FORM 10-K/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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
California 33-0531301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE
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PART I.
Item 1. Business
Organization
WNC California Housing Tax Credits IV, Series 4 (the "Partnership") is a
California limited partnership formed under the laws of the State of California
on February 16, 1994. The Partnership was formed to acquire limited partnership
interests in limited partnerships or limited liability companies ("Local Limited
Partnerships") which own multifamily housing complexes that are eligible for
Federal and in certain cases, California income tax credits ("Low Income Housing
Credit").
The general partner of the Partnership is WNC California Tax Credits IV, L.P.
(the "General Partner"). The general partner of WNC California Tax Credit
Partners IV, L.P. is WNC & Associates, Inc. ("Associates"). Wilfred N. Cooper,
Sr., through the Cooper Revocable Trust, owns 66.8% of the outstanding stock of
Associates. 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 Associates. The business of the Partnership is conducted primarily
through Associates, as the Partnership has no employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on July 26, 1994, the Partnership commenced a public offering of
25,000 Units of Limited Partnership Interest ("Units") at a price of $1,000 per
Unit. As of the close of the public offering on August 10, 1995, a total of
11,500 Units representing approximately $11,099,000 had been sold. Holders of
Units are referred to herein as "Limited Partners."
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended by Supplements to the Prospectus thereto (the
"Partnership Agreement"), will be able to be accomplished promptly at the end of
the 15-year period. If a Local Limited Partnership is unable to sell its Housing
Complex, it is anticipated that the local general partner ("Local General
Partner") will either continue to operate such Housing Complex or take such
3
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other actions as the Local General Partner believes to be in the best interest
of the Local Limited Partnership. Notwithstanding the preceding, circumstances
beyond the control of the General Partner or the Local General Partners may
occur during the Compliance Period, which would require the Partnership to
approve the disposition of an Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.
As of December 31, 1998, the Partnership had invested in nine Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit and four of them were
eligible for the California Low Income Housing Credits. Certain Local Limited
Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
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 subject to mortgage
indebtedness. If a Local Limited Partnership does not makes its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member 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 general partners or managing members 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 Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investment in Local Limited Partnerships the Partnership holds
limited partnership interests in Housing Complexes. The following table reflects
the status of the nine Housing Complexes as of December 31, 1998 and for the
periods indicated.
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<TABLE>
<CAPTION>
---------------------------------------------------------------------------
As of December 31, 1998
---------------------------------------------------------------------------
Partnership's
Total Investment Amount of Estimated Low Encumbrances of
Number Occu- in Local Limited Investment Income Housing Local Limited
Partnership Name Location General Partner Name of Units pancy Partnerships Paid to Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chadron Apartments Chadron, Douglas E. Hiner 16 94% $ 483,000 $ 391,000 $ 1,029,000 $ 800,000
I, L.P. Nebraska
Colonial Village Auburn, S.P. Thomas Company
Auburn California of Northern California
and Project Go, Inc.,
a California Non-profit
Corporation 56 98% 2,979,000 2,979,000 4,115,000 2,087,000
Eagleville Eagleville, Kenneth M. Vitor and
Associates I, L.P. Missouri Joseph A.Shepard 16 100% 79,000 79,000 145,000 356,000
Maharlika, Ltd. Stockton, Daniels C. Logue and
California Cyrus Youssefi 69 96% 1,524,000 1,524,000 1,958,000 1,565,000
Pawnee Associates Pawnee, Kenneth M. Vitor and
I, L.P. Illinois Joseph A.Shepard 20 85% 130,000 130,000 239,000 539,000
Rancheria Village Santa Community Housing Program,
Apartments, a Barbara, Inc., Richard A Bialosky,
California Limited California Detlev Peikert, Francis C.
Partnership Thompson, Peter Koelsch,
and Real Estate Concepts,
Inc. 14 100% 950,000 950,000 1,335,000 995,000
Sycamore Hills L.P. Salem, Larry A. Swank and Lance
Indiana A. Swank 24 100% 185,000 185,000 346,000 763,000
Wills Point Wills 1600 Capital Company,
Crossing, L.P. Point, Inc. 36 97% 234,000 234,000 395,000 984,000
Texas
Woodlake Valencia Woodlake, Philip R. Hammond, Jr.
Partners California and Diane M. Hammond 47 89% 1,798,000 1,798,000 2,522,000 952,000
--- --- --------- --------- ---------- ---------
298 95% $ 8,362,000 $ 8,270,000 $ 12,084,000 $ 9,041,000
=== === ========= ========= ========== =========
</TABLE>
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-------------------------------------------
For the year ended December 31, 1998
-------------------------------------------
Low Income
Housing Credit
Allocated to
Partnership Name Rental Income Net loss Partnership
- --------------------------------------------------------------------------------
Chadron Apartments I, L.P. $ 49,000 $ (57,000) 99%
Colonial Village Auburn 377,000 (130,000) 99%
Eagleville Associates I, L.P. 46,000 (12,000) 99%
Maharlika, Ltd. 110,000 (253,000) 99%
Pawnee Associates I, L.P. 65,000 (22,000) 99%
Rancheria Village Apartments, a 99%
California Limited Partnership 106,000 (47,000)
Sycamore Hills L.P. 85,000 (13,000) 99%
Wills Point Crossing, L.P. 103,000 (14,000) 99%
Woodlake Valencia Partners 84,000 (210,000) 99%
---------- ---------
$ 1,025,000 $ (758,000)
========== =========
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Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At December 31, 1998, there were 429 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during 1998.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows as of
December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 760,343 $ 1,147,906 $ 2,614,756 $ 3,827,214 $ 484,771
Receivables from affilates - 31,646 121,825 - -
Subscriptions receivable - - - - 258,200
Loans receivable 201,611 - - - 1,098,608
Investments in limited
partnerships, net 6,845,203 7,622,211 8,467,424 8,494,018 3,355,553
Other assets - - 12,912 25,824 1,613
--------- --------- ---------- ---------- ---------
$ 7,807,157 $ 8,801,763 $ 11,216,917 $ 12,347,056 $ 5,198,745
========= ========= ========== ========== =========
LIABILITIES
Loan payable - - - - 1,200,000
Accrued interest payable - - - - 13,388
Payable to limited
partnerships 91,746 363,634 1,929,597 2,785,857 584,640
Accrued fees and expenses
due to general partner
and affiliates 62,779 6,445 43,755 102,526 1,700,543
PARTNERS' EQUITY 7,652,632 8,431,684 9,243,565 9,458,673 1,700,174
--------- --------- ---------- ---------- ---------
$ 7,807,157 $ 8,801,763 $ 11,216,917 $ 12,347,056 $ 5,198,745
========= ========= ========== ========== =========
</TABLE>
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Selected results of operations, cash and other information for the Partnership
is as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) from operations $ (28,938) $ (5,242) $ 70,901 $ 23,654 $ (11,786)
Equity in income (loss) from
limited partnerships (750,114) (806,639) (528,288) (100,224) 2,212
--------- --------- --------- --------- -------
Net loss $ (779,052) $ (811,881) $ (457,387) $ (76,570) $ (9,574)
========= ========= ========= ========= =======
Net loss allocated to:
General Partner $ (7,791) $ (8,119) $ (4,574) $ (766) $ (96)
========= ========= ========= ========= =======
Limited Partners $ (771,261) $ (803,762) $ (452,813) $ (75,804) $ (9,478)
========= ========= ========= ========= =======
Net loss per limited partner
unit $ (67.07) $ (69.89) $ (39.38) $ (8.68) $ (10.84)
========= ========= ========= ========= =======
Outstanding weighted limited
partner units 11,500 11,500 11,500 8,735 874
========= ========= ========= ========= =======
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net cash provided by
(used in):
<S> <C> <C> <C> <C> <C>
Operating activities $ 84,603 $ 110,356 $ 95,766 $ 26,322 $ 1,602
Investing activities (472,166) (1,539,896) (1,369,907) (1,979,131) (3,717,992)
Financing activities - (37,310) 61,683 5,295,252 4,201,161
--------- --------- --------- --------- ---------
Net change in cash and cash
equivalents (387,563) (1,466,850) (1,212,458) 3,342,443 484,771
Cash and cash equivalents,
beginning of period 1,147,906 2,614,756 3,827,214 484,771 -
--------- --------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 760,343 $ 1,147,906 $ 2,614,756 $ 3,827,214 $ 484,771
========= ========= ========= ========= =======
<CAPTION>
Low Income Housing Credit per limited partner unit was as follows for the year
ended December 31:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Federal $ 99 $ 86 $ 64 $ 21 $ -
State 67 91 70 70 -
---- ---- ---- ---- ----
Total $ 166 $ 177 $ 134 $ 91 $ -
==== ==== ==== ==== ====
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Condition
The Partnership's assets at December 31, 1998 consisted primarily of $760,000 in
cash, $202,000 in loans receivable, and aggregate investments in the nine Local
Limited Partnerships of $6,845,000. Liabilities at December 31, 1998 primarily
consisted of $5,000 of accrued annual management fees due to the General
Partner, $55,000 due to Associates for cash advanced by Associates to acquire an
interest in a Local Limited Partnership and $92,000 due to limited partnerships.
