FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2003
OR
|_| 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.)
17782 Sky Park Circle
Irvine, CA 92614-6404
(Address of principal executive offices)
(714) 662-5565
(Telephone number)
3158 Redhill Avenue, Suite 120, Costa
Mesa, CA 92626 (Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
--------- ----------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes No X
--------- -------
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarterly Period Ended June 30, 2003
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
June 30, 2003 and March 31, 2003...........................3
Statements of Operations
For the Three Months Ended June 30, 2003 and 2002..........4
Statement of Partners' Equity (Deficit)
For the Three Months Ended June 30, 2003...................5
Statements of Cash Flows
For the Three Months Ended June 30, 2003 and 2002..........6
Notes to Financial Statements ...............................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................16
Item 3. Quantitative and Qualitative Disclosures about Market Risk..18
Item 4. Controls and Procedures.....................................18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................18
Signatures ..........................................................19
Certifications.......................................................20
2
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
BALANCE SHEETS
June 30, 2003 March 31, 2003
------------------------ ----------------------
(unaudited)
ASSETS
Cash and cash equivalents $ 23,898 $ 22,868
Funds held in escrow disbursement account 209,711 208,778
Investments in limited partnerships, net
(Notes 2 and 3) 14,630,493 14,954,813
Other assets (Note 6) 226,693 209,772
------------------------ ----------------------
$ 15,090,795 $ 15,396,231
======================== ======================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 4) $ 229,030 $ 229,030
Accrued fees and expenses due to
General Partner and affiliates (Note 3) 568,602 526,470
------------------------ ----------------------
Total liabilities 797,632 755,500
------------------------ ----------------------
Commitments and contingencies
Partners' equity (deficit):
General Partner (106,161) (102,685)
Limited Partners (25,000 units authorized,
25,000 units issued and outstanding) 14,399,324 14,743,416
------------------------ ----------------------
Total partners' equity 14,293,163 14,640,731
------------------------ ----------------------
$ 15,090,795 $ 15,396,231
======================== ======================
See accompanying notes to financial statements
3
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2003 and 2002
(unaudited)
2003 2002
--------------------- ----------------------
Three Three
Months Months
--------------------- ----------------------
Interest income $ 963 $ 2
--------------------- ----------------------
Operating expenses:
Amortization (Note 2) 16,134 16,134
Asset management fees (Note 3) 17,517 17,517
Legal and accounting fees 3,989 8,275
Other 3,705 4,997
--------------------- ----------------------
Total operating expenses 41,345 46,923
--------------------- ----------------------
Loss from operations (40,382) (46,921)
Equity in losses of
limited partnerships (Note 2) (307,186) (355,013)
--------------------- ----------------------
Net loss $ (347,568) $ (401,934)
===================== ======================
Net loss allocated to:
General Partner $ (3,476) $ (4,019)
===================== ======================
Limited Partners $ (344,092) $ (397,915)
===================== ======================
Net loss per weighted limited
partner unit $ (14) $ (16)
===================== ======================
Outstanding weighted limited
partner units 25,000 25,000
===================== ======================
See accompanying notes to financial statements
4
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For the Three Months Ended June 30, 2003
(unaudited)
General Limited
Partner Partners Total
----------------- ----------------- ------------------
Partners' equity (deficit) at March 31, 2003 $ (102,685) $ 14,743,416 $ 14,640,731
Net loss for the three months ended
June 30, 2003 (3,476) (344,092) (347,568)
----------------- ----------------- ------------------
Partners' equity (deficit) at June 30, 2003 $ (106,161) $ 14,399,324 $ 14,293,163
================= ================= ==================
See accompanying notes to financial statements
5
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 2003 and 2002
(unaudited)
2003 2002
------------------- --------------------
Cash flows from operating activities:
Net loss $ (347,568) $ (401,934)
Adjustment to reconcile net loss to
net cash used in operating activities:
Amortization 16,134 16,134
Equity in losses of limited partnerships 307,186 355,013
Other assets (16,921) (16,000)
Accrued fees and expenses due to General Partner
and affiliates 41,199 48,989
------------------- --------------------
Net cash provided by operating activities 30 2,202
------------------- --------------------
Cash flows from investing activities:
Distributions from limited partnerships 1,000 -
-------------------
--------------------
Net cash provided by investing activities 1,000 -
------------------- --------------------
Net increase in cash and cash equivalents 1,030 2,202
Cash and cash equivalents, beginning of period 22,868 1,288
------------------- --------------------
Cash and cash equivalents, end of period $ 23,898 $ 3,490
=================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Taxes paid $ - $ 800
=================== ====================
See accompanying notes to financial statements
6
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
General
- -------
The accompanying condensed unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act
of 1934. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended June 30, 2003 are not necessarily indicative of the results that may be
expected for the fiscal year ending March 31, 2004. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-K for the fiscal year ended March 31,
2003.
