10-Q 1 cip3q.txt COMMUNITY INVEST. PARTNERS III, L.P., LLLP 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 2000 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 incorporation or organization) Identification No.) 12555 Manchester Road St. Louis, Missouri 63131 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (314) 515-2000 ------------------ 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 --- --- 1 COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP INDEX Page Number Part I. FINANCIAL INFORMATION Item 1. Financial Statements Schedule of Portfolio Investments..........................3 Statement of Financial Condition...........................6 Statement of Income........................................7 Statement of Cash Flows ...................................8 Statement of Changes in Partnership Capital................9 Notes to Financial Statements ............................10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................11 Part II. OTHER INFORMATION Item 1. Legal Proceedings.........................................14 Item 6. Exhibits and Reports on Form 8-K..........................14 Signatures................................................15 2 Part I. FINANCIAL INFORMATION Item 1. Financial Statements COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP SCHEDULE OF PORTFOLIO INVESTMENTS AS OF SEPTEMBER 30, 2000 --------------------------------------------------------------------------------------------------------------------

5 Part I. FINANCIAL INFORMATION Item 1. Financial Statements COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENT OF FINANCIAL CONDITION

6 Part I. FINANCIAL INFORMATION Item 1. Financial Statements COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENT OF INCOME (UNAUDITED)

7 Part I. FINANCIAL INFORMATION Item 1. Financial Statements COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENT OF CASH FLOWS (UNAUDITED)

8 Part I. FINANCIAL INFORMATION Item 1. Financial Statements COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL (UNAUDITED)

9 Part I. FINANCIAL INFORMATION Item 1. Financial Statements COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION Community Investment Partners III, L.P., LLLP (CIP III) is a limited liability limited partnership, established July 23, 1997, which 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 total assets in qualifying investments as specified in the Investment Company Act. CIP Management, L.P., LLLP (Management), a limited liability limited partnership, is the Managing General Partner of CIP III. Management is responsible for making all decisions regarding CIP III's investment portfolio. 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. 10 Part I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP MANAGEMENT'S FINANCIAL DISCUSSION RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 2000 VERSUS QUARTER ENDED SEPTEMBER 30, 1999 Net income for the three months ended September 30, 2000 was $162,551, a 55% decrease from net income for the three months ended September 30, 1999 of $358,199. Interest income for the three months ended September 30, 2000 decreased $4,294 (78%) compared to interest income for the three months ended September 30, 1999, due to a decrease in funds held in a money market account. Offering proceeds were originally invested in a money market account until suitable investments could be found. During the second quarter of 2000, all initial investments were completed and the money market account was closed. Realized gains for the three months ended September 30, 2000 were $453,910. The gains were the result of the sale of 4,000 shares of United Therapeutics common stock. There were no investment sales during the third quarter of 1999. The $272,652 unrealized loss for the three months ended September 30, 2000 consisted of the reversal of $421,500 of unrealized gains on the 4,000 shares of UTHR sold, a $38,483 unrealized loss on the 1,833 remaining shares of UTHR, and a $187,331 unrealized gain on Atherogenics, Inc. (AGIX) common stock. AGIX completed an initial public offering on August 9, 2000. The $366,663 unrealized gain for the three months ended September 30, 1999 represented an increase in the share price of UTHR over the June 30, 1999 market price. Total expenses for the three months ended September 30, 2000 were $19,945, a $5,949 (43%) increase over total expenses for the three months ended September 30, 1999. Within total expenses, trustee fees increased 100%, management fees increased 22%, and legal expenses increased 313% over the third quarter of 2000. In 1999, trustee fees were expensed and paid for in the second quarter. Management fees are up due to an increase in total assets, and legal expenses are higher due to costs incurred for closing the Partnership's final initial investments. NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1999 Net income for the nine months ended Setember 30, 2000 was $948,184, compared to net income for the nine months ended September 30, 1999 of $638,783. Interest income decreased $15,225 (92%) due to the use of cash formerly held in a money market account to puchase Partnership investments during early 2000. Realized gains on the sale of investments for the nine months ended September 30, 2000 were $1,733,362, representing the sale of 23,500 shares of UTHR common stock. There were no investment sales during the nine months ended September 30, 1999. Unrealized losses for the nine months ended September 30, 2000 were $747,318, compared to unrealized gains of $662,492 during the nine months ended Spetember 30, 1999. The decrease is due to the conversion of UTHR unrealized gains into realized gains upon the sale of the investment. 11 Part I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Total expenses of $54,323 for the nine months ended September 30, 2000 were 40% greater than total expenses of $38,715 for the nine months ended September 30, 1999. A 50% increase in management fees and a 72% increase in professional expenses led total expenses to increase year over year. The increase in management fees follows the increase in total assets. Per the Partnership Agreement, a quarterly management fee is paid to the general partner based on 1.5% of total assets held at the end of the quarter. Professional expenses are up due to an increase in legal fees. INVESTMENT TRANSACTIONS Following is a summary of portfolio investment transactions during the period ended September 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2000, the partnership's total capital of $1,429,579, consisted of $1,404,690 in limited partner capital and $24,889 in general partner capital. Net income was allocated to the limited partners in the amount of $879,743 and to the general partners in the amount of $68,441. At September 30, 2000, the Partnership had $81,894 in cash and cash equivalents. During the first quarter of 2000, partnership capital accounts became equal to two times the original contributions. As such, the Partnership Agreement requires that a portion of 2000 net income now be allocated 90% to the Limited Partners and 10% to the general partner. In the future, profits will be allocated 90% to the Limited Partners and 10% to the General Partner. 13 Part II. OTHER INFORMATION COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP Item 1: Legal Proceedings The partnership is not a party to any material pending legal proceedings. Item 6: Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K No reports were filed on Form 8-K for the quarter ended September 30, 2000. 14 SIGNATURES Pursuant to the requirements 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. 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, Treasurer and Director November 14, 2000 Daniel A. Burkhardt /s/ Ray L. Robbins, Jr. ------------------------ Vice-President and Director November 14, 2000 Ray L. Robbins, Jr.

COMMUNITY INVESTMENT PARTNERS III LP LLP 10-Q