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EX-32.1 - EXHIBIT 32.1 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex31-2.htm
EX-32.2 - EXHIBIT 32.2 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex32-2.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2007

For the quarterly period ended September 30, 2007

For the quarterly period ended December 31, 2007

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ___________

 

Commission file number: 0-21897

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

 

California   33-0707612
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

17782 Sky Park Circle, Irvine, CA 92614

( Address of principle executive offices )

 

(714) 622-5565

(Telephone Number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes [  ] No [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated file [  ] Non-accelerated filer [X] Smaller reporting company [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [  ] No [X]

 

 

 

 
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

INDEX TO FORM 10-Q

 

For the Quarterly periods Ended June 30, 2007, September 30, 2007

and December 31, 2007

 

PART I. FINANCIAL INFORMATION   
    
Item 1. Financial Statements  F-1
    
Condensed Balance Sheets   
As of June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2007  F-1
    
Condensed Statements of Operations   
For the Three Months Ended June 30, 2007 and 2006  F-2
For the Three and Six Months Ended September 30, 2007 and 2006  F-3
For the Three and Nine Months Ended December 31, 2007 and 2006  F-4
    
Condensed Statements of Partners’ Equity (Deficit)   
For the Three Months Ended June 30, 2007  F-5
For the Six Months Ended September 30, 2007  F-5
For the Nine Months Ended December 31, 2007  F-5
    
Condensed Statements of Cash Flows   
For the Three Months Ended June 30, 2007 and 2006  F-6
For the Six Months Ended September 30, 2007 and 2006  F-7
For the Nine Months Ended December 31, 2007 and 2006  F-8
    
Notes to Condensed Financial Statements  F-9
    
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  3
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk 35  7
    
Item 4. Controls and Procedures 35  7
    
PART II. OTHER INFORMATION   
    
Item 1. Legal Proceedings  9
    
Item 1A. Risk Factors  9
    
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  9
    
Item 3. Defaults Upon Senior Securities  9
    
Item 4. Mine Safety Disclosures  9
    
Item 5. Other Information  9
    
Item 6. Exhibits.  9
    
Signatures  10

 

2
 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED BALANCE SHEETS

(unaudited)

 

   June 30, 2007   September 30, 2007   December 31, 2007   March 31, 2007 
ASSETS                    
 
Cash
  $174,379   $98,179   $92   $235,855 
Prepaid expenses   4,656    2,031    -    7,281 
Investments in Local Limited Partnerships, net (Notes 2 and 3)   2,552,310    2,352,806    2,165,252    4,942,198 
Due from affiliates, net   574    574    574    574 
                     
 Total Assets  $2,731,919   $2,453,590   $2,165,918   $5,185,908 
                     
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)               
                     
Liabilities:                    
Payables to Local Limited Partnerships (Note 4)  $39,310   $39,310   $39,310   $39,310 
Accrued fees and expenses due to                    
General Partner and affiliates (Note 3)   35,469    26,199    37,891    31,614 
                     
 Total Liabilities   74,779    65,509    77,201    70,924 
                     
Partners’ Equity (Deficit):                    
General Partner   (192,489)   (195,180)   (198,174)   (167,911)
Limited Partners (25,000 Partnership Units authorized; 21,990 Partnership Units issued and outstanding)   2,849,629    2,583,261    2,286,891    5,282,895 
                     
Total Partners’ Equity (Deficit)   2,657,140    2,388,081    2,088,717    5,114,984 
Total Liabilities and Partners’ Equity (Deficit)  $2,731,919   $2,453,590   $2,165,918   $5,185,908 

 

 

See accompanying notes to condensed financial statements

 

F-1
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF OPERATIONS

 

For the Three Months Ended June 30, 2007 and 2006

(unaudited)

 

   2007   2006 
   Three Months   Three Months 
Reporting fees  $-   $1,500 
Distribution income   2,983    - 
           
 Total operating income   2,983    1,500 
           
 Operating expenses and loss:          
Amortization (Note 3)   12,630    13,590 
Asset management fees (Note 3)   15,125    15,125 
Impairment loss (Note 2)   2,184,054    1,186,381 
Legal and accounting fees   1,284    734 
Write off of advances to Local Limited Partnerships (Note 5)   54,937    - 
Other   2,570    4,952 
           
Total operating expenses and loss   2,270,600    1,220,782 
           
Loss from operations   (2,267,617)   (1,219,282)
           
Equity in losses of Local Limited Partnerships (Note 2)   (190,402)   (166,247)
           
Interest income   175    418 
           
Net loss  $(2,457,844)  $(1,385,111)
           
Net loss allocated to:          
General Partner  $(24,578)  $(13,851)
           
Limited Partners  $(2,433,266)  $(1,371,260)
           
Net loss per Partnership Unit  $(111)  $(62)
           
Outstanding weighted Partnership Units   21,990    21,990 

 

See accompanying notes to condensed financial statements

 

F-2
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF OPERATIONS

 

For the Three and Six Months Ended

September 30, 2007 and 2006

(unaudited)

 

   2007   2006 
   Three   Six   Three   Six 
   Months   Months   Months   Months 
                 
Reporting fees  $29,036   $29,036   $19,000   $20,500 
Distribution income   -    2,983    -    - 
                     
Total operating income   29,036    32,019    19,000    20,500 
                     
Operating expenses and loss:                    
Amortization (Note 3)   3,821    16,451    13,590    27,180 
Asset management fees (Note 3)   15,125    30,250    15,125    30,250 
Impairment loss (Note 2)   -    2,184,054    -    1,186,381 
Legal and accounting fees   7,280    8,564    2,625    3,359 
Write off of advances to Local Limited Partnerships (Note 5)   87,013    141,950    19,000    19,000 
Other   1,196    3,766    3,020    7,972 
Total operating expenses and loss   114,435    2,385,035    53,360    1,274,142 
                     
Loss from operations   (85,399)   (2,353,016)   (34,360)   (1,253,642)
                     
Equity in losses of Local Limited Partnerships (Note 2)   (183,733)   (374,135)   (166,248)   (332,495)
                     
Interest income   73    248    392    810 
                     
Net loss  $(269,059)  $(2,726,903)  $(200,216)  $(1,585,327)
                     
Net loss allocated to:                    
General Partner  $(2,691)  $(27,269)  $(2,002)  $(15,853)
                     
Limited Partners  $(266,368)  $(2,699,634)  $(198,214)  $(1,569,474)
                     
Net loss per Partnership Unit  $(12)  $(123)  $(9)  $(71)
                     
Outstanding weighted Partnership Units   21,990    21,990    21,990    21,990 

 

See accompanying notes to condensed financial statements

 

F-3
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF OPERATIONS

 

For the Three and Nine Months Ended

December 31, 2007 and 2006

(unaudited)

 

   2007   2006 
   Three   Nine   Three   Nine 
   Months   Months   Months   Months 
                 
Reporting fees  $-   $29,036   $-   $20,500 
Distribution income   -    2,983    -    - 
                     
Total operating income   -    32,019    -    20,500 
                     
Operating expenses and loss:                    
Amortization (Note 3)   3,821    20,272    13,590    40,770 
Asset management fees (Note 3)   15,125    45,375    15,125    45,375 
Impairment loss (Note 2)   -    2,184,054    -    1,186,381 
Legal and accounting fees   2,691    11,255    108    3,467 
Write off of advances to Local
Limited Partnerships (Note 5)
   93,864    235,814    91,431    110,431 
Other   132    3,898    1,908    9,880 
                     
Total operating expenses and loss   115,633    2,500,668    122,162    1,396,304 
                     
Loss from operations   (115,633)   (2,468,649)   (122,162)   (1,375,804)
                     
Equity in losses of Local Limited Partnerships (Note 2)   (183,734)   (557,869)   (166,246)   (498,741)
                     
