FORM 10-K
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 March 31, 2000
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
<PAGE>
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
2
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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 other limited partnerships or limited liability companies ("Local
Limited Partnerships") which own multifamily housing complexes that are eligible
for low-income housing federal and, in certain cases, California income tax
credits ("Low Income Housing Credit").
The general partner of the Partnership is WNC California Tax Credit Partners IV,
L.P. (the "General Partner"). WNC & Associates, Inc. ("Associates") is the
general partner of the General Partner. Wilfred N. Cooper, Sr., through the
Cooper Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B.
Lester, Jr. was the original limited partner of the Partnership and owns,
through the Lester Family Trust, 28.6% of the outstanding stock of Associates.
Wilfred N. Cooper, Jr., President of Associates, owns 3.6% 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
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 a Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.
3
<PAGE>
As of March 31, 2000, the Partnership had invested in 10 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 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 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 ten Housing Complexes as of the dates and for the periods
indicated.
4
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<TABLE>
<CAPTION>
------------------------------ ------------------------------------------------
As of March 31, 2000 As of December 31, 1999
------------------------------ ------------------------------------------------
Partnership's Estimated Encumbrances
Total Investment Amount of Low Income of Local
General Partner in Local Limited Investment Number Occu- Housing Limited
Partnership Name Location Name Partnerships Paid to Date of Units pancy Credits Partnerships
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chadron Chadron, Retro Development, Inc. $ 483,000 $ 472,000 16 100% $ 1,029,000 $ 800,000
Apartments 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 2,979,000 2,979,000 56 98% 4,115,000 2,063,000
Eagleville Eagleville, Kenneth M. Vitor and
Associates I, L.P. Missouri Joseph A. Shepard 79,000 79,000 16 100% 145,000 354,000
Havana Associates Havana, Joseph A. Shepard 252,000 237,000 16 81% 360,000 821,000
I, L.P. Illinois
Maharlika, Ltd. Stockton, Daniels C. Logue and
California Cyrus Youssefi 1,524,000 1,524,000 69 81% 1,958,000 1,562,000
Pawnee Associates Pawnee, Kenneth M. Vitor and
I, L.P. Illinois Joseph A. Shepard 130,000 130,000 20 90% 239,000 536,000
Rancheria Village Santa Community Housing
Apartments, a Barbara, Program, Inc., Richard A.
California California Bialosky, Detlev Peikert,
Limited Francis C. Thompson,
Partnership Peter Koelsch, and Real
Estate Concepts, Inc. 950,000 950,000 14 100% 1,335,000 987,000
Sycamore Hills Salem, Larry A. Swank and Lance
L.P. Indiana A. Swank 185,000 185,000 24 92% 346,000 750,000
Wills Point Wills 1600 Capital Company, Inc. 234,000 234,000 36 86% 395,000 977,000
Crossing, L.P. Point,
Texas
Woodlake Valencia Woodlake, Philip R. Hammond, Jr.
Partners California and Diane M. Hammond 1,798,000 1,798,000 47 98% 2,522,000 952,000
---------- ---------- ---- ---- ---------- ----------
$ 8,614,000 $ 8,588,000 314 93% $ 12,444,000 $ 9,802,000
========== ========== ==== ==== ========== ==========
</TABLE>
5
<PAGE>
-----------------------------------------
For the year ended December 31, 1999
-----------------------------------------
Low Income Housing
Rental Net Credit Allocated to
Partnership Name Income Loss Partnership
--------------------------------------------------------------------------------
Chadron Apartments I, L.P. $ 69,000 $ (78,000) 99%
Colonial Village Auburn 374,000 (162,000) 99%
Eagleville Associates I, L.P. 47,000 (16,000) 99%
Havana Associates I, L.P. 22,000 (22,000) 99.89%
Maharlika, Ltd. 117,000 (237,000) 99%
Pawnee Associates I, L.P. 59,000 (29,000) 99%
Rancheria Village Apartments, a
California Limited Partnership 105,000 (68,000) 99%
Sycamore Hills L.P. 85,000 (15,000) 99%
Wills Point Crossing, L.P. 119,000 (2,000) 99%
Woodlake Valencia Partners 109,000 (182,000) 99%
--------- ---------
$ 1,106,000 $ (811,000)
========= =========
* Results of Chadron Apartments I, L.P. have not been audited. See Note 2 to
the financial statements and report of the independent certified public
accountants included elsewhere herein.
6
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Item 3. Legal Proceedings
The Partnership has an investment consisting of a 99% limited partnership
interest in Chadron Apartments I, Limited Partnership ("Chadron"), a Nebraska
limited partnership. Chadron, together with five other Local Limited
Partnerships in two other low-income housing tax credit funds sponsored by WNC
(collectively referred to as the "Defendants"), is a defendant in a lawsuit. The
lawsuit has been filed by eight partnerships (the "Plaintiffs") and seeks
recovery of $811,715. All of the Defendants involved in the lawsuit had the same
general partner and the Plaintiffs allege that the local general partner
accepted funds from them and improperly loaned those funds to the Defendants.
The Defendants have filed actions against the general partner for violating the
limited partnership agreements and for breach of fiduciary duties. During 1999,
the Defendants held a partners' meeting and voted to remove the local general
partner. A receiver was appointed by the District Court of Douglas County,
Nebraska to oversee the operations of the Defendants as a result of an
injunction filed against the local general partner by the defendants to prevent
the local general partner from further acting as the general partner of the
Defendants.
Chadron may not be successful in its defense of the aforementioned litigation
and, as a result, the Partnership may lose its investment in Chadron and be
subject to tax credit recapture.
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 March 31, 2000, there were 438 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 the year
ended March 31, 2000.
Item 5b.