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 of the Partnership is WNC & Associates, Inc. ("Associates").
The chairman and president own substantially all 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.
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 partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on July 9, 1998 at which
time 25,000 Units representing subscriptions in the amount of $24,918,175, net
of discount of $54,595 for volume purchases and $27,230 for dealer discounts,
had been accepted. The General Partner has a 1% interest in operating profits
and losses, taxable income and losses, in cash available for distribution from
the Partnership and tax credits. The limited partners will be allocated the
remaining 99% interest in proportion to their respective investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partner has received proceeds
equal to its capital contribution and a subordinated disposition fee (as
described in Note 3) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments) and 10% to the General Partner.
7
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Risks and Uncertainties
- -----------------------
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low-Income Housing Credit rules are extremely complicated. Noncompliance
with these rules results in the loss of future Low-Income Housing Credit s and
the fractional recapture of Low-Income Housing Credits already taken. In most
cases the annual amount of Low-Income Housing Credits that an individual can use
is limited to the tax liability due on the person's last $25,000 of taxable
income. The Local Limited Partnerships may be unable to sell the Housing
Complexes at a profit. Accordingly, the Partnership may be unable to distribute
any cash to its investors. Low-Income Housing Credits may be the only benefit
from an investment in the Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships.
Such limited diversity means that the results of operation of each single
Housing Complex will have a greater impact on the Partnership. With limited
diversity, poor performance of one Housing Complex could impair the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If
foreclosure were to occur during the first 15 years, the loss of any remaining
future Low-Income Housing Credits, a fractional recapture of prior Low-Income
Housing Credits, and a loss of the Partnership's investment in the Housing
Complex would occur. The Partnership is a limited partner or non-managing member
of each Local Limited Partnership. Accordingly, the Partnership will have very
limited rights with respect to management of the Local Limited Partnerships. The
Partnership will rely totally on the Local General Partners. Neither the
Partnership's investments in Local Limited Partnerships, nor the Local Limited
Partnerships' investments in Housing Complexes, are 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 interests
in Local Limited Partnerships; limitations on removal of Local General Partners;
limitations on subsidy programs; and possible changes in applicable regulations.
Uninsured casualties could result in loss of property and Low-Income Housing
Credits and recapture of Low-Income Housing Credits previously taken. The value
of real estate is subject to risks from fluctuating economic conditions,
including employment rates, inflation, tax, environmental, land use and zoning
policies, supply and demand of similar properties, and neighborhood conditions,
among others.
The ability of Limited Partners to claim tax losses from the Partnership is
limited. The IRS may audit the Partnership or a Local Limited Partnership and
challenge the tax treatment of tax items. The amount of Low-Income Housing
Credits and tax losses allocable to the investors could be reduced if the IRS
were successful in such a challenge. The alternative minimum tax could reduce
tax benefits from an investment in the Partnership. Changes in tax laws could
also impact the tax benefits from an investment in the Partnership and/or the
value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Investors may
be unable to sell their Units except at a discount and should consider their
Units to be a long-term investment. Individual investors will have no recourse
if they disagree with actions authorized by a vote of the majority of Limited
Partners.
8
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
Exit Strategy
- -------------
The IRS compliance period for low-income housing tax credit properties is
generally 15 years from occupancy following construction or rehabilitation
completion. WNC was one of the firsts in the industry to offer investments using
the tax credit. Now these very first programs are completing their compliance
period.
With that in mind, the Partnership is continuing to review the Partnership's
holdings, with special emphasis on the more mature properties including those
that have satisfied the IRS compliance requirements. The Partnership's review
will consider many factors including extended use requirements on the property
(such as those due to mortgage restrictions or state compliance agreements), the
condition of the property, and the tax consequences to the investors from the
sale of the property.
Upon identifying those properties with the highest potential for a successful
sale, refinancing or syndication, the Partnership expects to proceed with
efforts to liquidate those properties. The Partnership's objective is to
maximize the investors' return wherever possible and, ultimately, to wind down
those funds that no longer provide tax benefits to investors. To date no
properties in the Partnership have been selected.
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 Partnerships' results of operations
and for any contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by a comparison of the carrying
amount to future undiscounted net cash flows expected to be generated. If an
investment is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the investment exceeds
fair value. The accounting policies of the Local Limited Partnerships' are
generally 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 Notes 2 and 3).
