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 September 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: 333-76435-01
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 8
California 33-0761517
(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, CostaMesa, 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 8
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 2003
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
September 30, 2003 and March 31, 2003..................................3
Statements of Operations
For the Three and Six Months Ended September 30, 2003 and 2002.........4
Statement of Partners' Equity (Deficit)
For the Six Months Ended September 30, 2003............................5
Statements of Cash Flows
For the Six Months Ended September 30, 2003 and 2002...................6
Notes to Financial Statements............................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....17
Item 4. Controls and Procedures........................................17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................17
Item 6. Exhibits and Reports on Form 8-K...............................17
Signatures..............................................................18
2
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
BALANCE SHEETS
September 30, 2003 March 31, 2003
------------------ --------------
ASSETS (unaudited)
Cash and cash equivalents $ 643,552 $ 663,747
Investments in limited partnerships
(Notes 2 and 3) 7,633,845 7,786,112
---------------------- ----------------------
Total Assets $ 8,277,397 $ 8,449,859
====================== ======================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 4) $ 197,347 $ 197,347
Accrued fees and expenses due to
General Partner and affiliates (Note 3) 21,139 21,606
---------------------- ----------------------
Total Liabilities 218,486 218,953
---------------------- ----------------------
Commitment and contingencies
Partners' Equity (Deficit)
General partner (945) (773)
Limited partners (25,000 units authorized
and 9,814 units issued and outstanding
at September 30, 2003 and March 31, 2003) 8,059,856 8,231,679
---------------------- ----------------------
Total Partners' Equity 8,058,911 8,230,906
---------------------- ----------------------
Total liabilities and partners' equity $ 8,277,397 $ 8,449,859
====================== ======================
See accompanying notes to financial statements
3
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 2003 and 2002
(unaudited)
2003 2003 2002 2002
------------------- ------------------ ----------------- ----------------
Three Months Six Months Three Months Six Months
------------------- ------------------ ----------------- ----------------
Interest income $ 1,229 $ 2,467 $ 4,258 $ 9,291
------------------- ------------------ ----------------- ----------------
Operating expenses:
Amortization (Note 2) 7,613 15,226 7,724 15,226
Asset management fees (Note 3) 5,871 11,742 5,871 11,742
Legal and accounting 10,434 14,004 4,725 8,400
Other 3,870 5,103 804 3,438
------------------- ------------------ ----------------- ----------------
Total operating expenses 27,788 46,075 19,124 38,806
------------------- ------------------ ----------------- ----------------
Loss from operations (26,559) (43,608) (14,866) (29,515)
Equity in losses of
limited partnerships (Note 2) (64,193) (128,387) (114,165) (98,454)
------------------- ------------------ ----------------- ----------------
Net loss $ (90,752) $ (171,995) $ (129,031) $ (127,969)
=================== ================== ================= ================
Net loss allocated to:
General partner $ (91) $ (172) $ (129) $ (128)
=================== ================== ================= ================
Limited partners $ (90,661) $ (171,823) $ (128,902) $ (127,841)
=================== ================== ================= ================
Net loss per limited
partner unit $ (9) $ (18) $ (13) $ (13)
=================== ================== ================= ================
Outstanding weighted limited
partner units 9,814 9,814 9,814 9,814
=================== ================== ================= ================
See accompanying notes to financial statements
4
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For the Six Months Ended September 30, 2003
(unaudited)
General Partner Limited Partners Total
--------------- ---------------- -----
Partners' equity (deficit), March 31, 2003 $ (773) $ 8,231,679 $ 8,230,906
Net loss (172) (171,823) (171,995)
-------------------- -------------------- --------------------
Partners' equity (deficit), September 30, 2003 $ (945) $ 8,059,856 $ 8,058,911
==================== ==================== ====================
See accompanying notes to financial statements
5
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2003 and 2002
(unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net loss $ (171,995) $ (127,969)
Adjustments to reconcile net loss to
net cash used in operating activities:
