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, 2001 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.
Item 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending legal proceedings.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.
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, 2001 had 811 limited partners of record. There is no intention to sell additional limited partnership units nor is there a market for these units.
Average cash distributions of $17.86 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2001 and $19.12 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2000 and $16.55 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 1999. It is Registrant's expectations that distributions will continue to be paid in the future.
Item 6.
Item 6. SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, 1998, and 1997 - -------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $3,115,301 $3,121,611 $2,887,720 $2,778,744 $2,564,306
TOTAL EXPENSES 1,825,103 1,742,859 1,619,474 1,551,834 1,530,103 ---------- ---------- ---------- ---------- ----------
NET INCOME $1,290,198 $1,378,752 $1,268,246 $1,226,910 $1,034,203 ========== ========== ========== ========== ==========
TOTAL ASSETS $2,971,125 $3,372,953 $3,796,535 $4,114,006 $4,469,563 ========== ========== ========== ========== ==========
CASH FLOWS FROM: OPERATING $1,755,331 $1,860,986 $1,684,625 $1,626,928 $1,443,997 INVESTING (41,401) (48,969) (82,421) (31,393) (14,754) FINANCING (1,713,926) (1,834,963) (1,588,445) (1,579,233) (1,459,556)
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 53.77 $ 57.46 $ 52.86 $ 51.14 $ 43.10 ---------- ---------- ---------- ---------- ----------
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 71.43 $ 76.48 $ 66.20 $ 65.82 $ 60.83 ========== ========== ========== ========== ==========
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
2001 COMPARED TO 2000
Total revenues increased from $3,109,493 in 2000 to $3,109,553 in 2001, while total expenses increased from $1,742,859 to $1,825,103 and other income decreased from $12,118 to $5,748, resulting in a decrease in net income from $1,378,752 to $1,290,198. Rental revenues remained stable as lower occupancy levels were offset by higher unit rental rates. Occupancy levels for the Part- nership's seven mini-storage facilities averaged 87.0% for the year 2001 as compared to 88.0% for 2000. The increase in operating expenses of approximately $35,700 (4.7%) was due primarily to an increase in salaries and wages expense. General and administrative expenses increased approximately $27,900 (19.7%) primarily as a result of higher office supplies and expense. The General Partners' incentive management fee increased approximately $12,000 (6.7%). Property management fees, which are based on revenues, remained stable, as there was a small difference in rental revenue between the years 2000 and 2001.
2000 COMPARED TO 1999
Total revenues increased from $2,877,374 in 1999 to $3,109,493 in 2000, while total expenses increased from $1,619,474 to $1,742,859 and other income increased from $10,346 to $12,118, resulting in an increase in net income from $1,268,246 to $1,378,752. Rental revenues increased as a result of higher occupancy and unit rental rates. Occupancy levels for the Partnership's seven mini-storage facilities averaged 88.0% for the year 2000 as compared to 85.1% for 1999. The Partnership continued its advertising campaign to attract and keep new tenants in its various mini-storage facilities. The increase in operating expenses of approximately $36,200 (5.0%) was due primarily to in- creases in repairs and maintenance, salaries and wages and workers compensation insurance expenses, partially offset by a decrease in yellow pages advertising costs. General and administrative expenses remained relatively constant. The General Partners' incentive management fee which is based on cash available for distribution, increased as a result of the increase in net income. Property management fees, which are based on revenues, increased as a result of the increase 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 consists mainly of expenses such as legal and professional, office supplies, postage, accounting services and computer expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased approximately $105,700 (5.7%) in 2001 compared to 2000 primarily due to the decrease in net income and an increase in other assets. Net cash provided by operating activities increased approximately $176,400 (10.5%) in 2000 compared to 1999 primarily due to the increase in net income, depreciation and other liabilities, partially offset by an increase in other assets.
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 5%, 6% and 4% of capital contributed by limited partners were declared and paid on December 15, 2001, 2000, and 1999 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. The Partnership has no material commitments for capital expenditures.
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, 2001 and 2000 was a follows:
2001 Quarter Ended ------------------ March 31 June 30 September 30 December 30
Total revenues $791,400 $789,397 $782,190 $746,566
Net income 374,495 354,262 351,932 209,509
Net income per limited partnership unit $ 15.61 $ 14.77 $ 14.67 $ 8.73
Weighted average number of limited partnership units 23,753 23,753 23,753 23,753
2000 Quarter Ended ------------------ March 31 June 30 September 30 December 30
Total revenues $753,692 $756,917 $803,919 $794,965
Net income 326,017 315,741 364,789 372,205
Net income per limited partnership unit $ 13.59 $ 13.16 $ 15.20 $ 15.51
Weighted average number of limited partnership unit 23,753 23,753 23,753 23,753
Item 8.
