Item 2. PROPERTIES
Registrant owns a fee interest in six mini-storage facilities, none of which are subject to long-term indebtedness. Additional information is set forth in Registrant's letter to its Limited Partners regarding the Annual Report, attached hereto as Exhibit 2, and incorporated by this reference. 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
Chico, CA 1.97 acres 39,580 366 9/05/84
Fairfield, CA 2.29 acres 40,668 442 8/31/84
Ft.Collins, CO 2.49 acres 57,284 603 3/27/85
LaVerne, CA 2.78 acres 50,652 523 8/21/84
Riverside, CA 2.92 acres 60,011 567 12/12/84
Littleton, CO 3.071 acres 43,380 404 11/01/85
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 24,000 limited partnership units during its offering and currently has 956 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 $10.00 per Limited Partnership Unit were declared and paid each quarter for the years ended December 31, 1995 and $9.06 per Limited Partnership Unit for the year ended December 31, 1994.
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 $1,857,684 $1,845,486 $1,824,454 $1,729,775 $1,657,306
COSTS AND EXPENSES 1,397,768 1,359,766 1,316,766 1,304,100 1,299,755 ---------- ---------- ---------- ---------- ----------
NET INCOME $ 459,916 $ 485,720 $ 507,688 $ 425,675 $ 357,551 ========== ========== ========== ========== ==========
TOTAL ASSETS $4,697,315 $5,219,802 $5,586,962 $6,016,083 $6,495,166 ========== ========== ========== ========== ==========
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 970,822 $ 992,128 $ 921,052 $ 878,099 $ 832,298 ========== ========== ========== ========== ==========
CASH DISTRIBUTIONS PER $500 LIMITED PARTNERSHIP UNIT $ 40.00 $ 36.25 $ 35.00 $ 35.00 $ 35.00 ========== ========== ========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 18.97 $ 20.03 $ 20.94 $ 17.56 $ 14.75 ========== ========== ========== ========== ==========
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 $1,845,486 in 1994 to $1,857,684 in 1995, while total expenses increased from $1,359,766 to $1,397,768 resulting in a decrease in net income from $485,720 to $459,916. The approximate $8,000 (0.4%) increase in rental revenues can be attributed to higher unit rental rates as average occupancy rates remained relatively constant at 83.5% and 83.3% for the years ended December 31, 1995 and 1994, respectively. The Partnership is continuing its advertising campaign to attract and keep new tenants in its various mini-storage facilities. The approximate $28,000 (4.8%) increase in operating expenses was due primarily to an increase in maintenance and repair, salaries and wages and office expense partially offset by a decrease in yellow page advertising costs. General and administrative expense remained relatively constant. The General Partners' incentive management fee decreased approximately $3,000 (3.1%) as a result of the decrease in cash available for distribution on which this fee is based.
1994 COMPARED TO 1993
Total revenues increased from $1,824,454 in 1993 to $1,845,486 in 1994, while total expenses increased from $1,316,766 to $1,359,766 resulting in a decrease in net income from $507,688 to $485,720. The approximate $16,000 (0.9%) increase in rental revenues can be attributed to higher unit rental rates as average occupancy rates decreased. Occupancy levels for the Partnership's six mini-storage facilities averaged 83.3% for the year ended December 31, 1994, and 84.8% for the year ended December 31, 1993. The Partnership continued to increase rental rates where the market conditions made such increases feasible. The Partnership is continuing its advertising campaign to attract and keep new tenants in its various mini-storage facilities. The approximate $30,000 (5.4%) increase in operating expenses was due primarily to an increase in yellow page advertising costs, maintenance and repair, salaries and wages and real estate tax expense. The approximate $6,000 (3.7%) increase in general and administrative expense was primarily a result of higher professional fees. The General Partners' incentive management fee increased approximately $7,000 (7.7%) as a result of the increase in cash available for distribution on which this fee is based.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased by approximately $21,000 (2.1%) in 1995 compared to 1994 primarily due to the decrease in net income and customer deposits and other liabilities. Net cash provided by operating activities increased by approximately $71,000 (7.7%) in 1994 compared to 1993 primarily due to the absence of payments of accrued property management fee liabilities, which were all paid in 1993. Payment of this fee had been deferred in prior years in order to maximize cash available for distribution to the Limited Partners. In 1993, the Partnership paid all of the current year's fees, as well as a portion of the fees deferred in prior years. The General Partners anticipate that the property management fee will be paid on a current basis in the future without adversely affecting cash available for distribution.
Cash used in financing activities, as set forth in the statements of cash flows, has consisted solely of cash distributions to partners. The General Partners determined that effective with the fourth quarter 1994 distribution which was paid on January 15, 1995, 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 an annual return of 7% paid in the prior years.