8
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Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. The
Partnership's net loss for 1998 was $(779,000), reflecting a decrease of $33,000
from the net loss experienced in 1997. The decline in net loss is primarily due
to equity in losses from limited partnerships which declined to $(750,000) in
1998 from $(807,000) in 1997. The reduction in equity losses recognized was
partially offset by an increase in loss from operations of $(24,000) in 1998 to
$(29,000), from $(5,000) in 1997, due to a $5,000 increase in office expense
allocations and a $19,000 decrease in interest income.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. The
Partnership's net loss for 1997 was $(812,000), reflecting an increase of
$355,000 from the net loss experienced in 1996. The increase in net loss is
primarily due to equity in losses from limited partnerships which increased to
$(807,000) in 1997 from $(528,000) in 1996. Income from operations decreased to
a net loss of $(5,000) in 1997 from net income of $71,000 in 1996. The decrease
in net income of $76,000 was primarily due to a decrease in interest income of
$82,000, partially offset by a $6,000 decrease in office expense allocations.
Cash Flows
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. Net cash
used in 1998 was $(388,000), compared to net cash used in 1997 of $(1,467,000).
The change was due primarily to a decrease in cash used for investments in Local
Limited Partnerships of $1,084,000 and a decrease in cash paid to the General
Partner or affiliates of $37,000 partially offset by an increase in operating
costs paid to third parties and a decline in distributions from Local Limited
Partnerships.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996. Net cash
used in 1997 was $(1,467,000), compared to $(1,212,000) in 1996. The change was
due primarily to an increase in cash used for investments in Local Limited
Partnerships of $176,000, a decrease in cash collections of notes receivable of
$173,000 and a decrease in offering cost refund of $70,000 partially offset by a
decrease in cash paid to the General Partner or affiliates of $144,000, a
decrease in operating costs paid to third parties of $14,000, and an increase in
distributions from Limited Partnerships of $6,000.
During 1998 accrued payables, which include related party management fees due to
the General Partner, increased by $56,000, due primarily to an advance received
from Associates to acquire an interest in a Local Limited Partnership.
The Partnership expects its future cash flows, together with its net available
assets at December 31, 1998, to be sufficient to meet all currently forseeable
future cash requirements.
Impact of Year 2000
The General Partner has assessed the Partnership's exposure to date sensitive
computer systems that may not be operative subsequent to 1999. As a result of
this assessment, the General Partner has executed a plan to minimize the
Partnership's exposure to financial loss and/or disruption of normal business
operations that may occur as a result of Year 2000 non-compliant computer
systems.
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Business Computer Systems
These systems include both computer hardware and software applications relating
to operations such as financial reporting. The Partnership does not maintain its
own systems and thus utilizes the computer systems of the General Partner. The
General Partner developed a compliance plan for each of its business computer
systems, with particular attention given to critical systems. The General
Partner contracted with an outside vendor to evaluate, test and repair such
systems. The assessment consisted of determining the compliance with Year 2000
of critical computer hardware and software. Incidences of non-compliance were
found with respect to computer software applications and were corrected. The
vendor found no instances of non-compliance with respect to computer hardware.
The amount expended and to be expended by the General Partner is nominal.
The Local General Partners and/or property management companies maintain the
business computer systems that relate to the operations of the Local Limited
Partnerships. The General Partner is in the process of obtaining completed
questionnaires from such Local General Partners and property management
companies to assess their respective Year 2000 readiness. The General Partner
intends to identify those Local General Partners and property management
companies that have systems critical to the operations of the Local Limited
Partnerships that are not Year 2000 compliant. For those Local General Partners
and property management companies which have business computer systems which
will not be Year 2000 compliant prior to December 31, 1999 and where the lack of
such compliance is determined to have a potential material effect on the
Partnership's financial condition and results of operations, the General Partner
intends to develop contingency plans which may include changing property
management companies.
Outside Vendors
The General Partner has obtained assurances from its suppliers of electrical
power and banking and telecommunication services that their critical systems are
all Year 2000 compliant. There exists, however, inherent uncertainty that all
systems of outside vendors or other third parties on which the General Partner,
and thus the Partnership, and the Local General Partners and property management
companies, and thus the Local Limited Partnerships, rely will be Year 2000
compliant. Therefore, the Partnership remains susceptible to the consequences of
third party critical computer systems being non-compliant.
Personal Computers
The General Partner has determined that its personal computers and related
software critical to the operations of the Partnership are Year 2000 compliant.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NONE.
