##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q



---



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM  TO

Commission File Number 000-51270



---

APPLE REIT SIX, INC.

(Exact name of registrant as specified in its charter)



---



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|VIRGINIA                                                       |  | 20-0620523                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|814 EAST MAIN STREET RICHMOND, VIRGINIA                        |  | 23219                            
|(Address of principal executive offices)                       |  | (Zip Code)                       

(804) 344-8121

(Registrants telephone number, including area code)



---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act:



|                         |  |                      |  |                       
|------------------------ |  | -------------------- |  | ----------------------
|Large accelerated filer ̈ |  | Accelerated filer  x |  | Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

Number of registrants common shares outstanding as of July 30, 2006: 89,151,957



---



---

##### Table of Contents

APPLE REIT SIX, INC.

FORM 10-Q

INDEX



|                              |  |                                                                                                                                           |  |            
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|                              |  |                                                                                                                                           |  | Page Number
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                          
|                              |  |                                                                                                                                          
|Item 1.                       |  | Financial Statements (Unaudited)                                                                                                          |  |            
|                              |  |                                                                                                                                          
|                              |  | Consolidated Balance Sheets -June 30, 2006 and December 31, 2005                                                                          |  | 3          
|                              |  |                                                                                                                                          
|                              |  | Consolidated Statements of Operations -Three months and six months ended June 30, 2006 andThree months and six months ended June 30, 2005 |  | 4          
|                              |  |                                                                                                                                          
|                              |  | Consolidated Statements of Cash Flows -Six months ended June 30, 2006 andSix months ended June 30, 2005                                   |  | 5          
|                              |  |                                                                                                                                          
|                              |  | Notes to Consolidated Financial Statements                                                                                                |  | 6          
|                              |  |                                                                                                                                          
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                     |  | 10         
|                              |  |                                                                                                                                          
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                |  | 15         
|                              |  |                                                                                                                                          
|Item 4.                       |  | Controls and Procedures                                                                                                                   |  | 15         
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                                          
|                              |  |                                                                                                                                          
|Item 1.                       |  | Legal Proceedings (not applicable)                                                                                                        |  |            
|                              |  |                                                                                                                                          
|Item 1A.                      |  | Risk Factors (not applicable)                                                                                                             |  |            
|                              |  |                                                                                                                                          
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                               |  | 16         
|                              |  |                                                                                                                                          
|Item 3.                       |  | Defaults Upon Senior Securities (not applicable)                                                                                          |  |            
|                              |  |                                                                                                                                          
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                                       |  | 17         
|                              |  |                                                                                                                                          
|Item 5.                       |  | Other Information (not applicable)                                                                                                        |  |            
|                              |  |                                                                                                                                          
|Item 6.                       |  | Exhibits                                                                                                                                  |  | 18         
|                              | 
|Signatures                    |  | 19                                                                                                                                       

This Form 10-Q includes references to certain trademarks or service marks. The SpringHill
Suites® by Marriott, TownePlace Suites® by Marriott, Fairfield Inn® by Marriott, Courtyard® by Marriott, Residence Inn® by Marriott and Marriott Suites® trademarks are the property of Marriott International, Inc. or one of its affiliates.
The Homewood Suites® by Hilton, Hilton Garden
Inn®, Hampton Inn® and Hampton Inn & Suites® trademarks are the property of Hilton Hotels Corporation or one or more of its
affiliates. For convenience, the applicable trademark or servicemark symbol has been omitted but will be deemed to be included wherever the above-referenced terms are used.



2



---

##### Table of Contents

Apple REIT Six, Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share data)

|
|



|                                                                                                                                              |  |               |         |   |                   |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                              |  | June 30, 2006 |         |   | December 31, 2005 |  
|ASSETS                                                                                                                                        |  |               |         |   |                   |   |         |  
|Investment in real estate, net of accumulated depreciation of $25,260 and $13,247, respectively                                               |  | $             | 842,078 |   |                   | $ | 790,170 |  
|Cash and cash equivalents                                                                                                                     |  |               | 29,104  |   |                   |   | 35,948  |  
|Restricted cash-furniture, fixtures and other escrows                                                                                         |  |               | 3,734   |   |                   |   | 3,152   |  
|Due from third party manager, net                                                                                                             |  |               | 13,644  |   |                   |   | 7,813   |  
|Other assets, net                                                                                                                             |  |               | 12,329  |   |                   |   | 17,233  |  
|                                                                                                                                              |  |               |         |   |                   |   |         |  
|TOTAL ASSETS                                                                                                                                  |  | $             | 900,889 |   |                   | $ | 854,316 |  
|                                                                                                                                              |  |               |         |   |                   |   |         |  
|LIABILITIES                                                                                                                                   |  |               |         |   |                   |   |         |  
|Notes payable                                                                                                                                 |  | $             | 54,609  |   |                   | $ | 76,855  |  
|Accounts payable and accrued expenses                                                                                                         |  |               | 4,731   |   |                   |   | 5,626   |  
|                                                                                                                                              |  |               |         |   |                   |   |         |  
|TOTAL LIABILITIES                                                                                                                             |  |               | 59,340  |   |                   |   | 82,481  |  
|                                                                                                                                              |  |              
|SHAREHOLDERS EQUITY                                                                                                                          |  |               |         |   |                   |   |         |  
|Preferred stock, authorized 15,000,000 shares; none issued and outstanding                                                                    |  |               |        |   |                   |   |        |  
|Series A preferred stock, no par value, authorized 200,000,000 shares;issued and outstanding 90,146,807 and 81,774,666 shares,
respectively   |  |               |        |   |                   |   |        |  
|Series B convertible preferred stock, no par value, authorized 240,000 shares;issued and outstanding 240,000 and 240,000 shares,
respectively |  |               | 24      |   |                   |   | 24      |  
|Common stock, no par value, authorized 200,000,000 shares;issued and outstanding 90,146,807 and 81,774,666 shares,
respectively               |  |               | 887,228 |   |                   |   | 805,079 |  
|Distributions greater than net income                                                                                                         |  |               | (45,703 | ) |                   |   | (33,268 | )
|                                                                                                                                              |  |               |         |   |                   |   |         |  
|TOTAL SHAREHOLDERS EQUITY                                                                                                                    |  |               | 841,549 |   |                   |   | 771,835 |  
|                                                                                                                                              |  |               |         |   |                   |   |         |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                    |  | $             | 900,889 |   |                   | $ | 854,316 |  
|                                                                                                                                              |  |               |         |   |                   |   |         |  

See notes to consolidated financial statements.



3



---

##### Table of Contents

Apple REIT Six, Inc.

