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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 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.)
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
-------- ------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the registrant is an accelerated filer.
Yes No X
----------- ---------------
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
2
PART 1.
Item 1. Business
Organization
WNC Housing Tax Credit Fund, VI, L.P., Series 5 (the "Partnership") was formed
under the California Revised Limited Partnership Act on March 3, 1997 and
commenced operations on August 29, 1997. The Partnership was formed to invest
primarily in other limited partnerships or limited liability companies which
will own and operate multifamily housing complexes that are eligible for
low-income housing federal and, in certain cases, California income tax credits
("Low Income Housing Credit").
The general partner of the Partnership is WNC & Associates, Inc. ("Associates"
or the "General Partner".) 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.
Pursuant to a registration statement filed with the Securities and Exchange
Commission on June 23, 1997, the Partnership commenced a public offering of
25,000 units of Limited Partnership Interest ("Units"), at a price of $1,000 per
Unit. As of the close of the public offering on July 9, 1998, the Partnership
had received and accepted subscriptions for 25,000 Units in the amount of
$24,918,175 net of volume and dealer discounts of $81,825. Holders of Units are
referred to herein as "Limited Partners."
Description of Business
The Partnership's principal business objective is to provide its Limited
Partners with Low Income Housing Credits. The Partnership's principal business
therefore consists of investing as a limited partner or non-managing member in
Local Limited Partnerships each of which will own and operate a multi-family
housing complex (the "Housing Complexes") which will qualify for the Low Income
Housing Credit. In general, under Section 42 of the Internal Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce Federal taxes otherwise due in each year of a ten-year period. In
general, under Section 17058 of the California Revenue and Taxation Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against California taxes otherwise due in each year of a four-year period. Each
Housing Complex is subject to a fifteen-year compliance period (the "Compliance
Period"), and under state law may have to be maintained as low income housing
for 30 or more years.
In general, in order to avoid recapture of Low Income Housing Credits, the
Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited Partnership of its Housing Complex prior to the end of the
applicable Compliance Period. Because of (i) the nature of the Housing
Complexes, (ii) the difficulty of predicting the resale market for low-income
housing 15 or more years in the future, and (iii) the ability of government
lenders to disapprove of transfer, it is not possible at this time to predict
whether the liquidation of the Partnership's assets and the disposition of the
proceeds, if any, in accordance with the Partnership's Agreement of Limited
Partnership, dated March 3, 1997 as amended on August 29, 1997 (the "Partnership
Agreement"), will be able to be accomplished promptly at the end of the 15-year
period. If a Local Limited Partnership is unable to sell its Housing Complex, it
is anticipated that the local general partner ("Local General Partner") will
either continue to operate such Housing Complex or take such other actions as
the Local General Partner believes to be in the best interest of the Local
Limited Partnership. Notwithstanding the preceding, circumstances beyond the
control of the General Partner or the Local General Partners may occur during
the Compliance Period, which would require the Partnership to approve the
disposition of a Housing Complex prior to the end thereof, possibly resulting in
recapture of Low Income Housing Credits.
3
As of March 31, 2003, the Partnership had invested in fifteen Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
Certain 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.
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.
4
With that in mind, we are continuing our review of the Partnership's holdings,
with special emphasis on the more mature properties including those that have
satisfied the IRS compliance requirements. Our 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, we expect to proceed with efforts to liquidate
those properties. Our 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.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
limited partnership interests in the Housing Complexes. The following table
reflects the status of the fifteen Housing Complexes as of the dates and for the
periods indicated.
5
---------------------------------- -----------------------------------------------
As of March 31, 2003 As of December 31, 2002
---------------------------------- -----------------------------------------------
Partnership's Estimated Low Encumbrances
Total Investment Amount of Income of Local
General Partner in Local Limited Investment Number of Housing Limited
Partnership Name Location Name Partnerships Paid to Date Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Apartment
Housing of Theodore, Apartment Developers,
Theodore Alabama Inc. and Thomas H.
Cooksey $ 1,188,000 $ 1,188,000 40 97% $ 2,015,000 $ 1,140,000
Austin
Gateway, Austin, Gary L.
Ltd. Texas Kersch 131,000 131,000 10 100% 157,000 383,000
Bradley
Villas
Limited Bradley, Horizon
Partnership Arkansas Bank 501,000 501,000 20 90% 628,000 513,000
Chillicothe
Plaza Apts. Chillicothe, MBL Development
L.P. Missouri Co. 972,000 972,000 28 100% 1,555,000 708,000
Concord New Communities,
Apartment LLC, a
Partners, Orlando, Colorado limited
L.P. Florida liability Company 470,000 470,000 26 100% 782,000 277,000
El Reno Cowen
Housing Properties,
Associates Inc.,
Limited El Reno, an Oklahoma
Partnership Oklahoma Corporation 3,040,000 2,836,000 100 91% 4,407,000 2,358,000
Enhance, Baton Rouge, Olsen Securities
L.P. Louisiana Corp. 620,000 620,000 23 61% 867,000 628,000
Hillcrest Marshalltown, WNC &
Heights, L.P. Iowa Associates 609,000 609,000 32 91% 681,000 564,000
Hughes
Villas Billy
Limited Hughes, Wayne
Partnership Arkansas Bunn 182,000 182,000 20 90% 337,000 755,000
6
---------------------------------- -----------------------------------------------
As of March 31, 2003 As of December 31, 2002
---------------------------------- -----------------------------------------------
Partnership's Estimated Low Encumbrances
Total Investment Amount of Income of Local
General Partner in Local Limited Investment Number of Housing Limited
Partnership Name Location Name Partnerships Paid to Date Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Mansur Elderly
Wood Carbon Living
Living Cliff, Development,
Center, L.P. Illinois Inc. 6,446,000 6,446,000 115 96% 8,956,000 *
Mark Twain
Senior Thomas P.
