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, 1999
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: 0-20057
WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
California 33-0707612
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
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, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
September 30,1999 and March 31, 1999..............................3
Statements of Operations
For the three and six months ended September 30, 1999 and 1998....4
Statement of Partners' Equity
For the sixmonths ended September 30, 1999........................5
Statements of Cash Flows
For the six months ended September 30, 1999 and 1998..............6
Notes to Financial Statements .......................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................14
Item 6. Exhibits and Reports on Form 8-K...............................14
Signatures ............................................................15
2
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ --------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,076,185 $ 3,460,935
Loans receivable - Note 2 12,080 12,080
Due from affiliates - 52,835
Investment in limited partnerships - Note 3 15,990,783 15,345,027
Other assets 500 500
---------------- --------------
$ 18,079,548 $ 18,871,377
================ ==============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships $ 1,072,815 $ 1,182,870
Accrued fees and expenses due to
general partner and affiliates - Note 4 25,167 181,131
---------------- --------------
1,097,982 1,364,001
---------------- --------------
Partners' equity (deficit):
General partner (49,244) (43,986)
Limited partners ( 22,000 units issued
and outstanding) 17,030,810 17,551,362
---------------- --------------
Total partners' equity 16,981,566 17,507,376
---------------- --------------
$ 18,079,548 $ 18,871,377
================ ==============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 1999 and1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
------------------------------ --------------------------------
Three Six Three Six
Months Months Months Months
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income $ 27,325 $ 63,709 $ 74,369 $ 126,203
---------- ----------- ----------- ------------
27,325 63,709 74,369 126,203
---------- ----------- ----------- ------------
Operating expenses:
Amortization 14,891 29,783 13,921 28,095
Asset management fees - Note 4 15,125 30,250 14,838 29,719
Legal and accounting 15,920 20,238 1,560 2,810
Other 2,998 7,434 362 8,746
---------- ----------- ----------- ------------
Total operating expenses 48,934 87,705 30,681 69,370
---------- ----------- ----------- ------------
Loss from operations (21,609) (23,996) 43,688 56,833
Equity in loss from
limited partnerships (252,377) (501,814) (75,800) (241,300)
---------- ----------- ----------- ------------
Net loss $ (273,986) $ (525,810) $ (32,112) $ (184,467)
========== =========== =========== ============
Net loss allocated to:
General partner $ (2,740) $ (5,258) $ (321) $ (1,845)
========== =========== =========== ============
Limited partners $ (271,246) $ (520,552) $ (31,791) $ (182,622)
========== =========== =========== ============
Net loss per weighted limited
partner unit (22,000 units issued
and outstanding) $ (12) $ (24) $ (1) $ (8)
========== =========== =========== ============
</TABLE>
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 September 30, 1999
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Partners' equity (deficit), March 31, 1999 $ (43,986) $ 17,551,362 $ 17,507,376
Net loss for the six months ended
September 30, 1999 (5,258) (520,552) (525,810)
----------------- ----------------- ------------------
Partners' equity (deficit), September 30, 1999 $ (49,244) $ 17,030,810 $ 16,981,566
================= ================= ==================
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 1999 and 1998
(unaudited)
1999 1998
---- ----
Cash flows from operating activities:
Net loss $ (525,810) $ (184,467)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss from limited partnerships 501,814 241,300
Amortization 29,783 28,095
Asset management fees (102,691) 29,719
Change in other assets - (12,529)
Accrued fees and expense due to
general partner and affiliates 58,340 (4,635)
------------ -----------
Net cash provided by (used in)
operating activities (38,564) 97,483
------------ -----------
Cash flows from investing activities:
Investment in limited partnerships $ (1,291,055) $ (1,355,385)
Loans receivable - 100,226
Distributions from limited partnerships 3,647 -
Acquisition costs and fees (58,778) (34,813)
------------ -----------
Net cash used in investing activities (1,346,186) (1,289,972)
------------ -----------
Cash flows from financing activities:
Capital contributions from partners - 25,000
Offering expenses - 41
------------ -----------
Net cash provided by financing activities - 25,041
------------ -----------
Net decrease in cash and cash equivalents (1,384,750) (1,167,448)
------------ -----------
Cash and cash equivalents, beginning of period 3,460,935 5,318,484
------------ -----------
Cash and cash equivalents, end of period $ 2,076,185 $ 4,151,036
============ ===========
See accompanying notes to financial statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the WNC Housing Tax Credit Fund II, L.P. (the "Partnership") Annual Report on
Form 10-K for the year ended March 31, 1999. 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.
