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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 2004
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: 333-107180
333-107181
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 11
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 12
(Exact name of registrant as specified in its charter)
California 72-1566909
72-1566910
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17782 Sky Park Circle 92614-6404
Irvine, CA (Zip Code)
(Address of principal executive offices)
(714) 662-5565
(Telephone number)
Securities registered pursuant to Section12(b) of the Act:
NONE
Securities registered pursuant to section12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
- ------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. X
Indicate by check mark whether the registrant is an accelerated filer.
Yes No X
- ------- --------
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
INAPPLICABLE
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
NONE.
2
PART 1.
Item 1. Business
Organization
WNC Housing Tax Credit Fund, VI, L.P., Series 11 (the "Partnership") was formed
under the California Revised Limited Partnership Act on July 20, 2003, and
commenced operations on January 5, 2004. The Partnership was formed to invest
primarily in other limited partnerships or limited liability companies (the
"Local Limited Partnerships") which will own and operate multi-family housing
complexes that are eligible for Federal low-income housing and, in certain
cases, California low-income housing tax credits ("Low-Income Housing Credit").
WNC Housing Tax Credit Fund, VI, L.P., Series 12 ("Series 12") currently has no
assets or liabilities and has had no operations. Accordingly, no financial
information is included herein for Series 12.
The general partner of the Partnership is WNC National Partners, LLC (the
"General Partner"). The general partner of the General Partner is WNC &
Associates, Inc. ("Associates"). The chairman and the president of Associates
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 the prospectus of the Partnership dated July 31, 2003, as amended
December 24, 2003, the Partnership commenced a public offering of 25,000 units
of Limited Partnership Interest ("Units"), at a price of $1,000 per Unit.
Holders of Units are referred to herein as "Limited Partners." Effective
February 20, 2004, the Partnership had received the minimum subscriptions for
units required to break escrow. Accordingly, from February 20, 2004 and through
March 31, 2004, the Partnership has accepted subscriptions for 3,954 units, for
which it has received $3,157,300 in cash, net of a $1,890 volume/dealer
discount, $90,000 in promissory notes and $704,810 in amounts due from dealers
receivable.
The Partnership shall continue in full force and effect until December 31, 2065,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
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 owns and operates a multi-family
housing complex (the "Housing Complexes") which qualify for the Low-Income
Housing Credits. 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 California 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, as amended "by Supplements thereto" (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 GeneralPartners may occur during the Compliance
3
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.
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 Credits and
the fractional recapture of Low-Income Housing Credits already taken. An
individual Limited Partner's ability to use tax credits is limited. In most
cases, the annual amount of Low Income Housing Credits that an individual
Limited Partner can use is limited to the tax liability due on the person's last
$25,000 of taxable income. The Local Limited Partnerships may be unable to sell
the Housing Complexes at a price which would result in the Partnership realizing
cash distributions or proceeds from the transaction. Accordingly, the
Partnership may be unable to distribute any cash to its investors. Low Income
Housing Credits may be the only benefit from an investment in the Partnership.
Any transactions between the Partnership and Associates and its affiliates will
entail conflicts of interest.
The Partnership expects to invest 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
will be 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, and a fractional recapture of prior
Low-Income Housing Credits would occur. At any time, a foreclosure would result
in a loss of the Partnership's investment in the Housing Complex. The
Partnership will be 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, will be readily marketable. To the extent the
Housing Complexes receive government financing or operating subsidies, they may
be subject to one or more of the following risks: difficulties in obtaining
tenants for the Housing Complexes; difficulties in obtaining rent increases;
limitations on cash distributions; limitations on sales or refinancing of
Housing Complexes; limitations on transfers of interests in Local Limited
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.
There are limits on the transferability of units, including a prohibition on the
transfer of more than 50% of the Units in a 12-month period. 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.
4
Item 2. Properties
None
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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, 2004, there were 186 Limited Partners and no assignees of
Units who were not admitted as Limited Partners.
(c) The Partnership is not designed to provide cash distributions to Limited
Partners in circumstances other than refinancing or disposition of its
investments in Local Limited Partnerships. Any such distributions would be
made in accordance with the terms of the Partnership Agreement
(d) No securities are authorized for issuance by the Partnership under equity
compensation plans.
(e) No unregistered securities were sold by the Partnership during the year
ended March 31, 2004.