Community Lam and
Limited Oakland, Marilyn S.
Partnership California Lam 740,000 715,000 106 98% 1,145,000 1,419,000
Murfreesboro Murfreesboro
Villas Industrial
Limited Murfreesboro, Development
Partnership Arkansas Corporation 685,000 685,000 24 71% 130,000 *
Spring Valley Spring
Terrace Valley
Apartments, Mayer, Terrace,
LLC Arizona Inc. 716,000 716,000 20 80% 590,000 720,000
United Harold E.
Development Buehler, Sr.
Co., Memphis, and Jo Ellen
L.P. - 97.1 Tennessee Buehler 1,845,000 1,845,000 40 97% 2,693,000 877,000
United Harold E.
Development Buehler, Sr.
Co., Memphis, and Jo Ellen
L.P. - 97.2 Tennessee Buehler 743,000 743,000 20 100% 1,061,000 368,000
------------ ------------ ---- ---- ------------ ------------
$ 18,888,000 $ 18,659,000 624 91% $ 26,004,000 $ 10,710,000
============ ============ ==== ==== ============ ============
* Results of Mansur Wood Living Center, L.P. and Murfreesboro Villas, L.P. have not been audited and have thus been excluded. See
Note 2 to the financial statements and report of independent certified public accountants.
7
--------------------------------------------------------------------
For the year ended December 31, 2002
--------------------------------------------------------------------
Low Income Housing
Partnership Name Rental Income Net Loss Credits Allocated
- --------------------------------------------------------------------------------------------------------------------
Apartment Housing of Theodore $ 151,000 $ (78,000) 98.99%
Austin Gateway, Ltd. 60,000 (37,000) 99.98%
Bradley Villas Limited Partnership 64,000 (28,000) 99.00%
Chillicothe Plaza Apts. L.P. 100,000 (12,000) 99.97%
Concord Apartment Partners, L.P. 104,000 (24,000) 99.98%
El Reno Housing Associates Limited Partnership 465,000 (241,000) 99.98%
Enhance, L.P. 66,000 (64,000) 99.98%
Hillcrest Heights, L.P. 159,000 (21,000) 99.99%
Hughes Villas Limited Partnership 88,000 (34,000) 99.00%
Mansur Wood Living Center, L.P. * * 99.98%
Mark Twain Senior Community Limited Partnership 561,000 (58,000) 98.99%
Murfreesboro Villas Limited Partnership * * 99.00%
Spring Valley Terrace Apartments, LLC 50,000 (45,000) 99.98%
United Development Co., L.P. - 97.1 302,000 (64,000) 99.98%
United Development Co., L.P. - 97.2 116,000 (23,000) 99.98%
----------- ----------
$ 2,286,000 $(729,000)
=========== ==========
* Results of Mansur Wood Living Center, L.P. and Murfreesboro Villas, L.P. have not been audited and have thus been excluded. See
Note 2 to the financial statements and report of independent certified public accountants.
8
Item 3.Legal Proceedings
NONE
Item 4.Submission of Matters to a Vote of Security Holders
NONE
PART II.
Item 5.Market for Registrant's Common Equity and Related Stockholder Matters
Item 5a.
(a) The Units are not traded on a public exchange but are being sold through
a public offering. It is not anticipated that any public market will
develop for the purchase and sale of any Unit. Units can be assigned only
if certain requirements in the Partnership Agreement are satisfied.
(b) At March 31, 2003, there were 1,359 Limited Partners.
(c) The Partnership was not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships.
(d) No unregistered securities were sold by the Partnership during the year
ended March 31, 2002.
