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 530 Limited Partners at December 31, 2003. 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 $13.85 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2003 and $11.25 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2002 and $12.50 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2001. 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, 2003 - ----------------------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ----
TOTAL REVENUES AND OTHER INCOME $2,335,866 $2,334,725 $2,336,174 $2,181,934 $2,108,447
TOTAL EXPENSES 1,444,226 1,453,731 1,303,980 1,262,117 1,238,034
MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (204,804) (190,054) (204,104) (194,204) (186,102) --------- --------- --------- --------- ---------
NET INCOME $ 686,836 $ 690,940 $ 828,090 $ 725,613 $ 684,311 ========= ========= ========= ========= =========
TOTAL ASSETS $4,676,176 $5,091,587 $5,293,797 $5,485,221 $5,841,106 ========== ========== ========== ========== ==========
CASH FLOWS FROM: OPERATING $1,254,113 $1,262,126 $1,335,572 $1,287,282 $1,202,051 INVESTING - (17,459) (32,468) (18,864) - FINANCING (1,323,888) (1,099,145) (1,214,205) (1,305,315) (1,196,203)
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 34.00 $ 34.20 $ 40.99 $ 35.92 $ 33.87 ======== ========= ======== ======== ========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 55.39 $ 45.00 $ 50.00 $ 55.00 $ 50.00 ======== ======== ======== ======== ========
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, 2003, were: Whittier 91%, Edgewater Park 87%, Bloomingdale 81% and Sterling Heights 78%.
RESULTS OF OPERATIONS
2003 COMPARED TO 2002
Total revenues increased from $2,333,960 in 2002 to $2,335,465 in 2003, total expenses decreased from $1,453,731 to $1,444,226, other income decreased from $765 to $401 and minority interest in real estate joint ventures increased from $190,054 to $204,804. As a result, net income decreased from $690,940 to $686,836. Rental revenues remained constant. Occupancy levels for the Part- nership's four mini-storage facilities averaged 85.8% for the year ended December 31, 2003, compared to 85.5% for the year ended December 31, 2002. Operating expenses decreased approximately $57,200 (8.2%) primarily as a result of decreases in yellow pages advertising, repairs and maintenance, real estate tax, salaries and wages and workers compensation insurance expenses. General and administrative expenses increased approximately $30,500 (16.6%) primarily as a result of increases in legal and professional and New Jersey Partner annual processing fee expenses, partially offset by a decrease in office supplies and equipment and computer lease expenses. Legal expense increased as a result of legal challenges by dissident Limited Partners to a proposed amendment to the Partnership Agreement (see paragraph below). 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, remained relatively constant.
2002 COMPARED TO 2001
Total revenues increased from $2,333,037 in 2001 to $2,333,960 in 2002, total expenses increased from $1,303,980 to $1,453,731, other income decreased from $3,137 to $765 and minority interest in real estate joint ventures decreased from $204,104 to $190,054. As a result, net income decreased from $828,090 to $690,940. Rental revenues remained constant as higher unit rental rates were offset by lower occupancy rates. Occupancy levels for the Partnership's four mini-storage facilities averaged 85.5% for the year ended December 31, 2002, compared to 88.1% for the year ended December 31, 2001. Operating expenses increased approximately $74,700 (12.1%) primarily as a result of increases in yellow pages advertising, repairs and maintenance, real estate tax, salaries and wages and workers compensation insurance expenses. General and admini- stative expenses increased approximately $48,600 (36.1%) primarily as a result of increases in legal and professional, equipment and computer lease and New Jersey Partner annual processing fee expenses, partially offset by a decrease in travel expense. On July 3, 2002, the New Jersey legislature en- acted the New Jersey Business Tax Reform Act effective retroactively to January 1, 2002. The Act institutes a $150 per Partner annual processing fee plus a tax of 6.37% on the apportioned New Jersey net income allocated to non- resident Partners. Incentive management fees, which are based on distributions paid to limited partners, decreased as result of the decrease in distributions to limited partners. Property management fees, which are computed as a per- centage of rental revenues, remained relatively constant.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased approximately $8,000 (0.6%) in 2003 compared to 2002 primarily as a result of the decrease in net income. Net cash provided by operating activities decreased approximately $73,400 (5.5%) in 2002 compared to 2001 primarily as a result of the decrease in net income, partially offset by changes in other assets and liabilities.
