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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: 333-76435
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 7
California 33-0761517
(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|
1
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 7 (the "Partnership") was formed
under the California Revised Limited Partnership Act on June 16, 1997 and
commenced operations on September 3, 1999, the effective date of its public
offering pursuant to the Securities and Exchange Commission's approval of the
Partnership's Pre-Effective Amendment No. 3 to Form S-11 filed on July 16, 1999.
The Partnership was formed to invest primarily in other limited partnerships or
limited liability companies which will own and operate multifamily housing
complexes that are eligible for low-income housing federal and, in certain
cases, California income tax credits ("Low Income Housing Credit").
The 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 April 16, 1999, 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 November 7, 2000 a total of
18,850,000 units representing 18,850 had been sold. 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 April 1, 1999 (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 thirteen Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is or is expected to be 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 13 Housing Complexes as of the dates and for the
periods indicated:
5
---------------------------------- -----------------------------------------------
As of March 31, 2003 As of December 31, 2002
---------------------------------- -----------------------------------------------
Partnership's Original
Total Original Estimated Low Encumbrances
Investment in Amount of Income of Local
General Partner Local Limited Investment Number Housing Limited
Partnership Name Location Name Partnerships Paid to Date of Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
2nd Larry C. Porter
Fairhaven, Federalsburg, and Carter
LLC Maryland Chinniss $ 360,000 $ 360,000 18 100% $ 470,000 $ 996,000
ACN Southern
Hills
Partners II, Oskaloosa, ACN
L.P. Iowa Partnership 1,284,000 1,284,000 30 80% 1,792,000 462,000
Lewis F.
Weinberg
Weinberg,
Investments,
Hickory Inc. and
Lane Sioux Sioux Falls
Partners, City, Environmental
L.P. Iowa Access, Inc. 633,000 472,000 40 100% 845,000 3,178,000
Lake Quad Cities
Village Redevelopment
Apartments, Kewanee, Resources,
L.P. Illinois Inc. 3,834,000 3,834,000 50 82% 3,972,000 *
Montrose
County
Estates Raymond T.
Limited Cato, Jr.,
Dividend Christopher
Housing R. Cato and
Association, Montrose, Kenneth
L.P. Michigan Bradner 487,000 450,000 32 100% 747,000 687,000
Ozark ERC
Properties Ozark, Properties,
III Arkansas Inc. 300,000 300,000 24 96% 393,000 836,000
Lewis F.
Weinberg,
Weinberg
Investments,
Pierce Inc. and
Street Sioux Sioux Falls
Partners, City, Environmental
L.P. Iowa Access, Inc. 1,740,000 1,740,000 86 90% 1,729,000 4,100,000
Red Oaks Holly Douglas B.
Estates, Springs, Parker and
L.P. Mississippi Billy D. Cobb 242,000 242,000 24 100% 337,000 730,000
School Albany, Bradley V.
Square, L.P. Minnesota Larson
286,000 286,000 17 88% 397,000 994,000
* Results of Lake Village Apartments, L.P. have not been audited and thus have been excluded. See Note 3 to the financial
statements and report of independent certified public accountants.
6
---------------------------------- -----------------------------------------------
As of March 31, 2003 As of December 31, 2002
---------------------------------- -----------------------------------------------
Partnership's Original
Total Original Estimated Low Encumbrances
Investment in Amount of Income of Local
General Partner Local Limited Investment Number Housing Limited
Partnership Name Location Name Partnerships Paid to Date of Units Occupancy Credits Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Stroud NHS/ERC
Housing Housing
Associates, Stroud, Company,
L.P. Oklahoma LLC 891,000 847,000 36 81% 1,519,000 750,000
Tahlequah Tahlequah, ERC Properties,
Properties IV Oklahoma Inc. 375,000 375,000 24 100% 491,000 844,000
Curtis G.
Carlson Co.,
Inc., M.F.
Carlson Co.,
Timberwolf Deer Inc.,and
Townhomes, River, Robert
L.P. Minnesota Carlson 469,000 425,000 20 100% 685,000 1,348,000
Harold E.
United West Buehler, Sr.
Development, Memphis, and Jo Ellen
L.P. Arkansas Buehler 2,250,000 2,200,000 51 96% 3,000,0000 1,095,000
------------ ------------ --- --- ----------- -----------
$ 13,151,000 $ 12,815,000 452 92% $16,377,000 $16,020,000
============ ============ === === =========== ===========
7
For the year ended December 31, 2002 Low Income Housing Credits
Net Income Credits Allocated to Year to be
Partnership Name Rental Income (Loss) Partnership First Available
2nd Fairhaven, LLC $ 107,000 $(30,000) 99.98% 2000
ACN Southern Hills
Partners II, L.P. 129,000 (73,000) 99.98% 2001
Hickory Lane
Partners, L.P. 274,000 (156,000) 99.98% 2001
Lake Village
Apartments, L.P. * * 99.98% 2002
Montrose County Estates Limited
Dividend Housing Association, L.P. 122,000 (18,000) 99.98% 2001
Ozark Properties III 91,000 (24,000) 99.98% 2001
Pierce Street
Partners, L.P. 622,000 (153,000) 99.98% 2001
Red Oaks
Estates, L.P. 19,000 (20,000) 99.98% 2000
School Square, L.P. 109,000 (26,000) 99.98% 2000
Stroud Housing Associates, L.P. 103,000 (140,000) 99.98% 2001
Tahlequah Properties IV 100,000 (60,000) 99.98% 2001
Timberwolf Townhomes, L.P. 49,000 (41,000) 99.98% 2002
United Development, L.P. 209,000 5,000 99.98% 2002
----------- ----------
$ 1,934,000 $ (736,000)
=========== ==========
- ------------------------------------------------------------------------------------------------------------------------
* Results of Lake Village Apartments, L.P. have not been audited and thus have been excluded. See Note 3 to the financial
statements and report of independent certified public accountants.
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
8
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 937 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, 2003.
Item 5b.
NOT APPLICABLE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31
----------------------------------------------------------------------------
2003 2002 2001 2000
--------------- --------------- ---------------- ----------------
ASSETS
Cash and cash equivalents $ 2,246,731 $ 2,886,305 $ 5,103,916 $ 4,295,471
Funds held in escrow
disbursement account - 591,512 5,664,138 142,815
Subscriptions and notes
receivable - - 398,750 579,000
Investments in limited
partnerships, net 13,051,155 13,125,199 9,482,570 1,284,221
Loans receivable 212,019 953,241 1,080,974 154,000
Accrued interest receivable - - 65,377 4,635
Other assets - - 188 810
--------------- --------------- ---------------- ----------------
$ 15,509,905 $ 17,556,257 $ 21,795,913 $ 6,460,952
=============== =============== ================ ================
LIABILITIES
Payables to limited partnerships $ 336,428 $ 1,552,985 $ 5,142,481 $ 502,601
Accrued fees and expenses due to
general partner and affiliates 277,080 132,577 112,886 145,659
--------------- --------------- ---------------- ----------------
613,508 1,685,562 5,255,367 648,260
PARTNERS' EQUITY 14,896,397 15,870,695 16,540,546 5,812,692
--------------- --------------- ---------------- ----------------
$ 15,509,905 $ 17,556,257 $ 21,795,913 $ 6,460,952
=============== =============== ================ ================
9
Selected results of operations, cash flows, and other information for the
Partnership is as follows for the years ended March 31, 2003, 2002, 2001 and for
the period from September 3, 1999 (date operations commenced) to March 31, 2000:
For The
Period From
For The September 13,
Years Ended 1999
March 31 to March 31
----------------------------------------------------- -------------------
2003 2002 2001 2000
------------- ------------- ----------------- -------------------
Income (loss) from operations $ (52,092) $ (77,462)$ 233,508 $ 27,702
Equity in losses of limited
Partnerships (922,206) (622,249) (90,404) -
------------- ------------- ----------------- -------------------
Net income (loss) $ (974,298) $ (699,711)$ 143,104 $ 27,702
============= ============= ================= ===================
Net income (loss) allocated to:
General partner $ (974) $ (700)$ 143 $ 28
============= ============= ================= ===================
Limited partners $ (973,324) $ (699,011)$ 142,961 $ 27,674
============= ============= ================= ===================
Net income (loss) per limited partner
unit $ (51.64) $ (37.08) $ 10.13 $ 5.73
============= ============= ================= ===================
Outstanding weighted limited
partner units 18,850 18,850 14,110 4,831
============= ============= ================= ===================
For The
Period From
For The September 13,
Years Ended 1999
March 31 to March 31
----------------------------------------------------- -------------------
2003 2002 2001 2000
------------- ------------- ----------------- -------------------
Net cash provided by (used in):
Operating activities $ 198,914 $ 83,855 $ 304,387 $ 27,424
Investing activities (838,488) (2,710,931) (10,183,597) (1,037,023)
Financing activities - 409,465 10,687,655 5,305,070
------------- ------------- ----------------- -------------------
Net change in cash and cash
equivalents (639,574) (2,217,611) 808,445 4,295,471
Cash and cash equivalents,
beginning of period 2,886,305 5,103,916 4,295,471 -
------------- ------------- ----------------- -------------------
Cash and cash equivalents, end
of period $ 2,246,731 $ 2,886,305 $ 5,103,916 $ 4,295,471
============= ============= ================= ===================
Low Income Housing Credit per Unit was as follows for the period ended December 31:
2002 2001 2000 1999
-------------- -------------- -------------- ---------------
Federal $ 64 $ 35 $ 5 $ -
State - - - -
-------------- -------------- -------------- ---------------
Total $ 64 $ 35 $ 5 $ -
============== ============== ============== ===============
10
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.
