-----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, MDqxQ1LZ4Zxs7xXzDPpsOz+IZIxtBVadmmBanVCIxdEu5jzQMnfpNtZV4ROAbST7 X5SE10DulB3JzkQYFJKfFA== 0001068800-00-000100.txt : 20030429 0001068800-00-000100.hdr.sgml : 20030429 20000327172000 ACCESSION NUMBER: 0001068800-00-000100 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000327 DATE AS OF CHANGE: 20000328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY INVESTMENT PARTNERS III LP LLP CENTRAL INDEX KEY: 0001043161 IRS NUMBER: 431790352 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 814-00147 FILM NUMBER: 00580048 BUSINESS ADDRESS: STREET 1: C/O CIP MANAGEMENT INC STREET 2: 12555 MANCHESTER ROAD CITY: ST LOUIS STATE: MO ZIP: 63131 BUSINESS PHONE: 3145152000 MAIL ADDRESS: STREET 1: C/O CIP MANAGEMENT INC STREET 2: 12555 MANCHESTER ROAD CITY: ST LOUIS STATE: MO ZIP: 63131 10-K405 1 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission file number 000-23037 ----------------- --------- COMMUNITY INVESTMENT PARTNERS III L.P., LLLP - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) MISSOURI 43-1790352 - ------------------------------------------------------------------------------ (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 12555 Manchester Road St. Louis, Missouri 63131 - ------------------------------------------------------------------------------ (Address and principal executive office) (Zip Code) Registrant's telephone number, including area code (314) 515-2000 ------------------ Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this form 10-K. [X] As of March 15, 2000, 48,440 units of limited partnership interest (Units), representing net assets of $2,163,346 were held by non- affiliates. There is no established public market for such Units. 1 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Prospectus of the Registrant dated January 9, 1998, filed with the Securities and Exchange Commission are incorporated by reference in Part I, Part II and Part III hereof. 2 COMMUNITY INVESTMENT PARTNERS III L.P., LLLP TABLE OF CONTENTS
Page ---- PART I Item 1. Business 4 Item 2. Properties 5 Item 3. Legal Proceedings 6 Item 4. Submission of Matters to a Vote of Security Holders 6 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 8. Index to Financial Statements and Supplementary Financial Data 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 26 PART III Item 10. Directors and Executive Officers of the Registrant 27 Item 11. Executive Compensation 28 Item 12. Security Ownership of Certain Beneficial Owners and Management 29 Item 13 Certain Relationships and Related Transactions 29 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 30 SIGNATURES 31 INDEX TO EXHIBITS 32
3 PART I ITEM 1. BUSINESS Community Investment Partners III L.P., LLLP (the "Partnership") was formed to seek long-term capital appreciation by making investments in companies and other special investment situations. The Partnership will not engage in any other business or activity. The Partnership will dissolve on December 31, 2012, subject to the right of the Individual General Partners to extend the term for up to two additional two-year periods. The Partnership has elected to be a business development company under the Investment Company Act of 1940, as amended. As a business development company, the Partnership is required to invest at least 70% of its assets in qualifying investments as specified in the Investment Company Act. The Partnership was formed on July 23, 1997, under the Missouri Uniform Partnership Law and the Missouri Revised Uniform Limited Partnership Law. CIP Management, L.P., LLLP, the Managing General Partner, is a Missouri limited liability limited partnership originally formed on October 10, 1989 as a Missouri limited partnership and registered as a limited liability limited partnership on July 23, 1997. The general partner of CIP Management, L.P., LLLP is CIP Management, Inc., an indirect subsidiary of Edward D. Jones & Co., L.P. The Partnership participated in a public offering of its limited partnership interests in the first quarter of 1998. The Partnership sold 54,340 Units of limited partnership interest and 549 Units of general partnership interest for an aggregate price of $686,111. In the fourth quarter, the Partnership executed a call to each partner for an additional aggregate amount of $686,111. After offering expenses, the Partnership received approximately $1,289,859 in proceeds available for investment. The Managing General Partner is required to have invested the net proceeds of the Partnership's offering (excluding amounts held in reserve) within two years of the date of the capital call. The information set forth under the captions "Investment Objectives and Policies" and "Regulation" in the Prospectus of the Partnership dated January 9, 1998, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933, is incorporated herein by reference. RISKS OF UNIT OWNERSHIP The purchase and ownership of Units involve a number of significant risks and other important factors. The portfolio company investments of the Partnership involve a high degree of business and financial risk that can result in substantial losses. Among these are the risks associated with investment in companies with little operating history, companies operating at a loss or with substantial variations in operating results from period to period, companies with the need for substantial additional capital to support expansion or achieve or maintain a competitive position, companies which may be highly leveraged, companies which may not be diversified and companies in which the Partnership may be the sole or primary lender. The Partnership intends to invest in only a few companies; therefore, a loss or other problem with a single investment would have a material adverse effect on the Partnership. 