FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
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: 0-28370
WNC Housing Tax Credit Fund IV, L.P. - Series 2
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0596399
WNC Housing Tax Credit Fund IV, L.P. - Series 2
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 622-5565
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(a California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED September 30, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1996 and December 31, 1995..................3
Statement of Operations
For the nine and three months ended September 30, 1996..................4
Statement of Partners' Equity
For the nine months ended September 30, 1996............................5
Statement of Cash Flows
For the nine months ended September 30, 1996............................6
Notes to Financial Statements.............................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........................13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................18
Signatures...........................................................19
<PAGE>
Financial Statements
WNC HOUSING TAX CREDIT FUND IV, L.P. - SERIES 2
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 2,566,803 $ 5,285,730
Investment in limited
partnerships - Note 2 10,156,310 9,417,744
Other assets 8,651 29,568
----- ------
$ 12,731,764 $ 14,733,042
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and expenses due to
general partner and affiliates - Note 3 $ 11,075 $ 146,685
Payable to limited partnerships -Note 4 808,968 2,134,797
------- ---------
820,043 2,281,482
------- ---------
Partners' equity (deficit):
General partner (33,194) (27,796)
Limited partners (20,000 units
authorized, 15,600 units issued
and outstanding) 11,944,915 12,479,356
---------- ----------
Total partners' equity 11,911,721 12,451,560
---------- ----------
$ 12,731,764 $ 14,733,042
========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P. - SERIES 2
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the hree and Nine Months Ended September 30, 1996 and 1995
1996 1995
---- ----
Three Nine Three Nine
Months Months Months Months
Interest income $ 36,865 $ 130,941 $ 92,377 $ 124,749
------- ------- ------- -------
Operating expenses:
Amortization 11,300 30,046 7,047 17,225
Asset management fees - Note 4 10,725 32,175 6,666 16,833
Interest expense 5,350 39,148 39,148
Legal and accounting - 6,260 - 2,350
Other 616 8,236 2,941 7,042
--- ----- ----- -----
Total operating expenses 22,641 82,067 55,802 82,598
------ ------ ------ ------
Income from operations 14,224 48,874 36,575 42,151
Equity in loss from
limited partnerships (212,600) (566,000) (45,720) (166,500)
--------- --------- -------- ---------
Net loss $(198,376) $(517,126) $(9,145) $124,349)
========= ========= ======= ========
Net loss allocated to:
General partner $ (1,984) (5,171) (91) (1,243)
======= ======= ==== =======
Limited partners $(196,392) (511,955) (9,054) (123,106)
========= ======== ====== ========
Net loss per 15,600 and
11,363 weighted partner
units outstanding
September 30, 1996 and 1995 $ (13) $ (33) $ (1) $ (11)
==== ==== === ====
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P. - SERIES 2
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Nine Months Ended September 30, 1996 and 1995
For the Nine Months Ended September 30, 1996
General Limited
Partner Partner Total
Equity (deficit), December 31, 1995 $ (27,796) $ 12,479,356 $ 12,451,560
Offering expenses (227) (22,486) (22,713)
Net loss for the nine months ended
September 30, 1996 (5,171) (511,955) (517,126)
------- --------- ---------
Equity (deficit), September 30, 1996 $ (33,194) $ 11,944,915 $ 11,911,721
======== ========== ==========
For the Nine Months Ended September 30, 1995
General Limited
Partner Partner Total
Equity (deficit), December 31, 1994 $ (9,902) $ 4,473,382 $ 4,463,480
Capital contributions (20,000 units
authorized 9,856 units issued and
outstanding 9,593,000 9,593,000
Offering expenses (11,675) (1,155,846) (1,167,521)
Capital issued for notes receivable (80,000) (80,000)
Net loss for the nine months ended
September 30, 1995 (1,243) (123,106) (124,349)
------- --------- ---------
Equity (deficit), September 30, 1995 $(22,820) $ 12,707,430 $12,684,610
======== ========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P. - SERIES 2
(A California Limited Partnership)
STATEMENT OF CASH FLOWS For the Nine
Months Ended September 30, 1996 and 1995
1996 1995
---- ----
Cash flows provided by operating activities:
Net loss $ (517,126) $ (124,349)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of limited partnerships 566,000 166,500
Amortization 30,046 17,225
Asset management fee (47,825) 16,833
Change in other assets 20,917 (48,729)
Accrued fees and expense due to
general partner and affiliates 2559 (404)
Net cash operating activities 54,571 27,076
------- ------
Cash flows used by investing activities:
Investments in limited partnerships (2,651,479) (2,435,539)
Acquisition costs and fees (103,206) (780,548)
Increase in cash in escrow (900,000)
Distribution from limited partnerships 3,900 -
----- -----