Item 5b. Use of Proceeds
NOT APPLICABLE
5
Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
NONE
The Partnership conducted an offering pursuant to a registration statement
(Commission File No. 333-107180), which was declared effective on January 5,
2004. As of March 31, 2004, the Partnership had received subscriptions for 3,954
Units, for an aggregate amount of capital contributions of $3,952,110 net of
dealer discounts of $1,890. At March 31, 2004, approximately $512,130 was paid
or due to Associates or WNC Capital Corporation, the dealer-manager for the
offering, for selling commissions, wholesaling activities and in reimbursement
of other organization and offering expenses and $90,000 was receivable from
promissory notes as elected by Limited Partners upon their subscription.
Included therein are selling commissions of approximately $274,890 which were
paid or were to be paid to non-affiliates. At March 31, 2004, approximately
$3,350,317 is invested or available to be invested in Local Limited Partnership
Interests or Reserves as follows:
Paid or to be
Paid to Paid or to be
Affiliates Paid to Others Total
--------------- --------------- ---------------
Acquisition Fees through 3/31/2004 $ 276,780 $ $ 276,780
Acquisition Costs through 3/31/2004 79,080 79,080
Reserves or cash available to be invested 2,994,457 2,994,547
--------------- --------------- ---------------
Total $ 355,860 $ 2,994,457 $ 3,350,317
=============== =============== ===============
6
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
-----------------------------------
March 31 November 30,
2004 2003
--------------- ---------------
ASSETS
Cash and cash equivalents $ 2,481,446 $ 1,100
Amounts due from dealers and interest receivable 704,861 -
Prepaid acquisition fees and costs 355,459
--------------- ---------------
$ 3,541,766 $ 1,100
=============== ===============
LIABILITIES
Accrued fees and expenses due to
General Partner and affiliates $ 191,850 $ -
PARTNERS' EQUITY (DEFICIT) 3,349,916 1,100
--------------- ---------------
$ 3,541,766 $ 1,100
=============== ===============
Selected results of operations, cash flows, and other information for thePartnership are as follows:
For the period from
January 5, 2004
(date operations
commenced) to
March 31, 2004
----------------------
Loss from operations $ 48,612
Equity in losses of limited partnerships -
======================
Net loss 48,612
======================
Net loss allocated to:
General partner $ 49
======================
Limited partners $ 48,631
======================
Net loss per limited partner
Unit $ 23
======================
Outstanding weighted limited
Partner units 2,094
======================
7
For the period from
January 5, 2004
(date operations
commenced) to
March 31, 2004
--------------------
Net cash provided by (used in):
Operating activities $ (2,351)
Investing activities (288,270)
Financing activities 2,770,967
----------------
Net change in cash and cash
equivalents 2,480,346
Cash and cash equivalents,
beginning of period 1,100
----------------
Cash and cash equivalents, end
of period $ 2,481,446
================
Low Income Housing Credits per Unit were as follows for the year and period ended December 31:
2003
---------------
Federal $ -
State -
---------------
Total $ -
===============
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.
8
Critical Accounting Policies and Certain Risks and Uncertainties
The Partnership believes that the following discussion addresses its most
significant accounting policies, which are the most critical to aid in fully
understanding and evaluating the Partnership'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 will account 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 will
review the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by the estimated value derived by
management, generally consisting of the product of the remaining future
Low-Income Housing Credits estimated to be allocable to the Partnership and the
estimated residual value to the Partnership. If an investment is considered to
be impaired, the Partnership reduces the carrying value of its investment in any
such Local Limited Partnership and includes such reduction in equity in loss of
limited partnerships. The accounting policies of the Local Limited Partnerships,
generally, are expected to be consistent with those of the Partnership. Costs
incurred by the Partnership in acquiring the investments will be 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
will be 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 will be 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 will be
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 will not be recognized. If the Local Limited Partnerships report
net income in future years, the Partnership will resume applying the equity
method only after its share of such net income equals the share of net losses
not recognized during the period(s) the equity method was suspended.
Distributions received from the Local Limited Partnerships will be accounted for
as a reduction of the investment balance. Distributions received after the
investment has reached zero will be recognized as income.
Income Taxes
No provision for income taxes will be recorded in the financial statements as
any liability and/or benefit for income taxes flows to the partners of the
Partnership and is their obligation and/or benefit. For income tax purposes the
Partnership reports on a calendar year basis.
9
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 Credits and
the fractional recapture of Low-Income Housing Credits already taken. In most
cases the annual amount of Low-Income Housing Credits that an individual can use
is limited to the tax liability due on the person's last $25,000 of taxable
income. The Local Limited Partnerships may be unable to sell the Housing
Complexes at a price which would result in the Partnership realizing cash
distributions or proceeds from the transaction. Accordingly, the Partnership may
be unable to distribute any cash to its investors. Low Income Housing Credits
may be the only benefit from an investment in the Partnership.
