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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, 2004.
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,
2004, incorporated by reference to Form 10-K, Part II.
Item 11. Registrant's Financial Statements for its fiscal year ended December
31, 2004, 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, 2004, 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, 2004 and December 31, 2003 were as follows:
Location of Property Average Occupancy Average Occupancy
Level for the Level for the
Year Ended Year Ended
Dec. 31, 2004 Dec. 31, 2003
Ryan Road
Warren, MI 79% 80%
Crestwood, IL 77% 79%
Groesbeck Hwy
Warren, MI 77% 78%
Forestville, MD 83% 81%
Troy, MI 73% 78%
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, 2004 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 947 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 $10.94 per Limited Partnership Unit were
declared and paid each quarter for the year ended December 31, 2004 and $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.
Item 6. SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31, 2004
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
TOTAL REVENUES
AND OTHER
INCOME $2,678,680 $2,837,397 $3,076,030 $3,351,149 $3,201,912
TOTAL
EXPENSES 1,890,156 1,960,287 1,931,715 1,913,535 1,857,563
---------- ----------- ----------- ----------- -----------
NET
INCOME $ 788,524 $ 877,110 $1,144,315 $1,437,614 $1,344,349
========== =========== =========== =========== ===========
TOTAL
ASSETS $5,091,426 $5,557,881 $6,074,744 $7,194,045 $8,846,914
========== =========== =========== =========== ===========
CASH FLOW FROM (USED IN):
OPERATING $1,363,458 $1,448,782 $1,050,669 $ 461,933 $2,216,593
INVESTING (10,032) (7,302) - - -
FINANCING (1,404,669) (1,407,500) (1,610,044) (1,620,635)(1,638,784)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 24.56 $ 27.32 $ 35.64 $ 44.78 $ 41.87
========== =========== =========== =========== ===========
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 43.75 $ 43.84 $ 50.15 $ 50.48 $ 51.18
========== =========== =========== =========== ===========
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Critical Accounting Policies
Revenue recognition - 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.
RESULTS OF OPERATIONS
2004 COMPARED TO 2003
Total revenues decreased from $2,834,856 in 2003 to $2,676,266 in 2004, total
expenses decreased from $1,960,287 in $1,890,156 and other income decreased
from $2,541 to $2,414, resulting in a decease in net income from $877,110 to
$788,524. The approximate $158,600 (5.6%) 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 77.6% for the year
ended December 31, 2004, compared to 80.7% for the year ended December 31,
2003. The Partnership continued its advertising campaign to attract and keep
new tenants in its various mini-storage facilities. Operating expenses re-
mained relatively constant as increases in advertising and salaries and wages
expenses was offset by a decrease in maintenance and repair expense. General
and administrative expenses decreased approximately $64,800 (24.5%) as a
result of decreases in legal and professional and equipment and computer lease
expenses, partially offset by increases in office supplies and bank and credit
card fee expenses. The decrease in legal and professional expense is related
to unsuccessful legal challenges by two dissident Limited Partners to a pro-
posed amendment to the Partnership Agreement (see paragraph below). The
General Partners' incentive management fee remained relatively constant.
Property management fees, which are computed as a percentage of rental revenue,
decreased as a result of the decrease in rental revenue.
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.
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 $72,300
(5.0%) in 2004 compared to 2003 primarily as a result of the increase in
customer depositis and other liabilities, partially offset by the decrease in
net income. 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.
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%, 0.5%, and 1.9% of capital contributed by Limited Partners were declared
and paid on December 15, 2004, 2003 and 2002, 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 2004 and 2003. The Partnership has no material commitments for
capital expenditures.
In 2003, the Limited Partners approved an amendment to the Partnership
Agreement granting the General Partners ten days to review certain types of
transfers during which the General Partners may match, exceed or approve the
proposed transfers. The Court has rejected all preliminary attempts to halt
implementation of the amendment. Subsequently, the two 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, 2004 and
2003 was as follows:
2004 Quarter Ended
------------------
March 31 June 30 September 30 December 31
Total revenues $705,778 $676,801 $666,472 $627,215
Net income 243,434 185,862 189,273 169,955
Net income per limited
partnership unit $ 7.58 $ 5.79 $ 5.90 $ 5.29
Weighted average
number of limited
partnership units
outstanding 31,783 31,783 31,783 31,783
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
Item 7a. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
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. See the financial statements.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9a. CONTROLS AND PROCEDURES
The Partnership evaluated the effectiveness of its disclosure controls
and procedures. This evaluation 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 information required to be disclosed by the
Parnership in its periodic reports filed with the Securities and Exchange
Commission (the "Commission") is recorded, processed summarized and
reported, within the time periods specified by the 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.
