BRANTLEY CAPITAL CORP, 10-K405, 1999-03-31

BRANTLEY CAPITAL CORP
10-K405, 1999-03-31

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

<TABLE>
<S> <C> <C>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER: 814-00127

BRANTLEY CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
MARYLAND 34-1838462
- -------------------------------------------- --------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>

20600 Chagrin Boulevard, Suite 1150, Cleveland, Ohio 44126
(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 [ ]

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. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 22, 1999 was $23,265,576, based on the last sale
price of such stock as quoted by NASDAQ on such date (officers, directors and 5%
shareholders are considered affiliates for purposes of this calculation).

The number of shares of common stock outstanding as of March 22, 1999 was
3,810,535.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Brantley Capital Corporation's Proxy Statement to be filed on
or about April 15, 1999 (incorporated into Part III of this Form 10-K)
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TABLE OF CONTENTS

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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 5

PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 5
Item 6. Selected Financial Data..................................... 5
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 6
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 10
Item 8. Financial Statements and Supplementary Data................. 11
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 23

PART III
Item 10. Directors and Executive Officers of the Registrant.......... 23
Item 11. Executive Compensation...................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 23
Item 13. Certain Relationships and Related Transactions.............. 23

PART IV
Item 14. List of Financial Statements, Financial Statement Schedules,
Exhibits, and Reports on Form 8-K......................... 24

Signatures.............................................................. 25
Exhibit Index........................................................... 26
</TABLE>

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PART I

ITEM 1. BUSINESS

Brantley Capital Corporation (the "Company") is a closed-end,
non-diversified investment company incorporated on August 1, 1996 under the
General Corporation Law of the State of Maryland, that has elected to be treated
as a "business development company" under the Investment Company Act of 1940, as
amended (the "Act"). The Company invests primarily in the equity securities (for
example, common stock, preferred stock, convertible preferred stock, or options,
warrants or rights to acquire stock) and equity-linked debt securities (for
example, convertible debt or indebtedness accompanied by warrants, options or
rights to acquire stock) of private companies. The Company also invests a
portion of its assets in small-cap public companies (as defined below). The
Company's investment objective is the realization of long-term capital
appreciation in the value of its investments. In addition, whenever feasible in
light of market conditions and the cash flow characteristics of its portfolio
companies, the Company seeks to provide an element of current income primarily
from interest, dividends and fees paid by its portfolio companies. Finally, the
Company seeks to preserve the long-term value for its shareholders through its
investing and operating policies.

With respect to its investments in private companies, the Company's
principal focus is on industries that it considers to be good candidates for
successful consolidation. The Company also favors investments in private
companies that it believes can achieve the necessary size, profitability,
management depth and sophistication to become public companies or become
candidates for acquisition by merger or otherwise. The Company seeks to enable
its stockholders to participate in investments not typically available to the
public due to the private nature of a substantial majority of the Company's
portfolio companies, the size of the financial commitment often required in
order to participate in such investments, and/or the experience, skill and time
commitment required to identify and take advantage of these investment
opportunities.

The Company is a partner in the growth of its private portfolio companies,
rather than merely a financial participant. The Company offers managerial
assistance to its private portfolio companies and expects that its
representatives will play a role in setting corporate strategies and advising
such companies regarding important decisions affecting their businesses,
including potential acquisitions, recruiting key managers, and securing equity
and debt financing.

With respect to its investments in small-cap public companies, the
Company's primary focus is on post-venture companies that the Investment Adviser
(as defined below) believes to have significant potential for growth in sales
and earnings. A "post-venture" company is a company that has received venture
capital or private equity financing either (a) during the early stages of the
company's business or the early stages of the development of a new product or
service, or (b) as part of a restructuring or recapitalization of the company.
The Company generally limits its post-venture investments to companies which,
within the prior ten (10) years, have received an investment of venture or
private equity capital, have sold or distributed securities to venture or
private equity capital investors, or have completed an initial public offering
of equity securities.

