<PAGE>
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: March 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: 33-76970
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4 through 9
(Exact name of registrant as specified in its charter)
California 33-0531301 (Series 4) & 33-0676287 (Series 5)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(Address of principal executive offices)
(714) 662-5565
(Registrant's telephone number,
including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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 CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4 through 9
(A California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED March 31, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements- Series 4
Balance Sheets, March 31, 1996 and December 31, 1995 4
Statement of Operations
For the three months ended March 31, 1996 and 1995 5
Statement of Partners' Equity
For the three months ended March 31, 1996 and 1995 6
Statement of Cash Flows
For the three months ended March 31, 1996 and 1995 7
Notes to Financial Statements 9
Item 1. Financial Statements- Series 5
Balance Sheets, March 31, 1996 and December 31, 1995 16
Statement of Operations
For the Period from February 26, 1996
(Date Operations commenced) to March 31, 1996 17
Statement of Partners' Equity
For the Period from February 26, 1996
(Date Operations commenced) to March 31, 1996 18
Statement of Cash Flows
For the Period from February 26, 1996
(Date Operations commenced) to March 31, 1996 19
Notes to financial Statements 21
2
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4 through 9
(A California Limited Partnership)
INDEX TO FORM 10-Q (CONTINUED)
FOR THE QUARTER ENDED March 31, 1996
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 26
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 33
3
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
1996 1995
------ -----
ASSETS
Cash and cash equivalents $3,304,199 $3,827,214
Investment in limited partnerships (Note 2) 8,452,331 8,494,018
Other assets 16,029 25,824
------ ------
$ 11,772,559 $ 12,347,056
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partners (Note 4) $ 2,199,027 $ 2,785,857
Accrued fees and advances due to
affiliate (Note 3) 59,161 102,526
------- -------
Total liabilities 2,258,188 2,888,383
--------- ---------
Commitments and contingencies (Note7)
Partners' equity (deficit) (Note 6):
General partner (14,824) (14,581)
Limited partners (25,000 units authorized
11,500 units outstanding at March 31, 1996
and at December 31, 1995) 9,529,195 9,473,254
--- ---- --------- ---------
Total partners' equity 9,514,371 9,458,673
--------- ---------
$ 11,772,559 $ 12,347,056
============ ============
Unaudited
See accompanying notes to financial statements
4
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three months Ended March 31, 1996 and 1995
1996 1995
---- ----
Interest income .................................... $ 43,976 $ 2,930
-------- --------
Operating expenses:
Accounting ....................................... 2,000 7,000
Amortization ..................................... 6,023 1,496
Asset management fees (Note 3) ................... 7,906 443
Interest expense ................................. 0 25,594
Office expense ................................... 591 3,599
--- -----
Total operating expenses ........................... 16,520 38,132
-------- --------
Income (loss) from operations ...................... 27,456 (35,202)
Equity in losses from limited partnerships
(Note 2) ........................................ (62,371) (5,674)
-------- --------
Net loss ........................................... $(34,915) $(40,876)
======== ========
Net loss allocated to:
General partner .................................. $ (349) $ (409)
======== ========
Limited partners ................................. $(34,566) $(40,467)
======== ========
Net loss per weighted limited partner unit
(11,500 and 2,799 weighted units
outstanding March 31, 1996 and 1995,
respectively) $(3.00) $(14.60)
====== =======
Unaudited
See accompanying notes to financial statements
5
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Three months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
General Limited
Partner
Partner Total
-------
- ------- -----
For the three months Ended March 31, 1995
<S> <C> <C>
<C>
Equity (deficit) December 31, 1995 $(14,581) $9 ,473,254
$ 9,458,673
Collection of notes receivable 80,000
80,000
Offering expenses 106 10,507
10,613
Net loss for the three months ended
March 31, 1996 (349)
(34,566) (34,915)
---- -------
-------
Equity (deficit) March 31, 1996 $ (14,824) $ 9,529,195
$ 9,514,371
======= =========
=========
For the three months Ended March 31, 1995
Balance (deficit), December 31, 1994 $ (3,015) $ 1,703,189
$ 1,700,174
Capital contributions (25,000 units authorized,
1,243 units issued and outstanding) 1,243,000