Item 5a.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31 December 31
-------------------------------------------------------------------------- --------------
2003 2002 2001 2000 1999 1998
----------- ------------ ------------ ------------- ------------- --------------
ASSETS
Cash and cash equivalents $ 22,868 $ 1,288 $ 90,481 $ 574,137 $ 3,103,129 $ 3,521,888
Funds held in escrow
disbursement account 208,778 204,125 256,649 243,595 4,834,997 5,505,543
Marketable securities - - - 50,073 - -
Subscriptions and notes
receivable - - - - 38,600 879,800
Investments in limited
partnerships, net 14,954,813 16,200,256 17,555,917 19,293,654 19,968,445 19,927,953
Loans receivable - - - - - -
Other assets 209,772 11,113 18,822 23,798 30,814 68,482
----------- ------------ ------------ ------------- ------------- --------------
$ 15,396,231 $ 16,416,782 $ 17,921,869 $ 20,185,257 $ 27,975,985 $ 29,903,666
=========== ============ ============ ============= ============= ==============
LIABILITIES
Payables to limited
partnerships $ 229,030 $ 229,030 $ 229,030 $ 272,207 $ 6,131,391 $ 8,051,777
Accrued fees and expenses
due to general partner
and affiliates 526,470 169,478 66,298 123,718 159,973 97,387
----------- ------------ ------------ ------------- ------------- --------------
755,500 398,508 295,328 395,925 6,291,364 8,149,164
----------- ------------ ------------ ------------- ------------- --------------
PARTNERS' EQUITY 14,640,731 16,018,274 17,626,541 19,789,332 21,684,621 21,754,502
----------- ------------ ------------ ------------- ------------- --------------
$ 15,396,231 $ 16,416,782 $ 17,921,869 $ 20,185,257 $ 27,975,985 $ 29,903,666
=========== ============ ============ ============= ============= ==============
9
Selected results of operations, cash flows, and other information for the
Partnership are as follows:
For the
Three Months For the Year
For the Years Ended Ended Ended
March 31 March 31 December 31
------------------------------------------------------------ -------------- -------------
2003 2002 2001 2000 1999 1998
------------ ----------- ------------ ------------- -------------- -------------
operations $ (196,636) $ (242,642) $ (358,909)$ (458,580) $ (21,156)$ 164,828
Realized loss -
marketable securities - - - (188,483) - -
Equity in (losses)
income of limited
partnerships (1,180,907) (1,365,625) (1,803,882) (1,139,225) (22,000) (110,194)
------------ ----------- ------------ ------------- -------------- -------------
Net (loss) income $ (1,377,543) $ (1,608,267) $ (2,162,791)$ (1,786,288) $ (43,156)$ 54,634
============ =========== ============ ============= ============== =============
Net (loss) income
allocated to:
General Partner $ (13,775) $ (16,083) $ (21,628)$ (17,863) $ (431)$ 546
============ =========== ============ ============= ============== =============
Limited Partners $ (1,363,768) $ (1,592,184) $ (2,141,163)$ (1,768,425) $ (42,725)$ 54,088
============ =========== ============ ============= ============== =============
Net (loss) income per
limited partner unit $ (54.55) $ (63.69) $ (85.65)$ (70.74) $ (1.71)$ 2.57
============ =========== ============ ============= ============== =============
Outstanding weighted
limited partner units 25,000 25,000 25,000 25,000 25,000 21,008
============ =========== ============ ============= ============== =============
For the
Three For the
For the Years Ended Months Ended Year Ended
March 31 March 31 December 31
------------------------------------------------------------ ------------- -------------
2003 2002 2001 2000 1999 1998
------------ ---------- ------------- -------------- ------------- -------------
Net cash provided by
(used in):
Operating activities $ (13,473) $ (17,046) $ (59,867) $ (209,600) $ 15,016 $ (115,775)
Investing activities 35,053 (72,147) (423,789) (2,248,991) (1,248,250) (14,513,730)
Financing activities - - - (70,401) 814,475 13,261,819
------------ ---------- ------------- -------------- ------------- -------------
Net change in cash and
cash equivalents 21,580 (89,193) (483,656) (2,528,992) (418,759) (1,367,686)
Cash and cash
equivalents, beginning
of period 1,288 90,481 574,137 3,103,129 3,521,888 4,889,574
------------ ---------- ------------- -------------- ------------- -------------
Cash and cash
equivalents, end of
period $ 22,868 $ 1,288 $ 90,481 $ 574,137 $ 3,103,129 $ 3,521,888
============ ========== ============= ============== ============= =============
10
Low Income Housing Credit per Unit was as follows for the years ended December 31:
2002 2001 2000 1999 1998
------------- ------------- -------------- --------------- --------------
Federal $ 110 $ 111 $ 84 $ 48 $ 21
State - - - - -
------------- ------------- -------------- --------------- --------------
Total $ 110 $ 111 $ 84 $ 48 $ 21
============= ============= ============== =============== ==============
Item 7. 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-K 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-K and in other reports we filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Financial Statements and the Notes thereto included
elsewhere in this filing.
Critical Accounting Policies and Certain Risks and Uncertainties
The Company believes that the following discussion addresses the Partnership's
most significant accounting policies, which are the most critical to aid in
fully understanding and evaluating the Company's reported financial results, and
certain of the Partnership's risks and uncertainties.
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.
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 or 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.
11
Equity in losses of the Local Limited Partnerships for each year ended March 31
have been recorded by the Partnership based on nine months of reported results
provided by the Local Limited Partnerships for each year ended December 31 and
on three months of results estimated by management of the Partnership for each
three-month period ended March 31. 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. Equity in losses of the Local Limited Partnerships are 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 from the Local Limited Partnerships are accounted for as
a reduction of the investment balance. Distributions received after the
investment has reached zero are recognized as income.
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.
Certain 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.
12
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.
To date, 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.
Financial Condition
The Partnership's assets at March 31, 2003 consisted primarily of $23,000 in
cash, $209,000 in cash in escrow, and aggregate investments in the fifteen Local
Limited Partnerships of $14,955,000. Liabilities at March 31, 2003 primarily
consisted of $229,000 due to limited partnerships, $148,000 in annual asset
management fees payable and $379,000 in advances and other payables due to the
General Partner or affiliates.
