-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ub+zWf+6jY/mU6/nFaCdwGoDlCi6N2fBnpGSEyuSlvTsszIpby0NXrUJvMCXrx/d TUOcyYe7/kMD3lKfmchsiQ== 0000318835-04-000005.txt : 20040331 0000318835-04-000005.hdr.sgml : 20040331 20040330174820 ACCESSION NUMBER: 0000318835-04-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DSI REALTY INCOME FUND X CENTRAL INDEX KEY: 0000792989 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330195079 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15346 FILM NUMBER: 04703028 BUSINESS ADDRESS: STREET 1: 3701 LONG BEACH BLVD CITY: LONG BEACH STATE: CA ZIP: 90801 BUSINESS PHONE: 310-595-7711 MAIL ADDRESS: STREET 1: P O BOX 357 CITY: LONG BEACH STATE: CA ZIP: 90801 10-K 1 dsi10k03.txt DSI REALTY INCOME FUND X SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 2O549 FORM 10-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, 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 ______________ to ________________. Commission File No. 33-5327. DSI REALTY INCOME FUND X, a California Limited Partnership (Exact name of registrant as specified in governing instruments) _________California___________________________33-0195079_____ (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)493-3022 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, 2003, incorporated by reference to Form 10-K, Part II. Item 11. Registrant's Financial Statements for its fiscal year ended December 31, 2003, 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, 2003, incorporated by reference to Form 10-K, Part III. PART I Item l. BUSINESS Registrant, DSI Realty Income Fund X (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 April 15, 1986. The General Partners are DSI Properties, Inc., a California corporation, 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 thirty-one thousand seven hundred eighty-three (31,783) units of limited partnership interests aggregating Fifteen Million Eight Hundred Ninety-One Thousand Five Hundred Dollars ($15,891,500). 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. 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. The average occupancy levels for each of the Partnership's five properties for the years ended December 31, 2003 and December 31, 2002 were as follows: Location of Property Average Occupancy Average Occupancy Level for the Level for the Year Ended Year Ended Dec. 31, 2003 Dec. 31, 2002 Ryan Road Warren, MI 80% 83% Crestwood, IL 81% 82% Groesbeck Hwy Warren, MI 80% 81% Forestville, MD 80% 84% Troy, MI 83% 83% 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 for rentals. 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, none of which are subject to long-term indebtedness. The following table sets forth information as of December 31, 2003 regarding properties owned by the Partnership. Location Size of Net Rentable No. of Completion Parcel Area Rental Units Date Ryan Road, Warren, MI 4.286 acres 53,779 494 9/30/87 Crestwood, IL 2.96 acres 51,055 463 11/25/87 Groesbeck Hwy, Warren, MI 4.76 acres 59,281 493 l/23/88 Forestville, MD 4.18 acres 56,461 527 8/6/88 Troy, MI 4.98 acres 79,201 498 6/17/88 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 31,783 limited partnership units during its offering and currently has 952 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 $10.96 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2003 and $12.54 per Limited Partnership Units were declared and paid each quarter for the year ended December 31, 2002 and $12.62 per Limited Partnership Unit were declared and paid each quarter for the year ended December 31, 2001. Item 6. SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 2003 ------------------------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $2,837,397 $3,076,030 $3,351,149 $3,201,912 $2,928,689 TOTAL EXPENSES 1,960,287 1,931,715 1,913,535 1,857,563 1,737,036 ---------- ----------- ----------- ----------- ----------- NET INCOME $ 877,110 $1,144,315 $1,437,614 $1,344,349 $1,191,653 ========== =========== =========== =========== =========== TOTAL ASSETS $5,557,881 $6,074,744 $7,194,045 $8,846,914 $8,779,268 ========== =========== =========== =========== =========== CASH FLOW FROM: OPERATING $1,448,782 $1,050,669 $ 461,933 $2,216,593 $2,040,154 INVESTING (7,303) - - - (6,949) FINANCING (1,407,500)(1,610,044) (1,620,635) (1,638,784) (1,777,602) NET INCOME PER LIMITED PARTNERSHIP UNIT $ 27.32 $ 35.64 $ 44.78 $ 41.87 $ 37.12 ========== =========== =========== =========== =========== CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 