-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q0a6kyhnrLRTxHGngcU1h7IlV06hS/zksnXBlKOPtbp9aVsfRPfZASMTpXIFN5C7 HwaOnIDkKEpXTNCUlwiNCA== 0000318835-01-500014.txt : 20010517 0000318835-01-500014.hdr.sgml : 20010517 ACCESSION NUMBER: 0000318835-01-500014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DSI REALTY INCOME FUND XI CENTRAL INDEX KEY: 0000844048 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330324161 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18286 FILM NUMBER: 1641351 BUSINESS ADDRESS: STREET 1: 3701 LONG BEACH BLVD CITY: LONG BEACH STATE: CA ZIP: 90807 BUSINESS PHONE: 2135957711 MAIL ADDRESS: STREET 1: 6700 E. PACIFIC COAST HWY. STREET 2: P.O. BOX 357 CITY: LONG BEACH STATE: CA ZIP: 90801 10-K 1 d10k0011.txt DSI REALTY INCOME FUND XI SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-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, 2000. 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. 33-26038. DSI REALTY INCOME FUND XI, a California Limited Partnership (Exact name of Registrant as specified in governing instruments) __________California_________________________33-0324161_______ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification number) 6700 E. Pacific Coast Hwy., Long Beach, California 90803 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code-(562)493-8881 Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units. 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 shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 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 are owned by non-affiliates of the Registrant. All units sold to date were sold at $500.00 per unit. DOCUMENTS INCORPORATED BY REFERENCE Item 8. Registrant's Financial Statements for its fiscal year ended December 31, 2000, incorporated by reference to Form 10-K, Part II. Item 11. Registrant's Financial Statements for its fiscal year ended December 31, 2000, incorporated by reference to Form 10-K, Part III. Item 12. Registration Statement on Form S-11, as amended, previously filed with the Securities and Exchange Commission pursuant to the 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, 2000, together with report of independent public accountants, incorporated by reference to Form 10-K, Part III. PART I Item l. BUSINESS Registrant (the "Partnership") is a publicly held limited partnership organized under the California Uniform Limited Partnership Act pursuant to Agreement of Limited Partnership (the "Agreement") dated December 7, 1988. The General Partners are DSI Properties, Inc., a California corporation, ROBERT J. CONWAY and JOSEPH W. CONWAY. The General Partners are affiliates of the Selling Agent, Diversified Securities, Inc., a wholly-owned subsidiary of DSI Financial, Inc. The General Partners provide similar services to other partnerships. The Partnerships's public offering was completed on February 12, 1991, with 20,000 Units ($10,000,000) of limited partnership interests having been subscribed for. The General Partners have retained a l% interest in all profits, losses and distributions (subject to certain conditions) without making any capital contributions to the Partnership. The General Partners are not required to make any contributions to capital in the future. The General Partners and the Partnership have obtained a ruling from the Internal Revenue Service, that under present provisions of the Internal Revenue Code, current Treasury Regulations thereunder and the interpretations thereof by the Service and the courts, the Partnership should be treated for federal income tax purposes as a partnership and not as an association, which is taxable as a corporation. Such ruling was based upon certain representations contained in the ruling request. The Partnership 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 in order to shelter a portion of cash distributed from taxation. The Partnership has interests in joint ventures which purchased four mini-storage facilities. See discussion under Item 2 - Properties for further information. The Partnership does not intend to sell additional limited partnership interests in the future. The term of the Partnership is fifty years, however, it is anticipated that all properties will be sold and/or refinanced prior thereto. The Partnership is intended to be self-liquidating and it is not anticipated that proceeds from the sale or refinancing of its operating properties will be reinvested. The Registrant has no full time employees other than on-site managers at each mini-storage facility. However, the Partnership shares the expenses of one or more employees with its various affiliated Limited Partnerships. The general management and supervision of the business and affairs of the Registrant is vested exclusively in the General Partners. Limited Partners have no right to participate in the management or conduct of the Registrant's 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 levels for each of the Partnership's four properties for the years ended December 31, 2000 and December 31, 1999 were as follows: Location of Property Average Occupancy Average Occupancy for the Level for the Year Ended Year Ended Dec. 31, 2000 Dec. 31, 1999 Whittier, CA(1) 89% 88% Bloomingdale, IL(2) 83% 84% Edgewater, NJ(3) 86% 84% Sterling Heights, MI(4) 85% 84% (1) The Partnership owns a 90% interest in this property. (2) The Partnership owns a 90% interest in this property. (3) The Partnership owns an 85% interest in this property. (4) The Partnership owns a 75% interest in this property. 