Interest income   3    251    318    1,128 
                     
Net loss  $(299,364)  $(3,026,267)  $(288,090)  $(1,873,417)
                     
Net loss allocated to:                    
General Partner  $(2,994)  $(30,263)  $(2,881)  $(18,734)
                     
Limited Partners  $(296,370)  $(2,996,004)  $(285,209)  $(1,854,683)
                    
Net loss per Partnerships Units  $(13)  $(136)  $(13)  $(84)
                     
Outstanding weighted Partnership Units  $21,990   $21,990   $21,990   $21,990 

 

See accompanying notes to condensed financial statements

 

F-4
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)

 

For the Three Months Ended June 30, 2007, Six Months Ended September 30, 2007

And Nine Months Ended December 31, 2007

(unaudited)

 

For the Three Months Ended June 30, 2007

 

   General   Limited     
   Partner   Partners   Total 
             
Partners’ equity (deficit) at March 31, 2007  $(167,911)  $5,282,895   $5,114,984 
                
Net loss   (24,578)   (2,433,266)   (2,457,844)
                
Partners’ equity (deficit) at June 30, 2007  $(192,489)  $2,849,629   $2,657,140 

 

For the Six Months Ended September 30, 2007

 

   General   Limited     
   Partner   Partners   Total 
             
Partners’ equity (deficit) at March 31, 2007  $(167,911)  $5,282,895   $5,114,984 
                
Net loss   (27,269)   (2,699,634)   (2,726,903)
                
Partners’ equity (deficit) at September 30, 2007  $(195,180)  $2,583,261   $2,388,081 

 

For the Nine Months Ended December 31, 2007

 

   General   Limited     
   Partner   Partners   Total 
             
Partners’ equity (deficit) at March 31, 2007  $(167,911)  $5,282,895   $5,114,984 
                
Net loss   (30,263)   (2,996,004)   (3,026,267)
                
Partners’ equity (deficit) at December 31, 2007  $(198,174)  $2,286,891   $2,088,717 

 

See accompanying notes to condensed financial statements

 

F-5
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF CASH FLOWS

 

For the Three Months Ended June 30, 2007 and 2006

(unaudited)

 

   2007   2006 
Cash flows from operating activities:          
Net loss  $(2,457,844)  $(1,385,111)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization   12,630    13,590 
Impairment loss   2,184,054    1,186,381 
Equity in losses of Local Limited Partnerships   190,402    166,247 
(Increase) decrease in prepaid expenses   2,625    (3,781)
Increase in accrued fees and expenses due to General Partner and affiliates   3,855    2,185 
           
Net cash used in operating activities   (64,278)   (20,489)
           
Cash flows from investing activities:          
Advances made to Local Limited Partnerships   (54,937)   - 
Write off of advances made to Local Limited Partnerships   54,937    - 
Distributions received from Local Limited Partnerships   2,802    5,786 
Net cash provided by investing activities   2,802    5,786 
           
Net decrease in cash   (61,476)   (14,703)
           
Cash, beginning of period   235,855    361,469 
           
Cash, end of period  $174,379   $346,766 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
           
Taxes paid  $-   $- 

 

See accompanying notes to condensed financial statements

 

F-6
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF CASH FLOWS

 

For the Six Months Ended September 30, 2007 and 2006

(unaudited)

 

   2007   2006 
Cash flows from operating activities:          
Net loss  $(2,726,903)  $(1,585,327)
Adjustments to reconcile net loss to net cash used in operating activities:          
 Amortization   16,451    27,180 
Impairment loss   2,184,054    1,186,381 
Equity in losses of Local Limited Partnerships   374,135    332,495 
(Increase) decrease in prepaid expenses   5,250    (7,561)
Increase (decrease) in accrued fees and expenses due to General Partner and affiliates   (5,415)   1,814 
           
Net cash used in operating activities   (152,428)   (45,018)
           
Cash flows from in investing activities:          
Advances made to Local Limited Partnerships   (141,950)   (19,000)
Write off of advances made to Local Limited Partnerships   141,950    19,000 
Distributions received from Local Limited Partnerships   14,752    20,482 
           
Net cash provided by investing activities   14,752    20,482 
           
Net decrease in cash   (137,676)   (24,536)
           
Cash, beginning of period   235,855    361,469 
           
Cash, end of period  $98,179   $336,933 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
           
Taxes paid  $-   $- 

 

See accompanying notes to condensed financial statements

 

F-7
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENTS OF CASH FLOWS

 

For the Nine Months Ended December 31, 2007 and 2006

(unaudited)

 

   2007   2006 
Cash flows from operating activities:          
Net loss  $(3,026,267)  $(1,873,417)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization   20,272    40,770 
Impairment loss   2,184,054    1,186,381 
Equity in losses of Local Limited Partnerships   557,869    498,741 
(Increase) decrease in prepaid expenses   7,281    (4,937)
Increase (decrease) in accrued fees and expenses due to General Partner and affiliates   6,277    (2,289)
           
Net cash used in operating activities   (250,514)   (154,751)
           
Cash flows from investing activities:          
Advances made to Local Limited Partnerships   (235,814)   (110,431)
Write off of advances made to Local Limited Partnerships   235,814    110,431 
Repayment of advances made to Local Limited Partnerships   -    8,012 
Distributions received from Local Limited Partnerships   14,751    20,483 
           
Net cash provided by investing activities   14,751    28,495 
           
Net decrease in cash   (235,763)   (126,256)
           
Cash, beginning of period   235,855    361,469 
           
Cash, end of period  $92   $235,213 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
           
Taxes paid  $-   $- 

 

See accompanying notes to condensed financial statements

 

F-8
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

General

 

The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2007, six months ended September 30, 2007 and nine months ended December 31, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2008. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s annual report on Form 10-K for the fiscal year ended March 31, 2007.

 

Organization

 

WNC Housing Tax Credit Fund, V, L.P., Series 4 (the “Partnership”) was formed under the California Revised Limited Partnership Act on July 26, 1995 and commenced operations on July 1, 1996. The Partnership was formed to invest primarily in other limited partnerships (“Local Limited Partnerships”) which own and operate multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low-income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

The general partner of the Partnership is WNC & Associates, Inc. (the “General Partner” or “Associates”). The chairman and president of Associates own substantially all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through the General Partner, as the Partnership has no employees of its own.

 

The Partnership shall continue to be in full force and effect until December 31, 2050, unless terminated prior to that date, pursuant to the partnership agreement or law.

 

The financial statements include only activity relating to the business of the Partnership, and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes, of the partners.

 

The partnership agreement authorized the sale of up to 25,000 units of limited partnership interest (“Partnership Units”) at $1,000 per Partnership Unit. The offering of Partnership Units concluded on July 11, 1997 at which time 22,000 Partnership Units representing subscriptions in the amount of $21,914,830, net of discounts of $79,550 for volume purchases and $5,620 for dealer discounts, had been accepted. As of all periods presented, 21,990 Partnership Units remain outstanding. The General Partner has a 1% interest in operating profits and losses, taxable income and losses and in cash available for distribution from the Partnership and Low Income Housing Tax Credits. The investors (“Limited Partners”) in the Partnership will be allocated the remaining 99% of these items in proportion to their respective investments.

 

F-9
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partner would then be entitled to receive proceeds equal to their capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.

 

Risks and Uncertainties

 

An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:

 

The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.

 

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others.

 

F-10
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to the limited partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.

 

No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.

 

As of September 30 and December 31, 2007, the Partnership has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through November 30, 2014.

 

Exit Strategy

 

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.

 

Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met. None of the Housing Complexes have completed their 15-year Compliance Period.

 

With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

 

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of December 31, 2007.

 

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership, as the proceeds first would be used to pay Partnership obligations and funding of reserves.