4 Other risks include the Partnership's ability to find suitable investments for its funds because of competition from other entities having similar investment objectives. Risks may arise due to the significant period of time that may elapse before the Partnership has completed the selection of its portfolio company investments and the significant period of time (typically four to seven years or longer) which will elapse before portfolio company investments have reached a state of maturity such that disposition can be considered. It is unlikely that any significant distributions of the proceeds from the disposition of investments will be made until the later years of the term of the Partnership. Portfolio companies may require additional funds. There can be no assurance that the Partnership will have sufficient funds from reserves or borrowing to make such follow-up investments which may have a substantial negative impact on a portfolio company in need of additional funds or may result in a missed opportunity to increase participation in a successful operation. All decisions with respect to the management of the Partnership, including identifying and making portfolio investments, are made exclusively by the General Partners. Limited Partners must rely on the abilities of the General Partners. The key personnel of the Managing General Partner have considerable prior experience in investment banking and in structuring investments similar to those which the Partnership intends to pursue. In addition, they have prior experience in the operation of Community Investment Partners, L.P. and Community Investment Partners II, L.P., both business development companies with similar investment strategies. Ownership of the Units also entails risk because Limited Partners may not be able to liquidate their investment in the event of an emergency or for any other reason due to the substantial restrictions on transfers contained in the Partnership Agreement and the lack of a market for the resale of Units. The information set forth under the captions "Risk and Other Important Factors" (including the subsections "Risks of Investment," "Size of Partnership," "Ability to Invest Funds," "Time Required to Maturity of Investments; Illiquidity of Investments," "Need for Follow- on Investments," "Use of Leverage," "Unspecified Investments," "Reliance on Management," "New Business," "No Market for Units," "Distributions in Kind" and "Federal Income Tax Considerations") on pages 13 through 17 of the Prospectus of Partnership dated January 9, 1998, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933 on January 9, 1998, is incorporated herein by this reference. (This information has been restated herein pursuant to section 64(b) of the Investment Company Act of 1940). Partners should refer to the Partnership Agreement for more detailed information. EMPLOYEES The Partnership has no employees. The Managing General Partner performs management and administrative services for the operation of the Partnership. The Managing General Partner is paid an annual management fee of 1.5% of total assets, computed quarterly. The Managing General Partner is reimbursed by the Partnership for out of pocket expenses in connection with finding, evaluating, structuring, approving, monitoring and liquidating the Partnership's portfolio investments. ITEM 2. PROPERTIES The Partnership does not own or lease any physical properties. 5 ITEM 3. LEGAL PROCEEDINGS The Partnership is not a party to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the period covered by this report. 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no established public trading market for the Limited Partnership interests. As of March 15, 2000, the total number of holders of units is 111. The number of limited partnership units outstanding is 54,340. The number of general partnership units outstanding is 549 as of March 15, 2000. The information set forth under the captions "Partnership Distributions and Allocations" and "Transferability of Units" in the Prospectus of the Partnership dated January 9, 1998, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933 is incorporated herein by reference. 7 ITEM 6. SELECTED FINANCIAL DATA, STATEMENTS OF FINANCIAL CONDITION:
As of December 31, ---------------------------- 1999 1998 ---------- ---------- Net Assets $2,451,360 $1,240,442 Portfolio Investments at Fair Value 1,777,760 512,003 STATEMENTS OF INCOME: For the Years Ended December 31, ---------------------------- 1999 1998 ---------- --------- Net Loss before Net Realized Gains and Net Unrealized Gains $ (35,232) $(131,780) Net Realized Gains 156,832 - Net Unrealized Gains 1,089,318 - Net Income (Loss) 1,210,918 (131,780) Per Unit of Partnership Interest: Net Asset Value 44.66 22.60 Net Loss before Net Realized Gains and Net Unrealized Gains (.64) (2.40) Net Realized Gains 2.86 - Net Unrealized Gains 19.84 - Net Income (Loss) 22.06 (2.40)
8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (FISCAL YEAR 1999 VERSUS 1998) Net income for the year ended December 31, 1999 was $1,210,918, compared to a $131,780 net loss for the year ended December 31, 1998. The net increase is due to significant increases in investment gains and interest income, as well as a 57% decrease in expenses, as discussed below. The $1,089,318 unrealized gain on investments is composed entirely of an unrealized gain from holding United Therapeutics Corporation. United Therapeutics completed a public offering in May of 1999 and was trading at $46.00 per share on December 31, 1999. The Partnership's cost basis per share is $3.00. Interest income of $21,580 represents interest received on funds held in a money market account. This account was opened in early 1999 to hold proceeds received from capital contributions until they are used to purchase initial investments. The $156,832 net realized gain on sales of investments is composed of a $265,615 gain from the sale of 8,000 shares of United Therapeutics Corporation common stock, offset by a $108,783 loss recorded as a result of writing off the investment in Implemed, Inc. There were no investment gains or losses recorded for the year ended December 31, 1998. Expenses decreased $75,087, or 57% from the year ended December 31, 1999. Within total expenses, management fees increased $14,502, organization costs decreased $82,363, and professional fees decreased $9,033. Independent general partners' fees and other expenses remained constant. Management fees are calculated based on asset value at the end of each quarter and the increased fees properly follow the increase in asset value over 1998. Organization costs are lower because 100% of the costs were written off in 1998 in accordance with AICPA Statement of Position 98-5, "Reporting on the Costs of Start-up Activities". Professional fees were lower because 1998 included some initial filing fees and legal fees related to the formation of the Partnership. (FISCAL YEAR 1998 VERSUS 1997) Net loss for the year ended December 31, 1998, was $131,780. Operating activities did not commence until 1998; only initial contributions of $1,100 were made to establish the Partnership in 1997. The net loss is attributable to $29,060 in professional fees incurred by the Partnership and $19,813 in director and management fees. In addition, $82,363 for organization costs were expensed during 1998. The Partnership participated in a public offering of its limited partnership interests in the first quarter of 1998. The Partnership sold 54,340 Units of limited partnership interest and 549 Units of general partnership interest for an aggregate price of $686,111. In the fourth quarter, the Partnership executed a call to each partner for an additional aggregate amount of $686,111. After offering expenses, the Partnership received approximately $1,289,859 in proceeds available for investment. The Partnership has made several initial investments totaling $512,003 in its first year of operations (Note 6). The Partnership made no distributions during 1998. The future income or loss of the Partnership is contingent upon the performance of the portfolio investments. 