-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FO5A9mvTbhQVHD6wG6b9n+ciLjCdqpdS9/at68msLRpSQVymC8wAtxBVkDJrC0mR YMoKQnUaH3QOWzMkyemsUQ== 0001084067-04-000053.txt : 20040716 0001084067-04-000053.hdr.sgml : 20040716 20040715194740 ACCESSION NUMBER: 0001084067-04-000053 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040716 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WNC HOUSING TAX CREDIT FUND IV L P SERIES 1 CENTRAL INDEX KEY: 0000913496 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 330563307 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26048 FILM NUMBER: 04916780 BUSINESS ADDRESS: STREET 1: 17782 SKY PARK CIRCLE CITY: IRVINE STATE: CA ZIP: 92614-6404 BUSINESS PHONE: 7146625565 MAIL ADDRESS: STREET 1: 17782 SKY PARK CIRCLE CITY: IRVINE STATE: CA ZIP: 92614-6404 10-K 1 n4-1k04.txt ANNUAL 10-K FILING NAT 4-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2004 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 0-26048 WNC HOUSING TAX CREDIT FUND IV, L.P., Series 1 (Exact name of registrant as specified in its charter) California 33-0563307 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17782 Sky Park Circle 92614-6404 Irvine, CA (Zip Code) (Address of principal executive offices) (714) 662-5565 (Telephone number) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to section 12(g) of the Act: UNITS OF LIMITED PARTNERSHIP INTEREST (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| Indicate by check mark whether the registrant is an accelerated filer. Yes No X ----------- ---------------- State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. INAPPLICABLE DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). NONE 2 PART I. Item 1. Business Organization WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") is a California Limited Partnership formed under the laws of the State of California on May 4, 1993. The Partnership was formed to acquire limited partnership interests or membership interests in limited partnerships or limited liability companies ("Local Limited Partnerships") which own multi-family housing complexes that are eligible for Federal low-income housing and, in certain cases, California low-income housing tax credits ("Low Income Housing Credits"). The general partner of the Partnership is WNC Tax Credit Partners IV, L.P. ("TCP IV"). The general partner of TCP IV is WNC & Associates, Inc. ("Associates"). The chairman and president of Associates owns substantially all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates as neither TCP IV nor the Partnership have employees of their own. Pursuant to a registration statement filed with the Securities and Exchange Commission, on October 20, 1993, the Partnership commenced a public offering of 10,000 Units of Limited Partnership Interest ("Units"), at a price of $1,000 per Unit. The Partnership's offering terminated on July 19, 1994. A total of 10,000 Limited Partnership Interests representing $10,000,000 had been sold. Holders of Limited Partnership Interests are referred to herein as "Limited Partners." The Partnership shall continue to be in full force and effect until December 31, 2050 unless terminated prior to that date pursuant to the partnership agreement or law. Description of Business The Partnership's principal business objective is to provide its Limited Partners with Low Income Housing Credits. The Partnership's principal business therefore consists of investing as a limited partner or non-managing member in Local Limited Partnerships each of which owns and operates a multi-family housing complex (the "Housing Complexes") which qualify for the Low Income Housing Credits. In general, under Section 42 of the Internal Revenue Code, an owner of low-income housing can receive the Low Income Housing Credit to be used to reduce Federal taxes otherwise due in each year of a ten-year period. In general, under Section 17058 of the California Revenue and Taxation Code, an owner of low-income housing can receive the California Low Income Housing Credit to be used against California taxes otherwise due in each year of a four-year period. Each Housing Complex is subject to a fifteen-year compliance period (the "Compliance Period"), and under state law may have to be maintained as low income housing for 30 or more years. In general, in order to avoid recapture of Low Income Housing Credits, the Partnership does not expect that it will dispose of its interests in Local Limited Partnerships ("Local Limited Partnership Interests") or approve the sale by any Local Limited Partnership of its Housing Complex prior to the end of the applicable Compliance Period. Because of (i) the nature of the Housing Complexes, (ii) the difficulty of predicting the resale market for low-income housing 15 or more years in the future, and (iii) the ability of government lenders to disapprove of transfer, it is not possible at this time to predict whether the liquidation of the Partnership's assets and the disposition of the proceeds, if any, in accordance with the Partnership's Agreement of Limited Partnership, dated May 4, 1993, (the "Partnership Agreement"), will be able to be accomplished promptly at the end of the 15-year period. If a Local Limited Partnership is unable to sell its Housing Complex, it is anticipated that the local general partner ("Local General Partner") will either continue to operate such Housing Complex or take such other actions as the Local General Partner believes to be in the best interest of the Local Limited Partnership. Notwithstanding the preceding, circumstances beyond the control of the General Partner or the Local General Partners may occur during the Compliance Period, which would require the Partnership to approve the disposition of a Housing Complex prior to the end thereof, possibly resulting in recapture of Low Income Housing Credits. 3 As of March 31, 2004, the Partnership had invested in twenty-one Local Limited Partnerships. Each of these Local Limited Partnerships owns a Housing Complex that is eligible for the federal Low Income Housing Credit. Certain Local Limited Partnerships may also benefit from government programs promoting low- or moderate-income housing. Certain Risks and Uncertainties An investment in the Partnership and the Partnership's investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership's investments. Some of those risks include the following: The Low Income Housing Credit rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing credits and the fractional recapture of Low Income Housing Credits already taken. An individual Limited Partner's ability to use tax credits is limited. In most cases, the annual amount of Low Income Housing Credits that an individual Limited Partner can use is limited to the tax liability due on the person's last $25,000 of taxable income. Low Income Housing Credits may be the only material benefit from the Partnership because Limited Partners may not get back their capital. Any transactions between the Partnership and Associates and its affiliates will entail conflicts of interest. The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership's ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years, the loss of any remaining future Low Income Housing Credits, and a fractional recapture of prior Low Income Housing Credits, would occur. At any time, a foreclosure would result in a loss of the Partnership's investment in the Housing Complex. The Partnership is a limited partner or non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership's investments in Local Limited Partnerships, nor the Local Limited Partnerships' investments in Housing Complexes, are 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 interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Credits and recapture of Low Income Housing Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others. The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Credits and tax losses allocable to the Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes. There are limits on the transferability of units, including a prohibition on the transfer of more than 50% of the Units in a 12-month period. No trading market for the Units exists or is expected to develop. Limited Partners may be unable to sell their Units except at a discount and should consider their Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners. Substantially all of the Low Income Housing Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated a significant amount of Low Income Housing Credits from the Local Limited Partnerships in the future. Until the Local Limited Partnerships have completed the 15 year Low Income Housing Credit compliance period risks exist for potential recapture of prior low Income Housing Credits. 4 Anticipated future and existing cash resources are not sufficient to meet existing contractual cash obligations. Substantially all of the future contractual cash obligations of the Partnership are payable to the General Partner. Though a substantial portion of the amounts contractually obligated to the General Partner are contractually currently payable, the Partnership anticipates that the General Partner will not require the payment of these contractual obligations until capital reserves are in excess of the future foreseeable working capital requirements of the Partnership. However, the Partnership is contractually required to pay these obligations to the General Partner on a current basis. The Partnership would be adversely affected should the General Partner demand current payment of these contractual obligations and or suspend services for this or any other reason. Exit Strategy The IRS compliance period for low-income housing tax credit properties is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Credits. The initial programs are completing their compliance periods. With that in mind, the Partnership is continuing its review of the Partnership's holdings, with special emphasis on the more mature properties including those that have satisfied the IRS compliance requirements. The review considers many factors including extended use requirements on the property (such as those due to mortgage restrictions or state compliance agreements), the condition of the property, and the tax consequences to the Limited Partners from the sale of the property. Upon identifying those properties with the highest potential for a successful sale, refinancing or syndication, the Partnership expects to proceed with efforts to liquidate those properties. The objective is to maximize the Limited Partners' return wherever possible and, ultimately, to wind down the Partnership when it no longer provides tax benefits to Limited Partners. However, Local Limited Partnership interests may be disposed at any time by Associates in its discretion. To date no properties in the Partnership have been selected for disposition. Item 2. Properties Through its investments in Local Limited Partnerships, the Partnership holds indirect ownership interests in the Housing Complexes. The following table reflects the status of the twenty-one Housing Complexes as the dates and for the periods indicated: 5
---------------------------- ---------------------------------------------- As of March 31, 2004 As of December 31, 2003 ---------------------------- ---------------------------------------------- Partnership's Amount of Estimated Mortgage Total Investment Investment Aggregate Low Balances of Local Limited General Partner in Local Limited Paid to Number Income Housing Local Limited Partnership Name Location Name Partnership Date of Units Occupancy Credits (1) Partnerships - ------------------------------------------------------------------------------------------------------------------------------------ Alpine Alpine, 1600 Capital Manor, L.P. Texas Company, Inc. $ 195,000 $ 195,000 36 86% $ 394,000 $ 900,000 Baycity Village Baytown, Green Companies Apartments, Texas Development Limited Group, Inc. 301,000 301,000 62 97% 629,000 1,428,000 Partnership Beckwood Manor Marianna, Phillips Seven Limited Arkansas Development Partnership Corporation 307,000 307,000 42 100% 636,000 1,372,000 Briscoe Manor Galena, McKnight & Limited Maryland Decoster, Inc. Partnership 308,000 308,000 31 100% 648,000 1,470,000 Evergreen Maynard, Phillips Four Limited Arkansas Development Partnership Corporation 195,000 195,000 24 88% 402,000 859,000 Fawn Haven Manchester, Georg E. Maharg Limited Ohio and Maharg Partnership Realty, Inc. 167,000 167,000 28 100% 376,000 843,000 Fort Stockton Ft.Stockton, 1600 Capital Manor, L.P. Texas Company,Inc. 224,000 224,000 36 92% 453,000 1,037,000 Hidden Valley Gallup, New Alan Deke Limited Mexico Noftsker Partnership 412,000 412,000 40 97% 801,000 1,466,000 HOI Limited Lenoir, Housing Partnership North Opportunities, Of Lenoir Carolina Inc. 198,000 198,000 34 100% 400,000 512,000 Indian Creek Bucyrus, Georg E. Limited Ohio Maharg Partnership 306,000 306,000 48 96% 637,000 1,449,000 Laurel Creek San Luis San Luis Obispo Apartments Obispo, Non-Profit California Housing Corp. 1,030,000 1,030,000 24 100% 2,103,000 576,000
6
---------------------------- ---------------------------------------------- As of March 31, 2004 As of December 31, 2003 ---------------------------- ---------------------------------------------- Partnership's Amount of Estimated Mortgage Total Investment Investment Aggregate Low Balances of Local Limited General Partner in Local Limited Paid to Number Income Housing Local Limited Partnership Name Location Name Partnership Date of Units Occupancy Credits (1) Partnerships - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Madisonville Jean Manor Senior Texas Johnson Citizens Complex, Ltd. 174,000 174,000 32 100% 375,000 892,000 Mt. Graham Safford, Rural Housing, Housing, Ltd. Arizona Inc. 410,000 410,000 40 88% 788,000 1,387,000 Northside Plaza Angleton, Jean Apartments, Ltd. Texas Johnson 282,000 282,000 48 94% 607,000 1,341,000 Pampa Manor, Pampa, 1600 Capital L.P. Texas Company,Inc. 180,000 180,000 32 69% 363,000 834,000 Regency Monrovia, Community Court California Housing Partners Assistance Program,Inc., a California Nonprofit Corporation 1,692,000 1,690,000 115 100% 3,293,000 4,045,000 Sandpiper Aulander, I. Norwood Square, a North Stone Limited Carolina Partnership 219,000 219,000 24 96% 433,000 934,000 Seneca Falls Seneca David R. Bacon East Falls, New and Frank Apartments York Salvatore Company II, L.P. 270,000 270,000 32 94% 360,000 882,000 Vernon Vernon, 1600 Capital Manor, L.P. Texas Company, Inc. 177,000 177,000 28 100% 325,000 743,000 Waterford Calhoun Thomas E. Place, a Falls, Connelly, Jr., Limited South TEC Rental Partnership Carolina Properties Inc., Warren H.Abernathy, II and Solid South, Inc. 272,000 272,000 32 100% 549,000 1,163,000
7
---------------------------- ---------------------------------------------- As of March 31, 2004 As of December 31, 2003 ---------------------------- ---------------------------------------------- Partnership's Amount of Estimated Mortgage Total Investment Investment Aggregate Low Balances of Local Limited General Partner in Local Limited Paid to Number Income Housing Local Limited Partnership Name Location Name Partnership Date of Units Occupancy Credits (1) Partnerships - ------------------------------------------------------------------------------------------------------------------------------------ Yantis Yantis, Charles Housing, Ltd. Texas Cannon Jr. 145,000 145,000 24 100% 287,000 619,000 ------------ ----------- --- ---- ------------ ------------ $ 7,464,000 $ 7,462,000 812 95% $ 14,859,000 $ 24,752,000 ============ ============ === ==== ============ ============
(1) Represents aggregate anticipated Low Income Housing Credits to be received over the 10 year credit period if Housing Complexes are retained and rented in compliance with credit rules for the 15-year compliance period. Approximately 87% of the anticipated Low Income Housing Credits have been received from the Local Limited Partnerships and are no longer available to the Partnerships Limited Partners. 8
--------------------------------------------------------------------------- For the year ended December 31, 2003 --------------------------------------------------------------------------- Low Income Housing Credits Allocated to Partnership Name Rental Income Net Income (Loss) Partnership - -------------------------------------------------------------------------------------------------------------------- Alpine Manor, L.P. $ 122,000 $(15,000) 99% Baycity Village Apartments, Limited Partnership 321,000 (31,000) 99% Beckwood Manor Seven Limited Partnership 153,000 (64,000) 95% Briscoe Manor Limited Partnership 187,000 (48,000) 99% Evergreen Four Limited Partnership 86,000 (44,000) 95% Fawn Haven Limited Partnership 87,000 (20,000) 99% Fort Stockton Manor, L.P. 136,000 (15,000) 99% Hidden Valley Limited Partnership 188,000 (23,000) 99% HOI Limited Partnership Of Lenoir 150,000 (35,000) 99% Indian Creek Limited Partnership 148,000 (39,000) 99% Laurel Creek Apartments 206,000 19,000 99% Madisonville Manor Senior Citizens Complex, Ltd. 122,000 (5,000) 99% Mt. Graham Housing, Ltd. 158,000 (60,000) 99% Northside Plaza Apartments, Ltd. 172,000 (15,000) 99% Pampa Manor, L.P. 93,000 (21,000) 99% Regency Court Partners 726,000 (227,000) 99% Sandpiper Square, a Limited Partnership 105,000 (15,000) 99% Seneca Falls East Apartments Company II, L.P. 152,000 (32,000) 99.98% Vernon Manor, L.P. 107,000 (2,000) 99% Waterford Place, a Limited Partnership 132,000 (39,000) 99% Yantis Housing, Ltd. 82,000 (17,000) 99% ---------- ---------- $3,633,000 $(748,000) ========== ==========
9 Item 3. Legal Proceedings NONE. Item 4. Submission of Matters to a Vote of Security Holders NONE. PART II. Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 5a. (a) The Units are not traded on a public exchange but were sold through a public offering. It is not anticipated that any public market will develop for the purchase and sale of any Unit and none exists. Units can be assigned only if certain requirements in the Partnership Agreement are satisfied. (b) At March 31, 2004, there were 707 Limited Partners and 9 assignees of Units who were not admitted as Limited Partners. (c) The Partnership was not designed to provide cash distributions to Limited Partners in circumstances other than refinancing or disposition of its investments in Local Limited Partnerships. Any such distributions would be made in accordance with the terms of the Partnership Agreement. (d) No securities are authorized for issuance by the Partnership under equity compensation plans. (e) No unregistered securities were sold by the Partnership during the year ended March 31, 2004. Item 5b. Use of Proceeds NOT APPLICABLE Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers NONE 10 Item 6. Selected Financial Data Selected balance sheet information for the Partnership is as follows:
March 31 --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- ASSETS Cash and cash equivalents $ 222,356 $ 238,047 $ 277,292 $ 312,214 $ 310,214 Investments in limited partnerships, net 1,395,876 1,965,138 2,234,002 2,823,846 3,538,899 Due from affiliate - - - - 18,407 ----------- ----------- ----------- ----------- ----------- $ 1,618,232 $ 2,203,185 $ 2,511,294 $ 3,136,060 $ 3,867,520 =========== =========== =========== =========== =========== LIABILITIES Payables to limited $ partnerships $ 2,303 $ 2,303 2,303 $ 2,303 $ 2,303 Accrued fees and expenses due to general partner and affiliates 158,992 147,057 134,569 115,667 104,593 PARTNERS' EQUITY 1,456,937 2,053,825 2,374,422 3,018,090 3,760,624 ----------- ----------- ----------- ----------- ----------- $ 1,618,232 $ 2,203,185 $ 2,511,294 $ 3,136,060 $ 3,867,520 =========== =========== =========== =========== ===========
