FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 X No ____
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 1998
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1998 and December 31, 1997.............3
Statement of Operations
For the three months and nine months ended
September 30, 1998 and 1997....................................4
Statement of Partners' Equity
For the nine months ended September 30, 1998 and 1997..........5
Statement of Cash Flows
For the nine months ended September 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>
FINANCIAL STATEMENTS
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1998 and December 31, 1997
1998 1997
----- ----
ASSETS
Cash and cash equivalents $ 4,151,036 $ 5,906,978
Loans receivable 91,000 301,226
Due from affiliates 267,389 276,775
Investment in limited partnerships 15,504,704 14,894,897
Interest receivable 46,711 76,622
Other assets 500 500
------------- -------------
$ 20,061,340 $ 21,456,998
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships $ 1,590,213 $ 2,880,839
Accrued fees and expenses due to
general partner and affiliates 93,507 52,203
------------- -----------
1,683,720 2,933,042
------------- -----------
Partners' equity (deficit):
General partner (35,282) (32,069)
Limited partners (25,000 units
authorized, 22,000 units issued
and outstanding) 18,412,902 18,556,025
------------- -------------
Total partners' equity 18,377,620 18,523,956
------------- -------------
$ 20,061,340 $ 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 Nine Months Ended September 30, 1998 and 1997
Three Nine Three Nine
Months Months Months Months
-------- -------- -------- --------
Interest income $ 74,369 $ 176,146 $ 90,326 $ 144,839
------ ------- ------- -------
Operating expenses:
Amortization 13,921 42,272 20,155 27,861
Asset management fees 14,838 44,513 14,494 43,482
Legal and accounting 1,560 5,083
Other 362 9,303 (843) 7,091
------ ------- ------- -------
Total operating expenses 30,681 101,171 33,806 78,434
------ ------- ------- -------
Income from operations 43,688 74,975 56,520 66,405
Equity in loss from
limited partnerships (75,800) (394,800) (101,500) (119,500)
------ ------- ------- -------
Net loss $ (32,112) $ (319,825) $ (44,980) $ (53,095)
======= ======= ======= =======
Net loss allocated to:
General partner $ (321) $ (3,198) $ (450) $ (531)
======= ======= ======= =======
Limited partners $ (31,791) $ (316,627) $ (44,530) $ (52,564)
======= ======= ======= =======
Net loss per weighted limited
partner units (22,000
and 16,671, respectively) $ (1.45) $ (14.39) $ (2.58) $ (3.15)
======= ======= ======= =======
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 Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
For the Nine Months Ended September 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)
Payment received on investor notes 175,000 175,000
Net income (3,198) (316,627) (319,825)
--------------- -------------- ---------------
Equity (deficit), September 30, 1998 $ (35,282) $ 18,412,902 $ 18,377,620
=============== =============== ===============
For the Nine Months Ended September 30, 1997
- --------------------------------------------
General Limited
Partner Partner Total
----------------- ---------------- ----------------
Equity (deficit), December 31, 1996 $ (11,401) $ $
7,062,107 7,050,706
Capital contributions 13,528,025 13,528,025
Offering expenses
(17,536) (1,736,072) (1,753,608)
Capital issued for notes receivable
(6,000) (6,000)
Net income (531) (52,564) (53,095)
--------------- -------------- ---------------
Equity (deficit), September 30, 1997 $ (29,468) $ 18,795,496 $ 18,766,028
=============== =============== ===============
</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 Nine Months Ended September 30, 1998 and 1997
1998 1997
---- ----
Cash flows used by operating activities:
Net loss $ (319,825) $ (53,095)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of limited partnerships 394,800 119,500
Amortization 42,272 27,861
Asset management fee 44,513 13,482
Change in other assets 16,786 (75,122)
Accrued fees and expense due to
general partner and affiliates (3,209) (26,271)
---------- ----------
Net cash provided by operating activities 175,337 6,355
---------- ----------
Cash flows used by investing activities:
Investment in limited partnerships (2,173,889) (8,542,457)
Loans receivable 100,226
Acquisition fees and costs (34,849) (920,056)
Distribution from limited partnerships 3,744 -
---------- ----------
Net cash used by investing activities (2,104,768) (9,462,513)
---------- ----------
Cash flows provide by financing activities:
Capital contributions 14,383,275
Investor note payments 175,000
Offering expenses (1,511) (2,041,218)
---------- ----------
Net cash provided by financing activities 173,489 12,342,057
---------- ----------
Net increase in cash and cash equivalents (1,755,942) 2,885,899
Cash and cash equivalents, beginning of period 5,906,978 3,916,658
---------- ----------
Cash and cash equivalent, end of period $ 4,151,036 $ 6,802,557
========== =========
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 Period Nine months Ended September 30, 1998 and 1997
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the nine months ended September 30,1998, the Partnership's payables to
limited partnerships; (in connection with its investments in limited
partnerships) (see Note 3) had non-cash transactions as follows:
Increases due to acquisition of limited partnership interests $ 1,086,556
Application of loans receivable to acquisitions (110,000)
Increase in due to affiliate (22,511)
Decreases due to various price adjuster provisions in the
respective limited partnership agreements (70,782)
-------
Net non-cash adjustments to the Partnership's
payable to limited partnerships $ 883,263
========
During the nine months ended September 30,1997, the Partnership's payables to
limited partnerships; (in connection with its investments in limited
partnerships) had non-cash transactions as follows:
Increases due to acquisition of limited partnership interests $ 8,003,378
Application of loans receivable to acquisitions (126,381)
Decreases due to various price adjuster provisions in the
respective limited partnership agreements (67,548)
-------
Net non-cash adjustments to the Partnership's
payable to limited partnerships $ 7,809,449
===========
During the nine months end September 30, 1997, the Partnership incurred, but did
not pay, $61,119 of payables to affiliates for acquisitions fees (see Note 4).