 

F-11
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Subsequent to December 31, 2007 the Partnership identified and sold the Housing Complexes of Mesa Verde Apartments, L.P. (“Mesa Verde”), The North Central Limited Partnership (“The North Central”) and Blessed Rock of El Monte. A CA Limited Partnership (“Blessed Rock). The Partnership also identified and sold its Local Limited Partnership interests in Lamar Plaza Apartments, LP, D. Hilltop Apartments, Ltd., Woodland, Ltd., and Greyhound Associates I, L.P subsequent to December 31, 2007.

 

The following table reflects dispositions that occurred subsequent to December 31, 2007:

 

Local Limited Partnership  Debt at
prior 12/31
before sale
date
   Appraisal
Value
   Date of
Sale
   Sales
Proceeds
   Actual Sale
Related
Expenses
   Investment
balance at
date of sale
   Gain (loss)
on sale
 
Mesa Verde Apartments, L.P.(*)  $1,919,353   $2,300,000    4/23/2010   $137,413   $-   $-   $137,413 
The North Central Limited Partnership (*)   313,264    640,000    3/23/2011    225,967    992    -    224,975 
Blessed Rock of El Monte, a CA Limited Partnership   2,054,000    6,910,000    4/12/2013    2,355,384    2,250    547,890    1,805,244 
Lamar Plaza Apartments, LP (*)   651,285    330,000    12/31/2010    20,000    -    -    20,000 
D. Hilltop Apartments, Ltd.   415,909    220,000    8/1/2012    20,000    3,047    -    16,953 
Woodland, Ltd   1,341,720    226,000    7/31/2013    28,001    2,500    -    25,501 
Greyhound Associates I, L.P   435,203    115,000    8/31/2013    5,000    2,600    -    2,400 
Crescent City Apartment, a California Limited Partnership   2,681,206    320,000    10/1/2013    50,000    7,334    -    42,666 

 

(*) The Compliance Periods for the Local Limited Partnerships expired after the respective date of sale. The respective purchasers have guaranteed that the Local Limited Partnerships will stay in compliance with the Low Income Housing Tax Credit code, therefore there is no risk of recapture to the investors of the Partnership.

 

F-12
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The following table represents the use of the cash proceeds from the disposition of the Local Limited Partnerships that were disposed of subsequent to the year ended December 31, 2007:

 

Local Limited Partnership  Cash
Proceeds
   Reimburse GP or affiliates
for expenses
   Payment of
accrued asset
management fees
   Remaining cash
to remain in
reserves for
future expenses
 
Mesa Verde Apartments, L.P.  $137,413   $90,900   $-   $46,513 
The North Central Limited Partnership   225,967    36,000    88,719    101,248 
Blessed Rock of El Monte, a CA Limited Partnership   2,355,384    25,852    966,695    1,362,837 
Lamar Plaza Apartments, LP   20,000    14,000    -    6,000 
D. Hilltop Apartments, Ltd.   20,000    11,775    -    8,225 
Woodland, Ltd   28,001    23,000    -    5,001 
Greyhound Associates I, L.P   5,000    -    -    5,000 
Crescent City Apartment, a California Limited Partnership   50,000    -    21,868    28,132 

 

Subsequent to December 31, 2007, the Partnership has identified the following Local Limited Partnerships for possible disposition as listed in the table below. Once the sales are finalized, the Partnership will use the cash proceeds to reimburse the General Partner or an affiliate for expenses paid on its behalf or pay accrued asset management fees. Any remaining proceeds will be placed in the Partnership’s reserves for future operating expenses. No distributions will be made to the Limited Partners.

 

Local Limited
Partnership
  Expected
closing date
  Appraisal
value
   Mortgage
balance of
Local Limited
Partnership
   Estimated
sales price
   Appraisal
expense
   Estimated
gain on sale
 
Ashford Place Limited Partnership  01/31/2014  $2,560,000   $2,612,803   $5,000   $3,000   $2,000 
Cleveland Apartments, L.P  12/31/2013   1,070,000    1,471,060    50,000    -    50,000 

 

The Compliance Period for Ashford Place Limited Partnership has expired as the date of the sales so there is no risk of tax credit recapture to the investors in the Partnership. The Compliance period for Cleveland Apartments expires December 31, 2014. The purchaser has guaranteed that the Local Limited Partnerships will stay in compliance with the Low Income Housing Tax Credit code, therefore there is no risk of recapture to the investors of the Partnership.

 

F-13
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Method of Accounting for Investments in Local Limited Partnerships

 

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment account and were being amortized over 30 years (see Notes 2 and 3).

 

“Equity in losses of Local Limited Partnerships” for each year ended of the periods June 30, September 30 and December 31, 2007 and 2006 has been recorded by the Partnership. Management’s estimate for the three, six and nine month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses from the Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. 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 the net losses not recognized during the period(s) the equity method was suspended. For the three, six and nine months ended June 30, September 30 and December 31, 2007, respectively, as soon as the investment balance reached zero, the related costs for acquiring the investment were written off.

 

The Partnership does not consolidate the accounts and activities of the Local Limited Partnerships which a Variable Interest Entities under Financial Accounting Standards Board Interpretation No. 46-Revised, “Consolidation of Variable Interest Entities”, because the Partnership is not considered the primary beneficiary. The Partnership’s balance in Investments in Local Limited Partnerships represents the maximum exposure to loss in connection with such investments. The Partnership’s exposure to loss on the Local Limited Partnerships I mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners.

 

F-14
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income. As of June 30, 2007, September 30, 2007, December 31, 2007, and March 31, 2007 five, five, five and three, investment accounts in Local Limited Partnerships, respectively, had reached a zero balance.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

 

Cash and Cash Equivalents

 

The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. For all periods presented, the Partnership had no cash equivalents.

 

Reporting Comprehensive Income

 

The Partnership had no items of other comprehensive income for all periods presented.

 

Concentration of Credit Risk

 

For all periods presented, the Partnership maintained cash balances at certain financial institutions in excess of the federally insured maximum. The Partnership believes it is not exposed to any significant financial risk on cash.

 

Income Taxes

 

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2009 remain open.

 

Net Loss Per Partnership Unit

 

Net loss per Partnership Unit includes no dilution and is computed by dividing loss available to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required.

 

F-15
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnerships for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. Impairment loss for the three months ended June 30, 2007 and 2006 was $1,523,081 and $1,186,381, respectively. For the six months ended September 30, 2007 and 2006, impairment loss of $1,523,081 and $1,186,381, respectively, was recorded. Impairment loss for the nine months ended December 31, 2007 and 2006 was $1,523,081 and $1,186,381, respectively.

 

For the three, six and nine months ended June 30, September 30 and December 31, 2007, respectively, the Partnership also evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investments. During the three months ended June 30, 2007 an impairment loss of $660,973 was recorded against the related intangibles. During the six months ended September 30, 2007 an impairment loss of $660,973 was recorded against the related intangibles. During the nine months ended December 31, 2007 an impairment loss of $660,973 was recorded against the related intangibles.

 

For the three, six and nine months ended June 30, September 30 and December 31, 2006, respectively, when the value of the Partnership’s investment had been reduced to zero, the respective net acquisition fees and costs component of investments in Local Limited Partnerships were written off. No such write off was recorded for any of the periods presented.

 

Amortization

 

Acquisition fees and costs were being amortized over 30 years using the straight-line method. Amortization expense for the three months ended June 30, 2007 and 2006 was $12,630 and $13,590, respectively. For the six months ended September 30, 2007 and 2006 amortization expense was $16,451 and $27,180, respectively. For the nine months ended December 31, 2007 and 2006 amortization expense was $20,272 and $40,770, respectively.

 

Revenue Recognition

 

The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.

