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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to _______

Commission File Number:  0-23432

RIDGEWOOD ELECTRIC POWER TRUST III
 (Exact Name of Registrant as Specified in Its Charter)

Delaware
 
22-3264565
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer Identification Number)
 
 
500 Delaware Avenue, #1112, Wilmington, DE 19801
 
 
(Address of Principal Executive Offices, including Zip Code)
 

 
(302) 888-7444
 
 
(Registrant’s telephone number, including area code)
 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
None
 
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
Investor Shares of Beneficial Interest   
 
 
(Title of Class)
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o    No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o    No þ

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 þ      No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ    No o
 
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. þ
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer   o  
Accelerated filer  o
   Non-accelerated filer   o
Smaller reporting company    þ
   
   (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o    No  þ
 
There is no market for the Investor Shares. The number of Investor Shares outstanding at December 31, 2013 was 391.8444.
 


FORM 10-K
 

PART I
 
   
Page
     
1
3
3
3
3
3
     
PART II
     
3
4
4
5
5
5
5
6
     
PART III  
     
6
8
8
8
9
     
PART IV  
     
9
     
11
 
 
Forward-Looking Statements

Certain statements discussed in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements generally relate to the Trust’s plans, objectives and expectations for future events and include statements about the Trust’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. These statements are based upon management’s expectations, opinions and estimates as of the date they are made. Although management believes that the expectations, opinions and estimates reflected in these forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties many of which may be beyond the Trust’s control, which could cause actual results, performance and achievements to differ materially from the results, performance and achievements projected, expected, expressed or implied by the forward-looking statements. Examples of events that could cause actual results to differ materially from historical results or those anticipated include:

 
·
possible contingent liabilities and risks associated with the dissolution and liquidation of the Trust, including, without limitation, settlement of the Trust’s liabilities and obligations,
 
·
adverse developments, additional costs or delays with respect to the resolution of the matters described in Item 1. “Business – San Joaquin and Byron” of this report,
 
·
costs incurred in connection with the carrying out of the plan of liquidation and dissolution of the Trust,
 
·
the actual timing of the completion of the liquidation process, including, without limitation, any delay in the liquidation of the Trust caused by any adverse developments or delays regarding the resolution of the matters described in Item 1. “Business – San Joaquin and Byron” of this report, and
 
·
the amount, likelihood and timing of liquidating distributions, if any.
 

Additional information concerning the factors that could cause actual results to differ materially from those in the forward-looking statements is contained elsewhere in this Annual Report on Form 10-K.  Any forward-looking statement that the Trust makes speaks only as of the date of this report. The Trust undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors, as a result of new information, future events or otherwise, except as required by law.

PART I
ITEM 1.                      BUSINESS

Overview

Ridgewood Electric Power Trust III (the “Trust”) is a Delaware trust formed on December 6, 1993. The Trust began offering shares of beneficial interest (“Investor Shares”) in January 1994 and concluded its offering in May 1995. Prior to the adoption of the Trust’s Plan of Dissolution (described below), the objective of the Trust was to provide benefits to its shareholders through a combination of distributions of operating cash flow and capital appreciation. Historically, the Trust focused primarily on independent power generation facilities located in the US.

The Managing Shareholder of the Trust is Ridgewood Renewable Power LLC, a New Jersey limited liability company (the “Managing Shareholder” or “RRP”). As the Managing Shareholder, RRP has direct and exclusive control over the management and operations of the Trust.

On November 19, 2010, the Plan of Liquidation and Dissolution of Ridgewood Electric Power Trust III (the “Plan of Dissolution”) became effective. Under the Plan of Dissolution, the business of the Trust shifted, and became limited to the disposal of its remaining assets and resolution of its remaining liabilities. Upon the completion of these activities, if successful, the Managing Shareholder expects to distribute any remaining cash to the Trust’s shareholders and then proceed to terminate the Trust and its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Trust is required to make adequate provisions to satisfy its known and unknown liabilities, which could substantially delay or limit the Trust’s ability to make future distributions to shareholders. The process of accounting for the Trust’s liabilities, including those that are presently unknown, may involve difficult valuation decisions, which could adversely impact the amount or timing of any future distributions by the Trust.

See “San Joaquin and Byron” below for a discussion of pending matters involving one of the Trust’s prior cogeneration projects that could reduce or eliminate any further distributions to shareholders of the Trust as well as delay the dissolution and liquidation of the Trust. The Trust does not anticipate making additional distributions until the Trust has completed the dissolution and liquidation process. At that time, the Trust’s remaining cash, if any, will be distributed.
 

The Managing Shareholder is not currently able to project when the Trust will be able to complete its liquidation and dissolution.
 
There is no public market for Investor Shares and one is not likely to develop. In addition, Investor Shares are subject to significant restrictions on transfer and resale and cannot be transferred or resold except in accordance with the Trust’s Declaration of Trust (“Declaration of Trust”) and applicable federal and state securities laws.

San Joaquin and Byron

In January 1995, the Trust acquired 100% of the existing partnership interests of JRW Associates, L.P. (“San Joaquin”), which owned and operated an 8.5MW electric cogeneration facility located in Atwater, California. In January 1995, the Trust formed Byron Power Partners, L.P. (“Byron”), wholly-owned by the Trust, and acquired a 5.7MW electric cogeneration facility located in Byron, California. 

San Joaquin and Byron (together, the “Norcals”) were fueled by natural gas and sold their electric output to Pacific Gas & Electric Company (“PG&E”) under long-term power purchase agreements scheduled to expire in 2020. San Joaquin and Byron also entered long-term contacts to use thermal energy from the projects to provide steam to an adjacent food processing company and evaporate brine from oil and gas wells, respectively.

