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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 1O-K

(Mark One)
/ x /Annual Report Pursuant to Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 [Fee required] for the fiscal year ended December 31, 1996.
or / /Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No fee required] for the transition period from
_____________ to _____________.

Commission File No. 2-83291.

DSI REALTY INCOME FUND VII, a California Limited Partnership (Exact name of
registrant as specified in governing instruments)

_________California___________________________95-3871044_____
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization identification number

37O1 Long Beach Boulevard, Long Beach, California 9O8O7
(Address of principal executive offices) (Zip Code)

Registrants telephone number, including area code-(562)595-7711

Securities registered pursuant to Section 12(b) of the Act: none.

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interests
(Class of Securities Registered)

Indicate by check mark, whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 9O days. Yes_X____. No______.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. /x/

The Registrant is a limited partnership and there is no voting stock. All
units of limited partnership sold to date are owned by non-affiliates of the
registrant. All such units were sold at $5OO.OO per unit.



DOCUMENTS INCORPORATED BY REFERENCE

Item 8. Registrant's Financial Statements for its fiscal year ended December 31,
1996, incorporated by reference to Form 10-K, Part II.

Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 1996, incorporated by reference to Form 10-K, Part III.

Item 12. Registration Statement on Form S-11, previously filed with the
Securities and Exchange Commission pursuant to Securities Act of 1933, as
amended, incorporated by reference to Form 10-K Part III.

Item 13. Registrant's Financial Statements for its fiscal year ended December
31, 1996, incorporated by reference to Form 10-K, Part III.

PART I

Item l. BUSINESS

Registrant, DSI Realty Income Fund VII (the "Partnership") is a
publicly-held limited partnership organized under the California Uniform Limited
Partnership Act pursuant to a Certificate and Agreement of Limited Partnership
(hereinafter referred to as "Agreement") dated August 1, 1983. The General
Partners are DSI Properties, Inc., a California corporation, Diversified
Investors Agency, a general partnership, whose current partners are Robert J.
Conway and Joseph W. Conway, brothers. The General Partners are affiliates of
Diversified Securities, Inc., a wholly-owned subsidiary of DSI Financial, Inc.
The General Partners provide similar services to other partnerships. Through its
public offering of Limited Partnership Units, Registrant sold twenty-four
thousand (24,000) units of limited partnership interests aggregating Twelve
Million Dollars ($12,000,000). The General Partners have retained a one percent
(l%) interest in all profits, losses and distributions (subject to certain
conditions) without making any capital contribution to the Partnership. The
General Partners are not required to make any capital contributions to the
Partnership in the future. Registrant is engaged in the business of investing in
and operating mini-storage facilities with the primary objectives of generating,
for its partners, cash flow, capital appreciation of its properties, and
obtaining federal income tax deductions so that during the early years of
operations, all or a portion of such distributable cash may not represent
taxable income to its partners. Funds obtained by Registrant during the public
offering period of its units were used to acquire six mini-storage facilities.
Registrant does not intend to sell additional limited partnership units. The
term of the Partnership is fifty years but it is anticipated that Registrant
will sell and/or refinance its properties prior to the termination of the
Partnership. The Partnership is intended to be self-liquidating and it is not
intended that proceeds from the sale or refinancing of its operating properties
will be reinvested. Registrant has no full time employees but shares one or more
employees with other publicly-held limited partnerships sponsored by the General
Partners. The General Partners are vested with authority as to the general
management and supervision of the business and affairs of Registrant. Limited
Partners have no right to participate in the management or conduct of such
business and affairs. An independent management company has been retained to
provide day-to-day management services with respect to all of the Partnership's
investment properties.

The average occupancy level for each of the Partnership's six properties
for the years ended December 31, 1996 and December 31, 1995 were as follows:


Location of Property Average Occupancy Average Occupancy Level
for the Level for the
Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995

Chico, California 85% 87%

Fairfield, California 87% 84%

Ft. Collins, Colorado 81% 81%

LaVerne, California 88% 84%

Littleton, Colorado 86% 86%

Riverside, California 83% 79%

The business in which the Partnership is engaged is highly competitive.
Each of its mini-storage facilities is located in or near a major urban area,
and accordingly, competes with a significant number of individuals and
organizations with respect to both the purchase and sale of its properties and
for rentals. Generally, Registrant's business is not affected by the change in
seasons.



