Attached files

file filename
EX-31.2 - EXHIBIT 31.2 - WNC Housing Tax Credit Fund VI, L.P., Series 13exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - WNC Housing Tax Credit Fund VI, L.P., Series 13exhibit311.htm
EX-99 - GROVE_2007 - WNC Housing Tax Credit Fund VI, L.P., Series 13grove_2007.htm
EX-32.2 - EXHIBIT 32.2 - WNC Housing Tax Credit Fund VI, L.P., Series 13exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - WNC Housing Tax Credit Fund VI, L.P., Series 13exhibit321.htm
EX-99 - GROVE_2008 - WNC Housing Tax Credit Fund VI, L.P., Series 13grove_2008.htm
EX-99 - DAVENPORT VII LP 2008 - WNC Housing Tax Credit Fund VI, L.P., Series 13davenportviilp_08.htm
EX-99 - GROVEVILLAGE 12-31-09 - WNC Housing Tax Credit Fund VI, L.P., Series 13grovevillage_123109.htm
EX-99 - DEVENPORT VII LP 12-31-09 - WNC Housing Tax Credit Fund VI, L.P., Series 13davenportviilp_123109.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

S    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2010

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:  333-124115


WNC HOUSING TAX CREDIT FUND VI, L.P., Series 13
(Exact name of registrant as specified in its charter)
California
20-2355224
(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes_____ No___X__

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes_____ No___X__

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes_____ No___X__

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes_____ No___X__

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.  S

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Act. (Check one):
 
Large accelerated filer___ Accelerated filer___  Non-accelerated filer___X__ Smaller reporting company___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes____ No__X__

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

INAPPLICABLE


DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.  The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

NONE

 
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PART 1.

Item 1.  Business

Organization

WNC Housing Tax Credit Fund, VI, L.P., Series 13 (the "Partnership") was formed under the California Revised Limited Partnership Act on February 7, 2005, and commenced operations on December 14, 2005.  The Partnership was formed to invest primarily in other limited partnerships or limited liability companies (the “Local Limited Partnerships”) which own multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits ("Low Income Housing Tax Credits"). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership or operating agreement (the “Local Limited Partnership Agreement”).

The general partner of the Partnership is WNC National Partners, LLC (the "General Partner").  The general partner of the General Partner is WNC & Associates, Inc. ("Associates"). The chairman and the president of Associates own all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and the General Partner have no employees of their own.

Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit.  The required minimum offering amount of $1,400,000 was achieved by December 14, 2005.  Total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.”  The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and tax credits.  The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments.  This offering was closed on September 21, 2006.

The Partnership shall continue in full force and effect until December 31, 2070, unless terminated prior to that date, pursuant to the Partnership Agreement (as defined below) or law.

Description of Business

The Partnership's principal business objective is to provide its Limited Partners with Low Income Housing Tax Credits.  The Partnership's principal business therefore consists of investing as a limited partner or non-managing member in Local Limited Partnerships each of which will own and operate a Housing Complex which will qualify for the Low Income Housing Tax Credits.  In general, under Section 42 of the Internal Revenue Code, an owner of low income housing can receive the Low Income Housing Tax Credits to be used to reduce Federal taxes otherwise due in each year of a ten-year credit period. Each Housing Complex is subject to a 15-year compliance period (the “Compliance Period”), and under state law may have to be maintained as low income housing for 30 or more years.

 
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As a consequence of the provisions of tax law in effect for dispositions of buildings prior to August 2008, in order to avoid recapture of Low Income Housing Tax Credits, the Partnership expected that it would not 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. That provision of law was amended in 2008 (i) to provide that there would be no recapture on sale of a Low Income Housing Tax Credit building during the Compliance Period if it were reasonable to expect at the time of sale that the building would continue to be operated as qualified low income housing (see “Exit Strategy” below) and (ii) to eliminate the possibility of posting a bond against potential recapture.  The Partnership is not seeking to sell its Local Limited Partnership Interests.  And, because of (i) the nature of the Housing Complexes and the Local Limited Partnership Interests, (ii) the difficulty of predicting the resale market for low-income housing, (iii) the current economy, and (iv) the ability of lenders to disapprove of transfer, it is not possible at this time to predict when the liquidation of the Partnership's assets and the disposition of the proceeds, if any, in accordance with the Partnership's Agreement of Limited Partnership dated February 7, 2005 (the "Partnership Agreement"), would occur.  Furthermore, the recent codification of the economic substance doctrine as part of 2010 legislation has created some uncertainty about the deductibility of losses from low income housing that is not generating Low Income Housing Tax Credits, and this could have an adverse effect on the resale market for Housing Complexes and Local Limited Partnership Interests.  Until a Local Limited Partnership Interest or the related Housing Complex is sold, it is anticipated that the Local General Partner would continue to operate such Housing Complex.

The Partnership invested in ten Local Limited Partnerships as of March 31, 2010, none of which had been sold as of March 31, 2010. Each of these Local Limited Partnerships owns a Housing Complex that is eligible for the Federal Low Income Housing Tax Credits. Certain Local Limited Partnerships may also benefit from additional government programs promoting low or moderate income housing.

Exit Strategy

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits.  The initial programs have completed their Compliance Periods.  Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits.  A sale prior to the end of the Compliance Period must satisfy the reasonable belief test outlined above to avoid recapture.

The following table reflects the ends of the ten-year credit period and the fifteen-year Compliance Period of each Housing Complex:

Local Limited Partnership Name
Expected last
 year of credit delivery
15-year Expiration Date
     
909 4th YMCA , L.P.
2010
2014
Crestview Housing, L.P.
2018
2022
Davenport Housing VII, L.P.
2019
2023
FDI-Country Square, LTD
2017
2021
FDI-Park Place, LTD
2017
2021
Fernwood Meadows, L.P.
2017
2022
Grove Village, L.P.
2017
2021
Head Circle, L.P.
2016
2020
Pleasant Village, L.P.
2017
2021
Sierra’s Run, L.P.
2017
2022

 
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With that in mind, as of March 31, 2010, except as indicated in the following two paragraphs, the General Partner has not begun reviewing the Housing Complexes for potential disposition, since none of the Housing Complexes have completed the ten-year credit period.  Once the Housing Complexes have done so, the review will take into consideration many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

During the year ended March 31, 2010, on December 24, 2009, the Partnership identified two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P. (“Sierra’s Run”) for disposition in order to generate sufficient equity to complete the purchase of Davenport Housing VII, L.P.  (See footnote 3 to the financial statements.)  The Partnership’s net investment balances in Fernwood and Sierra’s Run were $1,904,702 and $1,805,558, respectively, as of December 31, 2009.  Accordingly, the Partnership would recognize a loss on the sale of Local Limited Partnerships in the amount of approximately $881,000 if the sales are approved by the Limited Partners.  As the outcome of the vote was unknown at the time the December 31, 2009 Form 10Q was filed, an $881,000 impairment loss was recorded during the quarter then ended. On February 12, 2010, Fernwood and Sierra’s Run were sold, subject to a condition that the Limited Partners subsequently approve the sales by a majority in interest of the Limited Partners. The approval of the Limited Partners was sought as the transfers were to a limited partnership that is affiliated with the Partnership.  Fernwood and Sierra’s Run were sold for an aggregate purchase price of $2,829,428.

The Partnership filed preliminary materials to the Securities and Exchange Commission (“SEC”) on April 2, 2010 and filed definitive materials on April 15, 2010 and they were disseminated to the Limited Partners on April 15, 2010.  The definitive materials sought approval for the disposition of Sierra’s Run and Fernwood with substantially all of those proceeds being used to purchase the additional tax credits for Davenport.  On May 10, 2010 the Partnership filed additional definitive materials, which served as a reminder to the Limited Partners that all proxies had to be received by the General Partner of the Partnership by June 14, 2010.  Majority vote in favor of the dispositions was obtained on June 9, 2010.   Therefore the disposition of both Fernwood and Sierra’s Run will be recorded during the quarterly period ended June 30, 2010.

Fernwood and Sierra’s Run will complete their 15-year compliance periods in 2022; therefore there is a risk of tax credit recapture.  The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.57 per Partnership Unit in the aggregate.  As part of the purchase agreement, the purchaser has agreed to assume all of the Partnership’s legal obligations to maintain the properties as Low Income Housing Tax Credit properties. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its compliance period, and, accordingly, does not anticipate that there will be any recapture.

 
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Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or syndication after termination of the ten-year credit period, the Partnership expects to proceed with efforts to liquidate them with the objective of winding down the Partnership. Local Limited Partnership Interests may be disposed of any time by the General Partner at its discretion.

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement.  Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations.  Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex.  Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership, as the proceeds first would be used to pay Partnership obligations and funding of reserves.

Certain Risks and Uncertainties

Item 1A.  Risk Factors

Set forth below are the risks the Partnership believes are the most significant to the Limited Partners.  The Partnership and the Local Limited Partnerships operate in a continually changing business environment and, therefore, new risks emerge from time to time.  This section contains some forward-looking statements.  For an explanation of the qualifications and limitations on forward-looking statements, see Item 7.
 
(a)           Risks arising from the Internal Revenue Code rules governing Low Income Housing Tax Credits

Low Income Housing Tax Credits might not be available.  If a Housing Complex does not satisfy the requirements of Internal Revenue Code Section 42, then the Housing Complex will not be eligible for Low Income Housing Tax Credits.

Low Income Housing Tax Credits might be less than anticipated. The Local General Partners will calculate the amount of the Low Income Housing Tax Credits. No opinion of counsel will cover the calculation of the amount of Low Income Housing Tax Credits. The IRS could challenge the amount of the Low Income Housing Tax Credits claimed for any Housing Complex under any of a number of provisions set forth in Internal Revenue Code Section 42. A successful challenge by the IRS would decrease the amount of the Low Income Housing Tax Credits from the amount paid for by the Partnership.

         Unless a bond is posted or a treasury direct account is established, Low Income Housing Tax Credits may be recaptured if Housing Complexes are not owned and operated for 15 years. Housing Complexes must comply with Internal Revenue Code Section 42 for the 15-year Compliance Period. Low Income Housing Tax Credits will be recaptured with interest to the extent that a Housing Complex is not rented as low income housing or in some other way does not satisfy the requirements of Internal Revenue Code Section 42 during the Compliance Period. For example, unless a bond is posted or a Treasury Direct Account is established, recapture with interest would occur if:

·  
a Local Limited Partnership disposed of its interest in a Housing Complex during the Compliance Period, or

·  
the Partnership disposed of its interest in a Local Limited Partnership during the Compliance Period.

For these purposes, disposition includes transfer by way of foreclosure. It will be up to the Partnership to determine whether to post a bond. There is no obligation under the agreements with the Local Limited Partnerships that the Local Limited Partnerships must do so.

 
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There can be no assurance that recapture will not occur.  If it does, recapture will be a portion of all Low Income Housing Tax Credits taken in prior years for that Housing Complex, plus interest.  During the first 11 years of the Compliance Period, non-compliance results in one-third of the Low Income Housing Tax Credits up to that point for the particular Housing Complex being recaptured, plus interest.  Between years 12 and 15, the recapture is phased out ratably.

Sales of Housing Complexes are subject to limitations which may impact a Local Limited Partnership’s ability to sell its Housing Complex.  Each Local Limited Partnership executes an extended low income housing commitment with the state in which the Housing Complex is located.  The extended low income housing commitment states the number of years that the Local Limited Partnership and any subsequent owners must rent the Housing Complex as low income housing.  Under Federal law, the commitment must be for at least 30 years.  The commitment, actually agreed to, may be significantly longer than 30 years.  In prioritizing applicants for Low Income Housing Tax Credits, most states give additional points for commitment periods in excess of 30 years.  On any sale of the Housing Complex during the commitment period, the purchaser would have to agree to continue to rent the Housing Complex as low income housing for the duration of the commitment period.  This requirement reduces the potential market, and possibly the sales price, for the Housing Complexes.  The sale of a Housing Complex may be subject to other restrictions.  For example, Federal lenders or subsidizers may have the right to approve or disapprove a purchase of a Housing Complex.  Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex.  Even if it does so, there can be no assurance that any amount of cash will be distributed to the Limited Partners.  The Partnership would first use sale proceeds to pay obligations of the Partnership.  As a result, a material portion of the Low Income Housing Tax Credits may represent a return of the money originally invested in the Partnership.

As part of the recently enacted health care legislation, Congress has codified the economic substance doctrine. Because of its recent enactment, the full reach of this provision is unclear.  Inasmuch as Housing Complexes might offer no benefit to a purchaser other than tax benefits, it is possible that the economic substance doctrine could be interpreted to limit deduction of tax losses from Housing Complexes, which would be expected to have a significant adverse effect on the sale value of the Housing Complexes and the Local Limited Partnership Interests.

Limited Partners can only use Low Income Housing Tax Credits in limited amounts.  The ability of an individual or other non-corporate Limited Partner to claim Low Income Housing Tax Credits on his individual tax return is limited. For example, an individual Limited Partner can use Low Income Housing Tax Credits to reduce his tax liability on:

·  
an unlimited amount of passive income, which is income from entities such as the Partnership, and
·  
$25,000 in income from other sources.

However, the use of Low Income Housing Tax Credits by an individual against these types of income is subject to ordering rules, which may further limit the use of Low Income Housing Tax Credits.  Some corporate Limited Partners are subject to similar and other limitations. They include corporations which provide personal services, and corporations which are owned by five or fewer shareholders.

Any portion of a Low Income Housing Tax Credit which is allowed to a Limited Partner under such rules is then aggregated with all of the Limited Partner’s other business credits.  The aggregate is then subject to the general limitation on all business credits.  That limitation provides that a Limited Partner can use business credits to offset the Limited Partner’s annual tax liability equal to $25,000 plus 75% of the Limited Partner’s tax liability in excess of $25,000. However, business credits may not be used to offset any alternative minimum tax.  All of these concepts are extremely complicated.