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
11
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.
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.
12
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 $2,247,000 in
cash, aggregate investments in the thirteen Local Limited Partnerships of
$13,051,000 and $212,000 in loans receivable. Liabilities at March 31, 2003
primarily consisted of $336,000 due to limited partnerships, and $277,000 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 $(974,000),
reflecting an increase of $(274,000) from the net loss $700,000 experienced for
the year ended March 31, 2002. The change in net loss is primarily due to equity
in losses of limited partnerships which increased by $(300,000) to $(922,000)
for the year ended March 31, 2003 from $(622,000) for the year ended March 31,
2002, offset by a decrease in loss from operations of $25,000. The increase in
equity in losses of limited partnerships was mainly due to the completion of
construction and rent up of certain Local Limited Partnerships.
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 $(700,000),
reflecting a change of $(843,000) from the net income of $143,000 experienced
for the year ended March 31, 2001. The change in net income(loss) is primarily
due to equity in losses of limited partnerships which increased by $(532,000) to
$(622,000) for the year ended March 31, 2002 from $(90,000) for the year ended
March 31, 2001, along with a change in income(loss) from operations of $311,000.
The increase in equity in losses of limited partnerships was mainly due to the
completion of construction and rent up of certain Local Limited Partnerships.
Loss from operations increased largely due to a reduction in interest income of
$199,000 as cash has used for investments in Local Limited Partnerships and an
increase in operating expenses of $112,000 due to ramp up of operations as fund
became fully invested and an increase in other expenses of $77,000 relating to a
write-off of interest receivable deemed uncollectible.
Liquidity and Capital Resources
Year Ended March 31, 2003 Compared to Year Ended March 31, 2002. Net cash used
during the year ended March 31, 2003 was $(640,000), compared to net cash used
for the year ended March 31, 2003 of $(2,218,000). Net cash flows provided by
financing activities decreased by $409,000 as a result of the completion of the
offering. Net cash flows used in investing activities decreased by $1,872,000 to
$(838,000) for the year ended March 31, 2003 from $(2,711,000) for the year
ended March 31, 2002 due primarily to a decrease in net investments in limited
partnerships of $(6,355,000) offset by a decrease in the amount of cash released
from escrow of $4,481,000. Net cash flows from operating activities increased by
$115,000 to net cash provided by operating activities of $199,000 for the year
ended March 31, 2003 from net cash provided by operating activities of $84,000
for the year ended March 31, 2002 largely due to a reduction in other expenses.
Year Ended March 31, 2002 Compared to Year Ended March 31, 2001. Net cash used
during the year ended March 31, 2002 was $(2,218,000), compared to net cash
provided for the year ended March 31, 2001 of $808,000. Net cash flows provided
by financing activities decreased by $10,278,000 as a result of the completion
of the offering. Net cash flows used in investing activities decreased by
$7,473,000 to $(2,711,000) for the year ended March 31, 2002 from $(10,184,000)
for the year ended March 31, 2001 due primarily to a decrease in cash paid into
escrow and a release of cash from escrow of $10,594,000, offset by a increase in
the net investment in Local Limited Partnerships of $5,276,000. Net cash flows
from operating activities decreased by $220,000 to net cash provided by
operating activities of $84,000 for the year ended March 31, 2002 from net cash
provided by operating
13
activities of $304,000 for the year ended March 31, 2001 largely due to a
significant increase in other expenses and a significant reduction in interest
income.
Other Matters
As of July 8, 2003, the Partnership had not obtained audited financial
statements for one of its investments, Lake Village Apartments, L.P. ("Lake
Village Apartments"), as of and for the years ended December 31, 2002 and 2001.
As a result of this limitation in scope, the Partnership's independent certified
public accountants have qualified their report with respect to their audit of
the Partnership's 2003 and 2002 financial statements. Furthermore, the
Partnership has not included the financial information of Lake Village
Apartments in the combined condensed financial statements presented elsewhere
herein. The Partnership's investment in Lake Village Apartments totaled
$3,722,000 (unaudited) and $2,978,000 (unaudited) at March 31, 2003 and 2002.
The Partnership's equity interest in the net losses of operations of Lake
Village Apartments totaled $(137,499) (unaudited) and $0 (unaudited) for the
years ended March 31, 2003 and 2002.
During the year ended March 31, 2002, WNC, the General Partner of the
Partnership was advised that Lake Village Apartments, a local limited
partnership, was in default of covenants relating to certain loans advanced to
it for the construction of apartments. The defaults were primarily caused by the
general contractor failing to complete the construction of the development
according to the terms of the loans. As a result of the foregoing, at June 30,
2002, Lake Village Apartments and a WNC affiliate executed a workout agreement
with their lender (the "Agreement"), whereby the General Partner of Lake Village
Apartments was replaced by the aforementioned WNC affiliate. Pursuant to the
terms of the Agreement, the new general partner would cause additional equity to
be contributed to the local limited partnership, a new general contractor would
complete the construction of the development, and the lender, upon satisfaction
of certain conditions of the Agreement as defined, would continue to fund the
completion of the construction, among other costs. In addition, pursuant to the
Agreement, the Partnership Agreement was amended, and the partnership committed
to additional capital contributions of $855,628 as a result of obtaining
additional tax credits, and $387,877 was disbursed to an escrow account and
further disbursed to Lake Village Apartments. A net amount of $522,997 had been
advanced to Lake Village by March 31, 2003. An amount of $467,751 from this
advance was applied to capital contributions leaving a balance of $55,246 which
is included in loans receivable. Construction of the development is completed
and the facility has reached 82% occupancy.
One Local Limited Partnership, ACN Southern Hills II, L.P. ("Southern Hills"),
in which the Partnership owns a 99.98% interest, had a construction loan payable
aggregating approximately $1,100,000 as of December 31, 2001. Such construction
loan was due in March 2002 and was not repaid at that time. In September 2002
the loan was successfully refinanced with a first mortgage of $463,000 and a
20-year loan of $80,000 from the Partnership to Southern Hills. The Partnerships
loan is subordinate to the first mortgage and requires payments to be made
monthly and at the end of the year from available cash flow. The Partnership
expects this loan to be collectible in full.
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 expects 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. This excludes amounts owed to Associates by the
Partnership disclosed below.
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 $ 106,337 $ 57,297 $ 57,297 $ 57,297 $ 57,297 $ 2,119,989 $ 2,455,514
Capital Contributions Payable
to Lower Tier Partnerships 336,428 - - - - - 336,428
---------- --------- --------- --------- --------- ------------ -----------
Total contractual cash
obligations $ 442,756 $ 57,297 $ 57,297 $ 57,297 $ 57,297 $ 2,119,989 $ 2,791,942
========== ========= ========= ========= ========= ============ ===========
(1) Asset Management Fees are payable annually until termination of the
Partnership, which is to occur no later than December 31, 2045. The
estimate of the fees payable included herein assumes the retention of the
Partnership's interest in all Housing Complexes until 2045. Amounts due to
the General Partner as of March 31, 2003 have been included in the 2004
column. The General Partner does not anticipate that these fees will be
paid until such time as capital reserves are in excess of the future
foreseeable working capital requirements of the Partnership.
For additional information on our Asset Management Fees and Capital
Contributions Payable to Lower Tier Partnerships, see Notes 4 and 6 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.
15
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinded three previously issued statements and amended SFAS No.
13, "Accounting for Leases." The statement provides reporting standards for debt
extinguishments and provides accounting standards for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
The statement is effective for certain lease transactions occurring after May
15, 2002 and all other provisions of the statement shall be effective for
financial statements issued on or after May 15, 2002. The implementation of SFAS
No. 145 did not have a material impact on the Partnership's financial position
or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which updates accounting and reporting
standards for personnel and operational restructurings. The Partnership adopted
SFAS No. 146 for exit, disposal or other restructuring activities initiated
after December 31, 2002. The adoption of SFAS No. 146 did not have a material
effect on the Partnership's financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The adoption of FIN 45 did not have a
material impact on the Partnership's financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123." SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method on accounting for stock-based employee compensation. The
adoption of SFAS No. 148 did not have a material impact on the Partnership's
financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." The adoption of FIN 46 did not
have a material impact on the Partnership's financial position or results of
operations.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
NONE.
