-----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, Dqwa7RHFoADqQXTq5CC6k2AfnjQ3O8jQhNqqs2wQ/vca19I2NR1/+Ud0ws9qHH3Q n7OlnmbImHscuEPSVoQU3g== 0001084067-08-000059.txt : 20080317 0001084067-08-000059.hdr.sgml : 20080317 20080317165532 ACCESSION NUMBER: 0001084067-08-000059 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20080317 DATE AS OF CHANGE: 20080317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 CENTRAL INDEX KEY: 0000913497 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 330596399 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28370 FILM NUMBER: 08693596 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 nt42q07.txt NAT 4-2 10-Q 93007 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 June 30, 2007 For the quarterly period ended September 30, 2007 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: 000-28370 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 California 33-0596399 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17782 Sky Park Circle, Irvine, CA 92614 ( Address of principle executive offices ) (714) 622-5565 ( 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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act: Large accelerated filer Accelerated filer --- --- Non-accelerated filer X Smaller reporting company --- --- Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X ------- ------- WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) INDEX TO FORM 10-Q FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets As of June 30, 2007, September 30, 2007 and March 31, 2007.................................................3 Statements of Operations For the Three Months Ended June 30, 2007 and 2006.......................................................4 For the Three and Six Months Ended September 30, 2007 and 2006..................................................5 Statement of Partners' Equity (Deficit) For the Three Months Ended June 30, 2007 ........................6 For the Six Months Ended September 30, 2007 .....................6 Statements of Cash Flows For the Three Months Ended June 30, 2007 and 2006................7 For the Six Months Ended September 30, 2007 and 2006.............8 Notes to Financial Statements.............................................9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................19 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......20 Item 4. Controls and Procedures ........................................20 Item 4T. Controls and Procedures .......................................21 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......21 Item 3. Defaults Upon Senior Securities..................................21 Item 4. Submission of Matters to a Vote of Security Holders..............21 Item 5. Other Information................................................21 Item 6. Exhibits.........................................................21 Signatures...............................................................22
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) BALANCE SHEETS (UNAUDITED) JUNE 30, 2007 SEPTEMBER 30, 2007 MARCH 31, 2007 ------------------- ------------------- ------------------- ASSETS Cash $ 23,054 $ 28,657 $ 20,085 Investments in Local Limited Partnerships, net (Note 2) 829,317 801,600 970,319 ------------------- ------------------- ------------------- Total Assets $ 852,371 $ 830,257 $ 990,404 =================== =================== =================== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Liabilities: Accrued expenses $ -- $ 11,184 $ -- Accrued fees and expenses due to General Partner and affiliates (Note 3) 630,927 642,182 618,403 ------------------- ------------------- ------------------- Total Liabilities 630,927 653,366 618,403 ------------------- ------------------- ------------------- Partners' equity (deficit): General Partner (150,098) (150,543) (148,592) Limited Partners (20,000 Partnership Units authorized; 15,600 Partnership Units issued and outstanding) 371,542 327,434 520,593 ------------------- ------------------- ------------------- Total Partners' Equity 221,444 176,891 372,001 ------------------- ------------------- ------------------- Total Liabilities and Partners' Equity $ 852,371 $ 830,257 $ 990,404 =================== =================== =================== See accompanying notes to financial statements 3 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED) 2007 2006 ----------------- ----------------- THREE MONTHS THREE MONTHS ----------------- ----------------- Reporting fees $ 2,950 $ -- Operating expenses: Amortization (Note 2) 1,280 5,176 Asset management fees (Note 3) 11,000 11,000 Impairment loss (Note 2) 113,285 450,003 Legal and accounting fees -- 742 Other 1,524 653 ----------------- ----------------- Total operating expenses 127,089 467,574 ----------------- ----------------- Loss from operations (124,139) (467,574) Equity in losses of Local Limited Partnerships (Note 2) (26,437) (52,195) Interest income 19 15 ----------------- ----------------- Net loss $ (150,557) $ (519,754) ================= ================= Net loss allocated to: General Partner $ (1,506) $ (5,198) ================= ================= Limited Partners $ (149,051) $ (514,556) ================= ================= Net loss per Partnership Unit $ (10) $ (33) ================= ================= Outstanding weighted Partnership Units 15,600 15,600 ================= ================= See accompanying notes to financial statements 4 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 2007 2006 ------------------------------ ------------------------------ THREE SIX THREE SIX MONTHS MONTHS MONTHS MONTHS ------------- ------------- ------------- ------------- Reporting fees $ 5,590 $ 8,540 $ 6,000 $ 6,000 Operating expenses: Amortization (Note 2) 1,280 2,560 4,996 10,172 