Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark
One)
☒QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
quarterly period ended September 30, 2016
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
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
California
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33-0974533
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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17782
Sky Park Circle, Irvine, CA 92614
(
Address of principle executive offices )
(714)
622-5565
(
Telephone Number )
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No
☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required
to submit and post such files).
Yes ☒
No
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act. (Check one):
Large
accelerated filer ☐ Accelerated filer ☐ Non-accelerated
filer ☒ Smaller reporting company ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
☐ No ☒
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
INDEX TO FORM 10-Q
For the Quarterly Period Ended September 30,
2016
PART I.
FINANCIAL INFORMATION
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Item
1.
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Financial
Statements
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Condensed
Balance Sheets
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As of
September 30, 2016 and March 31, 2016
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3
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Condensed
Statements of Operations
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For the
Three and Six Months Ended September 30, 2016 and 2015
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4
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Condensed
Statement of Partners' Deficit
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For the
Six Months Ended September 30, 2016
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5
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Condensed
Statements of Cash Flows
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For the
Six Months Ended September 30, 2016 and 2015
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6
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Notes
to Condensed Financial Statements
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7
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Item
2.
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Management's
Discussion and Analysis of Financial
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Condition and
Results of Operations
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16
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Item
3.
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Quantitative and Qualitative Disclosures about Market
Risks
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17
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Item
4.
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Controls and Procedures
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17
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PART
II. OTHER INFORMATION
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Item
1.
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Legal
Proceedings
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18
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Item
1A.
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Risk
Factors
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18
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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18
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Item
3.
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Defaults
Upon Senior Securities
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18
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Item
4.
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Mine
Safety Disclosures
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18
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Item
5.
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Other
Information
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18
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Item
6.
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Exhibits
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18
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Signatures
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19
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2
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
CONDENSED BALANCE SHEETS
For the Six Months Ended September 30, 2016
(Unaudited)
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September 30,
2016
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March 31,
2016
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ASSETS
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Cash
and cash equivalents
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$126,123
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$160,310
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Investments
in Local Limited Partnerships, net (Note 2)
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-
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-
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Other
assets
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7,800
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-
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Total
Assets
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$133,923
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$160,310
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LIABILITIES
AND PARTNERS’ DEFICIT
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Liabilities:
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Accrued
fees and expenses due to General Partner and affiliates
(Note 3)
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$1,727,635
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$1,699,257
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Payables
to Local Limited Partnerships (Note 4)
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40,282
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40,282
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Total
Liabilities
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1,767,917
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1,739,539
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Partners’
Deficit:
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General
Partner
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(15,657)
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(15,602)
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Limited
Partners (25,000 Partnership Units authorized; 15,302
Partnership Units issued and outstanding.)
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(1,618,337)
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(1,563,627)
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Total
Partners’ Deficit
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(1,633,994)
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(1,579,229)
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Total
Liabilities and Partners’ Deficit
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$133,923
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$160,310
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See
accompanying notes to condensed financial statements
3
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 2016 and
2015
(Unaudited)
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2016
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2015
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Three
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Six
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Three
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Six
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Months
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Months
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Months
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Months
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Reporting
fees
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$23,855
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$25,568
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$20,004
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$24,220
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Operating
expenses:
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Asset
management fees (Note 3)
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25,750
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51,500
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25,750
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56,612
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Legal
and accounting fees
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19,750
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23,782
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23,950
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27,950
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Other
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3,721
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5,072
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6,468
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9,032
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Total
operating expenses
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49,221
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80,354
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56,168
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93,594
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Loss
from operations
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(25,366)
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(54,786)
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(36,164)
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(69,374)
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Gain
(loss) on sale of Local Limited Partnerships
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-
