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
For the fiscal year ended December 31, 2006, or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
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
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [X]
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]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [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,
2006, incorporated by reference to Form 10-K, Part II.
Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 2006, 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, 2006, 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, 2006 and 2005 are as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Level for the
Year Ended Year Ended
Dec. 31, 2006 Dec. 31, 2005
Azusa, CA 82% 81%
Elgin, IL 66% 63%
Everett, WA 87% 80%
Monterey Park, CA 87% 84%
Romeoville, IL 65% 66%
Aurora, CO* 79% 78%
*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 1a. RISK FACTORS
Some Potential Losses Are Not Covered By Insurance.
We carry comprehensive liability, fire, extended coverage and rental loss
insurance on all of our Properties. We believe the policy specifications and
insured limits of these policies are adequate and appropriate. There are,
however, types of losses, such as lease and other contract claims and acts of
war that generally are not insured. We cannot be assured that we will be able
to renew insurance coverage upon expiration of our policies in an adequate
amount or at reasonable prices. In addition, insurance companies may no longer
offer coverage against certain types of losses, such as losses due to terrorist
acts and mold or, if offered, these types of insurance may be prohibitively
expensive. Should uninsured loss or a loss in excess from insured limits
occur, we could lose all or a portion of the capital we have invested in a
Property, as well as the anticipated future revenue from the Property. In
such an event, we might nevertheless remain obligated for any mortgage debt
or other financial obligations related to the Property. We cannot be assured
that material losses in excess of insurance proceeds will not occur in the
future. If any of our Properties were to experience catastrophic loss, it
could seriously disrupt our operations, delay revenue and result in large
expenses to repair or rebuild the Property. Such events could adversely
affect our cash flow and ability to make distributions to shareholders.
Because real estate is illiquid, we may not be able to sell Properties when
appropriate.
Real estate investments generally, mini-storage facilities like those that we
own, in particular, often cannot be sold quickly. Consequently, we may not be
able to sell Properties when appropriate. This could adversely affect our cash
flow and ability to make distributions.
Our operating costs might rise, which might reduce our profitability and have
an adverse affect on our cash flow and our ability to make distributions to
shareholders.
We might face higher operating expenses as a result of rising costs generally,
and in particular as a result of increased costs following a terrorist attack
or other catastrophic event. For example, it might cost more in the future
for security, property/casualty and liability insurance, and property mainten-
ance. As noted above, when our insurance policies expire, the cost of premiums
for comparable coverage might be significantly higher after such an event when
it is time to renew our coverage, which could then increase our operating
expenses and reduce or profitability and our cash flow. Because of rising
costs in general, we might experience increases in our property maintenance
costs, such as for cleaning and electricity. If operating expenses increase
dramatically, the availability of other comparable mini-storage facilities in
our specific geographic markets might limit our ability to increase rents,
which could reduce our profitability (if operating expenses increase without a
corresponding increase in revenues) and limit our ability to make distributions.
We face significant competition.
We compete with numerous other owners of mini-storage facilities for tenants.
Some of these competitors have significantly greater financial resources than
we do. Such competition may reduce our ability to attract and keep and retain
tenants, and may increase vacancies, which increases may lower rental rates.
In addition, some of our competitors may be willing, because their properties
may have vacancy rates higher than those for our properties, to make space
available at lower prices than the space in our properties. We cannot be
assured that this competition will not adversely affect our cash flow and
ability to make distributions.
Our ability to make distributions is subject to various risks.
We have been paying quarterly distributions since inception. Our ability to
make distributions in the future will depend upon:
- Financial performance of our Property;
- The absence of significant expenditures relating to environmental
and regulator matters; and
- Our ability to attract and maintain tenants.
Certain of these matters are beyond our control and any significant difference
between our expectations and actual results could have a material adverse
affect on our cash flow and our ability to make distributions.
Changes in the law may adversely affect our cash flow.
The Properties are subject to various regulatory requirements, such as those
relating to the environment, fire and safety. Our failure to comply with
these requirements could result in the imposition of fines and damage awards.
Additionally, the cost to comply with any new or different regulation could
adversely affect our cash flow and our ability to make distributions. While
we believe that the Properties are currently in material compliance with all
such requirements, we cannot be assured that these requirements will not change
our that newly imposed requirements will not require significant unanticipated
expenditures.
Should we incur long-term indebtedness, it will subject us to additional risks.
Like other real estate companies, should we incur indebtedness on our proper-
ties, we will be subject to risks normally associated with debt financing,
such as the insufficiency of cash flow to meet required debt service payment
obligations and the inability to refinance existing indebtedness. If such
debt cannot be paid, refinanced or extended at maturity, in addition to our
failure to repay our debt, we may not be able to make distributions at expected
levels or at all. Furthermore, an increase in interest expense could adversely
affect our cash flow and ability to make distributions to Limited Partners.