Asset management fees (Note 3) 11,000 22,000 11,000 22,000 Impairment loss (Note 2) -- 113,285 -- 450,003 Legal and accounting fees 11,184 11,184 18,625 19,367 Bad debt expense -- -- 8,000 8,000 Other -- 1,779 2,054 2,707 ------------- ------------- ------------- ------------- Total operating expenses 23,719 150,808 44,675 512,249 ------------- ------------- ------------- ------------- Loss from operations (18,129) (142,268) (38,675) (506,249) Equity in losses of Local Limited Partnerships (Note 2) (26,437) (52,874) (54,222) (106,417) Interest income 13 32 20 35 ------------- ------------- ------------- ------------- Net loss $ (44,553) $ (195,110) $ (92,877) $ (612,631) ============= ============= ============= ============= Net loss allocated to: General Partner $ (445) $ (1,951) $ (928) $ (6,126) ============= ============= ============= ============= Limited Partners $ (44,108) $ (193,159) $ (91,949) $ (606,505) ============= ============= ============= ============= Net loss per Partnership Unit $ (3) $ (12) $ (6) $ (39) ============= ============= ============= ============= Outstanding weighted Partnership Units 15,600 15,600 15,600 15,600 ============= ============= ============= ============= See accompanying notes to financial statements 5 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) STATEMENTS OF PARTNERS' EQUITY FOR THE THREE MONTHS ENDED JUNE 30, 2007, AND THE SIX MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2007 GENERAL LIMITED PARTNER PARTNERS TOTAL --------------- ---------------- --------------- Partners' equity (deficit) at March 31, 2007 $ (148,592) $ 520,593 $ 372,001 Net loss (1,506) (149,051) (150,557) --------------- ---------------- --------------- Partners' equity (deficit) at June 30, 2007 $ (150,098) $ 371,542 $ 221,444 =============== ================ =============== FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 GENERAL LIMITED PARTNER PARTNERS TOTAL --------------- ---------------- --------------- Partners' equity (deficit) at March 31, 2007 $ (148,592) $ 520,593 $ 372,001 Net loss (1,951) (193,159) (195,110) --------------- ---------------- --------------- Partners' equity (deficit) at September 30, 2007 $ (150,543) $ 327,434 $ 176,891 =============== ================ =============== See accompanying notes to financial statements 6 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED) 2007 2006 -------------- -------------- Cash flows from operating activities: Net loss $ (150,557) $ (519,754) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization 1,280 5,176 Equity in losses of Local Limited Partnerships 26,437 52,195 Impairment loss 113,285 450,003 Change in accrued fees and expenses due to General Partner and affiliates 12,524 12,395 -------------- -------------- Net cash provided by operating activities 2,969 15 -------------- -------------- Net increase in cash 2,969 15 Cash, beginning of period 20,085 16,967 -------------- -------------- Cash, end of period $ 23,054 $ 16,982 ============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Taxes paid $ - $ - ============== ============== See accompanying notes to financial statements 7 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (UNAUDITED) 2007 2006 -------------- -------------- Cash flows from operating activities: Net loss $ (195,110) $ (612,631) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Amortization 2,560 10,172 Equity in losses of Local Limited Partnerships 52,874 106,417 Impairment loss 113,285 450,003 Advances to Local Limited Partnerships - (8,000) Write-off of advances to Local Limited partnerships - 8,000 Change in accrued expenses 11,184 - Change in accrued fees and expenses due to General Partner and affiliates 23,779 44,074 -------------- -------------- Net cash provided by (used in) operating activities 8,572 (1,965) -------------- -------------- Net increase (decrease) in cash 8,572 (1,965) Cash, beginning of period 20,085 16,967 -------------- -------------- Cash, end of period $ 28,657 $ 15,002 ============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Taxes paid $ - $ - ============== ============== See accompanying notes to financial statements 8
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2004, SEPTEMBER 30, 2004 AND DECEMBER 31, 2004 (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 three months ended June 30, 2007, and six months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2008. 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, 2007. Organization - ------------ WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") is a California limited partnership formed under the laws of the State of California on September 27, 1993. The Partnership was formed to acquire limited partnership interests in other limited partnerships ("Local Limited Partnerships") which owns multi-family housing complexes ("Housing Complexes") that are eligible for Federal low income housing tax credits ("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. Each Local Limited Partnership is governed by its agreement of limited partnership (the "Local Limited Partnership Agreement"). The general partner of the Partnership is WNC Tax Credit Partners IV, L.P. (the "General Partner"). The general partner of the General Partner is WNC & Associates, Inc. ("Associates"). The chairman and president of Associates own substantially all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through the General Partner, as the Partnership has no employees of its own. The Partnership shall continue 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 20,000 units of limited partnership interest ("Partnership Units") at $1,000 per Partnership Unit. The offering of Partnership Units concluded in July 1995 at which time 15,600 Partnership Units representing subscriptions, net of discounts for volume purchases of more than 100 units, in the amount of $15,241,000 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 investors (the "Limited Partners") will be allocated the remaining 99% of these items in proportion to their respective investments. The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership 9 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED - -------------------------------------------------------------- obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partner would then be entitled to receive proceeds equal to their capital contributions 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. 