WNC HOUSING TAX CREDIT FUND VI, L.P.,
SERIES 5
[GRAPHIC OMITTED]
Supplement Dated January 21, 1998
To Prospectus Dated June 23, 1997
This Supplement is part of, and should be read in conjunction with, the
Prospectus of WNC Housing Tax Credit Fund VI, L.P., Series 5 ("Series 5") dated
June 23, 1997 (the "Prospectus"). This Supplement supersedes all previous
supplements. Capitalized terms used but not defined in this Supplement have the
meanings given to them in the Prospectus.
TABLE OF CONTENTS
Page
Status of Series 5 Offering............................................... 1
Local Limited Partnership Investments....................................... 2
Federal Income Tax Considerations........................................... 8
Profits, Losses and Tax Credits............................................. 9
Management................................................................. 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................... 10
Prior Performance Summary.................................................. 11
Financial Statements...................................................... FS-1
Prior Performance Tables.................................................. A-1
First Amendment to Partnership Agreement................................... B-1
As indicated in the chart which follows, the information presented
herein either adds to or supersedes similar information included in the
Prospectus, or constitutes information which has no corresponding information in
the Prospectus.
Supplement Presentation Relationship to Prospectus
Presentation
Status of Series 5 Offering New Information
Local Limited Partnership Investments New Information
Federal Income Tax Considerations Adds to or supersedes "Federal Income
Tax Considerations"
Profits, Losses and Tax Credits Supersedes a portion of "Profits and
Losses for Tax Purposes,
Tax Credits and Cash Distributions"
Management Adds to "Management"
Management's Discussion and Analysis Supersedes "Management's Discussion
Of Financial Condition and Results of and Analysis of Finanical Condition"
Operations
Prior Performance Summary Adds to "Prior Performance Summary"
Financial Statements Adds to "Financial Statements"
Prior Performance Tables Adds to "Prior Performance Tables"
First Amendment to Partnership Agreement Adds to "Partnership Agreement"
STATUS OF SERIES 5 OFFERING
As of the date hereof, Series 5 has received subscriptions in the
amount of $10,375,780 (10,406 Units), of which $356,500 currently is represented
by Promissory Notes.
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LOCAL LIMITED PARTNERSHIP INVESTMENTS
Included herein is a discussion of nine Local Limited Partnership
Interests acquired or identified for acquisition by Series 5. The Apartment
Complexes owned by these Local Limited Partnerships are located in six states
and are being developed and constructed by seven different development teams.
Each of the Apartment Complexes has received a reservation of Low Income Housing
Credits. While the Fund Manager believes that Series 5 is reasonably likely to
retain or acquire an interest in each of these Local Limited Partnerships,
Series 5 may not do so as a result of the failure by a Local Limited Partnership
to satisfy one or more conditions precedent to the payment of each installment
payment, the inability of Series 5 to raise additional capital necessary to
complete the purchase of the Local Limited Partnership Interests identified
herein, the purchase of Local Limited Partnership Interests other than those
identified herein, or other factors. Moreover, the terms of any acquisition may
differ from those as described. Accordingly, investors should not rely on the
ability of Series 5 to retain or acquire an investment in all these Local
Limited Partnerships on the indicated terms in deciding whether to invest in
Series 5.
Series 5 has acquired a Local Limited Partnership Interest in
Chillicothe Plaza Apartments, L.P., a Missouri limited partnership
("CHILLICOTHE"); and Spring Valley Terrace Apartments, L.L.C., an Arizona
limited liability company ("SPRING VALLEY"). Series 5 expects to acquire a Local
Limited Partnership Interest in Apartment Housing of Theodore, Ltd., an Alabama
limited partnership ("APT. HOUSING"); Bradley Villas, Limited Partnership, an
Arkansas limited partnership ("BRADLEY"); El Reno Housing Associates Limited
Partnership, an Oklahoma limited partnership ("EL RENO"); Hughes Villas, L.P.,
an Arkansas limited partnership ("HUGHES"); Mark Twain Senior Community, L.P., a
California limited partnership ("MARK TWAIN"); Murfreesboro Villas, L.P., an
Arkansas limited partnership ("MURFREESBORO"); and Tulsa-Crestview Housing
Partners, Ltd., a Texas limited partnership qualified to do business in Oklahoma
("TULSA-CRESTVIEW").
APT. HOUSING owns the Harbor Run Apartments in Theodore, Alabama;
BRADLEY owns the Bradley Villas Apartments in Bradley, Arkansas; CHILLICOTHE
owns the Chillicothe Plaza Apartments in Chillicothe, Missouri; EL RENO owns the
Ashton Place Retirement Community Apartments in El Reno, Oklahoma; HUGHES owns
the Hughes Villas Apartments in Hughes, Arkansas; MARK TWAIN owns the Mark Twain
Senior Community Apartments in Oakland, California; MURFREESBORO owns the
Murfreesboro Villas Apartments in Murfreesboro, Arkansas; SPRING VALLEY owns the
Spring Valley Terrace Apartments in Mayer, Arizona; and TULSACRESTVIEW owns the
Crestview Duplexes in Tulsa, Oklahoma.
The following tables contain information concerning the Apartment
Complexes and the Local Limited Partnerships identified herein:
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<TABLE>
LOCAL
LIMITED
PROJECT ACTUAL OR ESTIMATED PERMANENT PARTNER-
NAME AND ESTIMATED DEVELOP- MORTGAGE SHIP'S
LOCAL NUMBER LOCATION CONSTRUCTION MENT COST NUMBER OF BASIC LOAN ANTICIPATED YEAR CREDITS
LIMITED OF OF COMPLETION (INCLUDING APARTMENT MONTHLY PRINCIPAL TAX CREDITS TO BE FIRST
PARTNERSHIP BUILDINGS PROPERTY DATE LAND COST) UNITS RENTS AMOUNT (1) AVAILABLE
<S> <C> <C> <C> <C> <C> <C> <C>
APT. HOUSING Harbor Run Theodore October 1998 $2,320,000 4 1BR units $226 $341,000 $2,072,153 1998
Apartments (Mobile 24 2BR units $284 CB (2)
County), 12 3BR units $319
5 buildings Alabama $815,000
AHFA
(3)
BRADLEY Bradley Villas Bradley January 1998 $1,013,574 8 2BR units $331 $110,685 $867,500 1998
Apartments (Lafayette 20 2BR units $348 HB (4)
County),
4 buildings Arkansas $400,000
ADFA (5)
CHILLICOTHE Chillicothe Chillicothe June 1998 $1,900,000 24 2BR units $300 $775,000 $1,554,768 1998
Plaza (Livingston 4 3BR units $335 MHDC (6)
Apartments County),
Missouri
7 buildings
EL RENO Ashton Place El Reno August 1998 $5,266,619 60 1BR units $387 $2,403,000 $4,406,215 1999
Retirement (Canadian 40 2BR units $462 GAC(8)
Community County),
Apartments Oklahoma
26 buildings (7)
HUGHES Hughes Villas Hughes September $1,000,021 20 2BR units $398 $384,000 $298,484 1997
Apartments (St. Francis 1996 ADFA (9)
County),
4 buildings Arkansas $384,015
RD (10)
MARK TWAIN Mark Twain Oakland July 1996 $2,564,670 100 Efficiency $338-$407 $1,200,000 $1,019,835 1998
Senior (Alameda 6 1BR units $415 HSA (12)
Community County),
Apartments California $295,957
RACO(13)
3 buildings
(7)(11)
MURFREES- Murfreesboro Murfreesboro March 1998 $1,279,746 10 2BR units $258 $232,019 $1,116,770 1998
BORO Villas (Pike County), 14 2BR units $294 HB (14)
Apartments Arkansas
$400,000
6 buildings ADFA (5)
SPRING VALLEY Spring Valley Mayer August 1998 $1,480,057 20 1 BR units $140-$265 $162,000 $1,102,150 1998
Terrace (Yavapai WMB (15)
Apartments County),
Arizona $462,987
2 buildings HAC (16)
TULSA- Crestview Tulsa September $3,709,000 32 1BR units $379 $1,070,000 $3,748,880 1998
CRESTVIEW Duplexes (Tulsa 1998 24 2BR units $463 MFCM (17)
County),
29 building Oklahoma
(7)
<FN>
(1) Low Income Housing Credits are available over a 10-year period. For the year
in which the credit first becomes available, Series 5 will receive only that
percentage of the annual credit which corresponds to the number of months during
which Series 5 was a limited partner of the Local Limited Partnership, and
during which the Apartment Complex was completed and in service. See the
discussion under "The Low Income Housing Credit" in the Prospectus.
(2) Colonial Bank ("CB") will provide the first mortgage loan for a term of 20
years at an annual interest rate of 9.5%. Principal and interest will be payable
monthly, based on a 40-year amortization schedule. Outstanding principal will be
due upon maturity.
(3) Alabama Housing Finance Authority ("AHFA"), using HOME funds, will provide
the second mortgage loan for a term of 40 years at an annual interest rate of
0.5%. Principal and interest will be payable monthly, based on a 40-year
amortization schedule.
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(4) Horizon Bank ("HB") will provide the first mortgage loan for a term of 15
years at an annual interest rate of 9%. Principal and interest will be payable
monthly, based on a 15-year amortization schedule.
(5) Arkansas Development Finance Authority ("ADFA"), using HOME funds, will
provide the second mortgage loan for a term of 35 years at an annual interest
rate of 1%. Principal and interest will be payable annually, based on a 35-year
amortization schedule.
(6) Missouri Housing Development Commission ("MHDC") will provide the mortgage
loan for a term of 35 years at an annual interest rate of 1%. Principal and
interest will be payable monthly, based on a 35-year amortization schedule.
(7) Property designed for senior citizens.
(8) Greystone & Co. ("GAC") will provide the mortgage loan for a term of 18
years at an annual interest rate of 7.8%. Principal and interest will be payable
monthly, based on a 30-year amortization schedule. Outstanding principal will be
due upon maturity.
(9) ADFA will provide the first mortgage loan for a term of 30 years at an
annual interest rate of 6%. Principal and interest will be payable monthly,
based on a 30-year amortization schedule.
(10) Rural Development ("RD") will provide the second mortgage loan for a term
of 50 years at an annual interest rate of 1%. Principal and interest will be
payable monthly, based on a 50-year amortization schedule.
(11) Rehabilitation property.
(12) Home Savings of America ("HSA") will provide the first mortgage loan for a
term of 15 years at an annual interest rate of 8.72%. Principal and interest
will be payable monthly, based on a 30-year amortization schedule. Outstanding
principal will be due upon maturity.
(13) Redevelopment Agency of the City of Oakland ("RACO") will provide the
second mortgage loan for a term of 30 years at an annual interest rate of 6%.
Principal and interest will be payable from cash flow, based on a 30-year
amortization schedule. Outstanding principal will be due upon maturity.
(14) Horizon Bank ("HB") will provide the first mortgage loan for a term of 15
years at an annual interest rate of 10%. Principal and interest will be payable
monthly, based on a 15-year amortization schedule.
(15) Washington Mutual Bank, FA ("WMB") will provide the first mortgage loan for
a term of 15 years at an annual interest rate equal to the rate established by
the Federal Home Loan Bank of San Francisco Community Advance Program plus 2%.
Principal and interest will be payable monthly, based on a 30-year amortization
schedule. Outstanding principal will be due on maturity.
(16) Human Action for Chandler, an Arizona non-profit corporation dba
Coordinated Community Services of Arizona ("HAC"), will provide the second
mortgage loan for a term of 20 years at an annual interest rate of 1%. Principal
and interest will be payable from available net cash flow. Outstanding principal
will be due upon maturity.
(17) Multi Family Capital Markets ("MFCM") will provide the mortgage loan for a
term of 18 years at an annual interest rate of 8.3%. Principal and interest will
be payable monthly, based on a 30-year amortization schedule. Outstanding
principal will be due upon maturity.
</FN>
</TABLE>
Theodore (THEODORE): Theodore (population 6,500) is in Mobile County, in
southern Alabama near the Gulf of Mexico, near the intersection of Interstate
Highway 10 and U.S. Highway 90, approximately 20 miles southwest of Mobile. The
major employers for Theodore residents are Mobile County School System,
University of South Alabama and University of South Alabama Medical Facilities.
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Bradley (BRADLEY): Bradley (population 600) is in Lafayette County, in
southwestern Arkansas, near the Louisiana and Texas borders, at the intersection
of State Highways 29 and 160, approximately 25 miles southeast of Texarkana. The
major employers for Bradley residents are Falcon Products (chairs for hotels and
restaurants) and Pilgrim's Pride (chicken feed).
Chillicothe (CHILLICOTHE): Chillicothe (population 9,000) is the county seat of
Livingston County, and is in north-central Missouri at the intersection of U.S.
Highways 36 and 65, approximately 75 miles northeast of Kansas City. The major
employers for Chillicothe residents are Hendrick Medical Center, Chillicothe
School District, Donaldson Company (air filter manufacturing), and Lambert
Manufacturing (gloves/hats).
El Reno (EL RENO): El Reno (population 16,000) is in Canadian County, in central
Oklahoma, at the intersection of Interstate Highway 40 and U.S. Highway 81,
approximately eight miles from the Oklahoma City limits and approximately 27
miles from the center of Oklahoma City. The major employers for El Reno
residents are Federal Aviation Administration, CMI Corporation and Mustang
Independent Schools.
Hughes (HUGHES): Hughes (population 1,800) is in St. Francis County, in
east-central Arkansas, at the intersection of U.S. Highway 79 and State Highway
38, approximately 25 miles southwest of Memphis, Tennessee. The major employers
for Hughes residents are Arkansas Sock and Rag and Bill's Dollar Store.
Oakland (MARK TWAIN): Oakland (population 376,000) is in Alameda County in
northern California, approximately 10 miles east of San Francisco. The major
employers for Oakland residents are Kaiser Permanente, New United Motor
Manufacturing, Inc. and the Port of Oakland.
