<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 SEPTEMBER 30, 1997 COMMISSION FILE NUMBER: 814-00127
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 NUMBER)
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 September 30, 1997
was 3,810,535.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRANTLEY CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $8,386,242 September 30,
1997 and $0 at December 31, 1996, respectively)................. $ 10,883,525 $ --
Cash and cash equivalents (Note 2)................................ 31,414,827 36,329,220
Dividends and interest receivable................................. 646 --
Prepaid expenses.................................................. 80,171 128,566
Unamortized organization costs.................................... 172,880 162,250
Other assets...................................................... 4,543 --
----------- -----------
TOTAL ASSETS............................................ 4$2,556,592... $ 36,620,036
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Payable for investments purchased................................. 1$,500,100.... $ --
Advisory fee payable.............................................. 288,098 81,898
Organization costs payable........................................ 44,297 78,912
Offering costs payable............................................ 150,490 177,215
Payable to related party (Note 3)................................. -- 88,436
Other liabilities................................................. 105,810 51,271
----------- -----------
TOTAL LIABILITIES....................................... $ 2,088,795 $ 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
September 30, 1997 and December 31, 1996, respectively....... $ 38,105 $ 36,605
Additional Paid in Capital...................................... 37,611,421 36,112,921
Retained Earnings (Deficit)..................................... 2,818,271 (7,222)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY.............................. $ 40,467,797 $ 36,142,304
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $ 42,556,592 $ 36,620,036
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
2
<PAGE> 3
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
THREE MONTHS ENDED SEPTEMBER 30,
SEPTEMBER 30, 1997 1997
------------------ -----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend and interest income........................... $ 409,442 $ 1,267,303
---------- ----------
OPERATING EXPENSES:
Advisory Fees.......................................... 311,600 845,642
Administration Fees.................................... 20,164 59,836
Custody and Accounting Fees............................ 10,083 29,918
Professional Fees...................................... 66,402 123,557
Directors' Fees........................................ 9,452 28,048
Amortization of organization costs..................... 8,427 25,040
Other.................................................. 73,796 175,524
---------- ----------
TOTAL EXPENSES......................................... 499,924 1,287,565
---------- ----------
NET INVESTMENT LOSS...................................... (90,482) (20,262)
---------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS:
Net realized gain from investment transactions...... 511,681 411,472
Net unrealized appreciation during the period on
investment transactions........................... 584,537 2,497,283
---------- ----------
NET GAIN ON INVESTMENT TRANSACTIONS...................... 1,096,218 2,908,755
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 1,005,736 $ 2,888,493
========== ==========
EARNINGS PER SHARE....................................... $ 0.27 $ 0.76
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING............ 3,810,535 3,802,293
========== ==========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
BRANTLEY CAPITAL CORPORATION
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:........................ $ 2,888,493
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............................ (13,070,554)
Sales of long term investment securities................................ 5,096,228
Net realized gain from investment transactions.......................... (411,472)
Changes in assets and liabilities:
Dividends and interest receivable.................................... (646)
Prepaid expenses..................................................... (44,734)
Unamortized organization costs....................................... (35,670)
Other assets......................................................... (4,543)
Payable for investments purchased.................................... 1,500,100
Advisory fee payable................................................. 206,200
Organization costs payable........................................... (34,615)
Offering costs payable............................................... (26,725)
Payable to related party............................................. (88,436)
Other liabilities.................................................... 54,539
Non-cash items included in net increase in net assets resulting from
operations:
Depreciation and amortization........................................ 117,725
Change in unrealized appreciation on investment transactions......... (2,497,283)
------------
NET CASH USED FOR OPERATING ACTIVITIES............................... (6,351,393)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares issued subsequent to initial public offering....... 1,500,000
Distributions from net investment income................................ (63,000)
NET CASH PROVIDED BY FINANCING ACTIVITIES............................ 1,437,000
------------
NET DECREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD.................... (4,914,393)