NOT APPLICABLE
7
<PAGE>
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
<TABLE>
<CAPTION>
March 31 December 31
------------------------ --------------------------------------------------
2000 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 497,221 $ 675,871 $ 760,343 $ 1,147,906 $ 2,614,756 $ 3,827,214
Receivables from affiliates 25 - - 31,646 121,825 -
Loans receivable - - 201,611 - - -
Investments in limited
partnerships, net 6,052,638 6,899,934 6,845,203 7,622,211 8,467,424 8,494,018
Other assets - - - - 12,912 25,824
----------- ----------- ----------- ----------- ----------- -----------
$ 6,549,884 $ 7,575,805 $ 7,807,157 $ 8,801,763 $ 11,216,917 $ 12,347,056
=========== =========== =========== =========== =========== ===========
LIABILITIES
Payable to limited partnerships $ 25,977 $ 142,124 $ 91,746 $ 363,634 $ 1,929,597 $ 2,785,857
Accrued expenses 23,835 - - - - -
Accrued fees and expenses
due to general partner
and affiliates 8,124 (19,496) 62,779 6,445 43,755 102,526
PARTNERS' EQUITY 6,491,948 7,453,177 7,652,632 8,431,684 9,243,565 9,458,673
----------- ----------- ----------- ----------- ----------- -----------
$ 6,549,884 $ 7,575,805 $ 7,807,157 $ 8,801,763 $ 11,216,917 $ 12,347,056
=========== =========== =========== =========== =========== ===========
</TABLE>
Selected results of operations, cash and other information for the Partnership
is as follows:
<TABLE>
<CAPTION>
For the
Year Ended For the Three Months For the Years Ended
March 31 Ended March 31 December 31
----------- ------------------------ --------------------------------------------------
2000 1999 1998 1998 1997 1996 1995
----------- ----------- ----------- ----------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from
operations $ (93,638) $ (11,927) $ (7,453) $ (28,938) $ (5,242) $ 70,901 $ 23,654
Equity in losses of
limited partnerships (817,069) (187,528) (222,248) (750,114) (806,639) (528,288) (100,224)
Other expenses and
losses (50,522) - - - - - -
---------- ----------- ----------- ----------- ---------- ---------- ----------
Net loss $ (961,229) $ (199,455) $ (229,701) $ (779,052) $ (811,881) $ (457,387) $ (76,570)
========== =========== =========== =========== ========== ========== ==========
Net loss allocated to:
General Partner $ (9,612) $ (1,995) $ (2,297) $ (7,791) $ (8,119) $ (4,574) $ (766)
========== =========== =========== =========== ========== ========== ==========
Limited Partners $ (951,617) $ (197,460) $ (227,404) $ (771,261) $ (803,762) $ (452,813) $ (75,804)
========== =========== =========== =========== ========== ========== ==========
Net loss per limited
partner unit $ (82.75) $ (17.17) $ (19.77) $ (67.07) $ (69.89) $ (39.38) $ (8.68)
========== =========== =========== =========== ========== ========== ==========
Outstanding weighted
limited partner units 11,500 11,500 11,500 11,500 11,500 11,500 8,735
========== =========== =========== =========== ========== ========== ==========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
For the
Year Ended For the Three Months For the Years Ended
March 31 Ended March 31 December 31
----------- ------------------------ --------------------------------------------------
2000 1999 1998 1998 1997 1996 1995
----------- ----------- ----------- ----------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in):
Operating activities $ (67,091) $ (87,823) $ 10,707 $ 84,603 $ 123,268 $ 108,678 $ 26,322
Investing activities (111,559) 3,351 2,539 (472,166) (1,552,808) (1,382,819) (1,979,131)
Financing activities - - - - (37,310) 61,683 5,295,252
---------- ----------- ----------- ----------- ---------- ---------- ----------
Net change in cash
and cash equivalents (178,650) (84,472) 13,246 (387,563) (1,466,850) (1,212,458) 3,342,443
Cash and cash
equivalents,
beginning of period 675,871 760,343 1,147,906 1,147,906 2,614,756 3,827,214 484,771
---------- ----------- ----------- ----------- ---------- ---------- ----------
Cash and cash
equivalents,
end of period $ 497,221 $ 675,871 $ 1,161,152 $ 760,343 $ 1,147,906 $ 2,614,756 $ 3,827,214
========== =========== =========== =========== ========== ========== ==========
Low Income Housing Credit per limited partner unit was as follows for the year
ended December 31:
1999 1998 1997 1996 1995 1994
------------ -------------- -------------- -------------- -------------- ---------------
Federal $ 102 $ 99 $ 86 $ 64 $ 21 $ -
State 27 67 91 70 70 -
----------- ---------- ---------- ---------- ------------ ------------
Total $ 129 $ 166 $ 177 $ 134 $ 91 $ -
=========== ========== ========== ========== ============ ============
</TABLE>
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Uncertainty with respect to Chadron Investments
The Partnership has an investment, accounted for under the equity method,
consisting of a 99% limited partnership investment in Chadron Apartments I,
Limited Partnership ("Chadron"), a Nebraska limited partnership. The investment
in Chadron carried on the Partnership's balance sheet at March 31, 2000 totals
$329,597 (which represents approximately 5% of total investment in limited
partnerships of the Partnership). The Partnership has reflected equity in the
net losses of Chadron totaling $82,794 ($(7.20) per limited partnership unit)
for the year ended March 31, 2000.
Chadron, together with five other Local Limited Partnerships in two other low
income housing tax credit funds sponsored by WNC (collectively referred to as
the "Defendants"), is a defendant in a lawsuit. The lawsuit has been filed by
eight partnerships (the "Plaintiffs") and seeks recovery of $811,715. All of the
Defendants involved in the lawsuit had the same general partner and the
Plaintiffs allege that the local general partner accepted funds from them and
improperly loaned those funds to the Defendants. The Defendants have filed
actions against the general partner for violating the limited partnership
agreements and for breach of fiduciary duties. During 1999, the Defendants held
a partners' meeting and voted to remove the local general partner. A receiver
was appointed by the District Court of Douglas County, Nebraska to oversee the
operations of the Defendants as a result of an injunction filed against the
local general partner by the defendants to prevent the local general partner
from further acting as the general partner of the Defendants.
Legal costs in the amount of $31,645 were incurred through March 31, 2000,
including an accrual for management's estimate of future legal costs of $16,667,
which is the Partnership's prorated portion of the collective accrual of
$100,000 booked across the three affected WNC sponsored low income housing tax
credit funds. In addition, the Partnership has accrued $5,000 for estimated
additional audit fees and recognized approximately $3,300 for estimated costs
related to the receivership, which is included in other expenses.
The independent auditors engaged to perform an audit of Chadron's financial
statements as of and for the year ended December 31, 1999 were unable to form an
opinion on those financial statements due to the lack of general ledger
information for a period of approximately three months, the inability to obtain
reliable confirmations of advances to/notes receivable from the former general
partner and the inability to obtain a management representation letter from the
former management company which is an affiliate of the former general partner.
As a result, the Partnership has not included the financial information of
Chadron in the combined condensed financial statements presented in Note 3. The
combined condensed financial information for previous periods presented has been
restated to exclude the accounts of Chadron.
