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, 1999
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
California 33-0745418
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626
(714) 662-5565
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _____ No __X__
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended June 30, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
June 30, 1999 and March 31, 1999 3
Statements of Operations
For the Three Months ended June 30, 1999 and 1998 4
Statements of Partners' Equity (Deficit)
For the Three Months ended June 30, 1999 5
Statements of Cash Flows
For the Three Months ended June 30, 1999 and 1998 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risks 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
BALANCE SHEETS
June 30, 1999 March 31, 1999
------------- --------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 2,560,603 $ 3,103,129
Funds held in escrow disbursement account 4,834,997 4,834,997
Subscriptions receivable - Note 6 38,600 38,600
Investments in limited
partnerships - Note 2 19,808,792 19,968,445
Other Assets 10,814 30,814
----------- -----------
$ 27,253,806 $ 27,975,985
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payable to limited partnerships - Note 4 $ 5,658,486 $ 6,131,391
Accrued fees and expenses due to
general partner and affiliates - Note 3 190,709 159,973
----------- -----------
Total Liabilities 5,849,195 6,291,364
----------- -----------
Commitments and contingencies - Note 7
Partners' equity (deficit):
General partner (35,046) (32,246)
Limited partners (25,000 units authorized,
25,000 and 25,000 units issued and
outstanding at June 30, 1999 and
March 31, 1999, respectively) 21,439,657 21,716,867
----------- -----------
Total partners' equity 21,404,611 21,684,621
----------- -----------
$ 27,253,806 $ 27,975,985
=========== ===========
See accompanying notes to financial statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
( A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 1999 and 1998
(Unaudited)
1999 1998
---- ----
Interest income $ 47,112 $ 70,471
---------- ----------
Operating expenses:
Amortization 16,087 10,396
Asset management fees -Note 3 16,795 17,163
Other 133,195 3,508
---------- ----------
Total operating expenses 166,077 31,067
---------- ----------
Income (loss) from operations (118,965) 39,404
---------- ----------
Equity in loss from
limited partnerships - Note 2 (159,302) (12,515)
---------- ----------
Net income (loss) $ (278,267) $ 26,889
========== ==========
Net income (loss) allocated to:
General partner $ (2,783) $ 268
========== ==========
Limited partners $ (275,484) $ 26,621
========== ==========
Net income (loss) per weighted limited
partner unit (25,000 and 15790) (11) 2
========== ==========
See accompanying notes to financial statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For the Three Months Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Equity (deficit), March 31, 1999 $ (32,246) $ 21,716,867 $ 21,684,621
Offering expenses (17) (1,726) (1,743)
Net loss for the three months ended
June 30, 1999 (2,783) (275,484) (278,267)
--------- ----------- -----------
Equity (deficit), June 30, 1999 $ (35,046) $ 21,439,657 $ 21,404,611
========= =========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (278,267) $ 26,889
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Equity in loss from limited partnerships 159,302 12,515
Amortization 16,087 10,396
Asset management fee 16,795 17,163
Change in other assets 20,000 (2,880)
Accrued fees and expenses due to general partner
and affiliates 13,941 (6,913)
----------- -----------
Net cash provided by (used in) operating activities (52,142) 57,170
----------- -----------
Cash flows from investing activities:
Investment in limited partnerships - Note 2 (472,905) (2,022,276)
Capitalized acquisition fees and costs (15,736) (516,804)
----------- -----------
Net cash used in investing activities (488,641) (2,539,080)
----------- -----------
Cash flows from financing activities:
Capital contributions - 7,685,070
Offering expenses (1,743) (855,020)
----------- -----------
Net cash provided by (used in) financing activities (1,743) 6,830,050
----------- -----------
Net increase (decrease) in cash and cash equivalents (542,526) 4,348,140
Cash and cash equivalents, beginning of period 3,103,129 7,612,155
----------- -----------
Cash and cash equivalents, end of period $ 2,560,603 $ 11,960,295
=========== ===========
</TABLE>
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, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
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 audited financial statements and related notes thereto
contained in the WNC Housing Tax Credit Fund VI, L.P., Series 5 (the
"Partnership") Annual Report on form 10-K for the year end March 31, 1999
(audited). 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.