The Norcals suspended their operations in the fourth quarter of 2008 as the estimated incremental cost of production exceeded the estimated revenues from electricity sales. In 2009, due to continued projected operating losses, the Managing Shareholder of the Trust decided to shut down the operations of the Norcals. In December 2010, the Trust abandoned the Norcals and dissolved the entities involved in operating the Norcals. Since December 2010, the Trust has not had any operating assets.

In February and October 2010, the Norcals received notice from PG&E, in which PG&E alleged that San Joaquin and Byron owed PG&E $6.3 million and $3.0 million, respectively, due to, among other things, each facility failing to deliver power under its respective power purchase agreement with PG&E. In 2012, the Norcals, the Trust and PG&E finalized a settlement agreement releasing all claims PG&E and the Norcals had against each other, with the Trust paying $100,000 to PG&E.

In addition, the Norcals were tenants under two long-term ground leases. San Joaquin and Byron discontinued paying rent in December 2009 and November 2010, respectively. Thereafter San Joaquin and Byron each received notice asserting that it was in default under its respective lease. In 2011, San Joaquin entered into an agreement with its landlord, at no cost to the Trust, releasing the Trust and the Norcals, among others, from any claims regarding the lease, including San Joaquin’s nonpayment of rent. Byron has not at present reached any agreement resolving any claims its landlord may have against it. However, the Trust is working with the Byron landlord and the Alameda County Environmental Health Department to resolve Byron’s potential site reclamation obligations. As of December 31, 2013, the Trust estimates that it will incur no more than an additional $80,000 to complete its cleanup of the site, which is included in current liabilities in the Trust’s financial statements included in this report. Upon the completion of the cleanup, the Trust anticipates no further involvement with the project. Management of the Trust is not currently able to estimate when its cleanup of the Byron site will be completed. 

Although the Trust does not expect the resolution of these matters to result in a material expense to the Trust beyond the amounts set forth in the Trust’s financial statements included in this report, if the Byron landlord, or Alameda County, were to commence legal proceedings against the Trust, this would delay, and could reduce or eliminate, any further distributions to shareholders and would delay the liquidation and dissolution of the Trust. As of the issuance of the Trust’s financial statements included in this report, neither the Byron landlord nor Alameda County has commenced any legal proceedings against the Trust or Byron.

Managing Shareholder
 
RRP, via a predecessor corporation, was founded in 1991 by Robert E. Swanson. As the Managing Shareholder, RRP has direct and exclusive control over the management of the Trust’s operations.

RRP performed, or arranged for the performance of, the operation and maintenance of the projects invested in by the Trust and continues to perform the management and administrative services required for Trust operations. Among other services, RRP administers the Trust’s accounts, including tax and other financial information, and handles relations with the Trust’s shareholders. RRP also provides the Trust with office space, equipment and facilities and provides other services necessary for its operation. Under the Plan of Dissolution, the Managing Shareholder has sole authority to dissolve, liquidate and terminate the Trust.
 
As compensation for its management services, the Managing Shareholder is entitled to (i) an annual management fee, payable monthly, equal to 2.5% of the Trust's prior year-end net asset value, and (ii) a 20% interest in the cash distributions made by the Trust in excess of a certain threshold amount expressed in terms of shareholder returns, which has not been, and is not expected to be, achieved by the Trust. The Managing Shareholder is also entitled to receive reimbursement from the Trust for operating expenses incurred by the Trust, or on behalf of the Trust, and paid by RRP as the Managing Shareholder. RRP also serves as the managing shareholder (or managing member, as appropriate) of a number of affiliated trusts and investment vehicles similar to the Trust.
 
 
Affiliates of RRP act on behalf of a number of investment vehicles in the oil and gas and venture capital sectors in a manner similar to that for which RRP serves on behalf of the Trust.

Insurance
 
The Trust has insurance in place typical for activities such as those currently conducted by the Trust.
 
Employees
 
The Trust does not have employees. The activities of the Trust are performed either by employees of the Managing Shareholder or its affiliates.

Offices
 
The principal office of the Trust is located at 500 Delaware Avenue, #1112, Wilmington, Delaware, 19801, and its phone number is 302-888-7444. The Managing Shareholder’s principal office is located at 14 Philips Parkway, Montvale, New Jersey, 07645, and its phone number is 201-447-9000.

ITEM 1A.                   RISK FACTORS
 
Not required.
 
ITEM 1B.                   UNRESOLVED STAFF COMMENTS
 
Not applicable.

ITEM 2.                      PROPERTIES
 
None. 

ITEM 3.                      LEGAL PROCEEDINGS
 
None.


ITEM 4.                      MINE SAFETY DISCLOSURES
 
Not applicable.
 

PART II

ITEM 5.                      MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
There has never been an established public trading market for the Trust’s Investor Shares and one is not expected to develop.
 
 Holders
 
As of December 31, 2013, there were 862 holders of Investor Shares.
 
Dividends
 
The Trust did not make any distributions in 2013 or 2012.

The Trust does not anticipate additional distributions until the Trust has completed the liquidation process, including resolving pending matters related to the Trust’s prior ownership of Byron discussed in Item 1. “Business – San Joaquin and Byron” of this report, at which time, the Trust’s remaining cash, if any, will be distributed to its shareholders.
 
 
ITEM 6.                      SELECTED FINANCIAL DATA

Not required.

ITEM 7.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in conjunction with the Trust’s Audited Financial Statements and Notes, which are included in this Annual Report on Form 10-K beginning on page F-1. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. The Trust’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K.
 
