-----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, VwY9TNcJVs2lyzIvJi1IHn+DHVziNEjU6ZZWYWBxVEGbQS1W4vX3DNHQZJtP49ey ywBOm5pipV1Cb0BOp51Www== 0000711642-99-000322.txt : 19991117 0000711642-99-000322.hdr.sgml : 19991117 ACCESSION NUMBER: 0000711642-99-000322 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PENSION INCOME FUND XXIV CENTRAL INDEX KEY: 0000780590 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942984976 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-15710 FILM NUMBER: 99752714 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 BELLAIRE ST 17TH FLOOR STREET 2: 5665 NORTHSIDE DR NW CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 FORM 10-QSB---QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-15710 CENTURY PENSION INCOME FUND XXIV (Exact name of small business issuer as specified in its charter) California 94-2984976 (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) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) CENTURY PENSION INCOME FUND XXIV BALANCE SHEET (in thousands, except unit data) (Unaudited) September 30, 1999 Assets Cash and cash equivalents $ 9,239 Receivables and deposits 40 Other assets 176 Investments in unconsolidated joint ventures 2,109 $ 11,564 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 4 Due to general partner 610 Distribution payable 8,393 Other liabilities 271 Partners' (Deficit) Capital General partner $ (88) Limited partners (73,341 units issued and outstanding) 2,374 2,286 $ 11,564 See Accompanying Notes to Financial Statements b) CENTURY PENSION INCOME FUND XXIV STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 Revenues: Rental income $ -- $ 199 $ -- $ 1,232 Other income 22 76 85 123 Gain on sale of investment properties -- 3,381 -- 3,381 Total revenues 22 3,656 85 4,736 Expenses: Operating -- 66 -- 228 General and administrative 491 128 678 410 Depreciation -- 81 -- 322 Property taxes -- 22 -- 108 Total expenses 491 297 678 1,068 (Loss) income before equity in income of unconsolidated joint ventures (469) 3,359 (593) 3,668 Equity in income of unconsolidated joint ventures 124 188 149 434 Net (loss) income $ (345) $ 3,547 $ (444) $ 4,102 Net (loss) income allocated to general partner $ (3) $ 168 $ (4) $ 174 Net (loss) income allocated to limited partners (342) 3,379 (440) 3,928 $ (345) $ 3,547 $ (444) $ 4,102 Net (loss) income per limited partnership unit $ (4.66) $ 46.07 $ (6.00) $ 53.56 Distributions per limited partnership unit $113.29 $206.23 $113.29 $213.73 See Accompanying Notes to Financial Statements c) CENTURY PENSION INCOME FUND XXIV STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 73,341 $ -- $36,671 $36,671 Partners' capital at December 31, 1998 73,341 $ -- $11,123 $11,123 Distribution to partners -- (84) (8,309) (8,393) Net loss for the nine months ended September 30, 1999 -- (4) (440) (444) Partners' (deficit) capital at September 30, 1999 73,341 $ (88) $ 2,374 $ 2,286 See Accompanying Notes to Financial Statements d) CENTURY PENSION INCOME FUND XXIV STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1999 1998 Cash flows from operating activities: Net (loss) income $ (444) $ 4,102 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation -- 322 Amortization of lease commissions -- 32 Gain on sale of investment property -- (3,381) Equity in income of unconsolidated joint ventures (149) (434) Change in accounts: Receivables and deposits (40) 162 Other assets 10 4 Accounts payable 1 (4) Accrued property taxes -- 26 Due to general partner 434 -- Other liabilities (3) 288 Net cash (used in) provided by operating activities (191) 1,117 Cash flows from investing activities: Proceeds from sale of investment property -- 16,651 Distribution received from joint venture 5,901 -- Net cash provided by investing activities 5,901 16,651 Cash flows used in financing activities: Distributions paid to partners -- (15,833) Net increase in cash and cash equivalents 5,710 1,935 Cash and cash equivalents at beginning of period 3,529 1,889 Cash and cash equivalents at end of period $ 9,239 $ 3,824 Supplemental disclosure of non-cash financing activity: Distribution payable $ 8,393 $ -- See Accompanying Notes to Financial Statements e) CENTURY PENSION INCOME FUND XXIV NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Century Pension Income Fund XXIV (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Fox Capital Management Corporation (the "Managing General Partner" or "FCMC"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1999. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. NOTE B - TRANSFER OF CONTROL Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Managing General Partner. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. 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. The following transactions with the Managing General Partner and/or its affiliates were incurred during the nine month periods ended September 30, 1999 and 1998: 1999 1998 (in thousands) Partnership management fee $434 $ 93 Reimbursement for services of affiliates 50 90 The Partnership Agreement provides for the payment of a Partnership management fee to the general partner equal to ten percent of cash available for distribution. This management fee is intended to defray some of the expenses related to services provided by the general partner, or an affiliate, but not reimbursed by the Partnership. For the nine months ended September 30, 1999, a fee of approximately $434,000 was accrued in connection with the declared distribution and is included in "Due to general partner" on the balance sheet. For the nine months ended September 30, 1999, a fee of approximately $93,000 was paid. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $50,000 and $90,000 for the nine months ended September 30, 1999 and 1998, respectively. The Partnership Agreement provides for the payment of a subordinated sales interest to the general partner not to exceed the lesser of (i) three percent of the gross sales price of a property or (ii) one-half of the competitive real estate commission, as defined in the Partnership Agreement. The general partner was entitled to this fee in connection with the sale of the Partnership's three investment properties during 1998. Payment cannot be made until the limited partners receive their original invested capital plus a 6% per annum return. Once the limited partners have received their priority return and return of their original investment, the subordinated sales interest can be paid. The Partnership has recognized a deferred asset of approximately $176,000, which is included on the Partnership's balance sheet, until the fee becomes payable. NOTE D - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES The Partnership has investments in two unconsolidated joint ventures as follows: Coral Palm Plaza Joint Venture On January 23, 1987, the Partnership acquired a 33.33% ownership interest in Coral Palm Plaza Joint Venture ("Coral Palm"), a joint venture with Century Pension Income Fund XXIII, a California Limited Partnership ("CPIF XXIII") and an affiliate of FCMC. Also on January 23, 1987, Coral Palm acquired the Coral Palm Plaza, a shopping center located in Coral Springs, Florida. The Partnership's interest in Coral Palm is reported using the equity method of accounting. Summary financial information for Coral Palm is as follows (in thousands): September 30, 1999 Total assets $ 5,319 Total liabilities (255) Total venture's equity $ 5,064 For the Three Months Ended For the Nine Months Ended September 30, September 30, 1999 1998 1999 1998 Total revenues $ 416 $ 315 $ 870 $ 897 Total expenses (170) (225) (603) (657) Net income $ 246 $ 90 $ 267 $ 240 The Partnership did not receive distributions from Coral Palm during either of the nine months ended September 30, 1999 and 1998. For the nine months ended September 30, 1999, the Partnership recognized equity in the income of Coral Palm of approximately $89,000 as compared to equity in the income of Coral Palm of approximately $80,000 for the comparable period in 1998. Minneapolis Business Parks Joint Venture On April 30, 1987, the Partnership acquired a 32% ownership interest in Minneapolis Business Parks Joint Venture ("Minneapolis"), a joint venture with CPIF XXIII. On May 5, 1987, Minneapolis acquired Alpha Business Center located in Bloomington, Minnesota, Plymouth Service Center located in Plymouth, Minnesota, and Westpoint Business Center located in Plymouth, Minnesota. The Partnership's interest in Minneapolis is reported using the equity method of accounting. Summary financial information for Minneapolis is as follows (in thousands): September 30, 1999 Total assets $ 1,029 Total liabilities (13) Total venture's equity $ 1,016 For the Three Months Ended For the Nine Months Ended September 30, September 30, 1999 1998 1999 1998 Total revenues $ 131 $ 825 $ 1,674 $ 2,498 Total expenses -- (543) (1,487) (1,601) Net income $ 131 $ 282 $ 187 $ 897 The Partnership received a distribution of approximately $5,901,000 from Minneapolis during the nine months ended September 30, 1999. There was no distribution during the comparable period in 1998. The Partnership recognized equity in the income of Minneapolis of approximately $60,000 and $354,000 for the nine months ended September 30, 1999 and 1998, respectively. On June 1, 1999, Minneapolis sold Alpha Business Center, Plymouth Service Center, and Westpoint Service Center to an unaffiliated third party for net sales proceeds of approximately $14,202,000 after payment of closing costs. Minneapolis realized a loss of approximately $433,000 on the sale during the second quarter of 1999. The Partnership's share of the loss on the sale is approximately $139,000. NOTE E - SALE OF INVESTMENT PROPERTIES In September 1998, the Partnership sold its three investment properties, Butler Square Shopping Center, Kenilworth Commons Shopping Center, and Plantation Pointe Shopping Center to an unaffiliated third party. The Partnership's net proceeds were approximately $16,651,000 after payment of closing costs. The Partnership realized a gain of approximately $3,381,000 on the sale during the third quarter of 1998. The sale transaction is summarized as follows: (in thousands) Cash proceeds received $ 16,651 Net real estate (a) (13,270) Gain on sale of investment property $ 3,381 (a) Real estate at cost, net of accumulated depreciation of approximately $4,508,000. NOTE F - DISTRIBUTIONS During the nine months ended September 30, 1999, a distribution from operations of approximately $3,906,000 (approximately $3,867,000 to the limited partners, $52.73 per limited partnership unit) and a distribution from sales proceeds of Minneapolis Business Park Joint Venture of approximately $4,487,000 (approximately $4,442,000 to the limited partners, $60.56 per limited partnership unit) was declared. The distribution was paid subsequent to September 30, 1999. During the nine months ended September 30, 1998, a distribution from operations of approximately $833,000 (approximately $825,000 to the limited partners, $11.25 per limited partnership unit) and a distribution from sales proceeds of approximately $15,000,000 (approximately $14,850,000 to the limited partners, $202.48 per limited partnership unit) was paid to the partners. NOTE G - SEGMENT REPORTING Description of the types of products and services from which the reportable segment derives its revenues: For the nine months ended September 30, 1998, the Partnership had one reportable segment: commercial properties. The commercial property segment consisted of three retail shopping centers located in three different states: South Carolina, North Carolina, and Georgia. All of the commercial properties were sold in September 1998. Measurement of segment profit or loss: The Partnership evaluates performance based on net income. The accounting policies of the reportable segments are the same as those of the Partnership as described in Partnership's Annual Report on Form 10-K for the year ended December 31, 1998. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segment consisted of investment properties that offered similar products and services. Although each of the investment properties were managed separately, they have been aggregated into one segment as they provided services with similar types of products and customers. Segment information for the nine months ended September 30, 1999 and 1998, is shown in the following tables. The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. Information for the nine months ended September 30, 1999, is entirely administration-related due to the sale of the commercial properties in 1998. 1999 Commercial Other Totals (in thousands) Other income $ -- $ 85 $ 85 General and administrative expense -- 678 678 Equity in income of joint ventures -- 149 149 Segment loss -- (444) (444) Total assets -- 11,564 11,564 1998 Commercial Other Totals (in thousands) Rental income $ 1,232 $ -- $ 1,232 Other income 9 114 123 Gain on sale of investment properties 3,381 -- 3,381 Depreciation 322 -- 322 General and administrative expense -- 410 410 Equity in income of joint ventures -- 434 434 Segment profit 3,964 138 4,102 Total assets 156 11,689 11,845 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. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint 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 the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). The complaint seeks 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 have 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 ("Stipulation"), settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. The Court has preliminarily approved the Settlement and scheduled a final approval hearing for December 10, 1999. In exchange for a release of all claims, the Stipulation provides that, among other things, an affiliate of the Managing General Partner will make tender offers for all outstanding limited partnership interests in 49 partnerships, including the Registrant, subject to the terms and conditions set forth in the Stipulation, and has agreed to establish a reserve to pay an additional amount in settlement to qualifying class members (the "Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will make an application for attorneys' fees and reimbursement of expenses, to be paid in part by the partnerships and in part from the Settlement Fund. The Managing General Partner does not anticipate that costs associated with this case 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB 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-QSB and the other filings with the Securities and Exchange Commission made by the Partnership from time to time. The discussion of the Partnership'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 Partnership's business and results of operations. 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. On September 1, 1998, the Partnership sold its three wholly-owned investment properties and on June 1, 1999, a joint venture, in which the Partnership is invested, sold its three properties. As a result, the Partnership currently has an interest in one shopping center, Coral Palm Plaza, owned by one unconsolidated joint venture between the Partnership and an affiliated partnership. Results of Operations The Partnership realized a net loss of approximately $444,000 for the nine months ended September 30, 1999, as compared to net income of approximately $4,102,000 for the corresponding period in 1998. The Partnership realized a net loss of approximately $345,000 for the three months ended September 30, 1999, as compared to net income of approximately $3,547,000 for the corresponding period in 1998. The increase in net loss was due to a decrease in total revenues partially offset by a decrease in total expenses. Also contributing to the increase in net loss was a decrease in equity in the Partnership's unconsolidated joint ventures. Revenues and expenses decreased due to the sale of the Partnership's three investment properties in September 1998 and the sale of one of the joint venture's properties in June 1999, resulting in decreases in rental income and expenses. The decrease in equity in income of the unconsolidated joint venture is due to a decrease in the net income of the remaining joint venture for the nine months ended September 30, 1999, as compared to the same period in 1998. The decrease in net income for Coral Palm Plaza Joint Venture for the nine months ended September 30, 1999, is primarily due to a decrease in rental income due to a decline in the physical occupancy at the related property and corresponding bad debt expense and vacancy loss recorded during the period. Also contributing to the decrease in net income is an increase in property tax expense for the nine months ended September 30, 1999, due to the fact that a property tax refund was recorded during the corresponding period of 1998. The decrease in net income for Minneapolis Business Parks Joint Venture ("Minneapolis") for the three and nine months ended September 30, 1999, as compared to the same period of 1998, is primarily attributable to the loss on the sale of the three investment properties during the second quarter of 1999 (see discussion below). General and administrative expenses increased primarily due to the accrual of the Partnership management fee in association with the distribution to the partners during the nine months ended September 30, 1999. Partially offsetting this increase in general and administrative expenses is a decrease