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EXCEL - IDEA: XBRL DOCUMENT - WNC Housing Tax Credit Fund VI, L.P., Series 13Financial_Report.xls
EX-99.3 - WNC Housing Tax Credit Fund VI, L.P., Series 13ex99-3.htm
EX-32.2 - WNC Housing Tax Credit Fund VI, L.P., Series 13ex32-2.htm
EX-32.1 - WNC Housing Tax Credit Fund VI, L.P., Series 13ex32-1.htm
EX-31.1 - WNC Housing Tax Credit Fund VI, L.P., Series 13ex31-1.htm
EX-31.2 - WNC Housing Tax Credit Fund VI, L.P., Series 13ex31-2.htm
EX-99.2 BYLAWS - WNC Housing Tax Credit Fund VI, L.P., Series 13davenportvii.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the fiscal year ended March 31, 2011

 

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 Website, 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 [X] No [  ]

 

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.    [X]

 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

 

 

 
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

INDEX TO FORM 10-K

 

TABLE OF CONTENTS

 

 For the fiscal year end March 31, 2011

 

      Page
PART I.
 
Item 1. Business   3
Item 1A. Risk Factors   5
Item 1B. Unresolved Staff Comments   14
Item 2. Properties   15
Item 3. Legal Proceedings   18
Item 4. Mine Safety Disclosures   18
       
PART II.    
       
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   18
Item 5a.     18
Item 5b. Use of Proceeds   18
Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers   18
Item 6. Selected Financial Data   19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations   21
Item 7A. Quantitative and Qualitative Disclosures Above Market Risk   27
Item 8. Financial Statements and Supplementary Data   27
       
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    
   
Balance Sheets of March 31, 2011 and 2010   F-1
Statements of Operations for the Years Ended March 31, 2011, 2010 and 2009   F-2
Statements of Partner’s Equity (Deficit) for the Years Ended March 31, 2011, 2010 and 2009   F-3
Statements of Cash Flows for the Years Ended March 31, 2011, 2010 and 2009   F-4
Notes to Financial Statements   F-6
     
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure   41
Item 9A. Controls and Procedures   41
Item 9B. Other Information   42
     
PART III.    
     
Item 10. Directors, Executive Officers and Corporate Governance   42
Item 11. Executive Compensation   45
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   47
Item 13. Certain Relationships and Related Transactions, and Director Independence   47
Item 14. Principal Accountant Fees and Services   48
     
PART IV.      
     
Item 15. Exhibits and Financial Statement Schedules   49
     
SIGNATURES 56

 

2
 

 

PART I.

 

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.

 

3
 

 

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 originally invested in ten Local Limited Partnerships, two of which have been sold or otherwise disposed of as of March 31, 2011. 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 end 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
Grove Village, L.P.   2017   2021
Head Circle, L.P.   2016   2020
Pleasant Village, L.P.   2017   2021

 

4
 

 

With that in mind, as of March 31, 2011, 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 additional low income housing tax credits for Davenport Housing VII, L.P.  (“Davenport”, see Note 2 to the audited financial statements).  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 General Partner.  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. 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 those proceeds being used to purchase the additional low income housing 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.  A majority vote in favor of the dispositions was obtained on June 9, 2010.   The total net investment balances in Fernwood and Sierra’s Run were $85,349 less than the aggregate purchase price of $2,829,427.  Accordingly, a gain on sale of Local Limited Partnerships in that amount was recorded during the year ended March 31, 2011.

 

Fernwood and Sierra’s Run will complete their 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.

 

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.

 

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.

 

5
 

 

(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.

 

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.

 

6
 

 

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.

 

(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.

  

7
 

 

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.
·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 was not restored within a reasonable period of time. Any 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.

 

8
 

 

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.

 

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, 2011, 2010 and 2009, the Partnership had reduced the carrying amount to $0 with respect to three, one and one of its investments, respectively.

 

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, 2011, 2010, and 2009, impairment loss related to investments in Local Limited Partnerships was $82,672, $1,169,440, and $80,344, 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.

 

9
 

 

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.

 

(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.

 

10
 

 

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.

 

11
 

 

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.

 

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.

 

12
 

 

(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.

 

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 its affiliates is subject to limitations. The Partnership Agreement limits the liability of the General Partner and its affiliates to the Limited Partners. The General Partner and its 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 its affiliates than would be the case if such provisions were not included in the Partnership Agreement.

 

13
 

 

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 its affiliates. The General Partner and its 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 its 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.

 

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 $164,000, $179,000 and $161,000 for the years ended March 31 2011, 2010 and 2009, respectively. The payables due to the Local Limited Partnerships increased (decreased) by approximately $1,906,000,$(418,000), and $(2,244,000) for the years ended March 31, 2011, 2010 and 2009, 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$164,000 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 October 31, 2013.

 

Item 1B. Unresolved Staff Comments

 

Not Applicable

  

14
 

 

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:

 

         As of March 31, 2011   As of December 31, 2010 
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    1,885,000    24    2,268,000    749,000 
                                
Davenport Housing VII, L.P.  Davenport, Iowa  Shelter Resource Corporation   4,744,000    2,475,000    20    6,029,000    3,216,000 
                                
FDI-Country Square, LTD.  Lone Star, Texas  Fieser Holdings, Inc.   605,000    605,000    24    823,000    646,000 
                                
FDI-Park Place, LTD.  Bellville, Texas  Fieser Holdings, Inc.   758,000    758,000    40    1,068,000    1,146,000 
                                
Grove Village, L.P.  Dallas, Texas  Walker Guardian LLC   3,043,000    2,944,000    232    3,952,000    5,958,000 
                                
Head Circle, L.P.  Ruleville, Mississippi  SEMC, Inc.   464,000    464,000    38    657,000    1,434,000 
                                
Pleasant Village, L.P.  Dallas, Texas  Walker Guardian LLC   2,850,000    2,708,000    200    3,701,000    5,785,000 
                                
         $14,945,000   $12,347,000    598   $19,184,000   $18,934,000 

 

(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 28% of the anticipated Low Income Housing Tax Credits have been received from the Local Limited Partnerships.

 

15
 

 

   For the year ended December 31, 2010 
Local Limited
Partnership Name
  Rental Income   Net Loss   Low Income
Housing Tax
Credits
Allocated to
Partnership
 
                
909 4th YMCA, L.P.  $624,000   $(13,000)   99.98%
                
Crestview Housing, L.P.   119,000    (60,000)   99.98%
                
Davenport Housing VII, L.P.   70,000    (292,000)   99.98%
                
FDI-Country Square, LTD.   109,000    (20,000)   99.98%
                
FDI-Park Place, LTD.   196,000    (9,000)   99.98%
                
Grove Village, L.P.   1,649,000    (888,000)   99.98%
                
Head Circle, L.P.   267,000    (36,000)   99.98%
                
Pleasant Village, L.P.   1,385,000    (693,000)   99.98%
                
   $4,419,000   $(2,011,000)     

 

16
 

 

WNC Housing Tax Credit Fund VI, L.P., Series 13

 

         Occupancy Rates 
Local Limited        As of December 31, 
Partnership Name  Location  General Partner Name  2010   2009   2008   2007   2006 
                                
909 4th YMCA, L.P.  Seattle, Washington  YMCA of Greater Seattle   95%   100%   95%   90%   70%
                                
Crestview Housing, L.P.  Bigfork, Montana  American Covenant Senior Housing Foundation, Inc.   92%   83%   100%   (1)   (2)
                                
Davenport Housing VII, L.P.  Davenport, Iowa  Shelter Resource Corporation   95%   15%(3) (1)   (1)   (2)
                                
FDI-Country Square, LTD.  Lone Star, Texas  Fieser Holdings, Inc.   100%   100%   96%   96%   25%
                                
FDI-Park Place, LTD.  Bellville, Texas  Fieser Holdings, Inc.   93%   90%   85%   95%   85%
                                
Fernwood Meadows, L.P.  Fernley, Nevada  Fernwood Meadow, LLC   

 

N/A

    100%   96%   93%   (2)
                                
Grove Village, L.P.  Dallas, Texas  Walker Guardian LLC   94%   72%   88%   96%   53%
                                
Head Circle, L.P.  Ruleville, Mississippi  SEMC, Inc.   100%   97%   97%   95%   100%
                                
Pleasant Village, L.P.  Dallas, Texas  Walker Guardian LLC   91%   82%   93%   86%   66%
                                
Sierra’s Run, L.P.  Fernley, Nevada  Sierra Run, LLC   

N/A

    95%   86%   71%   (2)
          94%   80%   91%   91%   63%

 

N/A – This Local Limited Partnership was sold as of the respective year end.

