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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 2001
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: 0-20057
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
California 33-0391979
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section
12(b) of the Act:
NONE
Securities registered pursuant to section
12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
- ---- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
2
PART I.
Item 1. Business
Organization
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") is a
California Limited Partnership formed under the laws of the State of California
on September 27, 1993. The Partnership was formed to acquire limited partnership
interests in other limited partnerships or limited liability companies ("Local
Limited Partnerships") which own multifamily housing complexes that are eligible
for low-income housing federal and, in some cases, California income tax credits
(the"Low Income Housing Credit").
The general partner of the Partnership is WNC Tax Credit Partners IV, L.P. (the
"General Partner"). The general partner of the General Partner is WNC &
Associates, Inc. ("Associates"). Wilfred N. Cooper, Sr., through the Cooper
Revocable Trust, owns 66.8% of the outstanding stock of Associates. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of Associates.
Wilfred N. Cooper, Jr., President of Associates, owns 2.1% 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.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on October 20, 1993, in July 1994 the Partnership commenced a public
offering of 20,000 Units of Limited Partnership Interests ("Units"), at a price
of $1,000 per Unit. As of the close of the public offering in July 1995, a total
of 15,600 Units representing approximately $15,241,000 had been sold. Holders of
Limited Partnership Interests are referred to herein as" Limited Partners.
Sempra Energy Financial, a California corporation, which is not an affiliate of
the Partnership or General Partner, has purchased 4,000 Units, which represents
25.6% of the Units outstanding for the Partnership. Sempra Energy Financial
invested $3,641,000. A discount of $359,000 was allowed due to a volume
discount. See Item 12(a) in this 10-K.
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended by Supplements to the Prospectus thereto (the
"Partnership Agreement"), will be able to be accomplished promptly at the end of
the 15-year period. If a Local Limited Partnership is unable to sell its Housing
Complex, it is anticipated that the local general partner ("Local General
Partner") will either continue to operate such Housing Complex or take such
other actions as the Local General Partner believes to be in the best interest
of the Local Limited Partnership. Notwithstanding the preceding, circumstances
beyond the control of the General Partner or the Local General Partners may
occur during the Compliance Period, which would require the Partnership to
approve the disposition of a Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.
3
As of March 31, 2001, the Partnership had invested in twenty-two Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are subject to mortgage
indebtedness. If a Local Limited Partnership does not make its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member of
the Local Limited Partnerships, the Partnership will have very limited rights
with respect to management of the Local Limited Partnerships, and will rely
totally on the general partners or managing members of the Local Limited
Partnerships for management of the Local Limited Partnerships. The value of the
Partnership's investments will be subject to changes in national and local
economic conditions, including unemployment conditions, which could adversely
impact vacancy levels, rental payment defaults and operating expenses. This, in
turn, could substantially increase the risk of operating losses for the Housing
Complexes and the Partnership. In addition, each Local Limited Partnership is
subject to risks relating to environmental hazards and natural disasters, which
might be uninsurable. Because the Partnership's operations will depend on these
and other factors beyond the control of the General Partner and the Local
General Partners, there can be no assurance that the anticipated Low Income
Housing Credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the Low Income Housing Credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the Low
Income Housing Credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investment in Local Limited Partnerships the Partnership holds
limited partnership interests in Housing Complexes. The following table reflects
the status of the twenty-two Housing Complexes as of the dates and for the
periods indicated:
4
------------------------------ ---------------------------------
As of March 31, 2001 As of December 31, 2000
------------------------------ ---------------------------------
Partnership Name Location General Partner Partnership's Amount of Estimated Encumbrances
Name Total Investment Investment Low Income of Local
in Local Limited Paid to Number Housing Limited
Partnerships Date of Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East Apartment Developers
East Brewton, Ltd. Brewton, Inc. and Thomas H.
Alabama Cooksey $ 1,192,000 $ 1,192,000 40 100% $ 1,863,000 $ 1,145,000
Autumn Trace Silsbee, Olsen Securities
Associates, Ltd. Texas Corp. 412,000 412,000 58 97% 714,000 1,253,000
Broken Bow Apartments Broken Bow, Retro Development,
I, Limited Partnership Nebraska Inc. 608,000 608,000 16 88% 1,127,000 *
Candleridge Apartments Waukee, Eric A.
of Waukee L.P. II Iowa Sheldahl 125,000 125,000 23 100% 230,000 679,000
Chadwick Limited Edan, North Boyd Management, Inc.
Partnership Carolina Gordon L. Blackwell
and Regency
Investment
Associates 378,000 378,000 48 96% 735,000 1,551,000
Comanche Retirement Comanche, Max L.
Village, Ltd. Texas Rightmer 136,000 136,000 22 95% 265,000 591,000
Crossings II Limited Portage, Raymond T.
Dividend Housing Michigan Cato, Jr.
Association Limited
Partnership 432,000 432,000 114 91% 739,000 5,905,000
EW, a Wisconsin Evansville, Philip Wallis, James
Limited Partnership Wisconsin Poehlman, Cynthia
Solfest Wallis, and
Anita Poehlman 164,000 164,000 16 56% 306,000 613,000
* Results of Broken Bow Apartments I, L.P. and Sidney Apartments I, L.P.
have not been audited and thus have been excluded. See Note 2 to the financial
statements and report of certified public accountants.
5
------------------------------ ---------------------------------
As of March 31, 2001 As of December 31, 2000
------------------------------ ---------------------------------
Partnership Name Location General Partner Partnership's Amount of Estimated Encumbrances
Name Total Investment Investment Low Income of Local
in Local Limited Paid to Number Housing Limited
Partnerships Date of Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Garland Street Limited Malvarn, Conrad L. Beggs,
Partnership Arkansas Audrey D. Beggs,
Russell J. Altizer,
and Marjorie L.
Beggs 164,000 164,000 18 94% 319,000 693,000
Hereford Seniors Hereford, Winston
Community, Ltd. Texas Sullivan 167,000 167,000 28 100% 330,000 799,000
Hickory Lane Newton, Olsen Securities
Associates, Ltd Texas Corp. 174,000 174,000 24 96% 320,000 594,000
Honeysuckle Court Vidor, Olsen Securities
Associates, Ltd. Texas Corp 339,000 339,000 48 100% 622,000 1,162,000
Klimpel Manor, Ltd Fullerton, Klimpel Manor
California Apartments 1,774,000 1,774,000 59 100% 3,360,000 1,314,000
Lamesa Seniors Lamesa, Winston
Community, Ltd. Texas Sullivan 143,000 143,000 24 83% 284,000 671,000
Laredo Heights Navasota, Donald W.
Apartments Ltd. Texas Sowell 225,000 225,000 48 96% 413,000 1,101,000
Mountainview North John C. Loving
Apartments Limited Wilkesboro, and Gordon D.
Partnership North Brown, Jr.
Carolina 195,000 195,000 24 100% 387,000 994,000
Palestine Seniors Palestine, Winston
Community, Ltd. Texas Sullivan 225,000 225,000 42 100% 446,000 1,124,000
Pecan Grove Limited Forrest Conrad Beggs, Audrey
Partnership City, Beggs and Russell
Arkansas Altizer 240,000 240,000 32 94% 486,000 1,109,000
6
------------------------------ ---------------------------------
As of March 31, 2001 As of December 31, 2000
------------------------------ ---------------------------------
Partnership Name Location General Partner Partnership's Amount of Estimated Encumbrances
Name Total Investment Investment Low Income of Local
in Local Limited Paid to Number Housing Limited
Partnerships Date of Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Street Bakersfield, Philip R. Hammond,
Associates California Jr. and Walter A.
Dwelle 2,222,000 2,222,000 112 96% 4,116,000 1,862,000
Sidney Apartments I, Sidney, Retro Development,
Limited Partnership Nebraska Inc. And Most
Worshipful Prince
Hall Grand Lodge 530,000 530,000 18 100% 972,000 *
Southcove Orange Cove, Philip R. Hammond,
Associates California Jr. and Diane M.
Hammond 2,000,000 2,000,000 54 85% 3,585,000 1,527,000
Walnut Turn Buna, Olsen Securities
Associates, Ltd. Texas Corp. 188,000 188,000 24 96% 344,000 688,000
------------- ------------ ---- ------ ------------- ------------
$ 12,033,000 $ 12,033,000 892 93.77% $ 21,963,000 $ 25,375,000
============= ============ ==== ====== ============= ============
7
------------------------------------------------------------------------------------
For the year ended December 31, 2000
------------------------------------------------------------------------------------
Low Income Housing
Credits Allocated to
Partnership Name Rental Income Net Loss (Income) Partnership
- --------------------------------------------------------------------------------------------------------------------
Apartment Housing of East
Brewton, Ltd. $ 114,000 $ (89,000) 98.99%
Autumn Trace
Associates, Ltd. 209,000 (47,000) 95.00%
Broken Bow Apartments I,
Limited Partnership * * 99.00%
Candleridge Apartments of
Waukee L.P. II 129,000 (4,000) 99.00%
Chadwick Limited
Partnership 183,000 (27,000) 99.00%
Comanche Retirement Village,
Ltd. 67,000 (16,000) 99.00%
Crossings II Limited Dividend
Housing Association Limited
Partnership 648,000 (145,000) 98.99%
EW, a Wisconsin Limited
Partnership 74,000 (67,000) 99.00%
Garland Street Limited
Partnership 69,000 (30,000) 99.00%
Hereford Seniors Community,
Ltd. 96,000 - 99.00%
Hickory Lane
Associates, Ltd 75,000 (32,000) 99.00%
Honeysuckle Court
Associates,Ltd. 191,000 (47,000) 95.00%
Klimpel Manor, Ltd 374,000 (55,000) 96.00%
Lamesa Seniors
Community, Ltd. 103,000 (26,000) 99.00%
Laredo Heights
Apartments Ltd. 167,000 6,000 99.00%
Mountainview Apartments
Limited Partnership 96,000 (18,000) 99.00%
Palestine Seniors
Community,Ltd. 148,000 11,000 99.00%
Pecan Grove
Limited Partnership 123,000 (58,000) 99.00%
8
------------------------------------------------------------------------------------
For the year ended December 31, 2000
------------------------------------------------------------------------------------
Low Income Housing
Credits Allocated to
Partnership Name Rental Income Net Loss (Income) Partnership
- --------------------------------------------------------------------------------------------------------------------
Pioneer Street Associates 491,000 (80,000) 99.00%
Sidney Apartments I, Limited
Partnership * * 99.00%
Southcove Associates 226,000 (103,000) 99.00%
Walnut Turn Associates, Ltd. 92,000 (32,000) 99.00%
---------- ----------
$3,675,000 $ 859,000
========== ==========
* Results of Broken Bow Apartments I, L.P. and Sidney Apartments I, L.P. have not been audited and thus have
been excluded. See Note 2 to the financial statements and report of certified public accountants.
9
Item 3. Legal Proceedings
During 2000, Associates identified a potential problem with a developer who, at
the time, was the local general partner in six Local Limited Partnerships. The
Partnership has a 99% limited partnership interest in two of those six Local
Limited Partnerships. Those investments are Broken Bow Apartments I, Limited
Partnership and Sidney Apartments I, Limited Partnership. All of the properties
continue to experience operating deficits. The local general partner ceased
funding the operating deficits, which placed the Local Limited Partnerships in
jeopardy of foreclosure. Consequently, Associates voted to remove the local
general partner and the management company from the Local Limited Partnerships.
After the local general partner contested its removal, Associates commenced
legal action on behalf of the Local Limited Partnerships and was successful in
getting a receiver appointed to manage the Local Limited Partnerships and an
unaffiliated entity appointed as property manager. Associates was subsequently
successful in attaining a summary judgment to confirm the removal of the local
general partner, the receiver was discharged and Associates now controls all six
of the Local Limited Partnerships.
The six Local Limited Partnerships (hereinafter referred to as "Defendants")
were defendants in a separate lawsuit. The lawsuit was filed by eight other
partnerships in which the local general partner of the Local Limited
Partnerships is or was involved (the "Plaintiffs"). The Plaintiffs allege that
the local general partner accepted funds from the Plaintiffs and improperly
loaned these funds to the Defendants. In July 2001, a tentative settlement as
yet not executed was reached with respect to this lawsuit for an aggregate
amount of $35,000 of which the Partnership's share is approximately $11,700.
Item 4. Submission of Matters to a Vote of Security Holders
NONE.
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At March 31, 2001, there were 849 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during the year
ended March 31, 2001.
Item 5b.