Results of Operations
Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. The
Partnership's net loss for the year ended March 31, 2003 was $(1,378,000),
reflecting a decrease of $(230,000) from the net loss $(1,608,000) experienced
for the year ended March 31, 2002. The change is primarily due to a decrease in
equity in losses of limited partnerships of $(185,000) to $(1,181,000) for the
year ended March 31, 2003 from $(1,366,000) for the year ended March 31, 2002
and a decrease in operating expenses of $31,000. The decrease in operating
expenses is primarily due to a decrease in advances to a Local Limited
Partnership written off totaling $9,000 and a decrease in other expenses of
$22,000. In addition to the decrease in operating expenses, reporting fee income
increased by $18,000 offset by a decrease in interest income of $6,000 during
the year ended March 31, 2003.
Year Ended March 31, 2002 Compared to Year Ended March 31, 2001. The
Partnership's net loss for the year ended March 31, 2002 was $(1,608,000),
reflecting a decrease of $555,000 from the $(2,163,000) of net loss experienced
for the year ended March 31, 2001. The change is primarily due to a decrease in
equity in losses of limited partnerships of $438,000 to $(1,366,000) for the
year ended March 31, 2002 from $(1,804,000) for the year ended March 31, 2001
and a decrease in operating expenses of $159,000. The decrease in operating
expenses consisted primarily of a decrease in advances to a Local Limited
Partnership written off totaling $40,000 during the year ended March 31, 2002,
compared with advances of $229,000 to the same partnership in 2001 which were
also written off in full. An additional $18,000 advanced to two other
partnerships was also written off in full. The above decrease of $171,000 was
offset by a marginal increase in other operating expenses of $12,000. Offsetting
the above changes, reporting fees decreased by $26,000 and interest income
decreased by $16,000 due to significant aggregate capital contributions paid to
certain Local Limited Partnerships during the year ended March 31, 2001
resulting in a significantly lower average cash balance for the year ended March
31, 2002.
Liquidity and Capital Resources
Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. The net
increase in cash during the year ended March 31, 2003 was $22,000, compared to a
net decrease in cash for the year ended March 31, 2002 of $(89,000). The change
of $111,000 was primarily due to an increase in cash provided by investing
activities of $107,000. The increase in cash provided by investing activities
results primarily from approximately $287,000 advanced from the General Partner
of which $247,000 was then advanced to Local Limited Partnerships an addition
13
there was a decrease of $85,000 relating to the purchase of Limited Partnership
interests. Additionally, there was an increase of $4,000 provided by operating
activities.
Year Ended March 2002 Compared to Year Ended March 31, 2001. The net decrease in
cash during the year ended March 31, 2002 was $(89,000), compared to a net
decrease in cash for the year ended March 31, 2000 of $(484,000). The change was
primarily due to a decrease in cash used in investing activities related to
purchase of Limited Partnership interests of approximately $155,000 together
with a decrease in cash advanced to a Local Limited Partnership of $237,000
offset by a decrease in sales of marketable securities of $50,000 and an
increase of $10,000 in distributions from limited partnerships. Offsetting the
$352,000 decrease in cash used in investing activities is a $7,000 increase in
cash used in operating activities.
Other Matters
As of July 16, 2003, the Partnership had not obtained audited financial
statements for two of its investments, Mansur Wood Living Center, L.P., ("Mansur
Wood"), as of and for the years ended December 31, 2002 and 2001 and
Murfreesboro Villas, L.P., ("Murfreesboro") as of and for the year ended
December 31, 2002. As a result of this limitation in scope, the Partnership's
Independent Certified Public Accountants have qualified their report with
respect to their audits of the Partnership's 2003 and 2002 financial statements.
Furthermore, 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
$5,069,000 (unaudited) and $5,479,000 (unaudited) at March 31, 2003 and 2002,
respectively. The Partnership's investment in Murfreesboro totaled $422,000
(unaudited) as of March 31, 2003. The Partnership's interest in the results of
operations of Mansur Wood totaled $410,000 (unaudited) and $(514,000)
(unaudited) for the years ended March 31, 2003 and 2002, respectively. The
Partnership's interest in the results of operations of Murfreesboro totaled
$85,000 (unaudited) for the year ended March 31, 2003.
Through March 31, 2003, the Partnership advanced cash in the amount of $729,043
to one of the Local Limited Partnerships in which it has a Limited Partnership
interest. Of the $729,043 of advances, $48,559, $40,226 and $229,015 was written
off during the years ended March 31, 2003, 2002 and 2001, respectively. The
Partnership did receive $9,000 in payments from the Local Limited Partnership.
Advances were made to augment the Local Limited Partnership's cash flows which
were not sufficient to support the operating costs of the property. Such
advances have been expensed in full in the accompanying financial statements.
During the fiscal year end March 31, 2003, the respective property has continued
to rent up and Section 8 certifications have been obtained for approximately
100% of the units. Such certifications have enabled the property to charge
market rents applicable to multi-family housing complexes and attain a positive
cash flow.
During the fiscal year ended March 31, 2003, the Partnership advanced
approximately $199,000 to one Local Limited Partnership, Mansur Wood, in which
the Partnership is a limited partner. These advances were used to pay for the
current year property taxes. Subsequent to year end, Mansur Wood was awarded a
reduction in property taxes by the Property Tax Appeal Board. Therefore, the
Partnership determined the recoverability of these advances to be probable and,
accordingly, a reserve did not appear necessary.
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.
