 1,774,000 59 96% 3,360,000 1,984,000
Lamesa Seniors Lamesa, Winston Sullivan 143,000 143,000 24 98% 284,000 675,000
Community, Ltd. Texas
Laredo Heights Navasota, Donald W. Sowell 225,000 225,000 48 96% 413,000 1,001,000
Apartments Ltd. Texas
Mountainview North John C. Loving and
Apartments Limited Wilkesboro, Gordon D. Brown, Jr. 195,000 195,000 24 100% 387,000 1,002,000
Partnership North
Carolina
Palestine Seniors Palestine, Winston Sullivan 225,000 225,000 42 100% 446,000 1,132,000
Community, Ltd. Texas
Pecan Grove Limited Forrest Conrad Beggs, Audrey
Partnership City, Beggs and Russell
Arkansas Altizer 240,000 240,000 32 98% 486,000 1,118,000
6
----------------------------- --------------------------------------------
As of March 31, 1999 As of December 31, 1998
----------------------------- --------------------------------------------
Partnership's Encumbrances
Total Investment Amount of Estimated Low of Local
General Partner in Local Limited Investment Number Occu- Income Housing Limited
Partnership Name Location Name Partnerships Paid to Date of Units pancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Street Bakersfield, Philip R. Hammond,
Associates California Jr. and Walter A.
Dwelle 2,222,000 2,222,000 112 78% 4,116,000 1,903,000
Sidney Apartments I, Sidney, Retro Development,
Limited Partnership Nebraska Inc. And Most
Worshipful Prince
Hall Grand Lodge 530,000 484,000 18 100% No Form 8609 444,000
Southcove Associates Orange Cove, Philip R. Hammond, 2,000,000 2,000,000 54 100% 3,585,000 1,538,000
Califonia Jr. and Diane M.
Hammond
Walnut Turn Buna, Olsen Securities Corp. 188,000 188,000 24 100% 344,000 692,000
Associates, Ltd. Texas ---------- ---------- --- ---- ---------- ----------
$ 12,096,000 $11,674,000 892 92% $ 19,128,000 $ 27,339,000
========== ========== === ==== ========== ==========
7
-----------------------------------------------------------------------
For the year ended December 31, 1998
-----------------------------------------------------------------------
Low Income Housing Credits
Partnership Name Rental Income Net loss Allocated to Partnership
- --------------------------------------------------------------------------------------------------------------------
Apartment Housing of East
Brewton, Ltd. $ - $ - 98.99%
Autumn Trace Associates, Ltd. 206,000 (43,000) 95.00%
Broken Bow Apartments I,
Limited Partnership 39,000 (117,000) 99.00%
Candleridge Apartments of
Waukee L.P. II 116,000 (8,000) 99.00%
Chadwick Limited Partnership 188,000 (18,000) 99.00%
Comanche Retirement Village,
Ltd. 63,000 (21,000) 99.00%
Crossings II Limited Dividend
Housing Association Limited
Partnership 692,000 (19,000) 98.99%
EW, a Wisconsin Limited
Partnership 105,000 (20,000) 99.00%
Garland Street Limited
Partnership 66,000 (26,000) 99.00%
Hereford Seniors Community,
Ltd. 89,000 (7,000) 99.00%
Hickory Lane Associates, Ltd 81,000 (13,000) 99.00%
Honeysuckle Court Associates,
Ltd. 191,000 (18,000) 95.00%
Klimpel Manor, Ltd 344,000 (85,000) 96.00%
8
-----------------------------------------------------------------------
For the year ended December 31, 1998
-----------------------------------------------------------------------
Low Income Housing Credits
Partnership Name Rental Income Net loss Allocated to Partnership
- --------------------------------------------------------------------------------------------------------------------
Lamesa Seniors Community, Ltd. 84,000 (8,000) 99.00%
Laredo Heights Apartments Ltd. 166,000 (9,000) 99.00%
Mountainview Apartments
Limited Partnership 90,000 (11,000) 99.00%
Palestine Seniors Community,
Ltd. 135,000 (1,000) 99.00%
Pecan Grove Limited Partnership 114,000 (46,000) 99.00%
Pioneer Street Associates 507,000 (37,000) 99.00%
Sidney Apartments I, Limited
Partnership 77,000 (42,000) 99.00%
Southcove Associates 218,000 (102,000) 99.00%
Walnut Turn Associates, Ltd. 129,000 (17,000) 99.00%
--------- --------
$ 3,700,000 $ (668,000)
========= ========
9
Item 3. Legal Proceedings
NONE.
Item 4. Submission of Matters to a Vote of Security Holders
NONE.
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At March 31, 1999, there were 838 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during the three
months ended March 31, 1999.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31 December 31
-------------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(Unaudited)
ASSETS
Cash and cash
equivalents $ 552,348 $ 1,383,197 $ 738,364 $ 1,480,862 $ 2,371,389 $ 5,285,730 $ 720,130
Subscriptions
receivable - - - - - - 597,100
Investments in
limited
partnerships, net 10,092,782 9,510,560 10,274,595 9,738,583 10,096,100 9,417,744 6,235,586
Due from affiliate - - - - 53,200 - -
Loans receivable - 259,496 - 259,496 - - 880,760
Other assets 998 18,796 2,534 20,245 10,956 29,568 2,128
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 10,646,128 $ 11,172,049 $ 11,015,493 $ 11,499,186 $ 12,531,645 $ 14,733,042 $ 8,435,704
=========== =========== =========== =========== =========== =========== ===========
LIABILITIES
Payables to limited
partnerships $ 421,025 $ 275,392 $ 605,517 $ 411,543 $ 666,716 $ 2,134,797 $ 3,276,750
Accrued interest
payable - - - - - - 404
Loan payable - - - - - - 280,569
Accrued fees and
expenses due to
general partner
and affiliates 29,722 3,195 28,066 1,137 9,339 146,685 414,501
PARTNERS' EQUITY 10,195,381 10,893,462 10,381,910 11,086,506 11,855,590 12,451,560 4,463,480
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 10,646,128 $ 11,172,049 $ 11,015,493 $ 11,499,186 $ 12,531,645 $ 14,733,042 $ 8,435,704
=========== =========== =========== =========== =========== =========== ===========
10
Selected results of operations, cash flows and other information for the
Partnership are as follows:
For the Three Months For the Years Ended
Ended March 31 December 31
------------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(Unaudited)
Income (loss) from
operations $ (21,846) $ (1,492) $ (50,484) $ (31,969) $ 55,374 $ 56,606 $ (25,432)
Equity in losses of
limited
partnerships (164,683) (191,552) (658,728) (737,115) (628,631) (628,521) (239,118)
-------- -------- -------- -------- -------- -------- --------
Net loss $ (186,529) $ (193,044) $ (709,212) $ (769,084) $ (573,257) $ (571,915) $ (264,550)
======== ======== ======== ======== ======== ======== ========
Net loss allocated to:
General partner $ (1,865) $ (1,930) $ (7,092) $ (7,691) $ (5,733) $ (5,719) $ (2,646)
======== ======== ======== ======== ======== ======== ========
Limited partners $ (184,664) $ (191,114) $ (702,120) $ (761,393) $ (567,524) $ (566,196) $ (261,904)
======== ======== ======== ======== ======== ======== ========
Net loss per limited
partner unit $ (11.84) $ (12.25) $ (45.01) $ (48.81) $ (36.38) $ (46.90) $ (92.74)
======== ======== ======== ======== ======== ======== ========
Outstanding weighted
limited partner
units 15,600 15,600 15,600 15,600 15,600 12,073 2,824
======== ======== ======== ======== ======== ======== ========
------------------------ ----------------------------------------------------------------
For the Three Months For the Years Ended
Ended March 31 December 31
------------------------ ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(Unaudited)
Net cash provided by
(used in):
Operating activities $ (8,424) $ 12,245 $ 26,255 $ 52,765 $ 60,895 $ 54,970 $ (25,518)
Investing activities (177,592) (109,910) (768,753) (935,090) (2,837,890) (5,315,585) (4,655,255)
Financing activities - - - (8,202) (137,346) 9,826,215 5,400,903
-------- --------- --------- --------- --------- --------- ---------
Net change in cash and
cash equivalents (186,016) (97,665) (742,498) (890,527) (2,914,341) 4,565,600 720,130
Cash and cash
equivalents,
beginning of period 738,364 1,480,862 1,480,862 2,371,389 5,285,730 720,130 -
-------- --------- --------- --------- --------- --------- ---------
Cash and cash
equivalents,
end of period $ 552,348 $ 1,383,197 $ 738,364 $ 1,480,862 $ 2,371,389 $ 5,285,730 $ 720,130
========= ========= ========= ========= ========= ========= =========
Low Income Housing Credit per Unit was as follows for the years ended December 31:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Federal $ 124 $ 113 $ 105 $ 76 $ 29
State - - - - -
------ ------ ------ ------ ------
Total $ 124 $ 113 $ 105 $ 76 $ 29
====== ====== ====== ====== ======
11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Partnership's assets at March 31, 1999 consisted primarily of $552,348 in
cash and aggregate investments in the twenty-two Local Limited Partnerships of
$10,092,782. Liabilities at March 31, 1999 primarily consisted of $421,025 in
payables to limited partnerships and $26,759 of accrued annual management fees
due to the General Partner.