Overview

The Trust is a Delaware trust formed on December 6, 1993. Historically, the Trust focused primarily on independent power generation facilities located in the US. RRP, a New Jersey limited liability company, is the Managing Shareholder of the Trust and has direct and exclusive control over the management and operations of the Trust.

On November 19, 2010, the Trust’s Plan of Dissolution became effective. Under the Plan of Dissolution, the business of the Trust shifted, and became limited to the disposal of its remaining assets and resolution of its remaining liabilities. Upon the completion of these activities, if successful, the Managing Shareholder expects to distribute any remaining cash to the Trust’s shareholders and then proceed to terminate the Trust and its reporting obligations under the Exchange Act. Under the Plan of Dissolution, the Managing Shareholder has sole authority to conduct the Trust’s dissolution, liquidation and termination without additional shareholder approval. As of the date of this filing, the Trust has not been liquidated, primarily due to on-going matters relating to its prior ownership of the Byron cogeneration project discussed in Item 1. “Business – San Joaquin and Byron” of this report. The Managing Shareholder is unable to estimate when these matters will be resolved and what financial impact the matters will have on the Trust’s net assets or the timing, likelihood or amount of any future distributions to shareholders.

Liquidation Basis of Accounting

Upon the effectiveness of the Trust’s Plan of Dissolution, the Trust adopted the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the Trust is probable. Under this basis of accounting, assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The valuation of assets and liabilities requires management to make significant estimates and assumptions.

Critical Accounting Policies and Estimates

The discussion and analysis of the Trust’s financial condition and results of operations are based upon the Trust’s financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In preparing these financial statements, the Trust is required to make certain estimates, judgments and assumptions that affect the reported amount of the Trust’s assets, liabilities, revenues and expenses, including the disclosure of contingent assets and liabilities, as well as the reported amounts of changes in net assets. The estimates also affect the reported estimated value of net realizable assets and settlement of liabilities. The Trust evaluates these estimates and assumptions on an on-going basis. The Trust bases its estimates and assumptions on historical experience and on various other factors that the Trust believes to be reasonable at the time the estimates and assumptions are made. However, future events and their effects cannot be predicted with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may differ from these estimates and assumptions under different circumstances or conditions, and such differences may be material to the financial statements. If there are delays in liquidating the Trust, actual costs incurred during the liquidation process would likely increase, reducing net assets available in liquidation and for future distributions to shareholders.

Results of Operations and Changes in Financial Condition

Net assets at December 31, 2013 were $347,000, a $158,000 decrease from net assets at December 31, 2012. This decrease is primarily due to increased actual and estimated site cleanup costs at Byron as well as an increase in estimated liquidation accruals due to additional expenses expected to be incurred resulting from delays in liquidating and dissolving the Trust. As of December 31, 2013, the Trust estimates that it will incur no more than an additional $80,000 to complete its cleanup of the Byron site, which is included in current liabilities in the Trust’s financial statements included in this report.

During the year, the Trust’s cash balances decreased $490,000 to $526,000 as a result of payment of liabilities outstanding at December 31, 2012 and the increased estimated liquidation expenses discussed above that were paid during 2013. In 2013 and 2012, management fees paid to the Managing Shareholder totaled $12,000 and $28,000, respectively. The Trust estimates management fees to be incurred in 2014 to total $4,000.
 
 
For the purposes of the Trust’s estimates of fees and expenses to be incurred during liquidation, management has assumed that the liquidation of the Trust will be completed by June 30, 2014, instead of the prior assumed date of December 31, 2013. If the liquidation of the Trust is not completed by that date, the actual expenses that the Trust will incur will likely further increase. A delay in the liquidation of the Trust could result from, among other things, not finalizing the pending matters involving Byron discussed in Item 1. “Business – San Joaquin and Byron” of this report. Any additional, unanticipated expenses of the Trust, including expenses related to the resolution of the Byron matters, also would increase the expenses of the Trust in liquidation.

Future Liquidity and Capital Resource Requirements
 
The Trust believes it has sufficient cash and cash equivalents to provide working capital for the next 12 months. The Trust intends to distribute excess cash, if any, to its shareholders after liquidating its remaining assets and satisfying its liabilities. The liquidation of the Trust could be delayed by, among other things, the pending matters involving Byron. The Managing Shareholder is unable to predict when, or how, the matters related to Byron will ultimately be resolved or project the final financial impact these matters will have on the Trust’s net assets or the timing, likelihood or amount of any distributions to shareholders.

The Trust does not expect to make any distributions to shareholders until the Trust has completed the liquidation process.
 
Off-Balance Sheet Arrangements
 
None.
 
Commitments and Contingencies

See Item 1. “Business – San Joaquin and Byron” above and Note 3. “Commitments and Contingencies” in the financial statements included in this report for a discussion of pending matters relating to the Trust’s prior ownership of Byron, which could reduce or eliminate any further distributions to shareholders of the Trust as well as delay the dissolution and liquidation of the Trust.
 
ITEM 7A.                   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not required.
 
ITEM 8.                      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The audited financial statements of the Trust, including the notes thereto and the report of the Trust’s independent registered public accounting firm thereon, are presented beginning on page F-1 of this Form 10-K.
 
ITEM 9.                      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
ITEM 9A.                   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
 
In accordance with Rule 13a-15(b) of the Exchange Act, the Trust’s management, with the participation of the Trust’s Chief Executive and Financial Officer, has evaluated the effectiveness of the Trust’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based on this evaluation, the Trust’s Chief Executive and Financial Officer concluded that the Trust’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Trust in reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms and that information required to be disclosed by the Trust is accumulated and communicated to senior management so as to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Trust’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Trust, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Trust’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
 
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management of the Trust, including its Chief Executive and Financial Officer, assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2013, as required by Rule 13a-15(c) of the Exchange Act.  In making this assessment, management of the Trust used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial Reporting — Guidance for Smaller Public Companies. Based on this evaluation, the Trust’s management concluded that as of December 31, 2013, the Trust’s internal control over financial reporting was effective.
 
