Exhibit (a)(1)
OFFERS TO PURCHASE FOR CASH
LIMITED PARTNERSHIP UNITS
OF
DSI REALTY INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP; DSI REALTY INCOME
FUND VII, A CALIFORNIA LIMITED PARTNERSHIP; DSI REALTY INCOME FUND VIII, A
CALIFORNIA LIMITED PARTNERSHIP; DSI REALTY INCOME FUND IX, A CALIFORNIA LIMITED
PARTNERSHIP; AND DSI REALTY INCOME FUND XI, A CALIFORNIA LIMITED PARTNERSHIP
BY
MACKENZIE PATTERSON, INC.; MP INCOME FUND 18, LLC; MP INCOME FUND 17, LLC; MP
FALCON FUND, LLC; MP FALCON GROWTH FUND, LLC; MP FALCON GROWTH FUND 2, LLC;
MACKENZIE FUND VI, L.P.; MACKENZIE PATTERSON SPECIAL FUND 3, L.P.; ACCELERATED
HIGH YIELD INSTITUTIONAL FUND I, LTD.; ACCELERATED HIGH YIELD INSTITUTIONAL
INVESTORS, LTD.; MACKENZIE SPECIFIED INCOME FUND, L.P.; AND MP DEWAAY FUND, LLC
(collectively the "Purchasers")
THE OFFERs, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, PACIFIC STANDARD TIME, ON MAY 31, 2002, UNLESS THE
OFFER IS EXTENDED.
The Purchasers hereby seek to acquire any and all outstanding Units
of limited partnership interest (the "Units") in each of DSI REALTY INCOME FUND
VI, a California Limited Partnership ("DSI VI"); DSI REALTY INCOME FUND VII, a
California Limited Partnership ("DSI VII"); DSI REALTY INCOME FUND VIII, a
California Limited Partnership ("DSI VIII"); DSI REALTY INCOME FUND IX, a
California Limited Partnership ("DSI IX"); and DSI REALTY INCOME FUND XI, a
California Limited Partnership ("DSI XI") (each, a "Partnership," and together,
the "Partnerships"). The Purchasers are not affiliated with any of the
Partnerships' general partners (the "General Partners").
The Purchasers hereby offer to purchase up to the maximum number of
Units of each Partnership (the "Maximum Offer" for each Partnership) at the
respective purchase prices set forth in the table below, less the amount of any
distributions declared or made with respect to the Units between April 5, 2002
and May 31, 2002, or such other date to which this Offer may be extended (the
"Expiration Date"), in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in
the related Letter of Transmittal, as each may be supplemented or amended from
time to time (which together constitute the "Offers"). As noted above, the Offer
price for any Partnership's Units would be subject to reduction for
distributions made or declared by that Partnership prior to the Expiration Date.
Any distributions made or declared after the Expiration Date would, by the terms
of the Offers and as set forth in the Letter of Transmittal, be assigned by
tendering Unit holders to the Purchasers. Tender of Units will include the
tender of any and all securities into which the Units may be converted or
exchanged, and any securities distributed with respect to the Units from and
after the Offer Date.
Offer Price Maximum
Partnership Per Unit Units Sought
- ----------- ----------- ------------
DSI REALTY INCOME FUND VI,
a California Limited Partnership $340 23,753
DSI REALTY INCOME FUND VII,
a California Limited Partnership $300 24,000
DSI REALTY INCOME FUND VIII,
a California Limited Partnership $340 24,000
DSI REALTY INCOME FUND IX,
a California Limited Partnership $260 30,693
DSI REALTY INCOME FUND XI,
a California Limited Partnership $300 20,000
Each Offer is independent of the other Offers made hereby, and may,
subject to the terms and conditions set forth in the Offer to Purchase and such
accompanying documents, be completed or terminated or withdrawn independent of
the result of any other Offer. Holders of Units in more than one Partnership may
tender all or a portion of their Units in any or all of such Partnerships.
The number of Units subject to the Offer may be reduced to the
extent that any Partnership's limited partnership agreement would prohibit the
transfer of Units pursuant to the Offer which, when added to the number of all
other Units transferred within the 12 months preceding the closing of the Offer,
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would equal or exceed 50% of the total outstanding Units for that period, and
the Partnership's General Partner elects to enforce such a prohibition.
Holders of Units ("Unit holders") are urged to consider the following factors:
- Unit holders who tender their Units in a Partnership will
give up the opportunity to participate in any future
benefits from the ownership of Units, including potential
future distributions by the Partner ship, and the purchase
price per Unit payable to a tendering Unit holder by the
Purchasers may be less than the total amount which might
otherwise be received by the Unit holder with respect to
the Unit over the remaining term of the Partnership.
- The Purchasers are making the Offer for investment purposes
and with the intention of making a profit from the
ownership of the Units. In establishing the purchase price
per Unit, the Purchasers are motivated to establish the
lowest price which might be acceptable to Unit holders
consistent with the Purchasers' objectives. There is no
public market for the Units, and neither the Unit holders
nor the Purchasers have any accurate means for determining
the actual present value of the Units. Although there can
be no certainty as to the actual present value of the
Units, purchase prices offered by the Purchasers are less
than the Purchasers' estimates of the net liquidation
values of each Partnership's assets and less than the
prices reported in connection with limited secondary market
sales of Units. See "Establishment of Purchase Price."
- As a result of consummation of the Offer, the Purchasers
may be in a position to influence Partnership decisions on
which Unit holders may vote. The Purchasers will vote the
Units acquired in the Offer in their own interests, which
may be different from or in conflict with the interests of
the remaining Unit holders.
- The Purchasers may accept only a portion of the Units
tendered by a Unit holder in the event the number of Units
of any Partnership tendered to the Purchasers would
otherwise cause the total number of Units of that
Partnership transferred within 12 months to exceed 50% of
its outstanding Units and the General Partners elect to
enforce a restriction on transfers of Units in excess of
50% of the total outstanding.
- The Depositary, MacKenzie Patterson, Inc., is an affiliate
of the Purchasers. No independent party will hold
securities tendered until the offer closes and payment is
made. Because there is no independent intermediary to hold
the Purchasers' funds and tendered securities, the
Purchasers may have access to the securities before all
conditions to the Offer have been satisfied and selling
Unit holders have been paid.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING
TEN DERED. IF MORE UNITS OF A PARTNERSHIP THAN THE MAXIMUM OFFER FOR THAT
PARTNERSHIP ARE VALIDLY TENDERED AND NOT WITHDRAWN, THE PURCHASERS WILL ACCEPT
FOR PURCHASE UNITS EQUAL TO THE MAXIMUM OFFER FROM TENDERING UNIT HOLDERS ON A
PRO RATA BASIS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN. A UNIT HOLDER MAY
TENDER ANY OR ALL UNITS OWNED BY SUCH UNIT HOLDER.
The Purchasers expressly reserve the right, in their sole discretion, at any
time and from time to time, (i) to extend the period of time during which any
Offers are open and thereby delay acceptance for payment of, and the payment
for, any Units, (ii) upon the occurrence of any of the conditions specified in
Section 13 of this Offer to Purchase, to terminate an Offer and not accept for
payment any Units not theretofore accepted for payment or paid for, or to delay
the acceptance for payment of, or payment for, any Units not theretofore
accepted for payment or paid for, and (iii) to amend an Offer in any respect.
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Notice of any such extension, termination or amendment will promptly be
disseminated to Unit holders in a manner reasonably designed to inform Unit
holders of such change in compliance with Rule 14d-4(c) under the Securities
Exchange Act of 1934 (the "Exchange Act"). In the case of an extension of the
Offer, such extension will be followed by a press release or public announcement
which will be issued no later than 9:00 a.m., Eastern Standard Time, on the next
business day after the scheduled Expiration Date, in accordance with Rule
14e-1(d) under the Exchange Act.
April 5, 2002
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IMPORTANT
Any Unit holder desiring to tender any or all of such Unit holder's Units should
complete and sign the Letter of Transmittal (a copy of which is enclosed with
this Offer to Purchase) in accordance with the instructions in the Letter of
Transmittal and mail, deliver or telecopy the Letter of Transmittal and any
other required documents to MacKenzie Patterson, Inc. (the "Depositary"), an
affiliate of certain of the Purchasers, at the address or facsimile number set
forth below.
MacKenzie Patterson, Inc.
1640 School Street
Moraga, California 94556
Telephone: 800-854-8357
Facsimile: 925-631-9119
E-Mail Address: offers@mackpatt.com
Questions or requests for assistance or additional copies of this Offer to
Purchase or the Letter of Transmittal may be directed to the Purchasers at
800-854-8357.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY REPRESENTATION
ON BEHALF OF THE PURCHASERS OR TO PROVIDE ANY INFORMATION OTHER THAN AS
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
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The Partnerships are subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Such reports and other information are available on
the Commission's electronic data gathering and retrieval (EDGAR) system, at its
internet web site at www.sec.gov, may be inspected at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and are available for inspection and
copying at the regional offices of the Commission located in Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Room of the Commission
in Washington, D.C. at prescribed rates.
