-----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, PUg6yCsZ1/RscWfedyXoGYQAhNQcQe+GqoKlyK08IRTbiexWZpb6IRLZaWhiH6HK PyMHSNHKuR3UmMZd0LxZuQ== 0001084067-05-000181.txt : 20051122 0001084067-05-000181.hdr.sgml : 20051122 20051122102118 ACCESSION NUMBER: 0001084067-05-000181 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20051122 DATE AS OF CHANGE: 20051122 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: 051220027 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 nt4110k05.txt NAT 4-1 10-K WNC Housing Tax Credit Fund IV L.P., Series 1 Exceptions ---------- The financial statements are presented as unaudited in the Form 10-K as of March 31, 2005 and 2004 and for the three years ended March 31, 2005 as the Report of the Independent Registered Public Accounting Firm could not be filed within the prescribed time period because the issuer was not able to obtain audit opinions which refer to the auditing standards of the Public Company Accounting Oversight Board (United States) (PCAOB) of property partnerships, in which the issuer holds noncontrolling limited partner interests. The non-affiliated local operating partnership general partners engage the accountants auditing each local operating partnership. Historically, the audits, and the reports thereon, of the local operating partnerships were performed in accordance with Generally Accepted Auditing Standards (GAAS). On May 11, 2005 draft guidance was issued by the Public Company Accounting Oversight Board which was confirmed on June 24, 2005 by the AICPA Center for Public Company Audit Firms, that clearly establishes the requirement for the audit reports of the operating partnerships of a Public Fund to refer to the auditing standards of the PCAOB. The audits of the operating partnerships were performed primarily during the months of January, February and March and refer to Generally Accepted Auditing Standards. We have all appropriate originally signed opinions from the operating partnerships; however, they do not refer to the auditing standards of the Public Company Accounting Oversight Board. Our independent registered public accounting firm has performed an audit of the registrant but cannot issue an opinion in accordance with the standards of the Public Company Accounting Oversight Board (United States). Therefore, we are filing our 10-K as "UNAUDITED" as it is without an audit opinion. 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, 2005 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___ No_X_ 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" or the "General Partner"). 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, 2005, 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 of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing 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, 2005 As of December 31, 2004 ------------------------------- ------------------------------------------------- Estimated Mortgage Partnership's Aggregate Loans of General Total Investment Amount of Low Income Local Local Limited Partner in Local Limited Investment Number Housing Limited Partnership Name Location Name Partnership Paid to Date of Units Occupancy Credits(1) Partnership - ------------------------------------------------------------------------------------------------------------------------------------ 1600 Alpine, Capital Alpine Manor, L.P. Texas Company,Inc. $ 195,000 $ 195,000 36 100% $ 394,000 $ 895,000 Baycity Village Apartments, Green Companies Limited Baytown, Development Partnership Texas Group, Inc. 301,000 301,000 62 94% 629,000 1,413,000 Beckwood Phillips Manor Seven Marianna, Development Limited Partnership Arkansas Corporation 307,000 307,000 42 93% 636,000 1,367,000 Briscoe Manor Limited Galena, McKnight & Partnership Maryland Decoster, Inc 308,000 308,000 31 100% 648,000 1,464,000 Evergreen Phillips Four Limited Maynard, Development Partnership Arkansas Corporation 195,000 195,000 24 75% 402,000 855,000 Fawn Haven Georg E. Limited Manchester, and Maharg Partnership Ohio Realty, Inc. 167,000 167,000 28 89% 376,000 838,000 Ft. 1600 Fort Stockton Stockton, Capital Manor, L.P. Texas Company, Inc. 224,000 224,000 36 100% 453,000 1,032,000 Hidden Valley Gallup, Alan Limited New Deke Partnership Mexico Noftsker 412,000 412,000 40 98% 801,000 1,460,000 HOI Limited Lenoir, Housing Partnership Of North Opportunities, Lenoir Carolina Inc. 198,000 198,000 34 97% 400,000 497,000 Indian Creek Limited Bucyrus, Georg E. Partnership Ohio Maharg 306,000 306,000 48 90% 637,000 1,441,000 San Luis San Luis Obispo Laurel Creek Obispo, Non-Profit Apartments California Housing Corp. 1,030,000 1,030,000 24 100% 2,103,000 541,000
6
------------------------------- ------------------------------------------------- As of March 31, 2005 As of December 31, 2004 ------------------------------- ------------------------------------------------- Estimated Mortgage Partnership's Aggregate Loans of General Total Investment Amount of Low Income Local Local Limited Partner in Local Limited Investment Number Housing Limited Partnership Name Location Name Partnership Paid to Date of Units Occupancy Credits(1) Partnership - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Manor Senior Citizens Madisonville, Jean Complex, Ltd. Texas Johnson 174,000 174,000 32 97% 375,000 888,000 Mt. Graham Safford, Rural Housing, Ltd. Arizona Housing, Inc. 410,000 410,000 40 90% 788,000 1,380,000 Northside Plaza Angleton, Jean Apartments, Ltd. Texas Johnson 282,000 282,000 48 100% 607,000 1,335,000 1600 Pampa Pampa, Capital Manor, L.P. Texas Company, Inc. 180,000 180,000 32 100% 363,000 831,000 Community Housing Assistance Program, Inc., a California Regency Court Monrovia, Nonprofit Partners California Corporation 1,692,000 1,690,000 115 100% 3,293,000 4,858,000 Sandpiper Square, Aulander, a Limited North I. Norwood Partnership Carolina Stone 219,000 219,000 24 100% 433,000 930,000 Seneca Falls East Seneca David R. Bacon Apartments Falls, New and Frank Company II, L.P. York Salvatore 270,000 270,000 32 91% 360,000 878,000 1600 Vernon, Capital Vernon Manor, L.P. Texas Company,Inc. 177,000 177,000 28 100% 325,000 739,000 Thomas E. Connelly, Jr., TEC Rental Properties Inc., Calhoun Warren H. Falls, Abernathy, II Waterford Place, a South and Solid Limited Partnership Carolina South, Inc. 272,000 272,000 32 88% 549,000 1,157,000
7
------------------------------- ------------------------------------------------- As of March 31, 2005 As of December 31, 2004 ------------------------------- ------------------------------------------------- Estimated Mortgage Partnership's Aggregate Loans of General Total Investment Amount of Low Income Local Local Limited Partner in Local Limited Investment Number Housing Limited Partnership Name Location Name Partnership Paid to Date of Units Occupancy Credits(1) Partnership - ------------------------------------------------------------------------------------------------------------------------------------ Yantis Housing, Yantis, Charles Housing, Ltd. Texas Cannon Jr. 145,000 145,000 24 96% 287,000 615,000 ----------- ----------- --- --- ----------- ------------ $ 7,464,000 $ 7,462,000 812 95% $14,859,000 $ 25,414,000 =========== =========== === === =========== ============
