10KSB 1 cpf16.txt CPF16 FORM 10-KSB -- ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) Form 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended December 31, 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _________to _________ Commission file number 0-10435 CENTURY PROPERTIES FUND XVI (Name of small business issuer in its charter) California 94-2704651 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Limited Partnership Units (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $3,326,000 State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of December 31, 2001. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Description of Business Century Properties Fund XVI (the "Partnership" or the "Registrant") was organized in December 1980 as a California limited partnership under the Uniform Limited Partnership Act of the California Corporations Code. Fox Capital Management Corporation (the "Managing General Partner" or "FCMC"), a California corporation, and Fox Realty Investors ("FRI or "Non-Managing General Partner"), a California general partnership, are the general partners of the Registrant. NPI Equity Investments II Inc., a Florida corporation ("NPI Equity"), is the managing partner of FRI. Both FCMC and NPI Equity are subsidiaries of Apartment Investment and Management Company ("AIMCO"). The partnership agreement provides that the Partnership is to terminate on December 31, 2025 unless terminated prior to such date. Beginning in August 1981 through April 1982, the Registrant offered and sold 130,000 Limited Partnership Units for an aggregate of $65,000,000. The net proceeds of this offering were used to acquire ten income-producing real estate properties. The Registrant's original property portfolio was geographically diversified with properties acquired in six states. The Registrant's acquisition activities were completed in 1983, and since then, the principal activity of the Registrant has been managing its portfolio. During the period from 1986 through 1991, eight multi-family residential properties were either sold or otherwise disposed. The Registrant continues to own and operate two of its originally acquired properties. See "Item 2. Description of Properties." The Partnership has no full time employees. The Managing General Partner is vested with full authority as to the general management and supervision of the business and affairs of the Partnership. The Non-Managing General Partner and the limited partners have no right to participate in the management or conduct of such business and affairs. An affiliate of the Managing General Partner provides day-to-day property management services to the Partnership's investment properties. The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Registrant's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the Managing General Partner in such market area, could have a material effect on the rental market for apartments at the Registrant's properties and the rents that may be charged for such apartments. While the Managing General Partner and its affiliates own and/or control a significant number of apartment units in the United States such units represent an insignificant percentage of total apartment units in the United States and, competition for apartments is local. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as changes in the supply and demand for similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed, which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in "Management's Discussion and Analysis or Plan of Operations" included in "Item 6" of this Form 10-KSB. Item 2. Description of Properties: The following table sets forth the Registrant's investment in properties: Date of Property Purchase Type of Ownership Use Ralston Place 06/82 Fee ownership subject Apartments Tampa, Florida to first mortgage (1) 200 units Woods of Inverness 07/82 Fee ownership subject Apartments Apartments to first mortgage (2) 272 units Houston, Texas (1) Property is held by a limited partnership in which the Partnership owns a 99% interest. The remaining 1% interest is owned by AIMCO Properties, LP which is ultimately controlled by AIMCO. (2) Property is held by a Limited Partnership which is wholly-owned by the Registrant. Schedule of Properties: Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Ralston Place $ 6,744 $ 3,830 5-30 yrs S/L $ 1,462 Woods of Inverness 10,335 5,824 5-30 yrs S/L 2,240 Apartments $17,079 $ 9,654 $ 3,702
See "Item 7. Financial Statements - Note A" for a description of the Partnership's depreciation policy. Schedule of Property Indebtedness: The following table sets forth certain information relating to the loans encumbering the Registrant's properties.