Results of Operations
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
The Partnership's net loss for the three months ended March 31, 1999 was
$187,000 reflecting a decrease of $6,000 from the net loss experienced for the
three months ended March 31, 1998. The decline in net loss is primarily due to
equity in losses of limited partnerships which declined by $27,000 to $(165,000)
for the three months ended March 31, 1999 from $(192,000) for the three months
ended March 31, 1998. The reduction in equity losses recognized was partially
offset by an increase in loss from operations of $21,000 to $(22,000) for the
three months ended March 31, 1999 from $(1,000) for the three months ended March
31, 1998, due to a comparable increase in operating expense allocations and a
decrease in interest income.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. The
Partnership's net loss for 1998 was $(709,000), reflecting a decrease of $60,000
from the net loss experienced in 1997. The decline in net loss is primarily due
to equity in losses from limited partnerships which declined to $(659,000) in
1998 from $(737,000) in 1997 and a decrease in amortization expense of $9,000,
partially offset by a decrease in interest income of $27,000.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. The
Partnership's net loss for 1997 was $(769,000), reflecting an increase of
$196,000 from the net loss experienced in 1996. The increase in net loss is
primarily due to equity in losses from limited partnerships which increased to
$(737,000) in 1997 from $(629,000) in 1996 and a decrease in interest income of
$88,000.
Cash Flows
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
Net cash used during the three months ended March 31, 1999 was $(186,000),
compared to net cash used during the three months ended March 31, 1998 of
$(98,000). The change was due primarily to an increase in investments in limited
partnerships of $72,000 and an increase in cash used for operating activities of
$20,000, partially offset by an increase in distributions from limited
partnerships of $4,000.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. Net cash
used in 1998 was $(742,000), compared to net cash used in 1997 of $(891,000).
The change was due primarily to a decrease in cash used for investments in
limited partnerships of $164,000, a refund of offering expenses received in 1998
of $5,000, and a decrease in cash paid to the General Partner and or affiliates
of $17,000, partially offset by a decrease in interest income received of
$35,000, and a decline in distributions from Local Limited Partnerships of
$2,000.
12
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. Net cash
used in 1997 was $(891,000), compared to $(2,914,000) in 1996. The change was
due primarily to a decrease in cash used for investments in limited partnerships
of $1,876,000, a decrease in cash paid to the General Partner and or affiliates
of $215,000, a decrease in offering expenses of $23,000 and a decrease in
interest paid of $5,000, partially offset by a decrease in interest income
received of $96,000.
During the three months ended March 31, 1999 and the year ended December 31,
1998 accrued payables, which consist primarily of related party management fees
due to the General Partner, increased by $2,000 and $27,000, respectively. The
General Partner does not anticipate that these accrued fees will be paid in full
until such time as capital reserves are in excess of future forseeable working
capital requirements of the Partnership.
The Partnership expects its future cash flows, together with its net available
assets at March 31, 1999, to be sufficient to meet all currently forseeable
future cash requirements.
IMPACT OF YEAR 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology (IT) Systems. The Partnership relies on the IT systems of
WNC, its ultimate general partner. IT systems include computer hardware and
software used to produce financial reports and tax return information. This
information is then used to generate reports to investors and regulatory
agencies, including the Internal Revenue Service and the Securities and Exchange
Commission. The IT systems of WNC are year 2000 compliant.
Non-IT Systems. The Partnership also relies on the non-IT systems of WNC. Non-IT
systems include machinery and equipment such as telephones, voice mail and
electronic postage equipment. Except for one telephone system, the non-IT
systems of WNC are year 2000 compliant. The one telephone system will require
the replacement of one computer and one software application, both of which will
be completed on or before October 1, 1999.
Service Providers. WNC also relies on the IT and non-IT systems of service
providers. Service providers include utility companies, financial institutions,
telecommunications carriers, municipalities, and other outside vendors. WNC has
obtained verbal assurances from its material service providers (electrical power
provider, financial institutions and telecommunications carriers) that their IT
and non-IT systems are year 2000 compliant. There can be no assurance that this
compliance information is correct. There also can be no assurance that the
systems of other, less-important service providers and outside vendors will be
year 2000 compliant.
Costs to Address Year 2000 Issues
The cost to address year 2000 issues for WNC has been less than $20,000. The
cost to replace the telephone system noted above will be less than $5,000. The
cost to deal with potential year 2000 issues of other outside vendors cannot be
estimated at this time.
13
Risk of Year 2000 Issues
The most reasonable and likely result from non-year 2000 compliance of systems
of the service providers noted above will be the disruption of normal business
operations for WNC. This disruption would, in turn, lead to delays in performing
reporting and fiduciary responsibilities on behalf of the Partnership. The worst
case scenario would be the replacement of a service provider. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Local Limited Partnerships
Status of Readiness
WNC is in the process of obtaining year 2000 certifications from each Local
General Partner of each Local Limited Partnership. Those certifications will
represent to the Partnership that the IT and non-IT systems critical to the
operation of the Housing Complexes and investor reporting to the Partnership are
year 2000 compliant. These certifications will also represent to the Partnership
that the IT and non-IT systems of property management companies, independent
accountants, electrical power providers, financial institutions and
telecommunications carriers used by the Local Limited Partnership are year 2000
compliant.
There can be no assurance that the representations in the certifications will be
correct. There also can be no assurance that the systems of other,
less-important service providers and outside vendors, upon which the Local
Limited Partnerships rely, will be year 2000 compliant.
Costs to Address Year 2000 Issues
There will be no cost to the Partnership as a result of assessing year 2000
issues for the Local Limited Partnerships. The cost to deal with potential year
2000 issues of the Local Limited Partnerships cannot be estimated at this time.