This Annual Report on Form 10-K does not include an attestation report of the Trust’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Trust’s independent registered public accounting firm pursuant to SEC rules that permit the Trust to provide only management’s report in this Annual Report.
 
Changes in Internal Control over Financial Reporting

The Trust’s Chief Executive and Financial Officer has concluded that there was no change in the Trust's internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

ITEM 9B.                   OTHER INFORMATION
 
None.


PART III

ITEM 10.                   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
The Trust’s Managing Shareholder, RRP, was originally founded in 1991. The Managing Shareholder has very broad authority, including the authority to elect executive officers of the Trust.
 
Each of the executive officers of the Trust also serves in a similar capacity as an executive officer of the Managing Shareholder. The executive officers of the Trust are as follows:

Name, Age and Position with Registrant
Officer Since
Robert E. Swanson, 66
 
Chairman
1997
Jeffrey H. Strasberg, 56
 
President and Chief Executive and Financial Officer
2007
Daniel V. Gulino, 53
 
Senior Vice President, General Counsel and Secretary
2000

Set forth below is the name of, and certain biographical information regarding the executive officers of the Trust:
 
Robert E. Swanson has served as Chairman of the Trust, the Managing Shareholder and affiliated trusts and limited liability companies since their inception. From their inception until January 2006, Mr. Swanson also served as their Chief Executive Officer. Mr. Swanson is the controlling member of the Managing Shareholder, as well as Ridgewood Energy Corporation (“Ridgewood Energy”), Ridgewood Capital Management LLC (“Ridgewood Capital”) and other affiliates of the Trust. Mr. Swanson has been President and registered principal of Ridgewood Securities Corporation (“Ridgewood Securities”) since its formation in 1982, has served as the Chairman of the Board of Ridgewood Capital since its organization in 1998 and has served as Chief Executive Officer of Ridgewood Energy since its inception in 1982. Mr. Swanson is an inactive member of the New York State and New Jersey State Bars, the Association of the Bar of the City of New York and the New York State Bar Association. He is a graduate of Amherst College and Fordham University Law School.
 
 
Jeffrey H. Strasberg has served as Executive Vice President and Chief Financial Officer of the Trust, the Managing Shareholder and affiliated trusts and limited liability companies since May 2007. In November 2010, Mr. Strasberg was also appointed to serve as President and Chief Executive Officer of the Trust, the Managing Shareholder and affiliated trusts. Mr. Strasberg also serves as Senior Vice President and Chief Financial Officer of Ridgewood Capital and affiliated limited liability companies and Ridgewood Securities and has done so since April 2005. Mr. Strasberg joined Ridgewood Capital in 1998 where his initial responsibilities were to serve as interim Chief Financial Officer of various portfolio companies in which Ridgewood Capital trusts had interests. Currently, Mr. Strasberg also serves as a member of the Boards of Directors of Ethertronics, Inc., Scintera Networks, Inc.  and Drill Map, Inc., all of which are portfolio company investments of Ridgewood Capital. Mr. Strasberg is a Certified Public Accountant and a graduate of the University of Florida.

Daniel V. Gulino has served as Senior Vice President and General Counsel of the Trust, the Managing Shareholder and affiliated trusts and limited liability companies since 2000 and was appointed Secretary in February 2007. Mr. Gulino also serves as Senior Vice President and General Counsel of Ridgewood Energy, Ridgewood Capital, Ridgewood Securities and affiliated trusts and limited liability companies and has done so since 2000. Mr. Gulino is a member of the New Jersey State and Pennsylvania State Bars. He is a graduate of Fairleigh Dickinson University and Rutgers University School of Law.

Board of Directors and Board Committees
 
The Trust does not have its own board of directors or any board committees. The Trust relies upon the Managing Shareholder to perform the functions that a board of directors or its committees would otherwise perform. Officers of the Trust are not directly compensated by the Trust, and all compensation matters are addressed by the Managing Shareholder, as described in Item 11. “Executive Compensation”. Because the Trust does not maintain a board of directors and because officers of the Trust are compensated by the Managing Shareholder, the Managing Shareholder believes that it is appropriate for the Trust not to have a nominating, audit or compensation committee.

Managing Shareholder
 
The Trust operates pursuant to the terms of a management agreement with the Managing Shareholder (“Management Agreement”). The Trust’s Management Agreement details how the Managing Shareholder is to render management, administrative and investment advisory services to the Trust. Specifically, the Managing Shareholder performs (or may arrange for the performance of) the management and administrative services required for the operation of the Trust. Among other services, the Managing Shareholder administers the Trust’s accounts and handles relations with Trust’s shareholders, provides the Trust with office space, equipment and facilities and provides other services necessary for its operation, and conducts the Trust’s relations with custodians, depositories, accountants, attorneys, brokers and dealers, corporate fiduciaries, insurers, banks and others, as required. 
 
The Managing Shareholder also has been responsible for making investment and divestment decisions for the Trust, subject to the provisions of the Declaration of Trust. The Managing Shareholder is obligated to pay the compensation of the personnel, and the administrative and service expenses, necessary to perform the foregoing obligations. The Trust pays all other expenses of the Trust, including transaction expenses, valuation costs, expenses of preparing, printing and filing periodic reports for shareholders and the SEC, postage for Trust mailings, SEC filing fees, interest, taxes, legal, accounting and consulting fees, litigation expenses and other expenses properly payable by the Trust. The Trust reimburses the Managing Shareholder for all such Trust expenses that are paid by the Managing Shareholder.
 
