10QSB 1 q212-01.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Quarter Ended: June 30, 2001 Commission file number: 0-29274 AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP (Exact Name of Small Business Issuer as Specified in its Charter) State of Minnesota 41-1789725 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1300 Minnesota World Trade Center, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (651) 227-7333 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) 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 90 days. Yes [X] No Transitional Small Business Disclosure Format: Yes No [X] AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP INDEX PART I.Financial Information Item 1.Balance Sheet as of June 30, 2001 and December 31, 2000 Statements for the Periods ended June 30, 2001 and 2000: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements Item 2.Management's Discussion and Analysis PART II.Other Information Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP BALANCE SHEET JUNE 30, 2001 AND DECEMBER 31, 2000 (Unaudited) ASSETS 2001 2000 CURRENT ASSETS: Cash and Cash Equivalents $ 1,589,308 $ 1,388,156 Receivables 24,401 5,100 Short-Term Note Receivable 0 675,920 ----------- ----------- Total Current Assets 1,613,709 2,069,176 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 6,418,920 6,134,768 Buildings and Equipment 11,279,266 10,832,312 Construction in Progress 166,957 0 Property Acquisition Costs 0 15,395 Accumulated Depreciation (1,612,911) (1,504,698) ----------- ----------- Net Investments in Real Estate 16,252,232 15,477,777 ----------- ----------- Total Assets $17,865,941 $17,546,953 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 39,420 $ 61,934 Distributions Payable 405,730 390,705 Unearned Rent 87,600 0 ----------- ----------- Total Current Liabilities 532,750 452,639 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (23,854) (38,243) Limited Partners, $1,000 Unit Value; 24,000 Units authorized and issued; 23,322 Units outstanding 17,357,045 17,132,557 ----------- ----------- Total Partners' Capital 17,333,191 17,094,314 ----------- ----------- Total Liabilities and Partners' Capital $17,865,941 $17,546,953 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF INCOME FOR THE PERIODS ENDED JUNE 30 (Unaudited) Three Months Ended Six Months Ended 6/30/01 6/30/00 6/30/01 6/30/00 INCOME: Rent $ 490,012 $ 432,023 $ 946,807 $ 854,427 Investment Income 13,059 26,565 40,843 55,599 --------- --------- ---------- --------- Total Income 503,071 458,588 987,650 910,026 --------- --------- ---------- --------- EXPENSES: Partnership Administration - Affiliates 71,750 57,728 137,724 131,233 Partnership Administration and Property Management - Unrelated Parties 6,452 21,869 13,461 46,491 Depreciation 125,927 118,529 245,184 237,058 --------- --------- ---------- --------- Total Expenses 204,129 198,126 396,369 414,782 --------- --------- ---------- --------- OPERATING INCOME 298,942 260,462 591,281 495,244 GAIN ON SALE OF REAL ESTATE 209,232 0 450,620 0 --------- --------- ---------- --------- NET INCOME $ 508,174 $ 260,462 $1,041,901 $ 495,244 ========= ========= ========== ========= NET INCOME ALLOCATED: General Partners $ 17,082 $ 2,604 $ 22,419 $ 4,952 Limited Partners 491,092 257,858 1,019,482 490,292 --------- --------- ---------- --------- $ 508,174 $ 260,462 $1,041,901 $ 495,244 ========= ========= ========== ========= NET INCOME PER LIMITED PARTNERSHIP UNIT (23,322 and 23,548 weighted average Units outstanding in 2001 and 2000, respectively) $ 21.05 $ 10.95 $ 43.71 $ 20.82 ========= ========= ========== ========= The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE PERIODS ENDED JUNE 30 (Unaudited) 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,041,901 $ 495,244 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 245,184 237,058 Gain on Sale of Real Estate (450,620) 0 Increase in Receivables (19,301) (19,019) Decrease in Payable to AEI Fund Management, Inc. (22,514) (3,237) Increase in Unearned Rent 87,600 107,796 ----------- ----------- Total Adjustments (159,651) 322,598 ----------- ----------- Net Cash Provided By Operating Activities 882,250 817,842 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (2,051,958) (1,033,144) Proceeds from Sale of Real Estate 1,482,939 0 Payments Received on Short-Term Note Receivable 675,920 0 ----------- ----------- Net Cash Provided By (Used For) Investing Activities 106,901 (1,033,144) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in Distributions Payable 15,025 0 Distributions to Partners (803,024) (787,880) ----------- ----------- Net Cash Used For Financing Activities (787,999) (787,880) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 201,152 (1,003,182) CASH AND CASH EQUIVALENTS, beginning of period 1,388,156 2,412,278 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 1,589,308 $ 1,409,096 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIODS ENDED JUNE 30 (Unaudited) Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 1999 $(33,456) $17,606,412 $17,572,956 23,548.50 Distributions (7,879) (780,001) (787,880) Net Income 4,952 490,292 495,244 --------- ----------- ----------- ----------- BALANCE, June 30, 2000 $(36,383) $17,316,703 $17,280,320 23,548.50 ========= =========== =========== =========== BALANCE, December 31, 2000 $(38,243) $17,132,557 $17,094,314 23,322.18 Distributions (8,030) (794,994) (803,024) Net Income 22,419 1,019,482 1,041,901 --------- ----------- ---------- ----------- BALANCE, June 30, 2001 $(23,854) $17,357,045 $17,333,191 23,322.18 ========= =========== ========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Unaudited) (1) The condensed statements included herein have been prepared by the Partnership, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim period, on a basis consistent with the annual audited statements. The adjustments made to these condensed statements consist only of normal recurring adjustments. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the Partnership's latest annual report on Form 10-KSB. (2) Organization - AEI Income & Growth Fund XXI Limited Partnership (Partnership) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XXI, Inc. (AFM), the Managing General Partner. Robert P. Johnson, the President and sole shareholder of AFM, serves as the Individual General Partner and an affiliate of AFM, AEI Fund Management, Inc. (AEI), performs the administrative and operating functions for the Partnership. The terms of the Partnership offering call for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on April 14, 1995 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. On January 31, 1997, the offering terminated when the maximum subscription limit of 24,000 Limited Partnership Units ($24,000,000) was reached. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $24,000,000 and $1,000, respectively. During operations, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 90% to the Limited Partners and 10% to the General Partners; provided, however, that such distributions to the General Partners will be subordinated to the Limited Partners first receiving an annual, noncumulative distribution of Net Cash Flow equal to 10% of their Adjusted Capital Contribution, as defined, and, provided further, that in no event will the General Partners receive less than 1% of such Net Cash Flow per annum. Distributions to Limited Partners will be made pro rata by Units. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Continued) (2) Organization - (Continued) Any Net Proceeds of Sale, as defined, from the sale or financing of properties which the General Partners determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 10% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Partners and 10% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units. For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated first in the same ratio in which, and to the extent, Net Cash Flow is distributed to the Partners for such year. Any additional profits will be allocated in the same ratio as the last dollar of Net Cash Flow is distributed. Net losses from operations will be allocated 99% to the Limited Partners and 1% to the General Partners. For tax purposes, profits arising from the sale, financing, or other disposition of property will be allocated in accordance with the Partnership Agreement as follows: (i) first, to those partners with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Partners and 1% to the General Partners until the aggregate balance in the Limited Partners' capital accounts equals the sum of the Limited Partners' Adjusted Capital Contributions plus an amount equal to 10% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously allocated; (iii) third, the balance of any remaining gain will then be allocated 90% to the Limited Partners and 10% to the General Partners. Losses will be allocated 98% to the Limited Partners and 2% to the General Partners. The General Partners are not required to currently fund a deficit capital balance. Upon liquidation of the Partnership or withdrawal by a General Partner, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or 1% of total Limited Partners' and General Partners' capital contributions. (3) Short-Term Note Receivable - On August 2, 2000, the Partnership received a Contract for Deed from an affiliate of the buyer of the Media Play store in Apple Valley, Minnesota. The Note bore interest at 9% and was secured by the land, building and equipment. As of December 31, 2000, the Partnership's share of outstanding principal due on the Note was $675,920. On January 16, 2001, the Partnership received the outstanding principal and accrued interest on the Note. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Continued) (4) Investments in Real Estate - On August 2, 2000, the Media Play store was sold to an unrelated third party for $2,500,000. The sale agreement required $500,000 in cash and a $2,000,000 Contract for Deed, which bore interest at 9%. On January 16, 2001, the Partnership received its share of the outstanding principal and accrued interest on the Note. The Partnership's share of the net sale proceeds was $820,651, which resulted in a net gain of $129,813. At the time of sale, the cost and related accumulated depreciation was $833,860 and $143,022. Through June 30, 2001, the Partnership sold its interest in the Champps Americana restaurant in Columbus, Ohio, in eleven separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $2,295,174, which resulted in a total net gain of $631,607. The total cost and related accumulated depreciation of the interests sold was $1,808,880 and $145,313, respectively. For the six months ended June 30, 2001, the net gain was $289,679. Through June 30, 2001, the Partnership sold 16.1171% of the Champps Americana restaurant in Schaumburg, Illinois, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $930,207, which resulted in a total net gain of $254,776. The total cost and related accumulated depreciation of the interests sold was $733,218 and $57,787, respectively. For the six months ended June 30, 2001, the net gain was $160,941. Subsequent to June 30, 2001, the Partnership sold an additional 5.8928% of the Champps Americana restaurant in Schaumburg, Illinois, in two separate transactions, to unrelated third parties. The Partnership received net sale proceeds of approximately $335,000 which resulted in a net gain of approximately $91,000. During the first six months of 2000, the Partnership distributed $55,577 of the net sale proceeds to the Limited and General Partners as part of their regular quarterly distributions which represented a return of capital of $2.34 per Limited Partnership Unit. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. On March 8, 2000, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $549,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $48,038. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.75%. Effective July 5, 2000, the interest rate was increased to 9.875%. On September 11, 2000, after the development was completed, the Lease Agreement was amended to require annual rental payments of $132,621. Total acquisition costs, including the cost of the land, were $1,334,315. AEI INCOME & GROWTH FUND XXI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (Continued) (4) Investments in Real Estate - (Continued) On March 30, 2001, the Partnership purchased a Children's World daycare center in Mundelein, Illinois for $1,618,824. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $153,710. On March 8, 2001, the Partnership purchased a 25% interest in a parcel of land in Austin, Texas for $283,000. The land is leased to Kona Restaurant Group, Inc. (KRG) under a Lease Agreement with a primary term of 17 years and annual rental payments of $29,715. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to KRG for the construction of a Johnny Carino's restaurant on the site. Through June 30, 2001, the Partnership had advanced $166,957 for the construction of the property and was charging interest on the advances at a rate of 10.5%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $573,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $60,000. The remaining interests in the property are owned by AEI Real Estate Fund 85-A Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and AEI Income & Growth Fund 23 LLC, affiliates of the Partnership. (5) Payable to AEI Fund Management, Inc. - AEI Fund Management, Inc. performs the administrative and operating functions for the Partnership. The payable to AEI Fund Management represents the balance due for those services. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations For the six months ended June 30, 2001 and 2000, the Partnership recognized rental income of $946,807 and $854,427, respectively. During the same periods, the Partnership earned investment income of $40,843 and $55,599, respectively. In 2001, rental income increased as a result of additional rent received from three property acquisitions in 2000 and 2001, and rent increases on five properties. These increases in rental income were partially offset by a decrease in rental income due to the property sales discussed below. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) During the six months ended June 30, 2001 and 2000, the Partnership paid Partnership administration expenses to affiliated parties of $137,724 and $131,233, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and correspondence to the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $13,461 and $46,491, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. The decrease in these expenses in 2001, when compared to 2000, is mainly the result of expenses incurred in 2000 related to the Media Play store. As of June 30, 2001, the Partnership's annualized cash distribution rate was 6.75%, based on the Adjusted Capital Contribution. Distributions of Net Cash Flow to the General Partners were subordinated to the Limited Partners as required in the Partnership Agreement. As a result, 99% of distributions and income were allocated to Limited Partners and 1% to the General Partners. Inflation has had a minimal effect on income from operations. The Leases contain cost of living increases which will result in an increase in rental income over the term of the Leases. Inflation also may cause the Partnership's real estate to appreciate in value. However, inflation and changing prices may also have an adverse impact on the operating margins of the properties' tenants which could impair their ability to pay rent and subsequently reduce the Partnership's Net Cash Flow available for distributions. Liquidity and Capital Resources During the six months ended June 30, 2001, the Partnership's cash balances increased $201,152 mainly as a result of cash generated from the sale of property, which was partially offset by cash used to purchase property. Net cash provided by operating activities increased from $817,842 in 2000 to $882,250 in 2001 as a result of an increase in income and a decrease in Partnership administration expenses in 2001, which were partially offset by net timing differences in the collection of payments from the lessees and the payment of expenses. The major components of the Partnership's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the six months ended June 30, 2001, the Partnership generated cash flow from the sale of real estate of $1,482,939. During the six months ended June, 2001 and 2000, the Partnership expended $2,051,958 and $1,033,144, respectively, to invest in real properties (inclusive of acquisition expenses) as the Partnership reinvested cash generated from property sales. On August 2, 2000, the Media Play store was sold to an unrelated third party for $2,500,000. The sale agreement required $500,000 in cash and a $2,000,000 Contract for Deed, which bore interest at 9%. On January 16, 2001, the Partnership received its share of the outstanding principal and accrued interest on the Note. The Partnership's share of the net sale proceeds was $820,651, which resulted in a net gain of $129,813. At the time of sale, the cost and related accumulated depreciation was $833,860 and $143,022. Through June 30, 2001, the Partnership sold its interest in the Champps Americana restaurant in Columbus, Ohio, in eleven separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $2,295,174, which resulted in a total net gain of $631,607. The total cost and related accumulated depreciation of the interests sold was $1,808,880 and $145,313, respectively. For the six months ended June 30, 2001, the net gain was $289,679. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Through June 30, 2001, the Partnership sold 16.1171% of the Champps Americana restaurant in Schaumburg, Illinois, in five separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $930,207, which resulted in a total net gain of $254,776. The total cost and related accumulated depreciation of the interests sold was $733,218 and $57,787, respectively. For the six months ended June 30, 2001, the net gain was $160,941. Subsequent to June 30, 2001, the Partnership sold an additional 5.8928% of the Champps Americana restaurant in Schaumburg, Illinois, in two separate transactions, to unrelated third parties. The Partnership received net sale proceeds of approximately $335,000 which resulted in a net gain of approximately $91,000. During the first six months of 2000, the Partnership distributed $55,577 of the net sale proceeds to the Limited and General Partners as part of their regular quarterly distributions which represented a return of capital of $2.34 per Limited Partnership Unit. The remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future. On March 8, 2000, the Partnership purchased a parcel of land in Fort Wayne, Indiana for $549,000. The land is leased to Tumbleweed, Inc. (TWI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $48,038. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to TWI for the construction of a Tumbleweed restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 8.75%. Effective July 5, 2000, the interest rate was increased to 9.875%. On September 11, 2000, after the development was completed, the Lease Agreement was amended to require annual rental payments of $132,621. Total acquisition costs, including the cost of the land, were $1,334,315. On March 30, 2001, the Partnership purchased a Children's World daycare center in Mundelein, Illinois for $1,618,824. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $153,710. On March 8, 2001, the Partnership purchased a 25% interest in a parcel of land in Austin, Texas for $283,000. The land is leased to Kona Restaurant Group, Inc. (KRG) under a Lease Agreement with a primary term of 17 years and annual rental payments of $29,715. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to KRG for the construction of a Johnny Carino's restaurant on the site. Through June 30, 2001, the Partnership had advanced $166,957 for the construction of the property and was charging interest on the advances at a rate of 10.5%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $573,000. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $60,000. The remaining interests in the property are owned by AEI Real Estate Fund 85-A Limited Partnership, AEI Net Lease Income & Growth Fund XX Limited Partnership, and AEI Income & Growth Fund 23 LLC, affiliates of the Partnership. The Partnership's primary use of cash flow is distribution and redemption payments to Partners. The Partnership declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Partnership attempts to maintain a stable distribution rate from quarter to quarter. Redemption payments are paid to redeeming Partners in the fourth quarter of each year. Effective April 1, 2001, the Partnership's distribution rate was increased from 6.5% to 6.75%. As a result, distributions were higher in 2001, when compared to 2000. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership is not obligated to purchase in any year more than 5% of the number of Units outstanding at the beginning of the year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. During 2000, twelve Limited Partners redeemed a total of 226.32 Partnership Units for $186,379 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In prior years, thirteen Limited Partners redeemed a total of 451.47 Partnership Units for $393,500. The redemptions increase the remaining Limited Partners' ownership interest in the Partnership. The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Partnership obligations on both a short-term and long-term basis. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The foregoing Management's Discussion and Analysis contains various "forward looking statements" within the meaning of federal securities laws which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, taxation levels, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward looking statements made by the Partnership, must be evaluated in the context of a number of factors that may affect the Partnership's financial condition and results of operations, including the following: Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate; the federal income tax consequences of rental income, deductions, gain on sales and other items and the affects of these consequences for investors; resolution by the General Partners of conflicts with which they may be confronted; the success of the General Partners of locating properties with favorable risk return characteristics; the effect of tenant defaults; and the condition of the industries in which the tenants of properties owned by the Partnership operate. PART II - OTHER INFORMATION ITEM 1.LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership is a party or of which the Partnership's property is subject. PART II - OTHER INFORMATION (Continued) ITEM 2.CHANGES IN SECURITIES None. ITEM 3.DEFAULTS UPON SENIOR SECURITIES None. ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5.OTHER INFORMATION None. ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits - Description 10.1 Purchase Agreement dated April 3, 2001 between the Partnership and Lynn and Camille Bushman relating to the property at 161 E. Campus View Boulevard, Columbus, Ohio. 10.2 Purchase Agreement dated May 8, 2001 between the Partnership and The Wood Family Trust relating to the property at 161 E. Campus View Boulevard, Columbus, Ohio. 10.3 Purchase Agreement dated May 17, 2001 between the Partnership, AEI Real Estate Fund XVIII Limited Partnership and Walter L. Schrock relating to the property at 161 E. Campus View Boulevard, Columbus, Ohio. 10.4 Purchase Agreement dated June 26, 2001 between the Partnership and David L. Cruickshank relating to the property at 955 Golf Road, Schaumburg, Illinois. 10.5 Purchase Agreement dated July 2, 2001 between the Partnership and The Charles M. and Judith K. Westfahl Community Trust relating to the property at 955 Golf Road, Schaumburg, Illinois. 10.6 Purchase Agreement dated July 20, 2001 between the Partnership and The White Family Living Trust relating to the property at 955 Golf Road, Schaumburg, Illinois. b. Reports filed on Form 8-K - None. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 7, 2001 AEI Income & Growth Fund XXI Limited Partnership By: AEI Fund Management XXI, Inc. Its: Managing General Partner By: /s/ Robert P. Johnson Robert P. Johnson President (Principal Executive Officer) By: /s/ Mark E. Larson Mark E. Larson Chief Financial Officer (Principal Accounting Officer)