FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-21897
WNC HOUSING TAX CREDIT FUND V - Series 4
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0707612
WNC HOUSING TAX CREDIT FUND V - Series 4
3158 Redhill Avenue, Suite 120 Costa
Mesa, CA 92626
(714) 662-5565
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ____ No X
<PAGE>
WNC HOUSING TAX CREDIT FUND IV, L.P., Series 4
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended June 30, 1998
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, June 30, 1998 and December 31, 1997..................3
Statement of Operations
For the three months and six months ended
June 30, 1998 and 1997........................................4
Statement of Partners' Equity
For the six months ended June 30, 1998 and 1997.................5
Statement of Cash Flows
For the six months ended June 30, 1998 and 1997.................6
Notes to Financial Statements........................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................13
Item 3: Quantitative and Qualitative Disclosures Above Market Risks....16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................16
Signatures..............................................................17
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
June 30, 1998 and December 31, 1997
1998 1997
----- ----
ASSETS
Cash and cash equivalents $ 4,285,142 $ 5,906,978
Loans receivable 191,226 301,226
Due from affiliates 496,525 276,775
Investment in limited partnerships 15,007,189 14,894,897
Interest receivable 23,099 76,622
Other assets 447 500
----------- ------------
$ 20,003,628 $ 21,456,998
=========== ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships $ 1,525,564 $ 2,880,839
Accrued fees and expenses due to
general partner and affiliates 68,332 52,203
--------- ------------
1,593,896 2,933,042
--------- ------------
Committments and contingencies
Partners' equity (deficit):
General partner (34,961) (32,069)
Limited partners (25,000 units
authorized, 22,000 units issued
and outstanding) 18,444,693 18,556,025
---------- ----------
Total partners' equity 18,409,732 18,523,956
----------- ----------
$ 20,003,628 $ 21,456,998
=========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Three Six Three Six
Months Months Months Months
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income $ 51,834 $ 101,777 $ 28,672 $ 54,513
------- ------- ------ ------
Operating expenses:
Amortization 14,174 28,351 4,024 7,706
Asset management fees 14,881 29,675 23,203 28,988
Legal and accounting 1,250 3,523
Other 8,384 8,941 7,642 7,934
-------- --------- --------- -------
Total operating expenses 38,689 70,490 34,869 44,628
-------- --------- -------- --------
Income (loss) from operations 13,145 31,287 (6,197) 9,885
Equity in loss from
limited partnerships (165,500) (319,000) (17,051) (18,000)
-------- -------- ------- -------
Net loss $ (152,355) $ (287,713) $ (23,248) $ (8,115)
======== ======== ======= ======
Net loss allocated to:
General partner $ (1,524) $ (2,877) $ (232) $ (81)
====== ========= ========== ========
Limited partners $ (150,831) $ (284,836) $ (23,016) $ (8,034)
======== ======== ======== =========
Net loss per weighted
limited partner unit
(22,000 and 14,041) $ (6.86) $ (12.95) $ (1.64) $ (0.57)
========== ========== ========= ========
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
- --------------------------------------
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
Equity (deficit), December 31, 1997 $ (32,069) $ 18,556,025 $ 18,523,956
Offering expenses (15) (1,496) (1,511)
Collection of notes receivable 175,000 175,000
Net loss (2,877) (284,836) (287,713)
---------- ------------ ------------
Equity (deficit), June 30, 1998 $ (34,961) 18,444,693 18,409,732
========= ============ ==========
For the Six Months Ended June 30, 1997
- ---------------------------------------
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit), December 31, 1996 $ (11,401) $ 7,062,107 $ 7,050,706
Capital contributions 13,110,320 13,110,320
Offering expenses (15,106) (1,495,513) (1,510,619)
Capital issued for notes receivable (139,500) (139,500)
Net loss (81) (8,034) (8,115)
--------- ------------ ----------
Equity (deficit), June 30, 1997 $ (26,588) $ 18,529,380 $ 18,502,792
======== ============ ===========
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
STATEMENT OF CASH FLOWS For the Six Months
Ended June 30, 1998 and 1997
1998 1997
---- ----
Cash flows provided by operating activities:
Net loss $ (287,713) $ (8,115)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Equity in loss of limited partnerships 319,000 18,000
Amortization 28,351 7,706
Asset management fee 29,675 28,988
Change in other assets 41,576 (5,147)
Accrued fees and expense due
to general partner and affiliates (13,546) 3,247
---------- --------
Net cash provided by operating activities 117,343 44,679
---------- --------
Cash flows used by investing activities:
Investment in limited partnerships (1,708,611) (5,777,297)
Cash in escrow (421,783)
Acquisition fees and costs (51) (727,550)
Distributions from limited partnerships 3,744
Advance to affiliate - 3,622
----------- ----------
Net cash used by investing activities (1,704,918) (6,923,008)
---------- ----------
Cash flows provided by financing activities:
Capital contributions 175,000 13,091,760
Offering expenses (209,261) (1,707,065)
---------- ---------
Net cash provided by financing activities (34,261) 11,384,695
--------- ----------
Net increase in cash and cash equivalents (1,621,836) 4,506,366
Cash and cash equivalents, beginning of period 5,906,978 3,916,658
----------- ---------
Cash and cash equivalent, end of period $ 4,285,142 $ 8,423,024
=========== =========
Continued...