Murfreesboro (MURFREESBORO): Murfreesboro (population 1,500) is in Pike County,
in southwest Arkansas, at the intersection of State Highways 19 and 26,
approximately 60 miles southwest of Little Rock. The major employers for
Murfreesboro residents are Murfreesboro Diamond (newspaper) and Aalf's
Manufacturing Inc. (denim jeans).
Mayer (SPRING VALLEY): Mayer (population 1,800) is in Yavapai County in central
Arizona on State Highway 69 near Interstate Highway 17, approximately 20 miles
southeast of Prescott. The major employers for Mayer residents are Yavapai
County, Yavapai Regional Medical Center, and Caradon Better Built.
Tulsa (TULSA-CRESTVIEW): Tulsa (population 500,000) is the county seat of Tulsa
County, and is in eastern Oklahoma, at the intersection of Interstate Highway 44
and U.S. Highway 75. The major employers for Tulsa residents are American
Airlines, Southwestern Bell, and Boeing North American.
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<TABLE>
SHARING RATIOS:
LOCAL ALLOCATIONS (4) ESTIMATED
GENERAL AND SERIES 5'S ACQUISITION
LOCAL LOCAL PARTNER(S)' SHARING SALE OR CAPITAL FEES PAYABLE
LIMITED GENERAL PROPERTY DEVELOPMENT RATIOS: REFINANCING CONTRIBUTION TO FUND
PARTNERSHIP PARTNER(S) MANAGER (1) FEE (2) CASH FLOW (3) PROCEEDS (5) (6) MANAGER
<S> <C> <C> <C> <C> <C> <C>
APT. HOUSING Thomas H. Apartment $300,700 WNC: Greater 98.99/.01/1 $1,312,916 $122,000
Cooksey (7) Services and of 15% or $250 50/50
Management Co. LGP: 40% of the
Apartment (8) balance
Developers, Inc. The balance:
(7) 50/50
BRADLEY Billy Bunn Bunn Real $144,920 WNC: $500 99/1 $532,196 $49,000
(9) Estate and LGP: $1,000 50/50
Property Manage- The balance: 50/50
ment Co. (10)
CHILLICOTHE MBL The Remas $231,000 WNC: Greater of 98.99/.01/1 $981,049 $91,000
Development, Company 15% or $500 50/50
Co. (11) (12) LGP: 40% of the
balance
The balance: 50/50
EL RENO Cowen Insignia $689,212 WNC: Greater of 99.98/.01/.01 $3,039,985 $282,000
Properties, Inc Residential 20% or $4,000 40/60
(13) Group, L.P. LGP: 40% of the
(14) balance
The balance:
40/60
HUGHES Billy Bunn Southland $161,000 WNC: $500 99/1 $177,300 $22,000
(9) Management Co. LGP: $1,000 50/50
(15) The balance: 50/50
MARK TWAIN Thomas P. Lam Professional $133,553 WNC: 15% 98.99/.01/1 $683,290 $63,000
(16) Apartment LGP: 50% 50/50
Management The balance:
(17) 50/50
MURFREESBORO MIDC Bunn Real $184,946 WNC: $500 99/1 $684,474 $63,000
(18) Estate and LGP: $1,000 50/50
Property Manage- The balance: 50/50
ment Co. (10)
SPRING VALLEY Spring Valley Kay-Kay Realty $219,137 WNC: $500 99.98/.01/.01 $716,254 $66,000
Terrace, Inc. Corp. (20) LGP: $1,000 40/60
(19) The balance: HAC
TULSA-CRESTVIEW Grace Housing Barnes Real $512,108 WNC: Greater of 98.99/.01/1 $2,523,437 $234,000
Partners, Ltd. Estate 15% or $1,500 20/80
(21) Services, Inc. LGP: 40%
(22) The balance: 50/50
Barnes
Affordable
Properties (21)
New Faith
Baptist Church
(21)
<FN>
(1) The maximum annual management fee payable to the property manager generally
is determined pursuant to lender regulations. Each Local General Partner is
authorized to employ either itself or one of its Affiliates, or a third party,
as property manager for leasing and management of the Apartment Complex so long
as the fee therefore does not exceed the amount authorized and approved by the
lender for the Apartment Complex.
(2) Each Local Limited Partnership will pay its Local General Partner(s) or an
Affiliate of its Local General Partner(s) a development fee in the amount set
forth, for services incident to the development and construction of the
Apartment Complex, which services include: negotiating the financing commitments
for the Apartment Complex; securing necessary approvals and permits for the
development and construction of the Apartment Complex; and obtaining allocations
of Low Income Housing Credits. This payment will be made in installments after
receipt of each installment of the capital contributions made by Series 5.
(3) Reflects the amount of the net cash flow from operations, if any, to be
distributed to Series 5 ("WNC") and the Local General Partner(s) ("LGP") of the
Local Limited Partnership for each year of operations. Generally, to the extent
that the
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specific dollar amounts which are to be paid to WNC are not paid annually, they
will accrue and be paid from sale or refinancing proceeds as an obligation of
the Local Limited Partnership.
(4) Subject to certain special allocations, reflects the respective percentage
interests in profits, losses and Low Income Housing Credits of (a) in the case
of APT. HOUSING, CHILLICOTHE, EL RENO, MARK TWAIN, SPRING VALLEY and
TULSA-CRESTVIEW (i) Series 5, (ii) WNC Housing, L.P., an Affiliate of the
Sponsor which is the special limited partner, and (iii) the Local General
Partner(s); and (b) in the case of BRADLEY, HUGHES and MURFREESBORO (i) Series 5
and (ii) the Local General Partner(s).
(5) Reflects the percentage interests of (i) Series 5 and (ii) the Local General
Partner(s), in any net cash proceeds from sale or refinancing of the Apartment
Complex, after payment of the mortgage loan and other Local Limited Partnership
obligations (see, e.g., note 3), and the following, in the order set forth: the
capital contributions of Series 5; the capital contribution of WNC Housing, L.P.
(if applicable); and the capital contribution of the Local General Partner(s).
(6) Series 5 will make its capital contributions to the Local Limited
Partnership in stages, with each contribution due when certain conditions
regarding construction or operations of the Apartment Complex have been
fulfilled. See "Investment Policies" and "Terms of the Local Limited Partnership
Agreements" under "Investment Objectives and Policies" in the Prospectus.
(7) Thomas H. Cooksey has been involved in real estate development and
apartment management since 1980 and is the general partner of partnerships that
own apartment complexes located in 65 towns, principally in Alabama. Mr.
Cooksey, age 56, has represented to Series 5 that, as of March 1, 1997, he had a
net worth in excess of $10,000,000. Apartment Developers, Inc. was formed in
1993 by Mr. Cooksey, Charles Farrow, Jr. and Kay Wallace to act as a corporate
general partner of the Local Limited Partnership which owns the Apartment
Complex. Mr. Cooksey is the president and owner of the corporation. Apartment
Developers, Inc. has represented to Series 5 that its shareholders' equity is
nominal.
(8) Apartment Services and Management Co. was formed in 1986. Thomas H.
Cooksey is president and owner of 50% of the corporation. Apartment Services and
Management Co. manages in excess of 2,700 apartment units, more than 1,750 of
which are Tax Credit units.
(9) Billy Bunn, age 45, has represented to Series 5 that, as of April 1,
1997, he had a net worth in excess of $2,000,000.
(10) Bunn Real Estate and Property Management Co. manages in excess of 100
apartment units, more than 25 of which are Tax Credit units.
(11) D. Kim Lingle is the president of MBL Development, Co., which has the
primary goal of developing and constructing affordable housing. Ted Scwermer is
vice president of MBL Development, Co. and is also the uncle of Mr. Lingle. Mr.
Lingle and Mr. Scwermer have a background in banking and development. MBL
Development, Co. has represented to Series 5 that, as of December 31, 1996, its
total shareholder's equity was in excess of $700,000.
(12) The Remas Company is owned by William F. Gillen, who has 26 years'
experience in multi-family and commercial property management. Prior to forming
The Remas Company, Mr. Gillen was vice president of administration and
operations of Midland Property Management, Inc., a Kansas City-based real estate
development and property management firm, where he was employed for 14 years.
The Remas Company currently manages seven apartment complexes including three
government-subsidized properties.
(13) Cowen Properties, Inc. was formed by E. Allen Cowen, II, who has been
involved in real estate development for over 27 years. In 1969 Mr. Cowen formed
Allen Construction Company, which was principally involved in multi-family
housing projects. He later formed Cowen Properties, Inc., which is primarily
involved in Tax Credit housing. Mr. Cowen has developed 24 affordable housing
properties. Mr. Cowen, age 53, has represented to Series 5 that, as of August
31, 1997, he had a net worth in excess of $1,200,000.
(14) Insignia Management Group was formed in 1990, with the acquisition of
more than 48,000 apartment units in more than 30 states from U. S. Shelter
Corporation. In January 1997, Insignia Management Group changed its name to
Insignia Residential Group, L.P.
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(15) Southland Management Co. manages in excess of 600 apartment units,
more than 300 of which are Tax Credit units.
(16) Thomas P. Lam has been involved in real estate development and
management for 20 years. He has developed 28 properties, including five
affordable housing developments. Mr. Lam, age 59, has represented to Series 5
that, as of September 23, 1997, he had a net worth in excess of $1,600,000.
(17) Professional Apartment Management ("PAM") was formed in 1969. PAM provides
management services for over 5,700 apartment units, more than 600 of which are
Tax Credit units.
(18) Murfreesboro Industrial Development Corp. ("MIDC") has represented to
Series 5 that, as of July 1, 1997, it had a net worth in excess of $200,000.
(19) Spring Valley Terrace, Inc. is an Arizona corporation owned by HAC.
Sam Cioffi is vice-president and director of HAC. Mr. Cioffi has more than 25
years' experience in housing and community development. Spring Valley Terrace,
Inc. has represented to Series 5 that, as of September 30, 1997, it had a
nominal net worth. Construction completion and operating deficit guarantees will
be provided by HAC. HAC has represented to Series 5 that, as of June 30, 1997,
it had unrestricted net assets of approximately $200,000 and temporarily
restricted net assets of approximately $3,400,000.
(20) Kay-Kay Realty Corp. is an Arizona corporation which has been managing
properties for 18 years in Arizona. The company currently manages ten properties
consisting of 560 units. Four of the properties are Tax Credit properties.
(21) Grace Housing Partners, Ltd. was formed in 1996 solely for the purpose
of serving as one of the general partners of TULSA-CRESTVIEW. The general
partner of Grace Housing Partners, Ltd. is Aslan Real Estate, Ltd. Barnes
Properties, Inc. dba Barnes Affordable Properties was formed in 1983 to own,
manage, finance, develop and design multi-family and luxury master-planned
communities. Arthur Barnes, chairman of the board, has 36 years' experience in
real estate. New Faith Baptist Church was formed in 1979. Grace Housing
Partners, Ltd., Barnes Affordable Properties and New Faith Baptist Church have
represented to Series 5 that their respective net worths are nominal.
Construction completion and operating deficit guarantees will be provided by
Bruce A. Hall, Robert Voelker, and Aslan Real Estate, Ltd. Mr. Hall, age 41, has
represented to Series 5 that, as of July 31, 1997, he had a net worth in excess
of $800,000. Mr. Voelker, age 39, has represented to Series 5 that, as of
September 3, 1997, he had a net worth in excess of $700,000. Aslan Real Estate,
Ltd. has represented to Series 5 that, as of March 31, 1997, it had a net worth
in excess of $2,000,000.
(22) Barnes Real Estate Services, Inc. was formed as DMB Investments, Inc.
in 1990 to provide management for all phases of multi-family developments.
Barnes Real Estate Services, Inc. currently manages in excess of 2,250 apartment
units, more than 1,260 of which are Tax Credit units.
</FN>
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS
Tax Legislation
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). The 1997 Act includes many provisions, only
a few of which are directly applicable to an investment in Series 5. The
provisions of the 1997 Act that are material to an investment in Series 5 are
summarized below.
Tax Rates. The 1997 Act includes provisions that reduce the tax imposed
on most net capital gains. See "Federal Income Tax Considerations - Other
Important Tax Considerations - Tax Rates" in the Prospectus. These provisions
utilize a two-tier approach to taxation of net capital gains.
In the first tier, the maximum tax rate on net capital gains for
individuals is reduced from 28% to 20%; the rate for individuals who would pay a
15% tax on net capital gains is reduced to 10%. Effective July 29, 1997, these
new rates apply to assets held for more than 18 months. Assets held for more
than 12 but less that 18 months may qualify for the maximum tax rate of 28%.
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In the second tier, which is effective for any taxable year beginning
after December 31, 2000, the 20% rate is reduced to 18% for assets held more
than five years; the 10% rate is reduced to 8% for assets held more than five
years whenever acquired.
These preferential rates do not apply to collectibles (e.g., fine art
and jewelry), certain qualified small business stock, and certain gains on the
sale of depreciable real property. In the case of a sale of depreciable real
property, the taxation scheme is as follows: (i) the excess of accelerated
depreciation over straight-line depreciation is taxed at ordinary income rates
(there will be no such excess in the case of the sale of an Apartment Complex),
(ii) the balance of the depreciation is taxed at a top rate of 25%, and (iii)
the balance of the gain is subject to the net capital gains rates described in
the preceding paragraphs.
The rates described above generally apply for purposes of both the
regular tax and the alternative minimum tax.
Alternative Minimum Tax. The corporate alternative minimum tax (see
"Federal Income Tax Considerations - Other Important Tax Considerations -
Alternative Minimum Tax" in the Prospectus) is repealed for small business
corporations for taxable years ending after December 31, 1997. A corporation is
a small business corporation in 1998 if its average gross receipts for the prior
three years was less than $5,000,000. A corporation that meets the $5,000,000
test initially will be treated as a small business corporation in future years
if its average gross receipts does not exceed $7,500,000.
Another amendment made by the 1997 Act will reduce the impact of the
alternative minimum tax. For assets placed in service after December 31, 1998,
depreciation lives for regular tax purposes will also be used for alternative
minimum tax purposes. See "Federal Income Tax Considerations - Other Important
Tax Considerations - Alternative Minimum Tax" in the Prospectus.