In the opinion of the General Partner, the unaudited financial statements
contain all adjustments (consisting of normal recurring accruals) necessary to
present fairly the financial position as of June 30, 1999 and the results of
operations and changes in cash flows for the three months then ended.
Organization
WNC Housing Tax Credit Fund VI, L.P., Series 5, a California Limited Partnership
(the "Partnership"), was formed on March 3, 1997 under the laws of the state of
California, and commenced operations on August 29, 1997. The Partnership was
formed to invest primarily in other limited partnerships and limited liability
companies (the "Local Limited Partnerships") which own and operate multi-family
housing complexes (the "Housing Complex") that are eligible for low income
housing credits. The local general partners (the "Local General Partners") of
each Local Limited Partnership retain responsibility for maintaining, operating
and managing the Housing Complex.
The general partner is WNC & Associates, Inc. ("WNC") (the "General Partner"), a
California limited partnership. Wilfred N. Cooper, Sr., through the Cooper
Revocable Trust, owns 66.8% of the outstanding stock of WNC. John B. Lester was
the original limited partner of the Partnership and owns, through the Lester
Family Trust, 28.6% of the outstanding stock of WNC.
The partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on July 9, 1998 at which
time 25,000 Units representing subscriptions in the amount of $24,918,175, net
of discount of $54,595 for volume purchases and $27,230 for dealer discounts,
had been accepted. The General Partner has a 1% interest in operating profits
and losses, taxable income and losses, in cash available for distribution from
the Partnership and tax credits. The limited partners will be allocated the
remaining 99% interest in proportion to their respective investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partner has received proceeds
equal to its capital contribution and a subordinated disposition fee (as
described in Note 3) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
7
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not make its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low-income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters, which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partner.
Method of Accounting for Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership's are consistent with those of the Partnership. Costs incurred by
the Partnership in acquiring the investments are capitalized as part of the
investment account and are being amortized over 30 years (see Note 2).
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred in connection with selling
limited partnership interests in the Partnership. 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 limited partners' capital and amounted to
$3,250,183 and $3,248,440 as of June 30, 1999 and March 31, 1999, respectively.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with remaining
maturities of three months or less when purchased to be cash equivalents. The
Partnerships cash equivalents consisted of investments in tax exempt bonds
totaling $1,677,160 and $2,730,675 as of June 30, 1999 and March 31, 1999 ,
respectively.
Net Income (Loss) Per Weighted Limited Partner Unit
Net income (loss) per weighted limited partnership unit is calculated pursuant
to Statement of Financial Accounting Standards No. 128, Earnings Per Share. Net
income (loss) per unit includes no dilution and is computed by dividing loss
available to limited partners by the weighted average number of units
outstanding during the period. Calculation of diluted net income per unit is not
required.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of June 30, 1999 and March 31, 1999, the Partnership has acquired limited
partnership interests in 13 Local Limited Partnerships, each of which owns one
Housing Complex consisting of an aggregate of 591 apartment units. As of June
30, 1999 and March 31, 1999 construction or rehabilitation of 5 of the Housing
Complexes were still in process. The respective general partners of the Local
Limited Partnerships manage the day-to-day operations of the entities.
Significant Local Limited Partnership business decisions require approval from
the Partnership. The Partnership, as a limited partner, is generally entitled to
99%, as specified in the Local Limited Partnership agreements, of the operating
profits and losses, taxable income and losses and tax credits of the Local
Limited Partnerships.
Equity in losses of the Local Limited Partnerships is recognized in the
financial statements until the related investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
9
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999
(Unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income. As of June 30, 1999, no investment accounts in
Local Limited Partnerships had reached a zero balance.
