<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 March 31, 1998 Commission File Number: 814-00127
BRANTLEY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 34-1838462
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
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 March 31, 1998
was 3,810,535.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRANTLEY CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1998 DECEMBER 31,
(UNAUDITED) 1997
----------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 2) ............ $24,699,986 $24,691,345
Investments, at market (Note 2)................ 20,216,460 18,791,178
Dividends and interest receivable.............. 138,295 70,722
Prepaid insurance.............................. 61,488 92,190
Other assets................................... 48,948 49,194
Unamortized organization costs................. 121,862 130,106
----------- -----------
TOTAL ASSETS................................ $45,287,039 $43,824,735
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Investments purchased payable.................. $ 100 -
Advisery fee payable (Note 3).................. 274,638 $ 284,111
Administration fee payable..................... 13,476 18,750
Professional fee payable....................... 67,055 120,088
Distributions payable.......................... - 342,948
Custody and accounting fee..................... - 10,500
Directors fee payable.......................... 3,727 4,019
Registration fee payable....................... 8,630 -
Organization costs payable..................... 42,627 42,627
Offering costs payable......................... 25,490 50,490
Transfer agent fee payable..................... 7,842 1,500
Accrued printing............................... 13,508 18,000
Other liabilities.............................. 13,854 20,087
----------- -----------
TOTAL LIABILITIES........................... $ 470,947 $ 913,120
=========== ===========
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value;
25,000,000 shares authorized and
3,810,535 outstanding....................... $ 38,105 $ 38,105
Additional paid in capital.................. 37,611,421 37,611,421
Retained earnings........................... 7,166,566 5,262,089
----------- -----------
TOTAL STOCKHOLDERS' EQUITY.................. 44,816,092 42,911,615
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.. $45,287,039 $43,824,735
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
2
<PAGE> 3
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE QUARTER
ENDED ENDED
MARCH 31, MARCH 31,
1998 1997
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Interest and dividend income............. $ 425,192 $ 451,588
---------- ----------
OPERATING EXPENSES:
Advisery fees............................ 274,638 263,860
Administration fees...................... 19,726 19,726
Transfer Agent fees...................... 8,630 8,250
Custody and accounting fees.............. 9,863 9,863
Professional fees........................ 26,041 25,891
Registration fee......................... 8,630 8,250
Directors' fees.......................... 9,247 9,247
Postage and printing fees................ 986 783
Fund insurance fees...................... 30,702 30,225
Amortization of organization costs....... 8,244 8,278
Other.................................... 246 4,459
---------- ----------
TOTAL EXPENSES........................... 396,953 388,832
---------- ----------
NET INCOME..................................... $ 28,239 $ 62,756
---------- ----------
NET REALIZED AND UNREALIZED GAINS ON
INVESTMENT TRANSACTIONS:
Net realized gain on investment
transactions................................... 65,478 -
Net unrealized appreciation during the
period on investment transactions.............. 1,810,760 -
---------- ----------
NET GAIN ON INVESTMENT TRANSACTIONS............ 1,876,238 -
---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $1,904,477 $ 62,756
========== ==========
INCOME PER SHARE............................... $ 0.500 $ 0.017
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING.. 3,810,535 3,785,535
========== ==========
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
BRANTLEY CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER FOR THE QUARTER
ENDED MARCH 31, ENDED MARCH 31,
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS: $ 1,904,477 62,756
Adjustments to reconcile net change in
net assets resulting from operations
to net cash provided by operations:
Purchases of investment securities......... $(1,450,708,964) (2,258,854,000)
Sales/maturities of investment securities.. 1,451,160,020 2,258,854,000
Net realized gain from investments......... (65,478) -
Change in unrealized appreciation.......... (1,810,760) -
Changes in assets and liabilities:
Prepaid expenses..................... 30,702 30,225
Unamortized organization costs....... 8,244 8,278
Advisery fee payable................. (9,473) 181,962
Administration fee payable........... (5,274) -
Professional fee payable............. (53,033) -
Printing fee payable................. (4,492) -
Custody and accounting............... (10,500) -
Directors fee payable................ (292) -
Registration payable................. 8,630 - -
Transfer Agent fee payable........... 6,342 -
Distributions payable................ (342,948) -
Organization costs payable........... (25,000) (24,742)
Offering costs payable............... - (25,415)
Payable to related party............. - (88,436)
Dividend and interest receivable..... (67,573) -
Other assets......................... 246 -
Other liabilities.................... (6,233) 43,051
--------------- --------------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES................. (1,895,836) 187,679
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Subsequent offering........................ - 1,500,000
--------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES..... - 1,500,000
--------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS FOR
THE PERIOD................................. 8,641 1,637,679
--------------- --------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 24,691,345 36,329,220
--------------- --------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD.. $ 24,699,986 $ 38,016,899
=============== ==============
</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
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PAID IN EARNINGS STOCKHOLDERS
STOCK CAPITAL (DEFICIT) EQUITY
----- ------- --------- ------
<S> <C> <C> <C> <C>
Balance At December 31, 1997........ $38,105 $37,611,421 $ 5,262,089 $42,911,615
Net increase in net assets from
operations......................... - - 1,904,477 1,904,477
------- ----------- ----------- -----------
Balance at March 31, 1998........... $38,105 $37,611,421 $ 7,166,566 $44,816,092
======= =========== =========== ===========
</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 1997
Annual Report filed on Form 10-K dated March 31, 1998.