General Business Tax Credit Limitations. As set forth in the
Prospectus, the ability of taxpayers to use Tax Credits is subject to an annual
limitation on the allowance of aggregate general business tax credits (which
includes Tax Credits). See "Federal Income Tax Considerations - General Business
Tax Credit Limitations" in the Prospectus. Effective for business tax credits
arising in taxable years beginning after December 31, 1997, business tax credits
limited by this rule are first carried back one year and then forward 20 years.
Under prior law, such credits were first carried back three years and then
forward 15 years.
Tax Shelter Registration Number
The taxpayer identification number and tax shelter registration number
of Series 5 are 33-0745418 and 97175000054, respectively. See "Federal Income
Tax Considerations - Tax Shelter Registration" in the Prospectus.
PROFITS, LOSSES AND TAX CREDITS
Pursuant to the power granted to it in Section 12.1.2 of the
Partnership Agreement, the General Partner has amended the Partnership Agreement
to provide that all items of Profits for Tax Purposes, Losses for Tax Purposes
and Tax Credits which, under the Partnership Agreement would have been allocated
99% to the Unitholders and 1% to the General Partner, will instead be allocated
99.9% to the Unitholders and 0.1% to the General Partner. See "First Amendment
to Partnership Agreement" included herein as Exhibit B.
MANAGEMENT
WNC Management, Inc.
WNC Management, Inc., a California corporation which is wholly-owned by WNC
& Associates, Inc., was organized in 1997 to manage certain of the properties
invested in by partnerships sponsored by WNC & Associates, Inc. (including,
possibly, Series 5 and Series 6). The officers and directors of WNC Management,
Inc. are as follows: Thomas J. Riha (Chief Executive Officer/Director), David N.
Shafer (Secretary/Director), Theodore M. Paul (Chief Financial
Officer/Director), and Wilfred N. Cooper, Jr. (Director).
WNC6-12/SUPP1297
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
Series 5 is raising equity capital from investors by means of its
Offering, and is applying such capital to the purchase price and acquisition
fees and costs of Local Limited Partnership Interests, Reserves and expenses. As
of August 29, 1997, Series 5 had received cash subscription funds of $1,400,000,
thereby satisfying the minimum Offering condition. As of September 30, 1997 and
January 21, 1998, Series 5 had received and accepted subscription funds in the
amounts of $3,216,000 (3,216 Units), and $10,375,780 (10,406 Units),
respectively, of which $356,500 currently is represented by Promissory Notes.
All of the proceeds from the sale of Units have been committed to the
purchase price and acquisition fees and costs of nine Local Limited Partnership
Interests, Reserves and expenses of this Offering. Series 5 requires a total of
approximately $14,184,000 in this regard. As of September 30, 1997, Series 5 had
made no capital contributions to Local Limited Partnerships.
As of September 30, 1997, Series 5 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.
Overall, as reflected in its Statement of Cash Flows, Series 5 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 the payment of capitalized acquisitions costs of
approximately $98,000. Cash provided and used by the operating activities of
Series 5 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.
It is not expected that any of the Local Limited Partnerships in which
Series 5 will invest will generate cash from operations sufficient to provide
distributions to the Limited Partners in any significant amount. Such cash from
operations, if any, would first be used to meet operating expenses of Series 5,
including the payment of the Asset Management Fee.
The investments of Series 5 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 Series 5. These problems may result from a
number of factors, many of which cannot be controlled. See "Risk Factors" in the
Prospectus. Nevertheless, the Fund Manager anticipates that capital raised from
the sale of the Units will be sufficient to fund the future investment
commitments and proposed operations of Series 5.
Series 5 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
Series 5, including payment of the Asset Management Fee and expenses attendant
to the preparation of tax returns and reports to the Limited Partners and other
investor servicing obligations of Series 5. Liquidity would, however, be
adversely affected by unanticipated or greater than anticipated operating costs.
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 extent that working capital Reserves are
insufficient to satisfy the cash requirements of Series 5, it is anticipated
that additional funds would be sought through bank loans or other institutional
financing. The Fund Manager 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, Series 5 does not have the ability to
assess the Limited Partners for additional Capital Contributions to provide
capital if needed by Series 5 or Local Limited Partnerships. Accordingly, if
circumstances arise that cause the Local Limited Partnerships to require capital
in addition to that contributed by Series 5 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 Series 5 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
WNC6-12/SUPP1297
10
<PAGE>
contributions or advances of the Local General Partners, (iii) other equity
sources (which could adversely affect the interest of Series 5 in Tax Credits,
cash flow and/or proceeds of sale or refinancing of the Apartment Complexes and
result in adverse tax consequences to the Limited Partners), 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
funds were 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. See "Risk Factors - Investment Risks - Risks Associated with Use of
Leverage" and "Investment Objectives and Policies - Use of Leverage" in the
Prospectus.
The capital needs and resources of Series 5 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 capital needs and resources of Series 5 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 fund
the deferred obligations of Series 5.
Results of Operations
As reflected on its Statements of Operations, Series 5 had no material
operations for the period July 15, 1997 (date operations commenced) to September
30, 1997.
PRIOR PERFORMANCE SUMMARY
The Sponsor directly and through its Affiliates has had significant
prior experience in the syndication and management of real estate programs. From
its formation through July 31, 1997, the Sponsor and its Affiliates have raised
equity from more than 12,200 investors to acquire interests in more than 500
properties located in 37 states and one territory, and representing more than
$840,000,000 in aggregate acquisition costs. The information which follows
contains discussions as of July 31, 1997 of all of the prior real estate
investment programs sponsored the Sponsor and its Affiliates.
In addition to the Syndicated Partnerships for which the Sponsor has
performed syndication and related services for third parties as discussed under
"Management" in the Prospectus, as of July 31, 1997 the Sponsor and its
Affiliates had sponsored a total of 14 public and 49 non-public real estate
programs (excluding Series 5). As of July 31, 1997, one of the non-public real
estate programs had not sold its limited partnership interests; the other
partnerships had raised an aggregate of approximately $282,083,000 from
approximately 11,700 investors. These 62 programs invested in a total of 452
apartment properties at an aggregate acquisition cost of approximately
$758,000,000 in the following jurisdictions:
Alabama (16) Montana (1)
Arizona (7) Nebraska (8)
Arkansas (12) New Mexico (15)
California (103) North Carolina (29)
Florida (5) Ohio (4)
Georgia (6) Oklahoma (9)
Idaho (1) Oregon (5)
Illinois (15) Pennsylvania (1)
Indiana (4) South Carolina (14)
Iowa (8) South Dakota (1)
Kansas (3) Tennessee (26)
Kentucky (2) Texas (87)
Louisiana (13) U. S. Virgin Islands (1)
Maryland (2) Virginia (5)
Michigan (3) West Virginia (1)
Minnesota (1) Wisconsin (18)
Mississippi (10) Wyoming (1)
Missouri (15)
WNC6-12/SUPP1297
11
<PAGE>
Of these 62 partnerships, 12 public and 34 private real estate programs
commenced their offerings during the 10-year, seven-month period beginning
January 1, 1987 (the "Prior Programs"). See "Public Programs Sponsored" and
"Private Programs Sponsored" below. The Prior Programs were organized to invest
in apartment complexes (by acquiring limited partnership interests in other
limited partnerships which owned the apartment complexes) benefitting from Low
Income Housing Credits and, in most instances, one or more other forms of
Government Assistance. See "Government Assistance Programs." As will be the case
with respect to the Apartment Complexes in which the Partnership will invest,
management and operational control of the properties in which the Prior Programs
have invested is exercised by the general partners of the local limited
partnerships.
Public Programs Sponsored
The 12 public Prior Programs are WNC Housing Tax Credit Fund, L.P.
("HTCF"); WNC California Housing Tax Credits, L.P. ("CHTC"); WNC Housing Tax
Credit Fund II, L.P. ("HTCFII"); WNC California Housing Tax Credits II, L.P.
("CHTCII"); WNC Housing Tax Credit Fund III, L.P. ("HTCFIII"); WNC California
Housing Tax Credits III, L.P. ("CHTCIII"); WNC Housing Tax Credit Fund IV, L.P.,
Series 1 ("HTCFIV-1"); WNC Housing Tax Credit Fund IV, L.P., Series 2
("HTCFIV-2"); WNC California Housing Tax Credits IV, L.P., Series 4
("CHTCIV-4"); WNC California Housing Tax Credits IV, L.P., Series 5
("CHTCIV-5"); WNC Housing Tax Credit Fund V, L.P., Series 3 ("HTCFV-3"); and WNC
Housing Tax Credit Fund V, L.P., Series 4 ("HTCFV-4"). Each of the public Prior
Programs had completed its offering as of July 31, 1997.
Through July 31, 1997, the 12 public Prior Programs had raised an
aggregate of approximately $152,022,000 in capital contributions from an
aggregate of approximately 9,300 investors and invested in a total of 217
apartment properties located in the following jurisdictions:
Alabama (14) Mississippi (7)
Arizona (3) Missouri (5)
Arkansas (5) Nebraska (7)
California (48) New Mexico (8)
Florida (1) North Carolina (15)
Georgia (2) Ohio (4)
Idaho (1) Oklahoma (3)
Illinois (8) Oregon (3)
Indiana (4) South Carolina (1)
Iowa (7) South Dakota (1)
Kansas (2) Tennessee (6)
Kentucky (1) Texas (41)
Louisiana (3) Virginia (4)
Maryland (1) Wisconsin (11)
Michigan (1)
The aggregate mortgage debt encumbering the properties was
approximately $265,077,000 and the aggregate acquisition cost of the properties
was approximately $376,448,000. At the times of the Prior Programs' investments
therein 77 of the properties were existing apartment complexes and 140 were
under development or construction by the local partnerships which own them.
All of the public Prior Programs have as their principal investment
objective providing Federal Low Income Housing Credits to their investors, and
CHTC, CHTCII, CHTCIII, CHTCIV-4 and CHTCIV-5 have the additional objective of
providing California Low Income Housing Credits.
Certain information with regard to the public Prior Programs is set
forth in the tables which follow:
WNC6-12/SUPP1297
12
<PAGE>
<TABLE>
Federal Credit Programs
Federal
Offering Partnership Credits Received Per $10,000 Investment Credit Years
Commencement Name Total 1996 1995 1994 1993 1992 1991 1990 1989 Remaining(1)
- ------------ ---- ----- ---- ---- ---- ---- ---- ---- ---- ---- ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 HTCF $10,170 $1,410 $1,410 $1,410 $1,410 $1,410 $1,400 $1,640 $80 5
1990 HTCFII 9,010 1,450 1,450 1,460 1,380 1,210 1,300 760 -- 7
1992 HTCFIII 5,000 1,570 1,520 1,190 680 40 -- -- -- 9
1993 HTCFIV-1 2,690 1,360 1,010 320 -- -- -- -- -- 10
1994 HTCFIV-2 1,960 1,050 700 210 -- -- -- -- -- 10
1995 HTCFV-3 650 620 30 -- -- -- -- -- -- 11
1996 HTCFV-4 140 140 -- -- -- -- -- -- -- 12(2)
Federal and California Credit Programs
Federal
Offering Partnership Credits Received Per $10,000 Investment Credit Years
Commencement Name Total 1996 1995 1994 1993 1992 1991 1990 1989 Remaining(1)
- ------------ ---- ----- ---- ---- ---- ---- ---- ---- ---- ---- ------------
1989 CHTC $13,660 $ 990 $ 990 $1,180 $1,720 $2,360 $2,590 $2,270 $1,560 5
1991 CHTCII 9,770 1,530 2,060 1,940 1,780 1,810 650 -- -- 4(2)
1993 CHTCIII 4,630 1,970 1,800 800 60 -- -- -- -- 10
1994 CHTCIV-4 2,050 1,340 710 -- -- -- -- -- -- 10
1995 CHTCIV-5 -- -- -- -- -- -- -- -- -- 11
<FN>
(1) As of December 31, 1996.
(2) These Prior Programs will generate a small amount of Tax Credits for four
years beyond the stated number of years due to increases in qualified
basis.
</FN>
</TABLE>
WNC6-12/SUPP1297
13
<PAGE>
Private Programs Sponsored
As of July 31, 1997, the 34 private Prior Programs involved an aggregate of
approximately $122,169,000 in commitments for capital contributions payable in
installments from an aggregate of approximately 1,500 investors. These private
Prior Programs invested in a total of 190 apartment properties located in the
following jurisdictions:
Alabama (2) Missouri (7)
Arizona (3) Montana (1)
Arkansas (7) Nebraska (1)
California (43) New Mexico (6)
Florida (4) North Carolina (12)
Georgia (3) Oklahoma (3)
Illinois (6) Oregon (2)
Iowa (1) Pennsylvania (1)
Kentucky (1) South Carolina (7)
Louisiana (7) Tennessee (18)
Maryland (1) Texas (40)
Michigan (1) Virginia (1)
Minnesota (1) Wisconsin (7)
Mississippi (3) Wyoming (1)
The aggregate mortgage debt encumbering the properties was
approximately $227,111,000 and the aggregate acquisition cost of the properties
was approximately $319,984,000.
All of the 34 private Prior Programs have as their principal investment
objective providing Federal Low Income Housing Credits to their investors, and
13 of the 34 programs have the additional objective of providing California Low
Income Housing Credits.