If we should not meet our debt service obligations, any Properties securing
such indebtedness could be foreclosed on, which would have a material adverse
affect on our cash flow and ability to make distributions and, depending on
the number of Properties foreclosed on, could threaten our continued viability.
Our organizational documents do not contain any limitation on our ability to
incur debt secured by our Properties. Accordingly, we could place financing
on our Properties almost without restriction. If we were to take such action,
the debt service could adversely affect our cash flow and ability to make dis-
tributions and would include the risk of default on such indebtedness. There
are no plans to incur any long-term indebtedness on any of the Partnership's
Properties.
Environmental problems at the Properties are possible and may be costly.
Federal, state and local laws, ordinances and regulations may require a current
or previous owner or operator of real estate to investigate and clean up hazard-
ous or toxic substances or releases at such property. The owner or operator
may be forced to pay for property damage and for investigation and clean up
costs incurred by others in connection with environmental contamination. Such
laws typically impose clean-up responsibility and liability without regard to
whether the owner or operator knew of or caused the presence of contaminates.
Even if more than one person may have been responsible for the contamination,
each person covered by the environmental laws may be held responsible for all
the clean-up costs incurred. In addition, third parties may sue the owner or
operator of a site for damages and costs resulting from environmental contamin-
ation emanating from that site. These costs may be substantial and the presence
of such substances may adversely affect the owner's ability to sell or rent
such property or to borrow using such property as collateral.
Environmental laws that govern the presence, maintenance and removal of asbestos
require that owners or operators of buildings containing asbestos properly
manage and maintain the asbestos, notifying and train those who may come into
contact with asbestos and undertake special precautions, including removal or
other abatement, if asbestos would be disturbed during renovation or demolition
of a building. Such laws may impose fines and penalties on building owners or
operators who fail to comply with these requirements and may allow third parties
to seek recovery from owners or operators for personal injury associated with
exposure to asbestos fibers.
To the best of our knowledge, asbestos was not used in the construction of any
of the Properties. Tenants of the Partnership's mini-storage facilities are
prohibited from storing hazardous or toxic substances or from even bringing
hazardous or toxic substances onto the property. To the best knowledge of the
General Partners, there are no instances of storage or release of hazardous or
toxic substances at any of the Partnership's Properties. However, there can
be no guaranty that one or more tenants did not actually store such materials
or cause releases at any of the Partnership's Properties. If these conditions
should occur, we may need to undertake a target remediation program which could
become costly and could necessitate the temporary location of some or all of
the Properties' tenants or require rehabilitation of the affected property.
Americans With Disabilities Act compliance can be costly.
Under the Americans With Disabilities Act of 1990 ("ADA"), all public accom-
modations and commercial facilities, must meet certain Federal requirements
related to access and use by disabled persons. Compliance with the ADA re-
quirements could involve removal of structural barriers from certain disabled
persons' entrances, which could adversely affect our financial condition, and
results of operations. Other Federal, state or local laws may require modifi-
cations to or restrict further renovations of our Properties with respect to
such accesses. Although we believe that our Properties are currently in
material compliance with present requirements, non-compliance with the ADA or
similar or related laws or regulations could result in the United States govern-
ment imposing fines or private litigants being awarded damages against us. In
addition, we do not know whether existing requirements will change or whether
compliance with future requirements will require significant unanticipated
expenditures. Such costs may adversely affect our cash flow and ability to
make distributions.
Partnership's status as a limited partnership is dependent on compliance with
Federal income tax requirements.
Failure of the Partnership to be treated as a limited partnership would have
serious adverse consequences to holders of our Units. If the IRS were to
successfully challenge the tax status of the Partnership for Federal income
tax purposes, the Partnership would be treatable as a corporation. In such
event, the imposition of a corporate tax on the Partnership would reduce the
amount of cash available for distribution from such Partnership to the Limited
Partners. We do not anticipate such a challenge.
We are dependent upon our key personnel whose continued service is not guar-
anteed. We are dependent upon our independent property manager for experience
in managing mini-storage facilities. While we believe we could find replace-
ments for these key personnel, loss of their services could adversely affect
our operations.
Item 1b. UNRESOLVED STAFF COMMENTS
None.
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 regarding properties owned by the
Partnership.
2006 2005
Location Size of Net Rentable No. of Completion Avg. Rent
Parcel Area Rental Units Date Per. Sq. Ft.
