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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| UARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
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: 333-67682
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 10
California 33-0974362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626
(Address of principal executive offices)
(714) 662-5565
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes No X
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
(A Development-Stage Enterprise)
INDEX
December 31, 2002
PART I. FINANCIAL INFORMATION
Item 1. Financial Statement
Balance Sheet, December 31, 2002................................3
Notes to Balance Sheet.........................................4
Item 2. Management's Discussion and Analysis of Financial Condition .....8
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......9
Item 4. Controls and Procedures...........................................9
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................9
Item 5. Other information................................................9
Item 6. Exhibits and Reports on Form 8-K.................................9
Signatures...............................................................10
Certifications...........................................................11
2
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
(A Development-Stage Enterprise)
BALANCE SHEET
December 31, 2002
---------------------------
ASSETS
Cash $ 1,100
---------------------------
$ 1,100
===========================
LIABILITIES AND PARTNERS' EQUITY
Commitments and Contingencies (Note 2)
Partners' equity (Note 1):
General partner $ 100
Initial limited partners 1,000
---------------------------
Total partners' equity $ 1,100
===========================
See accompanying notes to balance sheet
3
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO BALANCE SHEET
December 31, 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund VI, L.P., Series 10 (a California Limited
Partnership) (the "Partnership") was formed on July 17, 2001 under the laws of
the State of California and has not commenced operations. The Partnership was
formed to invest primarily in other limited partnerships (the "Local Limited
Partnerships") which own and operate multi-family housing complexes (the
"Housing Complexes") that are eligible for low-income housing tax credits. The
local general partners (the "Local General Partners") of each Local Limited
Partnership will retain responsibility for maintaining, operating and managing
the Housing Complex.
The general partner is WNC & Associates, Inc. (the "General Partner"). The
chairman of the General Partner owns substantially all of the outstanding stock
of the General Partner.
The balance sheet includes only activity relating to the business of the
Partnership, and does 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.
Allocations under the Terms of the Partnership Agreement
- --------------------------------------------------------
The General Partner has a 0.1% interest in operating profits and losses, taxable
income and losses, cash available for distribution from the Partnership and tax
credits of the Partnership. The limited partners will be allocated the remaining
99.9% of these items in proportion to their respective investments in units of
limited partnership interest in the Partnership (the "Units").
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's Agreement of Limited Partnership) and the General Partner
has received proceeds equal to its capital contribution and a subordinated
disposition fee (as described in Note 2), any additional sale or refinancing
proceeds will be distributed 90% to the limited partners (in proportion to their
respective investments in Units) and 10% to the General Partner.
4
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO BALANCE SHEET (Continued)
December 31, 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
Risks and Uncertainties
- -----------------------
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low-income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of interests in Local Limited Partnership; limitations
on removal of Local General Partners; limitations on subsidy programs; and
possible changes in applicable regulations. The Housing Complexes are or will be
subject to mortgage indebtedness. If a Local Limited Partnership does not make
its mortgage payments, the lender could foreclose resulting in a loss of the
Housing Complex and the loss and the recapture of low-income housing credits. As
a limited partner of the Local Limited Partnerships, the Partnership will have
very limited rights with respect to management of the Local Limited
Partnerships, and will rely totally on the Local General Partners of the Local
Limited Partnerships for management of the Local Limited Partnerships. The value
of the Partnership's investments will be subject to changes in national and
local economic conditions, including unemployment conditions, which could
adversely impact vacancy levels, rental payment defaults and operating expenses.
This, in turn, could substantially increase the risk of operating losses for the
Housing Complexes and the Partnership. In addition, each Local Limited
Partnership is subject to risks relating to environmental hazards and natural
disasters, which might be uninsurable. Because the Partnership's operations will
depend on these and other factors beyond the control of the General Partner and
the Local General Partners, there can be no assurance that the anticipated
low-income housing credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low-income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the
low-income housing credits. There are limits on the transferability of Units,
and it is unlikely that a market for Units will develop. All management
decisions will be made by the General Partner.
Method of Accounting for Investments in Limited Partnerships
- ------------------------------------------------------------
The Partnership intends to account for its investments in limited partnerships
using the equity method of accounting, whereby the Partnership will adjust its
investment balance for its share of the Local Limited Partnership's results of
operations and for any distributions received. The accounting policies of the
Local Limited Partnerships are expected to be consistent with those of the
Partnership. Costs incurred by the Partnership in acquiring the investments will
be capitalized as part of the investment and amortized over 30 years (see Note
2).