 

F-16
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

 

As of all periods presented, the Partnership has acquired limited partnership interests in fourteen Local Limited Partnerships, each of which owns one Housing Complex consisting of an aggregate of 785 apartment units. The respective Local General Partners of the Local Limited Partnerships manage the day to day operations of the entities. Significant Local Limited Partnership business decisions, as defined, require approval from the Partnership. The Partnership, as a Limited Partner, is generally entitled to 98.98% to 99.98%, except for one Local Limited Partnership which the Partnership is entitled to 49.50%, as specified in the Local Limited Partnership agreements, of the operating profits and losses, taxable income and losses, and Low Income Housing Tax Credits of the Local Limited Partnerships.

 

The Partnership reviews its investments in Local Limited Partnerships for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. Impairment loss for the three months ended June 30, 2007 and 2006 was $1,523,081 and $1,186,381, respectively. For the six months ended September 30, 2007 and 2006, impairment loss of $1,523,081 and $1,186,381, respectively, was recorded. Impairment loss for the nine months ended December 31, 2007 and 2006 was $1,523,081 and $1,186,381, respectively.

 

For the three, six and nine months ended June 30, September 30 and December 31, 2007, respectively, the Partnership also evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investments. During the three months ended June 30, 2007 an impairment loss of $660,973 was recorded against the related intangibles. During the six months ended September 30, 2007 an impairment loss of $660,973 was recorded against the related intangibles. During the nine months ended December 31, 2007 an impairment loss of $660,973 was recorded against the related intangibles.

 

For the three, six and nine months ended June 30, September 30 and December 31, 2006, respectively, when the value of the Partnership’s investment had been reduced to zero, the respective net acquisition fees and costs component of investments in Local Limited Partnerships were written off. No such write off was recorded for any of the periods presented.

 

F-17
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented below:

 

   For the Three
Months Ended
June 30, 2007
   For the Year Ended
March 31, 2007
 
Investments per balance sheet, beginning of period  $4,942,198   $7,011,330 
Impairment loss   (2,184,054)   (1,186,381)
Equity in losses of Local Limited Partnerships   (190,402)   (808,469)
Distributions received from Local Limited Partnerships   (2,802)   (20,883)
Amortization of capitalized acquisition fees and costs   (12,630)   (53,399)
Investments per balance sheet, end of period  $2,552,310   $4,942,198 

 

   For the Six
Months Ended
September 30, 2007
   For the Year Ended
March 31, 2007
 
Investments per balance sheet, beginning of period  $4,942,198   $7,011,330 
Impairment loss   (2,184,054)   (1,186,381)
Equity in losses of Local Limited Partnerships   (374,135)   (808,469)
Distributions received from Local Limited Partnerships   (14,752)   (20,883)
Amortization of capitalized acquisition fees and costs   (16,451)   (53,399)
Investments per balance sheet, end of period  $2,352,806   $4,942,198 

 

   For the Nine
Months Ended
December 31, 2007
   For the Year Ended
March 31, 2007
 
Investments per balance sheet, beginning of period  $4,942,198   $7,011,330 
Impairment loss   (2,184,054)   (1,186,381)
Equity in losses of Local Limited Partnerships   (557,869)   (808,469)
Distributions received from Local Limited Partnerships   (14,751)   (20,883)
Amortization of capitalized acquisition fees and costs   (20,272)   (53,399)
Investments per balance sheet, end of period  $2,165,252   $4,942,198 

 

F-18
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

   For the Three
Months Ended
June 30, 2007
   For the Year Ended
March 31, 2007
 
Investments in Local Limited Partnerships, net  $2,246,638   $3,962,923 
Acquisition fees and costs, net of accumulated amortization of $0 and $818,633   305,672    979,275 
Investments per balance sheet, end of period  $2,552,310   $4,942,198 

 

   For the Six
Months Ended
September 30, 2007
   For the Year Ended
March 31, 2007
 
Investments in Local Limited Partnerships, net  $2,050,955   $3,962,923 
Acquisition fees and costs, net of accumulated amortization of $3,821 and $818,633   301,851    979,275 
Investments per balance sheet, end of period  $2,352,806   $4,942,198 

 

   For the Nine
Months Ended
December 31, 2007
   For the Year Ended
March 31, 2007
 
Investments in Local Limited Partnerships, net  $1,867,222   $3,962,923 
Acquisition fees and costs, net of accumulated amortization of $7,642 and $818,633   298,030    979,275 
Investments per balance sheet, end of period  $2,165,252   $4,942,198 

 

F-19
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Selected financial information for the three months ended June 30, 2007 and 2006 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS
         
   2007   2006 
Revenues  $998,000   $982,000 
Expenses:          
Interest expense   222,000    227,000 
Depreciation and amortization   291,000    284,000 
Operating expenses   731,000    672,000 
Total expenses   1,244,000    1,183,000 
           
Net loss  $(246,000)  $(201,000)
Net loss allocable to the Partnership  $(259,000)  $(203,000)
Net loss recorded by the Partnership  $(190,000)  $(166,000)

 

F-20
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Selected financial information for the six months ended September 30, 2007 and 2006 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS
 
    2007    2006 
Revenues  $1,996,000   $1,964,000 
Expenses:          
Interest expense   444,000    454,000 
Depreciation and amortization   583,000    569,000 
Operating expenses   1,462,000    1,344,000 
Total expenses   2,489,000    2,367,000 
           
Net loss  $(493,000)  $(403,000 
Net loss allocable to the Partnership  $(518,000)  $(407,000 
Net loss recorded by the Partnership  $(374,000)  $(332,000 

 

Selected financial information for the nine months ended December 31, 2007 and 2006 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS
 
   2007   2006 
Revenues  $2,994,000   $2,947,000 
Expenses:          
Interest expense   666,000    682,000 
Depreciation and amortization   874,000    853,000 
Operating expenses   2,194,000    2,016,000 
Total expenses   3,734,000    3,551,000 
           
Net loss  $(740,000)  $(604,000)
Net loss allocable to the Partnership  $(778,000)  $(610,000)
Net loss recorded by the Partnership  $(558,000)  $(499,000)

 

Certain Local Limited Partnerships have incurred significant operating losses and/or 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 Partners may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investment in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

 

F-21
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Troubled Housing Complexes

 

During the year ended March 31, 2006, Associates was advised that Lamar Plaza Apartments, (“Lamar Plaza”) a Local Limited Partnership, was experiencing a significant drop in occupancy and thereby cash flow due to three major employers discontinuing operations in the area. As a result of the foregoing, the Local Limited Partnership was added to the watch list and classified as a secondary concern level property. In December of 2006, Lamar Plaza’s occupancy dropped to its lowest level to date, 36% occupancy. The Local General Partner continued to meet Lamar Plaza’s cash flow deficit requirements and changed management agents in April 2007. Subsequent to this management change, occupancy had steadily rebounded through aggressive marketing techniques to reach 97% as of March 31, 2008 with corresponding cash deficits on the decline. Occupancy had continued to hold steady at 96% with slight cash flow deficits that were funded from reserves up until its sale on December 31, 2010.

 

Although Lamar Plaza was sold on December 31, 2010 the Local Limited Partnership continued to be monitored since the Compliance Period was not completed until December 31, 2012. It was revealed in 2011 that the economic occupancy was 94%, indicating a consistent occupancy of above 90%. However, the asset experienced a temporary reduction in occupancy during the third quarter of 2012, but ended the year with 100%. The investment balance for Lamar Plaza as of June 30, September 30, December 31, and March 31, 2007 was $56,023, $42,899, $29,774, and $179,043, respectively. No recapture of Low Income Housing Tax Credits was experience subsequent to the sale of this Local Limited Partnership.