Consolidated Statements of Operations

(unaudited)

(in thousands, except
per share data)



|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|-------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------- | - | ------ | ----------------------------- |  | - | ----------------------------- | - |  | - | ------ | -
|                                                               |  | Three months endedJune 30,
2006 |        |   | Three months endedJune 30,
2005 |   |        | Six Months endedJune 30, 2006 |  |   | Six Months endedJune 30, 2005 |  
|Revenues:                                                      |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Room revenue                                                   |  | $                               | 57,567 |   |                                 | $ | 17,452 |                               |  | $ | 106,473                       |   |  | $ | 27,674 |  
|Other revenue                                                  |  |                                 | 4,570  |   |                                 |   | 2,139  |                               |  |   | 8,750                         |   |  |   | 3,824  |  
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Total revenue                                                  |  |                                 | 62,137 |   |                                 |   | 19,591 |                               |  |   | 115,223                       |   |  |   | 31,498 |  
|                                                               |  |                                 |        |  
|Expenses:                                                      |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Operating expense                                              |  |                                 | 16,099 |   |                                 |   | 5,159  |                               |  |   | 30,161                        |   |  |   | 8,479  |  
|Hotel administrative expense                                   |  |                                 | 4,679  |   |                                 |   | 1,746  |                               |  |   | 8,968                         |   |  |   | 2,903  |  
|Sales and marketing                                            |  |                                 | 4,830  |   |                                 |   | 1,474  |                               |  |   | 8,972                         |   |  |   | 2,398  |  
|Utilities                                                      |  |                                 | 2,327  |   |                                 |   | 627    |                               |  |   | 4,614                         |   |  |   | 1,044  |  
|Repair and maintenance                                         |  |                                 | 2,572  |   |                                 |   | 612    |                               |  |   | 4,776                         |   |  |   | 1,016  |  
|Franchise fees                                                 |  |                                 | 2,374  |   |                                 |   | 558    |                               |  |   | 4,324                         |   |  |   | 806    |  
|Management fees                                                |  |                                 | 2,419  |   |                                 |   | 647    |                               |  |   | 4,728                         |   |  |   | 1,038  |  
|Taxes, insurance and other                                     |  |                                 | 3,416  |   |                                 |   | 926    |                               |  |   | 6,581                         |   |  |   | 1,523  |  
|General and administrative                                     |  |                                 | 1,219  |   |                                 |   | 833    |                               |  |   | 2,186                         |   |  |   | 1,356  |  
|Depreciation expense                                           |  |                                 | 6,417  |   |                                 |   | 2,046  |                               |  |   | 12,437                        |   |  |   | 3,345  |  
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Total expenses                                                 |  |                                 | 46,352 |   |                                 |   | 14,628 |                               |  |   | 87,747                        |   |  |   | 23,908 |  
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Operating income                                               |  |                                 | 15,785 |   |                                 |   | 4,963  |                               |  |   | 27,476                        |   |  |   | 7,590  |  
|                                                               |  |                                 |        |  
|Interest income                                                |  |                                 | 270    |   |                                 |   | 1,142  |                               |  |   | 561                           |   |  |   | 1,780  |  
|Interest expense                                               |  |                                 | (864   | ) |                                 |   | (310   | )                             |  |   | (1,862                        | ) |  |   | (464   | )
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Net income                                                     |  | $                               | 15,191 |   |                                 | $ | 5,795  |                               |  | $ | 26,175                        |   |  | $ | 8,906  |  
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Basic and diluted net income per common share                  |  | $                               | 0.17   |   |                                 | $ | 0.12   |                               |  | $ | 0.30                          |   |  | $ | 0.20   |  
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  
|Weighted average common shares outstanding - basic and diluted |  |                                 | 90,004 |   |                                 |   | 50,206 |                               |  |   | 88,155                        |   |  |   | 44,521 |  
|                                                               |  |                                 |        |  
|Distributions declared per common share                        |  | $                               | 0.22   |   |                                 | $ | 0.22   |                               |  | $ | 0.44                          |   |  | $ | 0.44   |  
|                                                               |  |                                 |        |   |                                 |   |        |                               |  |   |                               |   |  |   |        |  

See notes to consolidated financial statements.



4



---

##### Table of Contents

Apple REIT Six, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)



|                                                                              |  |                               |         |   |                               |   |          |  
|----------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ----------------------------- | - | -------- | -
|                                                                              |  | Six months endedJune 30, 2006 |         |   | Six months endedJune 30, 2005 |  
|Cash flow provided by operating activities:                                   |  |                               |         |   |                               |   |          |  
|Net income                                                                    |  | $                             | 26,175  |   |                               | $ | 8,906    |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                               |         |   |                               |   |          |  
|Depreciation                                                                  |  |                               | 12,437  |   |                               |   | 3,345    |  
|Amortization of deferred financing costs and fair value adjustments           |  |                               | (211    | ) |                               |   |         |  
|Stock option expense issued                                                   |  |                               | 69      |   |                               |   |         |  
|Changes in operating assets and liabilities, net of amounts acquired/assumed: |  |                               |         |   |                               |   |          |  
|Due from third party manager                                                  |  |                               | (5,828  | ) |                               |   | (3,325   | )
|Other assets                                                                  |  |                               | (256    | ) |                               |   | (446     | )
|Accounts payable and accrued expenses                                         |  |                               | 1,449   |   |                               |   | (820     | )
|                                                                              |  |                               |         |   |                               |   |          |  
|Net cash provided by operating activities                                     |  |                               | 33,835  |   |                               |   | 7,660    |  
|                                                                              |  |                              
|Cash flow from investing activities:                                          |  |                               |         |   |                               |   |          |  
|Cash paid in acquisition of hotels                                            |  |                               | (38,763 | ) |                               |   | (186,587 | )
|Cash paid for potential acquisition of hotels                                 |  |                               |        |   |                               |   | (5,796   | )
|Acquisition of other assets                                                   |  |                               | (8,247  | ) |                               |   | (1,013   | )
|Capital improvements                                                          |  |                               | (8,059  | ) |                               |   | (454     | )
|Net increase in cash restricted for property improvements                     |  |                               | (345    | ) |                               |   | (734     | )
|                                                                              |  |                               |         |   |                               |   |          |  
|Net cash used in investing activities                                         |  |                               | (55,414 | ) |                               |   | (194,584 | )
|                                                                              |  |                              
|Cash flow from financing activities:                                          |  |                               |         |   |                               |   |          |  
|Payment of financing costs                                                    |  |                               | (101    | ) |                               |   | (184     | )
|Repayment of secured notes payable                                            |  |                               | (28,634 | ) |                               |   | (141     | )
|Net proceeds from issuance of common stock                                    |  |                               | 94,010  |   |                               |   | 230,954  |  
|Redemptions of common stock                                                   |  |                               | (11,930 | ) |                               |   |         |  
|Cash distributions paid to shareholders                                       |  |                               | (38,610 | ) |                               |   | (19,203  | )
|                                                                              |  |                               |         |   |                               |   |          |  
|Net cash provided by financing activities                                     |  |                               | 14,735  |   |                               |   | 211,426  |  
|                                                                              |  |                              
|Increase (decrease) in cash and cash equivalents                              |  |                               | (6,844  | ) |                               |   | 24,502   |  
|                                                                              |  |                              
|Cash and cash equivalents, beginning of period                                |  |                               | 35,948  |   |                               |   | 142,790  |  
|                                                                              |  |                               |         |   |                               |   |          |  
|Cash and cash equivalents, end of period                                      |  | $                             | 29,104  |   |                               | $ | 167,292  |  
|                                                                              |  |                               |         |   |                               |   |          |  
|Non-cash transactions:                                                        |  |                               |         |   |                               |   |          |  
|Notes payable-secured assumed in acquisitions                                 |  | $                             | 6,663   |   |                               | $ | 10,033   |  