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, will compete with a significant number of individuals and organizations with respect to both the purchase and sale of its properties and for rentals. Item 2. PROPERTIES Location Size of Net Rentable No. of Completion Parcel Area Rental Date Whittier, CA(1) 3.92 acres 60,249 513 3/90 Bloomingdale, IL(2) 3.542 acres 60,624 571 1/31/91 Edgewater,NJ(2) 4.118 acres 52,940 447 8/21/90 Sterling Heights, MI(4) 3.76 acres 58,198 515 7/17/91 (1) The Partnership owns a 90% interest in this property. (2) The Partnership owns a 90% interest in this property. (3) The Partnership owns an 85% interest in this property. (4) The Partnership owns a 75% interest in this property. Item 3. LEGAL PROCEEDINGS Registrant is not a party to any material pending 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, had approximately 536 Limited Partners at December 31, 2000. The Registrant completed its public offering of limited partnership Units. There is no public market for the resale of these Units. Average cash distributions of $13.75 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2000 and $12.50 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 1999 and $13.75 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 1998. It is Registrant's expectations that distributions will continue to be paid in the future. Item 6. SELECTED FINANCIAL DATA DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) - ---------------------------------------------- SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 2000 - ----------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $2,181,934 $2,108,447 $1,990,616 $1,903,385 $1,829,360 TOTAL EXPENSES 1,262,117 1,238,034 1,108,711 1,115,758 1,068,283 MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (194,204) (186,102) (179,154) (171,956) (168,304) --------- --------- --------- --------- --------- NET INCOME $ 725,613 $ 684,311 $ 702,751 $ 615,671 $ 592,773 ========= ========= ========= ========= ========= TOTAL ASSETS $5,485,221 $5,841,106 $6,152,614 $6,517,581 $6,709,600 ========== ========== ========== ========== ========== CASH FLOWS FROM: OPERATING $1,287,282 $1,202,051 $1,212,360 $1,095,449 $1,097,502 INVESTING (18,864) - (53,786) - (13,634) FINANCING (1,305,315) (1,196,203) (1,265,013) ( 980,036) ( 976,385) NET INCOME PER LIMITED PARTNERSHIP UNIT $ 35.92 $ 33.87 $ 34.79 $ 30.48 $ 29.34 ======== ========= ======== ======== ======== CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 55.00 $ 50.00 $ 55.00 $ 40.00 $ 40.00 ======== ======== ======= ======== ======== Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Partnership holds a 90% interest in a joint venture that owns a mini-storage facility in Whittier, California, an 85% interest in an operating mini-storage facility in Edgewater Park, New Jersey, a 90% interest in an operating mini- storage facility in Bloomingdale, Illinois and a 75% interest in an operating facility in Sterling Heights, Michigan. Occupancy levels for the Partnership's four mini-storage facilities on December 31, 2000, were: Whittier 89%, Edge- water Park 85%, Bloomingdale 85% and Sterling Heights 85%. RESULTS OF OPERATIONS Total revenues increased from $2,101,733 in 1999, to $2,174,004 in 2000, total expenses increased from $1,238,034 to $1,262,117, other income incresed from $6,714 to $7,930 and minority interest in real estate joint ventures increased from $186,102 to $194,204. As a result, net income increased from $684,311 to $725,163. The approximately $72,300 (3.4%) increase in rental revenues can be attributed to higher occupancy rates. Occupancy levles for the Partnership's four mini-storage facilities averaged 86.0% for the year ended December 31, 1999. Operating expenses decreased approximately $23,500 (3.9%) primarily as a result of decreases in yellow pages advertising costs, repairs and mainten- ance, real estate tax and power and sweeping expenses, partially offset by an increase in salaries and wages and workers compensation insurance expenses. Power and sweeping expenses decreased as the substantial snow removal costs in the prior year assoiated with the blizzard that hit Illinois and Michigan, where two of the Partnership's properties are located, did not materialize in the current year. General and administrative expenses increased approximately $8,400 as a result of relatively insignificant fluctuations in various expense accounts. Incentive management fees, which are based on distributions paid to limited partners, increased as a result of the increase in distributions to limited partners. Property management fees, which are computed as a percentage of rental revenues, increased as a result of the increase in rental revenue. 