<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997 COMMISSION FILE NUMBER: 914-00127
BRANTLEY CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
------------------------------------------------------
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
34-1838462
------------------------------------------------------
(I.R.S. EMPLOYER IDENTIFICATION NO.)
20600 CHAGRIN BOULEVARD, SUITE 1150, CLEVELAND, OHIO 44122
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(216) 283-4800
(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:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of common stock outstanding as of June 30, 1997 was
3,810,535.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRANTLEY CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments, at market (identified cost $9,022,055)............... $10,934,801 $ --
Cash and cash equivalents (Note 2)................................ 28,812,361 36,329,220
Dividends and interest receivable................................. 36,541 --
Prepaid expenses.................................................. 62,755 128,566
Unamortized organization costs.................................... 179,443 162,250
Other assets...................................................... 4,543 --
----------- -----------
TOTAL ASSETS............................................ $40,030,444 $36,620,036
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Advisory fee payable.............................................. $ 266,383 $ 81,898
Organization costs payable........................................ 46,048 78,912
Offering costs payable............................................ 150,840 177,215
Payable to related party (Note 3)................................. -- 88,436
Other liabilities................................................. 80,217 51,271
----------- -----------
TOTAL LIABILITIES....................................... $ 543,488 $ 477,732
=========== ===========
STOCKHOLDERS' EQUITY (NOTE 4):
Common Stock, $0.01 par value; 25,000,000 shares authorized and
3,810,535 and 3,660,535 shares issued and outstanding at June
30, 1997 and December 31, 1996, respectively................. $ 38,105 $ 36,605
Additional Paid in Capital...................................... 37,611,421 36,112,921
Retained Earnings (Deficit)..................................... 1,837,430 (7,222)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY.............................. $39,486,956 $36,142,304
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $40,030,444 $36,620,036
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
2
<PAGE> 3
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------ ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend and interest income............................ $ 406,273 $ 857,861
---------- ----------
OPERATING EXPENSES:
Advisory Fees........................................... 270,182 534,042
Administration Fees..................................... 19,946 39,672
Custody and Accounting Fees............................. 9,972 19,835
Professional Fees....................................... 31,264 57,155
Directors' Fees......................................... 9,349 18,596
Amortization of organization costs...................... 8,335 16,613
Other................................................... 49,761 101,728
---------- ----------
TOTAL EXPENSES.......................................... 398,809 787,641
---------- ----------
NET INVESTMENT INCOME..................................... 7,464 70,220
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss from investment transactions....... (100,209) (100,209)
Net unrealized appreciation during the period on
investment transactions............................ 1,912,746 1,912,746
---------- ----------
NET GAIN ON INVESTMENT TRANSACTIONS....................... 1,812,537 1,812,537
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $1,820,001 $1,882,757
========== ==========
EARNINGS PER SHARE........................................ $ 0.48 $ 0.49
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING............. 3,810,535 3,798,172
========== ==========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
BRANTLEY CAPITAL CORPORATION
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:.......................... $ 1,882,757
-----------
Adjustments to reconcile net increase in net assets resulting from operations
to net cash provided by (used for) operations:
Purchases of long term investment securities.............................. (9,568,770)
Sales of long term investment securities.................................. 446,506
Changes in assets and liabilities:
Dividends and interest receivable......................................... (36,541)
Prepaid expenses.......................................................... 4,065
Unamortized organization costs............................................ (33,805)
Other assets.............................................................. (4,543)
Advisory fee payable...................................................... 184,485
Organization costs payable................................................ (32,864)
Offering costs payable.................................................... (26,375)
Payable to related party.................................................. (88,436)
Other liabilities......................................................... 28,946
Non-cash items included in net increase in net assets resulting from
operations:
Depreciation and amortization............................................. 78,358
Net realized loss from investment transactions............................ 100,209
Change in unrealized appreciation on investment transactions.............. (1,912,746)
-----------
NET CASH USED FOR OPERATING ACTIVITIES.................................... (10,861,511)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares issued subsequent to initial public offering......... 1,500,000
Distributions from net investment income.................................. (38,105)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................. 1,461,895
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD.................... (7,516,859)
-----------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................. 36,329,220
-----------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD................................... $28,812,361
===========
</TABLE>
The Company paid no interest or federal income tax during the period.