Certain additional information with regard to the 34 private Prior
Programs formed to provide Low Income Housing Credits is set forth in the tables
which follow:
WNC6-12/SUPP1297
14
<PAGE>
<TABLE>
Federal Credit Programs
Offering Federal
Commence- Partnership Credit Received Per $10,000 Investment(1) Credit Years
ment Name Totals 1996 1995 1994 1993 1992 1991 1990(3) 1989 1988 1987 Remaining(2)
- --------- ---- ------ ---- ---- ---- ---- ---- ---- ------- ---- ---- ---- ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 Pepper Tree (4) 13,650 $1,470 1,470 $1,470 $1,470 $1,470 $1,470 $2,370 $1,530 $ 900 $ 30 2
1987 East Bay 13,940 1,360 1,350 1,360 1,360 1,360 1,360 1,670 1,700 1,400 1,020 1
1987 Sequoia Manor 13,440 1,370 1,370 1,370 1,370 1,350 1,380 2,220 1,460 1,340 210 2
1987 Bayou 12,890 1,290 1,290 1,290 1,290 1,290 1,290 2,110 1,400 1,330 310 1
1987 Laurel Hill 12,770 1,320 1,320 1,320 1,320 1,320 1,300 2,090 1,320 1,230 230 2(5)
1988 Ridgetop 12,310 1,390 1,390 1,390 1,390 1,390 1,390 2,250 1,500 220 -- 2(6)
1989 Alta Mesa 10,410 1,320 1,320 1,320 1,320 1,320 1,320 1,950 540 -- -- 4
1990 WNC-90 8,240 990 1,400 1,400 1,400 1,400 1,400 250 -- -- -- 4
1991 Shelter Resource
XIX 7,920 1,440 1,440 1,440 1,440 1,440 720 -- -- -- -- 5
1991 WNC Tax Credits
XX 8,240 1,460 1,460 1,460 1,460 1,460 940 -- -- -- -- 5
1991 WNC Tax Credits
XXI 6,520 1,360 1,360 1,360 1,360 1,030 50 -- -- -- -- 6
1992 WNC Tax Credits
XXII 6,730 1,410 1,410 1,410 1,410 1,090 -- -- -- -- -- 6
1992 WNC Tax Credits
XXIII 6,440 1,400 1,400 1,400 1,370 870 -- -- -- -- -- 6
1992 WNC Tax Credits
XXV 5,060 1,380 1,380 1,280 870 150 -- -- -- -- -- 8
1993 WNC Tax Credits
XXVI 4,820 1,330 1,330 1,320 840 -- -- -- -- -- -- 7
1993 WNC Tax Credits
XXVIII 3,350 1,300 1,300 640 110 -- -- -- -- -- -- 8
1993 WNC Tax Credits
XXIX 3,220 1,290 1,110 790 30 -- -- -- -- -- -- 9
1994 WNC Tax Credits
XXX 2,330 1,220 1,000 110 -- -- -- -- -- -- -- 9
1994 ITC I 2,860 1,670 780 410 -- -- -- -- -- -- -- 10
1995 ITC II 660 590 70 -- -- -- -- -- -- -- -- 11
Federal and California Credit Programs
Offering Federal
Commence- Partnership Credit Received Per $10,000 Investment(1) Credit Years
ment Name Totals 1996 1995 1994 1993 1992 1991 1990(3) 1989 1988 1987 Remaining(2)
- ------ ---- ------ ---- ---- ---- ---- ---- ---- ------- ---- ---- ---- -----------
1987 Beech Villa $17,750 $1,360 $1,360 $1,350 $1,350 $1,350 $1,350 $2,670 $3,210 $3,210 $540 1
1988 Elmwood Villa 17,030 990 990 990 990 1,330 2,610 4,010 3,460 1,660 -- 3
1988 Poplar Villa 16,650 970 970 970 970 970 2,280 3,420 3,410 2,690 -- 1
1988 Olive Tree 16,490 970 970 970 970 970 1,620 3,990 3,310 2,720 -- 2
1988 Pine Rock 15,530 940 940 940 880 1,220 3,280 3,810 3,240 280 -- 3
1988 Mesa Verde 15,030 1,020 1,030 1,030 1,030 1,870 1,690 3,610 2,760 990 -- 3
1988 Sunfield 14,310 1,340 1,340 1,340 1,340 1,340 1,650 3,090 2,080 790 -- 3
1988 Foxglove 11,880 1,360 1,360 1,360 1,550 2,020 2,020 1,920 290 -- -- 4
1989 Elliot Place 14,160 1,200 1,200 1,200 1,200 1,670 2,460 3,200 2,030 -- -- 4
1990 Wheatridge 10,880 1,120 1,120 1,120 1,480 2,240 2,230 1,570 -- -- -- 5
1992 WNC Tax Credits
XXIV 8,590 1,260 1,740 2,180 2,180 1,230 -- -- -- -- -- 6
1993 WNC Tax Credits
XXVII 6,070 1,560 1,750 1,740 1,020 -- -- -- -- -- -- 8
<FN>
(1) Represents the return received by investors utilizing deferred payment
purchase plans. In many instances the respective returns to cash investors
were higher than those listed above inasmuch as the use of deferred payment
purchase notes entailed the payment of interest.
(2) As of December 31, 1996.
(3) In 1990 certain partnerships were permitted to, and did, elect to utilize
150% of the Federal Low Income Housing Credit otherwise allowable for 1990.
(4) Pepper Tree originally offered Federal Tax Credits only. After the
investors were admitted to the Prior Program, the Local General Partners
obtained California Low Income Housing Credits as well, which are not
reflected in this chart.
(5) These Prior Programs will generate a small amount of Tax Credits for five
years beyond the stated number of years due to increases in qualified
basis.
(6) These Prior Programs will generate a small amount of Tax Credits for four
years beyond the stated number of years due to increases in qualified
basis.
</FN>
</TABLE>
WNC6-12/SUPP1297
15
<PAGE>
Additional Information
In a prior private program sponsored in 1981, WNC & Associates, Inc.,
became successor managing general partner in 1989 after the original managing
general partner had misappropriated partnership accounts. Thereafter, using the
proceeds from an RD loan, the property was substantially rehabilitated and
continues to be owned and operated by the prior program. In a private program
sponsored in 1996, a Local General Partner was removed by the Sponsor in 1997
after construction defects were discovered and the Local General Partner
declared bankruptcy. The prior program purchased the bridge loan at its face
value upon maturity thereof and construction has since been completed using
other funds loaned by the Sponsor and the prior program. The Sponsor anticipates
that the property will be listed for sale after receipt of a commitment for
permanent financing. In a public program sponsored in 1993, a Local General
Partner was removed by the Sponsor in 1997 after the Local General Partner
violated provisions of the Local Limited Partnership Agreement. The remaining
Local General Partner, which is an agency of the county in which the property is
located, will be replaced by the Sponsor or an experienced non-profit agency.
And in 1997 five properties owned by four prior private programs and developed
by the same Local General Partner were the subject of notices of adjustment
wherein the IRS claims that development fees to the Local General Partner were
not property includable in the depreciable basis of the respective properties.
Each of the Local Limited Partnerships and the prior private programs has filed
a petition for readjustment before the United States Tax Court.
Additional information with regard to certain of the Prior Programs is
set forth in Tables I, II, III and V which comprise Exhibit A to this
Supplement. Reference also is made to Table VI which describes in greater detail
the properties in which these Prior Programs have invested. Table IV has been
omitted since none of the prior programs has completed operations.
There will be made available to any prospective investor upon request
and without charge, a copy of Table VI and upon request, for a reasonable fee,
copies of the most recent report on Form 10-K filed by any of the public Prior
Programs with the Securities and Exchange Commission.
WNC6-12/SUPP1297
16
<PAGE>
FINANCIAL STATEMENTS
INDEX
Page
WNC Housing Tax Credit Fund VI, L.P., Series 5
Balance Sheet, September 30, 1997 (Unaudited)............................FS-2
Statement of Operations For the Period July 15, 1997
(date operations commenced) to September 30, 1997 .....................FS-3
Statement of Partners' Equity for the Period July 15, 1997
(date operations commenced) to September 30, 1997 ....................FS-4
Statement of Cash Flows For the Period July 15, 1997
(date operations commenced) to September 30, 1997 ....................FS-5
Notes to Financial Statements ..........................................FS-7
Proforma Balance Sheet, September 30, 1997 (Unaudited) .................FS-11
Proforma Statement of Operations for the Period July 15, 1997
(date operations commenced) to September 30, 1997 (Unaudited) .........FS-12
Notes to Proforma Financial Statements .................................FS-13
WNC & Associates, Inc.
Independent Auditors' Report ...........................................FS-15
Consolidated Balance Sheet, August 31, 1997 ............................FS-16
Notes to Consolidated Balance Sheet ....................................FS-17
FS-1
<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
(3,371)
Original limited partner
1,000
Limited partners (25,000 units
authorized, 3,216 units issued
and outstanding) 2,842,328
Total partners' equity 2,839,957
------------ ---------
$ 3,079,535
============ =========
UNAUDITED
See Accompanying Notes to Financial Statements
FS-2
<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
FS-3
<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 (30,000) (30,000)
receivable
Net loss (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
FS-4
<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
FS-5
<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 and $30,000 of capital contributions were recorded as
subscriptions receivable and notes receivable, respectively.
UNAUDITED
See Accompanying Notes to Financial Statements
FS-6
<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.
Pursuant to the Partnership's Agreement of Limited Partnership, the Partnership
is authorized to sell 25,000 units of limited partnership interest in the
Partnership ("Units"), of which 3,216 Units in the amount of $3,216,000 had been
sold as of September 30, 1997.
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.
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.
FS-7
<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 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:
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
===========
FS-8
<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 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 to 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 $125,000
Advances made for acquisition costs,
organizational, offering and
selling expenses 114,558
--------
Total accrued fees and advances $239,578
========
FS-9
<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 therefor 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 presented on the accompanying balance sheet of $689,000
were 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.
FS-10
<PAGE>
<TABLE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
PROFORMA BALANCE SHEET
September 30, 1997
ASSETS
Historical Proforma Proforma
Balance Adjustments Balance
<S> <C> <C>
Cash $2,158,837 $4,154,520
(340,865)
445,000 $6,417,492
Subscriptions receivable 689,000 (445,000) 244,000
Investment in limited partnerships 231,569 6,985,436
340,865 7,557,870
Other assets 129 0 129
--------- ---------- -----------
$3,079,535 $11,139,956 $14,219,491
========== ========== = ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Notes payable to limited partnerships $ - $6,985,436 $6,985,436
Accrued fees and expenses due to general partner and
affiliates 239,578 0 239,578
------- --------- ---------
239,578 6,985,436 7,225,014
------- --------- ---------
PARTNERS' EQUITY
General partner (3,371) (6,848) (10,219)
Original limited partner 1,000 1,000
Limited partners 2,842,328 4,161,368 7,003,696
--------- --------- ---------
Total partners' equity 2,839,957 4,154,520 6,994,477
--------- --------- ---------
$3,079,535 $11,139,956 $14,219,491
========== ========== ==========
</TABLE>
- Unaudited -
See Accompanying Notes to Proforma Financial Statements
FS-11
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
PROFORMA STATEMENT OF OPERATIONS
For the Period July 15, 1997 (date operations commenced)
to September 30, 1997
Historical Proforma Proforma
Balance Adjustments Balance
Interest income $ 129 $ 129
------- -------
Operating expense
Amortization 289 289
Legal and accounting 43 43
------ ------
Total operating expense 332 332
---- ----
Loss from operations (203) (203)
Equity in income
of limited partnerships - 1,070 1,070
------- ----- -----
Net income (loss) $ (203) $ 1,070 $ 867
======= ======= =======
- Unaudited -
See Accompanying Notes to Proforma Financial Statements
FS-12
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO PROFORMA FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The information contained in the following notes to the proforma financial
statements is condensed from that which appears in the financial statements.
Accordingly, these proforma financial statements should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the WNC Housing Tax Credit Fund VI, L.P., Series 5 financial statements dated
September 30, 1997. WNC Housing Tax Credit Fund VI, L.P., Series 5 is referred
to in these notes as the "Partnership."
NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS
As of September 30, 1997, the Partnership was not admitted as majority limited
partner in any limited partnerships. Subsequent to September 30, 1997, the
Partnership has acquired a limited partnership interest in two limited
partnerships, Chillicothe Plaza Apartments, LP (Chillicothe) and Spring Valley
Terrace Apartments LLC (Spring Valley) and is negotiating to acquire limited
partnership interests in five other partnerships. The investments commit the
Partnership to capital contributions as follows:
CHILLICOTHE $ 981,049
APT HOUSING THEODORE 1,312,916
BRADLEY 532,196
HUGHES 235,110
MURFREESBORO 684,474
SPRING VALLEY 716,254
TULSA-CRESTVIEW 2,523,437
---------
$ 6,985,436
In accordance with Article 11, Proforma Financial Information of Regulation S-X
of the Securities and Exchange Commission, the accompanying proforma balance
sheet was computed assuming that the limited partnerships discussed above were
acquired at the end of the period presented. The first adjustment to cash and
the adjustment to partners' equity of $4,154,520 reflects the net proceeds from
October 1 to December 19, 1997 from issuance of 5,107 units of limited partners'
capital ($5,076,795 less notes receivable of $237,500, and commissions and
offering costs of $684,775.) The third adjustment to cash and the adjustment to
subscriptions receivable of $445,000 reflects the collection of subscriptions
receivable from
FS-13
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO PROFORMA FINANCIAL STATEMENTS (Continued)
NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS (Continued)
the above subscriptions. The adjustment to investment in limited partnerships
and notes payable to limited partnerships of $6,985,436 reflects the
Partnership's acquisition of the seven limited partnership interests as if the
Partnership's date of acquisition was September 30, 1997. The second adjustment
to investment in limited partnerships and the second adjustment to cash of
$340,865 reflects the acquisition fee for the acquisition of the identified
limited partnerships.
Six of the seven apartment complexes were under construction or rehabilitation
during the period presented and had no operations which should be reported.
Hughes Villa had operations during the period presented (July 15, 1996 to
September 30, 1996), and proforma income of $1,070 has been recorded in the
Proforma Statement of Operations. The Partnership uses the equity method of
accounting to account for its investments in these local limited partnerships.
FS-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
WNC & Associates, Inc.
We have audited the consolidated balance sheet of WNC & Associates, Inc. and
subsidiaries (the "Company") as of August 31, 1997. This consolidated balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall consolidated balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of WNC & Associates,
Inc. and subsidiaries as of August 31, 1997 in conformity with generally
accepted accounting principles.