In the opinion of the Partnership, the unaudited financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of September 30, 1999 and the results
of operations and changes in cash flows for the six months then ended.
Organization
WNC Housing Tax Credit Fund V, L.P., Series 4, a California Limited Partnership
(the "Partnership"), was formed on July 26, 1995 under the laws of the state of
California, and commenced operations on July 1, 1996. The Partnership was formed
to invest primarily in other limited partnerships and limited liability
companies (the "Local Limited Partnerships") 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 & Associates, Inc. ("WNC") (the "General Partner"), a
California limited partnership. Wilfred N. Cooper, Sr., through the Cooper
Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B. Lester was
the original limited partner of the Partnership and owns, through the Lester
Family Trust, 28.6% of the outstanding stock of WNC.
The partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on July 11, 1997 at which
time 22,000 Units representing subscriptions in the amount of $21,914,830, net
of discount of $79,550 for volume purchases and $5,620 for dealer discounts, had
been accepted. The General Partner has a 1% interest in operating profits and
losses, taxable income and losses and in cash available for distribution from
the Partnership and tax credits. 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.
7
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
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 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
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years.
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 $1,036,840 at the end of all
periods presented.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with remaining
maturities of three months or less when purchased to be cash equivalents.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
NOTE 2 - LOANS RECEIVABLE
Loans receivable represent amounts loaned by the Partnership to certain Local
Limited Partnerships in which the Partnership may invest. The loans are
generally applied against the first capital contribution due if the Partnership
ultimately invests in such entities. In the event that the Partnership does not
invest in such, the loans are to be repaid with interest at a rate which is
equal to the rate charged to the holder. Loans receivable with a balance of
$12,080 at September 30, and March 31, 1999 were collectible form one Local
Limited Partnership.
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of September 30, 1999 and March 31, 1999, the Partnership has acquired
limited partnership interests in 14 and 13 Local Limited Partnerships,
respectively, each of which owns one Housing Complex consisting of an aggregate
of 788 apartment units. As of September 30, 1999 and March 31, 1999,
construction or rehabilitation of 1 and 3, respectively of the Housing Complexes
was still in process. The respective Local 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, except for one of the investments in which it is entitled to 49.5%
of such amounts.
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.
9
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS, CONTINUED
The following is a summary of the equity method activity of the investment in
Local Limited Partnerships for the six months ended September 30, 1999 and the
three months ended March 31, 1999:
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ ---------------
<S> <C> <C>
Investment balance, beginning of period $ 15,345,027 $ 15,573,510
Capital contributions to limited partnerships 1,181,000 (19,187)
Acquisition fees and costs - 58,777
Equity in loss from limited partnerships (501,814) (249,437)
Distributions from limited partnerships (3,647) (3,744)
Amortization of acquisition costs (29,783)
(14,892)
------------------ --------------
Investment per balance sheet, end of period $ 15,990,783 $ 15,345,027
================== ==============
Selected financial information for the six months ended September 30 from the
combined financial statements of the limited partnerships in which the
partnership has invested is as follows:
1999 1998
---- ----
Total revenue $ 1,214,600 $ 1,201,400
------------------ --------------
Interest expense 438,400 258,400
Depreciation 467,600 439,500
Operating expenses 843,600 763,800
------------------ --------------
Total Expenses 1,749,600 1,461,700
------------------ --------------
Net loss $ (535,000) $ (260,300)
================== ==============
Net loss allocable to the Partnership $ (529,650) $ (257,697)
================== ==============
Net loss recognized by the Partnership $ (501,814) $ (241,300)
================== ==============
</TABLE>
10
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
(unaudited)
NOTE 4- RELATED PARTY TRANSACTIONS
(a) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.5% of invested assets (the sum of the Partnership's Investment
in Local Limited Partnership Interests and the Partnership's allocable
share of the amount of the mortgage loans on and other debts related to,
the Housing Complexes owned by such Local Limited Partnerships). Fees of
$30,250 and $29,719 were incurred during the six months ended September 30,
1999 and 1998, respectively. The Partnership made payment of $132,941 to
the General Partner or its affiliates for those fees during the six months
ended September 30, 1999 and 1998.