Item 8. Financial Statements and Supplementary Data
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WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
FINANCIAL STATEMENTS
For The Years Ended December 31, 1998, 1997 and 1996
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
WNC California Housing Tax Credits IV, L.P., Series 4
We have audited the accompanying balance sheet of WNC California Housing Tax
Credits IV, L.P., Series 4 (a California Limited Partnership) (the
"Partnership") as of December 31, 1998, and the related statements of
operations, partners' equity (deficit) and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We did not audit the financial statements of the
limited partnerships in which WNC California Housing Tax Credits IV, L.P.,
Series 4 is a limited partner. These investments, as discussed in Note 2 to the
financial statements, are accounted for by the equity method. The investments in
these limited partnerships represented 88% of the total assets of WNC California
Housing Tax Credits IV, L.P., Series 4 at December 31, 1998. Substantially all
of the financial statements of the limited partnerships were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for such limited partnerships, is based solely
on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC California Housing Tax Credits IV, L.P., Series 4
(a California Limited Partnership) as of December 31, 1998, and the results of
its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
BDO SEIDMAN, LLP
Orange County, California
April 5, 1999
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INDEPENDENT AUDITORS' REPORT
To the Partners
WNC California Housing Tax Credits IV, L.P., Series 4
We have audited the accompanying balance sheet of WNC California Housing Tax
Credits IV, L.P., Series 4 ( a California Limited Partnership) (the
"Partnership") as of December 31, 1997, and the related statements of
operations, partners' equity (deficit) and cash flows for each of the years in
the two-year period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit. We did not audit
the financial statements of the limited partnerships in which WNC California
Housing Tax Credits IV, L.P., Series 4 is a limited partner. These investments,
as discussed in Note 2 to the financial statements, are accounted for by the
equity method. The investments in these limited partnerships represented 87% of
the total assets of WNC California Housing Tax Credits IV, L.P., Series 4 at
December 31, 1997. Substantially all of the financial statements of the limited
partnerships were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for these
limited partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC California Housing Tax Credits IV, L.P., Series 4
(a California Limited Partnership) as of December 31, 1997, and the results of
its operations and its cash flows for each of the years in the two-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
CORBIN & WERTZ
Irvine, California
April 10, 1998
13
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WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 760,343 $ 1,147,906
Receivables from affiliates
(Note 3) - 31,646
Loans receivable (Note 7) 201,611 -
Investments in limited
partnerships (Notes 2 and 7) 6,845,203 7,622,211
--------------- ----------------
$ 7,807,157 $ 8,801,763
=============== ================
LIABILITIES AND PARTNERS'
EQUITY (DEFICIT)
Liabilities:
Payable to limited partnerships
(Notes 4 and 7) $ 91,746 $ 363,634
Accrued fees and expenses due
to General Partner and
affiliate (Note 3) 62,779 6,445
--------------- ----------------
Total liabilities 154,525 370,079
--------------- ----------------
Commitments and contingencies
(Note 7)
Partners' equity (deficit)
(Note 6):
General partner (24,647) (16,856)
Limited partner (25,000 units
authorized, 11,500 units
issued and outstanding) 7,677,279 8,448,540
--------------- ----------------
Total partners' equity 7,652,632 8,431,684
--------------- ----------------
$ 7,807,157 $ 8,801,763
=============== ================
See accompanying notes to financial statements
14
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WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Interest income $ 46,032 $ 65,307 $ 147,254
----------- ----------- -----------
Operating expenses:
Amortization (Note 2) 25,561 25,419 24,865
Asset management fees
(Note 3) 31,625 31,625 31,625
Office 17,784 13,505 19,863
----------- ----------- -----------
Total operating expenses 74,970 70,549 76,353
----------- ----------- -----------
(Loss) income from
operations (28,938) (5,242) 70,901
Equity in losses from
limited partnerships
(Note 2) (750,114) (806,639) (528,288)
----------- ----------- -----------
Net loss $ (779,052) $ (811,881) $ (457,387)
=========== =========== ===========
Net loss allocable to:
General partner $ (7,791) $ (8,119) $ (4,574)
=========== =========== ===========
Limited partners $ (771,261) $ (803,762) $ (452,813)
=========== =========== ===========
Net loss per limited
partner unit $ (67.07) $ (69.89) $ (39.38)
=========== =========== ===========
Outstanding weighted
limited partner units 11,500 11,500 11,500
=========== =========== ===========
See accompanying notes to financial statements
15
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
------- -------- -----
Partners' equity (deficit),
January 1, 1996 $ (4,861) $ 9,463,534 $ 9,458,673
Collection of notes
receivable (Note 6) - 172,500 172,500
Offering costs (Note 3) 698 69,081 69,779
Net loss (4,574) (452,813) (457,387)
----------- ----------- -----------
Partners' equity (deficit),
December 31, 1996 (8,737) 9,252,302 9,243,565
Net loss (8,119) (803,762) (811,881)
----------- ----------- -----------
Partners' equity (deficit),
December 31, 1997 (16,856) 8,448,540 8,431,684
Net loss (7,791) (771,261) (779,052)
----------- ----------- -----------
Partners' equity (deficit),
December 31, 1998 $ (24,647) $ 7,677,279 $ 7,652,632
=========== =========== ===========
See accompanying notes to financial statements
16
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Cash flows from operating
activities:
Net loss $ (779,052) $ (811,881) $ (457,387)
Adjustments to reconcile
net loss to net cash
provided by operating activities:
Amortization 25,561 25,419 24,865
Equity in losses from
limited partnerships 750,114 806,639 528,288
Change in receivables from
affiliates 31,646 90,179 -
Change in accrued fees and
expenses due to General
Partner and affiliates 56,334 - -
---------- ---------- ----------
Net cash provided by operating
activities 84,603 110,356 95,766
---------- ---------- ----------
Cash flows from investing activities:
Investments in limited
partnerships, net (271,888) (1,555,241) (1,341,247)
Capitalized acquisition cost
and fees (1,584) (3,567) (41,572)
Distributions from limited
partnerships 2,917 6,000 -
Loans receivable (201,611) - -
Other assets - 12,912 12,912
---------- ---------- ----------
Net cash used in investing
activities (472,166) (1,539,896) (1,369,907)
---------- ---------- ----------
Cash flows from financing activities:
Payments to affiliates or
general partner, net - (37,310) (180,596)
Offering costs - - 69,779
Collection on notes receivable - - 172,500
---------- ---------- ----------
Net cash (used in) provided
by financing activities - (37,310) 61,683
---------- ---------- ----------
Net decrease in cash and
cash equivalents (387,563) (1,466,850) (1,212,458)
Cash and cash equivalents,
beginning of year 1,147,906 2,614,756 3,827,214
---------- ---------- ----------
Cash and cash equivalents,
end of year $ 760,343 $ 1,147,906 $ 2,614,756
========== ========== ==========
Continued
See accompanying notes to financial statements
17
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITY:
During the year ended December 31, 1996, the Partnership incurred, but did not
pay, $382,865 in payables to a limited partnership.
See accompanying notes to financial statements
18
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC California Housing Tax Credits IV, L.P., Series 4 a California Limited
Partnership (the "Partnership"), was formed on February 16, 1994 under the laws
of the State of California, and began operations on July 26, 1994. The
Partnership was formed to invest primarily in other limited partnerships (the
"Local Limited Partnership") 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 California 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. is the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of WNC.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership Agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). The offering of Units concluded in August 1995 at which time
11,500 Units representing subscriptions, net of discounts of $400,950 for
purchases of 100 units or more, in the amount of $11,099,050 had been accepted.
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.
After the limited partners have received proceeds from a 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 (as
described in Note 3) 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.
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 of Local Limited
19
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 in 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's are consistent with those of the Partnership. Costs incurred by
the Partnership in acquiring the investment in limited partnerships are
capitalized as part of the investment account and are being amortized over 30
years (see Note 2).
Losses from limited partnerships allocated to the Partnership will not be
recognized to the extent that the 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 and amounted to $1,312,054, as of December 31,
1998 and 1997 respectively.
20
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers highly liquid investments with remaining maturities of
three months or less when purchased to be cash equivalents. The Partnership's
cash equivalents consisted of investments in mutual funds totaling $750,309 and
$768,013 at December 31, 1998 and 1997, respectively.
Concentration of Credit Risk
As of December 31, 1998, the Partnership maintained a cash balance at a certain
financial institution in excess of the maximum federally insured amounts.
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 years
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
21
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
At December 31, 1998, the Partnership had acquired limited partnership interests
in nine Local Limited Partnerships each of which owns one Housing Complex
consisting of an aggregate of 298 apartment units. 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
generally entitled to 99%, as specified in the Local Limited Partnership
agreements, of the operating profits and losses of the Local Limited
Partnerships.
