10-K 1 dsi06k04.txt 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 [Fee required] for fiscal year ended December 31, 2004, or / / Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [No fee required] 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 (Class of Securities Registered) 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/ 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, 2004, incorporated by reference to Form 10-K, Part II. Item 11. Registrant's Financial Statements for its fiscal year ended December 31, 2004, 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, 2004, 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 seven properties for the years ended December 31, 2004 and December 31, 2003 were as follows: Location of Property Average Occupancy Average Occupancy Level for the Year Level for the Year Ended Dec. 31, 2004 Ended Dec. 31, 2003 Vallejo, California 81% 82% Santa Rosa, California (both stages) 80% 82% Arvada, Colorado 79% 80% Las Vegas, Nevada 85% 86% Federal Heights, Colorado 79% 82% Colorado Springs, Colorado 78% 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 2. PROPERTIES Registrant owns a fee interest in seven 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 as of December 31, 2004 regarding properties owned by the Partnership. Location Size of Net Rentable No. of Completion Parcel Area Rental Units Date Vallejo, CA 3.10 acres 57,845 512 6/9/81 Arvada, CO 3.75 acres 65,535 662 1/4/83 Federal Heights, CO 2.39 acres 39,892 467 10/15/83 Las Vegas, NV 2.20 acres 39,682 431 12/l/82 Santa Rosa, CA 3.38 acres 72,163 626 9/10/83 Colorado Springs, CO 3.50 acres 60,566 692 11/15/83 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, 2004 had 796 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 $13.39 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2004 and $12.80 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2003 and $15.97 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2002. 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, 2004, 2003, 2002, 2001, and 2000 -------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $2,619,017 $2,787,298 $2,843,760 $3,115,301 $3,121,611 TOTAL EXPENSES 1,357,021 1,547,484 1,777,129 1,825,103 1,742,859 ---------- ---------- ---------- ---------- ---------- NET INCOME $1,261,996 $1,239,814 $1,066,631 $1,290,198 $1,378,752 ========== ========== ========== ========== ========== TOTAL ASSETS $2,638,552 $2,501,244 $2,527,467 $2,971,125 $3,372,953 ========== ========== ========== ========== ========== CASH FLOWS FROM (USED IN): OPERATING $1,243,303 $1,358,369 $1,522,050 $1,755,331 $1,860,986 INVESTING (13,203) - - (41,401) (48,969) FINANCING (1,284,500) (1,228,042) (1,533,059) (1,713,926) (1,834,963) NET INCOME PER LIMITED PARTNERSHIP UNIT $ 52.60 $ 51.67 $ 44.46 $ 53.77 $ 57.46 ---------- ---------- ---------- ---------- ---------- CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 53.54 $ 51.18 $ 63.90 $ 71.43 $ 76.48 =========== ========== ========== ========== ========== Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Critical Accounting Policies Revenue recognition - 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. RESULTS OF OPERATIONS 2004 COMPARED TO 2003 Total revenues decreased from $2,786,419 in 2003 to $2,618,177 in 2004, while total expenses decreased from $1,547,484 to $1,357,021 and other income decreased from $879 to $840, resulting in an increase in net income from $1,239,814 to $1,261,996. Rental revenues decreased primarily as a result of lower occupancy rates. Occupancy levels for the Partnership's seven mini- storage facilities averaged 80.1% for the year 2004 as compared to 85.1% for 2003. The approximate $16,600 (2.0%) increase in operating expenses was due primarily to increases in advertising and repairs and maintenance expenses, partially offset by a decrease in salaries and wage expense. General and administrative expenses decreased approximately $34,800 (14.8%) primarily as a result of lower legal and professional and equipment and computer lease expenses, partially offset by an increase in office supplies and printing expense. The decrease in legal and professional expense is related to un- successful legal challenges by two dissident Limited Partners to a proposed amendment to the Partnership Agreement in the prior year (see paragraph below). 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 reduced by additions to property. Property management fees, which are based on revenues, decreased as a result of the decrease in rental revenue. 2003 COMPARED TO 2002 Total revenues decreased from $2,842,325 in 2002 to $2,786,419 in 2003, while total expenses decreased from $1,777,129 to $1,547,484 and other income decreased from $1,435 to $879, resulting in an increase in net income from $1,066,631 to t$1,239,814. Rental revenues decreased as a result of lower unit rental rates, partially offset by higher occupancy rates. Occupancy levels for the Partnership's seven mini-storage facilities averaged 85.1% for the year 2003 as compared to 84.2% for 2002. Depreciation decreased as the Partnership's properties became essentially fully depreciated during the current year. Operating expenses remained relatively constant as increases in real estate tax and salaries and wages expenses was offset by decreases in maintenance and repair and workers compensation insurance expenses. General and administrative expenses increased approximatley $31,900 (15.7%) primarily as a result of higher legal and professional expense, partially offset by decreases in equipment and computer lease and office supplies and printing expense. Legal expense increased as a result of legal challenges by dissident Limited Partners to a proposed amendment to the Partnership Agreement (see paragraph below). The General Partners' incentive management fee which is based on cash available for distribution, decreased as a result of the de- crease in net cash provided by operating activities. Property management fees, which are based on revenues, decreased as a result of the decrease in rental revenue. 