(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 95% 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, 2004 --------------------------------------------------------------------------- Low Income Housing Credits Allocated Partnership Name Rental Income Net Income (Loss) to Partnership - -------------------------------------------------------------------------------------------------------------------- Alpine Manor, L.P. $ 124 ,000 $ (15,000) 99% Baycity Village Apartments, Limited Partnership 301,000 (110,000) 99% Beckwood Manor Seven Limited Partnership 172,000 (80,000) 95% Briscoe Manor Limited Partnership 190,000 (28,000) 99% Evergreen Four Limited Partnership 100,000 (22,000) 95% Fawn Haven Limited Partnership 81,000 (30,000) 99% Fort Stockton Manor, L.P. 140,000 (19,000) 99% Hidden Valley Limited Partnership 192,000 (13,000) 99% HOI Limited Partnership Of Lenoir 163,000 (14,000) 99% Indian Creek Limited Partnership 144,000 (37,000) 99% Laurel Creek Apartments 220,000 24,000 99% Madisonville Manor Senior Citizens Complex, Ltd. 121,000 (2,000) 99% Mt. Graham Housing, Ltd. 183,000 (51,000) 99% Northside Plaza Apartments, Ltd. 173,000 (10,000) 99% Pampa Manor, L.P. 97,000 (20,000) 99% Regency Court Partners 758,000 (188,000) 99% Sandpiper Square, a Limited Partnership 104,000 (24,000) 99% Seneca Falls East Apartments Company II, L.P. 169,000 (24,000) 99.98% Vernon Manor, L.P. 106,000 (6,000) 99% Waterford Place, a Limited Partnership 128,000 (35,000) 99% Yantis Housing, Ltd. 92,000 (2,000) 99% ---------- ----------- $3,758,000 $ (706,000) ========== ===========
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 or otherwise transferred only if certain requirements in the Partnership Agreement are satisfied. (b) At March 31, 2005, there were 716 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) Except as may have otherwise been previously reported, no unregistered securities were sold by the Partnership during the three years ended March 31, 2005, 2004 and 2003. 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 --------------------------------------------------------------- 2005 2004 2003 2002 2001 ----------- ----------- ----------- ----------- ----------- (unaudited) ASSETS Cash and cash equivalents $ 191,640 $ 222,356 $ 238,047 $ 277,292 $ 312,214 Investments in limited partnerships, net 1,121,294 1,395,876 1,965,138 2,234,002 2,823,846 ----------- ----------- ----------- ----------- ----------- $ 1,312,934 $ 1,618,232 $ 2,203,185 $ 2,511,294 $ 3,136,060 =========== =========== =========== =========== =========== 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 177,069 158,992 147,057 134,569 115,667 PARTNERS' EQUITY 1,133,562 1,456,937 2,053,825 2,374,422 3,018,090 ----------- ----------- ----------- ----------- ----------- $ 1,312,934 $ 1,618,232 $ 2,203,185 $ 2,511,294 $ 3,136,060 =========== =========== =========== =========== ===========
Selected results of operations, cash flows and other information for the Partnership are as follows:
For the Years Ended March 31 ----------------------------------------------------------------- 2005 2004 2003 2002 2001 ----------- ----------- ----------- ---------- ------------ (unaudited) Loss from operations (Note 1) $ (200,567) $ (197,156) $ (81,348) $ (78,700) $ (76,146) Equity in losses of limited partnerships (122,808) (399,732) (239,249) (564,968) (666,388) ----------- ----------- ----------- ---------- ------------ Net loss $ (323,375) $ (596,888) $ (320,597) $ (643,668) $ (742,534) =========== =========== =========== ========== ============ Net loss allocated to: General Partner $ (3,233) $ (5,969) $ (3,206) $ (6,437) $ (7,425) =========== =========== =========== ========== ============ Limited Partners $ (320,142) $ (590,919) $ (317,391) $ (637,231) $ (735,109) =========== =========== =========== ========== ============ Net loss per limited partner unit $ (32.01) $ (59.09) $ (31.74) $ (63.72) $ (73.51) =========== =========== =========== ========== ============ Outstanding weighted limited partner units 10,000 10,000 10,000 10,000 10,000 =========== =========== =========== ========== ============
Note 1 - Loss from operations for the years ended March 31, 2005 and 2004 includes a charge for impairment losses on investments in limited partnerships of $127,956, and $124,048, respectively. (See Note 2 to the audited financial statements.) 11
For the Years Ended March 31 ----------------------------------------------------------------- 2005 2004 2003 2002 2001 ----------- ----------- ----------- ---------- ------------ (unaduited) Net cash provided by (used in): Operating activities $ (44,610) $ (43,185) $ (45,048) $ (35,847) $ (18,169) Investing activities 13,894 27,494 5,803 925 20,169 ----------- ----------- ----------- ----------- ----------- Net change in cash and Cash equivalents (30,716) (15,691) (39,245) (34,922) 2,000 Cash and cash equivalents, beginning of period 222,356 238,047 277,292 312,214 310,214 ----------- ----------- ----------- ----------- ------------ Cash and cash equivalents, end of period $ 191,640 $ 222,356 $ 238,047 $ 277,292 $ 310,214 =========== =========== =========== ========== ============
Low Income Housing Credits per Unit were as follows for the years ended December 31:
2004 2003 2002 2001 2000 ----------- ------------ ------------ ------------ ---------- Federal $ 118 $ 119 $ 146 $ 145 $ 149 State - - - - - ----------- ------------ ------------ ------------ ----------- Total $ 118 $ 119 $ 146 $ 145 $ 149 =========== ============ ============ ============ ===========
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 Partnership 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 Partnership'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 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. 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 sum 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 Notes 2 and 3 to the financial statements). 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. In subsequent annual financial statements, upon receiving the actual annual results reported by the Local Limited Partnerships, management reverses its prior estimate and records the actual results reported by 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. 13 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. 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 of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason. 14 Financial Condition The Partnership's assets at March 31, 2005 consisted primarily of $192,000 in cash and aggregate investments in the 21 Local Limited Partnerships of $1,121,000. Liabilities at March 31, 2005 were $179,000 of which $177,000 was accrued annual management fees and reimbursement for expenses paid by the General Partner and/or its affiliates and $2,000 was a payable to a limited partnership. Results of Operations Year Ended March 31, 2005 Compared to Year Ended March 31, 2004 The Partnership's net loss for the year ended March 31, 2005 was $(323,000), reflecting a decrease of $274,000 from the net loss experienced for the year ended March 31, 2004. The decrease in net loss is due to equity in losses from limited partnerships which decreased by $277,000 to $(123,000) for the year ended March 31, 2005 from $(400,000) for the year ended March 31, 2004. Equity in losses of limited partnerships decreased from the prior year due to the Partnership not recognizing certain losses of the Local Limited Partnerships. The investments in such Local Limited Partnerships had reached $0 at March 31, 2005. Since the Partnership's liability with respect to its investments is limited, losses in excess of investment are not recognized. Which was offset by an increase in loss from operations of approximately $(3,000) due to a decrease in amortization of acquisition fees and costs of $8,000, a $(4,000) increase in impairment loses, a $(4,000) increase in other operating expenses and a $(3,000) decrease in total income. 