FORM 10-K/A
Amendment No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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: 0-24855
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
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
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PART 1.
Item 1. Business
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 August 29, 1997. The Partnership was formed to invest
primarily in other limited partnerships or limited liability companies which
will own and operate multi-family housing complexes that will qualify for low
income housing credits (the "Low Income Housing Credit").
The general partner of the Partnership is WNC & Associates, Inc. ("Associates"
or the "General Partner".) Wilfred N. Cooper, Sr., through the Cooper Revocable
Trust, owns 66.8% of the outstanding stock of Associates. John B. Lester, Jr.
was the original limited partner of the Partnership and owns, through the Lester
Family Trust, 28.6% of the outstanding stock of Associates. The business of the
Partnership is conducted primarily through Associates, as the Partnership has no
employees of its own.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on June 23, 1997, the Partnership commenced a public offering of
25,000 units of Limited Partnership Interest ("Units"), at a price of $1,000 per
Unit. As of December 31, 1998, the Partnership had received and accepted
subscriptions for 25,000 Units in the amount of $24,918,175 net of volume and
dealer discounts of $81,825, of which $918,400 was represented by promissory
notes of the subscribers. Holders of Units are referred to herein as "Limited
Partners."
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complex") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. The
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, as amended "by Supplements thereto" (the "Partnership Agreement"),
will be able to be accomplished promptly at the end of the 15-year period. If a
Local Limited Partnership is unable to sell its Housing Complex, it is
anticipated that the local general partner ("Local General Partner") will either
continue to operate such Housing Complex or take such other actions as the Local
General Partner believes to be in the best interest of the Local Limited
Partnership. Notwithstanding the preceding, circumstances beyond the control of
the General Partner or the Local General Partners may occur during the
Compliance Period, which would require the Partnership to approve the
disposition of an Housing Complex prior to the end thereof, possibly resulting
in recapture of Low Income Housing Credits.
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As of December 31, 1998, the Partnership had invested in thirteen Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
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 subject to mortgage
indebtedness. If a Local Limited Partnership does not makes its mortgage
payments, the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits. As a limited partner or non-managing member 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 general partners or managing members 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 Partnership management
decisions are made by the General Partner.
As a limited partner or non-managing member, the Partnership's liability for
obligations of each Local Limited Partnership is limited to its investment. The
Local General Partners of each Local Limited Partnership retain responsibility
for developing, constructing, maintaining, operating and managing the Housing
Complexes.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
limited partnership interests in the Housing Complexes. The following table
reflects the status of the thirteen Housing Complexes as of December 31, 1998
and for the periods indicated:
4
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------
As of December 31, 1998
--------------------------------------------------------------------------
Partnership's Encumbrances
Number Total Investment Amount of Estimated Low of Local
Partnership General Partner of Occu- in Local Limited Investment Income Housing Limited
Name Location Name Units pancy Partnerships Paid to Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment Theodore, Apartment Developers, Inc.
Housing of Alabama and Thomas H. Cooksey 40 0% $ 1,277,000 $ 638,000 $ 2,015,490 $ 898,000
Theodore
Bradley Villas Bradley, Billy Wayne Bunn 20 95% 532,000 501,000 628,000 538,000
Limited Arkansas
Partnership
Chillicothe Chillicothe, MBL Development Co. 28 0% 991,000 697,000 1,554,760 246,000
Plaza Apts. L.P. Missouri
Concord Apartment Orlando, New Communities, LLC, a
Partners, L.P. Florida Colorado limited liability
Company 26 100% 470,000 470,000 782,000 293,000
El Reno Housing El Reno, Cowen Properties, Inc., an
Associates Limited Oklahoma Oklahoma Corporation 100 0% 3,040,000 2,280,000 4,406,656 2,187,000
Partnership
Hillcrest Heights, Marshalltown, WNC & Associates 32 69% 609,000 609,000 681,000 598,000
L.P. Iowa
Hughes Villas Hughes, Billy Wayne Bunn 20 100% 182,000 182,000 337,000 765,000
Limited Arkansas
Partnership
Mansur Wood Carbon Cliff, Elderly Living
Living Center, IIlinois Development, Inc. 115 0% 6,446,000 831,000 8,955,955 1,420,000
L.P.
Mark Twain Senior Oakland, Thomas P. Lam and Marilyn
Community Limited California S. Lam 106 91% 740,000 715,000 1,145,000 1,470,000
Partnership
Murfreesboro Murfreesboro, Murfreesboro Industrial
Villas Limited Arkansas Development Corporation 24 54% 686,000 686,000 130,000 643,000
Partnership
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
As of December 31, 1998
-------------------------------------------------------------------------
Partnership's Encumbrances
Number Total Investment Amount of Estimated Low of Local
Partnership General Partner of Occu- in Local Limited Investment Income Housing Limited
Name Location Name Units pancy Partnerships Paid to Date Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Spring Valley Mayer, Spring Valley Terrace,
Terrace Arizona Inc. 20 0% 716,000 358,000 590,000 997,000
Apartments, LLC
United Memphis, Harold E. Buehler, Sr.
Development Co., Tennessee and Jo Ellen Buehler 40 0% 1,845,000 1,384,000 2,693,230 876,000
L.P. - 97.1
United Memphis, Harold E. Buehler, Sr.
Development Co., Tennessee and Jo Ellen Buehler 20 100% 743,000 733,000 1,061,540 378,000
L.P. - 97.2 ---- ---- ---------- ---------- ---------- ----------
591 47% $ 18,277,000 $ 10,084,000 $ 24,980,631 $ 11,309,000
==== ==== ========== ========== ========== ==========
</TABLE>
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<TABLE>
<CAPTION>
--------------------------------------
For the year ended December 31,1998
--------------------------------------
Rental Net Income Low Income Housing
Partnership Name Income (loss) Credits Allocated
- -------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
Apartment Housing of Theodore $ - $ - 98.99%
Bradley Villas Limited Partnership 47,000 (16,000) 99.00%
Chillicothe Plaza Apts. L.P. - 18,000 99.97%
Concord Apartment Partners, L.P. 87,000 (51,000) 99.98%
El Reno Housing Associates Limited Partnership - 8,000 99.98%
Hillcrest Heights, L.P. 41,000 (22,000) 99.99%
Hughes Villas Limited Partnership 93,000 (3,000) 99.00%
Mansur Wood Living Center, L.P. - 83,000 99.98%
Mark Twain Senior Community Limited Partnership 592,000 (11,000) 98.99%
Murfreesboro Villas Limited Partnership 11,000 (31,000) 99.00%
Spring Valley Terrace Apartments, LLC 7,000 (29,000) 99.98%
United Development Co., L.P. - 97.1 7,000 5,000 99.98%
United Development Co., L.P. - 97.2 53,000 (61,000) 99.98%
-------- --------
$ 938,000 $ (110,000)
======== ========
</TABLE>
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Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but are being sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit. Units can be assigned only if
certain requirements in the Partnership Agreement are satisfied.
