Back to GetFilings.com
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: 333-67682
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 10
(Exact name of registrant as specified in its charter)
California 33-0974362
(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 Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(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.
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 10 (the "Partnership") was formed
under the California Revised Limited Partnership Act on July 17, 2001, and
commenced operations on February 28, 2003. 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").
The general partner of the Partnership is WNC & Associates, Inc. ("Associates"
or the "General Partner"). 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 a supplement dated February 28, 2003 to the prospectus of the
Partnership dated November 14, 2001, on March 6, 2003, the Partnership commenced
a public offering of 25,000 units of Limited Partnership Interest ("Units"), at
a price of $1,000 per Unit. Such offering is closed. A total of 13,153 Limited
Partnership Interests representing $13,119,270, net of dealer discounts of
$31,220 and volume discounts of $2,510 had been sold. Holders of Limited
Partnership Interests are referred to herein as "Limited Partners."
The Partnership shall continue in full force and effect until December 31, 2062,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
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 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, 2004 the Partnership had invested in three Local Limited
Partnerships. Each of these Local Limited Partnerships owns a Housing Complex
that is eligible for the federal Low Income Housing Credit. Certain Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.
Certain Risks and Uncertainties
An investment in the Partnership and the Partnership's investments in Local
Limited Partnerships and their Housing Complexes are subject to risks. These
risks may impact the tax benefits of an investment in the Partnership, and the
amount of proceeds available for distribution to the Limited Partners, if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:
The Low-Income Housing Credit rules are extremely complicated. Noncompliance
with these rules results in the loss of future Low-Income Housing 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. Low Income Housing Credits may be the only material
benefit from the Partnership because Limited Partners may not get back their
capital. Any transactions between the Partnership and Associates and its
affiliates will entail conflicts of interest.
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, 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 is a limited partner or non-managing member of each Local Limited
Partnership. Accordingly, the Partnership has 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 limited partners could be reduced if the
IRS were successful in such a challenge. The alternative minimum tax could
reduce tax benefits from an investment in the Partnership. Changes in tax laws
could also impact the tax benefits from an investment in the Partnership and/or
the value of the Housing Complexes.
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. Limited Partners may be unable
to sell their Units except at a discount and should consider their Units to be a
long-term investment. Individual Limited Partners will have no recourse if they
disagree with actions authorized by a vote of the majority of Limited Partners.
4
Exit Strategy
The IRS compliance period for low-income housing tax credit properties is
generally 15 years following construction or rehabilitation completion.
Associates was one of the first in the industry to offer syndicated investments
in Low Income Housing Credits. The initial programs are completing their
compliance periods.
With that in mind, the Partnership is continuing its review of the Partnership's
holdings, with special emphasis on the more mature properties such as any that
have satisfied the IRS compliance requirements. The review considers 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 Limited Partners 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 objective is to maximize the Limited
Partners' return wherever possible and, ultimately, to wind down the Partnership
when it no longer provides tax benefits to Limited Partners. However, Local
Limited Partnership interests may be disposed at any time by Associates in its
discretion. To date no properties in the Partnership have been selected for
disposition.
Item 2. Properties
Through its investments in Local Limited Partnerships, the Partnership holds
indirect ownership interests in the Housing Complexes. The following table
reflects the status of the three Housing Complexes as of the dates and for the
periods indicated:
5
---------------------------- ----------------------------------------------
As of March 31, 2004 As of December 31, 2003
---------------------------- ----------------------------------------------
Partnership's Amount of Estimated Mortgage
Total Investment Investment Aggregate Low Balances of
Local Limited General Partner in Local Limited Paid to Number Income Housing Local Limited
Partnership Name Location Name Partnership Date of Units Occupancy Credits (1) Partnerships
- ------------------------------------------------------------------------------------------------------------------------------------
Catoosa Senior Calhoun, BC Holdings,
Village, L.P. Georgia LLC $ 1,997,000 $ 1,579,000 60 100% $ 2,663,000 $ 2,382,000
Humboldt Winnemucca, Humboldt
Village, L.P. Nevada Village, LLC 1,754,000 350,000 38 ** ** **
Melodie Meadows Glencoe, Eagle Creek
Associates, Ltd. Alabama Partners 1,569,000 1,568,000 40 100% 2,135,000 1,243,000
------------- ------------- ---- ---- ----------- -----------
$ 5,320,000 $ 3,497,000 138 100% $ 4,798,000 $ 3,625,000
============= ============= ==== ==== =========== ===========
(1) Represents aggregate anticipated Low Income Housing Credits to be received
over the 10 year credit period if Housing Complexes are retained and rented
in compliance with credit rules for the 15-year compliance period.