(1) – The Local Limited Partnership was still under construction as of the respective year end.

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

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

 

17
 

 

Item 3. Legal Proceedings

 

NONE

 

Item 4. Mine Safety Disclosures

 

NOT APPLICABLE

 

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, 2011, there were 951 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, 2011.

 

Item 5b. Use of Proceeds

 

NOT APPLICABLE

 

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

 

NONE

 

18
 

 

Item 6. Selected Financial Data

 

Selected balance sheet information for the Partnership is as follows:

 

   March 31, 
    2011    2010    2009    2008    2007 
ASSETS                         
                          
Cash and cash equivalents  $2,357,819   $678,636   $1,522,248   $3,715,123   $11,964,300 
Investments in Local Limited Partnerships, net   8,956,651    10,079,132    13,242,305    15,943,480    8,726,771 
Prepaid acquisition fees and costs   -    -    -    -    910,151 
                          
Total Assets  $11,314,470   $10,757,768   $14,764,553   $19,658,603   $21,601,222 
                          
LIABILITIES                         
                          
Payables to Local Limited Partnerships  $2,598,328   $692,220   $1,110,039   $3,353,604   $3,641,780 
Accrued fees and expenses due to General Partner and affiliates   619,219    993,507    291,539    111,896    83,688 
Accrued expenses   -    -    -    17,765    8,000 
                          
Total Liabilities   3,217,547    1,685,727    1,401,578    3,483,265    3,733,468 
                          
PARTNERS’ EQUITY   8,096,923    9,072,041    13,362,975    16,175,338    17,867,754 
                          
Total Liabilities and Partners’ Equity  $11,314,470   $10,757,768   $14,764,553   $19,658,603   $21,601,222 

 

19
 

 

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

 

   For the Years Ended March 31, 
    2011    2010    2009    2008    2007 
                          
Loss from operations  $(349,683)  $(2,380,615)  $(381,550)  $(254,475)  $(148,071)
Equity in losses of Local Limited Partnerships   (713,926)   (1,861,108)   (2,443,000)   (1,859,713)   (453,675)
Gain on sale of Local Limited Partnerships   85,349    -    -    -    - 
Interest income   3,142    789    12,187    303,809    402,245 
                          
Net loss  $(975,118)  $(4,240,934)  $(2,812,363)  $(1,810,379)  $(199,501)
                          
Net loss allocated to:                         
General Partner  $(975)  $(4,241)  $(2,812)  $(1,810)  $(200)
                          
Limited Partners  $(974,143)  $(4,236,693)  $(2,809,551)  $(1,808,569)  $(199,301)
                          
Net loss  per Partnership Unit  $(46.43)  $(201.93)  $(133.91)  $(86.20)  $(11.42)
                          
Outstanding Weighted Partnership Units   20,981    20,981    20,981    20,981    17,456 

 

Note 1 – Loss from operations for the years ended March 31, 2011, 2010, 2009, 2008 and 2007 includes a charge for impairment losses on investments in Local Limited Partnerships of$82,672, $1,169,440, $80,344, $0, and $0 respectively (see Note 2 to the audited financial statements).

 

20
 

 

   For the Years Ended March 31, 
   2011   2010   2009   2008   2007 
Net cash provided by (used in):                         
                          
Operating activities  $(569,457)  $(439,718)  $(58,441)  $144,675   $317,304 
Investing activities   2,248,640    (403,894)   (2,134,434)   (8,511,815)   (5,919,684)
Financing activities   -    -    -    117,963    12,319,078 
                          
Net change in cash and cash equivalents   1,679,183    (843,612)   (2,192,875)   (8,249,177)   6,716,698 
                          
Cash and cash equivalents, beginning of period   678,636    1,522,248    3,715,123    11,964,300    5,247,602 
                          
Cash and cash equivalents, end of period  $2,357,819   $678,636   $1,522,248   $3,715,123   $11,964,300 

 

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

 

   2010   2009   2008   2007   2006 
                          
Federal  $88    90    86   $43    6 
State   -    -    -    -   $- 
                          
Total  $88    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.

 

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.

 

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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 at least annually or 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 any 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 the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.

 

Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income.

 

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. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. 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 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 guidance requires continual reconsideration of the primary beneficiary of a VIE.

 

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited 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 Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.

 

22
 

 

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 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 had no material impact on the Partnership’s financial statements.

 

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 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 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 Partnership did not include the disclosure in this Form 10-K.

 

23
 

 

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 replaced 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 did not 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.

 

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, 2011 consisted of $2,358,000 in cash and cash equivalents and aggregate investments in eight Local Limited Partnerships of $8,957,000(See “Method of Accounting for Investments in Local Limited Partnerships”). Liabilities at March 31, 2011 consisted of $2,598,000 of payables due to Local Limited Partnerships and $619,000 of accrued fees and expenses due to General Partner and affiliates (See “Future Contractual Cash Obligations” below).

 

24
 

 

Results of Operations

 

Year Ended March 31, 2011 Compared to Year Ended March 31,2010 The Partnership’s net loss for the year ended March 31, 2011 was $(975,000), reflecting a decrease of $3,266,000 from the net loss experienced for the year ended March 31, 2010 of $(4,241,000). An impairment loss of $(83,000) was recorded for the year ended March 31, 2011, compared to impairment loss of $(1,169,000) for the year ended March 31, 2010. The impairment loss can vary from year to year depending on the operations of the Local Limited Partnerships and the amount of low income housing tax credit that were allocated each year to the Partnership. In addition, there was a $846,000 decrease in write off of advances to Local Limited Partnerships. 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 $4,000 for the year ended March 31, 2011. These costs can fluctuate from year to year depending on the timing of the site visits to the Local Limited Partnerships. The accounting and legal fees increased by $(63,000) for the year ended March 31, 2011 compared to the year ended March 31, 2010, due to the timing of the accounting work being performed. The equity in losses of Local Limited Partnerships decreased by $(1,147,000) for the year ended March 31, 2010. Equity in losses can vary based on the operations of the underlying Housing Complexes of the Local Limited Partnerships. Other income increased by $124,000 for the year ended March 31, 2011 due to the recovery of previously written off advances. No such recoveries were made during the year ended March 31, 2010. Lastly, two Local Limited Partnerships were sold for a gain of $85,000 during the year ended March 31, 2011. No sales occurred during the year ended March 31, 2010.

 

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.

 

25
 

 

Liquidity and Capital Resources

 

Year Ended March 31, 2011 Compared to Year Ended March 31, 2010 The net increase in cash and cash equivalents during the year ended March 31, 2011 was $1,679,000 compared to a net decrease in cash and cash equivalents during the year ended March 31, 2010 of $(844,000). The change of $2,523,000 was due primarily to the fact that during the year ended March 31, 2011, the Partnership received $2,829,000 in cash proceeds as a result of selling its interest in two of the Local Limited Partnerships. Additionally, the Partnership paid $(157,000) in capital contributions to Local Limited Partnerships during the year ended March 31, 2011 compared to $(407,000) in capital contributions paid during the year ended March 31, 2010. The capital contributions will vary over time depending on when certain benchmarks are met by the Local Limited Partnerships. During the year ended March 31, 2011, the Partnership advanced $(427,000) to two Local Limited Partnerships compared to $(846,000) advanced during the year ended March 31, 2010.. Also, the Partnership paid $(285,000) to the General Partner or an affiliate as reimbursement for operating expenses that were paid on the Partnerships behalf during the year ended March 31, 2011 compared to no reimbursements paid during the year ended December 31, 2010. Such payments can vary depending on the cash position of the Partnership.

 

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.

 

Accrued payables, which consist primarily of related party management fees due to the General Partner, increased (decreased) by approximately $(374,000), $702,000, and $180,000 for the years ended March 31, 2011, 2010 and 2009, 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 November 30, 2013.

 

Other Matters

 

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 $427,131 to Davenport for construction related costs which later was offset by the capital contributions due to the property.