Risk of Year 2000 Issues
There may be Local General Partners who indicate that they or their property
management company are not year 2000 compliant and do not have plans to become
year 2000 compliant before the end of 1999. There may be other Local General
Partners who are unwilling to respond to the certification request. The most
likely result of either non-compliance or failure to respond will be the removal
and replacement of the property management company and/or the Local General
Partner with year 2000 compliant operators.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
14
Report of Independent Certified Public Accountants
To the Partners
WNC Housing Tax Credit Fund IV, L.P., Series 2
We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund
IV, L.P., Series 2 (a California Limited Partnership) (the "Partnership") as of
March 31, 1999 and December 31, 1998, and the related statements of operations,
partners' equity (deficit) and cash flows for the three months ended March 31,
1999 and the year ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits. A significant
portion of the financial statements of the limited partnerships in which the
Partnership is a limited partner were audited by other auditors whose reports
have been furnished to us. As discussed in Note 3 to the financial statements,
the Partnership accounts for its investments in limited partnerships using the
equity method. The portion of the Partnership's investments in limited
partnerships audited by other auditors represented 75% and 72% of the total
assets of the Partnership at March 31, 1999 and December 31, 1998, respectively.
Our opinion, insofar as it relates to the amounts included in the financial
statements for the limited partnerships which were audited by others, is based
solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC Housing Tax Credit Fund IV, L.P., Series 2 (a
California Limited Partnership) as of March 31, 1999 and December 31, 1998, and
the results of its operations and its cash flows for the three months ended
March 31, 1999 and the year ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
July 30, 1999
15
INDEPENDENT AUDITORS' REPORT
To the Partners
WNC Housing Tax Credit Fund IV, L.P., Series 2
We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund
IV, L.P., Series 2 ( a California Limited Partnership) (the "Partnership") as of
December 31, 1997, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the two-year period ended
December 31, 1997. 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 did not audit the financial
statements of the limited partnerships in which WNC Housing Tax Credit Fund IV,
L.P., Series 2 is a limited partner. These investments, as discussed in Note 2
to the financial statements, are accounted for by the equity method. The
investment in these limited partnerships represented 85% of the total assets of
WNC Housing Tax Credit Fund IV, L.P., Series 2 at December 31, 1997.
Substantially all of the financial statements of the limited partnerships were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for these limited
partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC Housing Tax Credit Fund IV, L.P., Series 2 (a
California Limited Partnership) as of December 31, 1997, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ CORBIN & WERTZ
CORBIN & WERTZ
Irvine, California
April 23, 1998
16
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
BALANCE SHEETS
March 31 December 31
------------------------------ ------------------------------
1999 1998 1998 1997
---- ---- ---- ----
ASSETS (Unaudited)
Cash and cash equivalents $ 552,348 $ 1,383,197 $ 738,364 $ 1,480,862
Investments in limited partnerships,
net (Note 3) 10,092,782 9,510,560 10,274,595 9,738,583
Loans receivable (Note 2) - 259,496 - 259,496
Other assets 998 18,796 2,534 20,245
----------- ----------- ----------- -----------
$ 10,646,128 $ 11,172,049 $ 11,015,493 $ 11,499,186
=========== =========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
(DEFICIT)
Liabilities:
Payables to limited partnerships (Note 5) $ 421,025 $ 275,392 $ 605,517 $ 411,543
Accrued fees and expenses due to General
Partner and affiliates (Note 4) 29,722 3,195 28,066 1,137
----------- ----------- ----------- -----------
Total liabilities 450,747 278,587 633,583 412,680
----------- ----------- ----------- -----------
Commitments and contingencies
Partners' equity (deficit):
General partner (50,358) (43,377) (48,493) (41,447)
Limited partners (20,000 units
authorized; 15,600 units
issued and outstanding) 10,245,739 10,936,839 10,430,403 11,127,953
----------- ----------- ----------- -----------
Total partners' equity 10,195,381 10,893,462 10,381,910 11,086,506
----------- ----------- ----------- -----------
$ 10,646,128 $ 11,172,049 $ 11,015,493 $ 11,499,186
=========== =========== =========== ===========
See accompanying notes to financial statements
17
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended
March 31 For the Years Ended December 31
---------------------------- -------------------------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(Unaudited)
Interest income $ 6,850 $ 21,520 $ 47,017 $ 74,570 $ 161,610
Operating expenses:
Amortization (Note 3) 10,230 10,230 32,099 40,823 40,109
Asset management fees (Note 4) 10,725 10,725 42,900 42,900 42,900
Interest expense - - - - 5,350
Other 7,741 2,057 22,502 22,816 17,877
--------- ---------- --------- --------- ---------
Total operating expenses 28,696 23,012 97,501 106,539 106,236
--------- ---------- --------- --------- ---------
Income (loss) from operations (21,846) (1,492) (50,484) (31,969) 55,374
Equity in losses of limited
partnerships (Note 3) (164,683) (191,552) (658,728) (737,115) (628,631)
--------- ---------- --------- --------- ---------
Net loss $ (186,529) $ (193,044) $ (709,212) $ (769,084) $ (573,257)
========= ========== ========= ========= =========
Net loss allocated to:
General partner $ (1,865) $ (1,930) $ (7,092) $ (7,691) $ (5,733)
========= ========== ========= ========= =========
Limited partners $ (184,664) $ (191,114) $ (702,120) $ (761,393) $ (567,524)
========= ========== ========= ========= =========
Net loss per limited partner unit $ (11.84) $ (12.25) $ (45.01) $ (48.81) $ (36.38)
========= ========== ========= ========= =========
Outstanding weighted limited
partner units 15,600 15,600 15,600 15,600 15,600
========= ========== ========= ========= =========
See accompanying notes to financial statements
18
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
------- -------- -----
Partners' equity (deficit) at
January 1, 1996 $ (27,796) $ 12,479,356 $ 12,451,560
Offering costs (227) (22,486) (22,713)
Net loss (5,733) (567,524) (573,257)
-------- ---------- ----------
Partners' equity (deficit)
at December 31, 1996 (33,756) 11,889,346 11,855,590
Net loss (7,691) (761,393) (769,084)
-------- ---------- ----------
Partners' equity (deficit)
at December 31, 1997 (41,447) 11,127,953 11,086,506
Offering costs 46 4,570 4,616
Net loss (7,092) (702,120) (709,212)
-------- ---------- ----------
Partners' equity (deficit)
at December 31, 1998 (48,493) 10,430,403 10,381,910
Net loss (1,865) (184,664) (186,529)
-------- ---------- ----------
Partners' equity (deficit)
at March 31, 1999 $ (50,358) $ 10,245,739 $ 10,195,381
======== ========== ==========
See accompanying notes to financial statements
19
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31 For the Years Ended December 31
------------------------------ --------------------------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (186,529) $ (193,044) $ (709,212) $ (769,084) $ (573,257)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Amortization 10,230 10,230 32,099 40,823 40,109
Equity in loss of limited
partnerships 164,683 191,552 658,728 737,115 628,631
Change in other assets 1,536 (9,276) 17,711 9,347 18,612
Change in due from affiliates - - - 34,564 (53,200)
Change in accrued fees and
expenses due to General
Partner and affiliates 1,656 12,783 26,929 - -
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
operating Activities (8,424) 12,245 26,255 52,765 60,895
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Investments in limited
partnerships, net (184,492) (112,860) (1,037,700) (674,929) (2,793,730)
Capitalized acquisition costs
and fees - - (465) (8,278) (25,347)
Distributions from limited
partnerships 6,900 2,950 5,300 7,613 3,900
Loans receivable - - 259,496 (259,496) -
Offering expenses - - 4,616 - (22,713)
---------- ---------- ---------- ---------- ----------
Net cash used in investing
activities (177,592) (109,910) (768,753) (935,090) (2,837,890)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Advances due to general partner
and affiliates - - - (8,202) (137,346)
---------- ---------- ---------- ---------- ----------
Net cash used in financing
activities - - - (8,202) (137,346)
---------- ---------- ---------- ---------- ----------
Net decrease in cash and cash
equivalents (186,016) (97,665) (742,498) (890,527) (2,914,341)
Cash and cash equivalents,
beginning of period 738,364 1,480,862 1,480,862 2,371,389 5,285,730
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, end of
period $ 552,348 $ 1,383,197 $ 738,364 $ 1,480,862 $ 2,371,389
========== ========== ========== ========== ==========
Continued
20
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
For the Three Months Ended For the Years Ended December 31
March 31
---------------------------- --------------------------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(Unaudited)
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW NFORMATION:
Interest paid $ - $ - $ - $ - $ 5,350
=========== =========== =========== =========== ===========
Taxes paid $ - $ - $ 800 $ 800 $ 800
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-
CASH FINANCING ACTIVITIES :
During 1998 and 1997, the Partnership recorded investments and payables to
limited partnerships of $427,483 and $225,720, respectively.
