FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
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: 333-24111
WNC HOUSING TAX CREDIT FUND VI, L.P.,
Series 5 and Series 6
California 33-0775418
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626
(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 X No ____
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5 and Series 6
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
PART I. FINANCIAL INFORMATION
Series 5
- --------
Item 1. Financial Statements
Balance Sheet, September 30, 1997...................................3
Statement of Operations For the Period July 15, 1997
(date operations commenced) to September 30, 1997..................4
Statement of Partners' Equity
For the Period July 15, 1997 (date operations commenced)
to September 30, 1997..............................................5
Statement of Cash Flows
For the Period July 15, 1997 (date operations commenced)
to September 30, 1997..............................................6
Notes to Financial Statements.......................................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........14
Series 6
- --------
Series 6 currently has no assets or liabilities and has had no operations.
Accordingly, no financial information is included herein for Series 6.
PART II. OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds............................15
Item 6. Exhibits and Reports on Form 8-K.....................................15
Signatures...........................................................16
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Partnership)
BALANCE SHEET
September 30, 1997
ASSETS
Cash and cash equivalents $ 2,158,837
Subscriptions receivable - Note 4 689,000
Investment in limited
partnerships - Note 2 231,569
Other assets 129
---------
$ 3,079,535
=========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and expenses due to
general partner and affiliates - Note 3 $ 239,578
---------
Partners' equity (deficit):
General partner (3,471)
Original limited partner 1,000
Limited partners (25,000 units
authorized, 3,216 units issued
and outstanding) 2,842,428
---------
Total partners' equity 2,839,957
---------
$ 3,079,535
=========
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Partnership)
STATEMENT OF OPERATIONS
For the Period July 15, 1997 (date operations commenced) to September 30, 1997
Interest income $ 129
Operating expenses:
Amortization 289
Other expense 43
--------
332
--------
Net loss $ (203)
========
Net loss allocated to:
General partner $ (2)
========
Limited partners $ (201)
========
Net loss per weighted limited partner
unit (1,369) $ (0.15)
========
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Period July 15, 1997 (date operations commenced) to September 30, 1997
Original
General Limited Limited
Partner Partner Partner Total
------- ------- ------- -----
Equity (deficit),
December 31, 1996 $ - $ - $ - $ -
Capital contributions 100 1,000 3,216,000 3,217,100
Offering expenses (3,469) (343,471) (346,940)
Capital issued for notes
receivable (30,000) (30,000)
Net income (2) - (201) (203)
------- -------- --------- ---------
Equity (deficit),
September 30, 1997 $ (3,371) $ 1,000 $ 2,842,328 $ 2,839,957
======= ======== ========= =========
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Partnership)
STATEMENT OF CASH FLOWS
For the Period July 15, 1997 (date operations commenced) to September 30, 1997
Cash flows used by operating activities:
Net loss $ (203)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 289
Change in other assets (129)
---------
Net cash used in operating activities (43)
---------
Cash flows used by investing activities:
Acquisition fees and costs (98,000)
---------
Net cash used in investing activities (98,000)
---------
Cash flows provided by financing activities:
Capital contributions 2,498,100
Offering expenses (241,220)
---------
Net cash provided by financing activities 2,256,880
---------
Net increase in cash and cash equivalents 2,158,837
Cash and cash equivalents, beginning of period -
---------
Cash and cash equivalent, end of period $ 2,158,837
=========
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
(A Development-Stage Partnership)
STATEMENT OF CASH FLOWS (CONTINUED)
For the Period July 15, 1997 (date operations commenced) to September 30, 1997
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the period July 15, 1997 (date operations commenced) to September 30,
1997 the Partnership incurred, but did not pay, $239,578 of payables to
affiliates for acquisitions costs, and fees and offering expenses (see Note 3).
During the period July 15, 1997 (date operations commenced) to September 30,
1997, $689,000 of capital contributions were recorded as subscriptions
receivable.