The Purchasers have filed with the Commission a Tender Offer Statement on
Schedule TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to an Offer. Such statement and any amendments thereto, including
exhibits, may be inspected and copies may be obtained from the offices of the
Commission in the manner specified above.
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TABLE OF CONTENTS
Page
SUMMARY TERM SHEET.............................................................5
INTRODUCTION...................................................................7
TENDER OFFER...................................................................9
Section 1. Terms of the Offers...............................................9
Section 2. Proration; Acceptance for Payment and Payment for Units..........10
Section 3. Procedures for Tendering Units...................................11
Section 4. Withdrawal Rights................................................12
Section 5. Extension of Tender Period; Termination; Amendment...............13
Section 6. Certain Federal Income Tax Consequences..........................14
Section 7. Effects of the Offers............................................16
Section 8. Future Plans.....................................................17
Section 9. The Business of the Partnership..................................17
Section 10. Conflicts of Interest............................................18
Section 11. Certain Information Concerning the Purchasers....................18
Section 12. Source of Funds..................................................19
Section 13. Conditions of the Offers.........................................19
Section 14. Certain Legal Matters............................................21
Section 15. Fees and Expenses................................................22
Section 16. Miscellaneous....................................................22
Schedule I - The Purchasers and Their Respective Principals
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SUMMARY TERM SHEET
The Purchasers are offering to purchase Units of 5 different Partnerships for
cash. The following are some of the questions that you, as a Unit holder of a
Partnership may have and answers to those questions. The information in this
summary is not complete and we urge you to carefully read the remainder of this
Offer to Purchase and the accompanying Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
The Offers to purchase Units are being made jointly by MACKENZIE PATTERSON,
INC.; MP INCOME FUND 18, LLC; MP INCOME FUND 17, LLC; MP FALCON FUND, LLC; MP
FALCON GROWTH FUND, LLC; MP FALCON GROWTH FUND 2, LLC; MACKENZIE FUND VI, L.P.;
MACKENZIE PATTERSON SPECIAL FUND 3, L.P.; ACCELERATED HIGH YIELD INSTITUTIONAL
FUND I, LTD.; ACCELERATED HIGH YIELD INSTITUTIONAL INVESTORS, LTD.; MACKENZIE
SPECIFIED INCOME FUND, L.P.; AND MP DEWAAY FUND, LLC. Each of the Purchasers is
a private real estate investment fund managed by MacKenzie Patterson, Inc.. None
of these entities is affiliated with any of the Partnerships' general partners.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFERS?
We are seeking to purchase Units of limited partnership interest of each of the
Partnerships, which are the "Units" issued to public investors in the
Partnerships.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay the offer prices for each Partnership's Units as set
forth on the cover of this Offer to Purchase, net to you in cash, less the
amount of any distributions declared or made with respect to the Units between
April 5, 2002 and the date the Offers expires. The Offer price would be reduced
by the amount of distributions made or declared prior to the Expiration Date.
Any distributions made or declared after the Expiration Date would, by the terms
of the Offers and as set forth in the Letter of Transmittal, be assigned by
tendering Unit holders to the Purchasers. If you tender your Units to us in an
Offer, you will not have to pay brokerage fees, transfer fees or similar
expenses. The Offer for Units of each Partnership is independent of the other
Offers, but are combined in this single document for purposes of convenience.
Holders of Units in more than one Partnership may tender all or a portion of
their Units in any or all of the Partnerships. The prices per Unit for each
Partnership are:
Offer Price Maximum
Partnership Per Unit Units Sought
- ----------- ----------- ------------
DSI REALTY INCOME FUND VI,
a California Limited Partnership $340 23,753
DSI REALTY INCOME FUND VII,
a California Limited Partnership $300 24,000
DSI REALTY INCOME FUND VIII,
a California Limited Partnership $340 24,000
DSI REALTY INCOME FUND IX,
a California Limited Partnership $260 30,693
DSI REALTY INCOME FUND XI,
a California Limited Partnership $300 20,000
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
If the total amount of Units subject to the offer is purchased, the Purchasers'
capital commitment will be approximately $37.4 million. However, the Purchasers
believe that the potential response to this offer will fall substantially short
of the maximum Units subject to the Offer and the actual amount necessary to
fund all purchases will be substantially less than $37.4 million. Nevertheless,
the Purchasers have aggregate assets in excess of $28 million and believe they
have the capital, as well as access to other capital and credit sources,
sufficient to fund the entire offer amount.
IS THE FINANCIAL CONDITION OF THE BIDDERS RELEVANT TO MY DECISION ON WHETHER TO
TENDER IN THE OFFERS?
This is a cash offer that is not conditioned on financing being available. The
Purchasers have adequate liquid resources to fund anticipated purchases, and
they have no intention to take control of the Partnership. Accordingly, other
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information concerning the Purchasers' financial condition would seem to have
little relevance to your decision. Summary information on the assets of each
Purchaser is included in Item 11 of the Offer below.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFERS?
You will have at least until 12:00 midnight, pacific standard time, on May 31,
2002, to decide whether to tender your Units in the Offers.
CAN THE OFFERS BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Any Offer can be extended in our discretion.
HOW WILL I BE NOTIFIED IF AN OFFER IS EXTENDED?
If we extend an offer, we will make a public announcement of the extension, not
later than 9:00 a.m., eastern standard time, on the day after the day on which
the Offer was scheduled to expire.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFERS?
There are no conditions to the Offers based on minimum Units tendered, the
availability of financing or otherwise determined by the success of any offer.
However, we may not be obligated to purchase any Units in the event certain
conditions occur, such as legal or government actions which would prohibit the
purchase. Furthermore, we are not obligated to purchase any Units which are
validly tendered if, among other things, there is a material adverse change in
the issuing Partnership or its business.
HOW DO I TENDER MY UNITS?
To tender your Units, you must deliver a completed Letter of Transmittal, to the
Depositary at: MacKenzie Patterson, Inc., 1640 School Street, Moraga, California
94556 (Telephone: 800-854-8357; Facsimile Transmission: 925-631-9119), no later
than the time an Offer expires.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED UNITS?
You can withdraw previously tendered Units at any time until an Offer has
expired and, if we have not agreed to accept your Units for payment by June 5,
2002, you can withdraw them at any time after such time until we do accept your
Units for payment.
HOW DO I WITHDRAW PREVIOUSLY TENDERED UNITS?
To withdraw Units, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the Units.
WHAT DO THE PARTNERSHIPS' GENERAL PARTNERS THINK OF THE OFFERS?
The Purchasers have not sought the approval or disapproval of the General
Partners. The General Partners may be expected to respond with the Partnerships'
positions on the Offers in the next two weeks.
WILL THE PARTNERSHIPS CONTINUE AS PUBLIC COMPANIES?
Unless the total number of Unit holders in a Partnership were to fall below 500,
the Partnership would continue as a public reporting company. The Purchasers do
not currently anticipate that the Offers will result in such a reduction in the
number of Unit holders, though they cannot predict the results of the Offers
with certainty.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFERS AFFECT MY UNITS?
The Purchasers do not anticipate that Units held by non-tendering Unit holders
will be affected by the completion of the Offers. However, depending on the
number of Units the Purchasers may acquire, the Purchasers could control a large
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or even controlling, block of Units. The Purchasers do not currently have any
intention of changing the operations or management of the Partnerships, however,
and the Purchasers believe their interests would not differ in any material way
from those of the current Unit holders.
WHAT ARE THE PURCHASERS' FUTURE INTENTIONS CONCERNING THE PARTNERSHIPS?
The Purchasers have no present intention to seek control of any Partnership or
to change the management or operations of any Partnership. Although the
Purchasers do not have any present intention to take any action with respect to
management or control of the Partnerships, the Purchasers reserve the right, at
an appropriate time, to exercise their rights as limited partners to vote on
matters subject to a limited partner vote, including any vote affecting the sale
of a Partnership's properties and the liquidation and dissolution of the
Partnership.
WHAT IS THE MARKET VALUE OF MY UNITS?
According to the Partnerships' General Partners, there is no public trading
market for the Units. It is not anticipated that a public market for the Units
will develop. Information concerning the limited secondary market trading prices
is included in the Offer to Purchase under the caption "Establishment of Offer
Price."
WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call the Purchasers at 800-854-8357
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INTRODUCTION
The Purchasers hereby offer to purchase up all of the outstanding Units
(the "Maximum Offer") at the purchases set forth in the first page of this offer
("Offer Price"), less the amount of any distributions declared or paid with
respect to the Units between April 5, 2002, and the Expiration Date, in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offers. The Purchasers are unaware of any distributions declared or paid since
April 5, 2002. Unit holders who tender their Units will not be obligated to pay
any Partnership transfer fees, or any other fees, expenses or commissions in
connection with the tender of Units. The Purchasers will pay all such costs and
all charges and expenses of the Depositary, an affiliate of certain of the
Purchasers, as depositary in connection with the Offers. Tender of Units will
include the tender of any and all securities into which the Units may be
converted or exchanged, and any securities distributed with respect to the Units
from and after the Offer Date.
For further information concerning the Purchasers, see Section 11 below
and Schedule I.
None of the Purchasers nor the Depositary is affiliated with any
Partnership, or any Partnership's general partner. The address of the
Partnerships' principal executive offices is 6700 E. Pacific Coast Hwy., Long
Beach, California 9O8O3.
Unit holders are urged to consider the following factors:
- Unit holders who tender their Units in a Partnership will give
up the opportunity to participate in any future benefits from
the ownership of Units, including potential future
distributions by the Partnership, and the purchase price per
Unit payable to a tendering Unit holder by the Purchasers may
be less than the total amount which might otherwise be
received by the Unit holder with respect to the Unit over the
remaining term of the Partnership.
- The Purchasers are making the Offer for investment purposes
and with the intention of making a profit from the ownership
of the Units. In establishing the purchase price per Unit, the
Purchasers are motivated to establish the lowest price which
might be acceptable to Unit holders consistent with the
Purchasers' objectives. There is no public market for the
Units, and neither the Unit holders nor the Purchasers have
any accurate means for determining the actual present value of
the Units. Although there can be no certainty as to the actual
present value of the Units, purchase prices offered by the
Purchasers are less than the Purchasers' estimates of the net
liquidation values of each Partnership's assets and less than
the prices reported in connection with limited secondary
market sales of Units. See "Establishment of Purchase Price."
- As a result of consummation of the Offer, the Purchasers may
be in a position to influence Partnership decisions on which
Unit holders may vote. The Purchasers will vote the Units
acquired in the Offer in their own interests, which may be
different from or in conflict with the interests of the
remaining Unit holders.
- The Purchasers may accept only a portion of the Units tendered
by a Unit holder in the event the number of Units of any
Partnership tendered to the Purchasers would otherwise cause
the total number of Units of that Partnership transferred
within 12 months to exceed 50% of its outstanding Units and
the General Partners elect to enforce a restriction on
transfers of Units in excess of 50% of the total outstanding.
- The Depositary, MacKenzie Patterson, Inc., is an affiliate of
the Purchasers. No independent party will hold securities
tendered until the offer closes and payment is made. Because
there is no independent intermediary to hold the Purchasers'
funds and tendered securities, the Purchasers may have access
to the securities before all conditions to the Offer have been
satisfied and selling Unit holders have been paid.
The Offers will provide Unit holders with an opportunity to liquidate
their investment without the usual transaction costs associated with market
sales. Unit holders may have a more immediate need to use the cash now tied up
in an investment in the Units and wish to sell them to the Purchasers. Unit
holders who sell all of their Units will also eliminate the need to file form
K-1 information for the Partnership with their federal tax returns for years
after 2002.
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Establishment of the Offer Prices
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The Purchasers have set the Offer Prices set forth on the cover page of
this Offer to Purchase, less the amount of any distributions declared or made
with respect to the Units between April 5, 2002 and the Expiration Date.In
determining the Offer Price, the Purchasers analyzed a number of quantitative
and qualitative factors, including: (i) the lack of a secondary market for
resales of the Units and the resulting lack of liquidity of an investment in the
Partnerships; (ii) the estimated value of each Partnership's real estate assets;
and (iii) the costs to the Purchasers associated with acquiring the Units. The
Purchasers have used published information about the value of the Partnerships'
assets, the limited prices in secondary market trading in Units and its
estimated costs in relation to anticipated results of its Offers to calculate
the price at which they believe may be attractive to Unit holders wishing to
sell Units, but at the same time provide a potential profit to Purchasers from
the holding of these illiquid securities.
Each of the Partnerships made the following statement in its annual
report on Form 10-K for the year ended December 31, 2000: "There is no intention
to sell additional limited partnership units nor is there a market for these
units." The lack of any public market for the sale of Units means that Unit
holders have limited alternatives if they seek to sell their Units. As a result
of such limited alternatives for Unit holders, the Purchasers may not need to
offer as high a price for the Units as they would otherwise. On the other hand,
the Purchasers take a greater risk in establishing a purchase price as there is
no prevailing market price to be used for reference and the Purchasers
themselves will have limited liquidity for the Units upon consummation of the
purchase. Although the Partnerships have reported some sales of Units on
secondary markets, such sales are limited and sporadic, and in the opinion of
the Purchasers, the reported trading prices do not necessarily represent prices
at which any willing seller and willing buyer would be able to execute a
transaction at any given time.
The Purchasers review of independent secondary market reporting
publications, such as The Stanger Report, found limited sales of Units reported
on secondary markets during the last six months. The information published by
such independent sources is believed to be the product of their private market
research and does not constitute the comprehensive transaction reporting of a
securities exchange. Accordingly, the Purchasers do not know whether the
foregoing information is accurate or complete. Set forth below is a table
stating the Offer price for the Units of DSI REALTY INCOME FUND VI, a California
Limited Partnership ("DSI VI"); DSI REALTY INCOME FUND VII, a California Limited
Partnership ("DSI VII"); DSI REALTY INCOME FUND VIII, a California Limited
Partnership ("DSI VIII"); DSI REALTY INCOME FUND IX, a California Limited
Partnership ("DSI IX"); and DSI REALTY INCOME FUND XI, a California Limited
Partnership ("DSI XI") and trading prices and volumes for Units reported by The
Stanger Report during the past six months:
Offer Price Six Month Per Unit Number of
Partnership Per Unit Trading Prices Units Traded
- ----------- ------------- -------------- ------------
DSI VI $340 None reported None reported
DSI VII` $300 $410 4
DSI VIII $340 $410 20
DSI IX $260 $300-$420 427
DSI XI $300 $415 8
The Purchasers are offering to purchase Units which are an illiquid
investment and are not offering to purchase the Partnerships' underlying assets.
The assets of each Partnership may not be liquidated for an indefinite period of
time. Accordingly, the underlying asset value of the Partnerships is only one
factor used by the Purchasers in arriving at the Offer Prices. However, in the
absence of substantial trading price information, the Purchasers estimate of the
net asset value of each Partnership may be relevant to Unit holders review of
the Offer Price. Using publicly available information concerning the Partnership
contained in the Partnership's Form 10-K for the fiscal year ended December 31,
2000 and the quarterly report for the quarter ended September 30, 2001, the
Purchasers derived an estimated net asset value for the Units. The Purchasers
are not qualified as real estate appraisers and have relied solely on publicly
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available information in making their estimate of the value of the Partnership's
assets. Furthermore, the Partnership has not announced any plans to liquidate
its assets. The Purchasers estimated value of Partnership assets was calculated
solely for purposes of formulating their offer and cannot be relied upon as
representing an amount which might actually be realized upon a liquidation of
the Partnership's assets, whether now or at any time in the future.
In determining their estimated value of the Units, the Purchasers first
calculated the "Estimated Net Sales Value" of the Partnership's real property
investments. The Estimated Net Sales Value was determined by first determining
the properties' net operating income ("NOI"). The NOI was calculated by
subtracting from rental income the property operating expenses. This NOI was
then divided by a 13.5% capitalization rate (the "Cap Rate") and the result
reduced by 1.5% to take into account the estimated closing costs which would be
incurred upon sale by the Partnership of the property, including brokerage
commissions, title costs, surveys, appraisals, legal fees and transfer taxes.
The Purchasers believe that the Cap Rate utilized is within a range of
capitalization rates currently employed in the marketplace for properties of
similar type, age and quality. The utilization of different capitalization
rates, however, could also be appropriate. In this regard, Unit holders should
be aware that the use of lower capitalization rate would result in a higher
Estimated Net Sales Value.
To determine the Estimated Liquidation Value of each Partnership's
assets, the Purchasers added to the Estimated Net Sales Value of the
Partnership's properties the net current assets. None of the Partnerships are
subject to any mortgage debt, according to each Partnership's most recent Form
10-K. The Purchasers then calculated the amount of the balance allocable to the
Units. The Offer Price for each Partnership's Units, and the Purchasers
resulting Estimated Liquidation Value of each Partnership's assets are as
follows:
Offer Price Estimated Liquidation
Partnership Per Unit Value Per Unit
- ----------- ------------- --------------
DSI VI $340 $424
DSI VII $300 $374
DSI VIII $340 $492
DSI IX $260 $290
DSI XI $300 $335
The Purchasers emphasize that these values were calculated by them solely for
purposes of selecting an Offer Price. There can be no assurance as to the actual
liquidation value of any Partnership's assets or as to the amount or timing of
distributions of liquidation proceeds which may be received by Unit holders.