CORBIN & WERTZ
Irvine, California
November 5, 1997
FS-15
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As Of August 31, 1997
ASSETS
Cash $ 259,554
Fees receivable, net 179,646
Loans to property developers 674,846
Offering costs advanced 518,079
Due from partnerships 1,958,933
Advances to partnerships 117,571
Deferred income taxes 180,527
Property and equipment, net 365,532
Other assets 318,785
----------------
$ 4,573,473
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable to bank $ 600,000
Accounts payable and accrued expenses 416,684
Income tax payable 335,427
Interest payable 16,200
Due to partnership 30,000
Accumulated losses of partnerships in excess
of investments 367,701
Capitalized lease obligations 98,469
Total liabilities 1,864,481
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized, no shares issued -
Common stock, no par value, 1,000,000 shares
authorized, 104,750 issued and outstanding 177,677
Retained earnings 2,531,315
Total stockholders' equity 2,708,992
$ 4,573,473
See accompanying notes to consolidated financial statements
FS-16
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
As Of August 31, 1997
Continued
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC & Associates, Inc. (a California corporation) (the "Company"), acts as a
corporate general partner and syndicator of both public and private placement
real estate partnerships (the "Partnerships"), which invest in apartment
complexes throughout the United States, the majority of which are government
assisted apartment complexes that qualify for low income housing tax credits.
The Company is the general partner of various limited partnerships which own
government assisted housing apartment complexes (either directly or indirectly
through other partnership interests). The majority of the Partnerships'
apartment complexes are subsidized through various United States governmental
low-income housing programs. The Company's interest in the profits and losses of
each Partnership, as general partner, varies between one-quarter and five
percent.
Principles of Consolidation
The accompanying consolidated balance sheet includes the accounts of the Company
and its wholly owned subsidiaries, WNC Capital Corporation and WNC Management,
Inc. All significant intercompany accounts and transactions have been eliminated
in consolidation.
WNC Capital Corporation was incorporated in California on February 23, 1994 and
is registered with the Securities and Exchange Commission as a broker/dealer in
securities. WNC Capital Corporation does not carry customers' accounts or hold
securities for the accounts of its customers. WNC Capital Corporation provides
wholesaling services to affiliates of the Company. WNC Management, Inc. was
incorporated in California on April 28, 1997 and is in the business of providing
property management services to government assisted apartment complexes. WNC
Management, Inc. provides management services to affiliates of the Company.
Use of Estimates
The preparation of the consolidated balance sheet in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities, as well
as disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could materially differ from those estimates.
Continued
FS-17
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Fair Value of Financial Instruments
The consolidated balance sheet contains financial instruments whereby the fair
market value of the financial instruments could be different than those recorded
on a historical basis in the accompanying consolidated balance sheet. The
Company's financial instruments consist of cash, fees receivable, loans to
property developers, offering costs advanced, due from and advances to
Partnerships, notes payable to bank, accounts payable and due to Partnership.
Management believes that the carrying amounts of the Company's financial
instruments generally approximate their fair market values at August 31, 1997.
In the case of certain financial instruments which are non-interest bearing, it
was not practical to determine fair values due to the lack of a market for such
financial instruments.
Concentration of Credit Risk
The Company, at times, maintains cash balances at certain financial institutions
in excess of the federally insured amounts.
Risks and Uncertainties
Net Capital Requirements
WNC Capital Corporation, as a broker-dealer, is required under provisions of
Rule 15c-1 of the Securities and Exchange Act of 1934 to maintain a ratio of
aggregate indebtedness to net capital, as defined, not to exceed 15 to 1. The
basic concept of the rule is liquidity, its objective being to require a broker
or dealer to have, at all times, sufficient liquid assets to cover its current
indebtedness. WNC Capital Corporation is also required to maintain a minimum net
capital of $5,000 or 6-2/3% of aggregate indebtedness, as defined, whichever is
greater. At August 31, 1997, WNC Capital Corporation had net capital of $52,770
which is $40,113 in excess of the required minimum capital and a ratio of
aggregate indebtedness to net capital of 3.60 to 1.
Continued
FS-18
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Registration
WNC Capital Corporation must register with state departments which govern
compliance with securities laws in which it does business. Various regulatory
requirements exist in each state with which WNC Capital Corporation must comply.
Because of the various compliance laws, there is a risk that one or more
regulatory authorities could determine that WNC Capital Corporation has not
complied with securities laws necessary for it to conduct business in a given
state. Regulatory actions, if ever taken, could have a material adverse effect
on WNC Capital Corporation's financial condition.
Fees Receivable
Fees receivable consist of syndication fees due from various Partnerships in
which the Company acts as general partner. Certain syndication fees are received
by the Company from the Partnerships as the limited partners make their capital
contributions to the Partnerships.
Loans to Property Developers
Loans to property developers are comprised of amounts loaned to, or deposits
made on behalf of, the general partners of limited partnerships in which the
Partnerships have or will have an equity interest. All such loans receivable are
secured by the respective general partners interest in the limited partnerships.
In the event a property is not acquired, deposits may not be refunded to the
Company. Accordingly, such amounts are written off in the period determined by
management that a property will not be acquired and the deposit will not be
refunded.
Offering Costs Advanced
Offering costs advanced represent funds that the Company advances to the
Partnerships for certain costs and expenses to produce the offering materials
and to qualify the partnership interests for sale under the various state or
federal securities laws. Such advances are repaid to the Company out of the
Partnerships' initial capital proceeds, and may be subject to limitations, as
defined, in the individual partnership agreements.
Continued
FS-19
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Due From Partnerships
Due from Partnerships consists of amounts advanced to Partnerships which invest
in apartment complexes. Such amounts are invested by the Partnerships in
apartment complexes as capital contributions pursuant to partnership agreements.
Such amounts are non-interest bearing and are due upon the Partnerships
collection of proceeds from sales of Partnership units. As of July 31, 1997, the
Company had amounts due from two Partnerships which represent 72% and 27%,
respectively, of the total due from Partnerships.
During 1997, the Company loaned $1,035,509 to a Partnership which invested the
funds into a property in Mississippi which was under construction. During fiscal
1997, it was determined by the Company that the property under construction had
certain structural defects which resulted in material cost overruns. Management
determined the estimated possible impairment of this loan to be $500,000.
Accordingly, such was reserved for during the year ended August 31, 1997. See
Litigation (see Note 8).
Organization Costs
Organization costs consist principally of legal and regulatory fees incurred to
incorporate WNC Capital Corporation and obtain the necessary approvals to
commence operations. These costs, totaling $14,797, are being amortized over a
five-year period on the straight-line basis and are included in other assets in
the accompanying consolidated balance sheet. Accumulated amortization at August
31, 1997 was $10,369.
Property and Equipment
Property and equipment and improvements which extend the economic life of assets
are recorded at cost and are depreciated using the straight-line method over the
estimated useful life of the related asset, generally from three to five years.
Leasehold improvements and capitalized leases are amortized over the shorter of
the life of the lease or estimated useful life of the related asset.
Continued
FS-20
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Investments in Partnerships
The Company records its investment in the Partnerships using the equity method,
which recognizes the Company's proportionate share of income or loss as an
increase or decrease in the investment in the Partnership. As the Company acts
as the General Partner, for those Partnerships where recourse losses have
occurred in excess of the Company's investment, amounts are recorded as
accumulated losses of Partnerships in excess of investments.
Revenue Recognition
Syndication fees, which represent fees for selecting, evaluating, structuring,
negotiating and closing Partnership investments in apartment complexes, are
recognized at the time the Partnerships' initial capital offerings are completed
and the Company's contractual obligations have been fulfilled. Syndication fees
receivable that are scheduled to be collected more than one year from the
Company's year end are discounted to reflect their present value.
Management fees, which represent an annual fee for providing administrative and
management services for Partnerships and their investments, are recognized as
earned and to the extent that such fees are deemed to be collectible, generally
on a cash basis.
Commission revenue earned and related expenses associated with the operations of
WNC Capital Corporation are recorded when the related services are performed.
Continued
FS-21
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting For Income
Taxes." Under the asset and liability method of SFAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized as income in the period that
includes the enactment date.
NOTE 2 - FEES RECEIVABLE
Aggregate annual future minimum collections as of August 31, 1997 total $179,646
and are all collectible in 1998. At August 31, 1997, fees receivable from three
Partnerships represented 45%, 32%, and 19%, respectively, of total fees
receivable.
NOTE 3 - LOANS TO PROPERTY DEVELOPERS
Loans to property developers consist of the following as of August 31, 1997:
Notes receivable due November 1997, with interest at the Company's borrowing
rate (8.75% at August 31, 1997) secured by the borrowers interest in the
properties to be constructed for which amounts are borrowed. $ 150,300
Notes receivable past due, generally with interest at the Company's borrowing
rate secured by the borrowers interest in the properties to be constructed for
which amounts are borrowed. 524,546
-------
$ 674,846
=======
The Company has loans to two property developers at August 31, 1997 which
represent 49% and 42%, respectively, of total loans to property developers.
Continued
FS-22
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of August 31, 1997:
Furniture, fixtures and computer software $ 401,937
Leasehold improvements 61,801
Equipment under capital leases (see Note 8) 205,019
----------------
668,757
Less: accumulated depreciation and amortization (303,225)
$ 365,532
NOTE 5 - OTHER ASSETS
Other assets as of August 31, 1997 consists of the following:
Real estate joint venture costs $ 182,230
Due from officers and stockholders (Note 9) 92,000
Deposits, advances and other 40,127
Organization costs 4,428
----------------
$ 318,785
=================
NOTE 6 - NOTES PAYABLE
On April 15, 1997 the Company renewed and changed the terms of its previous
line-of-credit with a bank. The renewal created two lines-of-credit. One
line-of-credit allows for borrowings of up to $1,500,000 at the bank's index
rate plus 0.25% (8.75% at August 31, 1997) and is unsecured. There were $600,000
of borrowings under this arrangement as of August 31, 1997. The other
line-of-credit allows for borrowings of up to $2,500,000 at the bank's index
rate plus 0.25% (8.75% at August 31, 1997) and is secured by assignment of the
Company's interest in Partnership properties to be acquired for which amounts
are borrowed and is personally guaranteed by the majority stockholder of the
Company. There were no amounts outstanding under this arrangement as of August
31, 1997.
Continued
FS-23
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 7 - INCOME TAXES
The deferred tax asset of $180,527 as of August 31, 1997 represents primarily
the tax effect of the temporary difference between the treatment of the reserve
for an advance due from a partnership (see Note 1) for financial statement
purposes and for tax return purposes.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space, automobiles and furniture under operating
leases and certain equipment under capital leases. Aggregate monthly capital
lease payments amount to $3,631 as of August 31, 1997. The leases are
noncancellable and require future minimum lease payments as follows:
Years Ending Capitalized
August 31, Leases Operating Leases
- ------------------- ------------------ ----------------
1998 $ 52,089 $ 141,730
1999 30,504 131,713
2000 14,059 38,811
2001 12,564 15,132
2002 5,235 8,827
----------------- --------------
Total minimum lease payments 114,451 $ 336,213
==============
Less: amounts representing interest
at rates ranging from 9.5% to 12.5% (15,982)
-----------------
Present value of future minimum
capitalized lease obligations $ 98,469
=================
Guarantees
The Company is a guarantor of certain bank loans made to the Partnerships. There
were no amounts outstanding on such loans as of August 31, 1997.
Continued
FS-24
<PAGE>
WNC & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - CONTINUED
As Of August 31, 1997
NOTE 8 - COMMITMENTS AND CONTINGENCIES, continued
Litigation
The Company serves as a limited and general partner to a certain limited
partnership. The Company loaned to the limited partnership $1,035,509 for
development of the property. The developed property incurred significant cost
overruns due to defects in construction. As a result of such defects, the
Company removed and replaced the local general partner. In this capacity,
construction was completed by the Company. The limited partnership has filed
suit against the architects and contractors. There have been various claims
filed against the limited partnership and certain liens placed on the property.
The ultimate outcome of the aforementioned actions are unknown at this time. The
Company has reserved $500,000 of its due from partnerships in connection with
various claims filed. Management of the Company does not believe that the
additional effect on the consolidated balance sheet upon the ultimate
disposition of the aforementioned actions will be material.
Equity Participation Agreement
The Company has an equity participation agreement with a key officer of the
Company and his spouse. This agreement provided for an investment of $80,000 by
the Company to acquire a 50% interest in certain property, which was later
converted into real property for rental purposes, owned by the key officer and
his spouse. Pursuant to terms of this agreement, all income and losses arising
from the operations of the rental property, including the allocation of income
and losses upon a sale or refinance shall be allocated 50% to the Company and
50% to the key officer and his spouse.
Due From Officers and Stockholders
In April, 1993, an officer and the Company's majority stockholder borrowed
$55,000. This note bears interest at 7.5% per annum. The maturity date of the
note was extended along with accrued interest to March 31, 1998. The note,
together with accrued interest, is included in other assets in the accompanying
consolidated balance sheet.
During 1994, an officer and stockholder of the Company borrowed $25,000. This
note bears interest at 7.5% per annum. The maturity date of the note was
extended along with accrued interest to March 31, 1998. The note, together with
accrued interest, is included in other assets in the accompanying consolidated
balance sheet.
FS-25
<PAGE>
EXHIBIT A
PRIOR PERFORMANCE TABLES
The tables set forth below present financial information with respect
to programs which were sponsored by the Sponsor. Each of these programs is
considered to have investment objectives similar to those of the Fund in that
they each own interests in local limited partnerships which own properties
generating low income housing credits or, in the case of Shelter Resource Fund,
benefitting from some other form of Government Assistance. However, the
principal investment objective of Shelter Resource Fund was to provide income
tax losses which its investors could use to offset income from other sources.
None of these tables is covered by the reports of independent public accountants
set forth in this document.
