SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 1O-K
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15 (d) of the Securities and
Exchange Act of 1934
For fiscal year ended December 31, 2006, 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 No. 2-68926.
DSI REALTY INCOME FUND VI, a California Limited Partnership
(Exact name of registrant as specified in governing instruments)
_________California___________________________95-3633566_____
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization identification
number
6700 E. Pacific Coast Hwy., Long Beach, California 9O8O3
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code-(562)493-8881
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 Interests
(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 Exchange Act.
Yes [ ] No [X]
Indicate by check mark, whether the registrant (l) 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 9O days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 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 or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The Registrant is a limited partnership and there is no voting stock. All
units of limited partnership sold to date are owned by non-affiliates of the
registrant. All such units were sold at $5OO.OO per unit.
DOCUMENTS INCORPORATED BY REFERENCE
Item 8. Registrant's Financial Statements for its fiscal year ended December 31,
2006, incorporated by reference to Form 10-K, Part II.
Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 2006, incorporated by reference to Form 10-K, Part III.
Item 12. Registration Statement on Form S-11, previously filed with the
Securities and Exchange Commission pursuant to Securities Act of 1933, as
amended, incorporated by reference to Form 10-K Part III.
Item 13. Registrant's Financial Statements for its fiscal year ended December
31, 2006, incorporated by reference to Form 10-K, Part III.
PART I
Item l. BUSINESS
Registrant, DSI Realty Income Fund VI (the "Partnership") is a
publicly-held limited partnership organized under the California Uniform Limited
Partnership Act pursuant to a Certificate and Agreement of Limited Partnership
(hereinafter referred to as "Agreement") dated March 27, 1981. The General
Partners are DSI Properties, Inc., a California corporation, Diversified
Investors Agency, a general partnership, whose current partners are Robert J.
Conway and Joseph W. Conway, brothers. The General Partners are affiliates of
Diversified Securities, Inc., a wholly-owned subsidiary of DSI Financial, Inc.
The General Partners provide similar services to other partnerships. Through its
public offering of Limited Partnership Units, Registrant sold twenty-three
thousand seven hundred fifty-three (23,753) units of limited partnership
interests aggregating Eleven Million Eight Hundred Seventy-Six Thousand Five
Hundred Dollars ($11,876,500). The General Partners have retained a one percent
(l%) interest in all profits, losses and distributions (subject to certain
conditions) without making any capital contribution to the Partnership. The
General Partners are not required to make any capital contributions to the
Partnership in the future. Registrant is engaged in the business of investing in
and operating mini-storage facilities with the primary objectives of generating,
for its partners, cash flow, capital appreciation of its properties, and
obtaining federal income tax deductions so that during the early years of
operations, all or a portion of such distributable cash may not represent
taxable income to its partners. Funds obtained by Registrant during the public
offering period of its units were used to acquire seven mini-storage facilities.
Registrant does not intend to sell additional limited partnership units. The
term of the Partnership is fifty years but it is anticipated that Registrant
will sell and/or refinance its properties prior to the termination of the
Partnership. The Partnership is intended to be self-liquidating and it is not
intended that proceeds from the sale or refinancing of its operating properties
will be reinvested. Registrant has no full time employees but shares one or more
employees with other publicly-held limited partnerships sponsored by the General
Partners. The General Partners are vested with authority as to the general
management and supervision of the business and affairs of Registrant. Limited
Partners have no right to participate in the management or conduct of such
business and affairs. An independent management company has been retained to
provide day-to-day management services with respect to all of the Partnership's
investment properties.
The average occupancy levels for each of the Partnership's six properties
(two of which have been combined) for the years ended December 31, 2006 and
2005 were as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Year Level for the Year
Ended Dec. 31, 2006 Ended Dec. 31, 2005
Vallejo, California 84% 82%
Santa Rosa, California
(both stages combined) 80% 78%
Arvada, Colorado 80% 75%
Federal Heights, Colorado 83% 82%
Colorado Springs, Colorado 84% 83%
Please refer to the discussion appearing elsewhere herein under the caption
Management's Discussion and Analysis of Financial Condition and Results of
Operations for a detailed analysis of the results of operations of the
Partnership's properties.
The business in which the Partnership is engaged is highly competitive.
Each of its mini-storage facilities is located in or near a major urban area,
and accordingly, competes with a significant number of individuals and
organizations with respect to both the purchase and sale of its properties and
for rentals. Generally, Registrant's business is not affected by the change in
seasons.
Item 1a. RISK FACTORS
Some Potential Losses Are Not Covered By Insurance.
We carry comprehensive liability, fire, extended coverage and rental loss
insurance on all of our Properties. We believe the policy specifications and
insured limits of these policies are adequate and appropriate. There are,
however, types of losses, such as lease and other contract claims and acts of
war that generally are not insured. We cannot be assured that we will be able
to renew insurance coverage upon expiration of our policies in an adequate
amount or at reasonable prices. In addition, insurance companies may no longer
offer coverage against certain types of losses, such as losses due to terrorist
acts and mold or, if offered, these types of insurance may be prohibitively
expensive. Should uninsured loss or a loss in excess from insured limits
occur, we could lose all or a portion of the capital we have invested in a
Property, as well as the anticipated future revenue from the Property. In
such an event, we might nevertheless remain obligated for any mortgage debt
or other financial obligations related to the Property. We cannot be assured
that material losses in excess of insurance proceeds will not occur in the
future. If any of our Properties were to experience catastrophic loss, it
could seriously disrupt our operations, delay revenue and result in large
expenses to repair or rebuild the Property. Such events could adversely
affect our cash flow and ability to make distributions to shareholders.
Because real estate is illiquid, we may not be able to sell Properties when
appropriate. Real estate investments generally, mini-storage facilities like
those that we own, in particular, often cannot be sold quickly. Consequently,
we may not be able to sell Properties when appropriate. This could adversely
affect our cash flow and ability to make distributions.
Our operating costs might rise, which might reduce our profitability and have
an adverse affect on our cash flow and our ability to make distributions to
shareholders.
We might face higher operating expenses as a result of rising costs generally,
and in particular as a result of increased costs following a terrorist attack
or other catastrophic event. For example, it might cost more in the future
for security, property/casualty and liability insurance, and property mainten-
ance. As noted above, when our insurance policies expire, the cost of premiums
for comparable coverage might be significantly higher after such an event when
it is time to renew our coverage, which could then increase our operating
expenses and reduce or profitability and our cash flow. Because of rising
costs in general, we might experience increases in our property maintenance
costs, such as for cleaning and electricity. If operating expenses increase
dramatically, the availability of other comparable mini-storage facilities in
our specific geographic markets might limit our ability to increase rents,
which could reduce our profitability (if operating expenses increase without a
corresponding increase in revenues) and limit our ability to make distributions.