Cash used in investing activities, as set forth in the statements of cash flows, has consisted solely of acquisitions of equipment for the Partnership's mini-storage facilities. 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 financial 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 an adverse material 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, and Diversified Investors Agency. 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 LLP. 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 VII 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 VII 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 VII
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 VII (A California Real Estate Limited Partnership)
SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
1995 1994 1993 1992 1991
REVENUES $1,857,684 $1,845,486 $1,824,454 $1,729,775 $1,657,306
COSTS AND EXPENSES $1,397,768 1,359,766 1,316,766 1,304,100 1,299,755 ---------- ---------- ---------- ---------- ---------- NET INCOME $ 459,916 $ 485,720 $ 507,688 $ 425,675 $ 357,551 ========== ========== ========== ========== ========== TOTAL ASSETS $4,697,315 $5,219,802 $5,586,962 $6,016,083 $6,495,166 ========== ========== ========== ========== ========== NET CASH PROVIDED BY OPERATING ACTIVITIES $ 970,822 992,128 $ 921,052 $ 878,099 $ 832,298 ========== ========== ========== ========== ========== CASH DISTRIBUTIONS PER $500 LIMITED PARTNERSHIP UNIT $ 40.00 $ 36.25 $ 35.00 $ 35.00 $ 35.00 ========== ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 18.97 $ 20.03 $ 20.94 $ 17.56 $ 14.75 ========== ========== ========== ========== ==========
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.
Operating Partners' Results Equity
Per financial statements $ 459,916 $ 4,137,707 Excess tax depreciation 111,718 299,852 Accrued property taxes (1,003) (70,000) Deferred rental revenues 67,065 Accrued incentive management fees 221,117 Fixed asset adjustments 218,274 Accrued distributions to partners 242,415 ----------- ----------- Per Partnership income tax return $ 570,631 $ 5,116,430 =========== =========== Taxable income per $500 limited partnership unit $ 23.78 ===========
DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report
Balance Sheets at December 31, 1995 and 1994
Statements of Income for the Three Years Ended December 31, 1995
Statements of Changes in Partners' Equity for the Three Years Ended December 31, 1995
Statements of Cash Flows for the Three Years Ended December 31, 1995
Notes to 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 VII:
We have audited the accompanying balance sheets of DSI Realty Income Fund VII, 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 Partner ship'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 audits 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 financial statements present fairly, in all material respects, the financial position of DSI Realty Income Fund VII 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 VII (A California Real Estate Limited Partnership)
BALANCE SHEETS DECEMBER 31, 1995 AND 1994 - --------------------------------------------------------------------------------
ASSETS 1995 1994
CASH AND CASH EQUIVALENTS $ 470,517 $ 486,497
PROPERTY, At cost (net of accumulated depreciation of $5,596,143 in 1995 and $5,072,536 in 1994) (Notes 1, 2 and 3) 4,195,138 4,701,643
OTHER ASSETS 31,660 31,662 ----------- ----------- TOTAL $ 4,697,315 $ 5,219,802 =========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES: Distribution due partners (Note 4) $ 242,424 $ 242,426 Incentive management fee payable to general partners (Note 4) 230,287 232,726 Property management fees payable (Note 1) 7,833 7,095 Customer deposits and other liabilities 79,064 90,064 ----------- ----------- Total liabilities 559,608 572,311 ----------- ----------- PARTNERS' EQUITY (Notes 1 and 4): General partners (66,391) (61,293) Limited partners (24,000 limited partnership units outstanding at December 31, 1995 and 1994) 4,204,098 4,708,784 ------------ ----------- Total partners' equity 4,137,707 4,647,491 ------------ ----------- TOTAL $ 4,697,315 $ 5,219,802 ============ ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership)
STATEMENTS OF INCOME THREE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
1995 1994 1993
REVENUES: Rental revenues $1,844,164 $1,836,372 $1,820,633 Interest income 13,520 9,114 3,821 ---------- ---------- ---------- Total revenues 1,857,684 1,845,486 1,824,454 ---------- ---------- ---------- EXPENSES: Depreciation (Note 2) 523,607 509,306 509,308 Operating expenses (Note 1) 613,328 585,686 555,483 General and administrative 166,268 167,443 161,465 General partners' incentive management fee (Note 4) 94,565 97,331 90,510 ---------- ---------- ---------- Total expenses 1,397,768 1,359,766 1,316,766 ---------- ---------- ---------- NET INCOME $ 459,916 $ 485,720 $ 507,688 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 455,317 $ 480,863 $ 502,611 General partners 4,599 4,857 5,077 ---------- ---------- ---------- TOTAL $ 459,916 $ 485,720 $ 507,688 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 18.97 $ 20.03 $ 20.94 ========== ========== ==========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
General Limited Partners Partners Total
BALANCE AT JANUARY 1, 1993 ($53,955) $ 5,435,310 $ 5,381,355
Net income 5,077 502,611 507,688
Distributions (Note 4) (8,484) (840,000) (848,484) ------- ---------- ---------- BALANCE AT DECEMBER 31, 1993 (57,362) 5,097,921 5,040,559
Net income 4,857 480,863 485,720
Distributions (Note 4) (8,788) (870,000) (878,788) ------- ---------- ----------- BALANCE AT DECEMBER 31, 1994 (61,293) 4,708,784 4,647,491
Net income 4,599 455,317 459,916