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
STATEMENT OF CASH FLOWS (CONTINUED)
For the Six Months Ended June 30, 1998 and 1997
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the six months ended June 30, 1998, the Partnership incurred, but did not
pay, $182,693 of payables to payables to limited partnerships (in connection
with its investments in limited partnerships) (see Note 4.)
During the six months ended June 30, 1998, the Partnership applied $110,000 of
loans receivable to notes payable (in connection with its investment in limited
partnerships.)
- -------------------------------------------------------------------------------
During the six months ended June 30, 1997, the Partnership incurred, but did not
pay, $2,099,700 of payables to payables to limited partnerships (in connection
with its investments in limited partnerships) (see Note 4)
During the six months ended June 30, 1997, the Partnership incurred, but did not
pay $2,400 of payables to an affiliate for offering and acquisition expenses
(See Note 3.)
UNAUDITED
See Accompanying Notes to Financial Statements
7
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund, V, L.P., Series 4 (the "Partnership") was formed
under the California Revised Limited Partnership Act on July 26, 1994 and
commenced operations on July 1, 1996. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's financial statements for the period ended December 31, 1997
(audited).
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of June 30, 1998
and the results of operations and changes in cash flows for the six months ended
June 30, 1998. Accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. The results of operations for
the interim period presented are not necessarily indicative of the results for
the entire year.
The general partner of the Partnership is WNC & Associates, Inc. (the "General
Partner".) Wilfred N. Cooper, Sr., through the Cooper Revocable Trust, owns 70%
of the outstanding stock of WNC & Associates, Inc. John B. Lester, Jr. is the
original limited partner of the Partnership and owns, through the Lester Family
Trust, 30% of the outstanding stock of WNC & Associates, Inc.
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to their respective investments.
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and the general partner has
received a subordinated disposition fee 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.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------
Method of Accounting For Investment in Limited Partnerships
- -----------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
- -------------------------
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 14.5% (including sales
commissions) of the total offering proceeds. Offering expenses are reflected as
a reduction of partners' capital.
Organization Costs
- ------------------
Organization costs will be amortized on the straight-line method over 60 months.
NOTE 2 - LOANS RECEIVABLE
- -------------------------
Loans receivable represent amounts loaned by the Partnership to certain limited
partnerships in which the Partnership may invest. These loans will be applied
against the first capital contribution due if the Partnership ultimately
acquires a limited partnership interest. In the event that the Partnership does
not acquire a limited partnership interest, the loans are to be repaid with
interest at a rate which is equal to the rate charged to the holder.
9
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
As of June 30, 1998, the Partnership had acquired limited partnership interests
in eleven limited partnerships each of which owns one apartment complex. As of
June 30, 1998, construction and rehabilitation of ten or the apartment complexes
had completed construction. The Partnership, as a limited partner, is a 99%
owner and is entitled to 99% of the operating profits and losses of the limited
partnerships except for BLESSED ROCK at 49.495%.
