[Federal Register Volume 68, Number 194 (Tuesday, October 7, 2003)]
[Notices]
[Pages 57941-57943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25338]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26199; 812-12988]


WNC Housing Tax Credit Fund VI, L.P., Series 11 and Series 12, 
and WNC National Partners, LLC; Notice of Application

October 1, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under sections 6(c) and 
6(e) of the Investment Company Act of 1940 (the ``Act'') granting 
relief from all provisions of the Act, except sections 37 through 53 of 
the Act and the rules and regulations under those sections.

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Applicants: WNC Housing Tax Credit Fund VI, L.P., Series 11 and WNC 
Housing Tax Credit Fund VI, L.P., Series 12 (each a ``Series,'' and 
collectively, the ``Fund''), and WNC National Partners, LLC (the 
``General Partner'').

Summary of the Application: Applicants request an order to permit each 
Series to invest in limited partnerships that engage in the ownership 
and operation of apartment complexes for low and moderate income 
persons.

Filing Date: The application was filed on July 23, 2003. Applicants 
have agreed to file an amendment to the application, the substance of 
which is reflected in this notice, during the notice period.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on October 24, 2003, and should be accompanied by proof of service 
on applicants in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 5th Street NW, Washington, DC 
20549-0609. Applicants, 17782 Skypark Circle, Irvine, California 92614.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, 
(202) 942-0634, or Mary Kay Frech, Branch Chief, (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Each Series was formed in 2003 as a California limited 
partnership. Each Series will operate as a ``two-tier'' partnership, 
i.e., each Series will invest as a limited partner in other limited 
partnerships (``Local Limited Partnerships''). The Local Limited 
Partnerships in turn will engage in the ownership and operation of 
apartment complexes expected to be qualified for low income housing tax 
credit under the Internal Revenue Code of 1986, as amended. The General 
Partner is a California limited liability company whose sole member is 
WNC & Associates, Inc. (``WNC & Associates''), a California 
corporation.
    2. The objectives of each Series are (a) to provide current tax 
benefits primarily in the form of low income housing credits which 
investors may use to offset their Federal income tax liabilities, (b) 
to preserve and protect capital, and (c) to provide cash distributions 
from sale or refinancing transactions.
    3. On July 21, 2003, the Fund filed a registration statement under 
the Securities Act of 1933, pursuant to which the Fund intends to offer 
publicly, in two series of offerings, 25,000 units of limited 
partnership interest (``Units'') at $1,000 per unit. The minimum 
investment will be five Units for most investors, although employees of 
the General Partner and/or its affiliates and/or investors in 
syndications previously sponsored by the General Partner and/or its 
affiliates may purchase a minimum of two Units. Purchasers of the Units 
will become limited partners (``Limited Partners'') of the Series 
offering the Units.
    4. A Series will not accept any subscriptions for Units until the 
requested exemptive order is granted or the Series receives an opinion 
of counsel that it is exempt from registration under the Act. 
Subscriptions for Units must be approved by the General Partner. Such 
approval will be conditioned upon representations as to suitability of 
the investment for each subscriber. The suitability standards provide, 
among other things, that investment in a Series is suitable only for an 
investor who either (a) has a net worth (exclusive of home, 
furnishings, and automobiles), of at least $35,000 and an annual gross 
income of at least $35,000, or (b) irrespective of annual income, has a 
net worth (exclusive of home, furnishings, and automobiles) of at least 
$75,000. Units will be sold only to investors who meet these 
suitability standards, or such more restrictive suitability standards 
as may be established by certain states for purchasers of Units within 
their respective jurisdictions. In addition, transfers of Units will be 
permitted only if the transferee meets the same suitability standards 
as had been imposed on the transferor Limited Partner.
    5. Although a Series' direct control over the management of each 
apartment complex will be limited, the Series' ownership of interests 
in Local Limited Partnerships will, in an economic sense, be tantamount 
to direct ownership of the apartment complexes themselves. A Series 
normally will acquire at least a 90% interest in the profits, losses, 
and tax credits of the Local Limited Partnerships. However, in certain 
cases, the Series may acquire a lesser interest in such partnerships. 
Each Local Limited Partnership's partnership agreement will provide 
that distributions of proceeds from a sale or refinancing of an 
apartment complex will be paid to a Series in the range of from 10% to 
50%.
    6. Each Series will have certain voting rights with respect to each 
Local Limited Partnership. The voting rights will include the right to 
dismiss and replace the local general partner on the basis of 
performance, to approve or disapprove a sale or refinancing of the 
apartment complex owned by such Local Limited Partnership, to approve 
or disapprove the dissolution of the Local Limited Partnership, and to 
approve or disapprove amendments to the Local