The Partnership's investment in Local Limited Partnerships as shown in the
balance sheets as of December 31, 1998 and 1997, is approximately $675,000 and
$1,061,000, respectively, greater than the Partnership's equity as shown in the
Local Limited Partnerships' financial statements. This difference is due to
unrecorded losses, acquisition, selection and other costs related to the
acquisition of the investments which have been capitalized in the Partnership's
investment account and capital contributions payable to the limited partnerships
which were netted against partner capital in the Local Limited Partnership's
financial statements (see Note 4).
Equity in losses of the 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.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income. During 1998, no investment accounts in Local
Limited Partnerships reached a zero balance.
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the years ended December 31:
1998 1997
---- ----
Investments per balance sheet,
beginning of year $ 7,622,211 $ 8,467,424
Total capital contributions made
or accrued, net of tax credit adjustments - (10,722)
Capitalized acquisition fees and costs 1,584 3,567
Equity in losses of limited partnerships (750,114) (806,639)
Distributions paid (2,917) (6,000)
Amortization of paid acquisition fees
and costs (25,561) (25,419)
---------- ----------
Investments per balance sheet, end of year $ 6,845,203 $ 7,622,211
========== ==========
22
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
The financial information from the individual financial statements of the
limited partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted in
interest expense. Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the years then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
1998 1997
---- ----
ASSETS
Buildings and improvements,
net of accumulated depreciation
for 1998 and 1997 of $1,838,000
and $1,223,000, respectively $ 15,124,000 $ 14,553,000
Land 916,000 916,000
Construction in progress - 1,181,000
Other assets 837,000 616,000
-------------- --------------
$ 16,877,000 $ 17,266,000
============== ==============
LIABILITIES
Mortgage and construction loans
payable $ 9,041,000 $ 9,164,000
Other liabilities (including
payables to affiliates of
$554,000 and $717,000 for
1998 and 1997, respectively) 1,584,000 1,496,000
-------------- --------------
10,625,000 10,660,000
-------------- --------------
PARTNERS' CAPITAL
WNC California Housing Tax
Credits IV, L.P., Series 4 6,170,000 6,561,000
Other partners 82,000 45,000
-------------- --------------
6,252,000 6,606,000
-------------- --------------
$ 16,877,000 $ 17,266,000
============== ==============
23
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENTS OF OPERATIONS
1998 1997 1996
---- ---- ----
Revenues $ 1,068,000 $ 1,045,000 $ 842,000
Expenses:
Operating expenses 713,000 705,000 521,000
Interest expense 489,000 535,000 392,000
Depreciation and
amortization 624,000 619,000 463,000
----------- ----------- -----------
Total expenses 1,826,000 1,859,000 1,376,000
----------- ----------- -----------
Net loss $ (758,000) $ (814,000) $ (534,000)
=========== =========== ===========
Net loss allocable
to the Partnership $ (750,000) $ (807,000) $ (528,000)
=========== =========== ===========
Net loss recorded
by the Partnership $ (750,000) $ (807,000) $ (528,000)
=========== =========== ===========
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 Partners 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.
NOTE 3 - RELATED PARTY TRANSACTIONS
As of December 31, 1997, 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. In connection with such allocation, offering expenses were reduced by
$69,779 during the year ended December 31, 1996.
Under the terms of the Partnership Agreement, the Partnership is obligated to
the General Partner or its affiliates for the following items:
Acquisition fees of 7% of the gross proceeds from the sale of Units as
compensation for services rendered in connection with the acquisition
of Local Limited Partnerships. As of December 31, 1998 and 1997, the
Partnership incurred acquisition fees of $654,580. Accumulated
amortization of these capitalized costs was $79,140 and $57,320 as of
December 31, 1998 and 1997, respectively.
24
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
Reimbursement of costs incurred by an affiliate of the General Partner
in connection with the acquisition of Local Limited Partnerships. These
reimbursements will not exceed 1.0% of the gross proceeds. As of
December 31, 1998 and 1997, the Partnership incurred acquisition costs
of $112,680 and $111,096, respectively, which have been included in
investments in limited partnerships. Accumulated amortization was
$12,760 and $9,016 for 1998 and 1997, respectively.
An annual asset management fee equal to the greater amount of (i)
$2,000 for each Housing 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 of the Local Limited
Partnerships, including the Partnership's allocable share of the
mortgages. Management fees of $31,625 were incurred for 1998, 1997 and
1996 respectively, of which, $31,646, $60,000 and $45,000 were paid
during 1998, 1997 and 1996, 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 preferred return of 14% through December
31, 2005 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 as of
December 31, 1998 and 1997 consist of the following:
1998 1997
---- ----
Cash advances by WNC
to acquire an interest in a
limited partnership (Note 7) $ 55,200 $ -
Reimbursement for expenses
paid by an affiliate
of the General Partner 2,210 1,055
Asset management fees payable 5,369 5,390
-------------- ---------------
$ 62,779 $ 6,445
============== ===============
25
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Years Ended December 31, 1998, 1997 and 1996
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the limited partnership agreements. These
contributions are payable in installments and are due upon the limited
partnership achieving certain operating and development benchmarks (generally
within two years of the Partnership's initial investment).
NOTE 5 - INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
NOTE 6 - SUBSCRIPTIONS AND INVESTOR NOTES RECEIVABLE
During 1995, limited partners who subscribed for ten or more units of limited
partnership interest ($10,000) could elect to pay 50% of the purchase price in
cash upon subscription and the remaining 50% by the delivery of a promissory
note payable, together with interest at the rate of 8% per annum, due no later
than 13 months after the subscription date. Since the promissory notes had not
been collected as of the date of issuance of the financial statements, their
aggregate unpaid balance was reflected as a reduction of partners' equity. The
promissory notes accepted during 1995 amounted to $172,500 and were collected
during 1996.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
In January 1999, the Partnership acquired a 99% limited partner interest in an
additional limited partnership which committed the Partnership to additional
contributions of approximately $251,989, of which $201,611 has been advanced and
has been reflected in loans receivable in the accompanying balance sheet.
26
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
(a)(1)
(i) On December 16, 1998, Corbin & Wertz, Irvine, California was dismissed
as the Partnership's principal independent accountant.
(ii) During the last two fiscal years of the Partnership, the reports of
Corbin & Wertz respecting the financial statements of the Partnership
did not contain an adverse opinion or a disclaimer of opinion, nor were
any such reports qualified or modified as to uncertainty, audit scope
or accounting principles.
(iii) The decision to change accountants was approved by the board of
directors of WNC & Associates, Inc., the general partner of the
Partnership.
(iv) During the last two fiscal years and subsequent interim period of the
Partnership there were no disagreements between Corbin & Wertz and the
Partnership on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure of the
nature described in Item 304(a)(1)(iv) of Securities and Exchange
Commission Regulation S-K.
(v) During the last two fiscal years and subsequent interim period of the
Partnership there were no reportable events of the nature described in
Item 304(a)(1)(v) of Securities and Exchange Commission Regulation S-K.