For additional information as to the investment objectives and policies
of such prior programs see "Prior Performance Summary." Additional information
concerning prior performance is included in Part II of the Registration
Statement of the Fund and for the public programs in the Form 10-K annual
reports. Copies of these 10-K Forms are available to any investor upon request
to the Sponsor. Any such request should be directed to 3158 Redhill Avenue,
Suite 120, Costa Mesa, California 92626.
The purpose of the tables is to provide information on the prior
performance of these partnerships so as to permit a prospective purchaser of the
Units to evaluate the experience of the Sponsor in sponsoring such limited
partnerships. The tables consist of:
Table I Experience in Raising and Investing Funds
Table II Compensation to Sponsor
Table III Operating Results of Prior Programs
Table V Sales or Disposals of Properties
Tables IV has been omitted since none of the prior programs which were
sponsored by the Sponsor have completed operations.
Definitions
The following terms used in the prior performance tables have the following
meanings:
A-1
<PAGE>
"Acquisition Cost" includes all costs related to the acquisition of partnership
interests, including equity contributions, acquisition and selection fees
payable to the general partners and other fees and expenses incident to the
acquisition of partnership interests.
"Capital Contributions" represents the contributions by investors in the
prior partnerships.
"GAAP" means generally accepted accounting principles.
"Months to Invest 90% of Amount Available for Investment" means the length of
time, in months, from the offering date to the date of the closing of properties
which, in the aggregate, represented the investment commitment of 90% of the
amount available for investment.
"Percent leverage" means mortgage financing divided by total acquisition costs.
IT SHOULD NOT BE ASSUMED THAT INVESTORS IN THIS OFFERING WILL
EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN THE
PARTNERSHIPS DESCRIBED IN THE FOLLOWING TABLES. INVESTORS WILL NOT HAVE ANY
INTEREST IN ANY OF THE PARTNERSHIPS DESCRIBED IN THE TABLES OR IN ANY OF THE
PROPERTIES OWNED BY THE LOCAL LIMITED PARTNERSHIPS IN WHICH THOSE PARTNERSHIPS
HAVE INVESTED AS A RESULT OF THE ACQUISITION OF UNITS.
A-2
<PAGE>
TABLE I
TABLE I provides information regarding the raising and investing of funds by
partnerships sponsored by the Sponsor which raised funds during the three-year
and six-month period ended June 30, 1997. The table presents the aggregate
dollar amount of the offering, the percentage of dollars raised which were used
to pay offering costs, establish reserves and acquire investments, as well as
information regarding percent of leverage and the timing for both raising and
investing funds. The information concerns investor capital contributions as the
sole source of funds for investment and excludes the nominal capital
contributions by the general partners.
A-3
<PAGE>
<TABLE>
TABLE I
EXPERIENCE IN RAISING AND
INVESTING FUNDS (January 1,
1994 - June 30, 1997)
CHTC III % HTCF IV-1 %
<S> <C> <C>
Dollar amount offered $30,000,000 $10,000,000
=========== ===========
Dollar amount raised 18,000,000 100.0 10,000,000 100.0
Less offering expenses:
Selling commissions &
discounts 1,440,000 8.0 750,000 7.5
paid to non-affiliates 909,000 5.0 686,300 6.9
Organizational expenses (a)
Reserves 855,000 4.8 280,600 2.8
------- --- ------- ---
Percent invested as of
close of offering 14,796,000 82.2 8,283,100 82.8
Acquisition costs:
Prepaid items and fees
related to purchase of
property 104,000 0.6 34,100 0.3
Cash down payments (b) 13,072,000 72.6 7,449,000 74.5
Acquisition fees 1,620,000 9.0 800,000 8.0
Other ------ -.- ------ -.-
---------- --- -------- ---
Total acquisition cost 14,796,000 82.2 8,283,100 82.8
Percentage leverage (mortgage
financing divided by total
acquisition cost) 64% 77%
Date offering began 2/93 10/93
Length of offering (months) 17 9
Months to invest 90% of
amount available for
investment (measured from
beginning of offering) 17 9
- -------------------------------
<FN>
(a) Consists of estimated legal, accounting, printing and other
organization and offering expenses paid by the partnership directly or
indirectly through the sponsor.
(b) Represents the capital contributions of the partnership paid or the
required payments to be paid to the local limited partnerships.
</FN>
</TABLE>
A-4
UNAUDITED
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND
INVESTING FUNDS (January 1,
1994 - June 30, 1997)
HTCF IV-2 % CHTC IV-4 %
Dollar amount offered $20,000,000 $25,000,000
=========== ===========
Dollar amount raised 15,241,000 100.0 11,099,000 100.0
Less offering expenses:
Selling commissions &
discounts 1,000,500 6.6 554,000 4.9
paid to non-affiliates (c) 969,900 6.4 827,000 7.5
Organizational expenses (a)
Reserves 241,600 1.7 387,000 3.5
------- --- ------- ---
Percent invested as of
close of offering 13,029,000 85.3 9,331,000 84.1
Acquisition costs:
Prepaid items and fees
related to purchase of
property 136,000 0.9 80,000 0.7
Cash down payments (b) 11,835,000 77.5 8,590,000 77.4
Acquisition fees 1,058,000 6.9 661,000 6.0
Other ------ -.- ------ -.-
----------- --- ----------- ---
Total acquisition cost 13,029,000 85.3 9,331,000 84.1
Percentage leverage (mortgage
financing divided by total
acquisition cost) 66% 60%
Date offering began 9/94 9/94
Length of offering (months) 13 12
Months to invest 90% of
amount available for
investment (measured from
beginning of offering) 17 15
- -------------------------------
(a) Consists of estimated legal, accounting, printing and other
organization and offering expenses paid by the partnership directly or
indirectly through the sponsor.
(b) Represents the capital contributions of the partnership paid or the
required payments to be paid to the local limited partnerships. (c) Selling
commissions were first paid to an affiliated broker-dealer which reallowed all
selling commissions to non-affiliates.
A-5
UNAUDITED
<PAGE>
<TABLE>
TABLE I
EXPERIENCE IN RAISING AND
INVESTING FUNDS (January 1,
1994 - June 30, 1997)
HTCF V-3 % HTCFV-4 (d)(e) % CHTC IV-5(d) %
<S> <C> <C> <C>
Dollar amount offered $25,000,000 $25,000,000 25,000,000
=========== =========== ==========
Dollar amount raised 17,559,000 100.0 21,920,450 100.0 6,253,000 100.0
Less offering expenses:
Selling commissions &
discounts 1,058,700 6.0 1,570,450 7.2 296,000 4.7
paid to non-affiliates (c) 1,062,900 6.1 1,320,000 6.0 475,000 7.6
Organizational expenses (a)
Reserves 349,000 2.0 3,166,480 14.4 1,462,500 23.4
------- --- --------- ---- --------- ----
Percent invested as of
close of offering 15,088,400 85.9 15,863,520 72.4 4,019,500 64.3
Acquisition costs:
Prepaid items and fees
related to purchase of
property 80,000 0.5 120,000 0.6 8,000 0.1
Cash down payments (b) 14,000000 79.7 14,093,520 64.3 3,689,500 59.1
Acquisition fees 1,008,400 5.7 1,650,000 7.5 322,000 5.1
Other ------ -.- ----- -.- ----- -.-
----------- --- --------- --- ------- ----
Total acquisition cost 15,088,400 85.9 15,863,520 72.4 4,019,500 64.3
Percentage leverage (mortgage
financing divided by total
acquisition cost) 70% 54% 49%
Date offering began 7/95 7/96 11/95
Length of offering (months) 11 13 7
Months to invest 90% of
amount available for
investment (measured from 21 N/A N/A
beginning of offering)
- -------------------------------
<FN>
(a) Consists of estimated legal, accounting, printing and other
organization and offering expenses paid by the partnership directly or
indirectly through the sponsor.
(b) Represents the capital contributions of the partnership paid or the
required payments to be paid to the local limited partnerships.
(c) Selling commissions were first paid to an affiliated broker-dealer
which reallowed all selling commissions to non-affiliates.
(d) Not all properties have been identified as of June 30, 1997.
(e) As of July 11, 1997, the date the final capital contributions were
received.
</FN>
</TABLE>
A-6
UNAUDITED
<PAGE>
<TABLE>
TABLE I
EXPERIENCE IN RAISING AND
INVESTING FUNDS (January 1,
1994 - June 30, 1997)
P R I V A T E O F F E R I N G S
Two One Two
Partnerships Partnership Partnerships
Organized in Organized in Organized in
1994 % 1995 % 1997 %
<S> <C> <C> <C>
Dollar amount offered $13,177,000 $15,000,000 $47,000,000
=========== =========== ===========
Dollar amount raised 13,177,000 100.0 15,000,000 100.0 46,278,066 100.0
Less offering expenses:
Selling commissions &
discounts 475,866 3.6 337,500 2.2 1,057,500 2.3
paid to non-affiliates (c) 354,314 2.7 337,500 2.2 1,057,500 2.3
Organizational expenses (a) 391,800 3.0 591,000 4.0 1,143,666 2.5
------- --- ------- --- --------- ---
Reserves
Percent invested as of
close of offering 11,955,020 90.7 13,734,000 91.6 43,019,400 93.0
Acquisition costs:
Prepaid items and fees
related to purchase of
property ------ -.- 150,000 1.0
Cash down payments (b) 11,141,539 84.5 12,984,000 86.6 40,859,400 88.3
Acquisition fees 655,000 5.0 600,000 4.0 1,880,000 4.1
Other 158,481 1.2 ----- -.- 280,000 0.6
--------- ---- ---------- ---- ---------- ----
Total acquisition cost 11,955,020 90.7 13,734,000 91.6 43,019,400 93.0
Percent leverage (mortgage
financing divided by total
acquisition cost) 72% 60% 58%
Date offering began Various 3/95 Various
Length of offering (months) 3 7 7
Months to invest 90% of
amount available for
investment (measured from
beginning of offering) 3 11 7
- ------------------------------
<FN>
(a) Consists of estimated legal, accounting, printing and other
organization and offering expenses paid by the partnership directly or
indirectly through the sponsor.
(b) Represents the capital contributions of the partnership paid or the
required payments to be paid to the local limited partnerships.
(c) Selling commissions were first paid to an affiliated broker-dealer
which reallowed all selling commissions to non-affiliates
</FN>
</TABLE>
A-7
UNAUDITED
<PAGE>
TABLE II
TABLE II presents information concerning the cumulative compensation paid to the
Sponsor for the period from January 1, 1994 to June 30, 1997 with respect to
programs presented in TABLE I and on an aggregate basis with respect to all
other programs which have been sponsored by the Sponsor.
A-8
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
(January 1, 1994 - June 30, 1997)
HTCF V-3 HTCF V-4(b) CHTC IV-5
Date offering commenced 7/95 7/96 11/95
Dollar amount raised 17,559,000 $21,920,450 $6,253,000
Amount paid to sponsor from
proceeds of offering: (a)
Underwriting fees 0 0 0
Acquisition fees 1,008,400 1,272,416 322,000
Syndication fee 0 0 0
Other 0 219,200 7,200
Dollar amount of cash generated
from (used in) operations before
deducting payments to sponsor 54,519 38,895 82,546
Amount paid to sponsor from
operations: 0 0 0
Property management fees 0 0 0
Partnership management fees 0 0 0
Reimbursements 0 0 0
Leasing commissions
Dollar amount of property sales and
refinancing before deducting
payments to sponsor: 0 0 0
Cash 0 0 0
Notes
Amount paid to sponsor from property
sales and refinancing:
Real estate commissions 0 0 0
Incentive fee 0 0 0
Other 0 0 0
- ------------------------------------
(a) Represents amounts paid to sponsor which were not reallowed to
non-affiliates.
(b) As of July 11, 1997, the date the final capital contributions were
received.
A-9
UNAUDITED
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
(January 1, 1994 - June 30, 1997)
HTCF IV-1 HTCF IV-2 CHTC IV-4
Date offering commenced 10/93 9/94 9/94
Dollar amount raised $10,000,000 $15,241,000 $11,099,000
Amount paid to sponsor from
proceeds of offering: (a)
Underwriting fees 0 0 0
Acquisition fees 800,000 1,058,000 655,000
Syndication fee 0 0 0
Other 0 0 12,800
Dollar amount of cash generated
from (used in) operations before
deducting payments to sponsor 94,526 253,321 232,799
Amount paid to sponsor from
operations: 0 0 0
Property management fees 15,000 123,250 45,000
Partnership management fees 0 0 0
Reimbursements 0 0 0
Leasing commissions
Dollar amount of property sales and
refinancing before deducting
payments to sponsor: 0 0 0
Cash 0 0 0
Notes
Amount paid to sponsor from property
sales and refinancing:
Real estate commissions 0 0 0
Incentive fee 0 0 0
Other 0 0 0
- ------------------------------------
(a) Represents amounts paid to sponsor which were not reallowed to
non-affiliates
A-10
UNAUDITED
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
(January 1, 1994 - June 30, 1997)
CHTC III Other Public
Programs (a)
Date offering commenced 2/93 Various
Dollar amount raised $18,000,000 $23,221,500
Amount paid to sponsor from
proceeds of offering: (c)
Underwriting fees 0 0
Acquisition fees 868,500 283,746
Syndication fee 0 0
Other 0 0
Dollar amount of cash generated
from (used in) operations before
deducting payments to sponsor 283,053 (13,167)
Amount paid to sponsor from
operations: 0 0
Property management fees 200,000 270,065
Partnership management fees (b) 0 0
Reimbursements 0 0
Leasing commissions
Dollar amount of property sales and
refinancing before deducting
payments
to sponsor: 0 51,407
Cash 0 0
Notes
Amount paid to sponsor from property
sales and refinancing:
Real estate commissions 0 0
Incentive fee 0 0
Other 0 0
- ------------------------------------
(a) Includes six public programs.
(b) Partnership management fees were paid from partnership reserves in the
instances where amounts paid to sponsor from operations exceed dollar
amount of cash generated from operations.
