-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bf2cbD1mH0VJCfLMOscFf6DKAtx1YaTaXGqzIODLw5nb7SbMYpFSVRrMQDyHd9Md wxI3f3UfSuswU7Ba+3GBDA== 0000764586-97-000001.txt : 19970409 0000764586-97-000001.hdr.sgml : 19970409 ACCESSION NUMBER: 0000764586-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970408 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DSI REALTY INCOME FUND IX CENTRAL INDEX KEY: 0000764586 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330103989 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14186 FILM NUMBER: 97576108 BUSINESS ADDRESS: STREET 1: 3701 LONG BEACH BLVD CITY: LONG BEACH STATE: CA ZIP: 90807 BUSINESS PHONE: 2135957711 MAIL ADDRESS: STREET 1: 3710 LONG BEACH BLVD STREET 2: P O BOX 357 CITY: LONG BEACH STATE: CA ZIP: 90807 10-K 1 DSI REALTY INCOME FUND IX SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 2O549 FORM 1O-K (Mark One) / x /Annual Report Pursuant to Section 13 or 15 (d) of the Securities and Exchange Act of 1934 [Fee Required] for the fiscal year ended December 31, 1996. or / /Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] for the transition period from ____________ to ______________. Commission File No. 2-96364. DSI REALTY INCOME FUND IX, a California Limited Partnership (Exact name of registrant as specified in governing instruments) _________California___________________________33-0103189_____ (State of other jurisdiction of (I.R.S. Employer incorporation or organization identification number 37O1 Long Beach Boulevard, Long Beach, California 9O8O7 (Address of principal executive offices) (Zip Code) Registrants telephone number, including area code-(562)595-7711 Securities registered pursuant to Section 12(b) of the Act: none. Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests (Class of Securities Registered) Indicate by check mark, whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 9O days. Yes_X____. No______. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/ The Registrant is a limited partnership and there is no voting stock. All units of limited partnership sold to date are owned by non-affiliates of the registrant. All such units were sold at $5OO.OO per unit. DOCUMENTS INCORPORATED BY REFERENCE Item 8. Registrant's Financial Statements for its fiscal year ended December 31, 1996, incorporated by reference to Form 10-K, Part II. Item 11. Registrant's Financial Statements for its fiscal year ended December 31, 1996, incorporated by reference to Form 10-K, Part III. Item 12. Registration Statement on Form S-11, previously filed with the Securities and Exchange Commission pursuant to Securities Act of 1933, as amended, incorporated by reference to Form 10-K Part III. Item 13. Registrant's Financial Statements for its fiscal year ended December 31, 1996, incorporated by reference to Form 10-K, Part III. PART I Item l. BUSINESS Registrant, DSI Realty Income Fund IX (the "Partnership") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act pursuant to a Certificate and Agreement of Limited Partnership (hereinafter referred to as "Agreement") dated March 6, 1985, as amended and restated to November 1, 1985. The General Partners are DSI Properties, Inc., a California corporation, Robert J. Conway and Joseph W. Conway, brothers. The General Partners are affiliates of Diversified Securities, Inc., a wholly-owned subsidiary of DSI Financial, Inc. The General Partners provide similar services to other partnerships. Through its public offering of Limited Partnership Units, Registrant sold thirty thousand six hundred ninety-three (30,693) units of limited partnership interests aggregating Fifteen Million Three Hundred Forty-Six Thousand Five Hundred Dollars ($15,346,500) The General Partners have retained a one percent (l%) interest in all profits, losses and distributions (subject to certain conditions) without making any capital contribution to the Partnership. The General Partners are not required to make any capital contributions to the Partnership in the future. Registrant is engaged in the business of investing in and operating mini-storage facilities with the primary objectives of generating, for its partners, cash flow, capital appreciation of its properties, and obtaining federal income tax deductions so that during the early years of operations, all or a portion of such distributable cash may not represent taxable income to its partners. Funds obtained by Registrant during the public offering period of its units were used to acquire five mini-storage facilities, as well as a joint venture interest with an affiliated Partnership (DSI Realty Income Fund VIII, a California Limited Partnership) in which the Partnership has a 70% interest