1999 COMPARED TO 1998 Total revenues increased from $1,971,279 in 1998 to $2,101,733 in 1999, total expenses increased from $1,108,711 to $1,238,034, other income decreased from $19,337 to $6,714 and minority interest in real estate joint ventures increased from $179,154 to $186,102. As a result net income decreased from $702,751 to $684,311. The approximately $130,500 (6.6%) increase in rental revenues can be attributed to higher unit rental rates as average occupancy levels decreased from 87.0% for the year ended December 31, 1998 to 85.1% for 1999. Operating expenses increased approximately $109,100 (22.4%) primarily as a result of increases in yellow pages and other advertising costs, repairs and maintenance, salaries and wages, workers compensation insurance and power and sweeping expenses. Power and sweeping expenses increased as result of the substantial snow removal costs associated with the blizzard that hit Illinois and Michigan where two of the Partnership's properties are located. General and administra- tive expenses remained relatively constant. Incentive management fees, which are based on distributions paid to limited partners, decreased as a result of the decrease in distributions to limited partners. Property management fees, which are computed as a percentage of rental revenues, increased approximately $26,100 (26.1%). Operating expenses consists mainly of expenses such as yellow pages and other advertising costs, utilities, repair and maintenance, real estate taxes, salaries and wages and their related expenses. General and administrative expenses consist mainly of expenses such as legal and professional, office supplies, postage, accounting services and computer expenses. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities increased by approximately $85,200 (7.1%) in 2000 as a result of the increase in net income, depreciation and customer deposits and other liaabilities. Net cash provided by operating activities decreased by approximately $10,300 (0.9%) in 1999 compared to 1998 primarily as a result of the decrease in net income. Cash used in financing activities consisted of cash distributions to partners in 2000, 1999 and 1998. Additionally, cash distributions were paid to the minority interests in the real estate joint ventures in 2000, 1999, and 1998. In December 1998, 1999 and 2000, the General Partners declared and paid a special distribution equal to 3%, 2% and 3% respectively of capital contributed by the limited partners. The General Partners determined that effective with the first quarter 1998 distribution, which was paid on April 15, 1998, distributions to 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 year. Cash used in investing activities, as set forth in the statement of cash flows, consists of acquisitions of equipment for the Partnership's mini storage facilities in 2000. 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 the Partnership properties with cash generated from operations. The Partnership anticipates that cash flows generated from operations of the Partnership's rental real estate operations will be sufficient to cover operating expenses and distributions for the next twelve months and beyond. The General Partners are not aware of any environmental problems which could have a material adverse effect upon the financial position of the Partnership. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for the years ended December 31, 2000 and 1999 was as follows: 2000 QUARTER ENDED ------------------ March 31, June 30, September 30, December 31, Total revenues $520,828 $537,386 $568,437 $547,353 Income before minority interest in joint venture 213,350 229,668 242,713 234,086 Net income 213,350 229,668 94,659 187,936 Net income per limited partnership unit $ 10.56 $ 11.37 $ 4.69 $ 9.30 Weighted average limited partnership unit 20,000 20,000 20,000 20,000 1999 QUARTER ENDED ------------------ March 31, June 30, September 30, December 31, Total revenues $524,347 $525,569 $522,629 $529,188 Income before minority interest in joint venture 234,334 209,600 249,875 176,604 Net income 234,334 209,600 112,221 128,156 Net income per limited partnership unit $ 11.60 $ 10.38 $ 5.55 $ 6.34 Weighted average limited partnership unit 20,000 20,000 20,000 20,000 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. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER The General Partners of Registrant are the same as when the Partnership was formed, i.e., DSI Properties, Inc., a California corporation, Robert J. Conway and Joseph W. Conway, brothers. As of December 31, 2000, Messrs. Robert J. Conway and Joseph W. Conway, each of whom own approximately 48.4% of the issued and outstanding capital stock of DSI Financial, Inc., a California corporation, together with Mr. Joseph W. Stok, currently comprise the entire Board of Directors of DSI Properties, Inc. Mr. Robert J. Conway is 67 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 71 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 77 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. MANAGEMENT REMUNERATION AND TRANSITIONS 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, 2000, 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 the Registrant to any of the General Partners or to any officer or director of the corporate General Partner; (b) No standard or other agreement exists by which directors of the Registrant are compensated; (c) 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 the December 31, 2000, no person of record owns more than 5% of the limited partnership units of the Registrant, nor was any person known by the 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 the 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. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required to be furnished in Item 13 of Part III is contained in the Registrant's Financial Statements and Financial Statement Schedule for it fiscal year ended December 31, 2000, 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 for its fiscal year ended December 31, 2000, together with the reports of its independent auditors, Deloitte, & Touche LLP. (a)(2) Attached hereto and incorporated herein by this reference as Exhibit 2 is Registrant's Letter to Limited Partners regarding the Annual Report for its fiscal year ended December 31, 2000. (b) There have been no 8K's filed during the last quarter of the period covered by this Report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and 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 XI by: DSI Properties, Inc., a California corporation, as General Partner By_______________________________ Dated: March 30, 2001 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director) By_______________________________ Dated: March 30, 2001 JOSEPH W. CONWAY (Executive Vice President and Director) Pursuant to the requirements of the Securities and 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 XI by: DSI Properties, Inc., a California corporation, as General Partner By_______________________________ Dated: March 30, 2001 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director) By______________________________ Dated: March 30, 2001 JOSEPH W. CONWAY (Executive Vice President and Director) DSI REALTY INCOME FUND XI 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, 2000, 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 XI (A California Real Estate Limited Partnership) SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $2,181,934 $2,108,447 $1,990,616 $1,903,385 $1,829,360 TOTAL EXPENSES 1,262,117 1,238,034 1,108,711 1,115,758 1,068,283 MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (194,204) (186,102) (179,154) (171,956) (168,304) --------- --------- --------- --------- --------- NET INCOME $ 725,613 $ 684,311 $ 702,751 $ 615,671 $ 592,773 ========= ========= ========= ========= ========= TOTAL ASSETS $5,485,221 $5,841,106 $6,152,614 $6,517,581 $6,709,600 ========== ========== ========== ========== ========== CASH FLOWS FROM: OPERATING $1,287,282 $1,202,051 $1,212,360 $1,095,449 $1,097,502 INVESTING (18,864) - (53,786) - (13,634) FINANCING (1,305,315) (1,196,203) (1,265,013) ( 980,036) ( 976,385) NET INCOME PER LIMITED PARTNERSHIP UNIT $ 35.92 $ 33.87 $ 34.79 $ 30.48 $ 29.34 ======== ========= ======== ======== ======== CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 55.00 $ 50.00 $ 55.00 $ 40.00 $ 40.00 ======== ======== ======= ======== ======== 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, 2000. Net Partners' Income Equity Per financial statements $ 725,613 $ 5,140,267 Excess book depreciation 134,706 1,186,489 Deferred rental revenues 19,008 68,995 Accrued distributions to partners 202,021 Accrued incentive management fees 443,214 Acquisition costs capitalized for tax purposes 1,033,227 ----------- ----------- Per Partnership income tax return $ 879,327 $ 8,074,213 =========== =========== Net Taxable income per limited partnership unit $ 43.53 =========== DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Page FINANCIAL STATEMENTS: Independent Auditors' Report F-1 Consolidated Balance Sheets at December 31, 2000 and 1999 F-2 Consolidated Statements of Income for the Three Years Ended December 31, 2000 F-3 Consolidated Statements of Changes in Partners' Equity for the Three Years Ended December 31, 2000 F-4 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2000 F-5 Notes to Consolidated Financial Statements F-6 SUPPLEMENTAL SCHEDULE: Independent