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, 1997
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
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0601852
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4 3158 Redhill Avenue, Suite
120 Costa Mesa, CA 92626
(714) 662-5565
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 CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4
(A California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1997 and
December 31, 1996.........................................................3
Statement of Operations
For the three months and nine months ended September 30, 1997 and 1996.....4
Statement of Partners' Equity
For the nine months ended September 30, 1997 and 1996......................5
Statement of Cash Flows
For the nine months ended September 30, 1997 and 1996......................6
Notes to Financial Statements...............................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................17
Signatures .................................................................18
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P. SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1997 and December 31, 1996
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 1,557,186 $ 2,614,756
Receivables from affiliates 95,670 121,825
Investment in limited
partnerships (Note 2) 8,156,548 8,467,424
Other assets - 12,912
---------- ----------
$ 9,809,404 $ 11,216,917
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payable to limited partnership
(Note 4) $ 871,946 $ 1,929,597
Accrued fees and expenses due to
general partner and affiliates
(Note 3) 30,584 43,755
---------- ----------
Total liabilities 902,530 1,973,352
---------- ----------
Partners' equity (deficit):
General partner (12,103) (8,737)
Limited partners (25,000 units
authorized, 11,500 issued
and outstanding) 8,918,977 9,252,302
---------- ----------
Total partners' equity 8,906,874 9,243,565
---------- ----------
$ 9,809,404 $ 11,216,917
========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P. SERIES 4
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three and Nine Months Ended September 30, 1997 and 1996
1997 1996
---- ----
Three Nine Three Nine
Months Months Months Months
------ ------ ------ ------
Interest income $ 13,315 $ 55,214 $ 36,690 $ 17,170
--------- --------- --------- ---------
Operating expenses:
Amortization 6,354 19,059 6,302 18,514
Asset management fees
(Note 4) 7,906 23,719 7,906 23,719
Legal and accounting 500 5,000 (175) 5,000
Other 1,422 6,777 799 5,429
--------- --------- --------- ---------
Total operating expenses 16,182 54,555 14,832 52,662
--------- --------- --------- ---------
Loss from operations (2,867) 659 21,858 64,508
Equity in loss from
limited partnerships (102,400) (337,000) (231,000) (403,000)
--------- --------- --------- ---------
Net loss $ (105,267) $ (336,341) $ (209,142) $ (338,492)
========= ========= ========= =========
Net loss allocated to:
General partner $ (1,053) $ (3,363) $ (2,091) $ (3,385)
========= ========= ========= =========
Limited partners $ (104,214) $ (332,978) $ (207,051) $ (335,107)
========= ========= ========= =========
Net loss per limited
partner units (11,500
weighted units
1997 and 1996) $ (9.06) $ (28.95) $ (18.00) $ (29.14)
========= ========= ========= =========
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 PARTNERS' EQUITY
For the Nine Months Ended September 30, 1997 and 1996
For the Nine Months Ended September 30, 1997
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit), December 31, 1996 $ (8,737) $ 9,252,302 $ 9,243,565
Offering expense (3) (347) (350)
Net loss for the nine months ended
September 30, 1997 (3,363) (332,978) (336,341)
-------- --------- ---------
Equity (deficit), September 30, 1997 $ (12,103) $ 8,918,977 $ 8,906,874
======== ========= =========
For the Nine Months Ended September 30, 1996
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit), December 31, 1996 $ (14,581) $ 9,473,254 $ 9,458,673
Capital collected from
notes receivable 172,500 172,500
Reduction of offering expense 1,137 112,541 113,678
Net loss for the nine months ended
September 30, 1996 (3,385) (335,107) (338,492)
-------- --------- ---------
Equity (deficit), September 30, 1996 $ (16,829) $ 9,423,188 $ 9,406,359
======== ========= =========
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 CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
1997 1996
---- ----
Cash flows provided by operating activities:
Net loss $ (336,341) $ (338,492)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of limited partnerships 337,000 403,000
Amortization 19,059 18,514
Increase (decrease) in asset
management fee payable (36,281) (21,281)
Decrease in interest receivable 39,067 13,821
Accrued fees and expense due
to general partner and affiliates 22,760 (5,613)
---------- ---------
Net cash provided by operating activities 45,264 69,949
---------- ---------
Cash flows used by investing activities:
Investments in limited partnerships (1,102,834) (984,793)
Loan receivable from limited partnerships (100,000)
Acquisition costs and fees - (29,377)
---------- ---------
Net cash used by investing activities (1,102,834) (1,114,170)
