Exhibit
Number Exhibit Description
EX-21.1 Financial Statements of Pioneer Street Associates, for the years ended
December 31, 1999 and 1998 togethor with Independent auditors' report thereon; a
significant subsidiary of the Partnership.
53
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners
Pioneer Street Associates
(A California Limited Partnership)
Visalia, California
I have audited the accompanying balance sheets of Pioneer Street Associates (A
California Limited Partnership), as of December 31, 1999 and 1998, and the
related statements of income, partners' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pioneer Street Associates (A
California Limited Partnership) as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Bernard E. Rea, CPA
Bernard E. Rea, CPA
Stockton, California
March 30, 2000
54
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS......................................... 54
FINANCIAL STATEMENTS
Balance sheets................................................... 56
Statements of income............................................. 57-60
Statements of changes in partners' equity........................ 61
Statements of cash flows......................................... 62-63
Notes to financial statements.................................... 63-67
55
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY 1999 1998
----- ----
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 22,374 $ 20,624
Accounts payable 3,580 7,742
Bank overdraft - -
Accrued reporting fee 2,000 3,000
Accrued property taxes - -
---------- ----------
Total current liabilities $ 27,954 $ 31,366
---------- ----------
DEPOSIT AND PREPAYMENT LIABILITIES
Tenants' security deposits $ 35,250 $ 35,250
Prepaid rents - -
---------- ----------
$ 35,250 $ 35,250
---------- ----------
LONG-TERM DEBT
Mortgage payable, less current maturities $ 1,860,474 $ 1,882,848
----------- ----------
COMMITMENT
PARTNERS' EQUITY $ 1,765,540 $ 1,832,905
----------- ----------
$ 3,689,218 $ 3,782,369
=========== ==========
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
RENTAL INCOME
Apartments $ 519,492 $ 519,492
Tenant assistance payments - -
Furniture and equipment - -
Commercial - -
Parking spaces - -
Subsidy income - -
Miscellaneous - -
---------- ----------
Sub-total potential rent revenue $ 519,492 $ 519,492
---------- ----------
VACANCIES
Apartments $ (37,696) $ (12,515)
Commercial - -
Parking spaces - -
Miscellaneous - -
---------- ----------
Sub-total vacancies $ (37,696) $ (12,515)
---------- ----------
Net rental revenue $ 481,796 $ 506,977
---------- ----------
FINANCIAL REVENUE
Interest Income - project operations $ 1,346 $ 1,457
Income from investments - replacement reserve 5,029 3,986
Income from investments - operating reserve - -
Income from investments - miscellaneous - -
---------- ----------
Sub-total financial revenue $ 6,375 $ 5,443
---------- ----------
OTHER REVENUE
Laundry and vending $ 10,555 $ 16,345
NSF and late charges - -
Damage and cleaning fees 329 -
Forfeited tenant security deposits 11,443 9,937
Other revenue 14,646 9,514
---------- ----------
Sub-total other revenue $ 36,973 $ 35,796
---------- ----------
Total revenues $ 525,144 $ 548,216
---------- ----------
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----- ----
OPERATING EXPENSES
<S> <C> <C>
Renting expenses
Advertising $ - $ 2,782
Miscellaneous renting expenses 13,942 1,546
---------- ----------
Sub-total renting expenses $ 13,942 $ 4,328
---------- ----------
Administrative expenses
Office salaries $ - $ -
Office supplies 1,117 1,348
Office rent - -
Management fee 38,201 39,084
Manager's salary 21,536 26,408
Legal expense 6,900 964
Audit expense 3,475 3,265
Bookkeeping / accounting services - -
Telephone and answering service 796 831
Bad debts - -
Miscellaneous administrative expenses - 398
---------- ----------
Sub-total administrative expenses $ 72,025 $ 72,298
---------- ----------
Utilities expense
Fuel oil / coal $ - $ -
Electricity 8,044 7,308
Water 11,542 10,169
Gas - -
Sewer 3,830 2,805
---------- ----------
Sub-total utilities expense $ 23,416 $ 20,282
---------- ----------
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----- ----
<S> <C> <C>
Operating and maintenance expense
Janitor and cleaning payroll $ - $ -
Janitor and cleaning supplies - -
Janitor and cleaning contract - -
Exterminating payroll / contract - -
Exterminating supplies - -
Garbage and trash removal 15,959 23,687
Security payroll / contract - -
Grounds payroll - -
Grounds supplies - -
Grounds contract 14,200 19,592
Repairs payroll 29,264 25,994
Repairs material 13,196 11,516
Repairs contract 18,133 26,984
Elevator maintenance / contract - -
Heating / cooling repairs and maintenance - -
Swim pool maintenance / contract - -
Snow removal - -
Decorating payroll / contract - -
Decorating supplies 1,633 100
Vehicle and maintenance equipment o & r - -
Miscellaneous operating and maint. expenses 949 -
---------- ----------
Sub-total operating & maint. expense $ 93,334 $ 107,873
---------- ----------
Taxes and insurance
Real estate taxes $ 46,488 $ 42,616
Payroll taxes 4,875 7,491