The following is a summary of the equity method activity of the investments in
limited partnerships as of:
<TABLE>
<CAPTION>
June 30, 1999 March 31, 1999
------------- --------------
<S> <C> <C>
Investments per balance sheet, beginning of period $ 19,968,445 $ 19,927,953
Capitalized acquisition fees and costs 15,736 77,826
Equity in losses of limited partnerships (159,302) (22,000)
Amortization of paid acquisition fees and costs (16,087) (15,334)
----------- -----------
Investments in limited partnerships, end of period $ 19,808,792 $ 19,968,445
=========== ===========
Selected financial information for the three months ended June 30 from the
combined financial statements of the Local Limited Partnerships in which the
Partnership has invested is as follows:
1999 1998
---- ----
TTotal revenue $ 382,437 $ 203,773
Interest expense 138,958 45,786
Depreciation 163,425 35,597
Operating expenses 240,676 135,030
----------- -----------
Total expenses 543,059 216,413
----------- -----------
Net Loss $ (160,622) $ (12,640)
=========== ===========
Net loss allocable to the Partnership $ (159,302) $ (12,515)
=========== ===========
</TABLE>
NOTE 3- RELATED PARTY TRANSACTIONS
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates for the following fees:
(a) Organization and Offering Expenses. The Partnership accrued or paid the
General Partner or its affiliates as of June 30, 1999 and March 31, 1999
approximately $3,250,000 and $3,248,000, respectively, for selling
commissions and other fees and expenses of the Partnership's offering of
Units.
(b) Acquisition Fees. Acquisition fees in an amount equal to 7.0% of the gross
proceeds of the Partnership's Offering ("Gross Proceeds"). As of June 30
1999 and March 31, 1999, the aggregate amount of acquisition fees paid or
accrued was approximately $1,747,300.
10
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999
(Unaudited)
NOTE 3- RELATED PARTY TRANSACTIONS, continued
(c) Acquisition Expense. The Partnership reimbursed the General Partner or its
affiliates as of June 30, 1999 and March 31, 1999 for acquisition expense,
not to exceed 1.5% of the Gross Proceeds, expended by such persons on
behalf of the Partnership in the amounts $186,000 and $170,000,
respectively.
(d) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.2% of the Invested Assets of the Partnership. "Invested Assets"
means the sum of the Partnership's Investment in Local Limited Partnerships
and the Partnership's allocable share of the amount of the mortgage loans
and other debts related to the Housing Complexes owned by such Local
Limited Partnerships. Fees of $17,000 and $17,000 were incurred for the
three months ended June 30, 1999 and March 31, 1999, of which $36,000 was
paid during the three months ended March 31, 1999.
(e) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of an Apartment Complex or Local Limited Partnership Interest.
Subordinated disposition fees will be subordinated to the prior return of
the Limited Partners' capital contributions and payment of the Return on
Investment to the Limited Partners. "Return on Investment" means an annual,
cumulative but not compounded, "return" to the Limited Partners (including
Low Income Housing Credits) as a class on their adjusted capital
contributions commencing for each Limited Partner on the last day of the
calendar quarter during which the Limited Partner's capital contribution is
received by the Partnership, calculated at the following rates: (i) 12%
through December 31, 2008, and (ii) 6% for the balance of the Partnerships
term. No disposition fees have been paid.
(f) Interest in Partnership. The General Partner will receive 1% of the Low
Income Housing Credits. The General Partners are also entitled to receive
1% of cash distributions. There were no distributions of cash to the
General Partner during the three months ended June 30, 1999 or the year
ended March 31, 1999.