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 7
We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund
VI, L.P., Series 7 (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 3 to the financial statements, the Partnership accounts for
its investments in limited partnerships using the equity method. The portion of
the Partnership's investments in limited partnerships audited by other auditors
represented 46% and 36% of the total assets of the Partnership at March 31, 2003
and 2002, respectively, and 84%, 78% and 35% 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 3 to the financial statements, the
Partnership was unable to obtain audited financial statements for one of its
investments, Lake Village Apartments, L.P. ("Lake Village Apartments"), as of
and for the years ended December 31, 2002 and 2001. The Partnership's investment
in Lake Village Apartments totaled $3,722,000 (unaudited) and $2,978,000
(unaudited) as of March 31, 2003 and 2002, respectively. The Partnership's
equity interest in the net losses of Lake Village totaled $137,000 (unaudited)
for the year ended March 31, 2003. As the housing complex of Lake Village
Apartments was under construction, there were no results of operations recorded
by the Partnership with respect to its investment in Lake Village Apartments
during the years ended March 31, 2002 and 2001.
In our opinion, except for the effects of such adjustments and disclosures, if
any, as might have been determined to be necessary had an audit of the 2002 and
2001 financial statements of Lake Village Apartments 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 7 (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, and in conformity with accounting principles generally accepted in the
United States of America.
/s/ BDO SEIDMAN, LLP
Costa Mesa, California
July 8, 2003
17
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
BALANCE SHEETS
March 31, 2003 and 2002
2003 2002
------------- -------------
ASSETS
Cash and cash equivalents $ 2,246,731 $ 2,886,305
Funds held in escrow disbursement account (Note 8) - 591,512
Investments in limited partnerships (Note 3) 13,051,155 13,125,199
Loans receivable (Notes 2 and 8) 212,019 953,241
------------- -------------
$ 15,509,905 $ 17,556,257
============= =============
LIABILITIES AND PARTNERS' EQUITY
(DEFICIT)
Liabilities:
Due to limited partnerships (Note 6) $ 336,428 $ 1,552,985
Accrued fees and expenses due to General
Partner and affiliates (Note 4) 277,080 132,577
------------- -------------
Total liabilities 613,508 1,685,562
------------- -------------
Commitments and contingencies (Note 3 and 8)
Partners' equity (deficit)
General partner (3,105) (2,131)
Limited partners (25,000 units authorized, 18,850
units outstanding at March 31, 2003 and 2002) 14,899,502 15,872,826
------------- -------------
Total partners' equity 14,896,397 15,870,695
------------- -------------
$ 15,509,905 $ 17,556,257
============= =============
See report of independent certified public accountants and accompanying notes to financial statements
18
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For The Years Ended March 31
-----------------------------------------------
2003 2002 2001
-------------- ------------- ------------
Interest income $ 93,654 $ 144,543 $ 343,152
Other income 7,000 - -
-------------- ------------- ------------
100,654 144,543 343,152
-------------- ------------- ------------
Operating expenses:
Amortization (Notes 3 and 4) 56,916 56,916 40,617
Asset management fees (Note 4) 47,255 39,703 34,573
Other 48,575 125,386 34,454
-------------- ------------- ------------
Total operating expenses 152,746 222,005 109,644
-------------- ------------- ------------
Income (loss) from operations (52,092) (77,462) 233,508
Equity in losses of limited
partnerships (Note 3) (922,206) (622,249) (90,404)
-------------- ------------- ------------
Net income (loss) $ (974,298) $ (699,711) $ 143,104
============== ============= ============
Net income (loss) allocated to:
General Partner $ (974) $ (700) $ 143
============== ============= ============
Limited Partners $ (973,324) $ (699,011) $ 142,961
============== ============= ============
Net income(loss) per limited partner unit $ (51.64) $ (37.08) $ 10.13
============== ============= ============
Outstanding weighted limited partner units 18,850 18,850 14,110
============== ============= ============
See report of independent certified public accountants and accompanying notes to financial statements
19
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(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 $ (301) $ 5,812,993 $ 5,812,692
Sale of limited partnership units, net of
discounts of $14,030 - 11,688,970 11,688,970
Collection of promissory notes receivable, net
(Note 8) - 397,000 397,000
Offering expenses (1,266) (1,498,954) (1,500,220)
Withdrawal of initial limited partner - (1,000) (1,000)
Net income 143 142,961 143,104
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2001 (1,424) 16,541,970 16,540,546
Collection of promissory notes receivable, net - 37,000 37,000
Offering expenses (7) (7,133) (7,140)
Net loss (700) (699,011) (699,711)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2002 (2,131) 15,872,826 15,870,695
Net loss (974) (973,324) (974,298)
--------------- --------------- ---------------
Partners' equity (deficit) at March 31, 2003 $ (3,105 )$ 14,899,502 $ 14,896,397
=============== =============== ===============
See report of independent certified public accountants and accompanying notes to financial statements
20
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For The Years Ended March 31
-----------------------------------------------
2003 2002 2001
-------------- ------------ -------------
Cash flows from operating activities:
Net (loss)income $ (974,298) $ (699,711) $ 143,104
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Amortization 56,916 56,916 40,617
Equity in losses of limited partnerships 922,206 622,249 90,404
Change in interest receivable - 65,377 (60,742)
Change in other assets - 188 622
Change in accrued fees and expenses due
to general partner and affiliates 194,090 38,836 90,382
-------------- ------------ -------------
Net cash provided by operating activities 198,914 83,855 304,387
-------------- ------------ -------------
Cash flows from investing activities:
Investments in limited partnerships, net (1,556,106) (7,911,290) (2,636,220)
Funds held in escrow disbursement account, net 591,512 5,072,626 (5,521,323)
Accrued and unpaid acquisition fees and advances
due to affiliate of general partner - - (45,810)
Loans receivable 123,884 127,733 (926,974)
Capitalized acquisition costs and fees - - (1,053,270)
Distributions from limited partnerships 2,222 - -
-------------- ------------ -------------
Net cash used in investing activities (838,488) (2,710,931) (10,183,597)
-------------- ------------ -------------
Cash flows from financing activities:
Capital contributions - 435,750 12,266,220
Offering expenses - (26,285) (1,577,565)
Withdrawal of initial limited partner - - (1,000)
-------------- ------------ -------------
Net cash provided by financing activities - 409,465 10,687,655
-------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents (639,574) (2,217,611) 808,445
Cash and cash equivalents, beginning of period 2,886,305 5,103,916 4,295,471
-------------- ------------ -------------
Cash and cash equivalents, end of period $ 2,246,731 $ 2,886,305 $ 5,103,916
============== ============ =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Taxes paid $ 800 $ 800 $ 800
============== ============ =============
Interest paid $ - $ - $ 4,295
============== ============ =============
See report of independent certified public accountants and accompanying notes to financial statements
21
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(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 7, a California Limited Partnership
(the "Partnership"), was formed on June 16, 1997 under the laws of the state of
California, and commenced operations on September 3, 1999, the effective date of
its public offering pursuant to the Securities and Exchange Commission's
approval of the Partnership's Pre-Effective Amendment No. 3 to Form S-11 filed
on July 16, 1999. Prior to September 3, 1999, the Partnership was considered a
development-stage enterprise. The Partnership was formed to invest primarily in
other limited partnerships and limited liability companies (the "Local Limited
Partnerships") which own and operate multi-family housing complexes (the
"Housing Complex") that are eligible for low income housing credits. The local
general partners (the "Local General Partners") of each Local Limited
Partnership retain responsibility for maintaining, operating and managing the
Housing Complex.
The general partner is WNC & Associates, Inc. ("WNC") (the "General Partner"), a
California limited partnership. The chairman and president own substantially all
of the outstanding stock of WNC. The business of the Partnership is conducted
primarily through WNC, as the Partnership has no employees of its own.
The Partnership shall continue in full force and effect until December 31, 2060,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
The 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"). As of March 31, 2003, 18,850 Units, representing
subscriptions in the amount of $18,828,790 net of dealer discounts of $21,210.
The General Partner has a 0.1% 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 99.9% 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 4) 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 7
(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.
23
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(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, continued
- --------------------------------------------------------------
Method of Accounting for Investments in Limited Partnerships
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of the Local Limited Partnerships' results of operations
and for any contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by a comparison of the carrying
amount to future undiscounted net cash flows expected to be generated. If an
investment is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the investment exceeds
fair value. The accounting policies of the Local Limited Partnership's are
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 3 and 4).
