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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 1O-K
(Mark One)
/ x /Annual Report Pursuant to Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 [Fee Required] for the fiscal year ended December 31, 2001.
or / /Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No fee required] for the transition period from
____________ to ______________.
Commission File No. 2-90168.
DSI REALTY INCOME FUND VIII, a California Limited Partnership
(Exact name of registrant as specified in governing instruments)
_________California___________________________33-0050204_____
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization identification
number
6700 E. Pacific Coast Hwy., Long Beach, California 9O8O3
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code-(562)493-8881
Securities registered pursuant to Section 12(b) of the Act: none.
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests
(Class of Securities Registered)
Indicate by check mark, whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 9O days. Yes_X____. No______.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. /x/
The Registrant is a limited partnership and there is no voting stock. All units
of limited partnership sold to date are owned by non-affiliates of the
registrant. All such units were sold at $5OO.OO per unit.
DOCUMENTS INCORPORATED BY REFERENCE
Item 8. Registrant's Financial Statements for its fiscal year ended December 31,
2001, incorporated by reference to Form 10-K, Part II.
Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 2001, incorporated by reference to Form 10-K, Part III.
Item 12. Registration Statement on Form S-11, previously filed with the
Securities and Exchange Commission pursuant to Securities Act of 1933, as
amended, incorporated by reference to Form 10-K Part III.
Item 13. Registrant's Financial Statements for its fiscal year ended December
31, 2001, incorporated by reference to Form 10-K, Part III.
PART I
Item l. BUSINESS
Registrant, DSI Realty Income Fund VIII (the "Partnership") is a
publicly-held limited partnership organized under the California Uniform Limited
Partnership Act pursuant to a Certificate and Agreement of Limited Partnership
(hereinafter referred to as "Agreement") dated November 28, 1983, as amended and
restated to November 1, 1985. The General Partners are DSI Properties, Inc., a
California corporation, Diversified Investors Agency, a general partnership,
whose current partners are Robert J. Conway and Joseph W. Conway, brothers. The
General Partners are affiliates of Diversified Securities, Inc., a wholly-owned
subsidiary of DSI Financial, Inc. The General Partners provide similar services
to other partnerships. Through its public offering of Limited Partnership Units,
Registrant sold twenty-four thousand (24,000) units of limited partnership
interests aggregating Twelve Million Dollars ($12,000,000). The General Partners
have retained a one percent (l%) interest in all profits, losses and
distributions (subject to certain conditions) without making any capital
contribution to the Partnership. The General Partners are not required to make
any capital contributions to the Partnership in the future. Registrant is
engaged in the business of investing in and operating mini-storage facilities
with the primary objectives of generating, for its partners, cash flow, capital
appreciation of its properties, and obtaining federal income tax deductions so
that during the early years of operations, all or a portion of such
distributable cash may not represent taxable income to its partners. Funds
obtained by Registrant during the public offering period of its units were used
to acquire five mini-storage facilities and a thirty percent (30%) interest in a
joint venture with DSI Realty Income Fund IX, an affiliated California limited
partnership, owning a sixth mini-storage facility. Registrant does not intend to
sell additional limited partnership units. The term of the Partnership is fifty
years but it is anticipated that Registrant will sell and/or refinance its
properties prior to the termination of the Partnership. The Partnership is
intended to be self-liquidating and it is not intended that proceeds from the
sale or refinancing of its operating properties will be reinvested. Registrant
has no full time employees but shares one or more employees with other
publicly-held limited partnerships sponsored by the General Partners. The
General Partners are vested with authority as to the general management and
supervision of the business and affairs of Registrant. Limited Partners have no
right to participate in the management or conduct of such business and affairs.
An independent management company has been retained to provide day-to-day
management services with respect to all of the Partnership's investment
properties.
Average occupancy levels for each of the Partnership's six properties for
the years ended December 31, 2001 and December 31, 2000 were as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Level for the
Year Ended Year Ended
Dec. 31, 2001 Dec. 31, 2000
El Centro, CA 88% 82%
Lompoc, CA 96% 91%
Pittsburg, CA 90% 89%
Stockton, CA 91% 91%
Huntington Beach, CA 90% 90%
Aurora, CO* 88% 86%
- ----------
*The Partnership owns a 30% fee interest in this facility.
The business in which the Partnership is engaged is highly competitive.