(b) 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, 2006, and
(ii) 6% for the balance of the Partnerships term. No disposition fees have
been paid.
(c) Interest in Partnership. The General Partners receive 1% of the
Partnership's allocated Low Income Housing Credits, which approximated
$10,000 for the General Partners for the year ended December 31, 1998. The
General Partners are also entitled to receive 1% of cash distributions.
There were no distributions of cash to the General Partners during the
three months ended September 30, 1999 or 1998.
Accrued fees and advance due to affiliates of the General Partner included in
the balance sheet consist of the following at September 30, 1998 and March 31,
1999:
September 30, 1999 March 31, 1999
------------------ --------------
Asset management fee $ 15,125 $ 117,816
Acquisition fee payable 58,778
Reimbursement due on expenses
paid by affiliate 10,042 4,537
------------------ --------------
Total related party payables $ 25,167 $ 181,131
=================== ==============
NOTE 5 - INCOME TAXES
No provision for income taxes has been made as the liability for income taxes is
an obligation of the partners of the Partnership.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Partnership's assets at September 30, 1999 consisted primarily of $2,076,000
in cash and aggregate investments in the fourteen Local Limited Partnerships of
$15,991,000. Liabilities at September 30, 1999 consisted primarily of $1,073,000
of payables to limited partnerships.
Results of Operations
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998. The Partnership's net loss for the three months ended September 30,
1999 was $(274,000), reflecting an increase of $242,000 from the net loss
experienced for the three months ended September 30, 1998. The increase in net
loss is primarily due to equity in losses from limited partnerships which
increased by $177,000 to $(252,000) for the three months ended September 30,
1999 from $(76,000) for the three months ended September 30, 1998. This increase
was a result of the Local Limited Partnerships completing construction and going
into operation. None of the investments in such Local Limited Partnerships had
reached $0 at September 30, 1999. Since the Partnership's liability with respect
to its investments is limited, losses in excess of investment are not
recognized. Along with the increase in equity in losses from limited
partnerships there was a increase in loss from operations of $65,000 for the
three months ended September 30, 1999 to $(22,000), from $44,000 for the three
months ended September 30, 1998, due to a decrease of interest income of $47,000
and an increase in operating expenses of $18,000.
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998. The Partnership's net loss for the six months ended September 30, 1999 was
$(526,000), reflecting an increase of $342,000 from the net loss experienced for
the six months ended September 30, 1998. . The increase in net loss is primarily
due to equity in losses from limited partnerships which increased by $261,000 to
$(502,000) for the six months ended September 30, 1999 from $(241,000) for the
three months ended September 30, 1998. This increase was a result of the Local
Limited Partnerships completing construction and starting operations. None of
the investments in such Local Limited Partnerships had reached $0 at September
30, 1999. Since the Partnership's liability with respect to its investments is
limited, losses in excess of investment are not recognized. Along with the
increase in equity in losses from limited partnerships there was a increase in
loss from operations of $81,000 for the six months ended September 30, 1999 to
$(24,000), from 57,000 for the six months ended September 30, 1998, due to a
decrease of interest income of $62,000 and an increase in operating expenses of
$19,000.