The Partnership has recognized equity in losses of Chadron totaling $82,794 for
the year ended March 31, 2000 based on nine months of reported results provided
by Chadron and on three months of results estimated by management of the
Partnership. Such estimates may be materially misstated due to the lack of
corroborative financial information, as discussed above.
The accompanying financial statements have been prepared assuming that the
Partnership will be able to realize its investment in Chadron. Chadron is a
defendant in the litigation described above and may owe substantial liabilities
not currently reflected in its financial statements in the event a judgment is
rendered against Chadron. In addition, Chadron has and is currently experiencing
substantial negative cash flows from operations and is currently in default on
its construction loan. Chadron may not be able to refinance its construction
loan into a permanent loan, which would increase cash flow from operations.
Furthermore, the Partnership may have to sell its investment in Chadron. If the
construction loan is not refinanced, the construction lender may foreclose on
Chadron. In addition, Chadron may not be successful in its defense of the
aforementioned litigation. As a result, the Partnership may lose its investment
in Chadron and be subject to tax credit recapture. There is an uncertainty as to
the amounts the Partnership will ultimately realize from its investment in
Chadron. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Financial Condition
The Partnership's assets at March 31, 2000 consisted primarily of $497,000 in
cash and aggregate investments in the ten Local Limited Partnerships of
$6,053,000. Liabilities at March 31, 2000 primarily consisted of $26,000 due to
limited partnerships, $24,000 of accrued expenses and $8,000 due to the general
partner of affiliates for annual management and advances.
10
<PAGE>
Results of Operations
Year Ended March 31, 2000 Compared to Year Ended December 31, 1998. The
Partnership's net loss for the year ended March 31, 2000 was $(961,000),
reflecting an increase of $182,000 from the net loss experienced for the year
ended December 31, 1998. The increase in net loss is primarily due to equity in
losses of limited partnerships which increased by $67,000 to $(817,000) for the
year ended March 31, 2000 from $(750,000) for the year ended December 31, 1998.
The increase in equity in losses of limited partnerships is due to the
acquisition of a Local Limited Partnership, Havana Associates I, in 1999 and the
completion of construction of that Local Limited Partnership during the current
fiscal year. The losses of this Local Limited Partnership recognized by the
Partnership for the year ended March 31, 2000 were $(28,000). In addition, one
Local Limited Partnership, Colonial Village - Auburn, experienced significantly
higher maintenance costs, taxes and insurance and other expenses which resulted
in the Partnership recognizing $(169,000) of losses of this Local Limited
Partnership for the year ended March 31, 2000 as compared to $(128,000) for the
year ended December 31, 1998. In addition, the Partnership experienced a
decrease in interest income of $15,000 resulting from a decrease in cash due to
capital contributions paid to Local Limited Partnerships of $318,000 since
December 31, 1998. The Partnership also experienced an increase in operating
expenses paid to third parties of $50,000 due to the litigation related to
Chadron Apartments I. Additionally, the Partnership recognized losses on sale of
securities of approximately $(51,000) for the year ended March 31, 2000 as
compared to $0 for the year ended December 31, 1998. The realized loss
experienced from the sale of securities was the result of market fluctuations
that reduced the values of certain tax-exempt investments by $(21,522). In order
to avoid future losses, these investments were liquidated prior to maturity and
deferred brokerage charges paid upon liquidation amounted to an additional
$(29,000). The cash generated from the sale of these investments was reinvested
in tax-exempt, auction rate preferred instruments that are highly liquid and
diversified securities backed by 200% collateral. Accordingly, losses from
investing activities are not expected to recur in the future.
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
The Partnership's net loss for the three months ended March 31, 1999 was
$(199,000), reflecting a decrease of $31,000 from the net loss experienced for
the three months ended March 31, 1998. The decline in net loss is due to equity
in losses of limited partnerships which decreased by $34,000 to $(188,000) for
the three month period ended March 31, 1999 from $(222,000) for the three month
period ended March 31, 1998. The reduction in equity in losses of limited
partnerships was partially offset by loss from operations which increased by
$5,000 to $(12,000) for the three month period ended March 31, 1999 from
$(7,000) for the three month period ended March 31, 1998 due to a comparable
decrease in operating income.
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.
Cash Flows
Year Ended March 31, 2000 Compared to Year Ended December 31, 1998. Net cash
used during the year ended March 31, 2000 was $(179,000), compared to net cash
used for the year ended December 31, 1998 of $(388,000). Net cash flows from
operating activities decreased by $152,000 to net cash used in operating
activities of $(67,000) for the year ended March 31, 2000 compared to net cash
provided by operating activities of $85,000 for the year ended December 31,
1998. This decrease was primarily due to changes in operating results as
discussed under Results of Operations. Net cash flows used in investing
activities decreased by $361,000 to $(112,000) for the year ended March 31, 2000
from $(472,000) due primarily to a decrease in capital contributions paid to
Local Limited Partnerships of $156,000, a decrease in cash paid for
pre-development loans receivable of $202,000 and an increase in distributions
received from Local Limited Partnerships of $3,000.
11
<PAGE>
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998.
Net decrease in cash during the three months ended March 31, 1999 was $(84,000),
compared to a net increase in cash for the three months ended March 31, 1998 of
$13,000. The change was due to an increase in cash paid to the General Partner
of affiliates of $94,000 and a decrease in operating income of $3,000.
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.
During the year ended March 31, 2000 and the three months ended March 31, 1999,
accrued fees and expenses due to general partner and affiliates, which include
related party management fees due to Associates, increased by $28,000 and
decreased by $82,000, respectively.
The Partnership expects its future cash flows, together with its net available
assets at March 31, 2000, to be sufficient to meet all currently foreseeable
future cash requirements.
12
<PAGE>
IMPACT OF YEAR 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology (IT) Systems. The Partnership relies on the IT systems of
WNC, its ultimate general partner. IT systems include computer hardware and
software used to produce financial reports and tax return information. This
information is then used to generate reports to investors and regulatory
agencies, including the Internal Revenue Service and the Securities and Exchange
Commission. The IT systems of WNC are year 2000 compliant.
Non-IT Systems. The Partnership also relies on the non-IT systems of WNC. Non-IT
systems include machinery and equipment such as telephones, voice mail and
electronic postage equipment. The non-IT systems of WNC are year 2000 compliant.