The Partnership expects to invest 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
will be 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 will be 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, will be readily
marketable. To the extent the Housing Complexes receive government financing or
operating subsidies, they may be subject to one or more of the following risks:
difficulties in obtaining tenants for the Housing Complexes; difficulties in
obtaining rent increases; limitations on cash distributions; limitations on
sales or refinancing of Housing Complexes; limitations on transfers of interests
in Local Limited 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 Partnership has invested in no Local Limited Partnerships as
of March 31, 2004.
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.
10
Financial Condition
The Partnership's assets at March 31, 2004 consisted primarily of $2,481,446 in
cash and cash equivalents, $704,810 in amounts due from dealers receivable, $51
in interest receivable, prepaid acquisition fees and costs of $355,459 net of
amortization of $401. Liabilities at March 31, 2004 consisted of $191,850 in
advances and other payables due to the General Partner or affiliates.
The Partnership offering of Units for sale to the public is ongoing, at March
31, 2004; total limited partner capital of $3,952,110 net of dealer and volume
discounts of $1,890 was raised.
Pursuant to the prospectus of the Partnership dated July 31, 2003, as amended
December 24, 2003, the Partnership commenced a public offering of 25,000 units
of Limited Partnership Interest ("Units"), at a price of $1,000 per Unit.
Holders of Units are referred to herein as "Limited Partners." Effective
February 20, 2004, the Partnership had received the minimum subscriptions for
units required to break escrow. Accordingly, from February 20, 2004 and through
March 31, 2004, the Partnership has accepted subscriptions for 3,954 units, for
which it has received $3,157,300 in cash, net of a $1,890 volume/dealer
discount, $90,000 in promissory notes and $704,810 in subscriptions receivable.
Results of Operations
The Partnership commenced operations on January 5, 2004. Therefore, there are no
comparative results of operations or financial condition from prior periods to
report. A loss of approximately, $49,000 from operations occurred of which
$47,000 was organization costs. In addition, there were no Low-Income Housing
Credits available for allocation to the partners.
Liquidity and Capital Resources
The Partnership had cash used of approximately $(2,351) from operating, cash
used in investing activities of approximately $(288,270) and cash provided by
financing activities of approximately $2,771,000 for the period ended March 31,
2004.
The Partnership expects its future cash flows, together with its net available
assets at March 31, 2004, to be sufficient to meet all currently foreseeable
future cash requirements. This excludes amounts owed to Associates by the
Partnership disclosed below.
Future Contractual Cash Obligations
As of March 31, 2004, the Partnership has the following contractual cash obligations:
Total < 1 year 1-3 years 3-5 years 5 years
Other Long Term Liabilities
Accounts Payable and
Accrued Expenses (1) $ - $ - $ - $ - $ -
Accrued fees and expenses
Due to GP and affiliates (1) 191,850 191,850 - -
------------ ---------- -------------- ---------------- -----------
-
$ 191,850 $ 191,850 $ - $ - $ -
============ ========== ============== ================ ========--=
Off Balance Sheet Arrangements
The Partnership has no off-balance sheet arrangements.
11
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 will review 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.
The Partnership has no Local Limited Partnership holdings as of March 31, 2004.
Impact of New Accounting Pronouncements
New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation
of Variable Interest Entities." FIN 46 provides guidance on when a company
should include the assets, liabilities, and activities of a variable interest
entity ("VIE") in its financial statements and when it should disclose
information about its relationship with a VIE. A VIE is a legal structure used
to conduct activities or hold assets, which must be consolidated by a company if
it is the primary beneficiary because it absorbs the majority of the entity's
expected losses, the majority of the expected returns, or both.
In December 2003, the FASB issued a revision of FIN 46 ("FIN 46R") to clarify
some of its provisions. The revision results in multiple effective dates based
on the nature as well as the creation date of the VIE. VIEs created after
January 31, 2003, but prior to January 1, 2004, may be accounted for either
based on the original interpretations or the revised interpretations. However,
all VIEs must be accounted for under the revised interpretations as of March 31,
2004, when FIN 46R is effective for the Partnership.
This Interpretation would require consolidation by the Partnership of certain
Local Limited Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the Partnership was the "Primary Beneficiary." Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other investors. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the potential
consolidation effects of the Interpretation and preliminarily concluded that the
adoption of the Interpretation will not have a material impact on the financial
statements of the Partnerships.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NONE.