We face significant competition.
We compete with numerous other owners of mini-storage facilities for tenants.
Some of these competitors have significantly greater financial resources than
we do. Such competition may reduce our ability to attract and keep and retain
tenants, and may increase vacancies, which increases may lower rental rates.
In addition, some of our competitors may be willing, because their properties
may have vacancy rates higher than those for our properties, to make space
available at lower prices than the space in our properties. We cannot be
assured that this competition will not adversely affect our cash flow and
ability to make distributions.
Our ability to make distributions is subject to various risks.
We have been paying quarterly distributions since inception. Our ability to
make distributions in the future will depend upon:
- Financial performance of our Property;
- The absence of significant expenditures relating to environmental
and regulator matters; and
- Our ability to attract and maintain tenants.
Certain of these matters are beyond our control and any significant difference
between our expectations and actual results could have a material adverse
affect on our cash flow and our ability to make distributions.
Changes in the law may adversely affect our cash flow.
The Properties are subject to various regulatory requirements, such as those
relating to the environment, fire and safety. Our failure to comply with
these requirements could result in the imposition of fines and damage awards.
Additionally, the cost to comply with any new or different regulation could
adversely affect our cash flow and our ability to make distributions. While
we believe that the Properties are currently in material compliance with all
such requirements, we cannot be assured that these requirements will not change
our that newly imposed requirements will not require significant unanticipated
expenditures.
Should we incur long-term indebtedness, it will subject us to additional risks.
Like other real estate companies, should we incur indebtedness on our proper-
ties, we will be subject to risks normally associated with debt financing,
such as the insufficiency of cash flow to meet required debt service payment
obligations and the inability to refinance existing indebtedness. If such
debt cannot be paid, refinanced or extended at maturity, in addition to our
failure to repay our debt, we may not be able to make distributions at expected
levels or at all. Furthermore, an increase in interest expense could adversely
affect our cash flow and ability to make distributions to Limited Partners.
If we should not meet our debt service obligations, any Properties securing
such indebtedness could be foreclosed on, which would have a material adverse
affect on our cash flow and ability to make distributions and, depending on
the number of Properties foreclosed on, could threaten our continued viability.
Our organizational documents do not contain any limitation on our ability to
incur debt secured by our Properties. Accordingly, we could place financing
on our Properties almost without restriction. If we were to take such action,
the debt service could adversely affect our cash flow and ability to make dis-
tributions and would include the risk of default on such indebtedness. There
are no plans to incur any long-term indebtedness on any of the Partnership's
Properties.
Environmental problems at the Properties are possible and may be costly.
Federal, state and local laws, ordinances and regulations may require a current
or previous owner or operator of real estate to investigate and clean up hazard-
ous or toxic substances or releases at such property. The owner or operator
may be forced to pay for property damage and for investigation and clean up
costs incurred by others in connection with environmental contamination. Such
laws typically impose clean-up responsibility and liability without regard to
whether the owner or operator knew of or caused the presence of contaminates.
Even if more than one person may have been responsible for the contamination,
each person covered by the environmental laws may be held responsible for all
the clean-up costs incurred. In addition, third parties may sue the owner or
operator of a site for damages and costs resulting from environmental contamin-
ation emanating from that site. These costs may be substantial and the presence
of such substances may adversely affect the owner's ability to sell or rent
such property or to borrow using such property as collateral.
Environmental laws that govern the presence, maintenance and removal of asbestos
require that owners or operators of buildings containing asbestos properly
manage and maintain the asbestos, notifying and train those who may come into
contact with asbestos and undertake special precautions, including removal or
other abatement, if asbestos would be disturbed during renovation or demolition
of a building. Such laws may impose fines and penalties on building owners or
operators who fail to comply with these requirements and may allow third parties
to seek recovery from owners or operators for personal injury associated with
exposure to asbestos fibers.
To the best of our knowledge, asbestos was not used in the construction of any
of the Properties. Tenants of the Partnership's mini-storage facilities are
prohibited from storing hazardous or toxic substances or from even bringing
hazardous or toxic substances onto the property. To the best knowledge of the
General Partners, there are no instances of storage or release of hazardous or
toxic substances at any of the Partnership's Properties. However, there can
be no guaranty that one or more tenants did not actually store such materials
or cause releases at any of the Partnership's Properties. If these conditions
should occur, we may need to undertake a target remediation program which could
become costly and could necessitate the temporary location of some or all of
the Properties' tenants or require rehabilitation of the affected property.
Americans With Disabilities Act compliance can be costly.
Under the Americans With Disabilities Act of 1990 ("ADA"), all public accom-
modations and commercial facilities, must meet certain Federal requirements
related to access and use by disabled persons. Compliance with the ADA re-
quirements could involve removal of structural barriers from certain disabled
persons' entrances, which could adversely affect our financial condition, and
results of operations. Other Federal, state or local laws may require modifi-
cations to or restrict further renovations of our Properties with respect to
such accesses. Although we believe that our Properties are currently in
material compliance with present requirements, non-compliance with the ADA or
similar or related laws or regulations could result in the United States govern-
ment imposing fines or private litigants being awarded damages against us. In
addition, we do not know whether existing requirements will change or whether
compliance with future requirements will require significant unanticipated
expenditures. Such costs may adversely affect our cash flow and ability to
make distributions.
Partnership's status as a limited partnership is dependent on compliance with
Federal income tax requirements.
Failure of the Partnership to be treated as a limited partnership would have
serious adverse consequences to holders of our Units. If the IRS were to
successfully challenge the tax status of the Partnership for Federal income
tax purposes, the Partnership would be treatable as a corporation. In such
event, the imposition of a corporate tax on the Partnership would reduce the
amount of cash available for distribution from such Partnership to the Limited
Partners. We do not anticipate such a challenge.
We are dependent upon our key personnel whose continued service is not guar-
anteed. We are dependent upon our independent property manager for experience
in managing mini-storage facilities. While we believe we could find replace-
ments for these key personnel, loss of their services could adversely affect
our operations.
Item 1b. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Registrant owns a fee interest in six mini-storage facilities, none of
which are subject to long-term indebtedness. Please refer to the discussion
under Business for a discussion of the average occupancy rate for each property
owned by the Partnership. The following table sets forth information regarding
properties owned by the Partnership.
