-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JBlC10tF0kV4m9+adjeKyInGY5CnXTugyFfnHjLUB28ILn+3kh7nBmasos6aUtkD LijMMRI6wvPcng1oS8xQtg== 0000711642-99-000004.txt : 19990202 0000711642-99-000004.hdr.sgml : 19990202 ACCESSION NUMBER: 0000711642-99-000004 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHELTER PROPERTIES VI LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000730013 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 570755618 STATE OF INCORPORATION: SC FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-13261 FILM NUMBER: 99517499 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10KSB 1 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) FORM 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended October 31, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from.........to......... Commission file number 0-13261 SHELTER PROPERTIES VI (Name of small business issuer in its charter) South Carolina 57-0755618 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's telephone number Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $10,216,000 State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of a specified date within the past 60 days. No market exists for the limited partnership interests of the Registrant, and therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I ITEM 1. DESCRIPTION OF BUSINESS Shelter Properties VI (the "Partnership" or "Registrant") was organized as a limited partnership under the laws of the State of South Carolina on August 3, 1983. The general partner responsible for management of the Partnership's business is Shelter Realty VI Corporation, a South Carolina corporation (the "Corporate General Partner"). The only other general partner of the Partnership is N. Barton Tuck, Jr. Mr. Tuck is not an affiliate of the Corporate General Partner and is effectively prohibited by the Partnership's partnership agreement (the "Partnership Agreement") from participating in the management of the Partnership. The Corporate General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"). The Partnership Agreement provides that the Partnership is to terminate on December 31, 2023, unless terminated prior to such date. The Registrant is engaged in the business of operating and holding real properties for investment. In 1984 and 1985 during its acquisition phase, the Registrant acquired eight existing apartment properties. The Registrant continues to own and operate six of these properties. See "Item 2, Properties". Commencing March 22, 1984, the Registrant offered, pursuant to a Registration Statement filed with the Securities and Exchange Commission, up to 34,900 Units of Limited Partnership Interest (the "Units") at a purchase price of $1,000 per Unit with a minimum purchase of 5 Units ($5,000), or 2 Units ($2,000) for an Individual Retirement Account. By means of Supplement No. 4 dated September 28, 1984, the Partnership offered for sale an additional 15,000 Units. The Corporate General Partner purchased 100 units as required by the Partnership Agreement. The offering terminated in October 1984. Upon termination of the offering, the Registrant had accepted subscriptions for 42,324 Units, including 100 Units purchased by the Corporate General Partner, for an aggregate of $42,324,000. Unsold Units (numbering 7,676) were deregistered pursuant to Post Effective Amendment No. 1 to Registration Statement No. 2-93285 filed with the Securities and Exchange Commission on November 13, 1984. The Registrant invested approximately $30,300,000 of such proceeds in eight existing apartment properties. Since its initial offering, the Registrant has not received, nor are limited partners required to make, additional capital contributions. A further description of the Partnership's business is included in Management's Discussion and Analysis or Plan of Operation included in "Item 6" of this Form 10-KSB. The Registrant has no employees. Management and administrative services are performed by the Corporate General Partner and by agents retained by the Corporate General Partner. Until September 30, 1998, property management services were performed at the Partnership's properties by Insignia Management Group L.P. Since October 1, 1998, AIMCO, an affiliate of the Corporate General Partner, has been providing such property management services. (See "Transfer of Control" below). The real estate business in which the Partnership is engaged is highly competitive, and the Partnership is not a significant factor in this industry. The Registrant's properties are subject to competition from similar properties in the vicinity in which the properties are located. In addition, various limited partnerships have been formed by the General Partners and/or their affiliates to engage in business which may be competitive with the Registrant. Transfer of Control On October 1, 1998, Insignia Financial Group, Inc. merged into Apartment Investment and Management Company, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the entity which controls the Corporate General Partner. As a result of the Insignia Merger, AIMCO acquired indirect control of the Corporate General Partner. Also, effective October 1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger, which requires the approval of the holders of a majority of the outstanding IPT Shares, is expected to be consummated in February 1999. AIMCO has agreed to vote all of the IPT Shares owned by it (approximately 51%) in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The Corporate General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. ITEM 2. DESCRIPTION OF PROPERTIES The following table sets forth the Registrant's investments in properties: Date of Property Purchase Type of Ownership Use Rocky Creek Apartments 06/29/84 Fee ownership subject Apartment Augusta, Georgia to first and second 120 units mortgages. Carriage House Apartments 6/29/84 Fee ownership subject Apartment Gastonia, North Carolina to first and second 102 units mortgages. Nottingham Square Apartments 08/31/84 Fee ownership subject Apartment Des Moines, Iowa to first and second 442 units mortgages. Foxfire Apartments/ 09/30/84 Fee ownership subject Apartment Barcelona Apartments 03/28/85 to first and second 354 units Durham, North Carolina mortgages. River Reach Apartments 01/30/85 Fee ownership subject Apartment Jacksonville, Florida to first and second 298 units mortgages. Village Garden Apartments 03/01/85 Fee ownership subject Apartment Fort Collins, Colorado to first and second 141 units mortgages. SCHEDULE OF PROPERTIES: Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and federal tax basis. Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Rocky Creek $ 4,591 $ 2,255 5-35 yrs S/L $ 1,033 Carriage House 3,895 2,225 5-27 yrs S/L 509 Nottingham 14,669 7,288 5-29 yrs S/L 4,595 Square Foxfire/Barcelona 11,799 5,978 5-31 yrs S/L 3.809 River Reach 14,356 7,072 5-27 yrs S/L 4,109 Village Garden 4,113 1,920 5-30 yrs S/L 1,375 Total $53,423 $26,738 $15,430 See "Note A" to financial statements in "Item 7" for a description of the Partnership's depreciation policy. SCHEDULE OF PROPERTY INDEBTEDNESS: The following table sets forth certain information relating to the loans encumbering the Registrant's properties. Principal Principal Balance At Stated Balance October 31, Interest Period Maturity Due At Property 1998 Rate Amortized Date Maturity (2) (in thousands) (in thousands) Rocky Creek 1st Mortgage $ 2,064 7.60% (1) 11/15/02 $ 1,737 2nd Mortgage 74 7.60% (1) 11/15/02 74 Carriage House 1st Mortgage 1,903 7.60% (1) 11/15/02 1,601 2nd Mortgage 69 7.60% (1) 11/15/02 68 Nottingham Square 1st Mortgage 7,448 7.60% (1) 11/15/02 6,268 2nd Mortgage 268 7.60% (1) 11/15/02 268 Foxfire/Barcelona 1st Mortgage 5,384 7.60% (1) 11/15/02 4,531 2nd Mortgage 193 7.60% (1) 11/15/02 193 River Reach 1st Mortgage 7,000 7.60% (1) 11/15/02 5,890 2nd Mortgage 252 7.60% (1) 11/15/02 252 Village Garden 1st Mortgage 2,423 7.60% (1) 11/15/02 2,039 2nd Mortgage 87 7.60% (1) 11/15/02 87 27,165 Less unamortized discounts (1,015) Total $ 26,150 (1)The principal balance is being amortized over 257 months with a balloon payment due November 15, 2002. (2)See Item 7. Financial Statements - Note C for information with respect to the Registrant's ability to repay these loans. RENTAL RATES AND OCCUPANCY: Average annual rental rates and occupancy for 1998 and 1997 for each property: Average Annual Average Annual Rental Rates Occupancy 1998 1997 1998 1997 Rocky Creek $ 6,886 $ 6,755 89% 90% Carriage House 7,352 7,230 86% 92% Nottingham Square 6,724 6,787 88% 92% Foxfire/Barcelona 7,219 6,896 92% 95% River Reach 8,242 7,693 97% 97% Village Garden 7,806 7,400 96% 95% The Corporate General Partner attributes the decrease in occupancy at Carriage House Apartments to an increase in home purchases and relocations by tenants to stronger job markets in areas outside the Gastonia market. The decrease in occupancy at Nottingham Square is attributed to increased competition as a result of new apartment construction in the Des Moines market. The decrease in occupancy at Foxfire/Barcelona Apartments is attributable to increased competition as a result of the start of new construction in the Durham area. Rental rates were increased in 1998 at all properties except Nottingham Square. As noted under "Item 1, Description of Business", the real estate industry is highly competitive. All of the properties are subject to competition from other residential apartment complexes in the area. The Corporate General Partner believes that all of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No individual tenant leases 10% or more of the available rental space. All of the properties are in good condition. See "Item 6 - Managements Discussion and Analysis or Plan of Operation" for information related to budgeted capital improvements at each of the properties. REAL ESTATE TAXES AND RATES: Real estate taxes and effective rates in 1998 for each property were: 1998 1998 Billing* Rate (in thousands) Rocky Creek $ 38 2.82% Carriage House 40 1.30% Nottingham Square 420 3.20% Foxfire/Barcelona 159 1.62% River Reach 219 2.04% Village Garden 44 8.77% *Due to these properties having a fiscal year different than the real estate tax year, tax expense, as stated in the Partnership's Statement of Operations, does not agree to the 1998 billings. ITEM 3. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Corporate General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Corporate General Partner has filed demurrers to the amended complaint which are scheduled to be heard during February 1999. The Corporate General Partner believes this action to be without merit, and intends to vigorously defend it. On July 30, 1998, certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners were, at the time, affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California, county of Los Angeles. The action involves 44 real estate limited partnerships (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia Affiliates allegedly manage or control (the "Subject Partnerships"). The complaint names as defendants Insignia, several Insignia Affiliates alleged to be managing partners of the Subject Partnerships, the Partnership and the Corporate General Partner. Plaintiffs allege that they have requested from, but have been denied by each of the Subject Partnerships, lists of their respective limited partners for the purpose of making tender offers to purchase up to 4.9% of the limited partner units of each of the Subject Partnerships. The complaint also alleges that certain of the defendants made tender offers to purchase limited partner units in many of the Subject Partnerships, with the alleged result that plaintiffs have been deprived of the benefits they would have realized from ownership of the additional units. The plaintiffs assert eleven causes of action, including breach of contract, unfair business practices, and violations of the partnership statutes of the states in which the Subject Partnerships are organized. Plaintiffs seek compensatory, punitive and treble damages. The Corporate General Partner filed an answer to the complaint on September 15, 1998. The Corporate General Partner believes the claims to be without merit and intends to defend the action vigorously. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The Corporate General Partner believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fiscal year ended October 31, 1998, no matter was submitted to a vote of unit holders through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS The Partnership, a publicly-held limited partnership, offered and sold 42,324 limited partnership units aggregating $42,324,000 inclusive of 100 units purchased by the Corporate General Partner. The Partnership currently has 2,657 holders of record owning an aggregate of 42,324 Units. Affiliates of the corporate General Partner owned 14,907 units or 35.22% at October 31, 1998. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. During the year ended October 31, 1997, distributions of $983,000 were paid from operations. The Partnership did not pay any distributions for the year ended October 31, 1998. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales and the availability of cash reserves. The Partnership's distribution policy will be reviewed on a quarterly basis. Subsequent to the Partnership's fiscal year-end a distribution of $688,000 was paid from operations and $1,412,000 was paid from surplus funds during November and December 1998. There can be no assurance, however, that the Partnership will generate sufficient funds from operations to permit any additional distributions to its partners in 1999 or subsequent periods. In addition, the Partnership is restricted from making distributions if the amount in the reserve account for each property maintained by the mortgage lender is less than $1,000 per apartment unit at such property. The reserve accounts are currently fully funded. See "Item 6, Management's Discussion and Analysis or Plan of Operation" for information relating to anticipated capital expenditures at the properties. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This item should be read in conjunction with the financial statements and other items contained elsewhere in this report. RESULTS OF OPERATIONS The Registrant's net income for the year ended October 31, 1998 was $322,000 as compared to $395,000 for the year ended October 31, 1997. (See "Note D" of the financial statements for a reconciliation of these amounts to the Registrant's federal taxable losses). The decrease in net income was due to a decrease in total revenue which was partially offset by a decrease in total expenses. Net income, however, without giving effect to the casualty gain recognized during fiscal 1997 was $53,000 for the year ended October 31, 1997. Revenues decreased due to a decrease in rental income and casualty gain, which was partially offset by an increase in other income. The decrease in rental income is primarily attributable to a decrease in occupancy at the Registrant's Carriage House, Nottingham Square and Foxfire/Barcelona properties and a decrease in average rental rates at Nottingham Square which more than offset increases in rental rates at the Registrant's other investment properties. The Registrant recorded a casualty gain of $342,000 during the year ended October 31, 1997 which consisted of (i) a casualty gain of approximately $240,000 from the insurance proceeds from hail and wind storm damage at Nottingham Square Apartments that occurred in the second quarter of 1996, (ii) the estimated costs to repair units damaged at Carriage House Apartments by a fire in November 1996 exceeded the insurance proceeds received and thus resulted in a casualty loss of approximately $8,000, (iii) the estimated costs to repair units damaged at Village Garden Apartments by a fire in March 1997 which destroyed one unit and caused smoke and water damage to additional units exceeded the insurance proceeds expected to be received and thus resulted in a casualty loss of approximately $10,000, (iv) a casualty gain of approximately $139,000 from the expected insurance proceeds exceeding the basis of the units destroyed, plus the total estimated non-capitalized costs to replace the assets, at Foxfire/Barcelona Apartments by a fire in April 1997 and (v) uprooted trees, minor damage to the parking lot and roofs of two units at River Beach Apartments caused by a tornado in May 1997 resulted in a casualty loss of approximately $19,000 resulted. The combination of these casualty events resulted in a casualty gain of approximately $342,000 for the year ended October 31, 1997. Expenses decreased due to reductions in operating, depreciation and interest expense which were partially offset by increases in general and administrative expense and property taxes. Operating expenses decreased due to the completion of an exterior painting project at the Carriage House Apartments and exterior building improvements and painting at the River Reach Apartments in 1997, which were partially offset by major landscaping projects in 1998 at Nottingham Square and River Reach Apartments. Interest expense decreased due to the reduction in mortgage balances encumbering the properties as a result of scheduled principal payments. The increase in property taxes is attributable to overall increased tax rates at the Registrant's properties. Included in general and administrative expenses at both October 31, 1998 and 1997 are reimbursements to the Corporate General Partner allowed under the Partnership Agreement associated with its management of the Partnership. The increase in general and administrative expenses for the year ended October 31, 1998 is primarily due to increases in such reimbursements. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit and appraisals required by the Partnership Agreement are also included. Management relies on the annual appraisals performed by outside appraisers to assess the impairment of investment properties. There are three recognized approaches or techniques available to the appraiser. When applicable, these approaches are used to process the data considered significant to each to arrive at separate value indications. In all instances the experience of the appraiser, coupled with his objective judgment, plays a major role in arriving at the conclusions of the indicated value from which the final estimate of value is made. The three approaches commonly known are the cost approach, the sales comparison approach, and the income approach. The cost approach is often not considered to be reliable due to the lack of land sales and the significant amount of depreciation and, therefore, is often not presented. Upon receipt of the appraisals, any property which is stated on the books of the Partnership above the estimated value given in the appraisal, is written down to the estimated value provided by the appraiser. The appraiser assumes a stabilized occupancy at the time of the appraisal and, therefore, any impairment of value is considered to be permanent by the Partnership. For the year ended October 31, 1998, no adjustments for impairment of value were necessary. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the Corporate General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. LIQUIDITY AND CAPITAL RESOURCES At October 31, 1998, the Registrant had cash and cash equivalents of approximately $3,111,000 as compared to approximately $2,632,000 at October 31, 1997. The increase in cash and cash equivalents is due to $2,458,000 of cash provided by operating activities, which was partially offset by $1,123,000 of cash used in investing activities and $856,000 of cash used in financing activities. Cash used in investing activities consisted of capital improvements, insurance proceeds received from the casualty losses discussed above and deposits to escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in a money market mutual fund. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with federal, state, and local legal and regulatory requirements. The Partnership has budgeted approximately $2.4 million in capital improvements for all of the Partnership's properties in 1999. Budgeted capital improvements at Village Garden include building painting and swimming pool and roof repairs. Budgeted capital improvements at Nottingham Square include wallcovering and cabinet replacements, electrical upgrades and parking lot repairs. River Reach, Carriage House and Rocky Creek have major landscaping projects planned. Rocky Creek also plans to perform roof repairs and flooring replacements. Foxfire/Barcelona have no major budgeted expenditures in 1999. The capital expenditures will be incurred only if cash is available from operations or from partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $26,150,000, net of discount, is being amortized over 257 months with balloon payments of approximately $23,008,000 due on November 15, 2002. The Corporate General Partner may attempt to refinance such indebtedness or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such properties through foreclosure. A cash distribution of $983,000 was paid from operations in September, 1997. No cash distributions were made in the year ended October 31, 1998. During the first quarter of fiscal 1999, the Partnership made a distribution of approximately $688,000 from operations and $1,412,000 from surplus funds for a total of $2,100,000. The Partnership's distribution policy will be reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations to permit further distributions to it partners in 1999 or subsequent periods. Year 2000 General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. The Partnership is dependent upon the Corporate General Partner and its affiliates for management and administrative services ("Managing Agent"). Any computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 Issue can be mitigated. However, if such modifications and replacements are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Managing Agent and the Partnership. Status of Progress in Becoming Year 2000 Compliant The Managing Agent's plan to resolve the Year 2000 Issue involves the following four phases: assessment, remediation, testing and implementation. As of December 31, 1998, the Managing Agent has fully completed its assessment of all information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phase on both hardware and software systems. Assessments are continuing in regards to embedded systems in operating equipment. The Managing Agent anticipates having all phases complete by June 1, 1999. In addition to the areas the Partnership is relying on the Managing Agent to verify compliance with, the Partnership has certain operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. The focus of the Corporate General Partner was to the security systems, elevators, heating-ventilation-air-conditioning systems, telephone systems and switches, and sprinkler systems. The Corporate General Partner is currently engaged in the identification of all non-compliant operational systems, and is in the process of estimating the costs associated with any potential modifications or replacements needed to such systems in order for them to be Year 2000 compliant. It is not expected that such costs would have a material adverse affect upon the operations of the Partnership. Risk Associated with the Year 2000 The Corporate General Partner believes that the Managing Agent has an effective program in place to resolve the Year 2000 issue in a timely manner and has appropriate contingency plans in place for critical applications that could affect the Partnership's operations. To date, the Corporate General Partner is not aware of any external agent with a Year 2000 issue that would materially impact the Partnership's results of operations, liquidity or capital resources. However, the Corporate General Partner has no means of ensuring that external agents will be Year 2000 compliant. The Corporate General Partner does not believe that the inability of external agents to complete their Year 2000 resolution process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Other Certain items discussed in this annual report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements speak only as of the date of this annual report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. ITEM 7. FINANCIAL STATEMENTS SHELTER PROPERTIES VI LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Balance Sheet - October 31, 1998 Statements of Operations - Years ended October 31, 1998 and 1997 Statements of Changes in Partners' Capital (Deficit) - Years ended October 31, 1998 and 1997 Statements of Cash Flows - Years ended October 31, 1998 and 1997 Notes to Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Shelter Properties VI We have audited the accompanying balance sheet of Shelter Properties VI as of October 31, 1998, and the related statements of operations, changes in partners' capital (deficit) and cash flows for each of the two years in the period ended October 31, 1998. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shelter Properties VI at October 31, 1998, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 1998, in conformity with generally accepted accounting principles. /s/ERNST & YOUNG LLP Greenville, South Carolina December 17, 1998 SHELTER PROPERTIES VI BALANCE SHEET October 31, 1998 (in thousands, except unit data) Assets Cash and cash equivalents $ 3,111 Receivables and deposits 914 Restricted escrows 1,626 Other assets 504 Investment properties (Notes C & F): Land $ 4,950 Buildings and related personal property 48,473 53,423 Less accumulated depreciation (26,738) 26,685 $32,840 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 283 Tenant security deposit liabilities 209 Accrued taxes 777 Other liabilities 261 Mortgage notes payable (Note C) 26,150 Partners' Capital (Deficit) General partners $ (307) Limited partners (42,324 units issued and outstanding) 5,467 5,160 $32,840 See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended October 31, 1998 1997 Revenues: Rental income $ 9,512 $ 9,581 Other income 704 692 Casualty gain -- 342 Total revenues 10,216 10,615 Expenses: Operating 4,219 4,524 General and administrative 325 284 Depreciation 1,987 2,026 Interest 2,410 2,467 Property taxes 953 919 Total expenses 9,894 10,220 Net income (Note D) $ 322 $ 395 Net income allocated to general partner (1%) $ 3 $ 4 Net income allocated to limited partners (99%) 319 391 $ 322 $ 395 Net income per limited partnership unit $ 7.54 $ 9.24 Distribution per limited partnership unit $ -- $ 22.99 See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 42,324 $ 2 $ 42,324 $ 42,326 Partners' (deficit) capital at October 31, 1996 42,324 $ (304) $ 5,730 $ 5,426 Distributions to partners -- (10) (973) (983) Net income for the year ended October 31, 1997 -- 4 391 395 Partners' (deficit) capital at October 31, 1997 42,324 (310) 5,148 4,838 Net income for the year ended October 31, 1998 -- 3 319 322 Partners' (deficit) capital at October 31, 1998 42,324 $ (307) $ 5,467 $ 5,160 See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI STATEMENTS OF CASH FLOWS (in thousands) Years Ended October 31, 1998 1997 Cash flows from operating activities: Net income $ 322 $ 395 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,987 2,026 Amortization of discounts and loan costs 311 307 Net casualty (gain) loss -- (342) Loss on disposal of property -- 24 Change in accounts: Receivables and deposits (198) 9 Other assets 60 (57) Accounts payable (233) 118 Tenant security deposit liabilities 16 (4) Accrued taxes 161 6 Other liabilities 32 (213) Net cash provided by operating activities 2,458 2,269 Cash flows from investing activities: Property improvements and replacements (1,214) (1,104) Net increase in restricted escrows (68) (49) Net insurance proceeds from casualty loss 159 189 Net cash used in investing activities (1,123) (964) Cash flows from financing activities: Payments on mortgage notes payable (856) (794) Distributions to partners -- (983) Net cash used in financing activities (856) (1,777) Net increase (decrease) in cash and cash equivalents 479 (472) Cash and cash equivalents at beginning of period 2,632 3,104 Cash and cash equivalents at end of period $ 3,111 $ 2,632 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,100 $ 2,163 Supplemental disclosure of non-cash activity: At October 31, 1997, receivables and deposits were adjusted by approximately $225,000 for non-cash amounts in connection with the recording of casualty items (See "Note F"). Also, accounts payable was adjusted for the same fiscal year by approximately $234,000, for non-cash amounts in connection with property improvements and replacements. See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI Notes to Financial Statements October 31, 1998 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: Shelter Properties VI (the "Partnership" or "Registrant") was organized as a limited partnership under the laws of the State of South Carolina on August 3, 1983. The general partner responsible for management of the Partnership's business is Shelter Realty VI Corporation, a South Carolina corporation (the "Corporate General Partner" or "General Partner"). The only other general partner of the Partnership is Barton Tuck, Jr. Mr. Tuck is not an affiliate of the Corporate General Partner and is effectively prohibited by the Partnership's partnership agreement (the "Partnership Agreement") from participating in the management of the Partnership. The Corporate General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"). See Note B - Transfer of Control. The directors and officers of the Corporate General Partner also serve as officers of AIMCO. The Partnership Agreement provides that the Partnership is to terminate December 31, 2023 unless terminated prior to such date. The Partnership commenced operations on June 29, 1984, and completed its acquisition of apartment properties on March 28, 1985. The Partnership operates six apartment properties located in the south, midwest and west. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Allocation of Cash Distributions: Cash distributions by the Partnership are allocated between general and limited partners in accordance with the provisions of the Partnership Agreement. The Partnership Agreement provides that net cash from operations means revenue received less operating expenses paid, adjusted for certain specified items which primarily include mortgage payments on debt, property improvements and replacements not previously reserved, and the effects of other adjustments to reserves. In the following notes to financial statements, whenever "net cash from (used by) operations" is used, it has the aforementioned meaning. The following is a reconciliation of the subtotal in the accompanying statements of cash flows captioned "net cash provided by operating activities" to "net cash used by operations", as defined in the Partnership Agreement. However, "net cash used by operations" should not be considered an alternative to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity. 1998 1997 (in thousands) Net cash provided by operating activities $ 2,458 $ 2,269 Property improvements and replacements (1,214) (1,104) Payments on mortgage notes payable (856) (794) Changes in reserves for net operating liabilities 162 141 Change in restricted escrows, net (68) (49) Additional operating reserves (482) (463) Net cash used by operations $ 0 $ 0 The Corporate General Partner has reserved net cash from operations of approximately $482,000 and $463,000 at October 31, 1998 and 1997, respectively, to fund continuing capital improvements at the six properties. Distributions made from reserves no longer considered necessary by the Corporate General Partner are considered to be additional net cash from operations for allocation purposes. During October 1997, the Partnership paid a distribution of approximately $983,000 from net cash from operations. No distributions were made in the year ended October 31, 1998. During the first fiscal quarter of 1999, the Partnership made a distribution of approximately $688,000 from operations and $1,412,000 from surplus of funds for a total of $2,100,000. The Partnership Agreement provides that 99% of distributions of net cash from operations are allocated to the limited partners until they receive net cash from operations for such fiscal year equal to 7% of their adjusted capital values (as defined in the Partnership Agreement), at which point the general partners will be allocated all net cash from operations until they have received distributions equal to 10% of the aggregate net cash from operations distributed to partners for such fiscal year. Thereafter, the general partners will be allocated 10% of any distributions of remaining net cash from operations for such fiscal year. All distributions of distributable net proceeds (as defined in the Partnership Agreement) from property dispositions and refinancings will be allocated to the limited partners until each limited partner has received an amount equal to a cumulative 7% per annum return based on the average of the limited partners' adjusted capital value, less any prior distributions of net cash from operations and distributable net proceeds, and has also received an amount equal to the limited partners' adjusted capital value. Thereafter, the general partners receive 1% of the selling prices of properties sold where they acted as a broker, and then the limited partners will be allocated 85% of any remaining distributions of distributable net proceeds and the general partners will receive 15%. Distributions may be restricted by the requirement to deposit net operating income (as defined in the mortgage note) into the Reserve Account until $1,000 per apartment unit is funded for each respective property for a total of $1,457,000. As of October 31, 1998, the Partnership has deposits of approximately $1,626,000 in its Reserve Account. Undistributed Net Proceeds from Disposition: Undistributed net proceeds from dispositions in prior years totaled $1,412,000 at October 31, 1998 and 1997. This amount was fully distributed during the first fiscal quarter of 1999. Allocation of Profits, Gains and Losses: Profits, gains and losses of the Partnership are allocated between general and limited partners in accordance with the provisions of the Partnership Agreement. For any fiscal year, to the extent that profits, not including gains from property dispositions, do not exceed distributions of net cash from operations, such profits are allocated in the same manner as such distributions. In any fiscal year in which profits, not including gains from property dispositions, exceed distributions of net cash from operations, such excess is treated on a cumulative basis as if it constituted an equivalent amount of distributable net proceeds and is allocated together with, and in the same manner as, that portion of gain described in the second sentence of the following paragraph. Any gain from property dispositions attributable to the excess, if any, of the indebtedness relating to a property immediately prior to the disposition of such property over the Partnership's adjusted basis in the property shall be allocated to each partner having a negative capital account balance, to the extent of such negative balance. The balance of any gain shall be treated on a cumulative basis as if it constituted an equivalent amount of distributable net proceeds and shall be allocated to the general partners to the extent that general partners would have received distributable net proceeds in connection therewith; the balance shall be allocated to the limited partners. However, the interest of the general partners will be equal to at least 1% of each gain at all times during the existence of the Partnership. All losses, including losses attributable to property dispositions, are allocated 99% to the limited partners and 1% to the general partners. Accordingly, net income (losses) as shown in the statements of operations and changes in partners' capital for 1998 and 1997 were allocated 99% to the limited partners and 1% to the general partners. Net income per limited partnership unit for each such year was computed as 99% of net income divided by 42,324 weighted average units outstanding. Other Reserves: The General Partner may also designate a portion of cash generated from operations as other reserves in determining net cash from operations. Per the Partnership Agreement, the General Partner designated as other reserves an amount equal to the net liabilities related to the operations of apartment properties during the current fiscal year that are expected to require the use of cash during the next fiscal year. The changes in other reserves during 1998 and 1997 were approximately $162,000 and $141,000, respectively, which amounts were determined by considering changes in the balances of receivables and deposits, other assets, accounts payable, tenant security deposit liabilities, accrued taxes and other liabilities. At this time, the General Partner expects to continue to adjust other reserves based on the net change in the aforementioned account balances. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks, demand deposits, money market funds, and certificates of deposit with original maturities less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Restricted Escrows: Capital Improvement Account - In 1992, the Partnership mortgaged the real estate assets of its properties under the terms of a multiple-asset real estate mortgage investment conduit ("REMIC"). At the time of the REMIC refinancing, $1,429,000 of the proceeds were designated for a "capital improvement escrow" for certain capital improvements. At October 31, 1998, the scheduled property improvements have been completed and the escrow account has been eliminated. Reserve Account - In addition to the Capital Improvement Account, a general Reserve Account was established in 1992 with the refinancing proceeds for each mortgaged property. These funds were established to cover necessary repairs and replacements of existing improvements, debt service, out of pocket expenses incurred for ordinary and necessary administrative tasks, and payment of real property taxes and insurance premiums. The Partnership is required to deposit net operating income (as defined in the mortgage note) from each property to the respective reserve account until the accounts equal $1,000 per apartment unit for each respective property. The minimum balance of $400 per apartment unit, as well as the requirement of $1,000 per apartment unit, has currently been attained. The current balance is approximately $1,626,000. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used (1) for real property over 15 years for the initial cost of Carriage House Apartments, 18 years for other additions acquired before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987, and (2) for personal property over 5 years for additions prior to January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property additions over 27.5 years and (2) personal property additions over 7 years. Loan Costs: Loan costs of approximately $943,000 less accumulated amortization of approximately $558,000 are included in other assets and are being amortized on a straight-line basis over the life of the loans. Tenant Security Deposits - The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, it is the Corporate General Partner's policy to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Investment Properties: Investment properties consist of six apartment complexes and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Financial Accounting Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Partnership records impairment losses on long- lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of apartment properties that have been permanently impaired have been written down to appraised value. The Corporate General Partner relies on the annual appraisals performed by the outside appraisers for the estimated value of the Partnership's properties. There are three recognized approaches or techniques available to the appraiser. When applicable, these approaches are used to process the data considered significant to each to arrive at separate value indications. In all instances the experience of the appraiser, coupled with his objective judgment, plays a major role in arriving at the conclusions of the indicated value from which the final estimate of value is made. The three approaches commonly known are the cost approach, the sales comparison approach, and the income approach. The cost approach is often not considered to be reliable due to the lack of land sales and the significant amount of depreciation and, therefore, is often not presented. Upon receipt of the appraisals, any property which is stated on the books of the Partnership above the estimated value given in the appraisal, is written down to the estimated value given by the appraiser. The appraiser assumes a stabilized occupancy at the time of the appraisal and, therefore, any impairment of value is considered to be permanent by the Corporate General Partner. No adjustments for impairment of value were recorded in the years ended October 31, 1998 or 1997. Segment Reporting: In June 1997, the Financial Accounting Standards Board issued Statement of Financial Standards No. 131, Disclosure about Segments of an Enterprise and Related Information ("Statement 131"), which is effective for years beginning after December 15, 1997. Statement 131 established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Management has not completed its review of Statement 131, but does not anticipate the adoption of this statement to materially affect the Partnership. The Partnership will adopt the new requirements retroactively in 1999. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising expense was approximately $134,000 and $139,000 for the years ended October 31, 1998 and 1997, respectively were charged to expense as incurred. Fair Value of Financial Instruments: Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying value. Reclassification: Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - TRANSFER OF CONTROL On October 1, 1998, Insignia Financial Group, Inc. merged into Apartment Investment and Management Company, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the entity which controls the Corporate General Partner. As a result of the Insignia Merger, AIMCO acquired indirect control of the Corporate General Partner. Also, effective October 1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger, which requires the approval of the holders of a majority of the outstanding IPT Shares, is expected to be consummated in February 1999. AIMCO has agreed to vote all of the IPT Shares owned by it (approximately 51%) in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The Corporate General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. NOTE C - MORTGAGE NOTES PAYABLE The principal terms of mortgage notes payable are as follows: Principal Monthly Principal Balance At Payment Stated Balance October 31, Including Interest Maturity Due At Property 1998 Interest Rate Date Maturity (in thousands) (in thousands) Rocky Creek 1st Mortgage $ 2,064 $ 19 7.60% 11/15/02 $ 1,737 2nd Mortgage 74 (a) 7.60% 11/15/02 74 Carriage House 1st Mortgage 1,903 17 7.60% 11/15/02 1,601 2nd Mortgage 69 (a) 7.60% 11/15/02 68 Nottingham Square 1st Mortgage 7,448 68 7.60% 11/15/02 6,268 2nd Mortgage 268 2 7.60% 11/15/02 268 Foxfire/Barcelona 1st Mortgage 5,384 49 7.60% 11/15/02 4,531 2nd Mortgage 193 1 7.60% 11/15/02 193 River Reach 1st Mortgage 7,000 64 7.60% 11/15/02 5,890 2nd Mortgage 252 2 7.60% 11/15/02 252 Village Garden 1st Mortgage 2,423 22 7.60% 11/15/02 2,039 2nd