Selected results of operations, cash flows and other information for the Partnership are as follows: For the Years Ended March 31 ---------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ---------- ----------- Loss from operations (Note 1) $ (197,156) $ (81,348) $ (78,700)$ (76,146)$ (79,134) Equity in losses of limited partnerships (399,732) (239,249) (564,968) (666,388) (693,836) ----------- ----------- ----------- ---------- ------------ Net loss $ (596,888) $ (320,597) $ (643,668)$ (742,534)$ (772,970) =========== =========== =========== ========== ============ Net loss allocated to: General Partner $ (5,969) $ (3,206) $ (6,437)$ (7,425)$ (7,730) =========== =========== =========== ========== ============ Limited Partners $ (590,919) $ (317,391) $ (637,231)$ (735,109)$ (765,240) =========== =========== =========== ========== ============ Net loss per limited partner unit $ (59.09) $ (31.74) $ (63.72)$ (73.51)$ (76.52) =========== =========== =========== ========== ============ Outstanding weighted limited partner units 10,000 10,000 10,000 10,000 10,000 =========== ========== =========== ========== ============
Note 1 - Loss from operations for the year ended March 31, 2004 includes a charge for impairment losses on investments in limited partnerships of $124,048. (See Note 2 to the audited financial statements.) 11
For the Years Ended March 31 -------------------------------------------------- ------------ 2004 2003 2002 2001 2000 ----------- ----------- ----------- ---------- ------------ Net cash provided by (used in): Operating activities $ (43,185)$ (45,048)$ (35,847)$ (18,169)$ (45,392) Investing activities 27,494 5,803 925 20,169 14,256 ----------- ----------- ----------- ---------- ------------ Net change in cash and cash equivalents (15,691) (39,245) (34,922) 2,000 (31,136) Cash and cash equivalents, beginning of period 238,047 277,292 312,214 310,214 341,350 ----------- ----------- ----------- ---------- ------------ Cash and cash equivalents, end of period $ 222,356 $ 238,047 $ 277,292 $ 312,214 $ 310,214 =========== =========== =========== ========== ============
Low Income Housing Credits per Unit were as follows for the years ended December 31: 2003 2002 2001 2000 1999 ----------- ------------ ------------ ------------ ------------ Federal $ 119 $ 146 $ 145 $ 149 $ 146 State - - - - - ----------- ------------ ------------ ------------ ------------ Total $ 119 $ 146 $ 145 $ 149 $ 146 =========== ============ ============ ============ ============
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements With the exception of the discussion regarding historical information, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other discussions elsewhere in this Form 10-K contain forward looking statements. Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate. Risks and uncertainties inherent in forward looking statements include, but are not limited to, our future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the low income housing tax credit property market and the economy in general, as well as legal proceedings. Historical results are not necessarily indicative of the operating results for any future period. Subsequent written and oral forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by cautionary statements in this Form 10-K and in other reports we filed with the Securities and Exchange Commission. The following discussion should be read in conjunction with the Financial Statements and the Notes thereto included elsewhere in this filing. Critical Accounting Policies and Certain Risks and Uncertainties The Company believes that the following discussion addresses the Partnership's most significant accounting policies, which are the most critical to aid in fully understanding and evaluating the Company's reported financial results, and certain of the Partnership's risks and uncertainties. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. 12 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 Partnerships' results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low-Income Housing Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be 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 (Notes 2 and 3). Equity in losses of limited partnerships for each year ended March 31 have been recorded by the Partnership based on nine months of reported results provided by the Local Limited Partnerships for each year ended December 31 and on three months of results estimated by management of the Partnership. Management's estimate for the three-month period is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses from the Local Limited Partnerships allocated to the Partnership are not recognized to the extent that the investment balance would be adjusted below zero. As soon as the investment balance reaches zero, amortization of the related costs of acquiring the investment are accelerated to the extent of losses available. Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. 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. Income Taxes No provision for income taxes has been recorded in the financial statements as any liability and/or benefits for income taxes flows to the partners of the Partnership and is their obligation and/or benefit. For income tax purposes the Partnership reports on a calendar year basis. Certain Risks and Uncertainties An investment in the Partnership and the Partnership's investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership's investments. Some of those risks include the following: The Low Income Housing Credit rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Credit s and the fractional recapture of Low Income Housing Credits already taken. In most cases the annual amount of Low Income Housing Credits that an individual can use is limited to the tax liability due on the person's last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Credits may be the only benefit from an investment in the Partnership. The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited 13 diversity, poor performance of one Housing Complex could impair the Partnership's ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years, the loss of any remaining future Low Income Housing Credits, a fractional recapture of prior Low Income Housing Credits, and a loss of the Partnership's investment in the Housing Complex would occur. The Partnership is a limited partner or non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership's investments in Local Limited Partnerships, nor the Local Limited Partnerships' investments in Housing Complexes, are 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 interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Credits and recapture of Low Income Housing Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others. The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Credits and tax losses allocable to the Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes. Substantially all of the Low Income Housing Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated a significant amount of Low Income Housing Credits from the Local Limited Partnerships in the future. Until the Local Limited Partnerships have completed the 15 year Low Income Housing Credit compliance period risks exist for potential recapture of prior low Income Housing Credits. No trading market for the Units exists or is expected to develop. Limited Partners may be unable to sell their Units except at a discount and should consider their Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners. To date, certain Local Limited Partnerships have incurred significant operating losses and have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partner may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership's investment in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related tax credits could occur. Anticipated future and existing cash resources are not sufficient to meet existing contractual cash obligations. Substantially all of the future contractual cash obligations of the Partnership are payable to the General Partner. Though a substantial portion of the amounts contractually obligated to the General Partner are contractually currently payable, the Partnership anticipates that the General Partner will not require the payment of these contractual obligations until capital reserves are in excess of the future foreseeable working capital requirements of the Partnership. However, the Partnership is contractually required to pay these obligations to the General Partner and/or its affiliates on a current basis. The Partnership would be adversely affected should the General Partner and/or affiliates demand current payment of these contractual obligations and or suspend services for this or any other reason. 14 Financial Condition The Partnership's assets at March 31, 2004 consisted primarily of $222,000 in cash and aggregate investments in the 21 Local Limited Partnerships of $1,396,000. Liabilities at March 31, 2004 were $161,000, of which $159,000 was accrued annual management fees and advances due to the General Partner, and $2,000 was a payable to a limited partnership. Results of Operations Year Ended March 31, 2004 Compared to Year Ended March 31, 2003 The Partnership's net loss for the year ended March 31, 2004 was $(597,000), reflecting an increase of $(276,000) from the net loss experienced for the year ended March 31, 2003. The increase in net loss is due to equity in losses from limited partnerships which increased by $(161,000) to $(400,000) for the year ended March 31, 2004 from $(239,000) for the year ended March 31, 2003. Equity in losses of limited partnerships increased from the prior year due to an increase of the write-off of acquisition fees and costs in the current year related to the investments that have gone below zero. Additionally, there was an increase in loss from operations of approximately $(116,000) largely due to an impairment loss of $(124,000) for the year ended March 31, 2004. The impairment loss was due to a certain limited partnership whose net investment balance exceeded the remaining tax credits and residual value. The impairment loss was offset by a decrease in amortization of acquisition fees and costs of $6,000 along with an increase in income of $3,000 in the current year. Year Ended March 31, 2003 Compared to Year Ended March 31, 2002 The Partnership's net loss for the year ended March 31, 2003 was $(321,000), reflecting a decrease of $323,000 from the net loss experienced for the year ended March 31, 2002. The decline in net loss is primarily due to equity in losses from limited partnerships which declined by $326,000 to $(239,000) for the year ended March 31, 2003 from $(565,000) for the year ended March 31, 2002. Equity in losses of limited partnerships decreased from prior year due to a reduction of the write-off of acquisition fees and costs in the current year related to the investments that have gone below zero. The equity in losses decrease is also due to one of the Local Limited Partnerships having an extraordinary gain of $86,000 in the current year. Liquidity and Capital Resources Year Ended March 31, 2004 Compared to Year Ended March 31, 2003 Net cash used during the year ended March 31, 2004 was $(16,000) compared to net cash used for the year ended March 31, 2003 of $(39,000). The change was primarily due to a $21,000 increase of cash provided by investing activities due to the $21,000 increase in distributions received from limited partnerships. Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. Net cash used during the year ended March 31, 2003 was $(39,000) compared to net cash used for the year ended March 31, 2002 of $(35,000). The change was primarily due to a $9,000 increase of cash used for operating expenses of which $4,000 resulted from a decrease in interest income, offset by an increase of $5,000 of cash provided by investing activities resulting from a decrease of investments in limited partnerships of $16,000 from prior year offset by a decrease of $11,000 in distributions from limited partners. The financial statements of one Local Limited Partnership were prepared assuming the limited partnership will continue as a going concern. The auditor for this entity has expressed substantial doubt as to this entity's ability to continue as a going concern as a result of the property tax issue discussed below. The Partnership had a $0 and $183,195, remaining investment in such Local Limited Partnership at March 31, 2004 and 2003, respectively. The Partnership's original investment in the Local Limited Partnership approximated $1,691,585. Through December 31, 2003, the Local Limited Partnership has had recurring losses, working capital deficiencies and has not been billed for certain property tax expenses due since 1994. The Local Limited Partnership is seeking abatement or an extended payment plan to pay down certain of these liabilities; however, if the Local Limited Partnership is unsuccessful, additional funding may be requested from the Partnership. In the event the Local Limited Partnership is required to liquidate or sell its property, the net proceeds could be significantly less than the carrying value of such property. As of 15 December 31, 2003 and 2002, the carrying value of such property on the books and records of the Local Limited Partnership totaled $6,114,888 and $6,311,179, respectively. The Partnership expects its future cash flows, together with its net available assets at March 31, 2004, to be sufficient to meet all currently foreseeable future cash requirements. This excludes amounts owed to Associates by the Partnership disclosed below. Future Contractual Cash Obligations
The following table summarizes our future contractual cash obligations as of March 31, 2004: 2005 2006 2007 2008 2009 Thereafter Total --------- --------- --------- --------- --------- ---------- ---------- Asset Management Fees (1) $ 199,167 $ 42,000 $ 42,000 $ 42,000 $ 42,000 $ 1,722,000 $ 2,089,167 Capital Contributions Payable to Lower Tier Partnerships 2,000 - - - - - 2,000 --------- --------- --------- --------- --------- ---------- ---------- Total contractual cash obligations $ 201,167 $ 42,000 $ 42,000 $ 42,000 $ 42,000 $ 1,722,000 $ 2,091,167 ========= ========= ========= ========= ========= ========== ==========
(1) Asset Management Fees are payable annually until termination of the Partnership, which is to occur no later than 2050. The estimate of the fees payable included herein assumes the retention of the Partnership's interest in all Housing Complexes until 2050. Amounts due to the General Partner as of March 31, 2004 have been included in the 2005 column. The General Partner does not anticipate that these fees will be paid until such time as capital reserves are in excess of the future foreseeable working capital requirements of the Partnership. For additional information on our Asset Management Fees and Capital Contributions Payable to Lower Tier Partnerships, see Notes 3 and 4 to the financial statements included elsewhere herein. Off-Balance Sheet Arrangements The Partnership has no off-balance sheet arrangements. Exit Strategy The IRS compliance period for low-income housing tax credit properties is generally 15 years from occupancy following construction or rehabilitation completion. WNC was one of the first in the industry to offer investments using the tax credit. Now these very first programs are completing their compliance period. With that in mind, we are continuing our review of the Partnership's holdings, with special emphasis on the more mature properties including those that have satisfied the IRS compliance requirements. Our review will consider many factors including extended use requirements on the property (such as those due to mortgage restrictions or state compliance agreements), the condition of the property, and the tax consequences to the Limited Partners from the sale of the property. Upon identifying those properties with the highest potential for a successful sale, refinancing or syndication, we expect to proceed with efforts to liquidate those properties. Our objective is to maximize the Limited Partners' return wherever possible and, ultimately, to wind down those funds that no longer provide tax benefits to Limited Partners. To date no properties in the Partnership have been selected. Impact of New Accounting Pronouncements In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation of Variable Interest Entities." FIN 46 provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity ("VIE") in its financial statements and when it should disclose information about its relationship with a VIE. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it absorbs the majority of the entity's expected losses, the majority of the expected returns, or both. 16 In December 2003, the FASB issued a revision of FIN 46 ("FIN 46R") to clarify some of its provisions. The revision results in multiple effective dates based on the nature as well as the creation date of the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretations or the revised interpretations. However, all VIEs must be accounted for under the revised interpretations as of March 31, 2004, when FIN 46R is effective for the Partnership. This Interpretation would require consolidation by the Partnership of certain Local Limited Partnerships' assets and liabilities and results of operations if the Partnership determined that the Local Limited Partnership was a VIE and that the Partnership was the "Primary Beneficiary." Minority interests may be recorded for the Local Limited Partnerships' ownership share attributable to other Limited Partners. Where consolidation of Local Limited Partnerships is not required, additional financial information disclosures of Local Limited Partnerships may be required. The Partnership has assessed the potential consolidation effects of the Interpretation and preliminarily concluded that the adoption of the Interpretation will not have a material impact on the financial statements of the Partnership. Item 7A. Quantitative and Qualitative Disclosures About Market Risk NOT APPLICABLE Item 8. Financial Statements and Supplementary Data 17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Partners WNC Housing Tax Credit Fund IV, L.P., Series 1 We have audited the accompanying balance sheet of WNC Housing Tax redit Fund IV, L.P., Series 1 (a California Limited Partnership) (the "Partnership") as of March 31, 2004 and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. A significant portion of the financial statements of the limited partnerships in which the Partnership is a limited partner were audited by other auditors whose reports have been furnished to us. As discussed in Note 2 to the financial statements, the Partnership accounts for its investments in limited partnerships using the equity method. The portion of the Partnership's investment in limited partnerships audited by other auditors represented $1,212,000 of the total assets of the Partnership at March 31, 2004 and $259,000 of the Partnership's net loss for the year ended March 31, 2004. Our opinion, insofar as it relates to the amounts included in the financial statements for the limited partnerships which were audited by others, is based solely on the reports of the other auditors. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of WNC Housing Tax Credit Fund IV, L.P., Series 1 (a California Limited Partnership) as of March 31, 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Reznick Fedder & Silverman Bethesda, Maryland June 11, 2004 18 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners WNC Housing Tax Credit Fund IV, L.P., Series 1 We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund IV, L.P., Series 1 (a California Limited Partnership) (the "Partnership") as of March 31, 2003 and the related statements of operations, partners' equity (deficit) and cash flows for the years ended March 31, 2003 and 2002. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. A significant portion of the financial statements of the limited partnerships in which the Partnership is a limited partner were audited by other auditors whose reports have been furnished to us. As discussed in Note 2 to the financial statements, the Partnership accounts for its investments in limited partnerships using the equity method. The portion of the Partnership's investment in limited partnerships audited by other auditors represented 74% of the total assets of the Partnership at March 31, 2002 and 79%, and 79% of the Partnership's equity in losses of limited partnerships for the years ended March 31, 2003 and 2002, respectively. Our opinion, insofar as it relates to the amounts included in the financial statements for the limited partnerships which were audited by others, is based solely on the reports of the other auditors. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of WNC Housing Tax Credit Fund IV, L.P., Series 1 (a California Limited Partnership) as of March 31, 2003, and the results of its operations and its cash flows for the years ended March 31, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America. /s/ BDO SEIDMAN, LLP Costa Mesa, California May 12, 2003 19 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) BALANCE SHEETS