None of the Partnerships has announced any pending offer to purchase its assets
or any plan to liquidate its assets. Accordingly, there can be no assurance as
to the availability or timing of any liquidation proceeds.
The Offer Prices represent the price at which the Purchasers are
willing to purchase Units. No independent person has been retained to evaluate
or render any opinion with respect to the fairness of the Offer Price and no
representation is made by the Purchasers or any affiliate of the Purchasers as
to such fairness. Other measures of the value of the Units may be relevant to
Unit holders. Unit holders are urged to consider carefully all of the
information contained herein and consult with their own advisors, tax, financial
or otherwise, in evaluating the terms of the Offer before deciding whether to
tender Units.
The Offers are not made with any current view toward or plan or purpose
of acquiring Units in a series of successive and periodic offers. Nevertheless,
the Purchasers reserve the right to gauge the response to this solicitation,
and, if not successful in achieving the Maximum Offer for Units of any
Partnership, may consider future offers. Factors affecting the Purchasers'
future interest in acquiring additional Units include, but are not limited to,
the relative success of the current Offers, any increase or decrease in the
availability of capital for investment by the Purchasers, the current
diversification and performance of each purchaser's portfolio, the development
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of any public market in the Units or actions by unrelated parties to tender for
or purchase Units, the status of and changes and trends in any Partnership's
operations, announcement of pending property sales and the proposed terms of
sales, and local and national real estate and financial market developments and
trends.
General Background Information
- ------------------------------
Certain information contained in this Offer to Purchase which relates
to, or represents, statements made by the Partnerships or the General Partners,
has been derived from information provided in reports filed by the Partnerships
with the Securities and Exchange Commission.
The Purchasers and their affiliates currently beneficially own no
Units. The number of Units subject to the Offers is all outstanding Units of
each Partnership.
Tendering Unit holders will not be obligated to pay transfer fees,
brokerage fees or commissions on the sale of the Units to the Purchasers
pursuant to the Offers. The Purchasers will pay all charges and expenses
incurred in connection with the Offers. The Purchasers desire to purchase all
Units tendered by each Unit holder.
Each Offer is independent of the other Offers made hereby, and may,
subject to the terms and conditions set forth in the Offer to Purchase and such
accompanying documents, be completed or terminated or withdrawn independent of
the result of any other Offer. Holders of Units in more than one Partnership may
tender all or a portion of their Units in any or all of such Partnerships.
If, prior to the Expiration Date, the Purchasers increase the
consideration offered to Unit holders pursuant to any Offer, such increased
consideration will be paid with respect to all Units that are purchased pursuant
to the Offer, whether or not such Units were tendered prior to such increase in
consideration.
Unit holders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding whether to tender
their Units.
TENDER OFFER
Section 1. Terms of the Offers. Upon the terms and subject to the conditions of
the Offers, the Purchasers will accept for payment and pay for Units validly
tendered on or prior to the Expiration Date and not withdrawn in accordance with
Section 4 of this Offer to Purchase. The term "Expiration Date" shall mean 12:00
midnight, Pacific Standard Time, on May 31, 2002, unless and until the
Purchasers shall have extended the period of time for which an Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date on
which the Offer, as so extended by the Purchasers, shall expire.
Each Offer is conditioned on satisfaction of certain conditions. See
Section 13, which sets forth in full the conditions of the Offers. The
Purchasers reserve the right (but shall not be obligated), in their sole
discretion and for any reason, to waive any or all of such conditions. If, by
the Expiration Date, any or all of such conditions have not been satisfied or
waived, the Purchasers reserve the right (but shall not be obligated) to (i)
decline to purchase any of the Units tendered, terminate any or all of the
Offers and return all tendered Units to tendering Unit holders, (ii) waive all
the unsatisfied conditions and, subject to complying with applicable rules and
regulations of the Commission, purchase all Units validly tendered, (iii) extend
any or all of the Offers and, subject to the right of Unit holders to withdraw
Units until the Expiration Date, retain the Units that have been tendered during
the period or periods for which the Offers are extended or (iv) to amend any or
all of the Offers. Notwithstanding the foregoing, upon the expiration of the
Offers, if all conditions are either satisfied or waived, the Purchasers will
promptly pay for all validly tendered Units, and the Purchasers do not intend to
imply that the foregoing rights of the Purchasers would permit the Purchasers to
delay payment for validly tendered Units following expiration.
The Purchasers do not anticipate and have no reason to believe that any
condition or event will occur that would prevent the Purchasers from purchasing
tendered Units as offered herein.
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Section 2. Proration; Acceptance for Payment and Payment for Units. If the
number of Units validly tendered prior to the Expiration Date and not withdrawn
less than the maximum number of Units sought with respect to a Partnership (the
"Maximum Offer" for that Partnership), the Purchasers, upon the terms and
subject to the conditions of the Offers, will accept for payment all Units so
tendered. The number of Units subject to the Offer may be reduced to the extent
that any Partnership's limited partnership agreement would prohibit the transfer
of Units pursuant to the Offer which, when added to the number of all other
Units transferred within the 12 months preceding the closing of the Offer, would
equal or exceed 50% of the total outstanding Units for that period, and the
Partnership's General Partner elects to enforce such a prohibition. If the
number of Units validly tendered prior to the Expiration Date and not withdrawn
exceeds the number a Partnership will permit to be transferred under such
restrictions, the Purchasers, upon the terms and subject to the conditions of
the Offers, will accept for payment for that Partnership's Units so tendered on
a pro rata basis up to the maximum amount permitted to be transferred.
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Units to be accepted, the
Purchasers will announce the final results of proration as soon as practicable,
but in no event later than five business days following the Expiration Date. The
Purchasers will not pay for any Units tendered until after the final proration
factor has been determined.
Upon the terms and subject to the conditions of the Offers (including,
if any Offer is extended or amended, the terms and conditions of any extension
or amendment), the Purchasers will accept for payment, and will pay for, Units
validly tendered and not withdrawn in accordance with Section 4, promptly
following the Expiration Date. In all cases, payment for Units purchased
pursuant to the Offers will be made only after timely receipt by the Depositary
of a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal.
For purposes of the Offers, the Purchasers shall be deemed to have
accepted for payment (and thereby purchased) tendered Units when, as and if the
Purchasers give oral or written notice to the Depositary of the Purchasers'
acceptance for payment of such Units pursuant to the Offers. Upon the terms and
subject to the conditions of the Offers, payment for Units purchased pursuant to
the Offers will in all cases be made by deposit of the Offer Price for the Units
with the Depositary, which will act as agent for the tendering Unit holders for
the purpose of receiving payment from the Purchasers and transmitting payment to
tendering Unit holders.
Under no circumstances will interest be paid on the Offer Price by
reason of any delay in making such payment.
If any tendered Units are not purchased for any reason, the Letter of
Transmittal with respect to such Units not purchased will be of no force or
effect. If, for any reason whatsoever, acceptance for payment of, or payment
for, any Units tendered pursuant to any Offer is delayed or the Purchasers are
unable to accept for payment, purchase or pay for Units tendered pursuant to the
Offer, then, without prejudice to the Purchasers' rights under Section 13 (but
subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary
may, nevertheless, on behalf of the Purchasers, retain tendered Units, subject
to any limitations of applicable law, and such Units may not be withdrawn except
to the extent that the tendering Unit holders are entitled to withdrawal rights
as described in Section 4.
If, prior to the Expiration Date, the Purchasers shall increase the
consideration offered to Unit holders pursuant to an Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
Section 3. Procedures for Tendering Units.
Valid Tender. For Units to be validly tendered pursuant to the Offers, a
properly completed and duly executed Letter of Transmittal (a copy of which is
enclosed with this Offer to Purchase) with any other documents required by the
Letter of Transmittal must be received by the Depositary at its address set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date. A Unit holder may tender any or all Units owned by such Unit holder.
In order for a tendering Unit holder to participate in the Offers, Units must be
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validly tendered and not withdrawn prior to the Expiration Date, which is 12:00
midnight, Pacific Standard Time, on May 31, 2002, or such date to which an Offer
may be extended.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering Unit holder and delivery
will be deemed made only when actually received by the Depositary.
Backup Federal Income Tax Withholding. To prevent the possible application of
31% backup federal income tax withholding with respect to payment of the Offer
Price for Units purchased pursuant to the Offers, a tendering Unit holder must
provide the Depositary with such Unit holder's correct taxpayer identification
number and make certain certifications that such Unit holder is not subject to
backup federal income tax withholding. Each tendering Unit holder must insert in
the Letter of Transmittal the Unit holder's taxpayer identification number or
social security number in the space provided on the front of the Letter of
Transmittal. The Letter of Transmittal also includes a substitute Form W-9,
which contains the certifications referred to above. (See the Instructions to
the Letter of Transmittal.)
