-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EGLNbLB2tFQwFQqeg10pey32poOnmukt/GuKfaRtRe7OQ06+0+QVZcZj2GrX93+R F+7R3BiGuSCokXjXtlRd8g== 0000711642-03-000080.txt : 20030328 0000711642-03-000080.hdr.sgml : 20030328 20030328130606 ACCESSION NUMBER: 0000711642-03-000080 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PENSION INCOME FUND XXIII CENTRAL INDEX KEY: 0000764543 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942963120 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14528 FILM NUMBER: 03623937 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR STREET 2: 5665 NORTHSIDE DR NW CITY: DENVER STATE: CO ZIP: 80222 10KSB 1 cpf23.txt CPF23 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-14528 CENTURY PENSION INCOME FUND XXIII (Exact name of registrant as specified in its charter) California 94-2963120 (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: Individual Investor Units and Pension Investor Notes (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 of 1934 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. N/A 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 a specified date within the past 60 days prior to the date of filing. No market for the Individual Investor Units and Pension Investor Notes exists, and, therefore, a market value for such Units or Notes cannot be determined. DOCUMENTS INCORPORATED BY REFERENCE None The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, do not take into account the effects of any changes to the Registrant's business and results of operations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. PART I Item 1. Description of Business Century Pension Income Fund XXIII (the "Registrant" or "Partnership") was organized in June 1984 as a California limited partnership under the Uniform Limited Partnership Act of the California Corporations Code. Fox Partners V, a California general partnership, is the general partner of the Registrant. Fox Capital Management Corporation (the "Managing General Partner" or "FCMC"), a California corporation, and Fox Realty Investors ("FRI") are the general partners of Fox Partners V. The managing general partner of FRI is NPI Equity Investments II, Inc. ("NPI Equity II"). The Managing General Partner and NPI Equity II are subsidiaries of Apartment Investment and Management Company ("AIMCO"), a publicly-traded real estate investment trust. Beginning in July 1985 through December 1986, the Partnership offered $50,000,000 in Individual Investor Units and $65,000,000 in Pension Investor Notes ("Nonrecourse Promissory Notes" or "Promissory Notes"). The Partnership sold Individual Investor Units and Pension Investor Notes of $47,894,500 and $41,939,000, respectively. The net proceeds of this offering were originally used to acquire interests in five business parks and two shopping centers and to fund eight mortgage loans. The principal business of the Partnership is and has been to hold for investment and ultimately sell income-producing properties, and to service and ultimately collect or dispose of mortgage loans on income-producing properties. The Partnership presently owns one business park. The Partnership also owned a 66 2/3% joint venture interest in one other commercial property which was sold in January 2000. One property in which the Partnership held an interest sold in 2001 (see "Item 6. Management's Discussion and Analysis or Plan of Operations" for further details). See "Item 2. Description of Properties" for a description of the Partnership's investment property. As of December 31, 1999, the Partnership adopted the liquidation basis of accounting. The Partnership's Nonrecourse Promissory Notes had a balance of principal and deferred interest of approximately $80,000,000 at the maturity date of February 15, 1999. The Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity and as a result, the Partnership was in default on the Nonrecourse Promissory Notes. The Managing General Partner contacted the indenture trustee for the Nonrecourse Promissory Notes regarding this default. In connection with these conversations, on July 30, 1999 the Partnership entered into a forbearance agreement with the indenture trustee pursuant to which the indenture trustee agreed not to exercise its rights and remedies under the indenture for up to 390 days. In turn, the Partnership agreed to (a) deliver to the indenture trustee for the benefit of the noteholders all of the accumulated cash of the Partnership, less certain reserves and anticipated operating expenses, (b) market all of its properties for sale, (c) deliver all cash proceeds from any sales to the indenture trustee until the notes are fully satisfied and (d) comply with the reporting requirements under the indenture. At the expiration of the forbearance period, the Partnership had not sold all of its properties or satisfied the Nonrecourse Promissory Notes. With the consent of the indenture trustee, the forbearance period extension is being negotiated to accommodate the sale of the remaining asset, which is currently anticipated to occur by the end of the second quarter of 2003. Based on current market conditions, it is unlikely that the sale of the Partnership's remaining asset will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. If the Partnership cannot sell the property for sufficient value, in accordance with the terms of the forbearance agreement, it is likely that the Partnership will lose its property through delivery to an auctioneer. Upon the sale or disposal of the last property, the Partnership is expected to terminate. The Partnership has no employees. Management and administrative services for the Partnership are provided by the Managing General Partner and by agents retained by the Managing General Partner. With respect to the Partnership's commercial properties, property management services are performed by an unaffiliated third party management company. Risk Factors The real estate business in which the Partnership is engaged is highly competitive. There are other commercial properties within the market area of the Partnership's property. The number and quality of competitive properties in such market area could have a material effect on the rental market for the commercial space owned by the Partnership and the rents that may be charged for such commercial space. The Managing General Partner is not a significant factor in the commercial property business. Laws benefiting disabled persons may result in the Partnership's incurrence of unanticipated expenses. Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain Federal requirements related to access and use by disabled persons. This and other Federal, state and local laws may require modifications to the Partnership's property, or restrict renovations of the property. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigations and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although the Managing General Partner believes that the Partnership's property is substantially in compliance with present requirements, the Partnership may incur unanticipated expenses to comply with the ADA and the FHAA. Both the income and expenses of operating the property 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 commercial 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 existing or new legislation or regulations might adversely affect the property owned by the Partnership. The Partnership monitors its property 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. Insurance coverage is becoming more expensive and difficult to obtain. The current market is characterized by rising premium rates, increasing deductibles, and more restrictive coverage language. Recent developments have resulted in significant increases in insurance premiums and have made it more difficult to obtain certain types of insurance. As an example, many insurance carriers are excluding mold-related risks from their policy coverages, or are adding significant restrictions to such coverage. Continued deterioration in insurance market place conditions may have a negative effect on the Partnership's operating results. A further description of the Partnership's business is included in "Item 6. Management's Discussion and Analysis or Plan of Operations". Item 2. Description of Property The following table sets forth the Partnership's investment in its property:
Date of Property Purchase Type of Ownership (1) Use Commerce Plaza 3/86 Fee ownership Business Park Tampa, Florida 83,000 sq. ft.
(1) The Non-Recourse Promissory Notes are secured by a deed of trust on the property owned in fee by the Partnership. Schedule of Property Set forth below for the Partnership's property is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.
Gross Carrying Accumulated Federal Property Value Depreciation (1) Rate Method Tax Basis (in thousands) (in thousands) Commerce Plaza $ 2,820 $ -- 5-39 S/L $ 2,670
(1) As a result of adopting the liquidation basis of accounting, the gross carrying value of the property was adjusted to its net realizable value and will not be depreciated further. See "Item 7. Financial Statements - Note B" for a description of the Partnership's former depreciation policy. Schedule of Property Indebtedness As of December 31, 1999, the Partnership adopted the liquidation basis of accounting. The Partnership's Nonrecourse Promissory Notes had a balance of principal and deferred interest of approximately $80,000,000 at the maturity date of February 15, 1999. The Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity and as a result, the Partnership was in default on the Nonrecourse Promissory Notes. The Managing General Partner contacted the indenture trustee for the Nonrecourse Promissory Notes regarding this default. In connection with these conversations, on July 30, 1999 the Partnership entered into a forbearance agreement with the indenture trustee pursuant to which the indenture trustee agreed not to exercise its rights and remedies under the indenture for up to 390 days. In turn, the Partnership agreed to (a) deliver to the indenture trustee for the benefit of the noteholders all of the accumulated cash of the Partnership, less certain reserves and anticipated operating expenses, (b) market all of its properties for sale, (c) deliver all cash proceeds from any sales to the indenture trustee until the notes are fully satisfied and (d) comply with the reporting requirements under the indenture. At the expiration of the forbearance period, the Partnership had not sold all of its properties or satisfied the Nonrecourse Promissory Notes. With the consent of the indenture trustee, the forbearance period extension is being negotiated to accommodate the sale of the remaining asset, which is currently anticipated to occur by the end of the second quarter of 2003. Based on current market conditions, it is unlikely that the sale of the Partnership's remaining asset will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. If the Partnership cannot sell the property for sufficient value, in accordance with the terms of the forbearance agreement, it is likely that the Partnership will lose its property through delivery to an auctioneer. Upon the sale or disposal of the last property, the Partnership is expected to terminate. Rental Rates and Occupancy Average annual rental rates and occupancy for 2002 and 2001 for the property:
Average Annual Average Rental Rates Occupancy Property 2002 2001 2002 2001 Commerce Plaza $ 8.29/sq.ft. $ 8.37/sq.ft. 69% 70%
As noted under "Item 1. Description of Business", the real estate industry is highly competitive. The property is subject to competition from other similar properties in the area. The Managing General Partner believes that the property is adequately insured. The commercial lease terms vary as set forth below. The property is in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. See the following disclosures regarding tenants that occupy 10% or more of the commercial space. Schedule of Lease Expirations for 2002-2003
Number of Square Annual % of Gross Expirations Feet Rent Annual Rent (in thousands) Commerce Plaza 2003 3 55,712 $ 152 100.0%
The following schedule reflects information on tenants occupying 10% or more of the leasable square feet at December 31, 2002:
Square Expiration Annual Rent Per Footage of Lease Square Foot Commerce Plaza Accounting Services 39,300 01/31/03 $ 7.43 Government Agency 9,523 09/30/03 14.32