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.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.
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, 2001, 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 68 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 72 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 78 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.
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, 2001, 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.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 2001, 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.
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, 2001 attached hereto as Exhibit l and incorporated herein by this reference.
PART IV
Item 14
Item 14 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, 2001, 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, 2001.
(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 29, 2002 ROBERT J. CONWAY, President (Chief Executive Officer, Chief Financial Officer, and Director)
By____________________________ Dated: March 29, 2002 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 29, 2002 ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director
By___________________________ Dated: March 29, 2002 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, 2001, 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, 2001 - -------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $3,115,301 $3,121,611 $2,887,720 $2,778,744 $2,564,306
TOTAL EXPENSES 1,825,103 1,742,859 1,619,474 1,551,834 1,530,103 ---------- ---------- ---------- ---------- ----------
NET INCOME $1,290,198 $1,378,752 $1,268,246 $1,226,910 $1,034,203 ========== ========== ========== ========== ==========
TOTAL ASSETS $2,971,125 $3,372,953 $3,796,535 $4,114,006 $4,469,563 ========== ========== ========== ========== ==========
CASH FLOWS FROM: (USED IN): OPERATING $1,755,331 $1,860,986 $1,684,625 $1,626,928 $1,443,997 INVESTING (41,401) (48,969) (82,421) (31,393) (14,754) FINANCING (1,713,926) (1,834,963) (1,588,445) (1,579,233) (1,459,556)
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 53.77 $ 57.46 $ 52.86 $ 51.14 $ 43.10 CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 71.43 $ 76.48 $ 66.20 $ 65.82 $ 60.83 ========== ========== ========== ========== ==========
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, 2001.
Net Partners' Income Equity
Per financial statements $ 1,290,198 $ 2,549,087 Excess tax depreciation 468,740 (437,028) Accrued revenue 10,169 Accrued incentive management fee (16,219) Acquisition costs capitalized for tax purposes 134,382 Deferred rental revenues 79,486 Accrued distributions to partners 17,704 269,920 Accrued property taxes (88,000) Other (34,421) (2,000) ----------- ----------- Per Partnership tax return $ 1,742,221 $ 2,499,797 =========== =========== Taxable income per $500 limited partnership unit $ 72.61 ===========
DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report
Balance Sheets at December 31, 2001 and 2000
Statements of Income for the Three Years Ended December 31, 2001
Statements of Changes in Partners' Equity for the Three Years Ended December 31, 2001
Statements of Cash Flows for the Three Years Ended December 31, 2001
Notes to Financial Statements
SUPPLEMENTAL SCHEDULE:
Independent Auditors' Report
Schedule XI - Real Estate and Accumulated Depreciation
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.
INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund VI:
We have audited the accompanying balance sheets of DSI Realty Income Fund VI, a California Real Estate Limited Partnership(the "Partnership") as of December 31, 2001 and 2000, and the related statements of income, changes in partners' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and the financial statement schedule 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 in the United States of America. 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 estimates, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of DSI Realty Income Fund VI at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, 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 February 1, 2002
DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership)
BALANCE SHEETS DECEMBER 31, 2001 AND 2000 - --------------------------------------------------------------------------------
ASSETS 2001 2000
CASH AND CASH EQUIVALENTS $ 537,427 $ 537,423
PROPERTY, Net (Note 3) 2,319,749 2,755,151
OTHER ASSETS 113,949 80,379 ----------- ----------- TOTAL $ 2,971,125 $ 3,372,953 =========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
LIABILITIES: Distribution due partners $ 269,920 $ 269,920 Incentive management fee payable to general partners (Note 4) 12,671 17,792 Property management fees payable 13,460 15,433 Customer deposits and other liabilities 125,987 96,993 ----------- ----------- Total liabilities 422,038 400,138 ----------- ----------- PARTNERS' EQUITY (DEFICIT)(Note 4): General partners (67,794) (63,557) Limited partners (23,753 limited partnership units outstanding at December 31, 2001 and 2000) 2,616,881 3,036,372 ------------ ----------- Total partners' equity 2,549,087 2,972,815 ------------ ----------- TOTAL $ 2,971,125 $3,372,953 ============ ===========
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, 2001 - --------------------------------------------------------------------------------
2001 2000 1999
