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.
Item 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending proceedings.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
				 PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND 		 RELATED STOCKHOLDER MATTERS.
Registrant, a publicly-held limited partnership, had approximately 537 Limited Partners at December 31, 2001. 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 $12.50 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2001 and $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. It is Registrant's expectations that distributions will continue to be paid in the future.
Item 6.
Item 6. SELECTED FINANCIAL DATA
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership) - ----------------------------------------------
SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 2001 - ----------------------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ----
TOTAL REVENUES AND OTHER INCOME $2,336,174, $2,181,934 $2,108,447 $1,990,616 $1,903,385
TOTAL EXPENSES 1,303,980 1,262,117 1,238,034 1,108,711 1,115,758
MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (204,104) (194,204) (186,102) (179,154) (171,956) --------- --------- --------- --------- ---------
NET INCOME $ 828,090 $ 725,613 $ 684,311 $ 702,751 $ 615,671 ========= ========= ========= ========= =========
TOTAL ASSETS $5,293,797 $5,485,221 $5,841,106 $6,152,614 $6,517,581 ========== ========== ========== ========== ==========
CASH FLOWS FROM: OPERATING $1,335,572 $1,287,282 $1,202,051 $1,212,360 $1,095,449 INVESTING (32,468) (18,864) - (53,786) - FINANCING (1,214,205) (1,305,315) (1,196,203) (1,265,013) ( 980,036)
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 40.99 $ 35.92 $ 33.87 $ 34.79 $ 30.48 ======== ========= ======== ======== ========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 50.00 $ 55.00 $ 50.00 $ 55.00 $ 40.00 ======== ======== ======== ======== ========
Item 7.
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 an operating 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 oper- ating 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 at December 31, 2001, were: Whittier 93%, Edgewater Park 84%, Bloomingdale 93% and Sterling Heights 86%.
RESULTS OF OPERATIONS
2001 COMPARED TO 2000
Total revenues increased from $2,174,004 in 2000 to $2,333,037 in 2001, total expenses increased from $1,262,117 to $1,303,980, other income decreased from $7,930 to $3,137 and minority interest in real estate joint ventures increased from $194,204 to $204,104. As a result, net income increased from $725,613 to $828,090. The approximate $159,000 (7.3%) increase in rental revenues can be attributed to higher occupancy and unit rental rates. Occupancy levels for the Partnership's four mini-storage facilities averaged 88.1% for the year ended December 31, 2001, compared to 86.0% for the year ended December 31, 2000. Operating expenses increased approximately $46,800 (8.2%) primarily as a result of increases in yellow pages advertising costs, repairs and maintenance, salaries and wages and security alarm services expenses, partially offset by a decrease in workers compensation insurance expense. General and administrative expenses increased approximately $20,400 (17.9%) primarily as a result of in- creases in legal and professional, office supplies and travel expenses. 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 as a result of the increase in rental revenue.
2000 COMPARED TO 1999
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 increased 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 approximate $72,300 (3.4%) increase in rental revenues can be attributed to higher occupancy rates. Occupancy levels for the Partnership's four mini-storage facilities averaged 86.0% for the year ended December 31, 2000, compared to 85.1% 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 maintenance, 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 associated with a blizzard that hit Illinois and Michigan, where two of the Partnership's properties are located, did not reoccur in the current year. General and administrative expenses increased approximately $8,400 (7.9%) 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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased approximately $48,300 (3.8%) in 2001 compared to 2000 primarily as a result of the increase in net income. Net cash provided by operating activities decreased approximately $85,200 (7.1%) in 2000 compared to 1999 primarily as a result of the increase in net income, depreciation, customer deposits and other liabilities.
Cash used in financing activities consisted of cash distributions to partners in 2001, 2000 and 1999. Additionally, cash distributions were paid to the minority interests in the real estate joint ventures in 2001, 2000, and 1999. In December 2001, 2000 and 1999, the General Partners declared and paid a special distribution equal to 2%, 3%, and 2% of capital contributed by limited partners, respectively of capital contributed by the limited partners.
