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, 2000
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 No X
<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, 2000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 2000 and March 31, 2000.....................3
Statements of Operations
For the three and six months ended September 30, 2000 and 1999...4
Statement of Partners' Equity (Deficit)
For the six months ended September 30, 2000......................5
Statements of Cash Flows
For the six months ended September 30, 2000 and 1999.............6
Notes to Financial Statements.............................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................14
Item 3. Quantitative and Qualitative Disclosures About Market Risks.......16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................16
Item 6. Exhibits and Reports on Form 8-K..................................16
Signatures.................................................................17
2
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 2000 March 31, 2000
------------------------ --------------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 127,273 $ 180,133
Investments in limited partnerships, net (Note 3) 7,918,112 8,311,454
Other assets 998 998
------------------------ --------------------
$ 8,046,383 $ 8,492,585
======================== ====================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accrued expenses $ 86,965 $ 86,965
Accrued fees and expenses due to General Partner
and affiliates (Note 4) 93,219 72,598
------------------------ --------------------
Total Liabilities 180,184 159,563
------------------------ --------------------
Partners' equity (deficit):
General partner (73,650) (68,982)
Limited partners (20,000 units authorized,
15,600 units issued and outstanding) 7,939,849 8,402,004
--------------------
------------------------
Total partners' equity 7,866,199 8,333,022
------------------------ --------------------
$ 8,046,383 $ 8,492,585
======================== ====================
</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, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------------------------ --------------------------------
Three Six Three Six
Months Months Months Months
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Interest income $ 1,879 $ 4,240 $ 3,875 $ 8,323
------------ -------------- ------------- --------------
Operating expenses:
Amortization 10,234 20,468 10,234 20,464
Asset management fees (Note 3) 11,000 22,000 10,725 21,450
Other 34,717 55,721 14,381 20,888
------------ -------------- ------------- --------------
Total operating expenses 55,951 98,189 35,340 62,802
------------ -------------- ------------- --------------
Loss from operations (54,072) (93,949) (31,465) (54,479)
Equity in losses of
limited partnerships (Note 2) (186,437) (372,874) (156,769) (313,538)
------------ -------------- ------------- --------------
Net loss $ (240,509) $ (466,823) $ (188,234) $ (368,017)
============ ============== ============= ==============
Net loss allocated to:
General partner $ (2,405) $ (4,668) $ (1,882) $ (3,680)
============ ============== ============= ==============
Limited partners $ (238,104) $ (462,155) $ (186,352) $ (364,337)
============ ============== ============= ==============
Net loss per weighted limited
partnership unit $ (15) $ (30) $ (12) $ (23)
============ ============== ============= ==============
Outstanding weighted limited
partner units 15,600 15,600 15,600 15,600
============ ============== ============= ==============
</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 (DEFICIT)
For the Six Months Ended September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
-------------- ---------------- ---------------
<S> <C> <C> <C>
Partners' equity (deficit) at $ (68,982) $ 8,402,004 $ 8,333,022
March 31, 2000
Net loss (4,668) (462,155) (466,823)
-------------- ---------------- ---------------
Partners' equity (deficit) at
September 30, 2000 $ (73,650) $ 7,939,849 $ 7,866,199
============== ================ ===============
</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, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (466,823) $ (368,017)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 20,468 20,464
Equity in losses of limited partnerships 372,874 313,538
Change in asset management fees payable 18,250 21,450
Change in accrued fees and expenses due
to General Partner and affiliates 2,371 689
----------------- -----------------
Net cash used in operating activities (52,860) (11,876)
----------------- -----------------
Cash flows from investing activities:
Investment in limited partnerships - (246,020)
----------------- -----------------
Net cash used in investing activities: - (246,020)
----------------- -----------------
Net decrease in cash and cash equivalents (52,860) (257,896)
Cash and cash equivalents, beginning of period 180,133 552,348
----------------- -----------------
Cash and cash equivalents, end of period $ 127,273 $ 294,452
================= =================
</TABLE>
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, 2000
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accompanying condensed consolidated unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 2001. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-K for the fiscal year ended March 31, 2000.