1,243,000
Collection of notes receivable 120,500
120,500
Capital issued for notes receivable (45,000)
(45,000)
Offering expenses (1,911) (189,237)
(191,148)
Net loss for the three months
ended March 31, 1995 (409) (40,467)
(40,876)
---- -------
-------
Equity (deficit) March 31, 1995 $ (5,335) $ 2,791,985
$ 2,786,65
======== ===========
==========
</TABLE>
Unaudited
See accompanying notes to financial statements
6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For the Three months Ended March 31, 1996 and 1995
1996 1995
----- -----
Cash flows provided (used) by operating activities:
Net loss $ (34,914) $ (40,876)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization 6,023 1,496
Equity in loss of limited partnerships 62,371 5,674
Increase in asset management fees payable 7,906 433
Decrease (increase) in interest receivable 9,795 551
Increase in interest payables 4,307
Increase in advances for accrued expense 908 7,000
--- -----
Net cash provided (used) by operating activities 52,089 (21,405)
------ -------
Net cash used by investing activities:
Investments in limited partnerships 592,179)
Acquisition costs and fees (9,079) (29,785)
-------- -------
Net cash used by investing activities (601,258) (29,785)
-------- -------
Net cash provided by financing activities:
Capital contributions from partners 1,318,500
Increase in subscriptions receivable (111,800)
Collection of notes receivable 80,000
Offering costs 10,613 (117,681)
Payment of advances from affiliates (64,459) (501,202)
------- --------
Net cash provided by financing activities 26,154 587,817
------ -------
Net increase (decrease) in cash (523,015) 536,627
Cash and cash equivalents, beginning of period 3,827,214 484,771
--------- -------
Cash and cash equivalents, end of period $ 3,304,199 $ 1,021,398
========= =========
Continued
Unaudited
See accompanying notes to financial statements
7
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF CASH FLOWS - CONTINUED
For the Three months Ended March 31, 1996 and 1995
Supplemental disclosure of noncash financing and investing activity:
- --------------------------------------------------------------------
1996 1995
---- ----
The Partnership has incurred but not paid:
Capital contributions in connection with
investments in limited partnerships $211,677 $184,972
======= =======
Acquisition fees $12,279 $73,514
====== ======
Offering costs $85,772
=======
The Partnership has adjusted capital contributions
in connection with investments in limited
partnerships due to reduced tax credits $(206,328)
=========
The Partnership applied loans receivable from limited
partnerships to investments in limited partnerships $147,178
========
Unaudited
See accompanying notes to financial statements
8
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC California Tax Credits IV, L.P., Series 4 (the "Partnership") was formed
under the California Revised Limited Partnership Act on February 16, 1995, and
commenced operations on July 26, 1995. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.
The 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 financial statements and related notes thereto contained in
the Partnership's Annual Report for the year ended December 31, 1995.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1996 and operations and changes in cash flows for the three months then ended.
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.
The general partner of the Partnership is WNC California 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.
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
9
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - ORGANIZATION AND OTHER MATTERS (CONTINUED)
- ---------------------------------------------------
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their preferred return (as defined in the
Partnership's Agreement of Limited Partnership) and the general partner has
received a subordinated disposition fee any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
Method of Accounting For Investment in Limited Partnerships
- -----------------------------------------------------------
The 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 each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
- -------------------------
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
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.
Organization Costs
- ------------------
Organization costs are being amortized on the straight-line method over 60
months.
10
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
-------------------------------------------
As of March 31, 1996 the Partnership had acquired limited partnership interests
in eight limited partnerships each of which owns one Apartment Complex. As of
March 31, 1996, construction or rehabilitation of five of the Apartment
Complexes had been completed and three were undergoing construction or
rehabilitation.