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-
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(3,426)
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188,845
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Interest
income
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9
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21
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12
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17
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Net
income (loss)
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$(25,357)
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$(54,765)
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$(39,578)
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$119,488
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Net
income (loss) allocated to:
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General
Partner
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$(25)
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$(55)
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$(40)
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$119
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Limited
Partners
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$(25,332)
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$(54,710)
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$(39,538)
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$119,369
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Net
income (loss) per Partnership Unit
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$(2)
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$(4)
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$(3)
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$8
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Outstanding
weighted Partnership
Units
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15,302
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15,302
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15,302
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15,302
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See
accompanying notes to condensed financial statements
4
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
CONDENSED STATEMENT OF PARTNERS’ DEFICIT
For the Six Months Ended September 30, 2016
(Unaudited)
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General
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Limited
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Partner
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Partners
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Total
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Partners’
deficit at March 31, 2016
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$(15,602)
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$(1,563,627)
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$(1,579,229)
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Net
loss
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(55)
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(54,710)
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(54,765)
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Partners’ deficit at September
30, 2016
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$(15,657)
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$(1,618,337)
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$(1,633,994)
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See
accompanying notes to condensed financial statements
5
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2016 and 2015
(Unaudited)
|
2016
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2015
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Cash
flows from operating activities:
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Net
income (loss)
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$(54,765)
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$119,488
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Adjustments
to reconcile net income (loss) to net cash
used in operating activities:
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Increase
in other assets
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(7,800)
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-
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Gain
on sale of Local Limited Partnerships
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-
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(188,845)
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Decrease
in accrued fees and expenses due to
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General
Partner and affiliates
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28,378
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9,840
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Net
cash used in operating activities
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(34,187)
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(59,517)
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Cash
flows from investing activities:
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Net
proceeds from sale of Local Limited Partnerships
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-
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188,845
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Net
cash provided by investing activities
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-
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188,845
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Net
increase (decrease) in cash and cash equivalents
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(34,187)
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129,328
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Cash
and cash equivalents, beginning of period
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160,310
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28,458
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Cash
and cash equivalents, end of period
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$126,123
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$157,786
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SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
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Taxes
paid
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$-
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$-
|
See
accompanying notes to condensed financial statements
6
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The
accompanying condensed unaudited financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of
1934. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in
the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months ended
September 30, 2016 are not necessarily indicative of the results
that may be expected for the fiscal year ending March 31, 2017. 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, 2016.
Organization
WNC
Housing Tax Credit Fund VI, L.P., Series 9 (the
“Partnership”) is a California Limited Partnership
formed under the laws of the State of California on July 17, 2001
and commenced operations on August 3, 2001. The Partnership was
formed to acquire limited partnership interests in other limited
partnerships ("Local Limited Partnerships") which own multi-family
housing complexes (“Housing Complexes”) that are
eligible for Federal low income housing tax credits (“Low
Income Housing Tax Credits”). The local general partners (the
“Local General Partners”) of each Local Limited
Partnership retain responsibility for maintaining, operating and
managing the Housing Complex. Each Local Limited Partnership is
governed by its agreement of limited partnership (the “Local
Limited Partnership Agreement”).
The
general partner of the Partnership is WNC & Associates, Inc.
(“Associates” or the “General Partner”).
The chairman and the president of Associates own all of the
outstanding stock of Associates. The business of the Partnership is
conducted primarily through the General Partner, as the Partnership
has no employees of its own.
The
Partnership shall continue in full force and effect until December
31, 2062, 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 of
limited partnership interest (“Partnership Units”) at
$1,000 per Partnership Unit. The offering of Partnership Units
concluded in July 1994, at which time 15,325 Partnership Units
representing subscriptions in the amount of $15,316,125, net of
dealer discounts of $7,350 and volume discount of $1,525, had been
sold. The General Partner has a 0.1% interest in operating profits
and losses, taxable income and losses, cash available for
distribution from the Partnership and Low Income Housing Tax
Credits of the Partnership. The investors (the “Limited
Partners”) in the Partnership will be allocated the remaining
99.9% of these items in proportion to their respective investments.
As of September 30, 2016 and March 31, 2016, a total of 15,302
Partnership Units remain outstanding.
7
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
The
proceeds from the disposition of any of the Housing Complexes will
be used first to pay debts and other obligations per the respective
Local Limited Partnership Agreement. Any remaining proceeds will
then be paid to the Partnership. The sale of a Housing Complex may
be subject to other restrictions and obligations. Accordingly,
there can be no assurance that a Local Limited Partnership will be
able to sell its Housing Complex. Even if it does so, there can be
no assurance that any significant amounts of cash will be
distributed to the Partnership. Should such distributions occur,
the Limited Partners will be entitled to receive distributions from
the proceeds remaining after payment of Partnership obligations and
funding reserves, equal to their capital contributions and their
return on investment (as defined in the Partnership Agreement). The
General Partner would then be entitled to receive proceeds equal to
its capital contributions from the remainder. Any additional sale
or refinancing proceeds will be distributed 90% to the Limited
Partners (in proportion to their respective investments) and 10% to
the General Partner.