As compensation for the Managing Shareholder’s performance under the Management Agreement, the Trust is obligated to pay the Managing Shareholder an annual management fee described below in Item 13. “Certain Relationships and Related Transactions, and Director Independence”.
 
Each investor in the Trust consented to the terms and conditions of the Management Agreement by subscribing to acquire Investor Shares in the Trust. The Management Agreement is subject to termination at any time on 60 days prior notice by a majority in interest of the shareholders or the Managing Shareholder. The Management Agreement is subject to amendment by the parties upon the approval of a majority in interest of the investors.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act, requires the Trust’s executive officers and directors, and persons who own more than 10% of a registered class of the Trust’s equity securities, to file reports of ownership and changes in ownership with the SEC. During the past fiscal year, the Managing Shareholder believes that all filings required to be made by the Trust’s executive officers pursuant to Section 16(a) of the Exchange Act have been timely filed with the SEC. The Trust has no directors or 10% shareholders.

Code of Ethics
 
In March 2004, the Managing Shareholder, for itself and for the Trust and its affiliates, adopted a Code of Ethics applicable to the principal executive officer, principal financial officer and principal accounting officer or controller (or any persons performing similar functions) of each such entity.  A copy of the Code of Ethics is filed as Exhibit 14 to this Annual Report on Form 10-K.
 
 
ITEM 11.                   EXECUTIVE COMPENSATION
 
The Trust does not directly compensate its executives. Notwithstanding, the Managing Shareholder does not believe its compensation practices are likely to have a material adverse effect on the Trust. The Managing Shareholder believes that its compensation policies and practices do not encourage excessive risk taking.

During 2013 and 2012, the executive officers of the Trust did not receive compensation directly from the Trust or any of its subsidiaries. They provide managerial services to the Trust in accordance with the terms of the Trust’s Declaration of Trust and the Management Agreement. The Managing Shareholder, directly or through affiliated management companies, determines and pays the compensation of these officers. Each of the executive officers of the Trust also serves as an executive officer of the Managing Shareholder and other trusts managed by the Managing Shareholder and its affiliates.

The Trust does, however, pay the Managing Shareholder a management fee under the Management Agreement, and the Managing Shareholder may determine to use a portion of the proceeds from the management fee to pay compensation to executive officers of the Trust. See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for more information regarding Managing Shareholder compensation.
 
ITEM 12.                   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The following table sets forth information with respect to the beneficial ownership of the Trust’s Investor Shares as of December 31, 2013 (no person owns more than 5% of the outstanding Investor Shares) by:

 
·
each executive officer of the Trust (there are no directors); and
 
·
all of the executive officers of the Trust as a group.

Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, each person named in the table below has sole voting and investment power with respect to all Investor Shares shown as beneficially owned by that person. Percentage of beneficial ownership is based on 391.8444 Investor Shares outstanding at December 31, 2013. Other than as set forth below, no officer of the Trust owns any shares of the Trust.
 
Name of beneficial owner
 
Number
of shares (1)
   
Percent
 
Ridgewood Renewable Power LLC (Managing Shareholder)
       Robert E. Swanson,  controlling member
   
1
     
*
 
Executive officers as a group
   
1
     
*
 
                                                                       
*       Represents less than one percent.

(1)
Does not include a management share in the Trust representing the beneficial interests and management rights of the Managing Shareholder in its capacity as the Managing Shareholder. The management share owned by the Managing Shareholder is the only issued and outstanding management share of the Trust. The material management rights and obligations of the Managing Shareholder are described in further detail in Item 1. “Business – Managing Shareholder”. The Managing Shareholder’s beneficial interest in cash distributions of the Trust and its allocable share of the Trust’s net profits and net losses and other items attributable to the management share are described in further detail below in Item 13. “Certain Relationships and Related Transactions, and Director Independence”.
 
ITEM 13.                   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Under the terms of the Trust’s Management Agreement, the Trust paid the Managing Shareholder an annual management fee of $12,000 and $28,000 for the years ended December 31, 2013 and 2012, respectively, an amount equal to 2.5% of the Trust’s prior year-end net asset value, as compensation for the services the Managing Shareholder provides to the Trust. The management fee is to be paid in monthly installments and, to the extent that the Trust does not pay the management fee on a timely basis, the Trust accrues interest at an annual rate of 10% on the unpaid balance. 

Under the Declaration of Trust, the Managing Shareholder is entitled to receive, concurrently with the shareholders of the Trust, other than the Managing Shareholder, 1% of all distributions from operations made by the Trust in a year until the shareholders have received distributions in that year equal to 14% per annum of their equity contribution. Thereafter, the Managing Shareholder is entitled to receive 20% of the distributions for the remainder of the year. The Managing Shareholder is entitled to receive 1% of the proceeds from dispositions of Trust property until the shareholders, other than the Managing Shareholder, have received cumulative distributions equal to their original investment (“Payout”). After Payout, the Managing Shareholder is entitled to receive 20% of all remaining distributions of the Trust. The Managing Shareholder did not receive any distributions in 2013 or 2012. The Trust has not reached Payout and is not expected to do so.
 
 
The Trust’s income is allocated to the Managing Shareholder until the profits so allocated equal distributions to the Managing Shareholder. Thereafter, income is allocated among the shareholders, other than the Managing Shareholder, in proportion to their ownership of Investor Shares. If the Trust has net losses for a fiscal period, the losses are allocated 99% to the shareholders, other than the Managing Shareholder, and 1% to the Managing Shareholder, subject to certain limitations as set forth in the Declaration of Trust. Losses allocated to shareholders, other than the Managing Shareholder, are apportioned among them in proportion to their ownership of Investor Shares.
 