Equity in losses of 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. Equity in losses of Local Limited Partnerships
allocated to the Partnership will not be recognized to the extent that the
investment balance would be adjusted below zero. As soon as the investment
balance reaches zero, the related costs of acquiring the investment are
accelerated to the extent of losses available (see Note 4).
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred in connection with selling
limited partnership interests in the Partnership. The General Partner is
obligated to pay all offering and organization costs in excess of 4% (excluding
sales commissions and the dealer manager fee) of the total offering proceeds.
Offering expenses are reflected as a reduction of partners' capital and amounted
to $2,429,245, $2,429,245 and $2,422,105 as of March 31, 2003, 2002 and 2001,
respectively.
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.
24
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(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, continued
- --------------------------------------------------------------
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 cash equivalents of approximately
$1,100,000 and $1,000,000, respectively.
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 Income Per Limited Partner Unit
Net income per limited partner unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net income per unit
includes no dilution and is computed by dividing income available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net income per unit is not required.
Reporting Comprehensive Income
The Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income establishes standards for 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 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.
25
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(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, continued
- --------------------------------------------------------------
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which updates accounting and reporting
standards for personnel and operational restructurings. The Partnership adopted
SFAS No. 146 for exit, disposal or other restructuring activities initiated
after December 31, 2002. The adoption of SFAS No. 146 did not have a material
effect on the Partnership's financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The adoption of FIN 45 did not have a
material impact on the Partnership's financial position or results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123." SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method on accounting for stock-based employee compensation. The
adoption of SFAS No. 148 did not have a material impact on the Partnership's
financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." The adoption of FIN 46 did not
have a material impact on the Partnership's financial position or results of
operations.
NOTE 2 - LOANS RECEIVABLE
- -------------------------
Loans receivable represent amounts loaned by the Partnership to certain Local
Limited Partnerships in which the Partnership may invest or has already
invested. These loans are generally applied against the first capital
contribution due if the Partnership ultimately invests in such entities. In the
event that the Partnership does not invest in such entities, the loans are to be
repaid with interest at a rate which is equal to the rate charged to the holder.
At March 31, 2002, loans receivable of $329,000 were due from one Local Limited
Partnership in which the Partnership had not acquired a limited partnership
interest, and $524,541 (See Note 8) and $100,000 had been advanced to two
additional Local Limited Partnerships in which the Partnership has an
investment. On July 25, 2002, the $329,000 loan was repaid to the Partnership
and on September 30, 2002, the $100,000 advance was offset against note payable
to that Local Limited Partnership.
At March 31, 2003, loans receivable of $212,019 were due from three Local
Limited Partnerships in which the Partnership owns a 99.98% interest. One of the
loans in the amount of $79,787, is in the form of a 20 year promissory note, is
subordinate to the first mortgage on the respective property, due in full on
August 30, 2022 and earns interest at a rate of 8% per annum.
26
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of March 31, 2003, the Partnership has acquired limited partnership interests
in thirteen Local Limited Partnerships, respectively, each of which owns one
Housing Complex consisting of an aggregate of 452 apartment units. As of March
31, 2003 construction or rehabilitation of all of the Housing Complexes was
completed. The respective general partners of the Local Limited Partnerships
manage the day-to-day operations of the entities. Significant Local Limited
Partnership business decisions require approval from the Partnership. The
Partnership, as a limited partner, is generally entitled to 99.98%, as specified
in the Local Limited Partnership agreements, of the operating profits and
losses, taxable income and losses and tax credits of the Local Limited
Partnerships.
As of July 8, 2003, the Partnership had not obtained audited financial
statements for one of its investments, Lake Village Apartments, L.P. ("Lake
Village Apartments"), as of and for the year ended December 31, 2002 and 2001.
As a result, the Partnership has not included the financial information of Lake
Village Apartments in the combined condensed financial statements presented
herein. The Partnership's investment in Lake Village Apartments totaled
$3,722,000 (unaudited) and $2,978,000 (unaudited) at March 31, 2003 and 2002,
respectively. The Partnership's equity interest in the net losses of Lake
Village Apartments totaled $(137,499) (unaudited) and $0 (unaudited) for the
years ended March 31, 2003 and 2002. The Lake Village Apartments Housing Complex
was still under construction as of and for the year ended December 31, 2001; as
a result, no equity in losses were recorded.
The Partnership's investments in Local Limited Partnerships as shown in the
balance sheets at March 31, 2003 and 2002, are approximately $5,761,000 and
$7,122,000, respectively, greater than the Partnership's 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, to capital
contributions payable to the limited partnerships which were netted against
partner capital in the Local Limited Partnerships' financial statements (see
Note 6), and to the exclusion of the Lake Village Apartments 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 from the Local 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 had reached a zero balance.
27
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the periods presented:
For The Years
Ended March 31
-----------------------------------------------------
2003 2002 2001
--------------- ----------------- ---------------
Investments per balance sheet, beginning of period $ 13,125,199 $ 9,482,570 $ 1,284,221
Capital contributions paid, net 1,105,258 4,013,757 2,205,074
Capital contributions payable - 310,954 5,071,026
Capitalized acquisition fees and costs - - 1,053,270
Distributions received from limited partnerships (2,222) - -
Tax credit adjustment (197,958) (2,917) -
Equity in losses of limited partnerships (922,206) (622,249) (90,404)
Amortization of paid acquisition fees and costs (56,916) (56,916) (40,617)
--------------- ----------------- ---------------
Investments per balance sheet, end of period $ 13,051,155 $ 13,125,199 $ 9,482,570
=============== ================= ===============
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 Local Limited Partnerships as of and for
the year ended December 31 is as follows: (Combined condensed financial
information for Lake Village Apartments has been excluded from the presentation
below):
COMBINED CONDENSED BALANCE SHEETS
2002 2001
----------------- -------------------
ASSETS
Buildings and improvements, net of accumulated depreciation
for 2002 and 2001 of $1,472,000 and $712,000, respectively $ 23,821,000 $ 16,714,000
Land 856,000 758,000
Construction in progress 1,538,000 3,861,000
Other assets 1,077,000 1,843,000
Due to related parties - 496,000
----------------- -------------------
$ 27,292,000 $ 23,672,000
================= ===================
LIABILITIES AND PARTNERS' EQUITY
Mortgage and construction loans payable $ 16,020,000 $ 12,978,000
Due to related parties 2,531,000 2,754,000
Other liabilities 1,130,000 1,711,000
----------------- -------------------
19,681,000 17,443,000
----------------- -------------------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund VI, L.P., Series 7 7,290,000 6,003,000
Other partners 321,000 226,000
----------------- -------------------
7,611,000 6,229,000
----------------- -------------------
$ 27,292,000 $ 23,672,000
================= ===================
28
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2002 2001 2000
----------------- --------------- -------------
Revenues $ 2,179,000 $ 1,740,000 $ 867,000
----------------- --------------- --------------
Expenses:
Operating expenses 1,372,000 936,000 398,000
Interest expense 728,000 663,000 372,000
Depreciation and amortization 814,000 510,000 154,000
----------------- --------------- --------------
Total expenses 2,914,000 2,109,000 924,000
----------------- --------------- --------------
Net income(loss) $ (736,000) $ (369,000) $ (57,000)
================= =============== ==============
Net loss allocable to the Partnership, before
equity in losses of Lake Village $ (736,000) $ (368,000) $ (56,000)
================= =============== ==============
Net loss recorded by the Partnership, before
equity in losses of Lake Village $ (785,000) $ (622,000) $ (90,000)
Net loss of Lake Village Apartments allocable
to the Partnership (137,000) - -
----------------- --------------- --------------
Net loss recorded by the Partnership $ (922,000) $ (622,000) $ (90,000)
================= =============== ==============
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 4 - 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 7% of the gross proceeds from the sale of Units as
compensation for services rendered in connection with the acquisition
of Local Limited Partnerships. At the end of all periods presented,
the Partnership incurred acquisition fees of $1,319,500. Accumulated
amortization of these capitalized costs was $122,857 and $78,869 as of
March 31, 2003 and 2002, respectively.
Acquisition costs of 2% of the gross proceeds from the sale of Units
as full reimbursement of costs incurred by the General Partner in
connection with the acquisition of Local Limited Partnerships. At the
end of all periods presented, the Partnership incurred acquisition
costs of $377,000, respectively, which have been included in
investments in limited partnerships. Accumulated amortization was
$35,990 and $23,062 as of March 31, 2003 and 2002, respectively.
29
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 4 - 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
$47,255, $39,703 and $34,573 were incurred during the years ended
March 31, 2003, 2002 and 2001, respectively, of which $40,133, $22,500
and $0 were paid, 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 return on investment (as defined in the
Partnership Agreement) and is payable only if the General Partner or
its affiliates render services in the sales effort.