** The Local Limited Partnership was not acquired until February 2004.
6
-------------------------------------------------------------
For the year ended December 31, 2003
-------------------------------------------------------------
Low Income
Housing Credits
Allocated to
Partnership Name Rental Income Net Loss Partnership
- ----------------------------------------------------------------------------------------------------
Catoosa Senior Village, L.P. $ 89,000 $ (39,000) 99.98%
Humboldt Village, L.P. ** ** 99.98%
Melodie Meadows Associates, Ltd. 89,000 (64,000) 99.98%
---------- -----------
$ 178,000 $ (103,000)
========== ===========
** The Local Limited Partnership was not acquired until February 2004.
7
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 were sold through a
public offering. It is not anticipated that any public market will develop
for the purchase and sale of any Unit and none exists. Units can be
assigned only if certain requirements in the Partnership Agreement are
satisfied.
(b) At March 31, 2004, there were 628 Limited Partners and 2 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
The Partnership conducted an offering pursuant to a registration statement
(Commission File No. 333-67670), which was declared effective on November 14,
2001. As of March 31, 2004, the Partnership had received subscriptions for
15,325 Units, for an aggregate amount of capital contributions of $13,119,270,
net of dealer discounts of $31,220 and volume discounts of $2,510. At March 31,
2004, approximately $1,673,000 was paid or due to Associates or WNC Capital
Corporation, the dealer-manager for the offering, for selling commissions,
wholesaling activites and in reimbursement of other organization and offering
expenses. Included therein are selling commissions of approximately $883,000
which were paid or were to be paid to non-affiliates. At March 31, 2004,
approximately $10,263,000 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 $ 921,000 $ - $ 921,000
Acquisition Costs through 3/31/2004 263,000 - 263,000
Cash invested or available to be invested or revenues - 10,263,000 10,263,000
--------------- --------------- ---------------
Total $ 1,184,000 $ 10,263,000 $ 11,447,000
=============== =============== ===============
8
Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
NONE
Item 6. Selected Financial Data
Selected balance sheet information for the Partnership is as follows:
March 31
-----------------------------------
2004 2003
--------------- ---------------
ASSETS
Cash and cash equivalents $ 6,649,763 $ 1,100
Interest receivable 108 -
Investments in limited partnerships, net 6,425,082 -
--------------- ---------------
$ 13,074,953 $ 1,100
=============== ===============
LIABILITIES
Payables to limited partnerships $ 1,822,497 $ -
Accrued fees and expenses due to
general partner and affiliates 29,535 -
PARTNERS' EQUITY 11,222,921 1,100
--------------- ---------------
$ 13,074,953 $ 1,100
=============== ===============
Selected results of operations, cash flows, and other information for the Partnership are as follows:
For the period
from
February 28,
2003 (date
For the Year operations
Ended commenced) to
March 31, 2004 March 31, 2003
----------------- -----------------
Loss from operations $ (60,828) $ -
Equity in losses of limited partnerships (128,146) -
----------------- -----------------
Net loss (188,974) -
================= =================
Net loss allocated to:
General partner $ (189) $ -
================= =================
Limited partners $ (188,785) $ -
================= =================
Net loss per limited partner
unit $ (22.97) $ -
================= =================
Outstanding weighted limited
partner units 8,220 -
================= =================
9
For the period
from February 28,
2003 (date
For the operations
Year Ended commenced) to
March 31, 2004 March 31, 2003
--------------- ------------------
Net cash provided by (used in):
Operating activities $ (7,273) $ -
Investing activities (4,754,859) -
Financing activities 11,410,795 -
------------- ----------------
Net increase/(decrease) in cash and cash
equivalents 6,648,663 -
Cash and cash equivalents,
beginning of period 1,100 1,100
------------- ----------------
Cash and cash equivalents, end
of period $ 6,649,763 $ 1,100
============= ================
Low Income Housing Credits per Unit were as follows for the year and period ended December 31:
2003 2002
--------------- ----------------
Federal $ 20 $ -
State - -
--------------- ----------------
Total $ 20 $ -
=============== ================
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.
10
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 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 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. 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 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. 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 from the Local
Limited Partnerships allocated to the Partnership are not recognized to the
extent that the investment balance would be adjusted below zero. As soon as the
investment balance reaches zero, amortization of the related costs of acquiring
the investment are accelerated to the extent of losses available.
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. If the Local Limited
Partnerships report net income in future year, 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.
Income Taxes
No provision for income taxes has been recorded in the 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.
