10-Q 1 dsivii-603.txt 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, 2003 /___/ Transition report pursuant to Section 13 or 15(d) of the Securities Act of 1934 for the transition period from ______________ to ________________. Commission File Number 2-83291 DSI REALTY INCOME FUND VII, A California Limited Partnership (Exact name of registrant as specified in its charter) California_______________________________________95-3871044 (State or other jurisdiction of (I.R.S. Employer incorporation) Identification No.) 6700 E. Pacific Coast Hwy, Long Beach, California 90803 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code-(562)493-8881 _________________________________________________________________ Former name, former address and former fiscal year, if changed since last report. 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__. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The information required by Rule 10-01 of Regulation S-X is included in the Quarterly Report to the Limited Partners of Registrant for the period ended June 30, 2003 which is attached hereto as Exhibit "20" and incorporated herein by this reference. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Registrant incorporates by this reference its Quarterly Report to Limited Partners for the period ended June 30, 2003. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8K. (a) Attached hereto as Exhibit "20" is Registrant's Quarterly Report to Limited Partners for the period ended June 30, 2003. (B) Registrant did not file any reports on Form 8-K for the period reported upon. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: July 31, 2003 DSI REALTY INCOME FUND VII A California Limited Partnership (Registrant) By____\s\ Robert J. Conway_____ DSI Properties, Inc., as General Partner by ROBERT J. CONWAY, President and Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: July 31, 2003 DSI REALTY INCOME FUND VII A California Limited Partnership (Registrant) By__\s\ Robert J. Conway________ DSI Properties, Inc., as General Partner by ROBERT J. CONWAY, President and Chief Financial Officer July 31, 2003 QUARTERLY REPORT TO THE LIMITED PARTNERS OF DSI REALTY INCOME FUND VII DEAR LIMITED PARTNERS: We are pleased to enclose the Partnership's unaudited financial statements for the period ended June 30, 2003. The following is Management's discussion and analysis of the Partnership's financial condition and results of its operations. For the three-month period ended June 30, 2003, and 2002, total revenues increased 1.8% from $637,269 to $648,778 and total expenses decreased 1.6% from $330,618 to $325,298 and other income decreased from $259 to $137. As a result, net income increased 5.4% from $306,910 for the three-month period ended June 30, 2002, to $323,617 for the same period in 2003. Rental revenue remained relatively constant. Occupancy levels for the Partnership's six mini- storage facilities averaged 89.1% for the three-month period ended June 30, 2003 and 88.8% for the same period in 2002. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini- storage facilities. Operating expenses remained constant as increases in advertising, real estate tax and salaries and wages expenses was offset by decreases in maintenance and repair, office supplies and workers compensation insurance expenses. General and administrative expenses decreased approx- imately $8,100 (11.0%) primarily as a result of a decrease in equipment and computer lease expense. For the six-month periods ended June 30, 2003, and 2002, total revenues decreased 0.7% from $1,309,012 to $1,299,482 and total expenses decreased 1.7% from $648,101 to $637,309 and other income decreased from $503 to $303. As a result, net income increased 0.2% from $661,414 for the six months ended June 30, 2002, to $662,476 for the same period in 2003. Rental revenue re- mained relatively constant. Operating expenses remained constant as increases in advertising, telephone and real estate tax expenses was offset by decreases in maintenance and repair, office supplies and workers compensation insurance. General and administrative expenses decreased approximately $6,300 (4.4%) as a result of relatively insignificant fluctuations in various accounts. On April 5, 2002, the General Partners received a copy of a hostile tender offer from MacKenzie Patterson, Inc. and associated corporations and limited partnerships to purchase all of the Units in the Partnership. This offer was also filed with the Securities and Exchange Commission on the same date. The General Partners have determined that the hostile tender offer was not in the best interests of the Limited Partners, that the tender offer was grossly inadequate given the performance history of the Limited Partnership and the inherent value of the Units, and recommended that the Limited Partners reject the hostile tender offer and not tender their Units pursuant thereto. The offer was subsequently increased and extended to June 30, 2002 and again to July 22, 2002. The General Partners initial determination regarding the offer did not change. Prior to the expiration date of the offer, Limited Partners tendered 74 Units representing 0.308% of the outstanding Units of the Partnership. The Limited Partners have approved an amendment to the Partnership Agreement granting the General Partners ten days to review certain types of transfers during which the General Partners may match, exceed or approve the proposed transfers. The Court has rejected all preliminary attempts to halt implemen- tation of the amendment. The General Partners will continue their policy of funding improvements and maintenance of Partnership properties with cash generated from operations. The Partnership's financial resources appear to be adequate to meet its needs. The General Partners anticipate distributions to the Limited Partners to remain at the current level for the foreseeable future. We are not enclosing a copy of the Partnership Form 10-Q as filed with the Securities and Exchange Commission since all the information set forth therein is contained either in this letter or in the attached financial statements. However, if