The Company anticipates that its position as an investor in both private
companies and post-venture small-cap public companies will benefit its ultimate
returns on its investments. This benefit will be derived from historic and
future knowledge that the Company and its managers have and will gain regarding
companies, technologies, management, markets and pricing in both public and
private markets. For example, knowledge of emerging technologies and companies
in the private markets can be beneficial in selecting small-cap public stocks.
Conversely, knowledge of public companies and market performance can be
beneficial in pricing and structuring private investments.

INVESTMENT ADVISER

Brantley Capital Management, Ltd., 20600 Chagrin Boulevard, Suite 1150,
Cleveland, Ohio 44122, serves as the investment adviser (the "Investment
Adviser") to the Company pursuant to an agreement (the "Investment Advisory
Agreement") with an initial term of two (2) years, renewable from year to year
thereafter if it is approved annually by the Company's Board of Directors or by
vote of a majority of the Company's outstanding

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shares of capital stock (including, in either instance, approval by Company
directors who are not interested persons). The Investment Advisory Agreement is
subject to renewal on November 26, 1999. The Investment Adviser is responsible,
on a day-to-day basis, for the selection and supervision of portfolio
investments and for management oversight of the Company's records and financial
reporting requirements. The Company pays the Investment Adviser 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 Investment Advisory Agreement. The Investment Adviser is responsible for the
salaries and expenses of its own personnel, office space costs, and local
telephone and administrative support costs.

NATURE OF INVESTMENTS IN PORTFOLIO COMPANIES

The Company currently maintains an investment strategy in which investments
in portfolio companies are, and will continue to be, in the form of equity or
some combination of debt with equity, but will always include some equity
feature through which the Company can participate in the growth in the value of
the underlying businesses. The Company's investment in a given portfolio company
may consist of common stock, preferred stock (which may or may not be
convertible into common stock), debentures (which may or may not be convertible
into common stock and may or may not be subordinated), warrants to purchase
common stock, or some combination thereof. The Company generally structures, and
anticipates that it will continue to generally structure, its investments in
privately-owned portfolio companies with the intention of having the investments
achieve liquidity within eighteen (18) months to three (3) years from the
respective dates of the investments, although there can be no assurance that
such time frame will be met and situations may arise in which the Company may
hold securities for a longer period.

TEMPORARY INVESTMENTS

Pending investments in the types of securities described above, the Company
invests its cash in cash items, government securities or high quality debt
securities maturing in one year or less from the time of investment.

OPERATIONS

The Investment Adviser locates potential investment opportunities primarily
by making use of an extensive network of investment bankers, commercial bankers,
accountants and other finance professionals; venture capitalists and other
investment professionals; attorneys; business executives; and entrepreneurs.

The investment process includes the identification, evaluation,
negotiation, documentation and closing of the investment. The evaluation of a
potential investment includes due diligence, which involves review of historical
and prospective financial information, and which, particularly in the case of a
privately-owned company, usually involves on-site visits; interviews with
management, employees, customers and vendors of the potential portfolio company;
and background checks and research relating to its management, markets, products
and services.

Upon the completion of due diligence and a decision to proceed with an
investment in a private company, the Investment Adviser creates an investment
memorandum containing information pertinent to the investment for presentation
to the Company's Board of Directors, which must approve the investment.
Additional due diligence with respect to any investment by the Company may be
conducted by the Company's attorneys and independent accountants prior to the
closing of the investment.

SELECTION OF INVESTMENTS

As a general rule, most of the Company's investments are, and the Company
anticipates that they will continue to be, in small- to medium-sized companies
with total assets or annual sales under $500,000,000. Many of these companies
may have very limited operating histories. The Company's main criteria for the
selection of investments in portfolio companies have remained consistent since
the Company's formation. Each investment includes portfolio companies that have
the potential for substantial growth in sales and earnings. The Company seeks to
identify companies which management believes have significant opportunities in
the markets they serve or that have devised innovative products, services or
ways of doing business that afford them a distinct competitive advantage. Such
companies might achieve growth either internally or by acquisition. In addition,
the
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Company invests in companies seeking to consolidate fragmented industries.
Often, such consolidations can improve performance by bringing experienced
management, economies of scale and greater capital resources to bear on
businesses that might have lacked such management, economies and resources in
the past.