---------- ---------
Cash flows provided by financing activities:
Collection of notes receivable - 172,500
Offering costs (77,541)
---------- ---------
Net cash provided by financing activities - 94,959
---------- ---------
Net decrease in cash and cash equivalents (1,057,570) (949,262)
Cash and cash equivalents,
beginning of period 2,614,756 3,827,214
---------- ---------
Cash and cash equivalent, end of period $ 1,557,186 $ 2,877,952
========== =========
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 - CONTINUED
For the Nine months ended September 30, 1997 and 1996
Supplemental disclosure of noncash financing and investing activity:
- --------------------------------------------------------------------
During the nine months ended September 30, 1997, the Partnership's payables to
limited partnerships; (in connection with its investments in limited
partnerships) (see Note 2) had non-cash transactions as follows:
For the Nine months Ended September 30,
---------------------------------------
1997 1996
---- ----
Increased due to acquisition
of limited partnership interests $ 311,677
Decreases due to various price
adjuster provisions in the respective
limited partnership agreements $ (10,721) (206,648)
------- --------
Net non-cash activity in Partnership'
payables to limited partnerships $ (10,721) 5,029
======= ========
Other non-cash activity:
The Partnership has incurred
but not paid:
Acquisition fees and costs
payable to affiliate general partner $ 12,244
========
Selling fees advanced by affiliate
of general partner $ 1,475
========
The Partnership has not received
O & O reimbursements from an affiliate $ 142,141
========
UNAUDITED
See Accompanying Notes to Financial Statements
7
<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 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.
General
- -------
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the audited financial statements and related notes thereto
contained in the Partnership's financial statements for the period ended
December 31, 1996 (audited).
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1997 and the results of operations and changes in cash flows for the nine months
ended September 30, 1997 and 1996.
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.
8
<PAGE>
WNC CALIFORNIA TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and the General Partner has
received a subordinated disposition fee (as described in Note 3 below), 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 investment in limited partnerships is accounted for on 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 account.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred 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 will be amortized on the straight-line method over 60 months.
Cash and Cash Equivalents
- -------------------------
The Partnership considers investments with an original maturity of three months
or less as cash equivalents.
9
<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 September 30, 1997 the Partnership had acquired limited partnership
interests in nine limited partnerships each of which owns one Apartment Complex.
As of September 30, 1997, construction or rehabilitation of eight of the
Apartment Complexes had been completed and one was undergoing construction or
rehabilitation.
As of September 30, 1996 the Partnership had acquired limited partnership
interests in eight limited partnerships each of which owns one Apartment
Complex. As of September 30, 1996, construction or rehabilitation of nine of the
Apartment Complexes had been completed and two 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
September 30, 1997 and December 31, 1996:
1997 1996
---- ----
Investment beginning of period $ 8,467,424 $ 8,494,018
Total capital contributions made and
accrued with respect to
limited partnership 45,183 484,987
Increase in capitalized acquisition
fees and costs 0 41,572
Amortization of acquisition fees and costs (19,059) (24,865)
Equity in loss of limited partnerships (337,000) (528,288)
--------- ---------
Investment, end of period $ 8,156,548 $ 8,467,424
========= =========
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 (CONTINUED)
- -------------------------------------------------------
Selected financial information from the financial statements of the limited
partnerships with operations for the nine months ended September 30, 1997 and
1996 is as follows:
Nine months ended
September 30, September 30,
1997 1996
---- ----
Total revenue $ 730,000 $ 527,000
-------- --------
Expenses:
Operating expenses - exclusive of
depreciation and interest 414,000 360,000
Interest expense 269,000 195,000
Depreciation 387,000 380,000
-------- --------
Total expenses 1,070,000 935,000
-------- --------
Net loss $ (340,000) $ (408,000)
======== ========
Net loss allocable to Partnership $ (337,000) $ (403,000)
======== ========
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Receivables from affiliates consists primarily of amounts due from WNC
California Housing Tax Credits IV, L.P. Series 5 related to the allocation of
offering expenses incurred, as defined in the Partnership Agreement.