Cash Flows
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998. Net cash used during the six months ended September 30, 1999 was
$(1,385,000) compared to a net use of cash for the six months ended September
30, 1998 of $(1,167,000). The change was due primarily to an increase in cash
used in operating activities of $136,000. The increase is the result of a
decrease in interest income of $62,000, an increase in asset management fees
paid of $133,000 and an increase in legal and accounting expenses of $17,000,
offset by an increase in accrued fees and expenses of $63,000 and a decrease in
other assets of $13,000. Cash used in investing activities increased by $57,000,
as a result of a decrease in loans receivable of $100,000 and an increase in
acquisition costs of $25,000, offset by a decrease in investments in limited
partnerships of $64,000, and an increase in distributions of $4,000. The cash
provided by financing activities decreased by $25,000, as the result of a
decrease in capital contributions from investors of $25,000.
During the six months ended September 30, 1999 and 1998, accrued payables, which
consist primarily of related party management fees due to the General Partner,
decreased by $156,000. The General Partner does not anticipate that these
accrued fees will be paid until such time as capital reserves are in excess of
future foreseeable working capital requirements of the partnership.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 1999, 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 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. Except for one telephone system, the non-IT
systems of WNC are year 2000 compliant. The one telephone system will require
the replacement of one computer and one software application, both of which will
be completed on or before December 15, 1999.
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. There can be no assurance that this
compliance information is correct. There also can be no assurance that the
systems of other, less-important service providers and outside vendors will be
year 2000 compliant.
Costs to Address Year 2000 Issues
The cost to address year 2000 issues for WNC has been less than $20,000. The
cost to replace the telephone system noted above will be less than $5,000. The
cost to deal with potential year 2000 issues of other outside vendors cannot be
estimated at this time.
Risk of Year 2000 Issues
The most reasonable and likely result from non-year 2000 compliance of systems
of the service providers noted above will be the disruption of normal business
operations for WNC. This disruption would, 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
WNC is in the process of obtaining year 2000 certifications from each Local
General Partner of each Local Limited Partnership. Those certifications will
represent to the Partnership that the IT and non-IT systems critical to the
operation of the Housing Complexes and investor reporting to the Partnership are
year 2000 compliant. These certifications will also represent to the Partnership
that the IT and non-IT systems of property management companies, independent
accountants, electrical power providers, financial institutions and
telecommunications carriers used by the Local Limited Partnership are year 2000
compliant.
There can be no assurance that the representations in the certifications will be
correct. There also can be no assurance that the systems of other,
less-important service providers and outside vendors, upon which the Local
Limited Partnerships rely, will be year 2000 compliant.
13
<PAGE>
Costs to Address Year 2000 Issues
There will be no cost to the Partnership as a result of assessing year 2000
issues for the Local Limited Partnerships. The cost to deal with potential year
2000 issues of the Local Limited Partnerships cannot be estimated at this time.
Risk of Year 2000 Issues
There may be Local General Partners who indicate that they or their property
management company are not year 2000 compliant and do not have plans to become
year 2000 compliant before the end of 1999. There may be other Local General
Partners who are unwilling to respond to the certification request. The most
likely result of either non-compliance or failure to respond will be the removal
and replacement of the property management company and/or the Local General
Partner with year 2000 compliant operators.
Despite the efforts to obtain certifications, 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 3. Quantitative and Qualitative Disclosures About Market Risks
NONE
Part II. Other Information
Item 1. Legal Proceedings
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
14
<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, L.P. Series 4
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., President
WNC & Associates, Inc.
Date: November 19, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson, Vice-President - Chief Financial Officer
WNC & Associates, Inc.
Date: November 19, 1999
15
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