See accompanying notes to financial statements
21
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") was formed on
September 27, 1993 under the laws of the state of California and commenced
operations on July 18, 1994. The Partnership was formed to invest primarily in
other limited partnerships (the "Local Limited Partnerships") which own and
operate multi-family housing complexes (the "Housing Complex") that are eligible
for low income housing credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner is WNC Tax Credit Partners, IV, L.P. (the "General
Partner"), a California limited partnership. WNC & Associates, Inc. ("WNC") is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of WNC.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership Agreement authorized the sale of 20,000 units at $1,000 per unit
("Units"). The offering of Units concluded in July 1995 at which time 15,600
Units representing subscriptions, net of discounts for volume purchases of more
than 100 units, in the amount of $15,241,000 had been accepted. The General
Partner has a 1% interest in operating profits and losses, taxable income and
losses, cash available for distribution from the Partnership and tax credits.
The limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received proceeds from sale or refinancing equal
to their capital contributions and their return on investment (as defined in the
Partnership Agreement) and the General Partner has received proceeds equal to
its capital contributions and a subordinated disposition fee (as described in
Note 4) from the remainder, any additional sale or refinancing proceeds will be
distributed 90% to the limited partners (in proportion to their respective
investments) and 10% to the General Partner.
Change in Reporting Year End
The Partnership has elected to change its year end for financial reporting
purposes from December 31 to March 31. All financial information reflected in
the financial statements and related footnotes has been adjusted for this change
in year end except for the combined condensed financial information relating to
the Local Limited Partnerships included in Note 3.
Due to the change in year end, unaudited financial information as of and for the
three months ended March 31, 1998 is included in the financial statements for
comparative purposes only. The financial statements as of and for the three
months ended March 31, 1998 are unaudited but include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of financial position and results of
operations of the Partnership for the interim period.
22
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not make its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting For Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (see Note 3).
Losses from Local Limited Partnerships for the years ended December 31, 1998,
1997 and 1996 have been recorded by the Partnership based on reported results
provided by the Local Limited Partnerships. Losses from Local Limited
Partnerships for the three months ended March 31, 1999 and 1998 have been
estimated by management of the Partnership. Losses from Local Limited
Partnerships allocated to the Partnership are not recognized to the extent that
the investment balance would be adjusted below zero.
23
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital and amounted to $970,717 as of March 31, 1999
and December 31, 1998, and $975,333 as of December 30, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. As of March 31, 1999 and
December 31, 1998 and 1997, the Partnership had cash equivalents of $0, $0 and
$893,070, respectively.
Concentration of Credit Risk
At March 31, 1999, the Partnership maintained a cash balance at a certain
financial institution in excess of the maximum federally insured amounts.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of Partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the periods
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
Reclassifications
Certain prior year balances have been reclassified to conform to the 1999
presentation.
24
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - LOANS RECEIVABLE
Loans receivable represent amounts loaned by the Partnership to certain limited
partnerships in which the Partnership may invest. Loans receivable consisted of
one loan with a balance of $259,496 as of December 31, 1997 which was fully
collected in 1998 upon finalization of its acquisition of an interest in a new
limited partnership.
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership had acquired limited partnership
interests in twenty-two Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 892 apartment units. As of March
31, 1999, construction or rehabilitation of all but one of the apartment
complexes had been completed. The respective general partners of the Local
Limited Partnerships manage the day-to-day operations of the entities.
Significant Local Limited Partnership business decisions require approval from
the Partnership. The Partnership, as a limited partner, is entitled to 96% to
99%, as specified in the partnership agreements, of the operating profits and
losses, taxable income and losses and tax credits of the Limited Partnerships.
The Partnership's investments in Local Limited Partnerships as shown in the
balance sheets at December 31, 1998 and 1997 are approximately $1,493,000 and
$1,555,000, respectively, greater than the Partnership's equity as shown in the
Local Limited Partnerships' financial statements. This difference is primarily
due to unrecorded losses, as discussed below, acquisition, selection and other
costs related to the acquisition of the investments which have been capitalized
in the Partnership's investment account and to capital contributions payable to
the limited partnerships which were netted against partner capital in the Local
Limited Partnership's financial statements.
Equity in losses of Local Limited Partnerships is recognized in the financial
statements until the related investment account is reduced to a zero balance.
Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income. During the three months ended March 31, 1999 and
the year ended December 31, 1998, no investment accounts in Local Limited
Partnerships reached a zero balance.
Following is a summary of the equity method activity of the investments in
limited partnerships for the periods presented:
For the Three
Months Ended
March 31 For the Years Ended December 31
-------------- -------------------------------
1999 1998 1997
-------------- ------------- -------------
Investments per balance sheet, beginning of year $ 10,274,595 $ 9,738,583 $ 10,096,100
Tax credit adjustment - (23,291) -
Capital contributions to limited partnerships, net - 827,482 194,036
Capital contributions to be paid - 427,483 225,720
Capitalized acquisition fees and costs - 465 8,278
Distributions received (6,900) (5,300) (7,613)
Equity in losses of limited partnerships (164,683) (658,728) (737,115)
Amortization of paid acquisition fees and costs (10,230) (32,099) (40,823)
---------- ---------- ----------
Investments per balance sheet, end of period $ 10,092,782 $ 10,274,595 $ 9,738,583
========== ========== ==========
25
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
The financial information from the individual financial statements of the Local
Limited Partnerships includes rental and interest subsidies. Rental subsidies
are included in total revenues and interest subsidies are generally netted
against interest expense. Approximate combined condensed financial information
from the individual financial statements of the Local Limited Partnerships as of
December 31 and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
1998 1997
---- ----
ASSETS
Buildings, net of accumulated
amortization of $4,330,000 and
$3,095,000 as of December 1998
and 1997, respectively $ 33,328,000 $ 34,598,000
Land 1,631,000 1,565,000
Construction in progress 1,895,000 -
Due from affiliates 299,000 669,000
Other assets 2,140,000 1,488,000
----------- -----------
$ 39,293,000 $ 38,320,000
=========== ===========
LIABILITIES
Construction and mortgage loans payable $ 27,339,000 $ 26,605,000
Other liabilities (including amounts
due to related parties of $1,032,000
and $1,307,000 as of December 31,
1998 and 1997, respectively) 1,757,000 2,061,000
----------- -----------
29,096,000 28,666,000
----------- -----------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund IV, L.P.,
Series 2 8,782,000 8,184,000
Other partners 1,415,000 1,470,000
----------- -----------
10,197,000 9,654,000
----------- -----------
$ 39,293,000 $ 38,320,000
=========== ===========
26
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1998 1997 1996
---- ---- ----
Revenues $ 3,893,000 $ 3,535,000 $ 3,057,000
Expenses:
Operating expenses 2,072,000 1,909,000 1,518,000
Interest expense 1,248,000 1,245,000 1,137,000
Depreciation and amortization 1,241,000 1,134,000 1,040,000
------------ ------------ ------------
Total expenses 4,561,000 4,288,000 3,695,000
------------ ------------ ------------
Net loss $ (668,000) $ (753,000) $ (638,000)
============ ============ ============
Net loss allocable to Partnership $ (659,000) $ (737,000) $ (629,000)
============ ============ ============
Net loss recorded by the Partnership $ (659,000) $ (737,000) $ (629,000)
============ ============ ============
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partner may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
impaired.