(c) Represents amounts paid to sponsor which were not reallowed to
non-affiliates
A-11
UNAUDITED
<PAGE>
<TABLE>
TABLE II
COMPENSATION TO SPONSOR
(January 1, 1994 - June 30, 1997)
----------------------------------------P R I V A T E O F F E R I N G S---------------------
Two One Two All
Partnerships Partnership Partnerships Other
Organized in Organized in Organized in Private
1994 1995 1997 Partnership (a)
------------- ------------- ------------ ---------------
<S> <C> <C>
Date offering commenced Various 3/95 Various 1993 & prior
Dollar amount raised $13,177,000 $15,000,000 $46,278,066 N/A
Amount paid to sponsor from
proceeds of offering: (c)
Underwriting fees 0 0 0 N/A
Acquisition fees 655,000 600,000 1,526,135 N/A
Syndication fee 0 0 0 N/A
Other 0 0 90,387 N/A
Dollar amount of cash generated
from (used in) operations before
deducting payments to sponsor (217,838) 470,148 (408,798) N/A
Amount paid to sponsor from
operations: 0 0 0 0
Property management fees 50,000 0 0 373,210
Partnership management fees (b) 0 0 0 0
Reimbursements 0 0 0 0
Leasing commissions
Dollar amount of property sales and
refinancing before deducting
payments
to sponsor: 0 0 0 0
Cash 0 0 0 0
Notes
Amount paid to sponsor from property
sales and refinancing:
Real estate commissions 0 0 0 0
Incentive fee 0 0 0 0
Other 0 0 0 0
- ------------------------------------
<FN>
(a) Includes 43 private programs sponsored since January 1984.
(b) Partnership management fees were paid from partnership reserves in the
instances where amounts paid to sponsor from operations
exceed dollar amount of cash generated from operations.
(c) Represents amounts paid to sponsor which were not reallowed to
non-affiliates
</FN>
</TABLE>
A-12
UNAUDITED
<PAGE>
TABLE III
TABLE III presents the operating results for all partnerships sponsored by the
Sponsor which closed during the five years and six months ended June 30, 1997.
The prior partnerships are structured as investment partnerships acquiring
interests in operating partnerships. The investment partnerships account for
such investments using the equity method of accounting which recognizes each of
such partnership's pro rata share of the operating partnership's total income or
loss. Revenues generated by the investment partnerships consist substantially of
interest on short-term investments. This interest income generally decreases
after the initial two years of operations as funds available for investment
decrease. This decrease in funds arises from the investment partnership's
payments of capital contributions due.
The prior public partnerships presented, one of the prior private partnerships
closed in 1994 and all of the prior private partnerships closed in 1995 and 1997
report on a GAAP basis, and, accordingly, "Cash generated (or used) from
operations" is per each program's Statement of Cash Flows. The remaining prior
private programs maintain their books and records on the tax basis of accounting
and not on a GAAP basis, and "Cash generated (or used) from operations" for such
programs is per their respective books and records. The significant difference
is that depreciation expense on a tax basis as compared to a GAAP basis is
greater in the early years of operations.
Other information included in the table includes data on cash generated from
operations and tax and cash distribution information per $1,000 invested,
including Tax Credit allocations.
A-13
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/------------------------------------------- HTCF II ----------------------------------------\
1992 1993 1994 1995 1996 1997 (a)
---- ---- ---- ---- ---- -------
1993
<S> <C> <C> <C> <C> <C> <C>
Gross revenue $ 23,054 $ 11,193 $ 9,287 $ 11,368 $ 10,157 $ 4,567
Less:
Operating expenses 145,784 154,060 157,875 163,151 212,809 84,966
Interest 0 0 0 0 0 0
Depreciation and amortization 23,584 22,079 23,905 23,266 21,352 10,676
Equity in losses in local partnerships 551,431 634,893 544,630 602,163 568,488 156,000
--------- --------- -------
Net income (loss) - GAAP basis (697,745) (799,839) (717,123) (777,212) (792,492) (247,075)
Taxable loss from operations (824,186) (888,131) (818,566) (858,138) (841,068) (272,400)
Cash generated (used)from operations 6,481 (8,894) 40,620 (5,443) (41,630) (8,103)
Cash generated from sales 0 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0 0
Less: Cash distributions to investors 0 0 0 0 0 0
Cash generated (deficiency) after cash 6,481 (8,894) 40,620 (5,443) (41,630) (8,103)
distributions and special items
TAX AND DISTRIBUTION DATA PER
$1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (116) (125) (116) (121) (119) (39)
From gain on sale 0 0 0 0 0 0
Federal tax credits 121 138 146 145 145 N/A
California tax credits 0 0 0 0 0 0
Cash distributions to investors 0 0 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by
total original acquisition costs
of all properties) 100 100 100 100 100 100
- --------------------------------
<FN>
(a) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the partnership's 1997 tax returns.
</FN>
</TABLE>
A-14
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/--------------------------------------------------- CHTC II ------------------------------------------\
1992 1993 1994 1995 1996 1997(c)
<S> <C> <C> <C> <C> <C> <C>
Gross revenue $ 72,092 $ 133,580 61,226 52,399 24,231 8,084
Less:
Operating expenses 105,481 158,082 355,671 251,425 234,202 136,493
Interest 2,157 0 0 0 0 0
Depreciation and amortization 32,961 52,480 47,565 54,836 54,836 27,434
Equity in losses in local partnerships 731,542 1,081,114 1,194,095 1,579,652 1,128,793 553,600
------- --------- --------- --------- --------- --------
Net income (loss) - GAAP basis (800,049) (1,158,096) (1,536,105) (1,833,514) (1,393,600) (709,443)
Taxable loss from operations (794,969) (1,208,709) (1,425,376) (2,079,433) (1,851,598) (782,161)
Cash generated (used) from operations 3,637 (221,444) 42,033 (68,921) (46,174) (39,312)
Cash generated from sales 0 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0 0
Less: Cash distributions to investors 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items 3,637 (221,444) 42,033 (68,921) (46,174) (39,312)
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (a)(75) (68) (80) (116) (103) (44)
From gain on sale 0 0 0 0 0 0
Federal tax credits (a)52 74 85 107 116 N/A
California tax credits (a)129 104 109 99 37 N/A
Cash distributions to investors (b)44 0 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year (original
total acquisition costs of properties
retained divided by total original
acquisition costs of all properties) 100 100 100 100 100 100
- --------------------------------
<FN>
(a) Tax losses and tax credits allocated to an investor in 1992 (second
year of operations) are dependent upon an investor's entry date. Amount shown is
that allocated to initial investors.
(b) This amount was distributed from CHTCII's reserves to investors who
purchased their units prior to January 1, 1991.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-15
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/-------------------------------------- HTCF III ----------------------------------------\
1992(a) 1993 1994 1995 1996 1997(c)
------- ---- ---- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue $ 45,236 $ 137,116 $ 87,521 $ 57,741 $ 16,756 $ 6,153
Less:
Operating expenses 13,036 120,054 313,134 314,320 394,781 164,320
Interest 679 0 0 0 0 0
Depreciation and amortization 3,394 24,478 45,724 47,176 47,176 23,624
Equity in losses in local partnerships 68,933 779,251 1,323,487 1,312,540 1,406,638 695,000
--------- ------- --------- --------- --------- --------
Net income (loss) - GAAP basis (40,806) (786,667) (1,594,824) (1,616,295) (1,831,839) (876,791)
Taxable loss from operations (36,895) (850,051) (1,594,118) (1,715,667) (1,820,369) (906,076)
Cash generated (used)from operations 53,333 (393,615) (38,224) (16,170) (73,931) (9,667)
Cash generated from sales 0 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0 0
Less: Cash distributions to investors 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items 53,333 (393,615) (38,224) (16,170) (73,931) (9,667)
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(9) (b)(77) (105) (113) (120) (60)
From gain on sale 0 0 0 0 0 0
Federal tax credits (b)4 (b)68 119 152 157 N/A
California tax credits 0 0 0 0 0 0
Cash distributions to investors 0 0 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs
of properties retained divided
by total original acquisition
costs of all properties 100 100 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax losses and tax credits allocated to an investor in the first two
years are dependent upon an investor's entry date. Amount shown is that
allocated to initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-16
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/---------------------------- CHTC III -----------------------------\
1993(a) 1994 1995 1996 1997(c)
------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Gross revenue $ 22,885 $ 156,271 $ 145,959 $ 74,947 $ 24,552
Less:
Operating expenses 7,204 86,306 193,916 214,737 109,048
Interest 0 0 0 0 0
Depreciation and amortizations 0 41,757 57,466 57,933 29,298
Equity in losses in local partnerships 33,260 352,511 1,155,114 1,132,216 554,000
-------- --------- --------- --------- -------
Net income (loss) - GAAP basis (17,579) (324,303) (1,260,537) (1,329,939) (667,794)
Taxable loss from operations (30,475) (388,247) (1,279,818) (1,523,381) (747,328)
Cash generated (used) from operations (9,831) (225,005) 437,400 (143,337) 13,995
Cash generated from sales 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0
Less: Cash distributions to investors 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items (9,831) (225,005) 437,400 (143,337) 13,995
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(6) (b)(28) (70) (84) (41)
From gain on sale 0 0 0 0 0
Federal tax credits (b)6 (b)32 95 112 N/A
California tax credits 0 (b)48 85 85 N/A
Cash distributions to investors 0 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties) 100 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax losses and tax credits allocated to an investor in the first two
years are dependent upon an investor's entry date. Amount shown is that
allocated to initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-17
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/-----------------------------HTCF IV-1-------------------------------\
1994(a) 1995 1996(d) 1997(c)
------- ---- ------- -------
<S> <C> <C> <C> <C>
Gross revenue $ 85,261 66,645 51,654 16,388
Less:
Operating expenses 47,149 53,536 51,467 29,009
Interest 0 0 0 0
Depreciation and amortization 20,797 30,926 31,032 15,470
Equity in losses in local partnerships 413,316 727,986 837,908 592,300
------- ------- ------- -------
Net income (loss) - GAAP basis (396,001) (745,803) (868,753) (620,391)
Taxable loss from operations (417,185) (874,044) (982,635) (725,857)
Cash generated (used)from operations 46,649 19,058 6,440 7,379
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
Less: Cash distributions to investors 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items 46,649 19,058 6,440 7,379
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(59) (87) (97) (72)
From gain on sale 0 0 0 0
Federal tax credits (b)32 101 136 N/A
California tax credits 0 0 0 0
Cash distributions to investors 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by
total original acquisition costs
of all properties 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax losses and tax credits allocated to an investor in the first year
are dependent upon an investor's entry date. Amount shown is that allocated to
initial investor.
(c) Six months ended June 30, 1997.
(d) Based on trial balance. Final audit not yet completed.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-18
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/----------------------HTCT VI-2------------------------\
1994(a) 1995 1996 1997(c)
------- ----- ---- -------
<S> <C> <C> <C> <C>
Gross revenue $ 3,475 $179,927 $ 161,610 $ 43,489
Less:
Operating expenses 27,269 57,965 60,777 37,395
Interest 0 39,148 5,350 0
Depreciation and amortization 1,638 26,208 40,109 20,363
Equity in losses in local partnerships 240,698 628,521 628,631 425,200
--------- --------- ------- -------
Net income (loss) - GAAP basis (266,130) (571,915) (573,257) (439,469)
Taxable loss from operations (228,979) (702,048) (641,050) (483,400)
Cash generated (used) from operations (25,518) 62,653 60,895 32,041
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
Less: Cash distributions to investors 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items (25,518) 62,653 60,895 32,041
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(82) (b)(58) (41) (31)
From gain on sale 0 0 0 0
Federal tax credits (b)21 (b)70 105 N/A
California tax credits 0 0 0 0
Cash distributions to investors 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax losses and tax credits allocated to an investor in the first two
years are dependent upon an investor's entry date. Amount shown is that
allocated to initial investor.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-19
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/-------------------------------------CHTC IV-4-------------------------------\
1994(a) 1995 1996 1997(c)
------- ---- ----- -------
<S> <C> <C> <C> <C>
Gross revenue $ 1,613 $ 160,888 $ 147,254 $ 41,899
Less:
Operating expenses 13,399 41,325 51,488 25,668
Interest 0 79,853 0 0
Depreciation and amortization 0 16,056 24,865 12,705
Equity in losses in local partnerships (2,212) 100,224 528,288 234,600
------- ------- --------- -------
Net income (loss) - GAAP basis (9,574) (76,570) (457,387) (231,074)
Taxable loss from operations (11,786) (60,108) (566,147) (250,561)
Cash generated (used) from operations 1,602 26,322 95,766 64,109
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
Less: Cash distributions to investors 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items 1,602 26,322 95,766 64,109
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(12) (b)(9) (49) (22)
From gain on sale 0 0 0 0
Federal tax credits 0 (b)18 64 N/A
California tax credits 0 (b)53 70 N/A
Cash distributions to investors 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax losses and tax credits allocated to an investor in the first two
years are dependent upon an investor's entry date. Amount shown is that
allocated to initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-20
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/---------------------HTCF V-3----------------------\
1995(a) 1996 1997 (d)
------- ----- --------
<S> <C> <C> <C>
Gross revenue $ 3,487 $ 209,940 $ 70,711
Less:
Operating expenses 12,379 69,130 36,035
Interest 0 0 0
Depreciation and amortization 454 23,436 17,978
Equity in losses in local partnerships 343 185,071 223,400
----- ------- -------
Net income (loss) - GAAP basis 9,689 (67,697) (206,702)
Taxable income (loss) from operations 2,522 (128,969) (248,971)
Cash generated (used)from operations 3,402 34,885 162,232
Cash generated from sales 0 0 0
Cash generated from refinancing 0 0 0
Less: Cash distributions to investors 0 0 0
Cash generated (deficiency) after cash
distributions and special items 3,402 34,885 162,232
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)2 (b)(26) (14)
From gain on sale 0 0 0
Federal tax credits (b)3 (b)62 N/A
California tax credits 0 0 0
Cash distributions to investors (c)5 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties) 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax income (losses) and tax credits allocated to an investor in the
first two years are dependent upon an investor's entry date. Amount shown is
that allocated to initial investors.