Azusa, CA 2.94 acres 71,059 664 6/11/86 9.48 8.78
Elgin, IL 4.99 acres 48,363 441 9/29/86 6.24 5.64
Everett, WA 2.71 acres 50,572 488 12/01/85 9.30 7.47
Monterey Park,
CA .95 acres 31,654 392 8/23/86 16.54 15.11
Romeoville, IL 3.956 acres 65,941 690 11/24/86 6.57 6.41
Aurora, CO(1) 4.6 acres 86,676 887 9/05/85 7.67 7.10
(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 1,152 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 $7.59 per Limited Partnership Unit were
declared and paid each quarter for the year ended December 31, 2006 and $8.20
per Limited Partnership Unit were declared and paid each quarter for the year
ended December 31, 2005 and $10.39 per Limited Partnership Unit were declared
and paid each quarter for the year ended December 31, 2004. It is the
Registrant's expectations that distributions will continue to be paid in the
future.
Item 6. SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31, 2006
--------------------------------------------------------------------
2006 2005 2004 2003 2002
---- ---- ---- ---- ----
TOTAL REVENUES
AND OTHER
INCOME $3,030,962 $2,791,288 $2,648,811 $ 2,848,497 $ 3,107,226
TOTAL
EXPENSES 1,807,977 2,064,603 1,843,046 1,807,338 1,892,925
MINORITY
INTEREST
IN INCOME OF
REAL ESTATE
JOINT
VENTURE (120,580) (108,420) (115,732) (128,775) (143,534)
----------- ----------- ----------- ------------ -----------
NET
INCOME $ 1,102,405 $ 618,265 $ 690,033 $ 912,384 $ 1,070,767
=========== =========== =========== ============ ===========
TOTAL
ASSETS $ 3,729,105 $ 3,803,223 $ 4,238,864 $ 4,713,603 $ 5,049,395
=========== =========== =========== ============ ===========
CASH FLOW FROM (USED IN):
OPERATING $ 1,232,721 $ 1,212,645 $ 1,203,300 $ 1,486,963 $ 1,640,392
INVESTING (18,675) (12,850) (28,262) (6,499) (10,438)
FINANCING (1,098,450) (1,166,460) (1,420,657) (1,379,818) (1,631,748)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 35.56 $ 19.94 $ 22.26 $ 29.43 $ 34.54
=========== =========== =========== ============ ===========
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 30.35 $ 32.81 $ 41.57 $ 40.37 $ 47.96
=========== =========== =========== ============ ===========
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Critical Accounting Policies
Revenue recognition - 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.
RESULTS OF OPERATIONS
2006 COMPARED TO 2005
Total revenues increased from $2,790,998 in 2005 to $3,030,769 in 2006, total
expenses decreased from $2,064,603 to $1,807,977, other income decreased from
$290 to $193 and minority interest in income of the real estate joint venture
increased from $108,420 to $120,580. As a result of these fluctuations, net
income increased from $618,265 to $1,102,405. The increase in rental revenues
can be attributed to higher occupancy and unit rental rates. Occupancy levels
for the Partnership's six mini-storage facilities averaged 78.4% for the year
ended December 31, 2006 and 75.3% for the year ended December 31, 2005. The
Partnership continued its advertising campaign to attract and keep new tenants
in its various mini-storage facilities. The approximate $54,300 (5.1%) de-
crease in operating expenses was due primarily to decreases in advertising,
purchase of locks and packing materials, partially offset by decreases in real
estate tax and salaries and wages. The approximate $7,600 (2.7%) decrease in
general and administrativ expenses was due primarily to decreases in office
supplies and printing expenses travel expenses, partially offset by increases
in legal and professional, bank and credit card fees and postage expenses.
General Partners' incentive management fees, which are based on cash distri-
butions to Limited Partnes, remained constant. Property management fees,
which are based on rental revenue, increased as a result of the increase in
rental revenue.
2005 COMPARED TO 2004
Total revenues increased from $2,648,288 in 2004 to $2,790,998 in 2005, total
expenses increased from $1,843,046 to $2,064,603, other income decreased
from $523 to $290 and minority interest in income of the real estate joint
venture decreased from $115,732 to $108,420. As a result of these fluctuations,
net income decreased from $690,033 to $618,265. The approximate $142,700
(5.4%) increase in rental revenues can be attributed to higher occupancy and
unit rental rates. Occupancy levels for the Partnership's six mini-storage
facilities averaged 75.3% for the year ended December 31, 2005 and 73.6% for
the year ended December 31, 2004. The Partnership continued its advertising
campaign to attract and keep new tenants in its various mini-storage facilities.