2006 2005
Location Size of Net Rentable No. of Completion Avg. Rent
Parcel Area Rental Units Date Per. Sq. Ft.
Vallejo, CA 3.10 acres 57,845 512 6/9/81 10.66 9.83
Arvada, CO 3.75 acres 65,535 662 1/4/83 8.88 7.50
Federal
Heights, CO 2.39 acres 39,892 467 10/15/83 9.35 8.59
Santa
Rosa, CA 3.38 acres 72,163 626 9/10/83 10.74 9.77
Colorado
Springs, CO 3.50 acres 60,566 692 11/15/83 6.59 5.77
Item 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Registrant, a publicly-held limited partnership, sold 23,753 limited
partnership units during its offering and as of December 31, 2006 had 811
limited partners of record. There is no intention to sell additional limited
partnership units nor is there a market for these units.
Average cash distributions of $10.81 per Limited Partnership Unit were
declared and paid each quarter for the year ended December 31, 2006 and $58.69
per Limited Partnership Unit were declared and paid each quarter for the year
ended December 31, 2005 and $13.39 per Limited Partnership Unit were declared
and paid each quarter for the year ended December 31, 2004. It is Registrant's
expectations that distributions will continue to be paid in the future.
Item 6. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
---- ---- ---- ---- ----
TOTAL REVENUES,
GAIN ON SALE AND
OTHER
INCOME $2,698,289 $6,921,126 $2,619,017 $2,787,298 $2,843,760
TOTAL
EXPENSES 1,421,223 1,566,370 1,357,021 1,547,484 1,777,129
---------- ---------- ---------- ---------- ----------
NET
INCOME $1,277,066 $5,354,756 $1,261,996 $1,239,814 $1,066,631
========== ========== ========== ========== ==========
TOTAL
ASSETS $2,447,719 $2,244,359 $2,638,552 $2,501,244 $2,527,467
========== ========== ========== ========== ==========
CASH FLOWS FROM (USED IN):
OPERATING $1,214,408 $1,044,965 $1,255,803 $1,358,369 $1,522,050
INVESTING (827) 4,573,632 (13,203) - -
FINANCING (1,072,786) (5,738,982) (1,297,000) (1,228,042) (1,533,059)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 53.23 $ 223.08 $ 52.60 $ 51.67 $ 44.46
---------- ---------- ---------- ---------- ----------
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 43.23 $ 234.76 $ 53.54 $ 51.18 $ 63.90
=========== ========== ========== ========== ==========
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Critical Accounting Policies
Revenue recognition - Revenue is recognized using the accrual method
based on contractual amounts provided for in the lease agreements, which
approximates recognition on a straight-line basis. The term of the lease
agreements is usually less than one year.
RESULTS OF OPERATIONS
2006 COMPARED TO 2005
Total revenues increased from $2,389,618 in 2005 to $2,697,518 in 2006, while
total expenses decreased from $1,460,842 to $1,421,223 and other income de-
creased from $808 to $771, resulting in an increase in income from operations
before discontinued operations from $929,584 to $1,277,066 and income from
discontinued operations decreased from $4,425,172 to $0 resulting in a decrease
in net income from $5,354,756 to $1,277,066. Rental revenues increased pri-
marily as a result of higher occupancy and unit rental rates. Occupancy levels
for the Partnership's six mini-storage facilities averaged 84.8% for the year
2006 as compared to 80.2% for 2005. The approximate $79,900 (8.7%) decrease
in operating expenses was due primarily to decreases in advertising, repairs
and maintenance, purchase of locks and packing materials, salaries and wages
ant truck insurance expenses. General and administrative expenses increased
approximately $13,400 (5.7%) primarily as a result of higher legal and pro-
fessional, bank and credit card fee and postage expenses. The General Partners'
incentive management fee which is based on cash available for distribution,
increased as a result of the increase in net cash provided by operating activ-
ities. Property management fees, which are based on revenues, increased as a
result of the increase in rental revenue.
2005 COMPARED TO 2004
Total revenues increased from $2,309,750 in 2004 to $2,389,618 in 2005, while
total expenses increased from $1,225,237 to $1,460,842 and other income de-
creased from $840 to $808, resulting in a decrease in income from operations
before discontinued operations from $1,085,353 to $929,584 and income from
discontinued operations increased from $176,643 to $4,425,172 resulting in an
increase in net income from $1,261,996 to $5,354,756. Rental revenues increased
primarily as a result of higher occupancy and unit rental rates. Occupancy
levels for the Partnership's six mini-storage facilities averaged 80.2% for
the year 2005 as compared to 79.2% for 2004. The approximate $152,000 (19.7%)
decrease in operating expenses was due primarily to increases in advertising,
repairs and maintenance, purchase of locks and packing materials, salaries and
wages and truck insurance and maintenance expenses. General and administrative
expenses increased approximately $51,700 (28.0%) primarily as a result of higher
legal and professional, equipment and computer lease and office supplies and
printing expenses. The General Partners' incentive management fee which is
based on cash available for distribution, decreased as a result of the decrease
in net cash provided by operating activities. Property management fees, which
are based on revenues, increased as a result of the increase in rental
revenue.
On June 10, 2005, a purchase agreement was signed with Station Casinos, where-
by they would acquire the Partnerships' mini-storage facility in Las Vegas,
Nevada for a gross sales price of $5,400,000. The mini-storage facility was
sold together with the adjacent mini-storage facility owned by DSI Realty
Income Fund IV, for a combined sales price of $10 million. The sales price
was allocated to the properties using the relatively fair values. The relative
fair values were determined by the general partners using historical net income
from operations. Escrow closed on August 1, 2005 and sale proceeds were trans-
ferred to the Partnership on August 2, 2005. On August 8, 2005 proceeds in the
amount of $4,545,612 was distributed to the Limited Partners. The gain on sale
of the facility was $4,343,581.
Operating expenses consists mainly of expenses such as yellow pages and other
advertising, utilities, repairs and maintenance, real estate taxes, salaries
and wages and their related expenses. General and administrative expenses
consist mainly of expenses such as legal and professional, office supplies,
accounting services and computer expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased approximately
$169,400 (16.2%) in 2006 compared to 2005 primarily due to the increase in
net income for continuing operations before depreciation, gain on sale and
incentive management fee payable to general partners, partially offset by an
increase in other assets. Net cash provided by operating activities decreased
approximately $210,800 (16.8%) in 2005 compared to 2004 primarily due to the
decrease in net income from continuing operations before depreciation, gain on
sale and incentive management fee payable to general partners.