Under the terms of the Declaration of Trust, if the Adjusted Capital Account (as defined in the Declaration of Trust) of a shareholder other than the Managing Shareholder would become negative using General Allocations (as defined in the Declaration of Trust), losses and expenses will be allocated to the Managing Shareholder. Should the Managing Shareholder’s Adjusted Capital Account become negative, then any such items of income or gain will be allocated entirely to the Managing Shareholder until such time as the Managing Shareholder’s Adjusted Capital Account becomes positive. This mechanism does not change the allocation of cash distributions, as discussed above.

ITEM 14.                   PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The following table presents fees and services rendered by Grant Thornton LLP, the Trust’s principal independent registered public accounting firm, for the years ended December 31, 2013 and 2012 (in thousands):

  
 
2013
   
2012
 
             
Audit fees
 
$
25
   
$
27
 
Tax fees
   
10
     
10
 
Total
 
$
35
   
$
37
 
 
Tax fees consisted principally of tax compliance, planning and advisory services as well as tax examination services. For the years ended December 31, 2013 and 2012, the Trust did not incur any audit related fees.
  
Pre-Approval Policy and Procedures
 
The Trust does not have a board of directors or any board committees. The Trust relies upon the Managing Shareholder to perform the functions that a board of directors or its committees would otherwise perform. The Managing Shareholder pre-approves all services, including any permitted tax services, that may be performed by the Trust’s independent registered public accounting firm, including the audit engagement terms and fees, either annually or on an engagement-by-engagement basis depending on the type of engagement. All services performed for the Trust by its independent registered public accounting firm during the 2013 and 2012 periods were pre-approved by the Managing Shareholder.
 
PART IV

ITEM 15.                   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a)(1)                        Financial Statements
 
  See the Index to Financial Statements on page F-1 of this report.

(a)(2)                        Financial Statement Schedules

  Not applicable.

(a)(3)                        Exhibits

  Exhibits required by Section 601 of Regulation S-K:
 
 
Exhibit No.
Description
     
2.1        
 
 
Interest Purchase Agreement dated as of July 26, 2010 by and among Ridgewood Electric Power Trust I, Ridgewood Olinda LLC, Ridgewood Electric Power Trust III, Ridgewood Electric Power Trust IV, Ridgewood Power B Fund/Providence Expansion, Ridgewood Renewable Power LLC, solely in its capacity as Sellers’ Representative, Brea Parent 2007, LLC, Rhode Island LFG Genco, LLC, Ridgewood Renewable Power LLC, Ridgewood Power Management LLC and MIP II BioPower LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Registrant with the SEC on July 29, 2010)
     
2.2
 
Ridgewood Electric Power Trust III Plan of Liquidation and Dissolution (incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2011)
     
3
(i)(A)       
Certificate of Trust of the Registrant (incorporated by reference to the Registrant’s Registration Statement filed with the SEC on February 15, 1994)
     
(i)(B)
Certificate of Amendment to the Certificate of Trust of the Registrant filed with Delaware Secretary of State on December 18, 2003 (incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the SEC on December 14, 2007)
     
3
(ii)(A)
Declaration of Trust of the Registrant (incorporated by reference to the Registrant’s Registration Statement filed with the SEC on February 15, 1994)
     
(ii)(B)
Declaration of Trust of the Registrant (as amended and restated) (incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the SEC on December 14, 2007)
     
(ii)(C)
First Amendment to the Declaration of Trust of the Registrant (incorporated by reference to Exhibit A of the Registrant’s Proxy Statement filed with the SEC on November 5, 2001, SEC File No. 814-00134)
     
(ii)(D)
Amendment to the Amended Declaration of Trust of the Registrant effective January 1, 2005 (incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the SEC on December 14, 2007)
     
10.1 
#
Management Agreement between the Trust and Managing Shareholder, dated January 3, 1994 (incorporated by reference to the Registrant’s Registration Statement filed with the SEC on February 15, 1994)
     
14 
 
Code of Ethics, adopted on March 1, 2004 (incorporated by reference to the Annual Report on Form 10-K filed by The Ridgewood Power Growth Fund with the SEC on March 1, 2006)
     
31
*
Certification of Jeffrey H. Strasberg, Chief Executive and Financial Officer of the Registrant, pursuant to Securities Exchange Act Rule 13a-14(a)
     
32 
*
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Jeffrey H. Strasberg, Chief Executive and Financial Officer of the Registrant
 

 
101.INS
*
XBRL Instance Document
     
101.SCH
*
XBRL Taxonomy Extension Schema Document
     
101.CAL
*
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF
*
XBRL Definition Linkbase Document
     
101.LAB
*
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE
*
XBRL Taxonomy Extension Presentation Linkbase Document
                              
*
Filed herewith.
 
#  
A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K.
 
 

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.

 
 
RIDGEWOOD ELECTRIC POWER TRUST III
     
     
Date:  February 7, 2014
By:   
/s/  Jeffrey H. Strasberg
   
Jeffrey H. Strasberg
   
Chief Executive and Financial Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the date indicated.
 