See accompanying notes to the financial statements.
4
<PAGE> 5
BRANTLEY CAPITAL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
RETAINED ADDITIONAL TOTAL
EARNINGS COMMON PAID IN STOCKHOLDERS'
(DEFICIT) STOCK CAPITAL EQUITY
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance At December 31, 1996.............. $ (7,222) $ 36,605 $36,112,921 $36,142,304
Net increase in net assets from
operations.............................. 1,882,757 1,882,757
Distributions from net investment
income.................................. (38,105) (38,105)
Issuance of 150,000 shares subsequent to
initial public offering................. 1,500 1,498,500 1,500,000
---------- -------- ----------- -----------
Balance at June 30, 1997.................. $1,837,430 $ 38,105 $37,611,421 $39,486,956
========== ======== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE> 6
BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared by Brantley Capital
Corporation (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") applicable to quarterly reports on
Form 10-Q. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the audited financial statements and related notes
and schedules included in the Company's 1996 Annual Report filed on Form 10-K
dated March 27, 1997.
The unaudited financial statements reflect, in the opinion of management,
all adjustments, all of which are of a normal recurring nature, necessary to
present fairly the financial position of the Company as of June 30, 1997, the
results of its operations for the three-month period ended June 30, 1997, the
results of its operations for the six-month period ended June 30, 1997, and its
cash flows for the six-month period ended June 30, 1997. Interim results are not
necessarily indicative of results to be expected for a full fiscal year.
2. CASH AND CASH EQUIVALENTS
Cash equivalents consisted of highly liquid investments with insignificant
interest rate risk and original maturities of three months or less at
acquisition date. Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(AUDITED)
<S> <C> <C>
Cash.............................................................. $ 1,565 $ 54
United States Treasury Bill
4.5%, 7/3/97.................................................... 28,810,796
4.79%, 1/02/97.................................................. 36,329,166
----------- -----------
$28,812,361 $ 36,329,220
=========== ===========
</TABLE>
3. TRANSACTIONS WITH RELATED PARTIES
The Company is seeking exemptive relief from certain provisions of the 1940
Act to permit the Company to invest in securities of an issuer in which
affiliates of Brantley Capital Management, L.L.C. (the "Adviser") already hold
an investment or intend to invest. Assuming the receipt of a favorable exemptive
order from the SEC, the Company anticipates that it may, subject to certain
terms and conditions, frequently invest in the same portfolio companies as
current and future affiliates of the Adviser. There can be no assurance that the
Company's application for exemptive relief will be granted. Certain offering and
organization costs were paid by officers of the Company and the Adviser. As of
June 30, 1997 and December 31, 1996, the Company owed the officers of the
Company and the Adviser $0 and $88,436, respectively, in connection with these
expenditures.
4. STOCKHOLDERS' EQUITY
On January 15, 1997, the Company, through an over-allotment option in its
initial public offering, issued an additional 150,000 shares at $10 per share.
6
<PAGE> 7
BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
5. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DECEMBER 3,
SIX MONTHS 1996*
ENDED THROUGH
JUNE 30, DECEMBER 31,
1997 1996
------------- ----------------
(AUDITED)
<S> <C> <C>
Net Asset Value, Beginning of the Period........................ $ 9.87 $ 9.87(a)
Net Increase In Net Assets Resulting From Operations(b)......... 0.49 (0.00)#
Distributions From Net Investment Income........................ (0.01) --
Issuance of Shares Subsequent to Initial Public Offering at $10
per Share..................................................... 0.01 --
------ ------
Net Asset Value, End of the Period.............................. $ 10.36 $ 9.87
====== ======
Market Value, End of the Period................................. $ 9.50 $10.00
====== ======
Total Return, At Market Value**(c).............................. (4.90)% 0.00%
Total Return, At NAV**(c)....................................... 5.07% 0.00%
</TABLE>
- ---------------
* Commencement of operations
** Not annualized
(a) Net of offering costs of $0.13 per share
(b) Based on average shares outstanding
(c) Total returns assume reinvestment of all dividends and capital gains and
past performance is not indicative of future results
# Less than $0.01 per share
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the financial condition and results of operation
of the Company should be read in conjunction with the Financial Statements, the
Notes thereto and the other financial information included elsewhere in this
report.
