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 December 31, 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) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
Title of Securities Exchanges on which Registered
NONE NOT APPLICABLE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
State the aggregate market value of the voting stock 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
<PAGE>
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 to acquire limited partnership interests in local limited
partnerships ("Local Limited Partnerships") which own multifamily apartment
complexes that are eligible for low-income housing federal income tax credits
(the "Low Income Housing Credit")
The general partner of the Partnership is WNC Tax Credits Partner IV, L.P. ("The
General Partner"). The general partner of the General Partner is WNC &
Associates, Inc. ("Associates"). The business of the Partnerships is conducted
primarily through Associates as neither the General Partner nor the Partnership
have employees of their own.
The Partnership conducted its public offering ("Offering") from July 1994 to
July 1995. 20,000 Units of Limited Partnership Interests ("Units"), at a price
of $1,000 per Unit were offered. Since inception a total of 15,600 Units
representing approximately $15,241,000 were sold throughout the offering. Enova
Financial, Inc. 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. Enova Financial, Inc.
invested $3,641,000. A discounts of $359,000 was allowed due to a volume
discount. See Item 12(a) in this 10-K.
Holders of Limited Partnership Interests are referred to herein as "Limited
Partners."
The Partnership has applied and will apply funds raised through its public
offerings, including the installment payments of the Limited Partners'
promissory notes as received, to the purchase price and acquisition fees and
costs of Local Limited Partnership Interests, reserves, and expenses of this
Offering.
Description of Business
The Partnership's principal business is to provide its Limited Partners with Low
Income Housing Credits. The Partnership's principal business therefore consists
of investing as a limited partner in Local Limited Partnerships each of which
will own and operate an apartment complex ("Apartment Complex") which will
qualify for the federal Low Income Housing Credit. In general, under Section 42,
an owner of a low-income housing project is entitled to receive the Low Income
Housing Credit in each year of a ten-year period (the "Credit Period"). The
Apartment Complex is subject to a 15-year compliance period (the "Compliance
Period").
2
<PAGE>
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 a Local Limited Partnership of any Apartment Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Apartment
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the inability of the
Partnership to directly cause the sale of Apartment Complexes by Local General
Partners, but generally only to require such Local General Partners to use their
respective best efforts to find a purchaser for the Apartment Complexes, it is
not possible at this time to predict whether the liquidation of substantially
all of the Partnership's assets and the disposition of the proceeds, if any, in
accordance with the Partnership's Agreement of Limited Partnership ("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 an Apartment Complex,
it is anticipated that the Local General Partner will either continue to operate
such Apartment Complex or take such other actions as the Local General Partner
believes to be in the best interest of the Local Limited Partnership. In
addition, circumstances beyond the control of the General Partner may occur
during the Compliance Period which would require the Partnership to approve the
disposition of an Apartment Complex prior to the end thereof.
As of December 31, 1996, the Partnership had invested in twenty Local Limited
Partnerships. Each of these Local Limited Partnerships owns an Apartment Complex
that is or is expected to be eligible for the Low Income Housing Credit. All of
the Local Limited Partnerships 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 multifamily residential real estate. Some of these
risks are that the Low Income Housing Credit could be recaptured and neither the
Partnership's investments nor the Apartment Complexes owned by Local Limited
Partnerships will be readily marketable. Additionally, there can be no assurance
that the Partnership will be able to dispose of its interest in the Local
Limited Partnerships at the end of the Compliance Period. The value of the
Partnership's investments could 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
Apartment Complexes and the Partnership. The Apartment Complexes will be subject
to loss through foreclosure. In addition, each Local Limited Partnership is
subject to risks relating to environmental hazards which might be uninsurable.
Because the Partnership's ability to control its 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 Partnership operations will be
profitable or that the anticipated Low Income Housing Credits will be available
to Limited Partners.
3
<PAGE>
As of December 31, 1996, 19 of the 20 Apartment Complexes acquired by the
Partnership were completed and in operation and one was under construction. The
Apartment Complexes owned by the Local Limited Partnerships in which the
Partnership has invested were or are being developed by the Local General
Partners who acquired the sites and applied for applicable mortgages and
subsidies. The Partnership became the principal limited partner in these Local
Limited Partnerships pursuant to arm's-length negotiations with the Local
General Partners. As a limited partner, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partner of the Local Limited Partnership retain responsibility for
developing, constructing, maintaining, operating and managing the Apartment
Complex.
Following is recap of the status of the twenty Apartment Complexes owned by the
twenty Limited Partnerships invested in or identified by the Partnership:
<TABLE>
<S> <C> <C> <C>
Construction Under
or Rehabilitation Construction Construction
Completed or Rehabilitation Not Started
--------- ----------------- -----------
Properties acquired by 12/31/96 19 1 0
</TABLE>
4
<PAGE>
The following is a schedule of the status as of December 31, 1996, of the
Apartment Complexes owned by Local Partnerships in which the Partnership was a
limited partner as of December 31, 1996:
<TABLE>
<CAPTION>
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH THE PARTNERSHIP HAS AN INVESTMENT
AS OF DECEMBER 31, 1996
Number Percentage
of Units Units of Total
NAME & Location Apts. Completed Occupied Units Occupied
- --------------- ----- --------- -------- --------------
<S> <C> <C> <C> <C>
AUTUMN TRACE 58 58 52 90%
Silsbee (Hardin Co.) Texas
BROKEN BOW 16 0 0 0
Broken Bow (Custer Co.), Nebraska
CHADWICK 48 48 47 98
Eden, (Rockingham Co.) N.C.
COMANCHE 22 22 20 91
Comanche (Comanche Co.) Texas
E. W. 16 16 15 94
Evansville (Rock Co.) Wisconsin
GARLAND 18 18 18 100
Malvern (Hot Spring Co.)Arkansas
HEREFORD 28 28 27 96
Hereford, (Deaf Smith Co.) Texas
HICKORY LANE 24 24 23 96
Newton (Newton Co.) Texas
HONEYSUCKLE 48 48 47 98
Vidor (Orange Co.) Texas
KLIMPEL MANOR 59 59 59 100
Fullerton (Orange Co.) CA
LA MESA 24 24 24 100
Lamesa (Dawson Co.), Texas
LAREDO HEIGHTS APTS 48 48 45 93
Navasto, Texas
MOUNTAINVIEW 24 24 22 92
North Wilkesboro (Wilkes Co.) N.C.
PALESTINE 42 42 41 98
Palestine (Anderson Co.) Texas
PECAN 32 32 32 100
Forrest City (St. Francis Co.) AR
PIONEER 112 112 111 99
Bakersfield (Kern Co.) California
SIDNEY APARTMENTS I 18 18 12 66
Omaha, Nebraska
SOUTHCOVE 54 54 53 98
Orange Cove (Fresno Co.) CA
WALNUT BEND 23 23 22 96
Buna (Jasper Co.) Texas
WAUKEE II 23 23 23 100
Waukee (Dallas Co.) Iowa -- -- -- ---
737 721 693 96%
=== === === ==
</TABLE>
5
<PAGE>
Description of Local Partnerships
The Partnership has become a limited partner in AUTUMN TRACE ASSOCIATES, LTD., a
Texas limited partnership ("AUTUMN"); in BROKEN BOW APARTMENTS, L.P. a Nebraska
limited partnership ("BROKEN BOW"), in CHADWICK LIMITED PARTNERSHIP, a North
Carolina limited partnership ("CHADWICK"); COMANCHE RETIREMENT VILLAGE, LTD., a
Texas limited partnership ("COMANCHE"); EW, a Wisconsin limited partnership
("EW"); GARLAND STREET LIMITED PARTNERSHIP, an Arkansas limited partnership
("GARLAND"); HEREFORD SENIORS COMMUNITY, LTD., a Texas limited partnership
("HEREFORD"); HICKORY LANE ASSOCIATES, LIMITED, a Texas limited partnership
("HICKORY"); HONEYSUCKLE COURT ASSOCIATES, LIMITED, a Texas limited partnership
("HONEYSUCKLE"); KLIMPEL MANOR, LTD., a California limited partnership
("KLIMPEL"), LAMESA SENIORS COMMUNITY, LTD., a Texas limited partnership
("LAMESA"); LAREDO HEIGHTS APARTMENTS, LTD., a Texas limited partnership
("LAREDO"), MOUNTAINVIEW APARTMENTS LIMITED PARTNERSHIP, a North Carolina
limited partnership ("MOUNTAINVIEW"); PALESTINE SENIORS COMMUNITY, LTD., a Texas
limited partnership ("PALESTINE"); PECAN GROVE LIMITED PARTNERSHIP, an Arkansas
limited partnership ("PECAN"), PIONEER STREET ASSOCIATES, L.P., a California
limited partnership ("PIONEER"); SIDNEY APARTMENTS I LIMITED PARTNERSHIP, a
Nebraska limited partnership, ("SIDNEY"), SOUTHCOVE ASSOCIATES, a California
limited partnership ("SOUTHCOVE"), WALNUT TURN ASSOCIATES, LIMITED, a Texas
limited partnership ("WALNUT"), and CANDLERIDGE APARTMENTS OF WAUKEE L.P. II, an
Iowa limited partnership ("WAUKEE-II").