Losses from Local Limited Partnerships allocated to the Partnership will not be
recognized to the extent that the investment balance would be adjusted below
zero.
5
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
Offering Expenses
- -----------------
Offering expenses are expected to consist of underwriting commissions, legal
fees, printing, filing and recordation fees, and other costs incurred in
connection with the selling of the Units. The General Partner is obligated to
pay all offering and organization costs excluding retail selling commissions and
dealer manager fees from its non-accountable expense reimbursement. Offering
expenses will be reflected as a reduction of limited partners capital.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Partnership is offering up to 25,000 Units at $1,000 per Unit. The balance
sheet does not include certain Partnership legal, accounting, and other
organization and offering costs paid and to be paid by the General Partner
and/or affiliates of the General Partner. If the minimum offering amount of
$1,400,000 is raised, the Partnership will be required to reimburse the General
Partner and/or its affiliates for such fees out of the proceeds of the offering,
up to certain maximum levels set forth below. In the event the Partnership is
unable to raise the minimum offering amount, the General Partner will absorb all
organization and offering costs.
The reader of this financial statement should refer to the WNC Housing Tax
Credit Fund VI, L.P., Series 10 Agreement of Limited Partnership and prospectus
for a more thorough description of the Partnership, and the terms and provisions
thereunder.
The Units are being offered by WNC Capital Corporation, a wholly-owned
subsidiary of the General Partner.
If the minimum offering amount of $1,400,000 is raised, the Partnership will be
obligated to the General Partner or affiliates for certain acquisition,
management and other fees as set forth below:
(a) Acquisition fees up to 7% of the gross proceeds from the sale of the Units
as compensation for services rendered in connection with the acquisition of
Local Limited Partnerships.
(b) A non-accountable acquisition expense reimbursement equal to 2% of the
gross proceeds from the sale of the Units.
(c) A non-accountable organization and offering expense reimbursement and
reimbursement equal to 4% of the gross proceeds from the sale of the Units,
a dealer manager fee equal to 2% of the gross proceeds from the sale of the
Units, and reimbursement for retail selling commissions advanced by the
General Partner or affiliates on behalf of the Partnership. This
reimbursement plus all other organizational and offering expenses,
inclusive of the non-accountable organization and offering expense
reimbursement, and the dealer manager fees, are not to exceed 13% of the
gross proceeds from the sale of Units.
6
NOTE 2 - COMMITMENTS AND CONTINGENCIES, continued
- -------------------------------------------------
(d) An annual asset management fee equal to 0.5% of the invested assets
(defined as the Partnership's capital contribution plus reserves of the
Partnership of up to 5% of gross proceeds plus its allocable percentage of
the mortgage debt encumbering the Housing Complexes).
(e) 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 distributions equal to their capital contributions and
their return on investment (as defined in the Agreement of Limited
Partnership) and is payable only if services are rendered in the sales
effort.
NOTE 3 - INCOME TAXES
- ---------------------
No provision for income taxes will be recorded in the financial statements as
any liability for income taxes is the obligation of the partners of the
Partnership.
7
Item 2. Management's Discussion and Analysis of Financial Condition
- -------------------------------------------------------------------
WNC Housing Tax Credit Fund VI, L.P. Series 10 (the "Partnership") has only
nominal funds as it has not yet commenced operations and the capital anticipated
to be raised through its public offering of Units has not yet become available.
The Partnership plans to raise equity capital from investors by means of its
public offering, and then to apply such funds, including the installment
payments on the investor promissory notes as received, to the purchase price and
acquisition fees and costs of local limited partnerships, reserves and expenses
of the offering.
It is not expected that any of the local limited partnerships will generate cash
from operations sufficient to provide distributions to investors in any
significant amount. Cash from operations, if any, would first be used to meet
operating expenses of the Partnership. Operating expenses include the asset
management fee.
Investments in local limited partnerships are not readily marketable. Such
investments may be affected by adverse general economic conditions which, in
turn, could substantially increase the risk of operating losses for the
apartment complexes, the local limited partnerships and the Partnership. These
problems may result from a number of factors, many of which cannot be
controlled. Nevertheless, WNC & Associates, Inc. (the "General Partner")
anticipates that capital raised from the sale of the Units will be sufficient to
fund the Partnership's future investment commitments and proposed operations.