(b) At December 31, 1998, there were 1,375 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships. The Limited Partners, who
invested in the Partnership received Housing Tax Credits of $21 to $12 per
Unit depending on the month of investment in 1998. The limited partners
received no Housing Tax Credits in 1997.
Item 5b.
The Partnership conducted an offering pursuant to a registration statement
(Commission File No. 333-24111) which was declared effective on June 23, 1997.
As of December 31, 1998 the Partnership had received subscriptions for 25,000
Units, for an aggregate amount of capital contributions of $24,918,175, net of
volume and dealer discounts of $81,825. At December 31, 1998, the above capital
contributions consisted of cash of $23,999,775 and notes receivable of $918,400.
At December 31, 1998, approximately $3,183,115 was paid or due to Associates or
WNC Capital Corporation, the dealer-manager for the offering, for selling
commissions, wholesaling activities and in reimbursement of other organization
and offering expenses. Included therein are selling commissions of approximately
$1,683,115 and wholesaling and other organization and offering expenses of
approximately $750,000 which were paid or to be paid to to non-affiliates. At
December 31, 1998, approximately $21,735,000 is invested or available to be
invested in Local Limited Partnership Interests or Reserves as follows:
<TABLE>
<CAPTION>
Paid or to be paid to Paid or to be
General Partner or affiliates paid to others Total
----------------------------- ------------------- ------------
<S> <C> <C> <C>
Acquisition Fees
through December 31, 1998 $ 1,670,800 $ 1,670,800
Acquisition costs
through December 31, 1998 $ 169,000 169,000
Lower tier partnerships 18,277,000 18,277,000
Reserves or available
to be invested - 1,618,200 1,618,200
---------- ---------- ----------
Total $ 1,670,800 $ 20,064,200 $ 21,735,000
========== ========== ==========
</TABLE>
8
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Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows as of
December 31:
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 3,521,888 $ 4,889,574
Cash in escrow 5,505,543 608,850
Subscriptions receivable 879,800 631,885
Investments in limited partnerships, net 19,927,953 2,398,460
Loan receivable - 878,894
Other assets 68,482 5,042
---------- ----------
$ 29,903,666 $ 9,412,705
========== ==========
LIABILITIES
Due to limited partnerships $ 8,051,777 $ 860,671
Accrued fees and expenses due to general
partner and affiliates 97,387 361,900
---------- ----------
8,149,164 1,222,571
PARTNERS' EQUITY 21,754,502 8,190,134
---------- ----------
$ 29,903,666 $ 9,412,705
========== ==========
Selected results of operations, cash flows, and other information for the
Partnership is as follows for the years ended December 31 and for the period
form August 29, 1997 (Date Operations Commenced) to December 31, 1997:
1998 1997
---- ----
Income/(loss) from operations $ 164,828 $ (87)
Equity in income/(losses) of
limited partnerships (110,194) 2,395
---------- ----------
Net loss $ 54,634 $ 2,308
========== ==========
Net loss allocated to:
General partner $ 546 $ 23
========== ==========
Limited partners $ 54,088 $ 2,285
========== ==========
Net loss per limited partner unit $ 2.57 $ 1.13
========== ==========
Outstanding weighted limited partner units 21,008 2,029
========== ==========
1998 1997
---- ----
Net cash provided by (used in):
Operating activities $ (115,775) $ 1,839
Investing activities (14,513,730) (2,962,516)
Financing activities 13,261,819 7,850,251
---------- ----------
Net change in cash and cash equivalents (1,367,686) 4,889,574
Cash and cash equivalents, beginning
of period 4,889,574 -
---------- ----------
Cash and cash equivalents, end of period $ 3,521,888 $ 4,889,574
========== ==========
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Low Income Housing Credit per Unit was as follows for the years ended December
31:
1998 1997
---- ----
Federal $ 21 $ -
State - -
---------- ----------
Total $ 21 $ -
========== ==========
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Condition
The Partnership's assets at December 31, 1998 consisted primarily of $3,522,000
in cash, $5,506,000 in cash in escrow, $880,000 in subscriptions receivable and
aggregate investments in the thirteen Local Limited Partnerships of $19,928,000.
Liabilities at December 31, 1998 primarily consisted of $8,052,000 due to
limited partnerships, $66,000 in annual asset management fees and $26,000 in
advances form the General Partner.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. The
Partnership's net income for 1998 was $55,000, reflecting an increase of $53,000
from the net income experienced in 1997. The increase in net income is primarily
due to interest income, which increased to $286,000 in 1998 from $10,000 in
1997, offset by an increase in equity in losses of limited partnerships of
$112,000, an increase of $66,000 in annual asset management fees, and a $45,000
increase in amortization expense.
Cash Flows
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997. Net
decrease in cash in 1998 was $(1,368,000), compared to a net increase in cash in
1997 of $4,890,000. The change was due primarily to an increase in investments
in limited partnerships of $6,763,000, an increase in funds held in escrow
disbursement accounts of $4,288,000, an increase in capitalized acquisition
costs of $500,000, and an increase in cash used in operating activities of
$118,000. These increases are offset by an increase in capital contributions of
$5,742,000, and an increase in collections on notes receivable of $632,000,
reduced by $962,000 for increases in offering costs.
During 1998 accrued payables, which consist of related party management fees and
advances due to the General Partner, decreased by $265,000.
The Partnership expects its future cash flows, together with its net available
assets at December 31, 1998, to be sufficient to meet all currently forseeable
future cash requirements.
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Impact of Year 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology (IT) Systems. The Partnership relies on the IT systems of
WNC, its ultimate 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.
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.
11
<PAGE>
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.
