FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 333-24111
WNC HOUSING TAX CREDIT FUND VI, L.P.,
Series 5 and Series 6
California 33-0775418 (Series 5)
33-0761578 (Series 6)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626
(Address of principal executive offices)
(714) 662-5565
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5 and Series 6
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
PART I. FINANCIAL INFORMATION
Section A. Series 5
Item 1. Financial Statements
Balance Sheet, June 30, 1998 and December 31, 1997 2
Statement of Operations For the Three and Six Months ended
June 30, 1998 3
Statement of Partners' Equity
For the Six Months ended June 30, 1998 4
Statement of Cash Flows
For the Six Months ended June 30, 1998 5
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risks 14
Section B Series 6
Series 6 currently has had no operations. Accordingly, only the balance sheet is
included herein for Series 6.
Item 1. Financial Statements
Balance Sheet, June 30, 1998 15
Notes to Balance Sheet 16
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risks` 19
PART II. OTHER INFORMATION
Section A . Series 5
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
Section B. Series 6
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
<PAGE>
Part I. Finacial Information
Section A. Series 5
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
BALANCE SHEETS
June 30, 1998 and December 31, 1997
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 11,960,295 $ 5,498,424
Subscriptions receivable - Note 6 1,644,250 631,885
Loans receivable - Note 2 380,194 878,894
Investment in limited
partnerships - Note 3 10,443,594 2,398,460
Other assets 27,432 5,042
---------- ---------
$ 24,455,765 $ 9,412,705
========== =========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Payable to limited partnerships
- Note 5 $ 2,874,296 $ 860,671
Accrued fees and expenses due to
general partner and affiliates
- Note 4 1,035,683 361,900
---------- ---------
3,909,979 1,222,571
---------- ---------
Commitments and contingencies
- - Note 8 Partners' equity (deficit):
General partner (14,204) (12,452)
Limited partners (25,000 units authorized,
24,638 and 9,834 units issued
and outstanding at June 30, 1998 and
December 31, 1997, respectively) 20,559,990 8,202,586
---------- ---------
Total partners' equity 20,545,786 8,190,134
---------- ---------
$ 24,455,765 $ 9,412,705
========== =========
UNAUDITED
See Accompanying Notes to Financial Statements
2
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For The Three and Six Months Ended June 30, 1998
Three Six
Months Months
------ ------
Interest income $ 70,471 $ 123,367
------- -------
Operating expenses:
Amortization 10,396 17,160
Asset management fees -Note 4 17,163 18,035
Other 3,568 3,568
------- -------
Total operating expenses 31,127 38,763
------- -------
Income from operations 39,344 84,604
Equity in loss from
limited partnerships - Note 3 (12,515) (26,100)
------- -------
Net income $ 26,829 $ 58,504
======= =======
Net income allocated to:
General partner $ 27 $ 59
======= =======
Limited partners $ 26,802 $ 58,445
======= =======
Net income per weighted limited
partner units (15,790) $ 1.70 $ 3.70
======= =======
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For The Six Months Ended June 30, 1998
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit), December 31, 1997 $ (12,452) $ 8,202,586 $ 8,190,134
Capital contributions 14,769,145 14,769,145
Offering expenses (1,811) (1,809,436) (1,811,247)
Capital issued for notes receivable -
Note 6 (660,750) (660,750)
Net income 59 58,445 58,504
------- ---------- ----------
Equity (deficit), June 30, 1998 $ (14,204) $ 20,559,990 $ 20,545,786
======= ========== ==========
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1998
1998
----
Cash flows used by operating activities:
Net income $ 58,504
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in loss of limited partnerships 26,100
Amortization 17,160
Asset management fee 18,035
Change in other assets (22,390)
Change in accrued fees and expenses
due to general partner and affiliates (6,913)
-----------
Net cash provided by operating activities 90,496
-----------
Cash flows used by investing activities:
Investment in limited partnerships (4,489,497)
Acquisition fees and costs (784,589)
Distributions from limited partnerships 315
-----------
Net cash used by investing activities (5,273,771)
-----------
Cash flows provided by financing activities:
Capital contributions 13,096,030
Offering expenses (1,450,884)
Net cash provided by financing activities 11,645,146
-----------
Net increase in cash and cash equivalents 6,461,871
Cash and cash equivalents, beginning of period 5,498,424
-----------
Cash and cash equivalent, end of period $ 11,960,295
===========
(Continued)
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
STATEMENT OF CASH FLOWS (CONTINUED)
For the Six Months Ended June 30, 1998
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
During the six months ended June 30, 1998 Series 5 incurred, but did not pay,
$662,661 of payables to affiliates for acquisitions costs, and fees and offering
expenses (see Note 4).