 
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(b)           Risks related to investment in Local Limited Partnerships and Housing Complexes

Because the Partnership has few investments, each investment will have a great impact on the Partnership’s results of operations.  Any single Housing Complex experiencing poor operating performance, impairment of value or recapture of Low Income Housing Tax Credits will have a significant impact upon the Partnership as a whole.

The failure to pay mortgage debt could result in a forced sale of a Housing Complex. Each Local Limited Partnership leverages the Partnership’s investment therein by incurring mortgage debt.  A Local Limited Partnership’s revenues could be less than its debt payments and taxes and other operating costs.  If so, the Local Limited Partnership would have to use working capital reserves, seek additional funds, or suffer a forced sale of its Housing Complex, which could include a foreclosure.  The same results could occur if government subsidies ceased.  Foreclosure would result in a loss of the Partnership’s capital invested in the Housing Complex.  Foreclosure could also result in a recapture of Low Income Housing Tax Credits, and a loss of Low Income Housing Tax Credits for the year in which the foreclosure occurs. If the Housing Complex is highly-leveraged, a relatively slight decrease in the rental revenues could adversely affect the Local Limited Partnership’s ability to pay its debt service requirements. Mortgage debt may be repayable in a self-amortizing series of equal installments or with a large balloon final payment.  Balloon payments maturing prior to the end of the anticipated holding period for the Housing Complex create the risk of a forced sale if the debt cannot be refinanced. There can be no assurance that additional funds will be available to any Local Limited Partnership if needed on acceptable terms or at all.

The Partnership does not control the Local Limited Partnerships and must rely on the Local General Partners. The Local General Partners will make all management decisions for the Local Limited Partnerships and the Housing Complexes.  The Partnership has very limited rights with respect to management of the Local Limited Partnerships. The Partnership will not be able to exercise any control with respect to Local Limited Partnership business decisions and operations. Consequently, the success of the Partnership will depend on the abilities of the Local General Partners.

Housing Complexes subsidized by other government programs are subject to additional rules which may make it difficult to operate and sell Housing Complexes.  Some or all of the Housing Complexes receive or may receive government financing or operating subsidies in addition to Low Income Housing Tax Credits.  The following are risks associated with some such subsidy programs:

·  
Obtaining tenants for the Housing Complexes.  Government regulations limit the types of people who can rent subsidized housing. These regulations may make it more difficult to rent the residential units in the Housing Complexes.
·  
Obtaining rent increases.  In many cases rents can only be increased with the prior approval of the subsidizing agency.
·  
Limitations on cash distributions.  The amount of cash that may be distributed to owners of subsidized Housing Complexes is less than the amount that could be earned by the owners of non-subsidized Housing Complexes.
·  
Limitations on sale or refinancing of the Housing Complexes.  A Local Limited Partnership may be unable to sell its Housing Complex or to refinance its mortgage loan without the prior approval of the lender. The lender may withhold such approval in the discretion of the lender. Approval may be subject to conditions, including the condition that the purchaser continues to operate the property as affordable housing for terms which could be as long as 30 years or more. In addition, any prepayment of a mortgage may result in the assessment of a prepayment penalty.
·  
Limitations on transfers of interests in Local Limited Partnerships.  The Partnership may be unable to sell its interest in a Local Limited Partnership without the prior approval of the lender.  The lender may withhold such approval in the discretion of the lender.  Approval may be subject to conditions.

 
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·  
Limitations on removal and admission of Local General Partners.  The Partnership may be unable to remove a Local General Partner from a Local Limited Partnership except for cause, such as the violation of the rules of the lender or state allocating authority.  Regulations may prohibit the removal of a Local General Partner or permit removal only with the prior approval of the lender.  Regulations may also require approval of the admission of a successor Local General Partner even upon the death or other disability of a Local General Partner.
·  
Limitations on subsidy payments. Subsidy payments may be fixed in amount and subject to annual legislative appropriations. The rental revenues of a Housing Complex, when combined with the maximum committed subsidy, may be insufficient to meet obligations. Congress or the state legislature, as the case may be, may fail to appropriate or increase the necessary subsidy.  In those events, the mortgage lender could foreclose on the Housing Complex unless a workout arrangement could be negotiated.
·  
Possible changes in applicable regulations.  Legislation may be enacted which adversely revises provisions of outstanding mortgage loans.  Such legislation has been enacted in the past.
·  
Limited Partners may not receive distributions if Housing Complexes are sold.  There is no assurance that Limited Partners will receive any cash distributions from the sale or refinancing of a Housing Complex.  The price at which a Housing Complex is sold may not be high enough to pay the mortgage and other expenses at the Local Limited Partnership and Partnerships levels which must be paid at such time.  If that happens, a Limited Partner’s return would be derived only from the Low Income Housing Tax Credits and tax losses.

Uninsured casualties could result in losses and recapture. There are casualties which are either uninsurable or not economically insurable.  These include earthquakes, floods, wars and losses relating to hazardous materials or environmental matters.  If a Housing Complex experienced an uninsured casualty, the Partnership could lose both its invested capital and anticipated profits in such property.  Even if the casualty were an insured loss, the Local Limited Partnership might be unable to rebuild the destroyed property.  A portion of prior tax credits could be recaptured and future tax credits could be lost if the Housing Complex were not restored within a reasonable period of time.  And liability judgments against the Local Limited Partnership could exceed available insurance proceeds or otherwise materially and adversely affect the Local Limited Partnership. The cost of liability and casualty insurance has increased in recent years.  Casualty insurance has become more difficult to obtain and may require large deductible amounts.

Housing Complexes without financing or operating subsidies may be unable to pay operating expenses. If a Local Limited Partnership were unable to pay operating expenses, one result could be a forced sale of its Housing Complex.  If a forced sale occurs during the Compliance Period for a Housing Complex, a partial recapture of Low Income Housing Tax Credits could occur. In this regard, some of the Local Limited Partnerships may own Housing Complexes which have no subsidies other than Low Income Housing Tax Credits.  Those Housing Complexes do not have the benefit of below-market-interest-rate financing or operating subsidies which often are important to the feasibility of low income housing.  Those Housing Complexes rely solely on rents to pay expenses. However, in order for any Housing Complex to be eligible for Low Income Housing Tax Credits, it must restrict the rent which may be charged to tenants.  Over time, the expenses of a Housing Complex will increase.  If a Local Limited Partnership cannot increase its rents, it may be unable to pay increased operating expenses.

The Partnership’s investment protection policies will be worthless if the net worth of the Local General Partners is not sufficient to satisfy their obligations.  There is a risk that the Local General Partners will be unable to perform their financial obligations to the Partnership.  The General Partner has not established a minimum net worth requirement for the Local General Partners.  Rather, each Local General Partner demonstrates a net worth which the General Partner believes is appropriate under the circumstances. The assets of the Local General Partners are likely to consist primarily of real estate holdings and similar assets. The fair market value of these types of assets is difficult to estimate. These types of assets cannot be readily liquidated to satisfy the financial guarantees and commitments which the Local General Partners make to the Partnership.  Moreover, other creditors may have claims on these assets. No escrow accounts or other security arrangements will be established to ensure performance of a Local General Partner’s obligations. The cost to enforce a Local General Partner’s obligations may be high. If a Local General Partner does not satisfy its obligations the Partnership may have no remedy, or the remedy may be limited to removing the Local General Partner as general partner of the Local Limited Partnership.

 
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Fluctuating economic conditions can reduce the value of real estate. The Partnership’s principal business objective is providing its Limited Partners with Low Income Housing Tax Credits, not the generation of gains from the appreciation of real estate held by the Local Limited Partnerships.    In its financial statements, the Partnership has carried its investments in Local Limited Partnerships at values equal to or less than the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership of its interests in the Local Limited Partnerships.  As of March 31, 2010, 2009 and 2008, the Partnership had reduced the carrying amount to $0 with respect to one of its investments.

Any investment in real estate is subject to risks from fluctuating economic conditions. These conditions can adversely affect the ability to realize a profit or even to recover invested capital. Among these conditions are:

·  
the general and local job market,
·  
the availability and cost of mortgage financing,
·  
monetary inflation,
·  
tax, environmental, land use and zoning policies,
·  
the supply of and demand for similar properties,
·  
neighborhood conditions,
·  
the availability and cost of utilities and water.

A loss in value of an investment in a Local Limited Partnership, other than a temporary decline, is recorded by the Partnership in its financial statements as an impairment loss. Impairment is measured by comparing the Partnership’s carrying amount in the investment to the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership. For the years ended March 31, 2010, 2009 and 2008, impairment loss related to investments in Local Limited Partnerships was $1,169,440, $80,344 and $0, respectively.

              Properties under development may not be completed. The Partnership invests in Housing Complexes which are under development. If a Housing Complex is not completed, the Partnership could lose any capital it invested in the Housing Complex. In general, investment in an uncompleted Housing Complex involves more risk than the purchase of a completed property. The Local General Partners' ability to complete development and construction and rent the property may be affected by conditions beyond their control. If a property is not constructed as anticipated, the permanent loan commitment might be of no effect. The lender could refuse to advance the permanent loan, and the Local Limited Partnership might be unable to repay the construction loan. Furthermore, a decision to invest in an uncompleted Housing Complex is made based on projections of rental income and expenses. Whether the Housing Complex will operate at such projected income and expense levels cannot be known.

                 If a loan made to a Local Limited Partnership is not repaid, the amount of capital available for investment would be reduced. The Partnership has or may make a loan to a Local Limited Partnership before the Partnership's acquisition of an interest therein. If the Partnership doesn't invest in the Local Limited Partnership, the Local Limited Partnership might not repay the loan. If the Local Limited Partnership doesn't repay the loan, the amount of capital available for investment in Local Limited Partnerships would be reduced.

 
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 (c)           Tax risks other than those relating to tax credits

In addition to the risks pertaining specifically to Low Income Housing Tax Credits, there are other Federal income tax risks.  Additional Federal income tax risks associated with the ownership of Partnership Units and the operations of the Partnership and the Local Limited Partnerships include, but are not limited to, the following:

No opinion of counsel as to certain matters.  No legal opinion is obtained regarding matters:

·  
the determination of which depends on future factual circumstances,
·  
which are peculiar to individual Limited Partners, or
·  
which are not customarily the subject of an opinion.

The more significant of these matters include:

·  
allocating purchase price among components of a property, particularly as between buildings and fixtures, the cost of which is depreciable, and the underlying land, the cost of which is not depreciable,
·  
characterizing expenses and payments made to or by the Partnership or a Local Limited Partnership,
·  
identifying the portion of the costs of any Housing Complex which qualify for historic and other tax credits, and
·  
applying to any specific Limited Partner the limitation on the use of tax credits and tax losses.  Limited Partners must determine for themselves the extent to which they can use tax credits and tax losses.

There can be no assurance, therefore, that the IRS will not challenge some of the tax positions adopted by the Partnership.  The courts could sustain an IRS challenge.  An IRS challenge, if successful, could have a detrimental effect on the Partnership’s ability to realize its investment objectives.

Passive activity rules will limit deduction of the Partnership’s losses and impose tax on interest income.   The Internal Revenue Code imposes limits on the ability of most investors to claim losses from investments in real estate.  An individual may claim these so-called passive losses only as an offset to income from investments in real estate or rental activities.  An individual may not claim passive losses as an offset against other types of income, such as salaries, wages, dividends and interest.  These passive activity rules will restrict the ability of most Limited Partners to use losses from the Partnership as an offset of non-passive income.

The Partnership may earn interest income on its reserves and loans.  The passive activity rules generally will categorize interest as portfolio income, and not passive income. Passive losses cannot be used as an offset to portfolio income.  Consequently, a Limited Partner could pay tax liability on portfolio income from the Partnership.

At risk rules might limit deduction of the Partnership’s losses.  If a significant portion of the financing used to purchase Housing Complexes does not consist of qualified nonrecourse financing, the “at risk” rules will limit a Limited Partner’s ability to claim Partnership losses to the amount the Limited Partner invests in the Partnership.  The “at risk” rules of the Internal Revenue Code generally limit a Limited Partner’s ability to deduct Partnership losses to the sum of:

·  
the amount of cash the Limited Partner invests in the Partnership, and
·  
the Limited Partner’s share of Partnership qualified nonrecourse financing.

Qualified nonrecourse financing is non-convertible, nonrecourse debt which is borrowed from a government, or with exceptions, any person actively and regularly engaged in the business of lending money.

 
11

 


Tax liability on sale of a Housing Complex or Local Limited Partnership Interest may exceed the cash available from the sale.  When a Local Limited Partnership sells a Housing Complex it will recognize gain. Such gain is equal to the difference between:

·  
the sales proceeds plus the amount of indebtedness secured by the Housing Complex, and
·  
the adjusted basis for the Housing Complex. The adjusted basis for a Housing Complex is its original cost, plus capital expenditures, minus depreciation.

Similarly, when the Partnership sells an interest in a Local Limited Partnership the Partnership will recognize gain. Such gain is equal to the difference between:

·  
the sales proceeds plus the Partnership’s share of the amount of indebtedness secured by the Housing Complex, and
·  
the adjusted basis for the interest.  The adjusted basis for an interest in a Local Limited Partnership is the amount paid for the interest, plus income allocations and cash distributions, less loss allocations.

Accordingly, gain will be increased by the depreciation deductions taken during the holding period for the Housing Complex.  In some cases, a Limited Partner could have a tax liability from a sale greater than the cash distributed to the Limited Partner from the sale.