The approximate $118,200 (12.6%) increase in operating expenses was due primar-
ily to increases in maintenance and repair, purchase of locks and packing
materials, real estate tax, salaries and wages and truck insurance and main-
tenance expenses, partially offset by a decrease in advertising and security
expenses. The approximate $68,300 (31.7%) increase in general and administra-
tive expenses was due primarily to increases in legal and professional, equip-
ment and computer lease and office supplies and printing expenses. General
Partners' incentive management fees, which are based on cash distributions to
Limited Partners, decreased as a result of a decrease in these distributions.
Property management fees, which are based on rental revenue, increased as a
result of the increase in rental revenue.
Operating expenses consists mainly of expenses such as yellow pages and
other advertising, utilities, repairs and maintenance, real estate taxes,
salaries and wages and their related expenses. General and administrative
expenses consist mainly of expenses such as legal and professional, office
supplies, postage accounting services and computer expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased approximately
$20,000 (1.7%) in 2006 as compared to 2005 primarily as a result of the in-
crease in net income, partially offset by an increase in other assets payment
of deferred incentive management fee payable to general partners and a de-
crease in customer deposits and other liabilities. Net cash provided by
operating activities increased approximately $9,300 (0.8%) in 2005 as compared
to 2004 primarily as a result of the decrease in payment of deferred incentive
management fee payable to general partners, partially offset by a decrease in
net income, a decrease in customer deposits and other liabilities and an in-
crease in other assets.
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 2006, 2005 and 2004. The Partnership has no material commitments
for capital expenditures.
Cash used in financing activities, as set forth in the statements of
cash flows, has been used for distributions to partners, the minority
investor in the Partnership's real estate joint venture in 2006, 2005
and 2004 and payments on capital lease obligations starting in 2004.
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 anticipates that cash
flows generated from operations of the Partnership's rental real estate oper-
ations will be sufficient to cover operating expenses and distributions for the
next twelve months and beyond.
The General Partners are not aware of any environmental problems which
could have a material adverse effect upon the financial position of
the Partnership.
LONG-TERM LIABILITIES, CONTRACTUAL OBLIGATIONS, AND OFF-BALANCE SHEET
ARRANGEMENTS
Long-Term Liabilities and Contractual Obligations. The following table summar-
izes our long-term liabilities, material obligations and commitments to make
future payments under certain contracts, including long-term debt obligations,
purchase commitments and operating leases.
Payments due by period
Less More
than 1 1-3 3-5 than 5
Contractual Obligations Total year years years years
Long-Term Debt - - - - -
Capital (Finance) Lease 112,500 58,500 54,000 - -
Purchase Obligations - - - - -
Other Long-Term Liablities - - - - -
Reflected on the Registrant's
Balance Sheet under the GAAP
of the primary financial
Statements
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 2006 and
2005 was as follows:
2006 Quarter Ended
------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Total revenues $737,612 $932,405 $773,618 $587,134
Income before
minority interest
in joint venture 212,762 383,121 264,200 362,902
Net income 182,160 359,493 234,623 326,129
Net income per limited
partnership unit $ 5.88 $ 11.60 $ 7.57 $ 10.51
Weighted average number
of limited partnership
units outstanding 30,693 30,693 30,693 30,693
2005 Quarter Ended
------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Total revenues $663,961 $658,264 $736,887 $731,886
Income before
minority interest
in joint venture 173,381 96,679 245,481 211,144
Net income 145,230 72,706 214,847 185,482
Net income per limited
partnership unit $ 4.68 $ 2.35 $ 6.93 $ 5.98
Weighted average number
of limited partnership
units outstanding 30,693 30,693 30,693 30,693
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
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.
See the financial statements.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9a. CONTROLS AND PROCEDURES
The Partnership evaluated the effectiveness of its disclosure controls
and procedures. This evaluation was performed by the Partnership's
Controller with the assistance of the Partnership's President and the
Chief Executive Officer. These disclosure controls and procedures are
designed to ensure that the information required to be disclosed by the
Parnership in its periodic reports filed with the Securities and Exchange
Commission (the "Commission") is recorded, processed summarized and
reported, within the time periods specified by the Commission's rules
and forms, and that the information is communicated to the certifying
officers on a timely basis. Based on this evaluation, the Partnership
concluded that its disclosure controls and procedures were effective.
There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date of their evaluation.
Item 9b. OTHER INFORMATION
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, 2006, 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 73 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 78 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 84 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, 2006, 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
The following table sets forth certain information regarding the beneficial
ownership of the Fund's limited partnership units as of December 31, 2006 of
(i) each person known to beneficially own more than 5% of the Fund's limited
partnership units(2), (ii) each director or director nominee of the Fund,
(iii) each executive officer of the Fund for whom information is given in the
Summary Compensation Table in this proxy statement, and (iv) all directors and
executive officers of the Fund.