(a)(2)
On December 16, 1998, BDO Seidman, LLP, Costa Mesa, California was engaged as
the Partnership's principal independent accountant. During the last two fiscal
years and subsequent interim period of the Partnership, the Partnership did not
consult BDO Seidman, LLP regarding (i) either, the application of accounting
principles to a specified transaction; or the type of audit opinion that might
be rendered on the Partnership's financial statements, or (ii) any matter that
was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Securities and Exchange Commission Regulation S-K) or was a reportable event (as
defined in Item 304(a)(1)(v) of Securities and Exchange Commission Regulation
S-K).
PART III.
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc.
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who serves
as Chairman of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N.
Cooper, Jr. and Kay L. Cooper. The principal shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.
Wilfred N. Cooper, Sr., age 68, is the founder, Chief Executive Officer and a
Director of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a
general partner in some of the programs previously sponsored by the Sponsor. Mr.
Cooper has been involved in real estate investment and acquisition activities
since 1968. Previously, during 1970 and 1971, he was founder and principal of
Creative Equity Development Corporation, a predecessor of WNC & Associates,
Inc., and of Creative Equity Corporation, a real estate investment firm. For 12
years prior to that, Mr. Cooper was employed by Rockwell International
Corporation, last serving as its manager of housing and urban developments where
he had responsibility for factory-built housing evaluation and project
management in urban planning and development. Mr. Cooper is a Director of the
National Association of Home Builders (NAHB) and a National Trustee for NAHB's
Political Action Committee, a Director of the National Housing Conference (NHC)
and a member of NHC's Executive Committee and a Director of the National
Multi-Housing Council (NMHC). Mr. Cooper graduated from Pomona College in 1956
with a Bachelor of Arts degree.
27
<PAGE>
John B. Lester, Jr., age 65, is President, a Director, Secretary and a member of
the Acquisition Committee of WNC & Associates, Inc., and a Director of WNC
Capital Corporation. Mr. Lester has 27 years of experience in engineering and
construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 36, is Executive Vice President, a Director and a
member of the Acquisition Committee of WNC & Associates, Inc. He is President
of, and a registered principal with, WNC Capital Corporation, a member firm of
the NASD, and is a Director of WNC Management, Inc. He has been involved in
investment and acquisition activities with respect to real estate since he
joined the Sponsor in 1988. Prior to this, he served as Government Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Advisory Board for LIHC Monthly Report, a Director of NMHC and an Alternate
Director of NAHB. He graduated from The American University in 1985 with a
Bachelor of Arts degree.
David N. Shafer, age 46, is Senior Vice President, a Director, General Counsel,
and a member of the Acquisition Committee of WNC & Associates, Inc., and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been involved in
real estate investment and acquisition activities since 1984. Prior to joining
the Sponsor in 1990, he was practicing law with a specialty in real estate and
taxation. Mr. Shafer is a Director and President of the California Council of
Affordable Housing and a member of the State Bar of California. Mr. Shafer
graduated from the University of California at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor degree (cum laude) and from the University of San Diego in 1986 with a
Master of Law degree in Taxation.
Michael L. Dickenson, age 42, is Vice President and Chief Financial Officer, and
a member of the Acquisition Committee of WNC & Associates, Inc., and Chief
Financial Officer of WNC Management, Inc. He has been involved with acquisition
and investment activities with respect to real estate since 1985. Prior to
joining the Sponsor in March 1999, he was the Director of Financial Services at
TrizecHahn Centers Inc., a developer and operator of commercial real estate,
from 1995 to 1999, a Senior Manager with E&Y Kenneth Leventhal Real Estate
Group, Ernst & Young, LLP, from 1988 to 1995, and Vice President of Finance with
Great Southwest Companies, a commercial and residential real estate developer,
from 1985 to 1988. Mr. Dickenson is a member of the Financial Accounting
Standards Committee for the National Association of Real Estate Companies and
the American Institute of Certified Public Accountants, and a Director of
HomeAid Southern California, a charitable organization affiliated with the
building industry. He graduated from Texas Tech University in 1978 with a
Bachelor of Business Administration - Accounting degree, and is a Certified
Public Accountant in California and Texas.
Thomas J. Riha, age 44, is Vice President - Asset Management and a member of the
Acquisition Committee of WNC & Associates, Inc. and a Director and Chief
Executive Officer of WNC Management, Inc. Mr. Riha has been involved in
acquisition and investment activities with respect to real estate since 1979.
Prior to joining the Sponsor in 1994, Mr. Riha was employed by Trust Realty
Advisor, a real estate acquisition and management company, last serving as Vice
President - Operations. Mr. Riha graduated from the California State University,
Fullerton in 1977 with a Bachelor of Arts degree (cum laude) in Business
Administration with a concentration in Accounting and is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
Sy P. Garban, age 53, is Vice President - National Sales of WNC & Associates,
Inc. and has been employed by the Sponsor since 1989. Mr. Garban has been
involved in real estate investment activities since 1978. Prior to joining the
Sponsor he served as Executive Vice President of MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
N. Paul Buckland, age 36, is Vice President - Acquisitions of WNC & Associates,
Inc. He has been involved in real estate acquisitions and investments since 1986
and has been employed with WNC & Associates, Inc. since 1994. Prior to that, he
served on the development team of the Bixby Ranch that constructed apartment
units and Class A office space in California and neighboring states, and as a
land acquisition coordinator with Lincoln Property Company where he identified
and analyzed multi-family developments. Mr. Buckland graduated from California
State University, Fullerton in 1992 with a Bachelor of Science degree in
Business Finance.
28
<PAGE>
David Turek, age 44, is Vice President - Originations of WNC & Associates, Inc.
He has been involved with real estate investment and finance activities since
1976 and has been employed by WNC & Associates, Inc. since 1996. From 1995 to
1996, Mr. Turek served as a consultant for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties. From 1990 to 1995, he was involved in the development of
conventional and tax credit multi-family housing. He is a Director with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.
Kay L. Cooper, age 62, is a Director of WNC & Associates, Inc. Mrs. Cooper was
the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
Item 11. Executive Compensation
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 its affiliates during the current or future years for the following
fees:
(a) Acquisition Expenses. The Partnership incurred acquisition expenses of
$113,000 as of December 31, 1998 and $111,000 as of December 31, 1997.
(b) Annual Asset Management Fee. An annual asset management fee 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 the
change 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 the
indebtedness related to the Housing Complexes. Fees of $32,000 were
incurred for the year ended December 31, 1998. The Partnership paid the
General Partner or its affiliates $32,000 of those fees during 1998.
(c) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of a Housing Complex. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital
contributions and payment of the Return on Investment to the Limited
Partners. "Return on Investment" means an annual, cumulative but not
compounded, "return" to the Limited Partners (including Low Income Housing
Credits) as a class on their adjusted capital contributions commencing for
each Limited Partner on the last day of the calendar quarter during which
the Limited Partner's capital contribution is received by the Partnership,
calculated at the following rates: (i) 14% through December 31, 2005, and
(ii) 6% for the balance of the Partnership's term. No disposition fees
have been paid.
(d) Operating Expense. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $2,000 during the year
ended December 31, 1998.
(e) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$19,000 for the General Partner for the year ended December 31, 1998. The
General Partners are also entitled to receive 1% of cash distributions.
There were no distributions of cash to the General Partners during the
year ended December 31,1998.
29
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
(a) Security Ownership of Certain Beneficial Owners
No person is known to own beneficially in excess of 5% of the outstanding
Limited Partnership Interests.
(b) Security Ownership of Management
Neither the General Partner, its affiliates nor any of the officers or
directors of the General Partner or its affiliates own directly or
beneficially any Units in the Partnership.