 

Another Local Limited Partnership, Wynwood Place, L.P. (“Wynwood Place”), in which the Partnership owns a 99.98% interest, struggled with occupancy and cash flow beginning in early 2002. The original Local General Partner funded operating deficits through May 2006 totaling $42,198, at which time they sought and brought forth an acceptable replacement Local General Partner, Greystone Affordable Housing, GP, LLC (“Greystone”). Associates approved this substitute Local General Partner as well as a related management agent of Greystone to manage the property. Through the year ended March 31, 2008, Greystone had advanced $155,266 to meet operating deficits and fund necessary renovation work at Wynwood Place. Occupancy and overall performance of the property has continued to improve with Greystone as both general partner and management agent. The property continued to not be able to generate enough cash flows to meet its financial obligations. A large storm in 2011 resulted in damage to the property that exceeded budgeted repairs and maintenance expenditures by $28,000. Wynwood Place will remain on the watch list until such time acceptable performance has been achieved and cash flows have improved.

 

Additionally, the management company also evicted several long term residents for non-payment and criminal activity during 2012. The combination of vacancy losses, associated turnover costs and capital expenditures incurred throughout the year caused the property to operate below its requirements. The General Partner funded the year-end cash flow deficit by temporarily suspending replacement reserve deposits, deferring management fees and reimbursable expenses due to the affiliated management company. The security deposit and escrow accounts remain fully funded. The management company is focused on reducing expenses to decrease operating deficits. However, the property is budgeted to operate at a deficit in 2013 and the General Partner is expected to continue to fund shortfalls. The investment balance for Wynwood Place as of June 30, September 31, December 31, and March 31, 2007 was $62,451, $47,976, $33,502, and $76,925, respectively. The Compliance Period for Wynwood Place ends on December 31, 2013.

 

In the first quarter of 2013, Wynwood Place continues to recover from the excessive vacancy loss which began the previous quarter. The management company has cleared out the non-paying and problem residents and returned the occupancy to 96%. Ten new residents, which equates to 42%, moved in during the quarter. As the replacement reserve account is depleted, all expenditures must be funded from the operating account, which had a balance of $5,273 at the end of the reporting period. Although the operating deficit guarantee period has expired, the Local General Partner remains available to fund cash deficits as needed.

 

F-22
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

Ashford Place Limited Partnership (“Ashford”) a Local Limited Partnership has struggled for several years with high turnover and a market which has increasingly become more competitive. Several factors have led to poor, property specific results over the past several years. Occupancy historically has been soft, never higher than 90% for any successive quarters for the past three years. Additionally, rents at Ashford have not kept pace with the increase in expenses, and as a result of the soft market conditions, cash flow has been negative since 2002. As this has been a factor from the onset of operations, the original Local General Partner, Cowen Properties, Inc., was unable to meet its financial obligations to the Local Limited Partnership and, as a result, Associates removed the original Local General Partner in March 2002 and substituted WNC Oklahoma, LLC, an affiliated entity. Since inception of Ashford, the Partnership and the General Partner of the Partnership have advanced $462,514 and $258,567 respectively to meet operating deficits as well as capital needs requirements. Ashford had also been subjected to restrictive reserve requirements imposed by the mortgage lender. However, WNC Oklahoma, LLC has been successful in having these requirements reduced which has had a beneficial effect on Ashford’s operating expenses. As of 2011, Ashford has been under the watch of WNC’s Structured Assets Group (“SAG”). During that time, SAG removed the managing agent Western Property Management in November 2011 and they were replaced with Professional Property Management. With a new management team in place along with a new advertising plan to attract more tenants, as of May 2013, Ashford was able to bring its occupancy level to 100%. As of this filing date, Ashford is now current on all past due debt with funds that were provided by the Partnership and the General Partner of the Partnership. The investment balance for Ashford as of June 30, September 30, December 31, and March 31, 2007 was $106,371, $70,562, $34,753, and $456,516, respectively. The Compliance Period for Ashford ends on December 31, 2012.

 

The Partnership was advised during the year ended March 31, 2003 that the Local Limited Partnership, Mesa Verde Apartments Limited Partnership (“Mesa Verde”) and its original Local General Partner, were not meeting their various guarantee requirements and partnership operational deficit needs. As a result, the Local General Partner was removed, and Associates brought in a substitute Local General Partner, Medlock Charitable Foundation, Inc. (“Medlock”) as managing general partner as well as Shelter Resource Corporation (“Shelter”) as general partner in November 2003. Medlock was unable to perform the general partner duties; therefore, Shelter became the new managing general partner in September 2004, and remains the Local General Partner as of the date of this report.

 

Since the Local Limited Partnership’s inception, there have been four managing agents providing property management services for Mesa Verde. Mesa Verde is currently being managed by Vantage Property Management and has been since November 2006.

 

During 2003, occupancy dropped into the 60% range and rebounded in late 2004 into the low 80s. During 2005, occupancy did reach into the high 80%s but collections were approximately 10% lower; this trend continued into 2006. From 2007 until the date of sale of the Local Limited Partnership, April 23, 2010, Mesa Verde Apartments had been continuously experiencing occupancy issues falling as low as the 50’s and no higher than the low 70’s in occupancy. During 2007, there were several incidents involving local authorities that were prevalent throughout the market area and Mesa Verde. These incidents further impacted Mesa Verde’s occupancy, which dropped even further into the low 70%s to high 60%s. Since early 2002, this property has operated with insufficient cash flow due to lower than anticipated occupancy, poor rental collections, and high tenant turnover. Due to the extended period of time Mesa Verde has experienced negative cash flow, the Partnership has funded over $1,000,000 for operations, capital needs, capital improvements, and to refinance the original mortgage as described below. Mesa Verde Apartments has been on the watch list since March 2002 and remained there until the date of sale, which occurred on April 23, 2010. The investment balance for Mesa Verde as of June 30, September 30, December 31, and March 31, 2007 was $269,519, $167,776, $66,033, and $912,470, respectively. The Compliance Period for Mesa Verde ended on December 31, 2012.

 

F-23
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

In July 2005, the primary mortgage was refinanced with US Bank at a lowered interest rate of 6.17% and a reduced principal balance of $1,750,000. With the new principal balance, the annual debt service was lowered by approximately $60,000. US Bank had declared that the first mortgage was in technical default due to the DCR not staying within mandatory levels. Through negotiations, Associates was able to reach an agreement with US Bank. Associates offered a plan that cured the DCR default which was accepted by US Bank and they in turn waived their prepayment/yield maintenance provision of the mortgage where $150,000 was be written off for this provision in accordance with the sale of the property.

 

The tax credit benefit stream ended in June 2008 for Mesa Verde. The General Partner elected to have Mesa Verde listed for sale at $2,300,000 with a national brokerage firm as of September 12, 2008. Mesa Verde appraised at $2,300,000 on June 26, 2008. The sale of the property closed on April 23, 2010 under the provision that the buyer would assume the HOME loan from NFMA and would hold the loan on their books until 2017. When the HOME loan compliance period ends in 2017, the loan will then be able to be written off and deemed paid in full. The HOME loan will carry an interest rate of 0% and require no monthly payments. No recapture of Low Income Housing Tax Credits was experience subsequent to the sale of this Local Limited Partnership.

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates the following fees:

 

(a)Acquisition fees of up to 7.5% of the gross proceeds from the sale of Partnership 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 $1,630,375. Accumulated amortization of these capitalized costs was $0, $3,821, $7,642 and $651,100 as of June 30, 2007, September 30, 2007, December 31, 2007, and March 31, 2007, respectively. Impairment on the intangibles is measure by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investments. If an impairment loss related to the acquisition expenses is recorded, the accumulated amortization is reduced to zero at that time.

 

(b)Reimbursement of costs incurred by the General Partner or an affiliate of Associates in connection with the acquisition of Local Limited Partnerships. These reimbursements have not exceeded 1% of the gross proceeds. As of the end of all periods presented, the Partnership incurred acquisition costs of $167,533, which have been included in investments in Local Limited Partnerships. As of all periods presented, the acquisition costs have been fully amortized.

