FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
o 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
California 33-0596399
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 622-5565
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No.
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
September 30,1999 and March 31, 1999..................................3
Statements of Operations
For the three and six months ended September 30, 1999 and 1998........4
Statement of Partners' Equity
For the six months ended September 30, 1999...........................5
Statements of Cash Flows
For the six months ended September 30, 1999 and 1998..................6
Notes to Financial Statements ..........................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk........14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................14
Item 6. Exhibits and Reports on Form 8-K..................................14
Signatures................................................................15
2
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ --------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 294,452 $ 552,348
Investment in limited partnerships - Note 2 9,758,780
10,092,782
Other assets - Note 4 998 998
----------------- ---------------
$ 10,054,230 $ 10,646,128
================= ===============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payables to limited partnerships - Note 5 175,005 421,025
Accrued fees and expenses due to
general partner and affiliates - Note 3 $ 51,861 $ 29,722
----------------- ---------------
Total Liabilities 226,866 450,747
----------------- ---------------
Partners' equity (deficit):
General partner (54,038) (50,358)
Limited partners (15,600 units issued
and outstanding) 9,881,402 10,245,739
----------------- ---------------
Total partners' equity 9,827,364 10,195,381
----------------- ---------------
$ 10,054,230 $ 10,646,128
================= ===============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 1999 and1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
------------------------------ --------------------------------
Three Six Three Six
Months Months Months Months
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income $ 3,875 $ 8,323 $ 10,197 $ 18,823
---------- ------------ ----------- ------------
3,875 8,323 10,197 18,823
---------- ------------ ----------- ------------
Operating expenses:
Amortization 10,234 20,464 10,230 20,460
Asset management fees - Note 3 10,725 21,450 10,725 21,450
Legal and accounting 10,481 14,609 518 7,518
Other 3,900 6,279 933 7,484
---------- ------------ ----------- ------------
Total operating expenses 35,340 62,802 22,406 56,912
---------- ------------ ----------- ------------
Loss from operations (31,465) (54,479) (12,209) (38,089)
Equity in loss from
limited partnerships (156,769) (313,538) (191,700) (353,148)
---------- ------------ ----------- ------------
Net loss $ (188,234) $ (368,017) $ (203,909) $ (391,237)
========== ============ =========== ============
Net loss allocated to:
General partner $ (1,882) $ (3,680) $ (2,039) $ (3,912)
========== ============ =========== ============
Limited partners $ (186,352) $ (364,337) $ (201,870) $ (387,325)
========== ============ =========== ============
Net loss per weighted limited
partner unit (15,600 units issued
and outstanding) $ (12) $ (23) $ (13) $ (25)
========== ============ =========== ============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Six Months Ended September 30, 1999
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Partners' equity (deficit), March 31, 1999 $ (50,358) $ 10,245,739 $ 10,195,381
Net loss for the six months ended
September 30, 1999 (3,680) (364,337) (368,017)
----------------- ----------------- ------------------
Partners' equity (deficit), September 30, 1999 $ (54,038) $ 9,881,402 $ 9,827,364
================= ================= ==================
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 1999 and 1998
(unaudited)
1999 1998
---- ----
Cash flows from operating activities:
Net loss $ (368,017) $ (391,237)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss from limited partnerships 313,538 353,148
Amortization 20,464 20,460
Asset management fees 21,450 21,450
Change in other assets - 10,885
Accrued fees and expense due to
general partner and affiliates 689 (3,021)
---------- ------------
Net cash provided by (used in) operating activities (11,876) 11,685
---------- ------------
Cash flows from investing activities:
Investments in limited partnerships (246,020) (418,184)
Distributions from limited partnerships - 850
---------- ------------
Net cash provided used by investing activities (246,020) (417,334)
---------- ------------
Net decrease in cash and cash equivalents (257,896) (405,649)
---------- ------------
Cash and cash equivalents, beginning of period 552,348 1,383,197
---------- ------------
Cash and cash equivalents, end of period $ 294,452 $ 977,548
========== ============
See accompanying notes to financial statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the audited financial statements and related notes thereto
contained in the WNC California Housing Tax Credits, L.P. (the "Partnership")
Annual Report for the year end March 31, 1999 (audited). Accounting measurements
at interim dates inherently involve greater reliance on estimates than at year
end. The results of operations for the interim period presented are not
necessarily indicative of the results for the entire year.