(c) Changes in Control
The management and control of the General Partner may be changed at any
time in accordance with their respective organizational documents, without
the consent or approval of the Limited Partners. In addition, the
Partnership Agreement provides for the admission of one or more additional
and successor General Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of any
other General Partner or the Limited Partners, (i) substitute in its stead
as General Partner any entity which has, by merger, consolidation or
otherwise, acquired substantially all of its assets, stock or other
evidence of equity interest and continued its business, or (ii) cause to
be admitted to the Partnership an additional General Partner or Partners
if it deems such admission to be necessary or desirable so that the
Partnership will be classified a partnership for Federal income tax
purposes. Finally, a majority-in-interest of the Limited Partners may at
anytime remove the General Partner of the Partnership and elect a
successor General Partner
Item 13. Certain Relationships and Related Transactions
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interests in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Independent Auditors' Report
Balance Sheets, December 31, 1998 and 1997
Statements of Operations for the years ended December 31, 1998, 1997
and 1996
Statements of Partners' Equity(Deficit) for the years ended December
31, 1998, 1997 and 1996
Statements of Cash Flows for the years ended December 31, 1998, 1997
and 1996
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial
Statement Schedule
Schedule III - Real Estate Owned by Local Limited Partnerships
30
<PAGE>
(b) Reports on Form 8-K
1. A Form 8-K dated December 16, 1998 was filed on December 22, 1998 reporting
the dismissal of the Partnership's former auditors and the engagement of
new auditors. No financial statements were included.
(c) Exhibits.
3.1 Articles of incorporation and by-laws: The registrant is not incorporated.
The Partnership Agreement included as Exhibit B to the Prospectus, and the
First Amendment to the Partnership Agreement included in the Supplement
dated April 30, 1996 to Prospectus, each of which is included in
Post-Effective No. 10 to Registration Statement on Form S-11 dated May 3,
1996 are incorporated herein by reference as Exhibit 3.
10.1 Escrow Agreement between Registrant and National Bank of Southern
California filed as exhibit 10.1 to the Pre-effective Amendment No. 2 to
Registration Statement on Form S-11 of the Partnership dated July 22, 1994
is hereby incorporated herein by reference as exhibit 10.1.
10.2 Amended and Restated Agreement of Limited Partnership of Colonial Village
Auburn filed as exhibit 10.1 to Form 8-K dated October 28, 1994 is hereby
incorporated herein by reference as exhibit 10.2
10.3 Amended and Restated Agreement of Limited Partnership of Sycamore Hills,
L.P. filed as exhibit 10.1 to Form 8-K dated January 9, 1995 is hereby
incorporated herein by reference as exhibit 10.3.
10.4 Amended and Restated Agreement of Limited Partnership of Maharlika, a
California Limited Partnership filed as exhibit 10.1 to Form 8-K dated May
31, 1995 is hereby incorporated herein by reference as exhibit 10.4.
10.5 Amended and Restated Agreement of Limited Partnership of Wills Point
Crossing, L.P. filed as exhibit 10.1 to Form 8-K dated July 26, 1995 is
hereby incorporated herein by reference as exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of Rancheria Village
Apartments, a California Limited Partnership filed as exhibit 10.1 to Form
8-K dated September 26, 1995 is hereby incorporated herein by reference as
exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of Woodlake Valencia
House, a California Limited Partnership. (1)
10.8 Amended and Restated Agreement of Limited Partnership of Pawnee Associates
I, L.P. (1)
10.9 Amended and Restated Agreement of Limited Partnership of Eagleville
Associates I, L.P. (1)
21.1 Financial Statements of Colonial Village Auburn, for the years ended
December 31, 1998 and 1997 together with auditors report thereon; a
significant subsidiary of the Partnership.
(d) Financial statement schedule follows, as set forth in subsection (a)(2)
hereof.
31
<PAGE>
Report of Independent Certified Public Accountants on
Financial Statement Schedule
To the Partners
WNC California Housing Tax Credits IV, L.P., Series 4
The audit referred to in our report dated April 5, 1999, relating to the 1998
financial statements of WNC California Housing Tax Credits IV, L.P., Series 4
(the "Partnership"), which is contained in Item 8 of this Form 10-K, included
the audit of the accompanying financial statement schedule. The financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the financial information set forth therein.
BDO SEIDMAN, LLP
Orange County, California
April 5, 1999
32
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
As of December 31, 1998
---------------------------------------------------------------------------------------------------------
Location Partnership's Amount of Encumbrances Property Accumulated Net
Partnership Name Total Investment Investment of Local and Depreciation Book
in Local Limited Paid to Date Limited Equipment Value
Partnerships Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chadron Apartments I, L.P. Chadron,
Nebraska $ 483,000 $ 391,000 $ 800,000 $ 1,265,000 $ 33,000 $ 1,232,000
Colonial Village Auburn Auburn,
California 2,979,000 2,979,000 2,087,000 5,326,000 685,000 4,641,000
Eagleville Associates I, L.P. Eagleville,
Missouri 79,000 79,000 356,000 416,000 43,000 373,000
Maharlika, Ltd. Stockton,
California 1,524,000 1,524,000 1,565,000 3,038,000 370,000 2,668,000
Pawnee Associates I, L.P. Pawnee,
Illinois 130,000 130,000 539,000 684,000 63,000 621,000
Rancheria Village Apartments, Santa Barbara,
a California Limited California 950,000 950,000 995,000 1,848,000 104,000 1,744,000
Partnership
Sycamore Hills L.P. Salem,
Indiana 185,000 185,000 763,000 989,000 162,000 827,000
Wills Point Crossing, L.P. Wills Point,
Texas 234,000 234,000 984,000 1,256,000 97,000 1,159,000
Woodlake Valencia Partners Woodlake,
California 1,798,000 1,798,000 952,000 3,056,000 281,000 2,775,000
---------- ---------- --------- ---------- --------- ----------
$ 8,362,000 $ 8,270,000 $9,041,000 $ 17,878,000 $ 1,838,000 $16,040,000
========== ========== ========= ========== ========= ==========
</TABLE>
33
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
For the year ended December 31, 1998
----------------------------------------------------------------------------------------
Partnership Name Rental Income Net loss Year Investment Status Estimated Useful
Acquired Life (Years)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Chadron Apartments I, L.P. $ 49,000 $ (57,000) 1996 Completed 40
Colonial Village Auburn 377,000 (130,000) 1994 Completed 27.5
Eagleville Associates I,
L.P. 46,000 (12,000) 1996 Completed 27.5
Maharlika, Ltd. 110,000 (253,000) 1995 Completed 27.5
Pawnee Associates I, L.P. 65,000 (22,000) 1996 Completed 27.5
Rancheria Village
Apartments, a California
Limited Partnership 106,000 (47,000) 1995 Completed 40
Sycamore Hills L.P. 85,000 (13,000) 1995 Completed 27.5
Wills Point Crossing, L.P. 103,000 (14,000) 1995 Completed 40
Woodlake Valencia Partners 84,000 (210,000) 1995 Completed 27.5
--------- --------
$ 1,025,000 $ (758,000)
========= ========
</TABLE>
34
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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 California Tax Credit Partners IV, L.P.
General Partner of the Registrant
By: WNC & Associates, Inc.
General Partner of WNC California Tax Credit Partners III, L.P.
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., President of WNC & Associates, Inc.
Date: July 1, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: July 1, 1999
By: /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., General Partner
Date: July 1, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., Chairman of the Board of WNC & Associates, Inc.