Item 8. Financial Statements and Supplementary Data
12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 11
We have audited the accompanying balance sheets of WNC Housing Tax Credit
Fund VI, L.P., Series 11 (a California Limited Partnership) (the "Partnership")
as of March 31, 2004 and November 30, 2003, and the related statements of
operations, partners' equity and cash flows for the period January 5, 2004 (date
operations commenced) through March 31, 2004. 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.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 provide a reasonable basis for our opinion.
In our opinion, 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 11 (a California Limited Partnership) as of March 31, 2004 and
November 30, 2003, and the results of its operations and its cash flows for the
period January 5, 2004 (date operations commenced) through March 31, 2004 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Reznick, Fedder & Silverman
Bethesda, Maryland
June 22, 2004
13
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
BALANCE SHEETS
-----------------------------
March 31, November 30,
2004 2003
------------- --------------
ASSETS
Cash and cash equivalents $ 2,481,446 $ 1,100
Amounts due from dealers and interest receivable (Note 4) 704,861
Prepaid acquisition fees and costs (Note 2 ) 355,459
------------- --------------
$ 3,541,766 $ 1,100
============= ==============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and expenses due to General Partner
And affiliates (Note 2) $ 191,850 $ -
Commitments and contingencies (Note5)
Partners' equity (Notes 4 and 6)
General partner (414) 100
Limited partners (25,000 units authorized, 3,954 and 0 units
outstanding at March 31, 2004 and November 30, 2003, respectively) 3,350,330 1,000
------------- --------------
Total partners' equity 3,349,916 1,100
------------- --------------
$ 3,541,766 $ 1,100
============= ==============
See accompanying notes to financial statements
14
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
For The Period
January 5,
2004 (Date
Operations
Commenced)
through
March 31, 2004
-----------------
Interest income $ 51
-----------------
Operating expenses:
Amortization (Note 2) 401
Organization costs 47,448
Other 814
-----------------
Total operating expenses 1,215
-----------------
Loss from operations (48,612)
-----------------
Net loss $ (48,612)
=================
Net income (loss) allocated to:
General partner $ (49)
=================
Limited partners $ (48,563)
=================
Net loss per limited partner unit $ (23)
=================
Outstanding weighted limited partner units 2,094
=================
See accompanying notes to financial statements
15
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
General Limited Total
Partner Partner
-------------- --------------- ---------------
Contribution from General Partner and initial
limited partner $ 100 $ 1,000 $ 1,100
-------------- --------------- ---------------
Partners' equity at November 30, 2003 100 1,000 1,100
Sale of limited partnership units (net of discounts
of $1,890) 3,952,110 3,952,110
Sale of limited partnership units issued for
promissory notes receivable (Note 4) (90,000) (90,000)
Offering expenses (465) (464,217) (464,682)
Net loss (49) (48,563) (48,612)
-------------- -------------- ---------------
Partners' equity (deficit) at March 31, 2004 $ (414) $ 3,350,330 $ 3,349,916
============== ============== ===============
See accompanying notes to financial statements
16
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
For The Period
January 5,
2004 (Date
Operations
Commenced)
through
March 31, 2004
-----------------
Cash flows from operating activities:
Net loss $ (48,612)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Amortization 401
Change in due to general partner and affiliates 45,860
-----------------
Net cash provided by (used in) operating
activities (2,351)
-----------------
Cash flows from investing activities:
Prepaid acquisition costs and fees (288,270)
-----------------
Cash flows from financing activities:
Capital contributions received 3,157,249
Offering expenses (386,282)
-----------------
Net cash provided by financing activities 2,770,967
-----------------
Net increase in cash and cash
equivalents 2,480,346
Cash and cash equivalents, beginning of period 1,100
-----------------
Cash and cash equivalents, end of period $ 2,481,446
=================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Taxes paid $ 800
=================
SIGNIFICANT NONCASH INVEST ING ACTIVITES
Prepaid acquisition fees and expenses included within due to general $ 67,590
partner and affiliates
=================
SIGNIFICANT NONCASH FINANCING ACTIVITES
Offering expenses included within due to general partners and
affiliates $ 78,400
=================
See accompanying notes to financial statements
17
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WNC Housing Tax Credit Fund VI, L.P., Series 11, a California Limited
Partnership (the "Partnership"), was formed on July 20, 2003 under the laws of
the state of California, and commenced operations on January 5, 2004. 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 tax credits. The local general partners (the "Local
General Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
The general partner of the Partnership is WNC National Partners, LLC (the
"General Partner".) The general partner of the General Partner is WNC &
Associates, Inc. ("Associates"). The chairman and the president of Associates
own substantially all of the outstanding stock of Associates. The initial
limited partner is an affiliate of Associates. The business of the Partnership
is conducted primarily through Associates, as the Partnership and General
Partner have no employees of their own.