Service Providers. WNC also relies on the IT and non-IT systems of service
providers. Service providers include utility companies, financial institutions,
telecommunications carriers, municipalities, and other outside vendors. WNC has
obtained verbal assurances from its material service providers (electrical power
provider, financial institutions and telecommunications carriers) that their IT
and non-IT systems are year 2000 compliant. To date, WNC has not encountered
significant year 2000 issues or business disruptions from its service providers.
Costs to Address Year 2000 Issues
The cost to address year 2000 issues for WNC has been less than $25,000.
Risk of Year 2000 Issues
Although WNC has encountered no significant year 2000 issues to date, the most
reasonable and likely result from non-year 2000 compliance of systems of the
service providers noted above would be the disruption of normal business
operations for WNC. This disruption could, in turn, lead to delays in performing
reporting and fiduciary responsibilities on behalf of the Partnership. The worst
case scenario would be the replacement of a service provider. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Local Limited Partnerships
Status of Readiness
To date, WNC and the Partnership have encountered no significant year 2000
issues with respect to the Local Limited Partnerships.
Costs to Address Year 2000 Issues
There has been and will be no cost to the Partnership as a result of assessing
year 2000 issues for the Local Limited Partnerships. Although no significant
year 2000 issues have been encountered to date, the cost to deal with potential
year 2000 issues of the Local Limited Partnerships cannot be estimated at this
time.
13
<PAGE>
Risk of Year 2000 Issues
Although no significant year 2000 issues have been encountered to date, there
can be no assurance that the Partnership will be unaffected by year 2000 issues.
The most reasonable and likely result from non-year 2000 compliance will be the
disruption of normal business operations for the Local Limited Partnerships,
including but not limited to the possible failure to properly collect rents and
meet their obligations in a timely manner. This disruption would, in turn, lead
to delays by the Local Limited Partnerships in performing reporting and
fiduciary responsibilities on behalf of the Partnership. The worst-case scenario
would include the initiation of foreclosure proceedings on the property by
mortgage debt holders. Under these circumstances, WNC or its affiliates will
take actions necessary to minimize the risk of foreclosure, including the
removal and replacement of a Local General Partner by the Partnership. These
delays would likely be temporary and would likely not have a material effect on
the Partnership or WNC.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NONE.
Item 8. Financial Statements and Supplementary Data
14
<PAGE>
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 sheets of WNC California Housing Tax
Credits IV, L.P., Series 4 (a California Limited Partnership) (the
"Partnership") as of March 31, 2000 and 1999, and December 31, 1998, and the
related statements of operations, partners' equity (deficit) and cash flows for
the year ended March 31, 2000, the three months ended March 31, 1999 and the
year ended December 31, 1998. 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 audits. A significant portion of the
financial statements of the limited partnerships in which the Partnership is a
limited partner were audited by other auditors whose reports have been furnished
to us. As discussed in Note 3 to the financial statements, the Partnership
accounts for its investments in limited partnerships using the equity method.
The portion of the Partnership's investment in limited partnerships audited by
other auditors represented 77%, 73% and 73% of the total assets of the
Partnership at March 31, 2000 and 1999, and December 31, 1998, respectively. Our
opinion, insofar as it relates to the amounts included in the financial
statements for the limited partnerships which were audited by others, is based
solely on the reports of the other auditors.
Except as discussed in the following paragraph, 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.
As more thoroughly discussed in Note 2 to the financial statements, the
independent auditors engaged to perform an audit of Chadron Apartments I, L.P.
("Chadron"), a Nebraska limited partnership's financial statements as of and for
the year ended December 31, 1999 were unable to express an opinion on those
financial statements. The investment in Chadron carried on the Partnership's
balance sheet at March 31, 2000 totals $329,597 (which represents approximately
5% of total investment in limited partnerships of the Partnership). The
Partnership has reflected equity in the net losses of Chadron totaling $82,794
($(7.20) per limited partnership unit) for the year ended March 31, 2000.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had the independent auditors been able to
form an opinion on Chadron's financial statements, 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 March 31, 2000 and 1999, and December 31, 1998, and
the results of its operations and its cash flows for the year ended March 31,
2000, the three months ended March 31, 1999 and the year ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
June 26, 2000
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
WNC California Housing Tax Credits IV, L.P., Series 4
We have audited the statements of operations, partners' equity (deficit) and
cash flows of WNC California Housing Tax Credits IV, L.P., Series 4 (a
California Limited Partnership) (the "Partnership") for the year 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 3 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 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 results of operations and cash flows of WNC California Housing Tax Credits
IV, L.P., Series 4 (a California Limited Partnership) for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ CORBIN & WERTZ
CORBIN & WERTZ
Irvine, California
April 10, 1998
16
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
------------------------------ ---------------
2000 1999 1998
-------------- ------------- ---------------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 497,221 $ 675,871 $ 760,343
Receivables from affiliates 25 - -
Loans receivable (Note 7) - - 201,611
Investments in limited partnerships (Note 2 and 3) 6,052,638 6,899,934 6,845,203
-------------- ------------- ---------------
$ 6,549,884 $ 7,575,805 $ 7,807,157
============== ============= ===============
LIABILITIES AND PARTNERS' EQUITY
(DEFICIT)
Liabilities:
Payable to limited partnerships (Note 5) $ 25,977 $ 142,124 $ 91,746
Accrued expenses 23,835 - -
Accrued fees and expenses due to General
Partner and affiliates (Note 4) 8,124 (19,496) 62,779
-------------- ------------- ---------------
Total liabilities 57,936 122,628 154,525
-------------- ------------- ---------------
Commitments and contingencies
Partners' equity (deficit):
General partner (36,254) (26,642) (24,647)
Limited partners (25,000 units authorized,
11,500 units issued and outstanding) 6,528,202 7,479,819 7,677,279
-------------- ------------- ---------------
Total partners' equity 6,491,948 7,453,177 7,652,632
-------------- ------------- ---------------
$ 6,549,884 $ 7,575,805 $ 7,807,157
============== ============= ===============
</TABLE>
See independent auditors' report and accompanying notes to financial statements
17
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
Three
For the Months
Year Ended Ended For the Years Ended
March 31 March 31 December 31
------------- ------------ -----------------------------
2000 1999 1998 1997
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Interest income $ 31,345 $ 7,756 $ 46,032 $ 65,307
------------- ------------ ------------ -------------
Operating expenses:
Amortization (Note 3) 25,639 6,379 25,561 25,419
Asset management fees (Note 4) 31,625 7,906 31,625 31,625
Other expenses 67,719 5,398 17,784 13,505
------------- ------------ ------------ -------------
Total operating expenses 124,983 19,683 74,970 70,549
------------- ------------ ------------ -------------
Loss from operations (93,638) (11,927) (28,938) (5,242)
Other expenses and losses:
Equity in losses of limited
partnerships (Note 3) (817,069) (187,528) (750,114) (806,639)
Loss from sale of securities (Note 8) (50,522) - - -
------------- ------------ ------------ -------------
Total other expenses and losses (867,591) (187,528) (750,114) (806,639)
------------- ------------ ------------ -------------
Net loss $ (961,229) $ (199,455) $ (779,052) $ (811,881)
============= ============ ============ =============
Net loss allocated to:
General partner $ (9,612) $ (1,995) $ (7,791) $ (8,119)
============= ============ ============ =============
Limited partners $ (951,617) $ (197,460) $ (771,261) $ (803,762)
============= ============ ============ =============
Net loss per limited partner unit $ (82.75) $ (17.17) $ (67.07) $ (69.89)
============= =========== ============ =============
Outstanding weighted limited
partner units 11,500 11,500 11,500 11,500
============= ============ ============ =============
</TABLE>
See independent auditors' report and accompanying notes to financial statements
18
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
-------------- --------------- ---------------
<S> <C> <C> <C> <C>
Partners' equity (deficit) at January 1, 1997 $ (8,737) $ 9,252,302 $ 9,243,565
Net loss (8,119) (803,762) (811,881)
-------------- --------------- ---------------
Partners' equity (deficit) at December 31, 1997 (16,856) 8,448,540 8,431,684
Net loss (7,791) (771,261) (779,052)
-------------- --------------- ---------------
Partners' equity (deficit) at December 31, 1998 (24,647) 7,677,279 7,652,632
Net loss (1,995) (197,460) (199,455)
-------------- --------------- ---------------
Partners' equity (deficit) at March 31, 1999 (26,642) 7,479,819 7,453,177
Net loss (9,612) (951,617) (961,229)
-------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2000 $ (36,254) $ 6,528,202 $ 6,491,948
============== =============== ===============
</TABLE>
See independent auditors' report and accompanying notes to financial statements
19
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
Three
For the Months
Year Ended Ended For the Years Ended
March 31 March 31 December 31
------------- ------------ -----------------------------
2000 1999 1998 1997
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (961,229) $ (199,455) $ (779,052) $ (811,881)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization 25,639 6,379 25,561 25,419
Equity in losses of limited partnerships 817,069 187,528 750,114 806,639
Change in receivables from affiliates (25) - 31,646 90,179
Change in other assets - - - 12,912
Change in accrued expenses 23,835 - - -
Change in accrued fees and expenses due
to general partner and affiliates 27,620 (82,275) 56,334 -
----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities (67,091) (87,823) 84,603 123,268
----------- ----------- ----------- -----------
Cash flows from investing activities:
Investments in limited partnerships, net (116,147) (201,611) (271,888) (1,555,241)
Capitalized acquisition costs and fees (1,921) (27) (1,584) (3,567)
Distributions from limited partnerships 6,509 3,378 2,917 6,000
Loans receivable - 201,611 (201,611) -
----------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities (111,559) 3,351 (472,166) (1,552,808)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Payments to affiliates or general
partner, net - - - (37,310)
----------- ----------- ----------- -----------
Net cash used in financing activities - - - (37,310)
----------- ----------- ----------- -----------
Net decrease in cash and
cash equivalents (178,650) (84,472) (387,563) (1,466,850)
Cash and cash equivalents, beginning
of period 675,871 760,343 1,147,906 2,614,756
----------- ----------- ----------- -----------
Cash and cash equivalents, end of period $ 497,221 $ 675,871 $ 760,343 $ 1,147,906
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Taxes paid $ 800 $ - $ 800 $ 800
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
20
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
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. was the original limited partner of the Partnership and
owns, through the Lester Family Trust, 28.6% of the outstanding stock of WNC.
Wilfred N. Cooper, Jr., President of WNC, owns 3.6% of the outstanding stock of
WNC.
The Partnership shall continue to be in full force and effect until December 31,
2050 unless terminated prior to that date pursuant to the partnership agreement
or law.
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 losses, in cash available for distribution from the Partnership and
tax credits of 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 contribution and a subordinated disposition fee (as
described in Note 4) 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.
Change in Reporting Year End
In 1999, the Partnership elected to change its year end for financial reporting
purposes from December 31 to March 31. All financial information reflected in
the financial statements and related footnotes has been adjusted for this change
in year end except for the combined condensed financial information relating to
the Local Limited Partnerships included in Note 3.
21
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy of Local Limited
Partnership Interests; limitations on removal of Local General Partners;
limitations on subsidy programs; and possible changes in applicable regulations.
The Housing Complexes are or will be subject to mortgage indebtedness. If a
Local Limited Partnership does not make its mortgage payments, the lender could
foreclose resulting in a loss of the Housing Complex and low income housing
credits. As a limited partner of the Local Limited Partnerships, the Partnership
will have very limited rights with respect to management of the Local Limited
Partnerships, and will rely totally on the Local General Partners of the Local
Limited Partnerships for management of the Local Limited Partnerships. The value
of the Partnership's investments will be subject to changes in national and
local economic conditions, including unemployment conditions, which could
adversely impact vacancy levels, rental payment defaults and operating expenses.
This, in turn, could substantially increase the risk of operating losses for the
Housing Complexes and the Partnership. In addition, each Local Limited
Partnership is subject to risks relating to environmental hazards and natural
disasters which might be uninsurable. Because the Partnership's operations will
depend on these and other factors beyond the control of the General Partner and
the Local General Partners, there can be no assurance that the anticipated low
income housing credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting For Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership'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 3).
Losses from limited partnerships for the years ended December 31, 1998 and 1997
have been recorded by the Partnership based on reported results provided by the
Local Limited Partnerships. Losses from limited partnerships for the three
months ended March 31, 1999 have been estimated by management of the
Partnership. Losses from Local Limited Partnerships for the year ended March 31,
2000 have been recorded by the Partnership based on nine months of reported
results provided by the Local Limited Partnerships and on three months of
results estimated by management of the Partnership. Losses from limited
partnerships allocated to the Partnership will not be recognized to the extent
that the investment balance would be adjusted below zero.