Date: July 1, 1999
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., Director of WNC & Associates, Inc.
Date: July 1, 1999
By: /s/ David N. Shafer
David N Shafer, Director of WNC & Associates, Inc.
Date: July 1, 1999
35
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS............................................ 37
FINANCIAL STATEMENTS
Balance sheets...................................................... 38
Statements of income................................................ 40
Statements of changes in partners' equity........................... 44
Statements of cash flows............................................ 45
Notes to financial statements....................................... 47
36
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners
Colonial Village - Auburn
(A California Limited Partnership)
Rocklin, California
I have audited the accompanying balance sheets of Colonial Village - Auburn (A
California Limited Partnership), as of December 31, 1998 and 1997, and the
related statements of income, partners' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colonial Village - Auburn (A
California Limited Partnership) as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Bernard E. Rea, CPA
Stockton, California
March 31, 1999
37
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS 1998 1997
---- ----
CURRENT ASSETS
Cash $ 22,384 $ 31,025
Rents receivable - 634
Other receivables - -
Prepaid expense 2,024 1,903
---------- ----------
Total current assets $ 24,408 $ 33,562
---------- ----------
RESTRICTED DEPOSITS AND FUNDED RESERVES
Tenants' security deposits $ 24,411 $ 23,534
Replacement reserve escrow 32,608 19,972
---------- ----------
$ 57,019 $ 43,506
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land $ 448,000 $ 448,000
Building 4,725,200 4,725,200
Equipment 152,122 152,122
---------- ----------
$ 5,325,322 $ 5,325,322
Less accumulated depreciation 684,512 493,680
---------- ----------
$ 4,640,810 $ 4,831,642
---------- ----------
OTHER ASSETS
Deferred charges, less accumulated
amortization of $7,209 and $4,974 $ 37,291 $ 39,526
---------- ----------
$ 37,291 $ 39,526
---------- ----------
$ 4,759,528 $ 4,948,236
========== ==========
See Notes to Financial Statements.
38
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
LIABILITIES AND PARTNERS' EQUITY 1998 1997
---- ----
CURRENT LIABILITIES
Current maturities of long-term debt $ 23,726 $ 21,986
Accounts payable 5,726 11,533
Advance payable - general
partner, without interest,
due date or collateral 6,876 -
Accrued interest - 13,151
Developer fees payable 23,500 -
----------- -----------
Total current liabilities $ 59,828 $ 46,670
----------- -----------
DEPOSIT AND PREPAYMENT LIABILITIES
Tenants' security deposits $ 22,856 $ 22,700
Prepaid rents 220 110
----------- -----------
$ 23,076 $ 22,810
----------- -----------
LONG-TERM DEBT
Mortgage payable, less
current maturities $ 2,062,651 $ 2,088,287
Developer fees payable 67,631 114,630
----------- -----------
$ 2,130,282 $ 2,202,917
----------- -----------
COMMITMENT
PARTNERS' EQUITY $ 2,546,342 $ 2,675,839
----------- -----------
$ 4,759,528 $ 4,948,236
=========== ===========
See Notes to Financial Statements.
39
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF INCOME
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
RENTAL INCOME
Apartments $ 376,724 $ 380,957
Tenant assistance payments - -
Furniture and equipment - -
Commercial - -
Parking spaces - -
Subsidy income - -
Miscellaneous - -
-------- --------
Net rental revenue $ 376,724 $ 380,957
-------- --------
FINANCIAL REVENUE
Interest Income - project
operations $ 2,103 $ 1,175
Income from investments -
replacement reserve 504 352
Income from investments -
miscellaneous - -
-------- --------
Sub-total financial revenue $ 2,607 $ 1,527
-------- --------
OTHER REVENUE
Laundry and vending $ 9,905 $ 9,397
NSF and late charges 1,975 2,325
Damage and cleaning fees - -
Forfeited tenant security
deposits 4,469 5,436
Other revenue 810 2,627
-------- --------
Sub-total other revenue $ 17,159 $ 19,785
-------- --------
Total revenues $ 396,490 $ 402,269
-------- --------
See Notes to Financial Statements.
40
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
OPERATING EXPENSES
Renting expenses
Advertising $ 136 $ 208
Miscellaneous renting expenses 2,204 5,658
------- -------
Sub-total renting expenses $ 2,340 $ 5,866
------- -------
Administrative expenses
Office salaries $ 2,708 $ 111
Office supplies 4,350 3,983
Office rent - -
Management fee 17,872 20,779
Manager's salary 11,872 17,826
Manager rent free unit - 7,760
Legal expense 768 1,687
Audit expense 4,147 3,978
Bookkeeping / accounting services - -
Telephone and answering service 2,301 2,467
Bad debts 3,717 691
Miscellaneous administrative expenses 3,998 616
------- -------
Sub-total administrative expenses $ 51,733 $ 59,898
------- -------
Utilities expense
Fuel oil / coal $ - $ -
Electricity 6,038 5,656
Water 10,240 11,023
Gas 2,355 1,916
Sewer 20,859 9,928
------- -------
Sub-total utilities expense $ 39,492 $ 28,523
------- -------
See Notes to Financial Statements.
41
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
Operating and maintenance expense
Janitor and cleaning payroll $ - $ -
Janitor and cleaning supplies 115 579
Janitor and cleaning contract 4,059 5,264
Exterminating payroll / contract 1,221 880
Exterminating supplies - -
Garbage and trash removal 15,334 16,386
Security payroll / contract - -
Grounds payroll 812 -
Grounds supplies 920 16
Grounds contract 12,304 16,548
Repairs payroll 14,287 14,261
Repairs material 1,842 3,456
Repairs contract 4,554 4,124
Elevator maintenance / contract - -
Heating / cooling repairs and maintenance - 1,200
Swim pool maintenance / contract - -
Snow removal - -
Decorating payroll / contract - -
Decorating supplies 2,974 1,583
Vehicle and maintenance equipment o & r 1,686 290
Miscellaneous operating and maint. expenses 1,201 454
-------- --------
Sub-total operating & maint. expense $ 61,309 $ 65,041
-------- --------
Taxes and insurance
Real estate taxes $ 1,736 $ 255
Payroll taxes 3,345 2,932
Miscellaneous taxes, licenses, and permits 800 800
Property and liability insurance 3,349 3,367
Fidelity bond insurance - -
Workman's compensation 1,958 2,820
Health insurance and other employee benefits 6,248 1,618
Other insurance - -
-------- --------
Sub-total taxes & insurance $ 17,436 $ 11,792
-------- --------
Total operating expenses $ 172,310 $ 171,120
-------- --------
See Notes to Financial Statements.
42
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
OTHER EXPENSES
Interest expense - mortgage $ 160,610 $ 161,871
Interest expense - notes - -
Miscellaneous financial expense - -
Depreciation and amortization 193,067 200,670
Non project expenses - -
---------- ----------
Sub-total other expenses $ 353,677 $ 362,541
---------- ----------
Total expenses $ 525,987 $ 533,661
---------- ----------
Net income (loss) $ (129,497) $ (131,392)
========== ==========
See Notes to Financial Statements.