 

26
 

 

The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010. In June 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 90% to the date of this filing. Davenport had 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 was 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 was 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 made the additional investment in Davenport. See the exit strategy in Note 1 regarding the dispositions of Sierra’s Run and Fernwood. On July 1, 2010, the Partnership committed additional capital to Davenport in the amount of $2,490,651. This additional commitment generated $408,710 of federal historic credits and $3,582,550 of additional federal Low Income Housing Tax Credits which was allocated to the partners of the Partnership.

 

Partnership’s Future Contractual Cash Obligations

 

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

 

   2012   2013   2014   2015   2016   Thereafter   Total 
                             
Asset management fees (1)  $782,823   $163,604   $163,604   $163,604   $163,604   $8,834,616   $10,271,855 
Payable to Local Limited Partnerships   2,598,328    -    -    -    -    -    2,598,328 
Total contractual cash obligations  $3,381,151   $163,604   $163,604   $163,604   $163,604   $8,834,616   $12,870,183 

 

(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. Fernwood and Sierra’s Run have been sold and therefore have been excluded. Amounts due to the General Partner as of March 31, 2011 have been included in the 2012 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

 

27
 

 

 

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 (the Partnership) as of March 31, 2011 and 2010, and the related statements of operations, partners’ deficit and cash flows for each of the years in the three-year period ended March 31, 2011. 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 $6,921,020 and $7,315,837 of the total Partnership assets as of March 31, 2011 and 2010, respectively and $388,804, $1,748,564 and $2,254,801 of the total Partnership loss for the years ended March 31, 2011, 2010 and 2009, 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 as of March 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

 

28
 

 

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/ CohnReznick LLP  
   
Bethesda, Maryland  
December 3, 2012  

 

29
 

 

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, 2010 and 2009 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 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 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, 2010 and 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, we have also issued a report dated September 8, 2011 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.

 

 

Metairie, Louisiana

September 8, 2011

 

3421 N. Causeway Blvd., Suite 701.  Metairie, LA 70002 Telephone (504) 837-0770 ● Fax (504) 837-7102

   Member of

IGAF Worldwide - Member Firms in Principal Cities ●  PCAOB - Public Company Accounting Oversight Board

AICPA Centers ● Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

 

30
 

 

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, 2010 and 2009 and the related statements of operations, changes in partners’ capital 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 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, 2010 and 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.

 

 

Metairie, Louisiana

September 7, 2012

 

3421 N. Causeway Blvd., Suite 701 ● Metairie, LA 70002 ● Telephone (504) 837-0770 ● Fax (504) 837-7102

201 St. Charles Ave., Suite 2500 ● New Orleans, LA 70170 ● Telephone (504) 599-5905 ● Fax (504) 837-7102

www.pmlcpa.com

Member of

IGAF POLARIS - A Global Association of Independent Firms ● PCAOB - Public Company Accounting Oversight Board

 AICPA: Centers for Public Company Audit Firms (SEC) ● Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

 

31
 

 

PAILET, MEUNIER and LeBLANC, L.L.P.

 

Certified Public Accountants

Management Consultants

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

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, 2010 and 2009 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, 2010 and 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, we have also issued a report dated January 27, 2011 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.

 

 

Metairie, Louisiana

January 27, 2011

 

3421 N. Causeway Blvd., Suite 701 ● Metairie, LA 70002 ● Telephone (504) 837-0770 ● Fax (504) 837-7102

  Member of

IGAF Worldwide - Member Firms in Principal Cities ●  PCAOB - Public Company Accounting Oversight Board

AICPA Centers ● Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

  

32
 

 

PAILET, MEUNIER and LeBALNC, 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.

 

 

Metairie, Louisiana

January 18, 2010

 

 3421 N. Causeway Blvd., Suite 701 ● Metairie, LA 70002 ● Telephone (504) 837-0770 ● Fax (504) 837-7102

 Member of

IGAF Worldwide - Member Firms in Principal Cities ●  PCAOB - Public Company Accounting Oversight Board

AICPA Centers ● Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

 

33
 

 

 

 

Douglas W. Child, CPA

Marty D. Van Wagoner, CPA

J. Russ Bradshaw, CPA

William R. Denney, CPA

Roger B. Kennard, CPA

Russell E, Anderson, CPA  

Scott L. Fames

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1284 W. Flint Meadow Dr. #D

Kaysville, UT 84037-9590

Telephone 801.927.1337

Facsimile 801.927.1344

                       

 

5296 S. Commerce Dr. #300

(53rd So. @1-15)

SLC.UT 84107-5370

Telephone 801.281.4700

Facsimile 801.281.4701 

                        

 

Suite B,4F,  

North Cape Commercial Bldg.

398 King’s Road

North Point, Hong Kong

                       

 

www.cpaone.net  

 


Report of Independent Registered Public Accounting Firm

 

To the Partners

Fernwood Meadows, L.P.
Fernley, Nevada

 

We have audited the accompanying balance sheets of Fernwood 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 America 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 arid 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 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 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                       

Child, Van Wagoner & Bradshaw,PLLC
Kaysville, Utah
March 22, 2010

 

34
 

 

Loveridge Hunt & Co., PLLC

CERTIFIED PUBLIC ACCOUNTANTS

 

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

 

Partners

Grove Village Limited Partnership

Portland, Oregon

 

We have audited the accompanying balance sheet 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 auditing standards generally accepted in the United States of America, 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 and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying additional information on pages 12 through 22 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such additional 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.

 

11100 NE 8th Street, Suite 410, Bellevue, WA 98004-4441     PHONE (425) 453-2088     FAX (425) 646-3368 

  

35
 

 

 

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS - (CONTINUED)

 

In accordance with Government Auditing Standards, we have also issued a report dated March 30, 2010, on our consideration of the Partnership’s internal control over financial reporting. 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. In accordance with Government Auditing Standards, we have also issued an opinion dated March 30, 2010 on compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters that could have a direct and material effect on a major HUD-assisted program. 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.

 

 

 

March 30, 2010

 

36
 

 

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.

 

Metairie, Louisiana

May 7, 2009

 

3421 N. Causeway Blvd., Suite 701 ● Metairie, LA 70002 ● Telephone (504) 837-0770 ● Fax (504) 837-7102
Member of 

Member Firms in Principal Cities ● PCAOB - Public Company Accounting Oversight Board

AICPA: Center for Public Company Audit Firms (SEC) ● Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

 

37
 

  

PAILET, MEUNIER and LeBLANC, L.L.P.

 

Certified Public Accountants
Management Consultants

 

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. TX16L0G0047 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.

 

 

 Metairte, Louisiana

April 22, 2010

 

3421 N. Causeway Blvd., Suite 701 ● Metairie, LA 70002 ● Telephone (504) 837-0770 ● Fax (504) 837-7102

201 St. Charles Ave., Suite 2500 ● New Orleans, LA 70170 ● Telephone (504) 599-5905 ● Fax (504) 837-7102

 www.pmlepa.com

Member of 

Member Firms in Principal Cities ● PCAOB - Public Company Accounting Oversight Board

AICPA: Center for Public Company Audit Firms (SEC) ● Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

 

38
 

 

PAILET, MEUNIER and LeBLANC, L.L.P.

 

Certified Public Accountants

Management Consultants

 

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.

 

Metairie, Louisiana

May 7, 2009

 

3421 N. Causeway Blvd., Suite 701 ● Metairie, LA 70002 ● Telephone (504) 837-0770 ● Fax (504) 837-7102

 Member of 

Member Firms in Principal Cities ● PCAOB - Public Company Accounting Oversight Board

AICPA: Center for Public Company Audit Firms (SEC) ● Governmental Audit Quality Center ● Private Companies Practice Section (PCPS)

 

39
 

 

 

Douglas W. Child, CFA  

Marty D. Van Wagoner, CPA  

J. Russ Bradshaw, CPA  

William R. Denney, CPA  

Roger B. Kennard, CPA  

Russell E.Anderson, CPA  

Scott L. Fames

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1284 W. Flint Meadow Dr. #D
Kaysville,UT 84037-9590
Telephone 801.927.1337

Facsimile 801.927.1344  

                              

 

5298 S. Commerce Dr, #300

(53rdSo.@l-15)

SLC,UT 64107-5370

Telephone 801.281.4700

Facsimile 801.281.4701 

                              

 

Suite B,4F,  

North Cape Commercial Bldg. 