During the six months ended June 30, 1998 Series 5 incurred, but did not pay,
$2,013,625 of payables to limited partnership in connection with the acquisition
of limited partnership interests.
During the six months ended June 30, 1998 Series 5 applied $498,700 from a loan
receivable to the respective note payables to limited partnership in connection
with the acquisition of limited partnership interests.
During the six months ended June 30, 1998 $660,750 of capital contributions were
recorded as notes receivable and $1,012,365 were recorded as subscriptions
receivable.
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund, VI, L.P., Series 5 ("Series 5") was formed under
the California Revised Limited Partnership Act on March 3, 1997 and commenced
operations on August 29, 1997. Series 5 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
Series 5's Annual Report of December 31, 1997.
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 June 30, 1998
and the results of operations and changes in cash flows for the six months ended
June 30, 1998. 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 Series 5 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 Series 5 and owns, through the Lester
Family Trust, just less than 30% of the outstanding stock of WNC & Associates,
Inc.
Pursuant to the Partnership Agreement, Series 5 is authorized to sell 25,000
units of limited partnership interests ("Units") at $1,000 per Unit of which
24,638 Units in the amount of $24,564,525 had been sold as of June 30, 1998,.
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a .01% interest in operating profits and losses, taxable
income and loss and in cash available for distribution from Series 5. The
limited partners will be allocated the remaining 99.9% of these items in
proportion to the number of their respective Units.
7
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------
Allocations Under the Terms of the Partnership Agreement (Continued)
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in Series
5'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.
Method of Accounting For Investment in Limited Partnerships
Series 5 accounts for its investments in limited partnerships using the equity
method of accounting, whereby Series 5 adjusts its investment balance for its
share of each limited partnership's results of operations and for any
distributions received. Costs incurred by Series 5 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
- -------------------------
Series 5 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.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
NOTE 2 - LOANS RECEIVABLE
- -------------------------
Loans receivable represent amounts loaned by Series 5 to certain limited
partnerships in which Series 5 may invest. These loans will be applied against
the first capital contribution due if Series 5 ultimately acquires a limited
partnership interest. In the event that Series 5 does not acquire a limited
partnership interest, the loans are to be repaid with interest at a rate which
is equal to the rate charged to an affiliate of the general partner (8.75 % at
June 30,1998). Loans receivable of $498,700 at December 31, 1997 were applied to
capital contributions due for limited partnership interests acquired in January
1998. Loans receivable with a balance of $260,194 at June 30, 1998 was
collectible from a partnership which is in negotiation to be acquired (set Note
8). Loans receivable with a balance of $120,000 at June 30, 1998 were
collectible from two limited partnerships that Series 5 has declined to acquire.
$100,000 was received subsequent to June 30, 1998 from one of the partnerships
and $20,000 is to be repaid by the other partnership to Series 5 in 1998.
NOTE 3 - INVESTMENT IN LIMITED PARTNERSHIPS
- -------------------------------------------
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of June 30, 1998 and
December 31, 1997:
1998 1997
---- ----
Investment balance,
beginning of period $ 2,398,460 $ 0
Capital contributions 4,988,197 836,632
Capital contributions payable 2,013,625 860,671
Capitalized acquisition fees and costs 1,086,887 701,018
Distributions from limited partnerships (315)
Equity in income of limited partnerships (26,100) 2,395
Amortization of acquisition fees and costs (17,160) (2,256)
---------- ----------
Investment balance,
end of period $ 10,443,594 $ 2,398,460
========== ==========
9
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
NOTE 4- RELATED PARTY TRANSACTIONS
- ----------------------------------
Under the terms of its Agreement of Limited Partnership, Series 5 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 $989,327 were incurred during the six months ended June
30, 1998.