[[Page 57942]]

Limited Partnership agreement materially and adversely affecting the 
Series' investment.
    7. Each Series will be controlled by the General Partner, pursuant 
to a partnership agreement (the ``Partnership Agreement''). The Limited 
Partners, consistent with their limited liability status, will not be 
entitled to participate in the control of the business of the Series. 
However, a majority-in-interest of the Limited Partners will have the 
right to amend the Partnership Agreement (subject to certain 
limitations), to remove any General Partner and elect a replacement, 
and to dissolve the Series. In addition, under the Partnership 
Agreement, each Limited Partner is entitled to review all books and 
records of the Series.
    8. Applicants state that the Partnership Agreement and prospectus 
of the Series contain provisions designed to ensure fair dealing by the 
General Partner with the Limited Partners. Applicants also state that 
all compensation to be paid to the General Partner and its affiliates 
is specified in the Partnership Agreement and prospectus. Applicants 
believe that the fees and other forms of compensation that will be paid 
to the General Partner and its affiliates are fair and on terms no less 
favorable to the Series than would be the case if such arrangements had 
been made with independent third parties.
    9. During the offering and organizational phase, WNC Capital 
Corporation, an affiliate of the General Partner, will receive a 
dealer-manager fee and a nonaccountable underwriting expense allowance 
in amounts equal to 2% and 1%, respectively, of capital contributions. 
The General Partner or an affiliate will receive a nonaccountable 
organizational and offering expense reimbursement in an amount equal to 
3% of capital contributions. The General Partner has agreed to pay all 
organizational and offering expenses (excluding selling commissions, 
the dealer-manager fee, the nonaccountable underwriting expense 
allowance and the nonaccountable expense reimbursement).
    10. During the acquisition phase, each Series will pay WNC & 
Associates a fee equal to 7% of capital contributions for analyzing and 
evaluating potential investments in Local Limited Partnerships and for 
various other services. WNC & Associates will receive a nonaccountable 
acquisition expense reimbursement equal to 2% of capital contributions 
in consideration of which WNC & Associates will pay all acquisition 
expenses of each Series. Aggregate fees and expenses paid in connection 
with the organization of each Series, the offering of Units, and the 
acquisition of Local Limited Partnership interests by each Series will 
be limited by the Partnership Agreement and will comply with guidelines 
published by the North American Securities Administrators Association. 
These guidelines require that a specified percentage (generally 80%, 
but subject to reduction) of the aggregate Limited Partners' capital 
contributions to the Fund be committed to Local Limited Partnership 
interests.
    11. During the operating phase, the General Partner will receive 
0.1% of any cash available for distribution, and each Series may pay 
certain fees and reimbursements to the General Partner or its 
affiliates. An asset management fee will be payable for services 
related to the administration of the affairs of each Series and ongoing 
management of each Series. Other fees may be paid in consideration of 
property management services provided by the General Partner or its 
affiliates as the management and leasing agents for some of the 
apartment complexes. In addition, the General Partner and its 
affiliates generally will be allocated 0.1% of profits and losses of 
each Series for tax purposes and tax credits.
    12. During the liquidation phase, and subject to certain prior 
payments to the Limited Partners, each Series will pay the General 
Partner or its affiliates a fee equal to 1% of the sales price of the 
apartment complexes sold in which the General Partner or its affiliates 
have provided a substantial amount of services. The General Partner 
also will receive 10% of any additional sale or refinancing proceeds.
    13. All proceeds from a Series' public offering of Units initially 
will be placed in an escrow account with USbank (``Escrow Agent''). 
Pending release of offering proceeds to the Series, the Escrow Agent 
will deposit escrowed funds in short-term United States Government 
securities, securities issued or guaranteed by the United States 
Government, and certificates of deposit or time or demand deposits in 
commercial banks. Upon receipt of a prescribed minimum amount of 
capital contributions for a Series, funds in escrow will be released to 
the Series and held by it pending investment in Local Limited 
Partnerships.
    14. If more than one entity that the General Partner or its 
affiliates advises or manages may invest in a particular investment 
opportunity, the decision as to the entity that will be allocated the 
investment will be based upon such factors as the effect of the 
acquisition on diversification of each entity's portfolio, the 
estimated income tax effects of the purchase on each entity, the amount 
of funds of each entity available for investment, and the length of 
time such funds have been available for investment. Priority generally 
will be given to the entity having uninvested funds for the longest 
period of time. However, any entity that was formed to invest primarily 
in apartment complexes eligible for state low income housing tax 
credits (``state tax credits'') as well as for Federal low income 
housing tax credits will be given priority with respect to any 
investment that is eligible for state tax credits over entities which 
are not seeking to provide state tax credits.