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Offer Price plus the amount of Partnership
liabilities allocable to each Unit tendered, each Unit holder must complete the
FIRPTA Affidavit included in the Letter of Transmittal certifying such Unit
holder's taxpayer identification number and address and that the Unit holder is
not a foreign person. (See the Instructions to the Letter of Transmittal and
"Section 6. Certain Federal Income Tax Consequences.")
Other Requirements. By executing a Letter of Transmittal as set forth above, a
tendering Unit holder irrevocably appoints the designees of the Purchasers as
such Unit holder's proxies, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
Unit holder's rights with respect to the Units tendered by such Unit holder and
accepted for payment by the Purchasers. Such appointment will be effective when,
and only to the extent that, the Purchasers accept such Units for payment. Upon
such acceptance for payment, all prior proxies given by such Unit holder with
respect to such Units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). The
designees of the Purchasers will, with respect to such Units, be empowered to
exercise all voting and other rights of such Unit holder as they in their sole
discretion may deem proper at any meeting of Unit holders, by written consent or
otherwise. In addition, by executing a Letter of Transmittal, a Unit holder also
assigns to the Purchasers all of the Unit holder's rights to receive
distributions from the Partnership with respect to Units which are accepted for
payment and purchased pursuant to the Offers, other than those distributions
declared or paid during the period commencing on the Offer Date and terminating
on the Expiration Date.
Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation
to Give Notice of Defects. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Units
pursuant to the procedures described above will be determined by the Purchasers,
in their sole discretion, which determination shall be final and binding. The
Purchasers reserve the absolute right to reject any or all tenders if not in
proper form or if the acceptance of, or payment for, the absolute right to
reject any or all tenders if not in proper form or if the acceptance of, or
payment for, the Units tendered may, in the opinion of the Purchasers' counsel,
be unlawful. The Purchasers also reserve the right to waive any defect or
irregularity in any tender with respect to any particular Units of any
particular Unit holder, and the Purchasers' interpretation of the terms and
conditions of the Offers (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Purchasers, the
Depositary, nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Units or will incur any
liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unit holder and the
Purchasers upon the terms and subject to the conditions of the Offers, including
the tendering Unit holder's representation and warranty that (i) such Unit
holder owns the Units being tendered within the meaning of Rule 14e-4 under the
Exchange Act and (ii) the tender of such Unit complies with Rule 14e- 4. Rule
14e-4 requires, in general, that a tendering security holder actually be able to
deliver the security subject to the tender offer, and is of concern particularly
to any Unit holders who have granted options to sell or purchase the Units, hold
option rights to acquire such securities, maintain "short" positions in the
Units (i.e., have borrowed the Units) or have loaned the Units to a short
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seller. Because of the nature of limited partnership interests, the Purchasers
believe it is unlikely that any option trading or short selling activity exists
with respect to the Units. In any event, a Unit holder will be deemed to tender
Units in compliance with Rule 14e-4 and the Offers if the holder is the record
owner of the Units and the holder (i) delivers the Units pursuant to the terms
of the Offers, (ii) causes such delivery to be made, (iii) guarantees such
delivery, (iv) causes a guaranty of such delivery, or (v) uses any other method
permitted in the Offers (such as facsimile delivery of the Transmittal Letter).
Section 4. Withdrawal Rights. Except as otherwise provided in this Section 4,
all tenders of Units pursuant to the Offers are irrevocable, provided that Units
tendered pursuant to any Offer may be withdrawn at any time prior to the
Expiration Date for the Offer and, unless theretofore accepted for payment as
provided in this Offer to Purchase, may also be withdrawn at any time on or
after June 5, 2002.
For withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address or
the facsimile number set forth in the attached Letter of Transmittal. Any such
notice of withdrawal must specify the name of the person who tendered the Units
to be withdrawn, must specify the identity and quantity of Units to be
withdrawn, and must be signed by the person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed.
If purchase of, or payment for, Units is delayed for any reason or if
the Purchasers are unable to purchase or pay for Units for any reason, then,
without prejudice to the Purchasers' rights under any Offer, tendered Units may
be retained by the Depositary on behalf of the Purchasers and may not be
withdrawn except to the extent that tendering Unit holders are entitled to
withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c) under
the Exchange Act, which provides that no person who makes a tender offer shall
fail to pay the consideration offered or return the securities deposited by or
on behalf of security holders promptly after the termination or withdrawal of
the tender offer.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchasers, in their sole
discretion, which determination shall be final and binding. Neither the
Purchasers, the Depositary, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such notification.
Any Units properly withdrawn will be deemed not to be validly tendered
for purposes of the Offers. Withdrawn Units may be re-tendered, however, by
following the procedures described in Section 3 at any time prior to the
Expiration Date.
Section 5. Extension of Tender Period; Termination; Amendment. The Purchasers
expressly reserve the right, in their sole discretion, at any time and from time
to time, (i) to extend the period of time during which the Offers are open and
thereby delay acceptance for payment of, and the payment for, any Units by
giving oral or written notice of such extension to the Depositary, (ii) upon the
occurrence or failure to occur of any of the conditions specified in Section 13,
to delay the acceptance for payment of, or payment for, any Units not heretofore
accepted for payment or paid for, or to terminate any Offer and not accept for
payment any Units not theretofore accepted for payment or paid for, by giving
oral or written notice of such termination to the Depositary, and (iii) to amend
any Offer in any respect (including, without limitation, by increasing or
decreasing the consideration offered or the number of Units being sought in the
Offer or both or changing the type of consideration) by giving oral or written
notice of such amendment to the Depositary. Any extension, termination or
amendment will be followed as promptly as practicable by public announcement,
the announcement in the case of an extension to be issued no later than 9:00
a.m., Eastern Standard Time, on the next business day after the previously
scheduled Expiration Date, in accordance with the public announcement
requirement of Rule 14d-4(c) under the Exchange Act. Without limiting the manner
in which the Purchasers may choose to make any public announcement, except as
provided by applicable law (including Rule 14d-4(c) under the Exchange Act), the
Purchasers will have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service. The Purchasers may also be required by applicable law to
disseminate to Unit holders certain information concerning the extensions of an
Offer and any material changes in the terms of an Offer.
If the Purchasers extend an Offer, or if the Purchasers (whether before
or after its acceptance for payment of Units) are delayed in their payment for
Units or are unable to pay for Units pursuant to an Offer for any reason, then,
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without prejudice to the Purchasers' rights under the Offer, the Depositary may
retain tendered Units on behalf of the Purchasers, and such Units may not be
withdrawn except to the extent tendering Unit holders are entitled to withdrawal
rights as described in Section 4. However, the ability of the Purchasers to
delay payment for Units that the Purchasers have accepted for payment is limited
by Rule 14e-1 under the Exchange Act, which requires that the Purchasers pay the
consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of the Offer.
If the Purchasers make a material change in the terms of an Offer or
the information concerning the Offer or waive a material condition of the Offer,
the Purchasers will extend the Offer to the extent required by Rules 14d- 4(c),
14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following a material change in the terms of the offer or
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer to Purchase, "business day" means any day other than a Saturday, Sunday or
a federal holiday, and consists of the time period from 12:01 a.m. through 12:00
midnight, Pacific Standard Time.
Section 6. Certain Federal Income Tax Consequences. THE FEDERAL INCOME TAX
DISCUSSION SET FORTH BELOW IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF TAXATION THAT MAY BE RELEVANT TO A
PARTICULAR UNIT HOLDER. For example, this discussion does not address the effect
of any applicable foreign, state, local or other tax laws other than federal
income tax laws. Certain Unit holders (including trusts, foreign persons,
tax-exempt organizations or corporations subject to special rules, such as life
insurance companies or S corporations) may be subject to special rules not
discussed below. This discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), existing regulations, court decisions and Internal
Revenue Service ("IRS") rulings and other pronouncements. EACH UNIT HOLDER
TENDERING UNITS SHOULD CONSULT SUCH UNIT HOLDER'S OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH UNIT HOLDER OF ACCEPTING The Offers,
INCLUDING THE APPLICATION OF THE ALTERNATIVE MINIMUM TAX AND FEDERAL, FOREIGN,
STATE, LOCAL AND OTHER TAX LAWS.
The following discussion is based on the assumption that each
Partnership is treated as a partnership for federal income tax purposes and is
not a "publicly traded partnership" as that term is defined in the Code.
Gain or Loss. A taxable Unit holder will recognize a gain or loss on the sale of
such Unit holder's Units in an amount equal to the difference between (i) the
amount realized by such Unit holder on the sale and (ii) such Unit holder's
adjusted tax basis in the Units sold. The amount realized by a Unit holder will
include the Unit holder's share of the Partnership's liabilities, if any (as
determined under Code section 752 and the regulations thereunder). If the Unit
holder reports a loss on the sale, such loss generally could not be currently
deducted by such Unit holder except against such Unit holder's capital gains
from other investments. In addition, such loss would be treated as a passive
activity loss. (See "Suspended Passive Activity Losses" below.)