The Partnership does not expect its future cash flows, together with its net
available assets at March 31, 2003, to be sufficient to meet all currently
foreseeable future cash requirements. Accordingly, WNC and Associates, Inc. has
agreed to provide advances sufficient to fund the operations and working capital
requirements of the Partnership through August 31, 2004.
14
Future Contractual Cash Obligations
The following table summarizes our future contractual cash obligations as of March 31, 2003:
2004 2005 2006 2007 2008 Thereafter Total
---------- ----------- ----------- ---------- ---------- ----------- -----------
Asset Management Fees $ 217,573 $ 70,068 $ 70,068 $ 70,068 $ 70,068 $ 3,082,992 $ 3,580,837
Capital Contributions Payable
to Lower Tier Partnerships 229,030 - - - - - 229,030
---------- ----------- ----------- ---------- ---------- ----------- -----------
Total contractual cash
obligations $ 446,603 $ 70,068 $ 70,068 $ 70,068 $ 70,068 $ 3,082,992 $ 3,809,867
========== =========== =========== ========== ========== =========== ===========
(1) Asset Management Fees are payable annually until termination of the
Partnership, which is to occur no later than 2052. The estimate of the
fees payable included herein assumes the retention of the Partnership's
interest in all Housing Complexes until 2052. Amounts due to the General
Partners as of March 31, 2003 have been included in the 2004 column.
For additional information on our Asset Management Fees and Capital
Contributions Payable to Lower Tier Partnerships, see Notes 3 and 5 to the
financial statements included elsewhere herein.
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, we are continuing our review of the Partnership's holdings,
with special emphasis on the more mature properties including those that have
satisfied the IRS compliance requirements. Our 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, we expect to proceed with efforts to liquidate
those properties. Our 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.
Impact of 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
15
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 ("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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 5
We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund
VI, L.P., Series 5 (a California Limited Partnership) (the "Partnership") as of
March 31, 2003 and 2002, and the related statements of operations, partners'
equity (deficit) and cash flows for the years ended March 31, 2003, 2002 and
2001. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. A significant portion of the financial
statements of the limited partnerships in which the Partnership is a limited
partner were audited by other auditors whose reports have been furnished to us.
As discussed in Note 2 to the financial statements, the Partnership accounts for
its investments in limited partnerships using the equity method. The portion of
the Partnership's investment in limited partnerships audited by other auditors
represented 47% and 48% of the total assets of the Partnership at March 31, 2003
and 2002, respectively, and 56%, 49% and 98% of the Partnership's equity in
losses of limited partnerships for the years ended March 31, 2003, 2002 and
2001, respectively. Our opinion, insofar as it relates to the amounts included
in the financial statements for the limited partnerships which were audited by
others, is based solely on the reports of the other auditors.
Except as discussed in the following paragraph, we conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
As more thoroughly discussed in Note 2 to the financial statements, the
Partnership was unable to obtain audited financial statements for Mansur Wood
Living Center, L.P., ("Mansur Wood"), as of and for the years ended December 31,
2002 and 2001, respectively. The Partnership's investment in Mansur Wood totaled
$5,069,000 (unaudited) and $5,479,000 (unaudited) as of March 31, 2003 and 2002,
respectively. The Partnership's equity interest in the net losses of Mansur Wood
totaled $410,000 (unaudited) and $514,000 (unaudited) for the years ended March
31, 2003 and 2002, respectively. The Partnership was also unable to obtain
audited financial statements for Murfreesboro Villas, L.P. ("Murfreesboro"), as
of and for the year ended December 31, 2002. The Partnership's investment in
Murfreesboro totaled $422,000 (unaudited) as of March 31, 2003. The
Partnership's equity interest in the net loss of Murfreesboro totaled $85,000
(unaudited) for the year ended March 31, 2003.
In our opinion, except for the effects of such adjustments and disclosures, if
any, as might have been determined to be necessary had audits of the 2002 and
2001 financial statements of Mansur Wood and the 2002 financial statements of
Murfreesboro been obtained, the financial statements referred to above present
fairly, in all material respects, the financial position of WNC Housing Tax
Credit Fund VI, L.P., Series 5 (a California Limited Partnership) as of March
31, 2003 and 2002, and the results of its operations and its cash flows for the
years ended March 31, 2003, 2002 and 2001, in conformity with accounting
principles generally accepted in the United States of America.
The Partnership currently has insufficient working capital to fund its
operations. As discussed in Note 3 to the accompanying financial statements, WNC
& Associates, Inc., has agreed to provide advances sufficient enough to fund the
operations and working capital requirements of the Partnership through August
31, 2004.