Signature
 
Capacity
 
Date
         
/s/ Jeffrey H. Strasberg
 
Chief Executive and Financial Officer
 
February 7, 2014
Jeffrey H. Strasberg
 
(Principal Executive, Financial and Accounting Officer)
   
         
         
RIDGEWOOD RENEWABLE POWER LLC
(Managing Shareholder)
       
         
By: /s/ Jeffrey H. Strasberg
 
Chief Executive and Financial Officer of Managing Shareholder
 
February 7, 2014
Jeffrey H. Strasberg
       
 
 
 
 
 
 
 
RIDGEWOOD ELECTRIC POWER TRUST III

INDEX TO FINANCIAL STATEMENTS
 
 
 
 

 
 
 
 
F-1

 


The Managing Shareholder and Shareholders
Ridgewood Electric Power Trust III


We have audited the accompanying statements of net assets (liquidation basis) of Ridgewood Electric Power Trust III (the “Trust” and a Delaware trust) as of December 31, 2013 and 2012, and the related statements of changes in net assets (liquidation basis) for the years ended December 31, 2013 and 2012. These financial statements are the responsibility of the Trust’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting.  Accordingly, we express no such opinion.  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, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets (liquidation basis) of Ridgewood Electric Power Trust III as of December 31, 2013 and 2012 and the changes in its net assets (liquidation basis) for the years ended December 31, 2013 and 2012 in conformity with accounting principles generally accepted in the United States of America.
 




/s/ GRANT THORNTON LLP
New York, New York
February 7, 2014
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
 
 
(Liquidation Basis)
 
(in thousands)
 
 
   
 
December 31,
 
 
2013
 
2012
 
ASSETS
       
Current assets:
       
     Cash and cash equivalents
 
$
526
   
$
1,016
 
     Other receivable
   
-
     
100
 
                 
               Total assets
 
$
526
   
$
1,116
 
                 
LIABILITIES AND NET ASSETS
               
Current liabilities:
               
      Accounts payable and accrued expenses
 
$
175
   
$
579
 
      Due to affiliates
   
4
     
32
 
                 
               Total liabilities
 
$
179
   
$
611
 
                 
Net assets in liquidation
 
$
347
   
$
505
 


The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
 
 
(Liquidation Basis)
 
(in thousands)
 
 
   
 
Year Ended December 31,
 
 
2013
 
2012
 
           
Net assets in liquidation, beginning of year
 
$
505
   
$
1,190
 
Lease cleanup expenses
   
(85
)
   
(480
Estimated future management fees to be incurred during liquidation
   
(4
)
   
(15
Estimated liquidation accruals
   
(69
)
   
(190
)
                 
Net assets in liquidation, end of year
 
$
347
   
$
505
 

 
The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 
 
RIDGEWOOD ELECTRIC POWER TRUST III
(dollar amounts in thousands, except per share data)

1.           DESCRIPTION OF BUSINESS

Ridgewood Electric Power Trust III (the “Trust”) is a Delaware trust formed on December 6, 1993. The Trust began offering shares of beneficial interest (“Investor Shares”) in January 1994 and concluded its offering in May 1995. The Trust has 391.8444 Investor Shares outstanding. Prior to the adoption of the Trust’s Plan of Dissolution (described below), the objective of the Trust was to provide benefits to its shareholders through a combination of distributions of operating cash flow and capital appreciation. The Managing Shareholder of the Trust is Ridgewood Renewable Power LLC, a New Jersey limited liability company (the “Managing Shareholder” or “RRP”). Historically, the Trust focused primarily on power generation facilities located in the US.

On November 19, 2010, the Plan of Liquidation and Dissolution of Ridgewood Electric Power Trust III (the “Plan of Dissolution”) became effective. Under the Plan of Dissolution, the business of the Trust shifted, and became limited to the disposal of its remaining assets and resolution of its remaining liabilities. Upon the completion of these activities, if successful, the Managing Shareholder expects to distribute any remaining cash to the Trust’s shareholders and then proceed to terminate the Trust and its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Trust is required to make adequate provisions to satisfy its known and unknown liabilities, which could substantially delay or limit the Trust’s ability to make future distributions to shareholders. The process of accounting for the Trust’s liabilities, including those that are presently unknown, may involve difficult valuation decisions, which could adversely impact the amount or timing of any future distributions by the Trust.

Under the Plan of Dissolution, the Managing Shareholder has sole authority to conduct the Trust’s dissolution, liquidation and termination without additional shareholder approval. As of the date of issuance of these financial statements, the Trust has not been liquidated, primarily due to on-going matters relating to its prior ownership of a cogeneration facility as discussed in Note 3. The Managing Shareholder is unable to estimate when these matters will be resolved and what financial impact the matters will have on the Trust’s net assets or the timing, likelihood or amount of any future distributions to shareholders.

The Trust did not make any distributions in 2013 or 2012, and does not anticipate making additional distributions until the Trust has completed the liquidation process. At that time, the Trust’s remaining cash, if any, will be distributed to shareholders.

The Trust has evaluated subsequent events and transactions through the date of the issuance of its financial statements, and concluded that there were no such events or transactions that require adjustment to, or disclosure in the notes to, the financial statements.

2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Presentation

The financial statements were prepared on the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the Trust is probable. Under this basis of accounting, assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The valuation of assets and liabilities requires management to make significant estimates and assumptions.

b) Use of Estimates
 
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires the Trust to make estimates and assumptions that affect the reported amounts of the Trust’s assets, liabilities, revenues and expenses, including the disclosure of contingent assets and liabilities, as well as the reported amounts of changes in net assets. The estimates also affect the reported estimated value of net realizable assets and settlement of liabilities. The Trust evaluates these estimates and assumptions on an on-going basis. The Trust evaluates its estimates of assets and recordable liabilities for litigation and other contingencies. The Trust bases its estimates and assumptions on historical experience, current and expected conditions and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates under different circumstances or conditions.
 
c) Cash and Cash Equivalents

The Trust considers all highly liquid investments with maturities, when purchased, of three months or less as cash and cash equivalents. At December 31, 2013, cash and cash equivalents exceeded federal insured limits by $431. This excess was invested in money market accounts.
 