UNAUDITED
See Accompanying Notes to Financial Statements
7
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund, VI, L.P., Series 5 (the "Partnership") was formed
under the California Revised Limited Partnership Act on March 3, 1997 and
commenced operations on July 15, 1997. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's Annual Report. The Partnership commenced operations July 15,
1997, consequently there is no Annual Report for prior years.
In the opinion of the management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of September 30,
1997 and the results of operations and changes in cash flows for the period July
15, 1997 (date operations commenced) to September 30, 1997. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year end. The results of operations for the interim period presented are
not necessarily indicative of the results for the entire year.
The general partner of the Partnership is WNC & Associates, Inc. (the "General
Partner"). Wilfred N. Cooper, Sr., through the Cooper Revocable Trust, owns just
less than 70% of the outstanding stock of WNC & Associates, Inc. John B. Lester,
Jr. is the original limited partner of the Partnership and owns, through the
Lester Family Trust, just less than 30% of the outstanding stock of WNC &
Associates, Inc.
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a 1% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from the Partnership. The
limited partners will be allocated the remaining 99% of these items in
proportion to the number of their respective units of limited partnership
interest in the Partnership ("Units").
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and the General Partner has
received a subordinated disposition fee (as described in Note 3 below) any
additional sale or refinancing proceeds will be distributed 90% to the limited
partners (in proportion to the number of their respective Units) and 10% to the
General Partner.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND V, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------------------------
Method of Accounting For Investment 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 each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
Losses from the limited partnerships will not be recognized to the extent that
the individual investment balance would be adjusted below zero.
Cash and Cash Equivalents
- -------------------------
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling Units. The
General Partner is obligated to pay all offering and organization costs in
excess of 14.5% (including sales commissions) of the total offering proceeds.
Offering expenses are reflected as a reduction of partners' capital.
Organization Costs
- ------------------
Organization costs will be amortized on the straight-line method over 60 months.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of September 30, 1997:
1997
----
Investment balance,
beginning of period $ 0
Acquisition fees and costs 231,858
Amortization of capitalized
acquisition costs (289)
Investment balance,
end of period $ 231,569
========
9
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1997
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the following items:
Acquisition fees up to 7% of the gross proceeds from the sale of Units.
Acquisition fees of $223,020 were incurred during the period July 15, 1997
(date operations commenced) to September 30, 1997.
An annual management fee not exceed .2% of the Partnership's invested
assets (defined by the Partnership's Agreement of Limited Partnership as
the Partnership's capital contributions to limited partnerships plus its
allocable percentage of the permanent financing of the limited
partnerships). The Partnership has incurred no such fees during the period
July 15, 1997 (date operations commenced) to September 30, 1997.
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 return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and is payable only if
services are rendered in the sales effort.
Accrued fees and advances due to affiliates of the General Partner included in
the accompanying balance sheet consists of the following at September 30, 1997:
1997
----
Acquisition fees $ 125,020
Advances made for acquisition costs, organizational,
offering and selling expenses 114,558
--------
Total accrued fees and advances $ 239,578
========
10
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1997
NOTE 4 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
- ---------------------------------------------------
During the period July 15, 1997 (date operations commenced) to September 30,
1997, the Partnership accepted $30,000 in promissory notes from limited
partners. Limited partners who subscribe for ten or more Units may elect to pay
50% of the purchase price therefore in cash upon subscription and the remaining
50% by the delivery of a promissory note bearing fixed interest at the rate of
5.54% per annum. Interest rates are established quarterly. Principal and
interest are due (i) January 31, 1999 if the investor subscribes on or before
June 30, 1998, (ii) June 30, 1999 if the investor subscribes between July 1,
1998 and December 31, 1998 or (iii) January 31, 2000 if the investor subscribes
after December 31, 1998. This amount is presented as a reduction in partners'
equity.
Subscriptions receivable of $689,000 has been received subsequent to September
30, 1997 and accordingly have been classified as an asset.
