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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, 1998.
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
6700 E. Pacific Coast Hwy., Long Beach, California 9O8O3
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code-(562)493-8881
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,
1998, incorporated by reference to Form 10-K, Part II.
Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 1998, 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, 1998, 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, 1998 and December 31, 1997 are as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Level for the
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
Azusa, CA 89% 81%
Elgin, IL 77% 81%
Everett, WA 78% 91%
Monterey Park, CA 92% 90%
Romeoville, IL 80% 78%
Aurora, CO* 88% 88%
*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, 1998 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 1,244 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 $11.32 per Limited Partnership Unit were
declared and paid each quarter for the year ended December 31, 1998 and 1997
$11.25 per Limited Partnership Unit for the year ended December 31, 1996. It is
Registrant's expectations that distributions will continue to be paid in the
future.
Item 6. SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31, 1998
--------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
REVENUES $2,779,151 $2,624,488 $ 2,468,108 $ 2,484,242 $ 2,312,201
COSTS AND
EXPENSES 1,684,393 1,674,192 1,620,477 1,563,848 1,520,382
MINORITY
INTEREST
IN EARNINGS OF
REAL ESTATE
JOINT
VENTURE (109,741) (93,305) (82,729) (116,421) (93,634)
----------- ----------- ----------- ------------ ------------
NET
INCOME $ 985,017 $ 856,991 $ 764,902 $ 803,973 $ 698,185
=========== =========== =========== ============ ============
TOTAL
ASSETS $ 6,924,389 $ 7,396,927 $ 8,011,698 $ 8,677,898 $ 9,031,055
=========== =========== =========== ============ ============
NET CASH
PROVIDED BY
OPERATING
ACTIVITIES $1,702,518 $ 1,494,901 $ 1,468,741 $ 1,488,619 $ 1,331,083
=========== =========== =========== ============ ============
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 45.30 $ 45.27 $ 45.00 $ 36.25 $ 35.00
=========== =========== =========== ============ ============
CASH
DISTRIBUTION
PER $500
LIMITED
PARTNERSHIP
UNIT $ 31.77 $ 27.64 $ 24.67 $ 25.93 $ 22.52
=========== =========== =========== ============ ============
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Total revenues increased from $2,624,488 in 1997 to $2,779,151 in 1998,
total expenses increased from $1,674,192 to $1,684,393 and minority interest
in income of the real estate joint venture increased from $93,305 to $109,741.
As a result of these fluctuations, net income increased from $856,991 in 1997
to $985,017 in 1998. The increase in rental revenues can be attributed to
higher unit rental rates. Average occupancy levels for the Partnership's six
mini-storage facilities decreased from 84.9% for the year ended December 31,
1997, to 83.8% for the year ended December 31, 1998. 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. Operating expenses remained
relatively constant with decreases in yellow pages advertising costs, salaries
and wages and worker's compensation insurance expenses being offset by
increases in maintenance and repairs and real estate tax. General and
administrative expenses increased approximately $8,400 (5.0%) as a result of
relatively insignificant fluctuations in various expense accounts. General
Partners' incentive management fees remained constant. Property management
fees, which are based on rental revenue, increased as a result of the increase
in rental revenue. 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.
1997 COMPARED TO 1996
Total revenues increased from $2,468,108 in 1996 to $2,624,488 in 1997,
total expenses increased from $1,620,477 to $1,674,192 and minority interest
in income of the real estate joint venture increased from $82,729 to $93,305.
As a result of these fluctuations, net income increased from $764,902 in 1996
to $856,991 in 1997. 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 84.0%
for the year ended December 31, 1996, to 84.9% for the year ended December 31,
1997. 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 $59,300 (9.3%) was
primarily due to increases in miscellaneous advertising costs, maintenance and
repair, salaries and wages and worker'S compensation insurance expense
partially offset by a decrease in real estate tax expense. General and
administrative expenses increased approximately $4,600 (2.8%) as a result of
relatively insignificant fluctuations in various expense accounts. General
Partners' incentive management fees remained constant. Property management
fees, which are based on rental revenue, increased as a result of the increase
in rental revenue. 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 by approximately
$207,600 (13.9%) in 1998 compared to 1997 primarily as a result of the increase
in net income and decrease in other assets. Net cash provided by operating
activities increased by approximately $26,200 (1.8%) in 1997 compared to 1996
primarily as a result of the increase in net income partially offset by
decreases in depreciation and customer deposits and other liabilities and an
increase in other assets.