Reimbursement for acquisition expenses, offering and selling expenses
advanced by the General Partner or affiliates on behalf of Series 5. These
reimbursements plus all other acquisition costs and offering expenses
inclusive of sales commissions will not exceed 14.5% of the gross proceeds.
During the six months ended June 30, 1998 Series 5 incurred acquisition
expense, offering and selling expenses of $97,560, $810,522, and
$1,000,725, respectively.
An annual management fee not to exceed .2% of Series 5's invested
assets (defined by Series 5's Agreement of Limited Partnership as Series
5's capital contributions to limited partnerships plus its allocable
percentage of the permanent financing of the limited partnerships). Series
5 has incurred fees of $18,035 for the six months ended June 30, 1998.
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 Series 5'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 June 30, 1998 and
December 31, 1997:
1998 1997
---- ----
Acquisition fees $ 332,207 $ 62,878
Advances made for acquisition costs,
organizational, offering and selling
expenses 680,642 294,310
Asset management fees 18,035
Other 4,799 4,712
--------- -------
Total accrued fees and advances $ 1,035,683 $ 361,900
========= =======
10
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998
NOTE 5 - PAYABLE TO LIMITED PARTNERSHIPS
- ----------------------------------------
Payable to limited partnerships at June 30, 1998 represents amounts which are
due at various times based on conditions specified in the respective local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited partnership achieving certain operating
benchmarks, and are generally expected to be paid within two years of Series 5's
initial investment.
NOTE 6 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE
- ---------------------------------------------------
As of June 30, 1998, Series 5 had received subscriptions for 24,638 units which
included subscriptions receivable of $1,644,250 and promissory notes of
$1,011,900. Limited partners who subscribe for ten or more units of limited
partnership interest ($10,000) could elect to pay 50% of the purchase price in
cash upon subscription and the remaining 50% by the delivery of a promissory
note bearing fixed interest at the rate of 5.5% 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. The amount of
promissory notes receivable during the six months ended June 30, 1998
($1,011,900) is presented as a reduction in partners' equity.
Subscriptions receivable presented on the accompanying balance sheet of
$1,644,250 were received subsequent to June 30, 1998 and accordingly have been
classified as an asset.
NOTE 7 - INCOME TAXES
- ---------------------
Series 5 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.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Subsequent to June 30, 1998, Series 5 acquired one limited partnership interest
which required capital contributions totaling approximately $1,844,678. Series 5
is negotiating to acquire one additional limited partnership interest which
would commit Series 5 to additional capital contributions of approximately
$1,312,916 of which $260,194 has been advanced as of June 30, 1998 and is
reflected in the loans receivable in the accompanying balance sheet as of June
30, 1998 (see Note 2).
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Liquidity and Capital Resources
- -------------------------------
Series 5 is raising equity capital from investors by means of its Offering, and
is applying such capital, including the installment payments on the Promissory
Notes as received, to the purchase price and acquisition fees and costs of Local
Limited Partnership Interests, Reserves and expenses. As of August 29, 1997
Series 5 had received cash subscriptions funds of $1,400,000, thereby satisfying
the minimum offering condition. As of June 30, 1998, Series 5 had received and
accepted subscriptions in the amount of $24,564,525, net of discounts of $73,475
(24,638 Units), of which $1,011,900 was represented by Promissory Notes.
As of June 30, 1998, Series 5 was indebted to WNC & Associates, Inc. in the
amount of approximately $1,035,000. The component items of such indebtedness
were as follows: accrued acquisition fees of approximately $332,000, advances to
pay front-end fees of approximately $680,000, accrued asset management fees of
approximately $18,000 and other advances of approximately $5,000.