Each of its mini-storage facilities is located in or near a major urban area,
and accordingly, competes with a significant number of individuals and
organizations with respect to both the purchase and sale of its properties and
rental of units. Generally, Registrant's business is not affected by the change
in seasons.
Item 2. PROPERTIES
Registrant owns a fee interest in five mini-storage facilities and a thirty
percent (30%) interest in a joint venture with DSI Realty Income Fund IX, an
affiliated California limited partnership, owning a sixth mini-storage facility,
none of which are subject to long-term indebtedness. Additional information is
set forth in Registrant's letter to its Limited Partners regarding the Annual
Report, attached hereto as Exhibit 2, and incorporated by this reference. The
following table sets forth information as of December 31, 2001 regarding
properties owned by the Partnership.
Location Size of Net Rentable No. of Completion
Parcel Area Rental Units Date
Stockton, CA 2.88 acres 48,017 560 2/11/85
Pittsburg, CA 1.91 acres 30,483 383 6/01/85
El Centro, CA 1.42 acres 24,818 276 4/01/85
Huntington
Beach, CA 3.28 acres 62,192 601 6/14/85
Lompoc, CA 2.24 acres 47,472 438 2/28/85
Aurora, CO* 4.6 acres 86,676 887 9/05/85
- ----------
*The Partnership has a 30% fee interest in this facility. DSI Realty Income Fund
IX, a California Limited Partnership, (an affiliated partnership) owns a 70% fee
interest in this facility.
Item 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Registrant, a publicly-held limited partnership, sold 24,000 limited
partnership units during its offering and currently has 861 limited partners of
record. There is no intention to sell additional limited partnership units nor
is there a market for these units.
Average cash distributions of $16.31 per Limited Partnership Unit were
declared and paid each quarter for the year ended December 31, 2001 and $14.44
per Limited Partnership Unit were declared and paid each quarter for the year
ended December 31, 2000 and $12.56 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. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, 1998, and 1997
--------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
TOTAL REVENUES
AND OTHER
INCOME $2,560,170 $2,191,329 $1,964,314 $1,899,608 $1,712,288
TOTAL
EXPENSES 1,017,264 1,124,448 1,325,636 1,253,740 1,217,044
EQUITY IN
INCOME OF
REAL ESTATE
JOINT
VENTURE 168,986 121,220 122,453 109,741 93,305
---------- ---------- ---------- ---------- ----------
NET
INCOME $1,711,892 $1,188,101 $ 761,131 $ 755,609 $ 588,549
========== ========== ========== ========== ==========
TOTAL
ASSETS $3,159,545 $3,039,636 $3,209,853 $3,668,506 $4,132,136
========== ========== ========== ========== ==========
CASH FLOW FROM:
(USED IN):
OPERATING $1,522,378 $1,291,175 $1,095,614 $1,058,931 $ 956,900
INVESTING - (26,440) (14,773) 50,712 -
1,417,681 (1,233,546) (1,055,558) (1,051,322) (946,609)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 70.62 $ 49.01 $ 31.40 $ 31.17 $ 24.28
========== ========== ========== ========== ==========
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 65.25 $ 57.77 $ 50.25 $ 50.00 $ 45.00
========== ========== ========== ========== ==========
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
2001 COMPARED TO 2000
Total revenues increased from $2,183,874 in 2000 to $2,555,493 in 2001, total
expenses decreased from $1,124,448 to $1,017,264, other income decreased from
$7,455 to $4,677 and income from the real estate joint venture increased from
$121,220 to $168,986. As a result, net income increased from $1,188,101 in
2000 to $1,711,892 in 2001. The approximate $371,600 (17.0%) increase in
rental revenues can be attributed to higher occupancy and unit rental rates.
Occupancy levels for the Partnership's six mini-storage facilities averaged
91.3% for the year ended December 31, 2001 and 89.0% for the year ended
December 31, 2000. The Partnership is continuing its advertising campaign to
attract and keep new tenants in its various mini-storage facilities. The
approximate $27,800 (5.0%) increase in operating expenses was due primarily
to an increase in repairs and maintenance and salaries and wages expenses,
partially offset by a decrease in workers compensation insurance expense.
General and administrative expenses remained relatively constant. General
Partners' incentive management fees increased as a result of the increase in
net income. Property management fees, which are based on revenue, increased
as a result of the increase in rental revenue. Income from real estate joint
venture increased approximately $47,800 (39.4%) primarily as a result of an
increase in rental revenue and a decrease in depreciation expense. Average
occupancy of the joint venture facility was 88.7% in 2001 and 86.2% in 2000.