22
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 15% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital and amounted to $1,312,054, at the end of all
periods presented.
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. As of March 31, 2000
and 1999, and December 31, 1998 the Partnership had cash equivalents of
$450,000, $609,587 and $750,309, respectively.
Concentration of Credit Risk
At March 31, 2000, 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 loss per unit is not required.
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of Partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the periods
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
23
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 2 - UNCERTAINTY WITH RESPECT TO INVESTMENT IN CHADRON
The Partnership has an investment, accounted for under the equity method,
consisting of a 99% limited partnership investment in Chadron Apartments I,
Limited Partnership ("Chadron"), a Nebraska limited partnership. The investment
in Chadron carried on the Partnership's balance sheet at March 31, 2000 totals
$329,597 (which represents approximately 5% of total investment in limited
partnerships of the Partnership). The Partnership has reflected equity in the
net losses of Chadron totaling $82,794 ($(7.20) per limited partnership unit)
for the year ended March 31, 2000.
Chadron, together with five other Local Limited Partnerships in two other low
income housing tax credit funds sponsored by WNC (collectively referred to as
the "Defendants"), is a defendant in a lawsuit. The lawsuit has been filed by
eight partnerships (the "Plaintiffs") and seeks recovery of $811,715. All of the
Defendants involved in the lawsuit had the same general partner and the
Plaintiffs allege that the local general partner accepted funds from them and
improperly loaned those funds to the Defendants. The Defendants have filed
actions against the general partner for violating the limited partnership
agreements and for breach of fiduciary duties. During 1999, the Defendants held
a partners' meeting and voted to remove the local general partner. A receiver
was appointed by the District Court of Douglas County, Nebraska to oversee the
operations of the Defendants as a result of an injunction filed against the
local general partner by the defendants to prevent the local general partner
from further acting as the general partner of the Defendants.
Legal costs in the amount of $31,645 were incurred through March 31, 2000,
including an accrual for management's estimate of future legal costs of $16,667,
which is the Partnership's prorated portion of the collective accrual of
$100,000 booked across the three affected WNC sponsored low income housing tax
credit funds. In addition, the Partnership has accrued $5,000 for estimated
additional audit fees and recognized approximately $3,300 for estimated costs
related to the receivership, which is included in other expenses.
The independent auditors engaged to perform an audit of Chadron's financial
statements as of and for the year ended December 31, 1999 were unable to form an
opinion on those financial statements due to the lack of general ledger
information for a period of approximately three months, the inability to obtain
reliable confirmations of advances to/notes receivable from the former general
partner and the inability to obtain a management representation letter from the
former management company which is an affiliate of the former general partner.
As a result, the Partnership has not included the financial information of
Chadron in the combined condensed financial statements presented in Note 3. The
combined condensed financial information for previous periods presented in Note
3 has been restated to exclude the accounts of Chadron.
The Partnership has recognized equity in losses of Chadron totaling $82,794 for
the year ended March 31, 2000 based on nine months of reported results provided
by Chadron and on three months of results estimated by management of the
Partnership. Such estimates may be materially misstated due to the lack of
corroborative financial information, as discussed above.
The accompanying financial statements have been prepared assuming that the
Partnership will be able to realize its investment in Chadron. Chadron is a
defendant in the litigation described above and may owe substantial liabilities
not currently reflected in its financial statements in the event a judgment is
rendered against Chadron. Chadron has and is currently experiencing negative
cash flows from operations and is currently in default on its construction loan.
Chadron may not be able to refinance its construction loan into a permanent
loan, which would increase cash flow from operations. Furthermore, the
Partnership may have to sell its investment in Chadron. If the construction loan
is not refinanced, the construction lender may foreclose on Chadron. In
addition, Chadron may not be successful in its defense of the aforementioned
litigation. As a result, the Partnership may lose its investment in Chadron and
be subject to tax credit recapture. There is an uncertainty as to the amounts
the Partnership will ultimately realize from its investment in Chadron. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
24
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership had acquired limited partnership
interests in ten Local Limited Partnerships each of which owns one Housing
Complex consisting of an aggregate of 314 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, taxable income and
losses and tax credits of the Local Limited Partnerships.
The Partnership's investment in Local Limited Partnerships as shown in the
balance sheets at March 31, 2000 and 1999, are approximately $781,000 and
$1,152,000, respectively, greater than the Partnership's equity at the preceding
December 31 as shown in the Local Limited Partnerships' financial statements
presented below. 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. The
Partnership's investment is also lower than the Partnership's equity as shown in
the Local Limited Partnership's combined financial statements due to the losses
recorded by the Partnership for the three month period ended March 31. Lastly,
the difference is due to the exclusion of the financial statements of Chadron
Apartments I, L.P. from the combined condensed financial information presented
below. See Note 2 for further discussion.
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 the year ended March 31, 2000, the three
month period ended March 31, 1999, and the year ended December 31, 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 periods presented:
<TABLE>
<CAPTION>
For the Year For the Three
Ended Months Ended For the Years Ended
March 31 March 31 December 31
--------------- --------------- ----------------------------
2000 1999 1998 1997
--------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Investments per balance sheet, beginning of $ 6,899,934 $ 6,845,203 $ 7,622,211 $ 8,467,424
period
Capital contributions paid, net of tax credit - 201,611 - (10,722)
adjustments
Capital contributions payable - 50,378 - -
Capitalized acquisition fees and costs 1,921 27 1,584 3,567
Equity in losses of limited partnerships (817,069) (187,528) (750,114) (806,639)
Distributions received (6,509) (3,378) (2,917) (6,000)
Amortization of paid acquisition fees and costs (25,639) (6,379) (25,561) (25,419)
--------------- --------------- ------------- ------------
Investments per balance sheet, end of period $ 6,052,638 $ 6,899,934 $ 6,845,203 $ 7,622,211
=============== =============== ============= ============
</TABLE>
25
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 3 - 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 against
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 financial
information for Chadron Apartments I Limited Partnership has been excluded from
the presentations below. See Note 2 for further discussion):
COMBINED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
ASSETS
<S> <C> <C>
Buildings and improvements,(net of accumulated
depreciation for 1999 and 1998 of $2,396,000 and
$1,805,000, respectively) $ 14,383,000 $ 13,919,000
Land 914,000 889,000
Other assets 573,000 612,000
--------------- ---------------
$ 15,870,000 $ 15,420,000
=============== ===============
LIABILITIES
Mortgage and construction loans payable $ 9,002,000 $ 8,241,000
Due to related parties 581,000 554,000
Other liabilities 988,000 839,000
--------------- ---------------
10,571,000 9,634,000
--------------- ---------------
PARTNERS' CAPITAL
WNC California Housing Tax Credits IV, L.P., Series 4 5,272,000 5,748,000
Other partners 27,000 38,000
--------------- ---------------
5,299,000 5,786,000
--------------- ---------------
$ 15,870,000 $ 15,420,000
=============== ===============
</TABLE>
26
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues $ 1,085,000 $ 1,019,000 $ 1,045,000
--------------- --------------- ---------------
Expenses:
Operating expenses 758,000 688,000 705,000
Interest expense 465,000 441,000 535,000
Depreciation and amortization 595,000 591,000 619,000
--------------- --------------- ---------------
Total expenses 1,818,000 1,720,000 1,859,000
--------------- --------------- ---------------
Net loss $ (733,000) $ (701,000) $ (814,000)
=============== =============== ===============
Net loss allocable to the Partnership $ (726,000) $ (694,000) $ (807,000)
=============== =============== ===============
Net loss recorded by the Partnership,
before equity in losses of Chadron $ (734,000) $ (694,000) $ (807,000)
Net loss of Chadron allocable to the Partnership (83,000) (56,000) -
--------------- --------------- ---------------
Net loss recorded by the Partnership $ (817,000) $ (750,000) $ (807,000)
=============== =============== ===============
</TABLE>
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General 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 and the loss and recapture of the related tax credits could occur.