See notes to consolidated financial statements.



5



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1

Basis of Presentation

The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Companys audited financial
statements included in its 2005 Annual Report on Form 10-K. Operating results for the period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the period ending December 31, 2006.

Note 2

General Information and Summary of Significant Accounting
Policies

Organization

Apple REIT
Six, Inc. (the Company) is a Virginia corporation formed to invest in hotels and other selected real estate in select metropolitan areas in the United States. Initial capitalization occurred on January 20, 2004 and operations began
on May 28, 2004, when the Company acquired its first hotel. On March 3, 2006, the Company concluded its best-efforts offering of Units. The Company has no foreign operations or assets and its operating structure includes only one segment.
The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company transactions and balances have been eliminated upon consolidation.

Stock Incentive Plans

Effective January 1, 2006, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation using the modified prospective transition method. Accordingly, no prior
year amounts have been restated. Statement 123 (R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123
(R) is similar to the approach described in Statement 123. However, Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer an alternative. The adoption of this statement has not had a material impact on the Companys results of operations or financial position. During the second quarter of 2006 the Company issued
approximately 72,000 directors stock options and share-based expense of approximately $69,000 was recorded.

Offering Costs

From the Companys initial capitalization on January 20, 2004 through June 30, 2006, the Company incurred costs of approximately $102
million related to its best-efforts offering. These costs are reflected as a reduction to shareholders equity. As of June 30, 2006, the Company has closed on a total of 91,125,541 Units, representing proceeds net of offering costs of
approximately $898 million.



6



---

##### Table of Contents

Earnings per Common Share

Basic earnings per common share is computed based upon the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated after giving effect to all potential common shares
that were dilutive and outstanding for the year. There were no potential common shares with a dilutive effect during the three months and six months ended June 30, 2006 or 2005. Series B convertible preferred shares are not included in earnings
per common share calculations until such time the Series B preferred convertible shares are converted to common shares.

Use of Estimates

The preparation of the 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.

Note 3

Property Acquisitions

The Company purchased five hotels in 2006. The following table summarizes the location, brand, date acquired, number of rooms, gross purchase price and property manager for each hotel acquired in 2006. All dollar amounts are in thousands.



|                  |  |                   |  |              |  |              |  |       |  |                    |       
|----------------- |  | ----------------- |  | ------------ |  | ------------ |  | ----- |  | ------------------ | ------
|Location          |  | Brand             |  | Manager      |  | DateAcquired |  | Rooms |  | GrossPurchasePrice
|San Francisco, CA |  | Hilton Garden Inn |  | Inn Ventures |  | 1/30/06      |  | 169   |  | $                  | 12,266
|Clearwater, FL    |  | SpringHill Suites |  | LBA          |  | 2/17/06      |  | 79    |  |                    | 6,923 
|Hillsboro, OR     |  | Residence Inn     |  | Inn Ventures |  | 3/09/06      |  | 122   |  |                    | 15,500
|Hillsboro, OR     |  | Courtyard         |  | Inn Ventures |  | 3/09/06      |  | 155   |  |                    | 11,000
|Panama City, FL   |  | Courtyard         |  | LBA          |  | 4/26/06      |  | 84    |  |                    | 9,245 
|                  |  |                   |  |              |  |              |  |       |  |                    |       
|                  |  |                   |  |              |  | Total        |  | 609   |  | $                  | 54,934
|                  |  |                   |  |              |  |              |  |       |  |                    |       

Substantially all of the purchases were funded with proceeds of the Companys best-efforts
offering of Units. However, the Company did assume approximately $6.7 million of secured debt associated with the purchase of the Courtyard hotel in Hillsboro, Oregon. The note bears interest at a rate of 6.4% per annum and matures on
December 11, 2014.

As there can be no assurance that all conditions to closing will be satisfied, the Company includes deposits for
hotels under contract in Other assets in the Companys Consolidated Balance Sheet and in Cash paid for potential acquisition of hotels in its Consolidated Statement of Cash Flows.

The terms and fees of the new management agreements are similar to the Companys existing management agreements.

The Company leased all of its hotels to wholly-owned taxable REIT subsidiaries under hotel lease agreements. The Company also used the proceeds of its
offering to pay 2% of the gross purchase price for these hotels, or approximately $1.1 million, as a commission to Apple Six Realty Group, Inc. (ASRG). ASRG is owned by the Companys Chairman, Chief Executive Officer and President,
Glade M. Knight. This commission was capitalized as part of the purchase price of the hotels.

No goodwill or intangible assets were
recorded in connection with any of the acquisitions.



7



---

##### Table of Contents

As of June 30, 2006, investment in real estate consisted of the following (in thousands):



|                                  |  |   |         |  
|--------------------------------- |  | - | ------- | -
|Land                              |  | $ | 107,490 |  
|Building and Improvements         |  |   | 718,479 |  
|Furniture, Fixtures and Equipment |  |   | 41,369  |  
|                                  |  |   |         |  
|                                  |  |   | 867,338 |  
|Less Accumulated Depreciation     |  |   | (25,260 | )
|                                  |  |   |         |  
|Investment in real estate, net    |  | $ | 842,078 |  
|                                  |  |   |         |  

Note 4

Related Parties

The Company has significant transactions with related parties. These transactions cannot be construed to be
arms length, and the results of the Companys operations may be different if these transactions were conducted with non-related parties.

The Company has a contract with ASRG, a related party, to provide brokerage services for the acquisition and disposition of the Companys real estate assets. In accordance with the contract, ASRG is paid a fee of 2% of the gross
purchase price of any acquisitions or gross sale price of any dispositions of real estate investments, subject to certain conditions. As of June 30, 2006, payments to ASRG for services under the terms of this contract have totaled $16.6 million
since inception, which were capitalized as a part of the purchase price of the hotels.