As of June 30, 1998 and December 31, 1997, Series 5 had made capital
contributions to Local Limited Partnerships of approximately $5,824,800 and $
836,600 and had commitments of approximately $2,874,300 and $860,700 for those
limited partnership interests acquired. Further, Series 5 had loans outstanding
to Local Limited Partnerships as of June 30, 1998 and as of December 31, 1997,
of approximately $380,200 and $878,900, respectively. Of the amount outstanding
as of December 31, 1997, approximately $498,700 was loaned to EL RENO and was
applied to Series 5's purchase price upon acquisition of this Limited
Partnership Interest in January 1998. The balance of $380,000 is still
outstanding as of June 30, 1998 and consist of three loans: approximately
$260,200 made to Apartment Housing of Theodore, a partnership under negoiation
to be acquired; $100,000 made to TULSA-CRESTVEW, repaid subsequent to June 30,
1998; and $20,000 to ASLAND to be repaid in 1998.
Overall, as reflected in its Statement of Cash Flows, Series 5 had a net
increase in cash and cash equivalents of approximately $6,461,900 for the six
month period ended June 30, 1998. This increase in cash consisted of cash
provided by operating activities of approximately $90,500, and financing
activities of approximately $11,645,100, offset by cash used in investing
activities, of approximately $5,273,800. Cash provided from financing activities
consisted of capital contributions from limited partners of approximately
$13,096,000 less offering expenses of approximately $1,450,900. Cash used by
investing activities consisted of payments to limited partnerships of
approximately $4,489,500, and capitalized acquisitions costs of approximately
$784,500, offset by a cash distribution from a limited partnership of $300. Cash
provided and used by the operating activities of Series 5 was minimal compared
to its other activities. Cash provided from operations consisted primarily of
interest received on cash deposits and investor notes receivable, and cash used
in operations consisted primarily of payments for operating fees and expenses.
The major components of all these activities are discussed in greater detail
below.
It is not expected that any of the Local Limited Partnerships in which Series 5
will invest will generate cash from operations sufficient to provide
distributions to the Unitholders in any significant amount. Such cash from
operations, if any, would first be used to meet operating expenses of Series 5,
including the payment of the Asset Management Fee.
Series 5's investments will not be readily marketable and may be affected by
adverse general economic conditions which, in turn, could substantially increase
the risk of operating losses for the Apartment Complexes, the Local Limited
Partnerships and Series 5. These problems may result from a number of factors,
many of which cannot be controlled. Nevertheless, the General Partner
anticipates that capital raised from the sale of the Units will be sufficient to
fund Series 5's future investment commitments and proposed operations.
12
<PAGE>
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 as well as expenses attendant to
the preparation of tax returns and reports to the Unitholders and other investor
servicing obligations of Series 5. Liquidity would, however, be adversely
affected by unanticipated or greater than anticipated operating costs. Series
5's liquidity could also be affected by defaults or delays in payment of the
Promissory Notes, from which a portion of the working capital Reserves is
expected to be funded. To the extend that working capital Reserves are
insufficient to satisfy the cash requirements of Series 5, it is anticipated
that additional funds would be sought through bank loans or other institutional
financing. Series 5 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 Unitholders 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 Partnership level) will be (i)
third-party debt financing (which may not be available if, as expected, the
Apartment Complexes owned by the Local Limited Partnerships are already
substantially leveraged), (ii) additional equity contributions or advances of
the Local General Partners, (iii) other equity sources (which could adversely
affect Series 5's interest in Tax Credits, cash flow and/or proceeds of sale or
refinancing of the Apartment Complexes and result in adverse tax consequences to
the Unitholders), or (iv) the sale or disposition of the Apartment Complexes
(which could have the same adverse effects as discussed in (iii) above). There
can be no assurance that funds from any of such sources would be readily
available in sufficient amounts to fund the capital requirements of the Local
Limited Partnerships in question. If such funds are not available, the Local
Limited Partnerships would risk foreclosure on their Apartment Complexes if they
were unable to renegotiate the terms of their first mortgages and any other debt
secured by the Apartment Complexes to the extent the capital requirements of the
Local Limited Partnerships relate to such debt.
