-----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, FjxxkJkUmJhq6Cb7h69+wSqxj2Rsf1bdoYZqTro96uke106P1M+DNiglPjY+W6Ed nbD7Fg1xCKdvdApF+UkEyg== 0001084067-06-000032.txt : 20060221 0001084067-06-000032.hdr.sgml : 20060220 20060221113142 ACCESSION NUMBER: 0001084067-06-000032 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060221 DATE AS OF CHANGE: 20060221 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26048 FILM NUMBER: 06631822 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-Q 1 nt4110q.txt NAT 4-1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 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 California 33-0563307 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 17782 Sky Park Circle Irvine, CA 92614-6404 (Address of principal executive offices) (714) 662-5565 (Telephone number) 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 whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). Yes No X --------- ---------- WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Lomited Partnership) INDEX TO FORM 10-Q For the Quarterly Period Ended December 31, 2005 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets December 31, 2005 and March 31, 2005..............................3 Statements of Operations For the Three and Nine Months Ended December 31, 2005 and 2004......4 Statement of Partners' Equity (Deficit) For the Nine Months Ended December 31, 2005.........................5 Statements of Cash Flows For the Nine Months Ended December 31, 2005 and 2004................6 Notes to Financial Statements.........................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................14 Item 3. Quantitative and Qualitative Disclosures about Market Risk...15 Item 4. Procedures and Controls......................................15 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................15 Item 2. Changes in Securities and Use of Proceed....................15 Item 3. Defaults Upon Senior Securities.............................15 Item 4. Submission of Matters to a Vote of Security Holders.........15 Item 5. Other Information...........................................15 Item 6. Exhibits.....................................................16 Signatures...........................................................17 2 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) BALANCE SHEETS
December 31, 2005 March 31, 2005 ---------------------- ------------------ (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 133,044 $ 191,640 Investments in limited partnerships, net (Note 2) 1,032,807 1,121,294 ---------------------- ------------------ Total assets $ 1,165,851 $ 1,312,934 ====================== ================== LIABILITIES AND PARTNERS EQUITY (DEFICIT) Liabilities: Payable to limited partnership (Note 4) $ 2,303 $ 2,303 Accrued fees and expenses due to General Partner and affiliates (Note 3) 163,409 177,069 ---------------------- ------------------ Total liabilities 165,712 179,372 ---------------------- ------------------ Partners' equity (deficit): General Partner (89,899) (88,565) Limited Partners (10,000 units authorized, 10,000 units issued and outstanding) 1,090,038 1,222,127 ---------------------- ------------------ Total partners' equity 1,000,139 1,133,562 ---------------------- ------------------ $ 1,165,851 $ 1,312,934 ====================== ==================
See accompanying notes to financial statements 3 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) STATEMENTS OF OPERATIONS For the Three and Nine Months Ended December 31, 2005 and 2004 (unaudited)
2005 2004 ----------------------------------------- ------------------------------------ Three Months Nine Months Three Months Nine Months ------------------- ----------------- ----------------- ------------- Interest income $ 199 $ 636 $ 119 $ 447 Distribution income 1,852 10,480 - 5,098 Reporting fee income - 2,456 - - ------------------- ----------------- ----------------- ------------- 2,051 13,572 119 5,545 ------------------- ----------------- ----------------- ------------- Operating expenses: Amortization (Note 2) 933 3,367 2,481 7,443 Asset management fees (Note 3) 10,500 31,500 10,500 31,500 Legal and accounting 12,696 26,501 4,925 21,750 Impairment loss 58,612 58,612 - - Other 1,267 2,741 3,930 6,721 ------------------- ----------------- ----------------- ------------- Total operating expenses 84,008 122,721 21,836 67,414 ------------------- ----------------- ----------------- ------------- Loss from operations (81,957) (109,149) (21,717) (61,869) ------------------- ----------------- ----------------- ------------- Equity in losses of limited partnerships (Note 2) (6,490) (24,274) (17,786) (55,930) ------------------- ----------------- ----------------- ------------- Net loss $ (88,447) $ (133,423) $ (39,503) $ (117,799) =================== ================= ================= ============= Net loss allocated to: General Partner $ (884) $ (1,334) $ (395) $ (1,178) =================== ================= ================= ============= Limited Partners $ (87,563) $ (132,089) $ (39,108) $ (116,621) =================== ================= ================= ============= Net loss per limited partner unit $ (9) $ (13) $ (4) $ (12) =================== ================= ================= ============= Outstanding weighted limited partner units 10,000 10,000 10,000 10,000 =================== ================= ================= =============
See accompanying notes to financial statements 4 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) STATEMENT OF PARTNERS' EQUITY (DEFICIT) For the Nine Months Ended December 31, 2005 (unaudited)