Principal Principal Balance At Balance December 31, Interest Period Maturity Due At Property 2001 Rate Amortized Date Maturity (in thousands) (in thousands) Ralston Place $ 2,157 7.88% 30 years 1/2006 $ 2,016 Woods of Inverness Apartments 4,925 7.88% 30 years 1/2006 4,602 $ 7,082 $ 6,618
Each mortgage note payable is non-recourse and secured by a pledge of the applicable Partnership property and the rental revenues derived therefrom. See "Item 7. Financial Statements - Note B" for information with respect to the Registrant's ability to prepay these loans and other specific details as to the terms of the loans. Rental Rates and Occupancy: Average annual rental rate and occupancy for 2001 and 2000 for each property: Average Annual Average Annual Rental Rates Occupancy (per unit) Property 2001 2000 2001 2000 Ralston Place $ 6,164 $ 5,912 96% 95% Woods of Inverness Apartments 7,738 7,464 95% 94% As noted under "Item 1. Description of Business", the real estate industry is highly competitive. Both of the properties of the Partnership are subject to competition from other apartment complexes in the area. The Managing General Partner believes that both of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No residential tenant leases 10% or more of the available rental space. Both of the properties are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. Real Estate Taxes and Rates: Real estate taxes and rates in 2001 for each property were: 2001 2001 Billing Rate (in thousands) Ralston Place $ 92 2.41% Woods of Inverness Apartments 187 2.85% Capital Improvements: Ralston Place Apartments: During the year ended December 31, 2001, the property has spent approximately $99,000 in capital expenditures consisting primarily of appliance, air conditioning and flooring replacements and structural improvements. These improvements were funded from replacement reserves and operations. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $60,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Woods of Inverness Apartments: During the year ended December 31, 2001, the property has spent approximately $231,000 in capital expenditures consisting primarily of appliance and floor covering replacements, window treatments, major landscaping, parking lot resurfacing and structural improvements. These improvements were funded primarily from replacement reserves and operations. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $82,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Item 3. Legal Proceedings In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The Managing General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders During the quarter ended December 31, 2001, no matters were submitted to a vote of security holders through the solicitation of proxies or otherwise. PART II Item 5. Market for the Partnership's Common Equity and Related Partner Matters The Partnership, a publicly-held limited partnership, offered and sold in 1981 and 1982, 130,000 Limited Partnership Units (the "Units") aggregating $65,000,000. The Partnership currently has 130,000 Units outstanding held by 3,688 limited partners of record. Affiliates of the Managing General Partner owned 76,903.69 Units or 59.16% of the outstanding Units at December 31, 2001. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. The following table sets forth the distributions made by the Partnership for the years ended December 31, 2001 and 2000. (See Item 6. Management's Discussion and Analysis or Plan of Operation for further details). Distributions Per Limited Aggregate Partnership Unit 01/01/00 - 12/31/00 $358,000 (1) $ 2.56 01/01/01 - 12/31/01 149,000 (1) 1.05 (1) Distributions were made from operations. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings and /or property sales. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital expenditures, to permit distributions to its partners in 2002 or subsequent periods. See "Item 2. Description of Properties - Capital Improvements" for information relating to anticipated capital expenditures at the properties. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 76,903.69 limited partnership units (the "Units") in the Partnership representing 59.16% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO, its affiliates or affiliates of the Managing General Partner. It is possible that AIMCO or its affiliates will acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 59.16% of the outstanding Units, AIMCO is in a position to influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. However, 47,326.68 Units held by Insignia Properties, LP, an affiliate of the Managing General Partner, are required to be voted: (i) against any increase in compensation payable to the Managing General Partner or to affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast by non-tendering unitholders. Except for the foregoing, no other limitations are imposed on AIMCO or its affiliates' ability to influence voting decisions with respect to the Partnership. Item 6. Management's Discussion and Analysis or Plan of Operation The matters discussed in this Form 10-KSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report. Results of Operations The Registrant's net income for year ended December 31, 2001 was approximately $78,000 compared to approximately $142,000 for the