AUTUMN owns the Autumn Trace Apartments in Silsbee, Texas; CHADWICK own the
Chadwick Apartments in Eden, North Carolina; COMANCHE owns the Comanche
Retirement Village Apartments in Comanche, Texas; EW owns the Evansville Town
Homes in Evansville, Wisconsin, GARLAND owns the Garland Street Apartments in
Malvern, Arkansas; HEREFORD owns the Hereford Seniors Community in Hereford,
Texas; HICKORY owns the Hickory Lane Apartments in Newton, Texas; HONEYSUCKLE
owns the Honeysuckle Court Apartments in Vidor, Texas; KLIMPEL owns the Klimpel
Manor Apartments in Fullerton, California, LAMESA owns the Lamesa Seniors
Community in Lamesa, Texas; MOUNTAINVIEW owns the Mountainview Apartments in
North Wilkesboro, North Carolina; PALESTINE owns the Palestine Seniors Community
in Palestine, Texas; and PECAN owns the Pecan Grove Apartments in Forrest City,
Arkansas, PIONEER owns the Pioneer Street Apartments in Bakersfield, California;
SOUTHCOVE own the Southcove Apartments in Orange Cove, California, WALNUT owns
the Walnut Turn Apartments in Buna, Texas. WAUKEE-II owns the Candleridge of
Waukee Apartments II in Waukee, Iowa.
The following tables contain information concerning the Local Limited
Partnerships acquired by the Partnership.
6
<PAGE>
<TABLE>
========================================================================================================================
<CAPTION>
Local Project Name Estimated Estimated Number of Basic Permanent Local
Limited Construction Development Apartment Monthly Mortgage Limited
Partnership Completion Cost With Units Rents Loan Amount Partnership's
Land Anticipated
Tax Credits (1)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
AUTUMN Autumn May 1994 $2,030,727 26 1BR units $210 $1,256,680 $768,000
Trace 32 2BR units $265 RECDS (3)
Apartments (2)
- ------------------------------------------------------------------------------------------------------------------------
BROKEN BOW Broken Bow December $1,417,102 6 2BR units $301 $500,000 $1,127,220
Apartments 1996 10 3BR units $352 FNBO (11)
- ------------------------------------------------------------------------------------------------------------------------
CHADWICK Chadwick October $2,024,524 8 1BR units $285 $898,311 $735,000
Apartments (2) 1994 36 2BR units $307 RECDS (3)
4 3BR units $333
- ------------------------------------------------------------------------------------------------------------------------
COMANCHE Comanche January $616,000 20 1BR units $235 $597,520 $290,000
Retirement 1995 2 2BR units $275 RECDS (3)
Village
Apartments
(4)
- ------------------------------------------------------------------------------------------------------------------------
EW Evansville September $868,552 4 2BR units $493 $660,000 $306,000
Town Homes 1994 12 3BR units $599 WHEDA (5)
- ------------------------------------------------------------------------------------------------------------------------
GARLAND Garland September $898,780 18 2BR units $270 $702,332 $319,000
Street 1994 RECDS (3)
Apartments
(2)
- ------------------------------------------------------------------------------------------------------------------------
HEREFORD Hereford December $854,000 28 1BR units $260 $809,750 $355,000
Seniors 1995 RECDS (3)
Community
Apartments
(4)
- ------------------------------------------------------------------------------------------------------------------------
HICKORY Hickory December $920,000 16 1BR units $185 $598,900 $322,000
Lane 1995 8 2BR units $233 RECDS (3)
Apartments
(2)
- ------------------------------------------------------------------------------------------------------------------------
HONEY- Honeysuckle December $1,701,691 24 1BR units $283 $1,172,600 $622,000
SUCKLE Court 1995 24 2BR units $333 RECDS (3)
Apartments
(2)
- ------------------------------------------------------------------------------------------------------------------------
KLIMPEL Klimpel November $3,618,242 58 1BR units $340-445 $1,320,000 $3,360,000
Manor 1994 1 2BR unit $497 CHFA (6)
Apartments
(5) $625,000
LGP (7)
- ------------------------------------------------------------------------------------------------------------------------
7
<PAGE>
<CAPTION>
Local Project Name Estimated Estimated Number of Basic Permanent Local
Limited Construction Development Apartment Monthly Mortgage Limited
Partnership Completion Cost With Units Rents Loan Amount Partnership's
Land Anticipated
Tax Credits (1)
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
LAMESA Lamesa June $826,426 24 1BR units $265 $679,000 $302,000
Seniors 1994 RECDS (3)
Community
Apartments
(4)
- ------------------------------------------------------------------------------------------------------------------------
LAREDO Laredo Heights July $1,302,003 8 1BR units $326 $1,009,500 $419,320
Apartments (2) 1996 40 2BR units $349 RECDS (12)
- ------------------------------------------------------------------------------------------------------------------------
MOUNTAIN-VIEW Mountain-view December $1,206,604 22 1BR units $292 $1,025,482 $387,000
Apartments 1993 2 2BR units $340 RECDS (3)
(4)
- ------------------------------------------------------------------------------------------------------------------------
PALESTINE Palestine June $1,180,000 40 1BR units $264 $1,144,600 $446,000
Seniors 1995 2 2BR units $318 RECDS (3)
Community
Apartments
(4)
- ------------------------------------------------------------------------------------------------------------------------
PECAN Pecan July $1,454,000 32 2BR units $245 $1,194,732 $464,000
Grove 1994 RECDS (3)
Apartments
(2)
- ------------------------------------------------------------------------------------------------------------------------
PIONEER Pioneer October $3,903,000 78 2BR units $341-4222 $1,960,000 $4,156,000
Street 1995 32 3BR units $488 CCRC (8)
Apartments 2 4BR units $437-542
- ------------------------------------------------------------------------------------------------------------------------
SIDNEY Sidney August $1,134,574 6 2BR units $326 $450,000 $993,320
Apartments I 1996 12 3BR units $349 FNBO (13)
- ------------------------------------------------------------------------------------------------------------------------
SOUTHCOVE Southcove July $3,750,000 20 2BR units $226-407 $1,051,050 $3,783,000
Apartments 1995 34 3BR units $249-471 RHCP (9)
$525,000
CCRC (8)
- ------------------------------------------------------------------------------------------------------------------------
WALNUT Walnut Turn December $981,000 23 2BR units $218 $716,000 $347,000
Apartments 1995 RECDS (3)
(2)
- ------------------------------------------------------------------------------------------------------------------------
WAUKEE-II Candleridge December $736,000 23 1BR units $285 $694,148 $230,000
(12) Apartments 1994 RECDS (3)
of Waukee II
(3)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
(1) Low Income Housing Credits are available over a 10-year period. For the
year in which the credit first becomes available with respect to an
Apartment Complex, The Partnership will receive only that percentage of
the annual credit which corresponds to the number of months during
which The Partnership was a limited partner of the Local Limited
Partnership, and during which the Apartment Complex was completed and
in service.
(2) Rehabilitation property.
(3) The Rural Economic and Community Development Services (formerly the
Farmers Home Administration) of the United States Department of
Agriculture ("RECDS") provides mortgage loans under the RECDS Section
515 Mortgage Loan Program. Each of these mortgage loans is or will be a
50-year loan and bears or will bear annual interest at a market rate
prior to reduction of the interest rate by a mortgage interest subsidy
to an annual rate of 1%, with principal and interest payable monthly
based on a 50-year amortization schedule.
(4) Senior citizen housing.
(5) The Wisconsin Housing & Economic Development Authority ("WHEDA") will
provide the mortgage loan for a term of 30 years at an interest rate of
6.65% per annum, with principal and interest payable monthly based on a
30-year amortization schedule.
(6) The California Housing and Finance Agency ("CHFA") will provide the
mortgage loan for a term of 40 years at an interest rate of 9% per
annum, with principal and interest payable monthly based on a 40-year
amortization schedule.
(7) Margaret N. Chaffee, one of the Local General Partners, will provide a
second loan for a term of 40 years at an interest rate of 9.25% per
annum, with principal and interest payable monthly based on a 40-year
amortization schedule.
(8) The California Community Reinvestment Corporation ("CCRC") is providing
the mortgage loan at an annual interest rate of 8.75%, with principal
and interest payable monthly based on a 30-year amortization schedule.
9
<PAGE>
(9) California has established the Rental Housing Construction Program
("RHCP") to provide low interest loans directly to project sponsors for
the construction of new rental housing for occupancy by very low-income
households, lower-income households and other households. RHCP funding
is provided through a combination of interim construction and permanent
loans or through permanent loans only. The standard interest rate is 3%
per annum, calculated on a simple (non-compounded) basis. The minimum
term to maturity is 40 years, with longer original terms and 10-year
extensions available. The repayment schedule is based on a formula
generally related to the project's ability to pay. During the first 30
years of the loan term, no principal payments are required. Interest is
payable from, and only to the extent of, net cash flow. Accrued
interest for any year which cannot be paid is deferred until such time
as net cash flow is sufficient for payment thereof. Commencing with the
30th year of the loan term, principal and interest are payable out of
net cash flow. The amount of the required payments depends, in part, on
the remaining duration of the loan term. In each project, 30% or more
of all units must be assisted units, and at least 2/3 of all assisted
units must be very low-income units.