in the third party asset management fees as a result of the September 1998, sale of the Partnership's investment properties. Included in general and administrative expenses at September 30, 1999 and 1998, 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. On June 1, 1999, Minneapolis sold Alpha Business Center, Plymouth Service Center, and Westpoint Service Center to an unaffiliated third party for net sales proceeds of approximately $14,202,000 after payment of closing costs. Minneapolis realized a loss of approximately $433,000 on the sale during the second quarter of 1999. The Partnership's share of the loss on the sale is approximately $139,000. In September 1998, the Partnership sold its three investment properties, Butler Square Shopping Center, Kenilworth Commons Shopping Center, and Plantation Pointe Shopping Center to an unaffiliated party. The Partnership's net proceeds were approximately $16,651,000 after payment of closing costs. The Partnership realized a gain of approximately $3,381,000 on the sale during the third quarter of 1998. Liquidity and Capital Resources At September 30, 1999, the Partnership had cash and cash equivalents of approximately $9,239,000 compared to approximately $3,824,000 at September 30, 1998. The increase in cash and cash equivalents for the nine months ended September 30, 1999, from the Partnership's year ended December 31, 1998, is approximately $5,710,000 and is largely due to a distribution received from the joint venture. During the nine months ended September 30, 1999, a distribution from operations of approximately $3,906,000 (approximately $3,867,000 to the limited partners, $52.73 per limited partnership unit) and a distribution from sales proceeds at Minneapolis Business Park Joint Venture of approximately $4,487,000 (approximately $4,442,000 to the limited partners, $60.56 per limited partnership unit) was declared. The distribution was paid subsequent to September 30, 1999. During the nine months ended September 30, 1998, a distribution from operations of approximately $833,000 (approximately $825,000 to the limited partners, $11.25 per limited partnership unit) and a distribution from sales proceeds of approximately $15,000,000 (approximately $14,850,000 to the limited partners, $202.48 per limited partnership unit) was paid to the partners. Year 2000 Compliance General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the Managing General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made, or not completed in time, the Year 2000 issue could have a material impact on the operations of the Partnership. The Managing Agent's plan to resolve Year 2000 issues involves four phases: assessment, remediation, testing, and implementation. To date, the Managing Agent has fully completed its assessment of all the information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phases on both hardware and software systems. Assessments are continuing in regards to embedded systems. The status of each is detailed below. Status of Progress in Becoming Year 2000 Compliant, Including Timetable for Completion of Each Remaining Phase Computer Hardware: During 1997 and 1998, the Managing Agent identified all of the computer systems at risk and formulated a plan to repair or replace each of the affected systems. In August 1998, the main computer system used by the Managing Agent became fully functional. In addition to the main computer system, PC-based network servers, routers and desktop PCs were analyzed for compliance. The Managing Agent has begun to replace each of the non-compliant network connections and desktop PCs and, as of September 30, 1999, had virtually completed this effort. The total cost to the Managing Agent to replace the PC-based network servers, routers and desktop PCs is expected to be approximately $1.5 million of which $1.3 million has been incurred to date. Computer Software: The Managing Agent utilizes a combination of off-the-shelf, commercially available software programs as well as custom-written programs that are designed to fit specific needs. Both of these types of programs were studied, and implementation plans written and executed with the intent of repairing or replacing any non-compliant software programs. In April 1999 the Managing Agent embarked on a data center consolidation project that unifies its core financial systems under its Year 2000 compliant system. The estimated completion date for this project is October 1999. During 1998, the Managing agent began converting the existing property management and rent collection systems to its management properties Year 2000 compliant systems. The estimated additional costs to convert such systems at all properties, is $200,000, and the implementation and testing process was completed in June 1999. The final software area is the office software and server operating systems. The Managing Agent has upgraded all non-compliant office software systems on each PC and has upgraded virtually all of the server operating systems. Operating Equipment: The Managing Agent has operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. In September 1997, the Managing Agent began taking a census and inventory of embedded systems (including those devices that use time to control systems and machines at specific properties, for example elevators, heating, ventilating, and air conditioning systems, security and alarm systems, etc.). The Managing Agent has chosen to focus its attention mainly upon security systems, elevators, heating, ventilating and air conditioning systems, telephone systems and switches, and sprinkler systems. While this area is the most difficult to fully research adequately, management has not yet found any major non-compliance issues that put the Managing Agent at risk financially or operationally. A pre-assessment of the properties by