Risks and Uncertainties
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 Tax Credits rules are extremely complicated.
Noncompliance with these rules results in the loss of future Low
Income Housing Tax Credits and the fractional recapture of Low
Income Housing Tax Credits already taken. In most cases the annual
amount of Low Income Housing Tax 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 price which would result
in the Partnership realizing cash distributions or proceeds from
the transaction. Accordingly, the Partnership may be unable to
distribute any cash to its Limited Partners. Low Income Housing Tax
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
“Compliance Period”), the loss of any remaining future
Low Income Housing Tax Credits, a fractional recapture of prior Low
Income Housing Tax Credits, and a loss of the Partnership’s
investment in the Housing Complex would occur. The Partnership is a
limited partner or a 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 Tax Credits
and recapture of Low Income Housing Tax 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.
8
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
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 Tax Credits and tax losses
allocable to the limited partners 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.
The
Partnership currently has insufficient working capital to fund its
operations. Associates has agreed to continue providing advances
sufficient enough to fund the operations and working capital
requirements of the Partnership through November 30,
2017.
Anticipated
future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership
are payable to the General Partner and/or its affiliates. Though
the amounts payable to the General Partner and/or its affiliates
are contractually currently payable, the Partnership anticipates
that the General Partner and/or its affiliates will not require the
payment of these contractual obligations until capital reserves are
in excess of the aggregate of then existing contractual obligations
and then anticipated future foreseeable obligations of the
Partnership. The Partnership would be adversely affected should the
General Partner and/or its affiliates demand current payment of the
existing contractual obligations and or suspend services for this
or any other reason.
No
trading market for the Partnership Units exists or is expected to
develop. Limited Partners may be unable to sell their Partnership
Units except at a discount and should consider their Partnership
Units to be a long-term investment. Individual Limited Partners
will have no recourse if they disagree with actions authorized by a
vote of the majority of Limited Partners.
Exit Strategy
The
Compliance Period for a Housing Complex is generally 15 years
following construction or rehabilitation completion. Associates was
one of the first in the industry to offer syndicated investments in
Low Income Housing Tax Credits. The initial programs have completed
their Compliance Periods.
Upon
the sale of a Local Limited Partnership interest or Housing Complex
after the end of the Compliance Period, there would be no recapture
of Low Income Housing Tax Credits. A sale prior to the end of the
Compliance Period could result in recapture if certain conditions
are not met. None of the remaining Housing Complexes have completed
their 15-year Compliance Period.
With
that in mind, the General Partner is continuing its review of the
Housing Complexes. The review considers many factors, including
extended use requirements (such as those due to mortgage
restrictions or state compliance agreements), the condition of the
Housing Complexes, and the tax consequences to the Limited Partners
from the sale of the Housing Complexes.
Upon
identifying those Housing Complexes with the highest potential for
a successful sale, refinancing or re-syndication, the Partnership
expects to proceed with efforts to liquidate them. The objective is
to maximize the Limited Partners’ return wherever possible
and, ultimately, to wind down the Partnership as Low Income Housing
Tax Credits are no longer available. Local Limited Partnership
interests may be disposed of any time by the General Partner in its
discretion. While liquidation of the Housing Complexes continues to
be evaluated, the dissolution of the Partnership was not imminent
as of September 30, 2016.
As of
March 31, 2016, the Partnership sold its Local Limited Partnership
interests in Mendota I, L.P. (“Mendota”), Villas of
Palm, L.P. (“Villas of Palm”), Preservation Partners
III Limited Partnership (“Preservation”), and Calico
Terrace Limited Partnership (“Calico Terrace”). The
Compliance Period for Mendota, Preservation, and Calico Terrace
expire in 2016, 2016, and 2017, respectively. The respective
purchasers have guaranteed that the LLP will stay in compliance
with the Low Income Housing Tax Credit code, therefore there is no
risk of recapture to the investors of the Partnership.