The Partnership shall continue in full force and effect until December 31, 2065,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
The Partnership agreement authorizes the sale of up to 25,000 units at $1,000
per Unit ("Units"). As of March 31, 2004, subscriptions for 3,954 Units had been
accepted by the Partnership. The required minimum offering amount of $1,400,000
was achieved by February 20, 2004 (see Note 4). Holders of Units are referred to
herein as "Limited Partners." 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 3) from the remainder, any additional sale or refinancing
proceeds will be distributed 90% to the Limited Partners (in proportion to their
respective investments) and 10% to the General Partner.
Risks and Uncertainties
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low Income Housing Credit rules are extremely complicated. Noncompliance
with these rules results in the loss of future Low Income Housing Credits and
the fractional recapture of Low Income Housing Credits already taken. In most
cases the annual amount of Low Income Housing Credits that an individual can use
is limited to the tax liability due on the person's last $25,000 of taxable
income. The Local Limited Partnerships may be unable to sell the Housing
Complexes at a price which would result in the Partnership realizing cash
distributions or proceeds from the transaction. Accordingly, the Partnership may
be unable to distribute any cash to its investors. Low Income Housing Credits
may be the only benefit from an investment in the Partnership.
18
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Risks and Uncertainties, continued
The Partnership will invest in a limited number of Local Limited Partnerships.
Such limited diversity means that the results of operation of each single
Housing Complex will have a greater impact on the Partnership. With limited
diversity, poor performance of one Housing Complex could impair the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure. If
foreclosure were to occur during the first 15 years, the loss of any remaining
Low Income Housing Credits, a fractional recapture of prior Low Income Housing
Credits, and a loss of the Partnership's investment in the Housing Complex would
occur. The Partnership is a limited partner or non-managing member of each Local
Limited Partnership. Accordingly, the Partnership will have very limited rights
with respect to management of the Local Limited Partnerships. The Partnership
will rely totally on the Local General Partners. Neither the Partnership's
investments in Local Limited Partnerships, nor the Local Limited Partnerships'
investments in Housing Complexes, are readily marketable. To the extent the
Housing Complexes receive government financing or operating subsidies, they may
be subject to one or more of the following risks: difficulties in obtaining
tenants for the Housing Complexes; difficulties in obtaining rent increases;
limitations on cash distributions; limitations on sales or refinancing of
Housing Complexes; limitations on transfers of interests in Local Limited
Partnerships; limitations on removal of Local General Partners; limitations on
subsidy programs; and possible changes in applicable regulations. Uninsured
casualties could result in loss of property and Low Income Housing Credits and
recapture of Low Income Housing Credits previously taken. The value of real
estate is subject to risks from fluctuating economic conditions, including
employment rates, inflation, tax, environmental, land use and zoning policies,
supply and demand of similar properties, and neighborhood conditions, among
others.
The ability of Limited Partners to claim tax losses from the Partnership is
limited. The IRS may audit the Partnership or a Local Limited Partnership and
challenge the tax treatment of tax items. The amount of Low Income Housing
Credits and tax losses allocable to the investors could be reduced if the IRS
were successful in such a challenge. The alternative minimum tax could reduce
tax benefits from an investment in the Partnership. Changes in tax laws could
also impact the tax benefits from an investment in the Partnership and/or the
value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Investors may
be unable to sell their Units except at a discount and should consider their
Units to be a long-term investment. Individual investors will have no recourse
if they disagree with actions authorized by a vote of the majority of Limited
Partners.
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.
19
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Exit Strategy, continued
With that in mind, the Partnership will review the Partnership's holdings, with
special emphasis on the more mature properties including those that have
satisfied the IRS compliance requirements. The Partnership's review will
consider many factors including extended use requirements on the property (such
as those due to mortgage restrictions or state compliance agreements), the
condition of the property, and the tax consequences to the investors from the
sale of the property.
Upon identifying those properties with the highest potential for a successful
sale, refinancing or syndication, the Partnership expects to proceed with
efforts to liquidate those properties. The Partnership's objective is to
maximize the investors' return wherever possible and, ultimately, to wind down
those funds that no longer provide tax benefits to investors.
Method of Accounting for Investments in Limited Partnerships
The Partnership will account 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 will
review the carrying amount of an individual investment in a Local Limited
Partnership for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of such investment may not be recoverable.