March 31 ------------------------------- 2004 2003 -------------- ------------- ASSETS Cash and cash equivalents $ 222,356 $ 238,047 Investments in limited partnerships (Notes 2 and 3) 1,395,876 1,965,138 -------------- ------------- $ 1,618,232 $ 2,203,185 ============== ============= LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Liabilities: Payable to a limited partnership (Note 4) $ 2,303 $ 2,303 Accrued fees and advances due to General Partner and affiliate (Note 3) 158,992 147,057 -------------- ------------- Total liabilities 161,295 149,360 -------------- ------------- Commitments and contingencies Partners' equity (deficit): General partner (85,332) (79,363) Limited partners (10,000 units authorized, 10,000 units issued and outstanding) 1,542,269 2,133,188 -------------- ------------- Total partners' equity 1,456,937 2,053,825 -------------- ------------- $ 1,618,232 $ 2,203,185 ============== =============
See accompanying notes to financial statements 20 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) STATEMENTS OF OPERATIONS
For the Years Ended March 31 ------------------------------------------- 2004 2003 2002 ------------ ------------- ------------ Interest income $ 2,093 $ 3,714 $ 7,808 Other income 12,238 7,475 9,798 ------------ ------------- ------------ Total income 14,331 11,189 17,606 ------------ ------------- ------------ Operating expenses: Amortization (Notes 2 and 3) 17,988 23,812 23,951 Asset management fees (Note 3) 42,000 42,000 42,000 Impairment loss (Note 2) 124,048 - - Other 27,451 26,725 30,355 ------------ ------------- ------------ Total operating expenses 211,487 92,537 96,306 ------------ ------------- ------------ Loss from operations (197,156) (81,348) (78,700) Equity in losses of limited partnerships (Note 2) (399,732) (239,249) (564,968) ------------ ------------- ------------ Net loss $ (596,888) $ (320,597) $ (643,668) ============ ============= ============ Net loss allocated to: General partner $ (5,969) $ (3,206) $ (6,437) ============ ============= ============ Limited partners $ (590,919) $ (317,391) $ (637,231) ============ ============= ============ Net loss per limited partner unit $ (59.09) $ (31.74) $ (63.72) ============ ============= ============ Outstanding weighted limited partner units 10,000 10,000 10,000 ============ ============= ============
See accompanying notes to financial statements 21 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) STATEMENTS OF PARTNERS' EQUITY (DEFICIT) For The Years Ended March 31, 2004, 2003 and 2002
General Limited Total Partner Partners --------------- --------------- --------------- Partners' equity (deficit) at March 31, 2001 $ (69,720)$ 3,087,810 $ 3,018,090 Net loss (6,437) (637,231) (643,668) --------------- --------------- --------------- Partners' equity (deficit) at March 31, 2002 (76,157) 2,450,579 2,374,422 Net loss (3,206) (317,391) (320,597) --------------- --------------- --------------- Partners' equity (deficit) at March 31, 2003 (79,363) 2,133,188 2,053,825 Net loss (5,969) (590,919) (596,888) --------------- --------------- --------------- Partners' equity (deficit) at March 31, 2004 $ (85,332) $ 1,542,269 $ 1,456,937 =============== =============== ===============
See accompanying notes to financial statements 22 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) STATEMENTS OF CASH FLOWS
For the Years Ended March 31 ------------------------------------------------ 2004 2003 2002 ----------- -------------- ---------------- Cash flows from operating activities: Net loss $ (596,888) $ (320,597) $ (643,668) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 17,988 23,812 23,951 Equity in losses of limited partnerships 399,732 239,249 564,968 Impairment loss 124,048 - - Increase in accrued fees and expenses due to General Partner and affiliates 11,935 12,488 18,902 ----------- -------------- ---------------- Net cash used in operating activities (43,185) (45,048) (35,847) ----------- -------------- ---------------- Cash flows from investing activities: Investments in limited partnerships, net - - (16,028) Distributions from limited partnerships 27,494 5,803 16,953 ----------- -------------- ---------------- Net cash provided by investing activities 27,494 5,803 925 ----------- -------------- ---------------- Net decrease in cash and cash equivalents (15,691) (39,245) (34,922) Cash and cash equivalents, beginning of period 238,047 277,292 312,214 ----------- -------------- ---------------- Cash and cash equivalents, end of period $ 222,356 $ 238,047 $ 277,292 =========== ============== ================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Taxes paid $ 800 $ 800 $ 800 =========== ============== ================
23 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS For The Years Ended March 31, 2004, 2003 and 2002 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------- Organization - ------------ WNC Housing Tax Credit Fund IV, L.P., Series 1, a California Limited Partnership (the "Partnership"), was formed on May 4, 1993 under the laws of the state of California, and commenced operations on October 20, 1993. The Partnership was formed to invest primarily in other limited partnerships (the "Local Limited Partnerships") which own and operate multi-family housing complexes (the "Housing Complexes") 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 Tax Credit Partners, IV, L.P. (the "General Partner"), a California limited partnership. WNC & Associates, Inc. ("Associates") is the general partner of the General Partner. The chairman and president of Associates own substantially all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership has no employees of its own. The Partnership shall continue to be in full force and effect until December 31, 2050 unless terminated prior to that date pursuant to the partnership agreement or law. The financial statements include only activity relating to the business of the Partnership, and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes, of the partners. The Partnership Agreement authorized the sale of up to 10,000 units at $1,000 per Unit ("Units"). The offering of Units concluded in July 1994 at which time 10,000 Units in the amount of $10,000,000 had been accepted. The General Partner has a 1% interest in operating profits and losses, taxable income and losses, 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 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 subordinated disposition fee (as described in Note 3) from the remainder, any additional sale or refinancing proceeds will be distributed 90% to the limited partners (in proportion to their respective investments) and 10% to the General Partner. 24 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - ------------------------------------------------------------------------------- Risks and Uncertainties - ----------------------- An investment in the Partnership and the Partnership's investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership's investments. Some of those risks include the following: The Low Income Housing Credit rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Credit s and the fractional recapture of Low Income Housing Credits already taken. In most cases the annual amount of Low Income Housing Credits that an individual can use is limited to the tax liability due on the person's last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Credits may be the only benefit from an investment in the Partnership. The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership's ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years, the loss of any remaining future Low Income Housing Credits, a fractional recapture of prior Low Income Housing Credits, and a loss of the Partnership's investment in the Housing Complex would occur. The Partnership is a limited partner or non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership's investments in Local Limited Partnerships, nor the Local Limited Partnerships' investments in Housing Complexes, are 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 interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Credits and recapture of Low Income Housing Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others. The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Credits and tax losses allocable to the Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes. Substantially all of the Low Income Housing Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated a significant amount of Low Income Housing Credits from the Local Limited Partnerships in the future. Until the Local Limited Partnerships have completed the 15 year Low Income Housing Credit compliance period risks exist for potential recapture of prior low Income Housing Credits. 25 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - ------------------------------------------------------------------------------- No trading market for the Units exists or is expected to develop. Limited Partners may be unable to sell their Units except at a discount and should consider their Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners. Anticipated future and existing cash resources of the Partnership are not sufficient to meet existing contractual cash obligations. Substantially all of the future contractual cash obligations of the Partnership are payable to the General Partner. Though a substantial portion of the amounts contractually obligated to the General Partner are contractually currently payable, the Partnership anticipates that the General Partner will not require the payment of these contractual obligations until capital reserves are in excess of the future foreseeable working capital requirements of the Partnership. However, the Partnership is contractually required to pay these obligations to the General Partner on a current basis. The Partnership would be adversely affected should the General Partner demand current payment of these contractual obligations and or suspend services for this or any other reason. Exit Strategy - ------------- The IRS compliance period for low-income housing tax credit properties is generally 15 years from occupancy following construction or rehabilitation completion. WNC was one of the first in the industry to offer investments using the tax credit. Now these very first programs are completing their compliance period. With that in mind, the Partnership is continuing to review the Partnership's holdings, with special emphasis on the more mature properties including those that have satisfied the IRS compliance requirements. The Partnership's review will consider many factors including extended use requirements on the property (such as those due to mortgage restrictions or state compliance agreements), the condition of the property, and the tax consequences to the Limited Partners from the sale of the property. Upon identifying those properties with the highest potential for a successful sale, refinancing or syndication, the Partnership expects to proceed with efforts to liquidate those properties. The Partnership's objective is to maximize the Limited Partners' return wherever possible and, ultimately, to wind down those funds that no longer provide tax benefits to Limited Partners. To date no properties in the Partnership have been selected. 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 Partnerships' results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low-Income Housing Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be 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 (see Note 2). Equity in losses of limited partnerships for each year ended March 31 have been recorded by the Partnership based on nine months of reported results provided by the Local Limited Partnerships for each year ended December 31 and on three months of results estimated by management of the Partnership. Management's estimate for the three-month 26 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - ------------------------------------------------------------------------------- period is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses from the Local Limited Partnerships allocated to the Partnership are not recognized to the extent that the investment balance would be adjusted below zero. As soon as the investment balance reaches zero, amortization of the related costs of acquiring the investment are accelerated to the extent of losses available (see Note 3). 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. Use of Estimates - ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 original maturities of three months or less when purchased to be cash equivalents. As of March 31, 2004 and 2003, the Partnership had no cash equivalents. Concentration of Credit Risk - ---------------------------- At March 31, 2004, the Partnership maintained a cash balance at a certain financial institution in excess of the maximum federally insured amounts. Net Loss Per Limited Partner Unit - --------------------------------- Net loss per limited partner unit is calculated pursuant to Statement of Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit includes no dilution and is computed by dividing loss available to limited partners by the weighted average number of units outstanding during the period. Calculation of diluted net loss per unit is not required. Income Taxes - ------------ No provision for income taxes has been recorded in the accompanying financial statements as any liability and/or benefits for income taxes as income taxes flows to the partners of the Partnership and is their obligation and/or benefit. For income tax purposes the Partnership reports on a calendar year basis. New Accounting Pronouncements - ----------------------------- In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation of Variable Interest Entities." FIN 46 provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity ("VIE") in its financial statements and when it should disclose information about its relationship with a VIE. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it absorbs the majority of the entity's expected losses, the majority of the expected returns, or both. In December 2003, the FASB issued a revision of FIN 46 ("FIN 46R") to clarify some of its provisions. The revision results in multiple effective dates based on the nature as well as the creation date of the VIE. VIEs created 27 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued. - ------------------------------------------------------------------------------- after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretations or the revised interpretations. However, all VIEs must be accounted for under the revised interpretations as of March 31, 2004, when FIN 46R is effective for the Partnership. This Interpretation would require consolidation by the Partnership of certain Local Limited Partnerships' assets and liabilities and results of operations if the Partnership determined that the Local Limited Partnership was a VIE and that the Partnership was the "Primary Beneficiary." Minority interests may be recorded for the Local Limited Partnerships' ownership share attributable to other Limited Partners. Where consolidation of Local Limited Partnerships is not required, additional financial information disclosures of Local Limited Partnerships may be required. The Partnership has assessed the potential consolidation effects of the Interpretation and preliminarily concluded that the adoption of the Interpretation will not have a material impact on the financial statements of the Partnership. NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS - -------------------------------------------- As of the periods presented, the Partnership had acquired limited partnership interests in twenty-one Local Limited Partnerships, each of which owns one Housing Complex consisting of an aggregate of 812 apartment units. 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. As discussed in Note 1, the Partnership accounts for its investments in limited partnerships using the equity method of accounting. The Partnership's investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2004 and 2003, are approximately $1,403,000 and $1,207,000, respectively, greater than the Partnership's equity at the preceding December 31 as shown in the Local Limited Partnerships' combined financial statements presented below. This difference is primarily due to unrecorded losses, as discussed below, acquisition, selection and other costs related to the acquisition of the investments which have been capitalized in the Partnership's investment account, impairment losses recorded in the Partnership's investment account and to capital contributions payable to the limited partnerships which were netted against partner capital in the Local Limited Partnership's financial statements. The Partnership's investment is also lower than the Partnership's equity as shown in the Local Limited Partnership's combined financial statements due to the estimated losses recorded by the Partnership for the three month period ended March 31. 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. A loss in value from a Local Limited Partnership other than a temporary decline would be recorded as an impairment loss. Impairment is measured by comparing the investment carrying amount to the sum of the total amount of the remaining tax credits allocated to the fund and the estimated residual value of the investment. Accordingly, the Partnership recorded an impairment loss of $124,048, $0 and $0 during the years ended March 31, 2004, 2003 and 2002, respectively. Distributions from the Local Limited Partners are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. 28 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - ------------------------------------------------------- At March 31, 2004 and 2003, the investment accounts in certain Local Limited Partnerships have reached a zero balance. Consequently, a portion of the Partnership's estimate of its share of losses for the years ended March 31, 2004, 2003 and 2002 amounting to approximately $354,000, $332,000 and $212,000, respectively, have not been recognized. As of March 31, 2004, the aggregate share of net losses not recognized by the Partnership amounted to $1,250,000. Following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented:
For the Years Ended March 31 ---------------------------------------------------- 2004 2003 2002 ---------------- --------------- -------------- Investments per balance sheet, beginning of period $ 1,965,138 $ 2,234,002 $ 2,823,846 Capital contributions paid, net - - 16,028 Distributions received from limited partnerships (27,494) (5,803) (16,953) Equity in losses of limited partnerships (399,732) (239,249) (564,968) Impairment loss (124,048) - - Amortization of paid acquisition fees and costs (17,988) (23,812) (23,951) ---------------- --------------- -------------- Investments per balance sheet, end of period $ 1,395,876 $ 1,965,138 $ 2,234,002 ================ =============== ==============
