1 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended: December 31, 2003
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:
Commission file number: 0-16508
____________________________
USA REAL ESTATE INVESTMENT TRUST
(Exact Name of Registrant as Specified in its Charter)
California 68-0109347
(State of Organization) (I.R.S. Employer Identification No.)
2443 Fair Oaks Boulevard., #314, Sacramento, California 95825-7684
(Address of registrant's principal executive offices) (Zip Code)
(800) 308-4532
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interests
____________________________
Indicate by check mark whether the registrant (1) 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, and (2) has been subject to such filing
requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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/
Indicate by check mark whether the Registrant is an accelerated filer
(as defined under Rule 12b-2 of the Securities Exchange Act of 1934).
/ / Yes /X/ No
The aggregate market value of the voting shares of beneficial interest
(the "shares") held by nonaffiliates of the registrant outstanding at December
31, 2003, was $12,145,657. This calculation is based on the book value
because there is no active public trading market for the shares.
Documents Incorporated by Reference: None
2
USA REAL ESTATE INVESTMENT TRUST
Table of Contents
Page
PART I.
ITEM 1. Business ................................... 3
ITEM 2. Properties ................................. 6
ITEM 3. Legal Proceedings .......................... 6
ITEM 4. Submission of Matters to a Vote
of Security Holders ...................... 6
PART II.
ITEM 5. Market for Registrant's Equity Securities
and Related Security Holder Matters ...... 7
ITEM 6. Selected Financial Data .................... 7
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ............................ 8
ITEM 8. Financial Statements and Supplementary
Data ..................................... 10
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure ..................... 19
ITEM 9A. Controls and Procedures .................... 20
PART III.
ITEM 10. Directors and Executive Officers
of the Registrant ........................ 21
ITEM 11. Executive Compensation ..................... 22
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management ......... 23
ITEM 13. Certain Relationships and
Related Transactions ..................... 23
ITEM 14. Principal Accountant Fees and Services ..... 23
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K .................. 24
3 PART I.
Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and
information publicly disseminated by USA Real Estate Investment Trust (the
"Trust"), contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements are based on assumptions and
expectations which may not be realized and are inherently subject to risks,
uncertainties and other factors, many of which cannot be predicted with
accuracy and some of which might not even be anticipated. Future events
and actual results, performance, transactions or achievements, financial
and otherwise, may differ materially from the results, performance,
transactions or achievements expressed or implied by the forward-looking
statements. Risks, uncertainties and other factors that might cause such
differences, some of which could be material, include, but are not limited
to: changes in the global political environment; national and local
economic, business and real estate and other market conditions; the competitive
environment in which we operate; property management risks; financing risks,
such as the inability to obtain debt or equity financing on favorable terms;
possible future downgrades in our credit rating; the level of volatility of
interest rates; financial stability of tenants, including the ability of
tenants to pay rent, the decision of tenants to close stores and the effect
of bankruptcy laws; the rate of revenue increases versus expense increases;
the ability to maintain our status as a REIT for federal income tax
purposes; governmental approvals, actions and initiatives; environmental/
safety requirements and costs; risks of real estate acquisition and
development, including the failure of acquisitions to close and pending
developments and redevelopments to be completed on time and within budget;
risks of disposition strategies, including the failure to complete sales
on a timely basis and the failure to reinvest sale proceeds in a manner
that generates favorable returns; risks of joint venture activities; as
well as other risks identified in this Annual Report on Form 10-K and,
from time to time, in the other reports we file with the SEC or in other
documents that we publicly disseminate. We undertake no obligation to
publicly update or revise these forward-looking statements, whether as a
result of new information, future events or otherwise.
ITEM 1. BUSINESS
GENERAL
The Trust is a California business trust that was formed on October 7,
1986, for the primary purpose of engaging in the business of acquiring,
owning and financing real property investments. The Trust commenced
operations on October 19, 1987, upon the sale of the minimum offering amount
of shares of beneficial interest ("shares").
The purpose of the Trust is to provide investors with an opportunity to
own, through transferable shares, an interest in diversified real estate
investments. The Trust invests primarily in income producing real properties
in accordance with the investment objectives and policies of the Trust.
Through such investments, the Trust seeks to provide investors with an
opportunity to participate in a portfolio of professionally managed real
4
estate investments in the same way a mutual fund affords investors an
opportunity to invest in a professionally managed portfolio of stocks, bonds
and other securities.
The Trust has operated and intends to continue to operate in a manner
intended to qualify as a "real estate investment trust" (REIT) under Sections
856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). A
qualified REIT is relieved, in part, from federal income taxes on ordinary
income and capital gains distributed to its shareholders. State tax benefits
also may accrue to a qualified REIT. Pursuant to Code requirements, the Trust
distributes to its shareholders at least 90 percent of its taxable income and
100 percent of the net capital gain from the sale of Trust properties.
The Trust will terminate 21 years after the death of the last survivor of
persons listed in the Trust's Declaration of Trust. The Trust may also be
terminated at any time by the majority vote or written consent of shareholders.
The office of the Trust is located at One Scripps Drive, Suite 201, in
Sacramento, California.
INVESTMENT OBJECTIVES
The Trust owns and manages two real properties and one promissory
note collateralized by real property in order to produce income. Subject to
certain limitations, the Declaration of Trust gives the Trustees discretion
to allocate the Trust's investments without the prior approval of
shareholders.