2000 COMPARED TO 1999
Total revenues increased from $1,958,184 in 1999 to $2,183,874 in 2000, total
expenses decreased from $1,325,636 to $1,124,448, other income increased from
$6,130 to $7,455 and income from the real estate joint venture decreased from
$122,453 to $121,220. As a result, net income increased from $761,131 in
1999 to $1,188,101 in 2000. The approximate $225,700 (11.5%) increase in
rental revenues is attributed to higher occupancy and unit rental rates.
Occupancy levels for the Partnership's six mini-storage facilities averaged
89.0% for the ended December 31, 2000 and 82.9% for the year ended December 31,
1999. The Partnership continued its advertising campaign to attract and
keep new tenants in its various mini-storage facilities. The approximate
$37,800 (7.3%) increase in operating expenses was due primarily to an increase
in yellow pages and other advertising costs, salaries and wages and workers
compensation insurance expenses, partially offset by a decrease in repair and
maintenance expense. General and administrative expenses increased as a
result of higher legal and professional expenses. General Partners' incentive
management fees increased as a result of the increase in net income. Property
management fees, wich are based on revenue, increased as a result of the in-
crease in rental revenue. Income from real estate joint venture remained
relatively constant. Average occupancy of the joint venture facility was
86.2% in 2000 and 88.0% in 1999.
Operating expenses consits mainly of expenses such as yellow pages and other
advertising, utilities, repairs and maintenance, real estate taxes, salaries
and wages and their related expenses. General and administrative expenses
consist mainly of expenses such as legal and professional, office supplies,
postage, accounting services and computer expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased approximately $231,200
(17.9%) in 2001 compared to 2000, primarily due to an increase in net income.
Net cash provided by operating activities increased approximately $195,600
(17.9%) in 2000 compared to 1999, primarily due to increase in net income and
other liabilities.
Cash used in financing activities, as set forth in the statements of cash
flows, has been limited to distributions paid to the partners. A special
distribution of 4.0%, 2.5%, and 1% of capital contributed by limited partners,
was declared and paid on December 15, 2001, 2000 and 1999 respectively.
Cash used in investing activities, as set forth in the statements of cash
flows, consisted of acquisitions of equipment for the Partnership's mini-
storage properties. The Partnership has no material commitments for capital
expenditures.
The General Partners plan to continue their policy of funding the
continuing improvement and maintenance of Partnership properties with cash
generated from operations. The Partnership anticipates that cash flows
generated from operations of the Partnership's real estate operations will be
sufficient to cover operating expenses and distributions for the next twelve
months.
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 $617,806 $632,472 $665,379 $639,836
Income before interest 379,772 391,423 400,465 371,246
in joint venture
Net income 423,166 434,513 440,117 414,096
Net income per limited
partnership unit $ 17.46 $ 17.92 $ 18.15 $ 17.08
Weighted average number
of limited partnership
units outstanding 24,000 24,000 24,000 24,000
2000 Quarter Ended
------------------
March 31 June 30 September 30 December 31
Total revenues $511,891 $529,876 $565,527 $576,580
Income before interest
in joint venture 165,733 182,641 192,458 526,049
Net income 197,922 208,830 221,945 559,404
Net income per limited $ 8.16 $ 8.61 $ 9.16 $ 23.08
partnership unit
Weighted average number
of limited partnership
units outstanding 24,000 24,000 24,000 24,000
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto as Exhibit l is the information required to be set forth as
Item 8, Part II hereof.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S
GENERAL PARTNER
The General Partners of Registrant are the same as when the Partnership was
formed, i.e., DSI Properties, Inc., a California corporation, and Diversified
Investors Agency. As of December 31, 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. EXECUTIVE COMPENSATION (MANAGEMENT REMUNERATION AND
TRANSACTIONS)
The information required to be furnished in Item 11 of Part III is
contained in Registrant's Financial Statements for its fiscal year ended
December 31, 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
Registrant to any of the General Partners or to any officer or
director of the corporate General Partner;
(b) No standard or other arrangement exists by which directors of the
Registrant are compensated;
(c) The Registrant has not granted any option to purchase any of its
securities; and
(d) The Registrant has no plan, nor does the Registrant presently propose
a plan, which will result in any renumeration being paid to any
officer or director upon termination of employment.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 2001, no person of record owned more than 5% of the
limited partnership units of Registrant, nor was any person known by Registrant
to own of record and beneficially, or beneficially only, more than 5% thereof.