 

(c)An annual asset management fee equal to the greater amount of (i) $2,000 for each Housing 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 Partnerships, as defined. “Invested assets” means the sum of the Partnership’s Investment in Local Limited Partnerships and the Partnership’s allocable share of the amount of the mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $15,125 were incurred during each of the three months ended June 30, 2007 and 2006. For each of the six months ended September 30, 2007 and 2006, the Partnership incurred asset management fees of $30,250. Management fees of $45,375 were incurred during each of the nine months ended December 31, 2007 and 2006. The Partnership paid the General, Partner or its Affiliates $12,500 and $18,906 of those fees during the three months ended June 30, 2007 and 2006, respectively. For the six months ended September 30, 2007 and 2006 the Partnership paid $25,000 and $37,812, respectively. For the nine months ended December 31, 2007 and 2006, the Partnership paid $25,000 and $50,312, respectively. During the three months ended June 30, 2007 and the six months ended September 30, 2007 the Partnership overpaid its asset management fees. The over payments are reflected as prepaid expenses on the accompanying balance sheets.

 

F-24
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

  

(d)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 14% through December 31, 2007 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. No such fee was incurred for all periods presented.

 

(e)The Partnership reimburses the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements were $0 and $0 during the three months ended June 30, 2007 and 2006, respectively. For the six months ended September 30, 2007 and 2006, the Partnership reimbursed operating expenses of $17,747 and $6,107, respectively. For the nine months ended December 31, 2007 and 2006, operating expense reimbursements were $24,671 and $12,136, respectively.

 

The accrued fees and expenses due to General Partner and affiliates consisted of the following at:

 

   June 30, 2007   September 30, 2007   December 31, 2007   March 31, 2007 
                 
Asset management fee payable  $-   $-   $13,094   $- 
Advances made to the Partnership from General Partner or affiliates   22,097    22,097    24,797    22,097 
Expenses paid by the General
Partners or an affiliate on behalf of
the Partnership
   13,372    4,102    -    9,517 
Total  $35,469   $26,199   $37,891   $31,614 

 

NOTE 4 – PAYABLES TO LOCAL LIMITED PARTNERSHIPS

 

Payables to Local Limited Partnerships represent amounts which are due at various times based on conditions specified in the Local Limited Partnership agreements. These contributions are payable in installments and are generally due upon the Local Limited Partnerships achieving certain operating and development benchmarks (generally within two years of the Partnership’s initial investment). As of June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2007 $39,310 was payable.

 

F-25
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 5 –ADVANCES TO LOCAL LIMITED PARTNERSHIPS

 

The Partnership is not obligated to fund advances to the Local Limited Partnerships. Occasionally, when Local Limited Partnerships encounter operational issues the Partnership may decide to advance funds to assist the Local Limited Partnership with its operational issues.

 

As of June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2007 the Partnership in total had advanced $260,031, $270,031, $280,031 and $260,031, respectively to one Local Limited Partnership, Mesa Verde Apartments Limited Partnership, in which the Partnership is a limited partner. These advances were used to pay for the property taxes, mortgage payments and operational expenses. All advances were reserved in full in the year they were advanced.

 

As of June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2007 the Partnership in total had advanced $432,742, $509,755, $593,619 and $377,805, respectively to one Local Limited Partnership, Ashford Place Limited Partnership, in which the Partnership is a limited partner. These advances were used to pay for the property taxes, mortgage payments and operational expenses. All advances were reserved in full in the year they were advanced.

 

As of June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2007 the Partnership in total had advanced $4,939, $4,939, $4,939 and $4,939, respectively to one Local Limited Partnership, Wynwood Place, L.P in which the Partnership is a limited partner. These advances were used to pay for the property taxes, mortgage payments and operational expenses. All advances were reserved in full in the year they were advanced.

 

F-26
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 6 – SUBSEQUENT EVENTS

 

Subsequent to December 31, 2007 the Partnership identified and sold the Housing Complexes of Mesa Verde Apartments, L.P. (“Mesa Verde”), The North Central Limited Partnership (“The North Central”) and Blessed Rock of El Monte. A CA Limited Partnership (“Blessed Rock). The Partnership also identified and sold its Local Limited Partnership interests in Lamar Plaza Apartments, LP, D. Hilltop Apartments, Ltd., Woodland, Ltd., and Greyhound Associates I, L.P subsequent to December 31, 2007.

 

The following table reflects the dispositions that occurred subsequent to December 31, 2007

 

Local Limited Partnership  Debt at
prior 12/31
before sale
date
   Appraisal Value   Date of Sale   Sales Proceeds   Actual Sale Related Expenses   Investment balance at date of sale   Gain (loss) on sale 
                             
Mesa Verde Apartments, L.P.(*)  $1,919,353   $2,300,000    4/23/2010   $137,413   $-   $-   $137,413 
The North Central Limited Partnership (*)   313,264    640,000    3/23/2011    225,967    992    -    224,975 
Blessed Rock of El Monte, a CA Limited Partnership   2,054,000    6,910,000    4/12/2013    2,355,384    2,250    547,890    1,805,244 
Lamar Plaza Apartments, LP (*)   651,285    330,000    12/31/2010    20,000    -    -    20,000 
D. Hilltop Apartments, Ltd.   415,909    220,000    8/1/2012    20,000    3,047    -    16,953 
Woodland, Ltd   1,341,720    226,000    7/31/2013    28,001    2,500    -    25,501 
Greyhound Associates I, L.P   435,203    115,000    8/31/2013    5,000    2,600    -    2,400 
Crescent City Apartment, a California Limited Partnership   2,681,206    320,000    10/1/2013    50,000    7,334    -    42,666 

 

(*) The Compliance Periods for the Local Limited Partnerships expired after the respective date of sale. The respective purchasers have guaranteed that the Local Limited Partnerships will stay in compliance with the Low Income Housing Tax Credit code, therefore there is no risk of recapture to the investors of the Partnership.

 

F-27
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO CONDENSED FINANCIAL STATEMENTS-CONTINUED

 

For the Quarterly periods ended June 30, 2007, September 30, 2007 and

December 31, 2007

(unaudited)

 

NOTE 6 – SUBSEQUENT EVENTS, continued

 

The following table represents the use of the cash proceeds from the disposition of the Local Limited Partnerships that were disposed of subsequent to the year ended December 31, 2007:

 

Local Limited Partnership  Cash Proceeds   Reimburse GP or affiliates for expenses   Payment of accrued asset management fees   Remaining cash to remain in reserves for future expenses 
                 
Mesa Verde Apartments, L.P.  $137,413   $90,900   $-   $46,513 
The North Central Limited Partnership   225,967    36,000    88,719    101,248 
Blessed Rock of El Monte, a CA Limited Partnership   2,355,384    25,852    966,695    1,362,837 
Lamar Plaza Apartments, LP   20,000    14,000    -    6,000 
D. Hilltop Apartments, Ltd.   20,000    11,775    -    8,225 
Woodland, Ltd   28,001    23,000    -    5,001 
Greyhound Associates I, L.P   5,000    -    -    5,000 
Crescent City Apartment, a California Limited Partnership   50,000    -    21,868    28,132 

 

Subsequent to December 31, 2007, the Partnership has identified the following Local Limited Partnerships for possible disposition as listed in the table below. Once the sales are finalized, the Partnership will use the cash proceeds to reimburse the General Partner or an affiliate for expenses paid on its behalf or pay accrued asset management fees. Any remaining proceeds will be placed in the Partnership’s reserves for future operating expenses. No distributions will be made to the Limited Partners.