INVESTMENT GUIDELINES
Acquisition Policies. The Trustees have adopted investment guidelines
for the purpose of selecting the Trust's investments. Pursuant to the
guidelines, the allocation of Trust assets depends principally upon the
following factors:
1. The number of properties available for acquisition which show current
income and potential for appreciation in value;
2. The availability of funds for investment;
3. The laws and regulations governing investment in and the subsequent
sale of real estate investments by a REIT; and
4. The applicable federal and state income tax, securities, and real
estate laws and regulations.
The guidelines may vary from time to time, at the sole discretion of the
Trustees, in order to adapt to changes in real estate markets, federal income
tax laws and regulations and general economic conditions. The Trustees also
have discretion to acquire an investment not meeting these guidelines if the
Trustees determine that other circumstances justify the acquisition in a
particular case.
Portfolio Turnover. The Trustees have set general guidelines for the
disposition of properties in its portfolio which take into consideration
certain regulatory restrictions and federal income tax laws regarding REIT
portfolio turnover. Income tax regulations preclude the Trust from holding
5
any property (other than foreclosure property) primarily for sale to customers
in the ordinary course of the Trust's trade or business, but provide a "safe
harbor" for property held for at least four years from the date of acquisition.
Portfolio turnover policy also depends on whether a favorable sales price can
be realized by the Trust, primarily a function of the capitalization rate
applied to similar types of property in similar markets. The Trust may elect
to hold property as long as is reasonably necessary to provide an attractive
sales price.
OTHER INFORMATION
The Trust has no employees. It is administered by its Trustees and by
its Chairman, and by independent contractors who work under the supervision
thereof as a self-administered real estate investment trust.
The Trust is involved in only one industry segment: acquiring,
operating, holding for investment and disposing of income-producing real
properties. Revenues, net income and assets from this industry segment are
included in the Trust's financial statements which appear at Item 8 of
Part II.
The Trust's results of operations will depend on the availability of
suitable opportunities for investment and the comparative yields available
from time to time on real estate and other investments, as well as market
conditions affecting leasing and sale of real estate in the areas in which the
Trust's investments are located. These factors, in turn, are influenced to a
large extent by the type of investment involved, financing available for real
estate investment, the nature and geographic location of the property,
competition and other factors, none of which can be predicted with certainty.
The real estate investment market is highly competitive. The Trust
competes for acceptable investments with other financial institutions,
including banks, insurance companies, savings and loan associations, pension
funds and other real estate investment trusts and partnerships. Many of
these competitors have greater resources than the Trust. The number of such
competitors and funds available for investment in properties of the type
suitable for investment by the Trust may increase, resulting in increased
competition for such investments and possibly increased costs and thus
reduced income for the Trust.
The rules and regulations adopted by various agencies of federal, state
or local governments relating to environmental controls and the development
and operation of real property may operate to reduce the number of investment
opportunities available to the Trust or may adversely affect the properties
currently owned by it. While the Trust does not believe environmental
controls have had a material impact on its activities, there can be no
assurance that the Trust will not be adversely affected thereby in the future.
TAX LEGISLATION
The Trust has elected to be treated as a real estate investment trust
under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Trust expects to operate and to invest in a manner that will
maintain its qualification for real estate investment trust taxation. The
Code requirements for such qualification are complex. While no assurance can
be given that the Trust qualified for taxation as a real estate investment
trust for past taxable years, the Trust nevertheless believes that it has so
6
qualified and will endeavor to continue to qualify for its current year and
future years.
The business of the Trust is uniquely sensitive to tax legislation.
Changes in tax laws are made frequently. There is no way for the Trust to
anticipate when or what changes in the tax laws may be made in the future, or
how such changes might affect the Trust.
The Internal Revenue Service ("IRS") has not yet issued regulations to
carry out numerous provisions enacted as part of the tax legislation passed
since 1986. Nor has the IRS addressed the issues relating to the application
of some of the new tax rules to entities such as real estate investment
trusts. Until such regulations are issued by the IRS, it is difficult to
predict what impact, if any, such new legislation may have on entities such
as a real estate investment trust.
ITEM 2. PROPERTIES
The Trust owns two real properties and one promissory note in the principal
amount of $80,000 collateralized by a second deed of trust on 6691 Stanford
Ranch Road in Rocklin, California. The first real property, located at 4350
Pell Drive in Sacramento, California, is 95 percent occupied and leased at
competitive rates for the area in which it is located. The second real
property, 19401 Parthenia Street in Northridge, California ("Parthenia"), is 21
percent occupied. The remainder of Parthenia is vacant. Parthenia is being
divided into two parts, one of which is subject to a contract of sale which we
anticipate will close in 2004 subject to certain contingencies, the other is
subject to a contract of sale which we anticipate will close in 2005 subject
to certain contingencies. In order to lease the vacant portion of Parthenia
substantial and costly renovation would be required. Because Parthenia is
about to be sold the Trust decided not to undertake such renovation at the
present time. With respect to the promissory note, both the January 31, 2003
and April 30, 2003 principal payments of $15,000 were made, but the other two
scheduled 2003 principal payments have not been made. The interest is current.
Title insurance and liability and property damage insurance in amounts
deemed appropriate by the Trust have been obtained for the properties referred
to above. The Trust does not carry flood insurance on said properties.
Because of the high cost of premiums, excessive deductibles, and limited
coverage, the Trust carries earthquake insurance only on 19401 Parthenia
Street in Northridge, California.