Net cash flows used by investing activities: (2,750,785) (4,116,087)
----------- -----------
Cash flows provided (used) by financing activities:
Capital contributions from partners 9,674,000
Collection of subscriptions receivable 597,100
Decrease in loan payable (280,569)
Offering costs (22,713) (1,278,501)
Decrease in advances from affiliates - (214,302)
-------- ---------
Net cash provided (used) by financing activities (22,713) 8,497,728
-------- ---------
Net decrease in cash and cash equivalents (2,718,927) 4,408,717
Cash and cash equivalents, beginning of period 5,285,730 720,130
---------- -------
Cash and cash equivalent, end of period $ 2,566,803 $ 5,128,847
========= =========
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENT OF CASH FLOWS - CONTINUED
For the Nine months ended September 30, 1996 and 1995
Supplemental disclosure of noncash financing and investing activity:
During the nine months ended September 30, 1996, the Partnership's Payables to
Limited Partnerships (in connection with its investments in limited
partnerships) decreased by $46,755 due to various price adjuster provisions in
the respective limited partnership agreements and increased by $1,372,405 due to
acquisitions of limited partnership interest. This results in a net noncash
change in the Partnership's payables to limited partnerships of $1,325,650. .
- --------------------------------------------------------------------------------
During the nine months ended September 30, 1995, the Partnership's Payables to
Limited Partnerships (in connection with its investments in limited
partnerships) decreased by $135,360 due to various price adjuster provisions in
the respective limited partnership agreements and increased by $3,234784 less
deposits of $880,760 due to acquisitions of limited partnership interest. This
results in a net noncash change in the Partnership's payables to limited
partnerships of $2,218,664
UNAUDITED
See Accompanying Notes to Financial Statements
7
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") was formed
under the California Revised Limited Partnership Act on September 27, 1993, and
commenced operations on July 18, 1995. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.
The general partner of the Partnership is WNC Tax Credit Partners IV, L.P. (the
"General Partner"), a California limited partnership. WNC & Associates, Inc. is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 70% of the outstanding stock of WNC & Associates,
Inc. John B. Lester, Jr. is the original limited partner of the Partnership and
owns, through the Lester Family Trust, 30% of the outstanding stock of WNC &
Associates, Inc.
General
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the audited financial statements and related notes thereto
contained in the Partnership's financial statements for the period ended
December 31, 1995 (audited).
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1996 and the results of operations and changes in cash flows for the nine months
ended September 30, 1996 and 1995.
Allocations Under the Terms of the Partnership Agreement
The General Partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in the
Partnership's Agreement of Limited
8
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Partnership) and the General Partner has received a subordinated disposition
fee (as described in Note 4 below), 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.
Method of Accounting For Investment in Limited Partnerships
The investment in limited partnerships is accounted for on the equity method of
accounting whereby the Partnership adjusts its investment balance for its share
of each limited partnership's results of operations and for any distributions
received. Costs incurred by the Partnership in acquiring the investments in
limited partnerships are capitalized as part of the investment account.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Offering Expenses
Offering expenses will 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.
Organization Costs
Organization costs will be amortized on the straight-line method over 60 months.
Cash and Cash Equivalents
The Partnership considers investments with an original maturity of three months
or less as cash equivalents.
9
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
As of September 30, 1996 the Partnership had acquired limited partnership
interests in twenty limited partnerships each of which owns one Apartment
Complex. As of September 30, 1996, construction or rehabilitation of nineteen of
the Apartment Complexes had been completed and three were undergoing
construction or rehabilitation.
As of September 30, 1995 the Partnership had acquired limited partnership
interests in seventeen limited partnerships each of which owns one Apartment
Complex. As of September 30, 1995, construction or rehabilitation of thirteen of
the Apartment Complexes had been completed and four were undergoing construction
or rehabilitation.
The Partnership, as a limited partner, is entitled to 95% to 99%, as specified
in the partnership agreements, of the operating profits and losses of the
limited partnerships upon the acquisition of its limited partnership interest.