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:
11
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 profit. Accordingly, the Partnership may be unable to distribute
any cash to its limited partners. 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
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 has 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 limited partners could be reduced if the
IRS were successful in such a challenge. The alternative minimum tax could
reduce tax benefits from an investment in the Partnership. Changes in tax laws
could also impact the tax benefits from an investment in the Partnership and/or
the value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Limited
partners may be unable to sell their Units except at a discount and should
consider their Units to be a long-term investment. Individual limited partners
will have no recourse if they disagree with actions authorized by a vote of the
majority of Limited Partners.
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, 2004 consisted primarily of $6,650,000 in
cash, $100 in interest receivable, aggregate investments in the three Local
Limited Partnerships of $6,425,000. Liabilities at March 31, 2004 consisted of
$30,000 in advances and other payables due to the General Partner or affiliates
and $1,822,000 in contributions payable to limited partnerships.
The Partnership offered Units for sale to the public until November 11, 2003 at
which time total limited partner capital of $13,119,270 net of dealer and volume
discounts of $33,730 was raised.
12
Results of Operations
Year Ended March 31, 2004 Compared to Period Ended March 31, 2003. The
Partnership commenced operations on February 28, 2003. Therefore, as of March
31, 2003, the Partnership had not accepted subscriptions for any Units nor made
any investments in Local Limited Partnerships. As a result there were no
operations for the period ended March 31, 2003. In addition, there were no
Low-Income Housing Credits available for allocation to the partners.
The two periods are not comparable, as there was no operations during the period
ended March 31, 2003.
Liquidity and Capital Resources
Year Ended March 31, 2004 Compared to Period Ended March 31, 2003. The
Partnership had no cash flows from operating or investing activities for the
period ended March 31, 2003. As such, the two periods are not comparable.
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
The following table summarizes our future contractual cash obligations as of March 31, 2004:
2005 2006 2007 2008 2009 Thereafter Total
---------- ---------- ---------- ---------- --------- ------------ -----------
Asset Management Fees $ 107,325 $ 80,108 $ 80,108 $ 80,108 $ 80,108 $ 4,245,724 $ 4,673,481
Capital Contributions Payable
to Lower Tier Partnerships 1,822,497 - - - - - 1,822,497
---------- ---------- ---------- ---------- --------- ------------ -----------
Total contractual cash
obligations $ 1,929,822 $ 80,108 $ 80,108 $ 80,108 $ 80,108 $ 4,245,724 $ 6,495,978
========== ========== ========== ========== ========= ============ ===========
(1) Asset Management Fees are payable annually until termination of the
Partnership, which is to occur no later than 2062. The estimate of the fees
payable included herein assumes the retention of the Partnership's interest
in all Housing Complexes until 2062. Amounts due to the General Partner as
of March 31, 2004 have been included in the 2005 column.
For additional information on our Asset Management Fees and Capital
Contributions Payable to Lower Tier Partnerships, see Notes 3 and 5 to the
financial statements included elsewhere herein.
Off-Balance Sheet Arrangements
The Partnership has no off-balance sheet arrangements.
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.
13
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 limited partners 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 limited partners' return
wherever possible and, ultimately, to wind down those funds that no longer
provide tax benefits to limited partners. To date no properties in the
Partnership have been selected.
Impact of 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 Limited Partners. 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 Partnership.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NONE.
Item 8. Financial Statements and Supplementary Data
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 10
We have audited the accompanying balance sheet of WNC Housing Tax Credit
Fund VI, L.P., Series 10 (a California Limited Partnership) (the "Partnership")
as of March 31, 2004 and the related statements of operations, partners' equity
and cash flows for the year then ended. 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 audit. A significant
portion of the financial statements of the limited partnerships in which the
Partnership is a limited partner were audited by other auditors whose reports
have been furnished to us. As discussed in note 2 to the financial statements,
the Partnership accounts for its investments in limited partnerships using the
equity method. The portion of the Partnership's investment in limited
partnerships audited by other auditors represented $3,045,804 of the total
assets of the Partnership at March 31, 2004 and $102,514 of the Partnership's
equity in losses of limited partnerships for the year ended March 31, 2004. 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.
We conducted our audit 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
audit and the reports of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audit and the reports of the other auditors,
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
10 (a California Limited Partnership) as of March 31, 2004, and the results of
its operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Reznick, Fedder & Silverman
Bethesda, Maryland
June 23, 2004
15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 10
We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund
VI, L.P., Series 10 (a California Limited Partnership) (the "Partnership") as of
March 31, 2003, and the related statements of operations, partners' equity and
cash flows for the period February 28, 2003 (date operations commenced) through
March 31, 2003. 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 audit.