NOT APPLICABLE
10
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31 December 31
--------------------------------------- ------------------------------------
2001 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
ASSETS
Cash and cash
equivalents $ 84,147 $ 180,133 $ 552,348 $ 738,364 $ 1,480,862 $ 2,371,389
Investments in
limited
partnerships, net 7,432,933 8,311,454 10,092,782 10,274,595 9,738,583 10,096,100
Due from affiliate - - - - - 53,200
Loans receivable - - - - 259,496 -
Other assets 998 998 998 2,534 20,245 10,956
----------- ----------- ----------- ----------- ----------- -----------
$ 7,518,078 $ 8,492,585 $ 10,646,128 $ 11,015,493 $ 11,499,186 $ 12,531,645
=========== =========== =========== =========== =========== ===========
LIABILITIES
Payables to limited
partnerships $ - $ - $ 421,025 $ 605,517 $ 411,543 $ 666,716
Accrued expenses 48,569 86,965 - - - -
Accrued fees and
expenses
due to general
partner
and affiliates 107,278 72,598 29,722 28,066 1,137 9,339
PARTNERS' EQUITY 7,362,231 8,333,022 10,195,381 10,381,910 11,086,506 11,855,590
----------- ----------- ----------- ----------- ----------- -----------
$ 7,518,078 $ 8,492,585 $ 10,646,128 $ 11,015,493 $ 11,499,186 $ 12,531,645
=========== =========== =========== =========== =========== ===========
Selected results of operations, cash flows and other information for the Partnership are as follows:
For the Years Ended For the Three Months For the Years Ended
March 31 Ended March 31 December 31
------------------------ ------------------------ -------------------------------------
2001 2000 1999 1998 1998 1997 1996
----------- ----------- ----------- ---------- ---------- ---------- -----------
(Unaudited)
Income (loss) from
operations (Note 1) $ (139,153)$ (870,197)$ (21,846)$ (1,492)$ (50,484)$ (31,969)$ 55,374
Equity in losses of
limited
partnerships (831,638) (992,162) (164,683) (191,552) (658,728) (737,115) (628,631)
----------- ----------- ----------- ---------- ---------- ---------- -----------
Net loss $ (970,791)$ (1,862,359)$ (186,529)$ (193,044)$ (709,212)$ (769,084)$ (573,257)
=========== =========== =========== ========== ========== ========== ===========
Net loss allocated to:
General partner $ (9,708)$ (18,624)$ (1,865)$ (1,930)$ (7,092)$ (7,691)$ (5,733)
=========== =========== =========== ========== ========== ========== ===========
Limited partners $ (961,083)$ (1,843,735)$ (184,664)$ (191,114)$ (702,120)$ (761,393)$ (567,524)
=========== =========== =========== ========== ========== ========== ===========
Net loss per limited
partner unit $ (61.61)$ (118.19)$ (11.84)$ (12.25)$ (45.01)$ (48.81)$ (36.38)
============ ============ ============ ============ ============ =========== ============
Outstanding weighted
limited partner
units 15,600 15,600 15,600 15,600 15,600 15,600 15,600
=========== =========== =========== ========== ========== ========== ===========
Note 1 - Loss from operations in 2000 includes a charge for impairment losses on investments in limited
partnerships of $766,559. (See Note 2 to the audited financial statements.)
11
For the Years Ended For the Three Months For the Years Ended
March 31 Ended March 31 December 31
------------------------ ------------------------ -------------------------------------
2001 2000 1999 1998 1998 1997 1996
----------- ----------- ----------- ---------- ---------- ---------- -----------
(Unaudited)
Net cash provided by
(used in):
Operating activities $ (101,935) $ (19,827) $ (8,424) $ 12,245 $ 26,255 $ 52,765 $ 60,895
Investing activities 5,949 (352,388) (177,592) (109,910) (768,753) (935,090) (2,837,890)
Financing activities - - - - - (8,202) (137,346)
----------- ----------- ----------- ---------- ---------- ---------- -----------
Net change in cash and
cash equivalents (95,986) (372,215) (186,016) (97,665) (742,498) (890,527) (2,914,341)
Cash and cash
equivalents,
beginning of period 180,133 552,348 738,364 1,480,862 1,480,862 2,371,389 5,285,730
----------- ----------- ----------- ---------- ---------- ---------- -----------
Cash and cash
equivalents,
end of period $ 84,147 $ 180,133 $ 552,348 $ 1,383,197 $ 738,364 $ 1,480,862 $ 2,371,389
=========== =========== =========== ========== ========== ========== ===========
Low Income Housing Credit per Unit was as follows for the years ended
December 31:
2000 1999 1998 1997 1996
--------------- --------------- ---------------- --------------- ---------------
Federal $ 141 $ 135 $ 124 $ 113 $ 105
State
- - - - -
--------------- --------------- ---------------- --------------- ---------------
Total $ 141 $ 135 $ 124 $ 113 $ 105
=============== =============== ================ =============== ===============
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
With the exception of the discussion regarding historical information,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other discussions elsewhere in this Form 10-K 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, our 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 us or
persons acting on our behalf are expressly qualified in their entirety by
cautionary statements in this Form 10-K and in other reports we filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Financial Statements and the Notes thereto included
elsewhere in this filing.
12
Uncertainty with Respect to Investment in Broken Bow and Sidney
The Partnership has two investments accounted for under the equity method,
consisting of 99% limited partnership interests in each of Broken Bow Apartments
I, Limited Partnership ("Broken Bow"), and Sidney Apartments I, Limited
Partnership ("Sidney").
The independent auditors engaged to perform an audit of Broken Bow and Sidney's'
financial statements as of and for the year ended December 31, 1999, were unable
to form an opinion on those financial statements. This was due to the inability
to obtain from the former local general partner certain general ledger
information for a period of approximately three months and reliable
confirmations of advances to/notes receivable from the former local general
partner. Further, the independent auditors were unable to obtain management
representation letters from the former property management company, which is an
affiliate of the former local general partner. As of July 9, 2001, the
Partnership had not obtained audited financial statements for Broken Bow and
Sidney as of and for the year ended December 31, 2000. As a result, the
Partnership has not included the financial information of Broken Bow and Sidney
in the combined condensed financial statements presented in Note 3 to the
financial statements. The combined condensed financial information presented in
Note 3 for the prior periods has been restated to exclude the accounts of Broken
Bow and Sidney. The Partnership has reflected equity in the net losses of Broken
Bow and Sidney totaling ($156,823) ($(10.05) per limited partnership unit) for
the year ended March 31, 2000, based on nine months of reported results provided
by Broken Bow and Sidney and on three months of results estimated by Associates.
Such estimates may be materially misstated due to the lack of corroborative
financial information. During the year ended March 31, 2000, the Partnership
advanced $120,906 in cash to Broken Bow and Sidney for operating expenses,
including legal fees relating to certain litigation involving these and other
properties as outlined in Note 7.
As a result of the foregoing, in 2000, management performed an evaluation of the
Partnership's remaining investment balances in Broken Bow and Sidney including
the cash advances noted above and other anticipated costs and determined that an
impairment adjustment was necessary. An impairment loss of $766,559 was
recognized at March 31, 2000. This impairment loss included $558,688 in
remaining book value of the Partnership's investments in Broken Bow and Sidney,
$120,906 and $30,753 of cash advances, pre and post year end, $37,670 accrual
for anticipated legal costs, and $18,542 of estimated accounting and other
related costs.
During 2001, Broken Bow and Sidney continued to experience negative cash flows
from operations. All mortgages were suspended under a written agreement with the
lender which expired in May 2001 and no payments have been made since August
2000.
WNC is currently attempting to sell the Broken Bow and Sidney properties. WNC
may not be successful in its efforts to sell and the lender may foreclose on the
properties as the loans are now in default.
As a result of the aforementioned operating difficulties, there is uncertainty
as to whether the Partnership will ultimately retain its interests in Broken Bow
and Sidney. If the investments are sold or otherwise not retained, the
Partnership could be subject to recapture of tax credits and certain prior tax
deductions. There is further uncertainty as to costs that the partnership may
ultimately incur in connection with its investments in Broken Bow and Sidney.
The Partnership's financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Financial Condition
The Partnership's assets at March 31, 2001 consisted primarily of $84,000 in
cash and aggregate investments in the twenty-two Local Limited Partnerships of
$7,433,000. Liabilities at March 31, 2001 primarily consisted of $49,000 of
accrued expenses and $107,000 due to General Partner or affiliates for advances.
Results of Operations
Year Ended March 31, 2001 Compared to Year Ended March 31, 2000 The Partnerships
net loss for the year ended March 31, 2001 was $(971,000), reflecting a decrease
of $(891,000) from the net loss experienced for the year ended March 31, 2000 of
$(1,862,000). The decline in net loss is due to the impairment loss recorded
during 2000 in connection with two of the limited partnership investments
totaling $767,000, a reduction in the equity in
13
losses of limited partnerships which decreased by $160,000 due largely to the
impairment loss recorded in 2000, offset by a reduction in income of $8,000 and
an increase in other operating expenses fees of $27,000.
Year Ended March 31, 2000 Compared to Year Ended December 31, 1998. The
Partnerships net loss for the year ended March 31, 2000 was $(1,862,000),
reflecting an increase of $(1,153,000) from the net loss experienced for the
year ended December 31, 1998 of $(709,000). The increase in net loss is due to
the impairment loss recorded in connection with two of the limited partnership
investments totaling $(767,000), a reduction in income of $(29,000) and an
increase in the equity in losses of limited partnerships of $(333,000).
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
The Partnership's net loss for the three months ended March 31, 1999 was
$187,000 reflecting a decrease of $6,000 from the net loss experienced for the
three months ended March 31, 1998. The decline in net loss is primarily due to
equity in losses of limited partnerships which declined by $27,000 to $(165,000)
for the three months ended March 31, 1999 from $(192,000) for the three months
ended March 31, 1998. The reduction in equity losses recognized was partially
offset by an increase in loss from operations of $21,000 to $(22,000) for the
three months ended March 31, 1999 from $(1,000) for the three months ended March
31, 1998, due to a comparable increase in operating expense allocations and a
decrease in interest income.
Cash Flows
Year Ended March 31, 2001 Compared to Year Ended March 31, 2000 Net decrease in
cash for the year ended March 31, 2001 was $(96,000) compared to a net decrease
in cash for the year ended March 31, 2000 of $(372,000). The change of $276,000
was due primarily to a decrease in cash paid for investments in limited
partnerships of $251,000, a decrease of $121,000 in cash advances to limited
partnerships, offset by an increase of $47,000 of fees paid to General Partner,
a net decrease of $28,000 in distributions from limited partnerships and a
decrease in income of $8,000.
Year Ended March 31, 2000 Compared to Year Ended December 31, 1998. Net decrease
in cash for the year ended March 31, 2000 was $(372,000) compared to a net
decrease in cash for the year ended December 31, 1998 of $(742,000). The change
was due primarily to a decrease in investments in limited partnerships of
$787,000 offset by an increase of $(121,000) in cash advances paid to limited
partnerships and a decrease in loans collected from limited partnerships of
$(259,000).
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
Net cash used during the three months ended March 31, 1999 was $(186,000),
compared to net cash used during the three months ended March 31, 1998 of
$(98,000). The change was due primarily to an increase in investments in limited
partnerships of $72,000 and an increase in cash used for operating activities of
$20,000, partially offset by an increase in distributions from limited
partnerships of $4,000.
During the year ended March 31, 2001 and 2000 and the three months ended March
31, 1999 accrued payables, which consist partly of related party management fees
due to the General Partner, decreased by $4,000 and increased by $130,000 and
$2,000, respectively. The General Partner does not anticipate that these accrued
management fees will be paid in full until such time as capital reserves are in
excess of future foreseeable working capital requirements of the Partnership.
The Partnership currently has insufficient working capital to fund its
operations. WNC and Associates, Inc., the general partner of the Partnership,
has agreed to continue providing advances sufficient enough to fund the
operations and working capital requirements of the Partnership through at least
April 1, 2002.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
14
Report of Independent Certified Public Accountants
To the Partners
WNC Housing Tax Credit Fund IV, L.P., Series 2
We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund
IV, L.P., Series 2 (a California Limited Partnership) (the "Partnership") as of
March 31, 2001 and 2000, and the related statements of operations, partners'
equity (deficit) and cash flows for the years ended March 31, 2001 and 2000, the
three months ended March 31, 1999 and the year ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. A significant portion of the financial statements of the limited
partnerships in which the Partnership is a limited partner were audited by other
auditors whose reports have been furnished to us. As discussed in Note 3 to the
financial statements, the Partnership accounts for its investments in limited
partnerships using the equity method. The portion of the Partnership's
investments in limited partnerships audited by other auditors represented 81%
and 81% of the total assets of the Partnership at March 31, 2001 and 2000,
respectively. Our opinion, insofar as it relates to the amounts included in the
financial statements for the limited partnerships which were audited by others,
is based solely on the reports of the other auditors.