Equity in losses of limited partnerships 128,387 98,454
Amortization 15,226 15,226
Accrued fees and expenses due to
General Partner and affiliates (467) 6,982
------------------- ---------------------
Net cash used in operating activities (28,849) (7,307)
------------------- ---------------------
Cash flows from investing activities:
Investments in limited partnerships, net - (281,381)
Distributions from limited partnerships 8,654 5,000
------------------- ---------------------
Net cash provided by (used in) investing activities 8,654 (276,381)
------------------- ---------------------
Cash flows from financing activities:
Financing fee payable - (2,960)
------------------- ---------------------
Net change in cash and cash equivalents (20,195) (286,648)
Cash and cash equivalents, beginning of period 663,747 1,127,639
------------------- ---------------------
Cash and cash equivalents, end of period $ 643,552 $ 840,991
=================== =====================
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 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 1 - ORGANIZATION AND 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 and six
months ended September 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 8 (the "Partnership") was formed
under the California Revised Limited Partnership Act on September 16, 1997 and
commenced operations on November 17, 2000, the effective date of its public
offering pursuant to the Securities and Exchange Commission's approval of the
Partnership's Pre-Effective Amendment No. 5 to Form S-11 initially filed on July
16, 1999. The Partnership was formed to invest primarily in other limited
partnerships or limited liability companies which will own and operate
multifamily housing complexes that are eligible for low-income housing federal
and, in certain cases, California income tax credits ("Low-income Housing
Credit").
The Partnership shall continue in full force and effect until December 31, 2060
unless terminated prior to that date, pursuant to the partnership agreement or
law.
The general partner is WNC & Associates, Inc. ("WNC") (the "General Partner"), a
California limited partnership. The chairman and president own substantially all
of the outstanding stock of WNC. The business of the Partnership is conducted
primarily through WNC, as the Partnership has no employees of its own.
The partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). As of September 30, 2003, 9,814 Units, representing
subscriptions in the amount of $9,807,585, net of dealer discounts of $6,370 and
volume discounts of $45, had been accepted. The General Partner has 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 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 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 1 - ORGANIZATION AND 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 Credits 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
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 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 1 - ORGANIZATION AND 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 first 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 Partnership's 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 (Notes 2 and 3).
Equity in losses of limited partnerships for the periods ended September 30,
2003 and 2002 have been recorded by the Partnership based on six months of
results estimated by management of the Partnership. Management's estimate for
the six-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. Equity in losses from the Local Limited Partnerships
allocated to the Partnership will not be 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 (see Note 2 ).
Offering Expenses
- -----------------
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred in connection with selling
limited partnership interests in the Partnership. The General Partner is
obligated to pay all offering and organization costs in excess of 4% (excluding
sales commissions) of the total offering proceeds. Offering expenses are
reflected as a reduction of limited partners' capital and amounted to $1,269,405
as of September 30, 2003 and March 31, 2003.
9
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 1 - ORGANIZATION AND 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
September 30, 2003, the Partnership had no cash equivalents.
Concentration of Credit Risk
- ----------------------------
At September 30, 2003, the Partnership maintained cash balances at certain
financial institutions in excess of the federally insured maximum.
Net Income Per Limited Partner Unit
- -----------------------------------
Net income per limited partner unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net income per unit
includes no dilution and is computed by dividing income 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.
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 the 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
Partnerhip'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.