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of June 30, 1998 and
December 31, 1997:
1997 1997
---- ----
Investment balance,
beginning of period $ 14,894,897 $ 6,700,570
Capital contributions to limited partnerships 280,643 6,194,337
Capital contributions payable to limited
partnerships 182,693 1,329,465
Distributions from limited partnerships (3,744)
Acquisition fees and costs 51 1,047,315
Equity in loss of limited
partnership (319,000) (334,756)
Amortization of capitalized
acquisition costs (28,351) (42,034)
------- -------
Investment balance,
end of period $ 15,007,189 $ 14,894,897
========== ==========
Selected financial information for the six months ended June 30, 1998 and 1997
from the combined financial statements of the limited partnerships in which the
partnership has invested is as follows:
1998 1997
---- ----
Total revenue $1,028,000 $ 99,500
--------- ----------
Interest expense 344,900 30,300
Depreciation 333,100 22,200
Operating expenses 718,500 65,300
------- ---------
Total expenses 1,396,500 117,800
--------- ---------
Net Loss $ (368,500) $ (18,300)
========== ==========
Net loss allocable to the Partnership $ (319,000) $ (18,000)
========== ==========
10
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4- RELATED PARTY TRANSACTIONS
- ----------------------------------
As of June 30, 1998 and December 31, 1997, due from affiliates consisted of an
overpayment of commissions totaling $77,875 and $65,875 and an advance to
affiliates for purchase of certain limited partnership interests totaling
$418,650 and $210,900. Such advances are non-interest bearing, due on demand and
are expected to be collected within one year.
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees up to 7.5% of the gross proceeds from the sale of
Partnership units. Through June 30, 1998 and December 31, 1997 the
Partnership incurred acquisition fees of $1,571,597. Accumulated
amortization totaled $67,788 and $44,885 as of June 30, 1998 and December
31, 1997.
An annual management fee equal to the greater of (i) $2,000 for each
apartment complex or (ii) .275% of the gross proceeds, in either case
increased or decreased based on annual changes in the Consumer Price Index.
However, the maximum fee may not exceed .2% of the invested assets (defined
as the Partnership's capital contributions plus its allocable percentage of
the permanent financing) of the local limited partnerships. The Partnership
has incurred fees of $29,675 and $28,988 for the six months ended June 30,
1998 and 1997.
A subordinated disposition fee in an amount equal to 1% of the sales price
of real estate sold. Payment of this fee is subordinated to the limited
partners receiving a return on investment (as defined in the Partnership's
Agreement of Limited Partnership) and is payable only if services are
rendered in the sales effort.
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheet consists of the following at June 30, 1998 and
December 31,1997:
1998 1997
---- ----
Advances made for acquisition costs,
organizational,offering and selling expenses $ (12,458) $ 1,088
Management fees 80,790 51,115
-------- ------
Total accrued fees and advances $ 68,332 $ 52,203
======== =======
11
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - PAYABLE TO LIMITED PARTNERSHIPS
- ----------------------------------------
Payable to limited partnerships at June 30, 1998 represents amounts which are
due at various times based on conditions specified in the respective local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited partnership achieving certain operating
benchmarks, and are generally expected to be paid within two years of the
Partnership's initial investment.
NOTE 6 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
- ---------------------------------------------------
During the six months ended June 30, 1998, the Partnership collected payments of
$175,000 for those promissory notes previously issued. Limited partners who
subscribe for ten or more units of limited partnership interest ($10,000) may
elect to pay 50% of such purchase price in cash upon subscription and the
remaining 50% by the delivery of a promissory note payable bearing interest at
the rate of 9.75% per annum, and are due no later than 13 months after
subscription. All such notes have been collected.
NOTE 7 - INCOME TAXES
- ---------------------
The Partnership will not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their respective
returns.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Subsequent to June 30, 1998, the Partnership acquired limited partnership
interests in one limited partnership totaling $552,444.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
WNC Housing Tax Credit Fund V, L.P., Series 4 (the Partnership) is a California
Limited Partnership formed under the laws of the State of California on July 26,
1994 to acquire limited partnership interests (Local Limited Partnership
Interests) in local limited partnerships ("Local Limited Partnerships") which
own multifamily apartment complexes (Apartment Complexes) that are eligible for
low-income housing federal income tax credits (the "Low Income Housing Credit").