Except as discussed in the following paragraph, we conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
As more thoroughly discussed in Note 2 to the financial statements, the
independent auditors engaged to perform the audits of the financial statements
as of and for the year ended December 31, 1999 for Broken Bow Apartments I,
Limited Partnership ("Broken Bow") and Sidney Apartments I, Limited Partnership
("Sidney"), were unable to express an opinion on those financial statements. In
addition, the Partnership did not obtain audited financial statements for Broken
Bow and Sidney as of and for the year ended December 31, 2000. The Partnership's
investments in Broken Bow and Sidney have been fully impaired at March 31, 2000.
In our opinion, except for the effects of such adjustments and disclosures, if
any, as might have been determined to be necessary had the 2000 and 1999
financial statements of Broken Bow and Sidney been audited, the financial
statements referred to above present fairly, in all material respects, the
financial position of WNC Housing Tax Credit Fund IV, L.P., Series 2 (a
California Limited Partnership) as of March 31, 2001 and 2000, and the results
of its operations and its cash flows for the years ended March 31, 2001 and
2000, the three months ended March 31, 1999 and the year ended December 31,
1998, in conformity with accounting principles generally accepted in the United
States of America.
/s/BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
July 9, 2001
15
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
BALANCE SHEETS
March 31
-------------------------------
2001 2000
-------------- --------------
ASSETS
Cash and cash equivalents $ 84,147 $ 180,133
Investments in limited partnerships,
net (Notes 2, 3 and 4) 7,432,933 8,311,454
Other assets 998 998
-------------- --------------
$ 7,518,078 $ 8,492,585
============== ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accrued expenses (Note 2) $ 48,569 $ 86,965
Accrued fees and expenses due to General
Partner and affiliates (Note 4) 107,278 72,598
-------------- --------------
Total liabilities 155,847 159,563
-------------- --------------
Commitments and contingencies (Note 7)
Partners' equity (deficit):
General partner (78,690) (68,982)
Limited partners (20,000 units authorized;
15,600 units issued and outstanding) 7,440,921 8,402,004
-------------- --------------
Total partners' equity 7,362,231 8,333,022
-------------- --------------
$ 7,518,078 $ 8,492,585
============== ==============
See report of independent certified public accountants and accompanying notes to financial statements.
16
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the
Three
Months For the Year
For the Years Ended Ended Ended
March 31 March 31 December 31
---------------------------- ------------ ---------------
2001 2000 1999 1998
------------ ------------- ------------ ---------------
Interest income $ 7,274 $ 14,374 $ 6,850 $ 47,017
Other income 2,950 4,000 - -
------------ ------------- ------------ ---------------
Total income 10,224 18,374 6,850 47,017
------------ ------------- ------------ ---------------
Operating expenses:
Amortization (Notes 3 and 4) 40,934 40,935 10,230 32,099
Asset management fees (Note 4) 44,000 42,900 10,725 42,900
Other 64,443 38,177 7,741 22,502
Impairment on investments in limited
partnerships (Notes 2 and 3) - 766,559 - -
------------ ------------- ------------ ---------------
Total operating expenses 149,377 888,571 28,696 97,501
------------ ------------- ------------ ---------------
Loss from operations (139,153) (870,197) (21,846) (50,484)
Equity in losses of limited
partnerships (Note 3) (831,638) (992,162) (164,683) (658,728)
------------ ------------- ------------ ---------------
Net loss $ (970,791) $ (1,862,359) $ (186,529)$ (709,212)
============ ============= ============ ===============
Net loss allocated to:
General partner $ (9,708) $ (18,624) $ (1,865)$ (7,092)
============ ============= ============ ===============
Limited partners $ (961,083) $ (1,843,735) $ (184,664)$ (702,120)
============ ============= ============ ===============
Net loss per limited partner unit $ (61.61) $ (118.19) $ (11.84)$ (45.01)
============ ============= ============ ===============
Outstanding weighted limited partner
units 15,600 15,600 15,600 15,600
============ ============= ============ ===============
See report of independent certified public accountants and accompanying notes to financial statements.
17
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
General Limited
Partner Partners Total
---------------- ---------------- ---------------
Partners' equity (deficit) at January 1, 1998 $ (41,447) $ 11,127,953 $ 11,086,506
Offering costs 46 4,570 4,616
Net loss (7,092) (702,120) (709,212)
---------------- --------------- --------------
Partners' equity (deficit) at December 31, 1998 (48,493) 10,430,403 10,381,910
Net loss (1,865) (184,664) (186,529)
---------------- --------------- --------------
Partners' equity (deficit) at March 31, 1999 (50,358) 10,245,739 10,195,381
Net loss (18,624) (1,843,735) (1,862,359)
---------------- --------------- --------------
Partners' equity (deficit) at March 31, 2000 (68,982) 8,402,004 8,333,022
Net loss (9,708) (961,083) (970,791)
---------------- --------------- --------------
Partners' equity (deficit) at March 31, 2001 $ (78,690) $ 7,440,921 $ 7,362,231
================ =============== ==============
See report of independent certified public accountants and accompanying notes to financial statements.
18
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the
Three
Months For the Year
For the Years Ended Ended Ended
March 31 March 31 December 31
---------------------------- ------------ ---------------
2001 2000 1999 1998
------------ ------------- ------------ ---------------
Cash flows from operating
activities:
Net loss $ (970,791) $ (1,862,359) $ (186,529) $ (709,212)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Amortization 40,934 40,935 10,230 32,099
Impairment loss on investments in limited
partnerships - 766,559 - -
Equity in losses of limited
partnerships 831,638 992,162 164,683 658,728
Change in other assets - - 1,536 17,711
Change in accrued expenses (38,396) - - -
Change in accrued fees and expenses
due to General Partner and affiliates (34,680) 42,876 1,656 26,929
------------- ------------ ------------ ---------------
Net cash (used in) provided by
operating activities (101,935) (19,827) (8,424) 26,255
------------- ------------ ------------ ---------------
Cash flows from investing
activities:
Investments in limited
partnerships, net - (251,149) (184,492) (1,037,700)
Capitalized acquisition costs and
fees - - - (465)
Distributions from limited
partnerships 5,949 19,667 6,900 5,300
Loans receivable - - - 259,496
Offering expenses - - - 4,616
Cash advances to limited partnerships - (120,906) - -
------------- ------------ ------------ ---------------
Net cash used in investing
activities 5,949 (352,388) (177,592) (768,753)
------------- ------------ ------------ ---------------
Net decrease in cash and cash
equivalents (95,986) (372,215) (186,016) (742,498)
Cash and cash equivalents,
beginning of period 180,133 552,348 738,364 1,480,862
------------- ------------ ------------ ---------------
Cash and cash equivalents, end of
period $ 84,147 $ 180,133 $ 552,348 $ 738,364
============= ============ ============ ===============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ - $ 800
============= ============ ============ ===============
See report of independent certified public accountants and accompanying notes to financial statements.
19
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") was formed on
September 27, 1993 under the laws of the state of California and commenced
operations on July 18, 1994. The Partnership was formed to invest primarily in
other limited partnerships (the "Local Limited Partnerships") which own and
operate multi-family housing complexes (the "Housing Complex") that are eligible
for low income housing credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner is WNC Tax Credit Partners, IV, L.P. (the "General
Partner"), a California limited partnership. WNC & Associates, Inc. ("WNC") is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of WNC. Wilfred
N. Cooper, Jr., President of WNC, owns 2.1% of the outstanding stock of WNC.
The Partnership shall continue in full force and effect until December 31, 2050
unless terminated prior to that date pursuant to the partnership agreement .
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership Agreement authorized the sale of 20,000 units at $1,000 per unit
("Units"). The offering of Units concluded in July 1995 at which time 15,600
Units representing subscriptions, net of discounts for volume purchases of more
than 100 units, in the amount of $15,241,000 had been accepted. The General
Partner has a 1% interest in operating profits and losses, taxable income and
losses, cash available for distribution from the Partnership and tax credits.
The limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received proceeds from sale or refinancing equal
to their capital contributions and their return on investment (as defined in the
Partnership Agreement) and the General Partner has received proceeds equal to
its capital contributions and a subordinated disposition fee (as described in
Note 4) from the remainder, any additional sale or refinancing proceeds will be
distributed 90% to the limited partners (in proportion to their respective
investments) and 10% to the General Partner.
Change in Reporting Year End
- ----------------------------
In 1999, the Partnership elected to change its year end for financial reporting
purposes from December 31 to March 31. All financial information reflected in
the financial statements and related footnotes has been adjusted for this change
in year end except for the combined condensed financial information relating to
the Local Limited Partnerships included in Note 3.
20
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Risks and Uncertainties
- -----------------------
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not make its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting For Investments in Limited Partnerships
- ------------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (see Note 3).
Losses from Local Limited Partnerships for the year ended December 31, 1998 have
been recorded by the Partnership based on reported results provided by the Local
Limited Partnerships. Losses from Local Limited Partnerships for the three
months ended March 31, 1999 have been estimated by management of the
Partnership. Losses from Local Limited Partnerships for the years ended March
31, 2001 and 2000 have been recorded by the Partnership based on nine months of
reported results provided by the Local Limited Partnerships and on three months
of results estimated by management of the Partnership. Losses from the limited
partnerships allocated to the Partnership will not be recognized to the extent
that the investment balance would be adjusted below zero.
21
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital and amounted to $970,717 as of March 31, 2001,
2000 and 1999 and December 31, 1998.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
- -------------------------
The Partnership considers highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. As of March 31, 2001 and
2000, the Partnership had no cash equivalents.
Net Loss Per Limited Partner Unit
- ---------------------------------
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
Reporting Comprehensive Income
- ------------------------------
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of Partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the periods
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
NOTE 2 - UNCERTAINTY WITH RESPECT TO INVESTMENTS IN BROKEN BOW AND SIDNEY:
- --------------------------------------------------------------------------
IMPAIRMENT OF INVESTMENTS
-------------------------
The Partnership has two investments accounted for under the equity method,
consisting of 99% limited partnership interests in each of Broken Bow Apartments
I, Limited Partnership ("Broken Bow"), and Sidney Apartments I, Limited
Partnership ("Sidney").
22
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 2 - UNCERTAINTY WITH RESPECT TO INVESTMENTS IN BROKEN BOW AND SIDNEY:
- --------------------------------------------------------------------------
IMPAIRMENT OF INVESTMENTS, continued ------------------------------------ The
independent auditors engaged to perform an audit of Broken Bow and Sidney's'
financial statements as of and for the year ended December 31, 1999, were unable
to form an opinion on those financial statements. This was due to the inability
to obtain from the former local general partner certain general ledger
information for a period of approximately three months and reliable
confirmations of advances to/notes receivable from the former local general
partner. Further, the independent auditors were unable to obtain management
representation letters from the former property management company, which is an
affiliate of the former local general partner. As of July 9, 2001, the
Partnership had not obtained audited financial statements for Broken Bow and
Sidney as of and for the year ended December 31, 2000. As a result, the
Partnership has not included the financial information of Broken Bow and Sidney
in the combined condensed financial statements presented in Note 3 to the
financial statements. The combined condensed financial information presented in
Note 3 for the prior periods has been restated to exclude the accounts of Broken
Bow and Sidney. The Partnership has reflected equity in the net losses of Broken
Bow and Sidney totaling ($156,823) ($(10.05) per limited partnership unit) for
the year ended March 31, 2000, based on nine months of reported results provided
by Broken Bow and Sidney and on three months of results estimated by Associates.
Such estimates may be materially misstated due to the lack of corroborative
financial information. During the year ended March 31, 2000, the Partnership
advanced $120,906 in cash to Broken Bow and Sidney for operating expenses,
including legal fees relating to certain litigation involving these and other
properties as outlined in Note 7.
As a result of the foregoing, in 2000, management performed an evaluation of the
Partnership's remaining investment balances in Broken Bow and Sidney including
the cash advances noted above and other anticipated costs and determined that an
impairment adjustment was necessary. An impairment loss of $766,559 was
recognized at March 31, 2000. This impairment loss included $558,688 in
remaining book value of the Partnership's investments in Broken Bow and Sidney,
$120,906 and $30,753 of cash advances, pre and post year end, a $37,670 accrual
for anticipated legal costs, and $18,542 of estimated accounting and other
related costs.