The balance of the information required to be furnished in Item 12 of Part III
is contained in Registrant's Registration Statement on Form S-11, previously
filed pursuant to the Securities Act of 1933, as amended, and which is
incorporated herein by this reference. The only change to the information
contained in said Registration Statement on Form S-11 is the fact that Messrs.
Benes and Blakley have retired and Messrs. Robert J. Conway and Joseph W. Conway
equity interest in DSI Financial, Inc., parent of DSI Properties, Inc., has
increased. Please see information contained in Item 10 hereinabove.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be furnished in Item 13 of Part III is
contained in Registrant's Financial Statements for its fiscal year ended
December 31, 2001, attached hereto as Exhibit l and incorporated herein by this
reference.
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(l) Attached hereto and incorporated herein by this reference as Exhibit
l are Registrant's Financial Statements and Supplemental Schedule for
its fiscal year ended December 31, 2001, together with the reports of
its independent auditors, Deloitte & Touche LLP. See Index to
Financial Statements and Supplemental Schedule.
(a)(2) Attached hereto and incorporated herein by this reference as Exhibit
2 is Registrant's letter to its Limited Partners regarding its Annual
Report for its fiscal year ended December 31, 2001.
(b) No reports on Form 8K were filed during the fiscal year ended December
31, 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DSI REALTY INCOME FUND VIII
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 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 VIII
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 VIII
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 VIII
(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 $2,560,170 $2,191,329 $1,964,314 $1,899,608 $1,712,288
TOTAL
EXPENSES 1,017,264 1,124,448 1,325,636 1,253,740 1,217,044
EQUITY IN
INCOME OF
REAL ESTATE
JOINT
VENTURE 168,986 121,220 122,453 109,741 93,305
---------- ---------- ---------- ---------- ----------
NET
INCOME $1,711,892 $1,188,101 $ 761,131 $ 755,609 $ 588,549
========== ========== ========== ========== ==========
TOTAL
ASSETS $3,159,545 $3,039,636 $3,209,853 $3,668,506 $4,132,136
========== ========== ========== ========== ==========
CASH FLOW FROM:
(USED IN):
OPERATING $1,522,378 $1,291,175 $1,095,614 $1,058,931 $ 956,900
INVESTING - (26,440) (14,773) 50,712 -
1,417,681 (1,233,546) (1,055,558) (1,051,322) (946,609)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 70.62 $ 49.01 $ 31.40 $ 31.17 $ 24.28
========== ========== ========== ========== ==========
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 65.25 $ 57.77 $ 50.25 $ 50.00 $ 45.00
========== ========== ========== ========== ==========
The following are reconciliations between the net income and partners' equity
for the financial statements and the Partnership's income tax return for the
year ended December 31, 2001.
Net Partners'
Income Equity
Per financial statements $ 1,711,892 $ 2,523,922
Excess financial statement depreciation (333,276) 1,004,465
Excess tax return income
from real estate joint venture (36,349) 179,021
Accrued incentive management fees 266,768
Capitalization of property acquisition costs 80,713
Fixed asset adjustments 2,080
Recognition of deferred rental revenues 41,918
Accrued distributions to partners 272,731
State taxes (6,023)
----------- -----------
Per Partnership income tax return $ 1,336,244 $ 4,371,618
=========== ===========
Net taxable income per limited
partnership unit $ 55.12
===========
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report F-1
Balance Sheets at December 31, 2001 and 2000 F-2
Statements of Income for the Three
Years Ended December 31, 2001 F-3
Statements of Changes in Partners' Equity (Deficit) for
the Three Years Ended December 31, 2001 F-4
Statements of Cash Flows for the Three Years
Ended December 31, 2001 F-5
Notes to Financial Statements F-6
SUPPLEMENTAL SCHEDULE:
Schedule III - Real Estate and Accumulated Depreciation F-10
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 VIII:
We have audited the accompanying balance sheets of DSI Realty Income Fund VIII,
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 state-
ment schedule listed in the Index at Item 14. These financial statements 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 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 VIII 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.
