AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP	Financial_Report.xls
EX-32 - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP	ex32-22.htm
EX-31.2 - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP	ex31-222.htm
EX-31.1 - AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP	ex31-122.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2011

Commission File Number: 000-24003

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

State of Minnesota		41-1848181
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

30 East 7th Street, Suite 1300 St. Paul, Minnesota 55101		(651) 227-7333
(Address of principal executive offices)		(Registrant’s telephone number)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

o Large accelerated filer	o Accelerated filer
o Non-accelerated filer	x Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

INDEX

				Page
Part I – Financial Information

	Item 1.	Financial Statements (unaudited):

		Balance Sheet as of June 30, 2011 and December 31, 2010		3

		Statements for the Periods ended June 30, 2011 and 2010:

			Income	4

			Cash Flows	5

			Changes in Partners’ Capital (Deficit)	6

		Notes to Financial Statements		7 - 10

	Item 2.	Management's Discussion and Analysis of Financial
			Condition and Results of Operations	11 - 15

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		16

	Item 4.	Controls and Procedures		16

Part II – Other Information

	Item 1.	Legal Proceedings		16

	Item 1A.	Risk Factors		16

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		17

	Item 3.	Defaults Upon Senior Securities		17

	Item 5.	Other Information		17

	Item 6.	Exhibits		17

Signatures				18

Page 2 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

BALANCE SHEET

ASSETS

	June 30,			December 31,
	2011			2010
Current Assets:
Cash	$	1,328,289		$	509,767

Real Estate Held for Investment:
Land		3,165,951			3,170,347
Buildings and Equipment		8,215,725			8,219,513
Accumulated Depreciation		(1,786,138	)		(1,623,752	)
Real Estate Held for Investment, Net		9,595,538			9,766,108
Real Estate Held for Sale		0			800,000
Total Real Estate		9,595,538			10,566,108
Total Assets	$	10,923,827		$	11,075,875

LIABILITIES AND PARTNERS' CAPITAL

	June 30,		December 31,
	2011		2010
Current Liabilities:
Payable to AEI Fund Management, Inc.	$	14,734	$	52,734
Distributions Payable		189,791		190,614
Unearned Rent		44,443		35,225
Total Current Liabilities		248,968		278,573

Partners’ Capital (Deficit):
General Partners		625		(16,055	)
Limited Partners, $1,000 per Unit; 24,000 Units authorized; 16,917 Units issued; 15,698 Units outstanding		10,674,234		10,813,357
Total Partners' Capital		10,674,859		10,797,302
Total Liabilities and Partners' Capital	$	10,923,827	$	11,075,875

The accompanying Notes to Financial Statements are an integral part of this statement.

Page 3 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

STATEMENT OF INCOME

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011		2010

Rental Income	$	217,215		$	212,694		$	431,683	$	425,206

Expenses:
Partnership Administration – Affiliates		40,001			39,223			80,552		78,483
Partnership Administration and Property Management – Unrelated Parties		8,519			7,385			16,559		16,974
Depreciation		82,155			82,155			164,310		164,310
Total Expenses		130,675			128,763			261,421		259,767

Operating Income		86,540			83,931			170,262		165,439

Other Income:
Interest Income		2,398			1,126			5,102		2,300

Income From Continuing Operations		88,938			85,057			175,364		167,739

Income (Loss) from Discontinued Operations		(318	)		(199,687	)		81,567		(172,951	)

Net Income (Loss)	$	88,620		$	(114,630	)	$	256,931	$	(5,212	)

Net Income (Loss) Allocated:
General Partners	$	5,264		$	(3,387	)	$	27,051	$	(104	)
Limited Partners		83,356			(111,243	)		229,880		(5,108	)
Total	$	88,620		$	(114,630	)	$	256,931	$	(5,212	)

Income (Loss) per Limited Partnership Unit:
Continuing Operations	$	5.50		$	5.26		$	10.84	$	10.36
Discontinued Operations		(0.19	)		(12.35	)		3.80		(10.69	)
Total	$	5.31		$	(7.09	)	$	14.64	$	(0.33	)

Weighted Average Units Outstanding – Basic and Diluted		15,698			15,698			15,698		15,698

The accompanying Notes to Financial Statements are an integral part of this statement.