The accrued fees and advances due to General Partner and affiliates consist of
the following:
March 31
-----------------------------------
2003 2002
--------------- ---------------
Organizational, offering and selling costs payable $ 2,590 $ 2,590
Accrued asset management fees 49,040 41,918
Reimbursements for expenses paid by the
General Partner or an affiliate 4,547 1,467
Payables to Local Limited Partnerships 64 86,602
Insurance proceeds due to Local Limited Partnership 220,839 -
--------------- ---------------
Total $ 277,080 $ 132,577
=============== ===============
30
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 5 - 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 $ 13,000 $ 26,000 $ 9,000 $ 53,000
Operating expenses (38,000) (37,000) (42,000) (36,000)
Equity in losses of limited
partnerships (92,000) (119,000) (378,000) (333,000)
Net loss (117,000) (130,000) (411,000) (316,000)
Loss available to limited partner (117,000) (130,000) (411,000) (315,000)
Loss per limited partnership unit (6) (7) (22) (17)
2002
----
Income $ 50,000 $ 29,000 $ 23,000 $ 42,000
Operating expenses (33,000) (27,000) (73,000) (89,000)
Equity in losses of limited
partnerships (33,000) (105,000) (64,000) (420,000)
Net loss (16,000) (103,000) (114,000) (467,000)
Loss available to limited partner (16,000) (103,000) (114,000) (466,000)
Loss per limited partnership unit (1) (5) (6) (25)
NOTE 6 - 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).
Subsequent to March 31, 2003 and through July 8, 2003, the Partnership disbursed
$342,250 to limited partnerships.
NOTE 7 - 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.
31
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Years Ended March 31, 2003, 2002 and 2001
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
One Local Limited Partnership, ACN Southern Hills II, L.P. ("Southern Hills"),
in which the Partnership owns a 99.98% interest, had a construction loan payable
aggregating approximately $1,100,000 as of December 31, 2001. Such construction
loan was due in March 2002 and was not repaid at that time. In September 2002
the loan was successfully refinanced with a first mortgage of $463,000 and a 20
year loan of $80,000 from the Partnership to Southern Hills. The balance of the
construction loan was paid off by the Local Limited Partnership. The
Partnership's loan is subordinate to the first mortgage and requires payments to
be made monthly and at the end of the year from available cash flow. The
Partnership expects this loan to be collectible in full.
During the year ended March 31, 2002, WNC, the General Partner of the
Partnership, was advised that Lake Village Apartments, a Local Limited
Partnership, was in default of covenants relating to certain loans advanced to
it for the construction of apartments. The defaults were primarily caused by the
general contractor failing to complete the construction of the development
according to the terms of the loans. As a result of the foregoing, at June 30,
2002, Lake Village Apartments and a WNC affiliate executed a workout agreement
with their lender (the "Agreement"), whereby the Local General Partner of Lake
Village Apartments was replaced by the aforementioned WNC affiliate. Pursuant to
the terms of the Agreement, the new Local General Partner would cause additional
equity to be contributed to the Local Limited Partnership, a new general
contractor would complete the construction of the development, and the lender,
upon satisfaction of certain conditions of the Agreement, as defined, would
continue to fund the completion of the construction, among other costs. In
addition, pursuant to the Agreement, the Partnership Agreement was amended, and
the Partnership committed to additional capital contributions of $855,628 as a
result of obtaining additional tax credits, and $387,877 was disbursed to an
escrow account and further disbursed to Lake Village Apartments. A net amount of
$522,997 had been advanced to Lake Village by March 31, 2003. An amount of
$467,751 from this advance was applied to capital contributions leaving a
balance of $55,246 which is included in loans receivable. Construction of the
development is completed and the facility has reached 82% occupancy.
32
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors, (b) Identification of Executive Officers, (c)
Identification of Certain Significant Employees, (d) Family Relationships,
and (e) Business Experience
The Partnership has no directors, executive officers or employees of its own.
The following biographical information is presented for the directors, executive
officers and significant employees of Associates, which has principal
responsibility for the Partnership's affairs.
Associates is a California corporation which was organized in 1971. Its officers
and significant employees are:
Wilfred N. Cooper, Sr. Chairman of the Board
Wilfred N. Cooper, Jr. President and Chief Executive Officer
David N. Shafer, Esq. Executive Vice President and Director of Asset Management
Sylvester P. Garban Senior Vice President - Institutional Investments
David C. Turek Senior Vice President - Originations
Thomas J. Riha, CPA Vice President - Chief Financial Officer
Michael J. Gaber Vice President - Acquisitions
Diemmy T. Tran Vice President - Portfolio Management
J. Brad Hurlbut Director of Syndications
In addition to Wilfred N. Cooper, Sr., the directors of Associates are Wilfred
N. Cooper, Jr., David N. Shafer, and Kay L. Cooper. The principal shareholder of
Associates is a trust established by Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., age 72, is the founder and Chairman of the Board of
Directors of Associates, a Director of WNC Capital Corporation, and a general
partner in some of the partnerships previously sponsored by Associates. Mr.
Cooper has been actively involved in the affordable housing industry since 1968.
Previously, during 1970 and 1971, he was founder and a principal of Creative
Equity Development Corporation, a predecessor of Associates, and of Creative
Equity Corporation, a real estate investment firm. For 12 years before that, Mr.
Cooper was employed by Rockwell International Corporation, last serving as its
manager of housing and urban developments where he had responsibility for
factory-built housing evaluation and project management in urban planning and
development. He has testified before committees of the U.S. Senate and the U.S.
House of Representatives. Mr. Cooper is a Life Director of the National
Association of Home Builders and a National Trustee for NAHB's Political Action
Committee, and the Chairman of NAHB's Multifamily Council. He is a Director of
the National Housing Conference and a member of NHC's Executive Committee, and a
founder and Director of the California Housing Consortium. He is the husband of
Kay Cooper and the father of Wilfred N. Cooper, Jr. Mr. Cooper graduated from
Pomona College in 1956 with a Bachelor of Arts degree.
Wilfred N. Cooper, Jr., age 40, is President, Chief Executive Officer, Secretary
and a Director and a member of the Acquisition Committee of Associates. He is
President of, and a registered principal with, WNC Capital Corporation, and is a
Director of WNC Management, Inc. He has been involved in real estate investment
and acquisition activities since 1988 when he joined Associates. Previously, he
served as a Government Affairs Assistant with Honda North America in Washington,
D.C. Mr. Cooper is a member of the Editorial Advisory Boards of Affordable
Housing Finance and LIHC Monthly Report, a Steering Member of the Housing Credit
Group of the National Association of Home Builders, an Alternate Director of
NAHB, a member of the Advisory Board of the New York State Association for
Affordable Housing and a member of the Urban Land Institute. He is the son of
Wilfred Cooper, Sr. and Kay Cooper. Mr. Cooper graduated from The American
University in 1985 with a Bachelor of Arts degree.
David N. Shafer, age 50, is Executive Vice President, a Director, Director of
Asset Management and a member of the Acquisition Committee of Associates, and a
Director and Secretary of WNC Management, Inc. Mr. Shafer has been active in the
real estate industry since 1984. Before joining Associates in 1990, he was
engaged as an attorney in the private practice of law with a specialty in real
estate and taxation. Mr. Shafer is a Director and President of the California
Council of Affordable Housing, and a member of the State Bar of California. Mr.
Shafer graduated from the University of California at Santa Barbara in 1978 with
a Bachelor of Arts degree, from the New England School
33
of Law in 1983 with a Juris Doctor degree cum laude and from the University of
San Diego in 1986 with a Master of Law degree in Taxation.
Sylvester P. Garban, age 57, is Senior Vice President - Institutional
Investments of Associates. Mr. Garban has been involved in real estate
investment activities since 1978. Before joining Associates in 1989, he served
as Executive Vice President with MRW, Inc., a real estate development and
management firm. Mr. Garban is a member of the National Association of
Affordable Housing Lenders and the Financial Planning Association. He graduated
from Michigan State University in 1967 with a Bachelor of Science degree in
Business Administration.
David C. Turek, age 48, is Senior Vice President - Originations of Associates.
His experience with real estate investments and finance has continued since
1976, and he has been employed by Associates since 1996. Previously, from 1995
to 1996, Mr. Turek served as a consultant for a national tax credit sponsor
where he was responsible for on-site feasibility studies and due diligence
analyses of tax credit properties. From 1992 to 1995 he served as Executive Vice
President for Levcor, Inc., a multi-family development company, and from 1990 to
1992 he served as Vice President for the Paragon Group where he was responsible
for tax credit development activities. He is a Director of the National Housing
and Rehabilitation Association, the Rural Rental Housing Association of Texas,
and the Alabama Council of Affordable Rental Housing. Mr. Turek graduated from
Southern Methodist University in 1976 with a Bachelor of Business Administration
degree.