you wish to receive a copy of said report, please send a written request to DSI Realty Income Fund VII, P.O. Box 357, Long Beach, California 90801. Very truly yours, DSI REALTY INCOME FUND VII By: DSI Properties, Inc., as General Partner By /s/ Robert J. Conway ____________________________ ROBERT J. CONWAY, President DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership) BALANCE SHEETS(UNAUDITED) JUNE 30, 2003 AND DECEMBER 31, 2002 June 30, December 31, 2003 2002 ASSETS CASH AND CASH EQUIVALENTS $ 641,529 $ 497,970 PROPERTY, Net 2,089,800 2,089,800 OTHER ASSETS 62,338 62,338 TOTAL $2,793,667 $2,650,108 LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES $ 578,662 $ 612,731 PARTNERS' EQUITY (DEFICIT): General Partners (85,618) (87,395) Limited Partners 2,300,623 2,124,772 Total partners' equity 2,215,005 2,037,377 TOTAL $2,793,667 $2,650,108 See accompanying notes to financial statements(unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 June 30, June 30, 2003 2002 REVENUES: Rental $ 648,778 $ 637,269 EXPENSES: Operating 259,982 257,178 General and administrative 65,316 73,440 Total expenses 325,298 330,618 OPERATING INCOME $ 323,480 $ 306,651 OTHER INCOME Interest 137 259 NET INCOME $ 323,617 $ 306,910 AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $ 320,381 $ 303,841 General Partners 3,236 3,069 TOTAL $ 323,617 $ 306,910 NET INCOME PER LIMITED PARTNERSHIP UNIT $ 13.35 $ 12.66 LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 See accompanying notes to financial statements(unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 June 30, June 30, 2003 2002 REVENUES: Rental $1,299,482 $1,309,012 EXPENSES: Operating 499,756 504,231 General and administrative 137,553 143,870 Total expenses 637,309 648,101 OPERATING INCOME $ 662,173 $ 660,911 OTHER INCOME Interest 303 503 NET INCOME $ 662,476 $ 661,414 AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $ 655,851 $ 654,800 General Partners 6,625 6,614 TOTAL $ 662,476 $ 661,414 NET INCOME PER LIMITED PARTNERSHIP UNIT $27.33 $27.28 LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 See accompanying notes to financial statements (unaudited) STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)(UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2003 ($87,395) $2,124,772 $2,037,377 NET INCOME 6,625 655,851 662,476 DISTRIBUTIONS (4,848) (480,000) (484,848) BALANCE AT JUNE 30, 2003 ($85,618) $2,300,623 $2,215,005 See accompanying notes to financial statements(unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 June 30, June 30, 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 662,476 $ 661,414 Adjustments to reconcile net income to net cash provided by operating activities: Changes in assets and liabilities: Decrease in assets 0 2,670 Decrease in liabilities (34,069) (23,778) Net cash provided by operating activities 628,407 640,306 CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (484,848) (484,848) NET INCREASE IN CASH AND CASH EQUIVALENTS 143,559 155,458 CASH AND CASH EQUIVALENTS: At beginning of period 497,970 530,721 At end of period $ 641,529 $ 686,179 See accompanying notes to financial statements(unaudited). DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund VII (the "Partnership"), has two general partners (DSI Properties, Inc., and Diversified Investors Agency) and limited partners owning 24,000 limited partnership units. The Partnership was formed under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The accompanying financial information as of June 30, 2003, and for the periods ended June 30, 2003, and 2002, is unaudited. Such financial information includes all adjustments which are considered necessary by the Partnership's management for a fair presentation of the results for the periods indicated. 2. PROPERTY Properties owned by the Partnership are all mini-storage facilities. Depreciation is calculated using the straight line method over the estimated useful life of 15 years. The total cost of property and accumulated depreciation at June 30, 2003, is as follows: Land $ 2,089,800 Buildings and improvements 7,685,522 Equipment 60,760 Total 9,836,082 Less: Accumulated Depreciation ( 7,746,282) Property - Net $ 2,089,800 3. NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is calculated by dividing the net income allocated to the limited partners by the number of limited partnership units outstanding during the period. 4. CONTROLS AND PROCEDURES Within 90 days prior to the date of this report, the Partnership evaluated the effectiveness of its disclosure controls and procedures. This evaluation was performed by the Partnership's Controller with the assistance of the Partnership's President and the Chief Executive Officer. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Partnership in its periodic reports filed with the Securities and Exchange Commission (the Commission) is recorded, processed, summarized and reported, within the time periods specified by the Commission's rules and forms, and that the information is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership con- cluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation. CERTIFICATIONS I, Robert J. Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund VII; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its con- solidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to re- cord, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 31, 2003 Robert J. Conway Chief Executive Officer CERTIFICATIONS I, Richard P. Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund VII; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its con- solidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to re- cord, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 31, 2003 Richard P. Conway Vice President CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VII (the "Partnership") on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Robert J. Conway Chief Executive Officer July 31, 2003 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VII (the "Partnership") on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Richard P. Conway Vice President July 31, 2003