Mortgage 87 1 7.60% 11/15/02 87 27,165 $ 245 Less unamortized discounts (1,015) Total $ 26,150 (a) Monthly payment including interest is less than $1,000. The Partnership exercised interest rate buy-down options for the six properties when the debt was refinanced in 1992, thereby reducing the stated rate from 8.76% to 7.6%. The fee for the interest rate reduction amounted to approximately $2,433,000 and is being amortized as a loan discount using the interest method over the life of the loans. The unamortized discount fee is reflected as a reduction of the mortgage notes payable and increases the effective rate of the debt to 8.76%. The mortgage notes payable are nonrecourse and are secured by pledge of the respective apartment properties and by pledge of revenues from the respective apartment properties. The notes could not be prepaid prior to November 15, 1997, thereafter, prepayment penalties are required if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. Scheduled principal payments of mortgage notes payable subsequent to October 31, 1998, are as follows (in thousands): 1999 $ 925 2000 997 2001 1,075 2002 1,160 2003 23,008 $27,165 NOTE D - INCOME TAXES The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation of reported net income and Federal taxable loss (in thousands, except unit data): 1998 1997 Net income as reported $ 322 $ 395 Add (deduct): Fixed asset write-offs and casualty gain -- (348) Amortization of present value discounts (2) (6) Depreciation differences (333) (280) Change in prepaid rental income (44) (11) Other 20 49 Federal taxable loss $ (37) $ (201) Federal taxable loss per limited partnership unit $ (.87) $(4.70) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net assets as reported $ 5,160 Buildings and land 3,632 Accumulated depreciation (14,887) Syndication fees 5,286 Other 72 Net liabilities - tax basis $ (737) NOTE E - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the Corporate General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and the reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to an affiliate of the Corporate General Partner during the year ended October 31, 1998 and 1997: 1998 1997 (in thousands) Property management fees (included in operating expenses) $512 $511 Reimbursements for services of affiliates (included in general and administrative expenses) 240 220 Included in reimbursements for services of affiliates is approximately $34,000 of reimbursements for construction oversight costs in both fiscal years ended October 31, 1998 and 1997. During the years ended October 31, 1998 and 1997, affiliates of the Corporate General Partner were entitled to receive 5% of the gross receipts from all of Registrant's properties as compensation for providing property management services. These services were performed by Insignia Management, L.P. during 1997 and until October 1, 1998 (effective date of the Insignia Merger (see Note B)), at which time AIMCO Management began providing such services. The Registrant paid to such affiliates $512,000 and $511,000 for the years ended October 31, 1998 and 1997, respectively. Insignia Residential Group, L.P. received reimbursement of accountable administrative expenses amounting to approximately $189,000 and $180,000 for the eleven month period ended September 30, 1998 and the year ended October 31, 1997, respectively. For October 1998, AIMCO, an affiliate of Corporate General Partner received reimbursements for administrative expenses of approximately $17,000. In July 21, 1998, an affiliate of the Corporate General Partner (the "Purchaser") commenced a tender offer for limited partnership interests in the Partnership. The Purchaser offered to purchase up to 17,000 of the outstanding units of limited partnership interest in the Partnership at $475 per Unit, net to the seller in cash. The Purchaser acquired 3,364 units pursuant to this tender offer. As a result of this purchase AIMCO currently owns, through its affiliates, a total of 14,907 limited partnership units or 35.22% as of October 31, 1998, consequently, AIMCO could be in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Corporate General Partner because of their affiliation with the Corporate General Partner. For the period of November 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with the Corporate General Partner. An affiliate of the Corporate General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Corporate General Partner, who received payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Corporate General Partner by virtue of the agent's obligations was not significant. NOTE F - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION Initial Cost To Partnership (in thousands) Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition Rocky Creek $ 2,138 $ 168 $ 3,821 $ 602 Carriage House 1,972 166 3,038 691 Nottingham Square 7,716 1,133 9,980 3,556 Foxfire/Barcelona 5,577 1,191 9,998 610 River Reach 7,252 1,872 10,854 1,630 Village Garden 2,510 420 3,050 643 Totals $ 27,165 $ 4,950 $ 40,741 $ 7,732

Gross Amount At Which Carried October 31, 1998 Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years (amounts in thousands) Rocky Creek Apartments Augusta, Georgia $ 168 $ 4,423 $ 4,591 $ 2,255 1979 06/29/84 5-35 Carriage House Apartments Gastonia, North Carolina 166 3,729 3,895 2,225 1970-1971 06/29/84 5-27 Nottingham Square Apartments Des Moines, Iowa 1,133 13,536 14,669 7,288 1972 08/31/84 5-29 Foxfire/Barcelona Apartments Durham, North Carolina 1,191 10,608 11,799 5,978 1973 03/28/85 5-29 1975 09/30/84 5-31 River Reach Apartments Jacksonville, Florida 1,872 12,484 14,356 7,072 1971 01/30/85 5-27 Village Garden Apartments Fort Collins, Colorado 420 3,693 4,113 1,920 1974 03/01/85 5-30 Totals $4,950 $ 48,473 $53,423 $26,738 EX-27 2
5 This schedule contains summary financial information extracted from Shelter Properties V Limited Partnership 1998 Year-End 10-KSB and is qualified in tis entirety by reference to such 10-KSB filing. 0000730013 SHELTER PROPERTIES VI 1 12-MOS OCT-31-1998 OCT-31-1998 3,111 0 914 0 0 0 53,423 26,738 32,840 0 26,150 0 0 0 5,160 32,840 0 10,216 0 0 9,894 0 2,410 0 0 0 0 0 0 322 7.54 0 Registrant has an unclassified balance sheet. Multiplier is 1.

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