The Company is party to an advisory agreement with
Apple Six Advisors, Inc. (ASA), pursuant to which ASA provides management services to the Company. An annual fee ranging from .1% to .25% of total equity proceeds received by the Company, in addition to certain reimbursable expenses, are
payable for these services. ASA utilizes Apple Hospitality Two, Inc. to provide these services. Expenses related to the ASA agreement, for the six months ended June 30, 2006 and 2005, totaled approximately $1.1 million and $631,000,
respectively.

During 2006 the Company assigned its rights under three contracts for the purchase of hotels in Houston, TX, Brownsville, TX
and Miami, FL, to Apple REIT Seven, Inc. The assignments were completed with no cost to the Company and were entered into to prevent the Company from incurring secured debt to complete its planned property acquisitions.

Mr. Knight is Chairman and Chief Executive Officer of ASRG, ASA, Apple Hospitality Two, Inc. (a hospitality REIT), Apple Hospitality Five, Inc. (a
hospitality REIT) and Apple REIT Seven, Inc. (a newly formed company proposed to be a diversified REIT). The Companys Board of Directors are also on the board of Apple Hospitality Two, Inc. and Apple Hospitality Five, Inc.

Note 5

Shareholders Equity

The company concluded its best-efforts offering of Units on March 3, 2006.



8



---

##### Table of Contents

Expense related to issuance of 240,000 Series B convertible preferred shares to Mr. Knight will be
recognized at such time when the number of common shares to be issued for conversion of the Series B shares can be reasonably estimated and the event triggering the conversion of the Series B shares to common shares occurs. The expense will be
measured as the difference between the fair value of the common stock for which the Series B shares can be converted and the amounts paid for the Series B shares. Based on equity raised through June 30, 2006, if a triggering event had occurred,
expense would have ranged from $0 to $63.8 million (assumes $11 per unit fair market value), which represents approximately 5.8 million shares of common stock.

In July 2005, the Company instituted a Unit Redemption Program to provide limited interim liquidity to its shareholders who have held their Units for at least one year. Shareholders may request redemption of Units for
a purchase price equal to the lesser of: (1) the purchase price per unit that the shareholder actually paid for the unit; or (2) $11.00 per unit. The Company reserves the right to change the purchase price of redemptions, reject any
request for redemption, or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. During the six months ended June 30, 2006, the Company redeemed approximately 1.1 million Units in the amount of $11.9 million
under the program.

In February 2006, the Company instituted a dividend reinvestment plan for its shareholders. The plan provides a
convenient and cost effective way to increase shareholder investment in the Company by reinvesting dividends to purchase additional Units of the Company. The uses of the proceeds from this plan may include purchasing Units under the Companys
Unit Redemption Program, enhancing properties, satisfying financing obligations and other expenses, increasing working capital, funding various corporate operations, and acquiring hotels. As of June 30, 2006, approximately 547,000 Units,
representing $6.0 million in proceeds to the Company, have been issued under the plan.

Note 6

Other Assets

On January 25, 2006, the Company,
through a wholly-owned subsidiary, Apple Six Hospitality Air, LLC, purchased a Lear 40XR jet. The jet will be used mainly for renovation and asset management purposes. The purchase price was approximately $8.3 million. The asset is depreciated on a
straight-line basis over a useful life of ten years. As of June 30, 2006, the Company recorded depreciation expense in the amount of approximately $424,000.

Note 7

Subsequent Events

On July 17, 2006, the Company declared and paid approximately $6.6 million, or $.073 per share, in distributions to its common shareholders of record on June 30, 2006, of which $2.5 million or 231,779 Units were reinvested under
the Companys Dividend Reinvestment Plan.

On July 17, 2006, the Company redeemed 1.2 million Units in the amount of $13.4
million under its Unit Redemption Program.



9



---

##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation

This
quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements involve known and
unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking
statements. Such factors include the ability of the Company to implement its acquisition strategy and operating strategy; the Companys ability to manage planned growth; changes in economic cycles and competition within the extended-stay
hotel industry. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such
statements included in the quarterly report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. In addition, the Companys qualification as a real estate investment
trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the Companys financial statements and the notes thereto, as well as the risk factors described in the
Companys filings with the Securities and Exchange Commission.

Overview

Apple REIT Six, Inc. (together with its wholly owned subsidiaries, the Company) was formed and initially capitalized on January 20, 2004,
with its first investor closing on April 23, 2004. The Company owns 67 hotels within different markets in the United States. The Company is treated as a Real Estate Investment Trust (REIT) for federal income tax purposes. The
Companys first hotel was acquired on May 28, 2004, with 11 total hotels purchased in 2004, 51 hotels purchased in 2005 and 5 hotels purchased in 2006. Accordingly, the results of operations include only the results of the hotels for the
period owned. Although hotel performance can be influenced by many factors including local competition, local and general economic conditions in the United States and the performance of individual managers assigned to each hotel, performance of the
hotels, in general, has met the Companys expectations for the period owned. In evaluating financial condition and operating performance, the most important matters on which the Company focuses are revenue measurements, such as average
occupancy, average daily rate (ADR) and revenue per available room (RevPAR), and expenses, such as hotel operating expenses, general and administrative and other expenses described below. The following is a summary of the
Companys results:



|                                        |  |                             |        |   |                           |     |   |      |   |        |     |  |     |               |  |     |      |  |   |         |   |  |      |   |  |     |        |   |               |     |   |  |     |   
|--------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | --- | - | ---- | - | ------ | --- |  | --- | ------------- |  | --- | ---- |  | - | ------- | - |  | ---- | - |  | --- | ------ | - | ------------- | --- | - |  | --- | --
|                                        |  | Three months ended June 30, |        |   | Six months ended June 30, |    
|(in thousands, except statistical data) |  | 2006                        |        |   | POR                       |     |   | 2005 |   |        | POR |  |     | Percentchange |  |     | 2006 |  |   | POR     |   |  | 2005 |   |  | POR |        |   | Percentchange |    
|Total revenues                          |  | $                           | 62,137 |   |                           | 100 | % |      | $ | 19,591 |     |  | 100 | %             |  | 217 | %    |  | $ | 115,223 |   |  | 100  | % |  | $   | 31,498 |   |               | 100 | % |  | 266 | % 
|Hotel direct expenses                   |  |                             | 35,300 |   |                           | 57  | % |      |   | 10,823 |     |  | 55  | %             |  | 226 | %    |  |   | 66,543  |   |  | 58   | % |  |     | 17,684 |   |               | 56  | % |  | 276 | % 
|Taxes, insurance and other expense      |  |                             | 3,416  |   |                           | 5   | % |      |   | 926    |     |  | 5   | %             |  | 269 | %    |  |   | 6,581   |   |  | 6    | % |  |     | 1,523  |   |               | 5   | % |  | 332 | % 
|General and administrative              |  |                             | 1,219  |   |                           | 2   | % |      |   | 833    |     |  | 4   | %             |  | 46  | %    |  |   | 2,186   |   |  | 2    | % |  |     | 1,356  |   |               | 4   | % |  | 61  | % 
|Depreciation                            |  |                             | 6,417  |   |                           | 10  | % |      |   | 2,046  |     |  | 10  | %             |  | 214 | %    |  |   | 12,437  |   |  | 11   | % |  |     | 3,345  |   |               | 11  | % |  | 272 | % 
|ADR                                     |  | $                           | 105    |   |                           |     |   |      | $ | 107    |     |  |     |               |  | (2  | )%   |  | $ | 103     |   |  |      |   |  | $   | 106    |   |               |     |   |  | (3  | )%
|Occupancy                               |  |                             | 78     | % |                           |     |   |      |   | 76     | %   |  |     |               |  | 3   | %    |  |   | 75      | % |  |      |   |  |     | 73     | % |               |     |   |  | 3   | % 
|RevPAR                                  |  | $                           | 82     |   |                           |     |   |      | $ | 81     |     |  |     |               |  | 1   | %    |  | $ | 78      |   |  |      |   |  | $   | 77     |   |               |     |   |  | 1   | % 