Thomas J. Riha, age 47, is Vice President - Chief Financial Officer and a member
of the Acquisition Committee of Associates and President, Treasurer and a
Director of WNC Management, Inc. He has been involved in real estate acquisition
and investment activities since 1979. Before joining Associates in 1994, Mr.
Riha was employed by Trust Realty Advisor, a real estate acquisition and
management company, last serving as Vice President - Operations. He is a
Director of the Task Force on Housing Credit Certification of the National
Association of Home Builders. Mr. Riha graduated from the California State
University, Fullerton in 1977 with a Bachelor of Arts degree cum laude in
Business Administration with a concentration in Accounting and is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants.
Michael J. Gaber, age 37, is Vice President - Acquisitions and a member of the
Acquisition Committee of Associates. Mr. Gaber has been involved in real estate
acquisition, valuation and investment activities since 1989 and has been
associated with Associates since 1997. Prior to joining Associates, he was
involved in the valuation and classification of major assets, restructuring of
debt and analysis of real estate taxes with H.F. Ahmanson & Company, parent of
Home Savings of America. Mr. Gaber graduated from the California State
University, Fullerton in 1991 with a Bachelor of Science degree in Business
Administration - Finance.
Diemmy T. Tran, age 37, is Vice President - Portfolio Management of Associates.
She is responsible for overseeing portfolio management and investor reporting
for all WNC funds, and for monitoring investment returns for all WNC
institutional funds. Ms. Tran has been involved in real estate asset management
and finance activities for 12 years. Prior to joining Associates in 1998, Ms.
Tran served as senior asset manager for a national Tax Credit sponsor and as an
asset specialist for the Resolution Trust Corporation where she was responsible
for the disposition and management of commercial loan and REO portfolios. Ms.
Tran is licensed as a California real estate broker. She graduated from
California State University, Northridge in 1989 with a Bachelor of Science
degree in finance and a minor in real estate.
J. Brad Hurlbut, age 43, is Director of Syndications of Associates. He is
responsible for the financial structuring of WNC's institutional funds. Mr.
Hurlbut has 20 years of experience in real estate investment and development.
Prior to joining WNC in 2000, he served as corporate controller for Great
Western Hotels Corporation. Mr. Hurlbut has been an enrolled agent licensed to
practice before the IRS since 1984. He graduated from the University of Redlands
in 1981 with a Bachelor of Science degree in business management and from
California State University, Fullerton in 1985 with a Master of Science degree
in taxation.
Kay L. Cooper, age 66, is a Director of Associates. Mrs. Cooper was the sole
proprietor of Agate 108, a manufacturer and retailer of home accessory products,
from 1975 until its sale in 1998. She is the wife of Wilfred Cooper, Sr. and the
mother of Wilfred Cooper, Jr. Mrs. Cooper graduated from the University of
Southern California in 1958 with a Bachelor of Science degree.
(f) Involvement in Certain Legal Proceedings
Inapplicable.
34
(g) Promoters and Control Persons
Inapplicable.
(h) Audit Committee Financial Expert
Neither the Partnership nor Associates has an audit committee.
35
Item 11. Executive Compensation
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates for the following fees:
(a) Organization and Offering Expenses. The Partnership accrued or paid
the General Partner or its affiliates as of March 31, 2003, 2002 and
2001 $2,429,245, $2,429,245 and $2,422,105, respectively, for selling
commissions and other fees and expenses of the Partnership's offering
of Units. Of the total accrued or paid, $1,298,245 was paid to
unaffiliated persons participating in the Partnership's offering.
(b) Acquisition Fees. Acquisition fees in an amount equal to 7.0% of the
gross proceeds of the Partnership's Offering ("Gross Proceeds"). As of
March 31, 2003 and 2002 the aggregate amount of acquisition fees paid
or accrued was $1,319,500, respectively.
(c) Acquisition Expense. The Partnership reimbursed the General Partner
for acquisition expenses in an amount equal to 2% of the Gross
Proceeds, pursuant to the terms of the partnership agreement. As of
March 31, 2003 and 2002, the aggregate amount of acquisition fees paid
or accrued was $377,000.
(d) Annual Asset Management Fee. An annual asset management fee in an
amount equal to 0.2% of the Invested Assets of the Partnership.
"Invested Assets" is defined as the sum of the Partnership's
Investment in Local Limited Partnerships and the Partnership's
allocable share of the amount of the mortgage loans and other debts
related to the Housing Complexes owned by such Local Limited
Partnerships. Fees of approximately $47,000, $40,000 and $35,000 were
incurred for the years ended March 31, 2003, 2002, and 2001, of which
approximately $40,000, $22,500 and $0 was paid during the respective
periods.
(e) Operating Expenses. The Partnership reimbursed the General Partner or
its affiliates for operating expenses of approximately $39,000,
$45,000 and $35,500 during the years ended March 31, 2003, 2002 and
2001, respectively, expended by such persons on behalf of the
Partnership.
(f) Subordinated Disposition Fee. A subordinated disposition fee in an
amount equal to 1% of the sale price received in connection with the
sale or disposition of an Apartment Complex or Local Limited
Partnership Interest. Subordinated disposition fees will be
subordinated to the prior return of the Limited Partners' capital
contributions and payment of the Return on Investment to the Limited
Partners. "Return on Investment" means an annual, cumulative but not
compounded, "return" to the Limited Partners (including Low Income
Housing Credits) as a class on their adjusted capital contributions
commencing for each Limited Partner on the last day of the calendar
quarter during which the Limited Partner's capital contribution is
received by the Partnership, calculated at the following rates: (i)
11% through December 31, 2010, and (ii) 6% for the balance of the
Partnerships term. No disposition fees have been paid.
(g) Interest in Partnership. The General Partner will receive 0.1% of the
Low Income Housing Credits. No Low Income Housing Credits were
allocated for the period ended December 31, 2000 and 1999. The General
Partners are also entitled to receive 0.1% of cash distributions.
There were no distributions of cash to the General Partner during the
years ended March 31, 2003, 2002 and 2001.
36
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
(a) Securities Authorized for Issuance Under Equity Compensation Plans
Inapplicable
(b) Security Ownership of Certain Beneficial Owners
No person is known to own beneficially in excess of 5% of the
outstanding Units.
(c) Security Ownership of Management
Neither the General Partner, its affiliates, nor any of the officers or
directors of the General Partner or its affiliates own directly or
beneficially any Units in the Partnership.
(d) Changes in Control
The management and control of the General Partner and of Associates
may be changed at any time in accordance with their respective
organizational documents, without the consent or approval of the
Limited Partners. In addition, the Partnership Agreement provides for
the admission of one or more additional and successor General Partners
in certain circumstances.
First, with the consent of any other General Partners and a
majority-in-interest of the Limited Partners, any General Partner may
designate one or more persons to be successor or additional General
Partners. In addition, any General Partner may, without the consent of
any other General Partner or the Limited Partners, (i) substitute in
its stead as General Partner any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets,
stock or other evidence of equity interest and continued its business,
or (ii) cause to be admitted to the Partnership an additional General
Partner or Partners if it deems such admission to be necessary or
desirable so that the Partnership will be classified a partnership for
Federal income tax purposes. Finally, a majority-in-interest of the
Limited Partners may at any time remove the General Partner of the
Partnership and elect a successor General Partner.
Item 13. Certain Relationships and Related Transactions
The General Partner manages all of the Partnership's affairs. The transactions
with the General Partner are primarily in the form of fees paid by the
Partnership for services rendered to the Partnership, reimbursement of expenses,
and the General Partner's interest in the Partnership, as discussed in Item 11
and in the notes to the Partnership's financial statements.
Item 14. Controls and Procedures
Associates, on behalf of the Partnership, maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our periodic reports filed with the Securities and Exchange Commission
("SEC") is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC and that such information is
accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, our management recognized that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Based on their most recent evaluation, which was completed within 90 days of the
filing of this Annual Report on Form 10-K, our Principal Executive Officer and
Principal Financial Officer believe that our disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934,
as amended) are effective. There were no significant changes in internal
controls or in other factors that could significantly affect these internal
controls subsequent to the date of their most recent evaluation.
37
PART IV.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial statements included in Part II hereof:
Report of Independent Certified Public Accountants
Balance Sheets as of March 31, 2003 and 2002
Statements of Operations for the years ended March 31, 2003, 2002 and
2001
Statements of Partners' Equity (Deficit) for the years ended March
31, 2003, 2002 and 2001
Statements of Cash Flows for the years ended March 31, 2003, 2002 and
2001
Notes to Financial Statements
(a)(2) Financial statement schedules included in Part IV hereof:
Report of Independent Certified Public Accountants on Financial
Statement Schedules Schedule III - Real Estate Owned by Local Limited
Partnerships
(b) Reports on Form 8-K.