398 King’s Road  

North Point, Hong Kong  

                              

 

www.cpaone.net  

 

 



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 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 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 of that report is to describe the scope of ourtesting 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 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 alt material respects, in relation to the basic financial statements taken as a whole.

 

 /s/ Child, Van Wagoner & Bradshaw                   

Child, Van Wagoner & Bradshaw, PLLC

Kaysville, Utah

March 19, 2010

   

40
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

BALANCE SHEETS

 

   2011   2010 
ASSETS          
Cash and cash equivalents  $2,357,819   $678,636 
Investments in Local Limited Partnerships, net (Notes 2 and 3)   8,956,651    10,079,132 
Total Assets  $11,314,470   $10,757,768 
           
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)          
           
Liabilities:          
Payables to Local Limited Partnerships (Note 4)  $2,598,328   $692,220 
Accrued fees and expenses due to General Partner and Affiliates (Note 3)   619,219    993,507 
Total Liabilities   3,217,547    1,685,727 
           
Partners’ equity (deficit)          
General Partner   (10,012)   (9,037)
Limited Partners (25,000 Partnership Units authorized, 20,981,  Partnership Units issued and outstanding)   8,106,935    9,081,078 
           
Total Partners’ Equity (Deficit)   8,096,923    9,072,041 
           
Total Liabilities and Partners’ Equity  $11,314,470   $10,757,768 

 

See accompanying notes to financial statements

 

F-1
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

STATEMENTS OF OPERATIONS

 

   For the Years Ended March 31, 
   2011   2010   2009 
             
Reporting fees  $157   $-   $7,333 
Other income   123,970    -    - 
                
Total operating income   124,127    -    7,333 
                
Operating expenses and loss:               
Amortization   68,700    68,700    68,700 
Asset management fees   163,604    178,455    178,693 
Asset management expenses   7,375    11,137    15,047 
Accounting and legal fees   140,136    77,592    19,861 
Write off of advances to a Local Limited Partnership (Note 6)   -    846,175    22,311 
Impairment loss   82,672    1,169,440    80,344 
Other   11,323    29,116    3,927 
                
Total operating expenses and loss   473,810    2,380,615    388,883 
                
Loss from operations   (349,683)   (2,380,615)   (381,550)
                
Equity in losses of Local Limited Partnerships   (713,926)   (1,861,108)   (2,443,000)
                
Gain on sale of Local Limited Partnerships   85,349    -    - 
                
Interest income   3,142    789    12,187 
                
Net loss  $(975,118)  $(4,240,934)  $(2,812,363)
                
Net loss allocated to:               
General Partner  $(975)  $(4,241)  $(2,812)
                
Limited Partners  $(974,143)  $(4,236,693)  $(2,809,551)
                
Net loss per Partnership Unit  $(46.43)  $(201.93)  $(133.91)
                
Outstanding weighted Partnership Units   20,981    20,981    20,981 

 

See accompanying notes to financial statements

 

F-2
 

 

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, 2011, 2010 and 2009

 

   General
Partner
   Limited
Partners
   Total 
             
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 
                
Net loss   (975)   (974,143)   (975,118)
                
Partners’ equity (deficit) at March 31, 2011  $(10,012)  $8,106,935   $8,096,923 

 

See accompanying notes to financial statements

 

F-3
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

STATEMENTS OF CASH FLOWS

 

For the Years Ended March 31, 2011, 2010 and 2009

 

   2011   2010   2009 
Cash flows from operating activities:               
Net loss  $(975,118)  $(4,240,934)  $(2,812,363)
Adjustments to reconcile net loss to net cash used in operating activities:               
Amortization   68,700    68,700    68,700 
Equity in losses of Local Limited Partnerships   713,926    1,861,108    2,443,000 
Impairment loss   82,672    1,169,440    80,344 
Gain on sale of Local Limited Partnerships   (85,349)   -    - 
Decrease in accrued expenses   -    -    (17,765)
Increase (decrease) in accrued fees and expenses due to General Partner and affiliates   (374,288)   701,968    179,643 
                
Net cash used in operating activities   (569,457)   (439,718)   (58,441)
                
Cash flows used in investing activities:               
Capital contributions paid   (157,205)   (407,453)   (2,135,434)
Proceeds from sale of Local Limited Partnerships   2,829,428    -    - 
Distributions received from Local Limited Partnerships   3,558    3,559    1,000 
Advances to Local Limited Partnerships   (427,141)   (846,175)   (22,311)
Write off of advances to Local Limited Partnerships   -    846,175    22,311 
                
Net cash provided by (used in) investing activities   2,248,640    (403,894)   (2,134,434)
                
Net increase (decrease) in cash and cash equivalents   1,679,183    (843,612)   (2,192,875)
                
Cash and cash equivalents, beginning of period   678,636    1,522,248    3,715,123 
                
Cash and cash equivalents, end of period  $2,357,819   $678,636   $1,522,248 

 

See accompanying notes to financial statements

 

F-4
 

 

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, 2011, 2010 and 2009

 

   2011   2010   2009 
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION               
Taxes paid  $800   $800   $800 
                
SIGNIFICANT NONCASH INVESTING AND FINANCING ACTIVITIES        

 

      
The Partnership increased its investment in Local Limited Partnerships for unpaid capital contributions payable to Local Limited Partnerships  $2,490,651   $-   $- 
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   $- 
The Partnership decreased its advances to Local Limited Partnerships and decreased its due to Local Limited Partnerships for conversion of advances receivable to capital contributions paid.  $427,141   $-   $- 

  

See accompanying notes to financial statements

 

F-5
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 13

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2011, 2010 and 2009

 

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.

 

F-6
 

 

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, 2011, 2010 and 2009

 

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.

 

F-7
 

 

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, 2011, 2010 and 2009

 

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 November 30, 2013.

 

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.

 

With that in mind, as of March 31, 2011, 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 additional low income housing tax credits for Davenport Housing VII, L.P. (“Davenport”, see Note 2 to the audited financial statements). 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 General Partner. 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. 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 those proceeds being used to purchase the additional low income housing 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. A majority vote in favor of the dispositions was obtained on June 9, 2010. The total net investment balances in Fernwood and Sierra’s Run were $85,349 less than the aggregate purchase price of $2,829,427. Accordingly, a gain on sale of Local Limited Partnerships in that amount was recorded during the year ended March 31, 2011.

 

F-8
 

 

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, 2011, 2010 and 2009

 

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

 

Fernwood and Sierra’s Run will complete their 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.

 

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.

 

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. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.

 

Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income.

 

F-9
 

 

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, 2011, 2010 and 2009

 

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. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. 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 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 guidance requires continual reconsideration of the primary beneficiary of a VIE.

 

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited 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 Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.

 

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, 2011 and 2010, the Partnership had cash equivalents of $92,524 and $319,375, 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.

 

F-10
 

 

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, 2011, 2010 and 2009

 

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

 

Concentration of Credit Risk

 

At March 31, 2011 and 2010, 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.

 

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 all periods presented was $68,700.Future estimated amortization expense for each of the years through March 31, 2016 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, 2011, 2010 and 2009 impairment loss related to investments in Local Limited Partnerships was $82,672, $1,169,440, and $80,344, 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, 2011, 2010, and 2009, there was no impairment loss recorded on the related intangibles.

 

F-11
 

 

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, 2011, 2010 and 2009

 

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

 

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 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 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 had 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 did not have a material effect on the Partnership’s financial statements.

 

F-12
 

 

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, 2011, 2010 and 2009

 

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 the March 31, 2011 and 2010 the Partnership has acquired limited partnership interests in 8 and 10, Local Limited Partnerships, respectively, each of which owns one Housing Complex consisting of an aggregate of 598 and 647 apartment units, respectively. 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, 2011 and 2010 is approximately $4,156,000 and $22,000 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, 2011, the investment account in three of the Local Limited Partnerships has reached zero balance. Consequently, a portion of the Partnerships estimate of its share of losses for the years ended March 31, 2011, 2010 and 2009, amounting to approximately $1,297,000, $2,000, and $0, respectively, have not been recognized. As of March 31, 2011, the aggregate share of net losses not recognized by the Partnership amounted to $1,299,000.

 

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, 2011, 2010 and 2009, impairment loss related to investments in Local Limited Partnerships was $82,672, $1,169,440 and $80,344, 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, 2011, 2010 and 2009, there was no impairment loss recorded on the related intangibles.