Following is a summary of the components of investment in limited partnerships
as of September 30, 1996 and December 31, 1995
1996 1995
---- ----
Investment balance, beginning of period $ 9,417,744 $ 6,235,584
Investments in limited partnerships 1,325,650 3,099,425
Capitalized acquisition fees and costs 12,862 737,464
Equity in loss of limited partnerships (566,000) (628,521)
Distributions (3,900)
Amortization of capitalized
acquisition costs (30,046) (26,208)
-------- --------
Investment balance,
end of period $ 10,156,310 $ 9,417,744
=========== =========
Selected financial information from the financial statements of the limited
partnerships with operations for the nine months ended September 30, 1996 and
1995 is as follows (rounded to the nearest thousand):
10
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
1996 1995
---- ----
Total revenue $ 1,813,000 $ 996,000
--------- -------
Interest expense 623,000 252,000
Depreciation 842,000 346,000
Operating expenses 920,000 568,000
-------- -------
Total expenses 2,385,000 1,166,000
--------- ---------
Net loss $ (572,000) $ ($170,000)
========= ==========
Net loss allocable to the
Partnership $ (566,000) $ (166,500)
========= =========
NOTE 3 - RELATED PARTY TRANSACTIONS
Under the terms of its Agreement of Limited Partnership, 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
Partnership units. During the nine months ended September 30, 1996 and
1995 the Partnership incurred acquisition fees of $884 and $547,786.
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 (defined as the
Partnership's capital contributions to the limited partnerships plus
its allocable percentage of the permanent financing) of the limited
partnerships which are subsidized under one or more Federal, state or
local government programs. The Partnership has incurred fees of $32,175
and $16,833 for the nine months ended September 30, 1996 and 1995.
11
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
Reimbursement for organizational, offering and selling expenses
advanced by an affiliate of the General Partner on behalf of the
Partnership. These reimbursements plus all other organizational and
offering expenses inclusive of sales commissions will not exceed 15% of
the gross proceeds. The Partnership incurred offering costs during the
nine months ended September 30, 1996 of $22,713. The Partnership
incurred offering and selling expenses during the nine months ended
September 30, 1995 of $590,667 and $576,854, respectively.
A subordinated disposition fee in an amount equal to 1% of the sales
price of real estate sold. Payment of this fee is subordinated to the
limited partners receiving a return on investment (as defined in the
Agreement of Limited Partnership) and is payable only if services are
rendered in the sales effort.
Advances and fees payable due to general partner of $11,075 and $ 146, 685 at
September 30, 1996 and December 31, 1996, respectively consists of the
following:
1996 1995
---- ----
Asset management fee payable, $11,075 $ 58,900
Acquisition fees and expenses payable 0 90,344
Advances for expenses 0 (2,559)
------- -------
$11,075 $146,685
====== =======
NOTE 4 - PAYABLE TO LIMITED PARTNERSHIPS
Payable to limited partnerships represent amounts which are due at various times
based on conditions specified in the respective limited partnership agreements.
These contributions are payable in installments, are generally due upon the
limited partnerships achieving certain operating benchmarks and are generally
expected to be paid within two years of the Partnership's initial investment.
NOTE 5- INCOME TAXES
The Partnership will not make a provision for income taxes since all items of
taxable income and loss will be allocated to the partners for inclusion in their
respective income tax returns.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
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, and commenced operations on July 18, 1995 to acquire
limited partnership interests in limited partnerships ("Limited Partnerships")
which own multifamily apartment complexes that are eligible for low-income
housing federal income tax credits (the "Housing Tax Credit").
The Partnership's offering of units terminated on July 26, 1996
Liquidity and Capital Resources
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $2,719,000 for the nine
months ended September 30, 1996. This decrease in cash consists of cash used by
investing and financing activities and cash provided by operating activities.