9 LIQUIDITY AND CAPITAL RESOURCES Total capital for the Partnership as of December 31, 1999, was $2,451,360. This consisted of $2,426,847 in Limited Partner capital and $24,513 in General Partner capital. Net income of $1,210,918 for 1999 was allocated in the amount of $1,198,809 to the Limited Partners and in the amount of $12,109 to the General Partner. The Partnership is actively reviewing potential portfolio investments. Until the Partnership finishes investing in portfolio investments, it intends to invest its cash balances in a money market account. Due to their short-term nature, such investments provide the Partnership with the liquidity necessary for investments as opportunities arise. At December 31, 1999, the Partnership had $692,986 in cash and cash equivalents. SUBSEQUENT EVENTS None ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK As of December 31, 1999, the Partnership maintained a portion of cash in financial instruments with original maturities less than three months. The General Partner monitors the risk associated with financial insturments. In their opinion, the risk associated with the Partnership's financial instruments at December 31, 1999 will not have a material adverse effect on the financial position or results of operations of the Partnership. 10 Item 8. INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA Page ---- Report of Independent Accountants 12 Schedule of Portfolio Investments as of December 31, 1999 and 1998 13 Statements of Financial Condition as of December 31, 1999 and 1998 16 Statements of Income for the Years Ended December 31, 1999, 1998 and 1997. 18 Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997. 19 Statements of Changes in Partnership Capital for the Years Ended December 31, 1999, 1998 and 1997. 20 Notes to Financial Statements. 21 Financial Statement Schedules: All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 11 REPORT OF INDEPENDENT ACCOUNTANTS REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Community Investment Partners III, L.P. In our opinion, the accompanying Statements of Financial Condition, including the Schedule of Portfolio Investments, and the related Statements of Income, of Cash Flows and of Changes in Partnership Capital present fairly, in all material respects, the financial position of Community Investment Partners III, L.P. (the "Partnership") at December 31, 1999 and 1998, and the results of its operations, its cash flows and the changes in Partnership Capital for each of the periods indicated, in conformity with accounting principles generally accepted in the United States. 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 of these financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audits 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of portfolio investments owned at December 31, 1999, by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Kansas City, Missouri March 3, 2000 12 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP SCHEDULE OF PORTFOLIO INVESTMENTS As of December 31, 1999
- ---------------------------------------------------------------------------------------------- Company Nature of Business Fair Value Investment Date Investment Cost (Note 3) - ---------------------------------------------------------------------------------------------- ATHEROGENICS, INC. Pharmaceutical company focused on the discovery and development of therapeutics for the treatments and prevention of cardiovascular disease. May 11, 1999 33,333 shares of Series C Convertible Preferred Stock $ 99,999 $ 99,999 ENDICOR MEDICAL, INC. Develops devices for the removal of blood clots and occlusive tissue from arteries June 18, 1999 46,801 shares of Series C Preferred Stock 100,000 100,000 INTELLIWORXX, INC. A Florida technology corporation that creates, designs and delivers products worldwide that offer specific solutions for individual customer needs. December 31, 1999 1%, $100,000 Demand Promissory Note Convertible into Common Stock 100,000 100,000 LIPOMED, INC. A diagnostic testing and analytical company that is pioneering new medical applications of nuclear magnetic resonance (NMR) spectroscopy. June 16, 1998 16,667 shares of Series B Convertible Preferred Stock 100,002 100,002 OPTIMARK TECHNOLOGIES, INC. Developed and patented a computer-based method for structuring auction markets that significantly improves liquidity and efficiency, lowering transaction costs in the process. September 23, 1998 10,000 shares of Series B Convertible Participating Preferred Stock 100,000 100,000
13 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.) As of December 31, 1999
- ----------------------------------------------------------------------------------------------- Company Nature of Business Fair Value Investment Date Investment Cost (Note 3) - ----------------------------------------------------------------------------------------------- PROTEIN DELIVERY INC. Drug delivery company specializing in proprietary polymer-based systems for the delivery and stabilization of protein and peptide drugs. April 6, 1998 44,445 shares of Series D Preferred Stock 100,001 100,001 December 23, 1998 4,976 shares of Series E Preferred Stock and Warrant to purchase 2,400 shares of common stock 12,440 12,440 UNITED THERAPEUTICS Develops innovative pharmaceutical CORPORATION and biotechnological therapies for the treatment of life threatening diseases. March 31, 1998 25,333 shares of Common Stock 76,000 1,165,318 -------- ---------- TOTAL INVESTMENTS $688,442 $1,777,760 ======== ========== The accompanying notes are an integral part of these financial statements.