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. A special distribution of 1%
was declared and paid on December 15, 1996, 1997 and 1998.
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 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 Year 2000 issue refers to the inability of certain computer systems to
recognize date using "00" as the Year 2000. The Partnership has implemented a
Year 2000 program, which has three phases: (1) identification;
(2) remediation; and (3) testing and verification. The Partnership, as well
as the property management company and the Partnership's warehouse facilities
have completed those phases. Computer programs have been upgraded and tested
to function properly with respect to the dates in the Year 2000 and thereafter.
Year 2000 compliance costs are nominal and have been expensed in the regular
course of business. The Partnership provides no assurance that third-party
suppliers and customers will be compliant. Nevertheless, the Partnership does
not believe that the Year 2000 issue will have a material adverse effect on
its financial condition or results of operations.
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, 1998, Messrs. Robert J.
Conway and Joseph W. Conway, each of whom own approximately 48.4% of the issued
and outstanding capital stock of DSI Financial, Inc., a California corporation,
together with Mr. Joseph W. Stok, currently comprise the entire Board of
Directors of DSI Properties, Inc.
Mr. Robert J. Conway is 65 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 69 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 75 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, 1998, 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, 1998 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, 1998, 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, 1998, 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, 1998.
(b) No reports on Form 8K were filed during the fiscal year ended December
31, 1998.
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 31, 1999
ROBERT J. CONWAY, President
(Chief Executive Officer, Chief
Financial Officer, and Director)
By____________________________ Dated: March 31, 1999
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 31, 1999
ROBERT J. CONWAY, President,
Chief Executive Officer, Chief
Financial Officer, and Director
By___________________________ Dated: March 31, 1999
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, 1998, 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, 1998
- --------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
REVENUES $2,779,151 $2,624,488 $ 2,468,108 $ 2,484,242 $ 2,312,201
COSTS AND
EXPENSES 1,684,393 1,674,192 1,620,477 1,563,848 1,520,382
MINORITY
INTEREST
IN EARNINGS OF
REAL ESTATE
JOINT
VENTURE (109,741) (93,305) (82,729) (116,421) (93,634)
----------- ----------- ----------- ------------ ------------
NET
INCOME $ 985,017 $ 856,991 $ 764,902 $ 803,973 $ 698,185
=========== =========== =========== ============ ============
TOTAL
ASSETS $ 6,924,389 $ 7,396,927 $ 8,011,698 $ 8,677,898 $ 9,031,055
=========== =========== =========== ============ ============
NET CASH
PROVIDED BY
OPERATING
ACTIVITIES $1,702,518 $ 1,494,901 $ 1,468,741 $ 1,488,619 $ 1,331,083
=========== =========== =========== ============ ============
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 45.30 $ 45.27 $ 45.00 $ 36.25 $ 35.00
=========== =========== =========== ============ ============
CASH
DISTRIBUTION
PER $500
LIMITED
PARTNERSHIP
UNIT $ 31.77 $ 27.64 $ 24.67 $ 25.93 $ 22.52
=========== =========== =========== ============ ============
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, 1998.
Net Partners'
Income Equity
Per financial statements $ 985,017 $ 5,934,008
Excess book depreciation 9,318 145,224
Accrued incentive management fee 314,602
Taxable income from joint venture
in excess of book value 27,317 482,330
Acquisition costs capitalized
for tax purposes 466,135
Recognition of deferred rental revenues 56,020
Accrued distributions to partners 310,030
Accrued property taxes (75,000)
----------- -----------
Per Partnership income tax return $ 1,021,652 $ 7,633,349
=========== ===========
Net taxable income per $500 limited
partnership unit $ 33.29
===========
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, 1998 and 1997 F-2
Consolidated Statements of Income for the Three
Years Ended December 31, 1998 F-3
Consolidated Statements of Changes in Partners' Equity for
the Three Years Ended December 31, 1998 F-4
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1998 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, 1998 and 1997, and the related consolidated statements of income, changes
in partners' equity (deficit), and cash flows for each of the three years in the
period ended December 31, 1998. 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, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998
in conformity with generally accepted accounting principles.