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 $60,100 (4.4%) in 2004 compared to 2003 primarily due to the increase in net income and customer deposits and other liabilities, partially offset by the decrease in depreciation. Net cash provided by operating activities decreased approximately $163,700 (10.8%) in 2003 compared to 2002 primarily due to the decreases in depreciation, incentive management fees payable and customer deposits and other liabilities, partially offset by an increase in net income. Cash used in financing activities, as set forth in the statements of cash flows, has consisted solely of cash distributions to partners. Special distributions of 1.5%, 1%, and 3.5% of capital contributed by limited partners were declared and paid on December 15, 2004, 2003, and 2002, respectively. Cash used in investing activities, as set forth in the statements of cash flows, has consisted solely of acquisitions of equipment for the Partnership's mini storage properties in 2004. The Partnership has no material commitments for capital expenditures. In 2003, the Limited Partners approved an amendment to the Partnership Agreement granting the General Partners ten days to review certain types of transfers during which the General Partners may match, exeed or approve the proposed transfers. The Court has rejected all preliminary attempts to halt implementation of the amendment. Subsequently, the dissident Limited Partners who initiated the legal proceedings decided not to pursue the matter any further. 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. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for the years ended December 31, 2004 and 2003 was a follows: 2004 Quarter Ended ------------------ March 31 June 30 September 30 December 31 Total revenues $670,669 $632,876 $643,758 $670,874 Net income 333,289 271,849 288,059 368,799 Net income per limited partnership unit $ 13.89 $ 11.33 $ 12.01 $ 15.37 Weighted average number of limited partnership units outstanding 23,753 23,753 23,753 23,753 2003 Quarter Ended ------------------ March 31 June 30 September 30 December 31 Total revenues $721,110 $716,697 $697,280 $669,332 Net income 292,741 290,428 317,525 339,120 Net income per limited partnership unit $ 12.20 $ 12.10 $ 13.23 $ 14.14 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. 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, 2004, 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 71 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 76 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 82 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, 2004, 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 As of December 31, 2004, no person of record owned more than 5% of the limited partnership units of Registrant, nor was any person known by Registrant to own of record and beneficially, 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 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, 2004 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 2004 were $26,920 and for 2003 were $25,600. Tax Fees The aggregate fees for professional services rendered by Deloitee & Touche LLP for tax compliance, tax advice and tax planning for 2004 were $20,900 and for 2003 were $19,500. 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, 2004, 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, 2004. (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 By_____________________________ Dated: March 31, 2005 ROBERT J. CONWAY, President (Chief Executive Officer, Chief Financial Officer, and Director) By____________________________ Dated: March 31, 2005 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 By:__________________________ Dated: March 31, 2005 ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director By___________________________ Dated: March 31, 2005 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, 2004, 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, 2004 -------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $2,619,017 $2,787,298 $2,843,760 $3,115,301 $3,121,611 TOTAL EXPENSES 1,357,021 1,547,484 1,777,129 1,825,103 1,742,859 ---------- ---------- ---------- ---------- ---------- NET INCOME $1,261,996 $1,239,814 $1,066,631 $1,290,198 $1,378,752 ========== ========== ========== ========== ========== TOTAL ASSETS $2,638,552 $2,501,244 $2,527,467 $2,971,125 $3,372,953 ========== ========== ========== ========== ========== CASH FLOWS FROM (USED IN): OPERATING $1,243,303 $1,358,369 $1,522,050 $1,755,331 $1,860,986 INVESTING (13,203) - - (41,401) (48,969) FINANCING (1,284,500) (1,228,042) (1,533,059) (1,713,926) (1,834,963) NET INCOME PER LIMITED PARTNERSHIP UNIT $ 52.60 $ 51.67 $ 44.46 $ 53.77 $ 57.46 ---------- ---------- ---------- ---------- ---------- CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 53.54 $ 51.18 $ 63.90 $ 71.43 $ 76.48 =========== ========== ========== ========== ========== The following are reconciliations between the operating results and partners' equity per the financial statements and the Partnership's income tax return for the year ended December 31, 2004: Net Partners' Income Equity Per financial statements $ 1,261,996 $ 2,071,927 Excess tax depreciation (7,519) 89,403 Accrued revenue 10,164 Accrued incentive management fee (16,219) Acquisition costs capitalized for tax purposes 134,382 Deferred rental revenues (17,105) 62,381 Accrued expenses 9,800 9,800 Accrued property taxes (88,000) Fixed asset adjustment (12,500) (12,500) Excess book distributions 269,920 Prior year's mis. tax adjustments (2,000) Tax expense adjustment (24,873) ----------- ----------- Per Partnership tax