Organization
WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") was formed on
September 27, 1993 under the laws of the state of California and commenced
operations on July 18, 1994. The Partnership was formed to invest primarily in
other limited partnerships (the "Local Limited Partnerships") which own and
operate multi-family housing complexes (the "Housing Complex") that are eligible
for low income housing credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner is WNC Tax Credit Partners, IV, L.P. (the "General
Partner"), a California limited partnership. WNC & Associates, Inc. ("WNC") is
the general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of WNC. Wilfred
N. Cooper, Jr., President of WNC, owns 2.1% of the outstanding stock of WNC.
The Partnership 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, 2000
(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.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital and amounted to $970,717 as of September 30,
2000 and March 31, 2000.
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 September 30, 2000
and March 31, 2000, the Partnership had no cash equivalents.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of Partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the periods
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
9
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 2 - UNCERTAINTY WITH RESPECT TO INVESTMENTS IN BROKEN BOW AND SIDNEY:
IMPAIRMENT OF INVESTMENTS
The Partnership has two investments accounted for under the equity method,
consisting of 99% limited partnership interests in each of Broken Bow Apartments
I, Limited Partnership ("Broken Bow") and Sidney Apartments I, Limited
Partnership ("Sidney").
The independent auditors engaged to perform the audits of Broken Bow and
Sidneys' financial statements as of and for the year ended December 31, 1999,
were unable to form an opinion on those financial statements. This was due to
the inability to obtain from the former local general partner certain general
ledger information for a period of approximately three months and reliable
confirmations of advances to/notes receivable from the former local general
partner. Further, the independent auditors were unable to obtain management
representation letters from the former property management company, which is an
affiliate of the former local general partner. As a result, the Partnership has
not included the financial information of Broken Bow and Sidney in the combined
condensed financial statements presented in Note 3 to the financial statements.
The combined condensed financial information presented in Note 3 for prior
periods has been restated to exclude the accounts of Broken Bow and Sidney. The
Partnership has reflected equity in the net losses of Broken Bow and Sidney
totaling $0 for the three and six months ended September 30, 2000 because the
recognition of any such loss would reduce the net investment account to a
balance below zero (See note 3). Such estimates may be materially misstated due
to the lack of corroborative financial information.
Broken Bow and Sidney continue to experience negative cash flows from
operations. During the three and six month periods ended September 30, 2000 and
the year ended March 31, 2000, the Partnership advanced $19,291, $30,757 and
$120,906, respectively, in cash to Broken Bow and Sidney for operating expenses,
including legal fees relating to certain litigation involving these and other
properties as outlined in the 10-K for the fiscal year ended March 31, 2000, as
well as another $2,000 in cash from October 1, 2000 to December 19, 2000. WNC is
currently negotiating for a restructuring of the related bank loans, which would
increase cash flow from operations. WNC may not be successful in the
restructuring of these loans. If the loans are not restructured, the Partnership
may be unable to support these properties. Consequently, the Partnership may be
forced to sell all or a portion of its interests in these properties. Further,
the lender may attempt to foreclose on the Broken Bow and Sidney properties.
As a result of the foregoing, WNC performed an evaluation of the Partnership's
remaining investment balances in Broken Bow and Sidney, including the cash
advances noted above and other anticipated costs. It was determined that an
impairment adjustment was necessary and an impairment loss of $766,559 has been
recognized for the year ended March 31, 2000. This impairment loss includes
$558,688 in remaining net book value of the Partnership's investments in Broken
Bow and Sidney, the $120,906 and $30,753 of cash advances, a $37,670 accrual for
anticipated legal costs, and $18,542 of estimated accounting and other related
costs. Additional legal fees totaling $2,487 were incurred during the six months
ended September 30, 2000.
As a result of the aforementioned operating difficulties and the litigation ,
there is uncertainty as to whether the Partnership will ultimately retain its
interests in Broken Bow and Sidney. If the investments are sold or otherwise not
retained, the Partnership could be subject to recapture of tax credits and
certain prior tax deductions. There is further uncertainty as to costs that the
Partnership may ultimately incur in connection with its investments in Broken
Bow and Sidney. The Partnership's financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
10
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership had acquired limited partnership
interests in twenty-two Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 892 apartment units. As of
September 30, 2000, construction or rehabilitation of all of the apartment
complexes have 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.