The adjusted tax basis in the Units of a Unit holder will depend upon
individual circumstances. (See also "Partnership Allocations in Year of Sale"
below.) Each Unit holder who plans to tender hereunder should consult with the
Unit holder's own tax advisor as to the Unit holder's adjusted tax basis in the
Unit holder's Units and the resulting tax consequences of a sale.
If any portion of the amount realized by a Unit holder is attributable
to such Unit holder's share of "unrealized receivables" or "substantially
appreciated inventory items" as defined in Code section 751, a corresponding
portion of such Unit holder's gain or loss will be treated as ordinary gain or
loss. It is possible that the basis allocation rules of Code Section 751 may
result in a Unit holder's recognizing ordinary income with respect to the
portion of the Unit holder's amount realized on the sale of a Unit that is
attributable to such items while recognizing a capital loss with respect to the
remainder of the Unit.
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A tax-exempt Unit holder (other than an organization described in Code
Section 501(c)(7) (social club), 501(c)(9) (voluntary employee benefit
association), 501(c)(17) (supplementary unemployment benefit trust), or
501(c)(20) (qualified group legal services plan)) should not be required to
recognize unrelated trade or business income upon the sale of its Units pursuant
to the Offers, assuming that such Unit holder does not hold its Units as a
"dealer" and has not acquired such Units with debt financed proceeds.
Partnership Allocations in Year of Sale. A tendering Unit holder will be
allocated the Unit holder's pro rata share of the annual taxable income and
losses from the Partnership with respect to the Units sold for the period
through the date of sale, even though such Unit holder will assign to the
Purchasers their rights to receive certain cash distributions with respect to
such Units. Such allocations and any Partnership distributions for such period
would affect a Unit holder's adjusted tax basis in the tendered Units and,
therefore, the amount of gain or loss recognized by the Unit holder on the sale
of the Units.
Possible Tax Termination. The Code provides that if 50% or more of the capital
and profits interests in a partnership are sold or exchanged within a single
12-month period, such partnership generally will terminate for federal income
tax purposes. Such a termination is unlikely to result from consummation of an
Offer because of the limited nature of the Offers and limited number of reported
transactions in Units, but it is nevertheless possible that a Partnership could
terminate for federal income tax purposes. Although the likelihood is remote, a
tax termination of the Partnership could have an effect on a corporate or other
non-individual Unit holder whose tax year is not the calendar year, as such a
Unit holder might recognize more than one year's Partnership tax items in one
tax return, thus accelerating by a fraction of a year the effects from such
items.
Suspended "Passive Activity Losses". A Unit holder who sells all of the Unit
holder's Units would be able to deduct "suspended" passive activity losses from
the Partnership, if any, in the year of sale free of the passive activity loss
limitation. As a limited partner of the Partnership, which was engaged in real
estate activities, the ability of a Unit holder, who or which is subject to the
passive activity loss rules, to claim tax losses from the Partnership was
limited. Upon sale of all of the Unit holder's Units, such Unit holder would be
able to use any "suspended" passive activity losses first against gain, if any,
on sale of the Unit holder's Units and then against income from any other
source.
Foreign Unit holders. Gain realized by a foreign Unit holder on a sale of a Unit
pursuant to the Offers will be subject to federal income tax. Under Section 1445
of the Code, the transferee of a partnership interest held by a foreign person
is generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchasers will withhold 10% of the amount
realized by a tendering Unit holder from the purchase price payment to be made
to such Unit holder unless the Unit holder properly completes and signs the
FIRPTA Affidavit included as part of the Letter of Transmittal certifying the
Unit holder's TIN, that such Unit holder is not a foreign person and the Unit
holder's address. Amounts withheld would be creditable against a foreign Unit
holder's federal income tax liability and, if in excess thereof, a refund could
be obtained from the Internal Revenue Service by filing a U.S. income tax
return.
Section 7. Effects of the Offers.
Limitations on Resales. The Partnerships' Limited Partnership Agreements may
prohibit transfers of Units if a transfer, when considered with all other
transfers during the same applicable twelve-month period, would cause a
termination of the Partnership for federal income tax purposes. In addition, one
or more of the Partnerships may have additional conditions to transfers of Units
that the Purchasers do not believe will have any effect on consummation of the
Offers.
Effect on Trading Market. If a substantial number of Units are purchased
pursuant to an Offer and there is no proration, the result could be a reduction
in the number of Unit Holders of the affected Partnership. Reducing the number
of security holders in certain kinds of equity securities might be expected to
result in a reduction in the liquidity and volume of activity in the trading
market for the security. However, there is no established public trading market
for the Units, and the number of Units of each Partnership which are subject to
the Offers is limited. Therefore, the Purchasers do not believe any reduction in
the number of Unit holders of any Partnership resulting from consummation of an
Offer will materially further restrict the Unit holders' ability to find
purchasers for their Units through secondary market transactions.
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Voting Power of Purchasers. Depending on the number of Units acquired by the
Purchasers pursuant to the Offers, the Purchasers may have the ability to
control matters subject to the vote of Unit holders. The Partnerships do not
hold annual or regular meetings to elect directors, and do not have a
representative board of directors overseeing management. Votes of Unit holders
would only be solicited, if ever, for matters affecting the fundamental
structure of a Partnership, and the affirmative vote of more than 50% of the
outstanding Units (not a mere quorum) is required to effect action. The
Purchasers and their affiliates do not have a present intention to call for any
such vote, nor are they aware that the General Partners intend to do so. They
would, nevertheless, exercise any and all rights they might hold in the event
that such a vote is called by the General Partners, or if, in the future,
changes in circumstances would dictate that limited partners exercise their
right to call a vote.
Other Potential Effects. The Units are registered under the Exchange Act, which
requires, among other things that the Partnership furnish certain information to
its Unit holders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of, and solicitation of consents from, Unit
holders. Registration and reporting requirements could be terminated by the
Partnership if the number of record holders falls below 300, or below 500 if the
Partnership's total assets are below $10 million for three consecutive preceding
fiscal years. The Purchasers do not currently anticipate that any Offer will
result in a reduction in the number of Unit holders below 500, though they
cannot now determine the results of the Offers with any certainty. Accordingly,
the Purchasers do not believe that the purchase of Units pursuant to the Offers
will result in any Units becoming eligible for de-registration under the
Exchange Act.
Section 8. Future Plans. Following the completion of the Offers, the Purchasers,
or their affiliates, may acquire additional Units. Any such acquisitions may be
made through private purchases, one or more future tender offers or by any other
means deemed advisable or appropriate. Any such acquisitions may be at a
consideration higher or lower than the consideration to be paid for the Units
purchased pursuant to the Offers. The Purchasers are seeking to purchase their
stated Maximum Offer for Units of each Partnership. If the Purchasers acquire
fewer Units than those representing the Maximum Offer for any Partnership, the
Purchasers may seek to make further purchases on the open market at prevailing
prices, or solicit Units pursuant to one or more future tender offers at the
same price, a higher price or, if that Partnership's circumstances change, at a
lower price. Alternatively, the Purchasers may discontinue any further purchases
of such Units after termination of the Offers, regardless of the number of Units
purchased. The Offers are not made with any current view toward or plan or
purpose of acquiring Units in a series of successive and periodic offers.
Nevertheless, as noted above, the Purchasers reserve the right to gauge the
response to this solicitation, and, if not successful in achieving the Maximum
Offer, may consider future offers. Factors affecting the Purchasers' future
interest in acquiring additional Units include, but are not limited to, the
relative success of the current Offers, any increase or decrease in the
availability of capital for investment by the Purchasers and their affiliates,
the current diversification and performance of each Purchaser's portfolio of
real estate interests, the development of any public market in the Units or
actions by unrelated parties to tender for or purchase Units, the status of and
changes and trends in a Partnership's operations, announcement of pending
property sales and the proposed terms of sales, and local and national real
estate and financial market developments and trends.
The Purchasers are acquiring the Units pursuant to the Offers solely
for investment purposes. The Purchasers have no present intention to seek
control of any Partnership or to change the management or operations of any
Partnership. The Purchasers nevertheless reserve the right, at an appropriate
time, to exercise their rights as limited partners to vote on matters subject to
a limited partner vote, including, but not limited to, any vote to affecting the
sale of a Partnership's property and the liquidation and dissolution of a
Partnership. Except as expressly set forth herein, the Purchasers have no
present intention to seek control of any Partnership, to cause the Partnership
to engage in any extraordinary transaction, to cause any purchase, sale or
transfer of a material amount of the assets of any Partnership, to make any
change in the distribution policies, indebtedness or capitalization of any
Partnership, or to change the structure, management or operations of any
Partnership, the listing status of the Units or the reporting requirements of
any Partnership.