/s/ BDO SEIDMAN, LLP
Costa Mesa, California
July 16, 2003
17
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
BALANCE SHEETS
March 31
----------------------------------
2003 2002
--------------- ---------------
ASSETS
Cash and cash equivalents $ 22,868 $ 1,288
Funds held in escrow disbursement account 208,778 204,125
Investments in limited partnerships (Notes 2 and 3) 14,954,813 16,200,256
Other assets (Note 7) 209,772 11,113
--------------- ---------------
$ 15,396,231 $ 16,416,782
=============== ===============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 5) $ 229,030 $ 229,030
Accrued fees and expenses due to General
Partner and affiliates (Note 3) 526,470 169,478
--------------- ---------------
Total liabilities 755,500 398,508
--------------- ---------------
Commitments and contingencies
Partners' equity (deficit)
General Partner (102,685) (88,910)
Limited Partners (25,000 units authorized,
25,000 units issued and outstanding) 14,743,416 16,107,184
--------------- ---------------
Total partners' equity 14,640,731 16,018,274
--------------- ---------------
$ 15,396,231 $ 16,416,782
=============== ===============
See accompanying notes to financial statements
18
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years
Ended March 31
---------------------------------------------------
2003 2002 2001
------------- ------------- --------------
Interest income $ 4,742 $ 10,758 $ 27,074
Reporting fees 18,500 - 26,000
Other income 2,250 - -
------------- ------------- --------------
Total income 25,492 10,758 53,074
------------- ------------- --------------
Operating expenses:
Amortization (Notes 2 and 3) 64,536 64,536 64,536
Asset management fees (Note 3) 70,068 70,068 69,869
Write off of advances to Local Limited
Partnerships (Note 7) 48,559 57,880 229,015
Other 38,965 60,916 48,563
------------- ------------- --------------
Total operating expenses 222,128 253,400 411,983
------------- ------------- --------------
Loss from operations (196,636) (242,642) (358,909)
Equity in losses of limited
partnerships (Note 2) (1,180,907) (1,365,625) (1,803,882)
------------- ------------- --------------
Net loss $ (1,377,543) $ (1,608,267) $ (2,162,791)
============= ============= ==============
Net loss allocated to:
General Partner $ (13,775) $ (16,083) $ (21,628)
============= ============= ==============
Limited Partners $ (1,363,768) $ (1,592,184) $ (2,141,163)
============= ============= ==============
Net loss per limited partner unit $ (54.55) $ (63.69) $ (85.65)
============= ============= ==============
Outstanding weighted limited partner units 25,000 25,000 25,000
============= ============= ==============
See accompanying notes to financial statements
19
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended March 31, 2003, 2002 and 2001
General Limited Total
Partner Partners
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2000 $ (51,199) $ 19,840,531 $ 19,789,332
Net loss (21,628) (2,141,163) (2,162,791)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2001 (72,827) 17,699,368 17,626,541
Net loss (16,083) (1,592,184) (1,608,267)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2002 (88,910) 16,107,184 16,018,274
Net loss (13,775) (1,363,768) (1,377,543)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2003 $ (102,685) $ 14,743,416 $ 14,640,731
=============== =============== ===============
See accompanying notes to financial statements
20
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years
Ended March 31
----------------------------------------------
2003 2002 2001
------------- -------------- -------------
Cash flows from operating activities:
Net loss $ (1,377,543) $ (1,608,267) $ (2,162,791)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization 64,536 64,536 64,536
Equity in losses of limited partnerships 1,180,907 1,365,625 1,803,882
Write off of advances to Local Limited
Partnership 48,559 57,880 229,015
Change in amounts due from affiliates - - 4,976
Change in accrued fees and expenses due to
general partner and affiliates 70,068 103,180 515
------------- -------------- -------------
Net cash used in operating activities (13,473) (17,046) (59,867)
------------- -------------- -------------
Cash flows from investing activities:
Investments in limited partnerships - (84,500) (173,858)
Funds held in escrow disbursement account (4,653) 52,524 (13,054)
Sale (purchase) of marketable securities - - 50,073
Distributions from limited partnerships - 10,000 -
Advances to Local Limited Partnerships (247,218) (50,171) (286,950)
Advances from WNC 286,924 - -
------------- -------------- -------------
Net cash used in investing activities 35,053 (72,147) (423,789)
------------- -------------- -------------
Net increase (decrease) in cash and cash equivalents 21,580 (89,193) (483,656)
Cash and cash equivalents, beginning of period 1,288 90,481 574,137
------------- -------------- -------------
Cash and cash equivalents, end of period $ 22,868 $ 1,288 $ 90,481
============= ============== =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
============= ============== =============
See accompanying notes to financial statements
21
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Years Ended March 31, 2003, 2002 and 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund VI, L.P., Series 5, a California Limited Partnership
(the "Partnership"), was formed on March 3, 1997 under the laws of the State of
California, and commenced operations on August 29, 1997. The Partnership was
formed to invest primarily in other limited partnerships and limited liability
companies (the "Local Limited Partnerships") which own and operate multi-family
housing complexes (the "Housing Complexes") that are eligible for low income
housing credits. The local general partners (the "Local General Partners") of
each Local Limited Partnership retain responsibility for maintaining, operating
and managing the Housing Complex.
The general partner is WNC & Associates, Inc. ("WNC") (the "General Partner"), a
California corporation. 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 shall continue in full force and effect until December 31, 2052,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). The offering of Units concluded on July 9, 1998 at which
time 25,000 Units representing subscriptions in the amount of $24,918,175, net
of discount of $54,595 for volume purchases and $27,230 for dealer discounts,
had been accepted. The General Partner has a 1% interest in operating profits
and losses, taxable income and 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.
22
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
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.
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.
23
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
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 years ended March 31, 2003, 2002 and
2001 have been recorded by the Partnership based on nine months of reported
results provided by the Local Limited Partnerships and on three months of
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 March 31, 2003, 2002 and 2001.
24
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
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
March 31, 2003 and 2002, the Partnership had no cash equivalents.
Concentration of Credit Risk
- ----------------------------
At March 31, 2003, the Partnership maintained cash balances at certain financial
institutions in excess of the federally insured maximum.