NOTE 4 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership is obligated to
the General Partner or its affiliates for the following items:
Acquisition fees of up to 8% of the gross proceeds from the sale of Units
as compensation for services rendered in connection with the acquisition of
Local Limited Partnerships. At the end of all periods presented, the
Partnership incurred acquisition fees of $1,058,950. Accumulated
amortization of these capitalized costs was $131,629, $124,017 and $96,331
as of March 31, 1999 and December 31, 1998 and 1997, respectively.
Reimbursement of costs incurred by the General Partner in connection with
the acquisition of Local Limited Partnerships. These reimbursements have
not exceeded 1.2% of the gross proceeds. As of March 31, 1999 and December
31, 1998 and 1997, the Partnership incurred acquisition costs of $169,103,
$169,103 and $168,638, respectively, which have been included in
investments in limited partnerships. Accumulated amortization was $19,478,
$16,859 and $12,447 as of March 31, 1999 and December 31, 1998 and 1997,
respectively.
27
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Three Months Ended March 31, 1999 and 1998 (Unaudited) and
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 4 - RELATED PARTY TRANSACTIONS, continued
An annual asset management fee equal to the greater amount of (i) $2,000
for each apartment complex, or (ii) 0.275% of gross proceeds. In either
case, the fee will be decreased or increased annually based on changes to
the Consumer Price Index. However, in no event will the maximum amount
exceed 0.2% of the invested assets of the Local Limited Partnerships,
including the Partnership's allocable share of the mortgages. Management
fees of $10,725 were incurred during the three months ended March 31, 1999
and $42,900 were incurred for 1998, 1997 and 1996, respectively, of which
$5,950 was paid during the three months ended March 31, 1999 and $4,616,
$6,000 and $155,000 were paid during 1998, 1997 and 1996, respectively.
A subordinated disposition fee in an amount equal to 1% of the sales price
of real estate sold. Payment of this fee is subordinated to the limited
partners receiving a preferred return of 16% through December 31, 2003 and
6% thereafter (as defined in the Partnership Agreement) and is payable only
if the General Partner or its affiliates render services in the sales
effort.
The accrued fees and expenses due to General Partner and affiliates consist of
the following:
March 31 December 31
--------------- -----------------------------------
1999 1998 1997
---- ---- ----
Reimbursement for expenses paid by the
General Partner or an affiliate $ 2,963 $ 6,082 $ 1,137
Asset management fee payable 26,759 21,984 -
---------- ---------- ----------
Total $ 29,722 $ 28,066 $ 1,137
========== ========== ==========
The General Partner does not anticipate that these accrued fees will be paid
until such time as capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
NOTE 5 - PAYABLES TO LIMITED PARTNERSHIPS
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the limited partnership agreements. These
contributions are payable in installments and are due upon the limited
partnerships achieving certain operating and development benchmarks (generally
within two years of the Partnership's initial investment).
NOTE 6 - INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
28
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
PART III.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who serves
as Chairman of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N.
Cooper, Jr. and Kay L. Cooper. The principal shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.
Wilfred N. Cooper, Sr., age 68, is the founder, Chief Executive Officer and a
Director of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a
general partner in some of the programs previously sponsored by the Sponsor. Mr.
Cooper has been involved in real estate investment and acquisition activities
since 1968. Previously, during 1970 and 1971, he was founder and principal of
Creative Equity Development Corporation, a predecessor of WNC & Associates,
Inc., and of Creative Equity Corporation, a real estate investment firm. For 12
years prior to that, Mr. Cooper was employed by Rockwell International
Corporation, last serving as its manager of housing and urban developments where
he had responsibility for factory-built housing evaluation and project
management in urban planning and development. Mr. Cooper is a Director of the
National Association of Home Builders (NAHB) and a National Trustee for NAHB's
Political Action Committee, a Director of the National Housing Conference (NHC)
and a member of NHC's Executive Committee and a Director of the National
Multi-Housing Council (NMHC). Mr. Cooper graduated from Pomona College in 1956
with a Bachelor of Arts degree.
John B. Lester, Jr., age 65, is President, a Director, Secretary and a member of
the Acquisition Committee of WNC & Associates, Inc., and a Director of WNC
Capital Corporation. Mr. Lester has 27 years of experience in engineering and
construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 36, is Executive Vice President, a Director and a
member of the Acquisition Committee of WNC & Associates, Inc. He is President
of, and a registered principal with, WNC Capital Corporation, a member firm of
the NASD, and is a Director of WNC Management, Inc. He has been involved in
investment and acquisition activities with respect to real estate since he
joined the Sponsor in 1988. Prior to this, he served as Government Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Advisory Board for LIHC Monthly Report, a Director of NMHC and an Alternate
Director of NAHB. He graduated from The American University in 1985 with a
Bachelor of Arts degree.
David N. Shafer, age 47, is Senior Vice President, a Director, General Counsel,
and a member of the Acquisition Committee of WNC & Associates, Inc., and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been involved in
real estate investment and acquisition activities since 1984. Prior to joining
the Sponsor in 1990, he was practicing law with a specialty in real estate and
taxation. Mr. Shafer is a Director and President of the California Council of
Affordable Housing and a member of the State Bar of California. Mr. Shafer
graduated from the University of California at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor degree (cum laude) and from the University of San Diego in 1986 with a
Master of Law degree in Taxation.
29
Michael L. Dickenson, age 42, is Vice President and Chief Financial Officer, and
a member of the Acquisition Committee of WNC & Associates, Inc., and Chief
Financial Officer of WNC Management, Inc. He has been involved with acquisition
and investment activities with respect to real estate since 1985. Prior to
joining the Sponsor in March 1999, he was the Director of Financial Services at
TrizecHahn Centers Inc., a developer and operator of commercial real estate,
from 1995 to 1999, a Senior Manager with E&Y Kenneth Leventhal Real Estate
Group, Ernst & Young, LLP, from 1988 to 1995, and Vice President of Finance with
Great Southwest Companies, a commercial and residential real estate developer,
from 1985 to 1988. Mr. Dickenson is a member of the Financial Accounting
Standards Committee for the National Association of Real Estate Companies and
the American Institute of Certified Public Accountants, and a Director of
HomeAid Southern California, a charitable organization affiliated with the
building industry. He graduated from Texas Tech University in 1978 with a
Bachelor of Business Administration - Accounting degree, and is a Certified
Public Accountant in California and Texas.
Thomas J. Riha, age 44, is Vice President - Asset Management and a member of the
Acquisition Committee of WNC & Associates, Inc. and a Director and Chief
Executive Officer of WNC Management, Inc. Mr. Riha has been involved in
acquisition and investment activities with respect to real estate since 1979.
Prior to joining the Sponsor in 1994, Mr. Riha was employed by Trust Realty
Advisor, a real estate acquisition and management company, last serving as Vice
President - Operations. Mr. Riha graduated from the California State University,
Fullerton in 1977 with a Bachelor of Arts degree (cum laude) in Business
Administration with a concentration in Accounting and is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
Sy P. Garban, age 53, is Vice President - National Sales of WNC & Associates,
Inc. and has been employed by the Sponsor since 1989. Mr. Garban has been
involved in real estate investment activities since 1978. Prior to joining the
Sponsor he served as Executive Vice President of MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
N. Paul Buckland, age 36, is Vice President - Acquisitions of WNC & Associates,
Inc. He has been involved in real estate acquisitions and investments since 1986
and has been employed with WNC & Associates, Inc. since 1994. Prior to that, he
served on the development team of the Bixby Ranch that constructed apartment
units and Class A office space in California and neighboring states, and as a
land acquisition coordinator with Lincoln Property Company where he identified
and analyzed multi-family developments. Mr. Buckland graduated from California
State University, Fullerton in 1992 with a Bachelor of Science degree in
Business Finance.