(10) California Community Reinvestment Corp. will provide the mortgage loan
at a fixed interest rate of 9% per annum. The loan will be for a
30-year term, with principal and interest payable monthly based on a
30-year amortization schedule.
(11) First National Bank of Omaha ("FNBO)") will provide the mortgage loan
for a term of 22 years at a variable interest rate. The interest rate
will be adjusted every 36 months to an annual rate of 9% per annum and
a maximum rate of 11.5% per annum. Principal and interest will be
payable monthly based on a 22-year amortization schedule.
(12) Rural Economic and Community Development Services (formerly, the
Farmers Home Administration) of the United States Department of
Agriculture ("RECDS") provides mortgage loans under the RECDS Section
515 Mortgage Loan Program. The mortgage loan will bear annual interest
at a market rate prior to reduction of the interest rate by a mortgage
interest subsidy to an annual rate of 1%, with principal and interest
payable monthly. The term and amortization schedule will be 40 years.
(13) First National Bank of Omaha ("FNBO") will provide the mortgage loan
for a term of 15 years at a variable interest rate. The interest rate
will be adjusted every 36 months to an annual rate of 25 basis points
over the three-year Treasury Constant Maturities. The note will have a
minimum rate of 9% and a maximum rate of 11.5%. Principal and interest
will be payable monthly based on a 22-year amortization schedule.
10
<PAGE>
Silsbee (AUTUMN): Silsbee is in Hardin County, Texas near the intersections of
U.S. Highways 69 and 96, and State Highway 92. Houston lies 120 miles southwest.
The population of Silsbee is approximately 6,400. The major employers for
Silsbee residents are Temple-Inland Forest Products Corp., Kirby Forest
Industries/Louisiana Pacific, and the Silsbee Independent School District.
Broken Bow (BROKEN BOW): Broken Bow is the county seat of Custer County, and is
central Nebraska at the intersection of State Highways 2, 21 and 70. The major
employers for Broken Bow residents are Becton Dickinson Vacutainer Systems
(medical equipment), Sargent Pipe Company, and Arrow Seed Company, Inc.
Eden (CHADWICK): Eden is in Rockingham County, North Carolina at the
intersection of State Highways 87 and 770. Greensboro is 30 miles to the south
and Winston-Salem is 60 miles to the southwest. The population of Eden is
approximately 16,000. The city's largest employers are Miller Brewing Company,
Billcrest Canon, and Sara Lee.
Comanche (COMANCHE): Comanche is the county seat of Comanche County, located in
west-central Texas along U.S. Highway 377. Fort Worth is 108 miles to the
northeast. The population of Comanche is approximately 4,000. It's major
employers are Gore Bros., Inc., Western Hills Nursing Home, Comanche
Manufacturing, and the Comanche Independent School District.
Evansville (EW): Evansville is in Rock County, Wisconsin at the intersection of
U.S. Highway 14 and State Highway 213. The state capitol of Madison is 35 miles
northeast of Orange Cove. The population of Evansville is approximately 3,300.
Three of the area's largest employers are Varco-Pruden, a division of AMCA
International, Baker Manufacturing, and the Harvard Corporation.
Malvern (GARLAND): Malvern is the county seat of Hot Spring County, located in
south-central Arkansas near Interstate Highway 30. Little Rock is 45 miles to
the northeast and Hot Springs National Park is 20 miles to the northwest. The
population of Malvern is approximately 9,200. The city's major employers include
Amoco Foam (meat packing trays), Acme Brick (brick manufacturer) and Willamette
(fiberboard).
Hereford (HEREFORD): Hereford is the county seat of Deaf Smith County, located
in northwest Texas at the intersection of U.S. Highways 60 and 385. Amarillo is
50 miles to the northeast and Lubbock is 90 miles to the southeast. The
population of Hereford is approximately 14,700. Major employers in the Hereford
area are Holly Sugar, Hereford Bi-Products, and the Hereford School System.
Newton (HICKORY): Newton (population 1900) is the county seat of Newton County,
and is located in east-central Texas near the Louisiana border at the
intersection of State Highways 63 and 87 approximately 125 miles northeast of
Houston and 225 miles southeast of Dallas. The major employers for Newton
residents are Shady Acre Shelter (nursing home), Brookshier Brothers (grocery
store) and Kirby Lumber Company.
Vidor (HONEYSUCKLE): Vidor (population 11,000) is in Orange County in
east-central Texas near the Louisiana border at the intersection of Interstate
Highway 10 and State Highway 12 approximately 90 miles northeast of Houston and
250 miles southeast of Dallas. The largest employers for the city's residents
are Vidor School District, North Store Steel, Trinity Industry (car repair) and
Wal-Mart.
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<PAGE>
Fullerton (KLIMPEL): Fullerton is in Orange County, California, near Interstate
Highway 5 and State Highway 57, approximately 25 miles from downtown Los
Angeles. The economy in the area is based primarily in retail sales, and
secondarily in manufacturing. The largest employers for Fullerton residents are
Hughes Aircraft, Beckman Instruments, and Hunt Wesson.
Lamesa (LAMESA): Lamesa is the county seat of Dawson County, located in
west-central Texas at the intersection of U.S. Highways 180 and 87. Lubbock is
60 miles to the north and Odessa is 63 miles to the southwest. The population of
Lamesa is approximately 10,800. The city's major employers are Lamesa
Independent School District, Britt Oil Service Co. (oil drilling), and Lamesa
Apparel, Inc. (clothing manufacturer).
Navasota (LAREDO): Navasota is in Grimes County, in east-central Texas at the
intersection of State Highways 6, 90 and 105, approximately 80 miles north east
of Houston. The major employers for Navasota residents are the Texas Department
of Corrections, Hackney Steel and Tubular (drill pipes).
North Wilkesboro (MOUNTAINVIEW): North Wilkesboro is in Wilkes County in western
North Carolina, at the intersection of U.S. Highway 421 and State Highway 18.
Charlotte is 80 miles to the southeast and Winston-Salem is 45 miles to the
east. The population of North Wilkesboro is approximately 3,400. The city's main
employers are Tyson Foods, Lowes Company (hardware), and Thaca Co.
(textiles).
Palestine (PALESTINE): Palestine is the county seat of Anderson County, located
in east-central Texas at the intersection of U.S. Highways 79 and 287. Dallas is
60 miles to the northwest and Houston is 125 miles to the southeast. The
population of Palestine is approximately 18,000. The city's major employers are
the Texas Department of Criminal Justice (prison system), Wal-Mart Distribution
Center, and Memorial Hospital.
Forrest City (PECAN): Forrest City is the county seat of St. Francis County,
located in eastern Arkansas at the intersection of Interstate Highway 40 and
State Highway 1. Little Rock is 90 miles to the west. The population of Forrest
City is approximately 13,000. The city's major employers are Sanyo Manufacturing
Corp. (color television sets), Yale Hoists (hoisting equipment) and Airtherm
Products (heating/air conditioning equipment).
Bakersfield (PIONEER): Bakersfield (population 202,000) is the county seat of
Kern County, California, and is located at the southern end of the San Joaquin
Valley on State Highway 99, approximately 110 miles north of Los Angeles. In
1993, Kern County was the largest oil producing county and third most productive
agricultural county in the country. The largest employers in Bakersfield are
Giumarra Vineyards, Sun World/Superior Farms, and Grimmway Farms.
Sidney (SIDNEY): Sidney is the county seat of Cheyenne County, and is located at
the south edge of the Nebraska panhandle near the Colorado border at the
intersection of Interstate Highway 80 and U.S. Highways 385 and 30,
approximately 170 miles northeast of Denver. The major employers for Sidney
residents are Cabel's (mail order sporting goods), Memorial Health Center and
Prestolite Wire Corporation (specialty wiring and cable).
12
<PAGE>
Orange Cove (SOUTHCOVE): Orange Cove is in Fresno County, California on State
Highway 63. The county seat of Fresno is 35 miles northeast of Orange Cove. The
population of Orange Cove is approximately 6,500. A majority of the employed
persons in Orange Cove are employed in agriculture, particularly in the citrus
packing business.
Buna (WALNUT): Buna (population 2,100) is in Jasper County , in east-central
Texas near the Louisiana border at the intersection of Interstate Highway 96 and
State Highway 62 approximately 100 miles northeast of Houston and 225 miles
southeast of Dallas. The largest employers for the city's residents are Temple
Inland Sawmill, Buna School District and Buna Nursing Home.
Waukee (WAUKEE-II): Waukee (population 2,500) is in Dallas County, Iowa, on U.S.
Highway 6, approximately 14 miles northwest of Des Moines. The largest category
of employment for Dallas County is wholesale and retail trade (34%). The
services category accounts for 27% of employment. Some of the larger employers
in the Waukee area are Downey Printing (telephone directory printing),
Selectivend (vending machine manufacturing) and Waukee Community School
District.