43.84 $ 50.15 $ 50.48 $ 51.18 $ 55.37 ========== =========== =========== =========== =========== Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS 2003 COMPARED TO 2002 Total revenues decreased from $3,070,312 in 2002 to $2,834,856 in 2003, total expenses increased from $1,931,715 to $1,960,287 and other income de- creased from $5,718 to $2,541, resulting in a decrease in net income from $1,144,315 to $877,110. The approximate $235,500 (7.7%) decrease in rental revenues can be attributed to lower occupancy and unit rental rates. Occupancy levels for the Partnership's five mini-storage facilities averaged 80.7% for the year ended December 31, 2003, compared to 84.3% for the year ended December 31, 2002. The Partnership increased rental rates where market conditions made such increases feasible. Operating expenses increased by approximately $12,900 (1.5%) primarily due to relatively insignificant fluctuations in various expense accounts. General and administrative expenses increased approximately $41,800 (18.7%) as a result of increases in legal and professional expense, partially offset by decreases in office supplies and equipment and computer lease expenses. Legal expense increased as a result of legal challenges by dissident Limited Partners to a proposed amendment to the Partnership Agreement (see paragraph below). The General Partners' in- centive management fee, which is based on cash distributions to Limited Partner, decreased as a result of a decrease in these distributions. Property manage- ment fees, which are computed as a percentage of rental revenue, decreased as a result of the decrease in rental revenue. 2002 COMPARED TO 2001 Total revenues decreased from $3,300,988 in 2001 to $3,070,312 in 2002, total expenses increased from $1,913,535 to $1,931,715 and other income decreased from $50,161 to $5,718, resulting in a decrease in net income from $1,437,614 to $1,144,315. The approximate $230,700 (7.0%) decrease in rental revenues can be attributed to lower occupancy and unit rental rates. Occupancy levels for the Partnership's five mini-storage facilities averaged 84.3% for the year ended December 31, 2002, compared to 87.9% for the year ended December 31, 2001. The Partnership increased rental rates where market conditions made such increases feasible. Operating expenses decreased by $38,100 (4.3%) primarily due to decreases in repairs and maintenance, salaries and wages and power and sweeping expenses, partially offset by increases in real estate tax and workers compensation insurance expenses. Power and sweeping expenses decreased as the substantial snow removal costs associated with heavy snowfalls in the Detroit, Michigan area during the first quarter of 2001, were not incurred in the current period. General and admin- istrative expenses increased approximately $46,800 (26.6%) as a result of increases in office supplies, legal and professional and equipment and computer lease expenses, partially offset by a decrease in travel expense. The General Partners' incentive management fee remained relatively constant. Property management fees, which are computed as a percentage of rental revenue, de- creased as a result of the decrease in rental revenue. Operating expenses consists 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 $398,100 (37.9%) in 2003 compared to 2002 primarily as a result of not having to pay accrued property management fees, partially offset by the decrease in net income. Net cash provided by operating activities increased approximately $588,700 (127.4%) in 2002 compared to 2001 primarily as a result of not having to pay accrued incentive management fees, partially offset by the decrease in net income and the partial payment fo deferred property management. Cash used in financing activities, as set forth in the statements of cash flows, consists solely of cash distributions to partners. Special distributions of 0.5%, 1.9%, and 1.9% of capital contributed by Limited Partners were declared and paid on December 15, 2003, 2002 and 2001, respectively. Cash used in investing activities, as set forth in the statements of cash flows, consists of acquisitions of property for the Partnership's mini-storage facilities in 2003. The Partnership has no material commitments for capital expenditures. The Limited Partners have approved an amendment to the Partnership Agree- ment granting the General Partners ten days to review certain types of transfers during which the General Partners may match, exceed or approve the