David Turek, age 44, is Vice President - Originations of WNC & Associates, Inc.
He has been involved with real estate investment and finance activities since
1976 and has been employed by WNC & Associates, Inc. since 1996. From 1995 to
1996, Mr. Turek served as a consultant for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties. From 1990 to 1995, he was involved in the development of
conventional and tax credit multi-family housing. He is a Director with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.
Kay L. Cooper, age 62, is a Director of WNC & Associates, Inc. Mrs. Cooper was
the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
30
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or Associates for the following fees:
(a) Annual Asset Management Fee. An annual asset management fee of the greater
of (i) $2,000 per multi-family housing complex or (ii) 0.275% of Gross
Proceeds. The base fee amount will be adjusted annually based on changes in
the Consumer Price Index, however in no event will the annual asset
management fee exceed 0.2% of Invested Assets. "Invested Assets" means the
sum of the Partnership's investment in Local Limited Partnerships and the
Partnership's allocable share of the amount of indebtedness related to the
Housing Complexes. Fees of $11,000 and $43,000 were incurred during the
three months ended March 31, 1999 and the year ended December 31, 1998,
respectively. The Partnership paid the General Partner or its affiliates
$6,000 and $5,000 of those fees during the three months ended March 31,
1999 and the year ended December 31, 1998, respectively.
(b) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of a Housing Complex. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital
contributions and payment of the Return on Investment to the Limited
Partners. "Return on Investment" means an annual, cumulative but not
compounded, "return" to the Limited Partners (including Low Income Housing
Credits) as a class on their adjusted capital contributions commencing for
each Limited Partner on the last day of the calendar quarter during which
the Limited Partner's capital contribution is received by the Partnership,
calculated at the following rates: (i) 16% through December 31, 2003, and
(ii) 6% for the balance of the Partnership's term. No disposition fees have
been paid.
(c) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $11,000 and $6,000
during the three months ended March 31, 1999 and the year ended December
31, 1998, respectively.
(d) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$20,000 for the General Partner for the year ended December 31, 1998. The
General Partner is also entitled to receive 1% of cash distributions. There
were no distributions of cash to the General Partner during the three
months ended March 31, 1999 or the year ended December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
(a) Security Ownership of Certain Beneficial Owners
The following is the only limited partner known to the General Partner to
own beneficially in excess of 5% of the outstanding Units.
Title of Class Name and Address of Amount of Units Percent
Beneficial Owner Controlled of Class
--------------------------------------------------------------------------
Units of Limited Sempra Energy Financial 4,000 Units 25.6%
Partnership Interests P.O. Box 126943
San Diego, CA 92113-6943
(b) Security Ownership of Management
Neither the General Partner, its affiliates, nor any of the officers or
directors of the General Partner or its affiliates own directly or
beneficially any Units in the Partnership.
31
(c) Changes in Control
The management and control of the General Partner may be changed at any
time in accordance with its organizational documents, without the consent
or approval of the Limited Partners. In addition, the Partnership Agreement
provides for the admission of one or more additional and successor General
Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of any
other General Partner or the Limited Partners, (i) substitute in its stead
as General Partner any entity which has, by merger, consolidation or
otherwise, acquired substantially all of its assets, stock or other
evidence of equity interest and continued its business, or (ii) cause to be
admitted to the Partnership an additional General Partner or Partners if it
deems such admission to be necessary or desirable so that the Partnership
will be classified a partnership for Federal income tax purposes. Finally,
a majority-in-interest of the Limited Partners may at any time remove the
General Partner of the Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interests in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
32
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Financial Statements
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Independent Auditors' Report
Balance Sheets, March 31, 1999 and 1998 (Unaudited) and December 31,
1998 and 1997
Statements of Operations for the three months ended March 31, 1999 and
1998 (Unaudited) and for the years ended December 31, 1998, 1997 and
1996
Statements of Partners' Equity (Deficit) for the for three months ended
March 31, 1999 and the years ended December 31, 1998, 1997 and 1996
Statements of Cash Flows for the three months ended March 31, 1999 and
1998 (Unaudited) and for the years ended December 31, 1998, 1997
and 1996
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial State-
ment Schedules
Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K
1. A Form 8-K dated May 13, 1999 was filed on May 14, 1999 reporting the
dismissal of the Partnership's former auditors and the engagement of
new auditors. No financial statements were included.
(c) Exhibits
3.1 Articles of incorporation and by-laws: The registrant is not
incorporated. The Partnership Agreement is included as Exhibit B to the
Prospectus which is included in Post-Effective No 11 to Registration
Statement on Form S-11 dated May 24, 1995 incorporated herein by
reference as Exhibit 3.
10.1 Amended and Restated Agreement of Limited Partnership of Chadwick
Limited Partnership filed as exhibit 10.1 to Form 8-K dated July 22,
1994 is hereby incorporated herein by reference as exhibit 10.1.
10.2 Second Amended and Restated Agreement of Limited Partnership of
Garland Street Limited Partnership filed as exhibit 10.2 to Form 8-K
dated July 22, 1994 is hereby incorporated herein by reference as
exhibit 10.2
10.3 Amended and Restated Agreement of Limited Partnership of Lamesa
Seniors Community, Ltd. filed as exhibit 10.3 to Form 8-K dated July
22, 1994 is hereby incorporated herein by reference as exhibit 10.3.
10.4 Amended and Restated Agreement of Limited Partnership of Palestine
Seniors Community, Ltd. filed as exhibit 10.4 to Form 8-K dated July
22, 1994 is hereby incorporated herein by reference as exhibit 10.4.
10.5 Second Amended and Restated Agreement of Limited Partnership of
Southcove Associates filed as exhibit 10.1 to Form 8-K dated August 8,
1994 is hereby incorporated herein by reference as exhibit 10.5.
33
10.6 Third Amended and Restated Agreement of Limited Partnership of
Southcove Associates filed as exhibit 10.2 to Form 8-K dated August 8,
1994 is hereby incorporated herein by reference as exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of Comanche
Retirement Village, Ltd. filed as exhibit 10.1 to Form 8-K dated
August 31, 1994 is hereby incorporated herein by reference as exhibit
10.7. 10.8 Amended and Restated Agreement of Limited Partnership of
Mountainview Apartments Limited Partnership filed as exhibit 10.1 to
Form 8-K dated September 21, 1994 is hereby incorporated herein by
reference as exhibit 10.8.
10.9 Second Amendment to Amended and Restated Agreement of Limited
Partnership of Mountainview Apartments Limited Partnership filed as
exhibit 10.2 to Form 8-K dated September 21, 1994 is hereby
incorporated herein by reference as exhibit 10.9.
10.10 Amended and Restated Agreement of Limited Partnership of Pecan Grove
Limited Partnership filed as exhibit 10.3 to Form 8-K dated September
21, 1994 is hereby incorporated herein by reference as exhibit 10.10.
10.11 Second Amendment to Amended and Restated Agreement of Limited
Partnership of Pecan Grove Limited Partnership filed as exhibit 10.4
to Form 8-K dated September 21, 1994 is hereby incorporated herein by
reference as exhibit 10.11.