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. Liquidity and Capital Resources Year Ended March 31, 2005 Compared to Year Ended March 31, 2004 Net cash used during the year ended March 31, 2005 was $(31,000) compared to net cash used for the year ended March 31, 2003 of $(16,000). The change was primarily due to a $(13,000) decrease of cash provided by investing activities due to the $(13,000) decrease in distributions received from limited partnerships. Along with a $(2,000) decrease in cash used in operating activities. 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. 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 remaining investment in such Local Limited Partnership at March 31, 2005 and 2004. The Partnership's original investment in the Local Limited Partnership approximated $1,691,585. Through December 31, 2004, 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, 2004 and 2003, the carrying value of such property on the books and records of the Local Limited Partnership totaled $5,918,598 and $6,114,888, respectively. 15 The Partnership expects its future cash flows, together with its net available assets at March 31, 2005, 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, 2005:
2006 2007 2008 2009 2010 Thereafter Total --------- --------- --------- --------- --------- ---------- ---------- Asset Management Fees (1) $ 211,167 $ 42,000 $ 42,000 $ 42,000 $ 42,000 $ 1,680,000 $ 2,059,167 Capital Contributions Payable to Lower Tier Partnerships 2,303 - - - - - 2,303 --------- --------- --------- --------- --------- ---------- ---------- Total contractual cash obligations $ 213,470 $ 42,000 $ 42,000 $ 42,000 $ 42,000 $ 1,680,000 $ 2,061,470 ========= ========= ========= ========= ========= ========== ==========
(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, 2005 have been included in the 2006 column. The General Partner does not anticipate that these fees will be paid until such time as capital reserves are in excess of the aggregate of the existing contractual obligations and the anticipated future foreseeable obligations of the Partnership. For additional information regarding asset management fees and capital contributions payable to Local Limited 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. 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. 16 Impact of New Accounting Pronouncements As of March 31, 2004, the Partnership adopted FASB Interpretation No. 46 - Revised, Consolidation of Variable Interest Entities ("FIN46R"). FIN 46R provides guidance as to when a company should include the assets, liabilities, and activities of a variable interest entity ("VIE") in its financial statements, and when a company should disclose information about its relationship with a VIE. A VIE is a legal structure used to conduct activities or hold assets, and a VIE must be consolidated by a company if it is the primary beneficiary because a primary beneficiary absorbs the majority of the entity's expected losses, the majority of the expected residual returns, or both. Under FIN 46R, the Local Limited Partnerships in which the Partnership invests are VIEs. However, management does not consolidate the Partnership's interests in these VIE's under FIN46R, as the Partnership is not considered the primary beneficiary. Rather, the Partnership currently records the amount of the investment in the Local Limited Partnerships as an asset in the balance sheet, and recognizes its share of Local Limited Partnership income or loss in the statement of operations. The Partnership's balance in its investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss is mitigated by the condition and financial performance of the underlying properties, as well as the strength of the Local General Partners and their guarantee against credit recapture. In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 (SFAS 154), "Accounting Changes and Error Corrections" which provides guidance on the accounting for and reporting of accounting changes and correction of errors. This statement changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Partnership does not anticipate a material effect upon the adoption of this statement. Item 7A. Quantitative and Qualitative Disclosures About Market Risk NOT APPLICABLE Item 8. Financial Statements and Supplementary Data 17 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) BALANCE SHEETS Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm.
March 31 ------------------------------- 2005 2004 -------------- ------------- ASSETS Cash $ 191,640 $ 222,356 Investments in limited partnerships (Notes 2 and 3) 1,121,294 1,395,876 -------------- ------------- $ 1,312,934 $ 1,618,232 ============== ============= 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) 177,069 158,992 -------------- ------------- Total liabilities 179,372 161,295 -------------- ------------- Commitments and contingencies Partners' equity (deficit): General partner (88,565) (85,332) Limited partners (10,000 units authorized, 10,000 units issued and outstanding) 1,222,127 1,542,269 -------------- ------------- Total partners' equity 1,133,562 1,456,937 -------------- ------------- $ 1,312,934 $ 1,618,232 ============== =============
See accompanying notes to financial statements 18 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) STATEMENTS OF OPERATIONS Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm.
For the Years Ended March 31 ------------------------------------------- 2005 2004 2003 ------------ ------------- ------------ Interest income $ 667 $ 2,093 $ 3,714 Other income 10,179 12,238 7,475 ------------ ------------- ------------ Total income 10,846 14,331 11,189 ------------ ------------- ------------ Operating expenses: Amortization (Notes 2 and 3) 9,924 17,988 23,812 Asset management fees (Note 3) 42,000 42,000 42,000 Impairment loss (Note 2) 127,956 124,048 - Accounting 21,550 19,176 19,919 Other 9,983 8,275 6,806 ------------ ------------- ------------ Total operating expenses 211,413 211,487 92,537 ------------ ------------- ------------ Loss from operations (200,567) (197,156) (81,348) Equity in losses of limited partnerships (Note 2) (122,808) (399,732) (239,249) ------------ ------------- ------------ Net loss $ (323,375)$ (596,888) $ (320,597) ============ ============= ============ Net loss allocated to: General Partner $ (3,233)$ (5,969) $ (3,206) ============ ============= ============ Limited Partners $ (320,142)$ (590,919) $ (317,391) ============ ============= ============ Net loss per limited partner unit $ (32.01)$ (59.09) $ (31.74) ============ ============= ============ Outstanding weighted limited partner units 10,000 10,000 10,000 ============ ============= ============
See accompanying notes to financial statements 19 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm.
General Limited Total Partner Partners --------------- --------------- --------------- 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 Net loss (3,233) (320,142) (323,375) --------------- --------------- --------------- Partners' equity (deficit) at March 31, 2005 $ (88,565) $ 1,222,127 $ (1,133,562) =============== =============== ===============
See accompanying notes to financial statements 20 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) STATEMENTS OF CASH FLOWS Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm.