Item 2. PROPERTIES

Registrant owns a fee interest in six mini-storage facilities, none of
which are subject to long-term indebtedness. Additional information is set forth
in Registrant's letter to its Limited Partners regarding the Annual Report,
attached hereto as Exhibit 2, and incorporated by this reference. The following
table sets forth information as of December 31, 1996 regarding properties owned
by the Partnership.

Location Size of Net Rentable No. of Completion
Parcel Area Rental Units Date

Chico, CA 1.97 acres 39,580 366 9/05/84

Fairfield, CA 2.29 acres 40,668 442 8/31/84

Ft.Collins, CO 2.49 acres 57,284 603 3/27/85

LaVerne, CA 2.78 acres 50,652 523 8/21/84

Riverside, CA 2.92 acres 60,011 567 12/12/84

Littleton, CO 3.071 acres 43,380 404 11/01/85

Item 3. LEGAL PROCEEDINGS

Registrant is not a party to any material pending legal proceedings.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

Registrant, a publicly-held limited partnership, sold 24,000 limited
partnership units during its offering and currently has 929 limited partners of
record. There is no intention to sell additional limited partnership units nor
is there a market for these units.

Average cash distributions of $10.00 per Limited Partnership Unit were
declared and paid each quarter for the years ended December 31, 1996 and 1995.


Item 6. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993, AND 1992
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

REVENUES $1,868,678 $1,857,684 $1,845,486 $1,824,454 $1,729,775

COSTS AND
EXPENSES 1,416,685 1,397,768 1,359,766 1,316,766 1,304,100
---------- ---------- ---------- ---------- ----------

NET
INCOME $ 451,993 $ 459,916 $ 485,720 $ 507,688 $ 425,675
========== ========== ========== ========== ==========

TOTAL
ASSETS $4,187,690 $4,697,315 $5,219,802 $5,586,962 $6,016,083
========== ========== ========== ========== ==========

NET CASH
PROVIDED BY
OPERATING
ACTIVITIES $ 980,482 $ 970,822 $ 992,128 $ 921,052 $ 878,099
========== ========== ========== ========== ==========

CASH
DISTRIBUTIONS
PER $500
LIMITED
PARTNERSHIP
UNIT $ 40.00 $ 40.00 $ 36.25 $ 35.00 $ 35.00
========== ========== ========== ========== ==========

NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 18.64 $ 18.97 $ 20.03 $ 20.94 $ 17.56
========== ========== ========== ========== ==========



Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

1996 COMPARED TO 1995

Total revenues increased from $1,857,684 in 1995 to $1,868,678 in 1996,
while total expenses increased from $1,397,768 to $1,416,685 resulting in a
decrease in net income from $459,916 to $451,993. The approximate $12,100 (0.7%)
increase in rental revenues can be attributed to higher average occupancy rates
partially offset by lower unit rental rates. Occupancy levels for the Partner-
ship's six mini-storage units averaged 85% for the year ended December 31, 1996,
and 83.5% for the year ended December 31, 1995. The Partnership is continuing
its advertising campaign to attract and keep new tenants in its various mini-
storage facilities. The approximate $19,000 (3.1%) increase in operating
expenses was due primarily to an increase in yellow pages advertising costs,
real estate tax expense and salaries and wages partially offset by a decrease
in office expenses. General and administrative expenses and the General
Partners' incentive management fee remained relatively constant.


1995 COMPARED TO 1994

Total revenues increased from $1,845,486 in 1994 to $1,857,684 in 1995,
while total expenses increased from $1,359,766 to $1,397,768 resulting in a
decrease in net income from $485,720 to $459,916. The approximate $8,000 (0.4%)
increase in rental revenues can be attributed to higher unit rental rates as
average occupancy rates remained relatively constant at 83.5% and 83.3% for the
years ended December 31, 1995 and 1994, respectively. The approximate
$28,000 (4.8%) increase in operating expenses was due primarily to an increase
in maintenance and repair, salaries and wages and office expense partially
offset by a decrease in yellow page advertising costs. General and
administrative expense remained relatively constant. The General Partners'
incentive management fee decreased approximately $3,000 (3.1%) as a result of
the decrease in cash available for distribution on which this fee is based.


LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities increased by approximately
$9,700 (1%) in 1996 compared to 1995 primarily due to the increase in
customer deposits and other liabilities partially offset by decreases in
net income and incentive management fee payable to general partners. Net cash
provided by operating activities decreased by approximately $21,000 (2.1%) in
1995 compared to 1994 primarily due to the decrease in net income and customer
deoisuts and other liabilities.

Cash used in financing activities, as set forth in the statements of cash
flows, has consisted solely of cash distributions to partners. The General
Partners determined that effective with the fourth quarter 1994 distribution
which was paid on January 15, 1995, distributions to the limited partners would
be increased to an amount which yields an 8% annual return on the capital
contributed by the limited partners from an annual return of 7% paid in the
prior years.

Cash used in investing activities, as set forth in the statements of cash
flows, has consisted solely of acquisitions of equipment for the Partnership's
mini-storage facilities. The Partnership has no material commitments for capital
expenditures.

The General Partners plan to continue their policy of funding the
continuing improvement and maintenance of Partnership properties with cash
generated from operations. The Partnership's financial resources appear to be
adequate to meet its needs for the next twelve months.

The General Partners are not aware of any environmental problems which
could have an adverse material effect upon the financial position of the
Partnership.



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Attached hereto as Exhibit l is the information required to be set forth as
Item 8, Part II hereof.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER

The General Partners of Registrant are the same as when the Partnership was
formed, i.e., DSI Properties, Inc., a California corporation, and Diversified
Investors Agency. As of December 31, 1996, Messrs. Robert J. Conway and Joseph
W. Conway, each of whom own approximately 45.43% of the issued and outstanding
capital stock of DSI Financial, Inc., a California corporation, together with
Mr. Joseph W. Stok, currently comprise the entire Board of Directors of DSI
Properties, Inc.

Mr. Robert J. Conway is 63 years of age and is a licensed California real
estate broker, and since 1965 has been President and a member of the Board of
Directors of Diversified Securities, Inc., and since 1973 President, Chief
Financial Officer and a member of the Board of Directors of DSI Properties, Inc.
Mr. Conway received a Bachelor of Science Degree from Marquette University with
majors in Corporate Finance and Real Estate.

Mr. Joseph W. Conway is age 67 and has been Executive Vice President,
Treasurer and a member of the Board of Directors of Diversified Securities, Inc.
since 1965 and since 1973 the Vice President, Treasurer and member of the Board
of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Arts
Degree from Loras College with a major in Accounting.

Mr. Joseph W. Stok is age 73 and has been a member of the Board of
Directors of DSI Properties, Inc. since 1994, a Vice President of Diversified
Securities, Inc. since 1973, and an Account Executive with Diversified
Securities, Inc. since 1967.

Item 11. EXECUTIVE COMPENSATION (MANAGEMENT REMUNERATION AND TRANSACTIONS)

The information required to be furnished in Item 11 of Part III is
contained in Registrant's Financial Statements for its fiscal year ended
December 31, 1996, which together with the report of its independent auditors,
Deloitte & Touche LLP, is attached hereto as Exhibit 1 and incorporated herein
by this reference. In addition to such information: (a) No annuity, pension or
retirement benefits are proposed to be paid by Registrant to any of the General
Partners or to any officer or director of the corporate General Partner;

(b) No standard or other arrangement exists by which directors of the
Registrant are compensated;

(c) The Registrant has not granted any option to purchase any of its
securities; and

(d) The Registrant has no plan, nor does the Registrant presently propose
a plan, which will result in any remuneration being paid to any
officer or director upon termination of employment.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 1996, no person of record owned more than 5% of the
limited partnership units of Registrant, nor was any person known by Registrant
to own of record and beneficially, or beneficially only, more than 5% thereof.
The balance of the information required to be furnished in Item 12 of Part III
is contained in Registrant's Registration Statement on Form S-11, previously
filed pursuant to the Securities Act of 1933, as amended, and which is
incorporated herein by this reference. The only change to the information
contained in said Registration Statement on Form S-11 is the fact that Messrs.
Benes and Blakley have retired and Messrs. Robert J. Conway and Joseph W. Conway
equity interest in DSI Financial, Inc., parent of DSI Properties, Inc., has
increased. Please see information contained in Item 10 hereinabove.



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be furnished in Item 13 of Part III is
contained in Registrant's Financial Statements for its fiscal year ended
December 31, 1996, attached hereto as Exhibit l and incorporated herein by this
reference.