43
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31, 1998 and 1997
General Limited
Total Partner Partner
----- ------- -------
Partners' equity
December 31, 1996 $ 2,793,419 $ (1,849) $ 2,795,268
Partners' capital
contributions 18,812 18,812 -
Partners' capital
distributions (5,000) - (5,000)
Net income (loss) (131,392) (1,314) (130,078)
---------- ------- ----------
Partners' equity
December 31, 1997 $ 2,675,839 $ 15,649 $ 2,660,190
Partners' capital
contributions - - -
Partners' capital
distributions - - -
Net income (loss) (129,497) (1,295) (128,202)
---------- ------- ----------
Partners' equity
December 31, 1998 $ 2,546,342 $ 14,354 $ 2,531,988
========== ======= ==========
Percentage at
December 31, 1998 100% 1% 99%
========== ======= ==========
See Notes to Financial Statements.
44
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (129,497) $ (131,392)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 193,067 200,670
Change in assets and liabilities:
Decrease (increase) in:
Prepaid expenses (121) 80
Tenants' security deposits (877) (562)
Rents receivable 634 (135)
Other receivables - -
Increase (decrease) in:
Accounts payable (5,807) 9,975
Accrued interest (13,151) (229)
Accrued expenses - (2,113)
Advance payable - general partner 6,876 -
Accrued property taxes - (18,812)
Prepaid rents 110 (686)
Tenants' security deposits 156 1,250
---------- ----------
Net cash provided by (used in)
operating activities $ 51,390 $ 58,046
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of replacement reserve escrow $ (12,636) $ (11,553)
Withdrawals from replacement reserve escrow - -
Acquisition of property and equipment - -
---------- ----------
Net cash provided by (used in)
investing activities $ (12,636) $ (11,553)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Partner contributions $ - $ 18,812
Partner distributions - (5,000)
Advances from general partner - -
Payments on developer fees payable (23,499) (95,850)
Principal payments on long-term debt (23,896) (20,374)
---------- ----------
Net cash provided by (used in)
financing activities $ (47,395) $ (102,412)
---------- ----------
See Notes to Financial Statements.
45
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
Increase (decrease) in cash and
cash equivalents $ (8,641) $ (55,919)
Cash and cash equivalents
Beginning 31,025 86,944
--------- ---------
Ending $ 22,384 $ 31,025
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for interest $ 173,761 $ 162,100
========= =========
See Notes to Financial Statements.
46
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Partnership's significant accounting policies
consistently applied in the preparation of the accompanying financial
statements follows.
CAPITALIZATION AND DEPRECIATION
Land, buildings and improvements are recorded at cost. Depreciation of
buildings and equipment is computed principally using the Modified
Accelerated Cost Recovery System which approximates straight-line for
buildings and double-declining balance for equipment over the following
estimated useful lives:
Years
Buildings 27.5
Equipment 7
Improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred. Upon disposal of depreciable
property, the appropriate property accounts are reduced by the related
costs and accumulated depreciation. The resulting gains and losses are
reflected in the statement of operations.
CASH AND CASH EQUIVALENTS
For purposes of reporting the statements of cash flows, the Partnership
includes all cash accounts which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments
purchased with a maturity of three months or less as cash and cash
equivalents on the accompanying balance sheet.
AMORTIZATION
Deferred charges are amortized over the following estimated useful lives
using the straight-line method:
Years
Deferred debt expense 30
Tax credit-monitoring fee 15
INCOME TAXES
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and
is reportable by, the partners individually.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
47
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PERSONAL ASSETS AND LIABILITIES
In accordance with the generally accepted method of presenting partnership
financial statements, the financial statements do not include the personal
assets and liabilities of the partners, including their obligation for
income taxes on their distributive shares of the net income of the
Partnership, nor any provision for income tax expense.
NOTE 2 - ORGANIZATION
Colonial Village - Auburn is a California Limited Partnership which was
formed in April 1993, to develop, construct, own, maintain and operate a
56-unit multi-family apartment complex and is located in the city of
Auburn, California. The Partnership Agreement and Loan Agreement with the
Home Savings of America govern the major activities of the Partnership.
Under the terms of the Partnership Agreement, the Partnership is required
to provide low cost housing to moderate or low-income households.
The Partnership has one general partner, Project Go Inc., a 501(c)(3) tax
exempt, non-profit community service organization, and one investing
limited partner, WNC Housing Tax Credits Fund IV, L.P., Series 4, a
California limited partnership. Partnership transactions with the partners
are described in other notes to these financial statements.
NOTE 3 - DEFERRED CHARGES
Deferred charges as of December 31, 1998 and 1997, consists of the
following:
1998 1997
---- ----
Deferred debt expense $ 21,950 $ 21,950
Tax credit monitoring fee 22,550 22,550
------------ ------------
$ 44,500 $ 44,500
Less accumulated amortization 7,209 4,974
------------ ------------
$ 37,291 $ 39,526
============ ============
NOTE 4 - RESTRICTED DEPOSITS AND FUNDED RESERVES
In accordance with the Partnership and the Capital Replacement Account
Agreements, the Partnership is required to maintain a replacement reserve
account. The account is to be funded monthly in the amount of $933.33.
48
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - MORTGAGE PAYABLE
Long-Term debt consisted of a permanent loan with Home Savings of America
in face amount of $2,145,000.
Under the terms of the 30-year Promissory Note with Home Savings of
America, the loan provides for an interest rate of 7.64% and monthly
payments of $15,204.32 commencing on April 1, 1996, and continuing through
March 2026.
The apartment complex is pledged as collateral for the mortgages and is
secured by deeds of trust, assignment of rents, security agreements and
fixture filings against the property.
Aggregate maturities of Long-term debt for the next five years are as
follows:
December 31,
1999 $ 23,726
2000 25,604
2001 27,630
2002 29,816
2003 32,176
Thereafter 1,947,425
---------
TOTAL $ 2,086,377
NOTE 6 - TRANSACTIONS WITH RELATED PARTIES
DEVELOPMENT FEE
In accordance with the Partnership Agreement, the Partnership agreed to
pay the general partner a development fee of $452,000 for services
rendered to the Partnership for overseeing the development and
construction of the project. During 1995, $40,606 of this amount was
waived by the general partners in accordance with the limitations imposed
by the California Tax Credit Allocation Committee.
Payment of the development fee is to be paid from future operational cash
flows.
The developer fee has been capitalized into the basis of the building.
NOTE 7 - COMMITMENT
The Partnership entered into a Regulatory Agreement with the Tax Credit
Allocation Committee (TCAC), established under Section 50185 of the Health
and Safety Code of the State of California. Under this Agreement, the
Partnership shall maintain the project as a Qualified Low-income Housing
Project for a period of 55 consecutive taxable years beginning with 1995,
the first taxable year of the Credit Period. In exchange for this
agreement, TCAC has authorized an allocation relating to the low-income
housing credit under the provisions of Section 42 of the Internal Revenue
Code.
49
<PAGE>
COLONIAL VILLAGE - AUBURN
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Partnership's sole asset is Colonial Village - Auburn Apartments. The
Partnership's operations are concentrated in the multifamily real estate
market.
50
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<NAME> WNC CALIFORNIA HOUSING TAX CREDITS IV LP, SERIES 4
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<SECURITIES> 0
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<CURRENT-ASSETS> 760,343
<PP&E> 0
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 0
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0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 7,807,157
<SALES> 0
<TOTAL-REVENUES> 46,032
<CGS> 0
<TOTAL-COSTS> 74,970
<OTHER-EXPENSES> 750,114
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (779,052)
<INCOME-TAX> 0
<INCOME-CONTINUING> (779,052)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (779,052)
<EPS-BASIC> (67.07)
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</TABLE>