Liquidity and Capital Resources
- -------------------------------
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $1,622,000 for the six
months ended June 30, 1998. This decrease in cash consisted of cash used by
investing activities and financing activities of approximately $1,705,000 and
$34,000, respectively, offset by cash provided by operating activities of
approximately $117,000. Cash used by investing activities consisted primarily of
capital contributions to Local Limited Partnerships, and payment of capitalized
acquisitions costs of approximately $1,709,000 offset by approximately $4,000
cash provided by distributions of limited partnerships. Cash used by financing
activities consisted of offering expenses of approximately $209,000 less notes
collected from limited partners of $175,000. Cash provided from operations
consisted primarily of interest received on cash deposits, and cash used in
operations consisted primarily of payments for operating fees and expenses. The
major components of all these activities are discussed in greater detail below.
As of June 30, 1998 and December 31, 1997 the Partnership was indebted to WNC &
Associates, Inc. in the amount of approximately $68,300 and $52,200,
respectively. The component items of such indebtedness were as follows: advances
to pay front-end fees of approximately $(12,500) and $1,100, respectively,
accrued asset management fees of approximately $80,800 and $51,100,
respectively.
As of June 30, 1998, the Partnership had received subscriptions for 22,000 units
of limited partnership interests ("Units"), consisting of cash $21,914,830.
As of September 30, 1998, June 30, 1998 and as of December 31, 1997, the
Partnership had made capital contributions to Local Limited Partnerships in the
amount of approximately $12,620,500, $12,551,700 and $10,733,100, respectively,
and had commitments for additional capital contributions of approximately
$2,009,200, $1,525,600 and $2,880,800, respectively. Further, the Partnership
had loans outstanding to Local Limited Partnerships as of September 30, as of
June 30, 1998 and as of December 31, 1997, of approximately $91,000, $191,200
and $301,200, respectively. Of the amount outstanding as of December 31, 1997,
approximately $110,000 was loaned to WYNWOOD and was applied to the
Partnership's purchase price upon acquisition of that Local Limited Partnership
Interest in May, 1998 and the amount of approximately $100,200 was repaid by
OGALLALA subsequent to June 30, 1998. The amount remaining of the December 31,
1997 balance and outstanding as of March 31, and September 31, 1997 of
approximately $91,000 was loaned to COLONIAL PINES.
Prior to sale of the Apartment Complexes, it is not expected that any of the
Local Limited Partnerships in which the Partnership have invested or will invest
will generate cash from operations sufficient to provide distributions to the
Limited Partners in any material amount. Such cash from operations, if any,
13
<PAGE>
would first be used to meet operating expenses of the Partnership, including
payment of the asset management fee to the General Partner. As a result, it is
not anticipated that the Partnerships will provide distributions to the Limited
Partners prior to the sale of the Apartment Complexes.
The Partnership's investments will not be readily marketable and may be affected
by adverse general economic conditions which, in turn, could substantially
increase the risk of operating losses for the Apartment Complexes, the Local
Limited Partnerships and The Partnerships. These problems may result from a
number of factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Units will be sufficient to fund the Partnerships' investment commitments
and proposed operations.
The Partnership will establish working capital reserves of at least 3% of
capital contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnerships excluding payment of the asset management fee as well as expenses
attendant to the preparation of tax returns and reports to the Limited Partners
and other investor servicing obligations of the Partnerships. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnerships' liquidity could also be affected by defaults
or delays in payment of the Limited Partners' promissory notes, from which a
portion of the working capital reserves is expected to be funded. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
of the Partnerships, it is anticipated that additional funds would be sought
through bank loans or other institutional financing. The General Partner may
also apply any cash distributions received from the Local Limited Partnerships
for such purposes or to replenish or increase working capital reserves.
Under the Partnership Agreements the Partnership does not have the ability to
assess the Limited Partners for additional capital contributions to provide
capital if needed by the Partnerships or Local Limited Partnerships.