Recoverability of such investment is measured by the estimated value derived by
management, generally consisting of the product of the remaining future
Low-Income Housing Credits estimated to be allocable to the Partnership and the
estimated residual value to the Partnership. If an investment is considered to
be impaired, the Partnership reduces the carrying value of its investment in any
such Local Limited Partnership and includes such reduction in equity in loss of
limited partnerships. The accounting policies of the Local Limited Partnerships,
generally, are expected to be consistent with those of the Partnership. Costs
incurred by the Partnership in acquiring the investments are capitalized as part
of the investment account and are being amortized over 30 years (Notes 2 and 3).
Equity in losses of limited partnerships for each year and period ended March 31
will be 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.
Management's estimate for the three-month period will be based on either actual
unaudited results reported by the Local Limited Partnerships or historical
trends in the operations of the Local Limited Partnerships. Equity in losses
from the Local Limited Partnerships allocated to the Partnership will not be
recognized to the extent that the investment balance would be adjusted below
zero. As soon as the investment balance reaches zero, amortization of the
related costs of acquiring the investment are accelerated to the extent of
losses available. 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.
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.
20
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents. As of March 31,
2004, the Partnership had no cash equivalents. The Partnership has not
experience any losses in such accounts.
Concentration of Credit Risk
At March 31, 2004, the Partnership maintained cash balances at certain financial
institutions in excess of the federally insured maximum. The Partnership
believes it is not exposed to any significant financial risk on cash.
Net Income Loss Per Limited Partner Unit
Net income loss per limited partner unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net income loss per
unit includes no dilution and is computed by dividing income and/or loss
available to limited partners by the weighted average number of units
outstanding during the period. Calculation of diluted net income loss per unit
is not required.
Income Taxes
No provision for income taxes has been recorded in the accompanying financial
statements as any liability and/or benefits for income taxes flows to the
partners of the Partnership and is their obligation and/or benefit. For income
tax purposes the Partnership reports on a calendar year basis.
New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation
of Variable Interest Entities." FIN 46 provides guidance on when a company
should include the assets, liabilities, and activities of a variable interest
entity ("VIE") in its financial statements and when it should disclose
information about its relationship with a VIE. A VIE is a legal structure used
to conduct activities or hold assets, which must be consolidated by a company if
it is the primary beneficiary because it absorbs the majority of the entity's
expected losses, the majority of the expected returns, or both.
In December 2003, the FASB issued a revision of FIN 46 ("FIN 46R") to clarify
some of its provisions. The revision results in multiple effective dates based
on the nature as well as the creation date of the VIE. VIEs created after
January 31, 2003, but prior to January 1, 2004, may be accounted for either
based on the original interpretations or the revised interpretations. However,
all VIEs must be accounted for under the revised interpretations as of March 31,
2004, when FIN 46R is effective for the Partnership.
This Interpretation would require consolidation by the Partnership of certain
Local Limited Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the Partnership was the "Primary Beneficiary". Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other investors. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the potential
consolidation effects of the Interpretation and preliminarily concluded that the
adoption of the Interpretation will not have a material impact on the financial
statements of the Partnerships.
21
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 2 - RELATED PARTY TRANSACTIONS
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partner or its affiliates for the following 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. For the period ended March 31, 2004,
the Partnership incurred acquisition fees of $276,780, which are
included in prepaid acquisition fees and costs. Accumulated
amortization of this capitalized cost was $312, as of March 31, 2004.
Acquisition costs of 2% of the gross proceeds from the sale of Units
as a non-accountable expense reimbursement in connection with the
acquisition of Local Limited Partnerships. For the period ended March
31, 2004, the Partnership incurred acquisition costs of $79,080, which
are included in prepaid acquisition fees and costs.. Accumulated
amortization of this capitalized cost was $89, as of March 31, 2004.
Selling commissions of 7% of the gross proceeds from the sale of the
Units of the payable to WNC Capital Corp. advanced by the General
Partner or affiliates on behalf of the Partnership. For the period
ended March 31, 2004, the Partnership incurred selling commissions of
$274,890.
A non-accountable organization and offering and underwriting expense
reimbursement, collectively equal to 4% of the gross proceeds from the
sale of the Units, a dealer manager fee equal to 2% of the gross
proceeds from the sale of the Units, and reimbursement for retail
selling commissions advanced by the General Partner or affiliates on
behalf of the Partnership. For the period ended March 31, 2004, the
Partnership incurred non-accountable organization and offering and
underwriting expense reimbursement costs totaling $158,160 and dealer
manager fees totaling $79,080. All other organizational and offering
expenses, inclusive of the non-accountable organization and offering
and underwriting expense reimbursement, and dealer manager fees, are
not to exceed 13% of the gross proceeds from the sale of the Units.