February 5, 1999
DELOITTE & TOUCHE LLP
LONG BEACH, CALIFORNIA
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
ASSETS 1998 1997
CASH AND CASH EQUIVALENTS $ 633,690 $ 496,565
PROPERTY, net (Notes 1, 2 and 3) 6,245,163 6,832,913
OTHER ASSETS 45,536 67,449
----------- -----------
TOTAL $ 6,924,389 $ 7,396,927
=========== ===========
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) 8,265 8,206
Customer deposits and other liabilities 94,891 94,657
----------- -----------
Total liabilities 727,790 727,497
----------- -----------
MINORITY INTERST IN REAL ESTATE
JOINT VENTURE (Notes 1 and 2) 262,591 315,846
PARTNERS' EQUITY (DEFICIT)(Notes 1 and 4):
General partners (78,101) (73,905)
Limited partners (30,693 limited
partnership units outstanding
at December 31, 1998 and 1997) 6,012,109 6,427,489
------------ -----------
Total partners' equity 5,934,008 6,353,584
------------ -----------
TOTAL $ 6,924,389 $ 7,396,927
============ ===========
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, 1998
- --------------------------------------------------------------------------------
1998 1997 1996
REVENUES:
Rental revenues $2,765,747 $2,610,080 $2,450,664
Interest income 13,404 14,408 17,444
---------- ---------- ----------
Total revenues 2,779,151 2,624,488 2,468,108
---------- ---------- ----------
EXPENSES:
Depreciation (Note 2) 587,750 587,750 604,057
Operating expenses (Note 1) 692,352 695,086 635,736
General and administrative 176,604 168,243 163,624
General partners' incentive
management fee (Note 4) 125,563 125,563 125,563
Property management fee (Note 1) 102,124 97,550 91,497
---------- ---------- ----------
Total expenses 1,684,393 1,674,192 1,620,477
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF REAL ESTATE JOINT VENTURE 1,094,758 950,296 847,631
MINORITY INTEREST IN INCOME OF REAL
ESTATE JOINT VENTURE (NOTES 1 and 2) (109,741) (93,305) (82,729)
---------- ---------- ----------
NET INCOME $ 985,017 $ 856,991 $ 764,902
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
Limited partners $ 975,167 $ 848,421 $ 757,253
General partners 9,850 8,570 7,649
---------- ---------- ----------
TOTAL $ 985,017 $ 856,991 $ 764,902
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT (Notes 2 and 4) $ 31.77 $ 27.64 $ 24.67
========== ========== ==========
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, 1998
- --------------------------------------------------------------------------------
General Limited
Partners Partners Total
BALANCE AT JANUARY 1, 1996 (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
Net income 8,570 848,421 856,991
Distributions (14,036) (1,389,578) (1,403,614)
------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 $(73,905) $ 6,427,489 $ 6,353,584
Net income 9,850 975,167 985,017
Distributions (14,046) (1,390,547) (1,404,593)
------- ----------- -----------
BALANCE AT DECEMBER 31, 1998 $(78,101) $ 6,012,109 $ 5,934,008
======= =========== ===========
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, 1998
- --------------------------------------------------------------------------------
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 985,017 $ 856,991 $ 764,902
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 587,750 587,750 604,057
Minority interest in income
of real estate joint venture 109,741 93,305 82,729
Changes in assets and liabilities:
Other assets 19,717 (25,992)
Property management fees payable 59 1,013 333
Customer deposits and
other liabilities 234 (18,166) 16,720
----------- ----------- ------------
Net cash provided by operating
activities 1,702,518 1,494,901 1,468,741
CASH FLOWS FROM FINANCING ACTIVITIES -
Distributions paid to minority interest
in real estate joint venture (160,800) (144,300) (135,749)
Distributions to partners (1,404,593) (1,403,614) (1,395,135)
____________ ___________ __________
Net cash used in financing
activities (1,565,393) (1,547,914) (1,530,884)
------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to property (6,230)
----------- ----------- ----------
NET (DECREASE)INCREASE IN CASH AND
CASH EQUIVALENTS 137,125 (53,013) (68,373)
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 496,565 549,578 617,951
----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 633,690 $ 496,565 $ 549,578
=========== =========== ============
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, 1998
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 ranging from 15 to
20 years for the facilities. Improvements are depreciated over a five-year
period.