The Partnership, as a limited partner, is entitled to 99%, as specified in the
partnership agreements, of the operating profits and losses of the limited
partnerships upon the acquisition of its limited partnership interest. Following
is a summary of the components of investment in limited partnerships as of March
31, 1996 and December 31, 1995:
1996 1995
---- ----
Investment per balance sheet,
beginning of period $ 8,494,018 $ 3,355,553
Capital contributions to limited partnerships 211,677 4,702,910
Adjustment to capital contributions
due to reduced tax credits (206,328)
Increase in capitalized acquisition
fees and costs 21,358 551,835
Amortization (6,023) (16,056)
Equity in income (loss) of limited
partnerships (62,371) (100,224)
------ -------
Investment per balance sheet, end of
period $ 8,452,331 $ 8,494,018
========= =========
11
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (Continued)
- -------------------------------------------------------
Selected financial information from the financial statements of the limited
partnerships with operations for the three months ended March 31, 1996 and 1995
is as follows:
1996 1995
---- ----
Total revenue ...................... $ 154, 000 $ 16,000
--------- --------
Expenses:
Interest expense ...................... 73,000 5,000
Depreciation ...................... 83,000 12,000
Operating expenses exclusive of
interest and depreciation ...................... 61,000 5,000
------ -----
Total expenses ...................... 217,000 22,000
------- ------
Net loss ...................... $ (63,000) $ (6,000)
========= ========
Net loss allocable to Partnership $ (62,371) $ (5,674)
======== ======
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees of up to 7% of the gross proceeds from the sale of
Partnership units. Acquisition fees of $13,685 and $87,010 were
incurred for the three months ended March 31, 1996 and 1995.
12
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 to the limited partnerships plus
its allocable percentage of the permanent financing) of the limited
partnerships which are subsidized under one or more Federal, state or
local government programs. The Partnership has incurred fees of $7,906
and $443 for the three months ended March 31, 1996 and 1995,
respectively.
Reimbursement for organizational, offering and selling expenses
advanced by an affiliate of the General Partner on behalf of the
Partnership. These reimbursements plus all other organizational and
offering expenses inclusive of sales commissions will not exceed 15% of
the gross proceeds. During the three months ended March 31, 1996 the
Partnership incurred organizational, offering and selling expenses of
$-0-, $(10,613) and $0 respectively. During the three months ended
March 31, 1995 the Partnership incurred organizational, offering and
selling expenses of $-0-, $634,700 and $403,500 respectively.
A subordinated disposition fee in an amount equal to 1% of the sales
price of real estate sold. Payment of this fee is subordinated to the
limited partners receiving a return on investment (as defined in the
Agreement of Limited Partnership) and is payable only if services are
rendered in the sales effort.
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheets consists of the following at March 31, 1996 and
December 31, 1995:
13
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
1996 1995
---- ----
Acquisition fees ..................... $ 26,600 $ 14,321
Advances made for acquisition costs,
organizational, offering and selling
expenses ........................... (9,484) 56,580
Asset Management fee payable ......... 39,531 0
Other advances and expenses .......... 2,514 0
----- -
$ 59,161 $ 102,526
========= =========
NOTE 4 - PAYABLE TO LIMITED PARTNERSHIPS
Payable to limited partnerships represent amounts which are due at various times
based on conditions specified in the respective limited partnership agreements.
These contributions are payable in installments, are generally due upon the
limited partnerships achieving certain operating benchmarks and are generally
expected to be paid within two years of the Partnership's initial investment.
NOTE 5 - INCOME TAXES
The Partnership does 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.
NOTE 6 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
During the three months ended March 31, 1996, the Partnership collected payments
of $80,000 for those promissory notes previously issued. The amount of $92,500
is outstanding at March 31, 1996 and included as a reduction in partners'
equity. During the three months ended March 31, 1995, the Partnership accepted
$45,000 in promissory notes from limited partners and collected payments of
$120,500 for those promissory notes previously issued. Limited partners who
subscribe for ten or more units of limited partnership interest ($10,000) may
elect to pay 50% of such purchase price in cash upon subscription and the
remaining 50% by the delivery of a promissory note payable bearing interest at
the rate of 8% per annum. Principal and interest are due (i) January 31, 1996 if
the investor subscribes between January 1, 1995 and June 1, 1995 or (ii) the
later of the date of subscription or June 30, 1996 if the investor subscribes
after June 1, 1995. This amount is presented as a reduction in partners' equity.
14
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Partnership is negotiating to acquire two additional limited partnership
interest which would commit the Partnership to additional capital contributions
of approximately $687,000.