9
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
As of
September 30, 2016, the Partnership has identified the following
Local Limited Partnerships for possible disposition.
Local Limited
Partnership
|
Debt at
12/31/15
|
Appraisal Value
Estimated Sales Price
|
Estimated
Sale
Expenses
|
Byhalia
Estates, L.P.
|
$632,725
|
$175,000*
|
$1,500
|
McPherson Housing
Associates, L.P.
|
1,639,647
|
2,245,000*
|
3,300
|
Parker Estates,
L.P.
|
854,396
|
615,000*
|
1,500
|
Saw Mill Creek II
LDHA, L.P.
|
980,655
|
780,000*
|
1,500
|
*
Estimated price, and close date have yet to be determined. The
Local Limited Partnership is not under contract to be purchased as
of the report filing.
The
proceeds from the disposition of any of the Housing Complexes will
be used first to pay debts and other obligations per the respective
Local Limited Partnership Agreement. Any remaining proceeds will
then be paid to the partners of the Local Limited Partnership,
including the Partnership, in accordance with the terms of the
particular Local Limited Partnership Agreement. The sale of a
Housing Complex may be subject to other restrictions and
obligations. Accordingly, there can be no assurance that a Local
Limited Partnership will be able to sell its Housing Complex. Even
if it does so, there can be no assurance that any significant
amounts of cash will be distributed to the Partnership, as the
proceeds first would be used to pay Local Limited Partnership
obligations and funding of reserves.
Method of Accounting for Investments in Local Limited
Partnerships
The
Partnership accounts for its investments in Local 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 the estimated value derived by
management, generally consisting of the sum of the remaining future
Low Income Housing Tax Credits estimated to be allocable to the
Partnership and the estimated residual value to the Partnership. If
an investment is considered to be impaired, the Partnership reduces
the carrying value of its investment in any such Local Limited
Partnership. The accounting policies of the Local Limited
Partnerships, generally, are expected to be consistent with those
of the Partnership. Costs incurred by the Partnership in acquiring
the investments were capitalized as part of the investment and were
being amortized over 30 years.
“Equity
in losses of Local Limited Partnerships” for the periods
ended September 30, 2016 and 2015 has been recorded by the
Partnership. Management’s estimate for the three and
six-month periods 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 Local Limited Partnerships allocated to the Partnership is not
recognized to the extent that the investment balance would be
adjusted below zero. 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 (see Note 2).
In
accordance with the accounting guidance for the consolidation of
variable interest entities, the Partnership determines when it
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. The analysis that must be performed to determine which entity
should consolidate a VIE focuses on control and economic factors. 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 has (1) the power to direct the activities
of the VIE that most significantly impact the VIE's economic
performance and (2) the obligation to absorb losses or receive
benefits that could potentially be significant to the VIE. If
multiple unrelated parties share such power, as defined, no party
will be required to consolidate the VIE. Further, the guidance
requires continual reconsideration of the primary beneficiary of a
VIE.
10
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Based
on this guidance, the Local Limited Partnerships in which the
Partnership invests meet the definition of a VIE because the owners
of the equity at risk in these entities do not have the power to
direct their operations. However, management does not consolidate
the Partnership's interests in these VIEs, as it is not considered
to be the primary beneficiary since it does not have the power to
direct the activities that are considered most significant to the
economic performance of these entities. The Partnership currently
records the amount of its investment in these Local Limited
Partnerships as an asset on its balance sheets, recognizes its
share of partnership income or losses in the statements of
operations, and discloses how it accounts for material types of
these investments in its financial statements. The Partnership's
balance in investment in Local Limited Partnerships, plus the risk
of recapture of tax credits previously recognized on these
investments, represents its maximum exposure to loss. The
Partnership's exposure to loss on these Local Limited Partnerships
is mitigated by the condition and financial performance of the
underlying Housing Complexes as well as the strength of the Local
General Partners and their guarantee against credit recapture to
the investors in the Partnership.
Distributions
received by the Partnership are accounted for as a reduction of the
investment balance. Distributions received after the investment has
reached zero are recognized as distribution income. As of all
periods presented, all investment balances in Local Limited
Partnerships had reached zero.