Cash used in financing activities consisted of cash distributions to partners in 2003, 2002, and 2001. Additionally, cash distributions were paid to the minority interests in the real estate joint ventures in 2003, 2002, and 2001. In December 2003, 2002 and 2001, the General Partners declared and paid a special distribution equal to 3%, 1%, and 2%, 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 2002 and 2001. The Partnership has no material commitments for capital expenditures.
On April 5, 2002, the General Partners received a copy of a hostile tender offer from MacKenzie Patterson, Inc. and associated corporations and limited partnerships to purchase all of the Units in the Partnership. This offer was also filed with the Securities and Exchange Commission on the same date. The General Partners have determined that the hostile tender offer was not in the best interests of the Limted Partners, that the tender offer was grossly in- adequate given the performance history of the Partnership and the inherent value of the Units, and recommended that the Limited Partners reject the hostile tender offer and not tender their Units pursuant thereto. The offer was subsequently increased and extended to June 30, 2002 and again to July 22, 2002. The General Partners' initial determination regarding the offer has not changed. Prior to the expiration date of the offer, Limited Partners tendered 30 Units representing (0.15%) of the outstanding Units in the Partnership.
The Limited Partners have approved an amendment to the Partnership Agreement granting the General Partners ten days to review certain types of transfers during which the General Partners may match, exceed or approve the proposed transfers. The Court has rejected all preliminary attempts to halt the imple- mentation of the amendment. Subsequently, the dissident Limited Partners who initiated the legal proceedings decided not to pursue the matter any further.
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, 2003 and 2002 was as follows:
2003 QUARTER ENDED ------------------ March 31 June 30 September 30 December 31 -------- ------- ------------ -----------
Total revenues $598,595 $566,320 $587,206 $583,344
Income before minority interest in joint venture 265,613 210,842 226,436 188,749
Net income 265,613 210,842 71,582 138,799
Net income per limited partnership unit $ 13.15 $ 10.44 $ 3.54 $ 6.87
Weighted average number of limited partnership units outstanding 20,000 20,000 20,000 20,000
2002 QUARTER ENDED ------------------ March 31 June 30 September 30 December 31 -------- ------- ------------ -----------
Total revenues $629,233 $562,263 $585,847 $556,627
Income before minority interest in joint venture 297,014 230,217 154,174 199,589
Net income 297,014 230,217 11,720 159,989
Net income per limited partnership unit $ 14.70 $ 11.40 $ 0.58 $ 7.52
Weighted average number of limited partnership units 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, 2003, 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 70 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 75 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 81 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, 2003, 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, 2003, 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, 2003, 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, 2003, 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, 2003.
(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 31, 2004 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director)
By_______________________________ Dated: March 31, 2004 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 31, 2004 ROBERT J. CONWAY (President, Chief Executive Officer, Chief Financial Officer and Director)
By______________________________ Dated: March 31, 2004 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, 2003, 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, 2003 - ----------------------------------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ----
TOTAL REVENUES AND OTHER INCOME $2,335,866 $2,334,725 $2,336,174 $2,181,934 $2,108,447
TOTAL EXPENSES 1,444,226 1,453,731 1,303,980 1,262,117 1,238,034
MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (204,804) (190,054) (204,104) (194,204) (186,102) --------- --------- --------- --------- ---------
NET INCOME $ 686,836 $ 690,940 $ 828,090 $ 725,613 $ 684,311 ========= ========= ========= ========= =========
TOTAL ASSETS $4,676,176 $5,091,587 $5,293,797 $5,485,221 $5,841,106 ========== ========== ========== ========== ==========
CASH FLOWS FROM: OPERATING $1,254,113 $1,262,126 $1,335,572 $1,287,282 $1,202,051 INVESTING - (17,459) (32,468) (18,864) - FINANCING (1,323,888) (1,099,145) (1,214,205) (1,305,315) (1,196,203)
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 34.00 $ 34.20 $ 40.99 $ 35.92 $ 33.87 ======== ========= ======== ======== ========
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 55.39 $ 45.00 $ 50.00 $ 55.00 $ 50.00 ======== ======== ======== ======== ========
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, 2003.
Net Partners' Income Equity
Per financial statements $ 686,836 $ 4,307,857 Excess financial statement depreciation 143,257 1,582,620 Excess book distributions 202,026 Deferred rental revenues 68,995 New Jersey filing fee 7,973 Tax expense adjustment 58,999 Accrued incentive management fee 443,214 Acquisition costs capitalized for tax purposes 1,033,227 ----------- ----------- Per Partnership income tax return $ 889,092 $ 7,645,912 =========== ===========
Net taxable income per limited partnership unit $ 44.01 ===========
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
									 Page
Independent Auditors' Report
FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 2003 and 2002
Consolidated Statements of Income for the Three Years Ended December 31, 2003
Consolidated Statements of Changes in Partners' Equity(Deficit) for the Three Years Ended December 31, 2003
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2003
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.
CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the Partnership evaluated the effectiveness of its disclosure controls and procedures. This evalu- ation was performed by the Partnership's Controller with the assistance of the Partnership's President and the Chief Executive Officer. These dis- closure controls and procedures are designed to ensure that the information required to be disclosed by the Partnership in its periodic reports filed with the Securities and Exchange Commission (the "Commission") is recorded, processed, summarized and reported, within the time periods specified by the certifying officers on a timely basis. Based on this evaluation, the Partnership concluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnerhip's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation.
INDEPENDENT AUDITORS' REPORT Partners 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, 2003 and 2002, and the related consolidated statements of income, changes in partners' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial state- ment schedule listed in the Index at Item 14. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial statement schedule 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 manage- ment, 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 consoldiated financial statements present fairly, in all material respects, the financial position of DSI Realty Income Fund XI at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 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, presents fairly in all material respects, the information set forth therein.
Deloitte & Touche March 20, 2004
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2003 AND 2002 - -------------------------------------------------------------------------------
ASSETS 2003 2002
CASH AND CASH EQUIVALENTS $ 527,509 $ 597,284
PROPERTY, net (Note 3) 4,100,678 4,454,466
OTHER ASSETS 47,989 39,837 ----------- ----------- TOTAL $4,676,176 $ 5,091,587 =========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
LIABILITIES: Distribution due partners (Note 4) $ 202,020 $ 202,020 Property management fees payable 11,357 10,570 Other liabilities 154,942 138,892
----------- ---------- Total liabilities 368,319 351,482 ----------- ---------- PARTNERS' EQUITY (DEFICIT)(Note 4): General partners (46,589) (42,266) Limited partners (20,000 limited partnership units outstanding at December 31, 2003 and 2002) 4,354,446 4,782,371 ------------ ----------- Total partners' equity 4,307,857 4,740,105 ------------ ----------- TOTAL $ 4,676,176 $ 5,091,587 ============ ===========
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, 2003 - --------------------------------------------------------------------------------
2003 2002 2001
REVENUES: Rental $2,335,465 $2,333,960 $2,333,037 ---------- ---------- ---------- EXPENSES: Depreciation 353,788 353,787 318,792 Operating 637,126 694,329 619,662 General and administrative 213,639 183,184 134,634 General partners' incentive management fee (Note 4) 100,001 81,819 90,910 Property management fees 139,672 140,612 139,982 ---------- ---------- ---------- Total expenses 1,444,226 1,453,731 1,303,980 ---------- ---------- ---------- OPERATING INCOME 891,239 880,229 1,029,057
OTHER INCOME - Interest income 401 765 3,137
INCOME BEFORE MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES 891,640 880,994 1,032,194
MINORITY INTERESTS IN INCOME OF REAL ESTATE JOINT VENTURES (204,804) (190,054) (204,104) ---------- ---------- ---------- NET INCOME $ 686,836 $ 690,940 $ 828,090 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): General partners 6,868 6,909 8,281 Limited partners $ 679,968 $ 684,031 $ 819,809
---------- ---------- ---------- TOTAL $ 686,836 $ 690,940 $ 828,090 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT (Notes 2 and 4) $ 34.00 $ 34.20 $ 40.99 ========== ========== ==========
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, 2003 - --------------------------------------------------------------------------------
General Limited Partners Partners Total
BALANCE, JANUARY 1, 2001 $(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
Net income 6,909 684,031 690,940
Distributions (9,091) (900,000) (909,091) -------- ----------- ----------- BALANCE, DECEMBER 31, 2002 $(42,266) $ 4,782,371 $ 4,740,105
Net income 6,868 679,968 686,836
Distributions (11,191) (1,107,893) (1,119,084) -------- ---------- ----------- BALANCE,DECEMBER 31, 2003 $(46,589) $4,354,446 $ 4,307,857 ======== =========== ===========
See accompanying notes to consolidated financial statements.