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
March 31, 1998, the results of its operations for the three month period
ended March 31, 1998, the results of its operations for the three month
period ended March 31, 1998, and its cash flows for the three month period
ended March 31, 1998. Interim results are not necessarily indicative of
results to be expected for a full fiscal year.
2. INVESTMENTS, CASH AND CASH EQUIVALENTS
As of March 31, 1998 and December 31, 1997 the identified cost of
investments were $13,144,742 and 13,530,220, respectively.
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>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
Cash.................................. $ (1,460) $ 1,568
Repurchase Agreement..................
5.28% 4/1/98.......................... 504,000
United States Treasury Bill...........
5.30%, 4/16/98........................ 24,197,446
1.00%, 1/22/98........................ 24,689,777
----------- ------------
$24,699,986 $ 24,691,345
=========== ============
</TABLE>
6
<PAGE> 7
BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
CONTINUED
3. INVESTMENT ADVISERY AGREEMENT
The Company has entered into an investment advisery agreement (the
"Advisery Agreement") with Brantley Capital Management, L.L.C. (the
"Adviser") under which the Adviser is entitled to an annual management fee
of 2.85% of the Company's net assets, determined at the end of each calendar
quarter, and payable quarterly in arrears throughout the term of the
Advisery Agreement. For the quarter ended March 31, 1998 the Adviser earned
$274,638 under the Advisery Agreement. Certain officers of the Company are
also officers of the Adviser. No officer of the Adviser receives any
compensation from the Company for serving as officer of the Company.
4. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
MARCH 31, MARCH 31,
FOR THE PERIODS ENDED 1998 1997
------ ------
<S> <C> <C>
Net Asset Value, Beginning of the Period....... $ 11.26 $ 9.87
Income from investment operations:
Net Income..................................... 0.01 0.02
Net Realized And Unrealized Gain
on Investments............................... 0.49 -
------- ------
Total from investment operations:............ 0.50 0.02
------- ------
Issuance of Shares Subsequent to Initial
Public Offering at $10 per Share............. - 0.01
------- ------
Net Asset Value, End of the Period............. $ 11.76 $ 9.90
======= =========
Market Value, End of the Period................ $ 10.75 $ 8.88
======= =========
Total Return, At Market Value................. 11.63% (11.20)%
Total Return, At NAV........................... 4.44% 0.30%
</TABLE>
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 Act of 1940, as amended (the "Act"). The Company
invests primarily in the equity and equity-linked debt securities of private
companies. The Company's principal investment objective is the realization of
long-term capital appreciation in respect of such investments.
The Quarterly Report on Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company and its investment portfolio companies. Such
statements are only predictions and the actual events or results may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those relating to investment capital demand, pricing, market acceptance, the
effect of economic conditions, litigation and the effect of regulatory
proceedings, competitive forces, the results of financing and investing efforts,
the ability to complete transactions and other risks identified below or in the
Company's filings with the Securities and Exchange Commission. 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, and has invested, a portion of its assets in post-venture
small-cap public companies.
Pending the completion of equity and equity-linked debt security
investments that meet the Company's investment objectives, available funds are
invested in short-term securities. In addition, as more fully described below,
the Company has entered into several investments in equity and equity-linked
debt securities of private companies which earn regular dividends and interest.
Dividend and interest income on investments was $425,192 for the quarter ended
March 31, 1998 compared to $451,588 for the quarter ended March 31, 1997. The
significant components of total operating expenses were fees of $274,638 to
Brantley Capital Management, L.L.C., the Company's investment adviser during the
quarter ended March 31, 1998, and other professional fees.
During the quarter, the Company's equity and equity-linked debt security
investments resulted in net realized and unrealized gains on investment
transactions of $1,876,238. Beginning in the second quarter of 1997, the Company
invested in a number of small capitalization public stocks which are subject to
general stock market conditions and the four private investments described
below. The 1998 unrealized gains (losses) were significantly influenced by
general market conditions and the operating performance of the small
capitalization public stocks.
Like other business development companies, mutual funds, financial and
business organizations and individuals around the world, the Company could be
adversely affected if the computer systems used by its investment adviser and
third party administrator, custodian and transfer agent do not properly process
and calculate date-related information from and after January 1, 2000.