Real Estate Taxes and Rates Real estate taxes and rates in 2002 for the property were: 2002 2002 Taxes Rate Property (in thousands) Commerce Plaza $107 2.30% Capital Improvements Commerce Plaza The Partnership made no capital improvements at Commerce Plaza during the year ended December 31, 2002. The Partnership has not budgeted capital improvements for 2003 since it anticipates selling this property in 2003. Item 3. Legal Proceedings In March 1998, several putative unit holders 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 oppose the motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the current trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties could have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect through January 10, 2003. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action described below. The Court has scheduled the hearing on preliminary approval for April 4, 2003 and the hearing on final approval for June 2, 2003. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $ 1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the Managing General Partner has also agreed to make a tender offer to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provides for the limitation of the allowable costs which the Managing General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. If the Court grants preliminary approval of the proposed settlement in March, a notice will be distributed to partners providing detail on the terms of the proposed settlement. 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. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. Before completing briefing on the appeal, the parties stayed further proceedings in the appeal pending the Court's review of the terms of the proposed settlement described above. The Managing General Partner does not anticipate that any costs to the Partnership, 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, 2002, no matter was submitted to a vote of unit holders through the solicitation of proxies or otherwise. PART II Item 5. Market for the Partnership's Equity and Related Partner Matters The Partnership, a publicly-held limited partnership, offered and sold 95,789 Individual Investor Units during its offering period through December 1986. As of December 31, 2002, the number of holders of Individual Investor Units was 2,980. An affiliate of the Managing General Partner owned 108 units or 0.11%, as of December 31, 2002. Affiliates of the Managing General Partner also own 5,511 (8.24%) of the Partnership's 1985 Non-Recourse Promissory Notes and 1,635 (9.64%) of the Partnership's 1986 Non-Recourse Promissory Notes. No public trading market has developed for Individual Investor Units or Pension Investor Units, and it is not anticipated such a market will develop in the future. No distributions were made to the limited partners during the years ended December 31, 2002 or 2001. Item 6. Management's Discussion and Analysis or Plan of Operations This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report. As of December 31, 1999, the Partnership adopted the liquidation basis of accounting. The Partnership's Nonrecourse Promissory Notes had a balance of principal and deferred interest of approximately $80,000,000 at the maturity date of February 15, 1999. The Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity and as a result, the Partnership was in default on the Nonrecourse Promissory Notes. The Managing General Partner contacted the indenture trustee for the Nonrecourse Promissory Notes regarding this default. In connection with these conversations, on July 30, 1999 the Partnership entered into a forbearance agreement with the indenture trustee pursuant to which the indenture trustee agreed not to exercise its rights and remedies under the indenture for up to 390 days. In turn, the Partnership agreed to (a) deliver to the indenture trustee for the benefit of the noteholders all of the accumulated cash of the Partnership, less certain reserves and anticipated operating expenses, (b) market all of its properties for sale, (c) deliver all cash proceeds from any sales to the indenture trustee until the notes are fully satisfied and (d) comply with the reporting requirements under the indenture. At the expiration of the forbearance period, the Partnership had not sold all of its properties or satisfied the Nonrecourse Promissory Notes. With the consent of the indenture trustee, the forbearance period extension is being negotiated to accommodate the sale of the remaining asset, which is currently anticipated to occur by the end of the second quarter of 2003. Based on current market conditions, it is unlikely that the sale of the Partnership's remaining asset will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. If the Partnership cannot sell the property for sufficient value, in accordance with the terms of the forbearance agreement, it is likely that the Partnership will lose its property through delivery to an auctioneer. Upon the sale or disposal of the last property, the Partnership is expected to terminate. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 1999 to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and are based upon the Managing General Partner's estimates as of the date of the consolidated financial statements. During the year ended December 31, 2002, net liabilities increased by approximately $1,152,000. This increase is primarily due to an increase in accrued interest payable on the nonrecourse promissory Notes and a decrease in cash and cash equivalents partially offset by an increase in the debt trustee escrow, a decrease in minority interest in a joint venture and a decrease in the estimated costs during the period of liquidation. During the year ended December 31, 2001, net liabilities increased by approximately $194,000. This increase is primarily due to decreases in investment properties and cash and cash equivalents largely offset by decreases in the principal and accrued interest of the Notes. The decrease in investment properties is due to the sale of a property in October 2001. The decrease in cash and cash equivalents, as well as the decrease in the principal and accrued interest of the Notes, is due to a payment to the note holders in December 2001. Included in liabilities in the statement on net liabilities in liquidation as of December 31, 2002, is approximately $1,073,000 of costs, net of income, that the Managing General Partner estimates will be incurred during the period of liquidation based on the assumption that the liquidation process will be completed by September 30, 2003. Because the success in realization of assets and the settlement of liabilities is based on the Managing General Partner's best estimates, the liquidation period may be shorter or extend beyond the projected period. On October 23, 2001, the Partnership sold Highland Park III to an unaffiliated third party for net sales proceeds of approximately $3,329,000 after the payment of closing costs. The Partnership's share of the net sales proceeds were paid to the indenture trustee to be applied to the amounts due to the