TITLE OF NAME OF NUMBER OF LP UNITS PERCENT
CLASS BENEFICIAL OWNER BENEFICIALLY HELD(1) OF CLASS
- -------- ----------------- -------------------- --------
Limited
Partnership
Interest Robert J. Conway 989 - Direct 3.22
Limited
Partnership
Interest Joseph W. Conway 190 - Direct *
* Less than one percent of the Fund's limited partnership's units.
(1) Unless otherwise indicated, the address for each listed director or officer
is c/o 6700 E. Pacific Coast Hwy. #150. As used in this table, "beneficial
ownership" means the sole or shared power to vote or direct the voting
or to dispose or direct the disposition of any security. For purposes of
this table, a person is deemed to be the beneficial owner of units acquired
before the date of this filing.
(2) As of December 31, 2006, 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 beneficiary, 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 State-
ment 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 State-
ment 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, 2006, attached hereto as Exhibit l and incorporated herein by this
reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees for professional services rendered by Deloitte & Touche
LLP for the audit of the Partnership's annual financial statements and for re-
view of the financial statements included in the Partnership's Quarterly Reports
on Form 10-Q for 2006 were $31,240 and for 2005 were $29,640.
Tax Fees
The aggregate fees for professional services rendered by Deloitte Tax
LLP for tax compliance, tax advice and tax planning for 2006 were $26,755
and 2005 were $24,050. Most of the fees related to preparation of the Partner-
ship's tax returns.
PART IV
Item 15. 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, 2006, 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, 2006.
(b) No reports on Form 8K were filed during the fiscal year ended December
31, 2006.
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
/s/ ROBERT J. CONWAY
By_____________________________ Dated: March 30, 2007
ROBERT J. CONWAY, President
(Chief Executive Officer, Chief
Financial Officer, and Director)
/s/ JOSEPH W. CONWAY
By____________________________ Dated: March 30, 2007
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
/s/ ROBERT J. CONWAY
By:__________________________ Dated: March 30, 2007
ROBERT J. CONWAY, President,
Chief Executive Officer, Chief
Financial Officer, and Director
/s/ JOSEPH W. CONWAY
By___________________________ Dated: March 30, 2007
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, 2006, 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,
--------------------------------------------------------------------
2006 2005 2004 2003 2002
---- ---- ---- ---- ----
TOTAL REVENUES
AND OTHER
INCOME $3,030,962 $2,791,288 $2,648,811 $ 2,848,497 $ 3,107,226
TOTAL
EXPENSES 1,807,977 2,064,603 1,843,046 1,807,338 1,892,925
MINORITY
INTEREST
IN INCOME OF
REAL ESTATE
JOINT
VENTURE (120,580) (108,420) (115,732) (128,775) (143,534)
----------- ----------- ----------- ------------ -----------
NET
INCOME $ 1,102,405 $ 618,265 $ 690,033 $ 912,384 $ 1,070,767
=========== =========== =========== ============ ===========
TOTAL
ASSETS $ 3,729,105 $ 3,803,223 $ 4,238,864 $ 4,713,603 $ 5,049,395
=========== =========== =========== ============ ===========
CASH FLOW FROM (USED IN):
OPERATING $ 1,232,721 $ 1,212,645 $ 1,203,300 $ 1,486,963 $ 1,640,392
INVESTING (18,675) (12,850) (28,262) (6,499) (10,438)
FINANCING (1,098,450) (1,166,460) (1,420,657) (1,379,818) (1,631,748)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 35.56 $ 19.94 $ 22.26 $ 29.43 $ 34.54
=========== =========== =========== ============ ===========
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 30.35 $ 32.81 $ 41.57 $ 40.37 $ 47.96
=========== =========== =========== ============ ===========
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, 2006:
Net Partners'
Income Equity
Per financial statements $ 1,102,405 $ 3,053,077
Excess book depreciation 217,416 715,815
Joint venture income adjustment (7,434) 218,935
Interest income 8,770
Property acquisition costs 466,135
Deferred rental revenues (904) 47,445
Accrued expenses (83,406) 18,579
Accrued property taxes (75,000)
Fixed asset adjustments (38,460) (95,960)
Excess book distributions 232,468
Bad debt allowance 36,599 36,599
Tax expense adjustment (10,902)
----------- -----------
Per Partnership income tax return $ 1,215,314 $ 4,626,863
=========== ===========
Net taxable income per limited
partnership unit $ 39.20
===========
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 2006 and 2005 F-2
Consolidated Statements of Income for Each of the Three
Years Ended December 31, 2006 F-3
Consolidated Statements of Changes in Partners' Equity (Deficit)
for Each of the Three Years Ended December 31, 2006 F-4
Consolidated Statements of Cash Flows for Each of the Three Years
Ended December 31, 2006 F-5
Notes to Consolidated Financial Statements as of December 31, 2006
and 2005, and for Each of the Three Years Ended
December 31, 2006 F-6
SUPPLEMENTAL SCHEDULE:
Schedule III - Real Estate and Accumulated Depreciation
as of December 31, 2006 F-10
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.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACOUNTING FIRM
To the Partners of
DSI Realty Income Fund IX:
We have audited the accompanying consolidated balance sheets of DSI Realty
Income Fund IX, a California Limited Partnership (the "Partnership") as of
December 31, 2006 and 2005, 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, 2006. Our audits also included
the supplemental schedule listed in the Index at Item 15. These financial
statements and the supplemental schedule are the responsibility of the Partner-
ship's management. Our responsibility is to express an opinion on the financial
statements and supplemental schedule based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial statement schedule are free of material
misstatement. The Partnership is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of espressing an opinion on the effectiveness of the
Partnership's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
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, 2006 and 2005, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2006,
in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such supplemental 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.