Alternative minimum tax liability could reduce a Limited Partner’s tax benefits.  If a Limited Partner pays alternative minimum tax, the Limited Partner could suffer a reduction in benefits from an investment in the Partnership.  The application of the alternative minimum tax is personal to each Limited Partner.  Tax credits may not be utilized to reduce alternative minimum tax liability.

IRS could audit the returns of the Partnership, the Local Limited Partnerships or the Limited Partners. The IRS can audit the Partnership or a Local Limited Partnership at the entity level with regard to issues affecting the entity.  The IRS does not have to audit each Limited Partner in order to challenge a position taken by the Partnership or a Local Limited Partnership.  Similarly, only one judicial proceeding can be filed to contest an IRS determination.  A contest by the Partnership of any IRS determination might result in high legal fees.

An audit of the Partnership or a Local Limited Partnership also could result in an audit of a Limited Partner.  An audit of a Limited Partner’s tax returns could result in adjustments both to items that are related to the Partnership and to unrelated items.  The Limited Partner could then be required to file amended tax returns and pay additional tax plus interest and penalties.

A successful IRS challenge to tax allocations of the Partnership or a Local Limited Partnership would reduce the tax benefits of an investment in the Partnership.  Under the Internal Revenue Code, a partnership’s allocation of income, gains, deductions, losses and tax credits must have substantial economic effect.  Substantial economic effect is a highly-technical concept.  The fundamental principle is two-fold.  If a partner will benefit economically from an item of partnership income or gain, that item must be allocated to him so that he bears the correlative tax burden.  Conversely, if a partner will suffer economically from an item of partnership deduction or loss, that item must be allocated to him so that he bears the correlative tax benefit.  If a partnership’s allocations do not have substantial economic effect, then the partnership’s tax items are allocated in accordance with each partner’s interest in the partnership. The IRS might challenge the allocations made by the Partnership:

·  
between the Limited Partners and the General Partner,
·  
among the Limited Partners, or
·  
between the Partnership and a Local General Partner.

If any allocations were successfully challenged, a greater share of the income or gain or a lesser share of the losses or tax credits might be allocated to the Limited Partners.  This would increase the tax liability or reduce the tax benefits to the Limited Partners.

 
12

 
 
Tax liabilities could arise in later years of the Partnership.  After a period of years following commencement of operations by a Local Limited Partnership, the Local Limited Partnership may generate profits rather than losses.  A Limited Partner would have tax liability on his share of such profits unless he could offset the income with:

·  
unused passive losses from the Partnership or other investments, or
·  
current passive losses from other investments.

In such circumstances, the Limited Partner would not receive a cash distribution from the Partnership with which to pay any tax liability.

IRS challenge to tax treatment of expenditures could reduce losses. The IRS may contend that fees and payments of the Partnership or a Local Limited Partnership:

·  
should be deductible over a longer period of time or in a later year,
·  
are excessive and may not be capitalized or deducted in full,
·  
should be capitalized and not deducted, or
·  
may not be included as part of the basis for computing tax credits.

Any such contention by the IRS could adversely impact, among other things:

·  
the eligible basis of a Housing Complex used to compute Low Income Housing Tax Credits,
·  
the adjusted basis of a Housing Complex used to compute depreciation,
·  
the correct deduction of fees,
·  
the amortization of organization and offering expenses and start-up expenditures.

If the IRS were successful in any such contention, the anticipated Low Income Housing Tax Credits and losses of the Partnership would be reduced, perhaps substantially.

 
13

 
 
Changes in tax law might reduce the value of Low Income Housing Tax Credits. Although all Low Income Housing Tax Credits are allocated to a Housing Complex at commencement of the 10-year credit period, there can be no assurance that future legislation may not adversely affect an investment in the Partnership. For example, legislation could reduce or eliminate the value of Low Income Housing Tax Credits.  In this regard, before 1986, the principal tax benefit of an investment in low income housing was tax losses.  These tax losses generally were used to reduce an investor’s income from all sources on a dollar-for-dollar basis.  Investments in low income housing were made in reliance on the availability of such tax benefits.  However, tax legislation enacted in 1986 severely curtailed deduction of such losses.

New administrative or judicial interpretations of the law might reduce the value of Low Income Housing Tax Credits.  Many of the provisions of the Internal Revenue Code related to low income housing and real estate investments have not been interpreted by the IRS in regulations, rulings or public announcements, or by the courts.  In the future, these provisions may be interpreted or clarified by the IRS or the courts in a manner adverse to the Partnership or the Local Limited Partnerships.  The IRS constantly reviews the Federal tax rules, and can revise its interpretations of established concepts.  Any such revisions could reduce or eliminate tax benefits associated with an investment in the Partnership.

State income tax laws may adversely affect the Limited Partners.  A Limited Partner may be required to file income tax returns and be subject to tax and withholding in each state or local taxing jurisdiction in which: a Housing Complex is located, the Partnership or a Local Limited Partnership engages in business activities, or the Limited Partner is a resident.  Corporate Limited Partners may be required to pay state franchise taxes.

The tax treatment of particular items under state or local income tax laws may vary materially from the Federal income tax treatment of such items.  Nonetheless, many of the Federal income tax risks associated with an investment in the Partnership may also apply under state or local income tax law.  The Partnership may be required to withhold state taxes from distributions or income allocations to Limited Partners in some instances.

(d)           Risks related to the Partnership and the Partnership Agreement

The Partnership may be unable to timely provide financial reports to the Limited Partners which would adversely affect their ability to monitor Partnership operations.  Historically, the Partnership has been unable to timely file and provide investors with all of its required periodic reports.  In some instances, the delay has been substantial.  Each Local General Partner is required to retain independent public accountants and to report financial information to the Partnership in a timely manner.  There cannot be any assurance that the Local General Partners will satisfy these obligations.  If not, the Partnership would be unable to provide to the Limited Partners in a timely manner its financial statements and other reports.  That would impact the Limited Partners’ ability to monitor Partnership operations.  The Partnership’s failure to meet its filing requirements under the Securities Exchange Act of 1934 could reduce the liquidity for the Partnership Units due to the unavailability of public information concerning the Partnership.  The failure to file could also result in sanctions imposed by the SEC.  Any defense mounted by the Partnership in the face of such sanctions could entail legal and other fees, which would diminish cash reserves.

Lack of liquidity of investment.  There is no public market for the purchase and sale of Partnership Units, and it is unlikely that one will develop.  Accordingly, Limited Partners may not be able to sell their Partnership Units promptly or at a reasonable price.  Partnership Units should be considered as a long-term investment because the Partnership is unlikely to sell any Local Limited Partnership Interests for at least 15 years.  Partnership Units cannot be transferred to tax-exempt or foreign entities, or through a secondary market.  The General Partner can deny effectiveness of a transfer if necessary to avoid adverse tax consequences from the transfer.  The General Partner does not anticipate that any Partnership Units will be redeemed by the Partnership.

The Limited Partners will not control the Partnership and must rely totally on the General Partner.  The General Partner will make all management decisions for the Partnership.  Management decisions include exercising powers granted to the Partnership by a Local Limited Partnership.  Limited Partners have no right or power to take part in Partnership management.

 
14

 


Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority.  The Partnership Agreement grants to Limited Partners owning more than 50% of the Partnership Units the right to:

·  
remove the General Partner and elect a replacement general partner,
·  
amend the Partnership Agreement,
·  
terminate the Partnership.

Accordingly, a majority-in-interest of the Limited Partners could cause any such events to occur, even if Limited Partners owning 49% of the Partnership Units opposed such action.

Limitations on liability of the General Partner to the Partnership.  The ability of Limited Partners to sue the General Partner and it affiliates is subject to limitations.  The Partnership Agreement limits the liability of the General Partner and it affiliates to the Limited Partners.  The General Partner and it affiliates will not be liable to the Limited Partners for acts and omissions: performed or omitted in good faith, and performed or omitted in a manner which the General Partner reasonably believed to be within the scope of its authority and in the best interest of the Limited Partners, provided such conduct did not constitute negligence or misconduct.

Therefore, Limited Partners may be less able to sue the General Partner and it affiliates than would be the case if such provisions were not included in the Partnership Agreement.

Associates and its affiliates are serving as the general partners of many other partnerships.  Depending on their corporate area of responsibility, the officers of Associates initially devote approximately 5% to 50% of their time to the Partnership.  These individuals spend significantly less time devoted to the Partnership after the investment of the Partnership’s capital in Local Limited Partnerships.

The interests of Limited Partners may conflict with the interests of the General Partner and it affiliates.  The General Partner and it affiliates are committed to the management of more than 100 other limited partnerships that have investments similar to those of the Partnership.  The General Partner and it affiliates receive substantial compensation from the Partnership. The General Partner decides how the Partnership’s investments in Housing Complexes are managed, and when the investments will be sold. The General Partner may face a conflict in these circumstances because the General Partner’s share of fees and cash distributions from the transaction may be more or less than their expected share of fees if a Housing Complex was not sold. The result of these conflicts could be that the General Partner may make investments which are less desirable, or on terms which are less favorable, to the Partnership than might otherwise be the case. The Partnership has not developed any formal process for resolving conflicts of interest. However, the General Partner is subject to a fiduciary duty to exercise good faith and integrity in handling the affairs of the Partnership, and that duty will govern its actions in all such matters. Furthermore, the manner in which the Partnership can operate and sell investments is subject to substantial restrictions as outlined in the Partnership Agreement.

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership.   However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates.

 
15

 
 
The Partnership’s accrued payables consist primarily of the asset management fees payable to the General Partner and the capital contributions payable to Local Limited Partnerships.  The asset management fees payable increased by approximately $179,000, $161,000 and  $28,000 for the years ended March 31 2010, 2009 and 2008, respectively.  The payables due to the Local Limited Partnerships decreased by approximately $(418,000), $(2,244,000) and $(288,000) for the years ended March 31, 2010, 2009 and 2008, respectively.  The Partnership’s future contractual cash obligations consist of its obligations to pay future annual asset management fees and the payables due to the Local Limited Partnerships.  The future annual asset management fees will equal approximately $149,888 per year through the termination of the Partnership, which must occur no later than December 31, 2070.  Though the amounts payable to the General Partner and/or its affiliates are contractually  currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual  obligations until capital reserves are in excess of the aggregate of the existing  contractual  obligations  and anticipated future foreseeable  obligations of the Partnership.  The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

Associates agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2012.

Item 1B. Unresolved Staff Comments

Not Applicable

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 Housing Complexes as of the dates or for the periods indicated:

 
16

 

       
     
As of March 31, 2010
 
As of December 31, 2009
Local Limited
Partnership Name
Location
General Partner Name
Partnership’s Total Investment in Local Limited Partnerships
Amount of Investment Paid to Date
 
Number of Units
Estimated
Aggregate Low Income Housing Tax Credits (1)
Mortgage Balances of Local Limited Partnership
909 4th YMCA, L.P.
Seattle, Washington
YMCA of Greater Seattle
$ 508,000
$ 508,000
 
20
$ 686,000
$                   -
                 
Crestview Housing, L.P.
Bigfork, Montana
American Covenant Senior Housing Foundation, Inc.
1,973,000
1,880,000
 
24
2,268,000
721,000
                 
Davenport Housing VII, L.P.
Davenport, Iowa
Shelter Resource Corporation
2,253,000
2,253,000
 
20
2,448,000
2,790,000
                 
FDI-Country Square, LTD.
Lone Star, Texas
Fieser Holdings, Inc.
605,000
605,000
 
24
823,000
661,000
                 
FDI-Park Place, LTD.
Bellville, Texas
Fieser Holdings, Inc.
758,000
758,000
 
40
1,068,000
1,161,000
                 
Fernwood Meadows, L.P. (2)
 Ferney, Nevada
Fernwood Meadow, LLC
 
2,013,000
2,013,000
 
28
2,369,000
1,131,000
                 
Grove Village, L.P.
Dallas, Texas
Walker Guardian LLC
3,043,000
2,587,000
 
232
3,952,000
8,132,000
                 
Head Circle, L.P.
Ruleville, Mississippi
SEMC, Inc.
464,000
464,000
 
38
657,000
1,448,000
                 
Pleasant Village, L.P.
Dallas, Texas
Walker Guardian LLC
2,850,000
2,708,000
 
200
3,701,000
8,850,000
                 
Sierra’s Run, L.P. (2)
Fernley, Nevada
Sierra Run, LLC
                       1,932,000
                   1,932,000
 
         21
    2,273,000
      366,000
                 
     
$  16,399,000
$  15,708,000
 
       647
$  20,245,000
$  25,260,000

(1) Represents aggregate anticipated Low Income Housing Tax Credits to be received over the 10 year credit period if the Housing Complexes are retained and rented in compliance with credit rules for the Compliance Period.  Approximately 23% of the anticipated Low Income Housing Tax Credits have been received from the Local Limited Partnerships.

(2) This Local Limited Partnership was sold subsequent to March 31, 2010.

 
17

 

   
For the year ended December 31, 2009
 
Local Limited
Partnership Name
Rental Income
 
Net Loss
 
Low Income Housing Tax Credits Allocated to Partnership
           
909 4th YMCA, L.P.
$      597,000
 
$      (74,000)
 
99.98%
           
Crestview Housing, L.P.
118,000
 
(50,000)
 
99.98%
           
Davenport Housing VII, L.P. (1)
-
 
(52,000)
 
99.98%
           
FDI-Country Square, LTD.
112,000
 
(10,000)
 
99.98%
           
FDI-Park Place, LTD.
175,000
 
(30,000)
 
99.98%
           
Fernwood Meadows, L.P. (2)
193,000
 
(32,000)
 
99.98%
           
Grove Village, L.P.
1,532,000
 
(890,000)
 
99.98%
           
Head Circle, L.P.
257,000
 
(63,000)
 
99.98%
           
Pleasant Village, L.P.
1,380,000
 
(656,000)
 
99.98%
           
Sierra’s Run, L.P. (2)
     134,000
 
       (57,000)
 
99.98%
           
 
$  4,498,000
 
$  (1,914,000)
   
           
 
(1) The Local Limited Partnership completed construction during December of 2009.