Cash was used by the investing activities of the Partnership during such period
in the aggregate amount of approximately $2,751,000, which consisted primarily
of capital contributions to Limited Partnerships. Cash used by financing
activities consisted entirely of payments for offering costs of approximately
$23,000. Cash was provided by the operating activities of the Partnership in
aggregate amount of approximately $55,000. Cash provided from operations
consisted primarily of interest received on cash deposits, and cash used in
operations consisted primarily of payments for operating fees and expenses. The
major components of all these activities are discussed in greater detail below.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
increase in cash and cash equivalents of approximately $4,409,000 for the nine
months ended September 30, 1995. This increase in cash was provided by the
Partnership's financing activities, including the proceeds from the offering and
short term indebtedness described below. Cash from financing activities for the
period ended September 30, 1995 of approximately $8,498,000 was sufficient to
fund the investing activities of the Partnership during such period in the
aggregate amount of approximately $4,116,000, which consisted primarily of
capital contributions to Limited Partnerships. Cash provided and used by the
operating activities of the Partnership was minimal compared to its other
activities. Cash provided from operations consisted primarily of interest
received on cash deposits, and cash used in operations consisted primarily of
payments for operating fees and expenses. The major components of all these
activities are discussed in greater detail below.
13
<PAGE>
As of December 31, 1995 and September 30, 1996 the Partnership was indebted to
WNC & Associates, Inc. in the amount of approximately $147,000 and $11,000,
respectively. The component items of such indebtedness were as follows: accrued
acquisition fees of approximately $90,000 and $0, respectively, advances to pay
front-end fees of approximately $0 and $19,000, respectively, accrued asset
management fees of approximately $59,000 and $11,000, respectively and advances
for expenses of approximately $(2,600) and $0, respectively.
As of August 1, 1996, the Partnership has received and accepted subscriptions
funds in the amount of $15,600,000. As of November 1, 1996, as of September 30,
1996 and as of December 31, 1995, the Partnership had made capital contributions
to Limited Partnerships in the amount of approximately $9,881,000 , $9,636,000
and $8,342,000, respectively, and had commitments for additional capital
contributions of approximately $564,000, $809,000 and $994,000, respectively.
Prior to sale of the Apartment Complexes, it is not expected that any of the
Limited Partnerships in which the Partnership has invested or will invest will
generate cash from operations sufficient to provide distributions to the Limited
Partners in any material amount. Such cash from operations, if any, would first
be used to meet operating expenses of the Partnership, including payment of the
asset management fee to the General Partner. As a result, it is not anticipated
that the Partnership will provide distributions to the Limited Partners prior to
the sale of the Apartment Complexes.
The Partnership's investments will not be readily marketable and may be affected
by adverse general economic conditions which, in turn, could substantially
increase the risk of operating losses for the Apartment Complexes, the Limited
Partnerships and the Partnership. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Units will be sufficient to fund the Partnership's investment commitments
and proposed operations.
The Partnership will establish working capital reserves of at least 3% of
capital contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership excluding payment of the asset management fee as well as expenses
attendant to the preparation of tax returns and reports to the Limited Partners
and other investor servicing obligations of the Partnership. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnership's liquidity could also be affected by defaults
or delays in payment of the Limited Partners' promissory notes, from which a
portion of the working capital reserves is expected to be funded. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
of the Partnership, it is anticipated that additional funds would be sought
through bank loans or other institutional financing. The General Partner may
also apply any cash distributions received from the Limited Partnerships for
such purposes or to replenish or increase working capital reserves.
14
<PAGE>
Under the Partnership Agreements the Partnership does not have the ability to
assess the Limited Partners for additional capital contributions to provide
capital if needed by the Partnership or Limited Partnerships. Accordingly, if
circumstances arise that cause the Limited Partnerships to require capital in
addition to that contributed by the Partnership and any equity contributed by
the general partners of the Limited Partnerships, the only sources from which
such capital needs will be able to be satisfied (other than the limited reserves
available at the Partnership level) will be (i) third-party debt financing
(which may not be available, if, as expected, the Apartment Complexes owned by
the Limited Partnerships are already substantially leveraged), (ii) additional
equity contributions or advances of the general partners of the Limited
Partnerships (in this regard, each local general partner is required to fund
operating deficits, but only for a period of two years following construction
completion), (iii) other equity sources (which could adversely affect the
Partnership's interest in Housing Tax Credits, cash flow and/or proceeds of sale
or refinancing of the Apartment Complexes and result in adverse tax consequences
to the Limited Partners), or (iv) the sale or disposition of the Apartment
Complexes (which could have the same adverse effects as discussed in (iii)
above). There can be no assurance that funds from any of such sources would be
readily available in sufficient amounts to fund the capital requirement of the
Limited Partnerships in question. If such funds are not available, the Limited
Partnerships would risk foreclosure on their Apartment Complexes if they were
unable to re-negotiate the terms of their first mortgages and any other debt
secured by the Apartment Complexes to the extent the capital requirements of the
Limited Partnerships relate to such debt.