29 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - ------------------------------------------------------- The financial information from the individual financial statements of the Local Limited Partnerships include rental and interest subsidies. Rental subsidies are included in total revenues and interest subsidies are generally netted against interest expense. Approximate combined condensed financial information from the individual financial statements of the Local Limited Partnerships as of December 31 and for the years then ended is as follows: COMBINED CONDENSED BALANCE SHEETS
2003 2002 --------------- --------------- ASSETS Buildings and improvements, net of accumulated depreciation as of December 31, 2003 and 2002 of $ 9,941,414 and $8,876,000, respectively $ 24,858,000 $ 25,862,000 Land 1,674,000 1,668,000 Due from related parties 13,000 14,000 Other assets 2,362,000 2,260,000 --------------- --------------- $ 28,907,000 $ 29,804,000 =============== =============== LIABILITIES Mortgage loans payable $ 24,752,000 $ 25,864,000 Due to related parties 914,000 923,000 Other liabilities 1,969,000 976,000 --------------- --------------- 27,635,000 27,763,000 --------------- --------------- PARTNERS' CAPITAL (DEFICIT) WNC Housing Tax Credits Fund IV, L.P., Series 1 (7,000) 758,000 Other partners 1,279,000 1,283,000 --------------- --------------- 1,272,000 2,041,000 --------------- --------------- $ 28,907,000 $ 29,804,000 =============== ===============
30 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - ------------------------------------------------------- COMBINED CONDENSED STATEMENTS OF OPERATIONS
2003 2002 2001 --------------- --------------- --------------- Revenues $ 3,746,000 $ 3,581,000 $ 3,400,000 --------------- --------------- --------------- Expenses: Operating expenses 2,583,000 2,251,000 2,250,000 Interest expense 833,000 860,000 841,000 Depreciation and amortization 1,078,000 1,076,000 1,098,000 --------------- --------------- --------------- Total expenses 4,494,000 4,187,000 4,189,000 --------------- --------------- --------------- Net loss $ (748,000) $ (606,000) $ (789,000) =============== =============== =============== Net loss allocable to the Partnership $ (736,000) $ (597,000) $ (777,000) =============== =============== =============== Net loss recorded by the Partnership $ (400,000) $ (239,000) $ (565,000) =============== =============== ===============
Certain Local Limited Partnerships incurred operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partner may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership's investment in certain of such Local Limited Partnerships could be impaired, and the loss of future and recapture of prior Low Income Housing Credits could occur. The financial statements of one Local Limited Partnership were prepared assuming the limited partnership will continue as a going concern. The auditor for this entity has expressed substantial doubt as to this entity's ability to continue as a going concern as a result of the property tax issue discussed below. The Partnership had a $0 and $183,195, remaining investment in such Local Limited Partnership at March 31, 2004 and 2003, respectively. The Partnership's original investment in the Local Limited Partnership approximated $1,691,585. Through December 31, 2003, the Local Limited Partnership has had recurring losses, working capital deficiencies and has not been billed for certain property tax expenses due since 1994. The Local Limited Partnership is seeking abatement or an extended payment plan to pay down certain of these liabilities; however, if the Local Limited Partnership is unsuccessful, additional funding may be requested from the Partnership. In the event the Local Limited Partnership is required to liquidate or sell its property, the net proceeds could be significantly less than the carrying value of such property. As of December 31, 2003 and 2002, the carrying value of such property on the books and records of the Local Limited Partnership totaled $6,114,888 and $6,311,179, respectively. 31 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 3 - RELATED PARTY TRANSACTIONS - ----------------------------------- Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates for the following items: Acquisition fees of up to 8% of the gross proceeds from the sale of Partnership units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships. At the end of all periods presented, the Partnership incurred acquisition fees of $800,000. Accumulated amortization of these capitalized costs was $616,251 and $457,719 as of March 31, 2004 and 2003, respectively. Of the accumulated amortization recorded on the balance sheet at March 31, 2004, $ 140,544, $49,656 and $117,011 of the related expense was reflected as equity in losses of limited partnerships during the years ended March 31, 2004, 2003 and 2002, respectively, to reduce the respective net acquisition fee component of investments in local limited partnerships to zero for those Local Limited Partnerships which would otherwise be below a zero balance. Reimbursement of costs incurred by the General Partner in connection with the acquisition of Local Limited Partnerships. These reimbursements have not exceeded 1.2% of the gross proceeds. At the end of all periods presented, the Partnership had incurred acquisition costs of $54,949, which have been included in investments in limited partnerships. At the end of all years presented accumulated amortization amounted to $54,949. An annual asset management fee equal to the greater amount of (i) $2,000 for each apartment complex, or (ii) 0.275% of gross proceeds. In either case, the fee will be decreased or increased annually based on changes to the Consumer Price Index. However, in no event will the maximum amount exceed 0.2% of the invested assets of the Local Limited Partnerships, including the Partnership's allocable share of the mortgages, for the life of the Partnership. Management fees of $42,000 were incurred during the years ended March 31, 2004, 2003 and 2002, of which $30,000, $30,000 and $24,500 was paid, respectively. The Partnership reimbursed the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements were approximately $ 27,500 during the year ended March 31, 2004. A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 16% through December 31, 2003 and 6% thereafter (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred in the three year period ended March 31, 2004. An affiliate of the General Partner provides management services for one of the properties in the limited partnerships. Management fees were earned by the affiliate in the amount of $35,780, $33,926 and $55,040 for the years ended March 31, 2004, 2003 and 2002. The accrued fees and advances due to the General Partner and affiliates consist of the following at:
March 31 ------------------------------ 2004 2003 ------------- ------------- Reimbursement for expenses paid by the General Partner or an affiliate $ 1,825 $ 1,890 Asset management fee payable 157,167 145,167 ------------- ------------- $ 158,992 $ 147,057 ============= =============
32 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended March 31, 2004, 2003 and 2002 NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS - ----------------------------------------- Payables to limited partnerships represent amounts which are due at various times based on conditions specified in the limited partnership agreement. These contributions are payable in installments and are due upon the limited partnership achieving certain operating and development benchmarks (generally within two years of the Partnership's initial investment). NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - ----------------------------------------------------
The following is a summary of the quarterly operations for the years ended March 31: June 30 September 30 December 31 March 31 --------------- --------------- --------------- --------------- 2004 ---- Income $ 3,000 $ 4,000 $ - $ 7,000 Operating expenses (24,000) (31,000) (18,000) (138,000) Equity in losses of limited partnerships (48,000) (48,000) (48,000) (256,000) Net loss (69,000) (75,000) (66,000) (387,000) Net Loss available to limited partners (68,000) (75,000) (65,000) (383,000) Net Loss per limited partner unit (7) (7) (7) (38) 2003 ---- Income $ 1,000 $ 7,000 $ 1,000 $ 2,000 Operating expenses (23,000) (28,000) (19,000) (23,000) Equity in losses of limited partnerships (70,000) (74,000) (72,000) (23,000) Net loss (92,000) (95,000) (90,000) (44,000) Net Loss available to limited partners (91,000) (94,000) (90,000) (42,000) Net Loss per limited partner unit (9) (9) (9) (5)
33 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure NOT APPLICABLE Item 9a. Controls and Procedures As of the end of the period covered by this report, the Partnership's General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates carried out an evaluation of the effectiveness of the Fund's "disclosure controls and procedures" as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that as of the end of the period covered by this report, the Partnership's disclosure controls and procedures were adequate and effective in timely alerting them to material information relating to the Partnership required to be included in the Partnership's periodic SEC filings. Changes in internal controls. There were no changes in the Partnership's internal control over financial reporting that occurred during the quarter ended March 31, 2004 that materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART III Item 10. Directors and Executive Officers of the Registrant (a) Identification of Directors, (b) Identification of Executive Officers, (c) --------------------------------------------------------------------------- Identification of Certain Significant Employees, (d) Family Relationships, --------------------------------------------------------------------------- and (e) Business Experience --------------------------- The Partnership has no directors, executive officers or employees of its own. The following biographical information is presented for the directors, executive officers and significant employees of Associates, which has principal responsibility for the Partnership's affairs. Associates is a California corporation which was organized in 1971. Its officers and significant employees are:
Wilfred N. Cooper, Sr. Chairman of the Board Wilfred N. Cooper, Jr. President and Chief Executive Officer David N. Shafer, Esq. Executive Vice President and Director of Asset Management Sylvester P. Garban Senior Vice President - Institutional Investments Thomas J. Riha, CPA Senior Vice President - Chief Financial Officer David C. Turek Senior Vice President - Originations Michael J. Gaber Senior Vice President - Acquisitions Diemmy T. Tran Vice President - Portfolio Management
In addition to Wilfred N. Cooper, Sr., the directors of Associates are Wilfred N. Cooper, Jr., David N. Shafer, and Kay L. Cooper. The principal shareholder of Associates is a trust established by Wilfred N. Cooper, Sr. and Kay L. Cooper. Wilfred N. Cooper, Sr., age 73, is the founder and Chairman of the Board of Directors of Associates, a Director of WNC Capital Corporation, and a general partner in some of the partnerships previously sponsored by Associates. Mr. Cooper has been actively involved in the affordable housing industry since 1968. Previously, during 1970 and 1971, he was founder and a principal of Creative Equity Development Corporation, a predecessor of Associates, and of Creative Equity Corporation, a real estate investment firm. For 12 years before that, Mr. Cooper was employed by Rockwell International Corporation, last serving as its manager of housing and urban developments where he had responsibility for factory-built housing evaluation and project management in urban planning and development. He has testified before committees of the U.S. Senate and the U.S. House of Representatives. Mr. Cooper is a Life Director of the National Association of Home Builders and a National Trustee for NAHB's Political Action Committee, and the Chairman of NAHB's Multifamily Council. He is a Director of the National Housing Conference and a member of NHC's Executive Committee, and a founder and Director of the California Housing Consortium. He is the husband of Kay Cooper and the father of Wilfred N. Cooper, Jr. Mr. Cooper graduated from Pomona College in 1956 with a Bachelor of Arts degree. 34 Wilfred N. Cooper, Jr., age 41, is President, Chief Executive Officer, Secretary, a Director and a member of the Acquisition Committee of Associates. He is President of, and a registered principal with, WNC Capital Corporation, and is a Director of WNC Management, Inc. He has been involved in real estate investment and acquisition activities since 1988 when he joined Associates. Previously, he served as a Government Affairs Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of the Editorial Advisory Boards of Affordable Housing Finance and LIHC Monthly Report, a Steering Member of the - ---------------------------- -------------------- Housing Credit Group of the National Association of Home Builders, an Alternate Director of NAHB, a member of the Advisory Board of the New York State Association for Affordable Housing and a member of the Urban Land Institute. He is the son of Wilfred Cooper, Sr. and Kay Cooper. Mr. Cooper graduated from The American University in 1985 with a Bachelor of Arts degree. David N. Shafer, age 51, is Executive Vice President, a Director, Director of Asset Management and a member of the Acquisition Committee of Associates, and a Director and Secretary of WNC Management, Inc. Mr. Shafer has been active in the real estate industry since 1984. Before joining Associates in 1990, he was engaged as an attorney in the private practice of law with a specialty in real estate and taxation. Mr. Shafer is a Director and President of the California Council of Affordable Housing, and a member of the State Bar of California. Mr. Shafer graduated from the University of California at Santa Barbara in 1978 with a Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris Doctor degree cum laude and from the University of San Diego in 1986 with a Master of Law degree in Taxation. Sylvester P. Garban, age 58, is Senior Vice President - Institutional Investments of Associates. Mr. Garban has been involved in real estate investment activities since 1978. Before joining Associates in 1989, he served as Executive Vice President with MRW, Inc., a real estate development and management firm. Mr. Garban is a member of the National Association of Affordable Housing Lenders and the Financial Planning Association. He graduated from Michigan State University in 1967 with a Bachelor of Science degree in Business Administration. Thomas J. Riha, age 48, is Senior Vice President - Chief Financial Officer and a member of the Acquisition Committee of Associates and President, Treasurer and a Director of WNC Management, Inc. He has been involved in real estate acquisition and investment activities since 1979. Before joining Associates in 1994, Mr. Riha was employed by Trust Realty Advisor, a real estate acquisition and management company, last serving as Vice President - Operations. He is a Director of the Task Force on Housing Credit Certification of the National Association of Home Builders. Mr. Riha graduated from the California State University, Fullerton in 1977 with a Bachelor of Arts degree cum laude in Business Administration with a concentration in Accounting and is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. David C. Turek, age 49, is Senior Vice President - Originations of Associates. His experience with real estate investments and finance has continued since 1976, and he has been employed by Associates since 1996. Previously, from 1995 to 1996, Mr. Turek served as a consultant for a national tax credit sponsor where he was responsible for on-site feasibility studies and due diligence analyses of tax credit properties. From 1992 to 1995 he served as Executive Vice President for Levcor, Inc., a multi-family development company, and from 1990 to 1992 he served as Vice President for the Paragon Group where he was responsible for tax credit development activities. He is a Director of the National Housing and Rehabilitation Association, the Rural Rental Housing Association of Texas, and the Alabama Council of Affordable Rental Housing. Mr. Turek graduated from Southern Methodist University in 1976 with a Bachelor of Business Administration degree. Michael J. Gaber, age 38, is Senior Vice President - Acquisitions and a member of the Acquisition Committee of Associates. Mr. Gaber has been involved in real estate acquisition, valuation and investment activities since 1989 and has been associated with Associates since 1997. Prior to joining Associates, he was involved in the valuation and classification of major assets, restructuring of debt and analysis of real estate taxes with H.F. Ahmanson & Company, parent of Home Savings of America. Mr. Gaber graduated from the California State University, Fullerton in 1991 with a Bachelor of Science degree in Business Administration - Finance. Diemmy T. Tran, age 38, is Vice President - Portfolio Management of Associates. She is responsible for overseeing portfolio management and investor reporting for all WNC funds, and for monitoring investment returns for all WNC institutional funds. Ms. Tran has been involved in real estate asset management and finance activities for 12 years. Prior to joining Associates in 1998, Ms. Tran served as senior asset manager for a national Tax Credit sponsor and as an asset specialist for the Resolution Trust Corporation where she was responsible for the disposition and management of commercial loan and REO portfolios. Ms. Tran is licensed as a California real estate broker. She graduated from California State University, Northridge in 1989 with a Bachelor of Science degree in finance and a minor in real estate. 35 Kay L. Cooper, age 67, is a Director of Associates. Mrs. Cooper was the sole proprietor of Agate 108, a manufacturer and retailer of home accessory products, from 1975 until its sale in 1998. She is the wife of Wilfred Cooper, Sr. and the mother of Wilfred Cooper, Jr. Ms. Cooper graduated from the University of Southern California in 1958 with a Bachelor of Science degree. (f) Involvement in Certain Legal Proceedings ---------------------------------------- Inapplicable. (g) Promoters and Control Persons ----------------------------- Inapplicable. (h) Audit Committee Financial Expert, and (i) Identification of the audit --------------------------------------------------------------------------- Committee --------- Neither the Partnership nor Associates has an audit committee. (j) Changes to Nominating Procedures -------------------------------- Inapplicable (k) Code of Ethics -------------- WNC & Associates has adopted a Code of Ethics which applies to the Chief Executive Officer and Chief Financial Officer of WNC & Associates. The Code of Ethics will be provided without charge to any person who requests it. Such requests should be directed to: Investor Relations at (714)662-5565 extension 118. Item 11. Executive Compensation: The Partnership has no officers, employees, or directors. However, under the terms of the Partnership Agreement the Partnership is obligated to TCP IV or Associates during the current or future years for the following fees: (a) Annual Asset Management Fee. An annual asset management fee accrues in an amount greater of (i) $2,000 per multi-family housing complex, or (ii) 0.275% of Gross Proceeds. The base fee amount will be adjusted annually based on the change in the Consumer Price Index. However, in no event will the annual asset management fee exceed 0.2% of Invested Assets. "Invested Assets" means the sum of the Partnership's investment in Local Limited Partnerships and the Partnership's allocable share of the amount of the indebtedness related to the Housing Complexes. Fees of $42,000 were incurred during the years ended March 31, 2004, 2003 and 2002 The Partnership paid the General Partner or its affiliates $30,000, $30,000 and $24,000 of those fees during the years ended March 31, 2004, 2003 and 2002, respectively. (b) Subordinated Disposition Fee. A subordinated disposition fee in an amount equal to 1% of the sale price may be 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) 16% through December 31, 2003, and (ii) 6% for the balance of the Partnership's term. No disposition fees have been incurred. 