15
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
1996 1995
---- ----
ASSETS
Cash and cash $ 1,675,913 $ 1,000
Subscriptions receivable (Note 8) 234,100
Investment in limited
partnerships (Note 3) 3,150,240
Other Assets 3,454
----- -----
$ 5,063,707 $ 1,000
========= =====
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and advances due to
affiliates (Note 4) $ 359,414
Payable to limited
partnerships (Note 3) 3,032,307
- ---------
Total liabilities 3,391,721
Partners' equity (deficit) (Note 8):
General partner (2,466) $ 100
Limited partners (25,000 units authorized
1,966 units outstanding at March 31, 1996 and
no units outstanding at December 31, 1995 1,674,452 900
---------- ---
Total partners' equity 1,671,986 1,000
--------- -----
$ 5,063,707 $1,000
========= =====
Unaudited
See accompanying notes to financial statements
16
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
STATEMENT OF OPERATIONS
For the Period from February 26, 1996
(Date Operations Commenced) to March 31, 1996
Interest income .......................... $4,260
------
Operating expenses:
Amortization ........................... 342
Asset management fees (Note 4)
Office expense ......................... 12
------------------------------------------ ------
Total operating expenses ................. 354
---
Income from operations ................... 3,905
Equity in losses from limited partnerships 0
------------------------------------------ ------
Net income ............................... $3,905
======
Net income allocated to:
General partner ........................ $ 39
======
Limited partners ....................... $3,866
======
Net income (loss) per weighted limited
partner unit (1,505 weighted units
outstanding March 31, 1996) $ 2.59
======
Unaudited
See accompanying notes to financial statements
17
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
STATEMENT OF PARTNERS' EQUITY
For the Period from February 26, 1996 (Date Operations
Commenced) to March 31, 1996
<TABLE>
<CAPTION>
General Limited
Partner Partner
Total
<S> <C> <C>
<C>
Equity (deficit) December 31, 1995 ............ $ 100 $ 900
$ 1,000
Capital contributions (25,000 units authorized,
1,966 units issued and outstan1,965,100 ....... 1,965,100
1,965,100
Capital issued for notes receivable (Note 8) ..
(37,500) (37,500)
Offering expenses ............................. (2,605)
(257,914) (260,519)
Net income for the three months ended
March 31, 1996 ................................ 39 3,866
3,905
- ----------------------------------------------- ----------- -----------
-----------
Equity (deficit) March 31, 1996$ .............. $ (2,466) $
1,674,452 $ 1,671,986
===========
=========== ===========
</TABLE>
Unaudited
See accompanying notes to financial statements
18
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
STATEMENT OF CASH FLOWS
For the Period from February 26, 1996 (Date Operations
Commenced) to March 31, 1996
Cash flows provided by operating activities:
Net income ....................................... $ 3,905
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization ..................................... 342
Increase in interest receivable .................. (3,454)
------
Net cash provided by operating activities ........ 793
-----------
Net cash used by investing activities:
Increase in acquisition costs .................... (118,275)
--------
Net cash used by investing activities ............ (118,275)
--------
Net cash provided by financing activities:
Capital contributions from partners .............. 1,927,600
Increase in subscriptions receivable ............. (234,100)
Advances from general partner .................... 359,414
Capitalized offering costs ....................... (260,519)
--------
Net cash provided by financing activities ........ 1,792,395
-----------
Net increase in cash ............................. 1,674,913
Cash and cash equivalents, beginning of period ... 1,000
- -------------------------------------------------- -----------
Cash and cash equivalents, end of period ......... $ 1,675,913
===========
Continued
Unaudited
See accompanying notes to financial statements
19
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
STATEMENT OF CASH FLOWS - CONTINUED
For the Period from February 26, 1996 (Date Operations
Commenced) to March 31, 1996
Supplemental disclosure of noncash financing and investing activity:
The Partnership has incurred but not paid:
Capital contributions in connection with investments in
limited partnerships $3,032,307
==========
Unaudited
See accompanying notes to financial statements
20
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC California Tax Credits IV, L.P., Series 5 (the "Partnership") was formed
under the California Revised Limited Partnership Act on September 12, 1995, and
commenced operations on February 26, 1996. 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 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 financial statements and related notes thereto contained in
the Partnership's Annual Report for the year ended December 31, 1995.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1996 and changes in cash flows for the three months then ended. 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.
The general partner of the Partnership is WNC & Associates, Inc. (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.