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 $0 and $13,650 were incurred for
the nine months ended September 30, 1997 and 1996.
11
<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 $23,719
for each nine month period ended September 30, 1997 and 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 nine months ended September 30, 1997 the
Partnership incurred organizational, offering and selling expenses of
$-0-, $350 and $-0-, respectively and during the nine months ended
September 30, 1996 the Partnership incurred organizational, offering
and selling expenses of $-0-, $(113,678) and $-0-, 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.
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)
- -----------------------------------------------
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheet consists of the following at September 30, 1997
and December 31, 1996:
1997 1996
---- ----
Acquisition fees $ 23,993 $ 23,993
Advances made for acquisition costs,
organizational, offering and
selling expenses 1,825 1,512
Asset management fees (18,031) 18,250
Other advances and expenses 22,797 -
-------- -------
$ 30,584 $ 43,755
======== =======
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 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 Operation
WNC California Housing Tax Credits IV, L.P., Series 4 ("the Partnership")is a
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").
As of September 30, 1997, the Partnership has received subscriptions for 11,500
Units at $1,000 per Unit consisting of cash of $11,099,050 and discounts
$400,950. The offering terminated in August, 1995 at which time the
subscriptions for 11,500 units were accepted.
The Partnership raised funds from investors through its 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
- -------------------------------
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $1,056,000 for the nine
months ended September 30, 1997. Cash of approximately $45,000 was provided by
operating activities during nine months ended September 30, 1997. Cash of
approximately $1,103,000 was used by investing activities and consisted entirely
of capital contributions to limited partnerships. Cash provided by operating
activities consisted primarily of interest received on cash deposits, and cash
used consisted primarily of payments operating fees and expenses. The major
components of all these activities are discussed in greater detail below.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $849,000 for the nine
months ended September 30, 1996. Cash of approximately $70,000 and 95,000 was
provided by operating activities and financing activities, respectively during
nine months ended September 30, 1996. Cash of an aggregate amount of
approximately $1,114,000 used by investing activities and consisted of capital
contributions to limited partnerships, loan made to limited partnership and
acquisition fees and expenses of approximately $985,000, 100,000 and $29,000,
respectively. Cash provided by financing activities consisted primarily of
collection of notes receivable and cash used consisted of payments to affiliates
of cash advanced. 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 September 30, 1997, the Partnership was indebted to WNC & Associates, Inc.
for approximately $31,000. The component items of such indebtedness were as
follows: accrued Acquisition Fees of approximately $24,000, advances to pay
front-end fees and for payment of operating fees and expenses of approximately
$3,000, Asset Management Fees of $(18,000) and advances to affiliates of the
general partner of $22,000. As of December 31, 1996, the Partnership was
indebted to WNC & Associates for approximately $44,000 consisting of accrued
Acquisition Fees of approximately $24,000, advances to pay front-end fees of
$2,000, and Asset Management Fees of $18,000.
14
<PAGE>
As of September 30, 1997 the Partnership has made offering costs reimbursements
in excess of the amount allocated on a per-Unit basis among the issuers of WNC
California Housing Tax Credits IV, L.P., Series through Series 9. The
Partnership is due approximately $96,000 from the other issuer, WNC California
Housing Tax Credits IV, L.P., Series 5.
As of September 30, 1997 and December 31, 1996, the Partnership has received and
accepted subscriptions funds in the amount of $11,099,000. As of September 30,
1997 and December 31, 1996, the Partnership had made capital contributions to
Local Limited Partnerships in the amount of approximately $7,546,000, and
$6,443,000, respectively, and had commitments for additional capital
contributions of approximately $872,000 and $1,930,000, respectively.