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 2003 - --------------------------------------------------------------------------------
2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 686,836 $ 690,940 $ 828,090 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 353,788 353,787 318,792 Minority interests in income of real estate joint ventures 204,804 190,054 204,104 Changes in assets and liabilities: Other assets (8,152) 11,404 (6,001) Property management fees payable 787 (1,009) 560 Customer deposits and other liabilities 16,050 16,950 (9,973) ---------- ----------- ---------- Net cash provided by operating activities 1,254,113 1,262,126 1,335,572
CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (17,459) (32,468) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions to partners (1,119,084) (909,091) (1,010,101) Distributions paid to minority inter- ests in real estate joint ventures (204,804) (190,054) (204,104) ----------- ----------- ---------- Net cash used in financing activities (1,323,888) (1,099,145) (1,214,205) ----------- ----------- ---------- NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (69,775) 145,522 88,899
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 597,284 451,762 362,863 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 527,509 $ 597,284 $ 451,762 =========== =========== ===========
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, 2003
1. GENERAL
DSI Realty Income Fund XI, a California 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, 2003, 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 Partner- ship 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, 8% return (7.75% for the Whittier Mini) from the operation of the joint ventures. Requirements under the subordination agreement were met during 2002, 2001 and 2000. 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 6% 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 consolidated 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 consolidated 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 $202,256.
On February 27, 2003, New Jersey adopted new regulations effective retro- actively to January 1, 2002 that impose a filing fee of $150 per each New Jersey resident partner and a filing fee of $150 multiplied by the corpor- ate allocation factor of the Partnership for each non-resident partner. As a result, the Partnership recorded $46,466 and $21,244 in partnership filing fees during the years ended December 31, 2003 and 2002, respectively which are included in general and administrative expenses.
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.
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 loss to the extent that the carrying value exceeded the fair value of the property. No impairment losses were required in 2003, 2002 or 2001.
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 and cash equivalents with high credit quality institutions.
Impact of Recent Accounting Pronouncement - In December 2002, the Partner- ship adopted the following pronouncements: Statement of Financial Account- ing Standards ("SFAS") No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, and SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The adoption of these pronouncements did not have a material impact on the Partnership's financial position or results of operations. The Part- nership believes the adoption of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, will not have a material impact on the consolidated financial statements.
3. PROPERTY
The total cost of property and accumulated depreciation is as follows as of December 31:
2003 2002
Land $ 1,894,250 $ 1,894,250 Buildings 6,550,726 6,550,726 ----------- ----------- Total 8,444,976 8,444,976 Less accumulated depreciation 4,344,298 3,990,510 ----------- ----------
Property, net $ 4,100,678 $ 4,454,466 =========== ===========
4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE MANAGEMENT FEE
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 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 9% 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 SFAS 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 predetermined rate.
DSI REALTY INCOME FUND XI (A California Real Estate Limited Partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION - --------------------------------------------------------------------------------
						 Real Estate Accumulated 							at Cost Depreciation
Balance at January 1, 2001 $ 8,395,049 $3,317,931 Additions 32,468 318,792 ----------- ---------- Balance at December 31, 2001 $ 8,427,517 $3,636,723 Additions 17,459 353,787 ----------- ---------- Balance at December 31, 2002 $ 8,444,976 $3,990,510 Additions 353,788 ----------- ---------- Balance at December 31, 2003 $ 8,444,976 $4,344,298 						 =========== ==========
				 EXHIBIT 2 March 20, 2004
		 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, 2003 and 2002, 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, 2003 accompanied by an independent auditors' report. The Partnership owns an interest in four mini-storage. 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, 2003 and December 31, 2002 were as follows:
Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 2003 Dec. 31, 2002
Whittier, CA(1) 93% 92%
Bloomingdale, IL(2) 80% 82%
Edgewater, NJ(3) 87% 86%
Sterling Heights, MI(4) 82% 81%
(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, 2003, 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 XI 					 By: DSI Properties, Inc.
					 By_______________________________ 						 ROBERT J. CONWAY, President
CERTIFICATIONS
I, Robert J. Conway, certify that:
1. I have reviewed this annual report on Form 10-K of DSI Realty Income Fund XI;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this annual report.
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its con- solidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to re- cord, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls; and
6. The registrnat's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 20, 2004
Robert J. Conway Chief Executive Officer
CERTIFICATIONS
I, Richard P. Conway, certify that:
1. I have reviewed this annual report on Form 10-K of DSI Realty Income Fund XI;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this annual report.
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its con- solidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to re- cord, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls; and
6. The registrnat's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 20, 2004
Richard P. Conway Vice President
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DSI Realty Income Fund XI (the "Partnership") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership.
Robert J. Conway Chief Executive Officer March 20, 2004
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DSI Realty Income Fund XI (the "Partnership") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership.
Richard P. Conway Vice President March 20, 2004