Net Loss Per Limited Partner Unit
- ---------------------------------
Net loss per limited 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
during the years ended March 31, 2003, 2002 and 2001, 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 statement is effective for certain lease transactions occurring after
25
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
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 ("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.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of March 31, 2003 and 2002, the Partnership had acquired limited partnership
interests in fifteen Local Limited Partnerships, each of which owns one Housing
Complex consisting of an aggregate of 627 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 July 16, 2003, the Partnership had not obtained audited financial
statements for two of its investments, Mansur Wood Living Center, L.P., ("Mansur
Wood"), as of and for the years ended December 31, 2002 and 2001 and
Murfreesboro Villas, L.P., ("Murfreesboro") as of and for the year ended
December 31, 2002. As a result of this limitation in scope, the Partnership's
Independent Certified Public Accountants have qualified their report with
respect to their audits of the Partnership's 2003 and 2002 financial statements.
Furthermore, 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
$5,069,000 (unaudited) and $5,479,000 (unaudited) at March 31, 2003 and 2002,
respectively. The Partnership's investment in Murfreesboro totaled $422,000
(unaudited) as of March 31, 2003. The Partnership's interest in the results of
operations of Mansur Wood totaled $(410,000) (unaudited) and $(514,000)
(unaudited) for the years ended March 31, 2003 and 2002, respectively. The
Partnership's interest in the results of operations of Murfreesboro totaled
$(85,000) (unaudited) for the year ended March 31, 2003. The combined condensed
financial statements presented herein for December 31, 2001 previously included
total assets of $1,127,000 and net losses of $46,000 for Murfreesboro. The
combined condensed financial statements presented herein for December 31, 2000
previously included net losses of $44,000 for Murfreesboro. The combined
condensed financial information presented in this footnote for 2001 and 2000 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.
26
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
The Partnership's investments in limited partnerships as reflected in the
balance sheets at March 31, 2003 and 2002, are approximately $7,158,000 and
$7,676,000, respectively, greater than the Partnership's combined equity at the
preceding December 31 as shown in the Local Limited Partnerships' combined
financial statements presented below. This difference is primarily due to
acquisition, selection, and other costs related to the acquisition of the
investments which have been capitalized in the Partnership's investment account
and to capital contributions payable to the limited partnerships which were
netted against partner capital in the Local Limited Partnerships' financial
statements (see Note 5). The Partnership's investment is also lower than the
Partnership's equity as shown in the Local Limited Partnership's combined
financial statements due to the losses recorded by the Partnership for the three
month period ended March 31 and due to the exclusion of Mansur Wood and
Murfreesboro from the combined condensed financial information.
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 March 31, 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 for the periods presented:
For the Years Ended
March 31
------------------------------------------------------
2003 2002 2001
---------------- ---------------- ---------------
Investments per balance sheet,
beginning of period $ 16,200,256 $ 17,555,917 $ 19,293,654
Capital contributions paid - 84,500 130,681
Distributions received - (10,000) -
Equity in losses of limited partnerships (1,180,907) (1,365,625) (1,803,882)
Amortization of capitalized acquisition fees
and costs (64,536) (64,536) (64,536)
---------------- ---------------- ---------------
Investments per balance sheet,
end of period $ 14,954,813 $ 16,200,256 $ 17,555,917
================ ================ ===============
27
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted against
interest expense. Approximate combined condensed financial information from the
individual financial statements of the individual financial statements of the
Local Limited Partnerships as of December 31 and for the years then ended is as
follows (Combined condensed financial information for Mansur Wood Living Center,
L.P. and Murfreesboro Villas, L.P. has been excluded from the presentation
below):
COMBINED CONDENSED BALANCE SHEETS
2002 2001
(Restated)
--------------- ---------------
ASSETS
Land $ 2,132,000 $ 2,132,000
Buildings and improvements, net of accumulated
depreciation for 2002 and 2001 of $4,089,000 and
$3,257,000, respectively 18,047,000 18,870,000
Other assets 929,000 840,000
--------------- ---------------
$ 21,108,000 $ 21,842,000
=============== ===============
LIABILITIES
Mortgage and construction loans payable $ 10,710,000 $ 10,802,000
Due to related parties 2,280,000 2,219,000
Other liabilities 472,000 409,000
--------------- ---------------
13,462,000 13,430,000
--------------- ---------------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund VI, L.P., Series 5 7,797,000 8,524,000
Other partners (151,000) (112,000)
--------------- ---------------
7,646,000 8,412,000
--------------- ---------------
$ 21,108,000 $ 21,842,000
=============== ===============
28
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2002 2001 2000
(Restated) (Restated)
--------------- --------------- ---------------
Revenues $ 2,322,000 $ 2,198,000 $ 1,890,000
--------------- --------------- ---------------
Expenses:
Operating expenses 1,564,000 1,597,000 1,517,000
Interest expense 641,000 629,000 668,000
Depreciation and amortization 846,000 848,000 857,000
--------------- --------------- ---------------
Total expenses 3,051,000 3,074,000 3,042,000
--------------- --------------- ---------------
Net loss $ (729,000) $ (876,000) $ (1,152,000)
=============== =============== ===============
Net loss allocable to the Partnership, before equity
in losses of Mansur Wood and Murfreesboro $ (727,000) $ (875,000) $ (1,148,000)
=============== =============== ===============
Net loss recorded by the Partnership, before equity in
losses of Mansur Wood and Murfreesboro $ (686,000) $ (806,000) $ (1,316,000)
Net loss of Mansur Wood recorded by the Partnership
(unaudited 2002 and 2001) (410,000) (514,000) (444,000)
Net loss of Murfreesboro recorded by the Partnership
(unaudited 2002) (85,000) (46,000) (44,000)
--------------- --------------- ---------------
Net loss recorded by the Partnership $ (1,181,000) (1,366,000) $ (1,804,000)
=============== =============== ===============
Certain Local Limited Partnerships have incurred significant operating losses
and/or 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
- -----------------------------------
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partner or their affiliates for the following items:
Acquisition fees of up to 7% of the gross proceeds from the sale of Units
as compensation for services rendered in connection with the acquisition
of Local Limited Partnerships. As of March 31, 2003 and 2002, the
Partnership incurred acquisition fees of $1,750,000. Accumulated
amortization of these capitalized costs was $293,174 and $234,834, as of
March 31, 2003 and 2002, respectively.