noteholders. In light of the maturity of the Notes, no distributions were made to the limited partners for the years ended December 31, 2002 or 2001. In addition to its indirect ownership of the Managing General Partner interest in the Partnership, AIMCO and its affiliates own 108 units in the Partnership representing 0.11% of the outstanding units at December 31, 2002. Affiliates of the Managing General Partner also own 5,511 (8.24%) of the Partnership's 1985 Non-Recourse Promissory Notes and 1,635 (9.64%) of the 1986 Non-Recourse Promissory Notes. The following is a general description of the tax consequences that may result to a limited partner upon the sale of the Partnership's remaining property. Each limited partner should consult with his or her own tax advisor to determine his or her particular tax consequences. The taxable gain and income resulting from the sale of the Partnership's property will pass through to the limited partners, and will likely result in income tax liability to the limited partners without any distribution of cash from the Partnership. Item 7. Financial Statements CENTURY PENSION INCOME FUND XXIII LIST OF CONSOLIDATED FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Consolidated Statement of Net Liabilities in Liquidation - December 31, 2002 Consolidated Statements of Changes in Net Liabilities in Liquidation - Years ended December 31, 2002 and 2001 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Century Pension Income Fund XXIII We have audited the accompanying consolidated statement of net liabilities in liquidation of Century Pension Income Fund XXIII as of December 31, 2002 and the related consolidated statements of changes in net liabilities in liquidation for each of the two years in the period ended December 31, 2002. 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 net liabilities in liquidation of Century Pension Income Fund XXIII at December 31, 2002 and the consolidated changes in net liabilities in liquidation for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States applied on the basis of accounting described in Note A to the financial statements. /s/ERNST & YOUNG LLP Greenville, South Carolina March 20, 2003 CENTURY PENSION INCOME FUND XXIII CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION (in thousands) December 31, 2002 Assets Cash and cash equivalents $ 228 Receivables and deposits 71 Debt trustee escrow 933 Investment property 2,820 4,052 Liabilities Accounts payable 21 Tenant security deposit liabilities 5 Other liabilities 74 Non-recourse promissory notes (Note A) Principal 11,847 Interest payable 16,126 Estimated costs during the period of liquidation (Note A) 1,073 29,146 Net liabilities in liquidation $(25,094) See Accompanying Notes to Consolidated Financial Statements CENTURY PENSION INCOME FUND XXIII CONSOLIDATED STATEMENTS OF CHANGES IN NET LIABILITIES IN LIQUIDATION (in thousands)
For the Years Ended December 31, 2002 2001 Net liabilities in liquidation at beginning of the year $(23,942) $(23,748) Changes in net liabilities in liquidation attributed to: Decrease in cash and cash equivalents (233) (709) Decrease in receivables and deposits (40) (784) Increase (decrease) in debt trustee escrow 290 (77) Decrease in investment properties -- (2,522) (Increase) decrease in accounts payable (11) 59 Decrease in tenant security deposit payable 4 14 Decrease in accrued property taxes -- 50 (Increase) decrease in other liabilities (1) 938 Decrease in nonrecourse promissory notes - principal -- 2,136 (Increase) decrease in non-recourse promissory notes - Interest payable (1,387) 1,045 Decrease (increase) in minority interest in consolidated joint venture 170 (2) Decrease (increase) in estimated costs during the period of liquidation 56 (342) Net liabilities in liquidation at end of the year $(25,094) $(23,942) See Accompanying Notes to Consolidated Financial Statements
CENTURY PENSION INCOME FUND XXIII Notes to Consolidated Financial Statements December 31, 2002 Note A - Basis of Presentation As of December 31, 1999, Century Pension Income Fund XXIII (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the imminent sale of its investment properties. The Partnership's Non-Recourse Promissory Notes are secured by a deed of trust on all properties owned in fee by the Partnership. The Notes were issued in two series. The "1985 Series Notes," in the amount of $33,454,000 bear interest at 12% per annum, and the "1986 Series Notes," in the amount of $8,485,000, bear interest at 10% per annum, except that portions of the interest were deferred, provided the Partnership made minimum interest payments of 5% on the unpaid principal balance. The Nonrecourse Promissory Notes had a balance of principal and deferred interest of approximately $80,000,000 at the maturity date of February 15, 1999. The Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity and as a result, the Partnership was in default on the Nonrecourse Promissory Notes. Fox Capital Management Corporation ("FCMC" or the "Managing General Partner") contacted the indenture trustee for the Nonrecourse Promissory Notes regarding this default. In connection with these conversations, on July 30, 1999 the Partnership entered into a forbearance agreement with the indenture trustee pursuant to which the indenture trustee agreed not to exercise its rights and remedies under the indenture for up to 390 days. In turn, the Partnership agreed to (a) deliver to the indenture trustee for the benefit of the noteholders all of the accumulated cash of the Partnership, less certain reserves and anticipated operating expenses, (b) market all of its properties for sale, (c) deliver all cash proceeds from any sales to the indenture trustee until the notes are fully satisfied and (d) comply with the reporting requirements under the indenture. At the expiration of the forbearance period the Partnership had not sold all of its properties or satisfied the Nonrecourse Promissory Notes. With the consent of the indenture trustee, the forbearance period extension is being negotiated to accommodate the sale of the remaining asset, which is currently anticipated to occur by the end of the second quarter of 2003. During 2000 and 2001, the Partnership sold all but one of its investment properties. The remaining property is actively being marketed for sale. Based on current market conditions, it is unlikely that the sale of the Partnership's remaining asset will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. If the Partnership cannot sell the property for sufficient value, in accordance with the terms of the forbearance agreement, it is likely that the Partnership will lose its property through delivery to an auctioneer. Upon the sale or disposal of the last property, the Partnership is expected to terminate. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 1999, to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the Managing General Partner's estimates as of the date of the consolidated financial statements. Included in liabilities in the statement of net liabilities in liquidation as of December 31, 2002, is approximately $1,073,000 of costs, net of income, that the Managing General Partner estimates will be incurred during the period of liquidation based on the assumption that the liquidation process will be completed by September 30, 2003. Because the success in realization of assets and the settlement of liabilities is based on the Managing General Partner's best estimates, the liquidation period may be shorter or extend beyond the projected period. Note B - Organization and Summary of Significant Accounting Policies Organization: The Partnership is a limited partnership organized in 1984 under the laws of the State of California to hold for investment and ultimately sell income-producing real estate properties, and invest in, service, and ultimately collect or dispose of mortgage loans on income-producing real estate properties. The Partnership currently owns one business park located in Florida. The general partner is Fox Partners V, a California general partnership, whose general partners are FCMC and Fox Realty Investors ("FRI"), a California general partnership. The Managing General Partner and the managing general partner of FRI are subsidiaries of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The directors and officers of the Managing General Partner also serve as executive directors of AIMCO. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2020, unless terminated prior to such date. Principles of Consolidation: The consolidated financial statements include all of the accounts of the Partnership and the joint ventures in which the Partnership had a controlling interest. An affiliated partnership owned the minority interest in this joint venture. All significant inter-entity transactions and balances 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 of Income, Loss, and Distributions: Net income, net loss, and distributions of cash of the Partnership are allocated between the general and limited partners in accordance with the provisions of the partnership agreement. Fair Value of Financial Instruments: Statement of Financial Accounting Standards ("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 amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. It is not practicable to estimate the fair value of the Partnership's Nonrecourse Promissory Notes due to their maturity in February 1999 and the Partnership is unable to obtain additional financing. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, in banks and money market accounts. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. 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 their space and is current on their rental payments. Investment Property: As a result of the Partnership adopting the liquidation basis of accounting, the investment property has been adjusted to its estimated net realizable value at December 31, 2002. Leases: The Partnership leases certain commercial space to tenants under various lease terms. The leases are accounted for as operating leases in accordance with SFAS No. 13, "Accounting for Leases". 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 131, the Partnership has only one reportable segment. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising expense was approximately $2,000 for the year ended December 31, 2001. No such expense was incurred in 2002. Note C - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $91,000 and $149,000 for the years ended December 31, 2002 and 2001, respectively. Beginning in 2001, the Partnership began insuring its property 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 property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the year ended December 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates approximately, $24,000 and $12,000, respectively, for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the Managing General Partner interest in the Partnership, AIMCO and its affiliates own 108 units in the Partnership representing 0.11% of the outstanding units at December 31, 2002. Affiliates of the Managing General Partner also own 5,511 (8.24%) of the Partnership's 1985 Non-Recourse Promissory Notes and 1,635 (9.64%) of the 1986 Non-Recourse Promissory Notes. Note D - Minimum Future Rental Revenues Minimum future rental revenues from operating leases having non-cancelable lease terms in excess of one year at December 31, 2002, are as follows (in thousands): 2003 $ 152 Note E - Income Taxes The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The taxable loss of the Partnership for the year ended December 31, 2002 is approximately $282,000 ($2.89 per limited partnership unit) and the taxable income of the Partnership for the year ended December 31, 2001 is approximately $621,000 ($8.01 per limited partnership unit). The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net liabilities (in thousands) at December 31, 2002: 2002 Net liabilities in liquidation as reported $(25,094) Differences resulted from: Accrued Interest 1,387 Sales commissions and organization expenses 6,554 Original issue discount 764 Depreciation (4,008) Land and building 3,859 Estimated costs in liquidation 1,073 Other 155 Net liabilities - Federal tax basis $ (15,310) Note F - Investment Property and Accumulated Depreciation
Initial Cost To Partnership (in thousands) Buildings Net Cost and Related Capitalized Adjustment to Personal Subsequent to Liquidation Description Encumbrances Land Property Acquisition Basis Property Commerce Plaza (1) $ 1,604 $ 4,188 $ 796 $(3,768)
(1) The Nonrecourse Promissory Notes are secured by a deed of trust on the property owned in fee by the Partnership and by a security interest in the joint venture interest held by the Partnership. As of December 31, 1999, the Partnership adopted the liquidation basis of accounting. The Partnership was unable to satisfy the Nonrecouse Promissory Notes at maturity and as a result, the Partnership was in default on the Nonrecourse Promissory Notes.