RESULTS OF OPERATIONS
The Company began operations upon the completion of an initial public
offering on December 3, 1996. Its principal investment objective is the
realization of long-term capital appreciation from investing primarily in the
equity and equity-linked debt securities of private companies. In addition, the
Company can invest a portion of its assets in post-venture, small-cap public
companies.
During the quarter and six months ended June 30, 1997, the Company was
primarily invested in short-term securities pending the completion of equity and
equity-linked debt securities transactions that meet the investment objectives
of the Company. Interest on short-term investments was $406,273 and $857,861,
respectively, for the quarter and six months ended June 30, 1997. The
significant components of total operating expenses were fees to Brantley Capital
Management, L.L.C., the Company's investment adviser (the "Investment Adviser")
and other professional fees.
During the quarter ended June 30, 1997, the Company committed $11.35
million to equity and equity-linked debt security investments. These investments
resulted in net realized and unrealized gains on investment transactions of
$1,812,537.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company completed an initial public offering of common stock of $36.5
million on December 3, 1996 and a related over-allotment option of $1.5 million
on January 15, 1997. The Company believes that the net proceeds of this offering
will be adequate to fund the growth of the Company's investment portfolio
through 1997.
At June 30, 1997, the Company had $28,812,361 in cash and cash equivalents.
The Company invested the proceeds of the initial public offering on a short-term
basis pending completion of investments in equity and equity-linked debt
securities of private companies and post-venture small-cap public companies. At
June 30, 1997, the $28,812,361 was primarily invested in a United States
Treasury Bill.
At June 30, 1997, the Company had stockholders' equity of $39,486,956,
resulting in a net asset value per share of $10.36, which represents an increase
of 4.96% since December 31, 1996.
During the quarter ended June 30, 1997, the Company committed $11.35
million to equity and equity-linked debt security investments. At June 30, 1997,
the cost of these investments made to date was approximately $9,022,055 and
their market value was approximately $10,934,801. Management believes the
companies included in its investment portfolio have significant potential for
long-term growth in sales and earnings.
Committments to purchase equity and equity-linked debt security investments
representing more than 3% of the total assets of the Company at June 30, 1997
were comprised of the following two (2) transactions:
On April 21, 1997, in connection with the Company's commitment to provide
$2.1 million of a $10 million senior subordinated note facility for Waterlink,
Inc., the Company received warrants to purchase 26,250 shares of Waterlink
common stock at an exercise price of $4.50 per share. Waterlink is a
consolidation strategy company in the industrial water and wastewater treatment
market. The subordinated note facility was entered into to enable Waterlink to
draw down, in its discretion, subordinated debt to help finance a recent
acquisition, and provided for the issuance of notes at a 12% interest rate per
annum during the first year and 14% per annum thereafter on the utilized portion
of the facility, if any, with a final maturity five (5) years from the closing.
On June 27, 1997, Waterlink completed its initial public offering of common
stock. As a result, Waterlink sold 4,500,000 shares at an $11.00 per share
price. Following Waterlink's initial public offering, Waterlink terminated its
senior subordinated note facility. At its termination, the facility had not
8
<PAGE> 9
been drawn down and no notes were issued to the Company. At June 30, 1997, the
market price of Waterlink common stock (NYSE: WLK) closed at $13 1/8.