36 (c) Operating Expenses. The Partnership reimbursed the General Partner or its affiliates for operating expenses of approximately $ 27,500, $25,000 and $28,000 during the years ended March 31, 2004, 2003 and 2002, respectively. (d) Interest in Partnership. The General Partner receives 1% of the Partnership's allocated Low Income Housing Credits, which approximated $15,000 for the General Partner for all tax years presented. The General Partner is also entitled to receive a percentage of cash distributions. There were no distributions of cash to the General Partner during the years presented. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (a) Securities Authorized for Issuance Under Equity Compensation Plans ------------------------------------------------------------------ The Partnership has no compensation plans under which intereests in the Partnership are authorized for issuance. (b) Security Ownership of Certain Beneficial Owners ----------------------------------------------- No person is known to the General Partner to own beneficially in excess of 5% of the outstanding units. (c) Security Ownership of Management -------------------------------- Neither the General Partner, its affiliates, nor any of the officers or directors of the General Partner or its affiliates own directly or beneficially any Units in the Partnership. (d) Changes in Control ------------------ The management and control of the General Partner and of Associates and their affiliates may be changed at any time in accordance with their respective organizational documents, without the consent or approval of the Limited Partners. In addition, the Partnership Agreement provides for the admission of one or more additional and successor General Partners in certain circumstances. First, with the consent of any other General Partners and a majority-in-interest of the Limited Partners, any General Partner may designate one or more persons to be successor or additional General Partners. In addition, any General Partner may, without the consent of any other General Partner or the Limited Partners, (i) substitute in its stead as General Partner any entity which has, by merger, consolidation or otherwise, acquired substantially all of its assets, stock or other evidence of equity interest and continued its business, or (ii) cause to be admitted to the Partnership an additional General Partner or Partners if it deems such admission to be necessary or desirable so that the Partnership will be classified a partnership for Federal income tax purposes. Finally, a majority-in-interest of the Limited Partners may at any time remove the General Partner of the Partnership and elect a successor General Partner. Item 13. Certain Relationships and Related Transactions The General Partner manages all of the Partnership's affairs. The transactions with the General Partner are primarily in the form of fees paid by the Partnership for services rendered to the Partnership, reimbursement of expenses, and the General Partner's interests in the Partnership, as discussed in Item 11 and in the notes to the Partnership's financial statements. 37 Item 14. Principal Accountant Fees and Services The following is a summary of fees paid to the Fund's independent auditors for the years ended March 31: 2004 2003 --------------- --------------- Audit Fees $ 19,351 18,570 Audit-related Fees - - Tax Fees 1,625 1,500 All Other Fees - - --------------- --------------- TOTAL $ 20,976 20,070 =============== =============== The Partnership has no Audit Committee. All audit services and any permitted non-audit services performed by the Fund's independent auditors are preapproved by the General Partner. 38 PART IV. Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Financial Statements (a)(1) Financial statements included in Part II hereof: ------------------------------------------------ Report of Independent Registered Public Accounting Firm - Reznick Fedder & Silverman Report of Independent Registered Public Accounting Firm - BDO Seidman, LLP Balance Sheets, March 31, 2004 and 2003 Statements of Operations for the years ended March 31, 2004, 2003 and 2002 Statements of Partners' Equity (Deficit) for the years ended March 31, 2004, 2003 and 2002 Statements of Cash Flows for the years ended March 31, 2004, 2003 and 2002 Notes to Financial Statements (a)(2) Financial statement schedule included in Part IV hereof: -------------------------------------------------------- Report of Independent Registered Public Accounting Firm on Financial Statement Schedules - Reznick Fedder & Silverman Report of Independent Registered Public Accounting Firm on Financial Statement Schedules - BDO Seidman, LLP Schedule III - Real Estate Owned by Local Limited Partnerships (b) Reports on Form 8-K. -------------------- NONE (c) Exhibits. --------- 3.1 Articles of incorporation and by-laws: The registrant is not incorporated. The Partnership Agreement filed as Exhibit 28.1 to Form 10-K for fiscal year ended December 31, 1995. 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) 32.1 Section 1350 Certification of the Chief Executive Officer. (filed herewith) 32.2 Section 1350 Certification of the Chief Financial Officer. (filed herewith) 99.1 Second Amended and Restated Agreement of Limited Partnership of Beckwood Manor Seven Limited Partnership filed as exhibit 10.1 to Form 8-K dated December 8, 1993 is hereby incorporated herein by reference as exhibit 99.1. 99.2 Amended and Restated Agreement of Limited Partnership of Alpine Manor filed as exhibit 10.3 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.2. 99.3 Second Amended and Restated Agreement of Limited Partnership of Briscoe Manor, Limited Partnership filed as exhibit 10.4 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.3. 99.4 Amended and Restated Agreement and Certificate of Limited Partnership of Evergreen Four, Limited Partnership filed as exhibit 10.5 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.4. 39 99.5 Amended and Restated Agreement and Certificate of Limited Partnership of Fawn Haven, Limited Partnership filed as exhibit 10.6 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.5. 99.6 Amended and Restated Agreement of Limited Partnership of Fort Stockton, L. P. filed as exhibit 10.7 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.6. 99.7 Amended and Restated Agreement and Certificate of Limited Partnership of Madison Manor Senior Citizens Complex, Ltd. filed as exhibit 10.8 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.7. 99.8 Amended and Restated Agreement and Certificate of Limited Partnership of Mt. Graham Housing, Ltd. filed as exhibit 10.9 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.8. 99.9 Amended and Restated Agreement and Certificate of Limited Partnership of Northside Plaza Apartments, Ltd. filed as exhibit 10.10 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.9. 99.10 Amended and Restated Agreement of Limited Partnership of Pampa Manor, L.P. filed as exhibit 10.11 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.10. 99.11 Amended and Restated Agreement of Limited Partnership of Vernon Manor, L.P. filed as exhibit 10.12 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.11. 99.12 Amended and Restated Agreement of Limited Partnership of Waterford Place, A Limited Partnership filed as exhibit 10.13 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.12. 99.13 Amended and Restated Agreement of Limited Partnership of Yantis Housing, Ltd filed as exhibit 10.13 to Post-Effective Amendment No 1 dated February 16, 1994 is hereby incorporated herein by reference as exhibit 99.13. 99.14 Third Amended and Restated Agreement of Limited Partnership and Certificate of Limited Partnership of Indian Creek Limited Partnership filed as exhibit 10.16 to Post-Effective Amendment No 2 dated March 11, 1994 is hereby incorporated herein by reference as exhibit 99.14. 99.15 Agreement of Limited Partnership of Laurel Creek Apartments filed as exhibit 10.1 to Form 8-K dated May 25, 1994 is hereby incorporated herein by reference as exhibit 99.15. 99.16 Second Amended and Restated Agreement of Limited Partnership of Sandpiper Square, A Limited Partnership filed as exhibit 10.2 to Form 8-K dated May 25, 1994 is hereby incorporated herein by reference as exhibit 99.16. 99.17 Amended and Restated Agreement of Limited Partnership of Regency Court Partners filed as exhibit 10.1 to Form 8-K dated June 30, 1994 is hereby incorporated herein by reference as exhibit 99.17. 99.18 Disposition and Development Agreement By and Between The Community Development Commission of the County of Los Angeles and Regency Court Partners (including forum of Ground Lease) filed as exhibit 10.2 to Form 8-K dated June 30, 1994 is hereby incorporated herein by reference as exhibit 99.18. 99.19 Amended and Restated Agreement of Limited Partnership of Bay City Village Apartments, Limited Partnership filed as exhibit 10.19 to Post-Effective Amendment No 4 dated July 14, 1994 is hereby incorporated herein by reference as exhibit 99.19. 99.20 Second Amended and Restated Agreement of Limited Partnership of Hidden Valley Limited Partnership filed as exhibit 10.20 to Post-Effective Amendment No 4 dated July 14, 1994 is hereby incorporated herein by reference as exhibit 99.20. 40 99.21 Amended and Restated Agreement of Limited Partnership of HOI Limited Partnership of Lenoir and Amendments thereto filed as exhibit 10.21 to Post-Effective Amendment No 4 dated July 14, 1994 is hereby incorporated herein by reference as exhibit 99.21. 99.22 Financial Statements of Regency Court, as of and for the years ended December 31, 2002 and 2001 together with Independent Auditors' Report thereon; filed as exhibit 99.6 on Form 10-K dated March 31, 2003; a significant subsidiary of the Partnership. 99.23 Financial Statements of Laurel Creek Apartments, as of and for the years ended December 31, 2003 and 2002 together with Independent Auditors' Report thereon; a significant subsidiary of the Partnership. (filed herewith) 99.24 Financial Statements of Regency Court, as of and for the years ended December 31, 2003 and 2002 together with Independent Auditors' Report thereon; a significant subsidiary of the Partnership. (filed herewith) (d) Financial statement schedules follow, as set forth in subsection --------------------------------------- (a)(2) hereof. 41 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULES To the Partners WNC Housing Tax Credit Fund IV, L.P., Series 1 The audits referred to in our report dated June 11, 2004 relating to the 2004 financial statements of WNC Housing Tax Credit Fund IV, L.P., Series 1 (a California Limited Partnership) (the "Partnership"), which are contained in Item 8 of this Form 10-K, included the audit of the accompanying financial statement schedule "Real Estate Owned by Local Limited Partnerships March 31, 2004." This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audit. In our opinion, based upon our audit and the reports of the other auditors, such financial statement schedule referred to above presents fairly, in all material respects, the information set forth therein. /s/ Reznick Fedder & Silverman Bethesda, Maryland June 11, 2004 42 Report of Independent Registered Public Accounting Firm on Financial Statement Schedules To the Partners WNC Housing Tax Credit Fund IV, L.P. Series 1 The audits referred to in our report dated May 12, 2003, relating to the 2003 and 2002 financial statements of WNC Housing Tax Credit Fund IV, L.P. Series 1 (the "Partnership"), which is contained in Item 8 of this Form 10-K, included the audit of the accompanying financial statement schedules. The financial statement schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statement schedules based upon our audits. In our opinion, such financial statement schedules presents fairly, in all material respects, the financial information set forth therein. /s/ BDO SEIDMAN, LLP Costa Mesa, California May 12, 2003 43 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2004
------------------------------- --------------------------------------------------- As of March 31, 2004 As of December 31, 2003 ------------------------------------------------------------------------------------ Mortgage Total Investment Amount of Balances of in Local Limited Investment Paid Local Limited Property and Accumulated Net Book Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Alpine Manor, Alpine, L.P. Texas $ 195,000 $ 195,000 $ 900,000 $1,171,000 $ 278,000 $ 893,000 Baycity Baytown, Village Texas Apartments, Limited Partnership 301,000 301,000 1,428,000 1,838,000 677,000 1,161,000 Beckwood Marianna, Manor Seven Arkansas Limited Partnership 307,000 307,000 1,372,000 1,805,000 651,000 1,154,000 Briscoe Manor Galena, Limited Maryland Partnership 308,000 308,000 1,470,000 1,845,000 633,000 1,212,000 Evergreen Maynard, Four Limited Arkansas Partnership 195,000 195,000 859,000 1,129,000 403,000 726,000 Fawn Haven Manchester, Limited Ohio Partnership 167,000 167,000 843,000 1,073,000 407,000 666,000 Fort Stockton Ft.Stockton, Manor, L.P. Texas 224,000 224,000 1,037,000 1,248,000 277,000 971,000 Hidden Gallup, Valley New Limited Mexico Partnership 412,000 412,000 1,466,000 2,005,000 482,000 1,523,000 HOI Limited Lenoir, Partnership North Of Lenoir Carolina 198,000 198,000 512,000 1,174,000 346,000 828,000 Indian Creek Bucyrus, Limited Ohio Partnership 306,000 306,000 1,449,000 1,778,000 603,000 1,175,000 Laurel San Luis Creek Obispo, Apartments California 1,030,000 1,030,000 576,000 2,165,000 670,000 1,495,000
44 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2004
------------------------------- --------------------------------------------------- As of March 31, 2004 As of December 31, 2003 ------------------------------------------------------------------------------------ Mortgage Total Investment Amount of Balances of in Local Limited Investment Paid Local Limited Property and Accumulated Net Book Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Madisonville, Manor Senior Texas Citizens Complex, Ltd. 174,000 174,000 892,000 1,154,000 188,000 966,000 Mt. Graham Safford, Housing, Ltd. Arizona 410,000 410,000 1,387,000 1,908,000 664,000 1,244,000 Northside Plaza Angleton, Apartments, Ltd. Texas 282,000 282,000 1,341,000 1,753,000 315,000 1,438,000 Pampa Manor, Pampa, L.P. Texas 180,000 180,000 834,000 1,033,000 237,000 796,000 Regency Court Monrovia, Partners California 1,692,000 1,690,000 4,045,000 7,707,000 1,593,000 6,114,000 Sandpiper Aulander, Square, a North Limited Carolina Partnership 219,000 219,000 934,000 1,200,000 290,000 910,000 Seneca Falls Seneca East Apartments Falls, New Company II, L.P. York 270,000 270,000 882,000 1,235,000 241,000 994,000 Vernon Manor, Vernon, L.P. Texas 177,000 177,000 743,000 906,000 206,000 700,000 Waterford Calhoun Place, a Limited Falls, South Partnership Carolina 272,000 272,000 1,163,000 1,503,000 574,000 929,000 Yantis Housing, Yantis, Ltd. Texas 145,000 145,000 619,000 843,000 206,000 637,000 ------------- ---------- ------------ ----------- ----------- ----------- $ 7,464,000 $7,462,000 $24,752,000 $36,473,000 $9,941,000 $26,532,000 ============= ========== ============ =========== =========== ===========
45 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2004
-------------------------------------------------------------------------------------- For the year ended December 31, 2003 -------------------------------------------------------------------------------------- Net Income Year Investment Estimated Useful Partnership Name Rental Income (Loss) Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Alpine Manor, L.P. $122,000 $(15,000) 1994 Completed 40 Baycity Village Apartments, Limited Partnership 321,000 (31,000) 1994 Completed 30 Beckwood Manor Seven Limited Partnership 153,000 (64,000) 1993 Completed 27.5 Briscoe Manor Limited Partnership 187,000 (48,000) 1994 Completed 27.5 Evergreen Four Limited Partnership 86,000 (44,000) 1994 Completed 27.5 Fawn Haven Limited Partnership 87,000 (20,000) 1994 Completed 27.5 Fort Stockton Manor, L.P. 136,000 (15,000) 1994 Completed 40 Hidden Valley Limited Partnership 188,000 (23,000) 1994 Completed 40 HOI Limited Partnership Of Lenoir 150,000 (35,000) 1993 Completed 40 Indian Creek Limited Partnership 148,000 (39,000) 1994 Completed 27.5 Laurel Creek Apartments 206,000 19,000 1994 Completed 27.5 Madisonville Manor Senior Citizens Complex, Ltd. 122,000 (5,000) 1994 Completed 50 Mt. Graham Housing, Ltd. 158,000 (60,000) 1994 Completed 27.5 Northside Plaza Apartments, Ltd. 172,000 (15,000) 1994 Completed 50 Pampa Manor, L.P. 93,000 (21,000) 1994 Completed 40 Regency Court Partners 726,000 (227,000) 1994 Completed 40 Sandpiper Square, a Limited Partnership 105,000 (15,000) 1994 Completed 35 Seneca Falls East Apartments Company II, L.P. 152,000 (32,000) 1998 Completed 40
46 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2004
-------------------------------------------------------------------------------------- For the year ended December 31, 2003 -------------------------------------------------------------------------------------- Net Income Year Investment Estimated Useful Partnership Name Rental Income (Loss) Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Vernon Manor, L.P. 107,000 (2,000) 1994 Completed 40 Waterford Place, a Limited Partnership 132,000 (39,000) 1994 Completed 40 Yantis Housing, Ltd. 82,000 (17,000) 1994 Completed 40 ---------- ---------- $3,633,000 $(748,000) ========== ==========
47 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2003
------------------------------- ----------------------------------------------------- As of March 31, 2003 As of December 31, 2002 -------------------------------------------------------------------------------------- Mortgage Total Investment Amount of Balances of in Local Limited Investment Paid Local Limited Property and Accumulated Net Book Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Alpine Manor, Alpine, L.P. Texas $ 195,000 $ 195,000 $ 904,000 $1,169,000 $ 249,000 $ 920,000 Baycity Baytown, Village Texas Apartments, Limited Partnership 301,000 301,000 1,442,000 1,837,000 613,000 1,224,000 Beckwood Marianna, Manor Seven Arkansas Limited Partnership 307,000 307,000 1,377,000 1,805,000 589,000 1,216,000 Briscoe Manor Galena, Limited Maryland Partnership 308,000 308,000 1,476,000 1,845,000 570,000 1,275,000 Evergreen Maynard, Four Limited Arkansas Partnership 195,000 195,000 862,000 1,129,000 364,000 765,000 Fawn Haven Manchester, Limited Ohio Partnership 167,000 167,000 847,000 1,072,000 370,000 702,000 Fort Stockton Ft.Stockton, Manor, L.P. Texas 224,000 224,000 1,042,000 1,249,000 246,000 1,003,000 Hidden Gallup, Valley New Limited Mexico Partnership 412,000 412,000 1,472,000 1,988,000 430,000 1,558,000 HOI Limited Lenoir, Partnership North Of Lenoir Carolina 198,000 198,000 526,000 1,178,000 316,000 862,000 Indian Creek Bucyrus, Limited Ohio Partnership 306,000 306,000 1,456,000 1,776,000 543,000 1,233,000 Laurel San Luis Creek Obispo, Apartments California 1,030,000 1,030,000 609,000 2,165,000 602,000 1,563,000