Income Taxes - No provision has been made for income taxes in the
accompanying financial statements. The taxable income or loss of the
Partnership is allocated to each partner in accordance with the terms of
the Agreement of Limited Partnership. Each partner's tax status, in turn,
determines the appropriate income tax for its allocated share of the
Partnership's taxable income or loss. The net difference between the bases
of the Partnership's assets and liabilities for federal income tax purposes
as as reported for financial statement purposes is $1,699,341.
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 1998, 1997 and 1996).
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. No impairment
losses were required in 1998, 1997 or 1996.
Fair Value of Financial Instruments - The Company's financial instruments
consist primarily of cash, receivables, accounts payable and accrued
liabilities. The carrying values of all financial instruments are
representative of their fair values due to their short-term maturities.
Concentrations of Credit Risk - Financial instruments that potentially
subject the Partnership to concentrations of credit risk consist primarily
of cash equivalents and rent receivables. The Partnership places its cash
equivalents with high credit quality institutions.
3. PROPERTY
As of December 31, 1998 and 1997, the total cost of property and the
accumulated depreciation are as follows:
1998 1997
Land $ 2,729,790 $ 2,729,790
Buildings and improvements 10,975,897 10,975,897
----------- -----------
Total 13,705,687 13,705,687
Accumulated depreciation (7,460,524) (6,872,774)
----------- ----------
Property, net $ 6,245,163 $ 6,832,913
=========== ===========
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.
5. BUSINESS SEGMENT INFORMATION
The following disclosure about segment reporting of the Partnership is
made in accordance with the requirements of SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The Partnership
operates under a single segment; storage facility operations, under which
the Partnership rents its storage facilities to its customers on a need
basis and charges rent on a predetermined rate.
DSI REALTY INCOME FUND 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 $867,586 08/86 12/85 20 Yrs
Azusa, CA None 696,000 2,095,965 9,188 696,000 2,105,153 2,801,153 1,315,048 06/86 01/86 20 Yrs
Everett, WA None 352,350 1,252,536 7,091 352,350 1,259,627 1,611,977 821,113 11/85 06/85 20 Yrs
Romeoville, IL None 298,740 2,180,802 18,598 298,740 2,199,400 2,498,180 1,324,911 01/87 05/86 20 Yrs
Elgin, IL None 376,000 1,424,577 6,521 376,000 1,431,098 1,807,098 864,730 09/86 03/86 20 Yrs
Aurora, CO None 586,500 2,544,046 21,400 586,500 2,565,446 3,151,946 2,267,136 02/85 09/85 15 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$2,729,790 $10,906,976 $ 68,921 $2,729,790 $10,975,897 $13,705,687*$7,460,524
========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated
at Cost Depreciation
Balance at January 1, 1996 13,699,457 5,680,967
Additions 6,230 604,057
----------- ----------
Balance at December 31, 1996 $13,705,687 $6,285,024
Additions 587,750
----------- ----------
Balance at December 31, 1997 $13,705,687 $6,872,774
Additions 587,750
----------- ----------
Balance at December 31, 1998 $13,705,687 $7,460,524
=========== ==========
EXHIBIT 2
March 31, 1999
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,
1998 and 1997, 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, 1998
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, 1998 and December 31, 1997 were as follows:
Location of Property Average Occupancy Average Occupancy
Levels for the Levels for the
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
Azusa, CA 89% 81%
Elgin, IL 77% 81%
Everett, WA 78% 91%
Monterey Park, CA 92% 90%
Romeoville, IL 80% 78%
Aurora, CO* 88% 88%
- ----------
*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) 493-3022.
If you would like a copy of the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1998 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