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1999 and the results of operations and changes in cash flows for the three
months ended.
Organization
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") was formed on
September 27, 1993 under the laws of the state of California and commenced
operations on July 18, 1994. The Partnership was formed to invest primarily in
other limited partnerships (the "Local Limited Partnerships") which own and
operate multi-family housing complexes (the "Housing Complex") that are eligible
for low income housing credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner is WNC Tax Credit Partners, IV, L.P. (the "General
Partner"), a California limited partnership. WNC & Associates, Inc. ("WNC") is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of WNC.
The Partnership Agreement authorized the sale of 20,000 units at $1,000 per unit
("Units"). The offering of Units concluded in July 1995 at which time 15,600
Units representing subscriptions, net of discounts for volume purchases of more
than 100 units, in the amount of $15,241,000 had been accepted. The General
Partner has a 1% interest in operating profits and losses, taxable income and
losses, cash available for distribution from the Partnership and tax credits.
The limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received proceeds from sale or refinancing equal
to their capital contributions and their return on investment (as defined in the
Partnership Agreement) and the General Partner has received proceeds equal to
its capital contributions and a subordinated disposition fee from the remainder,
any additional sale or refinancing proceeds will be distributed 90% to the
limited partners (in proportion to their respective investments) and 10% to the
General Partner.
7
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not make its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting For Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital and amounted to $970,717 as of September 30,
1999 and March 31, 1999.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. As of Septmber 30, 1999
and March 31, 1999, the Partnership had cash equivalents of $0 and $0
respectively.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership had acquired limited partnership
interests in twenty-two Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 892 apartment units. As of
September 30, 1999, construction or rehabilitation of all but one of the
apartment complexes had been completed. The respective general partners of the
Local Limited Partnerships manage the day-to-day operations of the entities.
Significant Local Limited Partnership business decisions require approval from
the Partnership. The Partnership, as a limited partner, is entitled to 96% to
99%, as specified in the partnership agreements, of the operating profits and
losses, taxable income and losses and tax credits of the Limited Partnerships.
Equity in losses of Local Limited Partnerships is recognized in the financial
statements until the related investment account is reduced to a zero balance.
Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
9
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS, CONTINUED
The following is a summary of the equity method activity of the investment in
Local Limited Partnerships for the six months ended September 30, 1999 and the
three months ended March 31, 1999:
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Investment balance, beginning of period $ 10,092,782 $ 10,274,595
Equity in loss from limited partnerships (313,538) (164,683)
Distributions from limited partnerships - (6,900)
Amortization of acquisition costs (20,464) (10,230)
------------------ --------------
Investment per balance sheet, end of period $ 9,758,780 $ 10,092,782
================== ==============
Selected financial information for the six months ended September 30 from the
combined financial statements of the limited partnerships in which the
partnership has invested is as follows:
1999 1998
------------------- --------------
Total revenue $ 2,123,600 $ 1,972,000
------------------- --------------
Interest expense 785,000 687,000
Depreciation 620,400 667,000
Operating expenses 1,036,200 975,000
------------------- --------------
Total Expenses 2,441,600 2,329,000
------------------- --------------
Net loss $ (318,000) $ (357,000)
=================== ==============
Net loss allocable to the Partnership $ (314,820) $ (353,430)
=================== ==============
Net loss recognized by the Partnership $ (313,538) $ (353,148)
=================== ==============
</TABLE>
10
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 3- RELATED PARTY TRANSACTIONS
(a) Annual Asset Management Fee. An annual asset management fee of the greater
of (i) $2,000 per multi-family housing complex or (ii) 0.275% of Gross
Proceeds. The base fee amount will be adjusted annually based on changes in
the Consumer Price Index, however in no event will the annual asset
management fee exceed 0.2% of Invested Assets. "Invested Assets" means the
sum of the Partnership's investment in Local Limited Partnerships and the
Partnership's allocable share of the amount of indebtedness related to the
Housing Complexes. Fees of $21,450 and $21,450 were incurred during the six
months ended September 30, 1999 and 1998, respectively. The Partnership
paid the General Partner or its affiliates $0 of those fees during the six
months ended September 30, 1999 and 1998, respectively.