The Partnership's capital needs and resources are expected to undergo major
changes during their first several years of operations as a result of the
completion of their offerings of Units and their acquisition of investments.
Thereafter, the Partnership's capital needs and resources are expected to be
relatively stable over the holding periods of the investments except to the
extent of proceeds received in payment of promissory notes and disbursed to fund
the deferred obligations of the Partnership.
15
<PAGE>
Results of Operations
As of September 30, 1995 and 1996 the Partnership had acquired seventeen and
twenty Limited Partnership Interests, respectively. Each of the twenty Limited
Partnerships receives or is expected to receive government assistance and each
of them has received a reservation for Housing Tax Credits.
As of September 30, 1995, thirteen of the Apartment Complexes in the Partnership
had commenced operations, as of September 30, 1996, nineteen of the Apartment
Complexes had commenced operations. Accordingly, the "Equity in losses from
limited partnerships" for the periods ended September 30, 1995 and September 30,
1996 reflected in the Statement of Operations of the Partnership is not
indicative of the amounts to be reported in future years.
As reflected on its Statements of Operations, the Partnership had a loss of
approximately $517,000 and $124,000 for the nine months ended September 30, 1996
and 1995, respectively. The component items of revenue and expense are discussed
below.
Revenue. The Partnership's revenues consisted entirely of interest earned on
promissory notes and cash deposits held in financial institutions (i) as
reserves, or (ii) pending investment in Limited Partnerships. Interest revenue
in future years will be a function of prevailing interest rates and the amount
of cash balances. It is anticipated that the Partnership will maintain cash
Reserves in an amount not materially in excess of the minimum amount required by
its Partnership Agreement, which is 3% of capital contributions.
Expenses. The most significant component of operating expenses was and is
expected to be the Asset Management Fee. The Asset Management Fee is equal to
the greater of (i) $2,000 for each Apartment Complex or (ii) 0.275% of gross
proceeds, and will be decreased or increased annually based on changes to the
Consumer Price Index.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of
Limited Partnership Interests.
16
<PAGE>
Because of the amounts of the Asset Management Fee and amortization expense
primarily are determined by the gross proceeds from the offering, the number and
size of Apartment Complexes and the number of investors, until termination of
the Offering and investment of the net proceeds therefrom the Partnership cannot
predict with any accuracy what these amounts will be.
Equity in Losses from Limited Partnership. The Partnership's equity in losses
from Limited Partnerships is equal to 96%-99% of the aggregate net losses of
each Limited Partnership incurred after admission of the Partnership as a
limited partner thereof.
After rent-up all Limited Partnerships are expected to generate losses during
each year of operations; this is so because, although rental income is expected
to exceed cash operating expenses, depreciation and amortization deductions
claimed by the Limited Partnerships are expected to exceed net rental income.
The Partnership accounts for its investments in Local Partnerships using the
equity method of accounting, whereby the Partnership reduces its investment
balance for its share of Local Partnerships' losses and distributions. Losses
are not recognized to the extent that the investment balance would be adjusted
below zero.
17
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
1. None.
No reports on Form 8-K were filed during the quarter ended September
30, 1996.
18
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC Housing Tax Credit Fund IV, L.P. - Series 2
By: WNC Tax Credit Partners IV, L.P. General Partner
By: WNC & ASSOCIATES, INC. General Partner
By: /S/John B. Lester, Jr.
John B. Lester, Jr. President
Date: November 13, 1996
By: /S/Theodore M. Paul
Theodore M. Paul Vice President - Finance
Date: November 13, 1996
19
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 913497
<NAME> WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 2
<MULTIPLIER> 1
<CURRENCY> US CURRENCY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,566,803
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,566,803
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,731,764
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,911,721
<TOTAL-LIABILITY-AND-EQUITY> 12,731,764
<SALES> 0
<TOTAL-REVENUES> 130,941
<CGS> 0
<TOTAL-COSTS> 76,717
<OTHER-EXPENSES> 566,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,350
<INCOME-PRETAX> (517,126)
<INCOME-TAX> 0
<INCOME-CONTINUING> (517,126)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (517,126)
<EPS-PRIMARY> (33)
<EPS-DILUTED> 0
</TABLE>