(2) This Local Limited Partnership was sold subsequent to March 31, 2010.

 
18

 

WNC Housing Tax Credit Fund VI, L.P., Series 13
   
     
Occupancy Rates
As of December 31,
   
         
Local Limited Partnership Name
Location
General Partner Name
2009
2008
2007
2006
2005
   
                   
909 4th YMCA, L.P.
Seattle, Washington
YMCA of Greater Seattle
 
100%
95%
90%
70%
(2)
   
                   
Crestview Housing, L.P.
Bigfork, Montana
American Covenant Senior Housing Foundation, Inc.
 
83%
100%
(1)
(2)
(2)
   
                   
Davenport Housing VII, L.P.
Davenport, Iowa
Shelter Resource Corporation
 
15%(4)
(1)
(1)
(2)
(2)
   
                   
FDI-Country Square, LTD.
Lone Star, Texas
Fieser Holdings, Inc.
 
100%
96%
96%
25%
(2)
   
                   
FDI-Park Place, LTD.
Bellville, Texas
Fieser Holdings, Inc.
90%
85%
95%
85%
(2)
   
                   
Fernwood Meadows, L.P. (3)
Fernley, Nevada
Fernwood Meadow, LLC
 
100%
96%
93%
(2)
(2)
   
                   
Grove Village, L.P.
Dallas, Texas
Walker Guardian LLC
72%
88%
96%
53%
(2)
   
                   
Head Circle, L.P.
Ruleville, Mississippi
SEMC, Inc.
 
97%
97%
95%
100%
(2)
   
                   
Pleasant Village, L.P.
Dallas, Texas
Walker Guardian LLC
82%
93%
86%
66%
(2)
   
                   
Sierra’s Run, L.P. (3)
Fernley, Nevada
Sierra Run, LLC
 
95%
   86%
   71%
      (2)
     (2)
   
     
   80%
    91%
   91%
   63%
        -
   
(1) – The Local Limited Partnership was still under construction at the respective year end.

(2) – The Local Limited Partnership was not acquired by the Partnership as of that respective year end.

(3) – This Local Limited Partnership was sold subsequent to March 31, 2010.

(4) – Construction was completed during December 2009, so the Local Limited Partnership was still in the lease up phase.

 
19

 

Item 3.  Legal Proceedings

NONE

Item 4.  (Removed and Reserved)

PART II.

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 5a.

(a)  
The Partnership Units are not traded on a public exchange but are being sold through a public offering.  It is not anticipated that any public market will develop for the purchase and sale of any Partnership Units and none exists.  Partnership Units can be assigned or otherwise transferred only if certain requirements in the Partnership Agreement are satisfied.

(b)  
At March 31, 2010, there were 948 Limited Partners, respectively, and there were no assignees of Partnership Units who were not admitted as Limited Partners.

(c)  
The Partnership was not designed to provide operating cash distributions to Limited Partners.  It is possible that the Partnership could make distributions from sale proceeds, if the Partnership is able to sell its Local Limited Partnership Interests or Housing Complexes for more than the related closing costs and any then accrued obligations of the Partnership.  There can be no assurance in this regard.  Any distributions would be made in accordance with the terms of the Partnership Agreement. Any such distributions would be made in accordance with the terms of the Partnership Agreement. For all periods presented, there were no cash distributions to the Limited Partners.

(d)  
No securities are authorized for issuance by the Partnership under equity compensation plans.

(e)  
The Partnership does not issue common stock.

(f)  
No unregistered securities were sold by the Partnership during the year ended March 31, 2010.

 
20

 

Item 5b. Use of Proceeds

NOT APPLICABLE

Item 5c. Purchases of Equity Securities by the Issuers and Affiliated Purchasers

NONE

Item 6.  Selected Financial Data

Selected balance sheet information for the Partnership is as follows:
 
   
March 31,
   
2010
 
2009
 
2008
 
2007
 
2006
ASSETS
                   
                     
Cash and cash equivalents
$
678,636
$
1,522,248
$
3,715,123
$
11,964,300
$
5,247,602
Investments in Local
Limited Partnerships, net
 
10,079,132
 
13,242,305
 
15,943,480
 
8,726,771
 
-
Due from investors
 
-
 
-
 
-
 
-
 
816,640
Prepaid acquisition fees and
costs
 
-
 
-
 
-
 
910,151
 
692,190
                     
     Total Assets
$
10,757,768
$
14,764,553
$
19,658,603
$
21,601,222
$
6,756,432
                     
LIABILITIES
                   
                     
Payables to Local Limited
    Partnerships
 
$
692,220
$
1,110,039
$
3,353,604
$
3,641,780
$
-
Accrued fees and expenses due to
    General Partner and affiliates
 
993,507
 
291,539
 
 
111,896
 
 
83,688
 
120,215
Accrued expenses
 
-
 
-
 
17,765
 
8,000
 
-
Due to investors
 
-
 
-
 
-
 
-
 
27,500
                     
    Total Liabilities
 
1,685,727
 
1,401,578
 
3,483,265
 
3,733,468
 
147,715
                     
PARTNERS’ EQUITY
 
9,072,041
 
13,362,975
 
16,175,338
 
17,867,754
 
6,608,717
                     
    Total Liabilities and Partners’
       Equity
$
10,757,768
$
14,764,553
$
19,658,603
$
21,601,222
$
6,756,432

 
21

 

Selected results of operations, cash flows, and other information for the Partnership are as follows:

   
For the Years Ended March 31,
   
   
 
 
 
 
 
2010
 
 
 
 
 
 
2009
 
 
 
 
 
 
2008
 
 2007
 
For the period from
December 14, 2005
(date operations commenced)
 to March 31, 2006
                     
Loss from operations
$
 
(2,380,615)
$
(381,550)
  $
(254,475)
$
(148,071)
$
(76,565)
Equity in losses of Local Limited
    Partnerships
 
 
(1,861,108)
 
(2,443,000)
 
(1,859,713)
 
(453,675)
 
-
Interest income
 
789
 
12,187
 
303,809
 
402,245
 
2,227
Net loss
$
 
(4,240,934)
$
(2,812,363)
  $
(1,810,379)
$
(199,501)
$
(74,338)
                     
Net loss allocated to:
                   
   General Partner
$
(4,241)
$
(2,812)
$
(1,810)
$
(200)
$
(74)
                     
   Limited Partners
$
(4,236,693)
$
(2,809,551)
$
(1,808,569)
$
(199,301)
$
(74,264)
                     
Net loss  per Partnership Unit
$
(201.93)
$
(133.91)
$
(86.20)
$
(11.42)
$
(16.04)
                     
Outstanding Weighted
 
20,981
 
20,981
 
20,981
 
17,456
 
4,630
 Partnership Units
                   

Note 1 – Loss from operations for the years ended March 31, 2010, 2009, 2008, 2007 and for the period ended March 31, 2006 include a charge for impairment losses on investments in Local Limited Partnerships of $1,169,440, $80,344, $0, $0 and $0, respectively (see Note 2 to the audited financial statements).

 
22

 


       
For the Years Ended March 31,
     
   
 
 
 
 
2010
 
 
 
 
2009
 
 
 
 
2008
 
2007
 
For the period from
December 14, 2005 (date operations commenced)
to March 31, 2006
 
                       
Net cash provided by (used in):
                     
Operating activities
$
(439,718)
$
(58,441)
 $
144,675
$
317,304
$
(72,773)
 
Investing activities
 
(403,894)
 
(2,134,434)
 
(8,511,815)
 
(5,919,684)
 
(621,000)
 
Financing activities
 
-
 
-
 
117,963
 
12,319,078
 
5,940,275
 
                       
Net change in cash and cash
   equivalents
 
 
(843,612)
 
(2,192,875)
 
 
(8,249,177)
 
6,716,698
 
5,246,502
 
                       
Cash and cash equivalents,
   beginning of period
 
 
1,522,248
 
 
3,715,123
 
 
11,964,300
 
5,247,602
 
1,100
 
                       
Cash and cash equivalents, end
   of period
$
 
678,636
$
1,522,248
$
 
3,715,123
$
11,964,300
$
5,247,602
 

Low Income Housing Tax Credits per Partnership Unit were as follows for the year and period ended December 31:

   
2009
 
2008
 
2007
 
2006
 
2005
 
                       
Federal
$
90
 
86
$
43
 
6
$
-
 
State
 
-
 
-
 
-
$
-
 
-
 
                       
Total
$
90
 
86
$
43
$
6
$
-
 

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, this “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, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credits property market and the economy in general, changes in law, rules and regulations, and legal proceedings.  Historical results are not necessarily indicative of the operating results for any future period.

 
23

 
Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-K and in other reports filed with the SEC.  The following discussion should be read in conjunction with the financial statements and the notes thereto included elsewhere in this filing.

Critical Accounting Policies and Certain Risks and Uncertainties

The Partnership believes that the following discussion addresses the Partnership’s most significant accounting policies, which are the most critical to aid in fully understanding and evaluating the 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 Local Limited Partnerships

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable.  Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership.  If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments are capitalized as part of the investment account and are being amortized over 27.5 years. (See Notes 2 and 3 to the financial statements.)

“Equity in losses of Local Limited Partnerships” for each year ended March 31 have been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. Equity in losses from the Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero.

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 distribution income.  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.

 
24

 

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. 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. Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE.  However, management does not consolidate the Partnership’s interests in these VIEs under this guidance, as it is not considered to be the primary beneficiary.  The Partnership currently records the amount of its investment in these partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss.  The Partnership’s exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying properties as well as the strength of the Local General Partners and their guarantee against credit recapture.

Income Taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns.  The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure.

Impact of Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued accounting guidance for Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007 and shall be applied prospectively except for very limited transactions.  In February 2008, the FASB delayed for one year implementation of the guidance as it pertains to certain non-financial assets and liabilities. The Partnership adopted Generally Accepted Accounting Principles (GAAP) for Fair Value Measurements effective April 1, 2008, except as it applies to those non-financial assets and liabilities, for which the effective date was April 1, 2009. The Partnership has determined that adoption of this guidance has no material impact on the Partnership’s financial statements.

In February 2007, the FASB issued accounting guidance for The Fair Value Option for Financial Assets and Financial Liabilities. This guidance permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value election is designed to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. It is effective for fiscal years beginning after November 15, 2007.  On April 1, 2008, the Partnership adopted GAAP for The Fair Value Option for Financial Assets and Financial Liabilities and elected not to apply the provisions to its eligible financial assets and financial liabilities on the date of adoption. Accordingly, the initial application of the guidance had no effect on the Partnership.

 
25

 

In November 2008, the FASB issued accounting guidance on Equity Method Investment Accounting Considerations that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009. The impact of adopting it does not have a material impact on the Partnership’s financial condition or results of operations.

In April 2009, the FASB issued accounting guidance for Interim Disclosures about Fair Value of Financial Instruments.  This requires disclosure about the method and significant assumptions used to establish the fair value of financial instruments for interim reporting periods as well as annual statements.  It became effective for as of and for the interim period ended June 30, 2009 and has no impact on the Partnership’s financial condition or results of operations.

In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Partnership for the quarter ended June 30, 2009. The adoption did not have a significant impact on the subsequent events that the Partnership reports, either through recognition or disclosure, in the financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and therefore the Company did not include the disclosure in this Form 10-K.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs).  The amended guidance modifies the consolidation model to one based on control and economics, and replaces the current quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE.  If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE.  Additionally, the amendment requires enhanced and expanded disclosures around VIEs.  This amendment is effective for fiscal years beginning after November 15, 2009.  The adoption of this guidance on April 1, 2010 is not expected to have a material effect on the Partnership’s financial statements.

In June 2009, the FASB issued the Accounting Standards Codification (Codification).  Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP.  The Codification is intended to reorganize, rather than change, existing GAAP.  Accordingly, all references to currently existing GAAP have been removed and have been replaced with plain English explanations of the Partnership’s accounting policies.  The adoption of the Codification did not have a material impact on the Partnership’s financial position or results of operations.

 
26

 

Certain Risks and Uncertainties

See Item 1A for a discussion of risks regarding the Partnership.

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 Partners may be required to sustain the operations of such Local Limited Partnerships.  If additional capital contributions are not made when they are required, the Partnership’s investment in certain of such Local Limited Partnerships could be lost, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership.  However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates.  Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership.  The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

Financial Condition

The Partnership’s assets at March 31, 2010 consisted of $679,000 in cash and cash equivalents and aggregate investments in ten Local Limited Partnerships of $10,079,000 (See “Method of Accounting for Investments in Local Limited Partnerships”). Liabilities at March 31, 2010 consisted of $692,000 of payables to Local Limited Partnerships and $994,000 of accrued fees and expenses due to General Partner and affiliates (See “Future Contractual Cash Obligations” below).