48 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2003
------------------------------- --------------------------------------------------- As of March 31, 2003 As of December 31, 2002 ------------------------------------------------------------------------------------ Mortgage Total Investment Amount of Balances of in Local Limited Investment Paid Local Limited Property and Accumulated Net Book Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Madisonville, Manor Senior Texas Citizens Complex, Ltd. 174,000 174,000 895,000 1,151,000 164,000 987,000 Mt. Graham Safford, Housing, Ltd. Arizona 410,000 410,000 1,394,000 1,886,000 594,000 1,292,000 Northside Angleton, Plaza Texas Apartments, Ltd. 282,000 282,000 1,348,000 1,745,000 280,000 1,465,000 Pampa Manor, Pampa, L.P. Texas 180,000 180,000 838,000 1,032,000 212,000 820,000 Regency Monrovia, Court California Partners 1,692,000 1,690,000 5,017,000 7,707,000 1,396,000 6,311,000 Sandpiper Aulander, Square, a North Limited Carolina Partnership 219,000 219,000 938,000 1,193,000 261,000 932,000 Seneca Falls Seneca East Apartments Falls, New Company II, L.P. York 270,000 270,000 885,000 1,229,000 195,000 1,034,000 Vernon Manor, Vernon, L.P. Texas 177,000 177,000 745,000 905,000 184,000 721,000 Waterford Calhoun Place, a Limited Falls, South Partnership Carolina 272,000 272,000 1,169,000 1,503,000 513,000 990,000 Yantis Housing, Yantis, Ltd. Texas 145,000 145,000 622,000 842,000 185,000 657,000 ------------- ---------- ------------ ----------- ---- ------- ----------- $ 7,464,000 $7,462,000 $25,864,000 $36,406,000 $8,876,000 $27,530,000 ============= ========== ============ =========== =========== ===========
49 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2003
-------------------------------------------------------------------------------------- For the year ended December 31, 2002 -------------------------------------------------------------------------------------- Year Investment Estimated Useful Partnership Name Rental Income Net Loss Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Alpine Manor, L.P. $ 121,000 $ (17,000) 1994 Completed 40 Baycity Village Apartments, Limited Partnership 309,000 (31,000) 1994 Completed 30 Beckwood Manor Seven Limited Partnership 148,000 (41,000) 1993 Completed 27.5 Briscoe Manor Limited Partnership 179,000 (50,000) 1994 Completed 27.5 Evergreen Four Limited Partnership 83,000 (40,000) 1994 Completed 27.5 Fawn Haven Limited Partnership 85,000 (15,000) 1994 Completed 27.5 Fort Stockton Manor, L.P. 131,000 (22,000) 1994 Completed 40 Hidden Valley Limited Partnership 182,000 (23,000) 1994 Completed 40 HOI Limited Partnership Of Lenoir 148,000 (18,000) 1993 Completed 40 Indian Creek Limited Partnership 148,000 (28,000) 1994 Completed 27.5 Laurel Creek Apartments 194,000 (19,000) 1994 Completed 27.5 Madisonville Manor Senior Citizens Complex, Ltd. 110,000 (1,000) 1994 Completed 50 Mt. Graham Housing, Ltd. 148,000 (64,000) 1994 Completed 27.5 Northside Plaza Apartments, Ltd. 171,000 (10,000) 1994 Completed 50 Pampa Manor, L.P. 95,000 (26,000) 1994 Completed 40 Regency Court Partners 686,000 (75,000) 1994 Completed 40 Sandpiper Square, a Limited Partnership 98,000 (23,000) 1994 Completed 35 Seneca Falls East Apartments Company II, L.P. 152,000 (25,000) 1998 Completed 40
50 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2003
-------------------------------------------------------------------------------------- For the year ended December 31, 2002 -------------------------------------------------------------------------------------- Year Investment Estimated Useful Partnership Name Rental Income Net Loss Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Vernon Manor, L.P. 96,000 (8,000) 1994 Completed 40 Waterford Place, a Limited Partnership 126,000 (46,000) 1994 Completed 40 Yantis Housing, Ltd. 77,000 (24,000) 1994 Completed 40 ----------- ----------- $ 3,487,000 $ (606,000) =========== ===========
51 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2002
------------------------------- ----------------------------------------------------- As of March 31, 2002 As of December 31, 2001 -------------------------------------------------------------------------------------- Mortgage Total Investment Amount of Balances of in Local Limited Investment Paid Local Limited Property and Accumulated Net Book Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Alpine Manor, Alpine, L.P. Texas $ 195,000 $ 195,000 $ 909,000 $1,170,000 $ 221,000 $ 949,000 Baycity Baytown, Village Texas Apartments, Limited Partnership 301,000 301,000 1,455,000 1,829,000 550,000 1,279,000 Beckwood Marianna, Manor Seven Arkansas Limited Partnership 307,000 307,000 1,383,000 1,789,000 527,000 1,262,000 Briscoe Manor Galena, Limited Maryland Partnership 308,000 308,000 1,481,000 1,845,000 505,000 1,340,000 Evergreen Maynard, Four Limited Arkansas Partnership 195,000 195,000 865,000 1,129,000 325,000 804,000 Fawn Haven Manchester, Limited Ohio Partnership 167,000 167,000 851,000 1,072,000 333,000 739,000 Fort Stockton Ft.Stockton, Manor, L.P. Texas 224,000 224,000 1,046,000 1,248,000 216,000 1,032,000 Hidden Gallup, Valley New Limited Mexico Partnership 412,000 412,000 1,477,000 1,981,000 378,000 1,603,000 HOI Limited Lenoir, Partnership North Of Lenoir Carolina 198,000 198,000 539,000 1,173,000 283,000 890,000 Indian Creek Bucyrus, Limited Ohio Partnership 306,000 306,000 1,462,000 1,777,000 483,000 1,294,000 Laurel San Luis Creek Obispo, Apartments California 1,030,000 1,030,000 611,000 2,165,000 534,000 1,631,000
52 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2002
------------------------------- --------------------------------------------------- As of March 31, 2002 As of December 31, 2001 ------------------------------------------------------------------------------------ Mortgage Total Investment Amount of Balances of in Local Limited Investment Paid Local Limited Property and Accumulated Net Book Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Madisonville, Manor Senior Texas Citizens Complex, Ltd. 174,000 174,000 898,000 1,150,000 140,000 1,010,000 Mt. Graham Safford, Housing, Ltd. Arizona 410,000 410,000 1,400,000 1,883,000 525,000 1,358,000 Northside Angleton, Plaza Texas Apartments, Ltd. 282,000 282,000 1,354,000 1,741,000 244,000 1,497,000 Pampa Manor, Pampa, L.P. Texas 180,000 180,000 841,000 1,032,000 186,000 846,000 Regency Monrovia, Court California Partners 1,692,000 1,690,000 5,088,000 7,708,000 1,200,000 6,508,000 Sandpiper Aulander, Square, a North Limited Carolina Partnership 219,000 219,000 942,000 1,193,000 231,000 962,000 Seneca Falls Seneca East Apartments Falls, New Company II, L.P. York 270,000 270,000 888,000 1,227,000 151,000 1,076,000 Vernon Manor, Vernon, L.P. Texas 177,000 177,000 748,000 905,000 162,000 743,000 Waterford Calhoun Place, a Limited Falls, South Partnership Carolina 272,000 272,000 1,174,000 1,501,000 452,000 1,049,000 Yantis Housing, Yantis, Ltd. Texas 145,000 145,000 625,000 839,000 163,000 676,000 ------------- ---------- ------------ ----------- ---- ------- ----------- $ 7,464,000 $7,462,000 $26,037,000 $36,357,000 $7,809,000 $28,548,000 ============= ========== ============ =========== =========== ===========
53 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2002
-------------------------------------------------------------------------------------- For the year ended December 31, 2001 -------------------------------------------------------------------------------------- Year Investment Estimated Useful Partnership Name Rental Income Net Loss Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Alpine Manor, L.P. $ 113,000 $ (19,000) 1994 Completed 40 Baycity Village Apartments, Limited Partnership 248,000 (51,000) 1994 Completed 30 Beckwood Manor Seven Limited Partnership 148,000 (75,000) 1993 Completed 27.5 Briscoe Manor Limited Partnership 174,000 (64,000) 1994 Completed 27.5 Evergreen Four Limited Partnership 89,000 (37,000) 1994 Completed 27.5 Fawn Haven Limited Partnership 84,000 (24,000) 1994 Completed 27.5 Fort Stockton Manor, L.P. 123,000 (14,000) 1994 Completed 40 Hidden Valley Limited Partnership 176,000 (18,000) 1994 Completed 40 HOI Limited Partnership Of Lenoir 142,000 (26,000) 1993 Completed 40 Indian Creek Limited Partnership 145,000 (33,000) 1994 Completed 27.5 Laurel Creek Apartments 180,000 (4,000) 1994 Completed 27.5 Madisonville Manor Senior Citizens Complex, Ltd. 104,000 (12,000) 1994 Completed 50 Mt. Graham Housing, Ltd. 138,000 (69,000) 1994 Completed 27.5 Northside Plaza Apartments, Ltd. 151,000 (30,000) 1994 Completed 50 Pampa Manor, L.P. 94,000 (27,000) 1994 Completed 40 Regency Court Partners 657,000 (162,000) 1994 Completed 40 Sandpiper Square, a Limited Partnership 99,000 (17,000) 1994 Completed 35 Seneca Falls East Apartments Company II, L.P. 144,000 (27,000) 1998 Completed 40
54 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2002
-------------------------------------------------------------------------------------- For the year ended December 31, 2001 -------------------------------------------------------------------------------------- Year Investment Estimated Useful Partnership Name Rental Income Net Loss Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Vernon Manor, L.P. 92,000 (4,000) 1994 Completed 40 Waterford Place, a Limited Partnership 125,000 (50,000) 1994 Completed 40 Yantis Housing, Ltd. 73,000 (26,000) 1994 Completed 40 ----------- ----------- $ 3,299,000 $ (789,000) =========== ===========
55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 By: WNC & Associates, Inc., General Partner By: /s/ Wilfred N. Cooper, Jr. -------------------------- Wilfred N. Cooper, Jr., President of WNC & Associates, Inc. Date: July 14, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Wilfred N. Cooper, Jr. -------------------------- Wilfred N. Cooper, Jr., Chief Executive Officer, President and Director of WNC & Associates, Inc. (principal executive officer) Date: July 14, 2004 By: /s/ Thomas J. Riha ---------------------- Thomas J. Riha, Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. (principal financial officer and principal accounting officer) Date: July 14, 2004 By: /s/ Wilfred N. Cooper, Sr. -------------------------- Wilfred N. Cooper, Sr., Chairman of the Board of WNC & Associates, Inc. Date: July 14, 2004 By: /s/ David N. Shafer ------------------- David N Shafer, Director of WNC & Associates, Inc. Date: July 14, 2004 56 EX-32 2 n41x32204.txt EXHIBIT 32-2 NAT 4-1 10-K EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") for the year ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C., section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, I, Thomas J. Riha, Chief Financial Officer of WNC & Associates, Inc., general partner of the Partnership, hereby certify that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. /s/THOMAS J. RIHA - ----------------- Thomas J. Riha Senior Vice President and Chief Financial Officer of WNC & Associates, Inc. July 14, 2004 EX-32 3 n41x32104.txt EXHIBIT 32-1 NAT 4-1 04 ANNUAL FILING EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") for the year ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C., section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, I, Wilfred N. Cooper, Jr., President and Chief Executive Officer of WNC & Associates, Inc., general partner of the Partnership, hereby certify that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. /s/WILFRED N. COOPER, JR. - ------------------------- Wilfred N. Cooper, Jr. President and Chief Executive Officer of WNC & Associates, Inc. July 14, 2004 EX-31 4 n41x311104.txt EXHIBIT 31-1 NAT 4-1 04 EXHIBIT 31.1 CERTIFICATIONS I, Wilfred N. Cooper, Jr., certify that: 1. I have reviewed this annual report on Form 10-K of WNC HOUSING TAX CREDIT FUND IV, L.P. Series 1; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 14, 2004 /s/ Wilfred N. Cooper, Jr. --------------------------- President and Chief Executive Officer of WNC & Associates, Inc. EX-31 5 n41x31204.txt EXHIBIT 31-2 NAT 4-1 04 EXHIBIT 31.2 CERTIFICATIONS I, Thomas J. Riha, certify that: 1. I have reviewed this annual report on Form 10-K of WNC HOUSING TAX CREDIT FUND IV, L.P., Series 1; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 14, 2004 /s/ Thomas J. Riha ------------------ Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. EX-99 6 regency.txt EXHIBIT 99.24 SIGNIFICANT SUBREGENCY COURT REGENCY COURT PARTNERS A California Limited Partnership (CI-WA Project No. 92-002-S) ANNUAL EXAMINATION ----------------- December 31, 2003 ----------------- CONTENTS Page INDEPENDENT AUDITOR'S REPORT 1-2 FINANCIAL STATEMENTS: Balance Sheets 3-4 Statements of Operations and Changes in Partners' Equity 5 Statements of Changes in Partners' Equity 6 Statements of Cash Flows 7-8 Notes to Financial Statements 9-14 SUPPLEMENTARY INFORMATION: Supplemental Schedule of Expenses 15 Supplemental Data Required by CHFA 16-18 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS 19-20 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS 21 CERTIFICATION OF GENERAL PARTNER 22 1730 Havens Point Place Carlsbad, California 92008-3611 Jack Gilk Telephone: 760.434.8845 Facsimile: 760.434.8865 Email: jack@gilkcpa.com Certified Public Accountant Partners Regency Court Partners Costa Mesa, California INDEPENDENT AUDITOR'S REPORT I have audited the accompanying balance sheet of Regency Court Partners, a California Limited Partnership (CHFA Project No. 92-002-S) as of December 31, 2002 and 2003, and the related statements of operations and changes in partners' equity, and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with auditing standards generally accepted in the United States, Government Auditing Standards issued by the Comptroller General of the United States, and the standards for financial and compliance audits contained in California Housing Finance Agency Audited Financial Statements Handbook (revised December 1991). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Regency Court Partners, a California Limited Partnership (RHCP Project No. 92-002-S) as of December 31, 2002 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. My audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information shown on pages 15 to 18 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of Regency Court Partners (RHCP Project No. 92-002-S). Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. Regency Court Partners CHFA Project No. 92-002-S Independent Auditor's Report, December 31, 2003 Page 2 - -------------------------------------------------------------------------------- In accordance with Government Auditing Standards, I have also issued a report dated January 19, 2004 on my consideration of Regency Court Partners' internal control structure and a report dated January 19, 2004 on its compliance with laws and regulations. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 2 to the financial statements, the Partnership has suffered recurring losses and an ongoing need for capital infusion to meet normal financial obligations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. January 19, 2004 /s/Jack Gilk V 33-0724657 - -------------------------------------------------------------------------------- See the accompanying notes tofinancial statements. 2
REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) - -------------------------------------------------------------------------------------------------------------- BALANCE SHEETS, DECEMBER 31, 2002 AND 2003 - -------------------------------------------------------------------------------------------------------------- ASSETS 2003 2002 --------------- --------------- Current Assets: Operating cash and equivalents $ 26,132 $ 27,629 Tenant security deposit cash 25,297 24,703 Tenant accounts receivable 2,420 70 Prepaid expenses 16,435 14,211 Restricted tax impound funds 41,071 56,381 Restricted hazard insurance impound funds 17,716 15,438 Restricted earthquake insurance impound funds 18,040 15,646 --------------- --------------- Total current assets 147,111 154,078 --------------- --------------- Property, Building and Equipment, At Cost: Building and improvements 7,703,983 7,703,983 Equipment 3,572 3,572 --------------- --------------- 7,707,555 7,707,555 Accumulated depreciation (1,592,667) (1,396,376) --------------- --------------- Property, building, and equipment - net 6,114,888 6,311,179 --------------- --------------- Other Assets: Replacement reserve 98,996 112,546 Rent up reserve 53,209 52,471 Unamortized deferred costs 13,207 19,811 --------------- --------------- Total other assets 165,412 184,828 --------------- --------------- $ 6,427,411 $ 6,650,085 =============== =============== See the accompanying notes to financial statements. - --------------------------------------------------------------------------------------------------------------
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Regency Court Partners CHFA Project No. 92-002-S Balance Sheets, December 31, 2002 and 2003 Page 2 - ------------------------------------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' EQUITY 2003 2002 --------------- --------------- Current Liabilities: Current portion of mortgage payable $ 82,446 $ 77,002 Accounts payable - 5,745 Tenant security trust liability 25,067 24,457 Accrued interest 23,090 23,531 Accrued property tax 58,896 48,447 Unearned rental income 791 81 --------------- --------------- Total current liabilities 190,290 179,263 --------------- --------------- Long-term Debt: Accrued property tax 254,175 227,748 Accrued interest 246,828 219,828 Accrued expenses 212,187 189,370 Mortgage payable, less current portion 3,962,731 4,045,177 Other note payable 894,900 894,900 --------------- --------------- Total long-term debt 5,570,821 5,577,023 --------------- --------------- Partners' equity 666,300 893,799 --------------- --------------- $6,427,411 $6,650,085 =============== =============== See the accompanying notes tofinancial statements. - --------------------------------------------------------------------------------------------------------------
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REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) - -------------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 - -------------------------------------------------------------------------------------------------------------- 2003 2002 --------------- ---------------- Revenue: Tenant rents $ 607,083 $ 578,821 Rental assistance 131,092 117,227 --------------- ---------------- Gross potential rents 738,175 696,048 Excess rents - 2,273 Less vacancies (12,432) (12,422) --------------- ---------------- Net rental income 725,743 685,899 Laundry and vending income 6,500 7,500 Tenant charges income 160 580 Interest income 4,917 5,241 --------------- ---------------- Total revenues 737,320 699,220 --------------- ---------------- Expenses: Payroll and related costs 102,653 89,113 Administrative 85,493 82,529 Utilities 67,471 61,682 Operating and maintenance 106,225 63,256 Insurance and taxes 93,540 48,366 Interest 306,542 311,656 Depreciation and amortization 202,895 202,895 --------------- ---------------- Total expenses 964,819 859,497 --------------- ---------------- Net loss before extraordinary item (227,499) (160,277) Extraordinary item - reduction of prior years property tax accrual - 85,605 --------------- ---------------- Net Loss (227,499) (74,672) Partners' equity - beginning 893,799 968,471 --------------- ---------------- Partners' equity - ending $ 666,300 $ 893,799 =============== ================ See the accompanying notes to financial statements. - --------------------------------------------------------------------------------------------------------------