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 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 any 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. 10 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED - -------------------------------------------------------------- No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership 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. The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through March 31, 2009. 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. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs are completing their compliance periods. As of September 30, 2007, none of the Local Limited Partnerships had completed their 15 year compliance period. 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 (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes. Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners' return wherever possible and, ultimately, to wind down the Partnership. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated , the dissolution of the Partnership was not imminent as of September 30, 2007. As of September 30, 2007, one Housing Complex had been sold, EW, a California Limited Partnership. Subsequent to September 30, 2007, in October 2007, the Housing Complex of one Local Limited Partnership (Crossings II Limited Dividend Housing Association, Limited Partnership) was identified for disposition. (see Note 4). Method of Accounting for Investments in Local Limited Partnerships - ------------------------------------------------------------------ The Partnership accounts for its investments in Local 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 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 and are being amortized over 30 years. (See Note 2) 11 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED - -------------------------------------------------------------- "Equity in losses of Local Limited Partnerships" for the periods ended June 30, 2007 and 2006 and September 30, 2007 and 2006, have been recorded by the Partnership. Management's estimate for the three and six-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 of 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 impaired (see Note 2). If the Local Limited Partnerships reported 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 (see Note 2). The Partnership does not consolidate the accounts and activities of the Local Limited Partnerships, which are considered Variable Interest Entities under Financial Accounting Standards Board Interpretation No. 46-Revised, "Consolidation of Variable Interest Entities", because the Partnership is not considered the primary beneficiary. The Partnership's balance in investments in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on such investments, represents the maximum exposure to loss in connection with such investments. The Partnership's exposure to loss on the Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the local General Partners and their guarantees against Low Income Housing Tax Credit recapture. 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 distribution income. As of June 30 and September 30, 2007 nineteen investment accounts in Local Limited Partnerships had reached a zero balance. 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 an original maturity of three months or less when purchased to be cash equivalents. For all periods presented, the Partnership had no cash equivalents. 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. 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. 12 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED - -------------------------------------------------------------- Net Loss Per Partnership Unit - ----------------------------- Net loss per Partnership Unit is calculated pursuant to Statement of Financial Accounting Standards No. 128, Earnings Per Share. Net loss per Partnership Unit includes no dilution and is computed by dividing loss allocated to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net loss per Partnership Unit is not required. Amortization - ------------ Acquisition fees and costs are being amortized over 30 years using the straight-line method. Amortization expense for the three months ended June 30, 2007 and 2006 was $1,280 and $5,176, respectively. For the six months ended September 30, 2007 and 2006 amortization expense was $2,560 and $10,172, respectively. Impairment - ---------- A loss in value from a Local Limited Partnership other than a temporary decline is recorded as an impairment loss. Impairment is measured by comparing the investment carrying amount to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value to the Partnership. 