General Limited Partner Partners Total --------------- ------------------- --------------- Partners' equity (deficit) at March 31, 2005 $ (88,565) $ 1,222,127 $ 1,133,562 Net loss (1,334) (132,089) (133,423) --------------- ------------------- --------------- Partners' equity (deficit) at December 31, 2005 $ (89,899) $ 1,090,038 $ 1,000,139 =============== =================== ===============
See accompanying notes to financial statements 5 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) STATEMENTS OF CASH FLOWS For the Nine Months Ended December 31, 2005 and 2004 (unaudited)
2005 2004 ------------------ ----------------- Cash flows from operating activities: Net loss $ (133,423) $ (117,799) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 3,367 7,443 Equity in losses of limited partnerships 24,274 55,930 Impairment loss 58,612 - Change in accrued fees and expenses due to General Partner and affiliates (13,660) 4,515 ------------------ ----------------- Net cash used in operating activities (60,830) (49,911) ------------------ ----------------- Cash flows from investing activities: Distributions from limited partnerships 2,234 3,009 ------------------ ----------------- Net decrease in cash and cash equivalents (58,596) (46,902) Cash and cash equivalents, beginning of period 191,640 222,356 ------------------ ----------------- Cash and cash equivalents, end of period $ 133,044 $ 175,454 ================== ================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Taxes paid $ - $ - ================== =================
See accompanying notes to financial statements 6 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- General - ------- The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended December 31, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2006. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2005. 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 Complex") that are eligible for Low Income Housing Tax 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 of the Partnership is WNC Tax Credit Partners IV, L.P. ("TCP IV"). The general partner of TCP IV is WNC & Associates, Inc. ("Associates"). The chairman and president own 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. 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 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 a sale or refinancing equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and the General Partner has received proceeds equal to its capital contribution and 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. 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 Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In 7 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS-CONTINUED For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - -------------------------------------------------------------- most cases the annual amount of Low Income Housing Tax 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 Tax 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 Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership's investment in the Housing Complex would occur. The Partnership is a limited partner or a 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 Tax Credits and recapture of Low Income Housing Tax 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 Tax 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 Tax 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 Tax Credits from the Local Limited Partnerships in the future. Until the Local Limited Partnerships have completed the 15 year Low Income Housing Tax Credit compliance period, risks exist for potential recapture of prior Low Income Housing Tax 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. 8 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS-Continued For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - -------------------------------------------------------------- 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. 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 Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the investment exceeds fair value. The accounting policies of the Local Limited Partnerships are generally 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 the periods ended December 31, 2005 and 2004 have been recorded by the Partnership based on Nine Months of reported 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 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 2). 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 received by limited partners are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. 9 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS-Continued For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - -------------------------------------------------------------- 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 for disposition. 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 December 31, 2005 and March 31, 2005, the Partnership had no cash equivalents. Concentration of Credit Risk - ---------------------------- At December 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 partnership unit is calculated pursuant to Statement of Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit includes no dilution and is computed by dividing loss available to Limited Partners by the weighted average number of units outstanding during the period. Calculation of diluted net loss per unit is not required. Income Taxes - ------------ No provision for income taxes has been recorded in the accompanying financial statements as any liability and/or benefits for income taxes as income taxes flows to the partners of the Partnership and is their obligation and/or benefit. For income tax purposes the Partnership reports on a calendar year basis. 