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, 2004, 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 71 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 76 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 82 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, 2004, 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, 2004, 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, 2004, attached hereto as Exhibit l and incorporated herein by this
reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees for professional services rendered by Deloitte & Touche
LLP for the audit of the Partnership's annual financial statements and for re-
view of the financial statements included in the Partnership's Quarterly Reports
on Form 10-Q for 2004 were $26,920 and for 2003 were $25,600.
Tax Fees
The aggregate fees for professional services rendered by Deloitee & Touche
LLP for tax compliance, tax advice and tax planning for 2004 were $16,300 and
for 2003 were $15,200. Most of the fees related to preparation of the Partner-
ship's tax returns.
PART IV
Item 15. 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, 2004, 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, 2004. (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, 2005
ROBERT J. CONWAY, President
(Chief Executive Officer, Chief
Financial Officer, and Director)
Joseph W. Conway
By____________________________ Dated: March 31, 2005
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, 2005
ROBERT J. CONWAY, President,
Chief Executive Officer, Chief
Financial Officer, and Director
Joseph W. Conway
By___________________________ Dated: March 31, 2005
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, 2004
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
TOTAL REVENUES
AND OTHER
INCOME $2,678,680 $2,837,397 $3,076,030 $3,351,149 $3,201,912
TOTAL
EXPENSES 1,890,156 1,960,287 1,931,715 1,913,535 1,857,563
---------- ----------- ----------- ----------- -----------
NET
INCOME $ 788,524 $ 877,110 $1,144,315 $1,437,614 $1,344,349
========== =========== =========== =========== ===========
TOTAL
ASSETS $5,091,426 $5,557,881 $6,074,744 $7,194,045 $8,846,914
========== =========== =========== =========== ===========
CASH FLOW FROM (USED IN):
OPERATING $1,363,458 $1,448,782 $1,050,669 $ 461,933 $2,216,593
INVESTING (10,032) (7,302) - - -
FINANCING (1,404,669) (1,407,500) (1,610,044) (1,620,635)(1,638,784)
NET INCOME
PER LIMITED
PARTNERSHIP
UNIT $ 24.56 $ 27.32 $ 35.64 $ 44.78 $ 41.87
========== =========== =========== =========== ===========
CASH
DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
UNIT $ 43.75 $ 43.84 $ 50.15 $ 50.48 $ 51.18
========== =========== =========== =========== ===========
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, 2004.
Net Partners'
Income Equity
Per financial statements $ 788,524 $ 3,996,552
Excess book depreciation 192,075 3,101,096
Capitalization of syndication costs 1,694,248
Excess book distributions 325,215
Property acquisition costs 1,146,935
Deferred rental revenues (19,534) 55,200
Fixed asset adjustments (11,250) (11,250)
Tax expense adjustment (23,555)
Gain on slae of land 2,272 2,272
Accrued expenses 9,800 9,800
----------- -----------
Per Partnership income tax return $ 938,332 $ 10,320,068
=========== ===========
Net taxable income per limited
partnership unit $ 29.23
===========
DSI REALTY INCOME FUND X
(A California Real Estate Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets as of December 31, 2004 and 2003 F-2
Statements of Income for each of the Three
Years Ended December 31, 2004 F-3
Statements of Changes in Partners' Equity (Deficit) for
each of the Three Years Ended December 31, 2004 F-4
Statements of Cash Flows for each of the Three Years
Ended December 31, 2004 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.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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, 2004
and 2003, and the related statements of income, changes in partners' equity
(deficit), and cash flows for each of the three years ended December 31, 2004.
Our audits also included the financial statement schedule listed in the Index
at Item 15. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Partnership
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's
internal control financial reporting. Accordingly we express no such opinion.