Losses from limited partnerships for the periods ended June 30, 2003 and 2002
have been recorded by the Partnership based on three months of reported results
estimated by management of the Partnership. Management's estimate for the
three-month period is based on either actual unaudited results reported by the
Local Limited Partnerships or historical trends in the operations of the Local
Limited Partnerships. Losses from the Local Limited Partnerships allocated to
the Partnership are not recognized to the extent that the investment balance
would be adjusted below zero. As soon as the investment balance reaches zero,
amortization of the related costs of acquiring the investment are accelerated to
the extent of losses available.
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
$3,357,441 as of June 30, 2003 and March 31, 2003.
9
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- ---------------------------------------------------------------
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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
June 30, 2003 and March 31, 2003, the Partnership had $0 cash equivalents.
Concentration of Credit Risk
- ----------------------------
At June 30, 2003 and March 31, 2003, the Partnership maintained cash balances at
certain financial institutions in excess of the federally insured maximum.
Net Loss Per Weighted Limited Partner Unit
- ------------------------------------------
Net loss per weighted limited partner 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 loss per unit is not required.
Reporting Comprehensive Income
- ------------------------------
The Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income established standards for the reporting and display of
comprehensive income (loss) and its components in a full set of general-purpose
financial statements. The Partnership had no items of other comprehensive income
for all periods presented, as defined by SFAS No. 130.
New Accounting Pronouncements
- -----------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations", which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with the associated asset retirement costs being capitalized as a part
of the carrying amount of the long-lived asset. SFAS No. 143 also includes
disclosure requirements that provide a description of asset retirement
obligations and reconciliation of changes in the components of those
obligations. The statement is effective for fiscal years beginning after June
15, 2002. The adoption of SFAS No. 143 did not have a material impact on the
Partnership's financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which addresses accounting and financial reporting for the
impairment or disposal of long-lived assets. This standard was effective for the
Partnership's financial statements beginning January 1, 2002. The implementation
of SFAS No. 144 did not have a material impact on the Partnership's financial
position or results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinded three previously issued statements and amended SFAS No.
13, "Accounting for Leases." The statement provides reporting standards for debt
extinguishments and provides accounting standards for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
The
10
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- ---------------------------------------------------------------
New Accounting Pronouncements, continued
- ----------------------------------------
statement is effective for certain lease transactions occurring after May 15,
2002 and all other provisions of the statement shall be effective for financial
statements issued on or after May 15, 2002. The implementation of SFAS No. 145
did not have a material impact on the Partnership's financial position or
results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which updates accounting and reporting
standards for personnel and operational restructurings. The Partnership adopted
SFAS No. 146 for exit, disposal or other restructuring activities initiated
after December 31, 2002. The adoption of SFAS No. 146 did not have a material
effect on the Partnership's financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The adoption of FIN 45 did not have a
material impact on the Partnership's financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123." SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method on accounting for stock-based employee compensation. The
adoption of SFAS No. 148 did not have a material impact on the Partnership's
financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." The adoption of FIN 46 did not
have a material impact on the Partnership's financial position or results of
operations.
Reclassification
- ----------------
Certain prior period balances have been reclassified to conform to the
presentation for the three months ended June 30, 2003.
11
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of the periods presented, the Partnership had acquired limited partnership
interests in 15 Local Limited Partnerships, each of which owns one Housing
Complex consisting of an aggregate of 624 apartment units. The respective
general partners of the Local Limited Partnerships manage the day-to-day
operations of the entities. Significant Local Limited Partnership business
decisions require approval from the Partnership. The Partnership, as a limited
partner, is generally entitled to 99%, as specified in the Local Limited
Partnership agreements, of the operating profits and losses, taxable income and
losses and tax credits of the Local Limited Partnerships.
As of August 28, 2003, the Partnership had not obtained audited financial
statements for two of its investments, Mansur Wood Living Center, L.P., ("Mansur
Wood") and Murfreesboro Villas, L.P., ("Murfreesboro") as of and for the years
ended December 31 2002 and 2001 for Mansur Wood and as of and for the year ended
December 31, 2002 for Murfreesboro. As a result, the Partnership has not
included the financial information of Mansur Wood and Murfreesboro in the
combined condensed financial statements presented elsewhere herein. The
Partnership's investment in Mansur Wood totaled $4,962,000 (unaudited) at June
30, 2003. The Partnership's investment in Murfreesboro totaled $403,000
(unaudited) as of June 30, 2003. The Partnership's interest in the results of
operations of Mansur Wood totaled $(107,000) (unaudited) for the period ended
June 30, 2003. The Partnership's interest in the results of operations of
Murfreesboro totaled $(19,000) (unaudited) for the period ended June 30, 2003.