We conducted our audit 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 audit provides 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 10 (a California Limited Partnership) as of March 31, 2003, and the
results of its operations and its cash flows for the period February 28, 2003
(date operations commenced) through March 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
/S/ BDO SEIDMAN, LLP
Costa Mesa, California
May 20, 2003
16
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
BALANCE SHEETS
March 31,
-----------------------------
2004 2003
------------- --------------
ASSETS
Cash and cash equivalents $ 6,649,763 $ 1,100
Interest receivable 108 -
Investments in limited partnerships (Notes 2 and 3) 6,425,082 -
------------- --------------
$ 13,074,953 $ 1,100
============= ==============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Payables to limited partnerships (Note 5) $ 1,822,497 $ -
Accrued fees and expenses due to General Partner
and affiliates (Note 3) 29,535 -
------------- --------------
Total liabilities 1,852,032 -
------------- --------------
Commitments and contingencies
Partners' equity (deficit)
General partner (89) 100
Limited partners (25,000 units authorized, 13,153 and 0 units
Outstanding at March 31, 2004 and 2003, respectively) 11,223,010 1,000
------------- --------------
Total partners' equity 11,222,921 1,100
------------- --------------
$ 13,074,953 $ 1,100
============= ==============
See accompanying notes to financial statements
17
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Year Ended March 31, 2004 and
For the Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
For The Period
February 28,
2003 (Date
Operations
For the Year Commenced)
Ended March through
31, 2004 March 31, 2003
----------------- -----------------
Interest income $ 6,203 $ -
----------------- -----------------
Operating expenses:
Amortization (Notes 2 and 3) 24,128 -
Asset management fees (Note 3) 27,168 -
Legal and accounting 10,445 -
Other 5,290 -
----------------- -----------------
Total operating expenses 67,031 -
----------------- -----------------
Loss from operations (60,828) -
----------------- -----------------
Equity in losses of limited partnerships (Note 2) (128,146) -
----------------- -----------------
Net loss $ (188,974) $ -
================= =================
Net income (loss) allocated to:
General partner $ (189) $ -
================= =================
Limited partners $ (188,785) $ -
================= =================
Net loss per limited partner unit $ (22.97) $ -
================= =================
Outstanding weighted limited partner units 8,220 0
================= =================
See accompanying notes to financial statements
18
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For The Year Ended March 31, 2004
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
General Limited
Partner Partners Total
--------------- --------------- ---------------
Contribution from General Partner and initial
limited partner $ 100 $ 1,000 $ 1,100
--------------- --------------- ---------------
Partners' equity at March 31, 2003 100 1,000 1,100
Sale of limited partnership units (net of discounts
of $33,730) - 13,083,455 13,083,455
Offering expenses - (1,672,660) (1,672,660)
Net loss (189) (188,785) (188,974)
--------------- -------------- ---------------
Partners' equity (deficit) at March 31, 2004 $ (89) $ 11,223,010 $ 11,222,921
=============== ============== ===============
See accompanying notes to financial statements
19
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
For The Period
February 28,
2003 (Date
Operations
For the Year Commenced)
Ended March 31, through
2004 March 31, 2003
------------------ -----------------
Cash flows from operating activities:
Net loss $ (188,974) $ -
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Amortization 24,128 -
Equity in losses of limited partnerships 128,146 -
Change in interest receivable (108) -
Change in due to general partner and affiliates 29,535 -
------------------ -----------------
Net cash used in operating activities (7,273) -
------------------ -----------------
Cash flows from investing activities:
Investments in limited partnerships, net (3,498,014) -
Capitalized acquisition costs and fees (1,256,845) -
------------------ -----------------
Net cash used in investing activities (4,754,859) -
------------------ -----------------
Cash flows from financing activities:
Capital contributions received 13,083,455 -
Offering expenses (1,672,660) -
------------------ -----------------
Net cash provided by financing activities 11,410,795 -
------------------ -----------------
Net increase in cash and cash
equivalents 6,648,663 -
Cash and cash equivalents, beginning of period 1,100 1,100
------------------ -----------------
Cash and cash equivalents, end of period $ 6,649,763 $ 1,100
================== =================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Taxes paid $ 800 $ -
================== =================
See accompanying notes to financial statements
20
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
Organization
- ------------
WNC Housing Tax Credit Fund VI, L.P., Series 10, a California Limited
Partnership (the "Partnership"), was formed on July 17, 2001 under the laws of
the state of California, and commenced operations on February 28, 2003. 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 & Associates, Inc. ("Associates"
or the "General Partner".) 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 has no employees of
its own.
The Partnership shall continue in full force and effect until December 31, 2062,
unless terminated prior to that date, pursuant to the partnership agreement or
law.
The financial statements include only activity relating to the business of the
Partnership, and do not give effect to any assets that the partners may have
outside of their interests in the Partnership, or to any obligations, including
income taxes, of the partners.