PART IV

Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(l) Attached hereto and incorporated herein by this reference as Exhibit
l are Registrant's Financial Statements and Supplemental Schedule for
its fiscal year ended December 31, 1996, together with the reports of
its independent auditors, Deloitte & Touche LLP. See Index to
Financial Statements and Supplemental Schedule.

(a)(2) Attached hereto and incorporated herein by this reference as Exhibit
2 is Registrant's letter to its Limited Partners regarding its Annual
Report for its fiscal year ended December 31, 1996.

(b) No reports on Form 8K were filed during the fiscal year ended December
31, 1996.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

DSI REALTY INCOME FUND VII
by: DSI Properties, Inc., a
California corporation, as
General Partner



By_____________________________ Dated: March 28, 1997
ROBERT J. CONWAY, President
(Chief Executive Officer, Chief
Financial Officer, and Director)



By____________________________ Dated: March 28, 1997
JOSEPH W. CONWAY (Executive
Vice President and Director)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

DSI REALTY INCOME FUND VII
by: DSI Properties, Inc., a
California corporation, as
General Partner



By:__________________________ Dated: March 28, 1997
ROBERT J. CONWAY, President,
Chief Executive Officer, Chief
Financial Officer, and Director



By___________________________ Dated: March 28, 1997
JOSEPH W. CONWAY
(Executive Vice President
and Director)



DSI REALTY INCOME FUND VII

CROSS REFERENCE SHEET

FORM 1O-K ITEMS TO ANNUAL REPORT


PART I, Item 3. There are no legal proceedings pending or threatened.

PART I, Item 4. Not applicable.

PART II, Item 5. Not applicable.

PART II, Item 6. The information required is contained in Registrant's Financial
Statements for its fiscal year ended December 31, 1996, attached as Exhibit l to
Form 10-K.

PART II, Item 8. See Exhibit l to Form 10-K filed herewith.

PART II, Item 9. Not applicable.



EXHIBIT l

DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------

1996 1995 1994 1993 1992

REVENUES $1,868,678 $1,857,684 $1,845,486 $1,824,454 $1,729,775

COSTS AND EXPENSES 1,416,685 1,397,768 1,359,766 1,316,766 1,304,100
---------- ---------- ---------- ---------- ----------
NET INCOME $ 451,993 $ 459,916 $ 485,720 $ 507,688 $ 425,675
========== ========== ========== ========== ==========
TOTAL ASSETS $4,187,690 $4,697,315 $5,219,802 $5,586,962 $6,016,083
========== ========== ========== ========== ==========
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 980,482 $ 970,822 992,128 $ 921,052 $ 878,099
========== ========== ========== ========== ==========
CASH DISTRIBUTIONS
PER $500 LIMITED
PARTNERSHIP UNIT $ 40.00 $ 40.00 $ 36.25 $ 35.00 $ 35.00
========== ========== ========== ========== ==========
NET INCOME PER
LIMITED
PARTNERSHIP UNIT $ 18.64 $ 18.97 $ 20.03 $ 20.94 $ 17.56
========== ========== ========== ========== ==========



The following are reconciliations between the operating results and partners'
equity per the financial statements and the Partnership's income tax return for
the year ended December 31, 1996.


Operating Partners'
Results Equity

Per financial statements $ 451,993 $ 3,620,002
Excess financial statement depreciation 106,999 406,852
Accrued property taxes (5,000) (75,000)
Deferred rental revenues 67,065
Accrued revenue 8,575 8,575
Accrued incentive management fees 221,117
Fixed asset adjustments 218,274
Accrued distributions to partners 242,415
----------- -----------
Per Partnership income tax return $ 562,567 $ 4,709,300
=========== ===========
Net taxable income per $500
limited partnership unit $ 23.44
===========


DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)


INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE


Page


FINANCIAL STATEMENTS:

Independent Auditors' Report F-1

Balance Sheets at December 31, 1996 and 1995 F-2

Statements of Income for the Three Years Ended December 31, 1996 F-3

Statements of Changes in Partners' Equity for the Three Years Ended
December 31, 1996 F-4

Statements of Cash Flows for the Three Years Ended December 31, 1996 F-5

Notes to Financial Statements F-6

SUPPLEMENTAL SCHEDULE:

Independent Auditors' Report F-8

Schedule XI - Real Estate and Accumulated Depreciation F-9

SCHEDULES OMITTED:

Financial statements and schedules not listed above are omitted because of the
absence of conditions under which they are required or because the
information is included in the financial statements named above, or in the
notes thereto.