On May 27, 1997, the Company entered into a $1.35 million commitment to
invest with Brantley Venture Partners III, L.P. in a $3.85 million preferred
stock issue for Fitness Quest, Inc. Fitness Quest is a direct marketing and
distribution company launching an acquisition strategy. A portion of the
proceeds was used for a management buy-out of the company from its previous
owners, The Time Warner Music Group (a 100% wholly-owned subsidiary of Time
Warner, Inc.), and the remainder will be used for future acquisitions. Fitness
Quest has been in the fitness promotional products business since 1994 and is
currently at a $100 million annual sales rate level. The Company has committed
to purchase approximately 787,500 shares of Class A Convertible Preferred Stock
at $1.71 per share. The terms of the Preferred Stock provide for a 10% dividend,
payable quarterly. The Company's commitment is subject to its receipt of a
favorable exemptive order from the Securities and Exchange Commission (the
"SEC"), as more particularly described below.
Since June 30, 1997, the Company completed the following equity and
equity-linked debt security investment commitment representing more than 3% of
the total assets of the Company at June 30, 1997:
On July 17, 1997, the Company entered into a $2.1 million commitment to
invest with Brantley Venture Partners III, L.P. in a $6.0 million preferred
stock issue for Corporate Wings, Inc. Corporate Wings' businesses include fixed
base operations, related flight management services and inertial navigation
systems repair services for private and commercial aircraft from six locations.
The proceeds of the transaction will be used to continue Corporate Wings'
acquisition strategy. Corporate Wings is a $40 million company that has been in
business since 1978. The Company has committed to purchase approximately 644,000
shares of Class A Convertible Preferred Stock at $3.26 per share. The terms of
the Convertible Preferred Stock provide for an 8% annual dividend, payable
quarterly. The Company's commitment is subject to its receipt of a favorable
exemptive order from the SEC, as more particularly described below.
Brantley Venture Partners II, L.P., and Brantley Venture Partners III, L.P.
(collectively, the "Partnerships") hold, in the aggregate, approximately $115
million of venture capital private equity investments. The Partnerships are
related to the Investment Adviser, in a manner that requires that SEC relief
from certain provisions of the Investment Company Act of 1940, as amended, be
obtained in order to permit, under certain circumstances, the Company, the
Investment Adviser and the Partnerships to invest in the same portfolio
companies. As a result, the Company and the Partnerships filed an application on
March 6, 1997 with the SEC seeking an exemptive order, which, if granted, would
permit the Company, under certain circumstances, to invest in securities of
issuers in which one of the Partnerships has previously invested or intends to
invest. Based upon comments received from the SEC and related discussions, the
Company is currently working to complete the necessary steps in its attempt to
obtain an exemptive order in substantially the form requested. The Company's
investment commitments described above with respect to Fitness Quest and
Corporate Wings are subject to the granting of the exemptive order, on
substantially the terms requested, within 150 days and 180 days, respectively,
of the dates these transactions closed.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Annual Meeting held April 24, 1997.
(b) The following director was elected at the Annual Meeting:
Richard Moodie
The following directors were not up for election at the Annual Meeting and
their respective terms in office continued after the Annual Meeting:
L. Patrick Bales
Benjamin F. Bryan
Robert P. Pinkas
Michael J. Finn
(c) The election of directors was voted upon at the Annual Meeting. The
number of votes cast for, against or withheld, with respect to the election of
Mr. Richard Moodie was 3,722,055 votes for, 0 votes against, and 27,680 votes
withheld.
The ratification of selection of Ernst & Young LLP as the Company's auditor
was voted upon at the Annual Meeting. The number of votes cast for, against or
withheld with respect to the ratification of selection of Ernst & Young LLP as
the Company's auditor was 3,720,935 votes for, 16,900 votes against, and 11,900
votes withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Reference is made to the Exhibit Index that is found on page 12 of this
Form 10-Q.
b. Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
Form 10-Q is filed.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRANTLEY CAPITAL CORPORATION
<TABLE>
<S> <C>
Date: August 13, 1997 By: /s/ Robert P. Pinkas
-------------------------------------------
Robert P. Pinkas
Chief Executive Officer
Date: August 13, 1997 By: /s/ Tab A. Keplinger
-------------------------------------------
Tab A. Keplinger
Chief Financial Officer
</TABLE>
11
<PAGE> 12
EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated
herein by reference to a prior filing, in accordance with Rule 12b-32 under the
Securities Exchange Act of 1934. (Asterisk denotes exhibits filed with this
report.)