Miscellaneous taxes, licenses, and permits 175 175
Property and liability insurance 6,663 6,234
Fidelity bond insurance - -
Workman's compensation 3,652 4,089
Health insurance and other employee benefits 4,180 4,548
Other insurance - -
---------- ----------
Sub-total taxes & insurance $ 66,033 $ 65,153
---------- ----------
Total operating expenses $ 268,750 $ 269,934
---------- ----------
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----- ----
<S> <C> <C>
OTHER EXPENSES
Interest expense - mortgage $ 154,753 $ 157,096
Interest expense - notes - -
Miscellaneous financial expense - -
Depreciation and amortization 150,207 156,561
Limited partnership tax 800 800
Non project expenses 5,000 5,000
---------- ----------
Sub-total other expenses $ 310,760 $ 315,457
---------- ----------
Total expenses $ 579,510 $ 585,391
---------- ----------
Net income (loss) $ (54,366) $ (37,175)
========== ==========
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
General Limited
Total Partners Partner
------------- ------------- ------------
<S> <C> <C> <C>
Partners' equity
December 31, 1997 $ 1,870,080 $ (151,741) $ 2,021,821
Partners' capital
contributions - - -
Partners' capital
distributions - - -
Net income (loss) (37,175) (372) (36,803)
------------ ----------- -----------
Partners' equity
December 31, 1998 $ 1,832,905 $ (152,113) $ 1,985,018
Partners' capital
contributions - - -
Partners' capital
distributions (12,999) (12,999) -
Net income (loss) (54,366) (544) (53,822)
------------ ----------- -----------
Partners' equity
December 31, 1999 $ 1,765,540 $ (165,656) $ 1,931,196
============ ============ ===========
Percentage at
December 31, 1999 100% 1% 99%
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (54,366) $ (37,175)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 150,207 156,561
Change in assets and liabilities:
Decrease (increase) in:
Rents receivable - -
Prepaid expenses 679 (565)
Tenants' security deposits (894) (1,029)
Tax and insurance impounds (312) (297)
Increase (decrease) in:
Accounts payable (4,162) 7,742
Bank overdraft - (5,013)
Accrued reporting fee (1,000) 1,000
Accrued property taxes - (11,991)
Prepaid rents - -
Tenants' security deposits - 1
---------- ---------
Net cash provided by (used in)
operating activities $ 90,152 $ 109,234
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of replacement reserve $ (35,319) $ (31,973)
Withdrawals from replacement reserve - -
Acquisition of property and equipment - -
---------- ---------
Net cash provided by (used in)
investing activities $ (35,319) $ (31,973)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Partner contributions $ - $ -
Partner distributions (12,999) -
Principal payments on long-term debt (20,624) (19,012)
---------- ---------
</TABLE>
See Notes to Financial Statements.
62
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net cash provided by (used in)
financing activities $ (33,623) $ (19,012)
----------- ----------
Increase (decrease) in cash and
cash equivalents $ 21,210 $ 58,249
Cash and cash equivalents
Beginning 64,286 6,037
----------- ----------
Ending $ 85,496 $ 64,286
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for interest $ 154,753 $ 157,096
=========== ==========
</TABLE>
See Notes to Financial Statements.
63
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Partnership's significant accounting policies
consistently applied in the preparation of the accompanying financial statements
follows.
CAPITALIZATION AND DEPRECIATION
Land, buildings and improvements are recorded at cost. Depreciation of
buildings and equipment is computed principally using the Modified
Accelerated Cost Recovery System which approximates straight-line for
buildings and double-declining balance for equipment over the following
estimated useful lives:
Years
-------
Buildings 27.5
Equipment 7
Improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred. Upon disposal of depreciable
property, the appropriate property accounts are reduced by the related
costs and accumulated depreciation. The resulting gains and losses are
reflected in the statement of operations.
CASH AND CASH EQUIVALENTS
For purposes of reporting the statements of cash flows, the Partnership
includes all cash accounts which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments
purchased with a maturity of three months or less as cash and cash
equivalents on the accompanying balance sheet.
AMORTIZATION
Deferred charges are amortized over the following estimated useful lives
using the straight-line method:
Years
--------
Deferred debt expense 30
Tax credit monitoring fee 15
INCOME TAXES
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and
is reportable by, the partners individually.
64
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
PERSONAL ASSETS AND LIABILITIES
In accordance with the generally accepted method of presenting partnership
financial statements, the financial statements do not include the personal
assets and liabilities of the partners, including their obligation for
income taxes on their distributive shares of the net income of the
Partnership, nor any provision for income tax expense.