10.12 Second Amendment to and Entire Restatement of the Agreement of
Limited Partnership of Autumn Trace Associates, Ltd. filed as exhibit
10.1 to Form 8-K dated October 31, 1994 is hereby incorporated herein
by reference as exhibit 10.12.
10.13 Amended and Restated Agreement of Limited Partnership of EW , a
Wisconsin Limited Partnership filed as exhibit 10.2 to Form 8-K dated
October 31, 1994 is hereby incorporated herein by reference as exhibit
10.13.
10.14 Agreement of Limited Partnership of Klimpel Manor, Ltd. filed as
exhibit 10.3 to Form 8-K dated September 21, 1994 is hereby
incorporated herein by reference as exhibit 10.14.
10.15 Amended and Restated Agreement of Limited Partnership of Hickory Lane
Associates Limited filed as exhibit 10.15 to Form 10-K dated December
31, 1995 is hereby incorporated herein by reference as exhibit 10.15.
10.16 Amended and Restated Agreement of Limited Partnership of Honeysuckle
Court Associates, Ltd. filed as exhibit 10.16 to Form 10-K dated
December 31, 1995 is hereby incorporated herein by reference as
exhibit 10.16.
10.17 Amended and Restated Agreement of Limited Partnership of Walnut Turn
Associates, Ltd. filed as exhibit 10.17 to Form 10-K dated December
31, 1995 is hereby incorporated herein by reference as exhibit 10.17.
10.18 Amended and Restated Agreement of Limited Partnership of Pioneer
Street Associates, a California limited partnership filed as exhibit
10.1 to Form 8-K dated July 5, 1995 is hereby incorporated herein by
reference as exhibit 10.18.
(d) Financial statement schedules follow, as set forth in subsection
(a)(2) hereof.
34
Report of Independent Certified Public Accountants on
Financial Statement Schedules
To the Partners
WNC Housing Tax Credit Fund IV, L.P., Series 2
The audits referred to in our report dated July 30, 1999, relating to the 1999
and 1998 financial statements of WNC Housing Tax Credit Fund IV, L.P., Series 2
(the "Partnership"), which is contained in Item 8 of this Form 10-K, included
the audit of the accompanying financial statement schedules. The financial
statement schedules are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statement schedules
based upon our audits.
In our opinion, such financial statement schedules present fairly, in all
material respects, the financial information set forth therein.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
July 30, 1999
35
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
-------------------------------- -------------------------------------------------------
As of March 31, 1999 As of December 31, 1998
-------------------------------- -------------------------------------------------------
Partnership's Total Amount of Encumbrances of Property
Investment in Local Investment Local Limited and Accumulated Net Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East Brewton,
East Brewton, Ltd. Alabama $ 1,255,000 $ 941,000 $ 1,011,000 $ 1,961,000 $ - $ 1,961,000
Autumn Trace Associates, Silsbee, Texas 412,000 412,000 1,269,000 2,059,000 394,000 1,665,000
Ltd.
Broken Bow Apartments I, Broken Bow,
Limited Partnership Nebraska 608,000 546,000 750,000 1,383,000 49,000 1,334,000
Candleridge Apartments Waukee, Iowa 125,000 125,000 685,000 873,000 112,000 761,000
of Waukee L.P. II
Chadwick Limited Edan, North
Partnership Carolina 378,000 378,000 1,571,000 2,011,000 207,000 1,804,000
Comanche Retirement Comanche, Texas 136,000 136,000 594,000 748,000 97,000 651,000
Village, Ltd.
Crossings II Limited Portage,
Dividend Housing Michigan 432,000 432,000 6,074,000 6,952,000 273,000 6,679,000
Association Limited
Partnership
EW, a Wisconsin Limited Evansville,
Partnership Wisconson 164,000 164,000 628,000 869,000 156,000 713,000
Garland Street Limited Malvarn,
Partnership Arkansas 164,000 164,000 699,000 918,000 164,000 754,000
Hereford Seniors Hereford,
Community, Ltd. Texas 167,000 167,000 804,000 1,006,000 94,000 912,000
Hickory Lane Newton, Texas 174,000 174,000 597,000 924,000 97,000 827,000
Associates, Ltd
36
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
---------------------------------- ------------------------------------------------------
As of March 31, 1999 As of December 31, 1998
---------------------------------- ------------------------------------------------------
Partnership's Total Amount of Encumbrances of Property
Investment in Local Investment Local Limited and Accumulated Net Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Honeysuckle Court Vidor, Texas $ 339,000 $ 339,000 $ 1,168,000 $ 1,780,000 $ 195,000 $ 1,585,000
Associates, Ltd.
Klimpel Manor, Ltd Fullerton,
California 1,774,000 1,774,000 1,984,000 3,576,000 437,000 3,139,000
Lamesa Seniors Lamesa, Texas 143,000 143,000 675,000 818,000 114,000 704,000
Community, Ltd.
Laredo Heights Navasota, Texas 225,000 225,000 1,001,000 1,349,000 98,000 1,251,000
Apartments Ltd.
Mountainview Apartments North Wilkesboro,
Limited Partnership North Carolina 195,000 195,000 1,002,000 1,211,000 140,000 1,071,000
Palestine Seniors Palestine, Texas 225,000 225,000 1,132,000 1,384,000 164,000 1,220,000
Community, Ltd.
Pecan Grove Limited Forrest City,
Partnership Arkansas 240,000 240,000 1,118,000 1,397,000 250,000 1,147,000
Pioneer Street Bakersfield,
Associates California 2,222,000 2,222,000 1,903,000 4,086,000 581,000 3,505,000
Sidney Apartments I, Sidney, Nebraska 530,000 484,000 444,000 1,419,000 100,000 1,319,000
Limited Partnership
Southcove Associates Orange Cove,
Califonia 2,000,000 2,000,000 1,538,000 3,445,000 500,000 2,945,000
Walnut Turn Associates, Buna, Texas 188,000 188,000 692,000 1,015,000 108,000 907,000
Ltd. ---------- ---------- ---------- ---------- --------- ----------
$12,096,000 $11,674,000 $27,339,000 $41,184,000 $4,330,000 $36,854,000
========== ========== ========== ========== ========= ==========
37
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
-----------------------------------------------------------------------------
For the year ended December 31, 1998
-----------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- -----------------------------------------------------------------------------------------------------------------------
Apartment Housing of East
Brewton, Ltd. $ - $ - 1998 Est. 1999 Not Determined
Autumn Trace Associates, Ltd. 206,000 (43,000) 1994 Completed 27.5 Years
Broken Bow Apartments I, Limited
Partnership 39,000 (117,000) 1996 Completed 40 Years
Candleridge Apartments of Waukee
L.P. II 116,000 (8,000) 1995 Completed 27.5 Years
Chadwick Limited Partnership 188,000 (18,000) 1994 Completed 50 Years
Comanche Retirement Village, Ltd. 63,000 (21,000) 1994 Completed 30 Years
Crossings II Limited Dividend
Housing Association Limited
Partnership 692,000 (19,000) 1997 Completed 40 Years
EW, a Wisconsin Limited
Partnership 105,000 (20,000) 1994 Completed 27.5 Years
Garland Street Limited
Partnership 66,000 (26,000) 1994 Completed 27.5 Years
Hereford Seniors Community, Ltd. 89,000 (7,000) 1995 Completed 40 Years
Hickory Lane Associates, Ltd 81,000 (13,000) 1995 Completed 27.5 Years
Honeysuckle Court Associates,
Ltd. 191,000 (18,000) 1995 Completed 27.5 Years
Klimpel Manor, Ltd 344,000 (85,000) 1994 Completed 40 Years
38
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
-----------------------------------------------------------------------------
For the year ended December 31, 1998
-----------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- -----------------------------------------------------------------------------------------------------------------------
Lamesa Seniors Community, Ltd. 84,000 (8,000) 1994 Completed 40 Years
Laredo Heights Apartments Ltd. 166,000 (9,000) 1996 Completed 45 Years
Mountainview Apartments Limited
Partnership 90,000 (11,000) 1994 Completed 40 Years
Palestine Seniors Community, Ltd. 135,000 (1,000) 1994 Completed 40 Years
Pecan Grove Limited Partnership 114,000 (46,000) 1994 Completed 27.5 Years
Pioneer Street Associates 507,000 (37,000) 1995 Completed 27.5 Years
Sidney Apartments I, Limited
Partnership 77,000 (42,000) 1996 Completed 40 Years
Southcove Associates 218,000 (102,000) 1994 Completed 27.5 Years
Walnut Turn Associates, Ltd. 129,000 (17,000) 1995 Completed 27.5 Years
---------- ----------
$ 3,700,000 $ (668,000)
========== ==========
39
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
December 31, 1998
-----------------------------------------------------------------------------------------
As of December 31, 1998
-----------------------------------------------------------------------------------------
Partnership's Total Amount of Encumbrances of Property
Investment in Local Investment Local Limited and Accumulated Net Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East Brewton,
East Brewton, Ltd. Alabama $ 1,255,000 $ 828,000 $ 1,011,000 $ 1,961,000 $ - $ 1,961,000
Autumn Trace Associates, Silsbee, Texas 412,000 412,000 1,269,000 2,059,000 394,000 1,665,000
Ltd.