The Partnership will establish working capital reserves of at least 3% of its
capital contributions. The General Partner believes this amount will be
sufficient to pay the operating costs and administrative expenses of the
Partnership, which include: the asset management fee to the General Partner;
expenses attendant to the preparation of tax returns; expenses attendant to the
preparation and dissemination of reports to the investors; and other investor
servicing obligations of the Partnership.
However, liquidity would be adversely affected by unanticipated or greater than
anticipated operating costs. Defaults or delays in payment of investor
promissory notes could also affect liquidity. Such payments are expected to fund
a portion of the working capital reserves. To the extent that working capital
reserves are insufficient to satisfy the cash requirements of the Partnership,
additional funds would be sought through bank loans or other institutional
financing. The Partnership may also use any cash distributions received from the
local limited partnerships to pay operating or administrative expenses or to
replenish or increase working capital reserves.
The Partnership does not have the ability to assess its investors to provide
additional capital if needed by the Partnership or its local limited
partnerships. Accordingly, if circumstances arise that cause the Partnership's
local limited partnerships to require capital in addition to that contributed by
the Partnership and any equity of the local general partners, the only possible
sources of such capital will be: the limited reserves of the Partnership;
third-party debt financing, which may not be available as the apartment
complexes already will be substantially leveraged; advances of the local general
partners; advances of the General Partner; other equity sources, which could
adversely affect the Partnership's interest in tax credits and cash
distributions and result in adverse tax consequences to the investors; or the
sale of the apartment complexes, which could have the same adverse effects.
There can be no assurance that funds from any of such sources would be readily
available in sufficient amounts to fund the capital requirements of the local
limited partnerships in question. If such funds are not available, the local
limited partnerships would risk foreclosure on their apartment complexes.
The capital needs and resources of the Partnership are expected to undergo major
changes during its first several years of operations as a result of the
completion of its offering of Units and its acquisition of investments.
Thereafter, the Partnership's capital needs and resources are expected to be
relatively stable.
8
Item 3: Quantitative and Qualitative Disclosures Above Market Risk
- ------------------------------------------------------------------
Not Applicable
Item 4. Procedures and Controls
- -------------------------------
Within the 90 days prior to the date of this report, the General Partner carried
out an evaluation, under the supervision and with the participation of the
General Partner's management, including the General Partner's Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Partnership's disclosure controls and procedures pursuant to
Exchange Act Rule 13a- 14. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Partnership's disclosure
controls and procedures are effective. There were no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
Part II. OTHER INFORMATION
- ---------------------------
Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
On December 9, 2002, WNC Housing Tax Credit Fund VI, L.P., Series 10 sold one
unit of limited partnership interest to Wilfred N. Cooper, Jr. and David N.
Shafer, officers, directors and shareholders of the General Partner, for the sum
of $1,000. Said transaction was exempt from the registration requirements of the
Securities Act of 1933, pursuant to Section 4(2) thereof, as a transaction not
constituting a public offering.
Item 5. Other Information
- --------------------------
Wilfred N. Cooper, Jr. has assumed the role of Chief Executive Officer of WNC &
Associates Inc. Wilfred N. Cooper, Sr., who previously held the role of Chief
Executive Officer, remains the Chairman of the Board.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Reports on Form 8-K.
None.
(b) Exhibits.
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
9
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 10
(Registrant)
By: WNC & Associates, Inc., General Partner
By: /s/ Wilfred N. Cooper, Jr.
Wilfred N. Cooper, Jr.
President - Chief Executive Officer of WNC & Associates, Inc.
Date: February 11, 2003
By: /s/ Thomas J. Riha
Thomas J. Riha
Vice President - Chief Financial Officer of WNC & Associates, Inc.
Date: February 11, 2003
10
CERTIFICATIONS
I, Wilfred N. Cooper, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX
CREDIT FUND VI, L.P., SERIES 10;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 11, 2003
/s/ Wilfred N. Cooper, Jr.
President and Chief Executive Officer of WNC & Associates, Inc.
11
CERTIFICATIONS
I, Thomas J. Riha, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WNC HOUSING TAX
CREDIT FUND VI, L.P., SERIES 10;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 11, 2003
/s/Thomas J. Riha
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
12