 
27

 

Results of Operations

Year Ended March 31, 2010 Compared to Year Ended March 31, 2009  The Partnership’s net loss for the year ended March 31, 2010 was $(4,241,000), reflecting an increase of $(1,429,000) from the net loss experienced for the year ended March 31, 2009 of $(2,812,000).  There was an impairment loss of $(1,169,000) for the year ended March 31, 2010, compared to an impairment loss of $(80,000) recorded for the year ended March 31, 2009.  Impairment is measured by comparing the Partnership’s carrying amount in the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership.  As the remaining Low Income Housing Tax Credits decrease each year it is expected that there will be an increased impairment loss to the Partnership.  The impairment loss also increased due to the impairment recorded related to the sales of Sierra’s Run and Fernwood as discussed in the exit strategy section of this filing.  During the year ended March 31, 2010, there were advances of $(846,000) made to a Local Limited Partnership, which were fully reserved for as of March 31, 2010. Advances of $(22,000) were made and fully reserved for during the year ended March 31, 2009.  The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships.  As discussed in footnote 2 to the audited financial statements one particular Local Limited Partnership, Davenport has been experiencing operational issues.  All of the advances made during the years ended March 31, 2010 and 2009 were to Davenport.  The asset management expenses decreased by $4,000 for the year ended March 31, 2010.  These costs can fluctuate from year to year depending on the timing of the site visits to the Local Limited Partnership.  The accounting and legal fees increased by $(58,000) for the year ended March 31, 2010 compared to the year ended March 31, 2009, due to the timing of the accounting work being performed as well as legal expenses due to the operational issues of Davenport.  Reporting fees decreased by $(7,000) for the year ended March 31, 2010 due to the fact that Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnership’s cash flow will allow for the payment.  Interest income decreased by $(11,000) due to the significant decrease in the cash balance throughout the year ended March 31, 2010 for investments made and advances made to Davenport.  The equity in losses of Local Limited Partnerships decreased by $(582,000) from $(2,443,000) for the year ended March 31, 2009 to $(1,861,000).  The decrease is due to the stabilization of operations of the Local Limited Partnerships.  The other operating expenses also increased by $(25,000) due in large part to an increase in property inspections for the Local Limited Partnerships.  Normally the Local Limited Partnerships are visited once every two years and during the year ended March 31, 2010 one particular property, Davenport Housing VII, L.P. was visited several times due to the construction issues related to that property.   Please see footnote 2 to the audited financial statements for a full explanation relating to this Local Limited Partnership.

 
28

 


Year Ended March 31, 2009 Compared to Year Ended March 31, 2008  The Partnership’s net loss for the year ended March 31, 2009 was $(2,812,000), reflecting an increase of $(1,002,000) from the net loss experienced for the year ended March 31, 2008 of $(1,810,000).  The equity in losses of Local Limited Partnerships increased by $(583,000) from $(1,860,000) for the year ended March 31, 2008 to $(2,443,000).  The increase is due to nine of the ten Local Limited Partnerships being in full operations for the year ended March 31, 2009, compared to six of the Local Limited Partnerships being in full operations and three of the properties leasing up during the year ended March 31, 2008.  There was an impairment loss of $(80,000) for the year ended March 31, 2009, compared to no impairment loss recorded for the year ended March 31, 2008.  For the year ended March 31, 2009, the impairment analysis calculated residual value to the Partnership in addition to the remaining Low Income Housing Tax Credits available to the Partnership, and compared the total amount to the current carrying value of each investment in the Partnership resulting in an impairment of $(80,000). For the year ended March 31, 2008, the same analysis was performed, however the calculation showed no impairment was necessary. The asset management fees increased by $(21,000) for the year ended March 31, 2009 since those fees accrue in an amount equal to 0.5% of the Invested Assets of the Partnership.  “Invested Assets” is defined as the sum of the Partnership’s Investment in Local Limited Partnerships, plus the reserves of the Partnership of up to 5% of gross Partnership 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.  Invested Assets increased during the year ended March 31, 2009 which led to the increase in asset management fees. During the year ended March 31, 2009, there was an advance for $(22,000) made to a Local Limited Partnership, which was also reserved in full as of March 31, 2009. This is compared to no advances made during the year ended March 31, 2008.  The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships.  The asset management expenses decreased by $3,000 for the year ended March 31, 2009.  These costs can fluctuate from year to year depending on the timing of the site visits to the Local Limited Partnership.  Amortization increased by $(11,000) as a result of an increase in capitalized acquisition fees and costs during the year ended March 31, 2009.  The accounting and legal fees increased by $(5,000) for the year ended March 31, 2009 compared to the year ended March 31, 2008, due to a timing issue of the accounting work being performed.  Reporting fees increased by $7,000 for the year ended March 31, 2009 due to the fact that Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnership’s cash flow will allow for the payment.  Interest income decreased by $(292,000) due to the cash balance decreasing significantly throughout the year ended March 31, 2009 for investments made, combined with the fact that interest rates declined in 2009 compared to the interest rates for the year ended March 31, 2008.

 
29

 


Liquidity and Capital Resources

Year Ended March 31, 2010 Compared to Year Ended March 31, 2009 Net cash used during the year ended March 31, 2010 was $(844,000) compared to net cash used during the year ended March 31, 2009 of $(2,193,000), reflecting a change of $1,349,000.  During the year ended March 31, 2010, the Partnership paid capital contributions to Local Limited Partnerships in the amount of $(407,000) compared to $(2,135,000) for the year ended March 31, 2009.  Capital contributions to Local Limited Partnerships are usually paid within the first two years of acquiring the interests as certain benchmarks are met.  The decrease in payments is due to the fact that some of the Local Limited Partnerships received all or substantially all their capital contributions as of March 31, 2009.  During the year ended March 31, 2010 the Partnership made $(846,000) of advances to Davenport, of which $408,000 was advanced from the General Partner or an affiliate to the Partnership compared to $(22,000) in advances made to Davenport during the year ended March 31, 2009.  During the year ended March 31, 2009, the Partnership paid the General Partner or an affiliate $(18,000) in accrued asset management fees compared to no asset management fees being paid during the year ended March 31, 2010.  There were no reimbursements paid to the General Partner or an affiliate during the year ended March 31, 2010 for operating expenses paid by the General Partner on behalf of the Partnership compared to $(20,000) reimbursed during the year ended March 31, 2009.  Additionally, during the year ended March 31, 2010 the Partnership paid no accrued expenses compared to March 31, 2009 when the Partnership paid $(18,000) in accrued expenses for accounting work that had been performed.

Year Ended March 31, 2009 Compared to Year Ended March 31, 2008 Net cash used during the year ended March 31, 2009 was $(2,193,000) compared to net cash used during the year ended March 31, 2008 of $(8,249,000), reflecting a change of $6,056,000.  During the year ended March 31, 2009, the Partnership paid capital contributions to Local Limited Partnerships in the amount of $(2,135,000) compared to $(8,512,000) for the year ended March 31, 2008, which is a net difference of $6,377,000.  Capital contributions to Local Limited Partnerships are usually paid within the first two years of acquiring the interests, once certain benchmarks are met.  A decrease in payments is the result of some of the Local Limited Partnerships having received all or substantially all their capital contributions as of March 31, 2008.  During the year ended March 31, 2008, the Partnership collected $142,000 in promissory notes receivable compared to no collections during the year ended March 31, 2009. The Partnership also paid offering costs of $(24,000) during the same time period.  During the year ended March 31, 2008, the Partnership paid the General Partner or an affiliate $(129,000) in accrued asset management fees compared to $(18,000) paid during the year ended March 31, 2009.  The Partnership had high interest income during the year ended March 31, 2008, so it paid asset management fees during that year.  There was $(20,000) paid to the General Partner or an affiliate during the year ended March 31, 2009 for reimbursement of operating expenses paid by the General Partner on behalf of the Partnership compared to $(28,000) paid during the year ended March 31, 2008.  Additionally, during the year ended March 31, 2009 the Partnership paid $(18,000) in accrued expenses for accounting work that had been performed.  The Partnership also received $(292,000) less interest income during the year ended March 31, 2009, as described above in the results of operations discussion.

Accrued payables, which consist primarily of related party management fees due to the General Partner, increased by approximately $702,000, $180,000 and $28,000 for the years ended March 31, 2010, 2009 and 2008, respectively.

The Partnership currently has insufficient working capital to fund its operations.  Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2012.

 
30

 

Other Matters

One Local Limited Partnership Davenport Housing VII, L.P., (“Davenport”) started construction in October 2006 and was scheduled to be completed in June 2008. Construction was delayed due to the original Local General Partner defaulting on his construction guarantee and resulting disputed mechanic liens on the property.  In November 2008, the original Local General Partner was replaced with a new Local General Partner, Shelter Resource Corporation due to restrictions implemented by the Iowa Finance Authority (“IFA”).  Subsequently with IFA’s approval the defaulting original Local General Partner was removed from the Partnership leaving Shelter Resource Corporation as the sole Local General Partner.

As of March 31, 2010 the property was 100% completed and a certificate of occupancy was granted for both buildings in December 2009.  The Partnership engaged all sub-contractors to sign new construction contracts, along with lien releases for any and all work done after their engagement.  During the year ended March 31, 2010 the Partnership voluntarily advanced $846,175 to Davenport for construction related costs.  There were no additional advances made to Davenport VII due to the fact that the Partnership has agreed to purchase the additional credits that Davenport VII was awarded, see below for the details regarding the additional Low Income Housing Tax Credits.

The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010.  In June of 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 90% to the date of this filing.  Davenport has been awarded state historical tax credits from the State of Iowa, federal historical credits and federal Low Income Housing Tax Credits.  The State historical credits are given in the form of a refund check from the State in conjunction with the State tax return filing.  The net amount of the check after applicable federal taxes will be contributed back to the property to help fund construction shortfalls.  Davenport was also allocated additional federal Low Income Housing Tax Credits as well as federal historical tax credits.  Upon the Limited Partners’ approval of the dispositions of Sierra Run’s and Fernwood, the Partnership will purchase the additional credits.  See the exit strategy in footnote 1 regarding the dispositions of Sierra’s Run and Fernwood.  Effective July 1, 2010 the Partnership bought $442,986 of federal historical credits for $221,471 as well as $3,282,060 of additional federal Low Income Housing Tax Credits for $2,269,180.

The Partnership filed preliminary materials to the Securities and Exchange Commission (“SEC”) on April 2, 2010 and filed definitive materials on April 15, 2010 and they were disseminated to the Limited Partners on April 15, 2010.  The definitive materials sought approval for the disposition of Sierra’s Run and Fernwood with substantially all of those proceeds being used to purchase the additional tax credits for Davenport.  On May 10, 2010 the Partnership filed additional definitive materials, which served as a reminder to the Limited Partners that all proxies had to be received by the General Partner of the Partnership by June 14, 2010.  Majority vote in favor of the dispositions was obtained on June 9, 2010.   Therefore the disposition of both Fernwood and Sierra’s Run will be recorded during the quarterly period ended June 30, 2010.

Fernwood and Sierra’s Run will complete their 15-year compliance periods in 2022; therefore there is a risk of tax credit recapture.  The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.57 per Partnership Unit in the aggregate.  As part of the purchase agreement, the purchaser has agreed to assume all of the Partnership’s legal obligations to maintain the properties and Low Income Housing Tax Credit properties. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its compliance period, and, accordingly, does not anticipate that there will be any recapture.

 
31

 

Partnership’s Future Contractual Cash Obligations

The following table summarizes the Partnership’s future contractual cash obligations as of March 31, 2010:

   
2011
 
2012
 
2013
 
2014
 
2015
 
Thereafter
Total
                             
                             
Asset management fees
$
586,896
$
149,888
$
149,888
$
149,888
$
149,888
$
8,243,840
$
9,430,288
Payable to Local Limited
   Partnerships
 
692,023
 
-
 
-
 
-
 
-
 
-
 
692,023
Total contractual cash obligations
$
1,279,919
$
149,888
$
149,888
$
149,888
$
149,888
$
8,243,840
$
10,122,311

(1)
Asset management fees are payable annually until termination of the Partnership, which is to occur no later than December 31, 2070. The estimate of the fees payable included herein assumes the retention of the Partnership’s interest in all Housing Complexes until December 31, 2070. Subsequent to March 31, 2010, Fernwood and Sierra’s Run were sold and therefore have been excluded. Amounts due to the General Partner as of March 31, 2010 have been included in the 2011 column.  The General Partner does not anticipate that these fees will be paid until such time as capital reserves are in excess of the aggregate of the existing contractual obligations and the anticipated future foreseeable obligations of the Partnership.

For additional information regarding our asset management fees and payables due to Local Limited Partnerships, see Notes 3 and 4 to the financial statements included elsewhere herein.

Off-Balance Sheet Arrangements

The Partnership has no off-balance sheet arrangements.

Exit Strategy

See Item 1 for information in this regard.

Impact of New Accounting Pronouncements

See footnote 1 to the financial statements.

Item 7A.  Quantitative and Qualitative Disclosures Above Market Risk

NOT APPLICABLE

Item 8. Financial Statements and Supplementary Data


 
32

 

REPORT OF INDEPENDENT REGISTERED PUBLIC
 
ACCOUNTING FIRM
 
To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 13
 
We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund VI, L.P., Series 13 (a California Limited Partnership) (the Partnership) as of March 31, 2010 and 2009, and the related statements of operations, partners’ equity (deficit) and cash flows for each of the years in the three-year period ended March 31, 2010.  The Partnership’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.  We did not audit the financial statements of certain local limited partnerships for which investments represent $7,315,837 and $6,066,353 of the total Partnership assets as of March 31, 2010 and 2009, respectively, and $(1,748,564), $(2,254,801) and $(1,609,127) of the total Partnership loss for the years ended March 31, 2010, 2009 and 2008, respectively.  Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to those local limited partnerships, is based solely on the reports of the other auditors.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
 
In our opinion, based on our audits and the reports of 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 13 (a California Limited Partnership) as of March 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The schedules listed under Item 15(a)(2) in the index related to years above are presented for the purpose of complying with the Securities and Exchange Commission’s rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied to the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial statement data required to be set forth therein in relation to the basic financial statements taken as a whole.
 