The Partnership agreement authorized the sale of up to 25,000 units at $1,000
per Unit ("Units"). As of March 31, 2004, 13,153 Units, representing
subscriptions in the amount of $13,119,270, net of dealer discounts of $31,220
and volume discounts of $2,510, had been accepted. 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 limited partners. Low Income Housing
Credits may be the only benefit from an investment in the Partnership.
21
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
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
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 Limited Partners could be reduced if the
IRS were successful in such a challenge. The alternative minimum tax could
reduce tax benefits from an investment in the Partnership. Changes in tax laws
could also impact the tax benefits from an investment in the Partnership and/or
the value of the Housing Complexes.
No trading market for the Units exists or is expected to develop. Limited
Partners may be unable to sell their Units except at a discount and should
consider their Units to be a long-term investment. Individual Limited Partnes
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.
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 limited partners 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 limited partners' return wherever possible and, ultimately, to wind
down those funds that no longer provide tax benefits to limited partners. To
date no properties in the Partnership have been selected.
22
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 1 - ORGANIZATION AND 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 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. 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 (see Notes 2 and 3).
Equity in losses of 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. 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 from the Local
Limited Partnerships allocated to the Partnership are not recognized, to the
extent that the investment balance would be adjusted below zero. As soon as the
investment balance reaches zero, amortization of the related costs of acquiring
the investment are accelerated to the extent of losses available (see Note 3).
If the Local Limited Partnerships report net income in future years, the
Partnership will resume applying the equity method only after its share of such
net income equals the share of net losses not recognized during the period(s)
the equity method was suspended
Distributions received from the Local Limited Partnerships are accounted for as
a reduction of the investment balance. Distributions received after the
investment balance has reached zero are recognized as income.
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 13% (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 $1,672,660 and $0 as of March 31, 2004 and 2003, 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.
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 and 2003, the Partnership had no cash equivalents.
23
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- -------------------------------------------------------------------------------
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 that it is not exposed to any significant risk on cash.
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 loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net loss per unit is not required.
Income Taxes
- ------------
No provision for income taxes has been recorded in the accompanying financial
statements as any liability and/or benefits for income tax purposes 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.
Impact of 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 Limited Partners. 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 Partnership.
24
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
- --------------------------------------------
As of the periods presented, the Partnership has acquired limited partnership
interests in three Local Limited Partnerships, each of which owns one Housing
Complex, except for one that owns three Housing Complexes, consisting of an
aggregate of 138 apartment units. As of March 31, 2004, one of the Housing
Complexes were under construction or rehabilitation. The respective Local
General Partners of the Local Limited Partnerships manage the day-to-day
operations of the entities. Significant Local Limited Partnership business
decisions require approval from the Partnership. The Partnership, as a limited
partner, is generally entitled to approximately 99%, as specified in the Local
Limited Partnership agreements, of the operating profits and losses, taxable
income and losses and tax credits of the Local Limited Partnerships.
The Partnership's investments in limited partnerships as reflected in the
balance sheets at March 31, 2004 and 2003 are approximately $3,379,000 and $0,
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 and to capital contributions
payable to the limited partnerships which were netted against partner capital in
the Local Limited Partnerships' financial statements (see Note 6). The
Partnership's investment is also lower than the Partnership's equity as shown in
the Local Limited Partnership's combined financial statements due to the
estimated losses recorded by the Partnership for the three month period ended
March 31.
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.
A loss in value from a Local Limited Partnership other than a temporary decline
would be recorded as an impairment loss. Impairment is measured by comparing the
investment carrying amount to the sum of the total amount of the remaining tax
credits allocated to the fund and the estimated residual value of the
investment. The Partnership recorded no impairment loss during the years ended
March 31, 2004 and 2003, respectively.
Distributions received from 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. As of March 31, 2004, no investment
accounts in Local Limited Partnerships had reached a zero balance.