For the Years Ended March 31 ------------------------------------------------ 2005 2004 2003 ----------- -------------- ---------------- Cash flows from operating activities: Net loss $ (323,375) $ (596,888) $ (320,597) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 9,924 17,988 23,812 Equity in losses of limited partnerships 122,808 399,732 239,249 Impairment loss 127,956 124,048 - Increase in accrued fees and expenses due to General Partner and affiliates 18,077 11,935 12,488 ----------- -------------- ---------------- Net cash used in operating activities (44,610) (43,185) (45,048) ----------- -------------- ---------------- Cash flows from investing activities: Distributions from limited partnerships 13,894 27,494 5,803 ----------- -------------- ---------------- Net decrease in cash and cash equivalents (30,716) (15,691) (39,245) Cash and cash equivalents, beginning of period 222,356 238,047 277,292 ----------- -------------- ---------------- Cash and cash equivalents, end of period $ 191,640 $ 222,356 $ 238,047 =========== ============== ================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Taxes paid $ 800 $ 800 $ 800 =========== ============== ================
See accompanying notes to financial statements 21 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS For The Years Ended March 31, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. 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. 22 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. 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. 23 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. 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 pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing 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 sum 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. 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - ------------------------------------------------------------------------------- Management's estimate for the three-monthperiod is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. In subsequent annual financial statements, upon receiving the actual annual results reported by the Local Limited Partnerships, management reverses its prior estimate and records the actual results reported by 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. 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. 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, 2005 and 2004, the Partnership had no cash equivalents. Concentration of Credit Risk - ---------------------------- At March 31, 2005, 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. Reclassifications - ----------------- Certain reclassifications have been made to the 2004 and 2003 financial statements to be consistent with the 2005 presentation. 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. 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - ------------------------------------------------------------------------------- New Accounting Pronouncements - ----------------------------- As of March 31, 2004, the Partnership adopted FASB Interpretation No. 46 - Revised, Consolidation of Variable Interest Entities ("FIN46R"). FIN 46R provides guidance as to when a company should include the assets, liabilities, and activities of a variable interest entity ("VIE") in its financial statements, and when a company should disclose information about its relationship with a VIE. A VIE is a legal structure used to conduct activities or hold assets, and a VIE must be consolidated by a company if it is the primary beneficiary because a primary beneficiary absorbs the majority of the entity's expected losses, the majority of the expected residual returns, or both. Under FIN 46R, the Local Limited Partnerships in which the Partnership invests are VIEs. However, management does not consolidate the Partnership's interests in these VIE's under FIN46R, as the Partnership is not considered the primary beneficiary. Rather, the Partnership currently records the amount of the investment in the Local Limited Partnerships as an asset in the balance sheet, and recognizes its share of Local Limited Partnership income or loss in the statement of operations. The Partnership's balance in its investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss is mitigated by the condition and financial performance of the underlying properties, as well as the strength of the Local General Partners and their guarantee against credit recapture. In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 (SFAS 154), "Accounting Changes and Error Corrections" which provides guidance on the accounting for and reporting of accounting changes and correction of errors. This statement changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Partnership does not anticipate a material effect upon the adoption of this statement. 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. The Partnership's investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2005 and 2004, are approximately $1,890,000 and $1,403,000, 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, 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. 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - ------------------------------------------------------- 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 $127,956 and $124,048 during the years ended March 31, 2005 and 2004, respectively. At March 31, 2005, 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, 2005, 2004 and 2003 amounting to approximately $561,000, $354,000 and $332,000, respectively, have not been recognized. As of March 31, 2005, the aggregate share of net losses not recognized by the Partnership amounted to $1,811,000. 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 ---------------------------------------------------- 2005 2004 2003 ---------------- --------------- -------------- Investments per balance sheet, beginning of period $ 1,395,876 $ 1,965,138 $ 2,234,002 Distributions received from limited partnerships (13,894) (27,494) (5,803) Equity in losses of limited partnerships (122,808) (399,732) (239,249) Impairment loss (127,956) (124,048) - Amortization of paid acquisition fees and costs (9,924) (17,988) (23,812) ---------------- --------------- -------------- Investments per balance sheet, end of period $ 1,121,294 $ 1,395,876 $ 1,965,138 ================ =============== ==============
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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. 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 2004 2003 --------------- --------------- ASSETS Buildings and improvements, net of accumulated depreciation as of December 31, 2004 and 2003 of $10,961,000 and $ 9,941,414, respectively $ 23,747,000 $ 24,858,000 Land 1,692,000 1,674,000 Due from related parties 8,000 13,000 Other assets 2,432,000 2,362,000 --------------- --------------- $ 27,879,000 $ 28,907,000 =============== =============== LIABILITIES Mortgage loans payable $ 25,414,000 $ 24,752,000 Due to related parties 871,000 914,000 Other liabilities 1,198,000 1,969,000 --------------- --------------- 27,483,000 27,635,000 --------------- --------------- PARTNERS' CAPITAL (DEFICIT) WNC Housing Tax Credits Fund IV, L.P., Series 1 (769,000) (7,000) Other partners 1,165,000 1,279,000 --------------- --------------- 396,000 1,272,000 --------------- --------------- $ 27,879,000 $ 28,907,000 =============== ===============
