Item 1. BUSINESS
Community Investment Partners, L.P. (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, 2005, 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 October 10, 1989, under the Revised Uniform Limited Partnership Act of Missouri. CIP Management, L.P., LLLP, the Managing General Partner, is a Missouri limited liability limited partnership formed on October 10, 1989 as a 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 1990. The Partnership sold 91,820 Units of limited partnership interest for an aggregate price of $2,295,500. After offering expenses of approximately $122,000, the Partnership received approximately $2,173,500 in proceeds available for investment.
The Partnership is no longer making initial portfolio investments, but may continue to make follow-on investments. For information regarding the Partnership's current portfolio investments and purchases and sales during the year, see Item 8 of this Form 10-K.
The information set forth under the captions "Investment Objectives & Policies" and "Regulation" in the Prospectus of the Partnership dated March 12, 1990, 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 investments 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 invests in only a few companies. Therefore, a loss or other problem with a single investment would have a material adverse effect on the Partnership.
Risks may arise due to the 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.
Portfolio companies may require additional funds and there can be no assurance that the Partnership will have sufficient funds from reserves or borrowing to make such follow-on investments which may have a substantial negative impact on a portfolio company in need of additional funds.
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.
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 Investment," "Reliance on Management," "New Business," "No Market for Units" and "Federal Income Tax Considerations") on pages 9 through 14 of the Prospectus of Partnership dated March 12, 1990, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933 on March 12, 1990, 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, subject to the supervision of the Individual General Partners, manages the Partnership's portfolio company investments and, pursuant to a Management Agreement with the Partnership, performs or arranges for affiliates to perform, the management and administrative services for the Partnership and is responsible for managing the Partnership's money- market investments. The Managing General Partner receives no fee under the Management Agreement but is reimbursed by the Partnership for certain expenses.
Item 2.
Item 2. PROPERTIES
The Partnership does not own or lease any physical properties.
Item 3.
Item 3. LEGAL PROCEEDINGS
The Partnership is not a party to any material pending legal proceedings.
Item 4.
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.
PART II
Item 5.
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, 1999, the total number of holders of units is 104. The number of limited partnership units outstanding is 87,820. The number of general partnership units outstanding is 20,000 as of March 15, 1999.
Cash distributions of $7 per unit and $12.50 per unit were made to its Partners during the year ended December 31, 1998.
The information set forth under the captions "Partnership Distributions and Allocations" and "Transferability of Units" in the Prospectus of the Partnership dated March 12, 1990, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933 is incorporated herein by reference.
Item 6.
Item 6. SELECTED FINANCIAL DATA
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
(FISCAL YEAR 1998 VERSUS 1997)
Net income for the year ended December 31, 1998, was $484,256, compared to net income of $269,655 in 1997, an increase of 80%. The increase in net income is attributable to realized gains of $1,237,319 offset by net unrealized losses of $733,306.
Realized gains are due to significant gains recognized in 1998 from the sale of stock in Intermedia Communications of Florida and Innovation Medical Technologies, Inc., see Note 6 to the financial statements. Innovation Medical Technologies, Inc. shares of Class A and B Preferred stock and Intermedia Communications of Florida shares of Common stock were sold resulting in gains of $1,170,602 and $527,207, respectively. The realized gains were offset by a realized loss in Vision Partners, L.P. limited partnership interests in the amount of $460,490. Unrealized losses are due to a decrease in share prices of portfolio investments from the prior year and to a reversal of previous unrealized gains on shares sold.
The partnership made distributions of $7 and $12.50 per unit during 1998 representing amounts of $754,740 and $1,347,750, respectively. Director's fees have been discontinued in 1998 due to the fact that initial investments will no longer be made by the Partnership.
As of December 31, 1998, unrealized losses on investments totaled $65,182. The future income or loss of the Partnership is contingent upon the performance of the portfolio investments.
(FISCAL YEAR 1997 VERSUS 1996)
Net income for the year ended December 31, 1997 was $269,655, compared to net income of $992,123 for the year ended December 31, 1996. This decrease in net income is primarily attributable to lower realized gains on the sale of investments in 1997. See detail of investment sales in Note 6 to the financial statements. In 1997, there was a net unrealized loss on investments of $254,746. This was due to a large unrealized loss recorded for Isolyser Company, Inc. when the share price declined significantly from the prior year, which was partially offset by a large unrealized gain recorded for Intermedia Communications of Florida when the company's share price more than doubled from the prior year. These unrealized gains and losses also were offset by reversals of prior period unrealized gains on stock sold during 1997.