Cash provided by (used in) investing activities, includes proceeds from the
sale of the property located in Las Vegas, Nevada in 2005 and acquisitions
of property for the Partnership's mini storage properties in 2006, 2005 and
2004. The Partnership has no material commitments for capital expenditures.
Cash used in financing activities, as set forth in the statements of cash
flows, has consisted solely of cash distributions to partners in 2006, 2005,
and 2004 and payments on capital lease obligations starting 2004. Special
distributions of 1.5%, 0.5%, and 1.5%, of capital contributed by Limited Part-
ners were declared and paid on December 15, 2006, 2005, and 2004, respectively.
The General Partners plan to continue their policy of funding the continuing
improvement and maintenance of Partnership properties with cash generated
from operations. The Partnership anticipates that cash flows generated
from operations of the Partnership's rental real estate operations will be
sufficient to cover operating expenses and distribtuions for the next twelve
months and beyond.
The General Partners are not aware of any environmental problems which
could have a material adverse effect upon the financial position of
the Partnership.
LONG-TERM LIABILITIES, CONTRACTUAL OBLIGATIONS, AND OFF-BALANCE SHEET
ARRANGEMENTS
Long-Term Liabilities and Contractual Obligations. The following table summ-
arizes our long-term liabilities, material obligations and commitments to make
future payments under certain contracts, including long-term debt obligations,
purchase commitments and operating leases.
Payments due by period
Less More
than 1 1-3 3-5 than 5
Contractual Obligations Total year years years years
Long-Term Debt - - - - -
Capital (Finance) Lease 86,438 44,948 41,490 - -
Purchase Obligations - - - - -
Other Long-Term Liablities - - - - -
Reflected on the Registrant's
Balance Sheet under the GAAP
of the primary financial
Statements
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 2006 and
2005 was a follows:
2006 Quarter Ended
------------------
March 31 June 30 September 30 December 31
Total revenues $638,104 $640,673 $688,863 $729,878
Net income 301,562 273,297 319,416 382,791
Net income per limited
partnership unit $ 12.57 $ 11.39 $ 13.31 $ 15.96
Weighted average number
of limited partnership
units outstanding 23,753 23,753 23,753 23,753
2005 Quarter Ended
------------------
March 31 June 30 September 30 December 31
Total revenues $662,791 $674,227 $4,963,333 $619,967
Net income 258,004 271,556 4,583,350 241,846
Net income per limited
partnership unit $ 10.75 $ 11.32 $ 190.93 $ 10.08
Weighted average number
of limited partnership
units outstanding 23,753 23,753 23,753 23,753
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto as Exhibit l is the information required to be set forth as
Item 8, Part II hereof.
See the financial statements
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Item 9a. CONTROLS AND PROCEDURES
The Partnership evaluated the effectiveness of its disclosure controls
and procedures. This evaluation was performed by the Partnership's
Controller with the assistance of the Partnership's President and the
Chief Executive Officer. These disclosure controls and procedures are
designed to ensure that the information required to be disclosed by the
Parnership in its periodic reports filed with the Securities and Exchange
Commission (the "Commission") is recorded, processed summarized and
reported, within the time periods specified by the Commission's rules
and forms, and that the information is communicated to the certifying
officers on a timely basis. Based on this evaluation, the Partnership
concluded that its disclosure controls and procedures were effective.
There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date of their evaluation.
Item 9b. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S
GENERAL PARTNER
The General Partners of Registrant are the same as when the Partnership was
formed, i.e., DSI Properties, Inc., a California corporation, and Diversified
Investors Agency. As of December 31, 2006, Messrs. Robert J. Conway and Joseph
W. Conway, each of whom own approximately 48.4% of the issued and outstanding
capital stock of DSI Financial, Inc., a California corporation, are the sole
partners of Diversified Investor Agency. Messrs. Robert J. and Joseph W. Conway,
together with Mr. Joseph W. Stok, currently comprise the entire Board of
Directors of DSI Properties, Inc.
Mr. Robert J. Conway is 73 years of age and is a licensed California real
estate broker, and since 1965 has been President and a member of the Board of
Directors of Diversified Securities, Inc., and since 1973 President, Chief
Financial Officer and a member of the Board of Directors of DSI Properties, Inc.
Mr. Conway received a Bachelor of Science Degree from Marquette University with
majors in Corporate Finance and Real Estate.
Mr. Joseph W. Conway is age 78 and has been Executive Vice President,
Treasurer and a member of the Board of Directors of Diversified Securities, Inc.
since 1965 and since 1973 the Vice President, Treasurer and member of the Board
of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Arts
Degree from Loras College with a major in Accounting.
Mr. Joseph W. Stok is age 84 and has been a member of the Board of
Directors of DSI Properties, Inc. since 1994, a Vice President of Diversified
Securities, Inc. since 1973, and an Account Executive with Diversified
Securities, Inc. since 1967.
Item 11. EXECUTIVE COMPENSATION (MANAGEMENT REMUNERATION AND TRANSACTIONS)
The information required to be furnished in Item 11 of Part III is
contained in Registrant's Financial Statements for its fiscal year ended
December 31, 2006, which together with the report of its independent auditors,
Deloitte & Touche LLP, attached hereto as Exhibit 1 and incorporated herein by
this reference. In addition to such information:
(a) No annuity, pension or retirement benefits are proposed to be paid by
Registrant to any of the General Partners or to any officer or
director of the corporate General Partner;
(b) No standard or other arrangement exists by which directors of the
Registrant are compensated;
(c) The Registrant has not granted any option to purchase any of its
securities; and
(d) The Registrant has no plan, nor does the Registrant presently propose
a plan, which will result in any remuneration being paid to any
officer or director upon termination of employment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Fund's limited partnership units as of December 31, 2006 of
(i) each person known to beneficially own more than 5% of the Fund's limited
partnership units(2), (ii) each General Partner of the Fund.
TITLE OF NAME OF NUMBER OF LP UNITS PERCENT
CLASS BENEFICIAL OWNER BENEFICIALLY HELD(1) OF CLASS
- -------- ----------------- -------------------- --------
Limited
Partnership
Interest Robert J. Conway 1,153 - Direct 4.8
Limited
Partnership
Interest Joseph W. Conway 272 - Direct 1.1
(1) Unless otherwise indicated, the address for each listed director or officer
is c/o 6700 E. Pacific Coast Hwy. #150. As used in this table, "beneficial
ownership" means the sole or shared power to vote or direct the voting
or to dispose or direct the disposition of any security. For purposes of
this table, a person is deemed to be the beneficial owner of units acquired
before the date of this filing.