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 original
maturities of three months or less when purchased to be cash
equivalents. As of September 30, 2016 and March 31, 2016,
respectively, the Partnership had $126,123 and $160,310 in cash
equivalents.
Reporting Comprehensive Income
The
Partnership had no items of other comprehensive income for all
periods presented.
Income Taxes
The
Partnership has elected to be treated as a pass-through entity for
income tax purposes and, as such, is not subject to income taxes.
Rather, all items of taxable income, deductions and tax credits are
passed through to and are reported by its owners on their
respective income tax returns. The Partnership’s federal tax
status as a pass-through entity is based on its legal status as a
partnership. Accordingly, the Partnership is not required to take
any tax positions in order to qualify as a pass-through entity. The
Partnership is required to file and does file tax returns with the
Internal Revenue Service and other taxing authorities. Accordingly,
these financial statements do not reflect a provision for income
taxes and the Partnership has no other tax positions which must be
considered for disclosure. Income tax returns filed by the
Partnership are subject to examination by the Internal Revenue
Service for a period of three years. While no income tax returns
are currently being examined by the Internal Revenue Service, tax
years since 2013 remain open.
11
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Net Income (Loss) Per Partnership Unit
Net
income (loss) per Partnership Unit includes no dilution and is
computed by dividing income (loss) available to Limited Partners by
the weighted average number of Partnership Units outstanding during
the period. Calculation of diluted net income (loss) per
Partnership Unit is not required.
Revenue Recognition
The
Partnership is entitled to receive reporting fees from the Local
Limited Partnerships. The intent of the reporting fees is to offset
(in part) administrative costs incurred by the Partnership in
corresponding with the Local Limited Partnerships. Due to the
uncertainty of the collection of these fees, the Partnership
recognizes reporting fees as collections are made.
Impact of Recent Accounting Pronouncements
In January 2014, the Financial Accounting Standards Board
(“FASB”) issued an amendment to the accounting and
disclosure requirements for investments in qualified affordable
housing projects. The amendments provide guidance on accounting for
investments by a reporting entity in flow-through limited liability
entities that manage or invest in affordable housing projects that
qualify for the low-income housing tax credit. The amendments
permit reporting entities to make an accounting policy election to
account for their investments in qualified affordable housing
projects using the proportional amortization method if certain
conditions are met. Under the proportional amortization method, an
entity amortizes the initial cost of the investment in proportion
to the tax credits and other tax benefits received, and recognizes
the net investment performance in the income statement as a
component of income tax expense (benefit). The amendments are
effective for interim and annual periods beginning after December
15, 2014 and should be applied retrospectively to all periods
presented. Early adoption was permitted. The adoption of this
update did not materially affect the Partnership's financial
statements.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810):
Amendments to the Consolidation Analysis”. This will improve
certain areas of consolidation guidance for reporting organizations
that are required to evaluate whether to consolidate certain legal
entities such as limited partnerships, limited liability
corporations and securitization structures.
ASU
2015-02 simplifies
and improves GAAP by: eliminating the presumption that a general
partner should consolidate a limited partnership, eliminating the
indefinite deferral of FASB Statement No. 167, thereby reducing the
number of Variable Interest Entity (VIE) consolidation models from
four to two (including the limited partnership consolidation model)
and clarifying when fees paid to a decision maker should be a
factor to include in the consolidation of VIEs.
ASU 2015-02 is effective
for periods beginning after December 15, 2015. The adoption of this
update did not materially affect the Partnership's financial
statements.
12
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of
September 30, 2016 and March 31, 2016, the Partnership had owned
limited partnership interests in 9 Local Limited Partnerships, each
of which owns one Housing Complex, consisting of an aggregate of
349 apartment units. The respective Local General Partners of the
Local Limited Partnerships manage the day to day operations of the
entities. Significant Local Limited Partnership business decisions,
as defined, require approval from the Partnership. The Partnership,
as a Limited Partner, is generally entitled to 99.9%, 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.