In addition, income derived from dividends and interest increased approximately $44,900 due to dividends declared for the first time that were recorded on Innovation Medical Technologies, Inc. 6% Class A and 6% Class B Preferred Stock. Expenses increased approximately $4,700, or 34% from the prior year due to higher trustee fees.
The Partnership made a distribution of $5 per unit during 1997.
As of December 31, 1997, unrealized gains on investments totaled $668,124. The future income or loss of the Partnership is contingent upon the performance of the portfolio investments.
SUBSEQUENT EVENTS
The Partnership is expected to receive disbursements of $96,750, $48,375, and $48,375 on July 31, 1999, 2000, and 2001 related to the escrow agreement from the liquidation of stock in Innovation Medical Technologies, Inc. dated July 30, 1998. These disbursements are contingent upon any claims against Innovation Medical Technologies, Inc.
LIQUIDITY AND CAPITAL RESOURCES
Total capital for the Partnership as of December 31, 1998, was $525,703. This consisted of $436,053 in Limited Partner capital and $89,650 in General Partner capital.
Net income of $484,256 for 1998 was allocated in the amount of $394,426 to the Limited Partners and in the amount of $89,830 to the General Partners.
At December 31, 1998, the Partnership had $212,383 in cash and cash equivalents.
YEAR 2000 ISSUE
Although the Partnership has no Year 2000 issues that would result from its own information systems, the Partnership has investments in publicly and privately placed securities and loans. The Partnership may be exposed to credit risk to the extent that the related borrowers are materially adversely impacted by the Year 2000 issue.
Item 8.
Item 8. INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
Page ----
Report of Independent Accountants 11
Schedule of Portfolio Investments as of December 31, 1998 and 1997 12
Statements of Financial Condition as of December 31, 1998 and 1997 15
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996. 16
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996. 17
Statements of Changes in Partnership Capital for the Years Ended December 31, 1998, 1997 and 1996. 18
Notes to Financial Statements. 19
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Community Investment Partners, 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, L.P. (the "Partnership") at December 31, 1998 and 1997, and the results of its operations, its cash flows and the changes in its Partnership Capital for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 1998, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
St. Louis, Missouri March 12, 1999
COMMUNITY INVESTMENT PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
Partnership Organization -------------------------
Community Investment Partners, L.P. (the "Partnership") was formed on October 10, 1989, under the Revised Uniform Limited Partnership Act of Missouri. CIP Management, L.P., LLLP, the Managing General Partner, is a Missouri limited liability limited partnership formed on October 10, 1989 as a 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.
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 has sought and will continue to 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, 2005, subject to the right of the Individual General Partners to extend the term for up to two additional two-year periods.
As of December 31, 1992, the Partnership is no longer making initial portfolio investments, but may continue to make follow-on investments.
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 investments 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.
2. ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES
The Partnership Agreement generally provides for the allocation of profits and losses pro rata based on the Partners' capital contributions. Refer to the Partnership Agreement for more detailed information.
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 are 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 are valued at the latest reported sales price on the last business day of the period. If no sale has taken place, the securities are valued at the last bid price. If no bid price has been reported, or if no exchange quotation is available, the securities are 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.
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. All distributions are subject to the sole discretion of the Managing General Partner and the Independent General Partners.
4. PER UNIT INFORMATION
There is no market for the Limited Partnership interests. Per Unit Information is as follows:
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 Partnership may place its General Partners on Boards of Directors of portfolio companies.
The Managing General Partner and the Independent General Partners of the Partnership are also the managing general partner and independent general partners, respectively, of Community Investment Partners II, L.P., a business development company. Additionally, the Managing General Partner is the managing general partner of Community Investment Partners III L.P., LLLP, another business development company.
6. INVESTMENT TRANSACTIONS
Following is a summary of portfolio investment transactions during the years ended December 31, 1998, 1997 and 1996, respectively.
During 1998, there was a two-for-one stock split on Intermedia Communications of Florida common stock. The Partnership's 6,535 remaining shares of common stock were converted into a total of 13,070 shares of common stock.