An annual asset management fee not to exceed 0.5% of the invested
assets (defined as the sum of the Partnership's investment in Local
Limited Partnerships, plus the revenues of the Partnership of up to 5%
of gross Unit sales proceeds, and the Partnership's allocable share of
the amount of the mortgage loans on, and other debts related to, the
Housing Complexes) of the Local Limited Partnerships. No asset
management fees have been incurred during the period ended March 31,
2004.
The Partnership reimbursed the General Partner or its affiliates for
operating expenses incurred on behalf of the Partnership. Operating
expenses reimbursements were approximately $800 for the period January
5, 2004 (date operations commenced) through March 31, 2004.
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. No disposition
fees have been incurred during the period ended March 31, 2004.
22
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 2 - RELATED PARTY TRANSACTIONS, continued
The accrued fees and expenses due to General Partner and affiliates consist of the following at March 31, 2004.
---------------
Acquisition fees payable $ 52,570
Acquisition expenses payable 15,020
Organizational and offering costs payable 45,060
Commissions payable 78,400
Reimbursements for expenses paid by the General Partner or an affiliate 800
---------------
$ 191,850
===============
23
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 11
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Period January 5, 2004 (Date Operations Commenced)
through March 31, 2004
NOTE 3 - INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial
statements as any liability for income taxes is the obligation of the partners
of the Partnership.
NOTE 4 - AMOUNTS DUE FROM DEALERS AND NOTES RECEIVABLE
As of March 31, 2004, the Partnership had received subscriptions for 3,954 units
which included amounts due from dealers totaling $704,810 and promissory notes
of $90,000, of which all receivable amounts due from the dealers were collected
and $0 of the promissory notes were collected after March 31, 2004 and prior to
the issuance of these financial statements, leaving an unpaid balance of
$90,000. Limited partners who subscribed for ten or more units of limited
partnerships interest ($10,000) could elect to pay 50% of the purchase price in
cash upon subscription and the remaining 50% by the delivery of a promissory
note payable, together with interest at a rate equal to the three month treasury
bill rate as of the date of execution of the promissory note, due no later than
13 months after the subscription date.
NOTE 5 - COMMITMENTS AND CONTINGINCIES
From April 1, 2004 to June 18, 2004, the Partnership acquired three Local
Limited Partnership interests which required capital contributions of
$2,644,970. Of this amount, $264,080 has been contributed during the period from
April 1, 2004 to June 18, 2004.
NOTE 6 - SUBSEQUENT EVENT (UNAUDITED)
From April 1, 2004 to June 18, 2004, the Partnership received subscriptions for
an additional 3,167 units, an equity of $3,166,230, net of $770 discounts, of
which it has received $2,828,500 in cash, $75,000 in notes receivable and
$262,730 in subscriptions receivable.
24
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
Item 9a. 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 the Partnership's 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 the Partnership's management as
appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, Associates
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and Associates 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, the persons performing functions
similar to that of a principal executive officer and principal financial officer
for the partnerships believe that the Partnership's 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.
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
Thomas J. Riha, CPA Senior Vice President - Chief Financial Officer
David C. Turek Senior Vice President - Originations
Michael J. Gaber Senior Vice President - Acquisitions
Diemmy T. Tran Vice President - Portfolio Management
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. and Kay Cooper.
Wilfred N. Cooper, Sr., age 73, 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
25
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 41, is President, Chief Executive Officer,
Secretary, 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 51, 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 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 58, 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.
Thomas J. Riha, age 48, is Senior 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.
David C. Turek, age 49, 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.
Michael J. Gaber, age 38, is Senior 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
26
University, Fullerton in 1991 with a Bachelor of Science degree in Business
Administration - Finance.
Diemmy T. Tran, age 38, 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.
Kay L. Cooper, age 67, 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. Ms. Cooper graduated from the University of
Southern California in 1958 with a Bachelor of Science degree.
(f) Involvement in Certain Legal Proceedings
Inapplicable.
(g) Promoters and Control Persons
Inapplicable
(h) Audit Committee Financial Expert, and (I) Identification of the Audit
Committee
Neither the Partnership nor Associates has an audit committee.