return $ 1,209,799 $ 2,529,258 =========== =========== Taxable income per limited partnership unit $ 50.42 =========== 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, 2004 and 2003 F-2 Statements of Income for each of the Three Years Ended December 31, 2004 F-3 Statements of Changes in Partners' Equity (Deficit) for each of the Three Years Ended December 31, 2004 F-4 Statements of Cash Flows for each of the Three Years Ended December 31, 2004 F-5 Notes to Financial Statements F-6 SUPPLEMENTAL SCHEDULE: Schedule III - Real Estate and Accumulated Depreciation F-9 SCHEDULES OMITTED: 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 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, 2004 and 2003, and the related statements of income, changes in partners' equity (deficit), and cash flows for each of the three years ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsi- bility is to express an opinion on these financial statements and financial statement 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 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 Company'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 e valuating 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, 2004 and 2003, and the results of its operations and its cash flows for each of the three years ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement 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. Deloitte & Touche LLP March 14, 2005 DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership) BALANCE SHEETS DECEMBER 31, 2004 AND 2003 -------------------------------------------------------------------------------- ASSETS 2004 2003 CASH AND CASH EQUIVALENTS $ 602,345 $ 656,745 PROPERTY, Net (Note 3) 1,949,719 1,769,589 OTHER ASSETS 86,488 74,910 ----------- ----------- TOTAL $ 2,638,552 $ 2,501,244 =========== =========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES: Distribution due partners $ 269,920 $ 269,920 Incentive management fee payable to general partners (Note 4) 37,333 32,543 Property management fees payable 12,707 13,052 Customer deposits and other liabilities 84,049 91,298 Capital lease obligations (Note 3) 162,616 ----------- ----------- Total liabilities 566,625 406,813 ----------- ----------- PARTNERS' EQUITY (DEFICIT)(Note 4): General partners (72,566) (72,341) Limited partners (23,753 limited partnership units outstanding at December 31, 2004 and 2003) 2,144,493 2,166,772 ------------ ----------- Total partners' equity 2,071,927 2,094,431 ------------ ----------- TOTAL $ 2,638,552 $2,501,244 ============ =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership) STATEMENTS OF INCOME THREE YEARS ENDED DECEMBER 31, 2004 -------------------------------------------------------------------------------- 2004 2003 2002 REVENUES: Rental $2,618,177 $2,786,419 $2,842,325 ---------- ---------- --------- EXPENSES: Depreciation 8,189 156,550 393,610 Operating 867,719 851,107 848,878 General and administrative 199,953 234,790 202,876 General partners' incentive management fee (Note 4) 125,589 138,120 160,168 Property management fee 155,571 166,917 171,597 ---------- ---------- --------- Total expenses 1,357,021 1,547,484 1,777,129 ---------- ---------- --------- OPERATING INCOME $1,261,156 $1,238,935 $1,065,196 OTHER INCOME - Interest income 840 879 1,435 ---------- ---------- ---------- NET INCOME $1,261,996 $1,239,814 $1,066,631 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $1,249,376 $1,227,416 $1,055,965 General partners 12,620 12,398 10,666 ---------- ---------- ---------- TOTAL $1,261,996 $1,239,814 $1,066,631 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 52.60 $ 51.67 $ 44.46 ========== ========== ========= See accompanying 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, 2004 -------------------------------------------------------------------------------- General Limited Partners Partners Total BALANCE JANUARY 1, 2002 $(67,794) $ 2,616,881 $ 2,549,087 Net income 10,666 1,055,965 1,066,631 Distributions (15,331) (1,517,728) (1,533,059) ------- ----------- ----------- BALANCE DECEMBER 31, 2002 $(72,459) $ 2,155,118 $ 2,082,659 Net income 12,398 1,227,416 1,239,814 Distributions (12,280) (1,215,762) (1,228,042) ------- ----------- ----------- BALANCE DECEMBER 31, 2003 $(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 ======= =========== =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership) STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 2004 -------------------------------------------------------------------------------- 2004 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,261,996 $ 1,239,814 $ 1,066,631 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,189 156,550 393,610 Changes in assets and liabilities: Other assets (11,578) 39,039 Incentive management fee payable to general partners 4,790 (17,979) 37,851 Property management fees payable (345) 188 (596) Customer deposits and other liabilities (7,249) (20,204) (14,485) Capital lease obligation (12,500) ---------- ---------- --------- Net cash provided by operating activities 1,243,303 1,358,369 1,522,050 CASH FLOWS USED IN INVESTING ACTIVITIES - Additions to property (13,203) CASH FLOWS USED IN FINANCING ACTIVITIES - Distributions to partners (1,284,500) (1,228,042) (1,533,059) ----------- ----------- --------- NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (54,400) 130,327 (11,009) CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 656,745 526,418 537,427 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 602,345 $ 656,745 $ 526,418 =========== =========== ============ NON CASH INVESTING ACTIVITIES Acquisition of trucks utilizing capital leases $175,116 See accompanying notes to financial statements. DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership) NOTES TO FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 2004 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 seven mini-storage facilities located in Vallejo, California; Arvada, Federal Heights and Colorado Springs, Colorado; Las Vegas, Nevada 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. The mini-storage facilities are operated for the Partnership by Dahn under various agreements that are subject to renewal annually. Under the terms of the agreements, the Partnership is required to pay Dahn a property management fee equal to 6% of gross revenue from operations, defined as the entire amount of all receipts from the renting or leasing of storage compartments and sale of locks. 