For additional information concerning the aforesaid properties, see Note
1 of the Notes to Financial Statements and Schedule III.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
7 PART II
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY SECURITIES AND RELATED SECURITY
HOLDER MATTERS
The Trust has one class of authorized and outstanding equity consisting
of shares of beneficial interest, par value $1.00 per share. The Trust
engaged in a continuous best efforts public offering from May 20, 1987, until
May 20, 1992. Since 1995 the Trust has repurchased 9,130 shares from 9,610
shareholders at a cost of $4,413,373. Repurchased shares revert to authorized
but unissued shares and result in closing shareholders' accounts.
The Trust executed a one-for-thirty reverse share split in 1998 and a one-
for-four reverse share split in 2000. After each reverse share split the Trust
eliminated all fractional shares when the shareholder account held less than one
share. As of December 31, 2003, the Trust had 25,684 shares outstanding to
3,135 shareholders of record.
No active public trading market presently exists for the shares of the
Trust. The Trust does not anticipate that an active public trading market will
exist within the foreseeable future. Occasional trades in the shares of the
Trust take place without the participation of the Trust on the Over-the-
Counter Bulletin Board (www.otcbb.com).
On March 3, 2004 the Trust adopted a Code of Ethics, a copy of which
is attached hereto as Exhibit 14.1. A copy of the Trust's Code of Ethics is
available without charge to any shareholder upon request to the Trust.
ITEM 6. SELECTED FINANCIAL DATA
The following represents selected financial data for the Trust for the
five years ended December 31, 2003. The data should be read in conjunction
with the financial statements and related notes included elsewhere herein.
Years Ended December 31
(Amounts in thousands, except for per share data)
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Operating Results:
Revenues $ 1,492 $ 2,325 $ 3,184 $ 3,310 $ 3,313
Net income 180 1,334 1,071 1,062 1,176
Net cash provided by
operating activities 545 1,203 1,610 1,657 1,812
Total Assets 12,212 13,512 20,750 24,476 26,222
Long-term obligations 0 0 3,756 6,354 6,535
Net income per share $ 6.95 $ 50.25 $ 39.51 $ 36.76 $ 37.80
Cash distributions
per share $ 47.52 $ 63.36 $ 63.36 $ 63.36 $ 60.48
Per share data has been restated to reflect the impact of the one-for-thirty
reverse share split which the Trust executed in 1998 and the one-for-four
reverse share split which the Trust executed in 2000.
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amount of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates.
The Trust carries its rental properties at cost less accumulated
depreciation unless the asset is determined to be impaired. In accordance
with Statement of Financial Accounting Standards No. 144, Accounting for
Impairment of Long-Lived Assets, which was adopted by the Trust on
January 1, 2002, the Trust records impairment losses on long-lived assets
used in operations when events and circumstances indicate that the asset
might be impaired and the expected undiscounted cash flows estimated to be
generated by those assets are less than the related carrying amounts. If
a rental property is determined to be impaired, the impairment would be
measured based upon the excess of the asset's carrying value over the fair
value.
RESULTS OF OPERATIONS
The Trust sold One Scripps Drive in Sacramento, California, 1590
Sycamore Drive in Hercules, California, 845 Harbor Boulevard in West
Sacramento, California and 7390 Greenback Lane in Sacramento, California
in September 2003, July 2002, December 2001 and July 2001, respectively.
As a result of the sales of the foregoing properties the Trust realized
$8,120,149 in cash and the elimination of long-term debt of $6,098,855.
In addition, part of the proceeds from the foregoing sales was used
to pay off short-term debt, thus further reducing interest expense. The
balance was used for working capital or to pay dividends.
Because all of the properties sold except One Scripps Drive in
Sacramento, California were leased under triple-net leases the foregoing sales
did not reduce operating expenses. Operating expenses increased in 2003
compared to 2002 primarily due to substantial increases in insurance premiums.
Rent revenues and depreciation and amortization decreased in 2003
and 2002 primarily due to the foregoing sales.
LIQUIDITY AND CAPITAL RESOURCES
The Trust meets its liquidity requirements through cash in the bank, net
cash provided by operating activities, draws on its line of credit, proceeds
from the sale of properties and collections on an outstanding note receivable.
In 2002 the Trust received $7,128,742 from the sale of 1590 Sycamore Drive in
Hercules, California and collected $40,000 on the outstanding note receivable.
In 2003 the Trust received $2,880,471 from the sale of One Scripps Drive in
Sacramento, California and collected $30,000 on the outstanding note receivable.
In 2004 the Trust expects to receive proceeds from the sale of the smaller part
of 19401 Parthenia Street in Northridge, California. In 2005 the Trust expects
to receive proceeds from the sale of the larger part of 19401 Parthenia Street
in Northridge, California.
9
In 2003 dividends exceeded cash provided by operating activities and
additional cash was used to renovate properties and repurchase shares.
The Trust's capital requirements in 2004 will depend upon the amount of
improvements and renovations it makes to its properties, the dividends paid
and the shares repurchased. The Trust expects it will have sufficient
liquidity and cash resources to meet its capital requirements in 2004.
OFF-BALANCE SHEET ARRANGEMENTS
The Trust has no off-balance sheet arrangements.
CONTRACTUAL OBLIGATIONS AND CONTINGENT LIABILITIES
The Trust has no contractual obligations or contingent liabilities.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Trust's primary financial market risk is the fluctuation in interest
rates. At December 31, 2003, the Trust had no assets or liabilities subject
to variable interest rates. However, the Trust has an available $2,000,000
line of credit indexed to the prime rate. If fully drawn, a 1 percent change
in the prime rate would result in a corresponding $20,000 change in borrowing
costs. The Trust believes that the change in the fair value of its financial
instruments resulting from a foreseeable fluctuation in interest rates would
be immaterial to its assets and liabilities.