25
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
The following is a summary of the equity method activity of the investments in
limited partnerships for the periods presented:
For the Years Ended
March 31
------------------------------
2004 2003
------------- --------------
Investments per balance sheet, beginning of period $ - $ -
Capital contributions paid, net 3,498,014 -
Capital contributions payable 1,822,497 -
Equity in losses of limited partnerships (128,146) -
Capitalized acquisition fees and costs 1,183,770 -
Amortization of capitalized acquisition fees and costs (22,301) -
Capitalized warehouse interest and fees 73,075
Amortization of capitalized warehouse interest and fees (1,827)
------------- --------------
Investments per balance sheet, end of period $ 6,425,082 $ -
============= ==============
26
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
The financial information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest subsidies are generally netted against
interest expense. Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the year then ended is as follows:
COMBINED CONDENSED BALANCE SHEETS
2003
---------------
ASSETS
Land $ 1,247,000
Buildings and improvements, net of accumulated depreciation of $115,000 6,348,000
Other assets 292,000
---------------
$ 7,887,000
===============
LIABILITIES AND PARTNERS' EQUITY
Mortgage and construction loans payable $ 3,625,000
Due to related parties 728,000
Other liabilities 67,000
---------------
4,420,000
---------------
PARTNERS' CAPITAL
WNC Housing Tax Credit Fund VI, L.P., Series 10 3,046,000
Other partners 421,000
---------------
3,467,000
---------------
$ 7,887,000
===============
27
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
- -------------------------------------------------------
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2003
---------------
Revenues $ 183,000
---------------
Expenses:
Operating expenses 151,000
Interest expense 18,000
Depreciation and amortization 117,000
---------------
Total expenses 286,000
---------------
Net loss $ (103,000)
===============
Net loss allocable to the Partnership $ (103,000)
===============
Net loss recorded by the Partnership $ (128,000)
===============
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 of future and recapture of prior Low Income Housing
Credits could occur.
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Under the terms of the Partnership Agreement, the Partnership has paid or is
obligated to the General Partner or 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 and
2003, the Partnership incurred acquisition fees of $920,710 and $0
respectively, which are included in investments in limited
partnerships. Accumulated amortization of these capitalized costs was
$17,309 and $0, as of March 31, 2004 and 2003, respectively.
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 and 2003, the Partnership incurred acquisition costs of
$263,060 and $0, respectively, which is included in investments in
limited partnerships. Accumulated amortization was $4,992 and $0 as of
March 31, 2004 and 2003, respectively.
28
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 3 - RELATED PARTY TRANSACTIONS, continued
- ----------------------------------------------
A non-accountable organization and offering expense reimbursement
equal to 4% of the gross proceeds from the sale of the Units, a dealer
manager fee equal to 2% of the gross proceeds from the sale of the
Units, and reimbursement for retail selling commissions advanced by
the General Partner or affiliates on behalf of the Partnership. This
reimbursement plus all other organizational and offering expenses,
inclusive of the non-accountable organization and offering expense
reimbursement, and the dealer manager fees, are not to exceed 13% of
the gross proceeds from the sale of the Units. Non-accountable
organizational offering expense reimbursement and dealer manager fees
totaled $526,120 and $263,060, respectively, for the year ended March
31, 2004
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. Management fees
of $27,168 and $0 were incurred during the year and period ended March
31, 2004 and 2003, respectively, of which $0 was paid during the year
ended March 31, 2004.
The Partnership reimburses the General Partner or its affiliates for
operating expenses incurred in behalf of the Partnership. Operating
expense reimbursements were approximately $13,400 during the year
ended 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 such fees were
incurred in the year ended March 31, 2004.
The accrued fees and expenses due to General Partner and affiliates consist of
the following at:
March 31
----------------------------------
2004 2003
--------------- ---------------
Advances from WNC $ 2,326 $ -
Asset management fees payable 27,209 -
--------------- ---------------
$ 29,535 $ -
=============== ===============
29
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the Year Ended March 31, 2004 and
For The Period February 28, 2003 (Date Operations Commenced)
through March 31, 2003
NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- ----------------------------------------------------
The following is a summary of the quarterly operations for the year ended March 31:
June 30 September 30 December 31 March 31
--------------- --------------- --------------- ---------------
2004
----
Income $ - $ 1,000 $ 1,000 $ 4,000
Operating expenses (4,000) (21,000) (20,000) (22,000)
Equity in income (losses) of
limited partnerships - (64,000) (94,000) 30,000
Net income (loss) (4,000) (84,000) (113,000) 12,000
Net income (loss) available to
limited partners (4,000) (84,000) (113,000) 12,000
Net income (loss) available per
limited partnership unit -
weighted average (2) (13) (10) 2
NOTE 5 - PAYABLES TO LIMITED PARTNERSHIPS
- -----------------------------------------
Payables to limited partnerships represent amounts which are due at various
times based on conditions specified in the respective limited partnership
agreements. These contributions are payable in installments and are generally
due upon the limited partnerships achieving certain development and operating
benchmarks (generally within two years of the Partnership's initial investment).
NOTE 6 - SUBSCRIPTIONS RECEIVABLE
- -------------------------------------------
As of March 31, 2003, the Partnership had accepted no subscriptions for Units.
Holders of Units are referred to herein as "Limited Partners." Effective May 15,
2003, the Partnership had received the minimum subscriptions for units required
to break escrow.
From April 1, 2003 through November 11, 2003, the date of closing the fund, the
Partnership received subscriptions for 13,153 units, which included promissory
notes of $35,815 for which it has received net cash totaling $13,083,455.