Accrued fees and expenses due to the General Partner and its affiliates of
presented on the balance sheets consist of the following:
<TABLE>
<CAPTION>
June 30,1999 March 31, 1999
------------ --------------
<S> <C> <C>
Acquisition fees $ 77,778 $ 77,778
Advances made for acquisition costs, organizational, 26,759
offering and selling expenses 43,189
Asset management fees 63,972 47,177
Other 5,770 8,259
---------- ----------
Total accrued fees and expenses $ 190,709 $ 159,973
========== ==========
</TABLE>
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the respective limited partnership
agreements. These contributions are payable in installments and are generally
due upon the limited partnerships achieving certain development and operating
benchmarks (generally within two years of the Partnership's initial investment).
11
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999
(Unaudited)
NOTE 5 - INCOME TAXES
No provision for income taxes has been recorded in the financial statements as
any liability for income taxes is the obligation of the partners of the
Partnership.
NOTE 6 - SUBSCRIPTIONS RECEIVABLE
During 1998, the Partnership received subscriptions for 15,166 Units which
included promissory notes of $615,250, of which $576,650 were collected in 1999
prior to the issuance of the December 31, 1998 financial statements, leaving an
unpaid balance of $38,600. At March 31 and June 30, 1999 promissory notes of
$38,600 had not been collected. As this balance was paid in 1999 prior to
issuance of March 31, 1999 financial statements and subsequent to June 30, 1999
it is reflected as capital contributed during the three months ended March 31,
1999 and is shown as subscription receivable at March 31 and June 30, 1999.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Partnership is in negotiations to acquire one additional Local Limited
Partnership interest which would commit the Partnership to additional capital
contributions of $670,000, of which $0 has been advanced as of June 30, 1999.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
The Partnership's assets at June 30, 1999 consisted primarily of $2,561,000 in
cash, $4,835,000 in cash in escrow, $39,000 in subscriptions receivable and
aggregate investments in the thirteen Local Limited Partnerships of $19,809,000.
Liabilities at June 30, 1999 primarily consisted of $5,658,000 due to limited
partnerships, $64,000 in annual asset management fees and $127,000 in advances
and other payables due to the General Partner or affiliates.
Results of Operations
Three Months Ended June 30, 1999 Compared to Three Months Ended June 3, 1998.
The Partnership's net loss for the three months ended June 30, 1999 was
$(278,000), reflecting a decrease of $305,000 from the net income experienced
for the three months ended June 30, 1998. The change is primarily due to an
increase in other operating expenses of $129,000 consisting primarily of an
unrealized loss in tax-exempt bonds which is expected to be recovered at the
maturity date. In addition, an increase in equity in loss from limited
partnerships of $146,000 as Local Limited Partnerships have completed
construction and initiated operations. Also contributing to the loss was a
decrease in interest income of $23,000 and an increase in amortization expense
of $6,000.
Cash Flows
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998.
Net decrease in cash during the three months ended June 31, 1999 was $(543,000),
compared to a net increase in cash for the three months ended June 30, 1998 of
$4,348,000. The change was due primarily to a decrease in capital contributions
of $7,685,000 and an increase in cash used in operating activities of $109,000,
offset by a decrease in investment in limited partnerships of $1,549,000, a
decrease in acquisition fees and costs of $501,000 and a increase in offering
expenses of $853,000.
During the three months ended June 30, 1999 and the year ended March 31, 1999,
accrued payables, which consist of related party management fees and advances
due to the General Partner, increased by $31,000 and increased by $63,000,
respectively.
The Partnership expects its future cash flows, together with its net available
assets at June 30, 1999, to be sufficient to meet all currently forseeable
future cash requirements.
Impact of Year 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology (IT) Systems. The Partnership relies on the IT systems of
WNC, its general partner. IT systems include computer hardware and software used
to produce financial reports and tax return information. This information is
then used to generate reports to investors and regulatory agencies, including
the Internal Revenue Service and the Securities and Exchange Commission. The IT
systems of WNC are year 2000 compliant.
Non-IT Systems. The Partnership also relies on the non-IT systems of WNC. Non-IT
systems include machinery and equipment such as telephones, voice mail and
electronic postage equipment. Except for one telephone system, the non-IT
systems of WNC are year 2000 compliant. The one telephone system will require
the replacement of one computer and one software application, both of which will
be completed on or before October 1, 1999.