 

F-13
 

 

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, 2011, 2010 and 2009

 

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, 
   2011   2010   2009 
Investments per balance sheet, beginning of period  $10,079,132   $13,242,305   $15,943,480 
Additional investment in a Local Limited Partnership   2,490,651    -    - 
Dispositions of Local Limited Partnerships   (2,744,276)   -    - 
Distributions received from Local Limited Partnerships   (3,558)   (3,559)   (1,000)
Equity in losses of Local Limited Partnerships   (713,926)   (1,861,108)   (2,443,000)
Tax credit adjustments   -    (10,366)   (108,131)
Impairment loss   (82,672)   (1,169,440)   (80,344)
Syndication costs   -    (50,000)   - 
Amortization of acquisition fees and costs   (68,664)   (68,664)   (68,664)
Amortization of warehouse interest and costs   (36)   (36)   (36)
                
Investments per balance sheet, end of period  $8,956,651   $10,079,132   $13,242,305 

 

   For the Years
Ended March 31,
 
   2011   2010   2009 
             
Investments in Local Limited Partnerships, net  $7,352,657   $8,406,438   $11,500,911 
Acquisition fees and costs, net of accumulated amortization of $285,159, $216,495, and $147,   1,603,131    1,671,795    1,740,459 
Warehouse interest and costs, net of accumulated amortization of $176, $140, and $104   863    899    935 
Investments per balance sheet, end of period  $8,956,651   $10,079,132   $13,242,305 

 

F-14
 

 

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, 2011, 2010 and 2009

 

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

 

   2010   2009 
ASSETS          
           
Buildings and improvements, net of accumulated depreciation of $9,481,000, and$7,838,000  $39,922,000   $46,724,000 
Land   3,063,000    2,371,000 
Other assets   1,997,000    2,257,000 
Total Assets  $44,982,000   $51,352,000 
           
LIABILITIES          
           
Mortgage and construction loans payable  $18,934,000   $25,260,000 
Due to related parties   10,218,000    5,538,000 
Other liabilities   3,156,000    2,609,000 
Total Liabilities   32,308,000    33,407,000 
           
PARTNERS’ EQUITY          
           
WNC Housing Tax Credit Fund VI, L.P., Series 13   4,801,000    10,057,000 
Other partners   7,873,000    7,888,000 
Total Partners’ Equity   12,674,000    17,945,000 
Total Liabilities and Partners’ Equity  $44,982,000   $51,352,000 

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS

 

   2010   2009   2008 
             
Revenues  $4,538,000   $4,617,000   $4,516,000 
                
Expenses:               
Operating expenses   3,491,000    3,468,000    3,847,000 
Interest expense   1,108,000    1,137,000    1,219,000 
Depreciation and amortization   1,950,000    1,926,000    1,894,000 
                
Total expenses   6,549,000    6,531,000    6,960,000 
                
Net loss  $(2,011,000)  $(1,914,000)  $(2,444,000)
                
Net loss allocable to the Partnership  $(2,011,000)  $(1,914,000)  $(2,443,000)
                
Net loss recorded by the Partnership  $(714,000)  $(1,861,000)  $(2,443,000)

 

F-15
 

 

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, 2011, 2010 and 2009

 

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

 

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 $427,131 to Davenport for construction related costs which later was offset by the capital contributions due to the property.

 

The project was fully completed as of March 31, 2010 and it achieved stabilized operations by June 2010. In June 2010 the property achieved 85% occupancy and has maintained occupancy of 80% to 90% to the date of this filing. Davenport had 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 was 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 was 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 made the additional investment in Davenport. See the exit strategy in Note 1 regarding the dispositions of Sierra’s Run and Fernwood. On July 1, 2010, the Partnership committed additional capital to Davenport in the amount of $2,490,651. This additional commitment generated $408,710 of federal historic credits and $3,582,550 of additional federal Low Income Housing Tax Credits which was allocated to the partners of the Partnership.

 

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 31,2011, and 2010, 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 $221,801, and $168,393, as of March 31, 2011, and 2010, respectively.

 

F-16
 

 

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, 2011, 2010 and 2009

 

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, 2011 and 2010, 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 $63,358, and $48,102, as of March 31, 2011, and 2010, respectively.

 

An annual asset management fee accrues in an amount equal to 0.5% of the Invested Assets of the Partnership, as defined. “Invested Assets” is defined as the sum of the Partnership’s Investment in Local Limited Partnerships, plus the reserves of the Partnership of up to 5% of gross 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 $163,604, $178,455, and $178,693 were incurred during the years ended March 31, 2011, 2010, and 2009, respectively, of which$0, $0, and $18,000, was paid during the years ended March 31, 2011, 2010, and 2009, 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 $285,055, $0, and $19,886 during the years ended March 31, 2011, 2010, and 2009, respectively.

 

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.

 

WNC Holding, LLC (“Holding”), a wholly owned subsidiary of Associates, acquires investments in Local Limited Partnerships using funds from a secured warehouse line of credit. Such investments are warehoused by Holding until transferred to syndicated partnerships as investors are identified. The transfer of the warehoused investments is typically achieved through the admittance of the syndicated partnership as the Limited Partner of the Local Limited Partnership and the removal of Holding as the Limited Partner. Consideration paid to Holding for the transfer of its interest in the Local Limited Partnership generally consists of cash reimbursement of capital contribution installment(s) paid to the Local Limited Partnerships by Holding, assumption of the remaining capital contributions payable due to the Local Limited Partnership and financing costs and interest charged by Holding. As of all periods presented, the Partnership incurred financing costs of $772 and interest of $267 which are included in investments in Local Limited Partnerships. The accumulated amortization of these financing costs and interest was $176, and $140 as of March 31, 2011, and 2010, respectively.

 

F-17
 

  

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, 2011, 2010 and 2009

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

 

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

 

   March 31, 
   2011   2010 
Asset management fee payable  $600,611   $437,007 
Reimbursements for expenses paid by the General Partner or an affiliate   18,608    148,330 
Advances from the General Partner or an affiliate   -    408,170 
           
Total  $619,219   $993,507 

 

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 October 31, 2013.

 

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, 2011, 2010, and 2009, payables to Local Limited Partnerships were increased (reduced) for tax credit adjusters in the amounts of $0, $(10,366), and $(108,131), respectively.

 

F-18
 

 

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, 2011, 2010 and 2009

 

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 
                 
2011                    
                     
Income  $-    -    -    124,000 
                     
Operating expenses   (232,000)   (84,000)   (74,000)   (84,000)
                     
Gain (loss) from operations   (232,000)   (84,000)   (74,000)   40,000 
                     
Equity in losses of Local Limited Partnerships   (347,000)   (51,000)   (51,000)   (264,000)
                     
Gain on sale   85,000    -    -    - 
                     
Interest income   -    1,000    1,000    1,000 
                     
Net loss   (494,000)   (134,000)   (124,000)   (223,000)
                     
Net loss available to Limited Partners   (494,000)   (134,000)   (124,000)   (222,000)
                     
Net loss per Partnership Unit   (24)   (6)   (6)   (11)

 

   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)

 

F-19
 

 

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, 2011, 2010 and 2009

 

NOTE 5 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued

 

   June 30   September 30   December 31   March 31 
                 
2009                    
Income  $2,000   $6,000   $-   $- 
                     
Operating expenses   (148,000)   (74,000)   (73,000)   (94,000)
                     
Loss from operations   (146,000)   (68,000)   (73,000)   (94,000)
                     
Equity in losses of Local Limited Partnerships   (611,000)   (611,000)   (611,000)   (610,000)
                     
Interest income   3,000    8,000    1,000    - 
                     
Net loss   (754,000)   (671,000)   (683,000)   (704,000)
                     
Net loss available to Limited Partners   (754,000)   (671,000)   (682,000)   (703,000)
                     
Net loss per Partnership Unit   (36)   (32)   (33)   (34)

 

NOTE 6 – ADVANCES TO LOCAL LIMITED PARTNERSHIPS

 

During the year ended March 31, 2011, the Partnership voluntarily advanced $427,141 to one Local Limited Partnership in which the Partnership is a limited partner, which was later converted to a capital contribution payment to the Local Limited Partnership. Advances in the amount of $846,175 and $22,311 were made to the same Local Limited Partnership for period ended March 31, 2010, and 2009, respectively. The Local Limited Partnership had been experiencing construction issues. The Partnership determined the recoverability of these advances to be improbable and, accordingly, a reserve had been recorded in full for both periods. During the year ended March 31, 2011, $123,970 of the advances that were previously reserved for were repaid to the Partnership.