IMPACT OF INFLATION
The Trust's operations have not been materially affected by inflation.
While the rate of inflation has been relatively low since the Trust commenced
operations in October, 1987, even if the rate of inflation were to rise, the
Trust anticipates that it would be able to offset most of the impact of higher
operating expenses through rent escalation clauses and lease clauses that pass
on most of the operating expenses to tenants.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Independent Auditors' Reports ............................. 11
Balance Sheets
As of December 31, 2003 and 2002 ........................ 13
Statements of Income
Years Ended December 31, 2003, 2002 and 2001 ............ 14
Statements of Changes in Shareholders' Equity
Years Ended December 31, 2003, 2002 and 2001 ............ 15
Statements of Cash Flows
Years Ended December 31, 2003, 2002 and 2001 ............ 16
Notes to Financial Statements ............................. 17
Schedule III
Real Estate and Accumulated Depreciation ................ 25
11
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
USA Real Estate Investment Trust
We have audited the accompanying balance sheet of USA Real Estate Investment
Trust as of December 31, 2003 and the related statements of income, changes
in shareholders' equity, and cash flows for the year ended December 31, 2003.
In connection with our audits of the financial statements, we also have
audited the financial statement schedule listed in the accompanying index.
These financial statements and financial statement schedule are the
responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audit. The financial statements of USA Real Estate Investment
Trust for the years ended December 31, 2002 and 2001 were audited by other
auditors whose report dated January 30, 2003, expressed an unqualified
opinion on those statements.
We conducted our audit 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 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
evaluation of the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA Real Estate Investment
Trust as of December 31, 2003 and the results of its operations and its cash
flows for the year ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related 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.
Perry-Smith LLP
Sacramento, California
January 24, 2004
12
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
USA Real Estate Investment Trust
We have audited the accompanying balance sheet of USA Real Estate Investment
Trust as of December 31, 2002 and the related statements of income, changes
in shareholders' equity, and cash flows for the years ended December 31, 2002
and 2001. These financial statements are the responsibility of the Trust'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 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
evaluation of the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA Real Estate Investment
Trust as of December 31, 2002 and the results of its operations and its cash
flows for the years ended December 31, 2002 and 2001 in conformity with
accounting principles generally accepted in the United States of America.
Burnett+Company LLP
Rancho Cordova, California
January 30, 2003
13
USA REAL ESTATE INVESTMENT TRUST
Balance Sheets
December 31, December 31,
2003 2002
----------- -----------
ASSETS
Rental properties, less accumulated
depreciation of $3,374,208 and
$4,285,259 in 2003 and 2002,
respectively $ 10,210,817 $ 12,926,048
Note receivable 80,000 110,000
---------- -----------
10,290,817 13,036,048
Cash and cash equivalents 1,666,172 214,999
Other assets 254,953 261,370
----------- -----------
Total assets $ 12,211,942 $ 13,512,417
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Lease deposits $ 39,793 $ 30,263
Accounts payable 26,492 8,381
----------- -----------
Total liabilities 66,285 38,644
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 62,500 shares;
25,684 and 26,285 shares outstanding
in 2003 and 2002, respectively 25,684 26,285
Additional paid-in capital 30,274,345 30,546,358
Distributions in excess of net income (18,154,372) (17,098,870)
----------- -----------
Total shareholders' equity 12,145,657 13,473,773
----------- -----------
Total liabilities and shareholders' equity $ 12,211,942 $ 13,512,417
=========== ===========
See notes to financial statements.
14
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
----------- ----------- -----------
Revenues:
Rent $ 1,481,495 $ 2,311,636 $ 3,169,227
Interest 11,149 12,923 14,792
----------- ----------- -----------
1,492,644 2,324,559 3,184,019
----------- ----------- -----------
Expenses:
Operating expenses 408,377 347,559 337,583
Property taxes 226,700 225,269 208,107
Property management fees 52,800 52,800 52,800
Interest 15,429 253,772 713,811
Depreciation and amortization 493,820 616,812 813,180
General and administrative 184,853 165,088 213,957
----------- ----------- -----------
1,381,979 1,661,300 2,339,438
----------- ----------- -----------
Net income before gain on
sale of rental properties 110,665 663,259 844,581
Gain on sale of rental properties 69,512 670,362 226,526
----------- ----------- -----------
Net income $ 180,177 $ 1,333,621 $ 1,071,107
=========== =========== ===========
Net income per share of
beneficial interest $ 6.95 $ 50.25 $ 39.51
=========== =========== ===========
Weighted average number of shares 25,938 26,541 27,108
=========== =========== ===========
See notes to financial statements.
15
USA REAL ESTATE INVESTMENT TRUST
Statements of Changes in Shareholders' Equity
Years Ended December 31, 2003, 2002 and 2001
Distribu- Total
Shares of Additional tions in Share-
Beneficial Interest Paid-in Excess of holders'
Number Amount Capital Net Income Equity
--------- --------- ----------- ------------- -----------
December 31,
2000 27,459 $ 27,459 $31,110,030 $(16,103,923) $15,033,566
Repurchases
of shares (561) (561) (275,803) (276,364)
Net income 1,071,107 1,071,107
Distributions
($63.36 per
share) (1,718,826) (1,718,826)
--------- --------- ---------- ----------- ----------
December 31,
2001 26,898 26,898 30,834,227 (16,751,642) $14,109,483
Repurchases
of shares (613) (613) (287,869) (288,482)
Net income 1,333,621 1,333,621
Distributions
($63.36 per
share) (1,680,849) (1,680,849)
--------- --------- ---------- ----------- ----------
December 31,
2002 26,285 26,285 30,546,358 (17,098,870) $13,473,773
Repurchases
of shares (601) (601) (272,013) (272,614)
Net income 180,177 180,177
Distributions
($47.52 per
share) (1,235,679) (1,235,679)
--------- --------- ---------- ----------- ----------
December 31,
2003 25,684 $ 25,684 $30,274,345 $(18,154,372) $12,145,657
========= ========= ========== =========== ==========
See notes to financial statements.