During 2001, Broken Bow and Sidney continued to experience negative cash flows
from operations. All mortgages were suspended under a written agreement with the
lender which expired in May 2001 and no payments have been made since August
2000.
WNC is currently attempting to sell the Broken Bow and Sidney properties. WNC
may not be successful in its efforts to sell and the lender may foreclose on the
properties as the loans are now in default.
As a result of the aforementioned operating difficulties, there is uncertainty
as to whether the Partnership will ultimately retain its interests in Broken Bow
and Sidney. If the investments are sold or otherwise not retained, the
Partnership could be subject to recapture of tax credits and certain prior tax
deductions. There is further uncertainty as to costs that the partnership may
ultimately incur in connection with its investments in Broken Bow and Sidney.
The Partnership's financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of the periods presented, the Partnership had acquired limited partnership
interests in twenty-two Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 892 apartment units. As of March
31, 1999, construction or rehabilitation of all of the apartment complexes had
been completed. The respective general partners of the Local Limited
Partnerships manage the day-to-day operations of the entities. Significant Local
Limited Partnership business decisions require approval from the Partnership.
The Partnership, as a limited partner, is entitled to 96% to 99%, as specified
in the partnership agreements, of the operating profits and losses, taxable
income and losses and tax credits of the Limited Partnerships.
23
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
The Partnership's investments in Local Limited Partnerships as shown in the
balance sheets at March 31, 2001 and 2000 are approximately $914,000 and
$876,000, respectively, greater than the Partnership's equity at the preceding
December 31 as shown in the Local Limited Partnerships' combined financial
statements presented below. This difference is primarily due to unrecorded
losses, as discussed below, acquisition, selection and other costs related to
the acquisition of the investments which have been capitalized in the
Partnership's investment account and to capital contributions payable to the
limited partnerships which were netted against partner capital in the Local
Limited Partnership's financial statements. The Partnership's investment is also
lower than the Partnership's equity as shown in the Local Limited Partnership's
combined financial statements due to the losses recorded by the Partnership for
the three month period ended March 31. Lastly the difference is due to the
exclusion of the financial statements of Sidney and Broken Bow from the combined
condensed financial information presented below. See Note 2 for discussion.
Equity in losses of Local Limited Partnerships is recognized in the financial
statements until the related investment account is reduced to a zero balance.
Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income. At March 31, 2000, the investment account in one
of the Local Limited Partnerships had reached a zero balance. Consequently a
portion of the Partnership's estimate of its share of losses for the year ended
March 31, 2001 and 2000 amounting to approximately $36,000 and $9,000 has not
been recognized by the Partnership as of March 31, 2001 and 2000.
Following is a summary of the equity method activity of the investments in
limited partnerships for the periods presented:
For the Three For the Year
For the Years Ended Months Ended Ended
March 31 March 31 December 31
----------------------------- --------------- ---------------
2001 2000 1999 1998
------------ -------------- --------------- ---------------
Investments per balance sheet, beginning of year $ 8,311,454 $ 10,092,782 $ 10,274,595 $ 9,738,583
Tax credit adjustment (62,593) - (23,291)
Capital contributions to limited partnerships,
net - - - 827,482
Capital contributions to be paid - - - 427,483
Impairment loss on investments in limited
partnerships (Note 2) - (766,559) - -
Capital contributions payable to Sidney and
Broken Bow offset to book value - (107,283) - -
Accrued expense (Note 2) - 86,965 - -
Cash advances (Note 2) - 120,906 - -
Capitalized acquisition fees and costs - - - 465
Distributions received (5,949) (19,667) (6,900) (5,300)
Equity in losses of limited partnerships (831,638) (992,162) (164,683) (658,728)
Amortization of capitalized acquisition fees and
costs (40,934) (40,935) (10,230) (32,099)
------------ -------------- --------------- ---------------
Investments per balance sheet, end of period $ 7,432,933 $ 8,311,454 $ 10,092,782 $ 10,274,595
============ ============== =============== ===============
24
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
The financial information from the individual financial statements of the Local
Limited Partnerships includes rental and interest subsidies. Rental subsidies
are included in total revenues and interest subsidies are generally netted
against interest expense. Approximate combined condensed financial information
from the individual financial statements of the Local Limited Partnerships as of
December 31 and for the years then ended is as follows (Combined condensed
financial information for Broken Bow and Sidney have been excluded from the
presentation below. See Note 2 for further discussion):
COMBINED CONDENSED BALANCE SHEETS
2000 1999
--------------- ---------------
ASSETS
Land $ 1,556,000 $ 1,557,000
Buildings, net of accumulated amortization of $6,718,000 and $5,428,000
for 2000 and 1999, respectively 30,656,000 31,791,000
Due from affiliates 3,000 1,000
Other assets 2,221,000 2,194,000
--------------- ---------------
$ 34,436,000 $ 35,543,000
=============== ===============
LIABILITIES
Mortgage and construction loans payable $ 25,375,000 $ 26,091,000
Other liabilities (including due to related parties of $1,011,000 and
$437,000 as of December 31, 2000 and 1999, respectively) 1,652,000 1,003,000
--------------- ---------------
27,027,000 27,094,000
--------------- ---------------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund IV, L.P., Series 2 6,519,000 7,435,000
Other partners 890,000 1,014,000
--------------- ---------------
7,409,000 8,449,000
--------------- ---------------
$ 34,436,000 $ 35,543,000
=============== ===============
25
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2000 1999 1998
(Restated)
--------------- --------------- ---------------
Revenues $ 3,832,000 $ 3,768,000 $ 3,750,000
--------------- --------------- ---------------
Expenses:
Operating expenses 2,268,000 2,165,000 1,965,000
Interest expense 1,134,000 1,154,000 1,131,000
Depreciation and amortization 1,289,000 1,238,000 1,162,000
--------------- --------------- ---------------
Total expenses 4,691,000 4,557 ,000 4,258,000
--------------- --------------- ---------------
Net loss $ (859,000) $ (789,000) $ (508,000)
=============== =============== ===============
Net loss allocable to the Partnership, before equity
in losses of Broken Bow and Sidney $ (849,000) $ (778,000) $ (501,000)
=============== =============== ===============
Net loss recorded by the Partnership, before equity in
losses of Broken Bow and Sidney $ (832,000) $ (835,000) $ (501,000)
Net loss of Broken Bow allocable to the Partnership - (109,000) (42,000)
Net loss of Sidney allocable to the Partnership - (48,000) (116,000)
--------------- --------------- ---------------
Net loss recorded by the Partnership $ (832,000) $ (992,000) $ (659,000)
=============== =============== ===============
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partner may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
impaired, and the loss and recapture of the related tax credits could occur.
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of the Partnership Agreement, the Partnership is obligated to
the General Partner or its affiliates for the following items:
Acquisition fees of up to 8% of the gross proceeds from the sale of Units
as compensation for services rendered in connection with the acquisition of
Local Limited Partnerships. At the end of all periods presented, the
Partnership incurred acquisition fees of $1,058,950. Accumulated
amortization of these capitalized costs was $269,703 and $166,925 as of
March 31, 2001 and 2000, respectively. Of the accumulated amortization
recorded on the balance sheet at March 31, 2001 $67,480 of the related
expense was reflected as equity in losses of limited partnerships on the
statement of operations during the fourth quarter of the year ended March
31, 2001 to reduce the respective net acquisition fee component of
investments in local limited partnerships to zero for those Local Limited
Partnerships which would otherwise be below a zero balance.
26
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 4 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
Reimbursement of costs incurred by the General Partner in connection with
the acquisition of Local Limited Partnerships. These reimbursements have
not exceeded 1.2% of the gross proceeds. The Partnership incurred
acquisition costs of $169,103, at the end of all periods presented, which
have been included in investments in limited partnerships. Accumulated
amortization was $46,011 and $25,117, as of March 31, 2001 and 2000,
respectively. Of the accumulated amortization recorded on the balance sheet
at March 31, 2001, $15,258 of the related expense was reflected as equity
in losses of limited partnerships on the statement of operations during the
fourth quarter of the year ended March 31, 2001 to reduce the respective
net acquisition cost component of investments in local limited partnerships
to zero for those Local Limited Partnerships which would otherwise be below
a zero balance.
An annual asset management fee equal to the greater amount of (i) $2,000
for each apartment complex, or (ii) 0.275% of gross proceeds. In either
case, the fee will be decreased or increased annually based on changes to
the Consumer Price Index. However, in no event will the maximum amount
exceed 0.2% of the invested assets of the Local Limited Partnerships,
including the Partnership's allocable share of the mortgages. Management
fees of $44,000 and $42,900 were incurred during the years ended March 31,
2001 and 2000, respectively, $10,725 during the three months ended March
31, 1999 and $42,900 were incurred for the year ended December 31, 1998, of
which $3,750 and $3,750 were paid during the years ended March 31, 2001 and
2000 and $5,950 during the three months ended March 31, 1999, and $4,616
were paid during the years ended December 31, 1998.
A subordinated disposition fee in an amount equal to 1% of the sales price
of real estate sold. Payment of this fee is subordinated to the limited
partners receiving a preferred return of 16% through December 31, 2003 and
6% thereafter (as defined in the Partnership Agreement) and is payable only
if the General Partner or its affiliates render services in the sales
effort.
The accrued fees and expenses due to General Partner and affiliates consist of
the following:
March 31
-------------------------------
2001 2000
------------ ---------------
Reimbursement for expenses paid by the General
Partner or an affiliate $ 1,119 $ 6,689
Asset management fee payable 106,159 65,909
------------ ---------------
Total $ 107,278 $ 72,598
============ ===============
The General Partner does not anticipate that these accrued fees will be paid
until such time as capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
27
NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- ----------------------------------------------------
The following is a summary of the quarterly operations for the years ended March
31, 2001 and 2000 (in thousands, except for per share data).
June 30 September 30 December 31 March 31
---------------- --------------- --------------- ---------------
2001
----
Income $ 2,000 $ 2,000 $ 2,000 $ 4,000
Operating expenses 42,000 56,000 26,000 25,000
Equity in losses of limited partnerships (187,000) (186,000) (187,000) (272,000)
Net loss (227,000) (240,000) (211,000) (293,000)
Loss available to limited partner (224,000) (238,000) (208,000) (291,000)
Loss per limited partner unit (14) (15) (13) (19)
2000
----
Income $ 4,000 $ 4,000 $ 3,000 $ 7,000
Operating expenses 28,000 35,000 31,000 795,000
Equity in losses of limited partnerships (156,000) (157,000) (199,000) (480,000)
Net income (loss) (180,000) (188,000) (227,000) (1,268,000)
Loss available to limited partners (178,000) (187,000) (224,000) (1,255,000)
Loss per limited partner unit (12) (12) (14) (80)
NOTE 6 - INCOME TAXES
- ---------------------
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
28
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended March 31, 2001 and 2000,
For The Three Months Ended March 31, 1999 and
For The Year Ended December 31, 1998
NOTE 7-COMMITMENTS AND CONTINGENCIES
- ------------------------------------
During 2000, WNC identified a potential problem with a developer who, at the
time, was the local general partner in six Local Limited Partnerships. The
Partnership has a 99% limited partnership interest in two of those six Local
Limited Partnerships. Those investments are Broken Bow Apartments I, Limited
Partnership, and Sidney Apartments I, Limited Partnership. All of the properties
continue to experience operating deficits. The local general partner ceased
funding the operating deficits, which placed the Local Limited Partnerships in
jeopardy of foreclosure. Consequently, WNC voted to remove the local general
partner and the management company from the Local Limited Partnerships. After
the local general partner contested its removal, WNC commenced legal action on
behalf of the Local Limited Partnerships and was successful in getting a
receiver appointed to manage the Local Limited Partnerships and an unaffiliated
entity appointed as property manager. WNC was subsequently successful in
attaining a summary judgment to confirm the removal of the local general
partner, the receiver was discharged and WNC now controls all six of the Local
Limited Partnerships.
The six Local Limited Partnerships (hereinafter referred to as "Defendants")
were defendants in a separate lawsuit. The lawsuit was filed by eight other
partnerships in which the local general partner of the Local Limited
Partnerships is or was involved (the "Plaintiffs"). The Plaintiffs allege that
the local general partner accepted funds from the Plaintiffs and improperly
loaned these funds to the Defendants. In July 2001, a tentative settlement as
yet not executed was reached with respect to this lawsuit for the aggregate
amount of $35,000. The Partnership's allocated share of $11,700 has been accrued
in full at March 31, 2001.
The Partnership currently has insufficient working capital to fund its
operations. WNC and Associates, Inc., the general partner of the Partnership,
has agreed to continue providing advances sufficient enough to fund the
operations and working capital requirements of the Partnership through at least
April 1, 2002.