Page 4 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

STATEMENT OF CASH FLOWS

	Six Months Ended June 30,
	2011			2010
Cash Flows from Operating Activities:
Net Income (Loss)	$	256,931		$	(5,212	)

Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities:
Depreciation		164,339			179,084
Real Estate Impairment		0			218,607
Gain on Sale of Real Estate		(83,734	)		0
(Increase) Decrease in Receivables		0			(12,056	)
Increase (Decrease) in Payable to AEI Fund Management, Inc.		(38,000	)		(21,735	)
Increase (Decrease) in Unearned Rent		9,218			(444	)
Total Adjustments		51,823			363,456
Net Cash Provided By Operating Activities		308,754			358,244

Cash Flows from Investing Activities:
Proceeds from Sale of Real Estate		889,965			0

Cash Flows from Financing Activities:
Distributions Paid to Partners		(380,197	)		(425,462	)
Redemption Payments		0			(910	)
Net Cash Used For Financing Activities		(380,197	)		(426,372	)

Net Increase (Decrease) in Cash		818,522			(68,128	)

Cash, beginning of period		509,767			590,840

Cash, end of period	$	1,328,289		$	522,712

The accompanying Notes to Financial Statements are an integral part of this statement.

Page 5 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

	General Partners			Limited Partners			Total			Limited Partnership Units Outstanding

Balance, December 31, 2009	$	(3,616	)	$	11,459,081		$	11,455,465			15,698.78

Distributions Declared		(12,773	)		(412,997	)		(425,770	)

Redemption Payments		(27	)		(883	)		(910	)		(1.25	)

Net Income (Loss)		(104	)		(5,108	)		(5,212	)

Balance, June 30, 2010	$	(16,520	)	$	11,040,093		$	11,023,573			15,697.53


Balance, December 31, 2010	$	(16,055	)	$	10,813,357		$	10,797,302			15,697.53

Distributions Declared		(10,371	)		(369,003	)		(379,374	)

Net Income (Loss)		27,051			229,880			256,931

Balance, June 30, 2011	$	625		$	10,674,234		$	10,674,859			15,697.53

The accompanying Notes to Financial Statements are an integral part of this statement.

Page 6 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2011

(1) The condensed statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim period, on a basis consistent with the annual audited statements. The adjustments made to these condensed statements consist only of normal recurring adjustments. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the registrant’s latest annual report on Form 10-K.

(2) Organization –

AEI Income & Growth Fund XXII Limited Partnership (“Partnership”) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management XXI, Inc. (“AFM”), the Managing General Partner. Robert P. Johnson, the President and sole director of AFM, serves as the Individual General Partner. AFM is a wholly owned subsidiary of AEI Capital Corporation of which Mr. Johnson is the majority shareholder. AEI Fund Management, Inc. (“AEI”), an affiliate of AFM, performs the administrative and operating functions for the Partnership.

The terms of the Partnership offering called for a subscription price of $1,000 per Limited Partnership Unit, payable on acceptance of the offer. The Partnership commenced operations on May 1, 1997 when minimum subscriptions of 1,500 Limited Partnership Units ($1,500,000) were accepted. The offering terminated January 9, 1999 when the extended offering period expired. The Partnership received subscriptions for 16,917.222 Limited Partnership Units. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $16,917,222 and $1,000, respectively.

During operations, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 97% to the Limited Partners and 3% to the General Partners. Distributions to Limited Partners will be made pro rata by Units.

Any Net Proceeds of Sale, as defined, from the sale or financing of properties which the General Partners determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 9% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) any remaining balance will be distributed 90% to the Limited Partners and 10% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units.

Page 7 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

(Continued)

(2) Organization – (Continued)

For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated first in the same ratio in which, and to the extent, Net Cash Flow is distributed to the Partners for such year. Any additional profits will be allocated in the same ratio as the last dollar of Net Cash Flow is distributed. Net losses from operations will be allocated 99% to the Limited Partners and 1% to the General Partners.

For tax purposes, profits arising from the sale, financing, or other disposition of property will be allocated in accordance with the Partnership Agreement as follows: (i) first, to those partners with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Partners and 1% to the General Partners until the aggregate balance in the Limited Partners' capital accounts equals the sum of the Limited Partners' Adjusted Capital Contributions plus an amount equal to 9% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously allocated; (iii) third, the balance of any remaining gain will then be allocated 90% to the Limited Partners and 10% to the General Partners. Losses will be allocated 98% to the Limited Partners and 2% to the General Partners.

The General Partners are not required to currently fund a deficit capital balance. Upon liquidation of the Partnership or withdrawal by a General Partner, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or 1% of total Limited Partners' and General Partners' capital contributions.

(3) Reclassification –

Certain items related to discontinued operations in the prior year’s financial statements have been reclassified to conform to 2011 presentation. These reclassifications had no effect on Partners’ capital, net income or cash flows.