(a) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of a Housing Complex. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital
contributions and payment of the Return on Investment to the Limited
Partners. "Return on Investment" means an annual, cumulative but not
compounded, "return" to the Limited Partners (including Low Income Housing
Credits) as a class on their adjusted capital contributions commencing for
each Limited Partner on the last day of the calendar quarter during which
the Limited Partner's capital contribution is received by the Partnership,
calculated at the following rates: (i) 16% through December 31, 2003, and
(ii) 6% for the balance of the Partnership's term. No disposition fees have
been paid.
(c) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$20,000 for the General Partner for the year ended December 31, 1998. The
General Partner is also entitled to receive 1% of cash distributions. There
were no distributions of cash to the General Partner during the six months
ended September 30, 1999 and 1998.
Accrued fees and advance due to affiliates of the General Partner included in
the balance sheet consist of the following at September 30, 1998 and March 31,
1999:
September 30, 1999 March 31, 1999
------------------ --------------
Asset management fee $ 48,209 $ 26,759
Reimbursement due on
expenses paid by affiliate 3,652 2,963
------------------ --------------
Total related party payables $ 51,861 $ 29,722
================== ==============
NOTE 4 - INCOME TAXES
No provision for income taxes has been made, as the liability for income taxes
is an obligation of the partners of the Partnership.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Partnership's assets at September 30, 1999 consisted primarily of $294,000
in cash and aggregate investments in the twenty-two Local Limited Partnerships
of $9,759,000. Liabilities at September 30, 1999 primarily consisted of $175,000
of payables to limited partnerships and $52,000 of accrued annual management
fees due to the General Partners.
Results of Operations
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998. The Partnership's net loss for the three months ended September 30,
1999 was $(188,000), reflecting a decrease of $16,000 from the net loss
experienced for the three months ended September 30, 1998. The decline in net
loss is primarily due to equity in losses from limited partnerships which
declined by $35,000 to $(157,000) for the three months ended September 30, 1999
from $(192,000) for the three months ended September 30, 1998. This decrease was
a result of the Partnership not recognizing certain losses of the Local Limited
Partnerships. The investments in such Local Limited Partnerships had reached $0
at September 30, 1999. Since the Partnership's liability with respect to its
investments is limited, losses in excess of investment are not recognized. Along
with the decrease in equity in losses from limited partnerships there was an
increase in loss from operations of $19,000 for the three months ended September
30, 1999 to $(31,000), from $(12,000) for the three months ended September 30,
1998, due to a comparable increase in operating expenses.
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998. The Partnership's net loss for the six months ended September 30, 1999 was
$(368,000), reflecting a decrease of $23,000 from the net loss experienced for
the six months ended September 30, 1998. The decline in net loss is primarily
due to equity in losses from limited partnerships which declined by $39,000 to
$(353,000) for the six months ended September 30, 1999 from $(314,000) for the
six months ended September 30, 1998. This decrease was a result of the
Partnership not recognizing certain losses of the Local Limited Partnerships.
The investments in such Local Limited Partnerships had reached $0 at September
30, 1999. Since the Partnership's liability with respect to its investments is
limited, losses in excess of investment are not recognized. Along with the
decrease in equity in losses from limited partnerships there was a increase in
loss from operations of $16,000 for the six months ended September 30, 1999 to
$(54,000), from $(38,000) for the six months ended September 30, 1998.
Cash Flows
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998. Net cash used during the six months ended September 30, 1999 was
$(258,000) compared to a net use of cash for the six months ended September 30,
1998 of $(406,000). The change was due primarily to a decrease in investments in
limited partnerships of $172,000, offset by an increase in operating activities
of $24,000.
During the six months ended September 30, 1999 and 1998, accrued payables, which
consist primarily of related party management fees due to the General Partner,
increased by $22,000. The General Partner does not anticipate that these accrued
fees will be paid until such time as capital reserves are in excess of future
foreseeable working capital requirements of the partnership.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 1999, to be sufficient to meet all currently foreseeable
future cash requirements.
12
<PAGE>
Impact of Year 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology (IT) Systems. The Partnership relies on the IT systems of
WNC, its general partner. IT systems include computer hardware and software used
to produce financial reports and tax return information. This information is
then used to generate reports to investors and regulatory agencies, including
the Internal Revenue Service and the Securities and Exchange Commission. The IT
systems of WNC are year 2000 compliant.
