FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 333-76435
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 7
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 8
California 33-0761517 - Series 7
33-0761519 - Series 8
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626
(Address of principal executive offices)
(714) 662-5565
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No.
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended December 31, 1999
PART I. FINANCIAL INFORMATION
Series 7
Item 1. Financial Statements
Balance Sheets
December 31, 1999 and September 30, 1999 ............................3
Statement of Operations
For the period September 3, 1999
(Date Operations Commenced) through December 31, 1999................4
Statement of Partners' Equity(Deficit)
For the period September 3, 1999
(Date Operations Commenced) through December 31, 1999................5
Statement of Cash Flows
For the period September 3, 1999
(Date Operations Commenced) through December 31, 1999................6
Notes to Financial Statements...........................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................12
Item 3. Quantitative and Qualitative Disclosures About Market Risks......14
Series 8
Series 8 currently has no assets or liabilities and has had no operations.
Accordingly, no financial information is included herein for Series 8.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................14
Item 6. Exhibits and Reports on Form 8-K.................................14
Signatures................................................................15
2
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
----------------- ------------------
(unaudited) (unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,195,749 $ 1,100
Investment in limited partnerships - Note 2 341,570 -
Subscriptions receivable 803,590 -
Other assets 440 -
----------------- ----------------
$ 3,341,349 $ 1,100
================= ================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Commissions payable $ 44,730 $ -
Accrued fees and expenses due to general
partner and affiliates - Note 3 155,449 -
----------------- ----------------
Total liabilities 200,179 -
----------------- ----------------
Partners' equity (deficit):
General partner (4,659) 100
Limited partners (25,000 units authorized and 3,803
and 1 unit(s) issued and outstanding at December
31, 1999 and June 30, 1999) 3,145,829 1,000
----------------- ----------------
Total partners' equity 3,141,170 1,100
----------------- ----------------
$ 3,341,349 $ 1,100
================= ================
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Period September 3, 1999 (Date Operations Commenced)
through December 31, 1999
(unaudited)
Interest income $ 6,082
---------------------
6,082
---------------------
Operating expenses:
Amortization 700
Other 12
---------------------
Total operating expenses 712
---------------------
Net income $ 5,370
=====================
Net income allocated to:
General partner $ 5
=====================
Limited partners' $ 5,365
=====================
Net income per limited partner unit (3,804 $ 1
units issued and outstanding) =====================
See accompanying notes to financial statements
4
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY(DEFICIT)
For the Period September 3, 1999 (Date Operations Commenced)
through December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
Equity, September 3, 1999 $ 100 $ 1,000 $ 1,100
Sale of Limited Partnership units, - 3,802,985 3,802,985
net of discounts
Less Limited Partnership units issued for (187,000) (187,000)
notes receivable
Offering expenses (4,813) (476,472) (481,285)
Net income For the Period September 3,
1999 (Date Operations Commenced)
through December 31, 1999 5 5,365 5,370
---------------- ----------------- ---------------
Equity(deficit), December 31, 1999 $ (4,659) $ 3,145,829 $ 3,141,170
================ ================= ===============
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For the Period September 3, 1999 (Date Operations Commenced)
through December 31, 1999
(unaudited)
Cash flows from operating activities:
Net income $ 5,370
Adjustments to reconcile net gain to net cash
provided by operating activities:
Amortization 700
Change in other assets (440)
-----------------
Net cash provided by operating activities 5,630
-----------------
Cash flows from investing activities:
Acquisition costs and fees (342,270)
Acquisition costs and fees payable 107,370
-----------------
Net cash used in investing activities (234,900)
-----------------
Cash flows from financing activities:
Sale of limited partnership units, net of discounts 3,802,985
Notes receivable - limited partners (187,000)
Subscriptions receivable (803,590)
Offering expenses (481,285)
Offering expense payable 92,809
-----------------
Net cash provided by financing activities 2,423,919
-----------------
Net increase in cash and cash equivalents 2,194,649
-----------------
Cash and cash equivalents, beginning of period 1,100
-----------------
Cash and cash equivalents, end of period $ 2,195,749
=================
See accompanying notes to financial statements
6
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The information contained in the following notes to the financial statements are
condensed from that which would appear in the annual financial statements. In
the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Partnership's financial position and
results of operations as of and for the period ended December 31, 1999.
Organization
WNC Housing Tax Credit Fund VI, L.P., Series 7, (a California Limited
Partnership) (the "Partnership") was formed on June 16, 1997 under the laws of
the state of California. The Partnership began operations on September 3, 1999,
the effective date of its public offering pursuant to Security and Exchange
approval of the Partnership's Pre-Effective Amendment No. 3 to Form S-11 filed
with the Securities and Exchange Commission on July 16, 1999. The Partnership
was formed to invest primarily in other limited partnerships (the "Local Limited
Partnerships") which own and operate multi-family housing complexes (the
"Housing Complexes") that are eligible for low income housing tax credits. The
local general partners (the "Local General Partners") of each Local Limited
Partnership will retain responsibility for maintaining, operating and managing
the Housing Complex.