29
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
PART III.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who serves
as Chairman of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N.
Cooper, Jr. and Kay L. Cooper. The principal shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.
Wilfred N. Cooper, Sr., age 70, is the founder, Chairman, Chief Executive
Officer, and a Director of WNC & Associates, Inc., a Director of WNC Capital
Corporation, and a general partner in some of the programs previously sponsored
by the Sponsor. Mr. Cooper has been involved in real estate investment and
acquisition activities since 1968. Previously, during 1970 and 1971, he was
founder and principal of Creative Equity Development Corporation, a predecessor
of WNC & Associates, Inc., and of Creative Equity Corporation, a real estate
investment firm. For 12 years prior to that, Mr. Cooper was employed by Rockwell
International Corporation, last serving as its manager of housing and urban
developments where he had responsibility for factory-built housing evaluation
and project management in urban planning and development. Mr. Cooper is a
Director of the National Association of Home Builders (NAHB) and a National
Trustee for NAHB's Political Action Committee, a Director of the National
Housing Conference (NHC) and a member of NHC's Executive Committee and a
Director of the National Multi-Housing Council (NMHC). Mr. Cooper graduated from
Pomona College in 1956 with a Bachelor of Arts degree.
John B. Lester, Jr., age 67, is Vice-Chairman, a Director, Secretary and a
member of the Acquisition Committee of WNC & Associates, Inc., and a Director of
WNC Capital Corporation. Mr. Lester has 27 years of experience in engineering
and construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 38, is President, Executive Vice President, Chief
Operating Officer, a Director and a member of the Acquisition Committee of WNC &
Associates, Inc. He is President of, and a registered principal with, WNC
Capital Corporation, a member firm of the NASD, and is a Director of WNC
Management, Inc. He has been involved in investment and acquisition activities
with respect to real estate since he joined the Sponsor in 1988. Prior to this,
he served as Government Affairs Assistant with Honda North America in
Washington, D.C. Mr. Cooper is a member of the Advisory Board for LIHC Monthly
Report, a Director of NMHC and an Alternate Director of NAHB. He graduated from
The American University in 1985 with a Bachelor of Arts degree.
David N. Shafer, age 49, is Executive Vice President, a Director, General
Counsel, and a member of the Acquisition Committee of WNC & Associates, Inc.,
and a Director and Secretary of WNC Management, Inc. Mr. Shafer has been
involved in real estate investment and acquisition activities since 1984. Prior
to joining the Sponsor in 1990, he was practicing law with a specialty in real
estate and taxation. Mr. Shafer is a Director and President of the California
Council of Affordable Housing and a member of the State Bar of California. Mr.
Shafer graduated from the University of California at Santa Barbara in 1978 with
a Bachelor of Arts degree, from the New England School of Law in 1983 with a
Juris Doctor degree (cum laude) and from the University of San Diego in 1986
with a Master of Law degree in Taxation.
30
Thomas J. Riha, age 46, became Chief Financial Officer effective January 2001.
Prior to his appointment as Chief Financial Officer he was Vice President -
Asset Management and a member of the Acquisition Committee of WNC & Associates,
Inc. and a Director and Chief Executive Officer of WNC Management, Inc. Mr. Riha
has been involved in acquisition and investment activities with respect to real
estate since 1979. Prior to joining the Sponsor in 1994, Mr. Riha was employed
by Trust Realty Advisor, a real estate acquisition and management company, last
serving as Vice President - Operations. Mr. Riha graduated from the California
State University, Fullerton in 1977 with a Bachelor of Arts degree (cum laude)
in Business Administration with a concentration in Accounting and is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants.
Sy P. Garban, age 55, is Vice President - National Sales of WNC & Associates,
Inc. and has been employed by the Sponsor since 1989. Mr. Garban has been
involved in real estate investment activities since 1978. Prior to joining the
Sponsor he served as Executive Vice President of MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
N. Paul Buckland, age 38, is Vice President - Acquisitions and a member of the
Acquisition Committee of WNC & Associates, Inc. He has been involved in real
estate acquisitions and investments since 1986 and has been employed with WNC &
Associates, Inc. since 1994. Prior to that, he served on the development team of
the Bixby Ranch that constructed apartment units and Class A office space in
California and neighboring states, and as a land acquisition coordinator with
Lincoln Property Company where he identified and analyzed multi-family
developments. Mr. Buckland graduated from California State University, Fullerton
in 1992 with a Bachelor of Science degree in Business Finance.
David Turek, age 46, is Vice President - Originations of WNC & Associates, Inc.
He has been involved with real estate investment and finance activities since
1976 and has been employed by WNC & Associates, Inc. since 1996. From 1995 to
1996, Mr. Turek served as a consultant for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties. From 1990 to 1995, he was involved in the development of
conventional and tax credit multi-family housing. He is a Director with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.
Kay L. Cooper, age 64, is a Director of WNC & Associates, Inc. Mrs. Cooper was
the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
31
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or Associates for the following fees:
(a) Annual Asset Management Fee. An annual asset management fee of the greater
of (i) $2,000 per multi-family housing complex or (ii) 0.275% of Gross
Proceeds. The base fee amount will be adjusted annually based on changes in
the Consumer Price Index, however in no event will the annual asset
management fee exceed 0.2% of Invested Assets. "Invested Assets" means the
sum of the Partnership's investment in Local Limited Partnerships and the
Partnership's allocable share of the amount of indebtedness related to the
Housing Complexes. Fees of $44,000, $43,000, $11,000 and $43,000 were
incurred during the years ended March 31, 2001 and 2000 and the three
months ended March 31, 1999 and the year ended December 31, 1998,
respectively. The Partnership paid the General Partner or its affiliates
$4,000, $4,000, $6,000 and $5,000 of those fees during the years ended
March 31, 2001 and 2000, the three months ended March 31, 1999 and the year
ended December 31, 1998, respectively.
(b) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of a Housing Complex. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital
contributions and payment of the Return on Investment to the Limited
Partners. "Return on Investment" means an annual, cumulative but not
compounded, "return" to the Limited Partners (including Low Income Housing
Credits) as a class on their adjusted capital contributions commencing for
each Limited Partner on the last day of the calendar quarter during which
the Limited Partner's capital contribution is received by the Partnership,
calculated at the following rates: (i) 16% through December 31, 2003, and
(ii) 6% for the balance of the Partnership's term. No disposition fees have
been paid.
(c) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $58,000, $31,000,
$11,000 and $6,000 during the years ended March 31, 2001 and 2000, the
three months ended March 31, 1999 and the year ended December 31, 1998,
respectively.
(d) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$22,000, $20,000 and $20,000 for the General Partner for the years ended
March 31, 2000 and December 31, 1998. The General Partner is also entitled
to receive 1% of cash distributions. There were no distributions of cash to
the General Partner during the years ended March 31, 2001 and 2000, the
three months ended March 31, 1999 or the year ended December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The following is the only limited partner known to the General Partner to
own beneficially in excess of 5% of the outstanding Units.
Amount of
Name and Address of Units
Title of Class Beneficial Owner Controlled Percent of Class
------------------------------- ---------------------------------- ------------------- -------------------
Units of Limited Sempra Energy Financial 4,000 Units 25.6%
Partnership Interests P.O. Box 126943
San Diego, CA 92113-6943
32
(b) Security Ownership of Management
---------------------------------
Neither the General Partner, its affiliates, nor any of the officers or
directors of the General Partner or its affiliates own directly or
beneficially any Units in the Partnership.
(c) Changes in Control
------------------
The management and control of the General Partner may be changed at any
time in accordance with its organizational documents, without the consent
or approval of the Limited Partners. In addition, the Partnership Agreement
provides for the admission of one or more additional and successor General
Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of any
other General Partner or the Limited Partners, (i) substitute in its stead
as General Partner any entity which has, by merger, consolidation or
otherwise, acquired substantially all of its assets, stock or other
evidence of equity interest and continued its business, or (ii) cause to be
admitted to the Partnership an additional General Partner or Partners if it
deems such admission to be necessary or desirable so that the Partnership
will be classified a partnership for Federal income tax purposes. Finally,
a majority-in-interest of the Limited Partners may at any time remove the
General Partner of the Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interests in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
33
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Financial Statements
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants Balance Sheets, March 31,
2001 and 2000
Statements of Operations for the years ended March 31, 2001
and 2000, the three months ended March 31, 1999 and the year ended
December 31, 1998
Statements of Partners' Equity for the years ended
March 31, 2001 and 2000, the three months ended March 31, 1999 and the
year ended December 31, 1998
Statements of Cash Flows for the years ended
March 31, 2001 and 2000, the three months ended March 31, 1999 and the
year ended December 31, 1998
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial Statement
Schedules Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K
1. NONE
(c) Exhibits
3.1 Articles of incorporation and by-laws: The registrant is not
incorporated. The Partnership Agreement is included as Exhibit B to the
Prospectus which is included in Post-Effective No 11 to Registration
Statement on Form S-11 dated May 24, 1995 incorporated herein by
reference as Exhibit 3.
10.1 Amended and Restated Agreement of Limited Partnership of Chadwick Limited
Partnership filed as exhibit 10.1 to Form 8-K dated July 22, 1994 is
hereby incorporated herein by reference as exhibit 10.1.
10.2 Second Amended and Restated Agreement of Limited Partnership of Garland
Street Limited Partnership filed as exhibit 10.2 to Form 8-K dated July
22, 1994 is hereby incorporated herein by reference as exhibit 10.2.
10.3 Amended and Restated Agreement of Limited Partnership of Lamesa Seniors
Community, Ltd. filed as exhibit 10.3 to Form 8-K dated July 22, 1994 is
hereby incorporated herein by reference as exhibit 10.3.
10.4 Amended and Restated Agreement of Limited Partnership of Palestine
Seniors Community, Ltd. filed as exhibit 10.4 to Form 8-K dated July 22,
1994 is hereby incorporated herein by reference as exhibit 10.4.
10.5 Second Amended and Restated Agreement of Limited Partnership of Southcove
Associates filed as exhibit 10.1 to Form 8-K dated August 8, 1994 is
hereby incorporated herein by reference as exhibit 10.5.
10.6 Third Amended and Restated Agreement of Limited Partnership of Southcove
Associates filed as exhibit 10.2 to Form 8-K dated August 8, 1994 is
hereby incorporated herein by reference as exhibit 10.6.
34
10.7 Amended and Restated Agreement of Limited Partnership of Comanche
Retirement Village, Ltd. filed as exhibit 10.1 to Form 8-K dated August
31, 1994 is hereby incorporated herein by reference as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Mountainview
Apartments Limited Partnership filed as exhibit 10.1 to Form 8-K dated
September 21, 1994 is hereby incorporated herein by reference as exhibit
10.8.
10.9 Second Amendment to Amended and Restated Agreement of Limited Partnership
of Mountainview Apartments Limited Partnership filed as exhibit 10.2 to
Form 8-K dated September 21, 1994 is hereby incorporated herein by
reference as exhibit 10.9.
10.10 AHmended and Restated Agreement of Limited Partnership of Pecan
Grove Limited Partnership filed as exhibit 10.3 to Form 8-K dated
September 21, 1994 is hereby incorporated herein by reference as exhibit
10.10.
10.11 Second Amendment to Amended and Restated Agreement of Limited
Partnership of Pecan Grove Limited Partnership filed as exhibit 10.4 to
Form 8-K dated September 21, 1994 is hereby incorporated herein by
reference as exhibit 10.11.
10.12 Second Amendment to and Entire Restatement of the Agreement of Limited
Partnership of Autumn Trace Associates, Ltd. filed as exhibit 10.1 to
Form 8-K dated October 31, 1994 is hereby incorporated herein by
reference as exhibit 10.12.
10.13 Amended and Restated Agreement of Limited Partnership of EW , a
Wisconsin Limited Partnership filed as exhibit 10.2 to Form 8-K dated
October 31, 1994 is hereby incorporated herein by reference as exhibit
10.13.
10.14 Agreement of Limited Partnership of Klimpel Manor, Ltd. filed as exhibit
10.3 to Form 8-K dated September 21, 1994 is hereby incorporated herein
by reference as exhibit 10.14.
10.15 Amended and Restated Agreement of Limited Partnership of Hickory Lane
Associates Limited filed as exhibit 10.15 to Form 10-K dated December 31,
1995 is hereby incorporated herein by reference as exhibit 10.15.
10.16 Amended and Restated Agreement of Limited Partnership of Honeysuckle
Court Associates, Ltd. filed as exhibit 10.16 to Form 10-K dated December
31, 1995 is hereby incorporated herein by reference as exhibit 10.16.