REVENUES: Rental $3,109,553 $3,109,493 $2,877,374 ---------- ---------- --------- EXPENSES: Depreciation 476,803 469,605 419,220 Operating 801,943 766,261 730,031 General and administrative 169,671 141,759 139,652 General partners' incentive management fee (Note 4) 190,675 178,665 158,369 Property management fee 186,011 186,569 172,202 ---------- ---------- --------- Total expenses 1,825,103 1,742,859 1,619,474 ---------- ---------- --------- OPERATING INCOME $1,284,450 $1,366,634 $1,257,900
OTHER INCOME - Interest income 5,748 12,118 10,346 ---------- ---------- ---------- NET INCOME $1,290,198 $1,378,752 $1,268,246 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $1,277,296 $1,364,964 $1,255,564 General partners 12,902 13,788 12,682 ---------- ---------- ---------- TOTAL $1,290,198 $1,378,752 $1,268,246 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 53.77 $ 57.46 $ 52.86 ========== ========== =========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VI (A California Real Estate Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 2001 - --------------------------------------------------------------------------------
General Limited Partners Partners Total
BALANCE AT JANUARY 1, 1999 $(55,794) $ 3,805,019 $ 3,749,225
Net income 12,682 1,255,564 1,268,246
Distributions (15,884) (1,572,561) (1,588,445) ------- ----------- ----------- BALANCE AT DECEMBER 31, 1999 $(58,996) $ 3,488,022 $ 3,429,026
Net income 13,788 1,364,964 1,378,752
Distributions (18,349) (1,816,614) (1,834,963) ------- ----------- ----------- BALANCE DECEMBER 31, 2000 $(63,557) $ 3,036,372 $ 2,972,815
Net income 12,902 1,277,296 1,290,198
Distributions (17,139) (1,696,787) (1,713,926) ------- ----------- ----------- BALANCE DECEMBER 31, 2001 $(67,794) $ 2,616,881 $ 2,549,087
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, 2001 - --------------------------------------------------------------------------------
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,290,198 $ 1,378,752 $1,268,246 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 476,803 469,605 419,220 Changes in assets and liabilities: Other assets (33,570) (20,000) (5,569) Incentive management fee payable to general partners (5,121) 8,368 1,477 Property management fees payable (1,973) 1,062 1,251 Customer deposits and other liabilities 28,994 29,199 ---------- ---------- --------- Net cash provided by operating activities 1,755,331 1,860,986 1,684,625
CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (41,401) (48,469) (82,421)
CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (1,713,926) (1,834,963) (1,588,445) ----------- ----------- ---------
NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS 4 (22,446) 13,759
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 537,423 559,869 546,110 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 537,427 $ 537,423 $ 559,869 =========== =========== ============
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, 2001
1. GENERAL
DSI Realty Income Fund VI, a California Real Estate 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 a 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 six percent 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.
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 $(49,290).
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 (23,753 in 2001, 2000, and 1999).
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 recognizes an impairment loss to the extent the carrying value exceeded the fair value of the property. No impairment losses were required in 2001, 2000 or 1999.
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 equivalents with high credit quality institutions.
3. PROPERTY At December 31, 2001 and 2000, the total cost of property and accumulated depreciation are as follows:
2001 2000 Land $ 1,759,000 $ 1,759,000 Buildings and improvements 8,618,136 8,576,735 ----------- -----------
Total 10,377,136 10,335,735 Less accumulated depreciation (8,057,387) (7,580,584) ----------- ----------
Property, net $ 2,319,749 $ 2,755,151 =========== ===========
4. ALLOCATION OF PROFITS AND LOSSES
Under the Agreement of Limited Partnership, the general partners are to be allocated one percent 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 nine percent per annum of the cash available for distribution on a cumulative basis, calculated as cash gen- erated 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 under 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 - --------------------------------------------------------------------------------
Real Estate Accumulated at Cost Depreciation
Balance at January 1, 1999 $10,204,845 $6,691,759 Additions 82,421 419,220 ----------- ---------- Balance at December 31, 1999 $10,287,266 $7,110,979 Additions 48,469 469,605 ----------- ---------- Balance at December 31, 2000 $10,335,735 $7,580,584 Additions 41,401 476,803 ----------- ---------- Balance at December 31, 2001 $10,377,136 $8,057,387 =========== ==========
EXHIBIT 2
March 28, 2002
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, 2001 and 2000, and the related statements of income, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 2001 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, 2001 and December 31, 2000 were as follows:
Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 2001 Dec. 31, 2000
Vallejo, California 84% 93%
Santa Rosa, California both stages) 84% 87%
Arvada, California 89% 86%
Las Vegas, Nevada 86% 86%
Federal Heights, Colorado 88% 87%
Colorado Springs, Colorado 90% 87%
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, 2001, 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