16 USA REAL ESTATE INVESTMENT TRUST
Statements of Cash Flows
For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
OPERATING ACTIVITIES: ---------- ---------- ----------
Net income $ 180,177 $ 1,333,621 $ 1,071,107
---------- ---------- ----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation & amortization 479,798 575,685 740,259
Amortization of loan fees 14,022 41,127 72,921
Gain on sale of properties (69,512) (670,362) (226,526)
Changes in other assets & liabilities:
Decrease in other assets (86,938) (55,640) (49,469)
Increase in accounts payable 18,111 1,459 6,923
Increase(decrease)in lease deposits 9,530 (23,038) (5,201)
---------- ---------- ----------
Total adjustments to net income 365,011 (130,769) 538,907
---------- ---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 545,188 1,202,852 1,610,014
---------- ---------- ----------
INVESTING ACTIVITIES:
Collections on notes receivable 30,000 40,000 75,000
Improvements to properties (496,193) (344,711) (448,739)
Proceeds from sale of properties 2,880,471 7,128,742 4,209,791
---------- ---------- ----------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 2,414,278 6,824,031 3,836,052
---------- ---------- ----------
FINANCING ACTIVITIES:
Borrowings (payments) on
lines of credit, net (2,824,285) (205,715)
Redemption of shares (272,614) (288,482) (276,364)
Payments on long-term notes payable (3,755,977) (2,598,052)
Distributions paid (1,235,679) (1,680,849) (1,718,826)
---------- ---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES (1,508,293) (8,549,593) (4,798,957)
---------- ---------- ----------
NET INCREASE(DECREASE)IN CASH 1,451,173 (522,710) 647,109
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 214,999 737,709 90,600
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,666,172 $ 214,999 $ 737,709
========== ========== ==========
INTEREST PAID $ 15,429 $ 253,772 $ 713,811
========== ========== ==========
See notes to financial statements.
17 USA REAL ESTATE INVESTMENT TRUST
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL: USA Real Estate Investment Trust (the "Trust") was organized
under the laws of the State of California pursuant to a Declaration of Trust
dated October 7, 1986. The Trust commenced operations on October 19, 1987,
upon the sale of the minimum offering amount of shares of beneficial interest.
Effective August 31, 1994, the Trust terminated its agreements with its former
advisor and its former property manager and became a self-administered real
estate investment trust. At the Trust's 1994 Annual Meeting of Shareholders
held on December 29, 1994, the Trust's shareholders approved an amendment to
the Trust's Declaration of Trust which changed the name of the Trust from
Commonwealth Equity Trust USA to its current name.
CASH EQUIVALENTS: For purposes of the statement of cash flows, all
certificates of deposit with original maturities of ninety days or less are
considered cash equivalents.
RENTAL PROPERTIES: The Trust carries its rental properties at cost less
accumulated depreciation unless the asset is determined to be impaired. In
accordance with Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment of Long-Lived Assets, which was adopted by the
Trust on January 1, 2002, the Trust records impairment losses on long-lived
assets used in operations when events and circumstances indicate that the
assets might be impaired and the expected undiscounted cash flows estimated
to be generated by those assets are less than the related carrying amounts.
If a rental property is determined to be impaired, the impairment would be
measured based upon the excess of the asset's carrying value over the fair
value.
Property improvements are capitalized while maintenance and repairs are
expensed as incurred. Depreciation of buildings and capital improvements is
computed using the straight-line method over five to forty years.
LEASING COSTS AND LOAN COSTS: Costs incurred in obtaining leases are
amortized on the straight-line method over the terms of the related leases.
Costs incurred in obtaining loans are amortized on the straight-line method
over the terms of the related debt.
DISTRIBUTIONS IN EXCESS OF NET INCOME: The Trust has a general policy of
distributing cash to its shareholders in an amount that approximates taxable
income plus noncash charges such as depreciation and amortization. As a
result, distributions to shareholders exceed cumulative net income.
REVENUE RECOGNITION: All the Trust's leases are classified as operating
leases. Minimum rents are recognized on a straight-line basis over the terms
of the related leases. Percentage rents, which represent additional rents
based on gross tenant sales, are recognized at the end of the lease year or
other period in which tenant sales' volumes have been reached and the
percentage rents are due. Property taxes, common area maintenance, and
insurance reimbursements are recognized on the accrual basis over the
periods in which the expenses occurred.
INCOME TAXES: The Trust has elected to be taxed as a real estate
investment trust. Accordingly, the Trust does not pay income tax on income
because income distributed to shareholders is at least equal to 90 percent of
its taxable income.
18
NET INCOME PER SHARE: The net income per share is computed based on the
weighted-average number of shares of 25,938, 26,541 and 27,108 during 2003,
2002 and 2001, respectively.