 

F-20
 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

NONE

 

Item 9A. Controls and Procedures

 

(a)Evaluation of disclosure controls and procedures

 

As of the end of the periods covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the periods covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

 

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary to the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

 

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Chief Executive Officer and the Chief Financial Officer of Associates believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

 

(b)Management’s annual report on internal control over financial reporting

 

The management of Associates is responsible for establishing and maintaining for the Partnership adequate internal control over financial reporting as that term is defined in Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f), and for performing an assessment of the effectiveness of internal control over financial reporting as of March 31, 2011. The internal control process of Associates, as it is applicable to the Partnership, was designed to provide reasonable assurance to Associates regarding the preparation and fair presentation of published financial statements, and includes those policies and procedures that:

 

(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that the Partnership’s receipts and expenditures are being made only in accordance with authorization of the management of Associates; and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.

 

All internal control processes, no matter how well designed, have inherent limitations. Therefore, even those processes determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and presentation. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

  

41
 

 

Management of Associates assessed the effectiveness of its internal control over financial reporting, as it is applicable to the Partnership, as of the end of the Partnership’s most recent fiscal year. In making this assessment, it used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management of Associates concluded that, for the reasons set forth above under “Disclosure controls and procedures”, the internal control over financial reporting, as it is applicable to the Partnership, was not effective as of March 31 2011. This annual report does not include an attestation report of the Partnership’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

 

For purposes of the Securities Exchange Act of 1934, the term “material weakness” is a deficiency, or a combination of deficiencies, in a reporting company’s internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. For the reasons discussed above in this Item 9A, sub-section (a) under the caption “Disclosure Controls and Procedures,” the Partnership’s internal control over financial reporting has not been effective in permitting timely reporting of the Partnership’s financial information. Accordingly, the management of Associates believes that this inability to generate timely reports constitutes a material weakness in its internal control over financial reporting.

(c)Changes in internal controls

 

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended March 31, 2011 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

Item 9B. Other Information

 

NONE

 

PART III.

 

Item 10. Directors, Executive Officers and Corporate Governance

 

(a)Identification of Directors, (b) Identification of Executive Officers, (c) Identification of Certain Significant Employees, (d) Family Relationships, and (e) Business Experience

 

Neither the General Partner nor the Partnership has directors, executives officers or employees of its own. The business of the Partnership is conducted primarily through Associates. Associates is a California corporation which was organized in 1971. The following biographical information is presented for the officers and employees of Associates with principal responsibility for the Partnership’s affairs.

 

Wilfred N. Cooper, Sr. Chairman
Wilfred N. Cooper, Jr. President, Chief Executive Officer and Secretary
Michael J. Gaber Executive Vice President and Chief Operating Officer
David N. Shafer, Esq. Executive Vice President
Darrick Metz Senior Vice President – Originations
Christine A. Cormier Senior Vice President – Fund Management
Melanie R. Wenk, CPA Vice President – Chief Financial Officer
Kelly Henderson Senior Vice President – Legal Affairs
AnandKannan Senior Vice President – Development
Paula Hall Vice President – Asset Management
Gregory S. Hand Vice President – Acquisitions
Thomas F. Maxwell Vice President – Originations
Kay L. Cooper Director of WNC & Associates, Inc.
Jennifer E. Cooper Director of WNC & Associates, Inc.

 

In addition to Wilfred N. Cooper, Sr., the directors of WNC & Associates, Inc. are Wilfred N. Cooper, Jr., Kay L. Cooper and Jennifer E. Cooper.

 

42
 

 

Wilfred N. Cooper, Sr., age 81, is the founder and Chairman of the Board of Directors of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a general partner in some of the partnerships previously sponsored by WNC & Associates, Inc. Mr. Cooper has been actively involved in the affordable housing industry since 1968. Previously, during 1970 and 1971, he was founder and a principal of Creative Equity Development Corporation, a predecessor of WNC & Associates, Inc., and of Creative Equity Corporation, a real estate investment firm. For 12 years before that, Mr. Cooper was employed by Rockwell International Corporation, last serving as its manager of housing and urban developments where he had responsibility for factory-built housing evaluation and project management in urban planning and development. He has testified before committees of the U.S. Senate and the U.S. House of Representatives on matters pertaining to the affordable housing industry. Mr. Cooper is a Life Director of the National Association of Home Builders (“NAHB”), a National Trustee for NAHB’s Political Action Committee, and a past Chairman of NAHB’s Multifamily Council. He is a Life Trustee of the National Housing Conference, and a co-founder and Director Emeritus of the California Housing Consortium. He is the husband of Kay Cooper and the father of Wilfred N. Cooper, Jr. Mr. Cooper graduated from Pomona College in 1956 with a Bachelor of Arts degree.

 

Wilfred N. Cooper, Jr., age 49, is President, Chief Executive Officer, Secretary, a Director, and a member of the Acquisition Committee, of WNC & Associates, Inc. He is President and a Director of, and a registered principal with, WNC Capital Corporation. He has been involved in real estate investment and acquisition activities since 1988 when he joined WNC & Associates, Inc. Previously, he served as a Government Affairs Assistant with Honda North America in Washington, D.C. Mr. Cooper serves on the Orange County Advisory Board of U.S. Bank, the Board of Trustees of NHC, the Editorial Advisory Board of Tax Credit Advisor, and the Tax Policy Council of the National Trust for Historic Preservation. He is a member of the Urban Land Institute and of Vistage International, a global network of business leaders and chief executives. He is the son of Wilfred Cooper, Sr. and Kay Cooper. Mr. Cooper graduated from The American University in 1985 with a Bachelor of Arts degree.

 

Michael J. Gaber, age 45, is an Executive Vice President, Chief Operating Officer, chair of the Acquisition Committee, and oversees the Property Acquisition and Investment Management groups, of WNC & Associates, Inc. Mr. Gaber has been involved in real estate acquisition, valuation and investment activities since 1989 and has been associated with WNC & Associates, Inc. since 1997. Prior to joining WNC & Associates, Inc., he was involved in the valuation and classification of major assets, restructuring of debt and analysis of real estate taxes with a large financial institution. Mr. Gaber is a member of the Housing Credit Group of NAHB and of National Housing and Rehabilitation Association (“NH&RA”). Mr. Gaber graduated from the California State University, Fullerton in 1991 with a Bachelor of Science degree in business administration – finance.

 

David N. Shafer, age 59, is an Executive Vice President, a member of the Acquisition Committee, and oversees the New Markets Tax Credit group, of WNC & Associates, Inc. Mr. Shafer has been active in the real estate industry since 1984. Before joining WNC & Associates, Inc. in 1990, he was engaged as an attorney in the private practice of law with a specialty in real estate and taxation. Mr. Shafer is a Director and past President of the California Council of Affordable Housing, a Director of the Council for Affordable and Rural Housing and a member of the State Bar of California. Mr. Shafer graduated from the University of California at Santa Barbara in 1978 with a Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris Doctor degree (cum laude) and from the University of San Diego in 1986 with a Master of Laws degree in taxation.

 

Darrick Metz, age 41, is Senior Vice President – Originations of WNC & Associates, Inc. He has been involved in multifamily property underwriting, acquisition and investment activities since 1991. Prior to joining WNC in 1999, he was employed by a Minnesota development company specializing in tax credit and market rate multifamily projects. Mr. Metz also worked with the Minnesota Housing Finance Agency (“MHFA”), where he held the position of Senior Housing Development Officer. While at MHFA, he was responsible for the allocation of tax credits, HOME funds and state loan products. Mr. Metz is active in the Qualified Allocation Plan Tax Credit Advisory Committee for the Wisconsin Housing and Economic Development Authority, a member of MHFA’s Multifamily Technical Assistance and a board member of NH&RA. He graduated from St. Cloud State University in 1993 with a Bachelor of Science degree in finance/economics.