Promissory notes in the amount of $35,815 were outstanding at March 31, 2004.
NOTE 7- SUBSEQUENT EVENT (UNAUDITED)
- -------------------------------------
In April 2004, the Partnership acquired limited partnership interests in one
Local Limited Partnership and in June 2004, the Partnership acquired limited
partnership interests in two Local Limited Partnerships for an aggregare amount
of $4,561,702. Payments in the amount of $720,463 were made to these Local
Limited Partnerships by the Partnership subsequent to year-end.
30
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
Item 9a. Controls and Procedures
As of the end of the period covered by this report, the Partnership's General
Partner, under the supervision and with the participation of the Chief Executive
Officer and Chief Financial Officer of Associates carried out an evaluation of
the effectiveness of the Fund's "disclosure controls and procedures" as defined
in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that
evaluation, the Chief Executive Officer and Principal Financial Officer have
concluded that as of the end of the period covered by this report, the
Partnership's disclosure controls and procedures were adequate and effective in
timely alerting them to material information relating to the Partnership
required to be included in the Partnership's periodic SEC filings.
Changes in internal controls. There were no changes in the Partnership's
internal control over financial reporting that occurred during the quarter ended
March 31, 2004 that materially affected, or are reasonably likely to materially
affect, the Partnership's internal control over financial reporting.
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 L. 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
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.
31
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
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.
32
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.
(j) Changes to Nominating Procedures
--------------------------------
Inapplicable
(k) Code of Ethics
--------------
WNC & Associates has adopted a Code of Ethics which applies to the Chief
Executive Officer and Chief Financial Officer of WNC & Associates. The Code
of Ethics will be provided without charge to any person who requests it.
Such requests should be directed to: Investor Relations at (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. The Partnership paid the General
Partner or its affiliates as of March 31, 2004 and 2003 approximately
$1,672,660 and $0 for selling commissions and other fees and expenses of
the Partnership's offering of Units. Of the total paid, approximately
$883,500 and $0 as of March 31, 2004 and 2003, respectively, was paid to
unaffiliated person 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,
2004 and 2003 the aggregate amount of acquisition fees paid or accrued was
approximately $920,710 and $0, respectively.
(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 and 2003, the aggregate amount of acquisition fees
paid or accrued was approximately $263,060 and $0, respectively.
(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, as defined.
"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. Fees of $27,168 were
incurred for the year ended March 31, 2004, and no fees were incurred for
the period February 28, 2003 (date operations commenced) through March 31,
2003.
33
(e) Operating Expenses. The Partnership reimbursed the General Partner or its
affiliates for operating expenses of approximately $13,400 and $0 for the
year ended March 31, 2004 and for the period February 28, 2003 (date
operations commenced) through March 31, 2003, 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 may be 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, 2002. 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 year ended
March 31, 2004 and during the period February 28, 2003 (date operations
commenced) through March 31, 2003.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
(a) Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------
The Partnership has no compensation plans under which interests in the
Partnership are authorized for issuance.
(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.
34
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. Principal Accountant Fees and Services
The following is a summary of fees paid to the Fund's independent auditors for
the years ended March 31:
2004 2003
--------------- ---------------
Audit Fees $ 16,925 $ 17,780
Audit-related Fees - -
Tax Fees 1,050 -
All Other Fees - -
--------------- ---------------
TOTAL $ 17,975 $ 17,780
=============== ===============
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.
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 - Reznick
Fedder & Silverman
Report of Independent Registered Public Accounting Firm - BDO Seidman,
LLP
Balance Sheets March 31, 2004 and 2003
Statements of Operations for the year ended March 31, 2004 and for the
period February 28, 2003 (Date Operations Commenced) through March 31,
2003
Statements of Partners' Equity for the year ended March 31, 2004 and
for the period February 28, 2003 (Date Operations Commenced) through
March 31, 2003
Statements of Cash Flows for the year ended March 31, 2004 and for the
period February 28, 2003 (Date Operations Commenced) through March
31, 2003
Notes to Financial Statements
(a)(2) Financial statement schedules:
------------------------------
Report of Independent Registered Public Accounting Firm on Financial
Statement Schedules - Reznick Fedder & Silverman Schedule III - Real
Estate Owned by Local Limited Partnerships
(b) Reports on Form 8-K.
--------------------
NONE
35
(c) Exhibits.