year ended December 31, 2000. The decrease in net income was due to an increase in total expenses partially offset by an increase in total revenues. The increase in total expenses is primarily attributable to an increase in operating, depreciation, general and administrative and property tax expenses. Operating expense increased due to an increase in payroll and related benefits and utility expenses at Woods of Inverness and an increase in insurance expense at Ralston Place Apartments. The increase in depreciation expense is due to depreciable assets put into service in the last twelve months which are now being depreciated. Property tax expense increased due to an increase in the assessed value of Woods of Inverness Apartments. General and administrative expenses increased for the year ended December 31, 2001 due to an increase in professional expenses necessary for the administration of the Partnership. Included in general and administrative expense for the year ended December 31, 2001 and 2000 are management reimbursements to the Managing General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. The increase in total revenues is attributable to an increase in rental and other income. Rental income increased due to higher average rental rates and an increase in occupancy at both properties. Other income increased due to increased utilities and tenant reimbursements at Woods of Inverness. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At December 31, 2001, the Registrant had cash and cash equivalents of approximately $272,000 compared to approximately $262,000 at December 31, 2000, an increase of approximately $10,000. The increase in cash and cash equivalents is due to approximately $699,000 of cash provided by operating activities, largely offset by approximately $445,000 and $244,000 of cash used in investing and financing activities, respectively. Cash used in investing activities consisted of capital improvements and replacements and net deposits to restricted escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of distributions to partners and principal payments made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in interest bearing accounts. An affiliate of the Managing General Partner has made available to the Partnership a credit line of up to $150,000 per property owned by the Partnership. The Partnership has no outstanding amounts due under this line of credit. Based on present plans, the Managing General Partner does not anticipate the need to borrow in the near future. Other than cash and cash equivalents, the line of credit is the Partnership's only unused source of liquidity. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. The Partnership is currently evaluating the capital improvement needs of the properties for the upcoming year. The minimum to be budgeted is expected to be $300 per unit or approximately $142,000. Additional improvements may be considered and will depend on the physical condition of the properties as well as replacement reserves and anticipated cash flow generated by the properties. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $7,082,000 is amortized over 360 months with a balloon payment of approximately $6,618,000 due January 1, 2006. The Managing General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. Cash distributions from operations of approximately $149,000 were paid during the year ended December 31, 2001, of which approximately $137,000 was paid to limited partners ($1.05 per limited partnership unit). Cash distributions from operations of approximately $358,000 were paid during the year ended December 31, 2000, of which approximately $333,000 was paid to limited partners ($2.56 per limited partnership unit). Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings and/or property sales. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital expenditures to permit distributions to its partners in 2002 or subsequent periods. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 76,903.69 limited partnership units (the "Units") in the Partnership representing 59.16% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO, its affiliates or affiliates of the Managing General Partner. It is possible that AIMCO or its affiliates will acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 59.16% of the outstanding Units, AIMCO is in a position to influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. However, 47,326.68 Units held by Insignia Properties, LP, an affiliate of the Managing General Partner, are required to be voted: (i) against any increase in compensation payable to the Managing General Partner or to affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast by non-tendering unitholders. Except for the foregoing, no other limitations are imposed on AIMCO or its affiliates' ability to influence voting decisions with respect to the Partnership. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Managing General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Item 7. Financial Statements CENTURY PROPERTIES FUND XVI LIST OF FINANCIAL STATEMENTS Report of Ernst & Young, LLP Independent Auditors Consolidated Balance Sheet - December 31, 2001 Consolidated Statements of Operations - Years ended December 31, 2001 and 2000 Consolidated Statements of Changes in Partners' (Deficit) Capital - Years ended December 31, 2001 and 2000 Consolidated Statements of Cash Flows - Years ended December 31, 2001 and 2000 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Century Properties Fund XVI We have audited the accompanying consolidated balance sheet of Century Properties Fund XVI as of December 31, 2001, and the related consolidated statements of operations, changes in partners' (deficit) capital, and cash flows for each of the two years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the 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. 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 the Partnership's 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Century Properties Fund XVI at December 31, 2001, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Greenville, South Carolina February 15, 2002 CENTURY PROPERTIES FUND XVI CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 2001
Assets Cash and cash equivalents $ 272 Receivables and deposits 287 Restricted escrows 77 Other assets 165 Investment properties (Notes B and E): Land $ 1,409 Buildings and related personal property 15,670 17,079 Less accumulated depreciation (9,654) 7,425 $ 8,226 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 30 Accrued property taxes 187 Tenant security deposit liabilities 56 Other liabilities 106 Mortgage notes payable (Notes B and E) 7,082 Partners' (Deficit) Capital General partners $ (3,854) Limited partners (130,000 units issued and outstanding) 4,619 765 $8,226 See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit data) Years Ended December 31, 2001 2000 Revenues: Rental income $3,057 $2,975 Other income 269 167 Total revenues 3,326 3,142 Expenses: Operating 1,417 1,281 General and administrative 280 244 Depreciation 683 629 Interest 593 601 Property tax 275 245 Total expenses 3,248 3,000 Net income $ 78 $ 142 Net income allocated to general partners (6.9%) $ 5 $ 10 Net income allocated to limited partners (93.1%) 73 132 $ 78 $ 142 Net income per limited partnership unit $ 0.56 $ 1.02 Distributions per limited partnership unit $ 1.05 $ 2.56 See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 130,000 $ -- $65,000 $ 65,000 Partners' (deficit) capital at December 31, 1999 130,000 $(3,832) $ 4,884 $ 1,052 Distributions to partners -- (25) (333) (358) Net income for the year ended December 31, 2000 -- 10 132 142 Partners' (deficit) capital at December 31, 2000 130,000 (3,847) 4,683 836 Distributions to partners -- (12) (137) (149) Net income for the year ended December 31, 2001 -- 5 73 78 Partners' (deficit) capital at December 31, 2001 130,000 $(3,854) $ 4,619 $ 765 See Accompanying Notes to Consolidated Financial Statements CENTURY PROPERTIES FUND XVI CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Year Ended December 31, 2001 2000 Cash flows from operating activities: Net income $ 78 $ 142 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 683 629 Amortization of loan costs 31 32 Change in accounts: Receivables and deposits (42) 79 Other assets (3) 6 Accounts payable (54) 51 Accrued property taxes 15 (8) Tenant security deposit liabilities 15 (1) Other liabilities (24) (62) Net cash provided by operating activities 699 868 Cash flows from investing activities: Property improvements and replacements (423) (683) Net (deposits to) withdrawals from restricted escrows (22) 55 Net cash used in investing activities (445) (628) Cash flows from financing activities: Distributions to partners (149) (358) Payments on mortgage notes payable (95) (88) Net cash used in financing activities (244) (446) Net increase (decrease) in cash and cash equivalents 10 (206) Cash and cash equivalents at beginning of year 262 468 Cash and cash equivalents at end of year $ 272 $ 262 Supplemental disclosure of cash flow information: Cash paid for interest $ 515 $ 616 Supplemental disclosure of non-cash transactions: Property improvement and replacements included in accounts payable $ -- $ 93 See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Organization and Significant Accounting Policies Organization: Century Properties Fund XVI (the "Partnership" or "Registrant") is a California limited partnership organized in December 1980 to acquire and operate residential apartment properties. The Partnership's general partners are Fox Capital Management Corporation ("FCMC" or the "Managing General Partner") and Fox Realty Investors ("FRI"). As of December 31, 2001, the Partnership operates two residential apartment complexes, one each located in Texas and Florida. The Managing General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2025 unless terminated prior to such date. The directors and officers of the Managing General Partner also serve as executive officers of AIMCO. Principles of Consolidation: The Partnership's consolidated financial statements include the accounts of the Partnership and one wholly owned partnership and one 99% owned partnership. The general partner of the 99% owned partnership can be removed by the Registrant; therefore, this partnership is controlled and consolidated by the Registrant. All significant interpartnership transactions have been eliminated. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Allocation to Partners: Net income and losses (excluding those arising from the occurrence of sales or dispositions) of the Partnership will be allocated 5% to the general partners with the remaining 95% allocated 2% to the general partners and 98% to the limited partners. Distributions of available cash, except as discussed below, are allocated 5% to the general partners with the remaining 95% allocated 2% to the general partners and 98% to the limited partners. In accordance with the Partnership Agreement, any gain from the sale or other disposition of Partnership properties shall be allocated: (i) to the general partners to the extent they are entitled to receive distributions of cash; (ii) 7% to the general partners and 93% to the limited partners, to the extent the general partners have a deficit capital balance; and (iii) to the limited partners. Cash from sales or other disposition, or refinancing and working capital reserves must be distributed in the following order: (i) first, an aggregate amount as discussed above to each Limited Partner which equals the total of their original invested capital contributed plus 8% per year, determined on a cumulative, noncompounded basis, on adjusted invested capital, adjusted as needed, of such Limited Partnership Unit Holder; (ii) second, to the general partners 15% of any additional cash from sales or refinancing and working capital reserve available for distribution, and (iii) the remainder shall be allocated 98% to the limited partners and 2% to the general partners. Upon sale of all properties and termination of the Partnership, the general partners may be required to contribute certain funds to the Partnership in accordance with the Partnership Agreement. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $258,000 at December 31, 2001 that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts. Depreciation: Depreciation is calculated by the straight-line method over the estimated lives of the rental properties and related personal property. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the Managing General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Loan Costs: Loan costs of approximately $319,000 are included in other assets in the accompanying consolidated balance sheet and are being amortized on a straight-line basis over the life of the loans. At December 31, 2001, accumulated amortization is approximately $189,000. Amortization of loan costs is included in interest expense. Investment Properties: Investment properties consist of two apartment complexes and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of these assets. Costs of apartment properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded in the years ended December 31, 2001 or 2000. See "Recent Accounting Pronouncements" below. Fair Value: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments" requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of its financial instruments (except for long term debt) approximate their fair values due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying value. Advertising Costs: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $56,000 and $78,000 for the years ended December 31, 2001 and 2000, respectively, were charged to operating expenses. Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The Managing General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Managing General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Note B - Mortgage Notes Payable The principal terms of mortgage notes payable are as follows:
Principal Monthly Principal Balance At Payment Balance December 31, Including Interest Period Maturity Due At Property 2001 Interest Rate Amortized Date Maturity (in thousands) (in thousands) Ralston Place $ 2,157 $ 17 7.88% 30 years 1/2006 $ 2,016 Woods of Inverness Apartments 4,925 38 7.88% 30 years 1/2006 4,602 $ 7,082 $ 55 $ 6,618
The mortgage notes payable are nonrecourse and are secured by a pledge of the respective apartment properties and by a pledge of revenues from the respective apartment properties. Prepayment penalties are required if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. An affiliate of the Managing General Partner has made available to the Partnership a credit line of up to $150,000 per property owned by the Partnership. The Partnership has no outstanding amounts due under this line of credit. Scheduled principal payments of mortgage notes payable subsequent to December 31, 2001 are as follows (in thousands): 2002 $ 103 2003 111 2004 120 2005 130 2006 6,618 $ 7,082 Note C - Income Taxes Taxable income or loss of the Partnership is reported in the income tax returns of its partners. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Differences between the net income as reported and Federal taxable income result primarily from depreciation over different methods and lives and on differing cost basis. The following is a reconciliation of reported net income and Federal taxable income (in thousands except per unit data): 2001 2000 Net income as reported $ 78 $ 142 Add (deduct): Unearned revenue (41) 31 Depreciation differences 361 359 Miscellaneous (10) (4) Federal taxable income $ 388 $ 528 Federal taxable income per limited partnership unit $ 2.78 $3.76 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): 2001 Net assets as reported $ 765 Land and buildings 926 Accumulated depreciation (4,649) Syndication and distribution costs 8,258 Other 82 Net assets - Federal tax basis $ 5,382 Note D - Transactions with Affiliated Parties The Partnership has no employees and is dependent upon the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid to the Managing General Partner and affiliates during the years ended December 31, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expense) $169 $157 Reimbursement for services of affiliates (included in investment property and general and administrative and operating expenses) 162 188 Affiliates of the Managing General Partner are entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $169,000 and $157,000 for the years ended December 31, 2001 and 2000, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $162,000 and $188,000 for the years ended December 31, 2001 and 2000, respectively. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $18,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 76,903.69 limited partnership units (the "Units") in the Partnership representing 59.16% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO, its affiliates or affiliates of the Managing General Partner. It is possible that AIMCO or its affiliates will acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 59.16% of the outstanding Units, AIMCO is in a position to influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. However, 47,326.68 Units held by Insignia Properties, LP, an affiliate of the Managing General Partner, are required to be voted: (i) against any increase in compensation payable to the Managing General Partner or to affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast by non-tendering unitholders. Except for the foregoing, no other limitations are imposed on AIMCO or its affiliates' ability to influence voting decisions with respect to the Partnership. Note E - Investment Properties and Accumulated Depreciation
Initial Cost To Partnership (in thousands) Costs Buildings Capitalized and Related (Removed) Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) Ralston Place $ 2,157 $ 504 $ 4,702 $ 1,538 Woods of Inverness 4,925 1,292 10,305 (1,262) Total $ 7,082 $1,796 $15,007 $ 276
Gross Amount At Which Carried At December 31, 2001 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years (in thousands) Ralston Place $ 504 $ 6,240 $ 6,744 $ 3,830 06/82 5-30 years Woods of Inverness 905 9,430 10,335 5,824 07/82 5-30 years Total $1,409 $15,670 $17,079 $ 9,654
Reconciliation of Investment Properties and Accumulated Depreciation: Years Ended December 31, 2001 2000 (in thousands) Balance at beginning of year $16,749 $16,054 Property improvements 330 695 Balance at end of year $17,079 $16,749 Accumulated Depreciation Balance at beginning of year $ 8,971 $ 8,342 Additions charged to expense 683 629 Balance at end of year $ 9,654 $ 8,971 The aggregate cost of the investment properties for Federal income tax purposes at December 31, 2001 and 2000, is approximately $18,005,000 and $17,674,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2001 and 2000, is approximately $14,303,000 and $13,981,000, respectively. Note F - Distributions Cash distributions from operations of approximately $149,000 were paid during the year ended December 31, 2001, of which approximately $137,000 was paid to limited partners ($1.05 per limited partnership unit). Cash distributions from operations of approximately $358,000 were paid during the year ended December 31, 2000, of which approximately $333,000 was paid to limited partners ($2.56 per limited partnership unit). Note G - Legal Proceedings In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The Managing General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 8. Changes in and Disagreements with Accountant on Accounting and Financial Disclosures None. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Century Properties Fund XVI (the "Partnership" or the "Registrant") has no officers or directors. Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), manages and controls substantially all of the Partnership's affairs and has general responsibility in all matters affecting its business. The names and ages of, as well as the positions and offices held by, the present executive officers and director of the Managing General Partner are set forth below. There are no family relationships between or among any officers or directors. Name Age Position Patrick J. Foye 44 Executive Vice President and Director Martha L. Long 42 Senior Vice President and Controller Patrick J. Foye has been Executive Vice President and Director of the Managing General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Martha L. Long has been Senior Vice President and Controller of the Managing General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1997, retaining that title until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the Managing General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the Managing General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the Managing General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements. The executive officers and director of the Managing General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under auditing standards generally accepted in the United States. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the Managing General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the Managing General Partner has approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2001 for filing with the Securities and Exchange Commission. The Managing General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were audit services of approximately $37,000 and non-audit services (principally tax-related) of approximately $19,000. Item 10. Executive Compensation No direct form of compensation or remuneration was paid by the Partnership to any officer or director of Fox Capital Management Corporation. However, fees and other payments have been made to the Partnership's Managing General Partner and its affiliates, as described in "Item 12. Certain Relationships and Related Transactions." Item 11. Security Ownership of Certain Beneficial Owners and Management Except as noted below, no person or entity was known by the Registrant to be the beneficial owner of more than 5% of the Limited Partnership Units of the Registrant as of December 31, 2001. Name of Percentage Beneficial Owner Number of Units of Class Insignia Properties, LP (an affiliate of AIMCO) 47,488.68 36.53% AIMCO Properties, LP (an affiliate of AIMCO) 29,215.01 22.47% Fox Capital Management Corp (an affiliate of AIMCO)` 200.00 0.16% Insignia Properties LP and Fox Capital Management Corp. are indirectly ultimately owned by AIMCO. Their business addresses are 55 Beattie Place, Greenville, SC 29602. AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Blvd, Denver, Colorado 80222. No director or officer of the Managing General Partner owns any units. Item 12. Certain Relationships and Related Transactions The Partnership has no employees and is dependent upon the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid to the Managing General Partner and affiliates during the years ended December 31, 2001 and 2000: 2001 2000 (in thousands) Property management fees $169 $157 Reimbursement for services of affiliates 162 188 Affiliates of the Managing General Partner are entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $169,000 and $157,000 for the years ended December 31, 2001 and 2000, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $162,000 and $188,000 for the years ended December 31, 2001 and 2000, respectively. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $18,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 76,903.69 limited partnership units (the "Units") in the Partnership representing 59.16% of the outstanding Units at December 31, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO, its affiliates or affiliates of the Managing General Partner. It is possible that AIMCO or its affiliates will acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 59.16% of the outstanding Units, AIMCO is in a position to influence all such voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. However, 47,326.68 Units held by Insignia Properties, LP, an affiliate of the Managing General Partner, are required to be voted: (i) against any increase in compensation payable to the Managing General Partner or to affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast by non-tendering unitholders. Except for the foregoing, no other limitations are imposed on AIMCO or its affiliates' ability to influence voting decisions with respect to the Partnership. Item 13. Exhibits and Reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K filed during the quarter ended December 31, 2001. None. SIGNATURES In accordance with section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTURY PROPERTIES FUND XVI By: Fox Capital Management Corporation Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Senior Vice President and Controller Date: March 25, 2002 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf by the registrant and in the capacities and on the date indicated. /s/Patrick J. Foye Date: March 25, 2002 Patrick J. Foye Executive Vice President and Director /s/Martha L. Long Date: March 25, 2002 Martha L. Long Senior Vice President and Controller CENTURY PROPERTIES FUND XVI EXHIBIT INDEX Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of October 1, 2000, by and between AIMCO and IPT (incorporated by reference to Exhibit 2.1 of IPT's Current Report or Form 8-K, file No. 1-4179, dated October 1, 2000. (Page 1) 2.5 Master Indemnity Agreement incorporated by reference to Exhibit 2.5 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995. (Page 2) 3.4 Agreement of Limited Partnership incorporated by reference to Exhibit A to the Prospectus of the Registrant dated August 17, 1981 and thereafter supplemented June 25, 1979 and thereafter supplemented, included in the Registrant's Registration Statement on Form S-11 (Reg. No. 2-71473). (Page 3) 10.1 Form of First Mortgage Note dated as of December 29, 1995 from the Registrant to Secore Financial Corporation ("Secore") relating to the refinancing of the Landings and Woods of Inverness incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report of Form 10-KSB for the year ended December 31, 1995. (Page 4) 10.2 Form of First Mortgage Note dated as of December 29, 1995 from the Registrant to Secore relating to the refinancing of the Landings and Woods of Inverness incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report of Form 10-KSB for the year ended December 31, 1995. (Page 4)