Accordingly, if circumstances arise that cause the Local Limited Partnerships to
require capital in addition to that contributed by the Partnerships and any
equity contributed by the general partners of the Local Limited Partnerships,
the only sources from which such capital needs will be able to be satisfied
(other than the limited reserves available at The Partnerships level) will be
(i) third-party debt financing (which may not be available, if, as expected, the
Apartment Complexes owned by the Local Limited Partnerships are already
substantially leveraged), (ii) additional equity contributions or advances of
the general partners of the Local Limited Partnerships (in this regard, each
local general partner is required to fund operating deficits, but only for a
period of two years following construction completion), (iii) other equity
sources (which could adversely affect the Partnerships' interest in Housing Tax
Credits, cash flow and/or proceeds of sale or refinancing of the Apartment
Complexes and result in adverse tax consequences to the Limited Partners), or
(iv) the sale or disposition of the Apartment Complexes (which could have the
same adverse effects as discussed in (iii) above). There can be no assurance
that funds from any of such sources would be readily available in sufficient
amounts to fund the capital requirement of the Local Limited Partnerships in
question. If such funds are not available, the Local Limited Partnerships would
risk foreclosure on their Apartment Complexes if they were unable to
re-negotiate the terms of their first mortgages and any other debt secured by
the Apartment Complexes to the extent the capital requirements of the Local
Limited Partnerships relate to such debt.
The Partnership's capital needs and resources are expected to undergo major
changes during their first several years of operations as a result of the
completion of their offerings of Units and their acquisition of investments.
Thereafter, the Partnerships' capital needs and resources are expected to be
relatively stable over the holding periods of the investments except to the
extent of proceeds received in payment of promissory notes and disbursed to fund
the deferred obligations of the Partnership.
14
<PAGE>
Results of Operations
- ---------------------
As of December 31, 1997 and June 30, 1998 the Partnership had acquired ten and
eleven Local Limited Partnership Interests, respectively. Each of the eleven
Local Limited Partnerships receives or is expected to receive government
assistance and each of them has received a reservation for Housing Tax Credits.
As of June 30, 1998, ten of the Apartment Complexes in the Partnership had
commenced operations, eight of them for a period less than a full year.
Accordingly, the "Equity in losses from Local Limited Partnerships" for the
periods ended December 31, 1997 and June 30, 1998 reflected in the Partnership's
Statement of Operations is not indicative of the amounts to be reported in
future years.
As reflected on its Statements of Operations, The Partnership had a losses of
approximately $288,000 and $8,000 for the six months ended June 30, 1998 and
1997. The component items of revenue and expense are discussed below.
Revenue. The Partnership's revenues consisted entirely of interest earned on
promissory notes and cash deposits held in financial institutions (i) as
reserves, or (ii) pending investment in Local Limited Partnerships. Interest
revenue in future years will be a function of prevailing interest rates and the
amount of cash balances. It is anticipated that The Partnership will maintain
cash Reserves in an amount not materially in excess of the minimum amount
required by its Partnership Agreement, which is 3% of capital contributions.
Expenses. The most significant component of operating expenses was and is
expected to be the Asset Management Fee. The Asset Management Fee is equal to
the greater of (i) $2,000 for each Apartment Complex or (ii) 0.275% of gross
proceeds, and will be decreased or increased annually based on changes to the
Consumer Price Index.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of Local
Limited Partnership Interests.
Because of the amounts of the Asset Management Fee and amortization expense
primarily are determined by the gross proceeds from the offering, the number and
size of Apartment Complexes and the number of investors, until termination of
the Offering and investment of the net proceeds therefrom The Partnership cannot
predict with any accuracy what these amounts will be.
Equity in Losses from Local Limited Partnership. Series 3's equity in losses
from Local Limited Partnerships is equal to 99% of the aggregate net losses of
each Local Limited Partnership incurred after admission of The Partnership as a
limited partner thereof.
After rent-up all Local Limited Partnerships are expected to generate losses
during each year of operations; this is so because, although rental income is
expected to exceed cash operating expenses, depreciation and amortization
deductions claimed by the Local Limited Partnerships are expected to exceed net
rental income.
The Partnership accounts for its investments in Local Partnerships using the
equity method of accounting, whereby The Partnership reduces its investment
balance for its share of Local Partnerships' losses and distributions. Losses
are not recognized to the extent that the investment balance would be adjusted
below zero.
15
<PAGE>
Item 3. Quantitative and Qualitative Disclosures Above Market Risks
None.
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits None.
2. Reports on Form 8-K
No Forms 8-K Current Reports were filed in the quarter ended June 30, 1998.
16
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND V - Series 4
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr. President
- -----------------------------------------------------
John B. Lester, Jr. President
Date: November 3, 1998
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice President - Finance
Date: November 3, 1998
17
<TABLE> <S> <C>
<ARTICLE> 5
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<NAME> WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
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0
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