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REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) - ------------------------------------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 - ------------------------------------------------------------------------------------------------------------ Old New General General Limited Partner Partner Partner Total ------------ ------------- ------------- -------------- Balance - December 31, 2001 $ 729,544 $ (8,058) $ 246,985 $ 968,471 Net Loss - 2002 - (747) (73,925) (74,672) ------------ ------------- ------------- -------------- Balance - December 31, 2002 729,544 (8,805) 173,060 893,799 Net Loss - 2003 - (2,275) (225,224) (227,499) ------------ ------------- ------------- -------------- Balance - December 31, 2003 $ 729,544 $ (11,080) $ (52,164) $ 666,300 ============ ============= ============= ============== Profit and loss percentage at December 31, 2003 0% 1% 99% 100% ============= ============= ============= =============== See the accompanying notes to financial statements. - -----------------------------------------------------------------------------------------------------------
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REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) - ------------------------------------------------------------------------------------------------------------ STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 - ------------------------------------------------------------------------------------------------------------ 2003 2002 ---------------- ---------------- Cash flows from operating activities: Tenant rental receipts $ 576,787 $553,048 Rental assistance 131,092 117,227 Interest receipts 199 343 Other receipts 6,660 8,080 Payments to suppliersand employees: Administrative expenses (29,121) (30,030) Management fees (38,643) (33,586) Utilities (67,471) (61,682) Salaries and wages (65,915) (53,809) Operating and maintenance (106,045) (71,149) Real estate tax (13,711) - Payroll taxes (6,167) (5,633) Property insurance (39,585) (29,838) Miscellaneous taxes and insurance (20,776) (14,445) Interest on mortgage (279,983) (285,066) Tenant security deposits 16 1,160 ---------------- ---------------- Net cash provided by operating activities 47,337 94,620 ---------------- ---------------- Cash flows from investing activities: Deposits to reserve, including interest (38,122) (34,885) Withdrawals from reserve 51,672 27,967 Reserve interest 2,111 4,898 Funding of other impounds - net 12,507 2,712 ---------------- ---------------- Net cash used in investing activities 28,168 692 ---------------- ---------------- Cash flow used in financing activities Mortgage principal payments (77,002) (71,918) ---------------- ---------------- Net increase (decrease) in cash (1,497) 23,394 Cash at beginning of year 27,629 4,235 ---------------- ---------------- Cash at end of year $ 26,132 $ 27,629 ================ ================ See the accompanying notes to financial statements. - ---------------------------------------------------------------------------------------------------------------
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Regency Court Partners CHFA Project No. 92-002-S Statements of Cash Flows, December 31, 2002 and 2003 Page 2 - --------------------------------------------------------------------------------------------------------------- Reconciliation of Net Loss to Net Cash Provided by Operating Activities 2003 2002 ---------------- ------------------ Net Loss $ (227,499) $ (74,672) Adjustments to reconcile net loss to net cash Provided by operating activities: Depreciation and amortization 202,895 202,895 Decrease (increase) in: Security deposit cash (594) 940 Receivables (2,350) 41 Prepaids (2,224) (3,796) Increase (decrease) in: Payables 180 (7,892) Security deposit liability 610 220 Accrued interest 26,559 26,590 Other accruals 53,768 40,958 Unearned income 710 (161) Reserve and impound interest earned (4,718) (4,898) Extraordinary items - (85,605) ---------------- ------------------ Net cash provided by operating activities $ 47,337 $ 94,620 ================ ================== See the accompanying notes to financial statements. - ---------------------------------------------------------------------------------------------------------------
8 REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: Regency Court Partners is a California limited partnership formed in 1992 to acquire an interest in real property located in Monrovia, California and to construct and operate thereon an apartment complex of 115 units for low-income senior citizens. Mortgage financing was provided by the California Housing Finance Agency (CHFA). Such projects are regulated under the terms of a Regulatory Agreement with CHFA, including rent charges, operating methods and other matters. Capitalization and Depreciation: Assets are recorded at cost and depreciated for financial accounting purposes using the straight-line method over their estimated useful lives. The principal estimated useful lives used in computing the depreciation provisions are 40 years for building and 10 years for equipment The policy of the project is to charge amounts expended for maintenance, repairs, and minor replacements to expense, and to capitalize expenditures for major replacements and betterments. Deferred Costs: Deferred costs, comprised substantially of tax credit fees, are amortized over their estimated useful life of ten years. Cash and Cash Equivalents: For purposes of reporting cash flows, cash includes unrestricted cash in bank, cash on hand, savings accounts, and all certificates of deposit with original maturities of three months or less. The Partnership maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles reqiires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements, and (2) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 9 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 2 - -------------------------------------------------------------------------------- Rental Income and Unearned Rents: The Partnership rents apartment units on a month to month basis and recognizes revenues when earned. Advance receipts of rents are classified as liabilities until earned. Income Taxes: No provision is made for income taxes since such taxes, if any, are the liability of the individual partners. 2. GOING CONCERN AND PROPERTY TAX LIABILITY The accompanying financial statements have been prepared assuming the Partnership will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. A number of factors including recurring losses and a working capital deficiency raise substantial doubt about the Partnership's ability to continue as a going concern. The Partnership has applied for property tax exemption, under the California welfare organization exemption, for 1999 and 1998 property tax. The Partnership has also requested that property taxes from June 1995 through December 1997, be abated. The Partnership believes that it will receive the abatement for 1999, 1998 and future taxes due to the non-profit status of its general partner. In addition, the Partnership is optimistic about receiving an abatement for the property taxes for the period June 1995 through December 1997, as it had a non-profit general partner during that time period. Communications with governmental authorities indicate application processing is three to five years behind. However, authorities state that tax exemption will likely be granted. These financial statements reflect a long-term accrued property tax liability of $254,175 as of December 31, 2003 for unpaid property taxes. The liability is expected to be reduced when future tax exemptions are received. However, cash generated from the Partnership's operations has not been sufficient enough to pay such tax liability. If an abatement for prior years' taxes is not obtained, the Partnership will seek to negotiate a 5 year payment plan during which to pay those taxes. If the Partnership is unsuccessful, it may request additional funds from the limited partner to satisfy this obligation. However, the limited partner is under no obligation to contribute any additional amounts. The Partnership believes the abatement of property taxes, if obtained, will enable the Partnership to fund its on-going operations. - -------------------------------------------------------------------------------- 10 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 3 - -------------------------------------------------------------------------------- The Partnership's continued existence is dependent upon its ability to resolve its liquidity problems, principally by, obtaining an abatement of real property taxes and/or obtaining additional equity capital. While pursuing the tax abatement and/or additional equity funding, the Partnership roust continue to operate on limited cash flow generated internally. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities thaHt might be necessary should the Partnership be unable to continue as a going concern. The Partnership's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms of its financing agreement, to obtain additional financing or refinancing as may be required, and ultimately to attain profitability. 3. EXTRAORDINARY ITEMS During 2002, the partnership received adjusted property tax bills for the periods 1998-1999 through 2001-2002. The portion of the tax bill which relates to voted indebtedness and which will not be abated is due and payable, and accordingly has been set up as a current liability. That portion related to the general tax levy on property is expected to be exempted under the California welfare organization exemption, and has been classified as a long-term debt until receipt of the exemption. The books have been adjusted $85,605 to reflect the new tax bills. This reduction to the accrued tax liability has been treated as an extraordinary item. 4. RESTRICTED FUNDS As required by the Regulatory Agreement with CHFA, the Partnership is required to make monthly impound deposits to cover insurance premiums, property taxes and to maintain an operating reserve and reserve for replacements. These restricted funds are held by, and expenditures are subject to, supervision and approval by CHFA. The operating reserve is funded by a letter of credit. - -------------------------------------------------------------------------------- 11 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 4 - -------------------------------------------------------------------------------- 5. MORTGAGE PAYABLE
California Housing Finance Agency 6.85% real estate mortgage payable in monthly installments of $29,749, including interest. Final payment is due in the year 2025. The mortgage may not be paid in advance without approval of CHFA, nor may the building be sold, demolished or alterations made without CHFA's prior approval. $4,045,177 Less current portion (82,446) ----------- $3,962,731 =========== Principal amounts maturing for the next five years are: 2004 $82,446 2005 88,274 2006 94,514 2007 101,196 2008 108,349 6. OTHER NOTE PAYABLE Community Development Commission, County of Los Angeles (CDC) 3% construction loan secured by second trust deed on buildings and improvements. Payments made to the extent there are residual receipts. In the event that residual rental receipts are available in any year, 70% thereof shall be paid to the holder of the construction loan and the remaining 30% balance will be paid to the CDC as rent on the ground lease. Upon payment of $750,000 of the outstanding balance, 3.4% of the residual rental receipts shall be paid to the CDC as repayment of principal and interest All unpaid amounts will be due and payable in the year 202. Accrued interest is $246,828 at December 31, 2003. $ 894,900
- -------------------------------------------------------------------------------- 12 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 5 - -------------------------------------------------------------------------------- 7. RELATED PARTY TRANSACTIONS The Regulatory Agreement with CHFA limits the maximum annual distributions to partners. Such distributions are payable only from surplus cash (as defined), but accumulate and may be distributed to the extent surplus cash is generated from future operations. No surplus cash was available at December 31, 2003 and 2002. Capital Contributions: The limited partner, WNC Housing Tax Credit Fund IV, L.P. Series I, a 99% limited partner, is required to make a capital contribution of $1,691,585, in amounts and at times as stated in the Limited Partnership Agreement. The limited partner's cash contributions may be reduced to account for reduced tax benefits, if any. As of December 31, 2003, the limited partner has contributed $1,641,782. Profit or Loss Allocations: All items included in the calculation of income or loss not arising from a sale or refinancing, and all tax credits, shall be allocated 99% to the limited partner and 1% to the general partner. Cash Distributions: Residual rental receipts, as defined, shall be distributed as follows: (i) 70% to the CDC until $750,000 of the construction loan has been repaid; 3.4% thereafter; (ii) 30% to the CDC as payment under the ground lease; (iii)The remaining residual rental receipts shall be distributed to the Partners in proportion to their partnership interests. Distribution of sale or refinancing proceeds, as defined, shall be made in accordance with the Limited Partnership Agreement. A monthly asset management fed is payable to the general partner. Fees of $22,817 and $22,370 were incurred for the years 2003 and 2002 respectively. An affiliate of the former general partner provided previous property management services to the Partnership. Included in long-term accrued expenses at December 31, 2003 and December 31, 2002 is $$8,000 of management fees payable to such entity. - -------------------------------------------------------------------------------- 13 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 6 - -------------------------------------------------------------------------------- An affiliate of the limited partner provides property management services to the Partnership. Property management fees were $35,780 and $33,926 for the years 2003 and 2002, respectively. 8. COMMITMENTS AND CONTINGENCIES Purchase Option: On January 4, 1994, the Partnership executed a Disposition and Development Agreement with the CDC. The Disposition and Development Agreement grants the Partnership the option to purchase the Rental Property under construction commencing on the first day of the 15th year of the ground lease and ending on the last day of the 20th year of the ground lease. The purchase price will be the future value of the CDC's original interest in the Rental Property under construction based on an 8% annually compounded return, legs any payments made by the Partnership related to interest. Ground Lease: On January 4, 1994, the Partnership executed a Ground Lease Agreement with the CDC. Future minimum rental payments on the ground lease are based on 30% of residual rental receipts, as defined, and will be paid annually through 2049. No payments were made during the years ended December 31, 2003 and 2002. 9. CURRENT VULNERABILITY WE TO CERTAIN CONCENTRATIONS The Partnership's sole asset is a 115-unit apartment complex. The Partnership's operations are concentrated in the multifamily real estate market In addition, the Partnership operates in a heavily regulated environment. The operations of the project are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to CHFA. Such administrative directives, rules and regulations are subject to change by an act of congress, the State of California or an administrative change mandated by CHFA. Such changes may occur with little notice or inadequate funding to pay for related costs, including the additional administrative burden, to comply with a change. - -------------------------------------------------------------------------------- 14 SUPPLEMENTARY INFORMATION
REGENCY COURT PARTNERSCHFA Project No. 92-002-S (A California Limited Partnership) - -------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL SCHEDULE OF EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2002 and 2003 - -------------------------------------------------------------------------------------------------------------- 2003 2002 ---------------- ---------------- On-site manager salary $ 24,816 $ 23,646 Office salaries 10,434 10,238 Maintenance salaries 27,604 22,986 Payroll taxes and workers' compensation 17,115 11,779 Employee benefits 6,460 4,960 Employee rent-free apartment 16,224 15,504 ---------------- ---------------- Subtotal payroll and related expenses 102,653 89,113 ---------------- ---------------- Advertising 412 302 Renting expenses 1,458 229 Office expenses 2,749 2,931 Management fee 35,780 33,925 Asset management fee 22,817 22,370 Legal - - Audit fee 5,700 5,300 Telephone 3,982 3,753 Educational and social programs 11,520 11,520 Miscellaneous administrative 1,075 2,199 ---------------- ---------------- Subtotal administrative expenses, 85,493 82,529 ---------------- ---------------- Electricity 17,282 19,723 Water and Sewer 27,532 25,565 Gas utilities 22,657 16,394 ---------------- ---------------- Subtotal utilities expenses 67,471 61,682 ---------------- ---------------- Maintenance supplies 9,024 7,226 Maintenance supplies - replacement reserve 53,804 25,154 Grounds supplies 468 62 Contract maintenance and repairs 6,416 4,458 Grounds contract 11,524 9,751 Exterminating 1,730 1,540 Trash removal 6,686 5,158 Heating repair 6,542 1,789 Decorating and painting 7,325 4,570 Miscellaneous operating and maintenance 2,706 3,548 ---------------- ---------------- Subtotal operating and maintenance expenses 106,225 63,256 ---------------- ---------------- Property and comprehensive insurance 26,197 19,734 Earthquake insurance 13,388 10,105 Property taxes 50,587 15,187 Miscellaneous taxes and licenses 3,368 3,340 ---------------- ---------------- Subtotal insurance and taxes 93,540 48,366 ---------------- ---------------- Interest 306,542 311,656 ---------------- ---------------- Depreciation and amortization 202,895 202,895 ---------------- ---------------- Total operating and maintenance expenses $ 964,819 $ 859,497 ================ ================ - --------------------------------------------------------------------------------------------------------------
15 REGENCY COURT PARTNERSCHFA Project No. 92-002-S (A California Limited Partnership) - -------------------------------------------------------------------------------- SUPPLEMENTAL DATA REQUIRED BY CHFA FOR THE YEAR ENDED DECEMBER 31, - -------------------------------------------------------------------------------- 2003 CASH ON HAND AND IN BANKS --- Unrestricted accounts: Cash on hand $ 300 Checking account 3,594 Operating deposit 1,700 Operating savings 20,538 ---------- Balance, December 31, 2003 $26,132 ---------- Restricted accounts: Tenant security deposits - checking $ 3,512 Tenant security deposits - savings 21,785 ---------- Balance, December 31, 2003 $ 25,297 ---------- Tenant security deposits are held in a separate federally insured interest bearing bank account in the name of Regency Court Partners. Interest earned is retained for project operations. The balance of the Security Deposit account is more than the liability for security deposits. ACCOUNTS RECEIVABLE Accounts receivable at December 31, 2003 consists of $1,740 due from tenants, of which $1,160 is past due. MORTGAGE IMPOUND ACCOUNTS
Property Earthquake Taxes Insurance Insurance Balance, December 2002 $ 56,381 $ 15,438 $ 15,646 Transfers ( 1,600) 1,600 Insurance deposits (4 x 2,585) - 10,340 - Insurance deposits (8 x 2,160) - 17,280 - Insurance deposits (5 x 980) - - 4,900 Insurance deposits (7 x 1,205) - - 8,435 Tax or insurance payments (13,710) (26,949) (12,541) Interest earned - 1,607 - --------- ---------- ----------- Balance, December 31, 2003 $ 41,071 $ 17,716 $ 18,040 ========= ========== =========== - -------------------------------------------------------------------------------------------------------