10
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- --------------------------------------------------------------
New Accounting Pronouncements, continued
- ----------------------------------------
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 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 finacial 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 ("FIN46"), "Consolidation
of Variable Interest Entities," FIN 46 provides guidance on when a company
should include the assets, liabilities, and activities of a variable interest
entity ("VIE") in its financial statements and when it should disclose
information about its relationship with a VIE. A VIE is a legal structure used
to conduct activities or hold assets, which must be consolidated by a company if
it is the primary beneficiary because it absorbs the majority of the entity's
expected losses, the majority of the expected returns, or both. The provisions
of FIN 46 were effective February 1, 2003 for all arrangements entered into
after January 31, 2003. FIN 46 is effective in the third quarter of 2004 for
those arrangements entered into prior to January 31, 2003. We are currently
reviewing whether we have relationships with VIEs and, if so, whether we should
consolidate them and disclose information about them as the primary beneficiary
or disclose information about them as an interest holder. We may have to
consolidate some of our equity investments in partnerships based on recent
interpretations from accounting professionals. We currently record the amount of
our investment in these partnerships as an asset on our balance sheet, recognize
our share of partnership income or losses in our income statement, and disclose
how we account for material types of these investments in our 2003 financial
statements. However, we do not yet know the extent of the impact of
consolidating the assets and liabilities of these partnerships on our balance
sheet because of the complexities of applying FIN 46, the evolving
interpretations from accounting professionals, and the nuances of each
individual partnership.
11
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of the periods presented, the Partnership has acquired limited partnership
interests in six Local Limited Partnerships, each of which owns one Housing
Complex consisting of an aggregate of 216 apartment units. As of September 30,
2003, construction or rehabilitation of the Housing Complexes has been
completed. 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 99.98%, as specified
in the Local Limited Partnership agreements, of the operating profits and
losses, taxable income and losses and tax credits of the Local Limited
Partnerships.
Equity in losses of the Local Limited Partnerships is recognized in the
financial statements until the related investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
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 September 30, 2003, no investment accounts
in Local Limited Partnerships had reached a zero balance.
The following is a summary of the equity method activity of the investments in
local limited partnerships as of:
September 30, 2003 March 31, 2003
--------------------- --------------------
Investments per balance sheet, beginning of period $ 7,786,112 $ 8,173,367
Tax credit adjustment - (15,413)
Equity in losses of limited partnership (128,387) (341,390)
Distributions from limited partnerships (8,654) -
Amortization of capitalized acquisition fees and costs (15,226) (30,452)
--------------------- --------------------
Investments per balance sheet, end of period $ 7,633,845 $ 7,786,112
===================== ====================
12
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, CONTINUED
- -------------------------------------------------------
Selected financial information for the six months ended September 30, 2003 and
2002 from the unaudited combined condensed financial statements of the limited
partnerships in which the Partnership has invested are as follows:
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2003 2002
-------------------- ------------------
Revenues $ 491,000 $ 478,000
-------------------- ------------------
Expenses:
Interest expense 150,000 190,000
Depreciation & amortization 186,000 126,000
Operating expenses 295,000 260,000
-------------------- ------------------
Total expenses 631,000 576,000
-------------------- ------------------
Net loss $ (140,000) $ (98,000)
==================== ==================
Net loss allocable to the Partnership $ (128,000) $ (98,000)
==================== ==================
Net loss recorded by the Partnership $ (128,000) $ (98,000)
==================== ==================
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Partnership has no officer, 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 September 30, 2003 and March 31, 2003,
the Partnership incurred acquisition fees of $686,980. Accumulated
amortization of these capitalized costs was $51,806 and $40,352 as of
September 30, 2003 and March 31, 2003, respectively.
(b) Acquisition costs of 2% of the gross proceeds from the sale of Units as
full reimbursement of costs incurred by the General Partner in connection
with the acquisition of Local Limited Partnerships. As of September 30,
2003 and March 31, 2003, the Partnership incurred acquisition costs of
$196,280. Accumulated amortization of these capitalized costs was $14,981
and $11,707 as of September 30, 2003 and March 31, 2003, respectively.
(c) 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 $11,742 were incurred in each of the six
months ended September 30, 2003 and 2002, respectively. The Partnership
paid the General Partner or its affiliates $11,742 and $0 of these fees
during the six months ended September 30, 2003 and 2002, respectively.
13
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 8
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Quarter Ended September 30, 2003
(unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
(d) 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.