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 7A. Quantitative and Qualitative Disclosures About Market Risk
NOT APPLICABLE
Item 8. Financial Statements and Supplementary Data
12
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
FINANCIAL STATEMENTS
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 5
We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund
VI, L.P., Series 5 (a California Limited Partnership) (the "Partnership") as of
December 31, 1998, and the related statements of operations, partners' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit. A
significant portion of the financial statements of the limited partnerships in
which the Partnership is a limited partner and investor member, respectively,
were audited by other auditors whose reports have been furnished to us. As
discussed in Note 3 to the financial statements, the Partnership accounts for
its investments in limited partnerships using the equity method. The portion of
the Partnership's investment in limited partnerships audited by other auditors
represented 38% of the total assets of the Partnership at December 31, 1998. Our
opinion, insofar as it relates to the amounts included in the financial
statements for the limited partnerships which were audited by others, is based
solely on the reports of the other auditors.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC Housing Tax Credit Fund VI, L.P., Series 5 (a
California Limited Partnership) as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
June 17, 1999
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 5
We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund
VI, L.P., Series 5 (a California Limited Partnership) (the "Partnership") as of
December 31, 1997, and the related statements of operations, partners' equity
(deficit) and cash flows for the period August 29, 1997 (date operations
commenced) through December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit. We did not audit
the financial statements of the limited partnerships in which WNC Housing Tax
Credit Fund VI, L.P., Series 5 is a limited partner. These investments, as
discussed in Note 3 to the financial statements, are accounted for by the equity
method. The investment in these limited partnerships represented 25% of the
total assets of WNC Housing Tax Credit Fund V, L.P., Series 5 at December 31,
1997. The financial statements of the limited partnerships were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for these limited partnerships, is based solely
on the reports of the other auditors.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WNC Housing Tax Credit Fund V, L.P., Series 5 (a
California Limited Partnership) as of December 31, 1997, and the results of its
operations and its cash flows for the period August 29, 1997 (date operations
commenced) through December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ CORBIN & WERTZ
CORBIN & WERTZ
Irvine, California
March 19, 1998
15
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,521,888 $ 4,889,574
Funds held in escrow disbursement account 5,505,543 608,850
Subscriptions and notes receivable (Note 7) 879,800 631,885
Loans receivable (Note 2) - 878,894
Investments in limited partnerships (Note 3) 19,927,953 2,398,460
Other assets 68,482 5,042
----------- -----------
$ 29,903,666 $ 9,412,705
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Due to limited partnerships (Note 5) $ 8,051,777 $ 860,671
Accrued fees and expenses due to general partner
and affiliates (Note 4) 97,387 361,900
----------- -----------
Total liabilities 8,149,164 1,222,571
----------- -----------
Commitments and contingencies (Note 8)
Partners' equity (deficit) (Notes 7 and 8):
General partner (31,162) (12,452)
Limited partners (25,000 units authorized, 25,000 and
9,834 units outstanding at December 31, 1998 and
1997, respectively) 21,785,664 8,202,586
----------- -----------
Total partners' equity 21,754,502 8,190,134
----------- -----------
$ 29,903,666 $ 9,412,705
=========== ===========
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
1998 1997
---- ----
Interest income $ 286,005 $ 10,012
--------- ---------
Operating expenses:
Amortization (Note 3) 47,350 2,256
Asset management fee (Note 4) 66,382 -
Other 7,445 7,843
--------- ---------
Total operating expenses 121,177 10,099
--------- ---------
Income (loss) from operations 164,828 (87)
Equity in income (losses) of limited
partnerships (Note 2) (110,194) 2,395
--------- ---------
Net income $ 54,634 $ 2,308
========= =========
Net income allocable to:
General partner $ 546 $ 23
========= =========
Limited partners $ 54,088 $ 2,285
========= =========
Net income per limited partner unit $ 2.57 $ 1.13
========= =========
Outstanding weighted limited
partner units 21,008 2,029
========= =========
See accompanying notes to financial statements
17
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
General Limited
Partner Partners Total
------- -------- -----
Contribution from General Partner
and initial limited partner $ 100 $ 1,000 $ 1,100
Sale of limited partnership units,
net of discounts of $38,620 - 9,795,380 9,795,380
Sale of limited partnership units
issued for promissory notes
receivable (Note 7) - (351,150) (351,150)
Offering expenses (12,575) (1,244,929) (1,257,504)
Net income 23 2,285 2,308
-------- ---------- ----------
Equity (deficit) at December 31, 1997 (12,452) 8,202,586 8,190,134
Sale of limited partnership units,
net of discounts of $43,205 - 15,122,795 15,122,795
Sale of limited partnership units
issued for promissory notes
receivable (Note 7) - (38,600) (38,600)
Collection of notes receivable - 351,150 351,150
Offering expenses (19,256) (1,906,355) (1,925,611)
Net income 546 54,088 54,634
-------- ---------- ----------
Equity (deficit), December 31, 1998 $ (31,162) $ 21,785,664 $ 21,754,502
======== ========== ==========
See accompanying notes to financial statements
18
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 54,634 $ 2,308
Adjustments to reconcile net income to net
cash used in operating activities:
Amortization 47,350 2,256
Equity in loss (income) of limited
partnerships 110,194 (2,395)
Change in other assets (63,440) (5,042)
Change in accrued fees and expenses
due to general partner and affiliates (264,513) 4,712
----------- -----------
Net cash provided by (used in) operating
activities (115,775) 1,839
----------- -----------
Cash flows from investing activities:
Investments in limited partnerships (9,357,460) (836,632)
Funds held in escrow disbursement account (4,896,693) (608,850)
Loans receivable 878,894 (878,894)
Capitalized acquisition costs and fees (1,138,786) (638,140)
Distributions from limited partnerships 315 -
----------- -----------
Net cash used in investing activities (14,513,730) (2,962,516)
----------- -----------
Cash flows from financing activities:
Capital contributions 14,555,545 8,813,445
Offering expenses (1,925,611) (963,194)
Collection on notes receivable 631,885 -
----------- -----------
Net cash provided by financing activities 13,261,819 7,850,251
----------- -----------
Net increase (decrease) in cash and
cash equivalents (1,367,686) 4,889,574
Cash and cash equivalents, beginning
of period 4,889,574 -
----------- -----------
Cash and cash equivalents, end of period $ 3,521,888 $ 4,889,574
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Taxes paid $ 800 $ 800
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
For the period ended December 31, 1997, the Partnership incurred but did not
pay offering expenses of $294,310 and acquisition fees of $62,878,
respectively (see Note 4).
See accompanying notes to financial statements
19
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 is
the original limited partner of the Partnership and owns, through the Lester
Family Trust, 28.6% of the outstanding stock of WNC.
The Partnership shall continue in full force and effect until December 31, 2052,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The partnership agreement authorized the sale of 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 loss and in cash available for distribution from
the Partnership. 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 4) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
Risks and Uncertainties
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
20
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 in 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 3).
Losses from Local Limited Partnerships allocated to the Partnership are not
recognized to the extent that the investment balance would be adjusted below
zero.
21
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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
$3,183,115 and $1,257,504 as of December 31, 1998 and 1997, respectively.
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 $3,400,000 at December 31, 1998.
Concentration of Credit Risk
As of December 31, 1998, the Partnership maintained cash balances at certain
financial institutions in excess of the federally insured maximum.
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net 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.
22
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Reporting Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting the components of comprehensive income and requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be included in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income includes net income as well as certain items that are reported directly
within a separate component of partners' equity and bypass net income. The
Partnership adopted the provisions of this statement in 1998. For the years
presented, the Partnership has no elements of other comprehensive income, as
defined by SFAS No. 130.
Reclassifications
Certain prior year balances have been reclassified to conform to the 1998
presentation.
NOTE 2 - LOANS RECEIVABLE
Loans receivable represent amounts loaned by the Partnership to certain Local
Limited Partnerships in which the Partnership may invest. These loans are
generally applied against the first capital contribution due if the Partnership
ultimately invests in such entities. In the event that the Partnership does not
invest in such entities, the loans are to be repaid with interest at a rate
which is equal to the rate charged to the holder. Loans receivable with a
balance of $758,894 at December 31, 1997 were collectible from two limited
partnerships, both of which were acquired in 1998. Loans receivable with a
balance of $100,000 at December 31, 1997 were collectible from one limited
partnership and were repaid to the Partnership in 1998.
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of December 31, 1998, 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 December 31,
1998 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 of
the Local Limited Partnerships.