 

Christine A. Cormier, age 53, is Senior Vice President – Fund Management and, accordingly, oversees the fund management group, of WNC & Associates, Inc. Ms. Cormier has been active in the real estate industry since 1985. Prior to joining WNC in 2008, Ms. Cormier was with another major tax credit syndicator for over 12 years where she was the Managing Director of investor relations. Ms. Cormier graduated from Bentley University in 1982 with a Bachelor of Science degree (summa cum laude) in accounting and computer science.

 

Melanie R. Wenk, age 43, is Vice President – Chief Financial Officer of WNC & Associates, Inc. She oversees WNC’s corporate and partnership accounting group, which is responsible for SEC reporting and New Markets Tax Credit compliance. Prior to joining WNC in 2003, Ms. Wenk was associated as a public accountant with BDO Seidman, LLP. She graduated from the California Polytechnic State University, Pomona in 1999 with a Bachelor of Science degree in accounting.

 

43
 

 

Kelly Henderson, age 40, is Senior Vice President – Legal Affairs of WNC & Associates, Inc. She is responsible for structuring local limited partnership letters of understanding and local limited partnership agreements, coordinating closings with outside counsel and reviewing local limited partnership loan documents. Prior to joining WNC in 2006, she was Vice President – Acquisitions and Senior Counsel with a national tax credit syndicator. Ms. Henderson has been underwriting tax credit properties since 1999. She graduated from the State University of New York at Geneseo in 1993 with a Bachelor of Arts degree in political science and from the New England School of Law in 1996 with a Juris Doctor degree. She is licensed to practice law in the States of New York and Massachusetts.

 

Anand Kannan, age 32, is Senior Vice President – Development of WNC & Associates, Inc. and leads the preservation and development teams for Community Preservation Partners, LLC. Prior to joining WNC in 2011, Mr. Kannan served as Associate Director at Vitus Group (previously Pacific Housing Advisors, Inc.), where he developed or consulted on affordable housing projects across the country. His expertise is in the acquisition and rehabilitation of existing low-income housing projects that are or will be financed by tax-exempt bonds, tax credits, and other government subsidies. Prior to his tenure at Vitus Group, Mr. Kannan was associated with Novogradac& Company LLP. Mr. Kannan graduated from the University of California at Berkeley in 2002 with a Bachelor of Arts degree in Economics with an emphasis in Accounting.

 

Paula Hall, age 45, is Vice President – Asset Management, a member of the Acquisition Committee, and oversees the asset management group, of WNC & Associates, Inc. She joined WNC in 1997 and has more than 21 years of property management experience. Ms. Hall is a Certified Occupancy Specialist (CPO), Housing Credit Certified Professional (HCCP), and Certified Property Manager (CPM) candidate. Prior to joining WNC, she was a property manager for NHP Property Management (AIMCO) where she oversaw operations, training and development.

 

Gregory S. Hand, age 48, is Vice President – Acquisitions, and oversees the property underwriting activities, of the Irvine office of WNC & Associates, Inc. Mr. Hand has been involved in real estate analysis, development and management since 1987. Prior to joining WNC in 1998, he was a portfolio asset manager with a national tax credit sponsor with responsibility for the management of $200 million in assets. Prior to that, he was a finance manager with The Koll Company and a financial analyst with The Irvine Company. Mr. Hand graduated from Iowa State University in 1987 with a Bachelor of Business Administration degree in finance.

 

Thomas F. Maxwell, age 60, is Vice President – Originations of the Northeast Region. He has 17 years of experience in the tax credit industry, and more than 30 years of real estate experience, including originating, structuring and closing all types of affordable housing developments. Prior to joining WNC in 2009, he served as a team leader for a national tax credit syndicator for nine years. Mr. Maxwell graduated from Case Western Reserve University in 1974 with a Bachelor of Arts degree in English and from Boston University in 1980 with a Master of Business Administration degree.

 

Kay L. Cooper, age 75, is a Director of WNC & Associates, Inc. and has not otherwise been engaged in business activities during the previous five years. Kay Cooper was the sole proprietor of Agate 108, a manufacturer and retailer of home accessory products from 1975 until its sale in 1998. She is the wife of Wilfred Cooper, Sr. and the mother of Wilfred Cooper, Jr. Ms. Cooper graduated from the University of Southern California in 1958 with a Bachelor of Science degree.

 

Jennifer E. Cooper, age 49, is a Director of WNC & Associates, Inc. and has not otherwise been engaged in business activities during the previous five years. She is the wife of Wilfred Cooper, Jr. and attended the University of Texas from 1981 to 1986.

 

(g)Involvement in Certain Legal Proceedings
   
  None.

 

(h)Promoters and Control Persons
   
  Inapplicable.

 

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(i)Audit Committee Financial Expert, and (i) Identification of the audit Committee

 

Neither the Partnership nor Associates has an audit committee.

 

(j)Changes to Nominating Procedures

 

Inapplicable.

 

(k)Compliance With Section 16(a) of the Exchange Act

 

None.

 

(l)Code of Ethics

 

Associates has adopted a Code of Ethics which applies to the Chief Executive Officer and Chief Financial Officer of Associates. The Code of Ethics will be provided without charge to any person who requests it. Such requests should be directed to: Investor Relations at (714)662-5565 extension 187.

 

Item 11. Executive Compensation

 

The General Partner and its affiliates are not permitted under Section 5.6 of the Partnership’s Agreement of Limited Partnership (the “Agreement,” incorporated as Exhibit 3.1 to this report) to receive any salary, fees, profits, distributions or allocations from the Partnership or any Local Limited Partnership in which the Partnership invests except as expressly allowed by the Agreement. The compensation and other economic benefits to the General Partner and its affiliates provided for in the Agreement are summarized below.

 

(a)Compensation for Services

 

For services rendered by the General Partner or an Affiliate of the General Partner in connection with the administration of the affairs of the Partnership, the General Partner or any such Affiliates shall receive from the Partnership an annual Asset Management Fee in an amount not to exceed 0.5% of that portion of Invested Assets in Local Limited Partnerships which are attributable to apartment units receiving Government Assistance. “Invested Assets” means the sum of the Partnership’s original investment in Local Limited Partnerships and the Partnership’s allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Accrued but unpaid asset management fees for any year are deferred without interest and are payable in subsequent years from any funds available to the Partnership after payment of all other costs and expenses of the Partnership, including any capital reserves then determined by the General Partner to no longer be necessary to be retained by the Partnership, or from the proceeds of a sale or refinancing of Partnership assets. Fees of $163,604, $178,455 and $178,693, were incurred during the years ended March 31, 2011, 2010 and 2009, respectively, of which $0, $0, and $18,000, was paid for the years ended March 31, 2011, 2010 and 2009, respectively.

 

Subject to a number of terms and conditions set forth in the Agreement, the General Partner and its Affiliates may be entitled to compensation for services actually rendered or to be rendered in connection with (i) selecting, evaluating, structuring, negotiating and closing the Partnership’s investments in Local Limited Partnership Interests, (ii) the acquisition or development of Properties for the Local Limited Partnerships, or (iii) property management services actually rendered by the General Partners or their Affiliates respecting the Properties owned by Local Limited Partnerships. The Partnership has completed its investment stage, so no compensation for the services in (i) or (ii) has been paid during the period covered by this report and none will be paid in the future. None of the services described in (iii) were rendered and no such compensation was payable for such services during the periods covered by this report.

 

(b)Operating Expenses

 

Reimbursement to a General Partner or any of its Affiliates of Operating Cash Expenses is subject to specific restrictions in Section 5.3.3 of the Partnership’s Agreement of Limited Partnership (the “Agreement,” incorporated as Exhibit 3.1 to this report). The Agreement defines “Operating Cash Expenses” as

 

“ . . . the amount of cash disbursed by the Partnership . . . in the ordinary course of business for the payment of its operating expenses, such as expenses for management, utilities, repair and maintenance, insurance, investor communications, legal, accounting, statistical and bookkeeping services, use of computing or accounting equipment, travel and telephone expenses, salaries and direct expenses of Partnership employees while engaged in Partnership business, and any other operational and administrative expenses necessary for the prudent operation of the Partnership. Without limiting the generality of the foregoing, Operating Cash Expenses shall include fees paid by the Partnership to any General Partner or any Affiliate of a General Partner permitted by this Agreement and the actual cost of goods, materials and administrative services used for or by the Partnership, whether incurred by a General Partner, an Affiliate of a General Partner or a non-Affiliated Person in performing the foregoing functions. As used in the preceding sentence, actual cost of goods and materials means the actual cost of goods and materials used for or by the Partnership and obtained from entities not Affiliated with a General Partner, and actual cost of administrative services means the pro rata cost of personnel (as if such persons were employees of the Partnership) associated therewith, but in no event to exceed the Competitive amount.”