in a mini-storage facility located in Aurora, Colorado. Registrant does not intend to sell additional limited partnership units. The term of the Partnership is fifty years but it is anticipated that Registrant will sell and/or refinance its properties prior to the termination of the Partnership. The Partnership is intended to be self-liquidating and it is not intended that proceeds from the sale or refinancing of its operating properties will be reinvested. Registrant has no full time employees but shares one or more employees with other publicly-held limited partnerships sponsored by the General Partners. The General Partners are vested with authority as to the general management and supervision of the business and affairs of Registrant. Limited Partners have no right to participate in the management or conduct of such business and affairs. An independent management company has been retained to provide day-to-day management services with respect to all of the Partnership's investment properties. Average occupancy levels for each of the Partnership's properties for the years ended December 31, 1996 and December 31, 1995 are as follows: Location of Property Average Occupancy Average Occupancy Level for the Level for the Year Ended Year Ended Dec. 31, 1996 Dec. 31, 1995 Azusa, CA 82% 85% Elgin, IL 83% 85% Everett, WA 84% 84% Monterey Park, CA 91% 86% Romeoville, IL 82% 82% Aurora, CO* 82% 89% *The Partnership owns a 70% interest in this facility. The business in which the Partnership is engaged is highly competitive. Each of its mini-storage facilities is located in or near a major urban area, and accordingly, competes with a significant number of individuals and organizations with respect to both the purchase and sale of its properties and for rentals. Generally, Registrant's business is not affected by the change in seasons. Item 2. PROPERTIES Registrant owns a fee interest in five mini-storage facilities, as well as a 70% interest in a joint venture with an affiliated partnership (DSI Realty Income Fund VIII, a California Limited Partnership) which joint venture owns a mini-storage facility, none of which are subject to long-term indebtedness. The following table sets forth information as of December 31, 1996 regarding properties owned by the Partnership. Location Size of Net Rentable No. of Completion Parcel Area Rental Units Date Azusa, CA 2.94 acres 71,059 664 6/11/86 Elgin, IL 4.99 acres 48,363 441 9/29/86 Everett, WA 2.71 acres 50,572 488 12/01/85 Monterey Park, CA .95 acres 31,654 392 8/23/86 Romeoville, IL 3.956 acres 65,941 690 11/24/86 Aurora, CO(1) 4.6 acres 86,676 887 9/05/85 (1) The Partnership has a 70% fee interest in this facility. DSI Realty Income Fund VIII, a California Limited Partnership (an affiliated partnership) owns a 30% fee interest in this facility. Item 3. LEGAL PROCEEDINGS Registrant is not a party to any material pending legal proceedings. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Registrant, a publicly-held limited partnership, sold 30,693 limited partnership units during its offering and currently has 1,307 limited partners of record. There is no intention to sell additional limited partnership units nor is there a market for these units. Average cash distributions of $11.25 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 1996 and $9.06 per Limited Partnership Unit for the year ended December 31, 1995. It is Registrant's expectations that distributions will continue to be paid in the future. Item 6. SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993, AND 1992 -------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- REVENUES $ 2,468,108 $ 2,484,242 $ 2,312,201 $ 2,315,457 $ 2,144,647 COSTS AND EXPENSES 1,620,477 1,563,848 1,520,382 1,552,502 1,532,136 MINORITY INTEREST IN EARNINGS OF REAL ESTATE JOINT VENTURE (82,729) (116,421) (93,634) (88,765) (59,417) ----------- ----------- ----------- ------------ ------------ NET INCOME $ 764,902 $ 803,973 $ 698,185 $ 674,190 $ 553,094 =========== =========== =========== ============ ============ TOTAL ASSETS $ 8,011,698 $ 8,677,898 $ 9,031,055 $ 9,525,832 $ 10,118,690 =========== =========== =========== ============ ============ NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,468,741 $ 1,488,619 $ 1,331,083 $ 1,213,385 $ 1,205,247 =========== =========== =========== ============ ============ NET INCOME PER LIMITED PARTNERSHIP UNIT $ 45.00 $ 36.25 $ 35.00 $ 35.00 $ 35.00 =========== =========== =========== ============ ============ CASH DISTRIBUTION PER $500 LIMITED PARTNERSHIP UNIT $ 24.67 $ 25.93 $ 22.52 $ 21.75 $ 17.84 =========== =========== =========== ============ ============ Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS 1996 COMPARED TO 1995 Total revenues decreased from $2,484,242 in 1995 to $2,468,108 in 1996, total expenses increased from $1,563,848 to $1,620,477 and minority interest share of income from the real estate joint venture decreased from $116,421 to $82,729. As a result of these fluctuations, net income decreased from $803,973 in 1995 to $764,902 in 1996. The decrease in rental revenues can be attributed to a combination of lower occupancy and unit rental rates. Average occupancy levels for the Partnership's six mini-storage facilities decreased from 85.2% for the year ended December 31, 1995, to 84% for the year ended December 31, 1996. The Partnership continued to adjust rental rates where market conditions made such adjustments feasible. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. The increase in operating expenses of approximately $27,900 (4.4%) was primarily due to increases in yellow pages advertising costs, real estate tax expense and salaries and wages partially offset by decreases in maintenance and repair and office expenses. General and administrative expenses remained constant. General Partners' incentive management fees increased approximately $24,400 (24.1%). These fees which are based on cash distributions to limited partners, increased as a result of an increase in these distributions. The amount of income from the Partnership's real estate joint venture allocated to the minority partner decreased due to the decreased profitability of the joint venture. 1995 COMPARED TO 1994 Total revenues increased from $2,312,201 in 1994 to $2,484,242 in 1995, total expenses increased from $1,520,382 to $1,563,848 and minority interest share of income from the real estate joint venture increased from $93,634 to $116,421. As a result of these fluctuations, net income increased from $698,185 in 1994 to $803,973 in 1995. The increase in rental revenues can be attributed to a combination of higher occupancy and unit rental rates. Average occupancy levels for the Partnership's six mini-storage facilities increased from 81.5% for the year ended December 31, 1994, to 85.2% for the year ended December 31, 1995. The Partnership continued to increase rental rates where market conditions made such increases feasible. The increase in operating expenses of approximately $22,000 (3.6%) was primarily due to increases in maintenance and repairs and salaries and wages partially offset by a decrease in yellow pages advertising costs. General and administrative expenses increased by approximately $8,000 (3.5%) primarily as a result of higher property management fees. Property management fees, which are based on rental income, increased as a result of the increase in rental income. The amount of income from the Partnership's real estate joint venture allocated to the minority partner increased due to the increased profitability of the joint venture. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities increased approximately $19,900 (1.3%) in 1996 compared to 1995 primarily as a result of the decrease in net income partially offset by an increase in customer deposits and other liabilities. Net cash provided by operating activities increased approximately $158,000 (11.9%) in 1995 compared to 1994 primarily as a result of the increase in net income and the reduction in the amount paid for deferred property management fees. Cash used in financing activities, as set forth in the statements of cash flows, has been used for distributions to partners and the minority interest in the Partnership's real estate joint venture. The General Partners determined that effective with the fourth quarter 1995 distribution, which was paid on January 15, 1996, distributions to the limited partners would be increased to an amount which yields an 8% annual return on the capital contributed by the limited partners from annual return of 7% paid in the prior year. In addition, a special distribution of 1% was declared and paid on December 15, 1996. Cash used in investing activities, as set forth in the statements of cash flows, consists of acquisitions of equipment for the Partnership's mini-storage facilities in 1995 and 1996. The Partnership has no material commitments for capital expenditures. The General Partners plan to continue their policy of funding the continuing improvement and maintenance of Partnership properties with cash generated from operations. The Partnership's resources appear to be adequate to meet its needs for the next twelve months. The General Partners are not aware of any environmental problems which could have a material adverse effect upon the financial position of the Partnership. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Attached hereto as Exhibit l is the information required to be set forth as Item 8, Part II hereof. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER The General Partners of Registrant are the same as when the Partnership was formed, i.e., DSI Properties, Inc., a California corporation, Robert J. Conway and Joseph W. Conway, brothers. As of December 31, 1996, Messrs. Robert J. Conway and Joseph W. Conway, each of whom own approximately 45.43% of the issued and outstanding capital stock of DSI Financial, Inc., a California corporation, together with Mr. Joseph W. Stok, currently comprise the entire Board of Directors of DSI Properties, Inc. Mr. Robert J. Conway is 63 years of age and is a licensed California real estate broker, and since 1965 has been President and a member of the Board of Directors of Diversified Securities, Inc., and since 1973 President, Chief Financial Officer and a member of the Board of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Science Degree from Marquette University with majors in Corporate Finance and Real Estate. Mr. Joseph W. Conway is age 67 and has been Executive Vice President, Treasurer and a member of the Board of Directors of Diversified Securities, Inc. since 1965 and since 1973 the Vice President, Treasurer and member of the Board of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Arts Degree from Loras College with a major in Accounting. Mr. Joseph W. Stok is age 73 and has been a member of the Board of Directors of DSI Properties, Inc. since 1994, a Vice President of Diversified Securities, Inc. since 1973, and an Account Executive with Diversified Securities, Inc. since 1967. Item 11. EXECUTIVE COMPENSATION (MANAGEMENT REMUNERATION AND TRANSACTIONS) The information required to be furnished in Item 11 of Part III is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1996, which together with the report of its independent auditors, Deloitte & Touche LLP, is attached hereto as Exhibit 1 and incorporated herein by this reference. In addition to such information: (a) No annuity, pension or retirement benefits are proposed to be paid by Registrant to any of the General Partners or to any officer or director of the corporate General Partner; (b) No standard or other arrangement exists by which directors of the Registrant are compensated; (c) The Registrant has not granted any option to purchase any of its securities; and (d) The Registrant has no plan, nor does the Registrant presently propose a plan, which will result in any remuneration being paid to any officer or director upon termination of employment. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 1996 no person of record owned more than 5% of the limited partnership units of Registrant, nor was any person known by Registrant to own of record and beneficially, or beneficially only, more than 5% thereof. The balance of the information required to be furnished in Item 12 of Part III is contained in Registrant's Registration Statement on Form S-11, previously filed pursuant to the Securities Act of 1933, as amended, and which is incorporated herein by this reference. The only change to the information contained in said Registration Statement on Form S-11 is the fact that Messrs. Benes and Blakley have retired and Messrs. Robert J. Conway and Joseph W. Conway equity interest in DSI Financial, Inc., parent of DSI Properties, Inc., has increased. Please see information contained in Item 10 hereinabove. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required to be furnished in Item 13 of Part III is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1996, attached hereto as Exhibit l and incorporated herein by this reference. PART IV Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(l) Attached hereto and incorporated herein by this reference as Exhibit l are Registrant's Financial Statements and Supplemental Schedule for its fiscal year ended December 31, 1996, together with the reports of its independent auditors, Deloitte & Touche. See Index to Financial Statements and Supplemental Schedule. (a)(2) Attached hereto and incorporated herein by this reference as Exhibit 2 is Registrant's letter to its Limited Partners regarding its Annual Report for its fiscal year ended December 31, 1996. (b) No reports on Form 8K were filed during the fiscal year ended December 31, 1996. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DSI REALTY INCOME FUND IX by: DSI Properties, Inc., a California corporation, as General Partner By_____________________________ Dated: March 28, 1997 ROBERT J. CONWAY, President (Chief Executive Officer, Chief Financial Officer, and Director) By____________________________ Dated: March 28, 1997 JOSEPH W. CONWAY (Executive Vice President and Director) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated. DSI REALTY INCOME FUND IX by: DSI Properties, Inc., a California corporation, as General Partner By:__________________________ Dated: March 28, 1997 ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director By___________________________ Dated: March 28, 1997 JOSEPH W. CONWAY (Executive Vice President and Director) DSI REALTY INCOME FUND IX CROSS REFERENCE SHEET FORM 1O-K ITEMS TO ANNUAL REPORT PART I, Item 3. There are no legal proceedings pending or threatened. PART I, Item 4. Not applicable. PART II, Item 5. Not applicable. PART II, Item 6. The information required is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1996, attached as Exhibit l to Form 10-K. PART II, Item 8. See Exhibit l to Form 10-K filed herewith. PART II, Item 9. Not applicable. EXHIBIT l DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 1996 - -------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 REVENUES $2,468,108 $2,484,242 $2,312,201 $2,315,457 $2,144,647 COSTS AND EXPENSES 1,620,477 1,563,848 1,520,382 1,552,502 1,532,136 MINORITY INTEREST IN EARNINGS OF REAL ESTATE JOINT VENTURE (82,729) (116,421) (93,634) (88,765) (59,417) ---------- ---------- ---------- ---------- ---------- NET INCOME $ 764,902 $ 803,973 $ 698,185 $ 674,190 $ 553,094 ========== ========== ========== ========== ========== TOTAL ASSETS $8,011,698 $8,677,898 $9,031,055 $9,525,832 $10,118,690 ========== ========== ========== ========== ========== NET CASH PROVIDED BY OPERATING ACTIVITIES $1,468,741 $1,488,619 $1,331,083 $1,213,385 $1,205,247 ========== ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 24.67 $ 25.93 $ 22.52 $ 21.75 $ 17.84 ========== ========== ========== ========== ========== CASH DISTRIBUTIONS PER $500 LIMITED PARTNERSHIP UNIT $ 45.00 $ 36.25 $ 35.00 $ 35.00 $ 35.00 ========== ========== ========== ========== ========== The following are reconciliations between the operating results and partners' equity per the financial statements and the Partnership's income tax return for the year ended December 31, 1996. Net Partners' Income Equity Per financial statements $ 764,902 $ 6,900,207 Capitalization of property acquisition costs 466,135 Deferred rental revenues 56,021 Excess financial statement depreciation 12,953 129,808 Excess tax return income from real estate joint venture 36,531 410,183 Accrued incentive management fee 314,602 Accrued property taxes (75,000) Accrued distributions 310,030 ----------- ----------- Per Partnership income tax return $ 814,386 $ 8,511,986 =========== =========== Taxable income per $500 limited partnership unit $ 26.53 =========== DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Page FINANCIAL STATEMENTS: Independent Auditors' Report F-1 Consolidated Balance Sheets at December 31, 1996 and 1995 F-2 Consolidated Statements of Income for the Three Years Ended December 31, 1996 F-3 Consolidated Statements of Changes in Partners' Equity for the Three Years Ended December 31, 1996 F-4 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1996 F-5 Notes to Consolidated Financial Statements F-6 SUPPLEMENTAL SCHEDULE: Independent Auditors' Report F-8 Schedule XI - Real Estate and Accumulated Depreciation F-9 SCHEDULES OMITTED: Financial statements and schedules not listed above are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements named above, or in the notes thereto. INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund IX: We have audited the accompanying balance sheets of DSI Realty Income Fund IX, a California Real Estate Limited Partnership (the "Partnership") as of December 31, 1996 and 1995, and the related statements of income, changes in partners' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of DSI Realty Income Fund IX at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. January 31, 1997 DELOITTE & TOUCHE LLP LONG BEACH, CALIFORNIA DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 - -------------------------------------------------------------------------------- ASSETS 1996 1995 CASH AND CASH EQUIVALENTS $ 549,578 $ 617,951 PROPERTY, At cost (net of accumulated depreciation of $6,285,024 in 1996 and $5,680,967 in 1995) (Notes 1, 2 and 3) 7,420,663 8,018,490 OTHER ASSETS 41,457 41,457 ----------- ----------- TOTAL $8,011,698 $ 8,677,898 =========== =========== LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Distribution due partners(Note 4) $ 310,030 $ 310,030 Incentive management fee payable to general partners (Note 4) 314,604 314,604 Property management fees payable (Note 1) 7,193 6,860 Customer deposits and other liabilities 