23
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
The Partnership's investments in limited partnerships as reflected in the
balance sheets at December 31, 1998 and 1997, are approximately $10,382,000 and
$1,559,000, respectively, greater than the Partnership's equity as shown in the
Local Limited Partnerships' financial statements. This difference is primarily
due to acquisition, selection, and other costs related to the acquisition of the
investments which have been capitalized in the Partnership's investment account
and to capital contributions payable to the limited partnerships which were
netted against partner capital in the Local Limited Partnerships' financial
statements (see Note 5).
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.
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. During 1998, no investment accounts in Local
Limited Partnerships reached a zero balance.
The following is a summary of the equity method activity of the investments in
limited partnerships for the years ended December 31:
1998 1997
---- ----
Investments per balance sheet,
beginning of year $ 2,398,460 $ -
Capital contributions 9,357,460 836,632
Capital contributions payable 7,191,106 860,671
Capitalized acquisition fees and costs 1,138,786 701,018
Distributions paid (315) -
Equity in income (losses) of Local
Limited Partnerships (110,194) 2,395
Amortization of paid acquisition fees
and costs (47,350) (2,256)
---------- ----------
Investments in limited partnerships,
end of year $ 19,927,953 $ 2,398,460
========== ==========
24
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted in
interest expense. Approximate combined condensed financial information from the
individual financial statements of the individual financial statements of the
Local Limited Partnerships as of December 31 and for the years then ended is as
follows:
COMBINED CONDENSED BALANCE SHEETS
1998 1997
---- ----
ASSETS
Buildings and improvements,
net of accumulated depreciation
for 1998 of $797,000 $ 9,037,000 $ -
Land 755,000 93,000
Construction in progress 10,010,000 357,000
Other assets 1,649,000 643,000
---------- ----------
$ 21,451,000 $ 1,093,000
========== ==========
LIABILITIES
Mortgage and construction loans payable $ 11,309,000 $ 149,000
Other liabilities (including due to
related parties at December 31,
1998 and 1997 of $177,000 and $0,
respectively) 712,000 29,000
---------- ----------
12,021,000 178,000
---------- ----------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund VI, L.P.,
Series 5 9,546,000 839,000
Other partners (116,000) 76,000
---------- ----------
9,430,000 915,000
---------- ----------
$ 21,451,000 $ 1,093,000
========== ==========
25
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
COMBINED CONDENSED STATEMENT OF OPERATIONS
1998 1997
---- ----
Revenues $ 1,088,000 $ 2,000
Expenses:
Operating expenses 644,000 -
Interest expense 268,000 -
Depreciation and amortization 286,000 -
---------- ----------
Total expenses 1,198,000 -
---------- ----------
Net income (loss) $ (110,000) $ 2,000
========== ==========
Net income (loss) allocable
to the Partnership $ (110,000) $ 2,000
========== ==========
Net income (loss) recorded
by the Partnership $ (110,000) $ 2,000
========== ==========
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partner may be
required to sustain the operations of such Local Limited Partnerships. If
additional capital contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited Partnerships could be
impaired.
NOTE 4 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partner or their affiliates for the following items:
Acquisition fees of up to 7% of the gross proceeds from the sale of Units
as compensation for services rendered in connection with the acquisition of
Local Limited Partnerships. As of December 31, 1998 and 1997, the
Partnership incurred acquisition fees of $1,670,772 and $664,500,
respectively. Accumulated amortization of these capitalized costs was
$45,936 and $2,131 as of December 31, 1998 and 1997, respectively.
26
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 4 - RELATED PARTY TRANSACTIONS, continued
Reimbursement of costs incurred by the General Partner in connection with
the acquisition of Local Limited Partnerships. These reimbursements have
not exceeded 1.5% of the gross proceeds. As of December 31, 1998 and 1997,
the Partnership incurred acquisition costs of $169,033 and $36,518,
respectively, which have been included in investments in limited
partnerships. Accumulated amortization was $3,670 and $125 as of December
31, 1998 and 1997, respectively.
An annual asset management fee not to exceed 0.2% of the invested assets
(defined as the Partnership's capital contributions plus reserves of the
Partnership of up to 5% of gross proceeds plus its allocable percentage of
the mortgage debt encumbering the housing complexes) of the Local Limited
Partnerships. Management fees of $66,382 were incurred for 1998, of which
$0 was paid during 1998. No management fees were incurred in 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
Agreement) and is payable only if the General Partner or its affiliates
render services in the sales effort.
The accrued fees and expenses due to General Partner and affiliates consist of
the following at December 31:
1998 1997
---- ----
Acquisition fees $ 1,252 $ 62,878
Asset management fee payable 66,382 -
Advances from WNC 25,884 294,310
Other 3,869 4,712
---------- ----------
$ 97,387 $ 361,900
========== ==========
NOTE 5 - 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).
27
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1998 and
For The Period August 29, 1997 (Date Operations
Commenced) Through December 31, 1997
NOTE 6 - INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
NOTE 7 - SUBSCRIPTIONS AND NOTES 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 these financial statements, leaving an unpaid balance
of $38,600. In 1997, the Partnership had received promissory notes of $351,150
related to the sale of Units, of which $48,000 was collected in 1998 and
$303,150 was collected in 1999. Promissory notes collected subsequent to year
end and prior to the issuance of the financial statements are recorded as a
capital contribution and an asset in the financial statements. Any unpaid
balance as of the issuance of the financial statements is reflected as a
reduction of partners' equity in the financial statements.
As of December 31, 1997, the Partnership had received subscriptions for 9,834
units which included subscriptions receivable of $631,885 and promissory notes
of $351,150, of which, all of the subscription receivables were collected and
$48,000 of the promissory notes were collected in 1998. Limited partners who
subscribed for ten or more units of limited partnerships 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 payable, together with
interest at the rate of 5.5% per annum, due no later than 13 months after the
subscription date. Subscriptions and notes receivable collected subsequent to
year-end are recorded as a capital contribution and an asset in the accompanying
financial statements. Any unpaid balance is reflected as a reduction of
partners' equity in the accompanying financial statements.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Subsequent to December 31, 1998, the Partnership entered into 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 December 31, 1998.
28
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
(a)(1)
(i) On December 16, 1998, Corbin & Wertz, Irvine, California was dismissed
as the Partnership's principal independent accountant.
(ii) During the last two fiscal years of the Partnership, the reports of
Corbin & Wertz respecting the financial statements of the Partnership
did not contain an adverse opinion or a disclaimer of opinion, nor were
any such reports qualified or modified as to uncertainty, audit scope
or accounting principles.
(iii) The decision to change accountants was approved by the board of direc-
tors of WNC & Associates, Inc., the general partner of the Partnership.
(iv) During the last two fiscal years and subsequent interim period of the
Partnership there were no disagreements between Corbin & Wertz and the
Partnership on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure of the
nature described in Item 304(a)(1)(iv) of Securities and Exchange
Commission Regulation S-K.
