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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12555 Manchester Road
St. Louis, Missouri 63131
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(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
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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
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
TABLE OF CONTENTS
<CAPTION>
Page
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<S> <C>
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
</TABLE>
3
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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
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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
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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
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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
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ITEM 6. SELECTED FINANCIAL DATA,
<TABLE>
STATEMENTS OF FINANCIAL CONDITION:
<CAPTION>
As of
December 31,
----------------------------
1999 1998
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<S> <C> <C>
Net Assets $2,451,360 $1,240,442
Portfolio Investments at Fair Value 1,777,760 512,003
<CAPTION>
STATEMENTS OF INCOME:
For the Years
Ended December 31,
----------------------------
1999 1998
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<S> <C> <C>
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)
</TABLE>
8
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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
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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
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Item 8. INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY
FINANCIAL DATA
Page
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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
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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
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS
As of December 31, 1999
<CAPTION>
- ----------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Investment Date Investment Cost (Note 3)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
13
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
As of December 31, 1999
<CAPTION>
- -----------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Investment Date Investment Cost (Note 3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
14
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS
As of December 31, 1998
<CAPTION>
- ----------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Investment Date Investment Cost (Note 3)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
15
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
As of December 31, 1998
<CAPTION>
- ----------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Investment Date Investment Cost (Note 3)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
16
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
ASSETS
------
December 31,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
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
========== ==========
<CAPTION>
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
December 31,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
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.
</TABLE>
17
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENTS OF INCOME
<CAPTION>
For the Years Ended
December 31,
----------------------------------------------
1999 1998 1997
---------- --------- ------
INCOME
------
<S> <C> <C> <C>
Interest Income $ 21,580 $ 119 $ -
---------- --------- ------
TOTAL INCOME 21,580 119 -
---------- --------- ------
<CAPTION>
EXPENSES
--------
<S> <C> <C> <C>
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.
</TABLE>
18
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended December 31,
---------------------------------------
1999 1998 1997
----------- ---------- -------
<S> <C> <C> <C>
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.
</TABLE>
19
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<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
----------------------------------------------
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
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.
</TABLE>
20
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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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
4. PER UNIT INFORMATION
There is no market for the Limited Partnership interests. Per Unit
Information is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31
-------------------------------
1999 1998
------ -------
<S> <C> <C>
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)
====== =======
</TABLE>
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
<PAGE>
<PAGE>
6. INVESTMENT TRANSACTIONS
Following is a summary of portfolio investment transactions for
the years ended December 31, 1999 and 1998.
<TABLE>
For the year ended December 31, 1999
- ------------------------------------
<CAPTION>
Type of Realized
Company Investment Cost Proceeds Gain (Loss)
- --------------------- --------------------------- -------- -------- -----------
PURCHASES:
<S> <C> <C> <C> <C>
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
========
</TABLE>
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.
<TABLE>
<CAPTION>
SALES:
<S> <C> <C> <C> <C>
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
======== ======== =========
</TABLE>
25
<PAGE>
<PAGE>
<TABLE>
For the year ended December 31, 1998
- ------------------------------------
<CAPTION>
Type of Realized
Company Investment Cost Proceeds Gain (Loss)
- -------------------- ----------------------------- -------- -------- -----------
PURCHASES:
<S> <C> <C> <C> <C>
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
========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None
26
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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.<F**>
(4) Form of Unit Certificate.<F*>
(10) Management Agreement dated January 9, 1998,
between the Partnership and CIP Management,
L.P., LLLP.<F**>
(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.<F**>
[FN]
<F*> 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.
<F**> 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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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 <F*>
(4) Form of Unit Certificate <F*>
(10) Management Agreement dated January 9, 1998,
between the Partnership and CIP Management,
L.P., LLLP <F*>
(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 <F*>
[FN]
- ----------------
<F*>Incorporated by reference
32
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 688,442
<INVESTMENTS-AT-VALUE> 1,777,760
<RECEIVABLES> 2,000
<ASSETS-OTHER> 692,986
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,472,746
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,386
<TOTAL-LIABILITIES> 21,386
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 54,889
<SHARES-COMMON-PRIOR> 54,889
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,451,360
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,580
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 156,832
<APPREC-INCREASE-CURRENT> 1,089,318
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 56,812
<AVERAGE-NET-ASSETS> 1,845,901
<PER-SHARE-NAV-BEGIN> 22.60
<PER-SHARE-NII> 22.06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 44.66
<EXPENSE-RATIO> 0
</TABLE>