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the periods presented:
<TABLE>
<CAPTION>
For the Six Months For the Year Ended
Ended March 31, 2000
September 30, 2000
---------------------- ---------------------
<S> <C> <C>
Investments per balance sheet, beginning of period $ 8,311,454 $ 10,092,782
Capital contribution paid - (62,593)
Impairment loss on investments in limited
partnerships - (766,559)
Capital contributions payable to Sidney and Broken
Bow offset to book value - (107,283)
Accrued expenses (Note 2) - 86,965
Cash advances (Note 2) - 120,906
Distributions received - (19,667)
Equity in losses of limited partnerships (372,874) (992,162)
Amortization of paid
acquisition fees and costs (20,468) (40,935)
====================== =====================
Investments per balance sheet, end of period $ 7,918,112 $ 8,311,454
====================== =====================
</TABLE>
11
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS, continued
Selected financial information for the six months ended September 30 from the
unaudited combined financial statements of the limited partnerships in which the
Partnership has invested as follows: (Combined condensed financial information
for Broken Bow and Sidney have been excluded from the presentations below. See
Note 2 for further discussion):
COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
2000 1999
-------------------- ------------------
<S> <C> <C>
Revenues $ 1,884,000 $ 1,947,000
-------------------- ------------------
Expenses:
Interest expense 577,000 621,000
Depreciation 619,000 581,000
Operating expenses 1,082,000 983,000
-------------------- ------------------
Total expenses 2,278,000 2,185,000
-------------------- ------------------
Net loss $ (394,000) $ (238,000)
==================== ==================
Net loss allocable to the Partnership, before
equity in losses of Broken Bow and Sidney (388,000) (235,000)
==================== ==================
Net loss recorded by the Partnership, before
equity in losses of Broken Bow and Sidney (373,000) (235,000)
Net loss of Broken Bow allocable to the Partnership (55,000) (58,000)
Net loss of Sidney allocable to the Partnership (24,000) (21,000)
Below zero adjustments of allocable losses of
Broken Bow and Sidney 79,000 -
-------------------- ------------------
Net loss recorded by the Partnership $ (373,000) $ (314,000)
==================== ==================
</TABLE>
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partner may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
impaired and the loss and recapture of the related tax credits could occur.
12
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 2
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or Associates for the following fees:
(a) Annual Asset Management Fee. An annual asset management fee of the greater
of (i) $2,000 per multi-family housing complex or (ii) 0.275% of Gross
Proceeds. The base fee amount will be adjusted annually based on changes in
the Consumer Price Index. However, in no event will the annual asset
management fee exceed 0.2% of Invested Assets. "Invested Assets" means the
sum of the Partnership's investment in Local Limited Partnerships and the
Partnership's allocable share of the amount of indebtedness related to the
Housing Complexes. Fees of $22,000 and $21,450 were incurred during the six
months ended September 30, 2000 and 1999, respectively. The Partnership
paid the General Partner or its affiliates $3,750 and $0 of those fees
during the six months ended September 30, 2000 and 1999, respectively.
(b) A subordinated disposition fee in an amount equal to 1% of the sales price
of real estate sold. Payment of this fee is subordinated to the limited
partners receiving a preferred return of 16% through December 31, 2003 and
6% thereafter (as defined in the Partnership Agreement) and is payable only
if the General Partner or its affiliates render services in the sales
effort.
The accrued fees and expenses due to General Partner and affiliates consist of
the following:
<TABLE>
<CAPTION>
September 30, 2000 March 31, 2000
--------------------- --------------------
<S> <C> <C>
Reimbursement for expenses paid by the General
Partner or an affiliate $ 9,060 $ 6,689
Asset management fee payable 84,159 65,909
--------------------- --------------------
Total $ 93,219 $ 72,598
===================== ====================
</TABLE>
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.