(v) During the last two fiscal years and subsequent interim period of the
Partnership there were no reportable events of the nature described in
Item 304(a)(1)(v) of Securities and Exchange Commission Regulation S-K.
(a)(2)
On December 16, 1998, BDO Seidman, LLP, Costa Mesa, California was engaged as
the Partnership's principal independent accountant. During the last two fiscal
years and subsequent interim period of the Partnership, the Partnership did not
consult BDO Seidman, LLP regarding (i) either, the application of accounting
principles to a specified transaction; or the type of audit opinion that might
be rendered on the Partnership's financial statements, or (ii) any matter that
was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Securities and Exchange Commission Regulation S-K) or was a reportable event (as
defined in Item 304(a)(1)(v) of Securities and Exchange Commission Regulation
S-K).
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers of its own. The following
biographical information is presented for the directors and executive officers
of Associates which has principal responsibility for the Partnership's affairs.
Directors and Executive Officers of WNC & Associates, Inc.
The directors of WNC & Associates, Inc. are Wilfred N. Cooper, Sr., who serves
as Chairman of the Board, John B. Lester, Jr., David N. Shafer, Wilfred N.
Cooper, Jr. and Kay L. Cooper. The principal shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.
Wilfred N. Cooper, Sr., age 68, is the founder, Chief Executive Officer and a
Director of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a
general partner in some of the programs previously sponsored by the Sponsor. Mr.
Cooper has been involved in real estate investment and acquisition activities
since 1968. Previously, during 1970 and 1971, he was founder and principal of
Creative Equity Development Corporation, a predecessor of WNC & Associates,
Inc., and of Creative Equity Corporation, a real estate investment firm. For 12
years prior to that, Mr. Cooper was employed by Rockwell International
Corporation, last serving as its manager of housing and urban developments where
he had responsibility for factory-built housing evaluation and project
management in urban planning and development. Mr. Cooper is a Director of the
National Association of Home Builders (NAHB) and a National Trustee for NAHB's
Political Action Committee, a Director of the National Housing Conference (NHC)
and a member of NHC's Executive Committee and a Director of the National
Multi-Housing Council (NMHC). Mr. Cooper graduated from Pomona College in 1956
with a Bachelor of Arts degree.
29
<PAGE>
John B. Lester, Jr., age 65, is President, a Director, Secretary and a member of
the Acquisition Committee of WNC & Associates, Inc., and a Director of WNC
Capital Corporation. Mr. Lester has 27 years of experience in engineering and
construction and has been involved in real estate investment and acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates, Inc., a provider
of engineering and construction services to the oil refinery and petrochemical
industries, which he co-founded in 1973. Mr. Lester graduated from the
University of Southern California in 1956 with a Bachelor of Science degree in
Mechanical Engineering.
Wilfred N. Cooper, Jr., age 36, is Executive Vice President, a Director and a
member of the Acquisition Committee of WNC & Associates, Inc. He is President
of, and a registered principal with, WNC Capital Corporation, a member firm of
the NASD, and is a Director of WNC Management, Inc. He has been involved in
investment and acquisition activities with respect to real estate since he
joined the Sponsor in 1988. Prior to this, he served as Government Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Advisory Board for LIHC Monthly Report, a Director of NMHC and an Alternate
Director of NAHB. He graduated from The American University in 1985 with a
Bachelor of Arts degree.
David N. Shafer, age 46, is Senior Vice President, a Director, General Counsel,
and a member of the Acquisition Committee of WNC & Associates, Inc., and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been involved in
real estate investment and acquisition activities since 1984. Prior to joining
the Sponsor in 1990, he was practicing law with a specialty in real estate and
taxation. Mr. Shafer is a Director and President of the California Council of
Affordable Housing and a member of the State Bar of California. Mr. Shafer
graduated from the University of California at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor degree (cum laude) and from the University of San Diego in 1986 with a
Master of Law degree in Taxation.
Michael L. Dickenson, age 42, is Vice President and Chief Financial Officer, and
a member of the Acquisition Committee of WNC & Associates, Inc., and Chief
Financial Officer of WNC Management, Inc. He has been involved with acquisition
and investment activities with respect to real estate since 1985. Prior to
joining the Sponsor in March 1999, he was the Director of Financial Services at
TrizecHahn Centers Inc., a developer and operator of commercial real estate,
from 1995 to 1999, a Senior Manager with E&Y Kenneth Leventhal Real Estate
Group, Ernst & Young, LLP, from 1988 to 1995, and Vice President of Finance with
Great Southwest Companies, a commercial and residential real estate developer,
from 1985 to 1988. Mr. Dickenson is a member of the Financial Accounting
Standards Committee for the National Association of Real Estate Companies and
the American Institute of Certified Public Accountants, and a Director of
HomeAid Southern California, a charitable organization affiliated with the
building industry. He graduated from Texas Tech University in 1978 with a
Bachelor of Business Administration - Accounting degree, and is a Certified
Public Accountant in California and Texas.
Thomas J. Riha, age 44, is Vice President - Asset Management and a member of the
Acquisition Committee of WNC & Associates, Inc. and a Director and Chief
Executive Officer of WNC Management, Inc. Mr. Riha has been involved in
acquisition and investment activities with respect to real estate since 1979.
Prior to joining the Sponsor in 1994, Mr. Riha was employed by Trust Realty
Advisor, a real estate acquisition and management company, last serving as Vice
President - Operations. Mr. Riha graduated from the California State University,
Fullerton in 1977 with a Bachelor of Arts degree (cum laude) in Business
Administration with a concentration in Accounting and is a Certified Public
Accountant and a member of the American Institute of Certified Public
Accountants.
Sy P. Garban, age 53, is Vice President - National Sales of WNC & Associates,
Inc. and has been employed by the Sponsor since 1989. Mr. Garban has been
involved in real estate investment activities since 1978. Prior to joining the
Sponsor he served as Executive Vice President of MRW, Inc., a real estate
development and management firm. Mr. Garban is a member of the International
Association of Financial Planners. He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.
30
<PAGE>
N. Paul Buckland, age 36, is Vice President - Acquisitions of WNC & Associates,
Inc. He has been involved in real estate acquisitions and investments since 1986
and has been employed with WNC & Associates, Inc. since 1994. Prior to that, he
served on the development team of the Bixby Ranch that constructed apartment
units and Class A office space in California and neighboring states, and as a
land acquisition coordinator with Lincoln Property Company where he identified
and analyzed multi-family developments. Mr. Buckland graduated from California
State University, Fullerton in 1992 with a Bachelor of Science degree in
Business Finance. David Turek, age 44, is Vice President - Originations of WNC &
Associates, Inc. He has been involved with real estate investment and finance
activities since 1976 and has been employed by WNC & Associates, Inc. since
1996. From 1995 to 1996, Mr. Turek served as a consultant for a national Tax
Credit sponsor where he was responsible for on-site feasibility studies and due
diligence analyses of Tax Credit properties. From 1990 to 1995, he was involved
in the development of conventional and tax credit multi-family housing. He is a
Director with the Texas Council for Affordable Rural Housing and graduated from
Southern Methodist University in 1976 with a Bachelor of Business Administration
degree.