Selected
financial information for the six months ended September 30, 2016
and 2015 from the unaudited combined condensed financial statements
of the Local Limited Partnerships in which the Partnership has
invested is as follows:
COMBINED
CONDENSED STATEMENTS OF OPERATIONS
|
||
|
2016
|
2015
|
Revenues
|
$1,328,000
|
$1,259,000
|
Expenses:
|
|
|
Interest
expense
|
211,000
|
206,000
|
Depreciation
and amortization
|
351,000
|
352,000
|
Operating
expenses
|
929,000
|
910,000
|
Total
expenses
|
1,491,000
|
1,468,000
|
|
|
|
Net
loss
|
$(163,000)
|
$(209,000)
|
Net loss allocable
to the Partnership
|
$(162,000)
|
$(199,000)
|
Net loss recorded
by the Partnership
|
$-
|
$-
|
Certain
Local Limited Partnerships incurred 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 Partners 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 Low Income Housing Tax Credits could occur.
13
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2016
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS
Under
the terms of the Partnership Agreement, the Partnership has paid or
is obligated to the General Partner or its affiliates for the
following fees:
(a)
An annual asset
management fee not to exceed 0.5% of the invested assets of the
Partnership, as defined. “Invested Assets” means the
sum of the Partnership’s investment in Local Limited
Partnership interests and the Partnership’s allocable share
of mortgage loans on and other debts related to the Housing
Complexes owned by such Local Limited Partnerships. Asset
management fees of $51,500 and $56,612 were incurred during the six
months ended September 30, 2016 and 2015, respectively, of which $0
and $21,970 were paid during the six months ended September 30,
2016 and 2015, respectively.
(b)
A subordinated
disposition fee in an amount equal to 1% of the sale price of real
estate sold by the Local Limited Partnerships. Payment of this fee
is subordinated to the Limited Partners receiving distributions
equal to their capital contributions and their return on investment
(as defined in the Partnership Agreement) and is payable only if
services are rendered in the sales effort. No such fee was incurred
for all periods presented.
(c)
The Partnership
reimburses the General Partner or its affiliates for operating
expenses incurred on behalf of the Partnership. Operating expenses
reimbursements paid were $59,776 and $79,908 during the six months
ended September 30, 2016 and 2015, respectively.
The
accrued fees and expenses due to General Partner and affiliates
consisted of the following at:
|
September 30,
2016
|
March 31,
2016
|
|
|
|
Asset management
fee payable
|
$1,691,257
|
$1,639,757
|
Expenses paid by
the General Partner or an affiliate on behalf
of the Partnership
|
36,378
|
59,500
|
Total
|
$1,727,635
|
$1,699,257
|
The
General Partner and/or its affiliates do not anticipate that these
accrued fees will be paid in full until such time as capital
reserves are in excess of future foreseeable working capital
requirements of the Partnership.
NOTE 4 – PAYABLES TO LOCAL LIMITED PARTNERSHIPS
Payables
to Local Limited Partnerships, amounting to $40,282 at both
September 30, 2016 and March 31, 2016, represent amounts which are
due at various times based on conditions specified in the
respective Local Limited Partnership Agreements. These
contributions are payable in installments and are generally due
upon the Local Limited Partnerships achieving certain development
and operating benchmarks. The payables to Local Limited
Partnerships are subject to adjustment in certain
circumstances.
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,
this “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, the Partnership’s 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 the
Partnership or persons acting on its behalf are expressly qualified
in their entirety by cautionary statements in this Form 10-Q and in
other reports filed with the Securities and Exchange
Commission.
The
following discussion and analysis compares the results of
operations for the six months ended September 30, 2016 and 2015 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, 2016 consisted of $126,000 in
cash and
cash equivalents and $8,000 in other assets. Liabilities at
September 30, 2016 consisted of $1,728,000 of accrued fees and
expenses due to General Partner and affiliates and $40,000 of
payables to Local Limited Partnerships.
Results of Operations
Three Months Ended September 30, 2016 Compared to Three Months
Ended September 30, 2015 The Partnership's net loss for the
three months ended September 30, 2016 was $25,000, reflecting a
decrease of approximately $15,000 from the net loss of $40,000 for
the three months ended September 30, 2015. Reporting fees increased
by $4,000 for the three months ended September 30, 2016 compared to
the three months ended September 30, 2015. Local Limited
Partnerships pay reporting fees to the Partnership when the Local
Limited Partnerships’ cash flows will allow for the payment.