(4) Payable to AEI Fund Management, Inc. –

AEI Fund Management, Inc. performs the administrative and operating functions for the Partnership. The payable to AEI Fund Management represents the balance due for those services. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business.

Page 8 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

(Continued)

(5) Discontinued Operations –

On February 2, 2010, Hollywood Entertainment Corporation (HEC), the tenant of the Hollywood Video stores in Minot, North Dakota (100% ownership interest) and Saraland, Alabama (3.08% ownership interest) filed for Chapter 11 bankruptcy reorganization for the second time. In July 2010, HEC closed its remaining stores, filed a motion with the bankruptcy court to reject the Lease for the Minot store and returned possession of the property to the Partnership. The Partnership listed the property for sale with a real estate broker in the Minot area. While the property was vacant, the Partnership was responsible for real estate taxes and other costs associated with maintaining the property. Based on an analysis of market conditions in the area, the Partnership determined the property was impaired. As a result, in the second quarter of 2010, a charge to discontinued operations for real estate impairment of $218,607 was recognized, which was the difference between the carrying value at June 30, 2010 of $1,018,607 and the estimated fair value of $800,000. The charge was recorded against the cost of the land and building.

In November 2010, the Partnership entered into an agreement to sell the Minot store to an unrelated third party. On January 14, 2011, the sale closed with the Partnership receiving net proceeds of $881,953, which resulted in a net gain of $81,953. At December 31, 2010, the property was classified as Real Estate Held for Sale.

In February 2010, HEC closed the Saraland store and filed a motion with the bankruptcy court to reject the Lease for this property. The court approved the motion and HEC returned possession of the property to the Partnership. The Partnership listed the property for sale or lease with a real estate broker in the Saraland area. While the property was vacant, the Partnership was responsible for its 3.08% share of real estate taxes and other costs associated with maintaining the property. In May 2010, the Partnership entered into an agreement to sell its interest in the Saraland store to an unrelated third party. On August 20, 2010, the sale closed with the Partnership receiving net sale proceeds of $34,485, which resulted in a net gain of $3,403. The cost and related accumulated depreciation of the interest sold was $42,439 and $11,357, respectively.

On March 17, 2011, the Partnership sold its remaining .5877% interest in the Arby’s restaurant in Homewood, Alabama to an unrelated third party. The Partnership received net sale proceeds of $8,012, which resulted in a net gain of $1,781. The cost and related accumulated depreciation of the interest sold was $8,184 and $1,953, respectively.

During the first six months of 2011, the Partnership distributed net sale proceeds of $50,505 to the Limited and General Partners as part of their quarterly distributions, which represented a return of capital of $3.18 per Limited Partnership Unit. The Partnership anticipates the remaining net sale proceeds will either be reinvested in additional property or distributed to the Partners in the future.

Page 9 of 18

AEI INCOME & GROWTH FUND XXII LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

(Continued)

(5) Discontinued Operations – (Continued)

The financial results for these properties are reflected as Discontinued Operations in the accompanying financial statements. The following are the results of discontinued operations for the periods ended June 30:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010

Rental Income	$	0		$	36,361		$	163		$	72,722
Property Management Expenses		(318	)		(10,054	)		(2,301	)		(12,292	)
Depreciation		0			(7,387	)		(29	)		(14,774	)
Real Estate Impairment		0			(218,607	)		0			(218,607	)
Gain on Disposal of Real Estate		0			0			83,734			0
Income (Loss) from Discontinued Operations	$	(318	)	$	(199,687	)	$	81,567		$	(172,951	)

(6) Fair Value Measurements –

Fair value, as defined by United States Generally Accepted Accounting Principles (“US GAAP”), is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. US GAAP establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. US GAAP requires the utilization of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1 inputs, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.

The Hollywood Video store in Minot, North Dakota, with a carrying amount of $1,018,607 at June 30, 2010, was written down to its fair value of $800,000 after completing our long-lived asset valuation analysis. The fair value of the property was based upon comparable sales of similar properties, which are considered Level 2 inputs in the valuation hierarchy. The resulting impairment charge of $218,607 was included in earnings for the second quarter of 2010. The property was sold on January 14, 2011.

As of June 30, 2011, the Partnership had no assets or liabilities measured at fair value on a recurring basis or nonrecurring basis.

Page 10 of 18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section contains "forward-looking statements" which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward-looking statements, should be evaluated in the context of a number of factors that may affect the Partnership's financial condition and results of operations, including the following:

—

Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate;

—

the federal income tax consequences of rental income, deductions, gain on sales and other items and the effects of these consequences for the Partners;

—

resolution by the General Partners of conflicts with which they may be confronted;

—

the success of the General Partners of locating properties with favorable risk return characteristics;

—

the effect of tenant defaults; and

—

the condition of the industries in which the tenants of properties owned by the Partnership operate.