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 LLP
February 1, 2002
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
- --------------------------------------------------------------------------------
ASSETS 2001 2000
CASH AND CASH EQUIVALENTS $ 619,194 $ 514,497
PROPERTY, net (Notes 3 and 7) 2,287,427 2,287,427
INVESTMENT IN REAL ESTATE
JOINT VENTURE
(Notes 2 and 6) 181,660 176,774
OTHER ASSETS 71,264 60,938
----------- -----------
TOTAL $ 3,159,545 $ 3,039,636
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
LIABILITIES:
Distribution due to partners (Note 4) $ 272,727 $ 272,727
Incentive management fee payable to
general partners (Note 4) 276,722 274,669
Property management fees payable 10,087 9,916
Customer deposits and other liabilities 76,087 88,513
----------- -----------
Total liabilities 635,623 645,825
----------- -----------
PARTNERS' EQUITY (DEFICIT) (Notes 4):
General partners (82,543) (83,844)
Limited partners (24,000 limited
partnership units outstanding
at December 31, 2001 and 2000) 2,606,465 2,477,655
------------ -----------
Total partners' equity 2,523,922 2,393,811
------------ -----------
TOTAL $ 3,159,545 $ 3,039,636
============ ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
STATEMENTS OF INCOME
THREE YEARS ENDED DECEMBER 31, 2001
- --------------------------------------------------------------------------------
2001 2000 1999
REVENUES:
Rental $2,555,493 $2,183,874 $1,958,184
---------- ---------- ----------
EXPENSES:
Depreciation 199,101 469,134
Operating 586,846 559,057 521,278
General and administrative 135,671 131,867 122,785
General partners' incentive
management fee (Note 4) 167,714 124,878 114,530
Property management fee 127,033 109,545 97,909
---------- ---------- ----------
Total expenses 1,017,264 1,124,448 1,325,636
---------- ---------- ----------
OPERATING INCOME 1,538,229 1,059,426 632,548
OTHER INCOME:
Interest income 4,677 7,455 6,130
--------- ---------- ----------
INCOME BEFORE EQUITY IN
INCOME OF REAL ESTATE
JOINT VENTURE 1,542,906 1,066,881 638,678
EQUITY IN INCOME OF
REAL ESTATE JOINT
VENTURE (Notes 2 and 6) 168,986 121,220 122,453
__________ __________ _________
NET INCOME $1,711,892 $1,188,101 $ 761,131
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
Limited partners $1,694,773 $1,176,220 $ 753,520
General partners 17,119 11,881 7,611
---------- ---------- ----------
TOTAL $1,711,892 $1,188,101 $ 761,131
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT (Notes 2 and 4) $ 70.62 $ 49.01 $ 31.40
========== ========== ==========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 2001
- --------------------------------------------------------------------------------
General Limited
Partners Partners Total
BALANCE, JANUARY 1, 1999 $(77,150) $3,140,323 $3,063,173
Net income 7,611 753,520 761,131
Distributions (12,182) (1,205,976) (1,218,158)
-------- ----------- -----------
BALANCE, DECEMBER 31, 1999 $(81,721) $2,687,867 $2,606,146
Net income 11,881 1,176,220 1,188,101
Distributions (14,004) (1,386,432) (1,400,436)
-------- ----------- -----------
BALANCE, DECEMBER 31, 2000 $(83,844) $2,477,655 $2,393,811
Net income 17,119 1,694,773 1,711,892
Distributions (15,818) (1,565,963) (1,581,781)
-------- ----------- -----------
BALANCE, DECEMBER 31, 2001 $(82,543) $2,606,465 $2,523,922
======== =========== ===========
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 2001
- --------------------------------------------------------------------------------
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,711,892 $ 1,188,101 $ 761,131
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 199,101 469,134
Equity in earnings of
real estate joint venture (168,986) (121,220) (122,453)
Changes in assets and liabilities:
Receivable from general partners
Other assets (10,326) (16,925) (10,572)
Incentive management fee
payable to general partners 2,053 3,653 (2,127)
Property management fees payable 171 1,870 501
Customer deposits and
other liabilities (12,426) 36,595
----------- ----------- -----------
Net cash provided by operating
activities 1,522,378 1,291,175 1,095,614
CASH FLOWS FROM INVESTING ACTIVITIES -
Additions of property (26,440) (14,773)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Distributions to partners (1,581,781) (1,400,436) (1,218,158)
Distributions from real
estate joint venture 167,700 166,890 162,600
Contributions to real
estate joint venture (3,600)
----------- ----------- ------------
Net cash used in
financing activities (1,417,681) (1,233,546) (1,055,558)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 104,697 31,189 25,283
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 514,497 483,308 458,025
----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 619,194 $ 514,497 $ 483,308
=========== =========== ============
See accompanying notes to financial statements.