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. NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS - -------------------------------------------------- As of June 30 and September 30, 2007, the Partnership has acquired limited partnership interests in twenty-one Local Limited Partnerships, each of which owns one Housing Complex consisting of an aggregate of 876 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, as defined, 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 Low Income Housing Tax Credits of the Local Limited Partnerships. A loss in value from a Local Limited Partnership other than a temporary decline is recorded as an impairment loss. Impairment is measured by comparing the investment carrying amount to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value to the Partnership. Accordingly, the Partnership recorded an impairment loss of $113,285 and $450,003, during the three months ended June 30, 2007 and 2006, respectively. There were no additional impairment losses for the periods ended September 30, 2007 and 2006. 13 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 2 - INVESTMENTS IN LOCAL 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 THREE FOR THE YEAR MONTHS ENDED ENDED JUNE 30, 2007 MARCH 31, 2007 ------------------- ------------------- Investments per balance sheet, beginning of period $ 970,319 $ 1,750,403 Impairment loss (113,285) (450,003) Equity in losses of Local Limited Partnerships (26,437) (310,379) Amortization of capitalized acquisition fees and costs (1,280) (19,702) ------------------- ------------------- Investments per balance sheet, end of period $ 829,317 $ 970,319 =================== ===================
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED SEPTEMBER 30, 2007 MARCH 31, 2007 ------------------- ------------------- Investments per balance sheet, beginning of period $ 970,319 $ 1,750,403 Impairment loss (113,285) (450,003) Equity in losses of Local Limited Partnerships (52,874) (310,379) Amortization of capitalized acquisition fees and costs (2,560) (19,702) ------------------- ------------------- Investments per balance sheet, end of period $ 801,600 $ 970,319 =================== =================== FOR THE THREE FOR THE YEAR MONTHS ENDED ENDED JUNE 30, 2007 MARCH 31, 2007 ------------------- ------------------- Investments in Local Limited Partnerships, net $ 608,284 $ 748,006 Acquisition fees and costs, net of accumulated amortization of $1,007,020 and $1,005,740 221,033 222,313 ------------------- ------------------- Investments per balance sheet, end of period $ 829,317 $ 970,319 =================== =================== FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED SEPTEMBER 30, 2007 MARCH 31, 2007 ------------------- ------------------- Investments in Local Limited Partnerships, net $ 581,847 $ 748,006 Acquisition fees and costs, net of accumulated amortization of $1,008,300 and $1,005,740 219,753 222,313 ------------------- ------------------- Investments per balance sheet, end of period $ 801,600 $ 970,319 =================== ===================
14 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, CONTINUED - ------------------------------------------------------------- Selected financial information for the three months ended June 30, 2007 and 2006 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:
COMBINED CONDENSED STATEMENTS OF OPERATIONS 2007 2006 -------------------- -------------------- Revenues $ 1,184,000 $ 1,184,000 -------------------- -------------------- Expenses: Interest expense 274,000 274,000 Depreciation and amortization 328,000 328,000 Operating expenses 796,000 796,000 -------------------- -------------------- Total expenses 1,398,000 1,398,000 -------------------- -------------------- Net loss $ (214,000) $ (214,000) ==================== ==================== Net loss allocable to the Partnership $ (211,000) $ (211,000) ==================== ==================== Net loss recorded by the Partnership $ (26,000) $ (52,000) ==================== ====================
15 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, CONTINUED - ------------------------------------------------------------- Selected financial information for the six months ended September 30, 2007 and 2006 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:
COMBINED CONDENSED STATEMENTS OF OPERATIONS 2007 2006 -------------------- -------------------- Revenues $ 2,369,000 $ 2,369,000 -------------------- -------------------- Expenses: Interest expense 548,000 548,000 Depreciation and amortization 656,000 656,000 Operating expenses 1,592,000 1,592,000 -------------------- -------------------- Total expenses 2,796,000 2,796,000 -------------------- -------------------- Net loss $ (427,000) $ (427,000) ==================== ==================== Net loss allocable to the Partnership $ (422,000) $ (422,000) ==================== ==================== Net loss recorded by the Partnership $ (53,000) $ (106,000) ==================== ====================
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. Troubled Properties - ------------------- One Local Limited Partnership, Crossing II Limited Dividend Housing Association LP ("Crossings II") started to experience operational issues during the year ended March 31, 2005. As interest rates were falling, this particular market saw an increasing number of people purchasing first time homes, thereby, causing high vacancy rates. This particular area of Michigan is experiencing an overall low occupancy issue. The low occupancy was the primary reason for the properties' cash flow issues. The Local General Partner continues to make advances to the property to help fund its operations. The Partnership received all the Low Income Housing Tax Credits from Crossings II. The final Low Income Housing Tax Credits were taken in 2007. The Local Limited Partnership's General Partner is looking to purchase the Partnership's limited partnership interest in Crossings II. The General Partner is going to post a surety bond to protect the Partnership from tax credit recapture. The anticipated closing date of this transaction is April of 2008. The Partnership has two investments, consisting of 99% limited partnership interests in each of Broken Bow Apartments I, Limited