10.17 Amended and Restated Agreement of Limited Partnership of Walnut Turn
Associates, Ltd. filed as exhibit 10.17 to Form 10-K dated December 31,
1995 is hereby incorporated herein by reference as exhibit 10.17.
10.18 Amended and Restated Agreement of Limited Partnership of Pioneer Street
Associates, a California limited partnership filed as exhibit 10.1 to
Form 8-K dated July 5, 1995 is hereby incorporated herein by reference as
exhibit 10.18.
21.1 Financial statements of Pioneer Street Associates, a California Limited
Partnership as of and for the years ended December 31, 2000 and 1999
together with independent auditors' report thereon; a significant
subsidiary of the Partnership.
(d) Financial statement schedules follow, as set forth in subsection (a)(2)
--------------------------------------
hereof.
35
Report of Independent Certified Public Accountants on
Financial Statement Schedules
To the Partners
WNC Housing Tax Credit Fund IV, L.P., Series 2
The audits referred to in our report dated July 9, 2001, relating to the 2001,
2000, 1999 and 1998 financial statements of WNC Housing Tax Credit Fund IV,
L.P., Series 2 (the "Partnership"), which is contained in Item 8 of this Form
10-K, included the audit of the accompanying financial statement schedules. The
financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statement schedules based upon our audits. The opinion to the financial
statements contains an audit scope limitation paragraph describing the inability
of other auditors to express an opinion on the financial statements of two
limited partnerships.
In our opinion, except for the effects of such audit scope limitation, such
financial statement schedules present fairly, in all material respects, the
financial information set forth therein.
/s/BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
July 9, 2001
36
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
-------------------------------------- --------------------------------------------------
As of March 31, 2001 As of December 31, 2000
-------------------------------------- --------------------------------------------------
Partnership's Total Amount of Encumbrances of Property Net
Investment in Local Investment Paid Local Limited and Accumu lated Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East East Brewton,
Brewton,Ltd. Alabama $ 1,192,000 $ 1,192,000 $ 1,145,000 $ 2,339,000 $ (168,000) $ 2,171,000
Autumn Trace Associates, Silsbee,
Ltd. Texas 412,000 412,000 1,253,000 2,059,000 (544,000) 1,515,000
Broken Bow Broken Bow,
Apartments I, Limited Nebraska
Limited Partnership 608,000 608,000 * * * *
Candleridge Apartments Waukee,
of Waukee L.P. II Iowa 125,000 125,000 679,000 883,000 (171,000) 712,000
Chadwick Limited Edan, North
Partnership Carolina 378,000 378,000 1,551,000 2,020,000 (298,000) 1,722,000
Comanche Retirement Comanche,
Village, Ltd. Texas 136,000 136,000 591,000 748,000 (166,000) 582,000
Crossings II Portage,
Limited Dividend Michigan
Housing Association
LimitedPartnership 432,000 432,000 5,905,000 6,952,000 (666,000) 6,286,000
EW, a Wisconsin Evansville,
Limited Partnership Wisconson 164,000 164,000 613,000 882,000 (224,000) 658,000
Garland Street Malvarn,
Limited Partnership Arkansas 164,000 164,000 693,000 924,000 (237,000) 687,000
Hereford Seniors Hereford,
Community, Ltd. Texas 167,000 167,000 799,000 1,006,000 (142,000) 864,000
* Results of Broken Bow Apartments I, L.P. and Sidney Apartments I, L.P. have not been audited and thus have been
excluded. See Note 2 to the financial
statements and report of certified public accountants.
37
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
-------------------------------------- --------------------------------------------------
As of March 31, 2001 As of December 31, 2000
-------------------------------------- --------------------------------------------------
Partnership's Total Amount of Encumbrances of Property Net
Investment in Local Investment Paid Local Limited and Accumu lated Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Hickory Lane Newton,
Associates, Ltd Texas 174,000 174,000 594,000 950,000 (160,000) 790,000
Honeysuckle Court Vidor,
Associates, Ltd. Texas 339,000 339,000 1,162,000 1,833,000 (323,000) 1,510,000
Klimpel
Manor, Ltd Fullerton, 1,774,000 1,774,000 1,314,000 3,589,000 (649,000) 2,940,000
California
Lamesa Seniors Lamesa,
Community, Ltd. Texas 143,000 143,000 671,000 818,000 (184,000) 634,000
Laredo Heights Navasota,
Apartments Ltd. Texas 225,000 225,000 1,101,000 1,358,000 (179,000) 1,179,000
Mountainview North
Apartments Limited Wilkesboro,
Partnership North Carolina 195,000 195,000 994,000 1,211,000 197,000 1,014,000
Palestine Seniors Palestine,
Community, Ltd. Texas 225,000 225,000 1,124,000 1,385,000 (231,000) 1,154,000
Pecan Grove Forrest City,
Limited Partnership Arkansas 240,000 240,000 1,109,000 1,402,000 (370,000) 1,032,000
Pioneer Street Bakersfield,
Associates California 2,222,000 2,222,000 1,862,000 4,087,000 (876,000) 3,211,000
Sidney Apartments Sidney,
I, Limited Nebraska
Partnership 530,000 530,000 * * * *
Southcove Orange Cove,
Associates California 2,000,000 2,000,000 1,527,000 3,445,000 (753,000) 2,692,000
Walnut Turn Buna,
Associates, Ltd. Texas 188,000 188,000 688,000 1,040,000 (179,000) 861,000
------------ ----------- ----------- ------------ ------------ -----------
$12,033,000 $12,033,000 $25,375,000 $ 38,931,000 $ 6,717,000 $ 32,214,000
============ ============ ============ ============ =========== ============
38
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
----------------------------------------------------------------------------------
For the year ended December 31, 2000
----------------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- ---------------------------------------------------------------------------------------------------------------------
Apartment Housing of East
Brewton, Ltd. $ 114,000 $ (89,000) 1998 Completed 40 Years
Autumn Trace Associates, Ltd. 209,000 (47,000) 1994 Completed 27.5 Years
Broken Bow Apartments I, Limited
Partnership * * 1996 Completed 40 Years
Candleridge Apartments of Waukee
L.P. II 129,000 (4,000) 1995 Completed 27.5 Years
Chadwick Limited Partnership 183,000 (27,000) 1994 Completed 50 Years
Comanche Retirement.
Village, Ltd 67,000 (16,000) 1994 Completed 30 Years
Crossings II Limited Dividend
Housing Association Limited
Partnership 648,000 (145,000) 1997 Completed 40 Years
EW, a Wisconsin Limited
Partnership 74,000 (67,000) 1994 Completed 27.5 Years
Garland Street Limited
Partnership 69,000 (30,000) 1994 Completed 27.5 Years
Hereford Seniors
Community, Ltd. 96,000 0 1995 Completed 40 Years
Hickory Lane Associates, Ltd 75,000 (32,000) 1995 Completed 27.5 Years
Honeysuckle Court
Associates, Ltd. 191,000 (47,000) 1995 Completed 27.5 Years
Klimpel Manor, Ltd 374,000 (55,000) 1994 Completed 40 Years
Lamesa Seniors
Community, Ltd. 103,000 (26,000) 1994 Completed 40 Years
Laredo Heights Apartments Ltd. 167,000 6,000 1996 Completed 45 Years
Mountainview Apartments Limited
Partnership 96,000 (18,000) 1994 Completed 40 Years
Palestine Seniors
Community, Ltd. 148,000 11,000 1994 Completed 40 Years
39
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
----------------------------------------------------------------------------------
For the year ended December 31, 2000
----------------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- ---------------------------------------------------------------------------------------------------------------------
Pecan Grove Limited Partnership 123,000 (58,000) 1994 Completed 27.5 Years
Pioneer Street Associates 491,000 (80,000) 1995 Completed 27.5 Years
Sidney Apartments I, Limited
Partnership * * 1996 Completed 40 Years
Southcove Associates 226,000 (103,000) 1994 Completed 27.5 Years
Walnut Turn Associates, Ltd. 92,000 (32,000) 1995 Completed 27.5 Years
------------ ------------
$ 3,675,000 $ 859,000
============ ============
* Results of Broken Bow Apartments I, L.P. and Sidney Apartments I, L.P. have not been audited and thus have
been excluded. See Note 2 to the financial statements and report of certified public accountants.
40
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
-------------------------------------- --------------------------------------------------
As of March 31, 2000 As of December 31, 1999
-------------------------------------- --------------------------------------------------
Partnership's Total Amount of Encumbrances of Property Net
Investment in Local Investment Paid Local Limited and Accumu lated Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East East Brewton,
Brewton,Ltd. Alabama $ 1,192,000 $ 1,192,000 $ 1,150,000 $ 2,339,000 $ 74,000 $ 2,165,000
Autumn Trace Associates, Silsbee,
Ltd. Texas 412,000 412,000 1,261,000 2,059,000 469,000 1,590,000
Broken Bow Apartments I, Broken Bow,
Limited Partnership Nebraska 608,000 608,000 * * * *
Candleridge Apartments Waukee,
of Waukee L.P. II Iowa 125,000 125,000 682,000 883,000 141,000 742,000
Chadwick Limited Edan, North
Partnership Carolina 378,000 378,000 1,561,000 2,010,000 253,000 1,757,000
Comanche Retirement Comanche,
Village, Ltd. Texas 136,000 136,000 592,000 748,000 138,000 610,000
Crossings II Portage,
Limited Dividend Michigan
Housing Association
LimitedPartnership 432,000 432,000 5,992,000 6,952,000 470,000 6,282,000
EW, a Wisconsin Evansville,
Limited Partnership Wisconson 164,000 164,000 619,000 869,000 189,000 680,000
Garland Street Malvarn,
Limited Partnership Arkansas 164,000 164,000 696,000 920,000 200,000 720,000
Hereford Seniors Hereford,
Community, Ltd. Texas 167,000 167,000 802,000 1,005,000 117,000 888,000
* Results of Broken Bow Apartments I, L.P. and Sidney Apartments I, L.P. have not been audited and thus have been
excluded. See Note 2 to the financial
statements and report of certified public accountants.
41
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
-------------------------------------- --------------------------------------------------
As of March 31, 2000 As of December 31, 1999
-------------------------------------- --------------------------------------------------
Partnership's Total Amount of Encumbrances of Property Net
Investment in Local Investment Paid Local Limited and Accumu lated Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Hickory Lane Newton,
Associates, Ltd Texas 174,000 174,000 596,000 924,000 128,000 796,000
Honeysuckle Court Vidor,
Associates, Ltd. Texas 339,000 339,000 1,165,000 1,780,000 258,000 1,522,000
Klimpel
Manor, Ltd Fullerton, 1,774,000 1,774,000 1,962,000 3,576,000 543,000 3,033,000
California
Lamesa Seniors Lamesa,
Community, Ltd. Texas 143,000 143,000 673,000 818,000 133,000 685,000
Laredo Heights Navasota,
Apartments Ltd. Texas 225,000 225,000 995,000 1,350,000 138,000 1,212,000
Mountainview North
Apartments Limited Wilkesboro,
Partnership North Carolina 195,000 195,000 998,000 1,211,000 292,000 919,000
Palestine Seniors Palestine,
Community, Ltd. Texas 225,000 225,000 1,128,000 1,385,000 198,000 1,187,000
Pecan Grove Forrest City,
Limited Partnership Arkansas 240,000 240,000 1,114,000 1,401,000 312,000 1,089,000
Pioneer Street Bakersfield,
Associates California 2,222,000 2,222,000 1,883,000 4,087,000 729,000 3,358,000
Sidney Apartments Sidney,
I, Limited Nebraska
Partnership 530,000 530,000 * * * *
Southcove Orange Cove,
Associates California 2,000,000 2,000,000 1,532,000 3,445,000 626,000 2,819,000
Walnut Turn Buna,
Associates, Ltd. Texas 188,000 188,000 690,000 1,015,000 143,000 872,000
------------ ----------- ----------- ------------ ------------ -----------
$12,033,000 $12,033,000 $26,091,000 $ 38,777,000 $ 5,551,000 $ 33,226,000
============ ============ ============ ============ =========== ============
42
WNC Hous
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
----------------------------------------------------------------------------------
For the year ended December 31, 1999
----------------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- ---------------------------------------------------------------------------------------------------------------------
Apartment Housing of East
Brewton, Ltd. $ 91,000 $ (78,000) 1998 Completed 40 Years
Autumn Trace Associates, Ltd. 204,000 (50,000) 1994 Completed 27.5 Years
Broken Bow Apartments I, Limited
Partnership * * 1996 Completed 40 Years
Candleridge Apartments of Waukee
L.P. II 120,000 (10,000) 1995 Completed 27.5 Years
Chadwick Limited Partnership 188,000 (62,000) 1994 Completed 50 Years
Comanche Retirement.