In evaluating potential portfolio companies, the Company pays particular
attention to the following characteristics:

MANAGEMENT. The Company seeks investments in companies whose management
teams consist of talented individuals of high integrity with significant
experience. The Company pays particular attention to the depth of the management
team and the extent to which key managers have an ownership interest in the
portfolio company.

OPPORTUNITY FOR SIGNIFICANT INFLUENCE. The Company favors investments in
companies in which it has the opportunity to become a partner in the building of
such companies, rather than being a mere financial participant. In addition, the
Company seeks investments in which its representatives will play a role in
setting corporate strategies for the portfolio companies, and will be in a
position to advise such companies regarding important decisions affecting their
businesses, including acquisitions for such companies, recruiting key managers,
and securing equity and debt financing.

MARKET DYNAMICS. The Company prefers investments in companies that are
addressing a large, unfulfilled market demand with long-term high-growth
prospects and that can reasonably expect to achieve and maintain a significant
market share through proprietary products and services. The Company also favors
investments in companies that deliver products and services with significant
performance and cost advantages and for which there exist significant barriers
to effective competition by others. In addition, with respect to its investments
in private companies, the Company will be attracted to industries that it
considers to be good candidates for successful consolidation.

ABILITY TO ACHIEVE LIQUIDITY. With respect to its investments in private
companies, the Company considers the potential and likely means for achieving
the liquidity that would ultimately enable the Company to achieve cash value for
its equity investments. Possible ways of achieving liquidity include an initial
public offering of the portfolio company, a sale of the portfolio company to a
third party or a purchase by the portfolio company (or its managers) of the
Company's equity interest.

GROWTH AT A REASONABLE PRICE. With respect to investments in post-venture
small-cap public companies, the Company targets companies whose current and
projected price/earnings ("P/E") ratios are less than their respective growth
rates. This growth at a reasonable price discipline is anticipated to result in
attractive stock appreciation as a result of both earnings growth and P/E
multiple expansion. The majority of these post-venture public investments are
expected to be in companies with prior financial support from professional
venture capitalists and private equity funds, and these companies often have
stronger management teams, better financial controls and significant competitive
advantages.

POTENTIAL CO-INVESTMENTS AND FOLLOW-ON INVESTMENTS

The Company has, and anticipates, "co-investing" with existing affiliates
of the Company and the Investment Adviser, as well as with other future
affiliates, in specified amounts and on terms and conditions that are the same
in all material respects, subject to the availability of capital for investment
on the part of the Company and each such affiliate and certain other conditions.
At the present time, affiliates of the Company and the Investment Adviser
include certain venture capital investment partnerships in which certain
officers and directors of the Company and officers of the Investment Adviser
serve as general partners of such investment partnerships' general partner.
Theses investment partnerships include Brantley Venture Partners II, L.P.,
Brantley Venture Partners III, L.P. and Brantley Partners IV, L.P. On November
18, 1997, the Company received an exemptive order from the Securities and
Exchange Commission (the "Commission") that, subject to certain terms and
conditions, relieves the Company from certain provisions of the Act to permit
certain joint transactions with the investment partnerships. No violations of
the Act existed as a result of investments made before obtaining exemptive
relief.

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ELIGIBLE PORTFOLIO COMPANIES

The Company, as a "business development company" under the Act, may not
acquire any assets other than "Eligible Assets" unless, at the time the
acquisition is made, Eligible Assets represent at least 70% of the Company's
total assets (other than certain assets necessary for its operation, such as
office furniture, equipment and facilities). "Eligible Assets" are defined in
Section 55(a) of the Act. The principal categories of Eligible Assets relevant
to the business of the Company are the following:

(1) Securities purchased in transactions not involving any public offering
from the issuer of such securities, which issuer is an eligible portfolio
company. An "eligible portfolio company" is defined in the Act as any issuer
which:

(a) is organized under the laws of, and has its principal place of
business in, the United States;

(b) is not an investment company other than a small business
investment company wholly-owned by the business development
company; and

(ii) is actively controlled by a business development company and
has an affiliate of a business development company on its board of
trustees or directors; or

(iii) meets other such criteria as may be established by the
Commission.