Partnership ("Broken Bow") and Sidney Apartments I, Limited Partnership ("Sidney"). Due to operational difficulties and negative cash flows in 2000, foreclosure procedures were commenced by the lender of these two Local Limited Partnerships. As a result, the Partnerships , Broken Bow and Sidney, in addition to a WNC subsidiary executed a work-out agreement with the lender (the "Agreement"), which was effective December 14, 2001. Broken Bow was required to pay to the lender $165,000 as a partial settlement of the indebtedness due and owed by Broken Bow due to the fact that their loan was a construction loan. The Partnership advanced the aforementioned monies to Broken Bow and fully reserved the amount as of March 31, 2002. The balance of the indebtedness owed to the lender by Broken Bow was satisfied by the execution of two promissory notes. Simultaneously, the balance of the indebtedness owed to the lender by Sidney was 16 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, CONTINUED - ------------------------------------------------------------- also satisfied by the execution of two promissory notes. The Partnership and a WNC subsidiary had executed a guarantee for the payment of both notes of Broken Bow and Sidney. In addition, several other commitments were made. Broken Bow and Sidney had also executed a grant deed to the lender in the event that any of the entities defaulted under the terms and provisions of the notes. The deeds were held in escrow, and if Broken Bow or Sidney defaults on either note, the lender may, at its option, record the respective deed. In addition, the Partnership had under the promissory notes assigned the lender as additional collateral all of its residual value interests, as defined, in all of the Local Limited Partnerships. The Partnership and the Local Limited Partnerships were prohibited from selling, assigning, transferring or further encumbering the Housing Complexes retained by each Local Limited Partnership without the lenders acknowledgement. On March 24, 2006 Broken Bow and Sidney had the promissory notes refinanced and as a result the Partnership and a subsidiary of Associates were relieved of their obligations as guarantors for these two Local Limited Partnerships. The Partnership was also released of pledging additional collateral in the form of its residual value interests. 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 the following fees: (a) 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 $1,058,950. Accumulated amortization of these capitalized costs was $839,197, $837,917 and $836,637 as of September 30, 2007, June 30, 2007 and March 31, 2007, respectively. (b) Reimbursement of costs incurred by the General Partner or an affiliate of Associates in connection with the acquisition of Local Limited Partnerships. These reimbursements have not exceeded 1.2% of the gross proceeds. As of the end of all periods presented, the Partnership incurred acquisition costs of $169,103, which have been included in investments in Local Limited Partnerships. Accumulated amortization was $169,103 as of September 30, 2007, June 30, 2007 and March 31, 2007. (c) 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. Asset management fees of $11,000 were incurred during each of the three months ended June 30, 2007 and 2006. For each of the six months ended September 30, 2007 and 2006, the Partnership incurred asset management fees of $22,000. The Partnership paid the General Partner or its affiliates $0 of those fees during each of the three months ended June 30, 2007 and 2006 and each of the six months ended September 30, 2007 and 2006. (d) A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 16% through December 31, 2003 and 6% thereafter (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. (e) The Partnership reimburses the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements were $0 during the three months ended June 30, 2007 and 2006 and for each of the six months ended September 30, 2007 and 2006. 17 WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2 (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED FOR THE QUARTERLY PERIODS ENDED JUNE 30, 2007 AND SEPTEMBER 30, 2007 (UNAUDITED) NOTE 3 - RELATED PARTY TRANSACTIONS, CONTINUED - ---------------------------------------------- The accrued fees and expenses due to General Partner and affiliates consisted of the following at:
SEPTEMBER 30, JUNE 30, 2007 2007 MARCH 31, 2007 ---------------- ---------------- ---------------- Accrued asset management fees $ 379,284 $ 390,284 $ 368,284 Expenses paid by the General Partners or affiliates on behalf of the Partnership 251,643 251,898 250,119 ---------------- ---------------- ---------------- Total $ 630,927 $ 642,182 $ 618,403 ================ ================ ================
The General Partner and/or its affiliates do not anticipate that these accrued fees will be paid in full until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership. NOTE 4 - SUBSEQUENT EVENTS - -------------------------- In October 2007, one additional Housing Complex has been identified for disposition (Crossing II Limited Dividend Housing Association LP ("Crossings II")). This Local Limited Partnership started to experience operational issues during the year ended March 31, 2005 and continues to have operation issues primarily due to cash flow issues. The Partnership received all of the Low Income Housing Tax Credits from Crossings II, with the final Low Income Housing Tax Credits being taken in 2007. The Local Limited Partnership's General Partner is looking to purchase the Partnership's limited partnership interest in Crossings II. The General Partner is going to post the surety bond to protect the Partnership from recapture. The anticipated closing date of this transaction is April of 2008. 