NONE
(c) Exhibits.
3.1 First Amended and Restated Agreement of Limited Partnership dated as
of April 1, 1999 included as Exhibit B to the Registration Statement
filed on April 16, 1999, is hereby incorporated herein as Exhibit 3.1.
10.1 Amended and Restated Limited Partnership Agreement of School Square
Limited Partnership filed as exhibit 10.1 to the current report on
Form 8-K dated February 9, 2000, is herein incorporated by reference
as Exhibit 10.1.
10.2 Second Amended and Restated Operating Agreement of 2nd Fairhaven,
L.L.C. filed as Exhibit 10.2 to the current report on Form 8-K dated
January 25, 2000, is herein incorporated by reference as Exhibit 10.2.
10.3 Amended and Restated agreement of Red Oaks, L.P. filed as exhibit 10.5
to Post Effective Amendment No 3 to Form S-11 dated September 20,
2000, is herein incorporated by reference as exhibit 10.3.
10.4 Third Amended and Restated Agreement of Limited Partnership of Hickory
Lane Partners Limited Partnership filed as exhibit 10.6 to Post
Effective Amendment No 3 to Form S-11 filed on September 20, 2000, is
herein incorporated by reference as exhibit 10.4
10.5 Second Amended and Restated agreement of Limited Partnership of Pierce
Street Partners Limited Partnership filed as Exhibit 10.1 to the
current report on Form 8-K dated January 25, 2000, is herein
incorporated by reference as Exhibit 10.5.
10.6 Amended and Restated Agreement of Limited Partnership of Lake Village
Apartments L.P. filed as Exhibit 10.1 to the current report on Form
8-K dated December 18, 2000, is herein incorporated by reference as
Exhibit 10.6.
10.7 Amended and Restated Agreement of Limited Partnership of United
Development Limited Partnership 2000 filed as Exhibit 10.1 to the
current report on Form 8-K dated April 16, 2001, is herein
incorporated by reference as Exhibit 10.7.
10.8 Amended and Restated Agreement of Limited Partnership of ACN Southern
Hills II, L.P. filed as Exhibit 10.10 to Post Effective Amendment No 6
to Form S-11 filed on May 1, 2001, is herein incorporated by reference
as exhibit 10.8.
38
10.9 Amended and Restated Agreement of Limited Partnership of Montrose
Country Estates Limited Dividend Housing Association, a Michigan
limited partnership, filed as Exhibit 10.9 to Post Effective Amendment
No 6 to Form S-11 filed on May 1, 2001, is herein incorporated by
reference as exhibit 10.9
99.1 Certification of the Principal Executive Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
99.2 Certification of the Principal Financial Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. (filed herewith)
99.3 Financial statements of Stroud Housing Associates, L.P., as of and for
the years ended December 31, 2001 and 2000 together with Independent
Auditors Report thereon; filed as exhibit 99.3 on Form 10-K dated
March 31, 2002; a significant subsidiary of the Partnership.
39
Report of Independent Certified Public Accountants on
Financial Statement Schedules
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 7
The audits referred to in our report dated July 8, 2003, relating to the 2003,
2002 and 2001 financial statements of WNC Housing Tax Credit Fund VI, L.P.,
Series 7 (the "Partnership"), which is contained in Item 8 of this Form 10-K,
included the audit of the accompanying financial statement schedules. The
financial statement schedules, listed in Item 15(a)2, are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statement schedules based upon our audits. The opinion to the
financial statements contains an audit scope limitation paragraph describing the
inability of the Partnership to obtain independently audited financial
statements of one Local Limited Partnership and an emphasis paragraph related to
the uncertainty of realizing the investment in another Local Limited
Partnership.
In our opinion, except for the effects of such audit scope limitation, such
financial statement schedules present fairly, in all material respects, the
financial information set forth therein.
/s/ BDO SEIDMAN, LLP
Costa Mesa, California
July 8, 2003
40
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2003
------------------------------------ ------------------------------------------------
As of March 31, 2003 As of December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Partnerships Total Amount of Encumbrances
Original Investment Investment of Local Net
in Local Limited Paid Limited Property and Accumulated Book
Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
2nd Fairhaven, Federalsburg,
LLC Maryland $ 360,000 $ 360,000 $ 996,000 $ 1,253,000 $ 109,000 $ 1,144,000
ACN Southern
Hills Partners Oskaloosa,
II, L.P. Oklahoma 1,284,000 1,284,000 462,000 2,141,000 184,000 1,957,000
Hickory Lane Sioux City,
Partners, L.P. Iowa 633,000 472,000 3,178,000 3,773,000 110,000 3,663,000
Lake Village Kewanee,
Apartments, L.P. Illinois 3,834,000 3,834,000 * * * *
Montrose County
Estates Limited
Dividend Housing Montrose,
Association, L.P. Michigan 487,000 450,000 687,000 1,245,000 64,000 1,181,000
Ozark Ozark,
Properties III Arkansas 300,000 300,000 836,000 1,237,000 79,000 1,158,000
Pierce Street Sioux City,
Partners, L.P. Iowa 1,740,000 1,740,000 4,100,000 7,086,000 261,000 6,825,000
Red Oaks Holly Springs,
Estates, L.P. Mississippi 242,000 242,000 730,000 1,016,000 103,000 913,000
School Albany,
Square, L.P. Minnesota 286,000 286,000 994,000 1,289,000 173,000 1,116,000
* Results of Lake Village Apartments, L.P. have not been audited and thus have been excluded. See Note 3 to the financial
statements and report of independent certified public accountants.
41
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2003
------------------------------------ ------------------------------------------------
As of March 31, 2003 As of December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Partnerships Total Amount of Encumbrances
Original Investment Investment of Local Net
in Local Limited Paid Limited Property and Accumulated Book
Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Stroud Housing Stroud,
Associates, L.P. Oklahoma 891,000 847,000 750,000 1,691,000 189,000 1,502,000
Tahlequah Tahlequah,
Properties IV Oklahoma 375,000 375,000 844,000 1,438,000 59,000 1,379,000
Timberwolf Deer River,
Townhomes, L.P. Minnesota 469,000 425,000 1,348,000 779,000 51,000 1,728,000
United West Memphis,
Development, L.P. Arkansas 2,250,000 2,200,000 1,095,000 3,739,000 90,000 3,649,000
----------- ------------ ------------ ------------ ----------- ------------
$13,151,000 $ 12,815,000 $ 16,020,000 $ 27,687,000 $ 1,472,000 $ 26,215,000
=========== ============ ============ ============ =========== ============
42
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2003
-------------------------------------------------------------------------------------
For the year ended December 31, 2002
-------------------------------------------------------------------------------------
Partnership Name Year Estimated Estimated
Rental Net Income Investment Useful Life Completion
Income (Loss) Acquired Status (Years) Date
- -----------------------------------------------------------------------------------------------------------------------
2nd Fairhaven, LLC 107,000 (30,000) 2000 Completed 40 2000
ACN Southern Hills Partners II,
L.P. 129,000 (73,000) 2000 Completed 27.5 2001
Hickory Lane
Partners, L.P. 274,000 (156,000) 2000 Completed 40 2001
Lake Village
Apartments, L.P. * * 2000 Completed * 2002
Montrose County Estates Limited
Dividend Housing Association,
L.P. 122,000 (18,000) 2001 Completed 40 2001
Ozark Properties III 91,000 (24,000) 2001 Completed 40 2001
Pierce Street
Partners, L.P. 622,000 153,000 2000 Completed 40 2001
Red Oaks
Estates, L.P. 19,000 (20,000) 2000 Completed 27.5 2000
School Square, L.P. 109,000 (26,000) 2000 Completed 27.5 2000
Stroud Housing
Associates, L.P. 103,000 (140,000) 2000 Completed 40 2001
Tahlequah Properties IV 100,000 (60,000) 2001 Completed 40 2001
Timberwolf Townhomes, L.P. 49,000 (41,000) 2001 Completed 40 2002
United Development, L.P.