INDEPENDENT AUDITORS' REPORT
To the Partners of
DSI Realty Income Fund VII:

We have audited the accompanying balance sheets of DSI Realty Income Fund VII, a
California Real Estate Limited Partnership (the "Partnership") as of December
31, 1996 and 1995, and the related statements of income, changes in partners'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Partner
ship's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of DSI Realty Income Fund VII at December 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.

January 31, 1997

DELOITTE & TOUCHE LLP
LONG BEACH, CALIFORNIA



DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------


ASSETS 1996 1995

CASH AND CASH EQUIVALENTS $ 481,301 $ 470,517

PROPERTY, At cost (net of accumulated
depreciation of $6,116,552
in 1996 and $5,596,143 in 1995)
(Notes 1, 2 and 3) 3,674,729 4,195,138

OTHER ASSETS 31,660 31,660
----------- -----------
TOTAL $ 4,187,690 $ 4,697,315
=========== ===========

LIABILITIES AND PARTNERS' EQUITY

LIABILITIES:
Distribution due partners (Note 4) $ 242,424 $ 242,424
Incentive management fee payable to
general partners (Note 4) 221,117 230,287
Property management fees payable (Note 1) 8,932 7,833
Customer deposits and other liabilities 95,195 79,064
----------- -----------
Total liabilities 567,688 559,608
----------- -----------
PARTNERS' EQUITY (Notes 1 and 4):
General partners (71,568) (66,391)
Limited partners (24,000 limited
partnership units outstanding
at December 31, 1996 and 1995) 3,691,570 4,204,098
------------ -----------
Total partners' equity 3,620,002 4,137,707
------------ -----------
TOTAL $ 4,187,690 $ 4,697,315
============ ===========

See accompanying notes to financial statements.



DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

STATEMENTS OF INCOME
THREE YEARS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------


1996 1995 1994

REVENUES:
Rental revenues $1,856,287 $1,844,164 $1,836,372
Interest income 12,391 13,520 9,114
---------- ---------- ----------
Total revenues 1,868,678 1,857,684 1,845,486
---------- ---------- ----------
EXPENSES:
Depreciation (Note 2) 520,408 523,607 509,306
Operating expenses (Note 1) 632,140 613,328 585,686
General and administrative 170,643 166,268 167,443
General partners' incentive
management fee (Note 4) 93,494 94,565 97,331
---------- ---------- ----------
Total expenses 1,416,685 1,397,768 1,359,766
---------- ---------- ----------
NET INCOME $ 451,993 $ 459,916 $ 485,720
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
Limited partners $ 447,473 $ 455,317 $ 480,863
General partners 4,520 4,599 4,857
---------- ---------- ----------
TOTAL $ 451,993 $ 459,916 $ 485,720
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT (Notes 2 and 4) $ 18.64 $ 18.97 $ 20.03
========== ========== ==========

See accompanying notes to financial statements.



DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

STATEMENTS OF CHANGES IN PARTNERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------


General Limited
Partners Partners Total


BALANCE AT JANUARY 1, 1994 (57,362) 5,097,921 5,040,559

Net income 4,857 480,863 485,720

Distributions (8,788) (870,000) (878,788)
------- ---------- -----------
BALANCE AT DECEMBER 31, 1994 (61,293) 4,708,784 4,647,491

Net income 4,599 455,317 459,916

Distributions (9,697) (960,003) (969,700)
------- ----------- -----------
BALANCE AT DECEMBER 31, 1995 ($66,391) $ 4,204,098 $ 4,137,707

Net income 4,520 447,473 451,993

Distributions (9,697) (960,001) (969,698)
------- ----------- -----------
BALANCE DECEMBER 31, 1996 $(71,568) $ 3,691,570 $ 3,620,002
========= =========== ===========

See accompanying notes to financial statements.


DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------


1996 1995 1994

CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 1,856,287 $ 1,844,164 $ 1,836,372
Cash paid to suppliers and employees (888,196) (886,862) (853,358)
Interest received 12,391 13,520 9,114
----------- ----------- ------------
Net cash provided by operating
activities 980,482 970,822 992,128

CASH FLOWS FROM FINANCING ACTIVITIES -
Distributions to partners (969,698) (969,700) (848,484)

CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to property (17,102) (18,067)
----------- ----------- ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS 10,784 (15,980) 125,577

CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 470,517 486,497 360,920
----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 481,301 $ 470,517 $ 486,497
=========== =========== ============
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 451,993 $ 459,916 $ 485,720
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 520,408 523,607 509,306
Changes in assets and liabilities:
Other assets 1,499
Incentive management fee payable to
general partners (9,170) (2,439) (10,061)
Property management fees payable 1,119 738 (1,336)
Customer deposits and other
liabilities 16,132 (11,000) 7,000
----------- ----------- ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 980,482 $ 970,822 $ 992,128
=========== =========== ============

See accompanying notes to financial statements.


DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

NOTES TO FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996


1. GENERAL


DSI Realty Income Fund VII, a California Real Estate Limited Partnership
(the "Partnership"), has two general partners (DSI Properties, Inc. and
Diversified Investors Agency) and limited partners owning 24,000 limited
partnership units that were purchased for $500 a unit. The general
partners have made no capital contribution to the Partnership and are
not required to make any capital contribution in the future. The
Partnership has a maximum life of 50 years and was formed on August 1,
1983 under the California Uniform Limited Partnership Act for the
primary purpose of acquiring and operating real estate.

The Partnership has acquired six mini-storage facilities located in
Chico, Fairfield, La Verne, and Riverside, California and Ft. Collins
and Littleton, Colorado. All facilities were purchased from Dahn
Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn
is affiliated with other partnerships in which DSI Properties, Inc. is a
general partner. The mini-storage facilities are operated for the
Partnership by Dahn under various agreements that are subject to renewal
annually. Under the terms of the agreements, the Partnership is required
to pay Dahn a property management fee equal to 5% of gross revenue from
opera tions, as defined.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Cash and Cash Equivalents - The Partnership classifies its short-term
investments purchased with an original maturity of three months or less
as cash equivalents.

Property and Depreciation - Property is recorded at cost and is
comprised primarily of mini-storage facilities. Depreciation is provided
for using the straight-line method over an estimated useful life of 15
years for the facilities.

Income Taxes - No provision has been made for income taxes in
the accompanying financial statements. The taxable income or loss
of the Partnership is allocated to each partner in accordance with the
terms of the Agreement of Limited Partnership. Each partner's tax
status, in turn, determines the appropriate income tax for its
allocated share of the Partnership taxable income or loss. The net
difference between the bases of the Partnership's assets and liabilities
for federal income tax purposes and as reported for financial statement
purpose is $1,089,298.

Revenues - Rental revenue is recognized using the accrual method
based on contractual amounts provided for in the lease agreements,
which approximates recognition on a straight line basis. The term
of the lease agreements is usually less than one year.

Net Income per Limited Partnership Unit - Net income per limited
partnership unit is computed by dividing net income allocated to the
limited partners by the weighted average number of limited partnership
units outstanding during each year (24,000 in 1996, 1995 and 1994).

Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires the Partnership's
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


Impairment of Long-Lived Assets - The Partnership regularly reviews
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not
be recoverable. If the sum of the expected future cash flow is less
than the carrying amount of the asset, the Partnership recognizes
an impairment loss. As of December 31, 1996, no impairment losses
were required.

3. PROPERTY


At December 31, 1996 and 1995, the total cost of property and accumulated
depreciation are as follows:


1996 1995
Land $ 2,089,800 $ 2,089,800
Buildings and improvements 7,701,481 7,701,481
----------- -----------

Total 9,791,281 9,791,281
Less accumulated depreciation (6,116,552) (5,596,143)
----------- ----------

Property, net $ 3,674,729 $ 4,195,138
=========== ===========

4. ALLOCATION OF PROFITS AND LOSSES


Under the Agreement of Limited Partnership, the general partners are to
be allocated 1% of the net profits or losses from operations and the
limited partners are to be allocated the balance of the net profits or
losses from operations in proportion to their limited partnership
interests. The general partners are also entitled to receive a
percentage, based on a predetermined formula, of any cash distribution
from the sale, other disposition, or refinancing of a real estate
project.

In addition, the general partners are entitled to receive an incentive
management fee for supervising the operations of the Partnership. The
fee is to be paid in an amount equal to 9% per annum of the cash
available for distribution on a cumulative basis.