Series 5's capital needs and resources are expected to undergo major changes
during its first several years of operations as a result of the completion of
its Offering of Units and its acquisition of investments. Thereafter, Series 5's
capital needs and resources are expected to be relatively stable over the
holding periods of the investments, except to the extent of proceeds received in
payment of Promissory Notes and disbursed to fund Series 5's deferred
obligations.
Results of Operations
- ---------------------
As reflected on its Statements of Operations, Series 5 had net income of
approximately $58,500 for the six months ended June 30, 1998. The component
items of revenue and expense are discussed below.
Revenue. Series 5's revenues consisted entirely of interest earned on Promissory
Notes and cash deposits held in financial institutions (i) as Reserves, or (ii)
pending investment in Local Limited Partnerships. Interest revenue in future
years will be a function of prevailing interest rates and the amount of cash
balances. It is anticipated that Series 5 will maintain cash Reserves in an
amount not materially in excess of the minimum amount required by its
Partnership Agreement, which is 3% of Capital Contributions.
13
<PAGE>
Expenses. The most significant component of operating expenses is expected to be
the Asset Management Fee. The Asset Management Fee is equal to 0.2% of that
portion of Invested Assets (i.e., the sum of Series 5's investment in Local
Limited Partnerships plus Series 5's allocable share of the mortgage loans on
and other debts related to, the Apartment Complexes owned by such Local Limited
Partnerships) which are attributable to apartment units receiving government
assistance.
Amortization expense consist of the amortization over a period of 30 years of
the Acquisition Fee and other expenses attributable to the acquisition of Local
Limited Partnership Interests.
Because the amounts of the Asset Management Fee and amortization expense
primarily are determined by the gross proceeds from the Offering, and the number
and size of Apartment Complexes, until termination of the Offering and
investment of the net proceeds therefrom Series 5 cannot predict with any
accuracy what these amounts will be.
Item 3: Quantitative and Qualitative Disclosures Above Market Risks
None.
14
<PAGE>
Section B. Series 6
Item I.
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)
(A Development-Stage Enterprise)
BALANCE SHEET
June 30, 1998
ASSETS
Cash $1,100
-----
$1,100
-----
LIABILITIES AND PARTNER'S CAPITAL
Commitments and contingencies (Note 2)
Partners' capital (Note 1):
General partner $ 100
Original limited partner 1,000
-----
Total partners' capital 1,100
-----
$1,100
-----
UNAUDITED
See accompanying notes to balance sheet.
15
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO BALANCE SHEET
June 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund VI, L.P., Series 6 ("Series 6") was formed
pursuant to the laws of California on March 6, 1997 and has not commenced
operations. 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 general partner 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. (see Note 2 below).
Allocations Under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a 0.1% interest in operating profits and
losses, taxable income and losses and cash available for distribution from
Series 6. The limited partners will be allocated the remaining 99.9% of these
items in proportion to their respective investments.
After the limited partners have received proceeds from a sale or
refinancing equal to their capital contributions and their return on investment
(as defined in Series 6's Agreement of Limited Partnership) and the General
Partner has received a subordinated disposition fee (as described in Note 2
below), any additional sale or refinancing proceeds will be distributed 90% to
the limited partners (in proportion to their respective investments) and 10% to
the General Partner.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Series 6 is offering up to 25,000 limited partnership units at $1,000
per unit (the "Units"). The accompanying balance sheet does not include certain
legal, accounting, and other organization and offering costs paid and to be paid
by the General Partner and/or affiliates of the General Partner on behalf of
Series 6. If the minimum offering amount of $1,400,000 is raised, Series 6 will
be required to reimburse the General Partner and/or its affiliates for such fees
out of the proceeds of the offering, up to certain maximum levels set forth
below. In the event Series 6 is unable to raise the minimum offering amount, the
General Partner will absorb all organization and offering costs.