(2) Securities of any eligible portfolio company which is controlled by the
business development company.

(3) Securities received in exchange for or distributed on or with respect
to securities described in (1) or (2) above, or pursuant to the exercise of
options, warrants or rights relating to such securities.

(4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.

In addition, the business development company must have been organized (and
have its principal place of business) in the United States for the purpose of
making investments in the types of securities described in (1) or (2) above.
Moreover, in order for securities of portfolio companies to constitute Eligible
Assets for the purpose of the 70% test described above, the Company must make
available to the issuer of the securities significant managerial assistance;
except that, where the Company purchases such securities in conjunction with one
or more other persons acting together, one of the other persons in the group may
make available such managerial assistance.

The Company may invest up to 30% of its assets in portfolio investments
that are not eligible assets. This portion of the Company's portfolio consists
primarily of investments in post-venture small-cap public companies.

COMPETITION

The Company's primary competitors include financial institutions, venture
capital and private equity firms, mutual funds concentrating on post-venture
small-cap companies, and other nontraditional investors. Many of these entities
have greater financial and managerial resources than the Company. The Company
competes with such entities primarily on the basis of the quality of its
services, the quality of the investment entities previously managed by
affiliates of the Investment Advisor, the Company's investment analysis and
decision-making processes, and on the investment terms the Company offers in
respect of the securities to be issued by its portfolio companies.

EMPLOYEES

The Company has no employees. Pursuant to the terms of the Investment
Advisory Agreement, the Investment Adviser supplies all of the personnel
necessary to operate the Company's business.

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ITEM 2. PROPERTIES

The Company does not own or lease any properties or other intangible
assets.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter
ended December 31, 1998.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE

The Company's common stock is traded on the NASDAQ Small Cap Market System
("NASDAQSCM") under the symbol "BBDC." The following table sets forth, for the
period indicated, high and low closing prices per share:

<TABLE>
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HIGH LOW
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<S> <C> <C>
January 1, 1998 -- March 31, 1998....... $10.875 $8.875
April 1, 1998 -- June 30, 1998.......... $11.50 $9.50
July 1, 1998 -- September 30, 1998...... $ 9.813 $6.75
October 1, 1998 -- December 31, 1998.... $ 8.125 $6.125
January 1, 1997 -- March 31, 1997....... $10.00 $8.875
April 1, 1997 -- June 30, 1997.......... $10.00 $8.50
July 1, 1997 -- September 30, 1997...... $ 9.75 $8.50
October 1, 1997 -- December 31, 1997.... $ 9.625 $8.625
</TABLE>

At March 22, 1999, there were approximately 80 shareholders of record of
the Company's common stock with a market price of $7.25 per share. There are
10,535 unregistered shares of common stock issued by the Company pursuant to a
sale of such shares to the Company's Chief Executive and Chief Operating
Officers at the Company's formation. The sale was subject to the terms,
conditions and price of the initial public offering.

During the year ended December 31, 1998 the Company declared a $.01
dividend on July 31, 1998. During the year ended December 31, 1997, the Company
declared the following dividends.

<TABLE>
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April 15, 1997........................ $.01
July 15, 1997......................... $.01
October 16, 1997...................... $.01
December 18, 1997..................... $.09
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA

The information set forth under Item 8 is incorporated herein by reference.

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ITEM 7. 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
"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 Annual Report on Form 10-K 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, whenever feasible in light of
market conditions and the cash flow characteristics of its portfolio companies,
the Company seeks to provide an element of current income primarily from
interest, dividends and fees paid by its portfolio companies. Dividend and
interest income on investments was $361,085 and $1,745,969 respectively, for the
quarter and twelve months ended December 31, 1998. The significant components of
total operating expenses were fees of $1,325,320 to the Investment Adviser
during the year ended December 31, 1998, and other professional fees.