proposed transfers. The Court has rejected all preliminary attempts to halt implemen- tation of the amendment. Subsequently, the dissident Limited Partners, who initiated the legal proceedings decided not to pursue the matter any further. The General Partners plan to continue their policy of funding the continuing improvement and maintenance of Partnership properties with cash generated from operations. The Partnership anticipates that cash flows generated from operations of the Partnership's rental real estate operations will be sufficient to cover operating expenses and distributions for the next twelve months and beyond. The General Partners are not aware of any environmental problems which might have a material adverse impact on the financial position of the Partnership. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for the years ended December 31, 2003 and 2002 was as follows: 2003 Quarter Ended ------------------ March 31 June 30 September 30 December 31 Total revenues $716,977 $715,720 $715,867 $686,292 Net income 225,853 273,422 186,481 191,354 Net income per limited partnership unit $ 7.03 $ 8.52 $ 5.81 $ 5.96 Weighted average number of limited partnership units outstanding 31,783 31,783 31,783 31,783 2002 Quarter Ended ------------------ March 31 June 30 September 30 December 31 Total revenues $828,313 $750,761 $765,152 $726,086 Net income 358,857 319,209 318,503 147,746 Net income per limited partnership unit $ 11.18 $ 9.94 $ 9.92 $ 4.60 Weighted average number of limited partnership units outstanding 31,783 31,783 31,783 31,783 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, Robert J. Conway and Joseph W. Conway, brothers. As of December 31, 2003, Messrs. Robert J. Conway and Joseph W. Conway, each of whom own approximately 48.4% of the issued and outstanding capital stock of DSI Financial, Inc., a California corporation, together with Mr. Joseph W. Stok, currently comprise the entire Board of Directors of DSI Properties, Inc. Mr. Robert J. Conway is 70 years of age and is a licensed California real estate broker, and since 1965 has been President and a member of the Board of Directors of Diversified Securities, Inc., and since 1973 President, Chief Financial Officer and a member of the Board of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Science Degree from Marquette University with majors in Corporate Finance and Real Estate. Mr. Joseph W. Conway is age 75 and has been Executive Vice President, Treasurer and a member of the Board of Directors of Diversified Securities, Inc. since 1965 and since 1973 the Vice President, Treasurer and member of the Board of Directors of DSI Properties, Inc. Mr. Conway received a Bachelor of Arts Degree from Loras College with a major in Accounting. Mr. Joseph W. Stok is age 81 and has been a member of the Board of Directors of DSI Properties, Inc. since 1994, a Vice President of Diversified Securities, Inc. since 1973, and an Account Executive with Diversified Securities, Inc. since 1967. Item 11. EXECUTIVE COMPENSATION (MANAGEMENT RENUMERATION 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, 2003, which together with the report of its independent auditors, Deloitte & Touche LLP, is attached hereto as Exhibit 1 and incorporated herein by this reference. In addition to such information: (a) No annuity, pension or retirement benefits are proposed to be paid by 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 remuneration 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, 2003, 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. 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, 2003, 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 year ended December 31, 2003, together with the reports of its independent auditors, Deloitte & Touche. 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, 2003. (b) No reports on Form 8K were filed during the fiscal year ended December 31, 2003. 