SUPPLEMENT NO. 1 TO
OFFER TO PURCHASE FOR CASH BY
QUADRANGLE ASSOCIATES III LLC
TO PURCHASE UP TO 964 UNITS OF LIMITED PARTNERSHIP INTEREST IN
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP,
A DELAWARE LIMITED PARTNERSHIP,
FOR $2,450 PER UNIT IN CASH
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OUR OFFER AND YOUR WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MARCH 26, 2004, UNLESS WE EXTEND THE DEADLINE.
- --------------------------------------------------------------------------------
On February 12, 2004, we offered to purchase up to 964 (27.54%) of the
outstanding units of limited partnership interest of Winthrop California
Investors Limited Partnership ("your partnership") for a purchase price of
$2,450 per limited partnership interest upon the terms and subject to the
conditions set forth in our offer to purchase dated February 12, 2004 and in the
related letter of transmittal. Capitalized terms used in this Supplement No. 1
that are not defined shall have the meaning given to such term in our offer to
purchase.
The purpose of this Supplement No. 1 is to (i) clarify certain
information provided and to provide certain additional information that you
might find informative and helpful in making your decision whether to tender
your units and (ii) to advise you that we have extended the expiration date of
our offer so that our offer will now expire at 12:00 midnight, New York time on
March 26, 2004. At the close of business on March 8, 2004, 109.09 units had been
tendered pursuant to the Offer.
In this regard, please note the following:
o As indicated in the Offer to Purchase, your partnership
entered into a Settlement Agreement on October 3, 2003 with,
among others, the general partner of the Development
Partnership pursuant to which your partnership is entitled
to receive a preference payment of $22,000,000 if certain
conditions are met. You should be aware that if you tender
your units in our offer, you will not receive the benefits
of this preference payment. Further, you should note that
your partnership does not presently know when its interest
in the Development Partnership will be liquidated; although
your partnership has agreed that when, and if, it receives
the preference amount it will surrender its interest in the
Development Partnership.
o We are offering to purchase your units for a purchase price
of $2,450 per unit. We will not charge any fees in
connection with such purchase nor will you be responsible
for the fees customarily charged by your partnership's
transfer agent. However, as indicated in the Summary Term
Sheet of our Offer to Purchase, if you hold your units in a
custodial or other beneficiary account (i.e., an IRA
account or a trust account) you may be subject to certain
fees payable to your custodian or trustee.
o As we previously indicated, we are affiliated with the
general partner of your partnership. As set forth in Section
10., pursuant to the terms of your partnership's partnership
agreement, the general partner of your partnership, our
affiliate, is entitled to receive an annual fee of $750,000
from your partnership. Accordingly, a conflict of interest
can arise between continuing your partnership and receiving
such fees, and the liquidation of your partnership and the
termination of such fees.
o If more than 964 units are tendered, we will announce upon
expiration of the offer that the offer is oversubscribed and
will advise you of the pro ration factor at such time as
payment is made for the accepted units. Payment for units
will be made promptly following the expiration date.
o We have attached to this Supplement No. 1 as Schedule II our
most recent financial statements. As indicated in the
financial statements, we have adequate funds to pay
tendering limited partners for units tendered, and our offer
is not conditioned on our obtaining any financing.
o We are a Delaware limited liability company formed in
February 2004. Our sole member is Bulfinch Group LLC, a
Delaware limited liability company that indirectly holds an
approximately 58% interest in your general partner.
o As indicated above, we will promptly pay for all tendered
units accepted for purchase promptly following the
expiration of the offer. Although we do not foresee any
circumstances that will effect our ability to promptly pay
for such units, it is possible that a situation may occur
that will impair our ability to promptly pay such as a suit
brought to enjoin our purchase of units, a banking
moratorium or other circumstances out of our control. In
such an event, without prejudice to our rights under the
offer, we may retain tendered units and those units may only
be withdrawn to the extent permitted in Section 4 of the
Offer to Purchase. In any event, our obligations pursuant to
Rule 14e-1(c) under the Exchange Act, to pay the offer price
in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
o As indicated in Section 14 of the Offer to Purchase, our
offer is subject to a number of conditions. Please note that
if we waive a material condition, our offer will remain open
for at least five business days from the date of such
waiver. Further, any such conditions, other than the receipt
of government or regulatory approval, will either be
satisfied or waived on or prior to the expiration date. You
should note further that to the extent we are required to
make a filing or declaration, the failure to do so will not
relieve us of our obligations to consummate our offer.
However, if we do not receive any requisite government
2
or regulatory approvals to enable us to consummate our
offer, we will have no obligation to accept or make payment
for units.
If you have any questions relating to our offer, please do not hesitate
to call us toll free at (888) 448-5554
QUADRANGLE ASSOCIATES III LLC
March 9, 2004
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Schedule II
QUADRANGLE ASSOCIATES III LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 4, 2004
II-1
QUADRANGLE ASSOCIATES III LLC
(A DEVELOPMENT STAGE COMPANY)
Table of Contents
March 4, 2004
Page
----
INDEPENDENT AUDITORS' REPORT II-3
FINANCIAL STATEMENT
Balance Sheet II-4
Notes to Financial Statement II-5
II-2
Independent Auditors' Report
To the Member
Quadrangle Associates III LLC
We have audited the accompanying balance sheet of Quadrangle Associates III LLC
(a development stage company), (the "Company"), as of March 4, 2004. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Company as of March 4, 2004
in conformity with accounting principles generally accepted in the United States
of America.