---------
31.1 Certification of the Principal Executive Officer pursuant to Rule
13a-14 and 15d-14, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. (filed herewith)
31.2 Certification of the Principal Financial Officer pursuant to Rule
13a-14 and 15d-14, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. (filed herewith)
32.1 Section 1350 Certification of the Chief Executive Officer. (filed
herewith)
32.2 Section 1350 Certification of the Chief Financial Officer. (filed
herewith)
99.1 Second Amendment to the Amended and Restated Agreement of Limited
Partnership of Catoosa Senior Village, L.P. as exhibit 10.3 to Form
8-K/A Current Report dated September 5, 2203 is herein incorporated by
reference as exhibit 99.1.
99.2 Amended and Restated Agreement of Limited Partnership of Humboldt
Village, L.P. as exhibit 99.1 to Form 8-K Current Report dated June 8,
2004 is herein incorporated by reference as exhibit 99.2.
99.3 Amended and Restated Agreement of Limited Partnership of Starlight
Place, L.P. as exhibit 99.2 to Form 8-K Current Report dated June 8,
2004 is herein incorporated by reference as exhibit 99.3.
99.4 Financial Statements of Melodie Meadows Associates, Ltd. for the years
ended December 31, 2003 and 2002 together with Independent Auditors'
Report thereon; a significant suvsidiary of the Partnership.
99.5 Financial Statements of Catoosa Senior Village, L.P. for the years
ended December 31, 2003 and 2002 together with Independent Auditors'
Report thereon; a significant suvsidiary of the Partnership.
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL
STATEMENT SCHEDULES
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 10
The audit referred to in our report dated June 23, 2004 relating to the
2004 financial statements of WNC Housing Tax Credit Fund VI, L.P., Series 10 (a
California Limited Partnership) (the "Partnership"), which are contained in Item
8 of this Form 10-K, included the audit of the accompanying financial statement
schedule "Real Estate Owned by Local Limited Partnerships March 31, 2004." This
financial statement schedule is the responsibility of the Partnership's
management. Our responsibility is to express an opinion on this financial
statement schedule based upon our audit.
In our opinion, based on our audit and the reports of the other auditors,
such financial statement schedule referred to above presents fairly, in all
material respects, the information set forth therein.
/s/ Reznick, Fedder & Silverman
Bethesda, Maryland
June 23, 2004
37
WNC Housing Tax Credit Fund VI, L.P., Series 10
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2004
------------------------------- ---------------------------------------------------
As of March 31, 2004 As of December 31, 2003
------------------------------------------------------------------------------------
Mortgage
Total Investment Amount of Balances of
in Local Limited Investment Paid Local Limited Property and Accumulated Net Book
Partnership Name Location Partnerships to Date Partnerships Equipment Depreciation Value
- ------------------------------------------------------------------------------------------------------------------------------------
Catoosa Senior Calhoun,
Village, L.P. Georgia $ 1,997,000 $ 1,579,000 $ 2,382,000 $ 4,808,000 $ 50,000 $ 4,758,000
Humboldt Winnemucca,
Village, L.P. Nevada 1,754,000 350,000 ** ** ** **
Melodie Meadows Glencoe,
Associates, Ltd. Alabama 1,569,000 1,568,000 1,243,000 2,902,000 65,000 2,837,000
------------ ------------ ----------- ----------- --------- -- ---------
$ 5,320,000 $ 3,497,000 $ 3,625,000 $ 7,710,000 $ 115,000 $ 7,595,000
============ ============ =========== =========== ========= ===========
** The Local Limited Partnership was not acquired until February 2004.
38
WNC Housing Tax Credit Fund VI, L.P., Series 10
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2004
--------------------------------------------------------------------------------------
For the year ended December 31, 2003
--------------------------------------------------------------------------------------
Year Investment Estimated Useful
Partnership Name Rental Income Net Loss Acquired Status Life (Years)
- --------------------------------------------------------------------------------------------------------------------
Catoosa Senior Village, L.P. $ 89,000 $ (39,000) 2003 Completed 40
Humbolt Village, L.P. ** ** 2004 ** **
Melodie Meadows Associates,
Ltd. 89,000 (64,000) 2003 Completed 40
--------- ----------
$ 178,000 $(103,000)
========= ==========
** The Local Limited Partnership was not acquired until February 2004.
39
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 10
By: WNC & Associates, Inc.,
General Partner
By: /s/ Wilfred N. Cooper, Jr.
--------------------------
Wilfred N. Cooper, Jr.,
President of WNC & Associates, Inc.
Date: Septemer 20, 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: September 20, 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: September 20, 2004
By: /s/ Wilfred N. Cooper, Sr.
--------------------------
Wilfred N. Cooper, Sr.,
Chairman of the Board of WNC & Associates, Inc.
Date: September 20, 2004
By: /s/ David N. Shafer
-------------------
David N Shafer,
Director of WNC & Associates, Inc.
Date: September 20, 2004
40