NOTE 5 - INCOME TAXES
- ---------------------
The Partnership will not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their respective
returns.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Liquidity and Capital Resources
- -------------------------------
The Partnership is raising equity capital from investors by means of its
Offering, and is applying such capital, including the installment payments on
the Promissory Notes as received, to the purchase price and acquisition fees and
costs of Local Limited Partnership Interests, Reserves and expenses. As of
August 29, 1997 the Partnership had received cash subscription funds of
$1,400,000, thereby satisfying the minimum Offering condition. As of September
30, 1997, the Partnership had received and accepted subscriptions in the amount
of $3,216,000 (3,216 Units), of which $30,000 currently is represented by
Promissory Notes.
As of September 30, 1997, the Partnership was indebted to WNC & Associates, Inc.
in the amount of approximately $240,000. The component items of such
indebtedness were as follows: accrued acquisition fees of approximately $125,000
and advances to pay front-end fees of approximately $115,000.
As of September 30, 1997, the Partnership had made no capital contributions to
Local Limited Partnerships.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
increase in cash and cash equivalents of approximately $2,159,000 for the period
July 15, 1997 (date operations commenced) to September 30, 1997. This increase
in cash consisted of cash provided by (used in) operating activities, investing
activities and financing activities, of approximately $(0), ($98,000), and
$2,257,000, respectively. Cash provided from financing activities consisted of
capital contributions from limited partners of approximately $2,498,000 less
offering expenses of approximately $241,000. Cash used by investing activities
consisted entirely of payment of capitalized acquisitions costs of approximately
$98,000. Cash provided and used by the operating activities of the Partnership
was minimal compared to its other activities. No cash was provided from
operations and cash used in operations consisted primarily of payments for
operating fees and expenses. The major components of all these activities are
discussed in greater detail below.
It is not expected that any of the Local Limited Partnerships in which the
Partnership will invest will generate cash from operations sufficient to provide
distributions to the Unitholders in any significant amount, Such cash from
operations, if any, would first be used to meet operating expenses of the
Partnership, including the payment of the Asset Management Fee.
The Partnership's investments will not be readily marketable and may be affected
by adverse general economic conditions which, in turn, could substantially
increase the risk of operating losses for the Apartment Complexes, the Local
Limited Partnerships and the Partnership. These problems may result from a
number of factors, many of which cannot be controlled. Nevertheless, the General
Partner anticipates that capital raised from the sale of the Units will be
sufficient to fund the Partnership's future investment commitments and proposed
operations.
12
<PAGE>
The Partnership will establish working capital Reserves of at least 3% of
Capital Contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership including payment of the Asset Management Fee as well as expenses
attendant to the preparation of tax returns and reports to the Unitholders and
other investor servicing obligations of the Partnership. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs. The Partnership's liquidity could also be affected by defaults
or delays in payment of the Promissory Notes, from which a portion of the
working capital Reserves is expected to be funded. To the extend that working
capital Reserves are insufficient to satisfy the cash requirements of the
Partnership, it is anticipated that additional funds would be sought through
bank loans or other institutional financing. The Partnership may also apply any
cash distributions received from the Local Limited Partnerships for such
purposes or to replenish or increase working capital Reserves.
Under the Partnership Agreement the Partnership does not have the ability to
assess the Unitholders for additional Capital Contributions to provide capital
if needed by the Partnership or Local Limited Partnerships. Accordingly, if
circumstances arise that cause the Local Limited Partnerships to require capital
in addition to that contributed by the Partnership and any equity of the Local
General Partners, the only sources from which such capital needs will be able to
be satisfied (other than the limited Reserves available at the Partnership
level) will be (i) third-party debt financing (which may not be available if, as
expected, the Apartment Complexes owned by the Local Limited Partnerships are
already substantially leveraged), (ii) additional equity contributions or
advances of the Local General Partners, (iii) other equity sources (which could
adversely affect the Partnership's interest in Tax Credits, cash flow and/or
proceeds of sale or refinancing of the Apartment Complexes and result in adverse
tax consequences to the Unitholders), or (iv) the sale or disposition of the
Apartment Complexes (which could have the same adverse effects as discussed in
(iii) above). There can be no assurance that funds from any of such sources
would be readily available in sufficient amounts to fund the capital
requirements of the Local Limited Partnerships in question. If such Partnerships
are not available, the Local Limited Partnerships would risk foreclosure on
their Apartment Complexes if they were unable to renegotiate the terms of their
first mortgages and any other debt secured by the Apartment Complexes to the
extent the capital requirements of the Local Limited Partnerships relate to such
debt.