16
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO BALANCE SHEET - (Continued)
June 30, 1998
NOTE 2 - COMMITMENTS AND CONTINGENCIES (continued)
- --------------------------------------------------
The Units are being offered by WNC Capital Corporation, a wholly-owned
subsidiary of the General Partner.
If the minimum offering amount of $1,400,000 is raised, the Partnership
will be obligated to the General Partner or affiliates for certain acquisition,
management and other fees as set forth below:
Acquisition fees up to 7.0%, as defined, of the gross proceeds
from the sale of Units.
Reimbursement for organizational, offering, dealer-manager,
selling and acquisition expenses advanced by the General
Partner or affiliates on behalf of Series 6. These
reimbursements plus all other organizational and offering
expenses inclusive of sales commissions and dealer-manager
fees will not exceed 14.5% of the gross proceeds.
An annual management fee equal to 0.2% of the invested assets
(defined by the Series 6's Agreement of Limited Partnership as
the sum of Series 6's capital contributions to limited
partnerships plus its allocable percentage of the permanent
financing of the limited partnerships).
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 distributions
equal to their capital contributions and their return on
investment (as defined in Series 6's Agreement of Limited
Partnership) and is payable only if services are rendered in
the sales effort.
NOTE 3 - INCOME TAXES
- ---------------------
Series 6 will not incur a provision for income taxes since all income
taxes and losses will be allocated to the Partners for inclusion in their
respective returns.
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Liquidity and Capital Resources
- -------------------------------
As reflected in its financial statements, WNC Housing Tax Credit Fund
VI, L.P., Series 6 ("Series 6") currently has only nominal funds, as it is
newly-formed, has not yet commenced operations and the capital anticipated to be
raised through its public offering of Units has not yet become available.
Series 6 plans to raise equity capital from investors by means of its
public offering, and then to apply such funds, including the installment
payments on the investor Promissory Notes as received, to the purchase price and
acquisition fees and costs of Local Limited Partnership Interests, reserves and
expenses of the offering.
It is not expected that any of the Local Limited Partnerships in which
Series 6 will invest will generate cash from operation sufficient to provide
distributions to the Unitholders in any significant amount. Such cash from
operations, if any, would first be used to meet operating expenses of Series 6,
including the payment of the Asset Management Fee.
Series 6's investments will not be readily marketable and may be
affected by adverse general economic conditions which, in turn, could
substantially increase the risk of operating losses for the Apartment Complexes,
the Local Limited Partnerships and Series 6. These problems may result from a
number of factors, many of which cannot be controlled. Nevertheless, the General
Partner anticipates that capital raised from the sale of the Units will be
sufficient to fund Series 6's future investment commitments and proposed
operations.
Series 6 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 6 including payment of the Asset Management Fee as well as expenses
attendant to the preparation of tax returns and reports to the Unitholders and
other investor servicing obligations of Series 6. Liquidity would, however, be
adversely affected by unanticipated or greater than anticipated operating costs.
Series 6's liquidity could also be affected by defaults or delays in payment of
the investor Promissory Notes, from which a portion of the working capital
reserves is expected to be funded. To the extend that working capital reserves
are insufficient to satisfy the cash requirements of Series 6, it is anticipated
that additional funds would be sought through bank loans or other institutional
financing. Series 6 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 6 does not have the ability to assess the
Unitholders for additional Capital Contributions to provide capital if needed by
Series 6 or Local Limited Partnerships. Accordingly, if circumstances arise that
cause the Local Limited Partnerships to require capital in addition to that
contributed by Series 6 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 6 level) will be (i) third-party
debt financing (which may not be available if, as expected, the Apartment
Complexes owned by the Local Limited Partnerships are already substantially
leveraged), (ii) additional equity contributions or advances of the Local
General Partners, (iii) other equity sources (which could adversely affect
Series 6's interest in Tax Credits, cash flow and/or proceeds of sale or
refinancing of the apartment Complexes and result in adverse tax consequences to
18
<PAGE>
the Unitholders), or (iv) the sale or disposition of the Apartment Complexes
(which could have the same adverse effects as discussed in (iii) above). There
can be no assurance that funds from any of such sources would be readily
available in sufficient amounts to fund the capital requirements of the Local
Limited Partnerships in question. If such funds are not available, the Local
Limited Partnerships would risk foreclosure on their Apartment Complexes if they
were unable to renegotiate the terms of their first mortgages and any other debt
secured by the Apartment Complexes to the extent the capital requirements of the
Local Limited Partnerships relate to such debt.