An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, 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,
2004 and 2003, and the results of its operations and its cash flows for each of
the three years in the ended December 31, 2004, 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 14, 2005
DSI REALTY INCOME FUND X
(A California Real Estate Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
ASSETS 2004 2003
CASH AND CASH EQUIVALENTS $ 870,322 $ 921,565
PROPERTY, net (Note 3) 4,100,004 4,493,620
OTHER ASSETS 121,100 142,696
----------- -----------
TOTAL $ 5,091,426 $ 5,557,881
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
LIABILITIES:
Distribution due partners (Note 4) $ 325,214 $ 325,214
Incentive management fee payable to
general partners (Note 4) 2,122 2,376
Property management fees payable 408,879 409,210
Customer deposits and other liabilities 212,305 208,384
Capital lease obligations (Note 3) 146,354
----------- -----------
Total liabilities 1,094,874 945,184
----------- -----------
PARTNERS' EQUITY (DEFICIT)(Note 4):
General partners (102,062) (95,901)
Limited partners (31,783 limited
partnership units outstanding
at December 31, 2004 and 2003) 4,098,614 4,708,598
------------ -----------
Total partners' equity 3,996,552 4,612,697
------------ -----------
TOTAL $ 5,091,426 $ 5,557,881
============ ===========
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, 2004
- --------------------------------------------------------------------------------
2004 2003 2002
REVENUES:
Rental $2,676,266 $2,834,856 $3,070,312
---------- ---------- ----------
EXPENSES:
Depreciation 561,252 561,309 557,427
Operating 867,829 865,712 852,859
General and administrative 200,076 264,846 223,009
General partners' incentive
management fee (Note 4) 126,421 126,675 144,904
Property management 134,578 141,745 153,516
---------- ---------- ----------
Total expenses 1,890,156 1,960,287 1,931,715
---------- ---------- ----------
OPERATING INCOME 786,110 874,569 1,138,597
OTHER INCOME -
Interest income 2,414 2,541 5,718
---------- ---------- ----------
NET INCOME $ 788,524 $ 877,110 $1,144,315
========== ========== ==========
AGGREGATE NET INCOME ALLOCATED
TO (Note 4):
Limited partners $ 780,639 $ 868,339 $1,132,872
General partners 7,885 8,771 11,443
---------- ---------- ----------
TOTAL $ 788,524 $ 877,110 $1,144,315
========== ========== ==========
NET INCOME PER LIMITED PARTNERSHIP
UNIT $ 24.56 $ 27.32 $ 35.64
========== ========== ==========
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, 2004
- --------------------------------------------------------------------------------
General Limited
Partners Partners Total
BALANCE, JANUARY 1, 2002 $(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
Net income 7,885 780,639 788,524
Distributions (14,046) (1,390,623) (1,404,669)
------- ---------- ----------
BALANCE, DECEMBER 31, 2004 $(102,062) $4,098,614 $3,996,552
======= ========== ==========
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, 2004
- --------------------------------------------------------------------------------
2004 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 788,524 $ 877,110 $1,144,315
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 561,252 561,309 557,427
Changes in assets and liabilities:
Receivable from general partners
Other assets 21,596 (3,164) 2,499
Incentive management fee
payable to general partners (254) 1,997 (953)
Property management fee payable (331) (471) (668,713)
Customer deposits and other
liabilities 3,921 12,001 16,094
Capital lease obligations (11,250)
----------- ----------- -----------
Net cash provided by operating
activities 1,363,458 1,448,782 1,050,669
CASH FLOWS USED IN INVESTING ACTIVITIES -
Additions to property (10,032) (7,302)
CASH FLOWS USED IN FINANCING ACTIVITIES -
Distributions to partners (1,404,669) (1,407,500) (1,610,044)
----------- ---------- ----------
NET (DECREASE)INCREASE IN CASH AND
CASH EQUIVALENTS (51,243) 33,980 (559,375)
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR 921,565 887,585 1,446,960
----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
AT END OF YEAR $ 870,322 $ 921,565 $ 887,585
=========== =========== ============
NON CASH INVESTING ACTIVITIIES
Acquisition of trucks utilizing capital leases $157,604
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, 2004
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. Property
under capital leases is amortized over the lives of the respective leases
or the estimated useful lives of the assets.