 

   Expected closing date  Appraisal value   Mortgage balance of Local Limited Partnership   Estimated sales price   Appraisal expense   Estimated gain on sale 
Ashford Place Limited Partnership  01/31/2014  $2,560,000   $2,612,803   $5,000   $3,000   $2,000 
Cleveland Apartments, L.P  12/31/2013   1,070,000    1,471,060    50,000    -    50,000 

 

The Compliance Period for Ashford Place Limited Partnership has expired as the date of the sales so there is no risk of tax credit recapture to the investors in the Partnership. The Compliance period for Cleveland Apartments expires December 31, 2014. The purchaser has guaranteed that the Local Limited Partnerships will stay in compliance with the Low Income Housing Tax Credit code, therefore there is no risk of recapture to the investors of the Partnership.

 

F-28
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

With the exception of the discussion regarding historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other discussions elsewhere in this Form 10-Q contain forward looking statements. Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate.

 

Risks and uncertainties inherent in forward looking statements include, but are not limited to, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credit property market and the economy in general, as well as legal proceedings. Historical results are not necessarily indicative of the operating results for any future period.

 

Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-Q and in other reports filed with the Securities and Exchange Commission.

 

The following discussion and analysis compares the results of operations for the three months ended June 30, 2007 and 2006, the three and six months ended September 30, 2007 and 2006, and the three and nine months ended December 31, 2007 and 2006, and should be read in conjunction with the combined condensed financial statements and accompanying notes included within this report.

 

Financial Condition

 

The Partnership’s assets at June 30, 2007 consisted primarily of $174,000 in cash, aggregate investments in the fourteen Local Limited Partnerships of $2,552,000, prepaid expenses of $5,000 and due from affiliates, net of $1,000. Liabilities at June 30, 2007 primarily consisted of $39,000 of payables to Local Limited Partnerships and $35,000 of accrued fees and expenses due to the General Partner and/or its affiliates.

 

The Partnership’s assets at September 30, 2007 consisted primarily of $98,000 in cash, aggregate investments in the fourteen Local Limited Partnerships of $2,353,000, prepaid expenses of $2,000 and due from affiliates, net of $1,000. Liabilities at September 30, 2007 primarily consisted of $39,000 of payables to Local Limited Partnerships and $26,000 of accrued fees and expenses due to the General Partner and/or its affiliates.

 

The Partnership’s assets at December 31, 2007 consisted primarily of $100 in cash, aggregate investments in the fourteen Local Limited Partnerships of $2,165,000 and due from affiliates, net of $1,000. Liabilities at December 31, 2007 primarily consisted of $39,000 of payables to Local Limited Partnerships and $38,000 of accrued fees and expenses due to the General Partner and/or its affiliates.

 

3
 

 

Results of Operations

 

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006. The Partnership’s net loss for the three months ended June 30, 2007 was $(2,458,000), reflecting an increase of approximately $(1,073,000) from the net loss of $(1,385,000) for the three months ended June 30, 2006. The increase in net loss was primarily due to the increase in impairment loss of $(998,000). The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership and the current estimated residual value of the investments compared to the current carrying value of each of the investments. During the three months ended June 30, 2007 there were advances of $(55,000) made to several Local Limited Partnerships which were reserved for in full as of June 30, 2007 compared to no such advances made during the three months ended June 30, 2006. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. There was an increase in equity in losses of Local Limited Partnerships of $(24,000) for the three months ended June 30, 2006. The equity in losses can vary each year depending on the operations of each of the Local Limited Partnerships. Total operating income increased by $1,000 for the three months ended June 30, 2007 compared to the three months ended June 30, 2006 due to the fact that Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

Three Months Ended September 30, 2007 Compared to the Three Months Ended September 30, 2006 The Partnership’s net loss for the three months ended September 30, 2007 was $(269,000), reflecting an increase of approximately $(69,000) from the net loss of $(200,000) for the three months ended September 30, 2006. There was an increase of equity in losses of Local Limited Partnerships of $(17,000) for the three months ended September 30, 2006. The equity in losses can vary each year depending on the operations of each of the Local Limited Partnerships. During the three months ended September 30, 2007 there were advances of $(87,000) made to several Local Limited Partnerships which were reserved for in full as of September 30, 2007 compared to $(19,000) advanced and reserved for during the three months ended September 30, 2006. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. Accounting and legal fees increased by $(4,000) for the three months ended September 30, 2007 compared to the three months ended September 30, 2006 due to the timing of accounting work performed. The amortization decreased by $10,000 for the three months ended September 30, 2007 due to the impairment of the intangible assets as of June 30, 2007, thereby reducing future amortization expenses. Reporting fees increased by $10,000 for the three months ended September 30, 2007 compared to the three months ended September 30, 2006 due to the fact that Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

Six Months Ended September 30, 2007 Compared to the Six Months Ended September 30, 2006 The Partnership’s net loss for the six months ended September 30, 2007 was $(2,727,000), reflecting an increase of approximately $(1,142,000) from the net loss of $(1,585,000) for the six months ended September 30, 2006. There was an increase in equity in losses of Local Limited Partnerships of $(42,000) for the six months ended September 30, 2006. The equity in losses can vary each year depending on the operations of each of the Local Limited Partnerships. There was an increase in impairment loss of $(998,000) for the six months ended September 30, 2007. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership and the current estimated residual value of the investments compared to the current carrying value of each of the investments. During the six months ended September 30, 2007 there were advances of $(142,000) made to several Local Limited Partnerships which were reserved for in full as of September 30, 2007 compared to $(19,000) advanced and reserved for during the six months ended September 30, 2006. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. Accounting and legal fees increased by $(5,000) for the six months ended September 30, 2007 compared to the six months ended September 30, 2006 due to the timing of accounting work performed. The amortization decreased by $11,000 for the six months ended September 30, 2007 due to the impairment of the intangible assets as of June 30, 2007, thereby reducing future amortization expenses. Total operating income increased by $12,000 for the six months ended September 30, 2007 compared to the six months ended September 30, 2006 due to the fact that Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

Three Months Ended December 31, 2007 Compared to the Three Months Ended December 31, 2006 The Partnership’s net loss for the three months ended December 31, 2007 was $(299,000), reflecting an increase of approximately $(11,000) from the net loss of $(288,000) for the three months ended December 31, 2006. There was an increase in equity in losses of Local Limited Partnerships of $(17,000) for the three months ended December 31, 2007. The equity in losses can vary each year depending on the operations of each of the Local Limited Partnerships. The amortization decreased by $10,000 for the three months ended December 31, 2007 due to the impairment of the intangible assets as of June 30, 2007, thereby reducing future amortization expenses. During the three months ended December 31, 2007 there were advances of $(94,000) made to several Local Limited Partnerships which were reserved for in full as of December 31, 2007 compared to $(91,000) advanced and reserved for during the three months ended December 31, 2006. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. Accounting and legal fees increased by $(3,000) for the three months ended December 31, 2007 compared to the three months ended December 31, 2006 due to the timing of accounting work performed.

 

4
 

 

Nine Months Ended December 31, 2007 Compared to Nine Months Ended December 31, 2006 The Partnership’s net loss for the nine months ended December 31, 2007 was $(3,026,000), reflecting an increase of approximately $(1,153,000) from the net loss of $(1,873,000) for the nine months ended December 31, 2006. There was an increase in equity in losses of Local Limited Partnerships of $(59,000) for the nine months ended December 31, 2007. The equity in losses can vary each year depending on the operations of each of the Local Limited Partnerships. Additionally, there was an increase in impairment loss of $(998,000) for the nine months ended December 31, 2007. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership and the current estimated residual value of the investments compared to the current carrying value of each of the investments. The amortization decreased by $20,000 for the nine months ended December 31, 2007 due to the impairment of the intangible assets as of June 30, 2007, thereby reducing future amortization expenses. During the nine months ended December 31, 2007 there were advances of $(236,000) made to several Local Limited Partnerships which were reserved for in full as of December 31, 2007 compared to $(110,000) advanced and reserved for during the nine months ended December 31, 2006. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. Total operating income increased by $12,000 for the nine months ended December 31, 2007 compared to the nine months ended December 31, 2006 due to the fact that Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment. Accounting and legal fees increased by $(8,000) for the nine months ended December 31, 2007 compared to the nine months ended December 31, 2006 due to the timing of accounting work performed.