<TABLE>
<CAPTION>
================================================================================================================================
Sharing Ratio:
--------------
Allocations(4) Approximate
Local Local and Sale or Partnership's
Limited General Property Refinancing Capital
Partnership Partners Manager (1) Cash Flow (2) Proceeds(5) Contributions (3)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
AUTUMN Clifford E. Olsen (5) Management & Partnership: 10% 99/1 $412,000
Systems LGP: 90% 51/49
Corporation (7)
- --------------------------------------------------------------------------------------------------------------------------------
BROKEN BOW Retro Development, Inc (7) Retro Management WNC: 1st $2,500 99/./1 $608,000
Group, Inc. LGP: 2nd $2,500 25/75
Most Worshipful Prince The balance:
Hall Grand Lodge WNC: 25%
LGP: 75%
- --------------------------------------------------------------------------------------------------------------------------------
CHADWICK MBG Investment MBG Partnership: 1st 99/1 $378,000
Corpora-tion Management, Inc. $2,950 51/49
LGP: 2nd $5,980
Gordon L. Balance: 99/1
Blackwell
- --------------------------------------------------------------------------------------------------------------------------------
COMANCHE Max L. M-DC Group, Partnership: 1st $490 99/1 $149,000
Rightmer Inc. dba Alpha LGP: 2nd $985 51/49
Management Balance: 99/1
Co., Inc.
- --------------------------------------------------------------------------------------------------------------------------------
EW Philip C. T & C Services 1995-2000: 99/1 $164,000
Wallis Partnership: $1,500 50/50
Balance to
James L. payment of
Poehlman development
fee, LGP, and
Cynthia L. replacement
Solfest- reserve.
Wallis
2001-there-after:
Anita B. Partnership: $5,000
Poehlman Balance to
payment of
development
fee, LGP, and
replacement
reserve.
- --------------------------------------------------------------------------------------------------------------------------------
GARLAND Conrad L. Sunbelt 99/1 99/1 $191,000
Beggs Property 60/40
Managers
Audrey D. Corp.
Beggs
Russell J.
Altizer
Marjorie L.
Beggs
- --------------------------------------------------------------------------------------------------------------------------------
13
<PAGE>
<CAPTION>
================================================================================================================================
Sharing Ratio:
--------------
Allocations(4) Approximate
Local Local and Sale or Partnership's
Limited General Property Refinancing Capital
Partnership Partners Manager (1) Cash Flow (2) Proceeds(5) Contributions (3)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
HEREFORD Winston MJS Management, 50/50 99/1 $179,000
Sullivan Inc. 51/49
- --------------------------------------------------------------------------------------------------------------------------------
HICKORY Olsen Olsen Partnership: 10% 99/1 $172,000
Securities Securities LGP: 90% 49/51
Corporation Corporation
- --------------------------------------------------------------------------------------------------------------------------------
HONEY- Olsen Olsen Partnership: 10% 99/1 $333,000
SUCKLE Securities Securities LGP: 90% 49/51
Corporation Corporation
- --------------------------------------------------------------------------------------------------------------------------------
KLIMPEL Douglas B. National Partnership: 1/3 96/4 $1,774,000
Chaffee Housing LGP: 2/3 50/50
Ministries
Margaret N.
Chaffee
- --------------------------------------------------------------------------------------------------------------------------------
LAMESA Winston MJS 50/50 99/1 $153,000
Sullivan Management, 51/49
Inc.
- --------------------------------------------------------------------------------------------------------------------------------
LAREDO Donald W. Sowell Wilmic Venture, WNC: 1st $1,053 99/1 $1,133,000
Inc. LGP: 2nd $2,107 50/50
The balance:
WNC: 99%
LGP: 1%
- --------------------------------------------------------------------------------------------------------------------------------
MOUNTAIN John C. Loving MBG Partnership: 1st 99/1 $195,000
VIEW Management, $850 51/49
Gordon D. Brown, Jr. Inc. LGP: 2nd
1,650
Balance: 99/1
- --------------------------------------------------------------------------------------------------------------------------------
PALESTINE Winston MJS 50/50 99/1 $225,000
Sullivan Management, 51/49
Inc.
- --------------------------------------------------------------------------------------------------------------------------------
PECAN Conrad L. Sunbelt 99/1 99/1 $239,000
Beggs Property 60/40
Managers
Audrey D. Corp.
Beggs
Russell J.
Altizer
- --------------------------------------------------------------------------------------------------------------------------------
PIONEER Philip R. The 1st $4,000: 99/1 $2,222,000
Hammond, Jr. Management WNC: $2,000 50/50
Company LGP: $2,000
LGP: the
Walter Dwelle balance
- --------------------------------------------------------------------------------------------------------------------------------
SIDNEY Retro Development, Inc Retro Management WNC: 1st $2,500 99/1 $536,000
Group, Inc. LGP: 2nd $2,500 25/75
Most Worshipful Prince The balance:
Hall Grand Lodge WNC: 25%
LGP: 75%
- --------------------------------------------------------------------------------------------------------------------------------
14
<PAGE>
<CAPTION>
================================================================================================================================
Sharing Ratio:
--------------
Allocations(4) Approximate
Local Local and Sale or Partnership's
Limited General Property Refinancing Capital
Partnership Partners Manager (1) Cash Flow (2) Proceeds(5) Contributions (3)
================================================================================================================================
<S> <C> <C> <C> <C> <C>
SOUTHCOVE Philip R. Buckingham 1996-1998: 99/1 $2,022,000
Hammond, Jr. Property WNC & LGP: 51/49
Management $1,500 each
Diane M. Company with balance
Hammond to LGP
1999-
thereafter:
WNC & LGP:
$2,250 each
with balance
to LGP
- --------------------------------------------------------------------------------------------------------------------------------
WALNUT Olsen Olsen WNC: 10% 99/1 $185,000
Securities Securities LGP: 90% 49/51
Corporation Corporation
- --------------------------------------------------------------------------------------------------------------------------------
WAUKEE-II Eric A. Sheldahl WNC: 1st $100 99/1 $125,000
Sheldahl Development LGP: the 51/49
Corporation balance
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The maximum annual management fee payable to the property manager generally
is determined pursuant to lender regulations. The Local General Partners are
authorized to employ either themselves or one of their Affiliates, or a third
party, as a property manager for leasing and management of the Apartment Complex
so long as the management fee does not exceed the amount authorized and approved
by the lender for the Apartment Complex.
(2) Reflects the amount of the net cash flow from operations, if any, to be
distributed to the Partnership and the Local General Partners ("LGP") of the
Local Limited Partnership for each year of operations. To the extent that the
specific dollar amounts which are to be paid are not paid annually, they will
accrue and be paid from sale or refinancing proceeds as an obligation of the
Local Limited Partnership.
15
<PAGE>
(3) The Partnership will make its capital contributions to the Local Limited
Partnership in stages, with each contribution due when certain conditions
regarding construction or operations of the Apartment Complex have been
fulfilled.
(4) Subject to certain special allocations, reflects the respective percentage
interests of the Partnership and the Local General Partners in profits, losses
and Low Income Housing Credits commencing with entry of the Partnership as a
limited partner.
(5) Reflects the percentage interests of the Partnership and the Local General
Partners in any net cash proceeds from sale or refinancing of the Apartment
Complex, after payment of the mortgage loan and other Local Limited Partnership
obligations (see, e.g., note 3), and the following, in the order set forth. As
used herein, the term "sales preparation fee" means a fee in the amount of 3%
(5% in the case of Garland and Pecan) of sale or refinancing proceeds.
Austin: The Local General Partners' sales preparation fee, $100,004 to the
Local General Partner as a partial return of its capital contribution; the
Partnership's capital contribution and the capital contribution of the
Local General Partner (less previous distributions).
Chadwick: The capital contribution of the Partnership (less previous
distributions) and the Local General Partners' sales preparation fee.
Comanche: The capital contribution of the Partnership (less previous
distributions) and the Local General Partner's sales preparation fee.
EW: The Partnership's capital contribution and the Local General Partners'
sales preparation fee.
Garland: An amount equal to 5% of remaining proceeds to the Local General
Partners, the Local General Partners' sales preparation fee, and the
capital contribution of the Partnership (less previous distributions).
Hereford: The capital contribution of the Partnership (less previous
distributions) and the Local General Partner's sales preparation fee.
Hickory: The Local General Partner's sales preparation fee; the capital
contribution of the Partnership; and the capital contribution of the Local
General Partner.
Honeysuckle: The Local General Partner's sales preparation fee; the capital
contribution of the Partnership; and the capital contribution of the Local
General Partner.
Klimpel: The Partnership's capital contribution and the capital
contribution of the Local General Partners LAMESA: The capital contribution
of the Partnership (less previous distributions) and the Local General
Partner's sales preparation fee.
16
<PAGE>
Mountainview: The capital contribution of the Partnership (less previous
distributions) and the Local General Partners' sales preparation fee.
Palestine: The capital contribution of the Partnership (less previous
distributions) and the Local General Partner's sales preparation fee.
Pecan: An amount equal to 5% of remaining proceeds to the Local General
Partners, the Local General Partners' sales preparation fee, and the
capital contribution of the Partnership (less previous distributions).
Pioneer: The capital contribution of the Partnership; the capital
contribution of the Local General Partners; and the Local General Partners'
sales preparation fee.