14 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP SCHEDULE OF PORTFOLIO INVESTMENTS As of December 31, 1998
- ---------------------------------------------------------------------------------------------- Company Nature of Business Fair Value Investment Date Investment Cost (Note 3) - ---------------------------------------------------------------------------------------------- IMPLEMED, INC. Develops polymers that are used to coat medical and other devices where infection is a serious problem April 6, 1998 10,000 shares of Series D Convertible Preferred Stock $100,000 $100,000 LIPOMED, INC. A diagnostic testing and analytical company that is pioneering new medical applications of nuclear magnetic resonance (NMR) spectroscopy. June 16, 1998 16,667 shares of Series B Convertible Preferred Stock 100,002 100,002 OPTIMARK TECHNOLOGIES, INC. Developed and patented a computer-based method for structuring auction markets that significantly improves liquidity and efficiency, lowering transaction costs in the process. September 23, 1998 10,000 shares of Series B Convertible Participating Preferred Stock 100,000 100,000 PROTEIN DELIVERY INC. Drug delivery company specializing in proprietary polymer-based systems for the delivery and stabilization of protein and peptide drugs. April 6, 1998 44,445 shares of Series D Preferred Stock 100,001 100,001 December 23, 1998 10% Bridge Note, due 4/1/99 and a Warrant to purchase shares of Common Stock, expiring 12/31/04 12,000 12,000 The accompanying notes are an integral part of these financial statements.
15 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.) As of December 31, 1998
- ---------------------------------------------------------------------------------------------- Company Nature of Business Fair Value Investment Date Investment Cost (Note 3) - ---------------------------------------------------------------------------------------------- UNITED THERAPEUTICS Develops innovative pharmaceutical CORPORATION and biotechnological therapies for the treatment of life threatening diseases. March 31, 1998 100,000 shares of Common Stock 100,000 100,000 -------- -------- TOTAL INVESTMENTS $512,003 $512,003 ======== ======== The accompanying notes are an integral part of these financial statements.
16 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENTS OF FINANCIAL CONDITION
ASSETS ------ December 31, ---------------------------- 1999 1998 ---------- ---------- Investments at Fair Value (Note 3) (cost $688,442 and $512,003 respectively) $1,777,760 $ 512,003 Cash and Cash Equivalents 692,986 742,439 Accrued Interest Receivable 2,000 - ---------- ---------- TOTAL ASSETS $2,472,746 $1,254,442 ========== ========== LIABILITIES AND PARTNERSHIP CAPITAL ----------------------------------- December 31, ---------------------------- 1999 1998 ---------- ---------- Liabilities: Accounts Payable and Accrued Expenses $ 21,386 $ 14,000 ---------- ---------- TOTAL LIABILITIES 21,386 14,000 ---------- ---------- Partnership Capital: Capital - Limited Partners 2,426,847 1,228,038 Capital - General Partners 24,513 12,404 ---------- ---------- TOTAL PARTNERSHIP CAPITAL 2,451,360 1,240,442 ---------- ---------- TOTAL LIABILITIES AND PARTNERSHIP CAPITAL $2,472,746 $1,254,442 ========== ========== The accompanying notes are an integral part of these financial statements.