(2) As of December 31, 2006, no person of record owned more than 5% of the
limited partnership units of Registrant, nor was any person known by Regis-
trant to own of record and beneficiary, or beneficially only, more than
5% thereof. The balance of the information required to be furnished in
Item 12 of Part III is contained in Registrant's Registration Statement
on Form S-11, previously filed pursuant to the Securities Act of 1933,
as amended, and which is incorporated herein by this reference. The
only change to the information contained in said Registration Statement
on Form S-11 is the fact that Messrs. Benes and Blakley have retired and
Messrs. Robert J. Conway and Joseph W. Conway's equity interest in DSI
Financial, Inc., parent of DSI Properties, Inc., has increased. Please
see information contained in Item 10 hereinabove.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be furnished in Item 13 of Part III is
contained in Registrant's Financial Statements for its fiscal year ended
December 31, 2006 attached hereto as Exhibit l and incorporated herein by this
reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees for professional services rendered by Deloitte & Touche
LLP for the audit of the Partnership's annual financial statements and for re-
view of the financial statements included in the Partnership's Quarterly Reports
on Form 10-Q for 2006 were $31,240 and for 2005 were $29,640.
Tax Fees
The aggregate fees for professional services rendered by Deloitte Tax
LLP for tax compliance, tax advice and tax planning for 2006 were $27,675
and 2005 were $22,750. Most of the fees related to preparation of the Partner-
ship's tax returns.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(l) Attached hereto and incorporated herein by this reference as Exhibit
l are Registrant's Financial Statements and Supplemental Schedule for
its fiscal year ended December 31, 2006, together with the reports of
its independent auditors, Deloitte & Touche. See Index to Financial
Statements and Supplemental Schedule.
(a)(2) Attached hereto and incorporated herein by this reference as Exhibit
2 is Registrant's letter to its Limited Partners regarding its Annual
Report for its fiscal year ended December 31, 2006.
(b) There have been no form 8-K's filed during the last quarter of the
period covered by this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DSI REALTY INCOME FUND VI,
a California Limited Partnership
by: DSI Properties, Inc., a
California corporation, as
General Partner
/s/ ROBERT J. CONWAY
By_____________________________ Dated: March 30, 2007
ROBERT J. CONWAY, President
(Chief Executive Officer, Chief
Financial Officer, and Director)
/s/ JOSEPH W. CONWAY
By____________________________ Dated: March 30, 2007
JOSEPH W. CONWAY (Executive
Vice President and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
DSI REALTY INCOME FUND VI,
a California Limited Partnership
by: DSI Properties, Inc., a
California corporation, as
General Partner
/s/ ROBERT J. CONWAY
By:__________________________ Dated: March 30, 2007
ROBERT J. CONWAY, President,
Chief Executive Officer, Chief
Financial Officer, and Director
/s/ JOSEPH W. CONWAY
By___________________________ Dated: March 30, 2007
JOSEPH W. CONWAY
(Executive Vice President
and Director)
DSI REALTY INCOME FUND VI
CROSS REFERENCE SHEET
FORM 1O-K ITEMS TO ANNUAL REPORT
PART I, Item 3. There are no legal proceedings pending or threatened.
PART I, Item 4. Not applicable.
PART II, Item 5. Not applicable.
PART II, Item 6. The information required is contained in Registrant's Financial
Statements for its fiscal year ended December 31, 2006, attached as Exhibit l to
Form 10-K.
PART II, Item 8. See Exhibit l to Form 10-K filed herewith.
PART II, Item 9. Not applicable.
EXHIBIT l
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
2006 2005 2004 2003 2002
---- ---- ---- ---- ----
TOTAL REVENUES,
GAIN ON SALE AND
OTHER
INCOME $2,698,289 $6,921,126 $2,619,017 $2,787,298 $2,843,760
TOTAL
EXPENSES 1,421,223 1,566,370 1,357,021 1,547,484 1,777,129
---------- ---------- ---------- ---------- ----------
NET
INCOME $1,277,066 $5,354,756 $1,261,996 $1,239,814 $1,066,631
========== ========== ========== ========== ==========
TOTAL
ASSETS $2,447,719 $2,244,359 $2,638,552 $2,501,244 $2,527,467
========== ========== ========== ========== ==========
CASH FLOWS FROM (USED IN):
OPERATING $1,214,408 $1,044,965 $1,255,803 $1,358,369 $1,522,050
INVESTING (827) 4,573,632 (13,203) - -
FINANCING (1,072,786) (5,738,982) (1,297,000) (1,228,042) (1,533,059)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 53.23 $ 223.08 $ 52.60 $ 51.67 $ 44.46
---------- ---------- ---------- ---------- ----------
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 43.23 $ 234.76 $ 53.54 $ 51.18 $ 63.90
=========== ========== ========== ========== ==========
The following are reconciliations between the net income and partners' equity
per the financial statements and the Partnership's income tax return for
the year ended December 31, 2006:
Net Partners'
Income Equity
Per financial statements $ 1,277,066 $ 2,033,512
Excess book depreciation 36,735 169,183
Accrued revenue 10,166
Accrued incentive management fee (16,219)
Acquisition costs capitalized
for tax purposes 134,384
Deferred rental revenues (50,032) 9,088
Accrued expenses (13,401) 13,599
Accrued property taxes (88,000)
Fixed asset adjustment 6,030 (39,874)
Excess book distributions 209,938
Prior year's miscellaneous
tax adjustments (2,000)
Tax expense adjustment (17,625)
Gain on sale of land (18,894) (18,894)
Bad debt allowance 22,716 22,716
----------- -----------
Per Partnership's income tax return $ 1,261,489 $ 2,437,599
=========== ===========
Taxable income per limited
partnership unit $ 52.58
===========
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets as of December 31, 2006 and 2005 F-2
Statements of Income for Each of the Three
Years Ended December 31, 2006 F-3
Statements of Changes in Partners' Equity (Deficit) for
Each of the Three Years Ended December 31, 2006 F-4
Statements of Cash Flows for Each of the Three Years
Ended December 31, 2006 F-5
Notes to Financial Statements as of December 31, 2006
and 2005, and for Each of the Three Years Ended
December 31, 2006 F-6
SUPPLEMENTAL SCHEDULE:
Schedule III - Real Estate and Accumulated Depreciation F-10
as of December 31, 2006
NOTE:
Financial statements and schedules not listed above are omitted because of the
absence of conditions under which they are required or because the
information is included in the financial statements named above, or in the
notes thereto.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Partners of
DSI Realty Income Fund VI:
We have audited the accompanying balance sheets of DSI Realty Income Fund VI,
a California Limited Partnership (the "Partnership") as of December 31, 2006
and 2005, and the related statements of income, changes in partners'
equity (deficit), and cash flows for each of the three years in the period
ended December 31, 2006. Our audits also included the supplemental schedule
listed in the Index at Item 15. These financial statements and the supplemental