Section 9. The Business of the Partnerships. Information included herein
concerning each of the Partnerships is derived from the Partnership's
publicly-filed reports. Information concerning each Partnership, its assets,
operations and management is contained in its Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q and other filings with the Securities and
Exchange Commission. Such reports and filings are available on the Commission's
EDGAR system, at its internet web site at www.sec.gov, and are available for
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inspection at the Commission's principal office in Washington, D.C. and at its
regional offices in New York, New York and Chicago, Illinois. The Purchasers
have relied on such information to the extent information is presented herein
concerning the Partnership, and expressly disclaim any responsibility for the
information included in such reports and extracted in this Offer.
Each Partnership was formed to engage 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 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 each Partnership during its public offering period
were used to acquire mini-storage facilities and joint venture interests in
mini-storage facilities.
Section 10. Conflicts of Interest. The Depositary is affiliated with the
Purchasers. Therefore, by virtue of this affiliation, the Depositary may have
inherent conflicts of interest in acting as Depositary for the Offer. The
Depositary's role is administrative only, however, and any conflict of interest
should not be deemed material to Unit holders.
Section 11. Certain Information Concerning the Purchasers. The Purchasers are
MACKENZIE PATTERSON, INC.; MP INCOME FUND 18, LLC; MP INCOME FUND 17, LLC; MP
FALCON FUND, LLC; MP FALCON GROWTH FUND, LLC; MP FALCON GROWTH FUND 2, LLC;
MACKENZIE FUND VI, L.P.; MACKENZIE PATTERSON SPECIAL FUND 3, L.P.; ACCELERATED
HIGH YIELD INSTITUTIONAL FUND I, LTD.; ACCELERATED HIGH YIELD INSTITUTIONAL
INVESTORS, LTD.; MACKENZIE SPECIFIED INCOME FUND, L.P.; AND MP DEWAAY FUND, LLC.
For information concerning the Purchasers and their respective principals,
please refer to Schedule I attached hereto. The principal business of each of
the Purchasers is investment in securities, particularly real estate-based
securities. The principal business address of each of the Purchasers is 1640
School Street, Moraga, California 94556.
The Purchasers have made binding commitments to contribute and have
available sufficient amounts of capital necessary to fund the acquisition of all
Units subject to the Offer, the expenses to be incurred in connection with the
Offer, and all other anticipated costs of the Purchasers. The Purchasers are not
public companies and have not prepared audited financial statements or financial
statements prepared in accordance with generally accepted accounting principles.
MacKenzie Patterson, Inc. and its affiliates have been in the business of
purchasing illiquid real estate securities, both in open market transactions and
by means of tender offers, since 1982 and have acquired more than $50 million in
such securities for affiliated portfolios during the last ten years.
Set forth below is summary of total assets, total net assets (that is,
total assets less total liabilities), total current assets (defined for this
purpose as cash, cash equivalents and marketable securities) for each of the
Purchasers (numbers are expressed in thousands of dollars and are rounded to the
nearest thousand) as of March 5, 2002:
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Total Total Net Current
Purchaser Assets Assets Assets
- --------- ------ --------- -------
MP FALCON GROWTH FUND, LLC 2,126 2,126 128
MP FALCON GROWTH FUND 2, LLC 4 4 1
MP FALCON FUND, LLC 1,714 1,714 (42)
MP INCOME FUND 18, LLC 1,957 1,957 1,126
MP INCOME FUND 17, LLC 2,354 2,354 198
MACKENZIE SPECIFIED INCOME
FUND, L.P. 2,043 2,037 144
MACKENZIE PATTERSON SPECIAL
FUND 3, L.P. 3,053 2,797 166
MP DEWAAY FUND, LLC 2,211 2,211 94
MACKENZIE FUND VI, L.P. 1,162 1,162 18
ACCELERATED HIGH YIELD
INSTITUTIONAL FUND I, LTD 1,027 997 114
ACCELERATED HIGH YIELD INSTITUTIONAL
INVESTORS, LTD. 2,058 2,050 126
MACKENZIE PATTERSON, INC. 8,510 228 353
TOTALS 28,219 19,637 2,246
Except as otherwise set forth herein, (i) neither the Purchasers nor, to the
best knowledge of the Purchasers, the persons listed on Schedule I nor any
affiliate of the Purchasers beneficially owns or has a right to acquire any
Units, (ii) neither the Purchasers nor, to the best knowledge of the Purchasers,
the persons listed on Schedule I nor any affiliate of the Purchasers, or any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the Units within the past 60 days, (iii) neither the
Purchasers nor, to the best knowledge of the Purchasers, the persons listed on
Schedule I nor any affiliate of the Purchasers has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies,
consents or authorizations, (iv) there have been no transactions or business
relationships which would be required to be disclosed under the rules and
regulations of the Commission between any of the Purchasers or, to the best
knowledge of the Purchasers, the persons listed on Schedule I, or any affiliate
of the Purchasers on the one hand, and the Partnership or its affiliates, on the
other hand, (v) there have been no contracts, negotiations or transactions
between the Purchasers, or to the best knowledge of the Purchasers any affiliate
of the Purchasers on the one hand, the persons listed on Schedule I, and the
Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets, (vi) no person listed on Schedule I has been convicted in a criminal
proceeding during the past five years (excluding traffic violations or similar
misdemeanors), and (vii) no person listed on Schedule I has been a party to any
judicial or administrative proceeding during the past five years (except for
matters dismissed without sanction or settlement) that resulted in a judgment,
decree, or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws. .
Section 12. Source of Funds. The Purchasers expect that approximately $37
million would be required to purchase all Units subject to the Offers, if
tendered, and an additional $50,000 may be required to pay related fees and
expenses. Based on the Purchasers' substantial experience in consummating tender
offers for real estate limited partnership securities without public trading
markets, however, the Purchasers believe that the potential response to this
offer will fall substantially short of the maximum Units subject to the Offer
and the actual amount necessary to fund all purchases will be substantially less
than $37 million. Nevertheless, the Purchasers have aggregate assets in excess
of $28 million and believe they have the capital, as well as access to other
capital and credit sources, sufficient to fund the entire offer amount. The
Purchasers expect to fund the purchase of Units from their current liquid
capital reserves. If the response to the offer should exceed the Purchasers'
aggregate current liquid assets, however, the Purchasers believe that capital
commitments from their current investors as well as existing working capital
credit lines would be adequate to fund all obligations under the Offers.
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Section 13. Conditions of the Offers. Notwithstanding any other term of the
Offers, the Purchasers shall not be required to accept for payment or to pay for
any Units tendered unless all authorizations or approvals of, or expirations of
waiting periods imposed by, any court, administrative agency or other
governmental authority necessary for the consummation of the transactions
contemplated by the Offers shall have been obtained or occurred on or before the
Expiration Date.
The Purchasers shall not be required to accept for payment or pay for
any Units not theretofore accepted for payment or paid for and may terminate or
amend any Offer as to such Units if, at any time on or after the date of the
Offer and before the Expiration Date, any of the following conditions exists
with respect to the Offer or the Partnership issuing the Units subject to the
Offer:
(a) a preliminary or permanent injunction or other order of any federal
or state court, government or governmental authority or agency shall have been
issued and shall remain in effect which (i) makes illegal, delays or otherwise
directly or indirectly restrains or prohibits the making of the Offer or the
acceptance for payment of or payment for any Units by the Purchasers, (ii)
imposes or confirms limitations on the ability of the Purchasers effectively to
exercise full rights of ownership of any Units, including, without limitation,
the right to vote any Units acquired by the Purchasers pursuant to the Offer or
otherwise on all matters properly presented to the Partnership's Unit holders,
(iii) requires divestiture by the Purchasers of any Units, (iv) causes any
material diminution of the benefits to be derived by the Purchasers as a result
of the transactions contemplated by the Offer or (v) might materially adversely
affect the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Purchasers or the
Partnership, in the reasonable judgment of the Purchasers;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental authority
or agency, other than the application of the waiting period provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which might,
directly or indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date hereof, in the business, properties, assets, liabilities,
financial condition, operations, results of operations or prospects of the
Partnership, which, in the reasonable judgment of the Purchasers, is or may be
materially adverse to the Partnership, or the Purchasers shall have become aware
of any fact that, in the reasonable judgment of the Purchasers, does or may have
a material adverse effect on the value of the Units;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchasers shall have
otherwise learned that (i) more than fifty percent of the outstanding Units have
been or are proposed to be acquired by another person (including a "group"
within the meaning of Section 13(d)(3) of the Exchange Act), or (ii) any person
or group that prior to such date had filed a Statement with the Commission
pursuant to Sections 13(d) or (g) of the Exchange Act has increased or proposes
to increase the number of Units beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchasers and
may be asserted by the Purchasers or may be waived by the Purchasers in whole or
in part at any time and from time to time prior to the Expiration Date in their
sole exercise of reasonable discretion, and the Offer will remain open for a
period of at least five business days following any such waiver of a material
condition. Any termination by the Purchasers concerning the events described
above will be final and binding upon all parties.