NOTE 2 - ORGANIZATION
Pioneer Street Associates is a California Limited Partnership which was
formed in February 1994, to develop, construct, own, maintain and operate
a 112-unit multi-family apartment complex known as Foothill Vista
Apartments and is located in the city of Bakersfield, California. The
major activities of the Partnership are governed by the Partnership
Agreement and Loan Agreement with the California Community Reinvestment
Corporation (CCRC), a California nonprofit public benefit corporation.
Under the Loan Agreement, the Partnership is required to provide low cost
housing to moderate or low-income households.
The Partnership has three general partners and one investing limited
partner. Partnership transactions with the general partners are described
in other notes to this financial statement.
NOTE 3 - DEFERRED CHARGES
Deferred charges as of December 31, 1999 and 1998, consists of the
following:
1999 1998
----------------- ---------------
Deferred debt expense $ 39,200 $ 39,200
Tax credit monitoring fee 26,650 26,650
Less accumulated amortization 13,403 10,319
--------------- ---------------
$ 65,850 $ 65,850
--------------- ---------------
$ 52,447 $ 55,531
============== ===============
65
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PIONEER STREET ASSOCIATES
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RESTRICTED DEPOSITS AND FUNDED RESERVES
In accordance with the Partnership and the CCRC Replacement Reserve
Agreements, the Partnership is required to maintain a replacement reserve
account. The account is to be funded annually in the amount of $28,000
until the aggregate balance of the account reaches $182,000.
NOTE 5 - LONG-TERM DEBT
Long-Term debt consisted of a permanent loan with CCRC in face amount of
$1,960,000.
Under the terms of the 30-year Promissory Note with CCRC, the loan
provides for an initial interest rate of 8.17% and monthly payments of
$14,614.74 commencing on November 1, 1995, and continuing through
September 2025. The interest rate and monthly payment will be adjusted at
year eleven (11) and year Twenty-one (21), at which time the interest rate
will be adjusted based on the Current Index plus 2.75% and the payment
will be adjusted and determined by the amount of the monthly payment that
would be sufficient to repay the note within 360 months of the initial
payment date. As of December 31, 1999 the current interest, rate and
minimum monthly payment due is 8.17% and $14,617.74, respectively.
The apartment complex is pledged as collateral for the mortgage and is
secured by deeds of trust, assignment of rents, security agreements and
fixture filings against the property.
Aggregate maturities of Long-term debt for the next five years are as
follows:
December 31, 2000 $ 22,374
2001 24,272
2002 26,331
2003 28,564
2004 30,987
Thereafter 1,750,320
-----------
TOTAL $ 1,882,848
===========
66
<PAGE>
PIONEER STREET ASSOCIATES
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
ANNUAL REPORTING FEE
An annual reporting fee of $1,000 is payable to the limited partner, WNC
California Housing Tax Credit Fund IV, L.P. Series 2, an investor limited
partner which holds a 99% interest in the partnership, for services to be
rendered for accounting matters relating to preparation of tax returns and
other reports required.
ANNUAL PARTNERSHIP ADMINISTRATIVE FEE
An annual partnership administrative fee of $1,000 is payable to the
general partners, for their services to be rendered in connection with the
administration of the day to day business of the Partnership. For the year
ended December 31, 1999, $3,000 was charged to operations for fees payable
from 1996 through 1999.
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
MANAGEMENT FEE
In accordance with the management agreement, the Partnership paid Tetra
Property Management Company, affiliates of one of the general partners, a
management fee during 1999 in the amount of 38,201, for services rendered
in connection with the leasing and operation of the project. The fee for
its services is approximately 7% of the project's rental income.
NOTE 7 - CONCENTRATION OF CREDIT RISK
The Partnership maintains cash and cash equivalents at two financial
institutions located in California. The accounts are insured by the
Federal Deposit Insurance Corporation up to $100,000 per financial
institution. At December 31, 1999, the Partnership's uninsured cash
balances totaled $73,520.
NOTE 8 - COMMITMENT
The Partnership entered into a Regulatory Agreement with the Tax Credit
Allocation Committee (TCAC), established under Section 50185 of the Health
and Safety Code of the State of California. Under this Agreement, the
Partnership shall maintain the project as a Qualified Low-income Housing
Project for a period of 55 consecutive taxable years beginning with 1995,
the first taxable year of the Credit Period. In exchange for this
agreement, TCAC has authorized an allocation relating to the low-income
housing credit under the provisions of Section 42 of the Internal Revenue
Code.
NOTE 9 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Partnership's sole asset is Foothill Vista Apartments. The
Partnership's operations are concentrated in the multifamily real estate market.
67