Accrued fees and expenses due to the General Partner and affiliates consisted of
the following as of:
September 30, 2003 March 31, 2003
---------------------- ---------------------
Asset management fees payable $ 17,687 $ 17,687
Reimbursements for expenses paid by the
General Partner or an affiliate 3,452 3,919
---------------------- ---------------------
Total $ 21,139 $ 21,606
====================== =====================
NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
- -----------------------------------------
Payables to limited partnerships amounting to $197,347 at September 30, 2003 and
March 31, 2003 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 will be recorded in the financial statements, as
any liability for income taxes is the obligation of the partners of the
Partnership.
14
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 condensed Financial Statements and the Notes thereto
included elsewhere in this filing.
The following discussion and analysis discusses the results of operations for
the three and six months ended September 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 September 30, 2003 consisted primarily of $644,000
in cash and aggregate investments in the six Local Limited Partnerships of
$7,634,000. Liabilities at September 30, 2003 primarily consisted of $197,000 of
notes payable to limited partnerships and $21,000 in accrued expenses and
management fees due to the General Partner or affiliates.
Results of Operations
Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002. The Partnership's net loss for the three months ended September 30,
2003 was $(91,000) reflecting a decrease of $38,000 from the net loss of
$(129,000) experienced for the three months ended September 30, 2002. The
decrease in net loss is primarily due to a decrease of equity in losses from
limited partnerships of $50,000 from $(114,000) of losses for the three months
ended September 30, 2002 to $(64,000) of losses for the three months ended
September 30, 2003. The decrease in equity in losses is largely due to the fact
that the properties were still in the start-up stage in 2002 and have stabilized
in the current year. The decrease of equity in losses from limited partnerships,
was offset by an increase in the loss from operations of $(12,000) due to a
decrease in interest income of $(3,000) along with an increase of $(6,000) in
legal and accounting combined with an increase in other operating expenses of
$(3,000) for the three months ended September 30, 2003.
Six Months Ended September 30, 2003 Compared to Six Months Ended September 30,
2002. The Partnership's net loss for the six months ended September 30, 2003 was
$(172,000) reflecting an increase of $(44,000) from the net loss of $(128,000)
for the six months ended September 30, 2002. The increase in net loss is
primarily due to an increase in equity in losses from limited partnerships of
$(30,000) from $(98,000) of losses for the six months ended September 30, 2002
to $(128,000) of losses for the six months ended September 30, 2003 as
properties became fully operational. Along with the increase of equity in losses
from limited partnerships, loss from operations increased by $(14,000) due to a
decrease in interest income of $(7,000) along with an increase of $(6,000) in
legal and accounting combined with an increase in other operating expenses of
$(1,000) for the six months ended September 30, 2003.
15
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
Cash Flows
Six Months Ended September 30, 2003 Compared to Six Months Ended September 30,
2002. Net decrease in cash during the six months ended September 30, 2003 was
$(20,000), compared to a net decrease in cash for the six months ended September
30, 2002 of $(286,000) reflecting a decrease in cash used of $266,000. The
change in net cash used is due primarily to a change of $285,000 in cash used in
investing activities, due to the decrease in capital contributions to Local
Limited Partnerships as their balances were paid down, along with a decrease in
net cash used by financing activities by $(3,000) due to the completion of the
syndication process. The decrease in cash used in financing and investing
activities was offset by an increase of $(22,000) in cash used in operating
activities for the six months September 30, 2003.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 2003, to be sufficient to meet all currently foreseeable
future cash requirements.
16
Item 3. Quantitative and Qualitative Disclosures About Market Risk
NOT APPLICABLE
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 1. Legal Proceedings
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K.
--------------------
1. NONE
(b) Exhibits.
---------
31.1 Certification of the Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. (filed herewith)
31.2 Certification of the Principal Financial Officer pursuant to Rule
13a-14(a/)15d-14(a), as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. (filed herewith)
32.1 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)
32.2 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)
17
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 8
(Registrant)
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: December 15, 2003
By: /s/ Thomas J. Riha
------------------
Thomas J. Riha
Vice President and Chief Financial Officer of WNC & Associates, Inc.
Date: December 15, 2003
18