Accounting and custodial services of the fund are provided by State Street Bank
& Trust Company. Transfer agency services are provided by Boston Equiserv. The
Company has made inquiries to these service providers regarding whether they
expect to have their computer systems adjusted for the year 2000 transition.
While there can be no assurances that the steps being taken by the service
providers will be sufficient to avoid any adverse impact on the Company, all of
these service providers have reported that they expect their systems to be in
compliance with year 2000 requirements prior to that time.
8
<PAGE> 9
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 March 31, 1998, the Company had $24,699,986 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 March 31, 1998, the cash was primarily invested in a United States
Treasury security.
At March 31, 1998, the cost of equity and equity-linked debt security
investments was $13,144,742 and their aggregate market value was $20,216,460.
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 March 31, 1998 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 (the
"Waterlink Warrants"). 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 down and no notes
were issued to the Company. The Company still holds the Waterlink Warrants. At
March 31, 1998, the market price of Waterlink common Stock (NYSE:WLK) closed at
$14.00.
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 Midwest and Great Lakes
States region. 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
warrant may not be exercised until the earlier of September 30, 1998 or the
occurence of certain events. The warrants are currently not exercisable. The
proceeds of the notes will be used by Health Care Solutions to help finance
current and future acquisitions.
On December 16, 1997, the Company funded 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"). As a result the Company
purchased approximately 788,961 shares of Fitness Quest Series A Convertible
Preferred Stock at $1.71 per share. Fitness Quest is a direct marketing and
distribution company launching an acquisition strategy. A portion of the
proceeds were used by Fitness Quest for a management buy-out of the company from
its previous owner, 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, at the time of the purchase, had revenues at a $120 million annual sales
rate level. The terms of the Preferred Stock provide for payment of a 10%
dividend, payable quarterly.
Fitness Quest showed extraordinary operating results during 1997
growing to $120 million in sales, completing the acquisition of a tread mill
manufacturing company, and improving its operating margins and profits. In
addition it is currently planning for 1998 sales growth rates of approximately
40% with continued improvement in operating margins and profits. As a result of
this performance the Company's market value in its Fitness Quest investment was
increased to $5,440,000 during 1997. This valuation was based on P/E ratios,
cash flow multiples and other appropriate financial
9
<PAGE> 10
measurements of similar private Companies and was reviewed and approved by its
Board of Directors.
On December 23, 1997, the Company completed a $2.1 million investment with
Brantley Venture Partners III, L.P. to purchase a $6.0 million preferred stock
issue for Corporate Wings, Inc. ("Corporate Wings"). The Company's investment
consists of approximately 644,000 shares of Corporate Wings Series A Convertible
Preferred Stock at $3.26 per share. The terms of the transaction provide for an
8% dividend, payable quarterly. 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 are being used by Corporate Wings to continue to
execute an acquisition strategy. Corporate Wings has been in business since 1978
and had approximately $40 million in sales in 1997.
At March 31, 1998, the Company had stockholders' equity of $44,816,092,
resulting in a net asset value per share of $11.76.
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
Date: May 14, 1998 By: /s/ Robert P. Pinkas
------------------------
Robert P. Pinkas
Chief Executive Officer
Date: May 14, 1998 By: /s/ Tab A. Keplinger
------------------------
Tab A. Keplinger
Chief Financial Officer
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.)
EXHIBIT 3 Articles of Incorporation and By-laws
(1) Articles of Incorporation and Articles of Amendment and Restatement
of the Charter of 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) Bylaws 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. 1 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 exhibits are incorporated herein by reference)
(2) Form of Investment Advisory Agreement between the Registrant and the
Investment Advisor (Exhibit 2.g to Amendment No. 3 to the
Registration Statement filed on November 26, 1996, which exhibits are
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 exhibits are 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 exhibits are 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 exhibits are
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 exhibits are 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 exhibits
are 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 exhibits are incorporated herein by
reference)
EXHIBIT 27* Financial Data Schedule
12
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 13,144,742
<INVESTMENTS-AT-VALUE> 20,216,460
<RECEIVABLES> 138,295
<ASSETS-OTHER> 232,298
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,287,039
<PAYABLE-FOR-SECURITIES> 100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 470,847
<TOTAL-LIABILITIES> 470,947
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,649,526
<SHARES-COMMON-STOCK> 3,810,535
<SHARES-COMMON-PRIOR> 3,810,535
<ACCUMULATED-NII-CURRENT> 28,239
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 65,478
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,810,760
<NET-ASSETS> 44,816,092
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 425,192
<OTHER-INCOME> 0
<EXPENSES-NET> 396,953
<NET-INVESTMENT-INCOME> 28,239
<REALIZED-GAINS-CURRENT> 65,478
<APPREC-INCREASE-CURRENT> 1,810,760
<NET-CHANGE-FROM-OPS> 1,904,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,904,477
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 274,638
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 396,953
<AVERAGE-NET-ASSETS> 43,863,854
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .49
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.76
<EXPENSE-RATIO> .036
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