Kay L. Cooper, age 62, is a Director of WNC & Associates, Inc. Mrs. Cooper was
the founder and sole proprietor of Agate 108, a manufacturer and retailer of
home accessory products, from 1975 until 1998. She is the wife of Wilfred N.
Cooper, Sr., the mother of Wilfred N. Cooper, Jr. and the sister of John B.
Lester, Jr. Ms. Cooper graduated from the University of Southern California in
1958 with a Bachelor of Science degree.
Item 11. Executive Compensation
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 December 31, 1998 approximately
$3,183,000 for selling commissions and other fees and expenses of the
Partnership's offering of Units. Of the total accrued or paid,
approximately $2,733,000 was paid or to be paid to unaffiliated persons
participating in the Partnership's offering or rendering other services
in connection with the Partnership's offering.
(b) Acquisition Fees. Acquisition fees in an amount equal to 7.0% of the
gross proceeds of the Partnership's Offering ("Gross Proceeds").
Through December 31, 1998, the aggregate amount of acquisition fees
paid or accrued was approximately $1,670,800.
(c) Acquisition Expense. The Partnership reimbursed the General Partner or
its affiliates as of December 31, 1998 for acquisition expense, not to
exceed 1.5% of the Gross Proceeds, expended by such persons on behalf
of the Partnership in the amounts $169,000.
(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 $66,000
were incurred for the year ended 1998 of which none were paid in 1998.
(e) Operating Expenses. The Partnership reimbursed the General Partner or
its affiliates as of December 31, 1998 for approximately $4,500
operating expenses expended by such persons on behalf of the Partner-
ship.
(f) Subordinated Dispostion 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.
31
<PAGE>
(g) Interest in Partnership. The General Partner will receive 1% of the Low
Income Housing Credits. The General Partner was allocated Low Income
Housing Credits of $441 for the year ended December 31, 1998. No Low
Income Housing Credits were allocated for the year ended December 31,
1997. The General Partners are also entitled to receive 1% of cash
distributions. There were no distributions of cash to the General
Partner during the year ended December 31, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
No person is known to own beneficially in excess of 5% of the
outstanding Units.
(b) Security Ownership of Management
Neither the General Partner, its affiliates, nor any of the officers or
directors of the General Partner or its affiliates own directly or
beneficially any Units in the Partnership.
(c) Changes in Control
The management and control of the General Partner may be changed at any
time in accordance with its organizational documents, without the
consent or approval of the Limited Partners. In addition, the
Partnership Agreement provides for the admission of one or more
additional and successor General Partners in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of
any other General Partner or the Limited Partners, (i) substitute in
its stead as General Partner any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets,
stock or other evidence of equity interest and continued its business,
or (ii) cause to be admitted to the Partnership an additional General
Partner or Partners if it deems such admission to be necessary or
desirable so that the Partnership will be classified a partnership for
Federal income tax purposes. Finally, a majority-in-interest of the
Limited Partners may at any time remove the General Partner of the
Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership and the General Partner's
interest in the Partnership, as discussed in Item 11 and in the notes to the
Partnership's financial statements.
32
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Independent Auditors' Report
Balance Sheets, December 31, 1998 and 1997
Statements of Operations for the year ended December 31, 1998 and
the period August 29, 1997 (date operations commenced) through De-
cember 31, 1997
Statements of Partners' Equity for the year ended December 31, 1998
and the period August 29, 1997 (date operations commenced) through
December 31, 1997
Statements of Cash Flows for the year ended December 31, 1998, and the
period August 29, 1997 (date operations commenced) through December
31, 1997
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial State-
ment Schedule
Schedule III - Real Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K.
1. A Form 8-K dated December 16, 1998 was filed on December 22, 1998 re-
porting the dismissal of the Partnership's former auditors and the
engagement of new auditors. No financial statements were included.
(c) Exhibits.
3.1. Agreement of Limited Partnership dated as of March 3, 1997 included as
Exhibit 3.1 to the Form 10-K filed for the year ended December 31,
1997, is hereby incorporated herein as Exhibit 3.1.
3.2 First Amendment to Agreement of Limited Partnership dated August 29,
1997 included as Exhibit 3.2 to the Form 10-K filed for the year ended
December 31, 1997, is hereby incorporated as Exhibit 3.2.
10.1 Amended and Restated Agreement of Limited Partnership of Chillicothe
Plaza Apts., L.P. filed as exhibit 10.1 to the current report on Form
8-K dated November 11, 1997, is herein incorporated by reference as
Exhibit 10.1.
10.2 Amended and Restated Agreement of Spring Valley Terrace Apartments,
L.L.C. filed as Exhibit 10.3 to Post-effective Amendment No. 1 to
Registration statement, is herein incorporated by reference as Exhibit
10.2.
10.3 Amended and Restated Agreement of Limited Partnership of El Reno Hou-
sing Associates Limited Partnership filed as Exhibit 10.1 to the cur-
rent report on Form 8-K dated January 15, 1998, is herein incorporated
by reference as Exhibit 10.3.
10.4 Second Amended and Restated Agreement of Limited Partnership of Hughes
Villas Limited Partnership filed as Exhibit 10.2 to the current report
on Form 8-K dated January 15, 1998, is herein incorporated by reference
as Exhibit 10.4.
33
<PAGE>
10.5 First Amendment to Second Amended and Restated Agreement of Limited
Partnership of Hughes Villas Limited Partnership filed as Exhibit 10.3
to the current report on Form 8-K dated January 15, 1998, is herein
incorporated by reference as Exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of Mark Twain
Senior Community Limited Partnership filed as Exhibit 10.3 to the cur-
rent report on Form 8-K dated January 15, 1998, is herein incorporated
by reference as Exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of Bradley Vil-
las, L.P. filed as Exhibit 10.1 to Form 8-K dated April 1, 1998 is
herein incorporated as Exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of Murfreeburo
Villas filed as Exhibit 10.5 to Form 8-K dated April 1, 1998
is herein incorporated as Exhibit 10.8.
10.9 Amended and Restated Agreement of Limited Partnership of United Devel-
opment Co., L.P. - 97-2 filed as Exhibit 10.3 to Form 8-K dated April
30, 1998 is herein incorporated as Exhibit 10.9.
10.10 Second Amended and Restated Agreement of Limited Partnership of United
Development Co., L.P. - 97-2 filed as Exhibit 10.2 to Form 8-K dated
April 30, 1998 is herein incorporated as Exhibit 10.10.
10.11 Second Amended and Restated Agreement of Limited Partnership of United
Development Co., L.P. - 97-1 filed as Exhibit 10.3 to Form 8-K dated
April 30, 1998 is herein incorporated as Exhibit 10.11.
10.12 Second Amended and Restated Agreement of Limited Partnership of Concord
Apartment Partners, L.P. filed as Exhibit 10.1 to Form 8-K dated May
31, 1998 is herein incorporated as Exhibit 10.12.