10



---

##### Table of Contents

Hotels Owned

As of June 30, 2006, the Company owned 67 hotels, with a total of 7,750 rooms. The following table summarizes the location, brand, manager, date acquired, number of rooms and gross purchase price for each hotel. All dollar amounts are
in thousands.



|                     |  |                      |  |              |  |              |  |       |  |                    |        
|-------------------- |  | -------------------- |  | ------------ |  | ------------ |  | ----- |  | ------------------ | -------
|Location             |  | Brand                |  | Manager      |  | DateAcquired |  | Rooms |  | GrossPurchasePrice
|Ft. Worth, TX        |  | SpringHill Suites    |  | Marriott     |  | 5/28/04      |  | 145   |  | $                  | 13,340 
|Myrtle Beach, SC     |  | Courtyard            |  | Marriott     |  | 6/8/04       |  | 135   |  |                    | 9,200  
|Redmond, WA          |  | Marriott             |  | Marriott     |  | 7/7/04       |  | 262   |  |                    | 64,000 
|Anchorage, AK        |  | Hilton Garden Inn    |  | Stonebridge  |  | 10/12/04     |  | 125   |  |                    | 18,900 
|Anchorage, AK        |  | Homewood Suites      |  | Stonebridge  |  | 10/12/04     |  | 122   |  |                    | 13,200 
|Arcadia, CA          |  | Hilton Garden Inn    |  | Stonebridge  |  | 10/12/04     |  | 124   |  |                    | 12,000 
|Arcadia, CA          |  | SpringHill Suites    |  | Stonebridge  |  | 10/12/04     |  | 86    |  |                    | 8,100  
|Glendale, CO         |  | Hampton Inn & Suites |  | Stonebridge  |  | 10/12/04     |  | 133   |  |                    | 14,700 
|Lakewood, CO         |  | Hampton Inn          |  | Stonebridge  |  | 10/12/04     |  | 170   |  |                    | 10,600 
|Lake Forest, CA      |  | Hilton Garden Inn    |  | Stonebridge  |  | 10/12/04     |  | 103   |  |                    | 11,400 
|Phoenix, AZ          |  | Hampton Inn          |  | Stonebridge  |  | 10/12/04     |  | 99    |  |                    | 6,700  
|Anchorage, AK        |  | Hampton Inn          |  | Stonebridge  |  | 3/14/05      |  | 101   |  |                    | 11,500 
|Bakersfield, CA      |  | Hilton Garden Inn    |  | Hilton       |  | 3/18/05      |  | 120   |  |                    | 11,500 
|Tallahassee, FL      |  | Hilton Garden Inn    |  | Hilton       |  | 3/18/05      |  | 99    |  |                    | 10,850 
|Lake Mary, FL        |  | Courtyard            |  | Stonebridge  |  | 3/18/05      |  | 86    |  |                    | 6,000  
|Foothill Ranch, CA   |  | Hampton Inn          |  | Stonebridge  |  | 4/21/05      |  | 84    |  |                    | 7,400  
|Ft. Worth, TX        |  | Residence Inn        |  | Western      |  | 5/6/05       |  | 149   |  |                    | 17,000 
|Boulder, CO          |  | Marriott             |  | WLS          |  | 5/9/05       |  | 157   |  |                    | 30,000 
|Ft. Worth, TX        |  | Homewood Suites      |  | Hilton       |  | 5/24/05      |  | 137   |  |                    | 9,097  
|Nashville, TN        |  | Homewood Suites      |  | Hilton       |  | 5/24/05      |  | 121   |  |                    | 8,103  
|Albany, GA           |  | Courtyard            |  | LBA          |  | 6/24/05      |  | 84    |  |                    | 8,597  
|Lakeland, FL         |  | Residence Inn        |  | LBA          |  | 6/24/05      |  | 78    |  |                    | 9,886  
|Huntsville, AL       |  | Residence Inn        |  | LBA          |  | 6/24/05      |  | 78    |  |                    | 8,288  
|Dothan, AL           |  | Hampton Inn & Suites |  | LBA          |  | 6/24/05      |  | 85    |  |                    | 8,673  
|Columbus, GA         |  | Residence Inn        |  | LBA          |  | 6/24/05      |  | 78    |  |                    | 7,888  
|Las Colinas, TX      |  | TownePlace Suites    |  | Western      |  | 6/30/05      |  | 136   |  |                    | 7,178  
|Arlington, TX        |  | TownePlace Suites    |  | Western      |  | 6/30/05      |  | 95    |  |                    | 7,148  
|Arlington, TX        |  | SpringHill Suites    |  | Western      |  | 6/30/05      |  | 122   |  |                    | 7,486  
|Tempe, AZ            |  | TownePlace Suites    |  | Western      |  | 6/30/05      |  | 119   |  |                    | 8,128  
|Tempe, AZ            |  | SpringHill Suites    |  | Western      |  | 6/30/05      |  | 121   |  |                    | 8,060  
|Wallingford, CT      |  | Homewood Suites      |  | WLS          |  | 7/8/05       |  | 104   |  |                    | 12,780 
|McAllen, TX          |  | Hilton Garden Inn    |  | Western      |  | 7/19/05      |  | 104   |  |                    | 9,000  
|Pensacola, FL        |  | Hampton Inn & Suites |  | LBA          |  | 7/21/05      |  | 85    |  |                    | 9,279  
|Rocky Hill, CT       |  | Residence Inn        |  | WLS          |  | 8/1/05       |  | 96    |  |                    | 12,070 
|Dothan, AL           |  | Courtyard            |  | LBA          |  | 8/11/05      |  | 78    |  |                    | 8,016  
|Somerset, NJ         |  | Homewood Suites      |  | WLS          |  | 8/17/05      |  | 123   |  |                    | 17,750 
|Birmingham, AL       |  | Fairfield Inn        |  | LBA          |  | 8/25/05      |  | 63    |  |                    | 2,176  
|Tuscaloosa, AL       |  | Courtyard            |  | LBA          |  | 8/25/05      |  | 78    |  |                    | 7,551  
|Tuscaloosa, AL       |  | Fairfield Inn        |  | LBA          |  | 8/25/05      |  | 63    |  |                    | 3,982  
|Pensacola, FL        |  | Courtyard            |  | LBA          |  | 8/25/05      |  | 90    |  |                    | 11,369 