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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS 2004 2003 2002 --------------- --------------- --------------- Revenues $ 3,837,000 $ 3,746,000 $ 3,581,000 --------------- --------------- --------------- Expenses: Operating expenses 2,692,000 2,583,000 2,251,000 Interest expense 785,000 833,000 860,000 Depreciation and amortization 1,066,000 1,078,000 1,076,000 --------------- --------------- --------------- Total expenses 4,543,000 4,494,000 4,187,000 --------------- --------------- --------------- Net loss $ (706,000) $ (748,000) $ (606,000) =============== =============== =============== Net loss allocable to the Partnership $ (695,000) $ (736,000) $ (597,000) =============== =============== =============== Net loss recorded by the Partnership $ (123,000) $ (400,000) $ (239,000) =============== =============== ===============
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 $0 remaining investment in such Local Limited Partnership at March 31, 2005 and 2004. The Partnership's original investment in the Local Limited Partnership approximated $1,691,585. Through December 31, 2004, 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, 2004 and 2003, the carrying value of such property on the books and records of the Local Limited Partnership totaled $918,598 and $6,114,888, respectively. 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. 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 $706,741 and $616,251 as of March 31, 2005 and 2004, respectively. Of the accumulated amortization recorded on the balance sheet at March 31, 2005, $80,565, $140,544 and $49,656 of the related expense was reflected as equity in losses of limited partnerships during the years ended March 31, 2005, 2004 and 2003, 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 each of the years ended March 31, 2005, 2004 and 2003, of which $30,000 was paid during each of the years. The Partnership reimbursed the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements were approximately $25,500 and $27,500 during the years ended March 31, 2005 and 2004, respectively. A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 16% through December 31, 2004 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, 2005. 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 $37,275, $35,780 and $33,926 for the years ended March 31, 2005, 2004 and 2003, respectively. The accrued fees and advances due to the General Partner and affiliates consist of the following at:
March 31 ------------------------------ 2005 2004 ------------- ------------- Reimbursement for expenses paid by the General Partner and/or an affiliate $ 7,902 $ 1,825 Asset management fee payable 169,167 157,167 ------------- ------------- $ 177,069 $ 158,992 ============= ============
The General Partner does not anticipate that these accrued fees will be paid in full until such time as capital reserves are in excess of the future foreseeable working capital requirements of the Partnership. 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, 2005, 2004 and 2003 Unaudited - These financial statements are being filed without an opinion from our independent registered public accounting firm. 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 --------------- --------------- --------------- --------------- 2005 ---- Income $ 2,000 $ 4,000 $ - $ 5,000 Operating expenses (16,000) (30,000) (22,000) (143,000) Equity in losses of limited partnerships (19,000) (19,000) (18,000) (67,000) Net loss (33,000) (45,000) (40,000) (205,000) Net Loss available to limited partners (33,000) (45,000) (39,000) (203,000) Net Loss per limited partner unit (3) (4) (4) (20) 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)
31 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, 2005 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 Sylvester P. Garban Senior Vice President - Institutional Investments Thomas J. Riha, CPA Senior Vice President - Chief Financial Officer Michael J. Gaber Senior Vice President - Acquisitions Edward W. Peters President WNC Management, Inc. 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, a National Trustee for NAHB's Political Action Committee, and a past Chairman of NAH's Multifamily Council. He is a Director of the National Housing Conference and a member of NHC's Board of Governors, 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. 32 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 and a Director of, and a registered principal with, WNC Capital Corporation, and is a Director and Vice President 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, a member of the Tax Policy Council for the National Trust for Historic Preservation, a member of the Advisory Board of the New York State Association for Affordable Housing, a member of the Urban Land Institute and a member of TEC International. 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 52, is Executive Vice President, a Director and a member of the Acquisition Committee of Associates, and a Director, Vice President 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 past 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 and a registered principal with WNC Capital Corporation. 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 49, is Senior Vice President - Chief Financial Officer and a member of the Acquisition Committee and the Commercial Real Estate Group of Associates and Vice 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. 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. Michael J. Gaber, age 38, is Senior Vice President - Acquisitions and a member of the Acquisition Committee and the Commercial Real Estate Group of Associates and a Vice President of WNC Management, Inc. 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. Edward W. Peters, age 52, is President of WNC Management, Inc. He has more than 12 years of experience in all facets of property management. Prior to joining WNC in 2003, Mr. Peters served as Vice President and Director of Property Management at Design Center Housing Services, Inc. and as Director at John Stewart Company. He is a licensed real estate broker in the State of California, a certified occupancy specialist (COS), and holds two national housing compliance certificates: the housing credit compliance professional (HCCP) and the national credit compliance professional-executive (NCP-e). Mr. Peters is a Director of the Affordable Housing Management Association and graduated from Rutgers University in 1990 with a Master of Science degree in social work and in 1983 from Antioch University with a Master of Science degree in education. Kay L. Cooper, age 68, 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. 33 (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, 2005, 2004 and 2003. The Partnership paid the General Partner or its affiliates $30,000 of those fees during the years ended March 31, 2005, 2004 and 2003. (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, 2004, and (ii) 6% for the balance of the Partnership's term. No disposition fees have been incurred. (c) Operating Expenses. The Partnership reimbursed the General Partner or its affiliates for operating expenses of approximately $25,500, $27,500 and $25,000 during the years ended March 31, 2005, 2004 and 2003, respectively. (d) Interest in Partnership. The General Partner receives 1% of the Partnership's allocated Low Income Housing Credits, which approximated $11,000, $15,000 and $15,000 for the General Partner for the tax years ending December 31, 2004, 2003 and 2002, respectively. 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. 34 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 Partne's interests in the Partnership, as discussed in Item 11 and in the notes to the Partnership's financial statements. 35 Item 14. Principal Accountant Fees and Services The following is a summary of fees paid to the Partnership's independent registered public accounting firm for the years ended March 31:
2005 2004 --------------- --------------- Audit Fees $ 18,550 $ 19,351 Audit-related Fees - - Tax Fees 3,000 1,625 All Other Fees - - --------------- --------------- TOTAL $ 21,550 $ 20,976 =============== ===============