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
21
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - ORGANIZATION AND OTHER MATTERS (CONTINUED)
- ---------------------------------------------------
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their preferred return (as defined in the
Partnership's Agreement of Limited Partnership) and the general partner has
received a subordinated disposition fee any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
Method of Accounting For Investment in Limited Partnerships
- -----------------------------------------------------------
The 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 each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
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.
Organization Costs
- ------------------
Organization costs are being amortized on the straight-line method over 60
months.
22
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - LOANS RECEIVABLE
- -------------------------
Loans receivable represent amounts loaned by the Partnership to certain limited
partnerships in which the Partnership may invest. These loans will be applied
against the first capital contribution due if the Partnership ultimately
acquires a limited partnership interest. In the event that the Partnership does
not acquire a limited partnership interest, the loans are to be repaid with
interest with at a rate of prime plus 1% per annum. No loans receivable have
been incurred.
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
As of March 31, 1996 the Partnership had acquired limited partnership interests
in one limited partnership which owns one Apartment Complex. As of March 31,
1996, the Apartment Complex had not yet started construction.
The Partnership, as a limited partner, is entitled to 99%, as specified in the
partnership agreements, of the operating profits and losses of the limited
partnership upon the acquisition of its limited partnership interest. Following
is a summary of the components of investment in limited partnerships as of March
31, 1996.
1996
Investment per balance sheet, beginning of
0eriod $ 0
Capital contributions to limited partnerships 3,032,307
Increase in capitalized acquisition fees and costs 118,275
Amortization (342)
----
Investment per balance sheet, end of period $3,150,240
==========
23
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS (Continued)
No operations were incurred by limited partnership for the period from February
26, 1996 (Date Operations Commenced) to March 31, 1996.
NOTE 4 - RELATED PARTY TRANSACTIONS
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees of up to 7% of the gross proceeds from the sale of
Partnership units. Acquisition fees of $115,710 were incurred for the
three months ended March 31, 1996.
An annual asset management fee equal to the greater amount of (i)
$2,000 for each Apartment Complex, or (ii) 0.275% of Gross Proceeds. In
either case, the fee will be decreased or increased annually based on
changes to the Consumer Price Index. However, in no event will the
maximum amount exceed 0.2 % of the invested assets (defined as the
Partnership's capital contributions to the limited partnerships plus
its allocable percentage of the permanent financing) of the limited
partnerships which are subsidized under one or more Federal, state or
local government programs. The Partnership incurred no fees for the
three months ended March 31, 1996
Reimbursement for organizational, offering and selling expenses
advanced by an affiliate of the General Partner on behalf of the
Partnership. These reimbursements plus all other organizational and
offering expenses inclusive of sales commissions will not exceed 15% of
the gross proceeds. During the three months ended March 31, 1996 the
Partnership incurred organizational, offering and selling expenses of
$-0-, $122,899 and $137,620 respectively.
A subordinated disposition fee in an amount equal to 1% of the sales
price of real estate sold. Payment of this fee is subordinated to the
limited partners receiving a return on investment (as defined in the
Agreement of Limited Partnership) and is payable only if services are
rendered in the sales effort.
24
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
- -----------------------------------------------
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheet consists of the following at March 31, 1996 and
December 31, 1995:
1996
----
Acquisition fees ............... $ 115,710
Advances made for acquisition costs,
organizational, offering and selling
expenses ....................... 243,704
-------
$ 359,414
=========
NOTE 5 - PAYABLE TO LIMITED PARTNERSHIPS
- ----------------------------------------
Payable to limited partnerships represent amounts which are due at various times
based on conditions specified in the respective limited partnership agreements.
These contributions are payable in installments, are generally due upon the
limited partnerships achieving certain operating benchmarks and are generally
expected to be paid within two years of the Partnership's initial investment.
NOTE 6 - 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.