CONCENTRATION OF CREDIT RISK: The Trust operates in one industry
segment. The Trust's properties and the collateral for its note receivable
are all located in California. The Trust maintains cash balances in excess
of Federal Deposit Insurance Corporation insurable limits.
USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amount of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS: As of the date of this annual report, there
are no recently issued accounting pronouncements that are expected to have a
material impact on the Trust's current accounting or financial reporting
requirements.
2. NOTE RECEIVABLE
The note receivable as of December 31, 2003 and 2002 is collateralized
by a second dead of trust on 6691 Stanford Ranch Road in Rocklin, California.
As of December 31, 2003 the note bears interest at 10 percent per annum. The
fair market value of the note approximates its carrying value at December 31,
2003 and 2002.
3. LINES OF CREDIT
At December 31, 2003 the Trust had available a $2,000,000 line of credit.
The line of credit expires June 30, 2006 and is collateralized by 4350 Pell
Drive in Sacramento, California. Advances under the line of credit bear
interest at prime.
At December 31, 2002 the Trust had available two lines of credit with
different financial institutions, one with interest at prime per annum, and
the other at prime plus 0.25 percent per annum. The credit lines were for
$2,000,000 and $1,516,400 and were scheduled to expire in June 2003 and
March 2004, respectively. One line was collateralized by 4350 Pell Drive in
Sacramento, California and the other was collateralized by One Scripps Drive
in Sacramento, California.
At December 31, 2003 and 2002 there were no outstanding balances on the
lines of credit. The weighted-average interest rates for the lines of credit
were 7.96 percent and 6.75 percent for 2003 and 2002, respectively.
4. DISTRIBUTIONS
Cash distributions per share of beneficial interest for federal income
tax purposes for the past three years were: 100 percent of the
distributions paid in 2003 were nontaxable, 47 percent of the distributions
paid in 2002 were ordinary income, 15 percent were nontaxable and 38 percent
were capital gains; 57 percent of the distributions paid in 2001 were ordinary
income, 36 percent were nontaxable and 7 percent were capital gains.
19
5. RENT UNDER OPERATING LEASES
The Trust is the lessor of real properties under operating leases
expiring in various years through 2008. Noncancelable operating leases
provide for minimum rent during each of the next five years of $927,254,
$760,376, $310,519, $292,602 and $255,481, respectively. The above assumes
that all leases which expire are not renewed, therefore neither renewal rent
nor rent from replacement tenants is included.
6. QUARTERLY DATA (UNAUDITED)
The following is a summary of quarterly results of operations for 2003
and 2002:
Quarters Ended
March 31 June 30 Sept 30 Dec 31 Total
-------- -------- -------- -------- ----------
2003:
Revenues $439,569 $420,114 $371,067 $261,894 $1,492,644
Operating income 83,479 65,703 1,927 (40,444) 110,665
Net income:
Income(loss) 83,479 65,703 63,332 (32,337) 180,177
Income (loss)
per share $ 3.19 $ 2.51 $ 2.45 $ (1.20) $ 6.95
2002:
Revenues $689,307 $677,358 $533,573 $424,321 $2,324,559
Operating income 200,989 255,045 126,774 80,451 663,259
Net income:
Income 200,989 255,045 797,136 80,451 1,333,621
Income per share $ 7.53 $ 9.58 $ 30.07 $ 3.07 $ 50.25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On January 20, 2004 we dismissed our independent auditor Burnett+
Company LLP and engaged Perry-Smith LLP as our independent auditor for
the fiscal year ending December 31, 2003. The decision to dismiss
Burnett+Company was approved by the Audit Committee and the Board.
Burnett+Company's reports on our financial statements as of and for
the years ended December 31, 2002 and December 31, 2001 did not contain
an adverse opinion or a disclaimer of opinion, nor were they modified as
to uncertainty, audit scope, or accounting principles. During the periods
ended December 31, 2002 and December 31, 2001, and the interim period from
January 1, 2004 through the date of Burnett+Company's dismissal, we did
not have any disagreements with Burnett+Company on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to
Burnett+Company's satisfaction, would have caused it to make a reference
to the subject matter of the disagreements in connection with its reports.
Prior to engaging Perry-Smith LLP we did not consult with Perry-Smith
LLP regarding the application of accounting principles to a specified
completed or contemplated transaction or the type of audit opinion that
might be rendered on our financial statements.
20
ITEM 9A. CONTROLS AND PROCEDURES
The Trust's Chief Executive Officer and Chief Financial Officer,
Gregory Crissman, conducted an evaluation of the effectiveness of the
Trust's disclosure controls and procedures. Based on that evaluation,
he concluded that the Trust's disclosure controls and procedures were
effective as of December 31, 2003. Additionally, there have been no
significant changes in the Trust's internal controls or in other factors
that could significantly affect these controls subsequent to December 31,
2003, including any corrective actions with regard to significant
deficiencies and material weaknesses.
21
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
GENERAL
The Trust has no employees. It is administered by its Trustees
and by its Chairman, and by independent contractors who work under the
supervision thereof.
THE TRUSTEES
The trustees of the Trust are as follows:
Trustee
Name Age Since Office
---- --- ------- ------
Gregory E. Crissman 52 1986 Trustee and Chairman and
Chief Financial Officer
Benjamin A. Diaz 70 1988 Trustee and Secretary
Joyce A. Marks 69 1986 Trustee
The following is a brief description of the background and business
experience of each Trustee.