The Partnership has no Audit Committee. All audit services and any permitted non-audit services performed by the Partnership's independent registered public accounting firm are preapproved by the General Partner. 36 PART IV. Item 15. Exhibits and Financial Statement Schedules Financial Statements (a)(1) List of Financial statements included in Part II hereof: -------------------------------------------------------- Unaudited Balance Sheets, March 31, 2005 and 2004 Unaudited Statements of Operations for the years ended March 31, 2005, 2004 and 2003 Unaudited Statements of Partners' Equity (Deficit) for the years ended March 31, 2005, 2004 and 2003 Unaudited Statements of Cash Flows for the years ended March 31, 2005, 2004 and 2003 Unaudited Notes to Financial Statements (a)(2) List of Financial statement schedule included in Part IV hereof: --------------------------------------------------------------- Unaudited Schedule III - Real Estate Owned by Local Limited Partnerships (a)(3) 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 is hereby incorporated herein by reference as Exhibit 3.1. 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 2003. (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 2003. (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. 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. 37 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. 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. 38 99.22 Financial Statements of Regency Court, as of and for the years ended December 31, 2003 and 2002 together with Independent Auditors' Report thereon; filed as exhibit 99.6 on Form 10-K dated March 31, 2004; a significant subsidiary of the Partnership. 99.23 Financial Statements of Laurel Creek Apartments, as of and for the years ended December 31, 2004 and 2003 together with Independent Auditors' Report thereon; a significant subsidiary of the Partnership. (filed herewith) 39 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2005
------------------------------------------ -------------------------------------------------------------- As of March 31, 2005 As of December 31, 2004 ------------------------------------------ -------------------------------------------------------------- Total Investment Amount of Mortgage Loans of Property Net in Local Limited Investment Local Limited and Accumulated Book Partnership Name Location Partnership Paid to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Alpine, Alpine Manor, L.P. Texas $ 195,000 $ 195,000 $ 895,000 $ 1,171,000 $ 306,000 $ 865,000 Baycity Village Apartments, Limited Baytown, Partnership Texas 301,000 301,000 1,413,000 1,841,000 741,000 1,100,000 Beckwood Manor Seven Limited Marianna, Partnership Arkansas 307,000 307,000 1,367,000 1,805,000 712,000 1,093,000 Briscoe Manor Limited Galena, Partnership Maryland 308,000 308,000 1,464,000 1,845,000 692,000 1,153,000 Evergreen Four Limited Maynard, Partnership Arkansas 195,000 195,000 855,000 1,129,000 441,000 688,000 Fawn Haven Limited Manchester, Partnership Ohio 167,000 167,000 838,000 1,075,000 444,000 631,000 Fort Stockton Ft. Stockton, Manor, L.P. Texas 224,000 224,000 1,032,000 1,248,000 307,000 941,000 Gallup, Hidden Valley New Limited Partnership Mexico 412,000 412,000 1,460,000 2,016,000 538,000 1,478,000 HOI Limited Lenoir, Partnership Of North Lenoir Carolina 198,000 198,000 497,000 1,174,000 379,000 795,000 Indian Creek Bucyrus, Limited Partnership Ohio 306,000 306,000 1,441,000 1,778,000 664,000 1,114,000 San Luis Laurel Creek Obispo, Apartments California 1,030,000 1,030,000 541,000 2,165,000 738,000 1,427,000
40 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2005
------------------------------------------ -------------------------------------------------------------- As of March 31, 2005 As of December 31, 2004 ------------------------------------------ -------------------------------------------------------------- Total Investment Amount of Mortgage Loans of Property Net in Local Limited Investment Local Limited and Accumulated Book Partnership Name Location Partnership Paid to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Manor Senior Citizens Madisonville, Complex, Ltd. Texas 174,000 174,000 888,000 1,159,000 218,000 941,000 Mt. Graham Safford, Housing, Ltd. Arizona 410,000 410,000 1,380,000 1,917,000 733,000 1,184,000 Northside Plaza Angleton, Apartments, Ltd. Texas 282,000 282,000 1,335,000 1,755,000 351,000 1,404,000 Pampa Manor, L.P. Pampa, Texas 180,000 180,000 831,000 1,033,000 263,000 770,000 Regency Court Monrovia, Partners California 1,692,000 1,690,000 4,858,000 7,708,000 1,789,000 5,919,000 Sandpiper Square, Aulander, a Limited North Partnership Carolina 219,000 219,000 930,000 1,236,000 321,000 915,000 Seneca Falls Seneca East Apartments Falls, New Company II, L.P. York 270,000 270,000 878,000 1,238,000 287,000 951,000 Vernon Manor, L.P. Vernon, Texas 177,000 177,000 739,000 905,000 228,000 677,000 Waterford Place, Calhoun a Limited Falls, South Partnership Carolina 272,000 272,000 1,157,000 1,503,000 623,000 880,000 Yantis Housing, Ltd. Yantis, Texas 145,000 145,000 615,000 699,000 186,000 513,000 ------------- ------------- ------------ ------------ ------------ ------------- $ 7,464,000 $ 7,462,000 $ 25,414,000 $ 36,400,000 $ 10,961,000 $ 25,439,000 ============= ============ ============ ============ =========== =============
41 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2005
-------------------------------------------------------------------------------------- For the year ended December 31, 2004 -------------------------------------------------------------------------------------- Net Income Year Investment Estimated Useful Partnership Name Rental Income (Loss) Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Alpine Manor, L.P. $ 124,000 $ (15,000) 1994 Completed 40 Baycity Village Apartments, Limited Partnership 301,000 (110,000) 1994 Completed 30 Beckwood Manor Seven Limited Partnership 172,000 (80,000) 1993 Completed 27.5 Briscoe Manor Limited Partnership 190,000 (28,000) 1994 Completed 27.5 Evergreen Four Limited Partnership 100,000 (22,000) 1994 Completed 27.5 Fawn Haven Limited Partnership 81,000 (30,000) 1994 Completed 27.5 Fort Stockton Manor, L.P. 140,000 (19,000) 1994 Completed 40 Hidden Valley Limited Partnership 192,000 (13,000) 1994 Completed 40 HOI Limited Partnership Of Lenoir 163,000 (14,000) 1993 Completed 40 Indian Creek Limited Partnership 144,000 (37,000) 1994 Completed 27.5 Laurel Creek Apartments 220,000 24,000 1994 Completed 27.5 Madisonville Manor Senior Citizens Complex, Ltd. 121,000 (2,000) 1994 Completed 50 Mt. Graham Housing, Ltd. 183,000 (51,000) 1994 Completed 27.5 Northside Plaza Apartments, Ltd. 173,000 (10,000) 1994 Completed 50 Pampa Manor, L.P. 97,000 (20,000) 1994 Completed 40 Regency Court Partners 758,000 (188,000) 1994 Completed 40 Sandpiper Square, a Limited Partnership 104,000 (24,000) 1994 Completed 35 Seneca Falls East Apartments Company II, L.P. 169,000 (24,000) 1998 Completed 40
42 WNC Housing Tax Credit Fund IV, L.P., Series 1 Schedule III Real Estate Owned by Local Limited Partnerships March 31, 2005
-------------------------------------------------------------------------------------- For the year ended December 31, 2004 -------------------------------------------------------------------------------------- Net Income Year Investment Estimated Useful Partnership Name Rental Income (Loss) Acquired Status Life (Years) - -------------------------------------------------------------------------------------------------------------------- Vernon Manor, L.P. 106,000 (6,000) 1994 Completed 40 Waterford Place, a Limited Partnership 128,000 (35,000) 1994 Completed 40 Yantis Housing, Ltd. 92,000 (2,000) 1994 Completed 40 ----------- ----------- $ 3,758,000 $ (706,000) ========== ==========