17 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENTS OF INCOME
For the Years Ended December 31, ---------------------------------------------- 1999 1998 1997 ---------- --------- ------ INCOME ------ Interest Income $ 21,580 $ 119 $ - ---------- --------- ------ TOTAL INCOME 21,580 119 - ---------- --------- ------ EXPENSES -------- Management Fees (Note 5) 22,315 7,813 - Organization Costs (Note 3) - 82,363 - Professional Fees 20,027 29,060 - Independent General Partners' Fees 12,000 12,000 - Other 2,470 663 - ---------- --------- ------ TOTAL EXPENSES 56,812 131,899 - ---------- --------- ------ Net Loss before Net Realized Gains and Unrealized Gains (35,232) (131,780) - Net Realized Gains on Sales of Investments 156,832 - - Unrealized Gains on Investments 1,089,318 - - ---------- --------- ------ NET INCOME (LOSS) $1,210,918 $(131,780) $ - ========== ========= ====== The accompanying notes are an integral part of these financial statements.
18 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENTS OF CASH FLOWS
For the Years Ended December 31, --------------------------------------- 1999 1998 1997 ----------- ---------- ------- CASH FLOWS USED FOR OPERATING ACTIVITIES: Net income (loss) $ 1,210,918 $ (131,780) $ - Adjustments to reconcile net income (loss) to net cash used for operating activities: Purchase of portfolio investments (309,222) (512,003) - Proceeds from sale of portfolio investments 289,615 - - Unrealized gains on portfolio investments (1,089,318) - - Net realized gains on sale/liquidation of portfolio investments (156,832) - - Decrease (increase) in deferred organization costs - 8,532 (8,532) Increase in dividends receivable (2,000) - - Increase in accounts payable and accrued expenses 7,386 14,000 - (Decrease) increase in payable to affiliates - (8,532) 8,532 ----------- ---------- ------- Net cash used for operating activities (49,453) (629,783) - ----------- ---------- ------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Capital Contributions - 1,371,122 1,100 ----------- ---------- ------- Net cash provided by financing activities - 1,371,122 1,100 ----------- ---------- ------- Net increase in cash and cash equivalents - 741,339 1,100 CASH AND CASH EQUIVALENTS: Beginning of year 742,439 1,100 - ----------- ---------- ------- End of year $ 692,986 $ 742,439 $ 1,100 =========== ========== ======= The accompanying notes are an integral part of these financial statements.
19 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL For the Years Ended December 31, 1999, 1998 and 1997
---------------------------------------------- LIMITED GENERAL PARTNERS PARTNERS TOTAL ---------- ---------- ---------- Balance, December 31, 1997 $ 100 $ 1,000 $ 1,100 Contributions 1,358,400 12,722 1,371,122 Net Loss (130,462) (1,318) (131,780) ---------- ---------- ---------- Balance, December 31, 1998 $1,228,038 $ 12,404 $1,240,442 Net Income 1,198,809 12,109 1,210,918 ---------- ---------- ---------- Balance, December 31, 1999 $2,426,847 $ 24,513 $2,451,360 ========== ========== ========== The accompanying notes are an integral part of these financial statements.
20 COMMUNITY INVESTMENT PARTNERS III L.P., LLLP NOTES TO FINANCIAL STATEMENTS 1. GENERAL Partnership Organization ------------------------ Community Investment Partners III L.P., LLLP (the "Partnership") was formed on July 23, 1997, under the Missouri Uniform Partnership Law and the Missouri Revised Uniform Limited Partnership Law. CIP Management, L.P., LLLP, the Managing General Partner, is a Missouri limited liability limited partnership originally formed on October 10, 1989 as a Missouri limited partnership and elected to register as a limited liability limited partnership on July 23, 1997. The general partner of CIP Management, L.P., LLLP is CIP Management, Inc., an indirect subsidiary of Edward D. Jones & Co., L.P. Business -------- The Partnership elected to be a business development company under the Investment Company Act of 1940, as amended. As a business development company, the Partnership is required to invest at least 70% of its assets in qualifying investments as specified in the Investment Company Act. The Managing General Partner is responsible for making the Partnership's investment decisions. The Partnership will seek long-term capital appreciation by making investments in companies and other special investment situations. The Partnership is not permitted to engage in any other business or activity. The Partnership will dissolve on December 31, 2012, subject to the right of the Individual General Partners to extend the term for up to two additional two-year periods. Risk of Ownership ----------------- The purchase and ownership of Partnership Units involve a number of significant risks and other important factors. The portfolio company investments of the Partnership involve a high degree of business and financial risk that can result in substantial losses. Among these are the risks associated with investing in companies with little operating history, companies operating at a loss or with substantial variations in operating results from period to period, companies with the need for substantial additional capital to support expansion or achieve or maintain a competitive position, companies which may be highly leveraged, companies which may not be diversified and companies in which the Partnership may be the sole or primary lender. The Partnership intends to invest in only a few companies; therefore, a loss or other problem with a single investment could have a material adverse effect on the Partnership. 21 2. ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES Generally, profits will be allocated 99% to the Limited Partners and 1% to the General Partners until the Partners' Capital Accounts equal their undistributed Capital Contributions. Thereafter, profits will be allocated 90% to the Limited Partners and 10% to the General Partners in an amount sufficient to cause their Capital Accounts to equal an amount equal to (i) two times their Capital Contributions less (ii) cumulative distributions pursuant to paragraph 4.1 and paragraph 9.2.2 of the Partnership Agreement, at which time profits will be allocated 80% to the Limited Partners and 20% to the General Partners. Generally, losses will be allocated 99% to the Limited Partners and 1% to the General Partners; provided, however, that losses will be allocated 80% to the Limited Partners and 20% to the General Partners to the extent of any prior allocation of profits which were made to the Partners on an 80%/20% basis. Next, losses will be allocated 90% to the Limited Partners and 10% to the General Partners to the extent any prior allocations of profits were made to the Partners on an 90%/10% basis. Thereafter, losses, if any, will be allocated to those Partners who bear the economic risk of loss. Partners should refer to the information set forth under the caption "Partnership Distributions and Allocations" in the Prospectus of the Partnership dated January 9, 1998, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933, for more specific information. 22 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents ------------------------- All short-term investments with original maturities of three months or less are considered to be cash equivalents. Investment Transactions ----------------------- All portfolio investments are carried at cost until significant developments affecting an investment provide a basis for revaluation. Thereafter, portfolio investments will be carried at fair value as obtained from outside sources or at a value determined quarterly by the Managing General Partner under the supervision of the Independent General Partners. Due to the inherent uncertainty of valuation, those estimated values for portfolio investments carried at cost may differ significantly from the values that would have been used had a ready market for the investment existed, and the differences could be material to the financial statements. Investments in securities traded on a national securities exchange will be valued at the latest reported sales price on the last business day of the period. If no sale has taken place, the securities will be valued at the last bid price. If no bid price has been reported, or if no exchange quotation is available, the securities will be valued at the quotation obtained from an outside broker. Investment transactions are recorded on a trade date basis. Income is recorded on an accrual basis. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Organizational Costs -------------------- Total organizational and offering expenses for the Partnership totaled $213,052, of which, $130,689 were paid by an affiliate. The remaining $82,363 of organization costs were expensed in 1998 in accordance with AICPA Statement of Position 98-5, "Reporting on the Costs of Start-up Activities." Income Taxes ------------ Income taxes have not been provided for as the Partnership is a limited partnership and each partner is liable for its own tax payments. Allocation of Partnership profits and losses for tax purposes is based upon taxable income which may differ from net income for financial reporting primarily due to differences between book and tax accounting for portfolio investments. Distributions ------------- When excess cash, if any, becomes available, it is the Partnership's intent to make distributions on an annual basis. All distributions are subject to the sole discretion of the Managing General Partner and the Independent General Partners. No distributions were made during 1998 and 1999. 23 4. PER UNIT INFORMATION There is no market for the Limited Partnership interests. Per Unit Information is as follows:
For the Years Ended December 31 ------------------------------- 1999 1998 ------ ------- Number of unit holders 111 111 ====== ======= Limited partnership units 54,340 54,340 General partnership units 549 549 ------ ------- Total units outstanding 54,889 54,889 ====== ======= Net asset value per unit 44.66 $ 22.60 ====== ======= Net income (loss) per unit 22.06 $ (2.40) ====== =======
5. RELATED PARTY TRANSACTIONS The Partnership is furnished with certain non-reimbursed management and accounting services by affiliates, which are not reflected in the accompanying financial statements. The Managing General Partner performs management and administrative services for the operation of the Partnership. The Managing General Partner is paid an annual management fee of 1.5% of total assets, computed quarterly. This fee was $22,315 and $7,813 for 1999 and 1998, respectively. The Managing General Partner is also reimbursed by the Partnership for out of pocket expenses in connection with finding, evaluating, structuring, approving, monitoring and liquidating the Partnership's portfolio investments. The Partnership may place its General Partners on Boards of Directors of portfolio companies. The Managing General Partner of the Partnership is also the managing general partner of Community Investment Partners, L.P. and Community Investment Partners II, L.P., both business development companies. 24 6. INVESTMENT TRANSACTIONS Following is a summary of portfolio investment transactions for the years ended December 31, 1999 and 1998. For the year ended December 31, 1999 - ------------------------------------
Type of Realized Company Investment Cost Proceeds Gain (Loss) - --------------------- --------------------------- -------- -------- ----------- PURCHASES: Implemed, Inc. Purchase of Series D Convertible Preferred stock $ 33 Purchase of Bridge Note, convertible to Series E Preferred Stock 8,750 AtheroGenics, Inc. Purchase of Series C convertible Preferred Stock 99,999 EndiCOR Purchase of Series C Medical, Inc. Preferred Stock 100,000 Intelliworxx, Inc. Purchase of 1% Demand Promissory Note 100,000 Protein Delivery, Inc. Conversion of Bridge Note and Accrued Interest to Series E Preferred Stock 440 -------- TOTAL PURCHASES $309,222 ========
During the quarter ended June 30, 1999, the $12,000 Bridge Note formerly held by the Partnership, along with $440 of accrued interest receivable, was automatically converted to 4,976 shares of Series E Preferred stock by the Issuer.