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 2001
1. GENERAL
DSI Realty Income Fund VIII, a California Real Estate Limited Partnership
(the "Partnership"), has two general partners (DSI Properties, Inc. and
Diversified Investors Agency) and limited partners owning 24,000 limited
partnership units, 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 April 23, 1984 under the
California Uniform Limited Partnership Act for the primary purpose of
acquiring and operating real estate.
The Partnership has acquired five mini-storage facilities located in
Stockton, Pittsburgh, El Centro, Huntington Beach, and Lompoc, California.
The Partnership has also entered into a joint venture with DSI Realty
Income Fund IX, through which the Partnership has a 30 percent interest in
a mini-storage facility in Aurora, Colorado (see Note 6). All facilities
were acquired from Dahn Corporation ("Dahn"). Dahn is not affiliated with
the Partnership. Dahn is affiliated with other partnerships in which DSI
Properties, Inc. is a general partner. The mini-storage facilities are
operated for the Partnership by Dahn under various agreements that are
subject to renewal annually. Under the terms of the agreements, the
Partnership is required to pay Dahn a property management fee equal to
five 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
Cash and Cash Equivalents - The Partnership classifies its short-term
investments purchased with an original maturity of three months or less as
cash equivalents.
Property and Depreciation - Property is recorded at cost and is composed
primarily of mini-storage facilities. Depreciation is provided for using
the straight-line method over an estimated useful life of 15 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 assets and liabilities for federal income tax purposes
and as reported for financial statement purposes is $1,847,696.
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.
Investment in Real Estate Joint Venture - The Partnership accounts for its
30 percent interest in the Aurora, Colorado, Facility using the equity
method of accounting (see Note 6).
Net Income per Limited Partnership Unit - Net income per limited
partnership unit is computed by dividing the net income allocated to
the limited partners by the weighted average number of limited
partnership units outstanding during each year (24,000 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 loss to the extent that the carrying value exceeded the fair value
of the property. No impairment losses were required in 2001, 2000, or
1999.
Fair Value of Financial Instruments - The Partnership's financial instru-
ments consist primarily of cash and cash equivalents, 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.
Reclassifications - Certain reclassifications have been made to the 2000
and 1999 amounts to conform to the 2001 presentation.
3. PROPERTY
As of December 31, 2001 and 2000, the total cost of property and
accumulated depreciation are as follows:
Land $ 2,287,427
Buildings and improvements 7,149,828
-----------
Total 9,437,255
Less accumulated depreciation (7,149,828)
-----------
Property, net $ 2,287,427
===========
4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' MANAGEMENT FEES
Under the Agreement of Limited Partnership, the general partners are to be
allocated 1% of the net profits or net losses from operations and the
limited partners are to be allocated the balance of the net profits or
losses from operations in proportion to their limited partnership
interests. The general partners are also entitled to receive a
percentage, based on a predetermined formula, of any cash distribution
from the sale, other disposition, or refinancing of a real estate project.
In addition, the general partners are entitled to receive an incentive
management fee for supervising the operations of the Partnership. The fee
is to be paid in an amount equal to nine percent per annum of the cash
available for distribution, on a cumulative basis, calculated as cash
generated from operation 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 Enter-
prise and Related Information." The Partnership operates in 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.
6. INVESTMENT IN REAL ESTATE JOINT VENTURE
The Partnership is involved in a joint venture (the Buckley Road facility)
that owns a mini-storage facility in Aurora, Colorado. Under the terms
of the joint venture agreement, the Partnership is entitled to 30 percent
of the profits or losses of the venture and owns 30 percent of the mini-
storage facility as a tenant in common with DSI Realty Income Fund IX
("Fund IX"), which has the remaining 70 percent interest in the venture.
The agreement specifies that DSI Properties, Inc. (a general partner in
both the Partnership and Fund IX) shall make all decisions relating to
the activities of the joint venture and the management of the property.