NOTE 4 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees equal to 7% of the gross proceeds from the sale of
Units as compensation for services rendered in connection with the
acquisition of Local Limited Partnerships. At the end of all periods
presented, the Partnership incurred acquisition fees of $654,580.
Accumulated amortization of these capitalized costs was $106,414,
$84,594 and $79,140 as of March 31, 2000 and 1999 and December 31,
1998, respectively.
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 March
31, 2000 and 1999 and December 31, 1998, the Partnership incurred
acquisition costs of $114,628, $112,707 and $112,680, respectively,
which have been included in investments in limited partnerships.
Accumulated amortization was $17,504, $13,685 and $12,760 as of March
31, 2000 and 1999 and December 31, 1998, respectively.
27
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 4 - RELATED PARTY TRANSACTIONS, continued
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 and $7,906 were incurred during
the year ended March 31, 2000 and the three months ended March 31,
1999, respectively, and $31,625 was incurred for each of the years
ended December 31, 1998 and 1997, of which $8,940 and $35,761 were paid
during the year ended March 31, 2000 and the three months ended March
31, 1999, respectively, and $31,646 and $0 were was paid during the
year ended December 31, 1998 and 1997, 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 consist of
the following at:
<TABLE>
<CAPTION>
March 31 December 31
------------------------------ ---------------
2000 1999 1998
------------- ------------ ---------------
<S> <C> <C> <C>
Cash advances by WNC to acquire an interest in a
limited partnership (Note 7) $ - $ - $ 55,200
Reimbursement for expenses paid by the General
Partner or an affiliate 7,925 2,990 2,210
Asset management fee payable 199 (22,486) 5,369
------------- ------------ ---------------
Total $ 8,124 $ (19,496) $ 62,779
============= ============ ===============
</TABLE>
NOTE 5 - 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 6 - 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 7 - LOANS RECEIVABLE
Loans receivable represent amounts loaned by the Partnership to certain Local
Limited Partnerships in which the Partnership may invest. Loans receivable
consisted of one loan with a balance of $201,611 as of December 31, 1998 which
was applied as a capital contribution in 1999 upon finalization of its
acquisition of an interest in a new Local Limited Partnership.
28
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS IV, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2000,
For The Three Months Ended March 31, 1999 and
For The Years Ended December 31, 1998 and 1997
NOTE 8 - LOSS FROM SALE OF SECURITIES
The $(50,522) realized loss experienced from the sale of securities was the
result of market fluctuations that reduced the values of certain tax-exempt
investments by $(21,522). In order to avoid future losses, these investments
were liquidated prior to maturity and deferred brokerage charges paid upon
liquidation amounted to an additional $(29,000). The cash generated from the
sale of these investments was reinvested in tax-exempt, auction rate preferred
instruments that are highly liquid and diversified securities backed by 200%
collateral. Accordingly, losses from investing activities are not expected to
recur in the future.
29
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
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 69, is the founder, Chairman, 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.
John B. Lester, Jr., age 66, is Vice-Chairman, a Director, and a member of the
Acquisition Committee of WNC & Associates, Inc., and a Director of WNC Capital
Corporation. Mr. Lester has 28 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 37, is President, Chief Operating Officer, 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 48, is Executive 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.
30
<PAGE>
Michael L. Dickenson, age 43, 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 45, 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 54, is Vice President - Institutional Investments 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 37, is Vice President - Acquisitions and a member of the
Acquisition Committee 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.
David Turek, age 45, 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 63, 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
$115,000, $113,000 and $113,000 as of March 31, 2000, March 31, 1999 and
December 31, 1998, respectively.
31
<PAGE>
(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" is
defined as 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, $7,900 and
$32,000 were incurred during the year ended March 31, 2000, the three
months ended March 31, 1999 and the year ended December 31, 1998,
respectively. The Partnership paid the General Partner or its affiliates
$9,000, $7,900 and $32,000 of those fees during the year ended March 31,
2000, the three months ended March 31, 1999 and the year ended December
31, 1998, respectively.
(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 $22,792, $5,000 and
$2,000 during the year ended March 31, 2000, the three months ended March
31, 1999 and the year ended December 31, 1998, respectively.
(e) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$15,000 and $19,000 for the General Partner for the years ended December
31, 1999 and 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 March 31, 2000, the three months ended
March 31, 1999 or the year ended December 31, 1998.
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
Units.
(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.
32
<PAGE>
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, March 31, 2000 and 1999 and December 31, 1998
Statements of Operations for the year ended March 31, 2000, the three
months ended March 31, 1999 and the years ended December 31, 1998 and
1997
Statements of Partners' Equity (Deficit) for the year ended March 31,
2000, the three months ended March 31, 1999 and for the years ended
December 31, 1998 and 1997
Statements of Cash Flows for the year ended March 31, 2000, the three
months ended March 31, 1999 and for the years ended December 31, 1998
and 1997
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial State-
ment Schedules
Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K
1. A Form 8-K dated May 13, 1999 was filed on May 14, 1999 reporting the
Partnership's change in fiscal year end to March 31. 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.