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 X by: DSI Properties, Inc., a California corporation, as General Partner Robert J. Conway By_____________________________ Dated: March 31, 2004 ROBERT J. CONWAY, President (Chief Executive Officer, Chief Financial Officer, and Director) Joseph W. Conway By____________________________ Dated: March 31, 2004 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 X by: DSI Properties, Inc., a California corporation, as General Partner Robert J. Conway By:__________________________ Dated: March 31, 2004 ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director Joseph W. Conway By___________________________ Dated: March 31, 2004 JOSEPH W. CONWAY (Executive Vice President and Director) DSI REALTY INCOME FUND X CROSS REFERENCE SHEET FORM 1O-K ITEMS TO ANNUAL REPORT PART I, Item 3. There are no legal proceedings pending or threatened. PART I, Item 4. Not applicable. PART II, Item 5. Not applicable. PART II, Item 6. The information required is contained in Registrant's Financial Statements for its fiscal year ended December 31, 2003, attached as Exhibit l to Form 10-K. PART II, Item 8. See Exhibit l to Form 10-K filed herewith. PART II, Item 9. Not applicable. EXHIBIT l DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) SELECTED FINANCIAL DATA FIVE YEARS ENDED DECEMBER 31, 2003 ------------------------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- TOTAL REVENUES AND OTHER INCOME $2,837,397 $3,076,030 $3,351,149 $3,201,912 $2,928,689 TOTAL EXPENSES 1,960,287 1,931,715 1,913,535 1,857,563 1,737,036 ---------- ----------- ----------- ----------- ----------- NET INCOME $ 877,110 $1,144,315 $1,437,614 $1,344,349 $1,191,653 ========== =========== =========== =========== =========== TOTAL ASSETS $5,557,881 $6,074,744 $7,194,045 $8,846,914 $8,779,268 ========== =========== =========== =========== =========== CASH FLOW FROM: OPERATING $1,448,782 $1,050,669 $ 461,933 $2,216,593 $2,040,154 INVESTING (7,303) - - - (6,949) FINANCING (1,407,500)(1,610,044) (1,620,635) (1,638,784) (1,777,602) NET INCOME PER LIMITED PARTNERSHIP UNIT $ 27.32 $ 35.64 $ 44.78 $ 41.87 $ 37.12 ========== =========== =========== =========== =========== CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ 43.84 $ 50.15 $ 50.48 $ 51.18 $ 55.37 ========== =========== =========== =========== =========== The following are reconciliations between the operating results and partners' equity per the financial statements and the Partnership's income tax return for the year ended December 31, 2003. Net Partners' Income Equity Per financial statements $ 877,110 $ 4,612,697 Excess financial statement depreciation 205,119 2,909,021 Capitalization of syndication costs 1,694,248 Excess book distributions 325,215 Property acquisition costs 1,146,935 Deferred rental revenues 74,734 Tax expense adjustment (26,384) Incentive management fee (379) ----------- ----------- Per Partnership income tax return $ 1,055,466 $ 10,762,850 =========== =========== Net taxable income per limited partnership unit $ 32.88 =========== DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Page Independent Auditors' Report F-1 FINANCIAL STATEMENTS: Balance Sheets at December 31, 2003 and 2002 F-2 Statements of Income for the Three Years Ended December 31, 2003 F-3 Statements of Changes in Partners' Equity (Deficit) for the Three Years Ended December 31, 2003 F-4 Statements of Cash Flows for the Three Years Ended December 31, 2003 F-5 Notes to Financial Statements F-6 SUPPLEMENTAL SCHEDULE: Schedule III - Real Estate and Accumulated Depreciation F-9 SCHEDULES OMITTED: Financial statements and schedules not listed above are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements named above, or in the notes thereto. CONTROLS AND PROCEDURES Within 90 days prior to the date of this report, the Partnership evaluated the effectiveness of its disclosure controls and procedures. This evalu- ation was performed by the Partnership's Controller with the assistance of the Partnership's President and the Chief Executive Officer. These disclosure controls and procedures are designed to ensure that the inform- ation required to be disclosed by the Parnership it its periodic reports filed with the Securities and Exchange Commission (the "Commission") is recorded, processed summarized and reported, within the time periods specified by the Commission's rules and forms, and that the information is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership concluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation. INDEPENDENT AUDITORS' REPORT To the Partners of DSI Realty Income Fund X: We have audited the accompanying balance sheets of DSI Realty Income Fund X, a California Limited Partnership (the "Partnership") as of December 31, 2003 and 2002, 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, 2003. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial statement schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by 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 X at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with generally accepted accounting 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 March 20, 2004 DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) BALANCE SHEETS DECEMBER 31, 2003 AND 2002 - -------------------------------------------------------------------------------- ASSETS 2003 2002 CASH AND CASH EQUIVALENTS $ 921,565 $ 887,585 PROPERTY, net (Note 3) 4,493,620 5,047,627 OTHER ASSETS 142,696 139,532 ----------- ----------- TOTAL $ 5,557,881 $ 6,074,744 =========== =========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES: Distribution due partners (Note 4) $ 325,214 $ 325,214 Incentive management fee payable to general partners (Note 4) 2,376 379 Property management fees payable 409,210 409,681 Customer deposits and other liabilities 208,384 196,383 ----------- ----------- Total liabilities 945,184 931,657 ----------- ----------- PARTNERS' EQUITY (DEFICIT)(Note 4): General partners (95,901) (90,597) Limited partners (31,783 limited partnership units outstanding at December 31, 2002 and 2001) 4,708,598 5,233,684 ------------ ----------- Total partners' equity 4,612,697 5,143,087 ------------ ----------- TOTAL $ 5,557,881 $ 6,074,744 ============ =========== See accompanying notes to financial statements. DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) STATEMENTS OF INCOME THREE YEARS ENDED DECEMBER 31, 2003 - -------------------------------------------------------------------------------- 2003 2002 2001 REVENUES: Rental $2,834,856 $3,070,312 $3,300,988 ---------- ---------- ---------- EXPENSES: Depreciation 561,309 557,427 538,528 Operating 865,712 852,859 890,989 General and administrative 264,846 223,009 176,169 General partners' incentive management fee (Note 4) 126,675 144,904 145,857 Property management 141,745 153,516 161,992 ---------- ---------- ---------- Total expenses 1,960,287 1,931,715 1,913,535 ---------- ---------- ---------- OPERATING INCOME 874,569 1,138,597 1,387,453 OTHER INCOME - Interest income 2,541 5,718 50,161 ---------- ---------- ---------- NET INCOME $ 877,110 $1,144,315 $1,437,614 ========== ========== ========== AGGREGATE NET INCOME ALLOCATED TO (Note 4): Limited partners $ 868,339 $1,132,872 $1,423,238 General partners 8,771 11,443 14,376 ---------- ---------- ---------- TOTAL $ 877,110 $1,144,315 $1,437,614 ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 27.32 $ 35.64 $ 44.78 ========== ========== ========== See accompanying notes to financial statements. DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 2003 - -------------------------------------------------------------------------------- General Limited Partners Partners Total BALANCE, JANUARY 1, 2001 $(84,110) $5,875,947 $5,791,837 Net income 14,376 1,423,238 1,437,614 Distributions (16,206) (1,604,429) (1,620,635) ------- ---------- ---------- BALANCE, DECEMBER 31, 2001 $(85,940) $5,694,756 $5,608,816 Net income 11,443 1,132,872 1,144,315 Distributions (16,100) (1,593,944) (1,610,044) ------- ---------- ---------- BALANCE, DECEMBER 31, 2002 $(90,597) $5,233,684 $5,143,087 Net income 8,771 868,339 877,110 Distributions (14,075) (1,393,425) (1,407,500) ------- ---------- ---------- BALANCE, DECEMBER 31, 2003 $(95,901) $4,708,598 $4,612,697 ======= ========== ========== See accompanying notes to financial statements. DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) STATEMENTS OF CASH FLOWS THREE YEARS ENDED DECEMBER 31, 2003 - -------------------------------------------------------------------------------- 2003 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 877,110 $1,144,315 $1,437,614 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 561,309 557,427 538,528 Changes in assets and liabilities: Receivable from general partners Other assets (3,164) 2,499 (44,361) Incentive management fee payable to general partners 1,997 (953) (1,608,358) Property management fee payable (471) (668,713) 161,993 Customer deposits and other liabilities 12,001 16,094 (23,483) ----------- ----------- ----------- Net cash provided by operating activities 1,448,782 1,050,699 461,933 CASH FLOWS FROM INVESTING ACTIVITIES - Additions to property (7,302) CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (1,407,500) (1,610,044) (1,620,635) ----------- ---------- ---------- NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 33,980 (559,375) (1,158,702) CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 887,585 1,446,960 2,605,662 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 921,565 $ 887,585 $ 1,446,960 =========== =========== ============ See accompanying notes to financial