Auditors' Report F-8 Schedule XI - Real Estate and Accumulated Depreciation F-9 SCHEDULES OMITTED: Financial statements and schedules not listed above are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements named above, or in the notes thereto. INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund XI: We have audited the accompanying balance sheets of DSI Realty Income Fund XI, a California Real Estate Limited Partnership (the "Partnership") as of December 31, 2000 and 1999, and the related statements of income, changes in partners' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements are the responsi- bility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of DSI Realty Income Fund XI at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, in all material respects, the information set forth therein. February 2, 2001 Deloitte Touche LLP Los Angeles, California DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 - ------------------------------------------------------------------------------- ASSETS 2000 1999 CASH AND CASH EQUIVALENTS $ 362,863 $ 399,760 PROPERTY, net (Note 3) 5,077,118 5,402,056 OTHER ASSETS 45,240 39,290 ----------- ----------- TOTAL $ 5,485,221 $ 5,841,106 =========== =========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES: Distribution due partners (Note 4) $ 202,020 $ 202,020 Property management fees payable (Note 1) 11,019 10,387 Other liabilities 131,915 102,934 ----------- ---------- Total liabilities 344,954 315,341 ----------- ---------- PARTNERS' EQUITY (DEFICIT)(Note 4): General partners (38,264) (34,409) Limited partners (20,000 limited partnership units outstanding at December 31, 2000 and 1999) 5,178,531 5,560,174 ------------ ----------- Total partners' equity 5,140,267 5,525,765 ------------ ----------- TOTAL $ 5,485,221 $ 5,841,106 ============ =========== See accompanying notes to consolidated financial statements. DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) CONSOLIDATED STATEMENTS OF INCOME THREE YEARS ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------- 2000 1999 1998 REVENUES: Rental revenues $2,174,004 $2,101,733 $1,971,279 ---------- ---------- ---------- EXPENSES: Depreciation 343,802 318,792 319,242 Operating 572,837 596,336 487,225 General and administrative 114,253 105,892 103,731 General partners' incentive management fee (Note 4) 100,001 90,910 98,511 Property management fees 131,224 126,104 100,002 ---------- ---------- ---------- Total expenses 1,262,117 1,238,034 1,108,711 ---------- ---------- ---------- OPERATING INCOME 911,887 863,699 862,568 OTHER INCOME - Interest income 7,930 6,714 19,337 INCOME BEFORE MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES 919,817 870,413 881,905 MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES (194,204) (186,102) (179,154) ---------- ---------- ---------- NET INCOME $ 725,613 $ 684,311 $ 702,751 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 718,357 $ 677,468 $ 695,723 General partners 7,256 6,843 7,028 ---------- ---------- ---------- TOTAL $ 725,613 $ 684,311 $ 702,751 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 35.92 $ 33.87 $ 34.79 ========== ========== ========== See accompanying notes to financial statements. DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) THREE YEARS ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------- General Limited Partners Partners Total BALANCE, JANUARY 1, 1998 $(27,068) $ 6,286,983 $ 6,259,915 Net income 7,028 695,723 702,751 Distributions (11,111) (1,100,000) (1,111,111) ------- ----------- ----------- BALANCE, DECEMBER 31,1998 $(31,151) $ 5,882,706 $ 5,851,555 Net Income 6,843 677,468 684,311 Distributions (10,101) (1,000,000) (1,010,101) -------- ----------- ----------- BALANCE, DECEMBER 31, 1999 $(34,409) $ 5,560,174 $ 5,525,765 Net income 7,256 718,357 725,613 Distributions (11,111) (1,100,000) (1,111,111) -------- ----------- ----------- BALANCE, DECEMBER 31, 2000 $(38,264) $ 5,178,531 $ 5,140,267 ======== =========== =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) CONSOLIDATED STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------- 2000 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 725,613 $ 684,311 $ 702,751 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 343,802 318,792 319,242 Minority interests in income of real estate joint ventures 194,204 186,102 179,154 Changes in assets and liabilities: Other assets (5,950) (1,436) (6,928) Property management fees payable 632 2,282 649 Customer deposits and other liabilities 28,981 12,000 17,492 ---------- ----------- ---------- Net cash provided by operating activities 1,287,282 1,202,051 1,212,360 CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (18,864) (53,786) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions to partners (1,111,111) (1,010,101) (1,085,859) Distributions paid to minority inter- ests in real estate joint ventures (194,204) (186,102) (179,154) ----------- ----------- ---------- Net