------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................. 36,329,220
------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD................................... $ 31,414,827
------------
</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
NINE MONTHS ENDED SEPTEMBER 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.............................. 2,888,493 2,888,493
Distributions from net investment
income.................................. (63,000) (63,000)
Issuance of 1,500,000 shares subsequent to
initial public offering................. 1,500 1,498,500 1,500,000
---------- ------- ----------- -----------
Balance at September 30, 1997............. $2,818,271 $38,105 $37,611,421 $ 40,467,797
========== ======= =========== ===========
</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 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
September 30, 1997, the results of its operations for the three month period
ended September 30, 1997, the results of its operations for the nine month
period ended September 30, 1997, and its cash flows for the nine month period
ended September 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 consist 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>
DECEMBER 31,
SEPTEMBER 30, 1996
1997 (AUDITED)
------------- ------------
<S> <C> <C>
Cash........................................................... $ 1,500,767 $ 54
United States Treasury Bill
4.00%, 10/16/97.............................................. 29,914,060
4.79%, 1/02/97............................................... 36,329,166
----------- -----------
$ 31,414,827 $ 36,329,220
=========== ===========
</TABLE>
3. TRANSACTIONS WITH RELATED PARTIES
The Company is seeking exemptive relief from certain provisions of the
Investment Company Act of 1940 to permit the Company to invest in companies
in which affiliates of Brantley Capital Management, L.L.C. (the "Investment
Adviser") also 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 Investment Adviser. The
staff of the SEC has informed the Company that they have concluded their
review of the Company's application for exemptive relief and a notice of the
application has been published in the Federal Register. Upon the expiration
of a required notice period, an order granting the request will be issued by
the SEC, unless an interested person requests, and the SEC grants, a hearing
regarding the application. 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 Investment Adviser. As of September 30, 1997 and December 31,
1996, the Company owed the officers of the Company and the Investment 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, 1996*
NINE MONTHS THROUGH
ENDED DECEMBER 31, 1996
SEPTEMBER 30, 1997 (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).................................................... 0.76 0.00(c)
Distributions From Net Investment Income................. (0.02) --
Issuance of Shares Subsequent to Initial Public Offering
at $10 per Share....................................... 0.01 --
------ ------
Net Asset Value, End of the Period....................... $10.62 $ 9.87
====== ======
Market Value, End of the Period.......................... $ 9.25 $ 10.00
====== ======
Total Return, At Market Value (d)........................ (7.35)% 0.00%
Total Return, At NAV (d)................................. 7.78% 0.00%
</TABLE>
- ---------------
* Commencement of operations
(a) Net of offering costs of $0.13 per share
(b) Calculated based on average shares outstanding
(c) Less than $0.01 per share
(d) Assumes investment at market value or net asset value as applicable, at
the beginning of the period, reinvestment of all dividends and distributions,
and a complete redemption of the investment at market value or net asset
value as applicable at the end of the period. Total investment return for a
period of less than one year is not annualized. Past performance results
shown in this report should not be considered a representation of future
performance.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Brantley Capital Corporation ( the "Company") is a closed end,
non-diversified investment company that has elected to be treated as a "business
development company" under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Company was formed to invest primarily in the equity and
equity-linked debt securities of private companies. The Company's investment
objective is the realization of long-term appreciation in the value of its
investments. 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.
Pending the completion of equity and equity-linked debt securities that
meet the Company's investment objectives, available funds are invested in
short-term securities. Dividend and interest income on short-term investments
was $409,442 and $1,267,303, respectively, for the quarter and nine months ended
September 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 and nine months ended September 30, 1997 the Company's
equity and equity-linked debt security investments resulted in net realized and
unrealized gains on investment transactions of $1,096,218 and $2,908,755,
respectively.
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 1998.
At September 30, 1997, the Company had $31,414,827 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 September 30, 1997, the $31,414,827 was primarily invested
in a United States Treasury Security.
At September 30, 1997 , the cost of equity and equity-linked debt security
investments made to date was $8,386,242 and their aggregate market value was
$10,883,525. In addition, the Company had outstanding commitments to purchase
equity and equity-linked debt securities of approximately $3,450,000. Management
believes the companies identified have significant potential for long-term
growth in sales and earnings.