The combined condensed financial statements presented herein for June 30, 2002
previously included net losses of $(125,000) for Mansur Wood and $(11,000) for
Murfreesboro. The combined condensed financial information presented in this
footnote for 2002 has been restated to exclude the accounts of Murfreesboro.
Furthermore, the financial information of Mansur Wood has been excluded for all
periods presented in the combined condensed financial statements.
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. As of June 30, 2003, 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 as of:
For the Three Months For the Year
Ended Ended
June 30, 2003
(unadudited) March 31, 2003
---------------------- ------------------
Investments in limited partnerships, beginning of
period $ 14,954,813 $ 16,200,256
Equity in losses of limited partnerships (307,186) (1,180,907)
Distributions received from limited partnerships (1,000) -
Amortization of capitalized acquisition fees and costs (16,134) (64,536)
---------------------- ------------------
Investments in limited partnerships, end of period $ 14,630,493 $ 14,954,813
====================== ==================
12
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
Selected unaudited financial information for the three months ended June 30,
2003 and 2002 from the combined financial statements of the Local Limited
Partnerships in which the Partnership has invested is as follows (combined
condensed financial information for Mansur Wood Living Center, L.P. and
Murfreesboro Villas, L.P. have been excluded from the presentation below):
COMBINED CONDENSED STATEMENT OF OPERATIONS
2003 2002
------------------- -----------------
(Restated)
Revenues $ 581,000 $ 549,000
------------------- -----------------
Expenses:
Interest expense 160,000 157,000
Depreciation and amortization 211,000 212,000
Operating expenses 391,000 399,000
------------------- -----------------
Total expenses 762,000 768,000
------------------- -----------------
Net loss $ (181,000) $ (219,000)
=================== =================
Net loss allocable to the Partnership,
before equity in losses of Mansur Wood and Murfreesboro $ (181,000) $ (219,000)
=================== =================
Net loss recorded by the Partnership,
before equity in losses of Mansur Wood and Murfreesboro $ (181,000) $ (219,000)
Net loss of Mansur Wood
recorded by the Partnership (unaudited) (107,000) (125,000)
Net loss of Murfreesboro
recorded by the Partnership (unaudited) (19,000) (11,000)
=================== =================
Net loss recorded by the Partnership $ (307,000) $ (355,000)
=================== =================
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, and the loss and recapture of the related tax credits could occur.
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates for the following fees:
(a) Acquisition fees of 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 June 30, 2003 and March 31, 2003, the
Partnership incurred acquisition fees of $1,750,000. Accumulated
amortization of these capitalized costs were $307,759 and $293,174 as of
June 30, 2003 and March 31, 2003, respectively.
13
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
(b) Acquisition costs of 0.75% of the gross proceeds from the sales of Units as
full reimbursement of costs incurred by the General Partner in connection
with the acquisition of Local Limited Partnerships. As of June 30, 2003 and
March 31, 2003, the Partnership incurred acquisition costs of $185,734.
Accumulated amortization was $31,382 and $29,833 as of June 30, 2003 and
March 31, 2003, respectively.
(b) 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 $17,517 were incurred for each of the
three months ended June 30, 2003 and 2002, of which $0 was paid during the
three months ended June 30, 2003 and 2002.
(c) 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 preferred return of 12% through December 31, 2008 and
6% thereafter (as defined in the Partnership Agreement) and is payable only
if the General Partner or its affiliates render services in the sales
effort.
Accrued fees and expenses due to the General Partner and affiliates consisted of
the following:
June 30, 2003 March 31, 2003
----------------------- ------------------
Advances from WNC $ 403,580 $ 378,965
Asset management fee payable 165,022 147,505
----------------------- ------------------
Total $ 568,602 $ 526,470
======================= ==================
The Partnership currently has insufficient working capital to fund operations.
WNC & Associates, Inc. has agreed to provide advances sufficient enough to fund
the operations and working capital requirements of the partnership through at
least September 1, 2004.
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
- -----------------------------------------
Payables to limited partnerships represent amounts, which are due at various
times based on conditions specified in the respective limited partnership
agreements. These contributions are payable in installments and are generally
due upon the limited partnerships achieving certain development and operating
benchmarks (generally within two years of the Partnership's initial investment).
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.
14
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarterly Period Ended June 30, 2003
(unaudited)
NOTE 6 -ADVANCES TO LOCAL LIMITED PARTNERSHIPS
- ----------------------------------------------
During the period ended June 30, 2003, the Partnership advanced approximately
$17,000 to one Local Limited Partnership, Mansur Wood, in which the Partnership
is a limited partner. These advances were used to facilitate timely escrow
payments. The Partnership determined the recoverability of these advances and
previous advances aggregating $216,000 to be probable and, accordingly, a
reserve has not been recorded.
