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, 1995 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.
Item 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending legal proceedings.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registrant, a publicly-held limited partnership, sold 30,693 limited partnership units during its offering and currently has 1,365 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 $9.06 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 1995 and $8.75 per Limited Partnership Unit for the year ended December 31, 1994. It is Registrant's expectations that distributions will continue to be paid in the future.
Item 6.
Item 6. SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, AND 1991. -------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ----
REVENUES $ 2,484,242 $ 2,312,201 $ 2,315,457 $ 2,144,647 $ 2,041,195
COSTS AND EXPENSES 1,563,848 1,520,382 1,552,502 1,532,136 1,494,797
MINORITY INTEREST IN EARNINGS OF REAL ESTATE JOINT VENTURE (116,421) (93,634) (88,765) (59,417) (49,287) ----------- ----------- ----------- ------------ ------------
NET INCOME $ 803,973 $ 698,185 $ 674,190 $ 553,094 $ 497,111 =========== =========== =========== ============ ============
TOTAL ASSETS $ 8,677,898 $ 9,031,055 $ 9,525,832 $ 10,118,690 $ 10,706,384 =========== =========== =========== ============ ============
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,488,619 $ 1,331,083 $ 1,213,385 $ 1,205,247 $ 1,179,966 =========== =========== =========== ============ ============
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 36.25 $ 35.00 $ 35.00 $ 35.00 $ 35.00 =========== =========== =========== ============ ============
CASH DISTRIBUTION PER $500 LIMITED PARTNERSHIP UNIT $ 25.93 $ 22.52 $ 21.75 $ 17.84 $ 16.03 =========== =========== =========== ============ ============
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
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 in income of 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 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 $22,000 (3.6%) was primarily due to increases in maintenance and repairs and salaries and wages partially offset by a decrease in yellow page 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.
1994 COMPARED TO 1993
Total revenues decreased slightly from $2,315,457 in 1993 to $2,312,201 in 1994, total expenses decreased from $1,552,502 to $1,520,382 and minority interest in income of the real estate joint venture increased from $88,765 to $93,634. As a result of these fluctuations, net income increased from $674,190 in 1993 to $698,185 in 1994. The slight decrease in rental revenues can be attributed to a combination of lower occupancy rates offset to some extent by higher unit rental rates. Average occupancy levels for the Partnership's six mini-storage facilities decreased from 84.2% for the year ended December 31, 1993, to 81.5% for the year ended December 31, 1994. The Partnership continued to increase rental rates where market conditions made such increases feasible. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. The decrease in operating expenses of approximately $41,000 (6.3%) was primarily due to decreases in maintenance and repair, salaries and wages, workers' compensation insurance expenses and yellow page advertising costs offset to some extent by an increase in real estate tax expense. General and administrative expenses increased by approximately $9,000 (4.2%) primarily as a result of higher professional fees. 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 $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. Net cash provided by operating activities increased approximately $118,000 (9.7%) in 1994 compared to 1993 primarily as a result of the increase in net income and the reduction in the amount paid for deferred property management and General Partners' incentive management fees. Payment of a portion of the property management and General Partners' incentive management fees had been deferred in prior years in order to maximize cash available for distribution to Limited Partners.
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. Distributions paid to the minority interest in the Partnership's real estate joint venture have increased each year as a result of the increased profitability of the joint venture.
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 1994 and 1995. 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.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto as Exhibit l is the information required to be set forth as Item 8, Part II hereof.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER
The General Partners of Registrant are the same as when the Partnership was formed, i.e., DSI Properties, Inc., a California corporation, Robert J. Conway and Joseph W. Conway, brothers. As of December 31, 1995, Messrs. Robert J. Conway and Joseph W. Conway, each of whom own approximately 41.63% 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 62 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 66 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 72 and has been a member of the Board of Directors of DSI Properties, Inc. since 1994, a Vice President of Diversified Securities, Inc. since 1973, and an Account Executive with Diversified Securities, Inc. since 1967.
Item 11.
Item 11. EXECUTIVE COMPENSATION (MANAGEMENT REMUNERATION AND TRANSACTIONS)
The information required to be furnished in Item 11 of Part III is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1995, 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.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995 no person of record owned more than 5% of the limited partnership units of Registrant, nor was any person known by Registrant to own of record and beneficially, or beneficially only, more than 5% thereof. The balance of the information required to be furnished in Item 12 of Part III is contained in Registrant's Registration Statement on Form S-11, previously filed pursuant to the Securities Act of 1933, as amended, and which is incorporated herein by this reference. The only change to the information contained in said Registration Statement on Form S-11 is the fact that Messrs. Benes and Blakley have retired and Messrs. Robert J. Conway and Joseph W. Conway equity interest in DSI Financial, Inc., parent of DSI Properties, Inc., has increased. Please see information contained in Item 10 hereinabove.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be furnished in Item 13 of Part III is contained in Registrant's Financial Statements for its fiscal year ended December 31, 1995, attached hereto as Exhibit l and incorporated herein by this reference.