Equity and equity-linked debt security investments that individually
represent more than 3% of the total assets of the Company at September 30, 1997
were comprised of the following 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. ("Waterlink"), 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, at 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 the Waterlink initial public offering, Waterlink terminated its
senior subordinated note facility. At its termination, the facility had not been
drawn
8
<PAGE> 9
down and no notes were issued to the Company. At September 30, 1997, the market
price of Waterlink common stock (NYSE:WLK) closed at $18.75.
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"). 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 potential 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 Series A Convertible
Preferred Stock at $1.71 per share. The terms of the Series A Convertible
Preferred Stock provide for payment of 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 fully described
below.
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"). 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 to
execute an 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 Series A Convertible Preferred Stock at $3.26
per share. The terms of the transaction provide for an 8% dividend, payable
quarterly. The Company's commitment is subject to its receipt of a favorable
exemptive order from the SEC, as more fully described below.
On September 30, 1997, the Company entered into a $1.5 convertible junior
subordinated promissory note facility for Health Care Solutions, Inc. ("Health
Care Solutions"). Health Care Solutions is an acquisition strategy company in
the home healthcare services market and is currently at a $50 million annual
sales rate level with a strong presence in the Great Lakes markets. The terms of
the notes call for an 18% interest rate per annum during the first year and 12%
per annum thereafter, with final maturity two years from the closing. After the
first year the notes are convertible into common stock at a price of $3.50 per
share. In connection with its commitment to provide this facility, the Company
received warrants to purchase up to $450,000 of common stock valued at an
exercise price of 10% of an initial public offering ("IPO") price completed
during the term of the notes, or at $3.50 per share should the warrants be
exercised other than in connection with an IPO. The proceeds of the notes will
be used to help finance current and future acquisitions.
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 1940 Act 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 (the
"Application") 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 also intends to invest. The staff of the SEC has
informed the Company that they have concluded their review of the Application
and a notice of the Application has appeared in the Federal Register. Upon the
expiration of the applicable notice period, an order granting the requested
relief will be issued by the SEC, unless interested persons request a hearing
within the notice period and the SEC determines to order such a hearing. When
and if the exemptive order is granted, the Company expects to complete its
investments in Fitness Quest and Corporate Wings.
At September 30, 1997, the Company had stockholders' equity of $40,467,797,
resulting in a net asset value per share of $10.62, an increase of 7.60% for the
nine month period ended September 30, 1997.
9
<PAGE> 10
PART II. OTHER INFORMATION
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: November 13, 1997 By: -------------------------------------------
Robert P. Pinkas
Chief Executive Officer
Date: November 13, 1997 By:
-------------------------------------------
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>
<C> <S>
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 8,386,242
<INVESTMENTS-AT-VALUE> 10,883,525
<RECEIVABLES> 646
<ASSETS-OTHER> 4,543
<OTHER-ITEMS-ASSETS> 31,667,878
<TOTAL-ASSETS> 42,556,592
<PAYABLE-FOR-SECURITIES> 1,500,100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 588,695
<TOTAL-LIABILITIES> 2,088,795
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,649,526
<SHARES-COMMON-STOCK> 3,810,535
<SHARES-COMMON-PRIOR> 3,660,535
<ACCUMULATED-NII-CURRENT> (90,484)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 411,472
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,497,283
<NET-ASSETS> 40,467,797
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,267,303
<OTHER-INCOME> 0
<EXPENSES-NET> 1,287,565
<NET-INVESTMENT-INCOME> (20,262)
<REALIZED-GAINS-CURRENT> 411,472
<APPREC-INCREASE-CURRENT> 2,497,283
<NET-CHANGE-FROM-OPS> 2,888,493
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (63,000)
<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> 4,325,493
<ACCUMULATED-NII-PRIOR> (7,222)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 845,642
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,287,565
<AVERAGE-NET-ASSETS> 38,450,529
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> .77
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .01
<PER-SHARE-NAV-END> 10.62
<EXPENSE-RATIO> .04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