Applicants' Legal Analysis

    1. Applicants believe that the Fund and its Series will not be 
``investment companies'' under sections 3(a)(1)(A) or 3(a)(1)(C) of the 
Act. If the Fund and its Series are deemed to be investment companies, 
however, applicants request an exemption under section 6(c) and 6(e) of 
the Act from all provisions of the Act, except sections 37 through 53 
of the Act and the rules and regulations under those sections.
    2. Section 3(a)(1)(A) of the Act provides that an issuer is an 
``investment company'' if it is or holds itself out as being engaged 
primarily, or proposes to engage primarily, in the business of 
investing, reinvesting, or trading in securities. Applicants believe 
that the Fund will not be an investment company under section 
3(a)(1)(A) because the Fund will be in the business of investing in and 
being beneficial owner of apartment complexes, not securities.
    3. Section 3(a)(1)(C) of the Act provides that an issuer is an 
``investment company'' if it is engaged or proposes to engage in the 
business of investing, reinvesting, owning, holding, or trading in 
securities, and owns or proposes to acquire ``investment securities'' 
having a value exceeding 40% of the value of such issuer's total assets 
(exclusive of Government securities and cash items). Applicants state 
that although the Local Limited Partnership interests may be deemed 
``investment securities,'' they are not readily marketable, cannot be 
sold without severe adverse tax consequences, and have no value apart 
from the value of the apartment complexes owned by the Local Limited 
Partnerships.
    4. Applicants believe that the two-tier structure is consistent 
with the purposes and criteria set forth in the Commission's release 
concerning two-tier real estate partnerships (the

[[Page 57943]]

``Release'').\1\ The Release states that investment companies that are 
two-tier real estate partnerships that invest in limited partnerships 
engaged in the development and operation of housing for low and 
moderate income persons may qualify for an exemption from the Act 
pursuant to section 6(c). Section 6(c) provides that the Commission may 
exempt any person from any provision of the Act and any rule 
thereunder, if, and to the extent that, such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Section 6(e) permits the Commission to require 
companies exempted from the registration requirements of the Act to 
comply with certain specified provisions of the Act as though the 
company were a registered investment company.
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    \1\ Investment Company Act Release No. 8465 (Aug. 9, 1974).
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    5. The Release lists two conditions, designed for the protection of 
investors, which must be satisfied by two-tier partnerships to qualify 
for the exemption under section 6(c). First, interests in the issuer 
should be sold only to persons for whom investments in limited profit, 
essentially tax-shelter, investments would not be unsuitable. Second, 
requirements for fair dealing by the general partner of the issuer with 
the limited partners of the issuer should be included in the basic 
organizational documents of the company.
    6. Applicants assert, among other things, that the suitability 
standards set forth in the application, the requirements for fair 
dealing provided by the Partnership Agreement, and pertinent 
governmental regulations imposed on each Local Limited Partnership by 
various Federal, state, and local agencies provide protection to 
investors in Units. In addition, applicants assert that the requested 
exemption is both necessary and appropriate in the public interest.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-25338 Filed 10-6-03; 8:45 am]
BILLING CODE 8010-01-P