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Regency Court Partners CHFA Project No. 92-002-S Supplemental Data Required by CHFA, December 31, 2003 Page 2 - ------------------------------------------------------------------------------------------------------------ RESERVE FOR REPLACEMENTS In accordance with the provisions of the Regulatory Agreement, restricted cash and investments are held by the California Housing Finance Agency to be used for replacements of property with the approval of CHFA as follows: Balance December 31, 2002 112,546 Monthly deposits 33,000 Interest earned to December 31, 2003 2,372 Withdrawals (48,922) -------------- Balance confirmed by mortgagee - December 31, 2003 $ 98,996 ============== BUILDINGS AND IMPROVEMENTS Buildings and Improvements Equipment Total Balance, January 1 $ 7,703,983 $ 3,572 $ 7,707,555 Additions - - - ------------ --------------- -------------- Balance, December 31 7,703,983 3,572 7,707,555 Less accumulated depreciation (1,589,095) (3,572) (1,592,667) ------------ --------------- -------------- Net $ 6,114,888 $ - $ 60,114,888 ============ =============== ============== ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable are payable to suppliers and are being paid on a current basis. Non-current accrued expenses at December 31, 2003 and 2002 includes amounts payable to Alken Management Company ($88,000 for prior management services) and the Los Angeles County Sanitation ($79,000 for initial hook-up fees). As of December 31, 2003 there has been no resolution to these accrued expenses. GROSS POTENTIAL RENTS Gross potential rent includes: Tenant rental payments $578,427 Housing assistance payments 131,092 Manager's rent-free apartment 16,224 Vacancy loss 12,432 Excess assistance payments - ------------ Total gross potential rent $738,175 ============ - ------------------------------------------------------------------------------------------------------------ 17
Regency Court Partners CHFA Project No. 92-002-S Supplemental Data Required by CHFA, December 31, 2003 Page 3 - -------------------------------------------------------------------------------------------- MANAGEMENT FEE The management fee has been calculated at 5% of collected rental income amounting to $35,780. In addition is a general partner asset management fee of $22,817. SURPLUS CASH COMPUTATION Add: Cash on hand and in banks $ 26,132 Other receivables 2,420 Tenant security deposits 25,297 ----------------- Total 53,849 ----------------- Less current obligations: Accounts payable and accrued expenses (due within 30 days) - Tenant security deposits 25,067 Accrued interest 23,090 Prepaid revenue 791 ----------------- Total 48,948 ----------------- Surplus cash (deficiency), end of year $ 4,901 ================= Current year owner distribution allowed under the Regulatory Agreement with CHFA $ - ================= ACCUMULATED LIMITED DISTRIBUTIONS There are no allowable accumulated distributions at December 31, 2003. - --------------------------------------------------------------------------------------------
18 1730 Havens Point Place Carlsbad, California 92008-3611 Jack Gilk Telephone: 760.434.8845 Facsimile: 760.434.8865 Email: jack@gilkcpa.com Certified Public Accountant Partners Regency Court Partners Costa Mesa, California INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFOMRED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS I have audited the financial statements of Regency Court Partners, a California Limited Partnership (CHFA Project No. 92-002-S) as of and for the year ended December 31, 2003, and have issued my report thereon dated January 19, 2004, which contains an explanatory paragraph regarding the Partnership's ability to continue as a going concern. I conducted my audit in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan arid perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The management of the Project is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management authorization and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that the state-assisted program is managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures ma become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. In planning and performing my audit for the year ended December 31, 2003, I obtained an understanding of the design of relevant internal control structure policies and procedures and determined whether they had been placed in operation, and I assessed control risk in order to determine my auditing procedures for the purpose of expressing my opinions on the Project's basic financial statements and on its compliance with specific requirements applicable to its major state-assisted program and not to provide assurance on the internal control structure. - -------------------------------------------------------------------------------- 19 Regency Court Partners CHFA Project No. 92-002-S Independent Auditor's Report on Internal Controls, December 31, 2003 Page 2 - -------------------------------------------------------------------------------- I performed tests of controls to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that I considered relevant to preventing or detecting material noncompliance with specific requirements applicable to the Project's state-assisted program. My procedures were less in scope than would be necessary to render an opinion on internal control structure policy and procedures. Accordingly, I do not express such an opinion. My consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would he material in relation to the financial statements being audited or that noncompliance with laws and regulations that would be material to a state-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. I noted no matters involving the internal control structure and its operations that I consider to be material weaknesses as defined above. This report is intended solely for he information of the partners, management and their staff, and the California Housing Finance Agency and is not intended to be and should not be used by anyone other than these specified parties. /s/Jack Gilk January 19, 2004 33-0724657 - -------------------------------------------------------------------------------- 20 1730 Havens Point Place Carlsbad, California 92008-3611 Jack Gilk Telephone: 760.434.8845 Facsimile: 760.434.8865 Email: jack@gilkcpa.com Certified Public Accountant Partners Regency Court Partners Costa Mesa, California INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS BASED N AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS I have audited the financial statements of Regency Court Partners, a California Limited Partnership (CHFA Project No. 92-002-S) as of and for the year ended December 31, 2003, and have issued my report thereon dated January 19, 2004 which contains an explanatory paragraph regarding the Partnership's ability to continue as a going concern. I conducted my audit in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement re free of material misstatement. Compliance with laws, regulations and contracts applicable to the project is the responsibility of the project's manager nt. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, I performed tests of the project's compliance with certain provisions of laws, regulations and contracts. However, my objective was not to provide an opinion on overall compliance with such provisions. Accordingly, I do not express such an opinion. I also considered those compliance matters comprehended in theCalifornia Housing Finance Agency "Audited Financial Statements Handbook." (Revised December 1991) The results of my tests of compliance indicate that, with respect to the items tested, the project complied, in all material respects, with the provisions referred to in the second and third paragraphs of this report. With respect to items not tested, nothing came to my attention that caused me to believe that the project had not complied, in all material respects, with those provisions. This report is intended solely for the information of the partners, management and their staff, and the California Housing Finance Agency and is not intended to be and should not be used by anyone other than these specified parties. /s/ Jack Gilk January 19, 2004 33-0724657 - -------------------------------------------------------------------------------- 21 REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) ------------------------------------------------------------------------------- CERTIFICATION OF GENERAL PARTNER, DECEMBER 31, 2003 ------------------------------------------------------------------------------- We hereby certify that we have examined the accompanying financial statements and supplemental data of Regency Court Partners, CHFA Project No. 92-002-S and, to the best of our knowledge and belief, the same is complete and accurate. Officers: --------------- ------- (signature) (date) --------------- ------- (signature) (date) TIN: 95-4409236 - -------------------------------------------------------------------------------- 22 EX-99 7 laurelc.txt EXHIBIT 99.23 SIGNIFICANT SUB LAUREL CREEK LAUREL CREEK APARTMENTS (A California Limited Partnership) AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2003 LAUREL CREEK APARTMENTS AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2003 TABLE OF CONTENTS ----------------- Page -------- Independent Auditors' Report 1 Balance Sheet 2 Statement of Income, Expenses and Changes in Partners' Capital 3 Statement of Cash Flows 4 Notes to Financial Statements 5 WALLACE ROWE & Associates Accounting Firm ================================================================================ 430 Verbena Court Pleasant Hill, CA 94523 (925) 229-1950 Fax (925) 229-1952 wroweassoc@ aol.com INDEPENDENT AUDITORS' REPORT To the Board of Directors Laurel Creek Apartments San Luis Obispo, California We have audited the accompanying balance sheet of Laurel Creek Apartments (A California Limited Partnership) as of December 31, 2003 and December 31, 2002 and the related statements of income, expenses, and changes in partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Laurel Creek Apartments as of December 31, 2003 and December 31, 2002, and the results of its operations for the years then ended in conformity with generally accepted accounting principles. /s/Wallace Rowe & Associates January 23, 2004 LAUREL CREEK APARTMENTS BALANCE SHEET DECEMBER 31, 2003 AND 2002
2003 2002 ------------------ ------------------ ASSETS CURRENT ASSETS Cash (Note 2) $ 57,316 $ 47,077 Accounts receivable 215 820 Prepaid expenses 2,652 1,760 ------------------ ------------------- TOTAL CURRENT ASSETS 60,183 49,657 Restricted reserves (Note 3) 55,209 50,022 Land, structures and equipment, net of accumulated depreciation of $669,9B3 and $601,947 (Note 4) 1,495,371 1,563,407 Organizational costs, net of accumulated amortization of $17,329 and $15,661 (Note 5) 9,589 11,257 ------------------ ------------------- TOTAL ASSETS $ 1,620,352 $ 1,674,343 ================== =================== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Accounts payable - other $ 8,564 $ 6,836 Accounts payable - related party (Note 7) 2,007 1,666 Security deposits payable 8,592 8,438 Current portion of long-term debt (Note 6) 31,336 35,701 ------------------ ------------------- TOTAL CURRENT LIABILITIES 50,499 52,641 Long-term debt (Note 6) 544,925 573,491 ------------------ ------------------- TOTAL LIABILITIES 595,424 626,132 Partners' capital 1,024,928 1,048,211 ------------------ ------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,620,352 $ 1,674,343 ================== ===================
See accompanying notes. 2 LAUREL CREEK APARTMENTS STATEMENT OF INCOME, EXPENSES AND CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002 ------------------ ------------------- OPERATING INCOME Rental income $ 205,982 $ 194,199 Tenant charges 1,043 1,769 Other 2,034 1,226 ------------------ ------------------- TOTAL OPERATING INCOME 209,059 197,194 ------------------ ------------------- OPERATING EXPENSES Administration 20,953 20,319 Insurance and taxes 5,660 5,307 Maintenance 28,676 54,090 Utilities 22,674 21,627 Depreciation and amortization 69,704 69,304 ------------------ ------------------- TOTAL EXPENSES 147,667 171,047 ------------------ ------------------- NET INCOME (LOSS) FROM OPERATIONS 61,392 26,147 ------------------ ------------------- OTHER INCOME AND EXPENSES Interest income 1,614 2,072 Interest expense (43,596) (47,020) ------------------ -------------------- NET OTHER INCOME UNDER EXPENSES (41,982) (44,948) ------------------ -------------------- 19,410 (18,801) NET INCOME (LOSS) BEGINNING PARTNERS' CAPITAL 1,048,211 1,095,824 Partner withdrawals (42,693) (28,812) ------------------ -------------------- ENDING PARTNERS' CAPITAL $ 1,024,928 $ 1,048,211 ================== ===================
See accompanying notes. 3 LAUREL CREEK APARTMENTS STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2003 AND 2002
2003 2002 ------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Rents received $ 206,590 $ 194,429 Other operating revenues 3,077 1,769 Cash payments for goods and services (76,786) (104,975) ------------------- -------------------- Net cash provided (used) by operating activities 132,881 91,223 ------------------- -------------------- CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Increases in security deposits 154 178 Additions (uses) of replacement reserves (4,800) (17,603) ------------------- -------------------- Net cash provided (used) by noncapital financing activities (4,646) (17,425) ------------------- -------------------- CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES; Capital withdrawals (42,693) (28,812) Payment of debt (32,931) (1,410) ------------------- -------------------- Net cash provided (used) by capital and related financing activities (75,624) (30,222) ------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 1,224 2,072 Interest paid on notes (43,596) (47,020) ------------------- -------------------- Net cash provided (used) by investing activities (42,372) (44,948) ------------------- -------------------- NET INCREASE (DECREASE) IN CASH 10,239 (1,372) CASH - BEGINNING OF YEAR 47,077 48,449 ------------------- -------------------- CASH - END OF YEAR $ 57,316 $ 47,007 =================== ==================== RECONCILIATION OF OPERATING LOS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income from operations $ 61,392 $ 26,147 Adjustments to reconcile net loss to Net cash provided by operating activities: Depreciation and amortization 69,704 69,704 Decrease in accounts receivable 608 230 Increase in prepaid expenses (892) (587) Increase in accounts payable - other 2,813 (1,447) Decrease in accounts payable - related parties (744) (2,824) ------------------- -------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 132,881 $ 91,223 =================== ==================== See accompanying notes.
4 LAUREL CREEK APARTMENTS NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2003 Note 1 - DEFINITION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Laurel Creek Apartments is a California Limited Partnership which was formed on May 17, 1994. The partnership was formed to construct, acquire, own, operate, maintain, manage, lease, sell, mortgage or otherwise dispose of a 24 unit apartment complex located in the City of San Luis Obispo,, California. As of the report date there are two partners in the partnership, consisting of one general and one limited partner. Summary of Significant Accounting Policies a. Basis of accounting The partnership is accounted for on the accrual basis of accounting. Under this method revenues are recognized when they are earned and expenses are recognized when they are incurred. b. Fixed assets and depreciation Fixed assets are carried at cost. Expenditures for the fixed assets are capitalized. Maintenance and repairs are charged to operations. Depreciation is calculated using the straight-line basis over the estimated useful lives. c. Income taxes Taxable income or expenses and related tax credits are not reflected as expenses or credits of the partnership. These items are the responsibilities of the individual partners. 5 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (Continued) Note 2- CASH Cash consists of $56,486 deposited into savings or checking accounts, and $830 is on deposit with the State of California Local Agency Investment Fund. At December 31, 2003 the amount deposited into the savings accounts and the Local Agency Investment Fund earned interest at rates from.5% to 1.56% respectively. Note 3- RESTRICTED CASH Restricted cash consists of $55,209 maintained in a money market account earning 2.02%. Reserves for replacement of structures and equipment totals $44,019 and $11,190 is reserved for repayment of tenant security deposits. Note 4- LAND, STRUCTURES AND EQUIPMENT Property and equipment and accumulated depreciation consist of the following: Accumulated Cost Depreciation ----------- ------------ Land $ 275,000 $ - Building 1,868,634 648,308 Equipment 21,720 21,675 ----------- ------------ $ 2,165,354 $ 669,983 =========== ============ Note 5- ORGANIZATION COSTS Organization costs and accumulated amortization consist of the following: Accumulated Cost Amortization ----------- ------------ Organization costs $ 26,918 $ 17,329 =========== ============ 6 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (Continued) Note 6 - NOTE PAYABLE The Agency has a mortgage note payable to the First Bank of San Luis Obispo. The note requires principal and interest payments totaling $6,385 each month until 5/18/2009. The note bears interest at 7.25% per annum. The following is a schedule of the debt payment requirements to maturity: Year ending December 31 2004 $ 76,620 2005 76,620 2006 76,620 2007 76,620 2008 76,620 Thereafter 378,436 ----------------- Total 761,536 Less amounts representing interest 185,275 ----------------- $ 576,261 ================= Note 7 - RELATED PARTIES The accounting and administrative functions of the partnership are performed by employees of the Housing Authority of the City of San Luis Obispo (the Authority). Two members of the general partner's (San Luis Obispo Nonprofit Housing Corporation) board of directors are also members of the board of commissioner's of the Housing Authority of the City of San Luis Obispo. At December 31, 2003 the partnership owed the Authority $2,007. During the year ended December 31, 2003, the partnership paid the Authority $24,302 in maintenance expenses and management fees. 7 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (Continued) Note 8 - LAND DONATION AND LEASE The land upon which the Laurel Creek Apartments were built was originally leased from the City of San Luis Obispo (the City) by the Housing Authority of the City of San Luis Obispo (the Authority). This lease agreement was later assigned from the Authority to the San Luis Obispo Nonprofit Housing Corporation (the Corporation). The lease was later assigned to the Laurel Creek Apartments Partnership. Each of the above mentioned agencies have common board members or in some other manner have oversight responsibilities over the other organizations; which would qualify them as related parties. The lease expires on April 29, 2046, The provisions for extending or renewing the lease term are not specified and are contingent upon the continuation of the project being used to provide affordable housing to lower income families. The annual lease payments are $1 per year. The land was recorded on the Agency's books of accounts at the appraised value on the date the land was assigned to the Agency. This appraised value was $275,000. The value of the land was also recorded as a capital contribution from the general partner on that date. 8 -----END PRIVACY-ENHANCED MESSAGE-----