<TABLE>
<S> <C>
EXHIBIT 3 Articles of Incorporation and By-laws
(1) Articles of Incorporation and Articles of Amendment and Restatement of the
Charter of the Company (Exhibit 2.a.1 to the Company's Registration Statement on
Form N-2 (Reg. No. 333-10785) filed on August 23, 1996 (the "Registration
Statement") and Exhibit 2.a.2 to Amendment No. 2 to the Registration Statement
filed on November 22, 1996, which exhibits are incorporated herein by reference)
(2) By-laws of the Company (Exhibit 2.b.2 to Amendment No. 2 to the Registration
Statement filed on November 22, 1996, which exhibit is incorporated herein by
reference)
EXHIBIT 4 Form of Share Certificate (Exhibit 2.d to Amendment No. I to the Registration
Statement filed on October 30, 1996, which exhibit is incorporated herein by
reference).
EXHIBIT 10 Material Contracts
(1) Dividend Reinvestment and Cash Purchase Plan (Exhibit 2.e to Amendment No. 3 to
the Registration Statement filed on November 26, 1996, which exhibit is
incorporated herein by reference)
(2) Form of Investment Advisory Agreement between the Company and the Investment
Adviser (Exhibit 2.g to Amendment No. 3 to the Registration Statement filed on
November 26, 1996, which exhibit is incorporated herein by reference)
(3) Stock Option Plan and Form of Option Grants (Exhibit 2.i.1 to Amendment No. 2 to
the Registration Statement filed on November 22, 1996, which exhibit is
incorporated herein by reference)
(4) Disinterested Director Option Plan and Form of Option Grants (Exhibit 2.i.2 to
Amendment No. 2 to the Registration Statement filed on November 22, 1996, which
exhibit is incorporated herein by reference)
(5) Form of Custodian Contract (Exhibit 2.j to Amendment No. 2 to the Registration
Statement filed on November 22, 1996, which exhibit is incorporated herein by
reference)
(6) Form of Registrar, Transfer Agency and Service Agreement (Exhibit 2.k.1 to
Amendment No. 2 to the Registration Statement filed on November 22, 1996, which
exhibit is incorporated herein by reference)
(7) Form of Administration Agreement (Exhibit 2.k.2 to Amendment No. 2 to the
Registration Statement filed on November 22, 1996, which exhibit is incorporated
herein by reference)
(8) Form of Indemnification Agreement for Directors and Officers (Exhibit 2.s to
Amendment No. 2 to the Registration Statement filed on November 22, 1996, which
exhibit is incorporated herein by reference)
EXHIBIT 27* Financial Data Schedule
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 9,022,055
<INVESTMENTS-AT-VALUE> 10,934,801
<RECEIVABLES> 36,541
<ASSETS-OTHER> 246,741
<OTHER-ITEMS-ASSETS> 28,812,361
<TOTAL-ASSETS> 40,030,444
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 543,488
<TOTAL-LIABILITIES> 543,488
<SENIOR-EQUITY> 38,105
<PAID-IN-CAPITAL-COMMON> 37,611,421
<SHARES-COMMON-STOCK> 3,810,535
<SHARES-COMMON-PRIOR> 3,660,535
<ACCUMULATED-NII-CURRENT> 24,893
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (100,209)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,912,746
<NET-ASSETS> 39,486,956
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 857,861
<OTHER-INCOME> 0
<EXPENSES-NET> 787,641
<NET-INVESTMENT-INCOME> 70,220
<REALIZED-GAINS-CURRENT> (100,209)
<APPREC-INCREASE-CURRENT> 1,912,746
<NET-CHANGE-FROM-OPS> 1,882,757
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 38,105
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 150,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,344,652
<ACCUMULATED-NII-PRIOR> (7,222)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 534,042
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 787,641
<AVERAGE-NET-ASSETS> 37,814,630
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .01
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> .04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