Southcove: The Local General Partners' sales preparation fee, the capital
contribution of the Partnership and the capital contribution of the Local
General Partners
Walnut: The Local General Partner's sales preparation fee; the capital
contribution of the Partnership; and the capital contribution of the Local
General Partner.
Waukee II: The capital contribution of the Partnership; the Local General
Partner's sales preparation fee
Item 2. Properties
Through its investment in Local Limited Partnerships the Partnership holds
interests in Apartment Complexes. See Item 1 for information pertaining to the
Apartment Complexes.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
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. Units can be assigned only if certain
requirements in the Partnership's Agreement are satisfied.
At December 31, 1996, there were 830 registered holders of Units. 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. The Low Income Housing Credits for 1996, 1995 and
1994 were $105, $70 and $23, respectively, per Unit.
17
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
July 18, 1994
(Date Operations
Commenced) through
1996 1995 December 31,1994
---------- ---------- ----------------
<S> <C> <C> <C>
Revenue $ 161,610 $ 179,927 $ 3,475
Partnership operating expenses (106,236) (123,321) (28,907)
Equity in loss of
Local Partnerships (628,631) (623,521) (239,118)
-------- -------- --------
Net loss $ (573,257) $ (571,915) $ (264,550)
======== ======== =======
Net loss per Limited
Partnership Interest $ (36) $ (47) $ (93)
====== ======= ======
Total assets $ 12,531,645 $ 14,733,042 $ 8,435,704
========== ========== =========
Net investment in
Local Partnerships $ 10,096,100 $ 9,417,744 $ 6,234,006
========== ========= =========
Capital contributions payable
to Local Partnerships $ 666,716 $ 2,134,797 $ 3,276,750
======= ========= =========
Accrued fees and expenses due
to affiliates $ 9,339 $ 146,685 $ 414,501
===== ======= =======
</TABLE>
18
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $2,914,300 for the period
ended December 31, 1996. This decrease in cash consists of cash (used in) and
provided by the Partnership's operating, investing activities and financing
activities of approximately $60,900, $(2,837,900) and $(137,300), respectively.
Cash used by investing activities consisted primarily of capital contributions
to Local Limited Partnerships of approximately $2,793,700, and payment of
capitalized costs and offering expenses totaling $25,300 and 22,700,
respectively. Cash used by financing activities consisted of advances to General
Partner and affiliates. Cash provided by operating activities consisted of
interest earned on cash balances. Cash used in operating activites 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 $4,565,600 for the period
ended December 31, 1995. Cash from financing activities of approximately
$9,826,200 was sufficient to fund the investing activities of the Partnership in
the aggregate amount of approximately $5,315,600, which consisted primarily of
capital contributions to Local Limited Partnerships and offering expenses of
approximately $4,241,400 and $1,217,500, respectively. In addition, acquisition
costs and fees of $737,500 were paid during 1995. Cash provided by and used in
the operating activities of the Partnership was minimal compared to its other
activities. Cash provided by operating activities consisted primarily of
interest received on cash deposits, and cash used in operating activities
consisted primarily of payments for operating fees and expenses. The major
components of all these activities are discussed in greater detail below.
The Partnership is indebted to WNC & Associates, Inc., at December 31, 1996 and
December 31, 1995 in the amount of approximately $9,300 and $146,700,
respectively. The component items of such indebtedness are as follows:
December 31, 1996 December 31, 1995
----------------- -----------------
Advances to make loans and
capital contributions to
Local Limited Partnerships
Advances to pay front end fees $9,300 $(2,500)
Asset management fees payable -- 58,900
Accrued acquisition fees -- 90,300
------ ------
$9,300 $146,700
====== ========
19
<PAGE>
As of December 31, 1996, the Partnership has received approximately $15,241,000
from the sale of Units. Approximately $11,655,200 (76%) of which has been
committed to the purchase price and acquisition fees and costs of investments in
20 Local Limited Partnership Interests.
The Partnership had made capital contributions to Local Limited Partnerships in
the amount of approximately $9,778,000 as of December 31, 1996.
Prior to sale of the Apartment Complexes, it is not expected that any of the
Local Limited Partnerships in which the Partnership has invested or will invest
will generate cash sufficient to provide distributions to the Partnership of any
material amount. Distributions to the Partnership would first by used to meet
operating expenses of the Partnership, including the payment of the asset
management fee to the General Partner. See Item 11 hereof. 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, if ever.
The Partnership's investments are not 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 Local 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 is sufficient to fund the Partnership's operations.
The Partnership has established 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. 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 Local Limited Partnerships for such purposes or to replenish or
increase working capital reserves.
20
<PAGE>
Under its Partnership Agreement the Partnership does not have the ability to
assess its partners for additional capital contributions to provide capital if
needed by the Partnership or Local Limited Partnerships. Accordingly, if
circumstances arise that cause the Local Limited Partnerships to require capital
in addition to that contributed by the Partnership and any equity of the Local
General Partners, 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 Local Limited Partnerships are
already substantially leveraged), (ii) additional equity contributions or
advances of the Local General Partners, (iii) other equity sources (which could
adversely affect the Partnership's interest in Low Income Housing 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 Local Limited Partnerships in question. If such funds
are not available, the Local Limited Partnerships would risk foreclosure on
their Apartment Complexes if they were unable to renegotiate the terms of their
first mortgages and any other debt secured by the Apartment Complexes to the
extent the capital requirements of the Local 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 Partnerships.
Results of Operations
As reflected on its Statements of Operations, the Partnership had losses of
approximately $573,300 $572,000, and $264,500 for the year ended December 31,
1996, 1995 and 1994, respectively. The component items of revenue and expense
are discussed below.
21
<PAGE>
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 Local 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 is expected to be
the Asset Management Fee. The Asset Management Fees 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.
The annual management fee incurred was $42,900, $42,900 and $16,000 for the year
ended December 31, 1996, 1995 and period July 18, 1994 (date operations
commenced) to December 31, 1994, respectively.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of Local
Limited Partnership Interests.
Interest Expense consisted of payments on a loan from a bank paid at the bank's
prime rate plus 1% (10.25% at December 31, 1995 and 9.75% at June 17, 1996.)
Office expense consist of the Partnership's administrative expenses, such as
accounting and legal fees, bank charges and investor reporting expenses.
Equity in losses from Limited Partnerships. The Partnership's equity in losses
from Limited Partnerships is equal to approximately 99% of the aggregate net
loss of the Limited Partnerships. After rent-up, the 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.
22
<PAGE>
Item 8. Financial Statements and Supplementary Data
WNC HOUSING TAX CREDIT FUND, IV, L.P., SERIES 2
(A California Limited Partnership)
FINANCIAL STATEMENTS
For The Years Ended December 31, 1996 and 1995 and
For The Period July 18, 1994 (Date Operations
Commenced) To December 31, 1994
with
INDEPENDENT AUDITORS' REPORT THEREON
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
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
December 31, 1996 and 1995, and the related statements of operations, partners'
equity and cash flows for the years ended December 31, 1996 and 1995 and for the
period July 18, 1994 (date operations commenced) to December 31, 1994. 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. We did not audit the financial statements of the limited
partnerships in which WNC Housing Tax Credit Fund IV, L.P., Series 2 is a
limited partner. These investments, as discussed in Note 2 to the financial
statements, are accounted for by the equity method. The investments in these
limited partnerships represented 81% and 64% of the total assets of WNC Housing
Tax Credit Fund IV, L.P., Series 2 at December 31, 1996 and 1995, respectively.
Substantially all of the financial statements of the limited partnerships were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for those limited
partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC Housing Tax Credit Fund IV, L.P., Series 2 (a
California Limited Partnership) as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years ended December 31,
1996 and 1995 and for the period July 18, 1994 (date operations commenced) to
December 31, 1994, in conformity with generally accepted accounting principles.