Non-IT Systems. The Partnership also relies on the non-IT systems of WNC. Non-IT
systems include machinery and equipment such as telephones, voice mail and
electronic postage equipment. Except for one telephone system, the non-IT
systems of WNC are year 2000 compliant. The one telephone system will require
the replacement of one computer and one software application, both of which will
be completed on or before December 15, 1999.
Service Providers. WNC also relies on the IT and non-IT systems of service
providers. Service providers include utility companies, financial institutions,
telecommunications carriers, municipalities, and other outside vendors. WNC has
obtained verbal assurances from its material service providers (electrical power
provider, financial institutions and telecommunications carriers) that their IT
and non-IT systems are year 2000 compliant. There can be no assurance that this
compliance information is correct. There also can be no assurance that the
systems of other, less-important service providers and outside vendors will be
year 2000 compliant.
Costs to Address Year 2000 Issues
The cost to address year 2000 issues for WNC has been less than $20,000. The
cost to replace the telephone system noted above will be less than $5,000. The
cost to deal with potential year 2000 issues of other outside vendors cannot be
estimated at this time.
Risk of Year 2000 Issues
The most reasonable and likely result from non-year 2000 compliance of systems
of the service providers noted above will be the disruption of normal business
operations for WNC. This disruption would, in turn, lead to delays in performing
reporting and fiduciary responsibilities on behalf of the Partnership. The worst
case scenario would be the replacement of a service provider. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Local Limited Partnerships
Status of Readiness
WNC is in the process of obtaining year 2000 certifications from each Local
General Partner of each Local Limited Partnership. Those certifications will
represent to the Partnership that the IT and non-IT systems critical to the
operation of the Housing Complexes and investor reporting to the Partnership are
year 2000 compliant. These certifications will also represent to the Partnership
that the IT and non-IT systems of property management companies, independent
accountants, electrical power providers, financial institutions and
telecommunications carriers used by the Local Limited Partnership are year 2000
compliant.
There can be no assurance that the representations in the certifications will be
correct. There also can be no assurance that the systems of other,
less-important service providers and outside vendors, upon which the Local
Limited Partnerships rely, will be year 2000 compliant.
13
<PAGE>
Costs to Address Year 2000 Issues
There will be no cost to the Partnership as a result of assessing year 2000
issues for the Local Limited Partnerships. The cost to deal with potential year
2000 issues of the Local Limited Partnerships cannot be estimated at this time.
Risk of Year 2000 Issues
There may be Local General Partners who indicate that they or their property
management company are not year 2000 compliant and do not have plans to become
year 2000 compliant before the end of 1999. There may be other Local General
Partners who are unwilling to respond to the certification request. The most
likely result of either non-compliance or failure to respond will be the removal
and replacement of the property management company and/or the Local General
Partner with year 2000 compliant operators.
Despite the efforts to obtain certifications, there can be no assurance that the
Partnership will be unaffected by year 2000 issues. The most reasonable and
likely result from non-year 2000 compliance will be the disruption of normal
business operations for the Local Limited Partnerships, including but not
limited to the possible failure to properly collect rents and meet their
obligations in a timely manner. This disruption would, in turn, lead to delays
by the Local Limited Partnerships in performing reporting and fiduciary
responsibilities on behalf of the Partnership. The worst-case scenario would
include the initiation of foreclosure proceedings on the property by mortgage
debt holders. Under these circumstances, WNC or its affiliates will take actions
necessary to minimize the risk of foreclosure, including the removal and
replacement of a Local General Partner by the Partnership. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
NONE
Part II. Other Information
Item 1. Legal Proceedings
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
14
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC Housing Tax Credit Fund IV, L.P. - Series 2
By: WNC Tax Credit Partners IV, L.P., General Partner
By: WNC & ASSOCIATES, INC. General Partner
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., President
WNC & Associates, Inc.
Date: November 17, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson, Vice President - Chief Financial Officer
WNC & Associates, Inc.
Date: November 17, 1999
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000913497
<NAME> WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 294,452
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 294,452
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,054,230
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,827,364
<TOTAL-LIABILITY-AND-EQUITY> 10,054,230
<SALES> 0
<TOTAL-REVENUES> 8,323
<CGS> 0
<TOTAL-COSTS> 62,802
<OTHER-EXPENSES> 313,538
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (368,017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (368,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (368,017)
<EPS-BASIC> (23)
<EPS-DILUTED> 0
</TABLE>