SALES: Implemed, Inc. Write off Series D Convertible Preferred Stock $100,033 $ - $(100,033) Write off Bridge Note 8,750 - (8,750) United Therapeutics Sold 8,000 shares of common stock 24,000 289,615 265,615 -------- -------- --------- TOTAL SALES: $132,783 $289,615 $ 156,832 ======== ======== =========
25 For the year ended December 31, 1998 - ------------------------------------
Type of Realized Company Investment Cost Proceeds Gain (Loss) - -------------------- ----------------------------- -------- -------- ----------- PURCHASES: United Therapeutics Corporation Common Stock $100,000 Implemed, Inc. Series D Convertible Preferred Stock 100,000 Protein Delivery Inc. Series D Preferred Stock 100,001 10% Bridge Note, due 4/1/99 and One Warrant 12,000 LipoMed, Inc. Series B Convertible Preferred stock 100,002 OptiMark Technologies, Inc. Series B Convertible Participating Preferred stock 100,000 -------- TOTAL PURCHASES $512,003 ========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None 26 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There are two Independent General Partners and one Managing General Partner of the Partnership. These Independent General Partners and the Managing General Partner are responsible for the management and administration of the Partnership. The General Partners are "interested persons" of the Partnership as defined by the Investment Company Act, but the Partnership has obtained an exemptive order from the Securities and Exchange Commission permitting them to be considered disinterested persons. The Independent General Partners provide overall guidance and supervision with respect to the operation of the Partnership and perform the various duties imposed on the directors of a business development company by the Investment Company Act. In addition to general fiduciary duties, the Independent General Partners supervise the management and underwriting arrangement of the Partnership, the custody arrangement with respect to portfolio securities, the selection of accountants, fidelity bonding and transactions with affiliates. Specific Information regarding the Independent General Partners: Thomas A. Hughes, 56, is the Assistant Vice President, Associate General Counsel and Manager-Legal of The Detroit Edison Company, the utility subsidiary of DTE Energy Company. He also serves as the Associate General Counsel of DTE Energy Company. Headquartered in Detroit, Michigan, Detroit Edison is Michigan's largest electric utility serving two million customers in Southeastern Michigan. Prior to joining Detroit Edison in 1978, Mr. Hughes served as General Counsel of the Missouri Public Service Commission. Mr. Hughes has served as a Trustee of the Detroit Metropolitan Bar Association Foundation, and as a member of the Michigan State Bar Association Administrative Law Section Council and is currently serving as a member of the Board of Directors of the Michigan Chapter of the American Corporate Counsel Association. Mr. Hughes does not own any units. Ralph G. Kelly, 42, joined Charter Communications, Inc. in 1993 as Vice President -- Finance, a position he held until early 1994, when he became Chief Financial Officer of CableMaxx, Inc., a wireless cable television operator. Mr. Kelly returned as Senior Vice President -- Treasurer of Charter Communications, Inc. in February 1996, and has responsibility for treasury operations, investor relations and financial reporting. Mr. Kelly has worked in the cable industry since 1984 when he joined Cencom Cable Associates, Inc. as Controller. Mr. Kelly was promoted to Treasurer of Cencom Cable Associates, Inc. in 1989 and was responsible for treasury management, loan compliance, budget administration, supervision of internal audit and SEC reporting. Mr. Kelly is a Certified Public Accountant and was in the audit division of Arthur Andersen LLC from 1979 to 1984. Mr. Kelly owns 100 Units. CIP Management, L.P., LLLP (the "Managing General Partner") is the Managing General Partner of Community Investment Partners III L.P., LLLP. The Managing General Partner is also managing general partner of Community Investment Partners, L.P. and Community Investment Partners II, L.P., both business development companies. The General Partners of the Managing General Partner are CIP Management, Inc., a Missouri corporation and a wholly-owned subsidiary of Edward D. Jones & Co., L.P., and Daniel A. Burkhardt. 27 The Directors and Officers of CIP Management's, Inc. are as follows: Daniel A. Burkhardt, 52, President, Treasurer and Director of CIP Management, Inc. since October, 1989 and general partner of CIP Management, L.P., LLLP since February 1990. He is a general partner of The Jones Financial Companies, L.L.L.P., the parent company of Edward D. Jones & Co., L.P., where he has specialized in investment banking and structuring investments since 1980. He is also a director of St. Joseph Light & Power Co. and SEMCO Energy, Inc. Mr. Burkhardt currently owns 2,000 Units. Ray A. Robbins, Jr., 55, Vice President and Director of CIP Management, Inc. since October 1989. He is a general partner of The Jones Financial Companies, L.L.L.P., the parent company of Edward D. Jones & Co., L.P., where he has specialized in securities analysis since 1984, and where he was responsible for municipal bond transactions from 1975 to 1983. Mr. Robbins is Co-Chairman of the Edward D. Jones & Co., L.P. Investment Policy Committee. Mr. Robbins