/s/ Deloitte & Touche LLP
_______________________________________
Deloitte & Touche LLP
Los Angeles, California
March 30, 2007
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
- --------------------------------------------------------------------------------
ASSETS 2006 2005
CASH AND CASH EQUIVALENTS $ 635,667 $ 520,071
PROPERTY, net (Note 3) 2,918,479 3,190,797
OTHER ASSETS 174,959 92,355
----------- -----------
TOTAL $ 3,729,105 $ 3,803,223
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Distribution due to partners (Note 4) $ 232,468 $ 232,468
Incentive management fee payable to
general partners (Note 4) 158,150
Property management fees payable (Note 6) 12,424 9,372
Customer deposits and other liabilities 134,123 177,678
Capital lease obligations (Notes 3 and 6) 105,510 151,662
----------- -----------
Total liabilities 484,525 729,330
----------- -----------
MINORITY INTEREST IN REAL ESTATE
JOINT VENTURE 191,503 182,223
PARTNERS' EQUITY (DEFICIT)(Note 4):
General partners (106,910) (108,524)
Limited partners (30,693 limited
partnership units outstanding
at December 31, 2006 and 2005) 3,159,987 3,000,194
------------ -----------
Total partners' equity 3,053,077 2,891,670
------------ -----------
TOTAL $ 3,729,105 $ 3,803,223
============ ===========
See notes to financial statements.
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
CONSOLIDATED STATEMENTS OF INCOME
THREE YEARS ENDED DECEMBER 31, 2006
- --------------------------------------------------------------------------------
2006 2005 2004
REVENUES:
Rental $3,030,769 $2,790,998 $2,648,288
---------- ---------- ----------
EXPENSES:
Depreciation 290,993 492,778 443,745
Operating 1,000,370 1,054,717 936,470
Interest Expense 7,848 10,525
General and administrative 276,101 283,651 215,317
General partners' incentive
management fee (Note 4) 83,708 84,557 115,100
Property management fee (Note 6) 148,957 138,375 132,414
---------- ---------- ----------
Total expenses 1,807,977 2,064,603 1,843,046
---------- ---------- ----------
OPERATING INCOME 1,222,792 726,395 805,242
OTHER INCOME-
Interest income 193 290 523
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF REAL ESTATE JOINT VENTURE 1,222,985 726,685 805,765
MINORITY INTEREST IN INCOME OF REAL
ESTATE JOINT VENTURE (120,580) (108,420) (115,732)
---------- ---------- ----------
NET INCOME $1,102,405 $ 618,265 $ 690,033
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
General partners $ 11,024 $ 6,183 $ 6,900
Limited partners 1,091,381 612,082 683,133
---------- ---------- ----------
TOTAL $1,102,405 $ 618,265 $ 690,033
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT (Notes 2 and 4) $ 35.56 $ 19.94 $ 22.26
========== ========== ==========
See notes to financial statements.