Gross Amount At Which Carried At December 31, 2002 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years Property Commerce Plaza $ 1,604 $ 1,216 $ 2,820 (1) 3/86 5-39 yrs
(1) As a result of adopting the liquidation basis of accounting, the gross carrying value of the property was adjusted to its net realizable value and will not be depreciated further. Reconciliation of "Real Estate and Accumulated Depreciation": Years Ended December 31, 2002 2001 (in thousands) Investment Properties Balance at beginning of year $ 2,820 $ 5,342 Property improvements -- 141 Sale of property -- (3,183) Change in estimated net realizable value -- 520 Balance at end of year $ 2,820 $ 2,820 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2002 and 2001 is approximately $6,679,000 and $6,678,000, respectively. Accumulated depreciation for Federal income tax purposes at December 31, 2002 and 2001 is approximately $4,009,000 and $3,756,000, respectively. Note G - Sale of Investment Property On October 23, 2001, the Partnership sold Highland Park III to an unaffiliated third party for net sales proceeds of approximately $3,329,000 after the payment of closing costs. The Partnership's share of the net sales proceeds were paid to the indenture trustee to be applied to the amounts due to the noteholders. Note H - Legal Proceedings In March 1998, several putative unit holders 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 oppose the motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the current trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties could have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect through January 10, 2003. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action described below. The Court has scheduled the hearing on preliminary approval for April 4, 2003 and the hearing on final approval for June 2, 2003. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $ 1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the Managing General Partner has also agreed to make a tender offer to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provides for the limitation of the allowable costs which the Managing General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. If the Court grants preliminary approval of the proposed settlement in March, a notice will be distributed to partners providing detail on the terms of the proposed settlement. 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. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. Before completing briefing on the appeal, the parties stayed further proceedings in the appeal pending the Court's review of the terms of the proposed settlement described above. The Managing General Partner does not anticipate that any costs to the Partnership, 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 Accountants on Accounting and Financial Disclosures None. PART III Item 9. Directors and Executive Officers of the Registrant Century Pension Income Fund XXIII (the "Partnership" or "Registrant"), as well as Fox Partners V ("Fox"), the general partner of the Registrant, have no officers or directors. Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), the managing general partner of Fox, manages and controls substantially all of the Registrant's affairs and has general responsibility and ultimate authority in all matters affecting its business. The names and ages of, as well as the positions held by the executive officers and director of the Managing General Partner are set forth below. No family relationships exist among any of the officers or director of the Managing General Partner. Name Age Position Patrick J. Foye 45 Executive Vice President and Director Paul J. McAuliffe 46 Executive Vice President and Chief Financial Officer Thomas C. Novosel 44 Senior Vice President and Chief Accounting Officer 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, where he is responsible for continuous improvement, acquisitions of partnership securities, consolidation of minority interests, and corporate and other acquisitions. Prior to joining AIMCO, Mr. Foye was a Merger and Acquisitions Partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998. Paul J. McAuliffe has been Executive Vice President and Chief Financial Officer of the Managing General Partner since April 1, 2002. Mr. McAuliffe has served as Executive Vice President of AIMCO since February 1999 and Chief Financial Officer of AIMCO since October 1999. From May 1996 until he joined AIMCO, Mr. McAuliffe was Senior Managing Director of Secured Capital Corp. Thomas C. Novosel has been Senior Vice President and Chief Accounting Officer of the Managing General Partner since April 1, 2002. Mr. Novosel has served as Senior Vice President and Chief Accounting Officer of AIMCO since April 2000. From October 1993 until he joined AIMCO, Mr. Novosel was a partner at Ernst & Young LLP, where he served as the director of real estate advisory services for the southern Ohio Valley area offices but did not work on any assignments related to AIMCO or the Partnership. 