 

Capital Resources and Liquidity

 

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006 Net cash used during the three months ended June 30, 2007 was $(61,000), compared to net cash used during the three months ended June 30, 2006 of $(15,000). The Partnership reimbursed the General Partner or affiliates $(13,000) during the three months ended June 30, 2007 compared to $(19,000) during the three months ended June 30, 2006 for accrued asset management fees and reimbursement of operating expenses paid on its behalf. The accrued asset management fees and reimbursements of operating expenses are paid after management reviews the cash position of the Partnership. During the three months ended June 30, 2007 the Partnership advanced $(55,000) to a Local Limited Partnership that was experiencing operational issues compared to no advances made during the three months ended June 30, 2006. Reporting fees decreased by $(2,000) for the three months ended June 30, 2007 due to the fact that Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment.

 

Six Months Ended September 30, 2007 Compared to Six Months Ended September 30, 2006 Net cash used during the six months ended September 30, 2007 was $(138,000), compared to net cash used during the six months ended September 30, 2006 of $(25,000). The increase of cash used was mainly due to the increase of $(123,000) in advances made to Local Limited Partnership during the six months ended September 30, 2007 compared to the six months ended September 30, 2006 as discussed above. The Partnership paid $(43,000) during the six months ended September 30, 2007 for accrued asset management fees and of operating expenses compared to $(44,000) paid during the three months ended September 30, 2006. The accrued asset management fees and reimbursements of operating expenses are paid after management reviews the cash position of the Partnership. Reporting fees increased by $9,000 and distributions decreased by $(3,000) for the six months ended September 30, 20007 due to the fact that Local Limited Partnerships pay reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

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Nine Months Ended December 31, 2007 Compared to Nine Months Ended December 31, 2006 Net cash used during the nine months ended December 31, 2007 was $(236,000) compared to net cash used during the nine months ended December 31, 2006 of $(126,000). During the nine months ended December 31, 2007 the Partnership paid the General Partner $(50,000) for accrued asset management fees and reimbursement of operating expenses compared to $(62,000) for the nine months ended December 31, 2006. The accrued asset management fees and reimbursements of operating expenses are paid after management reviews the cash position of the Partnership. During the nine months ended December 31, 2007, the Partnership made advances to a Local Limited Partnership of $(236,000) compared to $(110,000) advanced during the nine months ended December 31, 2006 as discussed above. No advances were repaid to the Partnership during the nine months ended December 31, 2007 compared to $8,000 repaid during the nine months ended December 31, 2006. Reporting fees increased by $9,000 and distributions decreased by $(3,000) for the nine months ended December 31, 20007 due to the fact that Local Limited Partnerships pay reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

The Partnership expects its future cash flows, together with its net available assets as of September 30 and December 31, 2007, to be insufficient to meet all currently foreseeable future cash requirements. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through November 30, 2014.

 

Recent Accounting Changes

 

In September 2006, the Financial Accounting Standards Board (“FASB”) issued accounting guidance for Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007 and shall be applied prospectively except for very limited transactions. In February 2008, the FASB delayed for one year implementation of the guidance as it pertains to certain non-financial assets and liabilities. The Partnership adopted GAAP for Fair Value Measurements effective April 1, 2008, except as it applies to those non-financial assets and liabilities, for which the effective date was April 1, 2009. The Partnership has determined that adoption of this guidance had no material impact on the Partnership’s financial statements.

 

In February 2007, the FASB issued accounting guidance for The Fair Value Option for Financial Assets and Financial Liabilities. This guidance permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value election is designed to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. It is effective for fiscal years beginning after November 15, 2007. On April 1, 2008, the Partnership adopted GAAP for The Fair Value Option for Financial Assets and Financial Liabilities and elected not to apply the provisions to its eligible financial assets and financial liabilities on the date of adoption. Accordingly, the initial application of the guidance had no effect on the Partnership.

 

In November 2008, the FASB issued accounting guidance on Equity Method Investment Accounting Considerations that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009. The impact of adopting it did not have a material impact on the Partnership’s financial condition or results of operations.

 

In April 2009, the FASB issued accounting guidance for Interim Disclosures about Fair Value of Financial Instruments. This requires disclosure about the method and significant assumptions used to establish the fair value of financial instruments for interim reporting periods as well as annual statements. It became effective for as of and for the interim period ended June 30, 2009 and had no impact on the Partnership’s financial condition or results of operations.

 

In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Partnership for the quarter ended June 30, 2009. The adoption did not have a significant impact on the subsequent events that the Partnership reports, either through recognition or disclosure, in the financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and therefore the Partnership did not include the disclosure in this Form 10-K.

 

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In June 2009, the FASB issued the Accounting Standards Codification (Codification). Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. The Codification is intended to reorganize, rather than change, existing GAAP. Accordingly, all references to currently existing GAAP have been removed and have been replaced with plain English explanations of the Partnership’s accounting policies. The adoption of the Codification did not have a material impact on the Partnership’s financial position or results of operations.

 

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs). The amended guidance modified the consolidation model to one based on control and economics, and replaced quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment was effective for fiscal years beginning after November 15, 2009. The adoption of this guidance on April 1, 2010 did not have a material effect on the Partnership’s financial statements.

 

In May 2011, the FASB issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update is effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not materially affect the Partnership’s financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risks

 

NOT APPLICABLE

 

Item 4. Controls and Procedures

 

(a)Disclosure controls and procedures

 

As of the end of the periods covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

 

7
 

 

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary to the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

 

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Chief Executive Officer and the Chief Financial Officer of Associates believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

 

(b)Changes in internal controls

 

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarters ended June 30, 2007, September 30, 2007 and December 31, 2007 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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Part II. Other Information

 

Item 1. Legal Proceedings

 

NONE

 

Item 1A. Risk Factors

 

No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

NONE

 

Item 3. Defaults Upon Senior Securities

 

NONE

 

Item 4. Mine Safety Disclosures

 

NONE

 

Item 5. Other Information

 

NONE

 

Item 6. Exhibits

 

31.1   Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
31.2   Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
32.1   Section 1350 Certification of the Chief Executive Officer. (filed herewith)
     
32.2   Section 1350 Certification of the Chief Financial Officer. (filed herewith)
     
101   Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Balance Sheets at June 30, 2007, September 30, 2007 December 31, 2007, and March 31, 2007, (ii) the Condensed Statements of Operations for the three months ended June 30, 2007 and 2006, the three and six months ended September 30, 2007 and 2006 and the three and nine months ended December 31, 2007 and 2006 (iii) the Condensed Statements of Partners Equity for the three months ended June 30, 2007, for the six months ended September 30, 2007, and for the nine months ended December 31, 2007 (iv) the Condensed Statements of Cash Flows for the three months ended June 30, 2007 and 2006, the six months ended September 30, 2007 and 2006 and the nine months ended December 31, 2007 and 2006 and (v) the Notes to Condensed Financial Statements.
     
    Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

 

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Signatures

 

Pursuant to the requirements 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 V, L.P., SERIES 4

 

By: WNC & ASSOCIATES, INC.   General Partner

 

By: /s/ Wilfred N. Cooper, Jr.  
Wilfred N. Cooper, Jr.  
President and Chief Executive Officer of WNC & Associates, Inc.
     
Date: November 4, 2013  

 

By: /s/ Melanie R. Wenk  
Melanie R. Wenk  
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
     
Date: November 4, 2013  

 

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