Investment in real estate joint venture is summarized as follows:
December 31
2001 2000 1999
Beginning balance $ 176,774 $ 222,444 $ 262,591
Income allocation 168,986 121,220 122,453
Distribution (167,700) (166,890) (162,600)
Contributions 3,600
--------- --------- ---------
Ending balance $ 181,660 $ 176,774 $ 222,444
========= ========= =========
Summarized financial information of the Buckley Road statements is as follows:
2001 2000
(Unaudited)
Assets:
Cash $ 12,729 $ 13,652
---------- ----------
Property:
Land 586,500 586,500
Building 2,597,764 2,586,208
---------- ----------
Total 3,184,264 3,172,708
Less accumulated
depreciation 2,588,519 2,586,208
---------- ----------
Property, net 595,745 586,500
Other assets 21,044 19,542
---------- ----------
Total $ 629,518 $ 619,694
Liabilities and Partners' Equity:
Liabilities $ 20,752 $ 27,215
Partners' equity 608,766 592,479
---------- ----------
Total $ 629,518 $ 619,694
========== ==========
2001 2000 1999
Income Statement Data:
Rental revenues $ 782,893 $ 763,992 $ 774,753
Less expenses 219,606 359,924 366,576
Net income 563,287 404,068 408,177
------- ------- -------
Allocation of net income $ 168,986 $ 121,220 $ 122,453
========== ========== ==========
Property is stated at cost; depreciation is provided for using the
straight-line method over the estimated useful life of 15 years.
DSI REALTY INCOME FUND VIII
(A California Real Estate Limited Partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------
Costs Capitalized
Initial Cost to Subsequent to Gross Amount at Which Carried
Partnership Acquisition at Close of Period
------------------- ----------------- -----------------------------
Buildings Buildings Date
and Improve- Carrying and Accum. of Date
Description Encumbrances Land Improvements ments Costs Land Improvements Total Deprec. Const. Acq. Life
MINI-U-STORAGE
Stockton, CA None $371,000 $1,375,823 $ 24,599 $353,117 $1,418,304 $1,771,422 $1,418,304 01/85 07/84 15 Yrs
Pittsburgh, CA None 317,550 1,122,032 18,890 317,550 1,140,922 1,458,472 1,140,922 05/85 11/84 15 Yrs
El Centro, CA None 163,560 708,710 3,202 163,560 711,912 875,472 711,912 04/85 12/84 15 Yrs
Lompoc, CA None 277,200 1,524,419 6,303 277,200 1,530,722 1,807,922 1,530,722 02/85 02/85 15 Yrs
Huntington Bch, CA None 1,176,000 2,306,020 41,947 1,176,000 2,347,968 3,523,967 2,347,968 06/85 02/85 15 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$2,305,310 $7,037,004 $ 94,941 $2,287,427 $7,149,828 $ 9,437,255 $7,149,828
========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated
at Cost Depreciation
Balance, January 1 1999 $ 9,396,042 $6,481,593
Additions 14,773 469,134
----------- ----------
Balance, December 31, 1999 $ 9,410,815 $6,950,727
Additions 26,440 199,101
----------- ----------
Balance, December 31, 2000 $ 9,437,255 $7,149,828
Additions - -
----------- ----------
Balance, December 31, 2002 $ 9,437,255 $7,149,828
=========== ==========
EXHIBIT 2
March 28, 2002
ANNUAL REPORT TO LIMITED PARTNERS OF
DSI REALTY INCOME FUND VIII
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 five
mini-storage facilities, plus a 30% interest in a sixth mini-storage facility on
a joint venture basis with an affiliated Partnership, DSI Realty Income Fund IX,
a California Limited Partnership. The Partnership's properties were each
purchased for all cash and funded solely from subscriptions for limited
partnership interests without the use of mortgage financing.
Your attention is directed to the section entitled Management's Discussion
and Analysis of Financial Condition and Results of Operations for the General
Partners' discussion and analysis of the financial statements and operations of
the Partnership.
Average occupancy levels for each of the Partnership's six properties for
the years ended December 31, 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
El Centro, CA 88% 82%
Lompoc, CA 96% 91%
Pittsburg, CA 90% 89%
Stockton, CA 91% 91%
Huntington Beach, CA 90% 90%
Aurora, CO* 88% 86%
- ---------
*The Partnership owns a 30% fee interest in this facility.
We will keep you informed of the activities of DSI Realty Income Fund VIII
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 VIII
By: DSI Properties, Inc.
By___________________________
ROBERT J. CONWAY, President