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 2001 and 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, 2001 and 2000 was as follows:
2001 QUARTER ENDED ------------------ March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- Total revenues $587,421 $582,203 $575,643 $587,770
Income before minority interest in joint venture 285,688 243,446 240,127 262,933
Net income 285,688 243,446 93,723 205,233
Net income per limited partnership unit $ 14.14 $ 12.05 $ 4.64 $ 10.16
Weighted average number of limited partnership units outstanding 20,000 20,000 20,000 20,000
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 outstanding 20,000 20,000 20,000 20,000
Item 8.
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.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
				 PART III
Item 10.
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, 2001, 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 68 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 72 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 78 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.
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, 2001, 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.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 		 MANAGEMENT
As of the December 31, 2001, 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.
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, 2001, attached hereto as Exhibit l and incorporated herein by this reference.
				 PART IV
Item 14.
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, 2001, 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, 2001.
(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 28, 2002 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director)
By_______________________________ Dated: March 28, 2002 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 28, 2002 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director)
By______________________________ Dated: March 28, 2002 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, 2001, 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, 2001 - -------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ----
TOTAL REVENUES AND OTHER INCOME $2,336,174, $2,181,934 $2,108,447 $1,990,616 $1,903,385
TOTAL EXPENSES 1,303,980 1,262,117 1,238,034 1,108,711 1,115,758
MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (204,104) (194,204) (186,102) (179,154) (171,956) --------- --------- --------- --------- ---------
NET INCOME $ 828,090 $ 725,613 $ 684,311 $ 702,751 $ 615,671 ========= ========= ========= ========= =========
TOTAL ASSETS $5,293,797 $5,485,221 $5,841,106 $6,152,614 $6,517,581 ========== ========== ========== ========== ==========
CASH FLOWS FROM: OPERATING $1,335,572 $1,287,282 $1,202,051 $1,212,360 $1,095,449 INVESTING (32,468) (18,864) - (53,786) - FINANCING (1,214,205) (1,305,315) (1,196,203) (1,265,013) ( 980,036)
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 40.99 $ 35.92 $ 33.87 $ 34.79 $ 30.48 ======== ========= ======== ======== ========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 50.00 $ 55.00 $ 50.00 $ 55.00 $ 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, 2001.
Net Partners' Income Equity
Per financial statements $ 828,090 $ 4,958,256 Excess book depreciation 109,420 1,295,909 Deferred rental revenues 68,995 Accrued distributions to partners 202,020 Accrued incentive management fees 443,214 Acquisition costs capitalized for tax purposes 1,033,227 ----------- ----------- Per Partnership income tax return $ 937,510 $ 8,001,621 =========== =========== Net Taxable income per limited partnership unit $ 46.41 ===========
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
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Income for the Three Years Ended December 31, 2001
Consolidated Statements of Changes in Partners' Equity (Deficit) for the Three Years Ended December 31, 2001
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2001
Notes to Consolidated Financial Statements
SUPPLEMENTAL SCHEDULE:
Schedule III - Real Estate and Accumulated Depreciation
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, 2001 and 2000, 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, 2001. 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, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP February 1, 2002
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000 - -------------------------------------------------------------------------------
ASSETS 2001 2000
CASH AND CASH EQUIVALENTS $ 451,762 $ 362,863
PROPERTY, net (Note 3) 4,790,794 5,077,118
OTHER ASSETS 51,241 45,240 ----------- ----------- TOTAL $ 5,293,797 $ 5,485,221 =========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
LIABILITIES: Distribution due partners (Note 4) $ 202,020 $ 202,020 Property management fees payable (Note 1) 11,579 11,019 Other liabilities 121,942 131,915
----------- ---------- Total liabilities 335,541 344,954 ----------- ---------- PARTNERS' EQUITY (DEFICIT)(Note 4): General partners (40,084) (38,264) Limited partners (20,000 limited partnership units outstanding at December 31, 2001 and 2000) 4,998,340 5,178,531 ------------ ----------- Total partners' equity 4,958,256 5,140,267 ------------ ----------- TOTAL $ 5,293,797 $ 5,485,221 ============ ===========
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, 2001 - --------------------------------------------------------------------------------
2001 2000 1999