/s/ Corbin & Wertz
______________________
CORBIN & WERTZ
Irvine, California
April 5, 1997
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
---------- ----------
Cash and cash equivalents $ 2,371,389 $ 5,285,730
Investments in limited partnerships (Note 2) 10,096,100 9,417,744
Due from affiliate (Note 3) 53,200 --
Other assets 10,956 29,568
---------- ----------
$ 12,531,645 $ 14,733,042
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 4) $ 666,716 2,134,797
Accrued fees and advances due to
General Partner and affiliate (Note 3) 9,339 146,685
---------- ----------
Total liabilities 676,055 2,281,482
---------- ----------
Partners' equity (deficit) (Note 6):
General partner (33,756) (27,796)
Limited partners (20,000 units authorized,
15,600 units outstanding at December 31,
1996 and 1995, respectively) 11,889,346 12,479,356
---------- ----------
Total partners' equity 11,855,590 12,451,560
---------- ----------
$ 12,531,645 $ 14,733,042
========== ==========
See accompanying notes to financial statements
FS-2
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
1996 1995 1994
------------ ------------ ------------
Interest income $ 161,610 $ 179,927 $ 3,475
--------- --------- ---------
Operating expenses:
Amortization 40,109 26,208 1,638
Asset management fees (Note 3) 42,900 42,900 16,000
Interest expense (Note 3) 5,350 39,148 11,173
Other 17,877 15,065 96
--------- --------- ---------
Total operating expenses 106,236 123,321 28,907
--------- --------- ---------
Income (loss) from operations 55,374 56,606 (25,432)
Equity in losses from limited
partnerships (Note 2) (628,631) (628,521) (239,118)
--------- --------- ---------
Net loss $(573,257) $(571,915) $(264,550)
========= ========= =========
Net loss allocated to:
General partner $ (5,733) $ (5,719) $ (2,646)
========= ========= =========
Limited partners $(567,524) $(566,196) $(261,904)
========= ========= =========
Net loss per weighted limited
partners units $ (36.38) $ (46.90) $ (92.74)
========= ========= =========
Outstanding weighted limited
partner units 15,600 12,073 2,824
========= ========= =========
See accompanying notes to financial statements
FS-3
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
General Limited
Partner Partners Total
------- -------- -----
Capital contributions $ 100 $ 5,648,000 $ 5,648,100
Offering expenses (7,356) (728,214) (735,570)
Partnership units issued for
notes receivable (Note 6) --- (184,500) (184,500)
Net loss (2,646) (261,904) (264,550)
---------- ---------- ----------
Equity (deficit)
December 31, 1994 (9,902) 4,473,382 4,463,480
Capital contributions, net
of discount of $359,000 --- 9,593,000 9,593,000
Offering expenses (12,175) (1,205,330) (1,217,505)
Collection of notes receivable
(Note 6) --- 184,500 184,500
Net loss (5,719) (566,196) (571,915)
---------- ---------- ----------
Equity (deficit)
December 31, 1995 (27,796) 12,479,356 12,451,560
Offering expenses (227) (22,486) (22,713)
Net loss (5,733) (567,524) (573,257)
---------- ---------- ----------
Equity (deficit)
December 31, 1996 $ (33,756) $11,889,346 $11,855,590
========== ========== ==========
See accompanying notes to financial statements
FS-4
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (573,257) $ (571,915) $ (264,550)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Amortization 40,109 26,208 1,638
Equity in loss of limited partnerships 628,631 628,521 239,118
Change in other assets 18,612 (27,440) (2,128)
Change in accrued interest payable -- (404) 404
Change in due from affiliates (53,200) -- --
---------- ---------- -------
Net cash provided by (used in)
operating activities 60,895 54,970 (25,518)
---------- ---------- ----------
Cash flows from investing activities:
Investments in limited partnerships, net (2,793,730) (4,241,376) (2,743,092)
Distributions from limited partnerships 3,900 -- --
Loans receivable -- 880,760 (880,760)
Capitalized acquisition costs and fees (25,347) (737,464) (295,833)
Offering expenses (22,713) (1,217,505) (735,570)
---------- ---------- ----------
Net cash used in investing activities (2,837,890) (5,315,585) (4,655,255)
---------- ---------- ----------
Cash flows from financing activities:
Capital contributions -- 9,777,500 4,866,500
Subscriptions receivable collected -- 597,100 --
Advances from general partner and
affiliates (137,346) (267,816) 253,834
Issuance of loan payable -- -- 870,000
Repayment of loan payable -- (280,569) (589,431)
---------- ---------- ----------
Net cash (used in) provided by financing
activities (137,346) 9,826,215 5,400,903
---------- ---------- ----------
Net change in cash and cash equivalents (2,914,341) 4,565,600 720,130
Cash and cash equivalents, beginning
of period 5,285,730 720,130 --
---------- ---------- -------
Cash and cash equivalents, end of period $ 2,371,389 $ 5,285,730 $ 720,130
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for:
Interest $ 5,350 $ 39,552 $ 10,769
========== ========== ==========
Income taxes $ 800 $ 800 $ --
========== ========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the period ended December 31, 1994, the Partnership incurred, but did not
pay, $3,276,750 of payables to limited partnerships (in connection with its
investments in limited partnerships).
During the period ended December 31, 1994, the Partnership incurred, but did not
pay, $160,667 of payables to an affiliate for offering and acquisition expenses.
See accompanying notes to financial statements
FS-5
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
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, 1994. Prior to October 1, 1994, the Partnership
was considered a development-stage enterprise. 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 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.
The Partnership agreement authorized the sale of 20,000 Units at $1,000 per Unit
("Units"). The offering of units concluded July 1995 at which time 15,600 units,
representing subscriptions, net of discounts for volume purchases of more than
100 units, of $15,241,000 had been accepted.
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 proceeds from a 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 a
subordinated disposition fee (as described in Note 4), 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.
The Partnership's investments in limited partnerships are subject to the risks
incident to the management and ownership of multifamily residential real estate,
and include the risks that neither the Partnership's investments nor the
apartment complexes owned by the limited partnerships will be readily
marketable. Additionally there can be no assurance that the Partnership will be
able to dispose of its interest in the 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
apartment complexes and the Partnership. The apartment complexes could be
subject to loss through foreclosure. In addition, each limited partnership is
subject to risks relating to environmental hazards which might be uninsurable.
Because the Partnership's ability to control its operations will depend on these
and other factors beyond the control of the General Partner and the general
partners of the limited partnerships, there can be no assurance that Partnership
operations will be profitable or that the anticipated housing tax credits will
be available to limited partners.
Continued
FS-6
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
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 limited partnership's results of operations and for
any distributions received. The accounting policies of the limited partnership
are consistent with the Partnership. Costs incurred by the Partnership in
acquiring the investments in limited partnerships are capitalized as part of the
investment and amortized over 30 years (see Note 3).
Losses from limited partnerships allocated to the Partnership will not be
recognized to the extent that the investment balance would be adjusted below
zero.
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred in connection with the
selling of 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 limited partners' capital. Through December 31,
1996, the Partnership incurred offering expenses and selling expenses of
$975,333 and $1,000,455, respectively.
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 all investments with maturities of three months or
less when purchased to be cash equivalents. Cash equivalents totaled $2,134,000
at December 31, 1996 and represented investments in U.S. Treasury Bills.
Concentration of Credit Risk
- ----------------------------
As of December 31, 1996, the Partnership maintained cash balances at certain
financial institutions in excess of the federally insured maximum.
Net Loss Per Limited Partner Unit
- ---------------------------------
Net loss per limited partner unit is computed by dividing the limited partners'
share of net loss by the weighted number of limited partner units outstanding
during the period.
Continued
FS-7
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of December 31, 1996, the Partnership had acquired limited partnership
interests in twenty limited partnerships each of which owns one apartment
complex consisting of an aggregate of 737 apartment units. As of December 31,
1996, construction or rehabilitation of all of the apartment complexes had been
completed. The respective general partners of the limited partnerships manage
the day to day operations of the limited partnerships. Significant 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 of the limited
partnerships upon its acquisition of its limited partnership interests.
The Partnership's investments in limited partnerships as shown in the
accompanying balance sheet as of December 31, 1996 and 1995 are approximately
$1,446,000 and $2,589,000 greater than the Partnership's equity as shown in the
limited partnerships' financial statements. This difference is primarily due to
acquisition costs related to the acquisition of the investments that have been
capitalized in the Partnership's investment account and are being amortized over
30 years (see Note 3) and certain capital contributions accrued but not paid
(see Note 4).
Following is a summary of the equity method activity of the investments in
limited partnerships for the years ended December 31:
1996 1995
---------- ----------
Investments, beginning of period $ 9,417,744 $ 6,235,586
Capital contributions to limited
partnerships, net 1,325,649 3,099,423
Capitalized acquisition fees and costs 25,347 737,464
Distributions (3,900) --
Equity in losses of limited partnerships (628,631) (628,521)
Amortization of acquisition fees and costs (40,109) (26,208)
---------- ----------
Investments, end of period $ 10,096,100 $ 9,417,744
========== ==========
Continued
FS-8
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
Approximate combined condensed financial information from the individual
financial statements of the limited partnerships at December 31 and for the
periods then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
ASSETS 1996 1995
---------- ----------
Cash (including restricted cash of $685,000
and $475,000 as of December 31, 1996 and
1995, respectively) $ 1,120,000 $ 961,000
Land 1,333,000 1,166,000
Construction in progress 121,000 --
Buildings, net of accumulated amortization
of $1,961,000 and $245,000 as of December
31, 1996 and 1995, respectively 28,154,000 25,966,000
Due from affiliates 891,000 701,000
Other assets 254,000 296,000
---------- ----------
$31,873,000 $29,090,000
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Construction and mortgage loans payable $20,699,000 $18,513,000
Due to related parties 1,090,000 1,326,000
Other liabilities 458,000 1,478,000
---------- ----------
Total liabilities 22,247,000 21,317,000
---------- ----------
Partners' equity:
WNC Housing Tax Credit Fund IV, L.P.,
Series 2 8,650,000 6,829,000
Other partners 976,000 944,000
---------- ----------
Total partners' equity 9,626,000 7,773,000
---------- ----------
$31,873,000 $29,090,000
========== ==========
Continued
FS-9
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1996 1995 1994
---------- ---------- ----------
Total revenue $ 3,057,000 $ 1,762,000 $ 532,000
---------- ---------- ----------
Expenses:
Operating expenses 1,518,000 943,000 356,000
Interest expense 1,137,000 778,000 203,000
Depreciation 1,040,000 683,000 217,000
---------- ---------- ----------
Total expenses 3,695,000 2,404,000 776,000
---------- ---------- ----------
Net loss $ (638,000) $ (642,000) $ (244,000)
========== ========== ==========
Net loss allocable to Partnership $ (629,000) $ (629,000) $ (239,000)
========== ========== ==========
Certain limited partnerships have incurred operating losses and have working
capital deficiencies. In the event these limited partnerships continue to incur
operating losses, additional capital contributions by the Partnership may be
required to sustain the operations of such limited partnerships. If additional
capital contributions are not made when they are required, the Partnership's
investment in certain of such limited partnerships could be impaired.