Village, Ltd 68,000 (15,000) 1994 Completed 30 Years
Crossings II Limited Dividend
Housing Association Limited
Partnership 665,000 (140,000) 1997 Completed 40 Years
EW, a Wisconsin Limited
Partnership 99,000 (31,000) 1994 Completed 27.5 Years
Garland Street Limited
Partnership 66,000 (29,000) 1994 Completed 27.5 Years
Hereford Seniors
Community, Ltd. 93,000 (5,000) 1995 Completed 40 Years
Hickory Lane Associates, Ltd 115,000 (16,000) 1995 Completed 27.5 Years
Honeysuckle Court
Associates, Ltd. 194,000 (23,000) 1995 Completed 27.5 Years
Klimpel Manor, Ltd 362,000 (74,000) 1994 Completed 40 Years
Lamesa Seniors
Community, Ltd. 81,000 (11,000) 1994 Completed 40 Years
Laredo Heights Apartments Ltd. 146,000 (3,000) 1996 Completed 45 Years
Mountainview Apartments Limited
Partnership 93,000 (13,000) 1994 Completed 40 Years
Palestine Seniors
Community, Ltd. 142,000 5,000 1994 Completed 40 Years
43
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
----------------------------------------------------------------------------------
For the year ended December 31, 1999
----------------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- ---------------------------------------------------------------------------------------------------------------------
Pecan Grove Limited Partnership 120,000 (42,000) 1994 Completed 27.5 Years
Pioneer Street Associates 482,000 (54,000) 1995 Completed 27.5 Years
Sidney Apartments I, Limited
Partnership * * 1996 Completed 40 Years
Southcove Associates 213,000 (109,000) 1994 Completed 27.5 Years
Walnut Turn Associates, Ltd. 90,000 (29,000) 1995 Completed 27.5 Years
------------ -----------
$ 3,632,000 $ (789,000)
============ ===========
* Results of Broken Bow Apartments I, L.P. and Sidney Apartments I, L.P. have not been audited and thus have
been excluded. See Note 2 to the financial statements and report of certified public accountants.
44
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
-------------------------------------- --------------------------------------------------
As of March 31, 1999 As of December 31, 1998
-------------------------------------- --------------------------------------------------
Partnership's Total Amount of Encumbrances of Property Net
Investment in Local Investment Paid Local Limited and Accumu lated Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment Housing of East East Brewton,
Brewton,Ltd. Alabama $ 1,255,000 $ 941,000 $ 1,011,000 $ 1,961,000 $ - $ 1,961,000
Autumn Trace Associates, Silsbee,
Ltd. Texas 412,000 412,000 1,269,000 2,059,000 394,000 1,665,000
Broken Bow Apartments I, Broken Bow,
Limited Partnership Nebraska 608,000 546,000 750,000 1,383,000 49,000 1,334,000
Candleridge Apartments Waukee,
of Waukee L.P. II Iowa 125,000 125,000 685,000 873,000 112,000 761,000
Chadwick Limited Edan, North
Partnership Carolina 378,000 378,000 1,571,000 2,011,000 207,000 1,804,000
Comanche Retirement Comanche,
Village, Ltd. Texas 136,000 136,000 594,000 748,000 97,000 651,000
Crossings II Portage,
Limited Dividend Michigan
Housing Association
LimitedPartnership 432,000 432,000 6,074,000 6,952,000 273,000 6,679,000
EW, a Wisconsin Evansville,
Limited Partnership Wisconson 164,000 164,000 628,000 869,000 156,000 713,000
Garland Street Malvarn,
Limited Partnership Arkansas 164,000 164,000 699,000 918,000 164,000 754,000
Hereford Seniors Hereford,
Community, Ltd. Texas 167,000 167,000 804,000 1,006,000 94,000 912,000
Hickory Lane Newton,
Associates, Ltd Texas 174,000 174,000 597,000 924,000 97,000 827,000
45
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
-------------------------------------- --------------------------------------------------
As of March 31, 1999 As of December 31, 1998
-------------------------------------- --------------------------------------------------
Partnership's Total Amount of Encumbrances of Property Net
Investment in Local Investment Paid Local Limited and Accumu lated Book
Partnership Name Location Limited Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Honeysuckle Court Vidor,
Associates, Ltd. Texas 339,000 339,000 1,168,000 1,780,000 195,000 1,585,000
Klimpel
Manor, Ltd Fullerton, 1,774,000 1,774,000 1,984,000 3,576,000 437,000 3,139,000
California
Lamesa Seniors Lamesa,
Community, Ltd. Texas 143,000 143,000 675,000 818,000 114,000 704,000
Laredo Heights Navasota,
Apartments Ltd. Texas 225,000 225,000 1,001,000 1,349,000 98,000 1,251,000
Mountainview North
Apartments Limited Wilkesboro,
Partnership North Carolina 195,000 195,000 1,002,000 1,211,000 140,000 1,071,000
Palestine Seniors Palestine,
Community, Ltd. Texas 225,000 225,000 1,132,000 1,384,000 164,000 1,220,000
Pecan Grove Forrest City,
Limited Partnership Arkansas 240,000 240,000 1,118,000 1,397,000 250,000 1,147,000
Pioneer Street Bakersfield,
Associates California 2,222,000 2,222,000 1,903,000 4,086,000 581,000 3,505,000
Sidney Apartments Sidney,
I, Limited Nebraska
Partnership 530,000 484,000 444,000 1,419,000 100,000 1,319,000
Southcove Orange Cove,
Associates California 2,000,000 2,000,000 1,538,000 3,445,000 500,000 2,945,000
Walnut Turn Buna,
Associates, Ltd. Texas 188,000 188,000 692,000 1,015,000 108,000 907,000
------------ ----------- ----------- ------------ ------------ -----------
$12,096,000 $11,674,000 $27,339,000 $ 41,184,000 $ 4,330,000 $ 36,854,000
============ ============ ============ ============ =========== ============
46
W
WNC Hous
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
----------------------------------------------------------------------------------
For the year ended December 31, 1998
----------------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- ---------------------------------------------------------------------------------------------------------------------
Apartment Housing of East Not
Brewton, Ltd. $ - $ - 1998 Est.1999 Determined
Autumn Trace Associates, Ltd. 206,000 (43,000) 1994 Completed 27.5 Years
Broken Bow Apartments I, Limited
Partnership 39,000 (117,000) 1996 Completed 40 Years
Candleridge Apartments of Waukee
L.P. II 116,000 (8,000) 1995 Completed 27.5 Years
Chadwick Limited Partnership 188,000 (18,000) 1994 Completed 50 Years
Comanche Retirement.
Village, Ltd 63,000 (21,000) 1994 Completed 30 Years
Crossings II Limited Dividend
Housing Association Limited
Partnership 692,000 (19,000) 1997 Completed 40 Years
EW, a Wisconsin Limited
Partnership 105,000 (20,000) 1994 Completed 27.5 Years
Garland Street Limited
Partnership 66,000 (26,000) 1994 Completed 27.5 Years
Hereford Seniors
Community, Ltd. 89,000 (7,000) 1995 Completed 40 Years
Hickory Lane Associates, Ltd 81,000 (13,000) 1995 Completed 27.5 Years
Honeysuckle Court
Associates, Ltd. 191,000 (18,000) 1995 Completed 27.5 Years
Klimpel Manor, Ltd 344,000 (85,000) 1994 Completed 40 Years
Lamesa Seniors
Community, Ltd. 84,000 (8,000) 1994 Completed 40 Years
Laredo Heights Apartments Ltd. 166,000 (9,000) 1996 Completed 45 Years
Mountainview Apartments Limited
Partnership 90,000 (11,000) 1994 Completed 40 Years
Palestine Seniors
Community, Ltd. 135,000 (1,000) 1994 Completed 40 Years
47
WNC Housing Tax Credit Fund IV, L.P., Series 2
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
----------------------------------------------------------------------------------
For the year ended December 31, 1998
----------------------------------------------------------------------------------
Year Estimated
Investment Useful Life
Partnership Name Rental Income Net loss Acquired Status (Years)
- ---------------------------------------------------------------------------------------------------------------------
Pecan Grove Limited Partnership 114,000 (46,000) 1994 Completed 27.5 Years
Pioneer Street Associates 507,000 (37,000) 1995 Completed 27.5 Years
Sidney Apartments I, Limited
Partnership 77,000 (42,000) 1996 Completed 40 Years
Southcove Associates 218,000 (102,000) 1994 Completed 27.5 Years
Walnut Turn Associates, Ltd. 129,000 (17,000) 1995 Completed 27.5 Years
------------ -----------
$ 3,700,000 $ (668,000)
============ ===========
48
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
By: WNC & Associates, Inc. General Partner
By: /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr.,
Chairman and Chief Executive Officer of WNC & Associates, Inc.
Date: August 6, 2001
By: /s/ Thomas J. Riha
Thomas J. Riha
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: August 6, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr., President and Director of WNC & Associates, Inc.
Date: August 6, 2001
By: /s/ John B. Lester, Jr.
-----------------------
John B. Lester, Jr., Director of WNC & Associates, Inc.
Date: August 6, 2001
By: /s/ David N. Shafer
-------------------
David N Shafer, Director of WNC & Associates, Inc.
Date: August 6, 2001
49
C O N T E N T S
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS................................................. 1
FINANCIAL STATEMENTS
Balance sheets....................................................... 2-3
Statements of income.................................................. 4-7
Statements of changes in partners' equity................................ 8
Statements of cash flows...............................................9-10
Notes to financial statements.........................................11-14
INDEPENDENT AUDITOR'S REPORT
To the Partners
Pioneer Street Associates
(A California Limited Partnership)
Visalia, California
I have audited the accompanying balance sheets of Pioneer Street Associates (A
California Limited Partnership), as of December 31, 1999 and 1998, and the
related statements of income, partners' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pioneer Street Associates (A
California Limited Partnership) as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Bernard E. Rea, CPA
Bernard E. Rea, CPA
Stockton, California
March 30, 2000
- 1 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
BALANCE SHEETS
December 31, 2000 and 1999
ASSETS 2000 1999
---- -----
CURRENT ASSETS
Cash $ 87,783 $ 85,496
Real estate tax ans insurance 3,586 13,444
Prepaid expense 5,158 4,987
----------- -------------
Total current ASSETS $ 96,527 $ 103,927
----------- -------------
RESTRICTED DEPOSITS AND FUNDED RESERVES
Tenants' security deposits $ 40,805 $ 39,399
Replacement reserve 166,527 135,180
----------- -------------
$ 207,332 $ 174,579
----------- -------------
PROPERTY AND EQUIPMENT, AT COST
Land $ 300,000 $ 300,000
Buildings 3,608,910 3,608,910
Equipment $ 178,017 $ 178,017
----------- -------------
$ 4,086,927 $ 4,086,927
Less accumulated depreciation 875,784 728,662
----------- -------------
$ 3,211,143 $ 3,358,265
----------- -------------
OTHER ASSETS
deferred change, less accumulated
amortization of $16,487 and $13,403 $ 49,363 $ 52,447
----------- -------------
$ 3,564,365 $ 3,689,218
=========== =============
See Notes to Financial Statements.
2
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
BALANCE SHEETS
December 31, 2000 and 1999
LIABILITIES AND PARTNER 2000 1999
---- -----
CURRENT LIABILITIES
Current maturities of long-term debt $ 23,655 $ 22,374
Accounts payable 13,192 3,580
Bank overdraft - - - -
Accrued interest 12,680 - -
Accrued reporting fee 4,000 2,000
Accrued property taxes - - -
----------- ----------
Total current liabilities $ 53,527 $ 27,954
----------- ---------
DEPOSIT AND PREPAYMENT LIABILITIES
Tenants' security deposits $ 35,250 $ 35,250
Prepaid rents - - - -
----------- ---------
$ 35,250 $ 35,250
----------- ---------
LONG-TERM DEBT
Mortgage payable, less current maturities $ 1,838,754 $1,860,474
----------- ----------
COMMITMENT
PARTNERS' EQUITY $ 1,636,834 $ 1,765,540
----------- ------------
$ 3,564,365 $ 3,689,218
=========== ============
See Notes to Financial Statements.