13
<PAGE>
Service Providers. WNC also relies on the IT and non-IT systems of service
providers. Service providers include utility companies, financial institutions,
telecommunications carriers, municipalities, and other outside vendors. WNC has
obtained verbal assurances from its material service providers (electrical power
provider, financial institutions and telecommunications carriers) that their IT
and non-IT systems are year 2000 compliant. There can be no assurance that this
compliance information is correct. There also can be no assurance that the
systems of other, less-important service providers and outside vendors will be
year 2000 compliant.
Costs to Address Year 2000 Issues
The cost to address year 2000 issues for WNC has been less than $20,000. The
cost to replace the telephone system noted above will be less than $5,000. The
cost to deal with potential year 2000 issues of other outside vendors cannot be
estimated at this time.
Risk of Year 2000 Issues
The most reasonable and likely result from non-year 2000 compliance of systems
of the service providers noted above will be the disruption of normal business
operations for WNC. This disruption would, in turn, lead to delays in performing
reporting and fiduciary responsibilities on behalf of the Partnership. The worst
case scenario would be the replacement of a service provider. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Local Limited Partnerships
Status of Readiness
WNC is in the process of obtaining year 2000 certifications from each Local
General Partner of each Local Limited Partnership. Those certifications will
represent to the Partnership that the IT and non-IT systems critical to the
operation of the Housing Complexes and investor reporting to the Partnership are
year 2000 compliant. These certifications will also represent to the Partnership
that the IT and non-IT systems of property management companies, independent
accountants, electrical power providers, financial institutions and
telecommunications carriers used by the Local Limited Partnership are year 2000
compliant.
There can be no assurance that the representations in the certifications will be
correct. There also can be no assurance that the systems of other,
less-important service providers and outside vendors, upon which the Local
Limited Partnerships rely, will be year 2000 compliant.
Costs to Address Year 2000 Issues
There will be no cost to the Partnership as a result of assessing year 2000
issues for the Local Limited Partnerships. The cost to deal with potential year
2000 issues of the Local Limited Partnerships cannot be estimated at this time.
Risk of Year 2000 Issues
There may be Local General Partners who indicate that they or their property
management company are not year 2000 compliant and do not have plans to become
year 2000 compliant before the end of 1999. There may be other Local General
Partners who are unwilling to respond to the certification request. The most
likely result of either non-compliance or failure to respond will be the removal
and replacement of the property management company and/or the Local General
Partner with year 2000 compliant operators.
14
<PAGE>
Despite the efforts to obtain certifications, there can be no assurance that the
Partnership will be unaffected by year 2000 issues. The most reasonable and
likely result from non-year 2000 compliance will be the disruption of normal
business operations for the Local Limited Partnerships, including but not
limited to the possible failure to properly collect rents and meet their
obligations in a timely manner. This disruption would, in turn, lead to delays
by the Local Limited Partnerships in performing reporting and fiduciary
responsibilities on behalf of the Partnership. The worst-case scenario would
include the initiation of foreclosure proceedings on the property by mortgage
debt holders. Under these circumstances, WNC or its affiliates will take actions
necessary to minimize the risk of foreclosure, including the removal and
replacement of a Local General Partner by the Partnership. These delays would
likely be temporary and would likely not have a material effect on the
Partnership or WNC.
Item 3. Quantitative and Qualitative Disclosures Above Market Risks
None.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
1. A report on Form 8-K dated May 13, 1999 was filed on May 14, 1999
reporting the change in fiscal year end to March 31.
15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5 and Series 6
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr.
John B. Lester, Jr., President
WNC & Associates, Inc.
Date: September 23, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson, Vice President - Chief Financial Officer
WNC & Associates, Inc.
Date: September 23, 1999
16
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<NAME> WNC Housing Tax Credit Fund VI, L.P., Series 5
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