GREGORY E. CRISSMAN. Mr. Crissman is the Chairman and Chief Financial
Officer of the Trust. He has over 20 years of experience in real estate,
accounting, auditing, and taxation. He also served as Chairman of the Board
of California Real Estate Investment Trust, a New York Stock Exchange listed
real estate investment trust, and was its Chief Financial Officer from 1989
until 1993. Mr. Crissman was an Executive Vice President of B&B Property
Investment, Development and Management Company, Inc. ("B&B"), from 1983 until
1990 and from 1992 until 1993. In addition, Mr. Crissman was a director of
B&B and was President of B&B from 1990 until 1992. From 1976 to 1979 Mr.
Crissman worked at Bowman & Company, an accounting firm in Stockton,
California. In 1976 Mr. Crissman received his BS degree with honors from the
California State University at Sacramento and is a Certified Public
Accountant. Mr. Crissman is also a member of the American Institute of
Certified Public Accountants.
BENJAMIN A. DIAZ. The Honorable Benjamin A. Diaz is a retired judge of
the Superior Court of California. He served as a judge of the Sacramento
County Superior Court from April, 1976, to May, 1986. He has engaged in
private practice in Sacramento, California, as a partner in the law firm of
Grossfield and Diaz from June, 1986, to September, 1987, and in the law firm
of Diaz & Gebers, specializing in real estate transactions, general practice,
litigation, business law, and personal injury matters from October, 1987 to
December, 1991. From January, 1992, to the present, Judge Diaz has been
engaged in pro tem judging, arbitration, mediation and consulting services.
Mr. Diaz received his Juris Doctor degree from the University of Pacific,
McGeorge School of Law, Sacramento, California, in 1966. Prior to serving on
the bench, Mr. Diaz had extensive tax and auditing experience with the State
of California Franchise Tax Board, dealing with large corporate unitary tax
audits, and with the California State Board of Equalization.
22
JOYCE A. MARKS. Ms. Marks was employed by the Bank of America for more
than forty years. During her career with Bank of America, Ms. Marks had
extensive experience with land development and subdivision financing,
including construction and take-out financing for commercial properties. Ms.
Marks was for many years active in the Building Industry Association of
Sacramento and from 1976 to 1983 served as a board member of, and in 1983 as
President of, its Associate Counsel. Ms. Marks received Bank of America's
Award for Excellence in 1985. Her most recent positions include Senior Sales
Training Specialist, Marketing Officer, Branch Manager and Credit
Administrator at one of Bank of America's Regional Headquarters.
Trustees of the Trust are elected annually by the Trust's shareholders
and hold office until their successors are duly elected and qualified. No
family relationship exists between any Trustee and any other Trustee. No
arrangement exists or existed between any Trustee and any other person or
entity pursuant to which the Trustee was selected as a Trustee or nominee.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS
During 2003, the Trust was managed by its Trustees as a self-
administered, self-managed real estate investment trust. The Trust has the
following officers: Chairman, Chief Financial Officer, and Secretary. No
officer except Gregory E. Crissman is compensated by the Trust in his
capacity as an officer. During 2003, none of the Trust's officers received
compensation in excess of $66,550.
Summary Compensation Table
Total Long-Term
Name and Officer Annual and other
Principal Position Year Compensation Compensation Compensation
- ----------------------------- ---- ------------ ------------ ------------
Gregory E. Crissman, Chairman 2003 $52,800 $66,550 (1) None
(1) Includes fees for each meeting of the Trustees attended for a
total of $13,750.
COMPENSATION OF TRUSTEES
Each Trustee receives $1,375 for each Trustees' meeting attended
plus reimbursement of direct expenses incurred in connection with such
attendance. There are currently no plans to alter this compensation schedule.
No Trustee received compensation under any other arrangement during 2003 except
Gregory E. Crissman who received compensation as an officer for work performed.
The Board of Trustees does not maintain a nominating or compensation committee
or any other standing committee except for an audit committee. The audit
committee consists of Benjamin A. Diaz who serves without additional compen-
sation. The Board of Trustees has authority to establish other committees and
to compensate members as appropriate for their service. During 2003, the Board
of Trustees had ten regular meetings. All Trustees attended all meetings.
23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 2003, the number of
shares owned by each person who is known by the Trust to own beneficially more
than 5 percent of its outstanding shares and the Trustees and officers of the
Trust as a group. No Trustee beneficially owns any shares of the Trust except
as set forth below. The Trust has been advised that all of such shares are
beneficially owned and the sole investment and voting power is held by the
persons named:
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
------------------------------------ -------------------- --------
Mitchell Partners, L.P. and James E. Mitchell 1,903.0000 7.4093
3187-D Airway Avenue
Costa Mesa, California 92626
Gregory E. Crissman, Chairman and Trustee 46.0000 0.1791
2561 Fulton Square Lane, #55
Sacramento, CA 95821
All Trustees and officers as a group 46.0000 0.1791
During 2003, based upon a review of the Forms 3, 4 and 5 on file with the
Trust, it does not appear that any officer or trustee failed to file such a
required report on a timely basis.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees billed to the Trust for
2003 by Perry-Smith LLP and for 2002 by Burnett+Company LLP, the Trust's
principal accounting firms for each of those years.
2003 2002
---- ----
Audit Fees $ 27,500 $ 26,740
Audit Related Fees
Tax Fees 2,200 2,490
All Other Fees
------ ------
$ 29,700 $ 29,230
====== ======
Pre-Approval Policy for Accounting Services. In 2003, the Audit Committee
and the Board adopted a formal pre-approval policy for accounting services and
fees. The policy requires that all audit services, audit related services, tax
fees and all other fees of the Trust's independent auditor be pre-approved by
the Audit Committee and the Board. The Audit Committee and the Board approved
the audit and tax services and fees provided by the independent auditor during
2003.