the Managing Agent has indicated virtually no Year 2000 issues. A complete, formal assessment of all the properties by the Managing Agent was virtually completed by September 30, 1999. Any operating equipment that is found non-compliant will be repaired or replaced. The total cost incurred for all properties managed by the Managing Agent as of September 30, 1999 to replace or repair the operating equipment was approximately $75,000. The Managing Agent estimates the cost to replace or repair any remaining operating equipment is approximately $125,000. The Managing Agent continues to have "awareness campaigns" throughout the organization designed to raise awareness and report any possible compliance issues regarding operating equipment within its enterprise. Nature and Level of Importance of Third Parties and Their Exposure to the Year 2000 The Managing Agent has banking relationships with three major financial institutions, all of which have designated their compliance. The Managing Agent has updated data transmission standards with all of the financial institutions. All financial institutions have communicated that they are Year 2000 compliant and accordingly no accounts were required to be moved from the existing financial institutions. The Partnership does not rely heavily on any single vendor for goods and services, and does not have significant suppliers and subcontractors who share information systems (external agent). To date, the Partnership is not aware of any external agent with a Year 2000 compliance issue that would materially impact the Partnership's results of operations, liquidity, or capital resources. However, the Partnership has no means of ensuring that external agents will be Year 2000 compliant. The Managing Agent does not believe that the inability of external agents to complete their Year 2000 remediation process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Costs to Address Year 2000 The total cost of the Year 2000 project to the Managing Agent is estimated at $3.5 million and is being funded from operating cash flows. To date, the Managing Agent has incurred approximately $2.9 million ($0.7 million expenses and $2.2 million capitalized for new systems and equipment) related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $0.5 million is attributable to the purchase of new software and operating equipment, which will be capitalized. The remaining $0.2 million relates to repair of hardware and software and will be expensed as incurred. The Partnership's portion of these costs are not material. Risks Associated with the Year 2000 The Managing Agent believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, the Managing Agent has not yet completed all necessary phases of the Year 2000 program. In the event that the Managing Agent does not complete any additional phases, certain worst case scenarios could occur. The worst case scenarios could include elevators, security and heating, ventilating and air conditioning systems that read incorrect dates and operate with incorrect schedules (e.g., elevators will operate on Monday as if it were Sunday). Although such a change would be annoying to residents, it is not business critical. In addition, disruptions in the economy generally resulting from Year 2000 issues could also adversely affect the Partnership. The Partnership could be subject to litigation for, among other things, computer system failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency Plans Associated with the Year 2000 The Managing Agent has contingency plans for certain critical applications and is working on such plans for others. These contingency plans involve, among other actions, manual workarounds and selecting new relationships for such activities as banking relationships and elevator operating systems. PART II - OTHER INFORMATION ITEM 1. 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. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint 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 the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer of Control"). The complaint seeks 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 have 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 ("Stipulation"), settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. The Court has preliminarily approved the Settlement and scheduled a final approval hearing for December 10, 1999. In exchange for a release of all claims, the Stipulation provides that, among other things, an affiliate of the Managing General Partner will make tender offers for all outstanding limited partnership interests in 49 partnerships, including the Registrant, subject to the terms and conditions set forth in the Stipulation, and has agreed to establish a reserve to pay an additional amount in settlement to qualifying class members (the "Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will make an application for attorneys' fees and reimbursement of expenses, to be paid in part by the partnerships and in part from the Settlement Fund. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K filed in the third quarter of fiscal year 1999. None. SIGNATURES In accordance with the requirements 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 XXIV By: FOX PARTNERS VI 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/Martha L. Long Martha L. Long Senior Vice President and Controller Date: EX-27 2
5 This schedule contains summary financial information extracted from Century Pension Income Fund XXIV 1999 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000780590 CENTURY PENSION INCOME FUND XXIV 1,000 9-MOS DEC-31-1999 SEP-30-1999 9,239 0 0 0 0 0 11,564 0 0 0 0 0 0 0 2,286 11,564 0 85 0 0 678 0 0 0 0 0 0 0 0 (444) (6.00) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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