schedule are the responsibility of the Partnership's management. Our respons-
ibility is to express an opinion on these financial statements and supplemental
schedule 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. The Partnership
is not required to have, nor were we engaged to perform, an audit of its in-
ternal 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, 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, such financial statements present fairly, in all material
respects, the financial position of DSI Realty Income Fund VI at December 31,
2006 and 2005, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2006, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such supplemental schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ Deloitte & Touche LLP
_______________________________________
Deloitte & Touche LLP
Los Angeles, California
March 30, 2007
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
- --------------------------------------------------------------------------------
ASSETS 2006 2005
CASH AND CASH EQUIVALENTS $ 622,755 $ 481,960
PROPERTY, Net (Note 3) 1,618,705 1,665,658
OTHER ASSETS 206,259 96,741
----------- -----------
TOTAL $ 2,447,719 $ 2,244,359
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Distribution due to partners(Note 4) $ 209,938 $ 209,938
Incentive management fee payable to
general partners (Note 4) 13,556
Property management fees payable(Note 7) 12,564 12,633
Customer deposits and other liabilities 110,638 97,933
Capital lease obligations (Notes 3 and 7) 81,067 116,527
----------- -----------
Total liabilities 414,207 450,587
----------- -----------
PARTNERS' EQUITY (DEFICIT)(Note 4):
General partners (70,851) (73,249)
Limited partners (23,753 limited
partnership units outstanding
at December 31, 2006 and 2005) 2,104,363 1,867,021
------------ -----------
Total partners' equity 2,033,512 1,793,772
------------ -----------
TOTAL $ 2,447,719 $2,244,359
============ ===========
See notes to financial statements.
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
STATEMENTS OF INCOME
THREE YEARS ENDED DECEMBER 31, 2006
- --------------------------------------------------------------------------------
2006 2005 2004
REVENUES:
Rental $2,697,518 $2,389,618 $2,309,750
---------- ---------- ----------
EXPENSES:
Depreciation 47,780 50,426 6,106
Operating 843,585 923,477 771,486
General and administrative 249,623 236,245 184,556
Interest 6,030 8,086
General partners' incentive
management fee (Note 4) 117,598 99,409 125,589
Property management
fee(Note 7) 156,607 143,199 137,500
---------- ---------- ---------
Total expenses 1,421,223 1,460,842 1,225,237
---------- ---------- ---------
OPERATING INCOME 1,276,295 928,776 1,084,513
OTHER INCOME -
Interest income 771 808 840
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE DISCONTINUED OPERATIONS 1,277,066 929,584 1,085,353
DISCONTINUED OPERATIONS (Note 5): ---------- ---------- ----------
Net income from
discontinued operations - 81,591 176,643
Net gain on sale of
discontinued operations - 4,343,581 -
---------- ---------- ----------
Total income from discontinued
operations 4,425,172 176,643
---------- ---------- ----------
NET INCOME $1,277,066 $5,354,756 $1,261,996
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
Limited partners $1,264,295 $5,298,727 $1,249,376
General partners 12,771 56,029 12,620
---------- ---------- ----------
TOTAL $1,277,066 $5,354,756 $1,261,996
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT (Notes 2 and 4) $ 53.23 $ 223.08 $ 52.60
========== ========== =========
See notes to financial statements.
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
THREE YEARS ENDED DECEMBER 31, 2006
- --------------------------------------------------------------------------------
General Limited
Partners Partners Total
BALANCE JANUARY 1, 2004 $(72,341) $ 2,166,772 $ 2,094,431
Net income 12,620 1,249,376 1,261,996
Distributions (12,845) (1,271,655) (1,284,500)
------- ----------- -----------
BALANCE DECEMBER 31, 2004 (72,566) 2,144,493 2,071,927
Net income 56,029 5,298,727 5,354,756
Distributions (56,712) (5,576,199) (5,632,911)
------- ----------- -----------
BALANCE DECEMBER 31, 2005 (73,249) 1,867,021 1,793,772
Net income 12,771 1,264,295 1,277,066
Distributions (10,373) (1,026,953) (1,037,326)
------- ----------- -----------
BALANCE DECEMBER 31, 2006 $(70,851) $2,104,363 $2,033,512
======= =========== ===========
See notes to financial statements.
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 2006
- --------------------------------------------------------------------------------
2006 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,277,066 $ 5,354,756 $ 1,261,996
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 47,780 54,010 8,189
Gain on sale of
discontinued operations (4,343,581)
Changes in assets and liabilities:
Other assets (109,518) (10,253) (11,578)
Incentive management fee payable
to general partners (13,556) (23,777) 4,790
Property management fees payable (69) (74) (345)
Customer deposits and other liabilities 12,705 13,884 (7,249)
---------- ---------- ---------
Net cash provided by
operating activities 1,214,408 1,044,965 1,255,803
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to property (827) (31,853) (13,203)
Proceeds from the sale of
discontinued operations 4,605,485
---------- ---------- ---------
Net cash (used in) provided by
investing activities (827) 4,573,632 (13,203)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES -
Distributions to partners (1,037,326) (5,692,893) (1,284,500)
Payments on capital
lease obligations (35,460) (46,089) (12,500)
---------- ---------- ----------
Net cash used in financing activities (1,072,786) (5,738,982) (1,297,000)
---------- ---------- ----------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS 140,795 (120,385) (54,400)
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 481,960 602,345 656,745
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 622,755 $ 481,960 $ 602,345
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION -
Cash paid for interest $ 6,030 $ 8,695 $
=========== =========== ===========
NON CASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of trucks
utilizing capital leases $ - $ - $ 175,117
=========== ========== ===========
Distribution due partners
included in partners' equity $ 209,938 $ 209,938 $ 269,920
=========== ========== ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2006 AND 2005,
AND FOR EACH OF THE THREE YEARS
ENDED DECEMBER 31, 2006
1. GENERAL
DSI Realty Income Fund VI, a California Limited Partnership (the
"Partnership"), has two general partners (DSI Properties, Inc. and
Diversified Investors Agency) and limited partners owning 23,753 limited
partnership units, which were purchased for $500 per unit. The general
partners have made no capital contributions to the Partnership and are not
required to make any capital contributions in the future. The Partnership
has a maximum life of 50 years and was formed on March 27, 1981, under the
California Uniform Limited Partnership Act for the primary purpose of
acquiring and operating real estate.