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 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 have approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2002 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 2003. Fees for 2002 were annual services of approximately $27,000 and non-audit services (principally tax-related) of approximately $11,000. Item 10. Executive Compensation Neither the director nor officers received any remuneration from the Managing General Partner during the year ended December 31, 2002. Item 11. Security Ownership of Certain Beneficial Owners and Management The Partnership is a limited partnership and has no officers or directors. The Managing General Partner has discretionary control over most of the decisions made by or for the Partnership in accordance with the terms of the Partnership Agreement. The director and officers of the Managing General Partner and its affiliates, as a group, do not own any of the Partnership's voting securities. There is no person known to the Partnership who owns beneficially or of record more than five percent of the voting authorities of the Partnership as of December 31, 2002. As of December 31, 2002, Insignia Properties LP ("IPLP"), an affiliate of the Managing General Partner, owned 108 Individual Investor Units ("Units") or approximately 0.11%. IPLP's business address is 55 Beattie Place, Greenville, SC 29602. Additionally, IPLP is indirectly ultimately owned by AIMCO. Item 12. Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $91,000 and $149,000 for the years ended December 31, 2002 and 2001, respectively. Beginning in 2001, the Partnership began insuring its property 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 property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the year ended December 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates approximately $24,000 and $12,000, respectively, for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the Managing General Partner interest in the Partnership, AIMCO and its affiliates own 108 units in the Partnership representing 0.11% of the outstanding units at December 31, 2002. Affiliates of the Managing General Partner also own 5,511 (8.24%) of the Partnership's 1985 Non-Recourse Promissory Notes and 1,635 (9.64%) of the 1986 Non-Recourse Promissory Notes. PART IV Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) Exhibits: See Exhibit Index attached. (b) Reports on Form 8-K filed during the fourth quarter of calendar year 2002: None. Item 14. Controls and Procedures The principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have, within 90 days of the filing date of this annual report, evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) and have determined that such disclosure controls and procedures are adequate. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the Partnership's internal controls since the date of evaluation. The Partnership does not believe any significant deficiencies or material weaknesses exist in the Partnership's internal controls. Accordingly, no corrective actions have been taken. 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 PENSION INCOME FUND XXIII By: Fox Partners V Its General Partner By: Fox Capital Management Corporation Its Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Thomas C. Novosel Thomas C. Novosel Senior Vice President and Chief Accounting Officer Date: March 28, 2003 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/Patrick J. Foye Executive Vice President Date: March 28, 2003 Patrick J. Foye and Director /s/Thomas C. Novosel Senior Vice President Date: March 28, 2003 Thomas C. Novosel and Chief Accounting Officer CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this annual report on Form 10-KSB of Century Pension Income Fund XXIII; 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 covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 28, 2003 /s/Patrick J. Foye Patrick J. Foye Executive Vice President of Fox Capital Management Corporation, equivalent of the chief executive officer of the Partnership CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this annual report on Form 10-KSB of Century Pension Income Fund XXIII; 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 covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 28, 2003 /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer of Fox Capital Management Corporation, equivalent of the chief financial officer of the Partnership CENTURY PENSION INCOME FUND XXIII Exhibit Index Exhibit Number 2 NPI Stock Purchase Agreement, dated as of August 17, 1995, incorporated by reference to the Partnership's Current Report on Form 8-K dated August 17, 1995. 2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and between AIMCO and IPT; incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated October 1, 1998. 3.4 Agreement of Limited Partnership, incorporated by reference to Exhibit A to the Prospectus of the Partnership dated July 1, 1985 and thereafter supplemented contained in the Partnership's Registration Statement on Form S-11 (Reg. No. 2-96389) 10.1 Purchase and Sale Contract between Registrant and Duke Realty Limited Partnership, an Indiana limited partnership, dated April 20, 1999, incorporated by reference to the Partnership's Current Report on Form 8-K dated June 1, 1999, regarding the sale of Alpha Business Center, Plymouth Service Center and Westpoint Service Center. 10.2 Amendment to Purchase and Sale Contract between Registrant and Duke Realty Limited Partnership and Weeks Realty, L.P. (Assignee), a Georgia limited partnership, dated May 26, 1999, incorporated by reference to the Partnership's Current Report on Form 8-K dated June 1, 1999, regarding the sale of Alpha Business Center, Plymouth Service Center and Westpoint Service Center. 