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
With the exception of the discussion regarding historical information,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other discussions elsewhere in this Form 10-Q contain
forward-looking statements. Such statements are based on current expectations
subject to uncertainties and other factors, which may involve known and unknown
risks that could cause actual results of operations to differ materially from
those, projected or implied. Further, certain forward-looking statements are
based upon assumptions about future events, which may not prove to be accurate.
Risks and uncertainties inherent in forward-looking statements include, but are
not limited to, our future cash flows and ability to obtain sufficient
financing, level of operating expenses, conditions in the low-income housing tax
credit property market and the economy in general, as well as legal proceedings.
Historical results are not necessarily indicative of the operating results for
any future period.
Subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by
cautionary statements in this Form 10-Q and in other reports we filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this filing.
The following discussion and analysis compares the results of operations for the
fiscal quarters ended June 30, 2003 and 2002, and should be read in conjunction
with the condensed financial statements and accompanying notes included within
this report.
Financial Condition
The Partnership's assets at June 30, 2003 consisted primarily of $24,000 in
cash, $210,000 in restricted cash, aggregate investments in the fifteen Local
Limited Partnerships of $14,630,000 and $227,000 in other assets. Liabilities at
June 30, 2003 primarily consisted of $229,000 due to Local Limited Partnerships,
$165,000 in annual asset management fees, and $404,000 in advances and other
payables due to the General Partner or affiliates.
Results of Operations
Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002.
The Partnership's net loss for the three months ended June 30, 2003 was
$(348,000), reflecting a decrease of $(54,000) from the $(402,000) net loss for
the three months ended June 30, 2002. The change was primarily due to a decrease
in equity in losses of Local Limited Partnerships of $(48,000) from $(355,000)
for the three months ended June 30, 2002 to $(307,000) for the three months
ended June 30, 2003. In addition to the decrease in equity in losses of Local
Limited Partnerships, loss from operations decreased by approximately $(7,000)
from $(47,000) for the three months ended June 30, 2002 to $(40,000) for the
three months ended June 30, 2003 due to a decrease in legal and accounting fees
and a decrease in other operating expenses.
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations, Continued
Cash Flows
Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002.
Net cash increased by $1,000 during the three months ended June 30, 2003. Net
cash increased by $2,000 during the three months ended June 30, 2002 reflecting
a period to period change of $(1,000). The overall decrease in net cash provided
is due primarily to a $(2,000) reduction in net cash provided by operating
activities for the three months ended June 30, 2003 compared with the three
months ended June 30, 2002 offset by $1,000 of distributions which were received
by the Partnership during the three months ended June 30, 2003.
During the three months ended June 30, 2003 accrued fees and expenses increased
by $42,000, and consist primarily of related party management fees and advances
due to the General Partner. The General Partner does not anticipate that the
accrued fees and advances will be paid until such time as capital reserves are
in excess of foreseeable working capital requirements of the partnership.
The Partnership does not expect its future cash flows, together with its net
available assets at June 30, 2003, to be sufficient to meet all currently
foreseeable future cash requirements. Accordingly, WNC & Associates, Inc. has
agreed to provide advances sufficient enough to fund the operations and working
capital requirements of the partnership through at least September 1, 2004.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risks
None.
Item 4. Controls and Procedures
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's
Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a- 14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and
procedures are effective. There were no significant changes in the
Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K.
--------------------
1. NONE
(b) Exhibits.
---------
99.1 Certification of the Principal Executive Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
99.2 Certification of the Principal Financial Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
18
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
By: WNC & Associates, Inc. General Partner
By: /s/Wilfred N. Cooper, Jr.
-------------------------
Wilfred N. Cooper, Jr.,
President and Chief Operating Officer of WNC & Associates, Inc.
Date: October 14, 2003
By: /s/ Thomas J. Riha
-------------------
Thomas J. Riha
Vice President and Chief Financial Officer of WNC & Associates, Inc.
Date: October 14, 2003
19
CERTIFICATIONS
I, Wilfred N. Cooper, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC Housing Tax
Credit Fund VI, L.P. Series 5;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: October 14, 2003
/s/Wilfred N. Cooper, Jr.
-------------------------
President and Chief Executive Officer of WNC & Associates, Inc.
20
CERTIFICATIONS
I, Thomas J. Riha, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC
Housing Tax Credit Fund VI, L.P. Series 5;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: October 14, 2003
/s/ Thomas J. Riha
------------------
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
21