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 ------------------------------------------ -------------------------------------------------------------- Total Investment Amount of Mortgage Loans of Property Net in Local Limited Investment Local Limited and Accumulated Book Partnership Name Location Partnership Paid to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Alpine, Alpine Manor, L.P. Texas $ 195,000 $ 195,000 $ 900,000 $ 1,171,000 $ 278,000 $ 893,000 Baycity Village Apartments, Baytown, Limited Partnership Texas 301,000 301,000 1,428,000 1,838,000 677,000 1,161,000 Beckwood Manor Seven Limited Marianna, Partnership Arkansas 307,000 307,000 1,372,000 1,805,000 651,000 1,154,000 Briscoe Manor Galena, Limited Partnership Maryland 308,000 308,000 1,470,000 1,845,000 633,000 1,212,000 Evergreen Four Limited Maynard, Partnership Arkansas 195,000 195,000 859,000 1,129,000 403,000 726,000 Fawn Haven Limited Manchester, Partnership Ohio 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 Gallup, Hidden Valley New Limited Partnership Mexico 412,000 412,000 1,466,000 2,005,000 482,000 1,523,000 HOI Limited Lenoir, Partnership Of North Lenoir Carolina 198,000 198,000 512,000 1,174,000 346,000 828,000 Indian Creek Bucyrus, Limited Partnership Ohio 306,000 306,000 1,449,000 1,778,000 603,000 1,175,000 San Luis Laurel 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 ------------------------------------------ -------------------------------------------------------------- Total Investment Amount of Mortgage Loans of Property Net in Local Limited Investment Local Limited and Accumulated Book Partnership Name Location Partnership Paid to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Manor Senior Citizens Madisonville, Complex, Ltd. Texas 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, L.P. Pampa, Texas 180,000 180,000 834,000 1,033,000 237,000 796,000 Regency Monrovia, Court Partners California 1,692,000 1,690,000 4,045,000 7,707,000 1,593,000 6,114,000 Sandpiper Square, Aulander, a Limited North Partnership Carolina 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, L.P. Vernon, Texas 177,000 177,000 743,000 906,000 206,000 700,000 Waterford Place, Calhoun a Limited Falls, South Partnership Carolina 272,000 272,000 1,163,000 1,503,000 574,000 929,000 Yantis Housing, Ltd. Yantis, 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 --------------------------------------------------------------------------------------- Year Investment Estimated Useful Partnership Name Rental Income Net 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 --------------------------------------------------------------------------------------- Year Investment Estimated Useful Partnership Name Rental Income Net 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 -------------------------------------- -------------------------------------------------------------- Total Investment Amount of Mortgage Loans of Property Net in Local Limited Investment Local Limited and Accumulated Book Partnership Name Location Partnership Paid to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Alpine, Alpine Manor, L.P. Texas $ 195,000 $ 195,000 $ 904,000 $ 1,169,000 $ 249,000 $ 920,000 Baycity Village Apartments, Limited Baytown, Partnership Texas 301,000 301,000 1,442,000 1,837,000 613,000 1,224,000 Beckwood Manor Seven Limited Marianna, Partnership Arkansas 307,000 307,000 1,377,000 1,805,000 589,000 1,216,000 Briscoe Manor Limited Galena, Partnership Maryland 308,000 308,000 1,476,000 1,845,000 570,000 1,275,000 Evergreen Four Limited Maynard, Partnership Arkansas 195,000 195,000 862,000 1,129,000 364,000 765,000 Fawn Haven Limited Manchester, Partnership Ohio 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 Gallup, Hidden Valley New Limited Partnership Mexico 412,000 412,000 1,472,000 1,988,000 430,000 1,558,000 HOI Limited Lenoir, Partnership Of North Lenoir Carolina 198,000 198,000 526,000 1,178,000 316,000 862,000 Indian Creek Bucyrus, Limited Partnership Ohio 306,000 306,000 1,456,000 1,776,000 543,000 1,233,000 San Luis Laurel 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 -------------------------------------- -------------------------------------------------------------- Total Investment Amount of Mortgage Loans of Property Net in Local Limited Investment Local Limited and Accumulated Book Partnership Name Location Partnership Paid to Date Partnerships Equipment Depreciation Value - ------------------------------------------------------------------------------------------------------------------------------------ Madisonville Manor Senior Citizens Madisonville, Complex, Ltd. Texas 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 Plaza Angleton, Apartments, Ltd. Texas 282,000 282,000 1,348,000 1,745,000 280,000 1,465,000 Pampa Manor, L.P. Pampa, Texas 180,000 180,000 838,000 1,032,000 212,000 820,000 Regency Monrovia, Court Partners California 1,692,000 1,690,000 5,017,000 7,707,000 1,396,000 6,311,000 Sandpiper Square, Aulander, a Limited North Partnership Carolina 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, L.P. Vernon, Texas 177,000 177,000 745,000 905,000 184,000 721,000 Waterford Place, Calhoun a Limited Falls, South Partnership Carolina 272,000 272,000 1,169,000 1,503,000 513,000 990,000 Yantis Yantis, Housing, 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 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: November 21, 2005 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. (chief executive officer) Date: November 21, 2005 By: /s/ Thomas J. Riha ------------------ Thomas J. Riha, Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. (chief financial officer and principal accounting officer) Date: November 21, 2005 By: /s/ Wilfred N. Cooper, Sr. -------------------------- Wilfred N. Cooper, Sr., Chairman of the Board of WNC & Associates, Inc. Date: November 21, 2005 By: /s/ David N. Shafer -------------------- David N Shafer, Director of WNC & Associates, Inc. Date: November 21, 2005 52 EX-31 2 ex311nt41.txt EXHIBIT 31-1 NAT 4-1 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-15e and 15d-15e) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 independent registered public accounting firm and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in the registrant's ability to record, process, summarize and report financial information; 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: November 21, 2005 /s/ Wilfred N. Cooper, Jr. --------------------------- President and Chief Executive Officer of WNC & Associates, Inc. EX-31 3 ex312nt41.txt EXHIBIT 31-1 NAT 4-1 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-15e and 15d-15e) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 independent registered public accounting firm and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in the registrant's ability to record, process, summarize and report financial information; 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: November 21, 2005 /s/ Thomas J. Riha ------------------ Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. EX-32 4 ex321nt41.txt EXHIBIT 32-1 NAT 4-1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003 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, 2005 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 2003, 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, except to the extent that such provisions require the filing of an opinion of registered public accountants to accompany the Partnership's financial statements; 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. November 21, 2005 EX-32 5 ex322nt41.txt EXHIBIT 32-2 NAT 4-1 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003 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, 2005 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 2003, 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, except to the extent that such provisions require the filing of an opinion of registered public accountants to accompany the Partnership-s financial statements; 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. November 21, 2005 EX-99 6 laurelc04.txt EXHIBIT 99 LAUREL CREEK AUDIT LAUREL CREEK APARTMENTS (A California Limited Partnership) AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2004 LAUREL CREEK APARTMENTS AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2004 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, 2004 and December 31, 2003 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, 2004 and December 31, 2003, and the results of its operations for the years then ended in conformity with generally accepted accounting principles. /s/Wallace Rowe & Associates - ---------------------------- February 8, 2005 LAUREL CREEK APARTMENTS BALANCE SHEET DECEMBER 31, 2004 AND 2003