10.3 Purchase and Sale Contract between Registrant and 18011 Mitchell LLC, a California Limited Liability Company, dated September 23, 1999, incorporated by reference to the Partnership's Current Report on Form 8-K dated December 7, 1999, regarding the sale of Medtronics. 10.4 First Amendment to Purchase and Sale Contract between Registrant and 18011 Mitchell LLC, a California Limited Liability Company, dated November 10, 1999, incorporated by reference to the Partnership's Current Report on Form 8-K dated December 7, 1999, regarding the sale of Medtronics. 10.5 Second Amendment to Purchase and Sale Contract between Registrant and 18011 Mitchell LLC, a California Limited Liability Company, dated November 23, 1999, incorporated by reference to the Partnership's Current Report on Form 8-K dated December 7, 1999, regarding the sale of Medtronics. 10.6 Third Amendment to Purchase and Sale Contract between Registrant and 18011 Mitchell LLC, a California Limited Liability Company, dated November 30, 1999, incorporated by reference to the Partnership's Current Report on Form 8-K dated December 7, 1999, regarding the sale of Medtronics. 10.7 Purchase and Sale Contract between Registrant and Woolbright Development, Inc., a Florida Corporation, dated November 30, 1999, regarding the sale of Coral Palm Plaza. 10.8 First Amendment to Purchase and Sale Contract between Registrant and Woolbright Development, Inc., a Florida Corporation, dated December 16, 1999, regarding the sale of Coral Palm Plaza. 10.9 Second Amendment to Purchase and Sale Contract between Registrant, Woolbright Development, Inc., a Florida Corporation, and Woolbright Coral Palm, Ltd., a Florida limited partnership, dated January 19, 2000, regarding the sale of Coral Palm Plaza. 10.10 Purchase and Sale Contract between Registrant and Capreit Acquisition Corporation, a Maryland Corporation, dated February 21, 2000, regarding the sale of The Enclaves. 10.11 Reinstatement and First Amendment to Purchase and Sale Contract between Registrant and Capreit Acquisition Corporation, a Maryland Corporation, dated April 10, 2000, regarding the sale of The Enclaves. 10.12 Second Amendment to Purchase and Sale Contract between Registrant and Capreit Acquisition Corporation, a Maryland Corporation, dated April 19, 2000, regarding the sale of The Enclaves. 10.13 Purchase and Sale Contract between Registrant and Jeffrey C. Ruttenburg, an individual, dated December 28, 1999, regarding the sale of Regency Center. 10.14 Amendment to Purchase and Sale Contract between Registrant and Jeffrey C. Ruttenburg, an individual, dated February 9, 2000, regarding the sale of Regency Center. 10.15 Second Amendment to Purchase and Sale Contract between Registrant and Jeffrey C. Ruttenburg, an individual, dated March 29, 2000, regarding the sale of Regency Center. 10.16 Assignment of Purchase and Sale Contract between Jeffrey C. Ruttenburg, an individual, and Henry, Watz, Gardner, Sellers & Gardner, PLLC, dated April 14, 2000, regarding the sale of Regency Center. 10.17 Purchase and Sale Contract between Registrant and Harkinson Investment Corporation, a Texas Corporation, dated April 14, 2000, regarding the sale of Interrich Plaza. 10.18 Amendment to Purchase and Sale Contract between Registrant and Harkinson Investment Corporation, a Texas Corporation, dated May 26, 2000, regarding the sale of Interrich Plaza. 10.19 Reinstatement and Second Amendment to Purchase and Sale Contract between Registrant and Harkinson Investment Corporation, a Texas Corporation, dated June 13, 2000, regarding the sale of Interrich Plaza. 10.20 Purchase and Sale Contract dated April 26, 2001 between, Century Properties Fund XX, a California limited partnership and Century Pension Income Fund XXIII, a California limited partnership, as sellers, and High Investors, Ltd., as purchaser, regarding the sale of Highland Park III. 10.21 Amendment to Purchase and Sale Contract dated September 24, 2001 between, Century Properties Fund XX, a California limited partnership and Century Pension Income Fund XXIII, a California limited partnership, as sellers, and High Investors, Ltd., as purchaser, regarding the sale of Highland Park III. 16 Letter from the Partnership's former Independent Auditor dated April 27, 1994, incorporated by reference to Exhibit 10 to the Partnership's Current Report on Form 8-K dated April 22, 1994. 16.1 Letter dated December 14, 1999, from the former accountant, incorporated by reference to the Partnership's Current Report on Form 8-K dated December 10, 1999. 99 Certification of Chief Executive Officer and Chief Financial Officer. Exhibit 99 Certification of CEO and CFO 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 on Form 10-KSB of Century Pension Income Fund XXIII (the "Partnership"), for the year ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the Chief Executive Officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the Chief Financial Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (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 results of operations of the Partnership. /s/Patrick J. Foye Name: Patrick J. Foye Date: March 28, 2003 /s/Paul J. McAuliffe Name: Paul J. McAuliffe Date: March 28, 2003 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----