 

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The Agreement provides that no such reimbursement shall be permitted for services for which a General Partner or any of its Affiliates is entitled to compensation by way of a separate fee. Furthermore, no such reimbursement is to be made for (a) rent or depreciation, utilities, capital equipment or other such administrative items, and (b) salaries, fringe benefits, travel expenses and other administrative items incurred or allocated to any “controlling person” of a General Partner or any Affiliate of a General Partner. For the purposes of Section 5.3.4, “controlling person” includes, but is not limited to, any person, however titled, who performs functions for a General Partner or any Affiliate of a General Partner similar to those of: (1) chairman or member of the board of directors; (2) executive management, such as president, vice president or senior vice president, corporate secretary or treasurer; (3) senior management, such as the vice president of an operating division who reports directly to executive management; or (4) those holding 5% or more equity interest in such General Partner or any such Affiliate of a General Partner or a person having the power to direct or cause the direction of such General Partner or any such Affiliate of a General Partner, whether through the ownership of voting securities, by contract or otherwise.

 

The unpaid operating expenses reimbursable to the General Partner or its affiliates were $18,608, $148,330 and $32,987, for the years ended March 31, 2011, 2010 and 2009, respectively. The Partnership reimbursed the General Partner or its affiliates for operating expenses of $285,055, $0 and $19,886, during the years ended March 31, 2011, 2010 and 2009, respectively.

 

(c)Interest in Partnership

 

The General Partner receives .10% of the Partnership’s allocated Low Income Housing Tax Credits, which approximated $1,858,$1,898 and $1,796 for the years ended December 31, 2010, 2009 and 2008, respectively. The General Partner is also entitled to receive .10% of the Partnership’s operating income or losses, gain or loss from the sale of property and operating cash distributions. There were no distributions of operating cash to the General Partner during the years ended March 31, 2011, 2010, and 2009. The General Partner has an interest in sale or refinancing proceeds as follows: after the Limited Partners have received a return of their capital, General Partner may receive an amount equal to its capital contribution, less any prior distribution of such proceeds, then the General Partner may receive 10% and the Limited Partners 90% of any remaining proceeds. There were no such distributions of cash to the General Partner during the years ended March 31, 2011, 2010, and 2009.

 

(d)Subordinated Disposition Fee

 

A subordinated disposition fee in an amount equal to 1% of the sale price may be received in connection with the sale or disposition of a Housing Complex or Local Limited Partnership interest. Payment of this fee is subordinated to the Limited Partners receiving (a) their Adjusted Capital Contributions, plus (b) their Return on Investment minus (i) any cash distributed by the Partnership to the Limited Partners and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred for all periods presented.

  

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

(a)Securities Authorized for Issuance Under Equity Compensation Plans

 

The Partnership has no compensation plans under which interests in the Partnership are authorized for issuance.

 

(b)Security Ownership of Certain Beneficial Owners

 

No person is known to own beneficially in excess of 5% of the outstanding Partnership Units.

 

(c)Security Ownership of Management

 

Neither the General Partner, Associates, its affiliates, nor any of the officers or directors of the General Partner, Associates, or its affiliates own directly or beneficially any Partnership Units.

 

(d)Changes in Control

 

The management and control of the General Partner and of Associates may be changed at any time in accordance with their respective organizational documents, without the consent or approval of the Limited Partners. In addition, the Partnership Agreement provides for the admission of one or more additional and successor General Partners in certain circumstances.

 

First, with the consent of any other General Partners and a majority-in-interest of the Limited Partners, any General Partner may designate one or more persons to be successor or additional General Partners. In addition, any General Partner may, without the consent of any other General Partner or the Limited Partners, (i) substitute in its stead as General Partner any entity which has, by merger, consolidation or otherwise, acquired substantially all of its assets, stock or other evidence of equity interest and continued its business, or (ii) cause to be admitted to the Partnership an additional General Partner or Partners if it deems such admission to be necessary or desirable so that the Partnership will be classified a partnership for Federal income tax purposes. Finally, a majority-in-interest of the Limited Partners may at any time remove the General Partner of the Partnership and elect a successor General Partner.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

(a)The General Partner manages all of the Partnership’s affairs. The transactions with the General Partner are primarily in the form of fees paid by the Partnership for services rendered to the Partnership, reimbursement of expenses, and the General Partner’s interest in the Partnership, as discussed in Item 11 and in the notes to the Partnership’s financial statements.

 

(b)The Partnership has no directors.

  

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Item 14. Principal Accountant Fees and Services

 

The following is a summary of fees paid to the Partnership’s principal independent registered public accounting firm for the years ended March 31:

 

   2011   2010 
         
Audit Fees  $85,887   $63,573 
Audit-related Fees   -    - 
Tax Fees   3,035    3,035 
All Other Fees   -    - 
           
TOTAL  $88,922   $66,608 

 

The Partnership has no Audit Committee. All audit services and any permitted non-audit services performed by the Partnership’s independent auditors are pre-approved by the General Partner.

  

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PART IV.

 

Item 15. Exhibits and Financial Statement Schedules

 

(a)(1)List of financial statements included in Part II hereof:

 

Report of Independent Registered Public Accounting Firm

Balance Sheets, March 31, 2011 and 2010

Statement of Operations for the years ended in March 31, 2011, 2010 and 2009

Statement of Partners’ Equity (Deficit) for the year ended in March 31, 2011, 2010 and 2009

Statement of Cash Flows for the years ended in March 31, 2011, 2010 and 2009

Notes to Financial Statements

 

(a)(2)List of Financial statement schedules:

 

Schedule III - Real Estate Owned by Local Limited Partnerships

 

(a)(3)Exhibits

 

3.1Agreement of Limited Partnership dated February 7, 2005 filed in the Post-Effective Amendment No. 1 on July 11, 2006 is hereby incorporated herein by reference as exhibit 3.1

 

31.1Certification of the Chief Executive Officer pursuant to Rule 13a-14 and 15d-14 (filed herewith)

 

31.2Certification of the Chief Financial Officer pursuant to Rule 13a-14 and 15d-14 (filed herewith)

 

32.1Section 1350 Certification of the Chief Executive Officer. (filed herewith)

 

32.2Section 1350 Certification of the Chief Financial Officer. (filed herewith)

 

99.2Financial Statements of Davenport Housing VII, L.P. for the years ended December 31, 2009 and 2010 together with Independent Auditors’ Report thereon; a significant subsidiary of the Partnership.
   
99.3 Financial Statements of Grove Village Limited Partnership for the years ended December 31, 2009 and 2008 together with Independent Auditors’ Report thereon; a significant subsidiary of the Partnership.

 

101.Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets at March 31, 2011 and 2010, (ii) the Statements of Operations for the years ended March 31, 2011, 2010 and 2009, (iii) the Statements of Cash Flows for the years ended March 31, 2011, 2010 and 2009 and (iv) the Notes to Financial Statements

 

Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

 

49
 

 

WNC Housing Tax Credit Fund VI, L.P., Series 13

Schedule III

Real Estate Owned by Local Limited Partnerships

March 31, 2011

 

     As of March 31, 2011   Initial Cost to Partnership      As of December 31, 2010 
Local Limited
Partnership Name
  Location  Total
Investment
in Local
Limited
Partnership
   Amount of
Investment
Paid
to Date
   Land   Building &
Improvements
   Cost
Capitalized
Subsequent
to
Acquisition
   Mortgage
Balances
of Local
Limited
Partnerships
   Land   Building,
Construction
in Progress
&
Equipment
   Accumulated
Depreciation
   Net Book
Value
 
                                            
909 4th YMCA, L.P.  Seattle, Washington  $508,000   $508,000   $-   $16,649,000   $-   $-   $-   $16,649,000   $4,090,000   $12,559,000 
                                                      
Crestview Housing, L.P.  Bigfork, Montana   1,973,000    1,885,000    215,000    2,474,000    35,000    749,000    250,000    2,474,000    188,000    2,536,000