The general partner is WNC & Associates, Inc. (the "General Partner"). Wilfred
N. Cooper, Sr., through the Cooper Revocable Trust, owns just less than 66.8% of
the outstanding stock of WNC & Associates, Inc. John B. Lester, Jr. is the
initial limited partner of the Partnership and owns, through the Lester Family
Trust, just less than 28.6% of the outstanding stock of WNC & Associates, Inc.
The Partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). As of December 31, 1999, 3,804 Units in the amount of
$3,803,985, had been sold, net of volume discounts of $15. The General Partner
has a 0.1% interest in operating profits and losses, taxable income and losses,
cash available for distribution from the Partnership and tax credits of the
Partnership. The limited partners will be allocated the remaining 99.9% of these
items in proportion to their respective investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partner has received proceeds
equal to its capital contribution and a subordinated disposition fee (as
described in Note 3) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
7
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes: difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests: limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not 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 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 intends to account for its investments in limited partnerships
using the equity method of accounting, whereby the Partnership will adjust 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 Partnerships are expected to be consistent with those of the
Partnership. Costs incurred by the Partnership in acquiring the investments will
be capitalized as part of the investment and amortized over 15 years (see Note
2).
Offering Expenses
Offering expenses are expected to consist of underwriting commissions, legal
fees, printing, filing and recordation fees, and other costs incurred in
connection with the selling of limited partnership interests in the Partnership.
The General Partner is obligated to pay all offering and organization costs
inclusive of selling commissions and dealer manager fees, in excess of 13% of
the total offering proceeds. Offering expenses will be reflected as a reduction
of limited partners' capital.
8
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(unaudited)
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with remaining
maturities of three months or less when purchased to be cash equivalents. As of
December 31, 1999 and June 30, 1999 the Partnership had cash equivalents of
$2,195,749 and $1,100, respectively.
NOTE 2 INVESTMENTS IN LIMITED PARTNERSHIPS
Following is a summary of the equity method activity of the investments in
limited partnerships for the periods presented:
December 31, 1999
-----------------
Investment balance, beginning of period $ -
Capital contribution paid, net -
Capital contribution payable -
Loan receivable applied -
Equity in Income of limited partnerships -
Capitalized acquisition fees and costs 342,270
Amortization of capitalized
acquisition costs (700)
-----------------------
Investment balance, end of period $ 341,570
=======================
NOTE 3 RELATED PARTY TRANSACTIONS
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates for the following fees:
9
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(unaudited)
NOTE 3 RELATED PARTY TRANSACTIONS, continued
(a) Organization and Offering Expenses. The Partnership accrued or paid to the
General Partner or its affiliates as of December 31, 1999 approximately
$481,285 for selling commissions and other fees and expenses of the
Partnership's offering of Units. Of the total accrued or paid,
approximately $364,945 as of December 31, 1999 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, 1999, the aggregate amount of acquisition fees paid or accrued was
approximately $266,210.
(c) Acquisition Expense. The Partnership accrued or paid to the General Partner
or its affiliates for acquisition expense expended by such persons on
behalf of the Partnership of approximately $76,060 through December 31,
1999. The limit on this reimbursement is 1.5% of Gross Proceeds.
(d) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.2% of the Invested Assets. "Invested Assets" means the sum of
the Partnership's Investment in Local Limited Partnerships and the
Partnership's allocable share of mortgage loans on and other debts related
to the Housing Complexes owned by such Local Limited Partnerships.
(e) Subordinated Disposition Fee. A subordinated disposition fee in an amount
equal to 1% of the sale price received in connection with the sale or
disposition of a Housing Complex. 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) 11% through December 31, 2010, and
(ii) 6% for the balance of the Partnerships term. No disposition fees have
been paid.
(f) Interest in Partnership. The General Partner will receive 0.1% of the
Partnership's allocated Low Income Housing Credits. The General Partner is
also entitled to receive 0.1% of cash distributions. There has been no
allocation of Low Income Housing Credits or distributions of cash to the
General Partner.
The accrued fees and expenses due to the General Partner and affiliates consist
of the following:
10
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
(unaudited)
NOTE 3 RELATED PARTY TRANSACTIONS, continued
December 31, 1999
-----------------
Acquisition fees $ 83,510
Asset management fee payable -
Reimbursement for expenses paid by the
General partner or an affiliate 71,939
--------------------
$ 155,449
====================
NOTE 4 SUBSCRIPTIONS AND NOTES RECEIVABLE
During the period September 3, 1999 (Date Operations Commenced) through December
31, 1999, the Partnership received subscriptions for 3,804 Units which included
subscriptions receivable of $803,590, net of volume discounts, and promissory
notes receivable of $187,000.
NOTE 5 INCOME TAXES
No provision for income taxes has been recorded in the financial statements as
any liability for income taxes is the obligation of the partners of the
Partnership.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
The Partnership's assets at December 31, 1999 consisted primarily of $2,196,000
in cash and equivalents, subscriptions and notes receivable from the sale of
Units totaling $991,000, and Investment in Limited Partnerships of $342,000.
Liabilities at December 31, 1999 primarily consisted of $155,000 of accrued fees
and advances due to the General Partner and affiliates and $45,000 in
commissions payable.