/s/ Reznick Group, P.C.
Bethesda, Maryland
February 25, 2011
 
33

 
PAILET, MEUNIER and LeBLANC, L.L.P.
Certified Public Accountants
Management Consultants
 
 
 
INDEPENDENT AUDITOR'S REPORT
 
To the Partners
Grove Village Limited Partnership
Portland, Oregon
 
We have audited the accompanying balance sheets of Grove Village Limited Partnership, owner of Grove Village Apartments, HUD Section 8 Contract Nos. TX16L00024 and TX16M000311, as of December 31, 2009, and the related statements of operations, changes in partners' equity (deficit), 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.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Grove Village Limited Partnership as of December 31, 2009 and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated March 30, 2010, on our consideration of Grove Village Limited Partnership's internal control, and reports dated March 30, 2010, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

 
/s/ PAILET, MEUNIER and LeBLANC, L.L.P.
Metairie, Louisiana
March 30, 2010
 
34

 
 
 
PAILET, MEUNIER and LeBLANC, L.L.P.
Certified Public Accountants
Management Consultants
 
 
 
INDEPENDENT AUDITOR'S REPORT
 
To the Partners
Grove Village Limited Partnership
Portland, Oregon
 
We have audited the accompanying balance sheets of Grove Village Limited Partnership, owner of Grove Village Apartments, HUD Section 8 Contract Nos. TX16L00024 and TX16M000311, as of December 31, 2008, and the related statements of operations, changes in partners' equity (deficit), 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.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Grove Village Limited Partnership as of December 31, 2008 and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated May 7, 2009, on our consideration of Grove Village Limited Partnership's internal control, and reports dated May 7, 2009, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

 
/s/ PAILET, MEUNIER and LeBLANC, L.L.P.
Metairie, Louisiana
May 7, 2009
 
 
 
35

 
 
PAILET, MEUNIER and LeBLANC, L.L.P.
Certified Public Accountants
Management Consultants
 
 
 
INDEPENDENT AUDITOR'S REPORT
 
To the Partners
Grove Village Limited Partnership
Portland, Oregon
 
We have audited the accompanying balance sheets of Grove Village Limited Partnership, owner of Grove Village Apartments, HUD Section 8 Contract Nos. TX16L00024 and TX16M000311, as of December 31, 2007, and the related statements of operations, changes in partners' equity (deficit), 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.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Grove Village Limited Partnership as of December 31, 2007 and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated June 30, 2008, on our consideration of Grove Village Limited Partnership's internal control, and reports dated June 30, 2008, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

 
/s/ PAILET, MEUNIER and LeBLANC, L.L.P.
Metairie, Louisiana
June 30, 2008
 
36

 
 
PAILET, MEUNIER and LeBLANC, L.L.P.
 
Certified Public Accountants
 
Management Consultants
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Partners
Davenport Housing VII, L.P. Davenport, Iowa
 
We have audited the accompanying balance sheet of Davenport Housing VII, L.P., as of December 31, 2009 and the related statements of operations, changes in partners' capital 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.
 
We conducted our audit in accordance with the Standards of the Public 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. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Davenport Housing VII, L.P. as of December 31, 2009 and the results of its operations, changes in partners' capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
 
/s/ PAILET, MEUNIER and LeBLANC, L.L.P..
Metairie, Louisiana
November 4, 2010
 
37

 
Child, Van Wagoner s Bradshaw, PLLC
 
Douglas W Child, CPA
Marty D. Van Wagoner, CPA
J. Russ Bradshaw, CPA
William R. Denney, CPA
Roger B. Kennard, CPA
Scott L, Fames
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Femwood Meadows, L.P.
Fernley, Nevada
 
We have audited the accompanying balance sheets of Femwood Meadows, L.P. (the Partnership), as of December 31, 2009 and 2008, and the related statements of operations, changes in partners' equity and cash flows for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of Amerida and the standards of the Public Company Accounting Oversight Board (United States of America) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2009 and 2008, and the results of its operations, changes in partners' equity and cash flows for the years ended December 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated March 22, 2010, on our consideration of the Partnership's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
 
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The accompanying supplemental information shown on page 13 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
 
/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Kaysville, Utah
March 22, 2010
 
38

 
Child, Van Wagoner s Bradshaw, PLLC
 
Douglas W Child, CPA
Marty D. Van Wagoner, CPA
J. Russ Bradshaw, CPA
William R. Denney, CPA
Roger B. Kennard, CPA
Scott L, Fames
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Femwood Meadows, L.P.
Fernley, Nevada
 
We have audited the accompanying balance sheets of Femwood Meadows, L.P. (the Partnership), as of December 31, 2008 and 2007, and the related statements of operations, changes in partners' equity and cash flows for the year ended December 31, 2008 and the period from November 2, 2007 (inception) to December 31, 2007. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of Amerida and the standards of the Public Company Accounting Oversight Board (United States of America) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2008 and 2007, and the results of its operations, changes in partners' equity and cash flows for the year ended December 31, 2008 and the period from November 2, 2007 (inception) to December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated March 25, 2009, on our consideration of the Partnership's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
 
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The accompanying supplemental information shown on page 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
 
/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Kaysville, Utah
March 25, 2009
 
39

 
PAILET, MEUNIER and LeBLANC L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
 
To the Partners
Crestview Housing, Ltd.
Kalispell, Montana
and
USDA Rural Development Servicing Office
 
Kalispell, Montana
 
We have audited the accompanying balance sheets of Crestview Housing, Ltd., RHS PROJECT NO. 31-015-387826946, as of December 31, 2009 and 2008 and the related statements of operations, changes in partners' equity (deficit) and cash flows for the years 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 audits.
 
We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crestview Housing, Ltd. as of December 31, 2009 and 2008 and the results of its operations, changes in partners' equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated December 9, 2010 on our consideration of Crestview Housing, Ltd.'s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
 
/S/ PAILET, MEUNIER and LeBLANC L.L.P.
 
Metairie, Louisiana
December 9, 2010
 
 
40

 
 
PAILET, MEUNIER and LeBLANC L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
 
To the Partners
HEAD CIRCLE, L. P.
Ruleville, Mississippi
and
USDA Rural Development Servicing Office
 
Greenville, Mississippi
 
We have audited the accompanying balance sheets of HEAD CIRCLE, L. P., RHS PROJECT NO. 28-067-038654099, as of December 31, 2009 and 2008 and the related statements of operations, changes in partners' equity (deficit) and cash flows for the years 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 audits.
 
We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HEAD CIRCLE, L. P. as of December 31, 2009 and 2008 and the results of its operations, changes in partners' equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated January 18, 2010 on our consideration of HEAD CIRCLE, L. P.'s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
 
/S/ PAILET, MEUNIER and LeBLANC L.L.P.

Metairie, Louisiana
January 18, 2010
 
41

 
 
PAILET, MEUNIER and LeBLANC L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
 
To the Partners
HEAD CIRCLE, L. P.
Ruleville, Mississippi
and
USDA Rural Development Servicing Office
 
Greenville, Mississippi
 
We have audited the accompanying balance sheets of HEAD CIRCLE, L. P., RHS PROJECT NO. 28-067-038654099, as of December 31, 2008 and 2007 and the related statements of operations, changes in partners' equity (deficit) and cash flows for the years 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 audits.
 
We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HEAD CIRCLE, L. P. as of December 31, 2008 and 2007 and the results of its operations, changes in partners' equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated February 6, 2009 on our consideration of HEAD CIRCLE, L. P.'s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
 
/S/ PAILET, MEUNIER and LeBLANC L.L.P.

Metairie, Louisiana
February 6, 2009
 
 
 
42

 
PAILET, MEUNIER and LeBLANC L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
 

 
INDEPENDENT AUDITOR'S REPORT
 
 
To the Partners
Pleasant Village Limited Partnership
Portland, Oregon
 
We have audited the accompanying balance sheets of Pleasant Village Limited Partnership, HUD Section 8 Contract Nos. TX16L000047 and TX16M000310, as of December 31, 2009, and the related statements of income, changes in partners' equity, and cash flows for the years 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 audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pleasant Village Limited Partnership, HUD Section 8 Contract Nos. TX16L000047 and TX16M000310, as of December 31, 2009 and the results of its operations, changes in partners' equity, and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated April 22, 2010, on our consideration of Pleasant Village Limited Partnership's internal control, and reports dated April 22, 2010, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit
 
/S/ PAILET, MEUNIER and LeBLANC L.L.P.

Metairie, Louisiana
April 22, 2010
 
43

 
PAILET, MEUNIER and LeBLANC L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
 

 
INDEPENDENT AUDITOR'S REPORT
 
 
To the Partners
Pleasant Village Limited Partnership
Portland, Oregon
 
We have audited the accompanying balance sheets of Pleasant Village Limited Partnership, HUD Section 8 Contract Nos. TX16L000047 and TX16M000310, as of December 31, 2008, and the related statements of income, changes in partners' equity, and cash flows for the years 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 audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pleasant Village Limited Partnership, HUD Section 8 Contract Nos. TX16L000047 and TX16M000310, as of December 31, 2008 and the results of its operations, changes in partners' equity, and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated May 7, 2009, on our consideration of Pleasant Village Limited Partnership's internal control, and reports dated May 7, 2009, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit
 
/S/ PAILET, MEUNIER and LeBLANC L.L.P.

Metairie, Louisiana
May 7, 2009
 
 
 
44

 
 
PAILET, MEUNIER and LeBLANC L.L.P.
Certified Public Accountants
Management Consultants
INDEPENDENT AUDITOR'S REPORT
 

 
INDEPENDENT AUDITOR'S REPORT
 
 
 
To the Partners
Pleasant Village Limited Partnership
Portland, Oregon
 
We have audited the accompanying balance sheets of Pleasant Village Limited Partnership, HUD Section 8 Contract Nos. TX16L000047 and TX16M000310, as of December 31, 2007, and the related statements of income, changes in partners' equity, and cash flows for the years 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 audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained In Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, In all material respects, the financial position of Pleasant Village Limited Partnership, HUD Section 8 Contract Nos. TX161.000047 and TX16M000310, as of December 31, 2007 and the results of Its operations, changes in partners' equity, and cash flows for the years then ended in conformity with accounting principles generally accepted In the United States of America.
 
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs Issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated July 1, 2008, on our consideration of Pleasant Village Limited Partnership's internal control, and reports dated July 1, 2008, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
 
 
/S/ PAILET, MEUNIER and LeBLANC L.L.P.

Metairie, Louisiana
July 1, 2008
 
 
45

 
Child, Van Wagoners Bradshaw, PLLC
 
Douglas W Child, CPA
Marty D. Van Wagoner, CPA
J. Russ Bradshaw, CPA
William R. Denney, CPA
Roger B. Kennard, CPA
Scott L, Fames
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Sierra's Run L.P.
Fernley, Nevada
 
We have audited the accompanying balance sheets of Sierra's Run L.P. (the Partnership) as of December 31, 2009 and 2008, and the related statements of operations, changes in partners' equity, and cash flows for the year 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 audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America, the standards of the Public Company Accounting Oversight Board (United States of America) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated March 19, 2010, on our consideration of the Partnership's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report considering the results of our audit.
 
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The accompanying supplementary information shown on page 13 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
 
/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Kaysville, Utah
March 19, 2010
 
46

 
Child, Van Wagoners Bradshaw, PLLC
 
Douglas W Child, CPA
Marty D. Van Wagoner, CPA
J. Russ Bradshaw, CPA
William R. Denney, CPA
Roger B. Kennard, CPA
Scott L, Fames
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Sierra's Run L.P.
Fernley, Nevada
 
We have audited the accompanying balance sheets of Sierra's Run L.P. (the Partnership) as of December 31, 2008 and 2007, and the related statements of operations, changes in partners' equity, and cash flows for the year ended December 31, 2008, and the period of March 12, 2007 (inception) through December 31, 2007. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America, the standards of the Public Company Accounting Oversight Board (United States of America) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the year ended December 31, 2008, and the period of March 12, 2007 (inception) through December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
 
In accordance with Government Auditing Standards, we have also issued a report dated March 26, 2009, on our consideration of the Partnership's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report considering the results of our audit.
 