10 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS-Continued For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued - -------------------------------------------------------------- Revenue Recognition - ------------------- The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made. Reporting Comprehensive Income - ------------------------------ The Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income established standards for the reporting and display of comprehensive income (loss) and its components in a full set of general-purpose financial statements. The Partnership had no items of other comprehensive income for all periods presented, as defined by SFAS No. 130. 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, represent 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 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. 11 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS-Continued For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - ------------------------------------------------------- The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented below:
For the Nine Months For the Year Ended Ended December 31, 2005 March 31, 2005 ---------------------- ------------------- Investments per balance sheet, beginning of period $ 1,121,294 $ 1,395,876 Distributions received from limited partnerships (2,234) (13,894) Equity in losses of limited partnerships (24,274) (122,808) Impairment loss (58,612) (127,956) Amortization of capitalized acquisition fees and costs (3,367) (9,924) ---------------------- ------------------- Investments per balance sheet, end of period $ 1,032,807 $ 1,121,294 ====================== ===================
Selected financial information for the nine months ended December 31, 2005 and 2004 from the unaudited combined condensed financial statements of the limited partnership in which the Partnership has invested is as follows:
2005 2004 ------------------- ------------------ Revenues $ 2,878,000 $ 2,809,000 Expenses: Interest expense 588,000 625,000 Depreciation and amortization 800,000 809,000 Operating expenses 2,019,000 1,936,000 ------------------- ------------------- Total expenses 3,407,000 3,370,000 ------------------- ------------------- Net loss $ (529,000) (561,000) =================== =================== Net loss allocable to the Partnership $ (521,000) $ (552,000) =================== =================== Net loss recorded by the Partnership $ (24,000) $ (56,000) =================== ===================
12 WNC HOUSING TAX CREDIT FUND IV, L.P. SERIES 1 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS-Continued For the Quarterly Period Ended December 31, 2005 (unaudited) NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued - ------------------------------------------------------- Certain Local Limited Partnerships have incurred significant 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 Partners 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. NOTE 3 - RELATED PARTY TRANSACTIONS - ----------------------------------- The Partnership has no officers, employees, or directors. However, under the terms of the Partnership Agreement the Partnership is obligated to the General Partner or its affiliates for the following items: (a) Annual Asset Management Fee. 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. The base fee amount will be adjusted annually based on changes to the Consumer Price Index. However, in no event will the annual asset management fee exceed 0.2% of the invested assets of the Local Limited Partnerships, including the Partnership's allocable share of the mortgages. Asset management fees of $31,500 were incurred for each of the nine months ended December 31, 2005 and 2004. The Partnership paid $37,500 and $30,000 of those asset management fees for the nine months ended December 31, 2005 and 2004, respectively. (b) Subordinated Disposition Fee. A subordinated disposition fee is 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. (c) The Partnership reimburses the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements were $39,847 and $25,456 during the nine months ended December 31, 2005 and 2004, respectively. The accrued fees and advances due to General Partner and/or its affiliates consisted of the following:
December 31, 2005 March 31, 2005 ---------------------- -------------------- Reimbursement for expenses paid by the General Partner and/or its affiliate $ 242 $ 7,902 Asset management fee payable 163,167 169,167 ---------------------- -------------------- $ 163,409 $ 177,069 ====================== ====================
NOTE 4 - PAYABLE TO LIMITED PARTNERSHIP - --------------------------------------- Payable 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. 13 Item 2. 