The Partnership owns six mini-storage facilities located in Vallejo,
California; Arvada, Federal Heights and Colorado Springs, Colorado;
and two in Santa Rosa, California. All facilities were purchased from
Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership.
Dahn is affiliated with other partnerships in which DSI Properties,
Inc. is a general partner (see Note 7).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - The Partnership classifies its short-term
investments purchased with an original maturity of three months or less as
cash equivalents.
Property and Depreciation - Property is recorded at cost and is composed
primarily of mini-storage facilities. Depreciation is provided using
the straight-line method over an estimated useful life of 20 years for the
facilities. Building improvements are depreciated over a five year period.
Property under capital leases is amortized over the lesser of the lives of
the respective leases or the estimated useful lives of the assets.
Income Taxes - No provision has been made for income taxes in the
accompanying financial statements. The taxable income or loss of the
Partnership is allocated to each partner in accordance with the terms of
the Agreement of Limited Partnership. Each partner's tax status, in turn,
determines the appropriate income tax for its allocated share of the
Partnership's taxable income or loss. The net difference between the basis
of the Partnership's assets and liabilities for federal income tax purposes
and as reported for financial statement purposes for the year ended
December 31, 2006 is $15,577.
Revenues - Rental revenue is recognized using the accrual method based
on contractual amounts provided for in the lease agreements, which
approximates recognition on a straight-line basis. The term of the lease
agreements is usually less than one year.
Net Income per Limited Partnership Unit - Net income per limited
partnership unit is computed by dividing net income allocated to the
limited partners by the weighted average number of limited partnership
units outstanding during each year.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the Partnership to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contin-
gent 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 differ from those estimates.
Impairment of Long-Lived Assets - The Partnership regularly reviews long-
lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
If the sum of the expected undiscounted future cash flow is less than the
carrying amount of the asset,the Partnership would recognize an impairment
loss to the extent the carrying value exceeded the fair value of the
property. No impairment losses were required in 2006, 2005, or 2004.
Fair Value of Financial Instruments - For all financial instruments,
including cash and cash equivalents, other assets, distributions due to
partners, incentive management fee payable to general partners, property
management fee payable, and customer deposits and other liabilities, carry-
ing values approximate fair values because of the short maturity of those
instruments. The carrying value of the capital lease obligations approx-
imates fair value because the terms of the instrument are similar to terms
available to the Partnership for similar types of leasing agreements.
Concentrations of Credit Risk - Financial instruments that potentially
subject the Partnership to concentrations of credit risk consist primarily
of cash and cash equivalents and rent receivables. The Partnership places
its cash and cash equivalents with high credit quality institutions.
Recent Accounting Pronouncement - In September 2006, the Financial Account-
ing Standards Board issued Statement of Financial Accounting Standards
Board issued Statement of Financial Acounting Standards ("SFAS") No. 157,
"Fair Value Measurements." SFAS No. 157 defines fair value, establishes
a framework for measureing fair value and expands disclosures about fair
value measurements. The Partnership is required to adopt SFAS No. 157 for
fiscal year 2008 and does not expect its adoption to have a material effect
on the Partnership's results of operations or financial condition.
3. PROPERTY
The total cost of property and accumulated depreciation is as follows
as of December 31:
2006 2005
Land $ 1,512,000 $ 1,512,000
Buildings and improvements 7,515,836 7,515,009
Rental trucks under capital leases 161,181 161,181
----------- -----------
Total 9,189,017 9,188,190
Less accumulated depreciation (7,570,312) (7,522,532)
----------- ----------
Property - net $ 1,618,705 $ 1,665,658
=========== ===========
Depreciation expense of $41,152 and $41,152 was recorded on the rental
trucks under capital leases in 2006 and 2005, respectively.
The Partnership leases certain vehicles under agreements that meet the
criteria for classification as capital leases which expire in 2008.
Future minimum lease payments under these capital leases at December 31,
2006, are summarized as follows:
2007 $ 44,948
2008 41,490
-------
Total future minimum payment obligations 86,438
Less interest portion 5,371
-------
Present value of net minimum lease payments $ 81,067
=======
4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE
MANAGEMENT FEE
Under the Agreement of Limited Partnership, the general partners are to be
allocated 1% of the net profits or losses from operations, and the
limited partners are to be allocated the balance of the net profits or loss
es from operations in proportion to their limited partnership interests.
The general partners are also entitled to receive a percentage, based
on a predetermined formula, of any cash distribution from the sale,
other disposition, or refinancing of the project.
In addition, the general partners are entitled to receive an incentive
management fee for supervising the operations of the Partnership. The
fee is to be paid in an amount equal to 9% per annum of the cash available
for distribution on a cumulative basis, calculated as cash generated from
operations less capital expenditures.
5. DISCONTINUED OPERATIONS
In accordance with SFAS No. 144, Business Combinations, the net income
and the net gain on disposition of a mini-storage facility located in Las
Vegas, Nevada, which was sold on August 1, 2005, is reflected in the state-
ment of income as discontinued operations for all periods presented. The
mini-storage facility was sold for a sales price of$5,400,000. The
mini-storage facility was sold together with an adjacent mini-storage
facility owned by the Partnership, for a combined sales price of
$10 million. The sales price was allocated to the properties using
the relative fair values. The relative fair values were determined
by the general partners using historical net income from operations.
In August 2005, the proceeds in the amount of $4,545,612 were distributed
to the limited partners. The net gain on the sales of the facility is
$4,343,581, which is net of fees paid to the general partners in accord-
ance with the partnership agreement amounting to $788,500.
The following table summarizes the revenue and expense components that
comprise discontinued operations.