2004 2003 ------------------ ------------------ ASSETS CURRENT ASSETS Cash (Note 2) $ 66,297 $ 59,914 Accounts receivable 1,249 215 Prepaid expenses 3,335 2,652 ------------------ ------------------- TOTAL CURRENT ASSETS 70,881 62,781 Restricted reserves (Note 3) 55,350 52,611 Land, structures and equipment, net of accumulated depreciation of $737,972 and $699,947 (Note 4) 1,427,382 1,495,371 Organizational costs, net of accumulated amortization of $18,997 and $17,329 (Note 5) 7,921 9,589 ------------------ ------------------- TOTAL ASSETS $ 1,561,534 $ 1,620,352 ================== =================== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Accounts payable - other $ 10,468 $ 8,564 Accounts payable - related party (Note 7) 3,462 2,007 Security deposits payable 8,892 8,592 Current portion of long-term debt (Note 6) 38,536 31,336 ------------------ ------------------- TOTAL CURRENT LIABILITIES 61,358 50,499 Long-term debt (Note 6) 502,631 544,925 ------------------ ------------------- TOTAL LIABILITIES 563,989 595,424 Partners' capital 997,545 1,024,928 ------------------ ------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,561,534 $ 1,620,352 ================== ===================
See accompanying notes. 2 LAUREL CREEK APARTMENTS STATEMENT OF INCOME, EXPENSES AND CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ------------------ ------------------- OPERATING INCOME Rental income $ 220,203 $ 205,982 Tenant charges 3,111 1,043 Other 1,900 2,034 ------------------ ------------------- TOTAL OPERATING INCOME 225,214 209,059 ------------------ ------------------- OPERATING EXPENSES Administration 22,732 20,953 Insurance and taxes 8,233 5,660 Maintenance 40,838 28,676 Utilities 20,289 22,674 Depreciation and amortization 69,657 69,704 ------------------ ------------------- TOTAL EXPENSES 161,749 147,667 ------------------ ------------------- NET INCOME (LOSS) FROM OPERATIONS 63,465 61,392 ------------------ ------------------- OTHER INCOME AND EXPENSES Interest income 1,635 1,614 Interest expense (41,100) (43,596) ------------------ -------------------- NET OTHER INCOME UNDER EXPENSES (39,465) (41,982) ------------------ -------------------- 24,000 19,410 NET INCOME (LOSS) BEGINNING PARTNERS' CAPITAL 1,024,928 1,048,211 Partner withdrawals (51,383) (42,693) ------------------ -------------------- ENDING PARTNERS' CAPITAL $ 997,545 $ 1,024,928 ================== ===================
See accompanying notes. 3 LAUREL CREEK APARTMENTS STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Rents received $ 219,169 $ 206,590 Other operating revenues 5,011 3,077 Cash payments for goods and services (89,416) (74,188) ------------------- -------------------- Net cash provided (used) by operating activities 134,764 135,479 ------------------- -------------------- CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Increases in security deposits 300 154 Withdrawal from replacement reserves 2,061 - Additions (uses) of replacement reserves (4,800) (4,800) ------------------- -------------------- Net cash provided (used) by noncapital financing activities (2,439) (4,646) ------------------- -------------------- CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital withdrawals (51,383) (42,693) Payment of debt (35,094) (32,931) ------------------- -------------------- Net cash provided (used) by capital and related financing activities (86,477) (75,624) ------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 1,635 1,224 Interest paid on notes (41,100) (43,596) ------------------- -------------------- Net cash provided (used) by investing activities (39,465) (42,372) ------------------- -------------------- NET INCREASE (DECREASE) IN CASH 6,383 (12,837) CASH - BEGINNING OF YEAR 59,914 47,077 ------------------- -------------------- CASH - END OF YEAR $ 66,297 $ 59,914 =================== ==================== RECONCILIATION OF OPERATING LOS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income from operations $ 63,465 $ 61,392 Adjustments to reconcile net loss to Net cash provided by operating activities: Depreciation and amortization 69,657 69,704 Decrease (increase)in accounts receivable (1,034) 680 Increase in prepaid expenses (683) (892) Increase in accounts payable - other 1,904 5,411 Increase(decrease)in accounts payable - related parties 1,455 (744) ------------------- -------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 134,764 $ 135,479 =================== ==================== See accompanying notes.
4 LAUREL CREEK APARTMENTS NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2004 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, 2004 (Continued) Note 2- CASH Cash consists of $64,453 deposited into savings or checking accounts, and $844 is on deposit with the State of California Local Agency Investment Fund. At December 31, 2004 the amount deposited into the savings accounts and the Local Agency Investment Fund earned interest at rates from 2.02% to 2.19% respectively. Note 3- RESTRICTED CASH Restricted cash consists of $55,350 maintained in a money market account earning 2.02%. This cash is reserved for the replacement of fixed assets and the repayment of tenants' 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 1,868,634 716,252 Equipment 21,720 21,720 ----------- ------------ $ 2,165,354 $ 737,972 =========== ============ Note 5- ORGANIZATION COSTS Organization costs and accumulated amortization consist of the following: Accumulated Cost Amortization ----------- ------------ Organization costs $ 26,918 $ 18,997 =========== ============ 6 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 (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 2005 $ 76,620 2006 76,620 2007 76,620 2008 76,620 2009 379,405 ----------------- Total 685,885 Less amounts representing interest 144,718 ----------------- $ 541,167 =================
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, 2004 the partnership owed the Authority $3,462. During the year ended December 31, 2004, the partnership paid the Authority $31,386 in maintenance expenses and management fees. 7 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 (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 LAUREL CREEK APARTMENTS Calculation of Cash Distribution Net Profit @ 12-31-04 23,999.65 Add back depreciation expense 67,989.00 Add back amortization expense 1,668.00 Deposits to replacement reserve account (4,800.00) Debt service (mortgage loan) (35,094.16) ----------- Adjusted cash available from operations through 12-31-04 $ 53,762.49 Net cash available for disbursement $ 53,762.49 General Partner distribution=75%=$40,321.87 Limited Partner distribution=25%=$13,440.62 9 LAUREL CREEK APARTMENTS Replacement Reserve Summary Beginning Balance as of: 1/1/2004 44,019.14 Deposits to account for year $400 per mo 4,800.00 Withdrawals during year (20,061.46) carpet in 2 units ---------- Ending Balance as of: 12/31/04 46,7557.68 ========== Note: Replacement Reserve is fully funded as of FYE 12-31-04 10 -----END PRIVACY-ENHANCED MESSAGE-----