NOTE 3 - 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
Partnership units as compensation for services rendered in connection
with the acquisition of limited partnerships. Through December 31,
1996, the Partnership incurred acquisition fees of $1,058,950.
Accumulated amortization amounted to $61,031 and $25,748 as of December
31, 1996 and 1995, respectively.
Reimbursement of costs incurred by an affiliate of the General Partner
in connection with the acquisition of limited partnerships. These
reimbursements will not exceed 1.2% of the gross proceeds. As of
December 31, 1996 and 1995, the Partnership incurred acquisition costs
of $160,360 and $135,898, respectively, which have been included in
limited partnership investment. Accumulated amortization was
insignificant for 1996 and 1995.
Continued
FS-10
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
An annual asset management fee equal to the greater amount of (i)
$2,000 for each apartment complex, or (ii) 0.275% of gross proceeds. In
either case, the fee will be decreased or increased annually based on
changes to the Consumer Price Index. However, in no event will the
maximum amount exceed 0.2% of the invested assets (defined as the
Partnership's capital contributions plus its allocable percentage of
the mortgage debt encumbering the apartment complexes) of the limited
partnerships. The Partnership incurred asset management fees of
$42,900, $42,900 and $16,000 for the periods ended December 31, 1996,
1995 and 1994, respectively. During 1996, the Partnership paid $155,000
of such fees to the General Partner. Such over payment resulted in
amounts due from the General Partner totaling $53,200 as of December
31, 1996.
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
Partnership Agreement) and is payable only if services are rendered in
the sales effort.
Accrued fees and advances due the General Partner and affiliate consist of the
following at December 31, 1996 and 1995:
1996 1995
---------- ----------
Acquisition fees $ -- $ 90,344
Advances made for acquisition costs,
organizational, offering and selling
expenses 9,339 (2,559)
Asset management fees -- 58,900
---------- ----------
$ 9,339 $ 146,685
========== ==========
Amounts advanced to acquire limited partnerships bore interest at the rate
incurred by the affiliate on its line of credit which ranged from 9.75% to 10.5%
per annum during the period of acquisition. Interest expense related to such
borrowings totaled $5,350, $39,148 and $11,173 for the periods ended December
1996, 1995 and 1994, respectively.
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
- -----------------------------------------
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the limited partnership agreements. These
contributions are non-interest bearing, are payable in installments and are due
upon the limited partnerships achieving certain development and operating
benchmarks (generally within two years of the Partnership's initial investment).
NOTE 5 - 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.
Continued
FS-11
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1996 and 1995 and
For The Period From July 18, 1994 (Date Operations
Commenced) To December 31, 1994
NOTE 6 - SUBSCRIPTIONS AND NOTES RECEIVABLE
- -------------------------------------------
As of December 31, 1994, the Partnership had received subscriptions for
approximately 782 units which included promissory notes of $184,500. Limited
partners who subscribed for ten or more units of limited partnership interest
($10,000) could elect to pay 50% of the purchase price in cash upon subscription
and the remaining 50% by the delivery of a promissory note payable, together
with interest at the rate of 11% per annum, due no later than 13 months after
the subscription date. Since the promissory notes had not been collected prior
to the issuance of the financial statements, the unpaid balance was reflected as
a reduction of partners' equity in the accompanying financial statements as of
December 31, 1994. All such amounts were collected during 1995.
FS-12
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
Item 10. Directors and Executive Officers of the Registrant
Directors of 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.
WILFRED N. COOPER, SR., age 65, has been the principal shareholder and a
Director of WNC & ASSOCIATES, INC. since its organization in 1971, of SHELTER
RESOURCE CORPORATION since its organization in 1981 and of WNC RESOURCES, INC.
from its organization in 1988 through its acquisition by WNC & ASSOCIATES, INC.
in 1991, serving as President of those companies until 1992 and as Chief
Executive Officer since 1992, and has been a Director of WNC CAPITAL CORPORATION
since its organization. He is also a general partner with WNC & ASSOCIATES, INC.
in WNC FINANCIAL GROUP, L.P. and WNC TAX CREDIT PARTNERS, L.P. During 1970 and
1971 he was a 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. Previously, he had responsibility for new business
development including factory-built housing evaluation and project management in
urban planning and development. Mr. Cooper is a Director and a member of the
Executive Committee of the National Association of Home Builders (NAHB) and a
Chairman of the NAHB's Rural Housing Council, a Director of the National Housing
Conference, a Director of the Affordable Housing Tax Credit Coalition, a past
President of the Rural Builders Council of California (RBCC) and a past
President of Southern California Chapter II of the Real Estate Syndication and
Securities Institute (RESSI) of the National Association of Realtors (NAR). Mr.
Cooper graduated from Pomona College in 1956 with a Bachelor of Arts degree.
JOHN B. LESTER, JR., age 62, has been a shareholder, a Director and Secretary of
WNC & ASSOCIATES, INC. since 1986, Executive Vice President from 1986 to 1992,
and President and Chief Operating Officer since 1992, and has been a Director of
WNC CAPITAL CORPORATION since its organization. He was a shareholder, Executive
Vice President, Secretary and a Director of WNC RESOURCES, INC. from 1988
through its acquisition by WNC & ASSOCIATES, INC. in 1991. From 1973 to 1986 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 is a former
Director of the Los Angeles Chapter of the Associated General Contractors of
California. His responsibilities at WNC & ASSOCIATES, INC. include property
acquisitions and company operations. Mr. Lester graduated from the University of
Southern California in 1956 with a Bachelor of Science degree in Mechanical
Engineering.
<PAGE>
DAVID N. SHAFER, age 44, has been a Senior Vice President of WNC & ASSOCIATES,
INC. since 1992 and General Counsel since 1990, and served as Asset Management
Director from 1990 to 1992. Previously he was employed as an associate attorney
by the law firms of Morinello, Barone, Holden & Nardulli from 1987 until 1990,
Frye, Brandt & Lyster from 1986 to 1987 and Simon and Sheridan from 1984 to
1986. Mr. Shafer is a Director and President of RBCC, a member of NAHB's Rural
Housing Council, a past President of Southern California Chapter II of RESSI, a
past Director of the Council of Affordable and Rural Housing and Development 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
and from the University of San Diego in 1986 with a Master of Law degree in
Taxation.
WILFRED N. COOPER, JR., age 33, has been employed by WNC & ASSOCIATES, INC.
since 1988 and has been a Senior Vice President or Vice President since 1992.
Mr. Cooper heads the Acquisition Origination department at WNC and has been
President of and a registered principal with WNC CAPITAL CORPORATION, a member
firm of the NASD, since its organization. Previously, he was employed as a
government affairs assistant by Honda North America from 1987 to 1988, and as a
legal assistant with respect to Federal legislative and regulatory matters by
the law firm of Schwartz, Woods and Miller from 1986 to 1987. Mr. Cooper is a
member of NAHB's Rural Housing Council and serves as Chairman of its Membership
Committee. Mr. Cooper graduated from The American University in 1985 with a
Bachelor of Arts degree.
THEODORE M. PAUL, age 40, has been Vice President - Finance of WNC & ASSOCIATES,
INC. since 1992 and Chief Financial Officer since 1990. Previously, he was a
Vice President and Chief Financial Officer of National Partnership Investments
Corp., a sponsor and general partner of syndicated partnerships investing in
affordable rental housing qualified for tax credits, from 1986 until 1990, and
was employed as an associate by the accounting firms of Laventhol & Horwath,
during 1985, and Mann & Pollack Accountants, from 1979 to 1984. Mr. Paul is a
member of the California Society of Certified Public Accountants and the
American Institute of Certified Public Accountants. His responsibilities at WNC
& ASSOCIATES, INC. include supervision of investor partnership accounting and
tax reporting matters and monitoring the financial condition of the Local
Limited Partnerships in which the Partnership will invest. Mr. Paul graduated
from the University of Illinois in 1978 with a Bachelor of Science degree and is
a Certified Public Accountant in the State of California.
THOMAS J. RIHA, age 41, has been Vice President - Asset Management of WNC &
ASSOCIATES, INC. since 1994. He has more than 17 years' experience in commercial
and multi-family real estate investment and management. Previously, Mr. Riha was
employed by Trust Realty Advisor, a real estate acquisition and management
company, from 1988 to 1994, last serving as Vice President - Operations. His
responsibilities at WNC & ASSOCIATES, INC. include monitoring the operations and
financial performance of, and regulatory compliance by, properties in the WNC
portfolio. 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 in the State
of California and a member of the California Society of Certified Public
Accountants and the American Institute of Certified Public Accountants.