PART IV
Item 14
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(l) Attached hereto and incorporated herein by this reference as Exhibit l are Registrant's Financial Statements and Supplemental Schedule for its fiscal year ended December 31, 1995, 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, 1995.
(b) No reports on Form 8K were filed during the fiscal year ended December 31, 1995.
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, 1996 ROBERT J. CONWAY, President (Chief Executive Officer, Chief Financial Officer, and Director)
By____________________________ Dated: March 28, 1996 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, 1996 ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director
By___________________________ Dated: March 28, 1996 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, 1995, 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, 1995 - --------------------------------------------------------------------------------
1995 1994 1993 1992 1991
REVENUES $2,484,242 $2,312,201 $2,315,457 $2,144,647 $2,041,195
COSTS AND EXPENSES $1,563,848 1,520,382 1,552,502 1,532,136 1,494,797
MINORITY INTEREST IN EARNINGS OF REAL ESTATE JOINT VENTURE (116,421) (93,634) (88,765) (59,417) (49,287) ---------- ---------- ---------- ---------- ---------- NET INCOME $ 803,973 $ 698,185 $ 674,190 $ 553,094 $ 497,111 ========== ========== ========== ========== ========== TOTAL ASSETS $8,677,898 $9,031,055 $9,525,832 $10,118,690 $10,706,384 ========== ========== ========== ========== ========== NET CASH PROVIDED BY OPERATING ACTIVITIES $1,488,619 $1,331,083 $1,213,385 $1,205,247 $1,179,966 ========== ========== ========== ========== ========== CASH DISTRIBUTIONS PER $500 LIMITED PARTNERSHIP UNIT $ 36.25 $ 35.00 $ 35.00 $ 35.00 $ 35.00 ========== ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 25.93 $ 22.52 $ 21.75 $ 17.84 $ 16.03 ========== ========== ========== ========== ==========
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, 1995.
Net Partners' Income Equity
Per financial statements $ 803,973 $ 7,530,440 Capitalization of property acquisition costs 466,135 Deferred rental revenues 56,022 Excess financial statement depreciation 19,840 116,855 Excess tax return income from real estate joint venture 31,405 373,652 Accrued incentive management fee 314,602 Accrued property taxes (75,000) Accrued distributions 310,030 ----------- ----------- Per Partnership income tax return $ 855,218 $ 9,092,736 =========== =========== Taxable income per $500 limited partnership unit $ 27 ===========
DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Income for the Three Years Ended December 31, 1995
Consolidated Statements of Changes in Partners' Equity for the Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995
Notes to Consolidated Financial Statements
SUPPLEMENTAL SCHEDULE:
Independent Auditors' Report
Schedule XI - Real Estate and Accumulated Depreciation
SCHEDULES OMITTED:
Financial statements and schedules not listed above are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements named above, or in the notes thereto.
INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund 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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles.
January 31, 1996
DELOITTE & TOUCHE LLP LONG BEACH, CALIFORNIA
DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
ASSETS 1995 1994
CASH AND CASH EQUIVALENTS $ 617,951 $ 421,316
PROPERTY, At cost (net of accumulated depreciation of $5,680,967 in 1995 and $5,083,294 in 1994) (Notes 1, 2 and 3) 8,018,490 8,574,285
OTHER ASSETS 41,457 35,454 ----------- ----------- TOTAL $ 8,677,898 $ 9,031,055 =========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES: Distribution due partners(Note 4) $ 310,030 $ 271,277 Incentive management fee payable to general partners (Note 4) 314,604 314,604 Property management fees payable (Note 1) 6,860 20,931 Customer deposits and other liabilities 96,103 105,478 ----------- ----------- Total liabilities 727,597 712,290 ----------- ----------- MINORITY INTERST IN REAL ESTATE JOINT VENTURE (Notes 1 and 2) 419,861 468,439
PARTNERS' EQUITY (Notes 4): General partners (62,137) (58,938) Limited partners (30,693 limited partnership units outstanding at December 31, 1995 and 1994) 7,592,577 7,909,264 ------------ ----------- Total partners' equity 7,530,440 7,850,326 ------------ ----------- TOTAL $ 8,677,898 $ 9,031,055 ============ ===========
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, 1995 - --------------------------------------------------------------------------------
1995 1994 1993
REVENUES: Rental revenues $2,470,543 $2,306,251 $2,310,902 Interest income 13,699 5,950 4,555 ---------- ---------- ---------- Total revenues 2,484,242 2,312,201 2,315,457 ---------- ---------- ---------- EXPENSES: Depreciation (Note 2) 597,673 587,750 587,750 Operating expenses (Note 1) 631,778 609,945 650,620 General and administrative 233,249 225,027 216,472 General partners' incentive management fee (Note 4) 101,148 97,660 97,660 ---------- ---------- ---------- Total expenses 1,563,848 1,520,382 1,552,502 ---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE 920,394 791,819 762,955
MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (NOTES 1 and 2) (116,421) (93,634) (88,765)