33
<PAGE>
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 filed as exhibit 10.7
to Form 10-K dated July 1, 1999 is hereby incorporated herein by
reference as exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Pawnee
Associates I, L.P. filed as exhibit 10.8 to Form 10-K dated
July 1, 1999 is hereby incorporated herein by reference as exhibit
10.8.
10.9 Amended and Restated Agreement of Limited Partnership of Eagleville
Associates I, L.P. filed as exhibit 10.9 to Form 10-K dated
July 1, 1999 is hereby incorporated herein by reference as exhibit
10.9.
21.1 Financial Statements of Colonial Village Auburn, for the years ended
December 31, 1999 and 1998 together with auditors report thereon; a
significant subsidiary of the Partnership.
(d) Financial statement schedules follow, as set forth in subsection
(a)(2) hereof.
34
<PAGE>
Report of Independent Certified Public Accountants
on Financial Statement Schedules
To the Partners
WNC California Housing Tax Credits IV, L.P., Series 4
The audits referred to in our report dated June 26, 2000, relating to the 2000,
1999 and 1998 financial statements of WNC California Housing Tax Credits IV,
L.P., Series 4 (the "Partnership"), which are contained in Item 8 of this Form
10-K, included the audit of the accompanying financial statement schedules. The
financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statement schedules based upon our audits. The opinion to the financial
statements contains an audit scope limitation paragraph describing the inability
of other auditors to express an opinion on the financial statements of a limited
partnership.
In our opinion, such financial statement schedules present fairly, in all
material respects, the financial information set forth therein.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
June 26, 2000
35
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
<TABLE>
<CAPTION>
----------------------------------- ----------------------------------------------------
As of March 31, 2000 As of December 31, 1999
----------------------------------- ----------------------------------------------------
Partnership's Total Amount of Encumbrances of Net
Investment in Local Investment Local Limited Property and Accumulated Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
------------------------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chadron Apartments I, L.P. Chadron,
Nebraska $ 483,000 $ 472,000 * * * *
Colonial Village Auburn Auburn,
California 2,979,000 2,979,000 $ 2,063,000 $ 5,327,000 $ 870,000 $ 4,457,000
Eagleville Associates I, L.P. Eagleville,
Missouri 79,000 79,000 354,000 416,000 58,000 358,000
Havana Associates, I, Havana,
Limited Partnership Illinois 252,000 237,000 821,000 1,074,000 20,000 1,054,000
Maharlika, Ltd. Stockton,
California 1,524,000 1,524,000 1,562,000 3,038,000 484,000 2,554,000
Pawnee Associates I, L.P. Pawnee,
Illinois 130,000 130,000 536,000 684,000 87,000 597,000
Rancheria Village Apartments, Santa Barbara,
a California Limited California 950,000 950,000 987,000 1,851,000 147,000 1,704,000
Partnership
Sycamore Hills L.P. Salem,
Indiana 185,000 185,000 750,000 989,000 198,000 791,000
Wills Point Crossing, L.P. Wills Point,
Texas 234,000 234,000 977,000 1,258,000 128,000 1,130,000
Woodlake Valencia Partners Woodlake,
California 1,798,000 1,798,000 952,000 3,056,000 404,000 2,652,000
---------- ---------- ---------- ---------- ---------- ----------
$ 8,614,000 $ 8,588,000 $ 9,002,000 $ 17,693,000 $ 2,396,000 $ 15,297,000
========== ========== ========== ========== ========== ==========
</TABLE>
36
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
For the year ended December 31, 1999
-------------------------------------------------------------------------------------------------------------------
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. * * 1996 Completed 40
Colonial Village Auburn $ 374,000 $ (162,000) 1994 Completed 27.5
Eagleville Associates I,
L.P. 47,000 (16,000) 1996 Completed 27.5
Havana Associates, I, L.P. 22,000 (22,000) 1999 Completed 27.5
Maharlika, Ltd. 117,000 (237,000) 1995 Completed 27.5
Pawnee Associates I, L.P. 59,000 (29,000) 1996 Completed 27.5
Rancheria Village
Apartments, a California
Limited Partnership 105,000 (68,000) 1995 Completed 40
Sycamore Hills L.P. 85,000 (15,000) 1995 Completed 27.5
Wills Point Crossing, L.P. 119,000 (2,000) 1995 Completed 40
Woodlake Valencia Partners 109,000 (182,000) 1995 Completed 27.5
------------ -----------
$ 1,037,000 $ (733,000)
============ ===========
</TABLE>
* Results of Chadron Apartments I, L.P. have not been audited and thus have
been excluded. See Note 2 to the financial statements and report of
Certified Public Accountants.
37
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
<TABLE>
<CAPTION>
---------------------------------- ----------------------------------------------------
As of March 31, 1999 As of December 31, 1999
---------------------------------- ----------------------------------------------------
Partnership's Total Amount of Encumbrances of Net
Investment in Local Investment Local Limited Property and Accumulated Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
------------------------------------------------------------------------------- ----------------------------------------------------
<S> <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
Havana Associates I, Havana,
Limited Partnership Illinois 252,000 202,000 - - - -
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
---------- ---------- ---------- ---------- ---------- ----------
$ 8,614,000 $ 8,472,000 $ 9,041,000 $ 17,878,000 $ 1,838,000 $ 16,040,000
========== ========== ========== ========== ========== ==========
</TABLE>
38
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 1999
<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>
39
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
December 31, 1998
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
As of December 31, 1998
---------------------------------------------------------------------------------------
Partnership's Total Amount of Encumbrances of Net
Investment in Local Investment Local Limited Property and Accumulated Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <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>
40
<PAGE>
WNC California Housing Tax Credit Fund IV, L.P. Series 4
Schedule III
Real Estate Owned by Local Limited Partnerships
December 31, 1998
<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>
41
<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/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr.,
President - Chairman and Chief Executive Officer of WNC & Associates, Inc.
Date: August 3, 2000
By: /s/ Michael L. Dickenson
Michael L. Dickenson,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: August 3, 2000
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, Jr.
Wilfred N. Cooper, Jr., Director of WNC & Associates, Inc.
Date: August 3, 2000
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., Director of WNC & Associates, Inc.
Date: August 3, 2000
By: /s/ David N. Shafer
David N Shafer, Director of WNC & Associates, Inc.
Date: August 3, 2000
42