112,823 96,103 ----------- ----------- Total liabilities 744,650 727,597 ----------- ----------- MINORITY INTERST IN REAL ESTATE JOINT VENTURE (Notes 1 and 2) 366,841 419,861 PARTNERS' EQUITY (Notes 1 and 4): General partners (68,439) (62,137) Limited partners (30,693 limited partnership units outstanding at December 31, 1996 and 1995) 6,968,646 7,592,577 ------------ ----------- Total partners' equity 6,900,207 7,530,440 ------------ ----------- TOTAL $8,011,698 $ 8,677,898 ============ =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) CONSOLIDATED STATEMENTS OF INCOME THREE YEARS ENDED DECEMBER 31, 1996 - -------------------------------------------------------------------------------- 1996 1995 1994 REVENUES: Rental revenues $2,450,664 $2,470,543 $2,306,251 Interest income 17,444 13,699 5,950 ---------- ---------- ---------- Total revenues 2,468,108 2,484,242 2,312,201 ---------- ---------- ---------- EXPENSES: Depreciation (Note 2) 604,057 597,673 587,750 Operating expenses (Note 1) 659,645 631,778 609,945 General and administrative 231,212 233,249 225,027 General partners' incentive management fee (Note 4) 125,563 101,148 97,660 ---------- ---------- ---------- Total expenses 1,620,477 1,563,848 1,520,382 ---------- ---------- ---------- INCOME BEFORE MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE 847,631 920,394 791,819 MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (NOTES 1 and 2) (82,729) (116,421) (93,634) NET INCOME $ 764,902 $ 803,973 $ 698,185 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 757,253 $ 795,933 $ 691,203 General partners 7,649 8,040 6,982 ---------- ---------- ---------- TOTAL $ 764,902 $ 803,973 $ 698,185 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 24.67 $ 25.93 $ 22.52 ========== ========== ========== See accompanying notes to financial statements. DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 1996 - -------------------------------------------------------------------------------- General Limited Partners Partners Total BALANCE AT JANUARY 1, 1994 $(55,069) $8,292,316 $8,237,247 Net income 6,982 691,203 698,185 Distributions (Note 4) (10,851) (1,074,255) (1,085,106) ------- ---------- ----------- BALANCE AT DECEMBER 31, 1994 (58,938) 7,909,264 7,850,326 Net income 8,040 795,933 803,973 Distributions (Note 4) (11,239) (1,112,620) (1,123,859) ------- ----------- ----------- BALANCE AT DECEMBER 31, 1995 (62,137) $ 7,592,577 $ 7,530,440 Net income 7,649 757,253 764,902 Distributions (Note 4) (13,951) (1,381,184) (1,395,135) ------- ----------- ----------- BALANCE AT DECEMBER 31, 1996 $(68,439) $ 6,968,646 $ 6,900,207 ======= =========== =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) CONSOLIDATED STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 1996 - -------------------------------------------------------------------------------- 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 2,450,664 $ 2,464,540 $ 2,318,004 Cash paid to suppliers and employees (999,367) (989,620) (992,871) Interest received 17,444 13,699 5,950 ----------- ----------- ------------ Net cash provided by operating activities 1,468,741 1,488,619 1,331,083 CASH FLOWS FROM FINANCING ACTIVITIES - Distributions paid to minority interest in real estate joint venture (135,749) (165,000) (141,212) Distributions to partners (1,395,135) (1,085,106) (1,085,106) ____________ ___________ __________ Net cash used in financing activities (1,530,884) (1,250,106) (1,226,318) ------------ ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (6,230) (41,878) (16,322) ----------- ----------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (68,373) 196,635 88,443 CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 617,951 421,316 332,873 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 549,578 $ 617,951 $ 421,316 =========== =========== ============ RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 764,902 $ 803,973 $ 698,185 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 604,057 597,673 587,750 Minority interst in income of real estate joint venture 82,729 116,421 93,634 Changes in assets and liabilities: Other assets ( 6,002) 11,792 Property management fees payable 333 (14,071) (64,141) Customer deposits and other liabilities 16,720 ( 9,375) 3,863 ----------- ----------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,468,741 $ 1,488,619 $ 1,331,083 See accompanying notes to consolidated financial statements. DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 1996 1. GENERAL DSI Realty Income Fund IX, a California Real Estate Limited Partnership (the "Partnership"), has three general partners (DSI Properties, Inc., Robert J. Conway and Joseph W. Conway) and