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 $149,808.
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.
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 2004, 2003 or 2002.
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.
3. PROPERTY
The total cost of property and accumulated depreciation is as follows
as of December 31:
2004 2003
Land $ 2,076,627 $ 2,089,882
Buildings and improvements 10,870,874 10,847,587
----------- ------------
Total $12,947,501 $12,937,469
Accumulated depreciation (9,005,101) (8,443,849)
----------- -----------
Total $ 3,942,400 4,493,620
Rental trucks under capital leases 157,604
----------- -----------
Property - net $ 4,100,004 $ 4,493,620
=========== ===========
The rental trucks under capital leases were not placed into service until
January 2005 and therefore no depreciation expense was recorded during
2004.
The Partnership leases certain vehicles under agreements that meet the
criteria for classification as capital leases which expire in 2008.
Future minimum lease payments under these capital leases at December 31,
2004 are summarized as follows:
2005 $40,500
2006 40,500
2007 40,500
2008 40,500
--------
Total future minimum payment obligations $162,000
Less interest portion 15,646
--------
Present value of net minimum lease payments $146,354
========
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 $264,544 $1,715,183 $ 9,694 $264,544 $1,724,877 $1,989,421*$1,469,102 12/87 02/87 20 Yrs
Crestwood,Illinois None 205,960 1,631,179 9,115 205,960 1,640,294 1,846,254 1,396,184 12/87 04/87 20 Yrs
Grosebeck Highway
Warren, Michigan None 314,517 1,760,657 81,298 314,517 1,841,955 2,156,472 1,554,136 01/88 04/87 20 Yrs
Forestville, Maryland None 755,000 2,278,110 18,037 755,000 2,296,147 3,051,147 1,902,658 07/88 08/87 20 Yrs
Troy, Michigan None 536,606 3,152,736 214,865 536,606 3,367,601 3,904,207 2,683,021 06/88 06/88 20 Yrs
-------- ---------- ------- -------- ---------- ---------- ----------
$2,076,627 $10,537,865 $333,009 $2,076,627 $10,870,874 $12,947,501*$9,005,101
========== ========== ======== ========== ========== =========== ==========
Real Estate Accumulated
at Cost Depreciation
Balance, January 1, 2002 $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
Additions 10,032 561,252
----------- ----------
Balance, December 31, 2004 $12,947,501 $9,005,101
=========== ==========
EXHIBIT 2
March 14, 2005
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,
2004 and 2003, and the related statements of income, changes in partners' equity
and cash flows for each of the three years ended December 31, 2004 accompanied
by an independent auditors' report. The Partnership owns five mini-
storage facilities including two in Warren, MI. The Partnership's properties
were each purchased for all cash and funded solely from subscriptions for
limited partnership interests without the use of mortgage financing.
Your attention is directed to the section entitled Management's Discussion
and Analysis of Financial Condition and Results of Operations for the General
Partners' discussion and analysis of the financial statements and operations of
the Partnership.
Average occupancy levels for each of the Partnership's six properties for
the years ended December 31, 2004 and December 31, 2003 were as follows:
Location of Property Average Occupancy Average Occupancy
Levels for the Levels for the
Year Ended Year Ended
Dec. 31, 2004 Dec. 31, 2003
Ryan Road
Warren, MI 79% 80%
Crestwood, IL 77% 79%
Groesbeck Hwy
Warren, MI 77% 78%
Forestville, MD 83% 81%
Troy, MI 73% 78%
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, 2004 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-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relating to the registrant,
including its consolidated 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 and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of our annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed based
on our most recent evaluation of internal controls over financial reporting,
to the registrant's auditors:
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to affect the registrant's ability to record, pro-
cess, summarize and report financial information; 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 over financial reporting.
Date: March 14, 2005
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-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, to ensure that material information relating to the registrant,
including its consolidated 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 and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of our annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed based
on our most recent evaluation of internal controls over financial reporting,
to the registrant's auditors:
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to affect the registrant's ability to record, pro-
cess, summarize and report financial information; 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 over financial reporting.
Date: March 14, 2005
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, 2004 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 14, 2005
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, 2004 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 14, 2005