There was no gain (loss) on sale of Local Limited Partnerships
during the three months ended September 30, 2016 compared to $3,000
loss on sale of Local Limited Partnerships during the three months
ended September 30, 2015. The losses or gains recorded vary from
period to period depending on sale prices and values of Local
Limited Partnerships sold. During the six months ended September
30, 2016, legal and accounting fees decreased by $4,000 due to
timing of the work performed. Other expenses decreased by $2,000
for the three months ended September 30, 2016, mainly due to the
reduction in outsourcing of data input and site inspection of the
Local Limited Partnership.
Six Months Ended September 30, 2016 Compared to Six Months Ended
September 30, 2015 The Partnership's net loss for the six
months ended September 30, 2016 was $55,000, reflecting a decrease
of approximately $174,000 from the net income of $119,000 for the
six months ended September 30, 2015. The decrease was mainly due to
$189,000 in gain on sale of Local Limited Partnerships during the
six months ended September 30, 2015 compared to no gain on sale of
Local Limited Partnerships during the six months ended September
30, 2016. The gains recorded vary from period to period depending
on sale prices and values of Local Limited Partnerships sold.
Reporting fees increased by $2,000 for the six months ended
September 30, 2016 compared to the six months ended September 30,
2015. Local Limited Partnerships pay reporting fees to the
Partnership when the Local Limited Partnerships’ cash flows
will allow for the payment. For the six months ended September 30,
2016, asset management fees decreased by $5,000 compared to the six
months ended September 30, 2015. These fees are calculated based on
the Invested Assets. As Local Limited Partnerships are sold, the
Invested Assets decreased, thereby decreasing the asset management
fees that are incurred. During the six months ended
September 30, 2016,
legal and accounting fees decreased by $4,000 compared to the six
months ended September 30, 2015 due to timing of the work
performed. Other expenses decreased by $4,000 for the six months
ended September 30, 2016, mainly due to the reduction in
outsourcing of data input and site inspection of the Local Limited
Partnership.
15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Capital Resources and Liquidity
Six Months Ended September 30, 2016 Compared to Six Months Ended
September 30, 2015 Net cash and cash equivalents used during
the six months ended September 30, 2016 was $34,000, compared to
net cash and cash equivalents provided during the six months ended
September 30, 2015 of $129,000. The Partnership received $189,000
of disposition proceeds from the sale of four Local Limited
Partnerships during the six months ended September 30, 2015
compared to no disposition proceeds received during the six months
ended September 30, 2016. Proceeds received from
disposition vary from period to period, as discussed above.
During the six months ended September 30, 2016, the Partnership
paid $60,000 to the General partner or an affiliate for
reimbursement of operating expenses paid on behalf of the
Partnership compared to $80,000 paid during the six months ended
September 30, 2015. The Partnership made no payments to the general
partner for accrued asset management fees during the six months
ended September 30, 2016 compared to $22,000 paid during the six
months ended September 30, 2015. The reimbursement of operating
expenses and asset management fees are paid after management
reviews the cash position of the Partnership. The Partnership also
received $2,000 more in reporting fees during the six months ended
September 30, 2016 compared to the six months ended September 30,
2015. Reporting fees are paid to the Partnership when the Local
Limited Partnerships’ cash flows will allow for the
payment.
During
the six months ended September 30, 2016, accrued payables, which
consist primarily of related party asset management fees and
advances due to the General Partner and affiliates, increased by
$28,000 as compared to March 31, 2016. The General Partner does not
anticipate that these accrued fees and advances will be paid until
such time as capital reserves are in excess of foreseeable working
capital requirements of the Partnership.
The
Partnership expects its future cash flows, together with its net
available assets as of September 30, 2016, to be insufficient to
meet all currently foreseeable future cash requirements. Associates
has agreed to continue providing advances sufficient enough to fund
the operations and working capital requirements of the Partnership
through November 30, 2017.