limited partners owning 30,693 limited partnership units which were purchased for $500 a unit. The general partners have made no contribution to the Partnership and are not required to make any capital contribution in the future. The Partnership has a maximum life of 50 years and was formed on April 12, 1985 under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The Partnership has acquired five mini-storage facilities located in Monterey Park and Azusa, California; Everett, Washington;and Romeoville and Elgin, Illinois. The Partnership also entered into a joint venture with DSI Realty Income Fund VIII through which the Partnership has a 70% interest in a mini-storage facility in Aurora, Colorado. The facilities were acquired from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn is affiliated with other partnerships in which DSI Properties, Inc., Robert J. Conway and Joseph W. Conway are the general partners. The mini-storage facilities are operated for the Partnership by Dahn under various agreements which are subject to renewal annually. Under the terms of the agreements, the Partnership is required to pay Dahn a property management fee equal to 5% of gross revenue from operations, as defined. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of DSI Realty Income Fund IX and its 70% owned real estate joint venture. All significant intercompany accounts and trans- actions have been eliminated in consolidation. Cash and Cash Equivalents - The Partnership classifies its short-term investments purchased with an original maturity of three months or less as cash equivalents. Property and Depreciation - Property is recorded at cost and is composed primarily of mini-storage facilities. Depreciation is provided for using the straight-line method over an estimated useful life of 20 years for the facilities. Improvements are depreiceated over a five year period. Income Taxes - No provision has been made for income taxes in the accompanying financial statements. The taxable income or loss of the Partnership is allocated to each partner in accordance with the terms of the Agreement of Limited Partnership. Each partner's tax status, in turn, determines the appropriate income tax for its allocated share of the Partnership taxable income or loss. The net difference between the bases of the Partnership's assets and liabilities for federal income tax purposes as as reported for financial statement purposes is $1,611,779. Revenues - Rental revenue is recognized using the accrual method based on contractual amounts provided for in the lease agreements, which approximates recognition on a straight-line basis. The term of the lease agreements is usually less than one year. Net Income per Limited Partnership Unit - Net income per limited partnership unit is computed by dividing the net income allocated to the limited partners by the weighted average number of limited partnership units outstanding during each year (30,693 in 1996, 1995 and 1994). Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the Partnership's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impairment of Long-Lived Assets - The Company regularly reviews long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flow is less than the carrying amount of the asset, the Company recognizes an impairment. As of December 31, 1996, no impairment losses were required. 3. PROPERTY As of December 31, 1996 and 1995, the total cost of property and accumulated depreciation are as follows: 1996 1995 Land $ 2,729,790 $ 2,729,790 Buildings and improvements 10,975,897 10,969,667 ----------- ----------- Total 13,705,687 13,699,457 Less accumulated depreciation (6,285,024) (5,680,967) ----------- ---------- Property, net $ 7,420,663 $ 8,018,490 =========== =========== 4. ALLOCATION OF PROFITS AND LOSSES Under the Agreement of Limited Partnership, the general partners are to be allocated 1% of the net profits or losses from operations and the limited partners are to be allocated the balance of the net profits or losses from operations in proportion to their limited partnership interests. The general partners are also entitled to receive a percentage, based on a predetermined formula, of any cash distribution from the sale, other disposition, or refinancing of the project. In addition, the general partners are entitled to an incentive management fee for supervising the operations of the Partnership. The fee is to be paid in an amount equal to 9% per annum of Partnership distributions made from cash available for distribution from operations, as defined. Payment of incentive management fees earned by the general partners during the fiscal years 1986 through 1988 in tghe amount of $314,604 was subordinated to the limited partners' receiving a cumulative, noncompounded annual return of 8.1%. INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund IX: We have audited the financial statements of DSI Realty Income Fund IX (the "Partnership") as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, and have issued our report thereon dated January 31, 1997; such report is included elsewhere in this Form 10-K. Our audits also included the financial statements schedule of DSI Realty Income Fund IX, listed in Item 14. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. January 31, 1997 DELOITTE & TOUCHE LLP LONG BEACH, CALIFORNIA DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION - --------------------------------------------------------------------------------
Costs Capitalized Initial Cost to Subsequent to Gross Amount at Which Carried Partnership Acquisition at Close of Period ------------------- ----------------- ----------------------------- Buildings Buildings Date and Improve- Carrying and Accum. of Date Description Encumbrances Land Improvements ments Costs Land Improvements Total Deprec. Const. Acq. Life MINI-U-STORAGE Monterey Park, CA None $420,200 $1,409,050 $ 6,123 $420,200 $1,415,173 $1,835,373 $726,680 08/86 12/85 20 Yrs Azusa, CA None 696,000 2,095,965 9,188 696,000 2,105,153 2,801,153 1,105,452 06/86 01/86 20 Yrs Everett, WA None 352,350 1,252,536 7,091 352,350 1,259,627 1,611,977 695,861 11/85 06/85 20 Yrs Romeoville, IL None 298,740 2,180,802 18,598 298,740 2,199,400 2,498,180 1,106,831 01/87 05/86 20 Yrs Elgin, IL None 376,000 1,424,577 6,521 376,000 1,431,098 1,807,098 722,270 09/86 03/86 20 Yrs Aurora, CO None 586,500 2,544,046 21,400 586,500 2,565,446 3,151,946 1,927,930 02/85 09/85 15 Yrs -------- ---------- ------- -------- ---------- ---------- ---------- $2,729,790 $10,906,976 $ 68,921 $2,729,790 $10,975,897 $13,705,687* $6,285,024 ========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated at Cost Depreciation Balance at January 1, 1994 $13,641,257 $4,395,544 Additions 16,322 587,750 ----------- ---------- Balance at December 31, 1995 13,657,579 5,083,294 Additions 41,878 597,673 ----------- ---------- Balance at December 31, 1996 13,699,457 5,680,967 Additions 6,230 604,057 ----------- ---------- Balance at December 31, 1996 $13,705,687 $6,285,024 =========== ========== The total cost at the end of the period for Federal income tax purposes was approximately $10,975,000. EXHIBIT 2 March 28, 1997 ANNUAL REPORT TO LIMITED PARTNERS OF DSI REALTY INCOME FUND IX Dear Limited Partner: This report contains the Partnership's balance sheets as of December 31, 1996 and 1995, and the related statements of income, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1996 accompanied by an independent auditors' report. The Partnership owns five mini-storage facilities and a 70% interest in a sixth mini-storage facility on a joint venture basis with an affiliated Partnership, DSI Realty Income Fund VIII. The Partnership's properties were each purchased for all cash and funded solely from subscriptions for limited partnership interests without the use of mortgage financing. Your attention is directed to the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations for the General Partners' discussion and analysis of the financial statements and operations of the Partnership. Average occupancy levels for each of the Partnership's six properties for the years ended December 31, 1996 and December 31, 1995 were as follows: Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 1996 Dec. 31, 1995 Azusa, CA 82% 85% Elgin, IL 83% 85% Everett, WA 84% 84% Monterey Park, CA 91% 86% Romeoville, IL 82% 82% Aurora, CO* 82% 89% - ---------- *The Partnership owns a 70% interest in this facility. We will keep you informed of the activities of DSI Realty Income Fund IX as they develop. If you have any questions, please contact us at your convenience at (562) 424-2655. If you would like a copy of the Partnership's Annual Report on Form 10-K for the year ended December 31, 1996 which was filed with the Securities and Exchange Commission (which report includes the enclosed Financial Statements), we will forward a copy of the report to you upon written request. Very truly yours, DSI REALTY INCOME FUND IX By: DSI Properties, Inc. By___________________________ ROBERT J. CONWAY, President EX-27 2 DSI REALTY INCOME FUND IX WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 0000764586 1 U.S. Dollars YEAR DEC-31-1996 DEC-31-1996 549578 0 0 0 0 0 13705687 6285024 8011698 0 0 0 0 0 0 8011698 2450664 2468108 0 0 0 0 0 764902 0 764902 0 0 0 764902 0 0
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