NOTE 5 - INCOME TAXES
The Partnership will not make a provision for income taxes since all items of
taxable income and loss will be allocated to the partners for inclusion in their
respective income tax returns.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report contains forward-looking statements concerning the
Partnership's anticipated future revenues and earnings, adequacy of future cash
flow and related matters. These forward-looking statements include, but are not
limited to, statements containing the words "expect", "believe", "will", "may",
"should", "project", "estimate", and like expressions, and the negative thereof.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially from the statements, including competition, as well
as those risks described in the Partnership's SEC reports, including the
Partnership's Form 10-K filed pursuant to the Securities and Exchange Act of
1934 on September 28, 2000.
The following discussion and analysis compares the results of operations for the
three and six months ended September 30, 2000 and 1999, and should be read in
conjunction with the condensed consolidated financial statements and
accompanying notes included within this report.
Financial Condition
The Partnership's assets at September 30, 2000 consisted primarily of $127,000
in cash and aggregate investments in the twenty-two Local Limited Partnerships
of $7,918,000. Liabilities at September 30, 2000 primarily consisted of $87,000
in accrued expenses and $93,000 of accrued fees and expenses due to the General
Partner and affilates.
Results of Operations
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999. The Partnership's net loss for the three months ended September 30,
2000 was $(241,000) reflecting an increase of $53,000 from the $(188,000) net
loss experienced for the three months ended September 30, 1999. The increase in
net loss is primarily due to equity in losses of limited partnerships which
increased by $29,000 to $(186,000) for the three months ended September 30, 2000
from $(157,000) for the three months ended September 30, 1999. Along with the
increase in equity in losses of limited partnerships, there was an increase in
loss from operations of $23,000 for the three months ended September 30, 2000 to
$(54,000) from $(31,000) for the three months ended September 30, 1999.
Six Months Ended September 30, 2000 Compared to Six Months Ended September 30,
1999. The Partnership's net loss for the six months ended September 30, 2000 was
$(467,000) reflecting an increase of $99,000 from the $(368,000) net loss
experienced for the six months ended September 30, 1999. The increase in net
loss is primarily due to equity in losses of limited partnerships which
increased by $59,000 to $(373,000) for the six months ended September 30, 2000
from $(314,000) for the six months ended September 30, 1999. Along with the
increase in equity in losses of limited partnerships, there was an increase in
loss from operations of $40,000 for the six months ended September 30, 2000 to
$(94,000) from $(54,000) for the six months ended September 30, 1999. The
increase in loss is due to the write-off of operating advances paid to two
limited partnerships, Broken Bow and Sidney.
Cash Flows
Six Months Ended September 30, 2000 Compared to Six Months Ended September 30,
1999. Net cash used during the six months ended September 30, 2000 was $(53,000)
compared to net cash used during the six months ended September 30, 1999 of
$(258,000). The change was due primarily to a decrease in cash paid to Local
Limited Partnerships of $(246,000), offset by approximately $30,000 of operating
advances paid to two lower tier partnerships, Broken Bow and Sidney.
14
<PAGE>
During the six months ended September 30, 2000, accrued payables, which consist
primarily of asset management fees due to the General Partner, increased by
$20,000. The General Partner does not anticipate that these accrued fees will be
paid in full until such time as capital reserves are in excess of future
foreseeable working capital requirements of the Partnership.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 2000, to be sufficient to meet all currently foreseeable
future cash requirements.
15
<PAGE>
Item 3. Quantitative and Qualitative Disclosures Above Market Risks
NOT APPLICABLE.
Part II. Other Information
Item 1. Legal Proceedings
NONE.
Item 6. Exhibits and Reports on Form 8-K
NONE.
16
<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 of the Registrant
By: WNC & ASSOCIATES, INC., General Partner
By: /s/ Wilfred N. Cooper, Jr.
Wilfred N. Cooper, Jr.,
President - Chief Operating Officer of WNC & Associates, Inc.
Date: January 9, 2001
By: /s/ Thomas J. Riha
Thomas J. Riha,
Vice President - Chief Financial Officer of WNC & Associates, Inc.
Date: January 9, 2001
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