NOTE 8 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
- ---------------------------------------------------
During the three months ended March 31, 1996, the Partnership accepted $37,500
in promissory notes from limited partners. Limited partners who subscribe for
ten or more units of limited partnership interest ($10,000) may elect to pay 50%
of such purchase price in cash upon subscription and the remaining 50% by the
delivery of a promissory note payable bearing interest at the rate of 8% per
annum. Principal and interest are due (i) January 31, 1997 if the investor
subscribes between January 1, 1996 and June 1, 1996 or (ii) the later of the
date of subscription or June 30, 1997 if the investor subscribes after June 1,
1996. This amount is presented as a reduction in partners' equity.
25
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 5
(A California Limited Partnership)
(A Development Stage-Enterprise)
March 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
WNC California Housing Tax Credits IV, L.P., Series 4 - Series 9 are California
Limited Partnerships formed under the laws of the State of California on May 4,
1993 to acquire limited partnership interests in limited partnerships ("Limited
Partnerships") which own multifamily apartment complexes that are eligible for
low-income housing federal income tax credits (the "Housing Tax Credit"). WNC
California Housing Tax Credits IV, L.P., Series 4 ("Series 4") and Series 5
("Series 5") are the only registrants to have commenced an offering. Series 4
and Series 5 are referred together as the Partnerships".
The partnerships are raising funds from investors through their public offering
of units of limited partnership interest ("Units") and intends to apply such
funds, including the installment payments of the limited partners' promissory
notes as received, to the acquisition of investments in Limited Partnerships,
acquisition fees, the establishment of reserves, the payment of operating
expenses and the payment of expenses of this offering.
Liquidity and Capital Resources-Series 4
- ----------------------------------------
Overall, as reflected in its Statement of Cash Flows, Series 4 had a net
decrease in cash and cash equivalents of approximately $523,000 for the three
months ended March 31, 1996. Cash of approximately $26,000 and $52,000 was
provided by financing activities and operating activities during three months
ended March 31, 1996. Cash of approximately $601,000 used by investing
activities and consisted of capital contributions to limited partnerships and
acquisition fees and expenses of approximately $592,000 and $9,000,
respectively. Cash provided by operating activities consisted primarily of
interest received on cash deposits and investors notes receivable, and cash used
consisted primarily of payments operating fees and expenses. The major
components of all these activities are discussed in greater detail below.
As of March 31, 1996, Series 4 was indebted to WNC & Associates, Inc. for
approximately $59,000. The component items of such indebtedness were as follows:
accrued Acquisition Fees of approximately $27,000, advances to pay front-end
fees of approximately $(9,000), Asset Management Fees of $39,000 and advances to
for payment of operating fees and expenses 2,000. As of December 31, 1995 Series
4 was indebted to WNC & Associates for approximately $103,000 consisting of
accrued Acquisition Fees of approximately $14,000, an advance to pay front-end
fees of $57,000, and Asset Management Fees of $32,000. Associates obtained the
26
<PAGE>
necessary funds for its 1995 advances to Series 4 for capital contributions
pursuant to a bank line of credit. As permitted by Series 4 Agreement, such
funds bore interest at the lender's rate (i.e., the rate paid by Associates
pursuant to its line of credit, which is equal to 1% per annum over the prime
rate published in The Wall Street Journal from time to time) which has ranged
from 9.75 to 10.5% per cent per annum. Associates' loan is payable upon demand.
and amounts lent in 1995 were repaid in May 1995. In addition, during 1995
Series 4 obtained a bank loan in the amount of $1,200,000. The loan bore
interest at a variable rate equal to the lender's prime rate less 0.75% per
annum and was payable interest only on a monthly basis until April 1996 when the
entire principal amount was repaid.
As of March 31, 1996 and December 31, 1995, Series 4 has received and accepted
subscriptions funds in the amount of $11,099,000, of which $92,500 and $172,500,
respectively were represented by Promissory Notes. As of March 31, 1996 and
December 31, 1995, Series 4 had made capital contributions to Local Limited
Partnerships in the amount of approximately $5,694,000, and $5,102,000,
respectively, and had commitments for additional capital contributions of
approximately $2,886,000 and $2,786,000, respectively.
Series 4 and 5
- --------------
Prior to sale of the Apartment Complexes, it is not expected that any of the
Local Partnerships in which the Partnerships have invested or will invest will
generate cash from operations sufficient to provide distributions to the Limited
Partners in any material amount except possibly in the circumstances discussed
in the Prospectus under "Investment Objectives and Policies - Principal
Investment Objectives." Such cash from operations, if any, would first be used
to meet operating expenses of the Partnerships, including payment of the asset
management fee to CTCP IV. See "Management Compensation" in the Prospectus. As a
result, it is not anticipated that the Partnerships will provide distributions
to the Limited Partners prior to the sale of the Apartment Complexes.