Reimbursement of costs incurred by the General Partner in connection with
the acquisition of Local Limited Partnerships. These reimbursements have
not exceeded 1.5% of the gross proceeds. As of March 31, 2003 and 2002,
the Partnership incurred acquisition costs of $185,734, which have been
included in investments in limited partnerships. Accumulated amortization
of these capitalized costs was $29,833 and $23,637, as of March 31, 2003
and 2002, respectively.
29
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
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 $70,068, $70,068 and $69,869
were incurred during the years ended March 31, 2003, 2002 and 2001,
respectively, of which $0, $16,795 and $67,180 were paid during the years
ended March 31, 2003, 2002 and 2001, respectively.
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.
The accrued fees and expenses due to General Partner and affiliates consisted of
the following as of:
March 31
--------------------------------------
2003 2002
----------------- ----------------
Asset management fee payable $ 147,505 $ 77,437
Advances from WNC 378,965 92,041
----------------- ----------------
Total $ 526,470 $ 169,478
================= ================
The Partnership currently has insufficient working capital to fund its
operations. WNC and Associates, Inc., the general partner of the General Partner
of the Partnership, has agreed to provide advances sufficient enough to fund the
operations and working capital requirements of the Partnership through August
31, 2004.
NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- ----------------------------------------------------
The following is a summary of the quarterly operations for the years ended March 31, 2003 and 2002:
June 30 September 30 December 31 March 31
--------------- --------------- --------------- --------------
2003
----
Income $ - $ - $ - $ 25,000
Operating expenses (47,000) (66,000) (86,000) (23,000)
Equity in losses of limited
partnerships (355,000) (355,000) (248,000) (223,000)
Net loss (402,000) (421,000) (334,000) (221,000)
Loss available to limited partners (398,000) (416,000) (331,000) (219,000)
Loss per limited partner unit (16) (17) (13) (9)
30
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Years Ended March 31, 2003, 2002 and 2001
NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued
- ---------------------------------------------------------------
June 30 September 30 December 31 March 31
--------------- --------------- --------------- ---------------
2002
----
Income $ - $ - $ - $ 11,000
Operating expenses (47,000) (90,000) (56,000) (60,000)
Equity in losses of limited
partnerships (409,000) (409,000) (408,000) (140,000)
Net loss (456,000) (499,000) (464,000) (189,000)
Loss available to limited partners (452,000) (494,000) (460,000) (186,000)
Loss per limited partner unit (18) (20) (18) (7)
NOTE 5 - PAYABLES TO LIMITED PARTNERSHIPS
- -----------------------------------------
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the respective limited partnership
agreements. These contributions are payable in installments and are generally
due upon the limited partnerships achieving certain development and operating
benchmarks (generally within two years of the Partnership's initial investment).
NOTE 6 - INCOME TAXES
- ---------------------
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
NOTE 7 - WRITE OFF OF ADVANCES TO A LOCAL LIMITED PARTNERSHIP
- -------------------------------------------------------------
Through March 31, 2003, the Partnership advanced cash in the amount of $729,043
to one of the Local Limited Partnerships in which it has a Limited Partnership
interest. Of the $729,043 of advances, $48,559, $40,226 and $229,015 was written
off during the years ended March 31, 2003, 2002 and 2001, respectively. The
Partnership did receive $9,000 in payments from the Local Limited Partnership.
Advances were made to augment the Local Limited Partnership's cash flows which
were not sufficient to support the operating costs of the property. Such
advances have been expensed in full in the accompanying financial statements.
During the fiscal year end March 31, 2003, the respective property has continued
to rent up and Section 8 certifications have been obtained for approximately
100% of the units. Such certifications have enabled the property to charge
market rents applicable to multi-family housing complexes and attain a positive
cash flow.
During the fiscal year ended March 31, 2003, the Partnership advanced
approximately $199,000 to one Local Limited Partnership, Mansur Wood, in which
the Partnership is a limited partner. These advances were used to pay for the
current year property taxes. Subsequent to year end, Mansur Wood was awarded a
reduction in property taxes by the Property Tax Appeal Board. Therefore, the
Partnership determined the recoverability of these advances to be probable and,
accordingly, a reserve did not appear necessary.
31
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
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