statements. DSI REALTY INCOME FUND X (A California Real Estate Limited Partnership) NOTES TO FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 2003 1. GENERAL DSI Realty Income Fund X, a California Real Estate Limited Partnership (the "Partnership"), has three general partners (DSI Properties, Inc. Robert J. Conway and Joseph W. Conway) and limited partners owning 31,783 limited partnership units, which were purchased for $500 a unit. The general partners have made no capital contributions 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 May 1, 1986 under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The Partnership has acquired five mini-storage properties, two of which are located in Warren, Michigan; one in Crestwood, Illinois; one in Troy, Michigan; and one in Forestville, Maryland. The 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., Robert J. Conway and Joseph W. Conway are the general partners. The mini-storage facilities are operated for the Partnership by Dahn under various agreements which are subject to renewal annually. Under the terms of the agreements, the Partnership is required to pay Dahn a property management fee equal to 5% of gross revenue from oper- ations, defined as the entire amount of all receipts for 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 mini-storage facilities. Depreciation is provided using the straight-line method over an estimated useful life of twenty years for the facilities. 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 $178,356. Revenues - Rental revenue is recognized using the accrual method based on contractual amounts provided for in the lease agreements, which approximates recognition on a straight line basis. The term of the lease agreements is usually less than one year. Net Income per Limited Partnership Unit - Net income per limited partnership unit is computed by dividing net income allocated to the limited partners by the weighted average number of limited partnership units outstanding during each year (31,783 in 2003, 2002 and 2001). 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 flows is less than the carrying amount of the asset, the Partnership would recognize an impairment to the extent the carrying value exceeded the fair market value of the property. No impairment losses were recog- nized in 2003, 2002 or 2001. Fair Value of Financial Instruments - The Partnership's financial instruments consist primarily of cash, receivables, accounts payable and accrued liabilities. The carrying values of all financial instruments are representative of their fair values due to their short-term maturities. Concentrations of Credit Risk - Financial instruments that potentially subject the Partnership to concentrations of credit risk consist primarily of cash equivalents and rent receivables. The Partnership places its cash equivalents with high credit quality institutions. Impact of Recent Accounting Pronouncements - In 2002, the Partnership adopted the following pronouncements: Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for Impairment or Disposal of Long- Lived Assets, and SFAS No. 145, Rescission of FASB Statements No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical Corrections. The adoption of these pronouncements did not have a material impact on the Partnership's financial position or results of operations. The Partner- ship believes the adoption of Financial Accounting Standards Board Inter- pretation No. 46, Consolidation of Variable Interest Entities, will not have a material impact on the financial statements. 3. PROPERTY The total cost of property and accumulated depreciation is as follows as of December 31: 2003 2002 Land $ 2,089,882 $ 2,089,882 Buildings and improvements 10,847,587 10,840,285 ----------- ------------ Total $12,937,469 $12,930,167 Accumulated depreciation (8,443,849) (7,882,540) ----------- ----------- Property, net $ 4,493,620 $ 5,047,627 =========== =========== 4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE 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 profit or loss 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 an incentive management fee for supervising the operations of the Partnership. The fee is to be paid in an amount equal to 9% per annum of the Partnership distributions made from cash available for distribution, calculated as cash generated from operations less capital expenditures,and the payment of such fee is subordinated to a cumulative return to the limited partners of 8.1% of the offering proceeds. 