NET INCOME $ 803,973 $ 698,185 $ 674,190 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 795,933 $ 691,203 $ 667,448 General partners 8,040 6,982 6,742 ---------- ---------- ---------- TOTAL $ 803,973 $ 698,185 $ 674,190 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 25.93 $ 22.52 $ 21.75 ========== ========== ==========
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, 1995 - --------------------------------------------------------------------------------
General Limited Partners Partners Total
BALANCE AT JANUARY 1, 1993 ($50,960) $ 8,699,124 $ 8,648,164
Net income 6,742 667,448 674,190
Distributions (Note 4) (10,851) (1,074,256) (1,085,107) ------- ---------- ---------- BALANCE AT DECEMBER 31, 1993 (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 ======= =========== ===========
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, 1995 - --------------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 2,464,540 $ 2,318,004 $ 2,330,940 Cash paid to suppliers and employees (989,620) (992,871) (1,122,110) Interest received 13,699 5,950 4,555 ----------- ----------- ------------ Net cash provided by operating activities 1,488,619 1,331,083 1,213,385
CASH FLOWS FROM FINANCING ACTIVITIES - Distributions paid to minority interest in real estate joint venture (165,000) (141,212) (139,760) Distributions to partners (1,085,106) (1,085,106) (1,085,107) ____________ ___________ __________ Net cash used in financing activities (1,250,106) (1,226,318) (1,224,867) ------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (41,878) (16,322) ----------- ----------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 196,635 88,443 (11,482)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 421,316 332,873 344,355 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 617,951 $ 421,316 $ 332,873 =========== =========== ============ RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 803,973 $ 698,185 $ 674,190 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 597,673 587,750 587,750 Minority interst in income of real estate joint venture 116,421 93,634 88,765 Changes in assets and liabilities: Other assets ( 6,002) 11,792 (6,374) Incentive management fee payable to general partners ( 62,560) Property management fees payable (14,071) (64,141) ( 97,089) Customer deposits and other liabilities ( 9,375) 3,863 28,703 ----------- ----------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,488,619 $ 1,331,083 $ 1,213,385
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, 1995
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 owns 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.
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 1995, 1994 and 1993).
Property and Depreciation - Property is recorded at cost and is comprised 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.
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.
Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.
3. PROPERTY
As of December 31, 1995 and 1994, the total cost of property and accumulated depreciation are as follows:
1995 1994 Land $ 2,729,790 $ 2,729,790 Buildings and improvements 10,969,667 10,927,789 ----------- -----------
Total 13,699,457 13,657,579 Less accumulated depreciation (5,680,967) (5,083,294) ----------- ----------
Property, net $ 8,018,490 $ 8,574,285 =========== ===========
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.
The general partners are entitled to receive an incentive management fee for supervising the operations of the Partnership. The fee is to be paid in an amount equal to 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 was subordinated to the limited partners' receiving a cumulative, noncompounded annual return of 8.1%. Incentive management fees payable to general partners is $314,604 at December 31, 1995 and 1994.
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, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated January 31, 1996; 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, 1996
DELOITTE & TOUCHE LLP LONG BEACH, CALIFORNIA
DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION - --------------------------------------------------------------------------------
Real Estate Accumulated at Cost Depreciation
Balance at January 1, 1993 $13,641,257 $3,907,794 Additions 587,750 ----------- ---------- Balance at December 31, 1993 13,641,257 4,495,544 Additions 16,322 587,750 ----------- ---------- Balance at December 31, 1994 13,657,579 5,083,294 Additions 41,878 597,673 ----------- ---------- Balance at December 31, 1995 $13,699,457 $5,680,967 =========== ==========
The total cost at the end of the period for Federal income tax purposes was approximately $10,975,000.
EXHIBIT 2 March 28, 1996
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, 1995 and 1994, 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, 1995 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, 1995 and December 31, 1994 were as follows:
Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 1995 Dec. 31, 1994
Azusa, CA 85% 75%
Elgin, IL 85% 81%
Everett, WA 84% 81%
Monterey Park, CA 86% 84%
Romeoville, IL 82% 85%
Aurora, CO* 89% 83% - ---------- *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 (310) 424-2655.
If you would like a copy of the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995 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