cash used in financing activities (1,305,315) (1,196,203) (1,265,013) ----------- ----------- ---------- NET(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (36,897) 5,848 (106,439) CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 399,760 393,912 500,351 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 362,863 $ 399,760 $ 393,912 =========== =========== =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 2000 1. GENERAL DSI Realty Income Fund XI, a California Real Estate Limited Partnership (the "Partnership"), has three general partners (DSI Properties, Inc., Robert J. Conway and Joseph W. Conway) and limited partners owning 20,000 limited partnership units as of December 31, 2000, which 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 December 7, 1986 under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The Partnership has entered into four joint venture arrangements with affiliates of Dahn Corporation ("Dahn"). The Partnership and its joint venture partners have acquired four mini-storage properties located in Whittier, California; Edgewater, New Jersey; Bloomingdale, Illinois; and Sterling Heights, Michigan. The properties were acquired from Dahn. Under the terms of the property purchase agreements, the Partnership and its joint venture partners (Whittier Mini, Bloomingdale Mini, Edgewater Mini and Sterling Heights Mini, each a California Limited Partnership and an affiliate of Dahn, and hereinafter referred to as the "Joint Venture Partners") own an undivided interest in the mini-storage facilities as follows: Joint Venture Mini-Storage Property Partnership Partner Whittier, CA 90% 10% Bloomingdale, IL 90% 10% Edgewater, NJ 85% 15% Sterling Heights, MI 75% 25% The Joint Venture Partners have made no cash contributions to any of the joint ventures. Rather, each Joint Venture Partner's interest in each respective mini-storage property was obtained in consideration of a reduction in the purchase price of the property by Dahn. The Partnership has control over the business and operations of the mini-storage facilities. Pursuant to the terms of each joint venture agreement, annual profits (before depreciation) of each joint venture will be allocated to the Joint Venture Partners on the basis of actual distributions received, while annual losses (before depreciation) are to be allocated in pro- portion to the ownership percentages as specified above. Cash distri- butions are to be made to each Joint Venture Partner based upon each Joint Venture Partner's ownership percentage. However, the Joint Venture Partners have subordinated their rights to any distributions to the Partnership's receipt of an annual, noncumulative, eight percent return (7.75 percent for the Whittier Mini) from the operation of the joint ventures. Requirements under the subordination agreement were met during 2000, 1999 and 1998. A minority interest in real estate joint venture is recorded to the extent of any distributions due to the Joint Venture Partners. The Joint Venture Partners are also entitled to receive a percentage, based upon a pre-determined formula, of the net proceeds from the sale of the properties. The Partnership is required by the agreements to pay Dahn a management fee equal to six percent of gross revenue from operations, defined as the entire amount of all receipts from the renting or leasing of storage compartments and sale of locks. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principals of Consolidation - The accompanying finacial statements include the accounts of the Partnership and its joint venture investments. All significant intercompany balances and transactions have been eliminated. 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 consists primarily of mini-storage facilities. Depreciation is provided for using the straight-line method over an estimated useful life of 20 years. Building improvements are depreciated over a five year period. Income Taxes - No provision has been made for income taxes in the accompanying financial statements. The taxable income or loss of the Partnership is allocated to each partner in accordance with the terms of the Agreement of Limited Partnership. Each partner's tax status, in turn, determines the appropriate income tax for its allocated share of the Partnership taxable income or loss. The net difference between the basis of the Partnership's asset and liabilities for federal income tax purposes and as reported for financial statement purposes is $2,933,946. 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 period (20,000 in 2000, 1999 and 1998). Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Partnership's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impairment of Long-Lived Assets - The Company regularly reviews long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected undiscounted future cash flow is less than the carrying amount of the asset, the Partnership would recognize an impair- ment. No impairment losses were required in 2000, 1999 or 1998. Fair Value of Financial Instruments - The Company's financial instruments consist primarily of cash, receivables, accounts payable and accrued liabilities. The carrying values of all financial instruments are representative of their fair values due to their short-term maturities. Concentrations of Credit Risk - Financial instruments that potentially subject the Partnership to concentrations of crediot risk consist primarily of cash equivalents and rent receivables. The Partnership places its cash equivalents with high credit quality institutions. Recent Accounting Pronouncement - In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." The adoption of SAB 101 did not impact the financial statements. 3. PROPERTY At December 31, 2000 and 1999, the total cost of property and accumulated depreciation are as follows: 2000 1999 Land $ 1,894,250 $ 1,894,250 Buildings 6,500,799 6,481,935 ----------- ----------- Total 8,395,049 8,376,185 Less accumulated depreciation (3,317,931) (2,974,129) ----------- ---------- Property, net $ 5,077,118 $ 5,402,056 =========== =========== 4. ALLOCATION OF PROFITS AND LOSSES Under the Agreement of Limited Partnership, the general partners are to be allocated 1% of the net profits or losses from operations and the limited partners are to be allocated the balance of the net profits or losses from operations in proportion to their limited partnership interests. The general partners are also entitled to receive a percentage, based on a predetermined formula, of any cash distribution from the sale, other disposition, or refinancing of the project. In addition, the general partners are entitled to receive an incentive management fee for supervising the operations of the Partnership. The fee is equal to nine percent per annum of the Partnership distributions made from cash available for distribution calculated as cash generated from operations less capital expenditures. 5. BUSINESS SEGMENT INFORMATION The following disclosure about segment reporting of the Partnership is made in accordance with the requirements of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information. The Partnership operates under a single segment; storage facility operations, under which the Partnership rents its storage facilities to its customers on a need basis and charges rent on a pre- determined rate. DSI REALTY INCOME FUND XI (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 Whittier, CA None $845,000 $1,969,083 $11,719 $845,000 $1,980,802 $2,825,802 $1063,577 04/90 03/90 20 Yrs Edgewater, NJ None 191,250 2,358,780 44,706 191,250 2,403,486 2,594,736 1229,638 06/89 09/90 20 Yrs Bloomingdale, IL None 442,000 1,579,879 22,800 442,000 1,602,679 2,044,679 791,347 07/88 01/91 20 Yrs Sterling Heights, MI None 416,000 467,979 45,853 416,000 513,832 929,832 233,369 06/77 07/91 20 Yrs -------- ---------- ------- -------- ---------- ---------- ---------- $1,894,250 $6,375,721 $125,078 $1,894,250 $6,500,799 $ 8,395,049*$3,317,931 ========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated at Cost Depreciation Balance at January 1, 1998 $ 8,322,399 $2,336,095 Additions 53,786 319,242 ----------- ---------- Balance at December 31, 1998 $ 8,376,185 $2,655,337 Additions 318,792 ----------- ---------- Balance at December 31, 1999 $ 8,376,185 $2,974,129 Additions 18,864 343,802 ----------- ---------- Balance at December 31, 2000 $ 8,395,049 $3,317,931 =========== ========== EXHIBIT 2 March 31, 2000 ANNUAL REPORT TO LIMITED PARTNERS OF DSI REALTY INCOME FUND XI Dear Limited Partner: This report contains the Partnership's balance sheets as of December 31, 2000 and 1999, 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, 2000 accompanied by an independent auditors' report. The Partnership owns seven mini-storage facilities, including two in Santa Rosa, California. 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 four properties for the years ended December 31, 2000 and December 31, 1999 were as follows: Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 2000 Dec. 31, 1999 Whittier, CA(1) 89% 88% Bloomingdale, IL(2) 83% 84% Edgewater, NJ(3) 86% 84% Sterling Heights, MI(4) 85% 84% (1) The Partnership owns a 90% interest in this property. (2) The Partnership owns a 90% interest in this property (3) The Partnership owns an 85% interest in this property (4) The Partnership owns a 75% interest in this property We will keep you informed of the activities of DSI Realty Income Fund XI as they develop. If you have any questions, please contact us at your convenience at (562) 493-3022. If you would like a copy of the Partnership's Annual Report on Form 10-K for the year ended December 31, 2000, 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 VI By: DSI Properties, Inc. By_______________________________ ROBERT J. CONWAY, President -----END PRIVACY-ENHANCED MESSAGE-----