It is not expected that any of the local limited partnerships in which the
Partnership will invest will generate cash from operations sufficient to provide
distributions to the limited partners in any significant amount. Such cash from
operations, if any, would first be used to meet operating expenses of the
Partnership, including the payment of the asset management fee to the General
Partner.
The Partnership's 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
limited partnerships and the Partnership. These problems may result from a
number of factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Units will be sufficient to fund the Partnership's future investment
commitments and proposed operations.
The Partnership established working capital reserves of approximately 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
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 its partnership agreement the Partnership does not have the ability to
assess its partners for additional capital contributions to provide capital if
needed by the Partnership or local limited partnerships. Accordingly, if
circumstances arise that cause the local limited partnerships to require capital
in addition to that contributed by the Partnership and any equity of the local
general partners, the only sources from which such capital needs will be able to
be satisfied (other than the limited reserves available at the Partnership
level) will be (i) third-party debt financing (which may not be available, if,
as expected, the apartment complexes owned by the local limited partnerships are
already substantially leveraged), (ii) additional equity contributions or
advances of the local general partners, (iii) other equity sources (which could
adversely affect the Partnership's interest in 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).
15
<PAGE>
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.
Results of Operations
- ---------------------
As of September 30, 1997 and 1996, The Partnership had acquired nine and eight
Local Limited Partnership Interests, respectively. Each of the nine 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
September 30, 1997 and 1996, only eight and seven, respectively, of the
Apartment Complexes in the Partnership had commenced operations. Accordingly,
the "Equity in losses from limited partnerships" for the period ended September
30, 1997 and 1996 reflected in the Statement of Operations of the Partnership is
not indicative of the amounts to be reported in future years.
As reflected on its Statements of Operations, The Partnership had a loss of
approximately $333,000 and $335,000 for the nine months ended September 30, 1997
and 1996 respectively. The component items of revenue and expense are discussed
below.
Revenue. The Partnership's revenues consisted entirely of interest earned on
Promissory Notes and cash deposits held in financial institutions (i) as
Reserves, or (ii) pending investment in Local Partnerships. Interest revenue in
future years will be a function of prevailing interest rates and the amount of
cash balances. It is anticipated that The Partnership will maintain cash
Reserves in an amount not materially in excess of the minimum amount required by
its Partnership Agreement, which is 3% of Capital Contributions.
Expenses. The most significant component of operating expenses is and is
expected to be the Asset Management Fee. The Asset Management Fees is equal to
the greater of (i) $2,000 for each Apartment Complex or (ii) 0.275% of gross
proceeds, and will be decreased or increased annually based on changes to the
Consumer Price Index. Asset management fee of approximately $23,700 was accrued
for each of the nine month periods ended September 30, 1997 and 1996.
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 1996. Office expense consist of the Partnership's administrative expenses,
such as legal fees, bank charges and investor reporting expenses.
Office expenses and legal and accounting consists of the Partnership's
administrative expenses, such as accounting and legal fees, bank charges and
investor reporting expenses.
The Partnership's equity in losses from limited partnerships is equal to 99% of
the aggregate net loss of the limited partnerships. After rent-up, the limited
partnerships are expected to generate losses during each year of operations;
this is so because, although rental income is expected to exceed cash operating
expenses, depreciation and amortization deductions claimed by the limited
partnerships are expected to exceed net rental income.
16
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
1. NONE.
No reports on Form 8-K were filed during the quarter ended September
30, 1997.
17
<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 CALIFORNIA HOUSING TAX CREDITS IV, L.P., Series 4
By: WNC & ASSOCIATES, INC General Partner
By: /s/ John B. Lester, Jr.
- ----------------------------------------------------
John B. Lester, Jr. President
Date: November 11, 1997
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice President - Finance
Date: November 11, 1997
18
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000921052
<NAME> WNC CALIFORNIA HOUSING TAX CREDITS, L.P., Series 4
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
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