16
Item 3. Quantitative and Qualitative Disclosures About Market
Risks
NOT
APPLICABLE
Item 4. Controls and Procedures
(a)
Disclosure controls and procedures
As of
the end of the period covered by this report, the
Partnership’s General Partner, under the supervision and with
the participation of the Chief Executive Officer and Chief
Financial Officer of Associates, carried out an evaluation of the
effectiveness of the Partnership’s “disclosure controls
and procedures” as defined in Securities Exchange Act of 1934
Rule 13a-15 and 15d-15. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that,
as of the end of the period covered by this report, the
Partnership’s disclosure controls and procedures were not
effective to ensure that material information required to be
disclosed in the Partnership’s periodic report filings with
SEC is recorded, processed, summarized and reported within the time
period specified by the SEC’s rules and forms, consistent
with the definition of “disclosure controls and
procedures” under the Securities Exchange Act of
1934.
The
Partnership must rely on the Local Limited Partnerships to provide
the Partnership with certain information necessary to the timely
filing of the Partnership’s periodic reports. Factors in the
accounting at the Local Limited Partnerships have caused delays in
the provision of such information during past reporting periods,
and resulted in the Partnership’s inability to file its
periodic reports in a timely manner.
Once
the Partnership has received the necessary information from the
Local Limited Partnerships, the Chief Executive Officer and the
Chief Financial Officer of Associates believe that the material
information required to be disclosed in the Partnership’s
periodic report filings with SEC is effectively recorded,
processed, summarized and reported, albeit not in a timely manner.
Going forward, the Partnership will use the means reasonably within
its power to impose procedures designed to obtain from the Local
Limited Partnerships the information necessary to the timely filing
of the Partnership’s periodic reports.
(b)
Changes in internal controls
There
were no changes in the Partnership’s internal control over
financial reporting that occurred during the quarter ended
September 30, 2016 that materially affected, or are reasonably
likely to materially affect, the Partnership’s internal
control over financial reporting.
17
Part II.
|
Other Information
|
|
|
Item 1.
|
Legal Proceedings
|
|
|
|
NONE
|
|
|
Item 1A.
|
Risk Factors
|
|
|
|
No
material changes in risk factors as previously disclosed in the
Partnership’s Form 10-K.
|
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
|
|
NONE
|
|
|
Item 3.
|
Defaults Upon Senior Securities
|
|
|
|
NONE
|
|
|
Item 4.
|
Mine Safety Disclosures
NOT
APPLICABLE
|
|
|
Item 5.
|
Other Information
|
|
|
|
NONE
|
|
|
Item 6.
|
Exhibits
|
31.1
Certification of
the Chief Executive Officer pursuant to Rule 13a-14 or 15d-14, as
adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
(filed herewith)
31.2
Certification of
the Chief Financial Officer pursuant to Rule 13a-14 or 15d-14, as
adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
(filed herewith)
32.1
Section 1350
Certification of the Chief Executive Officer. (filed
herewith)
32.2
Section 1350
Certification of the Chief Financial Officer. (filed
herewith)
101
Interactive data
files pursuant to Rule 405 of Regulation S-T: (i) the Condensed
Balance Sheets at September 30, 2016 and March 31, 2016, (ii) the
Condensed Statements of Operations for the three and six months
ended September 30, 2016 and September 30, 2015, (iii) the
Condensed Statement of Partners’ Deficit for the six months
ended September 30, 2016 (iv) the Condensed Statements of Cash
Flows for the six months ended September 30, 2016 and September 30,
2015 and (v) the Notes to Condensed Financial
Statements.
Exhibits 32.1,
32.2 and 101 shall not be deemed “filed” for purposes
of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liability of that Section. Such exhibits
shall not be deemed incorporated by reference into any filing under
the Securities Act of 1933 or Securities Exchange Act of
1934.
18
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
WNC
HOUSING TAX CREDIT FUND VI, L.P., SERIES 9
By: WNC &
ASSOCIATES,
INC.
General Partner
By:
/s/ Wilfred N. Cooper,
Jr.
Wilfred
N. Cooper, Jr.
President
and Chief Executive Officer of WNC & Associates,
Inc.
Date:
November 10, 2016
By:
/s/ Melanie R.
Wenk
Melanie
R. Wenk
Senior
Vice President - Chief Financial Officer of WNC & Associates,
Inc.
Date:
November 10, 2016
19