24 PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS Page
----
Independent Auditors' Reports ..................... 11
Balance Sheets as of December 31, 2003 and 2002 ... 13
Statements of Income for Years Ended
December 31, 2003, 2002 and 2001 ................ 14
Statements of Changes in Shareholders' Equity for
Years Ended December 31, 2003, 2002 and 2001 .... 15
Statements of Cash Flows for Years Ended
December 31, 2003, 2002 and 2001 ................ 16
Notes to Financial Statements ..................... 17
(a)(2) FINANCIAL STATEMENT SCHEDULE
Schedule III - Real Estate and Accumulated
Depreciation .................................... 25
The statements and schedules referred to above should be read in
conjunction with the financial statements and notes thereto included in Part
II of this Form 10-K. Schedules not included in this item have been omitted
because they are not applicable or because the required information is
presented in the financial statements or notes thereto.
(a)(3) LIST OF EXHIBITS
3.1 Form of Amended and Restated Declaration of Trust of
Commonwealth Equity Trust USA
3.2 Form of Bylaws of the Board of Trustees
3.3 Amendments to Sections 2.3.1, 2.3.7, 2.3.8, 2.4.2 and
2.4.3 of the Amended and Restated Declaration of Trust
of Commonwealth Equity Trust USA (adopted on August 29,
1988 at the 1988 Annual Meeting)
4.1 Article VIII of Exhibit 3.1
4.2 Form of Share Certificate
14.1 Code of Ethics
31.1 Section 302 Certifications as filed by the Chief Executive
Officer and the Chief Financial Officer pursuant to SEC
Release No. 33-8212 and 34-47551.
32.1 Section 906 Certifications as filed by the Chief Executive
Officer and the Chief Financial Officer pursuant to SEC
Release No. 33-8212 and 34-47551.
(b) REPORTS ON FORM 8-K
None.
25
USA REAL ESTATE INVESTMENT TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
Page 1, Part A
------------------ ------------ ---------------------------
Column A Column B Column C
------------------ ------------ ---------------------------
---Initial Cost to Trust--
Buildings
Improvements,
& Personal
Description Encumbrances Land Property
------------------ ------------ ------------ ------------
19401 Parthenia
Street, Northridge,
California - $ 5,770,000 $ 3,100,000
4350 Pell Drive,
Sacramento,
California - 1,500,000 2,226,936
------------ ------------ ------------
$ - $ 7,270,000 $ 5,326,936
============ ============ ============
26
USA REAL ESTATE INVESTMENT TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
Page 1, Part B
- ------------------ -----------------------------
Column A Column D
- ------------------ -----------------------------
Cost Capitalization
Subsequent to
---------Acquisition---------
Description Improvements Carrying Cost
- ------------------ ------------ -------------
19401 Parthenia
Street, Northridge,
California $ 2,772,015 -
4350 Pell Drive,
Sacramento,
California 1,699,074 -
------------- -------------
$ 4,471,089 $ -
============= =============
27
USA REAL ESTATE INVESTMENT TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
Page 1, Part C
- ------------------ ---------------------------------------------------------
Column A Column E
- ------------------ ---------------------------------------------------------
Gross Amount at Which
----------------Carried at Close of Period---------------
Valuation
Buildings & Write
Description Land Improvements Down Total
- ------------------ ------------ ------------ ----------- ------------
19401 Parthenia
Street, Northridge,
California $ 5,770,000 $ 5,872,015 $ 3,483,000 $ 8,159,015
4350 Pell Drive,
Sacramento,
California 1,500,000 3,926,010 - 5,426,010
------------ ------------ ------------ ------------
$ 7,270,000 $ 9,798,025 $ 3,483,000 $ 13,585,025
============ ============ ============ ============
28
USA REAL ESTATE INVESTMENT TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
Page 1, Part D
- ------------------ ------------ ------------ ------------ ------------
Column A Column F Column G Column H Column I
- ------------------ ------------ ------------ ------------ ------------
Life
on Which
Depreciation
in Latest
Accumulated Date of Date Statement is
Description Depreciation Construction Acquired Computed
- ------------------ ------------ ------------ ----------- ------------
19401 Parthenia
Street, Northridge,
California $ 2,082,689 1973 11/90 40 years
4350 Pell Drive,
Sacramento,
California 1,291,519 1975 09/92 40 years
------------
$ 3,374,208
============
Footnote to Schedule III:
Balance at beginning of period $ 17,211,307
Additions during period:
Acquisitions through foreclosure $ 0
Other acquisitions 0
Improvements 496,193
Other 0
-----------
Deductions during period:
Cost of real estate sold 4,122,475
Other 0
-----------
(3,626,282)
-----------
Balance at end of period: $ 13,585,025
===========
29
USA REAL ESTATE INVESTMENT TRUST
Signatures
Pursuant to the requirements of Section 13 of 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.
Dated: March 14, 2004 USA Real Estate Investment Trust
--------------------
Gregory E. Crissman
By: -------------------------------
Gregory E. Crissman as
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Dated: March 14, 2004 Gregory E. Crissman
------------------- By: -------------------------------
Gregory E. Crissman
Chairman
Dated: March 14, 2004 Benjamin A. Diaz
------------------- By: -------------------------------
Benjamin A. Diaz
Trustee
Dated: March 14, 2004 Joyce A. Marks
------------------- By: -------------------------------
Joyce A. Marks
Trustee