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
THREE YEARS ENDED DECEMBER 31, 2006
- --------------------------------------------------------------------------------
General Limited
Partners Partners Total
------- ----------- -----------
BALANCE, JANUARY 1, 2004 $(99,325) $ 3,910,876 $ 3,811,551
Net income 6,900 683,133 690,033
Distributions (12,887) (1,275,770) (1,288,657)
------- ----------- -----------
BALANCE, DECEMBER 31, 2004 (105,312) 3,318,239 3,212,927
Net income 6,183 612,082 618,265
Distributions (9,395) (930,127) (939,522)
------- ----------- -----------
BALANCE, DECEMBER 31, 2005 (108,524) 3,000,194 2,891,670
Net income 11,024 1,091,381 1,102,405
Distributions (9,410) (931,588) (940,998)
------- ----------- -----------
BALANCE, DECEMBER 31, 2006 $(106,910) $ 3,159,987 $ 3,053,077
======= =========== ===========
See 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, 2006
- --------------------------------------------------------------------------------
2006 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,102,405 $ 618,265 $ 690,033
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 290,993 492,778 443,745
Minority interest in income
of real estate joint venture 120,580 108,420 115,732
Changes in assets and liabilities:
Other assets (82,604) (10,952) 23,775
Incentive management
fee payable (158,150) 849 (157,301)
Property management fees payable 3,052 1,136 (453)
Customer deposits and
other liabilities (43,555) 2,149 87,769
----------- ----------- ------------
Net cash provided by operating
activities 1,232,721 1,212,645 1,203,300
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to property (18,675) (12,850) (28,262)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to minority interest
in real estate joint venture (111,300) (105,900) (117,000)
Distributions to partners (940,998) (1,017,084) (1,288,657)
Payments on capital lease obligations (46,152) (43,476) (15,000)
____________ ___________ __________
Net cash used in financing
activities (1,098,450) (1,166,460) (1,420,657)
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 115,596 33,335 (245,619)
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 520,071 486,736 732,355
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 635,667 $ 520,071 $ 486,736
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION -
Cash paid for interest $ 7,848 $ 10,525 $ -
=========== =========== ============
NON CASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of trucks
utilizing capital leases $ - - $ 210,138
=========== =========== ============
Distributions due partners
included in partners' equity $ 232,468 $ 232,468 $ 310,030
=========== =========== ============
See notes to consolidated financial statements.
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2006 AND 2005 AND
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2006
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 contributions 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 has 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 Partnership
is a general partner in the joint venture. The facilities were acquired
from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partner-
ship. Dahn is affiliated with other partnerships in which DSI
Properties, Inc., Robert J. Conway, and Joseph W. Conway are the general
partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Partnership 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. Property under capital leases is amortized over the lives
of the respecitve leases or the estimated useful lives of the assets.
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 basis
of the Partnership's assets and liabilities for federal income tax purposes
and as reported for financial statement purposes for the year ended
December 31, 2006, is $112,909.
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.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 Partnership 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 undiscounted future cash flow is less than the
carrying amount of the asset, the Partnership would recognize an impairment
to the extent the carrying value exceeded the fair value of the property.
No impairment losses were required in 2006, 2005 or 2004.
Fair Value of Financial Instruments - For all financial instruments,
including cash and cash equivalents, other assets, distrivutions due part-
ners, incentive management fee payable to general partners, property
management fee payable, customer deposits and other liabilities, carrying
values approximate fair values because of the short maturity of those
instruments. The carrying value of the capital lease obligations approx-
imates fair value because the terms of the instrument are similar to terms
available to the Partnership for similar types of leasing agreements.
Concentrations of Credit Risk - Financial instruments that potentially
subject the Partnership to concentrations of credit risk consist primarily
of cash and cash equivalents and rent receivables. The Partnership places
its cash equivalents with high credit quality institutions.
Recent Accounting Pronouncement - In September 2006, the Financial Account-
ing Standards Board of Financial Accounting Standards ("SFAS") No. 157,
"Fair Value Measurements." SFAS No. 157 defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair
value measurements. The Partnership is required to adopt SFAS No. 157
for fiscal year 2008 and does not expect its adoption to have a material
effect on the Partnership's results of operations or financial condition.
3. PROPERTY
The total cost of property and the accumulated depreciation as of
December 31, 2006 and 2005, is as follows:
2006 2005
Land $ 2,729,790 $ 2,729,790
Buildings and improvements 11,129,105 11,110,430
Rental trucks under capital leases 210,138 210,138
----------- -----------
Total 14,069,033 14,050,358
Accumulated depreciation (11,150,554) (10,859,561)
----------- ----------
Property, net $ 2,918,479 $ 3,190,797
=========== ==========
Depreciation expense of $52,537 and $53,652 was recorded on the rental
trucks under capital leases in 2006 and 2005, respectively.
The Partnership leases certain vehicles under agreements that meet the
criteria for classification as capital leases which expire in 2008. Future
minimum lease payments under these capital leases at December 31, 2006 are
summarized as follows:
2007 $ 58,500
2008 54,000
----------
Total future minimum
payment obligations 112,500
Less interest portion 6,990
----------
Present value of net
minimum lease payments $ 105,510
==========
4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE
MANAGEMENT FEE
Under the Agreement of Limited Partnership, the general partners are to be
allocated 1% of the net profits or net 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 percent-
age, based on a predetermined formula, of any cash distribution from
the sale, other disposition, or refinancing of the real estate 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, calculated as cash generated
from operations less capital expenditures.