10.13 Amended and estated Agreement of Limited Partnership of Mansur Wood
Living Center, L.P. filed as Exhibit 10.1 to Form 8-K dated September
19, 1998 is herein incorporated as Exhibit 10.13.
10.14 Amended and Restated Agreement of Limited Partnership Apartment
Housing of Theodore, LTD filed as Exhibit 10.23 to Post-Effective
Amendment No 3 to Registration Statement dated May 1, 1998 is herein
incorporated as Exhibit 10.14.
10.15 Amended and Restated Agreement of Limited Partnership of Hillcrest
Height, Limited Partnership filed as Exhibit 10.2 to Form 8-K/A dated
October 8, 1998 is herein incorporated as Exhibit 10.15
21.1 Financial Statements of Mansur Woods Elderly Living Center, L.P., for
the year ended December 31, 1998 together with auditors report thereon;
a significant subsidiary of the Partnership.
(d) Financial statement schedule follows, as set forth in subsection (a)(2)
hereof.
34
<PAGE>
Report of Independent Certified Public Accountants on
Financial Statement Schedule
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 5
The audit referred to in our report dated June 17, 1999, relating to the 1998
financial statements of WNC Housing Tax Credit Fund VI, L.P., Series 5 (the
"Partnership"), which is contained in Item 8 of this Form 10-K, included the
audit of the accompanying financial statement schedule. The financial statement
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the financial information set forth therein.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Orange County, California
June 17, 1999
35
<PAGE>
WNC Housing Tax Credit Fund VI, L.P., Series 5
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
As of December 31, 1998
------------------------------------------------------------------------------------
Partnership's Total Amount of Encumbrances of Net
Investment in Local Investment Local Limited Property and Accumulated Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apartment Housing of Theodore Theodore,
Alabama $ 1,277,000 $ 638,000 $ 898,000 $ 1,651,000 $ - $ 1,651,000
Bradley Villas Limited Partnership Bradley,
Arkansas 532,000 501,000 538,000 1,000,000 23,000 977,000
Chillicothe Plaza Apts. L.P. Chillicothe,
Missouri 991,000 697,000 246,000 1,008,000 - 1,008,000
Concord Apartment Partners, L.P. Orlando,
Florida 470,000 470,000 293,000 442,000 26,000 416,000
El Reno Housing Associates Limited El Reno,
Partnership Oklahoma 3,040,000 2,280,000 2,187,000 4,032,000 - 4,032,000
Hillcrest Heights, L.P. Marshalltown,
Iowa 609,000 609,000 598,000 1,209,000 14,000 1,195,000
Hughes Villas Limited Partnership Hughes,
Arkansas 182,000 182,000 765,000 986,000 76,000 910,000
Mansur Wood Living Center, L.P. Carbon Cliff,
Illinois 6,446,000 831,000 1,420,000 2,060,000 - 2,060,000
Mark Twain Senior Community Limited Oakland,
Partnership California 740,000 715,000 1,470,000 2,509,000 575,000 1,934,000
Murfreesboro Villas Limited Murfreesboro,
Partnership Arkansas 686,000 686,000 643,000 1,258,000 20,000 1,238,000
</TABLE>
36
<PAGE>
WNC Housing Tax Credit Fund VI, L.P., Series 5
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
As of December 31, 1998
------------------------------------------------------------------------------------
Partnership's Total Amount of Encumbrances of Net
Investment in Local Investment Local Limited Property and Accumulated Book
Partnership Name Location Limited Partnerships Paid to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Spring Valley Terrace Mayer,
Apartments, LLC Arizona 716,000 358,000 997,000 1,428,000 14,000 1,414,000
United Development Co., Memphis,
L.P. - 97.1 Tennessee 1,845,000 1,384,000 876,000 1,922,000 1,000 1,921,000
United Development Co., Memphis,
L.P. - 97.2 Tennessee 743,000 733,000 378,000 1,094,000 48,000 1,046,000
---------- ---------- ---------- ---------- -------- ----------
$ 18,277,000 $ 10,084,000 $ 11,309,000 $ 20,599,000 $ 797,000 $ 19,802,000
========== ========== ========== ========== ======== ==========
</TABLE>
37
<PAGE>
WNC Housing Tax Credit Fund VI, L.P., Series 5
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
For the year ended December 31, 1998
--------------------------------------------------------------------------
Year Estimated
Rental Investment Useful Life
Partnership Name Income Net Loss Status Acquired (Years)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Apartment Housing of Theodore $ - $ - 1998 1999 Under Construction
Bradley Villas Limited Partnership 47,000 (16,000) 1998 Completed 40.0
Chillicothe Plaza Apts. L.P. - 18,000 1997 1999 Under Construction
Concord Apartment Partners, L.P. 87,000 (51,000) 1998 Completed 30.0
El Reno Housing Associates
Limited Partnership - 8,000 1998 1999 40.0
Hillcrest Heights, L.P. 41,000 (22,000) 1998 Completed 27.0
Hughes Villas Limited Partnership 93,000 (3,000) 1998 Completed 40.0
Mansur Wood Living Center, L.P. - 83,000 1998 2000 27.5
Mark Twain Senior Community
Limited Partnership 592,000 (11,000) 1998 Completed 27.5
Murfreesboro Villas Limited
Partnership 11,000 (31,000) 1998 Completed 40.0
Spring Valley Terrace Apartments,
LLC 7,000 (29,000) 1997 Completed 40.0
United Development Co., L.P. - 7,000 5,000 1998 1999 27.5
97.1
United Development Co., L.P. - 53,000 (61,000) 1998 Completed 27.5
97.2 -------- --------
$ 938,000 $ (110,000)
======== ========
</TABLE>
38
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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
By: WNC & Associates, Inc. General Partner
By: /s/ John B. Lester, Jr
John B. Lester, Jr.
President of WNC & Associates, Inc.
Date: August 5, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr. Chairman of the Board of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ John B. Lester, Jr
John B. Lester, Jr. Director of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ Michael L. Dickenson
Michael L. Dickenson
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: August 5, 1999
By: /s/ David N. Shafer
David N Shafer Director of WNC & Associates, Inc.
Date: August 5, 1999
39
<PAGE>
Exhibit
Number Exhibit Description
EX-21.1 Financial Statements of Mansur Wood Elderly Living Center, L.P.,
for the year ended December 31, 1998 together with auditors
report thereon; a significant subsidiary of the Partnership.
40
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
(An Illinois Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
T A B L E O F C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT 43
FINANCIAL STATEMENTS
Balance Sheet 44
Statement of Operations 46
Statement of Partners' Equity 47
Statement of Cash Flows 48
NOTES TO THE FINANCIAL STATEMENTS 49
41
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
(An Illinois Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
(TOGETHER WITH AUDITOR'S REPORT)
42
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Partners
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
(An Illinois Limited Partnership)
We have audited the accompanying balance sheet of MANSUR WOOD ELDERLY LIVING
CENTER, L.P. (An Illinois Limited Partnership) for the initial period beginning
September 19, 1998 through December 31, 1998, and the related statement of
operations, partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MANSUR WOOD ELDERLY LIVING
CENTER, L.P. as of December 31, 1998, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ FRIDUSS, LUKEE, SCHIFF & CO., P.C.