Results of Operations
The period September 3, 1999 (Date Operations Commenced) through December 31,
1999 The Partnership's net income for the period was $5,000, consisting of
interest income of $6,000, offset by operating expenses of $713.
Cash Flows
The period September 3, 1999 (Date Operations Commenced) through December 31,
1999 Net cash provided during the period was $2,194,000. The cash flow consists
of an increase in cash provided from the sale of Limited Partnership units of
$3,804,000, a decrease in cash paid to the general partner and affiliates of
$200,000 and an increase in cash from operations of $5,000. Offset by an
increase in subscriptions and notes receivable of $991,000, an increase in
offering expenses of $481,000, and an increase in acquisition fees and costs of
$342,000.
During the period September 3, 1999 (Date Operations Commenced) through December
31, 1999, accrued payables, consisting of accrued offering, acquisition fees and
accrued reimbursements, increased by $200,000.
12
<PAGE>
Impact of Year 2000
WNC & Associates, Inc.
Status of Readiness
Information Technology Systems. Information technology 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 Series will rely on the IT systems of WNC &
Associates, Inc. The IT systems of WNC & Associates, Inc. are Year 2000
compliant.
Non-IT Systems. The Series also relies on the non-IT systems of WNC &
Associates, Inc. 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 & Associates, Inc. are Year 2000
compliant. The remedy for that telephone system will be one replacement computer
and one software application. Acquisition and installation of those items will
be completed in October 1999.
Service Providers. WNC & Associates, Inc. and the Series also rely on the IT
systems and the non-IT systems of service providers. Service providers include:
utility companies, financial institutions, telecommunications carriers,
municipalities and other local jurisdictions, and other outside vendors. WNC &
Associates, Inc. has received oral assurances from its material service
providers that their respective IT and non-IT systems are Year 2000 compliant.
For these purposes, the material service providers are its: electrical utility
provider, financial institutions, and telecommunications carriers. There can be
no assurance that the information given by the service providers is correct.
There also can be no assurance that the IT and non-IT systems of less-important
service providers and outside vendors are Year 2000 compliant.
Costs to Address Year 2000 Issues
WNC & Associates, Inc.'s cost to address Year 2000 issues has been less than
$20,000. The cost to remedy the telephone system identified above will be less
than $5,000. The cost to deal with any Year 2000 issues of service providers and
other outside vendors cannot be estimated at this time.
Risk of Year 2000 Issues
The most reasonable and likely worst-case Year 2000 scenario for WNC &
Associates, Inc. would be business disruption due to the failure of service
providers. This disruption would include a delay in performing reporting and
fiduciary responsibilities on behalf of a Series. These delays would likely be
temporary as the worst case analysis remedy would be to replace the service
provider.
13
<PAGE>
Local Limited Partnerships
Status of Readiness
The local limited partnerships in which the Series will invest have not been
identified as of the date of this prospectus. For those investments identified
prior to 2000 WNC & Associates, Inc. will obtain Year 2000 certifications from
the local general partners. Through the certificates each local general partner
will represent that the IT and non-IT systems critical to the operation of the
apartment complex and reporting to the Series are Year 2000 compliant. WNC &
Associates, Inc. does not anticipate causing a Series to invest in a local
limited partnership with Year 2000 non-compliant systems. The certificates will
also include a representation that the IT and non-IT systems of: property
management companies, independent accountants, electrical utility providers,
financial institutions, and telecommunications carriers to be used by the local
limited partnership will be Year 2000 compliant.
Costs to Address Year 2000 Issues
There will be no incremental cost to the Series or WNC & Associates, Inc. as a
result of assessing Year 2000 compliance issues for the local limited
partnerships. The cost to the local limited partnerships to deal with Year 2000
issues cannot be known at this time.
Risk of Year 2000 Issues
The most reasonable and likely worst-case Year 2000 scenario for the local
limited partnerships would be business disruption due to the failure of service
providers. These disruptions would likely be temporary as the worst case
analysis remedy would be to replace the service provider.
Item 3: Quantitative and Qualitative Disclosures Above Market Risks
None.
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
None.
14
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 7 and Series 8
(Registrant)
By: WNC & Associates, Inc., General Partner
By: /s/ Wilfred N. Cooper, Jr.
Wilfred N. Cooper, Jr., President
WNC & Associates, Inc.
Date: February 14, 2000
By: /s/ Michael L. Dickenson
Michael L. Dickenson, Vice President - Chief Financial Officer
WNC & Associates, Inc.
Date: February 14, 2000
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001084067
<NAME> WNC Housing Tax Credit Fund VI, L.P., Series 7
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> SEP-03-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,195,749
<SECURITIES> 0
<RECEIVABLES> 803,590
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,999,339
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,341,349
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,141,170
<TOTAL-LIABILITY-AND-EQUITY> 3,341,349
<SALES> 0
<TOTAL-REVENUES> 6,082
<CGS> 0
<TOTAL-COSTS> 712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,370
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,370
<EPS-BASIC> 1
<EPS-DILUTED> 0
</TABLE>