Distributions (Note 4) (9,697) (960,003) (969,700) ------- ----------- ----------- BALANCE AT DECEMBER 31, 1995 ($66,391) $ 4,204,098 $ 4,137,707 ======= =========== ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership)
STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 1995 - --------------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 1,844,164 $ 1,836,372 $ 1,813,041 Cash paid to suppliers and employees (886,862) (853,358) (895,810) Interest received 13,520 9,114 3,821 ----------- ----------- ------------ Net cash provided by operating activities 970,822 992,128 921,052
CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (969,700) (848,484) (848,484)
CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (17,102) (18,067) (8,776) ----------- ----------- ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (15,980) 125,577 63,792
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 486,497 360,920 297,128 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 470,517 $ 486,497 $ 360,920 =========== =========== ============ RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 459,916 $ 485,720 $ 507,688 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 523,607 509,306 509,308 Changes in assets and liabilities: Other assets 1,499 (7,619) Incentive management fee payable to general partners (2,439) (10,061) 14,670 Property management fees payable 738 (1,336) (106,995) Customer deposits and other liabilities (11,000) 7,000 4,000 ----------- ----------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES $ 970,822 $ 992,128 $ 921,052 =========== =========== ============
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership)
NOTES TO FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 1995
1. GENERAL
DSI Realty Income Fund VII, a California Real Estate Limited Partnership (the "Partnership"), has two general partners (DSI Properties, Inc. and Diversified Investors Agency) and limited partners owning 24,000 limited partnership units that were purchased for $500 a unit. The general partners have made no capital 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 August 1, 1983 under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate.
The Partnership has acquired six mini-storage facilities located in Chico, Fairfield, La Verne, and Riverside, California and Ft. Collins and Littleton, Colorado. All facilities were purchased from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn is affiliated with other partnerships in which DSI Properties, Inc. is a general partner. The mini-storage facilities are operated for the Partnership by Dahn under various agreements that 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 opera tions, as defined.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 comprised primarily of mini-storage facilities. Depreciation is provided for using the straight-line method over an estimated useful life of 15 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.
Net Income per Limited Partnership Unit - Net income per limited partnership unit is computed by dividing net income allocated to the limited partners by the weighted average number of limited partnership units outstanding during each year (24,000 in 1995, 1994 and 1993).
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.
3. PROPERTY
At December 31, 1995 and 1994, the total cost of property and accumulated depreciation are as follows:
1995 1994 Land $ 2,089,800 $ 2,089,800 Buildings and improvements 7,701,481 7,684,379 ----------- -----------
Total 9,791,281 9,774,179 Less accumulated depreciation (5,596,143) (5,072,536) ----------- ----------
Property, net $ 4,195,138 $ 4,701,643 =========== ===========
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 a real estate project.
The general partners are entitled to receive an incentive management fee for supervising the operations of the Partnership equal to 9% per annum of the cash available for distribution on a cumulative basis. Payment of the incentive management fees earned by the general partners during the fiscal years 1986 through 1988 was subordinated to the limited partners' receipt of an annual cumulative noncompounded return equal to 9.l% of their capital contributions. Incentive management fee payable to general partners at December 31, 1995 and 1994 is $230,287 and $232,726, respectively.
INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund VII:
We have audited the financial statements of DSI Realty Income Fund VII (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 VII, 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
DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION - --------------------------------------------------------------------------------
Real Estate Accumulated at Cost Depreciation
Balance at January 1, 1993 $ 9,747,336 $4,053,922 Additions 8,776 509,308 ----------- ---------- Balance at December 31, 1993 9,756,112 4,563,230 Additions 18,067 509,306 ----------- ---------- Balance at December 31, 1994 9,774,179 5,072,536 Additions 17,102 523,607 ----------- ---------- Balance at December 31, 1995 $ 9,791,281 $5,596,143 =========== ==========
The total cost at the end of the period for Federal income tax purposes was approximately $9,992,000.
EXHIBIT 2
March 28, 1996
ANNUAL REPORT TO LIMITED PARTNERS OF
DSI REALTY INCOME FUND VII
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 six mini-storage facilities. 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
Chico, California 87% 83%
Fairfield, California 84% 88%
Ft. Collins, Colorado 81% 82%
LaVerne, California 84% 84%
Littleton, Colorado 86% 85%
Riverside, California 79% 78%
We will keep you informed of the activities of DSI Realty Income Fund VII 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 VII By: DSI Properties, Inc.
By___________________________ ROBERT J. CONWAY, President