|Pensacola, FL        |  | Fairfield Inn        |  | LBA          |  | 8/25/05      |  | 63    |  |                    | 4,858  
|Pittsburgh, PA       |  | Residence Inn        |  | WLS          |  | 9/2/05       |  | 156   |  |                    | 11,000 
|Laredo, TX           |  | Residence Inn        |  | Western      |  | 9/12/05      |  | 109   |  |                    | 11,445 
|Mt. Olive, NJ        |  | Residence Inn        |  | WLS          |  | 9/15/05      |  | 123   |  |                    | 12,070 
|Saratoga Springs, NY |  | Hilton Garden Inn    |  | WLS          |  | 9/29/05      |  | 112   |  |                    | 17,750 
|Huntsville, AL       |  | Fairfield Inn        |  | LBA          |  | 9/30/05      |  | 79    |  |                    | 4,954  
|Savannah, GA         |  | SpringHill Suites    |  | LBA          |  | 9/30/05      |  | 79    |  |                    | 5,407  
|Montgomery, AL       |  | SpringHill Suites    |  | LBA          |  | 9/30/05      |  | 79    |  |                    | 6,835  
|Valdosta, GA         |  | Courtyard            |  | LBA          |  | 10/3/05      |  | 84    |  |                    | 8,284  
|Farmington, CT       |  | Courtyard            |  | WLS          |  | 10/20/05     |  | 119   |  |                    | 16,330 
|Orange Park, FL      |  | Fairfield Inn        |  | LBA          |  | 11/8/05      |  | 83    |  |                    | 7,221  
|Folsom, CA           |  | Hilton Garden Inn    |  | Inn Ventures |  | 11/30/05     |  | 100   |  |                    | 18,028 
|Milpitas, CA         |  | Hilton Garden Inn    |  | Inn Ventures |  | 11/30/05     |  | 161   |  |                    | 18,600 
|Roseville, CA        |  | Hilton Garden Inn    |  | Inn Ventures |  | 11/30/05     |  | 131   |  |                    | 20,759 
|Renton, WA           |  | Hilton Garden Inn    |  | Inn Ventures |  | 11/30/05     |  | 150   |  |                    | 16,096 
|Laredo, TX           |  | Homewood Suites      |  | Western      |  | 11/30/05     |  | 106   |  |                    | 10,500 
|Dallas, TX           |  | SpringHill Suites    |  | Western      |  | 12/9/05      |  | 147   |  |                    | 19,500 
|Hillsboro, OR        |  | TownePlace Suites    |  | Inn Ventures |  | 12/19/05     |  | 136   |  |                    | 11,500 
|Kent, WA             |  | TownePlace Suites    |  | Inn Ventures |  | 12/19/05     |  | 152   |  |                    | 12,000 
|Mukilteo, WA         |  | TownePlace Suites    |  | Inn Ventures |  | 12/19/05     |  | 128   |  |                    | 12,000 
|Portland, OR         |  | Residence Inn        |  | Inn Ventures |  | 12/19/05     |  | 258   |  |                    | 42,000 
|Fredericksburg, VA   |  | Hilton Garden Inn    |  | Hilton       |  | 12/20/05     |  | 148   |  |                    | 16,600 
|San Francisco, CA    |  | Hilton Garden Inn    |  | Inn Ventures |  | 1/30/06      |  | 169   |  |                    | 12,266 
|Clearwater, FL       |  | SpringHill Suites    |  | LBA          |  | 2/17/06      |  | 79    |  |                    | 6,923  
|Hillsboro, OR        |  | Residence Inn        |  | Inn Ventures |  | 3/09/06      |  | 122   |  |                    | 15,500 
|Hillsboro, OR        |  | Courtyard            |  | Inn Ventures |  | 3/09/06      |  | 155   |  |                    | 11,000 
|Panama City, FL      |  | Courtyard            |  | LBA          |  | 4/26/06      |  | 84    |  |                    | 9,245  
|                     |  |                      |  |              |  |              |  |       |  |                    |        
|                     |  |                      |  |              |  | Total        |  | 7,750 |  | $                  | 827,566
|                     |  |                      |  |              |  |              |  |       |  |                    |        



11



---

##### Table of Contents

The Company leased all of its hotels to wholly-owned taxable REIT subsidiaries (collectively, the
lessee) under hotel lease agreements. The Company also used the proceeds from its best-efforts offering to pay 2% of the gross purchase price for these hotels, which equals approximately $16.6 million, as a commission to
Apple Six Realty Group, Inc. (ASRG). ASRG is owned by the Companys Chairman, Chief Executive Officer and President, Glade M. Knight.

No goodwill or intangible assets were recorded in connection with any of the acquisitions.

Results of Operations

Due to the fact the Company only owned 30 hotels as of June 30, 2005, versus 67 hotels as of June 30, 2006, a comparison of
hotel operations to 2005 would not be meaningful.

In general, performance at the Companys hotels have met expected financial
results. Hotel performance is impacted by many factors including the economic conditions in the United States, as well as each locality. As a result, there can be no assurance that the Companys operating performance will continue to meet
expectations in the future.

Revenues

The Companys principal source of revenue is hotel room revenue and other related revenue. Hotel operations are for the 67 hotels acquired through June 30, 2006 for their respective periods owned. For the three and six months
ended June 30, 2006, the Company had room revenue and other revenue of $62.1 and $115.2 million. For the three and six months ended June 30, 2006, the hotels achieved average occupancy of 78% and 75%, average daily rate, or ADR of $105 and
$103 and revenue per available room, or RevPAR of $82 and $78. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR. These rates are consistent with industry and brand
averages.

Expenses

For the three and
six months ended June 30, 2006, hotel operating expenses totaled $35.3 and $66.5 million or 57% and 58% of total revenue. This percentage is expected to decrease as revenues for newly opened properties increase.