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 for 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 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 is $52,197. 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 2004, 2003, or 2002. Fair Value of Financial Instruments - The Partnership's financial instruments consist primarily of cash, receivables, accounts payable and accrued liabilities. The carrying values of all financial instruments are representative of their fair values due to their short-term maturities. 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. 3. PROPERTY The total cost of property and accumulated depreciation is as follows as of December 31: 2004 2003 Land $ 1,759,000 $ 1,759,000 Buildings and improvements 8,631,339 8,618,136 ----------- ----------- Total 10,390,339 10,377,136 Less accumulated depreciation (8,615,736) (8,607,547) ----------- ---------- Total $ 1,774,603 $ 1,769,589 Rental trucks under capital leases 175,116 ----------- ----------- Property - net $ 1,949,719 $ 1,769,589 =========== =========== The rental trucks under capital leases were not placed into service until January 2005 and therefore no depreciation expense was recorded during 2004. 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, 2004 are summarized as follows: 2005 $45,000 2006 45,000 2007 45,000 2008 45,000 ------- Total future minimum payment obligations 180,000 Less interest portion 17,384 ------- Present value of net minimum lease payments $162,616 ======= 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. 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. DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership) 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 $1,357,740 11/81 06/81 20 Yrs Santa Rosa, CA II None 190,000 865,608 28,231 190,000 893,839 1,083,839 892,884 08/81 08/81 20 Yrs Arvada, CO None 305,000 1,759,608 61,098 305,000 1,820,706 2,125,706 1,818,067 12/83 06/82 20 Yrs Las Vegas, NV None 247,000 1,111,359 33,250 247,000 1,144,609 1,391,609 1,143,633 11/83 07/82 20 Yrs Santa Rosa, CA III None 157,000 715,122 23,323 157,000 738,445 895,445 737,656 10/83 12/82 20 Yrs Federal Heights, CO None 260,000 1,013,972 29,358 260,000 1,043,330 1,303,330 1,039,086 10/83 03/83 20 Yrs Colorado Springs, CO None 342,000 1,518,487 111,924 342,000 1,630,411 1,972,411 1,626,670 03/84 04/83 20 Yrs -------- ---------- ------- -------- ---------- ---------- ---------- $1,759,000 $8,304,945 $326,394 $1,759,000 $8,631,339 $10,390,339 $8,615,736 ========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated at Cost Depreciation Balance at January 1, 2002 $10,377,136 $8,057,387 Additions 393,610 ----------- ---------- Balance at December 31, 2002 $10,377,136 $8,450,997 Additions 156,550 ----------- ---------- Balance at December 31, 2003 $10,377,136 $8,607,547 Additions 13,203 8,189 ----------- ---------- Balance at December 31, 2004 $10,390,339 $8,615,736 =========== ========== EXHIBIT 2 March 14, 2005 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, 2004 and 2003, and the related statements of income, changes in partners' equity and cash flows for each of the three years ended December 31, 2004 accompanied by an independent auditors' report. The Partnership owns seven 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, 2004 and December 31, 2003 were as follows: Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 2004 Dec. 31, 2003 Vallejo, California 81% 82% Santa Rosa, California (both stages) 80% 82% Arvada, Colorado 79% 80% Las Vegas, Nevada 85% 86% Federal Heights, Colorado 79% 82% Colorado Springs, Colorado 78% 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, 2004, 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. 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 annual 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 annual report. 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers 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 annual 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 our 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 officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, pro- cess, 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 controls over financial reporting. Date: March 14, 2005 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 annual 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 annual report. 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers 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 annual 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 our 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 officers and I have disclosed based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, pro- cess, 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 controls over financial reporting. Date: March 14, 2005 Richard P. Conway Vice President 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, 2004 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. Robert J. Conway Chief Executive Officer March 14, 2005 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, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. 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. Richard P. Conway Vice President March 14, 2005