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 Partner-
ship operates in 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.
6. RELATED-PARTY TRANSACTION
The Partnership has entered into management agreement with Dahn to operate
their mini-storage facilities. The management agreement provides for
management fee equal to 5% of gross revenue from operations, which is
defined as the entire amount of all receipts from the renting or leasing
of storage compartments and sale of locks. The management agreement is
renewable annually. Dahn earned management fees equal to $148,957,
$138,375 and $132,414 for the years ended December 31, 2006, 2005 and
2004, respectively. Amounts payable to Dahn at December 31, 2006 and
2005, were $12,424 and $9,372, respectively.
In 2004, the Partnership entered into truck lease agreements with KMD
Trucks, LLC ("KMD"). The president of Dahn, Brian Dahn, is also a member
of KMD. The truck lease is a 48-month lease with monthly payments in the
amount of $750 (see Note 3).
DSI REALTY INCOME FUND IX
(A California Real Estate Limited Partnership)
SCHEDULE III
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 $15,385 $420,200 $1,424,435 $1,844,635 $1,418,617 08/86 12/85 20 Yrs
Azusa, CA None 696,000 2,095,965 19,760 696,000 2,115,725 2,811,725 2,109,298 06/86 01/86 20 Yrs
Everett, WA None 352,350 1,252,536 25,590 352,350 1,278,126 1,630,476 1,262,685 11/85 06/85 20 Yrs
Romeoville, IL None 298,740 2,180,802 70,742 298,740 2,251,544 2,550,284 2,210,994 01/87 05/86 20 Yrs
Elgin, IL None 376,000 1,424,577 18,759 376,000 1,443,336 1,819,336 1,436,790 09/86 03/86 20 Yrs
Aurora, CO None 586,500 2,521,560 94,379 586,500 2,615,939 3,202,439 2,605,981 02/85 09/85 15 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$2,729,790 $10,884,490 $244,615 $2,729,790 $11,129,105 $13,858,895 $11,044,365
========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated
at Cost Depreciation
Balance, January 1, 2004 $13,799,108 $ 9,923,038
Additions 28,262 443,745
----------- ----------
Balance, December 31, 2004 13,827,370 10,366,783
Additions 12,850 439,126
----------- ----------
Balance, December 31, 2005 13,840,220 10,805,909
Additions 18,675 238,456
----------- ----------
Balance, December 31, 2006 $13,858,895 $11,044,365
=========== ==========
SCHEDULE 2
March 30, 2007
ANNUAL REPORT TO LIMITED PARTNERS OF
DSI REALTY INCOME FUND IX
Dear Limited Partners:
This report contains the Partnership's balance sheets as of December 31,
2006 and 2005, and the related statements of income, changes in partner' equity
(deficit) and cash flows for each of the three years ended December 31, 2006
accompanied by a report of independent registered public accounting firm. 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 in-
terests 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, 2006 and 2005 were as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Level for the
Year Ended Year Ended
Dec. 31, 2006 Dec. 31, 2005
Azusa, CA 82% 81%
Elgin, IL 66% 63%
Everett, WA 87% 80%
Monterey Park, CA 87% 84%
Romeoville, IL 65% 66%
Aurora, CO* 79% 78%
*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 con-
venience 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, 2006 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.
/s/ ROBERT J. CONWAY
_______________________________
Robert J. Conway, President
CERTIFICATIONS
I, Robert J. Conway, certify that:
1. I have reviewed this annual report on Form 10-K of DSI Realty Income
Fund IX;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period cover-
ed by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to re-
cord, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's in-
ternal control over financial reporting.
Date: March 30, 2007
/s/ ROBERT J. CONWAY
________________________________
Robert J. Conway
Chief Executive Officer
CERTIFICATIONS
I, Richard P. Conway, certify that:
1. I have reviewed this annual report on Form 10-K of DSI Realty Income
Fund IX;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period cover-
ed by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to re-
cord, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's in-
ternal control over financial reporting.
Date: March 30, 2007
/s/ RICHARD P. CONWAY
_______________________________
Richard P. Conway
Vice President
EXHIBIT 3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DSI Realty Income Fund IX (the
"Partnership") on Form 10-K for the period ending December 31, 2006 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Robert J. Conway, Chief Executive Officer of the Partnership, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
/s/ ROBERT J. CONWAY
______________________________
Robert J. Conway
Chief Executive Officer
March 30, 2007
EXHIBIT 4
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DSI Realty Income Fund IX (the
"Partnership") on Form 10-K for the period ending December 31, 2006 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Richard P. Conway, Vice President of the Corporate General Partner, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
/s/ RICHARD P. CONWAY
_______________________________
Richard P. Conway
Vice President
March 30, 2007