209,000 5,000 2000 Completed 27.5 2002
---------- ----------
$1,934,000 $(736,000)
========== ==========
43
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2002
------------------------------------ ------------------------------------------------
As of March 31, 2002 As of December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Partnerships Total Amount of Encumbrances
Original Investment Investment of Local Net
in Local Limited Paid Limited Property and Accumulated Book
Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
2nd Fairhaven, Federalsburg,
LLC Maryland $ 360,000 $ 360,000 $ 998,000 $ 1,250,000 $ 79,000 $ 1,171,000
ACN Southern
Hills Partners Oskaloosa,
II, L.P. Oklahoma 1,339,000 785,000 1,100,000 2,141,000 84,000 2,057,000
Hickory Lane Sioux City,
Partners, L.P. Iowa 633,000 472,000 2,108,000 2,470,000 56,000 2,414,000
Lake Village Kewanee,
Apartments, L.P. Illinois 2,978,000 2,978,000 * * * *
Montrose County
Estates Limited
Dividend Housing Montrose,
Association, L.P. Michigan 553,000 450,000 688,000 1,244,000 34,000 1,210,000
Ozark Ozark,
Properties III Arkansas 300,000 300,000 844,000 1,237,000 35,000 1,202,000
Pierce Street Sioux City,
Partners, L.P. Iowa 1,527,000 1,104,000 2,656,000 4,892,000 120,000 4,772,000
Red Oaks Holly Springs,
Estates, L.P. Mississippi 242,000 242,000 730,000 1,015,000 61,000 954,000
School Albany,
Square, L.P. Minnesota 286,000 286,000 1,004,000 1,290,000 113,000 1,177,000
Stroud Housing Stroud,
Associates, L.P. Oklahoma 891,000 847,000 1,246,000 1,691,000 121,000 1,570,000
* Results of Lake Village Apartments, L.P. have not been audited and thus have been excluded. See Note 3 to the financial
statements and report of independent certified public accountants. The housing complex was under construction at December 31,
2001.
44
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2002
------------------------------------ ------------------------------------------------
As of March 31, 2002 As of December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Partnerships Total Amount of Encumbrances
Original Investment Investment of Local Net
in Local Limited Paid Limited Property and Accumulated Book
Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Tahlequah Tahlequah,
Properties IV Oklahoma 375,000 338,000 850,000 1,438,000 9,000 1,429,000
Timberwolf Deer River,
Townhomes, L.P. Minnesota 509,000 429,000 -(1) 703,000 -(1) 703,000
United West Memphis,
Development, L.P. Arkansas 2,250,000 2,100,000 754,000 2,674,000 -(1) 2,674,000
----------- ------------ ------------ ------------ --------- ------------
$12,243,000 $ 10,691,000 $ 12,978,000 $ 22,045,000 $ 712,000 $ 21,333,000
=========== ============ ============ ============ ========= ============
(1) The Housing Complex was under construction at December 31, 2001.
45
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2002
-------------------------------------------------------------------------------------
For the year ended December 31, 2002
-------------------------------------------------------------------------------------
Year Estimated Estimated
Rental Net Income Investment Useful Life Completion
Partnership Name Income (Loss) Acquired Status (Years) Date
- -----------------------------------------------------------------------------------------------------------------------
2nd Fairhaven, LLC 106,000 (32,000) 2000 Completed 40 2000
ACN Southern Hills Partners II,
L.P. 78,000 (102,000) 2000 Completed 27.5 2001
Hickory Lane
Partners, L.P. 262,000 (31,000) 2000 Completed 40 2001
Lake Village Under
Apartments, L.P. Construction
* * 2000 Rehabilitation * 2002
Montrose County Estates Limited
Dividend Housing Association,
L.P. 115,000 (11,000) 2001 Completed 40 2001
Ozark Properties III 73,000 (26,000) 2001 Completed 40 2001
Pierce Street
Partners, L.P. 625,000 88,000 2000 Completed 40 2001
Red Oaks
Estates, L.P. 101,000 (47,000) 2000 Completed 27.5 2000
School Square, L.P. 100,000 (50,000) 2000 Completed 27.5 2000
Stroud Housing
Associates, L.P. 115,000 (160,000) 2000 Completed 40 2001
Tahlequah Properties IV - (19,000) 2001 Completed 40 2001
Timberwolf Townhomes, L.P. Under
Construction
-(1) 9,000 2001 Rehabilitation (1) 2002
United Development, L.P. Under
Construction
-(1) 12,000 2000 Rehabilitation (1) 2002
---------- ----------
$1,575,000 $(369,000)
=========== ==========
(1) The housing complex is under construction and has not yet began operations.
* Results of Lake Village Apartments L.P. have not been audited and thus have
been excluded. See Note 3 to the financial statements and report of
independent certified public accountants. The housing complex is under
construction and has not yet begun operations.
46
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
------------------------------------ ------------------------------------------------
As of March 31, 2001 As of December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Partnerships Total Amount of Encumbrances
Original Investment Investment of Local Net
in Local Limited Paid Limited Property and Accumulated Book
Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
2nd Fairhaven, Federalsburg,
LLC Maryland $ 360,000 $ 360,000 $ 1,001,000 $ 1,245,000 $ 49,000 $ 1,196,000
ACN Southern
Hills Partners Oskaloosa,
II, L.P. Oklahoma 1,339,000 760,000 - (1) - (1) - (1) - (1)
Hickory Lane Sioux City,
Partners, L.P. Iowa 633,000 252,000 1,950,000 1,848,000 17,000 1,831,000
Lake Village Kewanee,
Apartments, L.P. Illinois 2,978,000 429,000 * * * *
Montrose County
Estates Limited
Dividend Housing Montrose,
Association, L.P. Michigan 553,000 - - (1) - (1) - (1) - (1)
Pierce Street Sioux City,
Partners, L.P. Iowa 1,527,000 580,000 2,930,000 2,990,000 32,000 2,958,000
Red Oaks Holly Springs,
Estates, L.P. Mississippi 245,000 184,000 734,000 1,016,000 17,000 999,000
School Albany,
Square, L.P. Minnesota 286,000 214,000 1,073,000 1,290,000 44,000 1,246,000
----------- ------------ ----------- ------------ --------- -----------
$ 7,921,000 $ 2,779,000 $ 7,688,000 $ 8,389,000 $ 159,000 $ 8,230,000
=========== =========== =========== =========== ========= ===========
(1) The Housing Complex was under construction at December 31, 2000.
* Results of Lake Village Apartments, L.P. were not audited in 2002 and 2001
and thus have been excluded to aid in comparability. See Note 3 to the
financial statements and report of independent certified public
accountants. The housing complex was under construction as of December 31,
2000.
47
WNC Housing Tax Credit Fund VI, L.P., Series 7
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2001
-------------------------------------------------------------------------------------
For the year ended December 31, 2000
-------------------------------------------------------------------------------------
Year Estimated Estimated
Rental Net Income Investment Useful Life Completion
Partnership Name Income (Loss) Acquired Status (Years) Date
- -----------------------------------------------------------------------------------------------------------------------
2nd Fairhaven, LLC $ 99,000 $ (30,000) 2000 Completed 40 1999
ACN Southern Hills Partners II, Under
L.P. - - 2000 Construction - 2001
Hickory Lane Under
Partners,. Construction/
L.P 155,000 (27,000) 2000 Rehabilitation 40 2001
Lake Village Under
Apartments, L.P. * * 2000 Construction - 2001
Montrose County Estates Limited
Dividend Housing Association, Under
L.P. - - 2001 Construction - 2001
Pierce Street Under
Partners, . Construction/
L.P 375,000 61,000 2000 Rehabilitation 40 2001
Red Oaks
Estates, L.P. 59,000 (9,000) 2000 Completed 27.5 2000
School Square, L.P. 43,000 (52,000) 2000 Completed 27.5 2000
---------- ----------
$ 731,000 $ (57,000)
========= ==========
* Results of Lake Village Apartments, L.P. were not audited in 2002 and 2001
and thus have been excluded to aid comparability. See Note 3 to the
financial statements and report of independent certified public
accountants. The housing complex was under construction as of December 31,
2000.
48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 7
By: WNC & Associates, Inc.,
General Partner
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
President of WNC & Associates, Inc.
Date: July 28, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
Chief Executive Officer, President and Director of WNC & Associates,
Inc. (principal executive officer)
Date: July 28, 2003
By: /s/ Thomas J. Riha
-------------------
Thomas J. Riha,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
(principal financial officer and principal accounting officer)
Date: July 28, 2003
By: /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr.,
Chairman of the Board of WNC & Associates, Inc.
Date: July 28, 2003
By: /s/ David N. Shafer
-------------------
David N Shafer,
Director of WNC & Associates, Inc.
Date: July 28, 2003
49
CERTIFICATIONS
I, Wilfred N. Cooper, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of WNC HOUSING
TAX CREDITS FUND VI, L.P., Series 7;
2. Based on my knowledge, this annual 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 periods covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation
Date"); and
(c) presented in this annual 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 annual 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: July 28, 2003
/s/ Wilfred N. Cooper, Jr.
[Signature]
Chairman and Chief Executive Officer of WNC & Associates, Inc.
50
CERTIFICATIONS
I, Thomas J. Riha, certify that:
1. I have reviewed this annual report on Form 10-K of WNC HOUSING
TAX CREDITS FUND VI, L.P., Series 7;
2. Based on my knowledge, this annual 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 periods covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation
Date"); and
(c) presented in this annual 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 annual 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: July 28, 2003
/s/ Thomas J. Riha
[Signature]
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
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