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-Q 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-Q and in other reports we filed with the Securities and Exchange Commission. The following discussion should be read in conjunction with the condensed unaudited Financial Statements and the Notes thereto included elsewhere in this filing. The following discussion and analysis compares the results of operations for the three and nine months ended December 31, 2005 and 2004, and should be read in conjunction with the condensed financial statements and accompanying notes included within this report. Financial Condition The Partnership's assets at December 31, 2005 consisted primarily of $133,000 in cash and aggregate investments in the twenty-one Local Limited Partnerships of $1,033,000. Liabilities at December 31, 2005 consisted primarily of $163,000 in accrued asset annual management fees and reimbursement for expenses paid by the General Partner and its affiliates. Results of Operations Three Months Ended December 31, 2005 Compared to Three Months December 31, 2004. The Partnership's net loss for three months ended December 31, 2005 was $(88,000), reflecting an increase of $(49,000) from the net loss experienced for the three months ended December 31, 2004 of $(39,000). The increase in net loss is primarily due to the increase in losses from operations by approximately $(60,000) to $(82,000) for the three months ended December 31, 2005 from $(22,000) for the three months ended December 31, 2004. The increase in losses from operations was primarily due to an increase in the impairment loss of $(59,000). The impairment loss is due to the fact that the net investment balance exceeded the remaining tax credits along with any residual value in four limited partnerships. The remaining $(1,000) increase in loss from operations is due to an $(8,000) increase in legal and accounting expenses offset by a $2,000 decrease in amortization, other operating expenses which decreased by $3,000 and distribution income which increased by $2,000. The increase in the loss from operations was offset by a decrease in the equity in losses from Local Limited Partnerships by $11,000 to $(6,000) for the three months ended December 31, 2005 from $(17,000) for the three months ended December 31, 2004. The decrease in equity in losses of Local Limited Partnerships is due to the Partnership not recognizing certain losses of the Local Limited Partnerships, as the investments in such Local Limited Partnerships had reached $0 at December 31, 2005. Since the Partnership's liability with respect to its investments is limited, losses in excess of investment are not recognized. Nine Months Ended December 31, 2005 Compared to Nine Months Ended December 31, 2004. The Partnership's net loss for the nine months ended December 31, 2005 was $(134,000), reflecting an increase of $(16,000) from the net loss experienced for the nine months ended December 31, 2004 of $(118,000). The increase in net loss is primarily due to the increase in losses from operations by approximately $(47,000) to $(109,000) for the nine months ended December 31, 2005 from $(62,000) for the nine months ended December 31, 2004. The increase in losses from operations was primarily due to an increase in impairment loss of $(59,000). The impairment loss is due to the fact that the net investment balance exceeded the remaining tax credits along with any residual value in four limited partnerships. In addition to the impairment loss increase there was a $5,000 increase in distribution income, $3,000 increase in reporting fee income, a $4,000 decrease in amortization, a $4,000 decrease in other operating expenses all offset by $(5,000) increase in legal and accounting expenses. The increase in loss from operations was offset by a decrease in the equity in losses of Local Limited Partnerships which decreased by $32,000 to $(24,000) for the nine months ended December 31, 2005 from $(56,000) for the nine months ended December 31, 2004. 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued The decrease in equity in losses of Local Limited Partnerships is due to the Partnership not recognizing certain losses of the Local Limited Partnerships, as the investments in such Local Limited Partnerships had reached $0 at December 31, 2005. Since the Partnership's liability with respect to its investments is limited, losses in excess of investment are not recognized. Cash Flows Nine Months Ended December 31, 2005 Compared to Nine Months Ended December 31, 2004. Net cash used during the nine months ended December 31, 2005 was $(59,000) compared to net cash used by the nine months ended December 31, 2004 of $(47,000). The increase of $(12,000) in cash used was due to an increase in cash used by operating activities of approximately $(11,000) which included a $(18,000) decrease in accrued fees and expenses due to General Partner and its affiliates along with a $(4,000) increase in other operating expenses. During the nine months ended December 31, 2005, accrued payables, which consist primarily of related party management fees and advances due to the General Partner, decreased by approximately $14,000. Item 3. Quantitative and Qualitative Disclosures about Market Risk NOT APPLICABLE Item 4. Procedures and Controls 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 Chief 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 December 31, 2005 that materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. Part II. Other Information Item 1. Legal Proceedings NONE Item 2. Changes in Securities and Use of Proceeds NONE Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information NONE 15 Item 6. Exhibits 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a- 15(e)and 15d-15(e), as adopted pursuant to section 302 of the Sarbanes- Oxley Act of 2002. (filed herewith) 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a- 15(e)and 15d-15(e), as adopted pursuant to section 302 of the Sarbanes- Oxley Act of 2002. (filed herewith) 32.1 Section 1350 Certification of the Chief Executive Officer. (filed herewith) 32.2 Section 1350 Certification of the Chief Financial Officer. (filed herewith) 16 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WNC HOUSING TAX CREDIT FUND IV, L.P., Series 1 By: WNC Tax Credit Partners IV, L.P. General Partner of the Registrant By: WNC & ASSOCIATES, INC. General Partner of WNC Tax Credit Partners IV, L.P. By: /s/ Wilfred N. Cooper Jr. ------------------------- Wilfred N. Cooper, Jr. President and Chief Executive Officer of WNC & Associates, Inc. Date: February 17, 2006 By: /s/ Thomas J. Riha ------------------ Thomas J. Riha, Senior Vice President - Chief Financial Officer of WNC & Associates, Inc. Date: February 17, 2006 17 EX-31 2 ex311nt41.txt EX 31-1 NAT 4-1 Exhibit 31-1 CERTIFICATIONS I, Wilfred N. Cooper, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX CREDIT FUND IV, L.P., Series 1; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report. As discussed in its cover letter to its annual report on Form 10-K for the year ended March 31, 2005, WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") was unable to obtain an audit of its financial statements included in such annual report performed in accordance with the standards of the PCAOB. This was due to the inability to obtain audits of financial statements of the entities in which the Partnership has invested (the "Local Limited Partnerships") performed in accordance with the standards of the PCAOB. (Audit opinions, which the Partnership's auditors originally intended to rely upon in forming their opinion, were obtained from the Local Limited Partnerships that are in accordance with generally accepted auditing standards for the United States, although not in accordance with the standards of PCAOB.) At the advice of the SEC, the Partnership filed its annual report on Form 10-K for the year ended as "UNAUDITED." The Partnership continues to evaluate ways of addressing this deficiency and, together with its auditors, has discussed solutions with the SEC and the PCAOB. To date, those solutions primarily entail enhanced audit documentation required by PCAOB Audit Standard No. 3. The Partnership's auditors would have to perform additional procedures related to those Local Limited Partnerships in order to complete their audit. The Partnership's auditors have been engaged to perform, and have performed, a review of the Partnership's interim financial information included in the Partnership's quarterly report on Form 10-Q for the quarter ended December 31, 2005. Despite the Partnership's ongoing efforts to address these matters, the Partnership at the time of this filing is an untimely filer due to the deficiency in its annual report on Form 10-K; 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 quarterly 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: February 17, 2006 /s/ Wilfred N. Cooper, Jr. - --------------------------- President and Chief Executive Officer of WNC & Associates, Inc. EX-32 3 ex321nat41.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 Quarterly Report on Form 10-Q of WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") for the quarter ended December 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 registiered public accountants to accompany the Partnership's annual 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. February 17, 2006 EX-32 4 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 Quarterly Report on Form 10-Q of WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") for the quarter ended December 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 registiered public accountants to accompany the Partnership's annual 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. February 17, 2006 EX-31 5 ex312nt41.txt EXHIBIT 31-2 NAT 4-1 Exhibit 31-2 CERTIFICATIONS I, Thomas J. Riha, certify that: 1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX CREDIT FUND IV, L.P., Series 1; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report. As discussed in its cover letter to its annual report on Form 10-K for the year ended March 31, 2005, WNC Housing Tax Credit Fund IV, L.P., Series 1 (the "Partnership") was unable to obtain an audit of its financial statements included in such annual report performed in accordance with the standards of the PCAOB. This was due to the inability to obtain audits of financial statements of the entities in which the Partnership has invested (the "Local Limited Partnerships") performed in accordance with the standards of the PCAOB. (Audit opinions, which the Partnership's auditors originally intended to rely upon in forming their opinion, were obtained from the Local Limited Partnerships that are in accordance with generally accepted auditing standards for the United States, although not in accordance with the standards of PCAOB.) At the advice of the SEC, the Partnership filed its annual report on Form 10-K for the year ended as "UNAUDITED." The Partnership continues to evaluate ways of addressing this deficiency and, together with its auditors, has discussed solutions with the SEC and the PCAOB. To date, those solutions primarily entail enhanced audit documentation required by PCAOB Audit Standard No. 3. The Partnership's auditors would have to perform additional procedures related to those Local Limited Partnerships in order to complete their audit. The Partnership's auditors have been engaged to perform, and have performed, a review of the Partnership's interim financial information included in the Partnership's quarterly report on Form 10-Q for the quarter ended December 31, 2005. Despite the Partnership's ongoing efforts to address these matters, the Partnership at the time of this filing is an untimely filer due to the deficiency in its annual report on Form 10-K; 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 quarterly 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: February 17, 2006 /s/ Thomas J. Riha - ------------------ Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. -----END PRIVACY-ENHANCED MESSAGE-----