2005 2004
Revenue - rental $ 187,119 $ 308,423
---------- ----------
Expenses:
Depreciation 3,584 2,083
Operating 74,460 96,233
General and administrative 14,957 15,393
Interest 609
Property management fee 11,918 18,071
---------- ----------
Total expenses 105,528 131,780
---------- ----------
Income from
discontinued operations 81,591 176,643
Gain on sale of
discontinued operations 4,343,581
---------- ----------
Total income from
discontinued operations $4,425,172 $ 176,643
========== ==========
6. BUSINESS SEGMENT INFORMATION
The following disclosure about segment reporting of the Partnership is
made in accordance with the requirements of SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." The Partnership
operates in a single segment; storage facility operations, under which
the Partnership rents its storage facilities to its customers on a need
basis and charges rent on a predetermined rate.
7. RELATED-PARTY TRANSACTIONS
The partnership has entered into management agreements with Dahn to
operate their mini-storage facility. The management provides for a
management fee equal to 6% of gross revenue from operations, which is
defined as the entire amount of all receipts from the renting or leasing
of storage compartments and sale of locks. The management agreement is
renewable annually. Dahn earned management fees equal to $156,607,
$143,199, and $137,500 for the years ended December 31, 2006, 2005, and
2004, respectively. Amounts payable to Dahn at December 31, 2006 and
2005, were $12,564 and $12,633, respectively.
In 2004, the Parnership entered into truck lease agreements with KMD
Trucks, LLC ("KMD"). The president of Dahn, Brian Dahn, is also a
member of KMD. The truck lease is a 48-month lease with monthly payments
in the amount of $750 (see Note 3).
DSI REALTY INCOME FUND VI
(A California Real Estate Limited Partnership)
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------
Costs Capitalized
Initial Cost to Subsequent to Gross Amount at Which Carried
Partnership Acquisition at Close of Period
------------------- ----------------- -----------------------------
Buildings Buildings Date
and Improve- Carrying and Accum. of Date
Description Encumbrances Land Improvements ments Costs Land Improvements Total Deprec. Const. Acq. Life
MINI-U-STORAGE
Vallejo, CA None $258,000 $1,320,789 $39,210 $258,000 $1,359,999 $1,617,999 $1,359,492 11/81 06/81 20 Yrs
Santa Rosa, CA II None 190,000 865,608 28,231 190,000 893,839 1,083,839 893,230 08/81 08/81 20 Yrs
Arvada, CO None 305,000 1,759,608 67,736 305,000 1,827,344 2,132,344 1,822,292 12/83 06/82 20 Yrs
Santa Rosa, CA III None 157,000 715,122 23,323 157,000 738,445 895,445 737,942 10/83 12/82 20 Yrs
Federal Heights, CO None 260,000 1,013,972 32,462 260,000 1,046,434 1,306,434 1,042,599 10/83 03/83 20 Yrs
Colorado Springs, CO None 342,000 1,518,487 131,288 342,000 1,649,775 1,991,775 1,632,453 03/84 04/83 20 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$1,512,000 $7,193,586 $322,250 $1,512,000 $7,515,836 $ 9,027,836 $7,488,008
========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated
at Cost Depreciation
Balance at January 1, 2004 $10,377,136 $8,607,547
Additions 13,203 8,189
----------- ----------
Balance at December 31, 2004 10,390,339 8,615,736
Disposals (1,395,183) (1,147,214)
Additions 31,853 12,858
----------- ----------
Balance at December 31, 2005 9,027,009 7,481,380
Additions 827 6,628
----------- ----------
Balance at December 31, 2006 $ 9,027,836 $7,488,008
=========== ==========
EXHIBIT 2
March 30, 2007
ANNUAL REPORT TO LIMITED PARTNERS OF
DSI REALTY INCOME FUND VI
Dear Limited Partner:
This report contains the Partnership's balance sheets as of December 31,
2006 and 2005, and the related statements of income, changes in partners' equity
(deficit) and cash flows for each of the three years ended December 31, 2006
accompanied by a report of Independent Registered Public Accounting firm. The
Partnership owns six mini-storage facilities, including two in Santa Rosa,
California. The Partnership's properties were each purchased for all cash and
funded solely from subscriptions for limited partnership interests without the
use of mortgage financing.
Your attention is directed to the section entitled Management's Discussion
and Analysis of Financial Condition and Results of Operations for the General
Partners' discussion and analysis of the financial statements and operations of
the Partnership.
Average occupancy levels for each of the Partnership's six properties for
the years ended December 31, 2006 and 2005 were as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Year Level for the Year
Ended Dec. 31, 2006 Ended Dec. 31, 2005
Vallejo, California 84% 82%
Santa Rosa, California
(both stages) 80% 78%
Arvada, Colorado 80% 75%
Federal Heights, Colorado 83% 82%
Colorado Springs, Colorado 84% 83%
We will keep you informed of the activities of DSI Realty Income Fund VI as
they develop. If you have any questions, please contact us at your convenience
at (562) 493-3022. If you would like a copy of the Partnership's Annual Report
on Form 10-K for the year ended December 31, 2006, which was filed with the
Securities and Exchange Commission (which report includes the enclosed Financial
Statements), we will forward a copy of the report to you upon written request.
Very truly yours,
DSI REALTY INCOME FUND VI
By: DSI Properties, Inc.
/s/ ROBERT J. CONWAY
By_______________________________
ROBERT J. CONWAY, President
CERTIFICATIONS
I, Robert J. Conway, certify that:
1. I have reviewed this annual report on Form 10-K of DSI Realty Income
Fund VI;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period cover-
ed by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to re-
cord, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's in-
ternal control over financial reporting.
Date: March 30, 2007
/s/ ROBERT J. CONWAY
_______________________________
Robert J. Conway
Chief Executive Officer
CERTIFICATIONS
I, Richard P. Conway, certify that:
1. I have reviewed this annual report on Form 10-K of DSI Realty Income
Fund VI;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period cover-
ed by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to re-
cord, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's in-
ternal control over financial reporting.
Date: March 30, 2007
/s/ RICHARD P. CONWAY
__________________________________
Richard P. Conway
Sr. Vice President
EXHIBIT 3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DSI Realty Income Fund VI (the
"Partnership") on Form 10-K for the period ending December 31, 2006 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Robert J. Conway, Chief Executive Officer of the Partnership, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
/s/ ROBERT J. CONWAY
___________________________________
Robert J. Conway
Chief Executive Officer
March 27, 2006
EXHIBIT 4
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DSI Realty Income Fund VI (the
"Partnership") on Form 10-K for the period ending December 31, 2006 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Richard P. Conway, Vice President of the Corporate General Partner, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
/s/ RICHARD P. CONWAY
________________________________
Richard P. Conway
Sr. Vice President
March 30, 2007