The Partnerships' investments will not be readily marketable and may be affected
by adverse general economic conditions which, in turn, could substantially
increase the risk of operating losses for the Apartment Complexes, the Local
Partnerships and the Partnerships. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner. See "Risk
Factors - Investment Risks" in the Prospectus. Nevertheless, the General Partner
anticipates that capital raised from the sale of the Units will be sufficient to
fund the Partnerships' investment commitments and proposed operations.
The Partnerships will establish working capital reserves of at least 3% of
capital contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnerships 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 Partnerships. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnerships' liquidity could also be affected by defaults
or delays in payment of the Limited Partners' promissory notes, from which a
portion of the working capital reserves is expected to be funded. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
27
<PAGE>
of the Partnerships, 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 Partnerships for such
purposes or to replenish or increase working capital reserves.
Under the Partnership Agreements the Partnerships do not have the ability to
assess the Limited Partners for additional capital contributions to provide
capital if needed by the Partnerships or Local Partnerships. Accordingly, if
circumstances arise that cause the Local Partnerships to require capital in
addition to that contributed by the Partnerships and any equity contributed by
the general partners of the Local Partnerships, the only sources from which such
capital needs will be able to be satisfied (other than the limited reserves
available at the Partnership level) will be (i) third-party debt financing
(which may not be available, if, as expected, the Apartment Complexes owned by
the Local Partnerships are already substantially leveraged), (ii) additional
equity contributions or advances of the general partners of the Local
Partnerships, (iii) other equity sources (which could adversely affect the
Partnerships' interest in Housing Tax Credits, cash flow and/or proceeds of sale
or refinancing of the Apartment Complexes and result in adverse tax consequences
to the Limited Partners), or (iv) the sale or disposition of the Apartment
Complexes (which could have the same adverse effects as discussed in (iii)
above). There can be no assurance that funds from any of such sources would be
readily available in sufficient amounts to fund the capital requirement of the
Local Partnerships in question. If such funds are not available, the Local
Partnerships would risk foreclosure on their Apartment Complexes if they were
unable to re-negotiate the terms of their first mortgages and any other debt
secured by the Apartment Complexes to the extent the capital requirements of the
Local Partnerships relate to such debt. See "Risk Factors Investment Risks -
Risks Associated With Use of Leverage" and "Investment Objectives and Policies -
Use of Leverage" in the Prospectus.
The Partnerships' 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 Partnerships' 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. See, however, "Risk Factors -
Investment Risks - Risks of Real Estate Ownership" in the Prospectus.
Liquidity and Capital Resources-Series 5
- ----------------------------------------
Overall, as reflected in its Statement of Cash Flows, Series 5 had a net
increase in cash and cash equivalents of approximately $1,675,000 for the three
months ended March 31, 1996. Cash from financing activities for the period ended
March 31, 1996 of approximately $1,792,000 was sufficient to fund the investing
activities of Series 5 during such periods in the amount of approximately
$118,000, which consisted of acquisition fees and costs. Cash used by the
Partnership's operating activities was minimal compared to the Partnership's
other activities and consisted primarily of payments for operating fees and
expenses. Cash provided from operations consisted primarily of interest
received. The major components of all these activities are discussed in greater
detail below.
28
<PAGE>
As of March 31, 1996 Series 5 was indebted to WNC & Associates, Inc. for
approximately $359,000. The component items of such indebtedness were as
follows: accrued Acquisition Fees of approximately $116,000, advances to pay
front-end fees of approximately $243,000.
As of May 20, 1996 and March 31, 1996, Series 5 has received and accepted
subscriptions funds in the amount of $2,606,000 and $1,966,000, respectively, of
which $47,500 and $37,500 was represented by Promissory Notes. As of May 20,
1996, March 31, 1996 and December 31, 1995, Series 5 had made capital
contributions to Local Limited Partnerships in the amount of approximately
$1,990,000, $0 and $0, respectively, and had commitments for additional capital
contributions of approximately $1,042,000, $3,032,000 and $0, respectively.