(i) Changes to Nominating Procedures
Inapplicable
(j) Code of Ethics
The Partnership has adopted a Code of Ethics which applies to the Chief
Executive Officer and Chief Financial Officer of Associates. The Code of
Ethics will be provided without charge to any person who requests it. Such
request should be directed to: Shelly Taylor, Director of Investor
Services, 714 662-5565 extension 118.
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. A non-accountable organization and
offering expense reimbursement equal to 3% of the gross proceeds from the
sale of the Units, a dealer manager fee equal to 2% of the gross proceeds
from the sale of the Units, non-accountable underwriting expense equal to
1% % of the gross proceeds from the sale of the Units and reimbursement for
retail selling commissions equal to 7% of the gross proceeds from the sale
of the Units advanced by the General Partner or affiliates on behalf of the
Partnership. This reimbursement plus all other organizational and offering
expenses, inclusive of the non-accountable organization and offering
expense reimbursement, and the dealer manager fees, are not to exceed 13%
of the gross proceeds from the sale of the Units.
27
Item 11. Executive Compensation, continued
As of March 31, 2004, the following organization and offering expenses
were paid or accrued to affiliates of the General Partner as follows:
Description Affiliate Amount
Non-accountable O & O WNC & Associates, Inc. $118,620
Non-accountable O & O WNC Capital Corp. 39,540
Dealer Manager Fee WNC Capital Corp. 79,080
Sales Commissions WNC Capital Corp. 274,890
--------
Total $512,130
========
(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, 2004 the aggregate amount of
acquisition fees paid or accrued was approximately $277,000.
(c) Acquisition Expense. The Partnership reimbursed the General
Partner for acquisition expenses, on a non-accountable basis, in
an amount equal to 2% of the Gross Proceeds, pursuant to the
terms of the partnership agreement. As of March 31, 2004, the
aggregate amount of acquisition fees paid or accrued was
approximately $79,000.
(d) Annual Asset Management Fee. An annual asset management fee
accrues in an amount equal to 0.5% of the Invested Assets of the
Partnership. "Invested Assets" is defined as the sum of the
Partnership's Investment in Local Limited Partnerships, plus the
reserves of the Partnership of up to 5% of gross Unit sales
proceeds, 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. No fees were
incurred for the period January 5, 2004 (date operations
commenced) through March 31, 2004.
(e) Operating Expenses. The Partnership reimbursed the General
Partner or its affiliates for operating expenses of approximately
$800 period January 5, 2004 (date operations commenced) through
March 31, 2004, 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 maybe 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 incurred.
(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, 2003. The
General Partners is also entitled to receive a percentage of cash
distributions. There were no distributions of cash owed to the
General Partner during the period January 5, 2004 (date
operations commenced) through March 31, 2004.
28
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 and
their affiliates 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
Associates manages all of the Partnership's affairs. The transactions with the
Associates 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 Principal Accountant Fees and Services
No fees were paid to the Fund's independent registered public accounting firm
for the period ending March 31, 2004. The Partnership has no Audit Committee.
All audit services and any permitted non-audit services performed by the Fund's
independent auditors are preapproved by the General Partner.
29
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 Registered Public Accounting Firm
Balance Sheets, March 31, 2004 and November 30, 2003
Statement of Operations for the period January 5, 2004, (Date
Operations Commenced) through March 31, 2004
Statement of Partners' Equity for the period January 5, 2004 (Date
Operations Commenced) through March 31, 2004
Statement of Cash Flows for the period January 5, 2004 (Date
Operations Commenced) through March 31, 2004
Notes to Financial Statements
(a)(2) Financial statement schedules:
NONE
(b) Reports on Form 8-K.
NONE
(c) Exhibits.
31.1 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)
31.2 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)
32.1 Section 1350 Certification. (filed herewith)
32.2 Section 1350 Certification. (filed herewith)
30
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 11
By: WNC National Partners, LLC
General Partner
By: WNC & Associates, Inc.,
General Partner
By: /s/ Wilfred N. Cooper, Jr.
Wilfred N. Cooper, Jr.,
President of WNC & Associates, Inc.
Date: June 29, 2004
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: June 29, 2004
By: /s/ Thomas J. Riha
Thomas J. Riha,
Senior Vice-President - Chief Financial Officer of
WNC & Associates, Inc. (principal financial officer and principal
accounting officer)
Date: June 29, 2004
By: /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr.,
Chairman of the Board of WNC & Associates, Inc.
Date: June 29, 2004
By: /s/ David N. Shafer
David N Shafer,
Director of WNC & Associates, Inc.
Date: June 29, 2004
31