REVENUES: Rental $2,333,037 $2,174,004 $2,101,733 ---------- ---------- ---------- EXPENSES: Depreciation 318,792 343,802 318,792 Operating 619,662 572,837 596,336 General and administrative 134,634 114,253 105,892 General partners' incentive management fee (Note 4) 90,910 100,001 90,910 Property management fees 139,982 131,224 126,104 ---------- ---------- ---------- Total expenses 1,303,980 1,262,117 1,238,034 ---------- ---------- ---------- OPERATING INCOME 1,029,057 911,887 863,699
OTHER INCOME - Interest income 3,137 7,930 6,714
INCOME BEFORE MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES 1,032,194 919,817 870,413
MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES (204,104) (194,204) (186,102) ---------- ---------- ---------- NET INCOME $ 828,090 $ 725,613 $ 684,311 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 819,809 $ 718,357 $ 677,468 General partners 8,281 7,256 6,843 ---------- ---------- ---------- TOTAL $ 828,090 $ 725,613 $ 684,311 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 40.99 $ 35.92 $ 33.87 ========== ========== ==========
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, 2001 - --------------------------------------------------------------------------------
General Limited Partners Partners Total
BALANCE, JANUARY 1, 1999 $(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
Net income 8,281 819,809 828,090
Distributions (10,101) (1,000,000) (1,010,101) -------- ----------- ----------- BALANCE, DECEMBER 31, 2001 $(40,084) $ 4,998,340 $ 4,958,256 ======== =========== ===========
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, 2001 - --------------------------------------------------------------------------------
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 828,090 $ 725,613 $ 684,311 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 318,792 343,802 318,792 Minority interests in income of real estate joint ventures 204,104 194,204 186,102 Changes in assets and liabilities: Other assets (6,001) (5,950) (1,436) Property management fees payable 560 632 2,282 Customer deposits and other liabilities (9,973) 28,981 12,000 ---------- ----------- ---------- Net cash provided by operating activities 1,335,572 1,287,282 1,202,051
CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (32,468) (18,864) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions to partners (1,010,101) (1,111,111) (1,010,101) Distributions paid to minority inter- ests in real estate joint ventures (204,104) (194,204) (186,102) ----------- ----------- ---------- Net cash used in financing activities (1,214,205) (1,305,315) (1,196,203) ----------- ----------- ---------- NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS 88,899 (36,897) 5,848
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 362,863 399,760 393,912 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 451,762 $ 362,863 $ 399,760 =========== =========== ===========
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, 2001
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, 2001, 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 for 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 2001, 2000 and 1999. 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 $3,043,365.
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 2001, 2000 and 1999).
Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Partnership's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets - The Partnership regularly reviews long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected undiscounted future cash flow is less than the carrying amount of the asset, the Partnership would recognize an impair- ment. No impairment losses were required in 2001, 2000 or 1999.
Fair Value of Financial Instruments - The Partnership'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 credit risk consist primarily of cash equivalents and rent receivables. The Partnership places its cash equivalents with high credit quality institutions.
3. PROPERTY
At December 31, 2001 and 2000, the total cost of property and accumulated depreciation are as follows:
2001 2000
Land $ 1,894,250 $ 1,894,250 Buildings 6,533,267 6,500,799 ----------- ----------- Total 8,427,517 8,395,049 Less accumulated depreciation 3,636,723 3,317,931 ----------- ----------
Property, net $ 4,790,794 $ 5,077,118 =========== ===========
4. ALLOCATION OF PROFITS AND LOSSES
Under the Agreement of Limited Partnership, the general partners are to be allocated one percent 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 percent- age, 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 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 - --------------------------------------------------------------------------------
						 Real Estate Accumulated 							at Cost Depreciation
Balance, January 1, 1999 $ 8,376,185 $2,655,337 Additions 318,792 ----------- ---------- Balance, December 31, 1999 $ 8,376,185 $2,974,129 Additions 18,864 343,802 ----------- ---------- Balance, December 31, 2000 $ 8,395,049 $3,317,931 Additions 32,468 318,792 ----------- ---------- Balance, December 31, 2001 $ 8,427,517 $3,636,723 						 =========== ==========
				 EXHIBIT 2 March 28, 2002
		 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, 2001 and 2000, 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, 2001 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, 2001 and December 31, 2000 were as follows:
Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 2001 Dec. 31, 2000
Whittier, CA(1) 92% 89%
Bloomingdale, IL(2) 87% 83%
Edgewater, NJ(3) 86% 86%
Sterling Heights, MI(4) 85% 85%
(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, 2001, 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