<PAGE>
SY GARBAN, age 50, has 19 years' experience in the real estate securities and
syndication industry. He has been associated with WNC & ASSOCIATES, INC., since
1989, serving as National Sales Director through 1992 and as Vice President -
National Sales since 1992. Previously, he was employed by MRW, Inc., Newport
Beach, California from 1980 to 1989, a real estate acquisition, development and
management firm. Mr. Garban is a member of the International Association of
Financial Planners. Mr. Garban graduated from Michigan State University in 1967
with a Bachelor of Science degree in Business Administration.
CARL FARRINGTON, age 50, has been associated with WNC & ASSOCIATES, INC. since
1993, currently serving as Director - Originations since 1994. Mr. Farrington
has more than 12 years' experience in finance and real estate acquisitions.
Previously, he served as Acquisitions Director for The Arcand Company from 1991
to 1993, and as Treasurer and Director of Finance and Administrator for Polytron
Corporation from 1988 to 1991. Mr. Farrington is a member and Director of the
Council of Affordable and Rural Housing and Development. Mr. Farrington
graduated from Yale University with a Bachelor of Arts degree in 1966 and from
Dartmouth College with a Master of Business Administration in 1970.
MICHELE M. TAYLOR, age 41, has been employed by WNC & ASSOCIATES, INC. since
1986, serving as a paralegal and office manager, and currently is the Investor
Services Director. Previously she was self-employed between 1982 and 1985 in
non-financial services activities and from 1978 to 1981 she was employed as a
paralegal by a law firm which specialized in real estate limited partnership
transactions. Ms. Taylor graduated from the University of California, Irvine in
1976 with a Bachelor of Arts degree.
THERESA I. CHAMPANY, age 38, has been employed by WNC & ASSOCIATES, INC., since
1989 and currently is the Marketing Services Director and a registered principal
with WNC CAPITAL CORPORATION. Previously, she was employed as Manager of
Marketing Services by August Financial Corporation from 1986 to 1989 and as
office manager and Assistant to the Vice President of Real Estate Syndications
by McCombs Securities Co., Inc. from 1979 to 1986. Ms. Champany attended
Manchester (Conn.) Community College from 1976 to 1978.
KAY L. COOPER, age 59, has been an officer and Director of WNC & ASSOCIATES,
INC. since 1971 and of WNC RESOURCES, INC. from 1988 through its acquisition by
WNC & ASSOCIATES, INC. in 1991. Mrs. Cooper has also been the sole proprietor of
Agate 108, a manufacturer and retailer of home accessory products, since 1975.
She is the wife of Wilfred N. Cooper, Sr., the mother of Wilfred N. Cooper, Jr.
and the sister of John B. Lester, Jr. Mrs. Cooper graduated from the University
of Southern California in 1958 with a Bachelor of Science degree.
<PAGE>
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) Selection fees in an amount equal to 8% of the gross proceeds of the
Partnerships' Offering ("Gross Proceeds"). Through December 31, 1996,
approximately $1,059,000 of selection fees had been incurred by the Partnership.
(b) A nonaccountable expense reimbursement in an amount equal to 2% of Gross
Proceeds. Through December 31, 1996, approximately $312,000 of nonaccountable
expense reimbursement has been incurred the Partnership.
(c) An annual asset management fee in an amount equal to the greater of (i)
$2,000 for each Apartment Complex or (ii) 0.275% of gross proceeds. Asset
management fees of $42,900 per year were incurred during the years ended
December 31, 1996 and December 31, 1995, respectively.
(d) A subordinated disposition fee in an amount equal to 1% of the sale price
received in connection with the sale or disposition of an Apartment Complex or
Local Limited Partnership Interest. 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 Parners. "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
Partnerships term. No disposition fees have been paid.
(e) The General Partner was allocated Low Income Housing Credits of $9,207 for
the year ended December 31, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following is only person known to own beneficially in excess of 5% of the
outstanding Units:
<TABLE>
<S> <C> <C> <C>
Name and Address Amount and
Title of Class of Beneficial Owner Nature of Percent
Beneficial Owner of Class
- ------------------------------------------------------------------------------------------------------------------------
Units of Limited Partnership Enova Financial , Inc. 4,000 units 25.6%
Interests P.O. Box 126943
San Diego, CA 92113-6943
</TABLE>
<PAGE>
(b) Security Ownership of Management
Neither the General Partner, Associates nor any of the officers or directors of
Associates own directly or beneficially any limited partnership interests in the
Partnership.
(c) Changes in Control
The management and control of the General Partners may be changed at any time in
accordance with their respective 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 anytime remove the General
Partner of the Partnership and elect a successor General Partner
Item 13. Certain Relationships and Related Transactions
All of the Partnership's affairs are managed by the General Partner, through
Associates. The transactions with the General Partner and Associates are
primarily in the form of fees paid by the Partnership for services rendered to
the Partnership, as discussed in Item 11 and in the notes to the accompanying
financial statements.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Financial Statements:
Report of independent public accountants.
Balance sheets as of December 31, 1996 and 1995.
Statements of Operations for the years ended December 31, 1996, 1995, and 1994.
Statement of Partners' Equity for the years ended December 31, 1996, 1995, and
1994.
Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.
Notes to Financial Statements.
<PAGE>
Financial Statement Schedules:
N/A
Exhibits
(3): 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) Material
contracts: 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 d. filed as exhibit 10.2 to Form 8-K dated August 8, 1994 is hereby
incorporated herein by reference as exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of Comanche
Retirement Village, Ltd. filed as exhibit 10.1 to Form 8-K dated August 31, 1994
is hereby incorporated herein by reference as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Mountainview
Apartments Limited Partnership filed as exhibit 10.1 to Form 8-K dated September
21, 1994 is hereby incorporated herein by reference as exhibit 10.8.
10.9 Second Amendment to Amended and Restated Agreement of Limited Partnership
of Mountainview Apartments Limited Partnership filed as exhibit 10.2 to Form 8-K
dated September 21, 1994 is hereby incorporated herein by reference as exhibit
10.9.
<PAGE>
10.10 Amended and Restated Agreement of Limited Partnership of Pecan Grove
Limited Partnership filed as exhibit 10.3 to Form 8-K dated September 21, 1994
is hereby incorporated herein by reference as exhibit 10.10.
10.11 Second Amendment to Amended and Restated Agreement of Limited Partnership
of Pecan Grove Limited Partnership filed as exhibit 10.4 to Form 8-K dated
September 21, 1994 is hereby incorporated herein by reference as exhibit 10.11.
10.12 Second Amendment to and Entire Restatement of the Agreement of Limited
Partnership of Autumn Trace Associates, Ltd. filed as exhibit 10.1 to Form 8-K
dated October 31, 1994 is hereby incorporated herein by reference as exhibit
10.12.
10.13 Amended and Restated Agreement of Limited Partnership of EW , a Wisconsin
Limited Partnership filed as exhibit 10.2 to Form 8-K dated October 31, 1994 is
hereby incorporated herein by reference as exhibit 10.13.
10.14 Agreement of Limited Partnership of Klimpel Manor, Ltd. filed as exhibit
10.3 to Form 8-K dated September 21, 1994 is hereby incorporated herein by
reference as exhibit 10.14.
10.15 Amended and Restated Agreement of Limited Partnership of Hickory Lane
Associates Limited filed as exhibit 10.15 to Form 10-K dated December 31, 1995
is hereby incorporated herein by reference as exhibit 10.15.
10.16 Amended and Restated Agreement of Limited Partnership of Honeysuckle Court
Associates, Ltd. filed as exhibit 10.16 to Form 10-K dated December 31, 1995 is
hereby incorporated herein by reference as exhibit 10.16.
10.17 Amended and Restated Agreement of Limited Partnership of Walnut Turn
Associates, Ltd. filed as exhibit 10.17 to Form 10-K dated December 31, 1995 is
hereby incorporated herein by reference as exhibit 10.17.
Reports on Form 8-K
No reports of Form 8-K were filed during the fourth quarter ended December 31,
1996.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND IV, L.P. - Series 2
By: WNC Tax Credit Partners IV, L.P. General Partner of the Registrant
By: WNC & Associates, Inc. General Partner of WNC Tax Credit Partners IV, L.P.
By: /s/ John B. Lester, Jr.
_____________________________________________________
John B. Lester, Jr. President and Chief Opertating Officer of WNC & Associates,
Inc.
Date: May 12, 1997
By: /s/ Theodore M. Paul
_____________________________________________________
Theodore M. Paul Vice-President Finance and Chief Financial Officer of WNC &
Associates, Inc.
Date: May 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Wilfred N. Cooper, Sr.
_____________________________________________________
Wilfred N. Cooper, Sr. Director and Chairman of the Board WNC & Associates, Inc.
Date: May 12, 1997
By: /s/ John B. Lester, Jr.
_____________________________________________________
John B. Lester, Jr. Director and Secretary of the Board WNC & Associates, Inc.
Date: May 12, 1997
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<FISCAL-YEAR-END> DEC-31-1996
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