Application of Critical Accounting Policies

The preparation of the Partnership’s financial statements requires management to make estimates and assumptions that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management evaluates these estimates on an ongoing basis, including those related to the carrying value of investments in real estate and the allocation by AEI Fund Management, Inc. of expenses to the Partnership as opposed to other funds they manage.

The Partnership purchases properties and records them in the financial statements at cost (not including acquisition expenses). The Partnership tests long-lived assets for recoverability when events or changes in circumstances indicate that the carrying value may not be recoverable. For properties the Partnership will hold and operate, management determines whether impairment has occurred by comparing the property’s probability-weighted future undiscounted cash flows to its current carrying value. For properties held for sale, management determines whether impairment has occurred by comparing the property’s estimated fair value less cost to sell to its current carrying value. If the carrying value is greater than the net realizable value, an impairment loss is recorded to reduce the carrying value of the property to its net realizable value. Changes in these assumptions or analysis may cause material changes in the carrying value of the properties.

AEI Fund Management, Inc. allocates expenses to each of the funds they manage primarily on the basis of the number of hours devoted by their employees to each fund’s affairs. They also allocate expenses at the end of each month that are not directly related to a fund’s operations based upon the number of investors in the fund and the fund’s capitalization relative to other funds they manage. The Partnership reimburses these expenses subject to detailed limitations contained in the Partnership Agreement.

Page 11 of 18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

Management of the Partnership has discussed the development and selection of the above accounting estimates and the management discussion and analysis disclosures regarding them with the managing partner of the Partnership.

Results of Operations

For the six months ended June 30, 2011 and 2010, the Partnership recognized rental income from continuing operations of $431,683 and $425,206, respectively. In 2011, rental income increased due to rent increases on three properties. Based on the scheduled rent for the properties owned as of July 31, 2011, the Partnership expects to recognize rental income from continuing operations of approximately $871,000 in 2011.

For the six months ended June 30, 2011 and 2010, the Partnership incurred Partnership administration expenses from affiliated parties of $80,552 and $78,483, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and communicating with the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $16,559 and $16,974, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit costs, taxes, insurance and other property costs.

For the six months ended June 30, 2011 and 2010, the Partnership recognized interest income of $5,102 and $2,300, respectively. In 2011, interest income increased due to the Partnership having more money invested in a money market account due to property sales.

Upon complete disposal of a property or classification of a property as Real Estate Held for Sale, the Partnership includes the operating results and sale of the property in discontinued operations. In addition, the Partnership reclassifies the prior periods’ operating results of the property to discontinued operations. For the six months ended June 30, 2011, the Partnership recognized income from discontinued operations of $81,567, representing gain on disposal of real estate of $83,734 and rental income of $163, which were partially offset by property management expenses and depreciation of $2,330. For the six months ended June 30, 2010, the Partnership recognized a loss from discontinued operations of $172,951, representing a real estate impairment loss of $218,607, which was partially offset by rental income less property management expenses and depreciation of $45,656.

Page 12 of 18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

Management believes inflation has not significantly affected income from operations. Leases may contain rent increases, based on the increase in the Consumer Price Index over a specified period, which will result in an increase in rental income over the term of the leases. Inflation also may cause the real estate to appreciate in value. However, inflation and changing prices may have an adverse impact on the operating margins of the properties' tenants, which could impair their ability to pay rent and subsequently reduce the Net Cash Flow available for distributions.

Page 13 of 18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

Liquidity and Capital Resources

During the six months ended June 30, 2011, the Partnership's cash balances increased $818,522 as a result of cash generated from the sale of property, which was partially offset by distributions paid to the Partners in excess of cash generated from operating activities. During the six months ended June 30, 2010, the Partnership's cash balances decreased $68,128 as a result of distributions paid to the Partners in excess of cash generated from operating activities.

Net cash provided by operating activities decreased from $358,244 in 2010 to $308,754 in 2011 as a result of a decrease in total rental and interest income in 2011, which was partially offset by a decrease in Partnership administration and property management expenses in 2011 and net timing differences in the collection of payments from the tenants and the payment of expenses.

During the six months ended June 30, 2011, the Partnership generated cash flow from the sale of real estate of $889,965.