 
d) Fair Value of Financial Instruments

At December 31, 2013 and 2012, the carrying value of the Trust’s cash and cash equivalents, and as applicable, the other receivable, accounts payable, accrued expenses and amounts due to affiliates approximates their fair value due to their short-term nature.

e) Income Taxes

No provision is made for income taxes in the Trust’s financial statements as the net income or losses of the Trust are passed through and included in the income tax returns of the individual shareholders of the Trust. 

f) Changes in net assets in liquidation

On an on-going basis, the Trust evaluates the estimates and assumptions that could have a significant impact on Trust’s reported net assets in liquidation. Actual costs and income may differ materially and adversely from these estimates.  If there are delays in liquidating the Trust, actual costs incurred during the liquidation process would increase, reducing net assets available in liquidation and for future distribution to shareholders. For the purposes of the Trust’s estimates of fees and expenses to be incurred during liquidation, management has assumed that the liquidation of the Trust will be completed by June 30, 2014. If the liquidation of the Trust is not completed by that date, the actual expenses that the Trust will incur will likely increase.

3.           COMMITMENTS AND CONTINGENCIES

Trust III formerly owned investments in Byron Power Partners, L.P. (“Byron”) and JRW Associates, L.P. (“San Joaquin”, and collectively with Byron, the “Norcals”). The Norcals suspended their operations in the fourth quarter of 2008 as the estimated incremental cost of production exceeded the estimated revenues from electricity sales. In 2009, due to continued projected operating losses, the Managing Shareholder of the Trust shut down the operations of the Norcals. In December 2010, the Trust abandoned the Norcals and dissolved the entities involved in operating the Norcals. Since December 2010, the Trust has not had any operating assets.

In February and October 2010, the Norcals received notices from Pacific Gas & Electric Company (“PG&E”), the Norcals’ sole customer, in which PG&E alleged that San Joaquin and Byron owed PG&E $6,329 and $2,966, respectively, due to, among other things, each facility failing to deliver power under its respective power purchase agreements with PG&E. In 2012, the Norcals, the Trust and PG&E finalized a settlement agreement releasing all claims PG&E and the Norcals had against each other, with the Trust paying $100 to PG&E.
 
In addition, the Norcals were tenants under two long-term ground leases. San Joaquin and Byron discontinued paying rent in December 2009 and November 2010, respectively. Thereafter San Joaquin and Byron each received notice asserting that it was in default under its respective lease. In 2011, San Joaquin entered into an agreement with its landlord, at no cost to the Trust, releasing the Trust and the Norcals, among others, from any claims regarding the lease, including San Joaquin’s nonpayment of rent. Byron has not at present reached any agreement resolving any claims its landlord may have against it. However, the Trust is working with the Byron landlord and the Alameda County Environmental Health Department to resolve Byron’s potential site reclamation obligations. As of December 31, 2013, the Trust estimates that it will incur an additional $80 to complete its cleanup of the site, which is included in current liabilities at December 31, 2013. Upon the completion of the cleanup, the Trust anticipates no further involvement with the project. Management of the Trust is not currently able to estimate when the cleanup of the Byron site will be completed.

Although the Trust does not expect the resolution of these matters to result in a material expense to the Trust beyond the amounts set forth in these financial statements, if the Byron landlord, or Alameda County, were to commence legal proceedings against the Trust, this would delay, and could reduce or eliminate, any further distributions to shareholders and would delay the liquidation and dissolution of the Trust. As of the issuance of these financial statements, neither the Byron landlord nor Alameda County has commenced any legal proceedings against the Trust or Byron.

4.           TRANSACTIONS WITH MANAGING SHAREHOLDER AND AFFILIATES
 
The Trust operates pursuant to the terms of a management agreement with the Managing Shareholder (“Management Agreement”).  Under the terms of the Management Agreement, the Managing Shareholder provides certain management, administrative and advisory services, and provides office space to the Trust. The Trust paid the Managing Shareholder an annual management fee of $12 and $28 for the years ended December 31, 2013 and 2012, respectively, an amount equal to 2.5% of the Trust’s prior year-end net asset value, as compensation for the services the Managing Shareholder provides to the Trust. The management fee is to be paid in monthly installments and, to the extent that the Trust does not pay the management fee on a timely basis, the Trust accrues interest at an annual rate of 10% on the unpaid balance.
 
 
Under the Trust’s Declaration of Trust (“Declaration of Trust”), the Managing Shareholder is entitled to receive, concurrently with the shareholders of the Trust, other than the Managing Shareholder, 1% of all distributions from operations made by the Trust in a year until the shareholders have received distributions in that year equal to 14% per annum of their equity contribution. Thereafter, the Managing Shareholder is entitled to receive 20% of the distributions for the remainder of the year. The Managing Shareholder is entitled to receive 1% of the proceeds from dispositions of Trust property until the shareholders, other than the Managing Shareholder, have received cumulative distributions equal to their original investment (“Payout”). After Payout, the Managing Shareholder is entitled to receive 20% of all remaining distributions of the Trust. The Managing Shareholder did not receive any distributions during 2013 or 2012. The Trust has not reached Payout and is not expected to do so.

RRP owns one Investor Share of the Trust. The Trust granted the Managing Shareholder a single Management Share representing the Managing Shareholder’s management rights and rights to distributions of cash flow.

The Trust records short-term payables to and receivables from its affiliates in the ordinary course of business. The amounts payable to and receivable from its affiliates, other than amounts relating to management fees owed to RRP, do not bear interest. At December 31, 2013 and 2012, the Trust had outstanding payables, including estimated amounts to be paid during the liquidation process, to RRP of $4 and $32, respectively. 
 
 
 
 
 
F-7