currently owns 1,000 Units. Marilyn A. Gaffney, 41, Secretary of CIP Management, Inc. since October, 1989. She is a Limited Partner of The Jones Financial Companies, L.L.L.P., the parent company of Edward D. Jones & Co., L.P., where she has been a senior investment adviser in investment banking since 1980. Ms. Gaffney currently owns 100 Units. ITEM 11. EXECUTIVE COMPENSATION Each Independent General Partner receives an annual fee of $6,000 from the Partnership, a fee of $1,000 for each meeting attended, and all out-of-pocket expenses relating to attendance at meetings of the Individual General Partners. Independent General Partner fees totaled $12,000 during 1999 and 1998. The information set forth under the caption "Partnership Distributions and Allocations" in the Prospectus of the Partnership dated January 9, 1998, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933, is incorporated herein by reference. 28 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information concerning the security ownership of the General Partner, Independent General Partners and the Officers and Directors of CIP Management, Inc., described in Part I, Item 1 and Part III, Item 10, is herein incorporated by reference. The Managing General Partner has a 1% General Partner (549 units) interest and a 4.97% (2,700 units) Limited Partner interest. As of March 15, 2000, no parties are known by the Partnership to be the beneficial owners of more than 5% of the Units. The Partnership is not aware of any arrangement which may, at a subsequent date, result in a change of control of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain relationships and related transactions, described in Part III, Items 10 and 12, are herein incorporated by reference. 29 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a. The following documents are filed as part of this report: 1. Financial Statements: --------------------- See Index to Financial Statements and Supplementary Data contained in Item 8 of this Form 10-K. 2. Financial Statement Schedules: ------------------------------ All financial statement schedules are omitted because they are not applicable, or the required information is included in the balance sheet or notes thereto. 3. Exhibits: --------- (3) Amended and Restated Agreement of Limited Partnership dated as of July 23, 1997. (4) Form of Unit Certificate. (10) Management Agreement dated January 9, 1998, between the Partnership and CIP Management, L.P., LLLP. (28) Prospectus of the Partnership dated January 9, 1998, filed with the Securities and Exchange Commission in connection with Registration Statement No. 333-34363 on Form N-2 under the Securities Act of 1933. [FN] Incorporated by reference to Exhibit A of the Prospectus of the Partnership dated January 9, 1998 filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933. Incorporated by reference to the Partnership's Registration Statement No. 333-34363 on Form N-2 under the Securities Act of 1933. b. No reports on Form 8-K were filed during the quarter ended December 31, 1999. c. Exhibits filed as part of this report are included in Item (14) (a)(3) above. d. All financial statement schedules are omitted because they are not applicable, or the required information is included in the balance sheet or notes thereto. 30 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 24th day of March, 2000. Community Investment Partners III L.P., LLLP By: CIP Management, L.P., LLLP, its Managing General Partner By: CIP Management, Inc., its Managing General Partner /s/ Daniel A. Burkhardt, President ------------------------------------- By: Daniel A. Burkhardt, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. /s/ Daniel A. Burkhardt General Partner of CIP Management - ------------------------------- L.P., LLLP, President, Treasurer and Daniel A. Burkhardt Director of CIP Management, Inc. /s/ Ray L. Robbins Vice President and Director of CIP - ------------------------------- Management, Inc. Ray L. Robbins /s/ Thomas A. Hughes Individual General Partner, - ------------------------------- Community Investment Partners III L.P., LLLP Thomas A. Hughes /s/ Ralph G. Kelly Individual General Partner, - ------------------------------- Community Investment Partners III L.P., LLLP Ralph G. Kelly 31 INDEX TO EXHIBITS Exhibit Number Description of Exhibit Page - ------ ---------------------- ---- (3) Amended and Restated Certificate and Agreement of Limited Liability Limited Partnership dated as of January 9, 1998 (4) Form of Unit Certificate (10) Management Agreement dated January 9, 1998, between the Partnership and CIP Management, L.P., LLLP (28) Prospectus of the Partnership dated January 9, 1998, filed with the Securities and Exchange Commission in connection with Registration Statement No. 333-34363 on Form N-2 under the Securities Act of 1933 [FN] - ---------------- Incorporated by reference 32 EX-27 2 FINANCIAL DATA SCHEDULE
6 This schedule contains summary financial information extracted from the financial statements for Community Investment Partners III, L.P., L.L.L.P. for the year ended December 31, 1999 and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 688,442 1,777,760 2,000 692,986 0 2,472,746 0 0 21,386 21,386 0 0 54,889 54,889 0 0 0 0 0 2,451,360 0 21,580 0 0 0 156,832 1,089,318 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 56,812 1,845,901 22.60 22.06 0 0 0 0 44.66 0
-----END PRIVACY-ENHANCED MESSAGE-----