3
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME
Years Ended December 31, 2000 and 1999
2000 1999
------ ------
RENTAL INCOME
Apartments $ 519,492 $ 519,492
Tenant assistance payments - - - -
Furniture and equipment - - - -
Commercial - - - -
Parking spaces - - - -
Subsidy income - - - -
Miscellaneous - - - -
----------- -----------
Sub-total potential rent revenue $ 519,492 $ 519,492
----------- -----------
VACANCIES
Apartments $ (28,535) $ (37,696)
Commercial - - - -
Parking spaces - - - -
Miscellaneous - - - -
---------- -----------
Sub-total vacancies $ (28,535) $ (37,696)
----------- -----------
Net rental revenue $ 490,957 $ 481,796
----------- -----------
FINANCIAL REVENUE
Interest Income - project operations $ 2,038 $ 1,346
Income from investments - replacement reserve 7,227 5,029
Income from investments - operating reserve - - - -
Income from investments - miscellaneous - - - -
---------- -----------
Sub-total financial revenue $ 9,265 $ 6,375
---------- -----------
OTHER REVENUE
Laundry and vending $ 12,438 $ 10,555
NSF and late charges - - - -
Damage and cleaning fees - - 329
Forfeited tenant security deposits 5,981 11,443
Other revenue 10,464 14,646
--------- -----------
Sub-total other revenue $ 28,883 $ 36,973
---------- -----------
Total revenues $ 529,105 $ 525,144
========== ===========
See Notes to Financial Statements.
- 4 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 2000 and 1999
2000 1999
----- -----
OPERATING EXPENSES
Renting expenses
Advertising $ 27 $ - -
Miscellaneous renting expenses 20,282 13,942
--------- ----------
Sub-total renting expenses $ 20,309 $ 13,942
--------- ----------
Administrative expenses
Office salaries $ - - $ - -
Office supplies 1,132 1,117
Office rent - - - -
Management fee 40,920 38,201
Manager's salary 22,138 21,536
Legal expense 429 6,900
Audit expense 3,565 3,475
Bookkeeping / accounting services - - - -
Telephone and answering service 722 796
Bad debts - - - -
Miscellaneous administrative expenses 28 - -
--------- ----------
Sub-total administrative expenses $ 68,934 $ 72,025
--------- ----------
Utilities expense
Fuel oil / coal $ - - $ - -
Electricity 9,295 8,044
Water 11,886 11,542
Gas - - - -
Sewer 2,554 3,830
--------- ----------
Sub-total utilities expense $ 23,735 $ 23,416
========= ==========
See Notes to Financial Statements.
- 5 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 2000 and 1999
2000 1999
----- ------
Operating and maintenance expense
Janitor and cleaning payroll $ - - $ - -
Janitor and cleaning supplies - - - -
Janitor and cleaning contract - - - -
Exterminating payroll / contract - - - -
Exterminating supplies - - - -
Garbage and trash removal 16,459 15,959
Security payroll / contract - - - -
Grounds payroll - - - -
Grounds supplies - - - -
Grounds contract 22,588 14,200
Repairs payroll 28,924 29,264
Repairs material 18,131 13,196
Repairs contract 33,060 18,133
Elevator maintenance / contract - - - -
Heating / cooling repairs and maintenance - - - -
Swim pool maintenance / contract - - - -
Snow removal - - - -
Decorating payroll / contract - - - -
Decorating supplies 2,052 1,633
Vehicle and maintenance equipment o & r - - - -
Miscellaneous operating and maint. expenses 8,516 949
---------- -----------
Sub-total operating & maint. expense $ 129,730 $ 93,334
---------- -----------
Taxes and insurance
Real estate taxes $ 37,321 $ 46,488
Payroll taxes 4,772 4,875
Miscellaneous taxes, licenses, and permits 205 175
Property and liability insurance 6,018 6,663
Fidelity bond insurance - - - -
Workman's compensation 5,237 3,652
Health insurance and other employee benefits 4,541 4,180
Other insurance - - - -
--------- -----------
Sub-total taxes & insurance $ 58,094 $ 66,033
--------- -----------
Total operating expenses $ 300,802 $ 268,750
========== ===========
See Notes to Financial Statements.
- 6 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 2000 and 1999
2000 1999
---- -----
OTHER EXPENSES
Interest expense - mortgage $ 153,003 $ 154,753
Interest expense - notes - - - -
Miscellaneous financial expense - - - -
Depreciation and amortization 150,206 150,207
Limited partnership tax 800 800
Non project expenses 4,000 5,000
---------- ----------
Sub-total other expenses $ 308,009 $ 310,760
---------- ----------
Total expenses $ 608,811 $ 579,510
---------- ----------
Net income (loss) $ (79,706) $ (54,366)
=========== ==========
See Notes to Financial Statements.
- 7 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31, 2000 and 1999
General Limited
Total Partners Partner
------- -------- --------
Partners' equity
December 31, 1998 $ 1,832,905 $ (152,113) $ 1,985,018
Partners' capital
contributions - - - - - -
Partners' capital
distributions 12,999) (12,999) - -
Net income (loss) (54,366) (544) (53,822)
------------ ----------- ------------
Partners' equity
December 31, 1999 $ 1,765,540 $ (165,656) $ 1,931,196
Partners' capital
contributions - - - - - -
Partners' capital
distributions (49,000) (49,000) - -
Net income (loss) (79,706) (797) (78,909)
------------ ----------- ------------
Partners' equity
December 31, 2000 $ 1,636,834 $ (215,453) $ 1,852,287
============ =========== ============
Percentage at
December 31, 2000 100% 1% 99%
============ ============= =============
See Notes to Financial Statements.
- 8 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000 and 1999
2000 1999
----- ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (79,706) $ (54,366)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 150,206 150,207
Change in assets and liabilities:
Decrease (increase) in:
Rents receivable - - - -
Prepaid expenses (171) 679
Tenants' security deposits (1,406) (894)
Tax and insurance impounds 9,858 (312)
Increase (decrease) in:
Accounts payable 9,612 (4,162)
Bank overdraft - - - -
Accrued reporting fee 2,000 (1,000)
Accrued interest 12,680 - -
Prepaid rents - - - -
Tenants' security deposits - - - -
Net cash provided by (used in) ---------- ----------
operating activities $ 103,073 $ 90,152
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of replacement reserve $ (31,347) $ (35,319)
Withdrawals from replacement reserve - - - -
Acquisition of property and equipment - - - -
Net cash provided by (used in)
---------- ----------
investing activities $ (31,347) $ (35,319)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Partner contributions $ - - $ - -
Partner distributions (49,000) (12,999)
Principal payments on long-term debt (20,439) (20,624)
---------- ----------
Net cash provided by (used in)
financing activities $ (69,439) $ (33,623)
========== ==========
See Notes to Financial Statements.
- 9 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2000 and 1999
2000 1999
---- ----
Increase (decrease) in cash and
cash equivalents $ 2,287 $ 21,210
Cash and cash equivalents
Beginning 85,496 64,286
---------- ----------
Ending $ 87,783 $ 85,496
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for interest, net
of capitalized interest $ 153,003 $ 154,753
========== ==========
See Notes to Financial Statements.
- 10 -
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Partnership's significant accounting policies consistently
applied in the preparation of the accompanying financial statements
follows.
Capitalization and Depreciation
-------------------------------
Land, buildings and improvements are recorded at cost. Depreciation of
buildings and equipment is computed principally using the Modified
Accelerated Cost Recovery System which approximates straight-line for
buildings and double-declining balance for equipment over the following
estimated useful lives:
Years
-----
Buildings 27.5
Equipment 7
Improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred. Upon disposal of depreciable
property, the appropriate property accounts are reduced by the related
costs and accumulated depreciation. The resulting gains and losses are
reflected in the statement of operations.
Cash and cash equivalents
-------------------------
For purposes of reporting the statements of cash flows, the Partnership
includes all cash accounts which are not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a
maturity of three months or less as cash and cash equivalents on the
accompanying balance sheet.
Amortization
------------
Deferred charges are amortized over the following estimated useful lives
using the straight-line method:
Years
-----
Deferred debt expense 30
Tax credit monitoring fee 15
Income Taxes
------------
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
- 11 -
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies (continued)
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Personal Assets and Liabilities
-------------------------------
In accordance with the generally accepted method of presenting partnership
financial statements, the financial statements do not include the personal
assets and liabilities of the partners, including their obligation for
income taxes on their distributive shares of the net income of the
Partnership, nor any provision for income tax expense.
NOTE 2 - ORGANIZATION
Pioneer Street Associates is a California Limited Partnership which was
formed in February 1994, to develop, construct, own, maintain and operate a
112-unit multi-family apartment complex known as Foothill Vista Apartments
and is located in the city of Bakersfield, California. The major activities
of the Partnership are governed by the Partnership Agreement and Loan
Agreement with the California Community Reinvestment Corporation (CCRC), a
California nonprofit public benefit corporation. Under the Loan Agreement,
the Partnership is required to provide low cost housing to moderate or
low-income households.
The Partnership has three general partners and one investing limited
partner. Partnership transactions with the general partners are described
in other notes to this financial statement.
NOTE 3 - Deferred charges
Deferred charges as of December 31, 2000 and 1999, consists of the
following:
2000 1999
---- -----
Deferred debt expense $ 39,200 $ 39,200
Tax credit monitoring fee 26,650 26,650
--------- ------------
$ 65,850 $ 65,850
========= ============
Less accumulated amortization 16,487 13,403
--------- ------------
$ 49,363 $ 52,447
========= ===========
12
NOTES TO FINANCIAL STATEMENTS
Note 4 - Restricted deposits and Funded reserves
In accordance with the Partnership and the CCRC Replacement Reserve
Agreements, the Partnership is required to maintain a replacement reserve
account. The account is to be funded annually in the amount of $28,000
until the aggregate balance of the account reaches $182,000.
Note 5 - Long-Term Debt
Long-Term debt consisted of a permanent loan with CCRC in face amount of
$1,960,000.
Under the terms of the 30-year Promissory Note with CCRC, the loan provides
for an initial interest rate of 8.17% and monthly payments of $14,614.74
commencing on November 1, 1995, and continuing through September 2025. The
interest rate and monthly payment will be adjusted at year eleven (11) and
year Twenty-one (21), at which time the interest rate will be adjusted
based on the Current Index plus 2.75% and the payment will be adjusted and
determined by the amount of the monthly payment that would be sufficient to
repay the note within 360 months of the initial payment date. As of
December 31, 1999 the current interest, rate and minimum monthly payment
due is 8.17% and $14,617.74, respectively.
The apartment complex is pledged as collateral for the mortgage and is
secured by deeds of trust, assignment of rents, security agreements and
fixture filings against the property.
Aggregate maturities of Long-term debt for the next five years are as
follows:
December 31, 2001 $ 23,655
2002 26,114
2003 28,329
2004 30,733
2005 33,340
Thereafter 1,720,238
------------
TOTAL $ 1,862,409
=============
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Annual reporting Fee
--------------------
An annual reporting fee of $2,000 is payable to the limited partner, WNC
California Housing Tax Credit Fund IV, L.P. Series 2, an investor limited
partner which holds a 99% interest in the partnership, for services to be
rendered for accounting matters relating to preparation of tax returns and
other reports required.
Annual PARTNERSHIP administrative Fee
-------------------------------------
An annual partnership administrative fee of $2,000 is payable to the
general partners, for their services to be rendered in connection with the
administration of the day to day business of the Partnership.
- 13 -
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (continued)
Management Fee
--------------
In accordance with the management agreement, the Partnership paid Tetra
Property Management Company, affiliates of one of the general partners, a
management fee during 2000 in the amount of 40,920, for services rendered
in connection with the leasing and operation of the project. The fee for
its services is approximately 8% of the project's rental income.
NOTE 7 - concentration of credit risk
The Partnership maintains cash and cash equivalents at two financial
institutions located in California. The accounts are insured by the
Federal Deposit Insurance Corporation up to $100,000 per financial
institution. At December 31, 1999, the Partnership' uninsured cash
balances totaled $82,212
Note 8 - Commitment
The Partnership entered into a Regulatory Agreement with the Tax Credit
Allocation Committee (TCAC), established under Section 50185 of the
Health and Safety Code of the State of California. Under this Agreement,
the Partnership shall maintain the project as a Qualified Low-income
Housing Project for a period of 55 consecutive taxable years beginning
with 1995, the first taxable year of the Credit Period. In exchange for
this agreement, TCAC has authorized an allocation relating to the
low-income housing credit under the provisions of Section 42 of the
Internal Revenue Code.
Note 9 - Current VULNERABILITY due to certain concentrations
The Partnership's sole asset is Foothill Vista Apartments. The
Partnership's operations are concentrated in the multifamily real estate
market.
- 14 -