Taxes, insurance, and other expenses for the three and six months ended June 30, 2006, were $3.4 and $6.6 million.



12



---

##### Table of Contents

General and administrative expense for the three and six months ended June 30, 2006, was $1.2 and
$2.2 million. The principal components of general and administrative expense are advisory fees, legal fees, accounting fees and reporting expense.

Depreciation expense for the three and six months ended June 30, 2006, was $6.4 and $12.4 million. Depreciation expense represents expense of the Companys 67 hotels and related personal property for their respective periods
owned.

Interest expense for the three and six months ended June 30, 2006, was $0.9 and $1.9 million. Interest expense arose from debt
assumed with 14 of the properties acquired and short term financing used to bridge the purchase of properties and the raising of capital. Total debt assumed was approximately $54.1 million.

Liquidity and Capital Resources

Operating cash flow
from the properties owned and cash on hand ($29.1 million at June 30, 2006) are the Companys principal source of liquidity. In addition, the Company may borrow funds, subject to limitations set forth in its bylaws. The Company anticipates
that cash flow, and cash on hand, will be adequate to cover its operating expenses and to permit the Company to meet its anticipated liquidity requirements, including distributions and capital expenditures.

On March 3, 2006, the Company concluded its best-efforts offering of Units. From the Companys initial capitalization on January 20, 2004
through March 3, 2006, the Company closed on a total of 91,125,541 Units, representing gross proceeds and proceeds net of selling, marketing fees, and other costs of approximately $1.0 billion and $898 million, respectively. These costs are
reflected as a reduction to shareholders equity.

The Company has on-going capital commitments to fund its capital improvements. The
Company is required, under all of the hotel management agreements, to make available, for the repair, replacement, and refurbishing of furniture, fixtures, and equipment, of its hotels an amount of 1% to 5% of gross revenues. The Company expects
that this amount will be adequate to fund required repair, replacement, and refurbishments and to maintain the Companys hotels in a competitive condition. As of June 30, 2006, the Company had made approximately $8.1 million of capital
expenditures during 2006.

To maintain its REIT status the Company is required to distribute at least 90% of its ordinary income.
Distributions during the six months ended June 30, 2006 totaled $38.6 million and were paid monthly at a rate of $0.073 per common share and included a return of capital. For the same period the Companys cash generated from operations was
$33.8 million. Due to the inherent delay between raising capital and investing that same capital in income producing real estate, the Company has had significant amounts of cash earning interest at short term money market rates. As a result,
the difference between distributions paid and cash generated from operations has been funded from proceeds from our offering of Units, and this portion of distributions is expected to be treated as a return of capital for federal income tax
purposes. The Company intends to continue paying dividends on a monthly basis at an annual rate of 8%. Since a portion of distributions has to date been funded with proceeds from the offering of Units and its offering has been completed,
the Companys ability to maintain its current intended rate of distribution will be based on its ability to generate cash from operations. Since there can be no assurance of the ability of the Companys properties to provide income at
this level, there can be no assurance as to the classification or duration of distributions at the current rate. Proceeds of the offering which are distributed are not available for investment in properties.

In conjunction with the acquisition of five hotels in December 2005, the Company utilized short-term unsecured financing from a commercial bank in the
amount of $40 million to fund a portion of the aggregate gross purchase price. This financing was evidenced by our promissory note and was governed by a loan agreement. The applicable interest rate was equal to LIBOR (the London Interbank Offered
Rate) plus 2.2%. Payments of interest only were due monthly. A principal payment of $12 million was made on December 30, 2005 and the remaining principal payment of $28 million was made on January 24, 2006 and the loan was extinguished.



13



---

##### Table of Contents

In February 2006, the Company instituted a dividend reinvestment plan for its shareholders. The plan
provides a convenient and cost effective way to increase shareholder investment in the Company by reinvesting dividends to purchase additional Units of the Company. The uses of the proceeds from this plan may include purchasing Units under the
Companys Unit Redemption Program, enhancing properties, satisfying financing obligations and other expenses, increasing working capital, funding various corporate operations, and acquiring hotels. As of June 30, 2006, approximately
547,000 Units, representing $6.0 million in proceeds to the Company, have been issued under the plan.

In July 2005, the Company instituted
a Unit Redemption Program to provide limited interim liquidity to its shareholders who have held their Units for at least one year. Shareholders may request redemption of Units for a purchase price equal to the lesser of: (1) the purchase price
per unit that the shareholder actually paid for the unit; or (2) $11.00 per unit. The Company reserves the right to change the purchase price of redemptions, reject any request for redemption, or otherwise amend the terms of, suspend, or
terminate the Unit Redemption Program. During the six months ended June 30, 2006, the Company redeemed approximately 1.1 million Units in the amount of $11.9 million under the program. It is anticipated the funds required for the
redemption program will be substantially offset by the funds received from the dividend reinvestment plan.

Related Party Transactions

The Company has significant transactions with related parties. These transactions cannot be construed to be arms length, and the results of the
Companys operations may be different if these transactions were conducted with non-related parties.

The Company has a contract with
ASRG, a related party, to provide brokerage services for the acquisition and disposition of the Companys real estate assets. In accordance with the contract, ASRG is paid a fee of 2% of the gross purchase price of any acquisitions or gross
sale price of any dispositions of real estate investments, subject to certain conditions. As of June 30, 2006, payments to ASRG for services under the terms of this contract have totaled $16.6 million since inception, which were capitalized as
a part of the purchase price of the hotels.

The Company is party to an advisory agreement with Apple Six Advisors, Inc. (ASA),
pursuant to which ASA provides management services to the Company. An annual fee ranging from .1% to .25% of total equity proceeds received by the Company, in addition to certain reimbursable expenses, are payable for these services. ASA utilizes
Apple Hospitality Two, Inc. to provide these services. Expenses related to the ASA agreement, for the six months ended June 30, 2006 and 2005, totaled approximately $1.1 million and $631,000, respectively.

During 2006 the Company assigned its rights under three contracts for the purchase of hotels in Houston, TX, Brownsville, TX and Miami, FL, to Apple REIT
Seven, Inc. The assignments were completed with no cost to the Company and were entered into to prevent the Company from incurring secured debt to complete its planned property acquisitions.

Mr. Knight is Chairman and Chief Executive Officer of ASRG, ASA, Apple Hospitality Two, Inc. (a hospitality REIT), Apple Hospitality Five, Inc. (a
hospitality REIT) and Apple REIT Seven, Inc. (a newly formed company proposed to be a diversified REIT). The Companys Board of Directors are also on the board of Apple Hospitality Two, Inc. and Apple Hospitality Five, Inc.