Broken Bow Apartments I, Broken Bow,
Limited Partnership Nebraska 608,000 546,000 750,000 1,383,000 49,000 1,334,000
Candleridge Apartments Waukee, Iowa 125,000 125,000 685,000 873,000 112,000 761,000
of Waukee L.P. II
Chadwick Limited Edan, North
Partnership Carolina 378,000 378,000 1,571,000 2,011,000 207,000 1,804,000
Comanche Retirement Comanche, Texas 136,000 136,000 594,000 748,000 97,000 651,000
Village, Ltd.
Crossings II Limited Portage,
Dividend Housing Michigan 432,000 361,000 6,074,000 6,952,000 273,000 6,679,000
Association Limited
Partnership
EW, a Wisconsin Limited Evansville,
Partnership Wisconson 164,000 164,000 628,000 869,000 156,000 713,000
Garland Street Limited Malvarn,
Partnership Arkansas 164,000 164,000 699,000 918,000 164,000 754,000
Hereford Seniors Hereford,
Community, Ltd. Texas 167,000 167,000 804,000 1,006,000 94,000 912,000
Hickory Lane Newton, Texas 174,000 174,000 597,000 924,000 97,000 827,000
Associates, Ltd
40
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
December 31, 1998
------------------------------------------------------------------------------------------
As of December 31, 1998
------------------------------------------------------------------------------------------
Partnership's Total Amount of Encumbrances of Property
Investment in Local Investment Local Limited and Accumulated Net Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Honeysuckle Court Vidor, Texas $ 339,000 $ 339,000 $ 1,168,000 $ 1,780,000 $ 195,000 $ 1,585,000
Associates, Ltd.
Klimpel Manor, Ltd Fullerton,
California 1,774,000 1,774,000 1,984,000 3,576,000 437,000 3,139,000
Lamesa Seniors Lamesa, Texas 143,000 143,000 675,000 818,000 114,000 704,000
Community, Ltd.
Laredo Heights Navasota, Texas 225,000 225,000 1,001,000 1,349,000 98,000 1,251,000
Apartments Ltd.
Mountainview Apartments North Wilkesboro,
Limited Partnership North Carolina 195,000 195,000 1,002,000 1,211,000 140,000 1,071,000
Palestine Seniors Palestine, Texas 225,000 225,000 1,132,000 1,384,000 164,000 1,220,000
Community, Ltd.
Pecan Grove Limited Forrest City,
Partnership Arkansas 240,000 240,000 1,118,000 1,397,000 250,000 1,147,000
Pioneer Street Bakersfield,
Associates California 2,222,000 2,222,000 1,903,000 4,086,000 581,000 3,505,000
Sidney Apartments I, Sidney, Nebraska 530,000 484,000 444,000 1,419,000 100,000 1,319,000
Limited Partnership
Southcove Associates Orange Cove,
Califonia 2,000,000 2,000,000 1,538,000 3,445,000 500,000 2,945,000
Walnut Turn Associates, Buna, Texas 188,000 188,000 692,000 1,015,000 108,000 907,000
Ltd. ---------- ---------- ---------- ---------- --------- ----------
$12,096,000 $11,490,000 $27,339,000 $41,184,000 $4,330,000 $36,854,000
========== ========== ========== ========== ========= ==========
41
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
December 31, 1998
-----------------------------------------------------------------------------
For the year ended December 31, 1998
-----------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- -----------------------------------------------------------------------------------------------------------------------
Apartment Housing of East
Brewton, Ltd. $ - $ - 1998 Est. 1999 Not Determined
Autumn Trace Associates, Ltd. 206,000 (43,000) 1994 Completed 27.5 Years
Broken Bow Apartments I, Limited
Partnership 39,000 (117,000) 1996 Completed 40 Years
Candleridge Apartments of Waukee
L.P. II 116,000 (8,000) 1995 Completed 27.5 Years
Chadwick Limited Partnership 188,000 (18,000) 1994 Completed 50 Years
Comanche Retirement Village, Ltd. 63,000 (21,000) 1994 Completed 30 Years
Crossings II Limited Dividend
Housing Association Limited
Partnership 692,000 (19,000) 1997 Completed 40 Years
EW, a Wisconsin Limited
Partnership 105,000 (20,000) 1994 Completed 27.5 Years
Garland Street Limited
Partnership 66,000 (26,000) 1994 Completed 27.5 Years
Hereford Seniors Community, Ltd. 89,000 (7,000) 1995 Completed 40 Years
Hickory Lane Associates, Ltd 81,000 (13,000) 1995 Completed 27.5 Years
Honeysuckle Court Associates,
Ltd. 191,000 (18,000) 1995 Completed 27.5 Years
Klimpel Manor, Ltd 344,000 (85,000) 1994 Completed 40 Years
42
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
December 31, 1998
-----------------------------------------------------------------------------
For the year ended December 31, 1998
-----------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- -----------------------------------------------------------------------------------------------------------------------
Lamesa Seniors Community, Ltd. 84,000 (8,000) 1994 Completed 40 Years
Laredo Heights Apartments Ltd. 166,000 (9,000) 1996 Completed 45 Years
Mountainview Apartments Limited
Partnership 90,000 (11,000) 1994 Completed 40 Years
Palestine Seniors Community, Ltd. 135,000 (1,000) 1994 Completed 40 Years
Pecan Grove Limited Partnership 114,000 (46,000) 1994 Completed 27.5 Years
Pioneer Street Associates 507,000 (37,000) 1995 Completed 27.5 Years
Sidney Apartments I, Limited
Partnership 77,000 (42,000) 1996 Completed 40 Years
Southcove Associates 218,000 (102,000) 1994 Completed 27.5 Years
Walnut Turn Associates, Ltd. 129,000 (17,000) 1995 Completed 27.5 Years
---------- ----------
$ 3,700,000 $ (668,000)
========== ==========
43
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
By: WNC Tax Credit Partners IV, L.P.
General Partner of the Registrant
By: WNC & Associates, Inc.
General Partner of WNC Tax Credit Partners IV, L.P.
By: /s/ John B. Lester, Jr.
John B. Lester, Jr.,
President of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., General Partner
Date: August 5, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., Chairman of the Board of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., Director of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ David N. Shafer
David N Shafer, Director of WNC & Associates, Inc.
Date: August 5, 1999
44