(c) This amount was distributed in 1995 by the general partner.
(d) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-21
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
/-----------HTCF V-4-------------\ /------------CHTC IV-5-------------\
1996 (a) 1997 1996 (a) 1997 (c)
--------- ------ -------- ---------
<S> <C> <C> <C> <C>
Gross revenue $ 15,529 $ 54,513 $ 54,573 $ 35,491
Less:
Operating expenses 30,183 15,640 1,393 13,802
Interest 0 0 0 0
Depreciation and amortization 2,851 15,640 7,753 5,494
Equity in losses in local partnerships 29,329 18,000 (15) 30,774
------ -------- ------ ------
Net income (loss) - GAAP basis (46,834) (8,115) 45,442 (14,579)
Taxable income (loss) from operations (23,166) (14,775) 45,427 (17,527)
Cash generated (used) from operations 4,010 44,679 159,328 16,748
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
Less: Cash distributions to investors 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items 4,010 44,679 159,328 16,748
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)5 (b)(1) (b)10 (b)2
From gain on sale 0 0 0 0
Federal tax credits (b)14 N/A 0 N/A
California tax credits 0 N/A 0 N/A
Cash distributions to investors 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax income (losses) and tax credits allocated to an investor in the
first two years are dependent upon an investor's entry date. Amount shown is
that allocated to initial investors.
(c) Six months ended June 30, 1997.
(d) Based on trial balance. Final audit not yet completed.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-22
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
FOUR PRIVATE
/---------------------------OFFERINGS CLOSED DURING 1992---------------------\
1992(a) 1993 1994 1995 1996 1997(c)
------- ---- ---- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Gross revenue $ 179,081 394,031 261,322 219,584 110,265 27,348
Less:
Operating expenses 9,951 12,208 9,958 15,822 20,825
Interest 38,574 40,265 20,139 13,392 0 28,679
Depreciation and amortization 0 1,346 2,619 3,518 9,006 0
Equity in losses in local partnerships 535,833 967,507 1,098,116 1,129,379 1,097,925 530,845
------- ------- --------- --------- --------- -------
Net income (loss) - Tax basis (405,277) (627,295) (869,510) (942,527) (1,017,491) (537,129)
Cash generated (used) from operations (31,736) (28,897) (6,385) 1,999 89,440 (1,331)
Cash generated from sales 0 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0 0
Less: Cash distributions to investors 0 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items (31,736) (28,897) (6,385) 1,999 89,440 (1,331)
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(47) (73) (110) (114) ( 123) ( 65)
From gain on sale 0 0 0 0 0 0
Federal tax credits 63 122 134 136 136 N/A
California tax credits 104 92 92 49 0 N/A
Cash distributions to investors 0 0 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties 100 100 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax loss and tax credits allocated to an investor in the first year are
dependent upon an investor's entry date. Amount shown is that allocated to
initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-23
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR
PROGRAMS
FOUR PRIVATE
/------------------OFFERINGS CLOSED DURING 1993-------------------------\
1993(a) 1994 1995 1996 1997(c)
------ ---- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Gross revenue $ 130,878 $ 332,016 $ 242,791 $ 147,841 $ 82,018
Less:
Operating expenses 2,834 16,958 10,944 23,613 24,830
Interest 6,111 14,094 14,427 0 0
Depreciation and amortication 13,808 12,262 15,457 13,863 6,932
Equity in losses in local partnerships 435,734 959,693 878,965 805,025 394,453
------- ------- ------- ------- -------
Net income (loss) - Tax basis (327,609) (670,691) (677,002) (694,660) (344,197)
Cash generated (used)from generations 121,645 302,422 6,094 124,228 57,188
Cash generated from sales 0 0 0 0 0
Cash generated from refinancing 0 0 0 0 0
Less: Cash distributions to investors 0 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items 121,645 302,422 6,094 124,228 57,188
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(48) (113) (112) (114) (57)
From gain on sale 0 0 0 0 0
Federal tax credits 49 101 126 130 N/A
California tax credits 46 46 46 27 N/A
Cash distributions to investors 0 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties 100 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax loss and tax credits allocated to an investor in the first year are
dependent upon an investor's entry date. Amount shown is that allocated to
initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-24
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR
PROGRAMS
TWO PRIVATE
/------------------------------OFFERINGS CLOSED DURING 1994-------------------------------\
1994(a) 1995 1996 1997(c)
------- ---- ---- -------
<S> <C> <C> <C> <C>
Gross revenue $ 7,619 $ 112,058 $ 67,700 $ 7,619
Less:
Operating expenses 111,523 36,529 54,699 111,523
Interest 0 0 0 0
Depreciation and amortization 1,305 12,906 37,940 1,305
Equity in losses in local partnerships 129,352 861,238 1,285,203 129,352
--------- --------- --------- -------
Net income (loss) - Tax basis for WNC Tax Credits XXX (234,561) (798,615) (1,310,142) (234,561)
GAAP basis for ITC I
Cash generated (used) from operations (39,826) (61,055) 13,001 (39,826)
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
Less: Cash distributions to investors 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items (39,826) (61,055) 13,001 (39,826)
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(76) (101) (158) (b)(76)
From gain on sale 0 0 0 0
Federal tax credits 31 90 126 N/A
California tax credits 0 0 0 0
Cash distributions to investors 0 0 0 0
Amount (in percentage terms) remaining
invested in program properties at end of
year (original total acquisition costs
of properties retained divided by total
original acquisition costs of all properties) 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax loss and tax credits allocated to an investor in the first year are
dependent upon an investor's entry date. Amount shown is that allocated to
initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-25
UNAUDITED
<PAGE>
<TABLE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
ONE PRIVATE TWO PRIVATE
---OFFERING CLOSED DURING 1995--- ---OFFERINGS CLOSED DURING 1997---
1995(a) 1996 1997 (c) 1997(a) (c)
-------- ----- -------- -----------
<S> <C> <C> <C> <C>
Gross revenue $ 58,335 $ 138,052 $ 18,704 $ 40,196
Less:
Operating expenses 126,526 102,922 52,314 25,232
Interest 0 0 0 674,920
Depreciation and amortization 6,099 32,616 11,500 21,168
Equity in losses in local partnerships 161,903 453,545 166,300
--------- -------- ------- -------
Net income (loss) - GAAP basis (236,193) (451,031) (288,510) (847,424)
Taxable loss from operations (146,497) (716,986) (378,510) (832,397)
Cash generated (used) from generations (74,596) (44,733) (40,282) (26,232)
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
Less: Cash distributions to investors 0 0 0 0
Cash generated (deficiency) after cash
distributions and special items (74,596) (44,733) (40,282) (26,232)
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED
Federal income tax results
Ordinary income (loss)
From operations (b)(10) (48) (25) (b)(145)
From gain on sale 0 0 0 0
Federal tax credits (b)7 59 N/A N/A
California tax credits 0 0 0 N/A
Cash distributions to investors 0 0 0 0
Amount (in percentage terms)
remaining invested in program
properties at end of year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of
all properties 100 100 100 100
- --------------------------------
<FN>
(a) Partial year of operations.
(b) Tax loss and tax credits allocated to an investor in the first year are
dependent upon an investor's entry date. Amount shown is that allocated to
initial investors.
(c) Six months ended June 30, 1997.
N/A The amount of tax credits is not available until the preparation of the
partnership's 1997 tax returns.
</FN>
</TABLE>
A-26
UNAUDITED
<PAGE>
TABLE V
TABLE V presents the sales or disposals of property by partnerships sponsored by
the Sponsor during the three years and six months ended June 30, 1997. The two
sales were in Shelter Resource Fund which is presented in TABLE II under other
public programs.
A-27
UNAUDITED
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
(January 1, 1994 - June 30, 1997
SHELTER RESOURCE FUND(e)
FOLSOM GARDEN I FOLSOM GARDEN II
Date property acquired 11/30/83 11/30/83
Date of sale 1/30/97(a) 1/30/97(a)
Selling Price, Net of Closing Costs and GAAP
Adjustments:
Cash received (disbursed) net of closing costs $(216,345) $117,454
Mortgage balance and accrued interest at 1,918,394 1,586,941
time of sale
Purchase money mortgage taken back
by program 0 0
Adjustments resulting from application
of GAAP 0 0
Total 1,702,049(b) 1,704,395(b)
Cost of Properties Including Closing and
Soft Costs
Original mortgage financing 1,200,000 1,200,000
Total acquisition cost, capital
improvement, closing and soft costs(c) 369,716 362,120
Total 1,569,716 1,562,120
Excess (Deficiency) of Property
Operating Cash Receipts Over Cash
Expenditures(d) $(27,339) $140,954
- ---------------------------------
(a) Sales were not to related parties.
(b) Allocation of taxable income between ordinary and capital will not be
known until the preparation of the partnership's 1997 tax return. Neither sale
will be reported as an installment sale.
(c) Amounts shown do not include pro rata share of original offering costs.
(d) Costs incurred in the administration of the partnership and not related
to the operation of the property are not included.
(e) All figures based on trial balances. Final audit not yet completed.
A-28
UNAUDITED
<PAGE>
EXHIBIT B
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
The AGREEMENT OF LIMITED PARTNERSHIP of WNC HOUSING TAX CREDIT FUND VI,
L.P., SERIES 5 dated as of March 3, 1997 among WNC & Associates, Inc., as
General Partner, John B. Lester, Jr., as Initial Limited Partner, and those
Persons admitted to the Partnership as Additional Limited Partners, is hereby
amended by the General Partner pursuant to the power granted it in Section
12.1.2 of such Partnership Agreement as follows:
1. Section 4.3.1 thereof shall be amended to read in its entirety
as follows:
4.3.1. Unless Section 4.3.3 applies, if there is an
aggregate Loss remaining, such remaining aggregate Loss shall be
allocated:
(i) First, to the extent of the positive Capital Account balances of
the Partners, in such manner and amount as is necessary to cause such balances,
as so adjusted, to be in the ratio of 99.9% to the Limited Partners and 0.1% to
the General Partner until such balances are reduced to zero;
(ii) Second, to the extent of the excess of Partnership Minimum Gain
over the aggregate negative Capital Account balances of the Partners with such
balances, to the General Partner and the Limited Partners in such manner and
amount as is necessary to cause their negative Capital Account balances, as so
adjusted, to be in the ratio of 99.9% to the Limited Partners and 0.1% to the
General Partner; and
(iii) Third, to the General Partner.
2. Section 4.3.2 thereof shall be amended to read in its entirety
as follows:
4.3.2. Unless Section 4.3.3 applies, if there is an
B-1
<PAGE>
aggregate Profit remaining, such remaining aggregate Profit shall
be allocated:
(i) First, in the event that the Limited Partners have an aggregate
positive Capital Account balance and the General Partner has a negative Capital
Account balance or vice versa, to the class of Partners with and to the extent
of such negative balances;
(ii) Second, to the extent of the aggregate negative Capital Account
balances of the Partners, to the Limited Partners and the General Partner in
such manner and amount as is necessary to cause the negative Capital Account
balances of such Partners, as so adjusted, to be in the ratio of 99.9% to the
Limited Partners and 0.1% to the General Partner; and
(iii) Third, to the Limited Partners to the extent that their positive
Capital Account balances are less than their Adjusted Capital Contributions.
3. Section 4.4.1(i) thereof shall be amended to read in its
entirety as follows:
4.4.1.(i) The provisions of this Agreement related to the maintenance
of Capital Accounts, the allocation of Profits and Losses for Tax Purposes and
Tax Credits and the distribution of cash and property to the Partners are
intended to comply with the requirements of Treasury Regulation Section
1.704-1(b) by causing the amount of such Profits and Losses for Tax Purposes to
be allocated among the Partners' Capital Accounts so that the amount in their
Capital Accounts as of the end of each fiscal year of the Partnership is equal
to the Partners' Deemed Liquidation Distributions. Where there would be no
Deemed Liquidation Distribution to the Partners, such provisions are intended to
comply with the above-referenced Treasury Regulations by (a) limiting the
maximum negative balance in the Capital Accounts of the Limited Partners, as a
class, to an amount not in excess of their aggregate share (determined in
accordance with Treasury Regulation Section 1.704-2(g)) of Partnership Minimum
Gain, (b) allocating the Partnership's aggregate Nonrecourse Deductions to cause
the negative Capital Account balances of the Limited Partners, as a class, and
the General Partner to be in the ratio of 99.9% to the Limited Partners and 0.1%
to the General Partner, and (c) allocating to the Partners an amount of gross
income or gain of the Partnership to the extent necessary to cause the
Partnership to comply with clauses (a) and (b) of this sentence at the end of
each fiscal year of the Partnership. In addition, such provisions are intended
to cause the amount distributable to each Partner in an actual distribution
pursuant to Section 4.2.2 to equal the amount that would be distributable to
each Partner if Section 4.2.1 rather than Section 4.2.2 applied to such
distribution.
B-2
<PAGE>
4. Section 4.4.3(ix) thereof shall be amended to read in its
entirety as follows:
(ix) Except as otherwise expressly provided herein, Nonrecourse
Deductions shall be allocated 99.9% to the Limited Partners and 0.1% to the
General Partner.
5. Section 4.5.1 thereof shall be amended to read in its entirety
as follows:
4.5.1. Except as provided in Section 4.5.2, in accordance with Treasury
Regulation Section 1.704-1(b)(4)(ii), all expenditures giving rise to the
allowance of any Tax Credits shall be allocated among the Partners in the manner
in which the deductions arising from such expenditures are allocated among the
Partners for the relevant taxable year, it being the intention of the Partners
that such expenditures, including, without limitation, expenditures giving rise
to the allowance of Low Income Housing Credits, be allocated 99.9% to the
Limited Partners, as a class, and 0.1% to the General Partner.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
to Partnership Agreement as of August 29, 1997.
WNC & ASSOCIATES, INC.
General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr.,
President
B-3