Impact of Inflation

Operators of hotels, in general,
possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, limit the operators ability to raise room rates. Currently the Company is not experiencing any material impact from
inflation.



14



---

##### Table of Contents

Business Interruption

Being in the real estate industry, the Company is exposed to natural disasters both locally and nationally, and although management believes there is adequate insurance to cover this exposure, there can be no
assurance that such events will not have a material adverse effect on the Companys financial position or results of operations.

Seasonality

The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at the Companys hotels may cause
quarterly fluctuations in its revenues. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand to make distributions.

Subsequent Events

On July 17,
2006, the Company declared and paid approximately $6.6 million, or $.073 per share, in distributions to its common shareholders of record on June 30, 2006, of which $2.5 million or 231,779 Units were reinvested under the Companys Dividend
Reinvestment Plan.

On July 17, 2006, the Company redeemed 1.2 million Units in the amount of $13.4 million under its Unit
Redemption Program.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not engage in
transactions in derivative financial instruments or derivative commodity instruments. As of June 30, 2006, the Companys financial instruments were not exposed to significant market risk due to interest rate risk, foreign currency exchange
risk, commodity price risk or equity price risk. The Company will be exposed to changes in short term money market rates as it invests cash on hand. Based on the Companys cash invested at June 30, 2006, of $29.1 million, every 100 basis
points change in interest rates will impact the Companys net income by $291,000, all other factors remaining the same.

Item 4. Controls and Procedures

Senior management, including the Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, the Chief Executive Officer and Chief Financial Officer
have concluded that the Companys disclosure controls and procedures are effective and that there have been no changes in the Companys internal control over financial reporting that occurred during the last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



15



---

##### Table of Contents

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Dividend Reinvestment Plan

During the first quarter of 2006, the Company instituted a dividend reinvestment plan. The purpose of the plan is to provide the Companys
shareholders with a convenient and inexpensive way to increase their investment in the Company by reinvesting their dividends to purchase additional Units. As of June 30, 2006, approximately 547,000 Units, representing $6.0 million in proceeds
to the Company, have been issued under the plan.

Unit Redemption Program

In July 2005, the Company instituted a share redemption program to provide its shareholders who have held their Units for at least one year with the
benefit of limited interim liquidity, by presenting for redemption all or any portion of their Units at any time and in accordance with certain procedures. Once this time limitation has been met, the Company may, subject to certain conditions and
limitations, redeem the Units presented for redemption for cash, to the extent that the Company has sufficient funds available to fund the redemption. If Units are held for the required one-year period, the Units may be redeemed for a purchase price
equal to the lesser of: (1) $11.00 per unit; or (2) the purchase price per Unit that was actually paid for the Units. The board of directors reserves the right, in its sole discretion, at any time and from time to time, to waive the
one-year holding period, reject any request for redemption, change the purchase price for redemptions or otherwise amend the terms of, suspend, or terminate the unit redemption program. The following is a summary of redemptions during the second
quarter of 2006:

Issuer Purchases of Equity Securities



|           |  |                               |  |                            |  |                                                                             |  |                                                                          
|---------- |  | ----------------------------- |  | -------------------------- |  | --------------------------------------------------------------------------- |  | -------------------------------------------------------------------------
|           |  |                               |  |                           
|           |  | (a)                           |  | (b)                        |  | (c)                                                                         |  | (d)                                                                      
|Period     |  | Total Numberof UnitsPurchased |  | Average Price Paidper Unit |  | Total Number ofUnits Purchased asPart of PubliclyAnnounced Plansor Programs |  | Maximum Numberof Units that MayYet Be PurchasedUnder the Plans orPrograms
|April 2006 |  | 695,188                       |  | $10.95                     |  | 1,526,106                                                                   |  | (1)                                                                      

---

|(1) | The maximum number of Units that may be redeemed in any 12 month period is limited to three percent (3.0%) of the weighted average number of Units outstanding
from the beginning of the 12 month period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

Item 4. Submission of Matters to a Vote of Security Holders

On May 11, 2006, the Company held an
Annual Meeting of Shareholders for the purpose of electing two directors to the Companys Board of Directors. The nominees to the Companys Board of Directors were Lisa B. Kern and Michael S. Waters, both of whom were current directors of
the Company. Ms. Kern and Mr. Waters were both nominated for an additional three-year term on the Board of Directors. The election was uncontested, and the nominees were elected.

The total number of votes represented at the Annual Meeting of Shareholders was 90,248,237. The voting results were as follows:



|                  |  |                |  |               
|----------------- |  | -------------- |  | --------------
|Nominee           |  | Votes Received |  | Votes Withheld
|Lisa B. Kern      |  | 89,655,147     |  | 593,090       
|Michael S. Waters |  | 89,660,814     |  | 587,423       

The names of the other directors whose terms of office as directors continued after the Annual Meeting of
Shareholders are Glade M. Knight, Bruce H. Matson, and Robert M. Wily.



17



---

##### Table of Contents

Item 6. Exhibits



|               |  |                                                                                                                                                                                                             
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                 
|               | 
|3.1            |  | Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the registrants registration statement on Form S-11 (SEC File No. 333-112169) effective April 23,
2004)             
|               | 
|3.2            |  | Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Companys Post-Effective Amendment No. 4 to Form S-11 (SEC File No. 333-112169) effective June 14,
2005).                           
|               | 
|31.1           |  | Certification of the Companys Chief Executive Officer pursuant to Rule 13a  14(a) and Rule 15d  14(a) of the Securities Exchange Act, as amended (FILED
HEREWITH).                                       
|               | 
|31.2           |  | Certification of the Companys Chief Financial Officer pursuant to Rule 13a  14(a) and Rule 15d  14(a) of the Securities Exchange Act, as amended (FILED
HEREWITH).                                       
|               | 
|32.1           |  | Certification of the Companys Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(FILED HEREWITH).



18



---

##### Table of Contents

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.



|                     |  |                                                                                             |  |  |  |                     
|-------------------- |  | ------------------------------------------------------------------------------------------- |  |  |  | --------------------
|APPLE REIT SIX, INC. |  |                                                                                             |  | 
|                     |  |                                                                                             | 
|By:                  |  | /s/ GLADE M. KNIGHT                                                                         |  |  |  | Date: August 8, 2006
|                     |  | Glade M. Knight,                                                                            |  |  |  |                     
|                     |  | Chairman of the Board, Chief Executive Officer, and President (Principal Executive Officer) |  |  |  |                     
|                     |  |                                                                                             | 
|By:                  |  | /s/ BRYAN PEERY                                                                             |  |  |  | Date: August 8, 2006
|                     |  | Bryan Peery,                                                                                |  |  |  |                     
|                     |  | Chief Financial Officer (Principal Financial and Principal Accounting Officer)              |  |  |  |                     



19