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, 1997. 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 September 30,
1998 and the results of operations and changes in cash flows for the nine months
ended September 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.
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)
- --------------------------------------------------------------
Allocations Under the Terms of the Partnership Agreement (Continued)
- -------------------------------------------------------------------------
will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner
Method of Accounting For Investment in Limited Partnerships
- -----------------------------------------------------------
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
- -------------------------
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. The General Partner is obligated to
pay all offering and organization costs in excess of 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 September 30, 1998 and 1997, the Partnership had acquired limited
partnership interests in twelve and eleven limited partnerships, respectively,
each of which owns one apartment complex. As of September 30, 1998, construction
and rehabilitation of eleven of 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 eleven of the limited
partnerships and is a 49.495% owner and is entitled to 49.495% of the operating
profits and losses of Blessed Rock.
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of September 30, 1998 and
December 31, 1997:
1998 1997
---- ----
Investment balance,
beginning of period $ 14,894,897 $ 6,700,570
Capital contributions to limited partnerships 770,424 6,194,337
Capital contributions payable to limited
partnerships 316,132 1,329,465
Decrease in capital contributions to
limited partnerships due to price
adjustment provisions (70,782)
Acquisition fees and costs 34,849 1,047,315
Distributions from limited partnerships (3,744)
Equity in loss of limited partnership (394,800) (334,756)
Amortization of capitalized
acquisition costs (42,272) (42,034)
---------- ----------
Investment balance,
end of period $ 15,504,704 $ 14,894,897
========== ==========
Selected financial information for the nine months ended September 30, 1998 and
for the period July 1, 1997 (date operations commenced) to September 30, 1997
from the combined financial statements of the limited partnerships in which the
partnership has invested is as follows:
1998 1997
---- ----
Total revenue $ 1,704,900 $ 315,000
----------- ---------
Interest expense 457,500 182,000
Depreciation 590,300 42,000
Operating expenses 1,101,500 212,000
--------- -------
Total expenses 2,149,300 436,000
--------- -------
Net Loss $ (444,400) $ (121,000)
========= =========
Net loss allocable
to the Partnership $ (394,800) $ (119,500)
========= =========
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
- -----------------------------------
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. No acquisition were incurred for the nine months ended
September 30, 1998.
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 $44,513 and $43,482 for the nine months ended
September 30, 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 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 and (due from) affiliates of the General
Partner included in the accompanying balance sheet consists of the following at
September 30, 1998 and December 31, 1997:
1998 1997
---- ----
Advances made for acquisition costs,
organizational, offering and selling expenses $ (2,121) $ 1,088
Management fees 95,628 51,115
-------- -------
Total accrued fees and advances $ 93,507 $ 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 September 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 nine months ended September 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 suscription. 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.
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 $1,756,000 for the nine
months ended September 30, 1998. This decrease in cash consisted of cash used by
investing activities of approximately $2,105,000, offset by cash provided by
financing activities and operating activities of approximately $174,000 and
$175,000, respectively. Cash used by investing activities consisted primarily of
capital contributions to Local Limited Partnerships, and payment of capitalized
acquisitions costs of approximately $2,174,000 and $35,000, respectively, offset
by cash provided by repayment of a loan receivable and distributions from
limited partnerships of approximately $100,000 and $4,000, respectively. Cash
provided by financing activities consisted of notes collected from limited
partners of $175,000 less offering expenses of approximately $1,000. 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 September 30, 1998 and December 31, 1997 the Partnership was indebted to
WNC & Associates, Inc. in the amount of approximately $93,500 and $52,200,
respectively. The component items of such indebtedness were as follows: advances
to pay front-end fees of approximately $(2,100) and $1,100, respectively,
accrued asset management fees of approximately $95,600 and $51,100,
respectively.
As of September 30, 1998, the Partnership had received subscriptions for 22,000
units of limited partnership interests ("Units"), consisting of cash
$21,914,830.
As of October 31, 1998, September 30, 1998 and as of December 31, 1997, the
Partnership had made capital contributions to Local Limited Partnerships in the
amount of approximately $14,470,500, $14,470,500 and $10,733,100, respectively,
and had commitments for additional capital contributions of approximately
$1,590,200, $1,590,200 and $2,880,800, respectively. Further, the Partnership
had loans outstanding to Local Limited Partnerships as of October 31,1998, as of
September 30, 1998 and as of December 31, 1997, of approximately $91,000,
$91,000 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. The amount remaining of the December 31, 1997 balance and outstanding
as of October 31, and September 31, 1998 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 September 30, 1998 the Partnership had acquired ten
and twelve Local Limited Partnership Interests, respectively. Each of the twelve
Local Limited Partnerships receives or is expected to receive government
assistance and each of them has received a reservation for Housing Tax Credits.
As of September 30, 1998, ten of the Apartment Complexes in the Partnership had
commenced operations, three 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 September 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 $320,000 and $53,000 for the nine months ended September 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. None.
No reports were filed on Form 8-K for the quarter ended September 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.
- -----------------------------------------------------
John B. Lester, Jr. President
Date: November 16, 1998
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice President - Finance
Date: November 16, 1998
17
<TABLE> <S> <C>
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<NAME> WNC HOUSING TAX CREDIT FUND V,L.P., SERIES 4
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0
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