The Partnership's primary use of cash flow, other than investment in real estate, is distribution and redemption payments to Partners. The Partnership declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Partnership attempts to maintain a stable distribution rate from quarter to quarter. Redemption payments are paid to redeeming Partners on a semi-annual basis.

For the six months ended June 30, 2011 and 2010, the Partnership declared distributions of $379,374 and $425,770, respectively. Pursuant to the Partnership Agreement, distributions of Net Cash Flow were allocated 97% to the Limited Partners and 3% to the General Partners. Distributions of Net Proceeds of Sale were allocated 99% to the Limited Partners and 1% to the General Partners. The Limited Partners received distributions of $369,003 and $412,997 and the General Partners received distributions of $10,371 and $12,773 for the periods, respectively. In 2011, distributions were lower due to a decrease in the distribution rate per Unit, effective July 1, 2010.

The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership will not be obligated to purchase in any year any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Partnership Agreement), would exceed 5% of the total number of Units outstanding on January 1 of such year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership.

Page 14 of 18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

During the first six months of 2011, the Partnership did not redeem any Units from the Limited Partners. On April 1, 2010, one Limited Partner redeemed 1.25 Partnership Units for $883 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In prior years, a total of 70 Limited Partners redeemed 1,218.44 Partnership Units for $974,262. The redemptions increase the remaining Limited Partners’ ownership interest in the Partnership. As a result of this redemption payment and pursuant to the Partnership Agreement, the General Partners received distributions of $27 in 2010.

The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Partnership obligations on both a short-term and long-term basis.

The Economy and Market Conditions

The impact of conditions in the current economy, including the turmoil in the credit markets, has adversely affected many real estate investment funds. However, the absence of mortgage financing on the Partnership's properties eliminates the risks of foreclosure and debt-refinancing that can negatively impact the value and distributions of leveraged real estate investment funds. Nevertheless, a prolonged economic downturn may adversely affect the operations of the Partnership's tenants and their cash flows. If a tenant were to default on its lease obligations, the Partnership's income would decrease, its distributions would likely be reduced and the value of its properties might decline.

Historically, the Partnership has sold properties at a gain and distributed the gain proceeds as part of its regular quarterly distributions, and to make special distributions on occasion. The remaining sales proceeds were reinvested in additional properties. Beginning in the fourth quarter of 2008, general economic conditions caused the volume of property sales to slow dramatically for all real estate sellers. Until such time as economic conditions allow the Partnership to begin selling properties at attractive prices, quarterly distributions will reflect the distribution of net core rental income and capital reserves, if any. Distribution rates in 2011 are expected to be consistent with distribution rates in the second half of 2010.

Page 15 of 18

ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures.

Under the supervision and with the participation of management, including its President and Chief Financial Officer, the Managing General Partner of the Partnership evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the President and Chief Financial Officer of the Managing General Partner concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to management, including the President and Chief Financial Officer of the Managing General Partner, in a manner that allows timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting.

During the most recent period covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Partnership is a party or of which the Partnership's property is subject.

ITEM 1A. RISK FACTORS.

Not required for a smaller reporting company.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES & USE OF PROCEEDS.

(a) None.

(b) Not applicable.

(c) Pursuant to Section 7.7 of the Partnership Agreement, each Limited Partner has the right to present Units to the Partnership for purchase by submitting notice to the Managing General Partner during January or July of each year. The purchase price of the Units is equal to 90% of the net asset value per Unit, as of the first business day of January or July of each year, as determined by the Managing General Partner in accordance with the provisions of the Partnership Agreement. Units tendered to the Partnership during January and July are redeemed on April 1st and October 1st, respectively, of each year subject to the following limitations. The Partnership will not be obligated to purchase in any year any number of Units that, when aggregated with all other transfers of Units that have occurred since the beginning of the same calendar year (excluding Permitted Transfers as defined in the Partnership Agreement), would exceed 5% of the total number of Units outstanding on January 1 of such year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. During the period covered by this report, the Partnership did not purchase any Units.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

31.1	Certification of Chief Executive Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer of General Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certification of Chief Executive Officer and Chief Financial Officer of General Partner pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements 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: August 12, 2011	AEI Income & Growth Fund XXII
	Limited Partnership
	By:	AEI Fund Management XXI, Inc.
	Its:	Managing General Partner



	By:	/s/ ROBERT P JOHNSON
		Robert P. Johnson
		President
		(Principal Executive Officer)



	By:	/s/PATRICK W KEENE
		Patrick W. Keene
		Chief Financial Officer
		(Principal Accounting Officer)

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Attached files

AEI INCOME & GROWTH FUND XXII LTD PARTNERSHIP Reports

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