The Partnership's capital needs and resources are expected to undergo major
changes during its first several years of operations as a result of the
completion of its Offering of Units and its acquisition of investments.
Thereafter, the Partnership's capital needs and resources are expected to be
relatively stable over the holding periods of the investments, except to the
extent of proceeds received in payment of Promissory Notes and disbursed to
Partnership the Partnership's deferred obligations.
Results of Operations
- ---------------------
As reflected on its Statements of Operations, the Partnership had a loss of
approximately $200 for the period July 15, 1997 (date operations commenced) to
September 30, 1997. The component items of revenue and expense are discussed
below.
Revenue. The Partnership's revenues consisted entirely of interest earned on
Promissory Notes and cash deposits held in financial institutions (i) as
Reserves, or (ii) pending investment in Local Limited Partnerships. Interest
revenue in future years will be a function of prevailing interest rates and the
amount of cash balances. It is anticipated that the Partnership will maintain
cash Reserves in an amount not materially in excess of the minimum amount
required by its Partnership Agreement, which is 3% of Capital Contributions.
13
<PAGE>
Expenses. The most significant component of operating expenses is expected to be
the Asset Management Fee. The Asset Management Fee is equal to 0.2% of that
portion of Invested Assets (i.e., the sum of the Partnership's investment in
Local Limited Partnerships plus the Partnership's allocable share of the
mortgage loans on and other debts related to, the Apartment Complexes owned by
such Local Limited Partnerships) which are attributable to apartment units
receiving government assistance.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of Local
Limited Partnership Interests.
Because the amounts of the Asset Management Fee and amortization expense
primarily are determined by the gross proceeds from the Offering, and the number
and size of Apartment Complexes, until termination of the Offering and
investment of the net proceeds therefrom the Partnership cannot predict with any
accuracy what these amounts will be.
Item 3: Quantitative and Qualitative Disclosures Above Market Risks
None.
14
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
As of September 30, 1997 the Partnership has received subscriptions for 3,216
units of limited partnership interest ("Units"), for an aggregate amount of
capital contributions of $3,216,000 in an offering which commenced on July 16,
1997. At September 30, 1997, the above capital contributions consisted of cash
of $2,497,000, subscriptions receivable of $689,000 and notes receivable of
$30,000. At September 30, 1997, approximately $347,000 was paid or due to WNC &
Associates, Inc. or WNC Capital Corporation, affiliates, for selling
commissions, wholesaling activities and in reimbursement of other organization
and offering expenses. Included therein are selling commissions of approximately
$227,000, and wholesaling and other organization and offering expenses of
approximately, $120,000 which were reallowed to non-affiliates. At September 30,
1997, approximately $2,869,000 is invested in Local Limited Partnership
Interests or Reserves as follows:
Paid or to be paid to
General Partner or Paid or to be
affiliate paid to others Total
Acquisition fees $ 223,000 $ $ 223,000
Acquisition costs 9,000 9,000
Reserves
(see note below) 2,637,000 2,637,000
--------- --------- ---------
Total $ 223,000 $ 2,646,000 $ 2,869,000
========= ========= =========
Item 6. Exhibits and Reports on Form 8-K
Exhibits
None.
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 1997.
15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI L.P., Series 5 and Series 6
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr.
-----------------------------------------------------
John B. Lester, Jr President
Date: November 14, 1997
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice President - Finance
Date: November 14, 1997
16
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<NAME> WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5 and 6
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,158,837
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<ALLOWANCES> 0
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0
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<INCOME-PRETAX> (203)
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