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Section 14. Certain Legal Matters.
General. Except as set forth in this Section 14, the Purchasers are not aware of
any filings, approvals or other actions by any domestic or foreign governmental
or administrative agency that would be required prior to the acquisition of
Units by the Purchasers pursuant to the Offers. Should any such approval or
other action be required, it is the Purchasers' present intention that such
additional approval or action would be sought. While there is no present intent
to delay the purchase of Units tendered pursuant to the Offers pending receipt
of any such additional approval or the taking of any such action, there can be
no assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to any Partnership's business, or that certain parts of a Partnership's
business might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchasers to elect to terminate an Offer without
purchasing Units thereunder. The Purchasers' obligation to purchase and pay for
Units is subject to certain conditions, including conditions related to the
legal matters discussed in this Section 14.
Antitrust. The Purchasers do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of Units
pursuant to the Offers.
Margin Requirements. The Units are not "margin securities" under the regulations
of the Board of Governors of the Federal Reserve System and, accordingly, such
regulations are not applicable to the Offers.
State Takeover Laws. A number of states have adopted anti-takeover laws which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business therein. These laws are directed at the acquisition of corporations and
not partnerships. The Purchasers, therefore, do not believe that any
anti-takeover laws apply to the transactions contemplated by the Offers.
Although the Purchasers have not attempted to comply with any state
anti-takeover statutes in connection with the Offers, the Purchasers reserve the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offers and nothing in this Offer nor any action taken in
connection herewith is intended as a waiver of such right. If any state anti-
takeover statute is applicable to the Offers, the Purchasers might be unable to
accept for payment or purchase Units tendered pursuant to the Offers or be
delayed in continuing or consummating the Offers. In such case, the Purchasers
may not be obligated to accept for purchase or pay for any Units tendered.
Section 15. Fees and Expenses. The Purchasers have retained MacKenzie Patterson,
Inc. to act as Depositary in connection with the Offers. The Purchasers will pay
the Depositary reasonable and customary compensation for its services in
connection with the Offers, plus reimbursement for out-of-pocket expenses, and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including liabilities under the federal securities laws.
The Purchasers will also pay all costs and expenses of printing, publication and
mailing of the Offers and all costs of transfer.
Section 16. Miscellaneous. The Offers are NOT BEING MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) UNIT HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OF The Offers OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION. THE PURCHASERS ARE NOT AWARE OF ANY JURISDICTION
WITHIN THE UNITED STATES IN WHICH THE MAKING OF The Offers OR THE ACCEPTANCE
THEREOF WOULD BE ILLEGAL.
No person has been authorized to give any information or to make any
representation on behalf of the Purchasers not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
April 5, 2002
MACKENZIE PATTERSON, INC.; MP INCOME FUND 18, LLC; MP INCOME FUND 17, LLC; MP
FALCON FUND, LLC; MP FALCON GROWTH FUND, LLC; MP FALCON GROWTH FUND 2, LLC;
MACKENZIE FUND VI, L.P.; MACKENZIE PATTERSON SPECIAL FUND 3, L.P.; ACCELERATED
HIGH YIELD INSTITUTIONAL FUND I, LTD.; ACCELERATED HIGH YIELD INSTITUTIONAL
INVESTORS, LTD.; MACKENZIE SPECIFIED INCOME FUND, L.P.; AND MP DEWAAY FUND, LLC
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SCHEDULE I
THE PURCHASERS AND THEIR PRINCIPALS
The Purchasers are MACKENZIE PATTERSON, INC.; MP INCOME FUND 18, LLC; MP
INCOME FUND 17, LLC; MP FALCON FUND, LLC; MP FALCON GROWTH FUND, LLC; MP FALCON
GROWTH FUND 2, LLC; MACKENZIE FUND VI, L.P.; MACKENZIE PATTERSON SPECIAL FUND 3,
L.P.; ACCELERATED HIGH YIELD INSTITUTIONAL FUND I, LTD.; ACCELERATED HIGH YIELD
INSTITUTIONAL INVESTORS, LTD.; MACKENZIE SPECIFIED INCOME FUND, L.P.; AND MP
DEWAAY FUND, LLC. MacKenzie Patterson, Inc., is a California corporation engaged
in a variety of investment and real estate related business activities,
including management of private investment funds such as the other Purchasers.
Each of the others purchasers is organized as either a limited partnership or a
limited liability company. The Manager of each of the limited liability company
Purchasers, and the General Partner of each of the limited partnership
purchasers, is MacKenzie Patterson, Inc. The names of the directors and
executive officers of MacKenzie Patterson, Inc. are set forth below. The
Purchasers have jointly made the offer and are jointly and severally liable for
satisfying its terms. Other than the foregoing, the Purchasers' relationship
consists of an informal agreement to share the costs associated with making the
offer and to allocate any resulting purchases of Units among them in such manner
and proportions as they may determine in the future. Each individual is a
citizen of the United States of America. Each of the entities, other than
ACCELERATED HIGH YIELD INSTITUTIONAL FUND I, LTD. and ACCELERATED HIGH YIELD
INSTITUTIONAL INVESTORS, LTD.;, is organized in California. ACCELERATED HIGH
YIELD INSTITUTIONAL FUND I, LTD. and ACCELERATED HIGH YIELD INSTITUTIONAL
INVESTORS, LTD. were organized in Florida.
MacKenzie Patterson, Inc.
C.E. Patterson is President and a director of MacKenzie Patterson, Inc. which
acts as manager and general partner of a number of real estate investment
vehicles, and has served in those positions since January 1989. In 1981, Mr.
Patterson founded Patterson Financial Services, Inc. (PFS) with Berniece A.
Patterson, as a financial planning firm, and he has served as its President
since that date. Mr. Patterson founded Patterson Real Estate Services, a
licensed California Real Estate Broker, in 1982. As President of PFS, Mr.
Patterson is responsible for all investment counseling activities. He supervises
the analysis of investment opportunities for the clients of the firm. Mr.
Patterson has served as president of Host Funding, Inc., an owner of lodging
properties, since December 1999. Mr. Patterson is also an officer and
controlling shareholder of Cal-Kan, Inc., an executive officer and controlling
shareholder of Moraga Partners, Inc., each a closely held real estate investment
company, and trustee of the Pat Patterson Western Securities, Inc. Profit
Sharing Plan. Mr. Patterson, through his affiliates, manages a number of
investment and real estate partnerships.
Berniece A. Patterson is a director of MacKenzie Patterson, Inc., and has
served in that capacity since January 1989. In 1981, Ms. Patterson and C.E.
Patterson established Patterson Financial Services, Inc. She has served as Chair
of the Board and Vice President of PFS since that date. Her responsibilities
with PFS include oversight of administrative matters and monitoring of past
projects underwritten by PFS. Since October 1990, Ms. Patterson has served as
Chief Executive Officer of Pioneer Health Care Services, Inc., and is
responsible for the day-to-day operations of its three nursing homes and over
300 employees.
Glen W. Fuller became senior vice president, chief operating officer, and a
director of MacKenzie Patterson, Inc. in May 2000. Prior to becoming senior vice
president, from August 1998 to April 2000, he was with MacKenzie Patterson, Inc.
as a portfolio manager and research analyst. Since December 1999, Mr. Fuller has
served as an officer and director of Host Funding, Inc. Prior to joining
MacKenzie Patterson, Inc., from May 1996 to July 1998, Mr. Fuller ran the over
the counter trading desk for North Coast Securities Corp. (previously Morgan
Fuller Capital Group) with responsibility for both the proprietary and retail
trading desks. Mr Fuller was also the registered options principal and
registered municipal bond principal for North Coast Securities, a registered
broker dealer. Mr. Fuller currently is a NASD - registered options principal,
registered bond principal, and holds his NASD Series 7, general securities
licence. Mr. Fuller has also spent time working on the floor of the New York
Stock Exchange as a trading clerk and on the floor of the Pacific Stock Exchange
in San Francisco as an assistant specialist for LIT America.
Christine Simpson is vice president of MacKenzie Patterson, Inc. and is
responsible for the day-to-day management of research, and securities purchases
and sales on behalf of the entities managed by MacKenzie Patterson, Inc. Ms.
Simpson has served in that position since January 1997, and prior to that time
was employed by MacKenzie Patterson, Inc. as a research analyst from January
1994 to December 1996. She joined MacKenzie Patterson, Inc. as an administrative
assistant in July 1990.