5. BUSINESS SEGMENT INFORMATION The following disclosure about segment reporting of the Partnership is made in accordance with the requirements of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Partnership operates under a single segment; storage facility operations, under which the Partnership rents its storage facilities to its customers on a need basis and charges rent on a predetermined rate on a predetermined rate. DSI REALTY INCOME FUND X (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 Ryan Road, Warren Michigan None $277,799 $1,715,183 $ 5,319 $277,799 $1,720,502 $1,998,301*$1,381,806 12/87 02/87 20 Yrs Crestwood,Illinois None 205,960 1,631,179 3,211 205,960 1,634,390 1,840,350 1,313,393 12/87 04/87 20 Yrs Grosebeck Highway Warren, Michigan None 314,517 1,760,657 74,155 314,517 1,834,812 2,149,329 1,450,557 01/88 04/87 20 Yrs Forestville, Maryland None 755,000 2,278,110 16,447 755,000 2,294,557 3,049,557 1,785,306 07/88 08/87 20 Yrs Troy, Michigan None 536,606 3,152,736 210,590 536,606 3,363,326 3,899,932 2,512,787 06/88 06/88 20 Yrs -------- ---------- ------- -------- ---------- ---------- ---------- $2,089,882 $10,537,865 $309,722 $2,089,882 $10,847,587 $12,937,469*$8,443,849 ========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated at Cost Depreciation Balance, January 1, 2001 $12,930,167 $6,786,585 Additions 538,528 ----------- ---------- Balance, December 31, 2001 $12,930,167 $7,325,113 Additions 557,427 ----------- ---------- Balance, December 31, 2002 $12,930,167 $7,882,540 Additions 7,302 561,309 ----------- ---------- Balance, December 31, 2003 $12,937,469 $8,443,849 =========== ========== EXHIBIT 2 March 20, 2004 ANNUAL REPORT TO LIMITED PARTNERS OF DSI REALTY INCOME FUND X Dear Limited Partner: This report contains the Partnership's balance sheets as of December 31, 2003 and 2002, and the related statements of income, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 2003 accompanied by an independent auditors' report. The Partnership owns five mini-storage facilities including two in Warren, MI. The Partnership's proper- ties 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, 2003 and December 31, 2002 were as follows: Location of Property Average Occupancy Average Occupancy Levels for the Levels for the Year Ended Year Ended Dec. 31, 2003 Dec. 31, 2002 Ryan Road Warren, MI 80% 83% Crestwood, IL 81% 82% Groesbeck Hwy Warren, MI 80% 81% Forestville, MD 80% 84% Troy, MI 83% 83% We will keep you informed of the activities of DSI Realty Income Fund X as they develop. If you have any questions, please contact us at your convenience at (562) 493-3022. If you would like a copy of the Partnership's Annual Report on Form 10-K for the year ended December 31, 2003 which was filed with the Securities and Exchange Commission (which report includes the enclosed Financial Statements), we will forward a copy of the report to you upon written request. Very truly yours, DSI REALTY INCOME FUND X By: DSI Properties, Inc. By___________________________ ROBERT J. CONWAY, President CERTIFICATIONS I, Robert J. Conway, certify that: 1. I have reviewed this annual report on Form 10-K of DSI Realty Income Fund X; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this annual report. 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its con- solidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to re- cord, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls; and 6. The registrnat's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 20, 2004 Robert J. Conway Chief Executive Officer CERTIFICATIONS I, Richard P. Conway, certify that: 1. I have reviewed this annual report on Form 10-K of DSI Realty Income Fund X; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this annual report. 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its con- solidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to re- cord, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls; and 6. The registrnat's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 20, 2004 Richard P. Conway Vice President CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of DSI Realty Income Fund X (the "Partnership") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Robert J. Conway Chief Executive Officer March 20, 2004 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of DSI Realty Income Fund X (the "Partnership") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Richard P. Conway Vice President March 20, 2004 -----END PRIVACY-ENHANCED MESSAGE-----