FRIDUSS, LUKEE, SCHIFF & CO., P.C.
Certified Public Accountants
Chicago, Illinois
June 25, 1999
43
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
BALANCE SHEET
DECEMBER 31, 1998
A S S E T S
INVESTMENT IN REAL ESTATE HELD FOR LEASE
(Note 2)
Land $ 50,000
Construction in Progress 2,009,418
----------
NET INVESTMENT IN REAL ESTATE
HELD FOR LEASE $ 2,059,418
----------
OTHER ASSETS
Cash (Note 3) $ 347,748
Construction Escrow Account (Note 8) 5,542,814
----------
TOTAL OTHER ASSETS $ 5,890,562
----------
TOTAL ASSETS $ 7,949,980
==========
See notes to the financial statements.
44
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
BALANCE SHEET
DECEMBER 31, 1998
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES APPLICABLE TO INVESTMENT
IN REAL ESTATE HELD FOR LEASE
Construction Costs Payable $ 1,419,951
----------
TOTAL LIABILITIES APPLICABLE
TO INVESTMENT IN REAL ESTATE
HELD FOR LEASE $ 1,419,951
----------
PARTNERS' EQUITY $ 6,530,029
----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 7,949,980
==========
See notes to the financial statements.
45
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
INCOME
Interest Income $ 83,038
---------
TOTAL INCOME $ 83,038
---------
OPERATING EXPENSES
Administrative $ 7
---------
TOTAL OPERATING EXPENSES $ 7
---------
NET INCOME $ 83,031
=========
See notes to the financial statements.
46
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
STATEMENT OF PARTNERS' EQUITY
YEAR ENDED DECEMBER 31, 1998
Special
General Limited Limited
Partner Partner Partner Total
PARTNERS' EQUITY,
JANUARY 1, 1998 $ - $ - $ - $ -
CAPITAL CONTRIBUTIONS - 6,446,347 651 6,446,998
NET INCOME
830 82,192 9 83,031
------- --------- ------- ---------
PARTNERS' EQUITY,
DECEMBER 31, 1998
$ 830 $ 6,528,539 $ 660 $ 6,530,029
======= ========= ======= =========
See notes to the financial statements.
47
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 83,031
----------
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
TOTAL ADJUSTMENTS $ -
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 83,031
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for Land $ (50,000)
Deposits to Construction Escrow (5,542,814)
NET CASH (USED IN) INVESTING ACTIVITIES $ (5,592,814)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions Received $ 6,446,998
Construction Costs Paid (589,467)
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 5,857,531
----------
NET INCREASE IN CASH $ 347,748
CASH - BEGINNING OF YEAR -
----------
CASH - END OF YEAR $ 347,748
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest $ -
=========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Increase in Construction Cost Payable $ 1,419,951
(Increase) in Construction in Progress (1,419,951)
TOTAL $ -
=========
See notes to the financial statements.
48
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - ORGANIZATION
The Partnership was formed as a limited partnership under the laws of the
State of Illinois on September 19, 1998, for the purpose of constructing
and operating a rental housing project. The project consists of 115 units
located in Carbon Cliff, Illinois, and is currently operating under the
name of MANSUR WOOD ELDERLY LIVING CENTER.
The project is expected to qualify for the Low-Income Housing Tax Credit
established by the Tax Reform Act of 1986 when it is completed.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Partnership's significant accounting policies consistently
applied in the preparation of the accompanying financial statements
follows:
CAPITALIZATION AND DEPRECIATION
Land, building and improvements are recorded at cost. Improvements are
capitalized, while expenditures for maintenance and repairs are charged to
expense as incurred. Upon disposal of depreciable property, the appropriate
property accounts are reduced by the related costs and accumulated
depreciation.
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives. The
estimated service life of the assets for depreciation purposes may be
different than their actual economic useful lives.
Estimated Life Method
-------------- ------
Land - None
Building and Improvements 27.5 Years Straight-Line
Furniture and Fixtures Various MACRS
INCOME TAXES
No provision or benefit for income taxes has been included in these
financial statements since taxable income passes through to, and is
reportable by, the partners individually.
49
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 differ from those
estimates.
NOTE 3 - CASH
The Partnership maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts. The Partnership believes it is not
exposed to any significant credit risk on cash.
NOTE 4 - PARTNERS' CAPITAL CONTRIBUTIONS
The Partnership has one General Partner, Elderly Living Development, Inc.,
which has a 1% interest and one Limited Partner, WNC Tax Credit Fund VI,
L.P. and one Special Limited Partner, WNC Housing L.P. The Limited
Partners' interests are 98.99% and .01%, respectively.
NOTE 5 - LONG-TERM DEBT
The construction loan is for the maximum amount of $4,300,000 and
bears interest at 2.10% over the Federal Home Loan Bank
Construction Note rates. As of December 31, 1998, no funds have
been drawn on this note. The loan is due December 9, 2000.
Collateralized by investment in real estate held for lease. $ -
=======
50
<PAGE>
MANSUR WOOD ELDERLY LIVING CENTER, L.P.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
The General Partner is entitled to a development fee in the amount of
$1,350,000, of which $100,000 has been paid in 1998.
The Partnership Agreement provides for various obligations of the
General Partners, including their obligation to provide funds for any
development and operating deficits.
NOTE 7 - PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS
All profits and losses are allocated 1% to the General Partner, 98.99%
to the Limited Partner and .01% to the Special Limited Partner.
Distributable net operating income, as defined by the Partnership
Agreement, is distributable as follows:
1. To pay reporting fee and accrued reporting fees from
previous years.
2. To pay development fee.
3. To pay operating loans
4. To pay incentive management fee.
5. The remainder, if any, 50% to the Limited Partner and 50% to
the General Partner.
Gain or loss from a sale, exchange or other disposition of the
property owned by the Partnership is allocated according to the terms
of the Partnership Agreement.
NOTE 8 - COMMITMENTS AND CONTIENGENCIES
Pursuant to the Amended Escrow Agreement, the Limited Partners' have
deposited their capital contributions into a construction escrow
account. The Limited Partners retain the rights to approve all
disbursements from the construction escrow in order to determine that
construction is in accordance with plans and specifications. Material
modifications to the plans and specifications that are not agreed upon
by the Limited Partners may cause the Limited Partners to request the
return of the remaining escrow funds.
51
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<ARTICLE> 5
<CIK> 0001036500
<NAME> WNC HOUSING TAX CREDIT FUNDVI, L.P., SERIES 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<CURRENT-ASSETS> 3,521,888
<PP&E> 0
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0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 29,903,666
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<TOTAL-REVENUES> 286,005
<CGS> 0
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<OTHER-EXPENSES> 110,194
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 54,634
<INCOME-TAX> 0
<INCOME-CONTINUING> 54,634
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