During 1997, there was a one-for-four reverse stock split on Saztec International, Inc. common stock. The Partnership's 108,400 shares of common stock were converted to 27,100 shares of common stock.
As of December 31, 1995, the Partnership held a $300,000 limited partnership investment in Micro Partners, L.P. During 1996, an additional investment of $256,413 was made in Micro Partners, L.P. Subsequent to this investment, the Micro Partners, L.P. partnership was dissolved and the Partnership received 88,220 shares of common stock in Microtek. Then, Microtek merged with Isolyser Company and the Partnership received 145,563 shares of Isolyser Company stock.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
Item 10.
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 of 1940, 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 operations 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:
Tommy L. Gleason, Jr., 53, has been an Independent General Partner of the Partnership since February 1990. He is also an independent general partner of Community Investment Partners II, L.P., a business development company. Mr. Gleason is the Chairman and Chief Executive Officer of Galaxy Systems Management, Inc., the general Partner of Galaxy Telecom, L.P., which is involved in management of cable television systems located in sixteen states and serving approximately 175,000 subscribers. Mr. Gleason owns 4,000 Units.
E. Stanley Kroenke, 51, has served as an Independent General Partner of the Partnership since February 1990. He is also an independent general partner of Community Investment Partners II, L.P., a business development company. Mr. Kroenke leads a company that is a national investor, developer, and owner of commercial real estate. The company is a developer and owner of numerous shopping centers, office buildings and apartment projects around the country. Mr. Kroenke is co- owner of the St. Louis Rams National Football League franchise. He serves as a member of the board of directors of Wal-Mart Stores, Inc., Bentonville, Arkansas; Central Bancompany, Jefferson City, Missouri; and Boone County National Bank, Columbia, Missouri. He is a trustee of the College of the Ozarks in Point Lookout, Missouri. He also serves on the boards of the Greater St. Louis Area Council Boy Scouts of America and the St. Louis Art Museum. Mr. Kroenke owns 4,000 Units.
CIP Management, L.P., LLLP, (the "Managing General Partner") is the Managing General Partner of Community Investment Partners, L.P. The Managing General Partner is also managing general partner of Community Investment Partners II, L.P. and Community Investment Partners III L.P., LLLP, which are also 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.
The Directors and Officers of CIP Management, Inc. are as follows:
Daniel A. Burkhardt, 51, 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 is the beneficial owner of 2,105 Units.
Ray L. Robbins, Jr., 54, 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 is a beneficial owner of 2,000 Units.
Marilyn A. Gaffney, 40, 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 is the beneficial owner of 200 Units.
Item 11.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Partnership Distributions and Allocations" in the Prospectus of the Partnership dated March 12, 1990, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933, is incorporated herein by reference.
Item 12.
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 Items 1 and 10, is herein incorporated by reference.
As of March 15, 1999, the following 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.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related transactions, described in Item 10, are herein incorporated by reference.
PART IV
Item 14.
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 Certificate and Agreement of Limited Partnership dated as of March 29, 1990.
(4) Form of Unit Certificate.
(10) Management Agreement dated March 28, 1990, between the Partnership and CIP Management, L.P., LLLP
(28) Prospectus of the Partnership dated March 12, 1990, filed with the Securities and Exchange Commission in connection with Registration Statement No. 33-31649 on Form N-2 under the Securities Act of 1933. [FN] Incorporated by reference to Exhibit A of the Prospectus of the Partnership dated March 12, 1990 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 Proxy Statement filed with the Securities Exchange Commission on March 11, 1991.
Incorporated by reference to the Partnership's Registration Statement No. 33-31649 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, 1998.
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.
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 22nd day of March, 1999.
Community Investment Partners, L.P. 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 Daniel A. Burkhardt L.P., LLLP, President, Treasurer and Director of CIP Management, Inc.
/s/ Ray L. Robbins - ------------------------------ Vice President and Director of CIP Ray L. Robbins Management, Inc.
/s/ Tommy L. Gleason, Jr. - ------------------------------ Individual General Partner, Tommy L. Gleason, Jr. Community Investment Partners, L.P.
/s/ E. Stanley Kroenke - ------------------------------ Individual General Partner, E. Stanley Kroenke Community Investment Partners, L.P.