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The accompanying supplementary information shown on page 15 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
 
/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Kaysville, Utah
March 26, 2009
 
47

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

BALANCE SHEETS
 
   
2010
 
2009
ASSETS
       
  Cash and cash equivalents
$
678,636
$
1,522,248
  Investments in Local Limited Partnerships, net
     (Notes 2 and 3)
 
 
10,079,132
 
 
13,242,305
    Total Assets
$
10,757,768
$
14,764,553
         
LIABILITIES AND PARTNERS’ EQUITY
    (DEFICIT)
       
         
Liabilities:
       
  Payables to Local Limited Partnerships (Note 4)
$
692,220
$
1,110,039
  Accrued fees and expenses due to General Partner
      and Affiliates (Note 3)
 
 
993,507
 
 
291,539
     Total Liabilities
 
1,685,727
 
1,401,578
         
         
Partners’ equity (deficit)
       
  General Partner
 
(9,037)
 
(4,796)
  Limited Partners (25,000 Partnership Units authorized, 20,981, 
      Partnership Units issued and outstanding)
 
 
9,081,078
 
 
13,367,771
         
Total Partners’ Equity (Deficit)
 
9,072,041
 
13,362,975
           Total Liabilities and Partners’ Equity
$
10,757,768
$
14,764,553


See accompanying notes to financial statements
 
 
48

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

STATEMENTS OF OPERATIONS

For the Years Ended March 31, 2010, 2009 and 2008


   
For the Years Ended March 31,
   
2010
 
2009
 
2008
             
Reporting fees
$
-
$
7,333
$
-
Other income
 
-
 
-
 
7
             
   Total operating income
 
-
 
7,333
 
7
             
Operating expenses and loss:
           
    Amortization
 
68,700
 
68,700
 
57,368
    Asset management fees
 
178,455
 
178,693
 
157,777
Asset management expenses
 
11,137
 
15,047
 
18,372
    Accounting and legal fees
 
77,592
 
19,861
 
14,596
    Write off of advances to a Local Limited Partnership (Note 8)
 
846,175
 
22,311
 
-
    Impairment loss
 
1,169,440
 
80,344
 
-
    Other
 
29,116
 
3,927
 
6,369
             
      Total operating expenses and loss
 
2,380,615
 
388,883
 
254,482
             
Loss from operations
 
(2,380,615)
 
(381,550)
 
(254,475)
             
Equity in losses of Local Limited
   Partnerships
 
(1,861,108)
 
(2,443,000)
 
 
(1,859,713)
             
Interest income
 
789
 
12,187
 
303,809
             
Net loss
$
(4,240,934)
$
(2,812,363)
$
(1,810,379)
             
Net loss allocated to:
           
General Partner
$
(4,241)
$
(2,812)
$
(1,810)
             
Limited Partners
$
(4,236,693)
$
(2,809,551)
$
(1,808,569)
             
Net loss per Partnership Unit
$
(201.93)
$
(133.91)
$
(86.20)
             
Outstanding weighted Partnership Units
 
20,981
 
20,981
 
20,981

See accompanying notes to financial statements
 
 
49

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)

For the Years Ended March 31, 2010, 2009 and 2008
 
 
   
 
General Partner
 
 
Limited Partner
 
 
 
Total
 
               
Partners’ equity (deficit) at March 31, 2007
$
(174)
$
17,867,928
$
17,867,754
 
               
Collection of promissory notes
 
-
 
142,085
 
142,085
 
               
Offering expenses
 
-
 
(24,122)
 
(24,122)
 
               
Net loss
 
(1,810)
 
(1,808,569)
 
(1,810,379)
 
               
Partners’ equity (deficit) at March 31, 2008
 
(1,984)
 
16,177,322
 
16,175,338
 
               
Net loss
 
(2,812)
 
(2,809,551)
 
(2,812,363)
 
               
Partners’ equity (deficit) at March 31, 2009
 
(4,796)
 
13,367,771
 
13,362,975
 
               
Syndication costs
 
-
 
(50,000)
 
(50,000)
 
               
Net loss
 
(4,241)
 
(4,236,693)
 
(4,240,934)
 
               
Partners’ equity (deficit) at March 31, 2010
$
(9,037)
$
9,081,078
$
9,072,041
 

See accompanying notes to financial statements
 
 
50

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

STATEMENTS OF CASH FLOWS

For the Years Ended March 31, 2010, 2009 and 2008
 

   
2010
 
2009
 
2008
 
Cash flows from operating activities:
             
  Net loss
$
(4,240,934)
$
(2,812,363)
$
(1,810,379)
 
  Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
             
      Amortization
 
68,700
 
68,700
 
57,368
 
      Equity in losses of Local Limited Partnerships
 
1,861,108
 
2,443,000
 
1,859,713
 
      Impairment loss
 
1,169,440
 
80,344
 
-
 
      Increase (decrease) in accrued expenses
 
-
 
(17,765)
 
9,765
 
Increase in accrued fees and expenses due to
         General Partner and affiliates
 
701,968
 
179,643
 
28,208
 
               
Net cash provided by (used in) operating activities
 
(439,718)
 
(58,441)
 
144,675
 
               
Cash flows used in investing activities:
             
   Capital contributions paid
 
(407,453)
 
(2,135,434)
 
(8,511,815)
 
   Distributions received from Local Limited
      Partnerships
 
3,559
 
1,000
 
-
 
   Advances to Local Limited Partnerships
 
(846,175)
 
(22,311)
 
-
 
   Write off of advances to Local Limited
       Partnerships
 
846,175
 
22,311
 
-
 
               
Net cash used in investing activities
 
(403,894)
 
(2,134,434)
 
(8,511,815)
 
               
Cash flows from financing activities:
             
Receipts from sales of Partnership Units
 
-
 
-
 
142,085
 
Offering expenses paid
 
-
 
-
 
(24,122)
 
               
Net cash provided by financing activities
 
-
 
-
 
117,963
 
               
Net decrease in cash and cash
    equivalents
 
(843,612)
 
(2,192,875)
 
(8,249,177)
 
               
Cash and cash equivalents, beginning of period
 
1,522,248
 
3,715,123
 
11,964,300
 
               
Cash and cash equivalents, end of period
$
678,636
$
1,522,248
$
3,715,123
 

See accompanying notes to financial statements
 
 
51

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

STATEMENTS OF CASH FLOWS - CONTINUED

For the Years Ended March 31, 2010, 2009 and 2008
 
 
   
2010
 
2009
 
2008
             
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
           
Taxes paid
$
800
$
800
$
800
SIGNIFICANT NONCASH INVESTING AND FINANCING ACTIVITES
           
    The Partnership increased its investment in Local Limited Partnerships for unpaid capital contributions payable to Local Limited Partnerships
 
 
 
$
-
 
 
 
$
 
 
 
-
 
$
2,252,595
    The Partnership increased its investment in Local Limited Partnerships and decreased prepaid acquisition fees and costs
 
 
$
 
 
-
 
 
$
 
 
-
 
 
$
 
 
910,151
    The Partnership decreased its investment in Local Limited Partnerships and capital contributions payable to Local Limited Partnerships for tax credit adjusters
 
 
 
$
 
 
 
10,366
 
 
 
$
 
 
 
108,131
 
 
 
$
 
 
 
-
    The Partnership decreased its investment in Local Limited Partnerships and Limited Partners’ equity for syndication costs
 
 
 
$
 
 
 
50,000
 
 
 
$
-
 
 
 
$
 
 
 
-

 
52

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

For the Years Ended March 31, 2010, 2009 and 2008


NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

WNC Housing Tax Credit Fund VI, L.P., Series 13, a California Limited Partnership (the “Partnership”), was formed on February 7, 2005 under the laws of the State of California, and commenced operations on December 14, 2005. The Partnership was formed to invest primarily in other limited partnerships and limited liability companies (the “Local Limited Partnerships”) which owns multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”).  The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

The general partner of the Partnership is WNC National Partners, LLC (the “General Partner”.)  The general partner of the General Partner is WNC & Associates, Inc. (“Associates”).  The chairman and the president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and General Partner have no employees of their own.

The Partnership shall continue in full force and effect until December 31, 2070, 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.

Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit.  The required minimum offering amount of $1,400,000 was achieved by December 14, 2005.  As of March 31, 2006, subscriptions for 7,691 Partnership Units had been accepted by the Partnership.  As of March 31, 2007 total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.” The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and tax credits.  The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments.  This offering was closed on September 21, 2006.

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement.  Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement.  The sale of a Housing Complex may be subject to other restrictions and obligations.  Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex.  Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership.  Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement).  The General Partner would then be entitled to receive proceeds equal to their capital contributions from the remainder.  Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.

 
53

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS – CONTINUED

For the Years Ended March 31, 2010, 2009 and 2008
 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Risks and Uncertainties

An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks.  These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:

The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction.  Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives.  Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations.  Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others.

The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to the Limited Partners could be reduced if the IRS were successful in such a challenge.  The alternative minimum tax could reduce tax benefits from an investment in the Partnership.  Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.

No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.

 
54

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS – CONTINUED

For the Years Ended March 31, 2010, 2009 and 2008
 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership.  However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates.  Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership.  The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

The Partnership currently has insufficient working capital to fund its operations.  Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2012.

Exit Strategy

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits.  The initial programs are completing their Compliance Periods.

With that in mind, as of March 31, 2010 except as indicated below, the General Partner has not begun reviewing the Housing Complexes for potential disposition, since none of the Housing Complexes have satisfied the IRS compliance requirements.  Once the Housing Complexes have satisfied the IRS compliance requirements, the review will take into many consideration many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership. Local Limited Partnership interests may be disposed of any time by the General Partner at its discretion.

During the year ended March 31, 2010, on December 24, 2009, the Partnership identified two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P. (“Sierra’s Run”) for disposition in order to generate sufficient equity to complete the purchase of Davenport Housing VII, L.P.  (See footnote 3 to the financial statements.) The Partnership’s net investment balances in Fernwood and Sierra’s Run were $1,904,702 and $1,805,558, respectively, as of December 31, 2009.  Accordingly, the Partnership would recognize a loss on the sale of Local Limited Partnerships in the amount of approximately $881,000 if the sales are approved by the Limited Partners.  As the outcome of the vote was unknown at the time the December 31, 2009 Form 10Q was filed, an $881,000 impairment loss was recorded during the quarter then ended. Subsequent to March 31, 2010, Fernwood and Sierra’s Run were sold. The approval of the Limited Partners was sought as the transfers were to a limited partnership that is affiliated with the Partnership.  Fernwood and Sierra’s Run were sold for an aggregate purchase price of $2,829,428.

 
55

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS – CONTINUED

For the Years Ended March 31, 2010, 2009 and 2008
 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The Partnership filed preliminary materials to the Securities and Exchange Commission (“SEC”) on April 2, 2010 and filed definitive materials on April 15, 2010 and they were disseminated to the Limited Partners on April 15, 2010.  The definitive materials sought approval for the disposition of Sierra’s Run and Fernwood with substantially all of those proceeds being used to purchase the additional credits for Davenport.  On May 10, 2010 the Partnership filed additional definitive materials, which served as a reminder to the Limited Partners that all proxies had to be received by the General Partner of the Partnership by June 14, 2010.  Majority vote in favor of the dispositions was obtained on June 9, 2010.   Therefore the disposition of both Fernwood and Sierra’s Run will be recorded during the quarterly period ended June 30, 2010.

Fernwood and Sierra’s Run will complete their 15-year compliance periods in 2022; therefore there is a risk of tax credit recapture.  The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.57 per Partnership Unit in the aggregate.  Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its compliance period, and, accordingly, does not anticipate that there will be any recapture.

Method of Accounting For Investments in Local Limited Partnerships

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable.  Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership.  If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments are capitalized as part of the investment account and are being amortized over 27.5 years. (See Notes 2 and 3 to the financial statements)

“Equity in losses of Local Limited Partnerships” for each year ended March 31 has been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. Equity in losses from the Local Limited Partnerships allocated to Partnership is not recognized to the extent that the investment balance would be adjusted below zero.

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 distribution income. 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.

 
56

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
(A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS – CONTINUED

For the Years Ended March 31, 2010, 2009 and 2008
 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. A VIE is a legalstructure 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. Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE.  However, management does not consolidate the Partnership’s interests in these VIEs under this guidance, as it is not considered to be the primary beneficiary.  The Partnership currently records the amount of its investment in these partnerships as an asset on its balance sheet, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss.  The Partnership’s exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying properties as well as the strength of the local general partners and their guarantee against credit recapture.

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, 2010 and 2009, the Partnership had cash equivalents of $319,375 and $1,484,626, respectively.

Reporting Comprehensive Income

The Partnership had no items of other comprehensive income for all periods presented.

Net Loss Per Partnership Unit

Net loss per Partnership Unit includes no dilution and is computed by dividing loss allocated to Limited Partners by the weighted average Partnership Units outstanding during the period.  Calculation of diluted net loss per Partnership Unit is not required.

Concentration of Credit Risk

At March 31, 2010 and 2009, the Partnership maintained cash and cash equivalent balances at certain financial institutions in excess of the federally insured maximum.  The Partnership believes it is not exposed to any significant financial risk on cash.

 
57

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008
 
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Income Taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns.  The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure.

Revenue Recognition

The Partnership is entitled to receive reporting fees from the Local Limited Partnerships.  The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships.  Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.

Amortization

Acquisition fees and costs included in investments in Local Limited Partnerships are being amortized over 27.5 years using the straight-line method. Amortization expense for the years ended March 31, 2010, 2009 and 2008 was $68,700, $68,700 and $57,368, respectively. Future estimated amortization expense for each of the years through March 31, 2015 is $68,700.

Impairment

The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment.  For the years ended March 31, 2010, 2009 and 2008, impairment loss related to investments in Local Limited Partnerships was $1,169,440, $80,344 and $0, respectively.  The Partnership also evaluates its intangibles for impairment in connection with its investment in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investment. During each of the years ended March 31, 2010, 2009 and 2008, there was no impairment loss recorded on the related intangibles.

Impact of Recent Accounting Pronouncements

In September 2006, the FASB issued accounting guidance for Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007 and shall be applied prospectively except for very limited transactions.  In February 2008, the FASB delayed for one year implementation of the guidance as it pertains to certain non-financial assets and liabilities. The Partnership adopted GAAP for Fair Value Measurements effective April 1, 2008, except as it applies to those non-financial assets and liabilities, for which the effective date was April 1, 2009. The Partnership has determined that adoption of this guidance will have no material impact on the Partnership’s financial statements.
 
58

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

In February 2007, the FASB issued accounting guidance for The Fair Value Option for Financial Assets and Financial Liabilities. This guidance permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value election is designed to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. It is effective for fiscal years beginning after November 15, 2007.  On April 1, 2008, the Partnership adopted GAAP for The Fair Value Option for Financial Assets and Financial Liabilities and elected not to apply the provisions to its eligible financial assets and financial liabilities on the date of adoption. Accordingly, the initial application of the guidance had no effect on the Partnership.

In November 2008, the FASB issued accounting guidance on Equity Method Investment Accounting Considerations that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009 and did not have a material impact on the Partnership’s financial condition or results of operations.