18 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, this "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 the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-Q and in other reports 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. The following discussion and analysis compares the results of operations for the three months ended June 30, 2007 and 2006 and the three and six months ended September 30, 2007 and 2006, and should be read in conjunction with the combined condensed financial statements and accompanying notes included within this report. FINANCIAL CONDITION The Partnership's assets at June 30, 2007 consisted primarily of $23,000 in cash and aggregate investments in the twenty-one Local Limited Partnerships of $829,000. Liabilities at June 30, 2007 primarily consisted of $631,000 of accrued annual asset management fees and reimbursement for expenses paid by the General Partner and/or its affiliates. The Partnership's assets at September 30, 2007 consisted primarily of $29,000 in cash and aggregate investments in the twenty-one Local Limited Partnerships of $802,000. Liabilities at September 30, 2007 primarily consisted of $642,000 of accrued annual asset management fees and reimbursement for expenses paid by the General Partner and/or its affiliates and accrued expenses of $11,000. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS ENDED JUNE 30, 2006. The Partnership's net loss for the three months ended June 30, 2007 was $(151,000), reflecting a decrease of approximately $369,000 from the net loss of $(520,000) for the three months ended June 30, 2006. The decrease in net loss was due to the decrease in impairment loss of $337,000. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the fund and the current estimated residual value to the Partnership compared to the current carrying value to the Partnership. The equity in losses of limited partnerships also decreased by $25,000 to $(26,000) for the three months ended June 30, 2007 from $(52,000) for the three months ended June 30, 2006. The decrease in equity in losses of Local Limited Partnerships is due to the Partnership not recognizing losses of additional Local Limited Partnerships, which investment balances had reached zero. Since the Partnership's liability with respect to its investments is limited, losses in excess of investment are not recognized. The legal and accounting fees decreased by $1,000 which was offset by an increase in other expenses of $(1,000). Reporting fees increased by $3,000 for the three months ended June 30, 2007 compared to the three months ended June 30, 2006 due to the fact that Local Limited Partnerships pay reporting fees and distributions to the Partnership when the Local Limited Partnership's cash flow will allow for the payment. The amortization expense decreased by $4,000 for the three months ended June 30, 2007 compared to the three months ended June 30, 2006 due to additional investments in Local Limited Partnerships reaching zero and the acquisition costs and fees associated with those investments were written to zero and as such amortization expense being reduced. 19 THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2006 The Partnership's net loss for the three months ended September 30, 2007 was $(45,000), reflecting a decrease of approximately $48,000 from the net loss of $(93,000) for the three months ended September 30, 2006. There was a decrease of equity in losses of Local Limited Partnerships of $28,000 to $(26,000) for the three months ended September 30, 2007 from $(54,000) for the three months ended September 30, 2006. The decrease in equity in losses of Local Limited Partnerships is due to the Partnership not recognizing losses of additional Local Limited Partnerships, which investment balances had reached zero. Since the Partnership's liability with respect to its investments is limited, losses in excess of investment are not recognized. In addition to the decrease in the equity in losses, there were a decrease in amortization of $4,000, due to additional investments in Local Limited Partnerships reaching zero and the acquisition costs and fees associated with those investments were written to zero and as such amortization expense being reduced. There was also a $7,000 decrease in accounting and legal expenses, which is attributable to the timing of the accounting work performed. Bad debt expense decreased by $8,000, due to the Partnership having to make advances to a Local Limited Partnership and reserving against those advances and a decrease in asset management expense of $1,000 for the three months ended September 30, 2007 compared to the three months ended September 30, 2006. SIX MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2006 The Partnership's net loss for the six months ended September 30, 2007 was $(195,000), reflecting a decrease of approximately $418,000 from the net loss of $(613,000) for the six months ended September 30, 2006. The increase in net loss was due primarily to the decrease in impairment loss of $337,000. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership and the current estimated residual value to the Partnership compared to the current carrying value to the Partnership. The accounting and legal expenses decreased by $8,000 for the six months ended September 30, 2007 compared to the six months ended September 30, 2006, due to a timing issue. Bad debt expense decreased by $8,000, due to the Partnership having to make advances in 2006 to a Local Limited Partnership and reserving against those advances, which were not required for the six months ended September 30, 2007. In addition, amortization decreased by $8,000, due to additional investments in Local Limited Partnerships reaching zero and the acquisition costs and fees associated with those investments were written to zero and as such amortization expense being reduced. Other expenses also increased by $1,000. Reporting fees increased by $3,000 for the six months ended September 30, 2007 compared to the six months ended September 30, 2006 due to the fact that Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnership's cash flow will allow for the payment. There was a decrease of $53,000 of equity in losses of Local Limited Partnerships to $(53,000) for the six months ended September 30, 2007 from $(106,000) for the six months ended September 30, 2006. The equity in losses can vary each year depending on the operations of each of the Local Limited Partnerships. CAPITAL RESOURCES AND LIQUIDITY THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS ENDED JUNE 30, 2006 Net cash provided during the three months ended June 30, 2007 was $3,000, compared to net cash provided during the three months ended June 30, 2006 of $0, reflecting a change of $3,000. The change was due to the Partnership collecting $3,000 in reporting fee income for the three months ended June 30, 2007 compared to $0 for the three months ended June 30, 2006. SIX MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 2006 Net cash provided during the six months ended September 30, 2007 was $9,000, compared to net cash used during the six months ended September 30, 2006 of $(2,000), reflecting a change of $11,000. During the six months ended September 30, 2007 the accrued expenses increased by $11,000. The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through March 31, 2009. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK NOT APPLICABLE ITEM 4. 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 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. 20 Changes in internal controls. There were no changes in the Partnership's internal control over financial reporting that occurred during the quarters ended June 30, 2007 and September 30, 2007 that materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. ITEM 4T. CONTROLS AND PROCEDURES This annual report does not include an attestation report of the Partnership's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation work to be performed by the Partnership's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management's report in this annual report. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS NONE ITEM 2. UNREGISTERED SALES OF EQUITY 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 ITEM 6. EXHIBITS 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith) 32.1 Section 1350 Certification of the Chief Executive Officer. (filed herewith) 32.2 Section 1350 Certification of the Chief Financial Officer. (filed herewith) 21 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 2 By: WNC & Associates, Inc., General Partner By: /s/ Wilfred N. Cooper, Jr. -------------------------- Wilfred N. Cooper, Jr. Chairman and Chief Executive Officer of WNC & Associates, Inc. Date: March 17, 2008 By: /s/ Thomas J. Riha ------------------ Thomas J. Riha Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. Date: March 17, 2008 22 EX-32 2 ex322.txt EX 32-2 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") for the quarters ended September 30, 2007 and June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C., section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, I, Thomas J. Riha, Senior Vice-President and 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 audit report of Local Limited Partnership financial statements to refer to the auditing standards of the Public Company Accounting Oversight Board for the Partnership's annual financial statements and except that the Report is a cumulative report covering each of the quarters ended September 30 and June 30, 2007; 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. March 17, 2008 EX-32 3 ex321.txt EX 32-1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of WNC Housing Tax Credit Fund IV, L.P., Series 2 (the "Partnership") for the quarters ended September 30, 2007 and June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C., section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, I, Wilfred N. Cooper, Jr., President and Chief Executive Officer of WNC & Associates, Inc., general partner of the Partnership, hereby certify that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, except to the extent that such provisions require the audit report of Local Limited Partnership financial statements to refer to the auditing standards of the Public Company Accounting Oversight Board for the Partnership's annual financial statements and except that the Report is a cumulative report covering each of the quarters ended September 30 and June 30, 2007; 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. March 17, 2008 EX-31 4 ex312.txt EX 31-2 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 2; 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; 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-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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 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: March 17, 2008 /s/ Thomas J. Riha ------------------ Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc. EX-31 5 ex311.txt EX 31-1 Exhibit 31-1 CERTIFICATIONS I, Wilfred N. Coooper, Jr. certify that: 1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 2; 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; 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-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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 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: March 17, 2008 /s/ Wilfred N. Coooper, Jr. --------------------------- President and Chief Executive Officer of WNC & Associates, Inc. -----END PRIVACY-ENHANCED MESSAGE-----