/s/ Imowitz Koenig & Co., LLP
New York, New York
March 4, 2004
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QUADRANGLE ASSOCIATES III LLC
(A Development Stage Company)
Balance Sheet
March 4, 2004
ASSETS
Cash $ 25,000
=========
LIABILITIES AND MEMBER'S EQUITY
Liabilities:
Accrued Expenses $ 3,000
Member's Equity $ 2,500,000
Deficit Accumulated During the Development Stage (3,000)
Subscription Receivable (2,475,000)
-------------
TOTAL MEMBER'S EQUITY 22,000
---------
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 25,000
=========
See Notes to Financial Statement.
II-4
QUADRANGLE ASSOCIATES III LLC
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statement
March 4, 2004
Note 1 - ORGANIZATION
Quadrangle Associates III LLC (the "Company") was organized on February
11, 2004. The Company is owned by Bulfinch Group LLC, a Delaware limited
liability company, and managed by WIN Manager Corp., a Delaware corporation,
which is a related party of the Company. The Company was formed to acquire, own
and ultimately dispose of limited partnership interests in Winthrop California
Investors Limited Partnership. As of March 4, 2004 the Company is still in the
development stage as principal operations have not yet commenced.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
Income Taxes
The Company is not subject to Federal, State and Local income taxes;
accordingly, the Company makes no provision for income taxes in its
financial statement. The member is liable for income taxes on its share
of the Company's taxable income.
Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosures of fair values of financial instruments for which
it is practicable to estimate that value. Based on available market
information, the Company estimates that the fair value of its financial
assets and liabilities approximates their carrying value.
Recently Issued Accounting Standards
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities." This interpretation clarifies the
application of existing accounting pronouncements to certain entities
in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional
subordinated financial support from other parties. In December 2003,
the FASB issued a revision to Interpretation No. 46 ("46R") to clarify
some of the provisions of Interpretation No. 46, and to exempt certain
entities from its requirements. The provisions of the interpretation
need to be applied no later than December 31, 2004, except for entities
that are considered to be special- purpose entities which need to be
applied as of December 31, 2003. This interpretation had no effect on
the Company's financial statement.
II-5
QUADRANGLE ASSOCIATES III LLC
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statement
March 4, 2004
In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133
on Derivative Instruments and Hedging Activities." This statement
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The changes in this statement improves
financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. In particular, this
statement (1) clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative
discussed in SFAS No. 133, (2) clarifies when a derivative contains a
financing component, (3) amends the definition of an underlying that is
related to an asset, liability or equity security to conform it to
language used in FASB Interpretation No. 45, and (4) amends certain
other existing pronouncements. Those changes will result in more
consistent reporting of contracts as either derivatives or hybrid
instruments. This statement is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated
after June 30, 2003. The guidance should be applied prospectively. The
provisions of this statement that relate to SFAS No. 133 implementation
issues that have been effective for fiscal quarters that began prior to
June 15, 2003, should continue to be applied in accordance with their
respective effective dates. In addition, certain provisions relating to
forward purchases or sales of when-issued securities or other
securities that do not yet exist, should be applied to existing
contracts as well as new contracts entered into after June 30, 2003.
This statement had no effect on the Company's financial statement.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." The statement improves the accounting for certain financial
instruments that under previous guidance, issuers could account for as
equity. The new statement requires that those instruments be classified
as liabilities in statements of financial position. SFAS No. 150
affects the issuer's accounting for three types of freestanding
financial instruments. One type is mandatorily redeemable shares, which
the issuing company is obligated to buy back in exchange for cash or
other assets. A second type, which includes put options and forward
purchase contracts, involves instruments that do or may require the
issuer to buy back some of its shares in exchange for cash or other
assets. The third type of instruments that are liabilities under this
statement is obligations that can be settled with shares, the monetary
value of which is fixed, tied solely or predominantly to a variable
such as a market index, or varies inversely with the value of the
issuers' shares. SFAS No. 150 does not apply to features embedded in a
financial instrument that is not a derivative in its entirety. In
addition to its requirements for the classification and measurement of
financial instruments in its scope, SFAS No. 150 also requires
disclosures about alternative ways of settling the instruments and the
capital structure of entities, all of whose shares are mandatorily
redeemable. Most of the guidance in SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31,
II-6
QUADRANGLE ASSOCIATES III LLC
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statement
March 4, 2004
2003, and otherwise was effective at the beginning of the first interim
period beginning after June 15, 2003. This statement had no effect on
the Company's financial statement.
Note 3 - SUBSCRIPTION RECEIVABLE
The subscription receivable from the sole member of the Company is due
on demand, accrues interest at the rate for demand loans as set forth in
Internal Revenue Code Section 7872 and is unsecured.
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