INDEPENDENT AUDITORS' REPORT
To the Partners of
DSI Realty Income Fund VII:

We have audited the financial statements of DSI Realty Income Fund VII (the
"Partnership") as of December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996, and have issued our report thereon dated
January 31, 1997; such report is included elsewhere in this Form 10-K. Our
audits also included the financial statements schedule of DSI realty Income Fund
VII, listed in Item 14. This financial statement schedule is the responsibility
of the Partnership's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.




January 31, 1997



DSI REALTY INCOME FUND VII
(A California Real Estate Limited Partnership)

REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------





Costs Capitalized
Initial Cost to Subsequent to Gross Amount at Which Carried
Partnership Acquisition at Close of Period
------------------- ----------------- -----------------------------
Buildings Buildings Date
and Improve- Carrying and Accum. of Date
Description Encumbrances Land Improvements ments Costs Land Improvements Total Deprec. Const. Acq. Life

MINI-U-STORAGE


Chico, CA None $209,700 $ 933,155 $ 5,888 $209,700 $ 939,043 $1,148,743 770,380 09/84 12/83 15 Yrs
Fairfield, CO None 264,500 1,268,897 6,659 264,500 1,275,556 1,540,056 1,054,139 08/84 01/84 15 Yrs
Fort Collins, CO None 375,100 1,389,919 15,686 375,100 1,405,605 1,780,705 1,133,452 12/84 05/84 15 Yrs
Riverside, CA None 356,000 1,381,634 18,137 356,000 1,399,771 1,755,771 1,107,477 12/84 06/84 15 Yrs
La Verne, CA None 453,250 1,243,972 6,127 453,250 1,250,099 1,703,349 978,542 03/85 08/84 15 Yrs
Littleton, CO None 431,250 1,423,813 7,594 431,250 1,431,407 1,862,657 1,072,562 10/85 05/85 15 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$2,089,800 $7,641,390 $ 60,091 $2,089,800 $7,701,481 $ 9,791,281 $6,116,552
========== ========== ======== ========== ========== =========== ==========


Real Estate Accumulated
at Cost Depreciation

Balance at January 1, 1994 $ 9,756,112 $4,563,230
Additions 18,067 509,306
----------- ----------
Balance at December 31, 1994 9,774,179 5,072,536
Additions 17,102 523,607
----------- ----------
Balance at December 31, 1995 9,791,281 5,596,143
Additions 520,408
----------- ----------
Balance at December 31, 1996 $ 9,791,281 $6,116,552
=========== ==========

The total cost at the end of the period for Federal income tax purposes was
approximately $9,992,000.



EXHIBIT 2

March 28, 1997

ANNUAL REPORT TO LIMITED PARTNERS OF

DSI REALTY INCOME FUND VII

Dear Limited Partner:

This report contains the Partnership's balance sheets as of December 31,
1996 and 1995, and the related statements of income, changes in partners' equity
and cash flows for each of the three years in the period ended December 31, 1996
accompanied by an independent auditors' report. The Partnership owns six
mini-storage facilities. The Partnership's properties were each purchased for
all cash and funded solely from subscriptions for limited partnership interests
without the use of mortgage financing.

Your attention is directed to the section entitled Management's Discussion
and Analysis of Financial Condition and Results of Operations for the General
Partners' discussion and analysis of the financial statements and operations of
the Partnership.

Average occupancy levels for each of the Partnership's six properties for
the years ended December 31, 1996 and December 31, 1995 were as follows:

Location of Property Average Occupancy Average Occupancy
Levels for the Levels for the
Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995

Chico, California 85% 87%

Fairfield, California 87% 84%

Ft. Collins, Colorado 81% 81%

LaVerne, California 88% 84%

Littleton, Colorado 86% 86%

Riverside, California 83% 79%

We will keep you informed of the activities of DSI Realty Income Fund VII
as they develop. If you have any questions, please contact us at your
convenience at (562) 424-2655.

If you would like a copy of the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1996 which was filed with the Securities and
Exchange Commission (which report includes the enclosed Financial Statements),
we will forward a copy of the report to you upon written request.

Very truly yours,

DSI REALTY INCOME FUND VII
By: DSI Properties, Inc.



By___________________________
ROBERT J. CONWAY, President