In April 2009, the FASB issued accounting guidance for Interim Disclosures about Fair Value of Financial Instruments.  This requires disclosure about the method and significant assumptions used to establish the fair value of financial instruments for interim reporting periods as well as annual statements.  It became effective for as of and for the interim period ended June 30, 2009 and did not have any impact on the Partnership’s financial condition or results of operations.

In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Partnership for the quarter ended June 30, 2009. The adoption did not have a significant impact on the subsequent events that the Partnership reports, either through recognition or disclosure, in the financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and therefore the Partnership did not include the disclosure in this Form 10-K.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs).  The amended guidance modifies the consolidation model to one based on control and economics, and replaces the current quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE.  If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE.  Additionally, the amendment requires enhanced and expanded disclosures around VIEs.  This amendment is effective for fiscal years beginning after November 15, 2009.  The adoption of this guidance on April 1, 2010 is not expected to have a material effect on the Partnership’s financial statements.

 
59

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008
 
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

In June 2009, the FASB issued the Accounting Standards Codification (Codification).  Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP.  The Codification is intended to reorganize, rather than change, existing GAAP. Accordingly, all references to currently existing GAAP have been removed and have been replaced with plain English explanations of the Partnership’s accounting policies.  The adoption of the Codification did not have a material impact on the Partnership’s financial position or results of operations.

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

As of March 31, 2010 and 2009 the Partnership has acquired limited partnership interests in 10 Local Limited Partnerships, each of which owns one Housing Complex consisting of an aggregate of 647 apartment units. The respective Local General Partners of the Local Limited Partnerships manage the day-to-day operations of the entities.  Significant Local Limited Partnership business decisions require approval from the Partnership.  The Partnership, as a limited partner, is entitled to 99.98%, as specified in the Local Limited Partnership agreements, of the operating profits and losses, taxable income and losses and Low Income Housing Tax Credits of the Local Limited Partnerships.

The Partnership's investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2010 and 2009 is approximately $22,000 and  $1,893,000 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 capital contributions payable to the Local Limited Partnerships which were netted against partner capital in the Local Limited Partnerships financial statements.

At March 31, 2010, the investment account in one of the Local Limited Partnerships has reached a zero balance. Consequently, a portion of the Partnerships estimate of its share of losses for the years ended March 31, 2010, 2009 and 2008, amounting to approximately $2,000, $0 and $0, respectively, have not been recognized.  As of March 31, 2010, the aggregate share of net losses not recognized by the Partnership amounted to $2,000.

The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment.  For the years ended March 31, 2010, 2009 and 2008, impairment loss related to investments in Local Limited Partnerships was $1,169,440, $80,344 and $0, respectively.  The Partnership also evaluates its intangibles for impairment in connection with its investment in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investment. During each of the years ended March 31, 2010, 2009 and 2008, there was no impairment loss recorded on the related intangibles.

 
60

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008
 
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented:

   
For the Years Ended March 31,
   
2010
 
2009
 
2008
 
Investments per balance sheet, beginning of period
$
13,242,305
$
15,943,480
$
8,726,771
 
Investments purchased and paid
 
-
 
-
 
5,970,905
 
Additions to capital contributions payable
 
-
 
-
 
2,252,595
 
Distributions received from Local Limited
Partnerships
 
(3,559)
 
(1,000)
 
-
 
Equity in losses of Local Limited Partnerships
 
(1,861,108)
 
(2,443,000)
 
(1,859,713)
 
Tax credit adjustments
 
(10,366)
 
(108,131)
 
139
 
Impairment loss
 
(1,169,440)
 
(80,344)
 
-
 
Syndication costs
 
(50,000)
 
-
 
-
 
Capitalized acquisition cost and fees
 
-
 
-
 
910,151
 
Amortization of acquisition fees and costs
 
(68,664)
 
(68,664)
 
(57,332)
 
Amortization of warehouse interest and costs
 
(36)
 
(36)
 
(36)
 
               
Investments per balance sheet, end of period
$
10,079,132
$
13,242,305
$
15,943,480
 

   
For the Years
Ended March 31,
 
   
2010
 
2009
 
2008
 
               
Investments in Local Limited Partnerships, net
$
8,406,438
$
11,500,911
$
14,133,386
 
Acquisition fees and costs, net of accumulated
    amortization of $216,495, $147,831and $79,167
 
1,671,795
 
1,740,459
 
1,809,123
 
Warehouse interest and costs, net of accumulated
   amortization of $140, $104 and  $68
 
899
 
935
 
971
 
Investments per balance sheet, end of period
$
10,079,132
 $
13,242,305
 $
15,943,480
 

 
61

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008
 
NOTE 2 - INVESTMENTS IN LOCAL 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 years then ended is as follows:

COMBINED CONDENSED BALANCE SHEETS

   
2009
 
2008
ASSETS
       
         
Buildings and improvements, net of accumulated depreciation of $7,838,000 and $5,943,000
$
 
 
46,724,000
$
 
 
42,344,000
Construction in progress
 
-
 
4,529,000
Land
 
2,371,000
 
2,370,000
Other assets
 
2,257,000
 
1,882,000
     Total Assets
$
51,352,000
$
51,125,000
         
LIABILITIES
       
         
Mortgage and construction loans payable
$
25,260,000
$
21,573,000
Due to related parties
 
5,538,000
 
8,136,000
Other liabilities
 
2,609,000
 
2,059,000
      Total Liabilities
 
33,407,000
 
31,768,000
         
PARTNERS’ EQUITY
       
         
WNC Housing Tax Credit Fund VI, L.P., Series 13
 
10,057,000
 
11,349,000
Other partners
 
7,888,000
 
8,008,000
          Total Partners’ Equity
 
17,945,000
 
19,357,000
                  Total Liabilities and Partners’ Equity
$
51,352,000
$
51,125,000

COMBINED CONDENSED STATEMENTS OF OPERATIONS

   
2009
 
2008
 
2007
             
Revenues
$
4,617,000
$
4,516,000
$
3,426,000
             
Expenses:
           
Operating expenses
 
3,468,000
 
3,847,000
 
2,926,000
Interest expense
 
1,137,000
 
1,219,000
 
1,446,000
Depreciation and amortization
 
1,926,000
 
1,894,000
 
914,000
             
Total expenses
 
6,531,000
 
6,960,000
 
5,286,000
             
Net loss
$
(1,914,000)
$
(2,444,000)
$
(1,860,000)
             
Net loss allocable to the Partnership
$
(1,914,000)
$
(2,443,000)
$
(1,860,000)
             
Net loss recorded by the Partnership
$
(1,861,000)
$
(2,443,000)
$
 
(1,860,000)

 
62

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

Certain Local Limited Partnerships have incurred operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General 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 Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

Troubled Housing Complex

One Local Limited Partnership Davenport Housing VII, L.P., (“Davenport”) started construction in October 2006 and was scheduled to be completed in June 2008. Construction was delayed due to the original Local General Partner defaulting on his construction guarantee and resulting disputed mechanic liens on the property.  In November 2008, the original Local General Partner was replaced with a new Local General Partner, Shelter Resource Corporation due to restrictions implemented by the Iowa Finance Authority (“IFA”).  Subsequently with IFA’s approval the defaulting original Local General Partner was removed from the Partnership leaving Shelter Resource Corporation as the sole Local General Partner.

As of March 31, 2010 the property was 100% completed and a certificate of occupancy was granted for both buildings in December 2009.  The Partnership engaged all sub-contractors to sign new construction contracts, along with lien releases for any and all work done after their engagement.  During the year ended March 31, 2010 the Partnership voluntarily advanced $846,175 to Davenport for construction related costs.  There were no additional advances made to Davenport VII due to the fact that the Partnership has agreed to purchase the additional credits that Davenport VII was awarded, see below for the details regarding the additional Low Income Housing Tax Credits.

The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010.  In June of 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 90% to the date of this filing.  Davenport has been awarded state historical tax credits from the State of Iowa, federal historical credits and federal Low Income Housing Tax Credits.  The State historical credits are given in the form of a refund check from the State in conjunction with the State tax return filing.  The net amount of the check after applicable federal taxes will be contributed back to the property to help fund construction shortfalls.  Davenport was also allocated additional federal Low Income Housing Tax Credits as well as federal historical tax credits.  Upon the Limited Partners’ approval of the dispositions of Sierra Run’s and Fernwood, the Partnership will purchase the additional credits.  See the exit strategy in footnote 1 regarding the dispositions of Sierra’s Run and Fernwood.  Effective July 1, 2010 the Partnership bought $442,986 of federal historical credits for $221,471 as well as $3,282,060 of additional federal Low Income Housing Tax Credits for $2,269,180.

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 Partnership Units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships.  As of March 31, 2010 and 2009, the Partnership had incurred cumulative acquisition fees of $1,468,670 which were included in investments in Local Limited Partnerships. Accumulated amortization of these capitalized costs was $168,393 and $114,985, as of March 31, 2010 and 2009, respectively.

 
63

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

 
A non-accountable acquisition costs of 2% of the gross proceeds from the sale of Partnership Units as an expense reimbursement in connection with the acquisition of Local Limited Partnerships.  As of March 31, 2010 and 2009, the Partnership incurred cumulative acquisition costs of $419,620 which were included in investments in Local Limited Partnerships.  Accumulated amortization of these capitalized costs was $48,102 and $32,846, as of March 31, 2010 and 2009, respectively.

A selling commission of 7% of the net proceeds from the sale of the Partnership Units which was paid to WNC Capital Corp., an affiliate of the General Partner. WNC Capital Corp. then paid the commissions to non-affiliated broker dealers for the sale of the Partnership Units. For all periods presented the Partnership had incurred cumulative selling commissions of $1,453,084.

A non-accountable organization and offering and underwriting expense reimbursement, collectively equal to 4% of the gross proceeds from the sale of the Partnership Units and a dealer manager fee equal to 2% of the gross proceeds from the sale of the Partnership Units, and reimbursement for retail selling commissions advanced by the General Partner or affiliates on behalf of the Partnership.  For all periods presented the Partnership incurred cumulative non-accountable organization and offering and underwriting expense reimbursement costs collectively totaling $839,240 and dealer manager fees totaling $419,620. All other organizational and offering expenses, inclusive of the non-accountable organization and offering and underwriting expense reimbursement, and dealer manager fees, are not to exceed 13% of the gross proceeds from the sale of the Partnership Units.

 
Annual Asset Management Fee. An annual asset management fee accrues in an amount equal to 0.5% of the Invested Assets of the Partnership.  “Invested Assets” is defined as the sum of the Partnership’s Investment in Local Limited Partnerships, plus the reserves of the Partnership of up to 5% of gross Partnership 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.  Management fees of $178,455, $178,693 and $157,777 were incurred during the years ended March 31, 2010, 2009 and 2008, respectively, of which $0, $18,000 and $129,436, was paid during the years ended March 31, 2010, 2009 and 2008, respectively.

The Partnership will reimburse the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership and paid for by the General Partner or its affiliates on behalf of the Partnership. Operating expense reimbursements were $0, $19,886 and $28,306 during the years ended March 31, 2010, 2009 and 2008, respectively.

The Partnership received $408,170 in cash advances from the General Partner or an affiliate during the year ended March 31, 2010.  The advances were then in turn advanced to a troubled Local Limited Partnership, Davenport VII.

 
A subordinated disposition fee will be paid in an amount equal to 1% of the sales price of real estate sold.  Payment of this fee is subordinated to the Limited Partners receiving a return on investment (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort.  No disposition fees have been incurred for the three years presented.

 
64

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

The accrued fees and expenses due to General Partner and affiliates consist of the following at:

   
March 31,
   
2010
 
2009
Asset management fee payable
$
437,007
$
258,552
Reimbursements for expenses paid
   by the General Partner or an affiliate
 
148,330
 
32,987
Advances from the General Partner or   an affiliate
 
408,170
 
-
         
    Total
$
993,507
$
291,539

The Partnership currently has insufficient working capital to fund its operations.  Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2012.

NOTE 4 – PAYABLES TO LOCAL LIMITED PARTNERSHIPS

Payables to Local Limited Partnerships represent amounts which are due at various times based on conditions specified in the Local Limited Partnership agreements.  These contributions are payable in installments and are generally due upon the Local Limited Partnerships achieving certain operating and development benchmarks (generally within two years of the Partnership’s initial investment). The payables to Local Limited Partnerships are subject to adjustment in certain circumstances. During the years ended March 31, 2010, 2009 and 2008, payables to Local Limited Partnerships were increased (reduced) for tax credit adjusters in the amounts of $(10,366), $(108,131) and  $139, respectively.

 
65

 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13
 (A California Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For the Years Ended March 31, 2010, 2009, and 2008

NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly operations for the years ended March 31 (rounded):

   
June 30
 
September 30
 
December 31
 
March 31
 
                   
2010
                 
                   
Income
$
-
$
-
$
-
$
-
 
                   
Operating expenses
 
(517,000)
 
(474,000)
 
(1,122,000)
 
(268,000)
 
                   
Loss from operations
 
(517,000)
 
(474,000)
 
(1,122,000)
 
(268,000)
 
                   
Equity in losses of Local Limited Partnerships
 
(611,000)
 
(611,000)
 
(585,000)
 
(54,000)
 
                   
Interest income
 
1,000
 
-
 
-
 
-
 
                   
Net loss
  $
(1,127,000)
$
(1,085,000)
$
(1,707,000)
$
(322,000)
 
                   
Net loss available to Limited Partners
$
(1,126,000)
$
(1,084,000)
$
(1,705,000)
$
(322,000)
 
                   
Net loss per Partnership Unit
$
(54)
$
(52)
$
(81)
$
(15)
 
                   


   
June 30
 
September 30
 
December 31
 
March 31
 
                   
2009