Results of Operations - Series 4
- --------------------------------
As of March 31, 1996 and March 31, 1995, Series 4 had acquired 8 and 2 Local
Limited Partnership Interests, respectively. Each of the eight Local Limited
Partnerships receives or is expected to receive government assistance and each
of them has received a reservation for Housing Tax Credits. As of March 31, 1996
and March 31, 1995, only five and one, respectively, of the Apartment Complexes
in Series 4 had commenced operations. Accordingly, the "Equity in losses from
limited partnerships" for the period ended March 31, 1996 and 1995 reflected in
the Statement of Operations of Series 4 is not indicative of the amounts to be
reported in future years.
As reflected on its Statements of Operations, Series 4 had a loss of
approximately $35,000 and $41,000 for the three months ended March 31, 1996 and
1995 respectively. The component items of revenue and expense are discussed
below.
Revenue.
- --------
Series 4'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 Partnerships. Interest revenue in future years will
be a function of prevailing interest rates and the amount of cash balances. It
is anticipated that Series 4 will maintain cash Reserves in an amount not
materially in excess of the minimum amount required by its Partnership
Agreement, which is 3% of Capital Contributions.
Expenses.
- ---------
The most significant component of operating expenses was interest
expense on borrowings of approximately $26,000 for the three months ended March
31, 1995; in the future the Asset Management Fee is expected to be the most
significant component. 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.
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 was incurred as described above
under "Liquidity and Capital Resources." Interest expense is expected to minimal
after 1995. Office expense consist of Series 4's administrative expenses, such
as legal fees, bank charges and investor reporting expenses.
29
<PAGE>
Because of the amounts of the Asset Management Fee and amortization expense
primarily are determined by the Gross Proceeds from the Offering, the number and
size of Apartment Complexes and the number of investors, until termination of
the Offering and investment of the net proceeds therefrom, Series 4 cannot
predict with any accuracy what these amounts will be.
Results of Operations - Series 5
- --------------------------------
As of March 31, 1996 and December 31, 1995, Series 5 had acquired 1 and 0 Local
Limited Partnership Interest, respectively. The Local Limited Partnership
receives or is expected to receive government assistance and has received a
reservation for Housing Tax Credits. As of March 31, 1996, the Apartment
Complexes in Series 5 had not commenced operations. Accordingly, the Statement
of Operations of Series 5 for the period ended March 31, 1996 is not indicative
of the amounts to be reported in future years.
As reflected on its Statements of Operations, Series 5 had income of
approximately $4,000 for the three months ended March 31, 1996. There were no
operations as of March 31, 1995. The component items of revenue and expense are
discussed below.
Revenue.
- ---------
Series 5'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 Partnerships. Interest revenue in future years will
be a function of prevailing interest rates and the amount of cash balances. It
is anticipated that Series 5 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 components of operating expenses were not significant; in the
future the Asset Management Fee is expected to be the most significant
component. 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.
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 was incurred as described above
under "Liquidity and Capital Resources." Interest expense is expected to minimal
after 1995. Office expense consist of Series 5's administrative expenses, such
as legal fees, bank charges and investor reporting expenses.
Because of the amounts of the Asset Management Fee and amortization expense
primarily are determined by the Gross Proceeds from the Offering, the number and
size of Apartment Complexes and the number of investors, until termination of
the Offering and investment of the net proceeds therefrom, Series 5 cannot
predict with any accuracy what these amounts will be.
Equity in Losses from Local Limited Partnership.
- -----------------------------------------------------
Series 5's equity in losses
from Local Limited Partnerships is equal to 99% of the aggregate net losses of
each Local Limited Partnership incurred after admission of Series 5 as a limited
Partner thereof.
30
<PAGE>
After rent-up all Local 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 Local Limited Partnerships are expected to exceed net
rental income.
31
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter ended March 31
1996.
32
<PAGE>
SIGNATURES
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 CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4 through 9
(Registrant)
By: WNC CALIFORNIA TAX CREDIT PARTNERS IV, L.P.,
General Partner
By: WNC & ASSOCIATES, INC., General Partner
By /s/ John B. Lester, Jr.
------------------------------------
John B. Lester, Jr.
President
Date: 05/30/96
----------------
By /s/ Theodore M. Paul
----------------------------
Theodore M. Paul,
Chief FinancialOfficer
Date: 05/30/96
-------------------
33
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