Series 6 capital needs and resources are expected to undergo major
changes during its first several years of operations as a result of the
completion of its offering of Units and its acquisition of investments.
Thereafter, the Partnership's capital needs and resources are expected to be
relatively stable over the holding periods of the investments, except to the
extent of proceeds received in payment of Promissory Notes and disbursed to fund
Series 6's deferred obligations.
Results of Operations
- ---------------------
Inapplicable.
Item 3: Quantitative and Qualitative Disclosures Above Market Risks
None.
19
<PAGE>
Part II. Other Information
Section A. Series 5
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
As of June 30, 1998 Series 5 has received subscriptions for 24,638 units of
limited partnership interest ("Units") for an aggregate gross amount of capital
contributions of $24,638,000 attributable to such subscriptions in an offering
which commenced on July 16, 1997. At June 30, 1998, the gross capital
contributions consisted of cash of $21,908,375, subscriptions receivable of
$1,644,250, notes receivable of $1,011,900and discounts of $73,475. At June 30,
1998, approximately $3,068,800 was paid or due to WNC & Associates, Inc. or WNC
Capital Corporation, affiliates, for selling commissions, wholesaling activities
and in reimbursement of other organization and offering expenses. Included
therein are selling commissions of approximately $1,651,200 and wholesaling and
other organization and offering expenses of approximately $708,800 which were
reallowed to non-affiliates. At June 30, 1998, approximately $18,839,575 is
invested in Local Limited Partnership Interests or Reserves as follows:
Paid or to be
paid to General Paid or to be
Partner or paid to others Total
affiliates
Local limited
Partnership Interests $ 8,699,100 $ 8,699,100
Acquisition fees $ 1,653,800 1,653,800
Acquisition costs 134,000 134,000
Reserves and to be
invested - 8,352,675 8,352,675
--------- ---------- ----------
$ 1,653,800 $ 17,185,775 $ 18,839,575
========= ========== ==========
Item 3. Defaults Upon Senior Securities
None.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibits
None.
Reports on Form 8-K
Current report on Form 8-K dated April 1, 1998 was filed on April 14.
The current report set forth information pertaining to the acquisition by Series
5 of two Limited Partnership interests under Item 2 thereof. Proforma financial
information required by Article 11 of Regulation S-X was provided under Item 7
of the current report.
Current report on Form 8-K dated April 30, 1998 was filed on May 15,
1998. The current report set forth information pertaining to the acquisition by
Series 5 of two Limited Partnership interests under Item 2 thereof. Proforma
financial information required by Article 11 of Regulation S-X was provided
under Item 7 of the amendment No. 1 to the current report filed on July 6, 1998
and Amendemnt No 2 to the current report filed on July 20, 1998.
Current report on Form 8-K dated May 31, 1998 was filed on June 15,
1998. The current report set forth information pertaining to the acquisition by
Series 5 of two Limited Partnership interests under Item 2 thereof. Financial
statements of business acquired required by Article 3 of Regulation S-X and
proforma financial information required by Article 11 of Regulation S-X were
providedunder Item 7 of Amentdment No. 1 to the current report filed on July 22,
1998 and Amendment No 2 to the curren report filed on July 28, 1998.
Part II
Section B Series 6
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
None.
21
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibits
None.
Reports on Form 8-K
22
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5 and Series 6
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr.
-----------------------------------------------------
John B. Lester, Jr. President
Date: August 27, 1998
By: /s/ Theodore M. Paul
- -----------------------------------------------------
Theodore M. Paul Vice President - Finance
Date: August 27, 1998
23
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