During the quarter and twelve months ended December 31, 1998, the Company's
equity and equity-linked debt security investments resulted in net realized and
unrealized gains on investment transactions of $8,946,106 and $7,137,032,
respectively. During 1998, the Company was invested in small capitalization
public stocks which are subject to general stock market conditions and the five
private investments described below. The 1998 unrealized gains (losses) were
significantly influenced by general market conditions and the operating
performance of Corporate Wings, Inc. as more fully described below.

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 the 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.
Significant accounting and custodial services of the Company are provided by
State Street Bank & Trust Company. In addition, transfer agency services are
provided by Boston Equiserv. The Company has made inquiries to the Investment
Adviser, State Street Bank & Trust Company, and Boston Equiserv regarding
whether they expect to have their computer systems year 2000 compliant. Reports
describing the progress of State Street Bank & Trust Company and Boston Equiserv
in preparing for January 1, 2000 are reviewed on a regular basis. 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. While all of the Company's service
providers are reporting an appropriate state of readiness, the risk of a service
provider failing to be year 2000 compliant could mean many things based upon the
specific conditions of non-compliance. As such, the Company is regularly
monitoring the projected readiness of its service providers to establish optimal
time frames in which to invoke contingency efforts should a year 2000
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transition plan fail. These contingency efforts may involve the development of
alternative operational procedures or, in a worse case scenario, requests for
proposals to identify alternative service providers prior to January 1, 2000.
Because the Company uses third parties for nearly all of its operating and
administrative activities, it has no material computer systems to maintain
itself, and as such, the cost of complying with the year 2000 issue is expected
to be minimal.

Year 2000 issues can also increase the risks of the Company's investments.
To assess the potential effect of year 2000 issues, the Adviser reviews
information regarding the year 2000 readiness of issuers of securities the
Company may purchase. However, this may be difficult with certain issuers. For
example, the Company primarily invests in the equity and equity-linked debt
securities of private companies which are not required to publish detailed
information regarding their year 2000 readiness. The financial impact of these
year 2000 issues is under continual evaluation. There can be no assurance that
potential year 2000 problems of issuers of securities purchased by the Company
would not have a material adverse effect on the Company's performance.

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 1999.

At December 31, 1998, the Company had $22,973,379 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 December 31, 1998, the cash was primarily invested in a United
States Treasury security.

At December 31, 1998, the cost of equity and equity-linked debt security
investments made to date was $14,455,755 and their aggregate market value was
$26,911,160. Management believes the companies identified have significant
potential for long-term growth in sales and earnings. On a quarterly basis the
Board of Directors reviews and approves the valuation of each of the Company's
private investments and the Company's private investment portfolio as a whole.
Equity and equity-linked debt security investments that individually represent
more than 3% of the total assets of the Company at December 31, 1998 were
comprised of the following transactions:

Waterlink, Inc.

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. 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 December 31,
1998, the market price of Waterlink common Stock (NYSE:WLK) closed at $3 5/8.
Therefore the Company reported no market value at December 31, 1998 for the
Warrants.

Health Care Solutions, Inc.

On September 30, 1997, the Company funded 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 health care services market and is currently at a $50 million annual
sales rate 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
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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 warrants are
currently exercisable. The proceeds of the notes were used by Health Care
Solutions to help finance acquisitions.

Fitness Quest, Inc.

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 was used for acquisitions. Fitness Quest
has been in the fitness promotional products business since 1994 and, at the
time of the purchase, had revenues at a $100 million annual sales rate level.
The terms of the Preferred Stock provide for payment of a 10% dividend, payable
quarterly.

During 1997, Fitness Quest grew to $120 million in sales and improved its
operating margins and profits. The Company's Board of Directors, after a
complete evaluation, made a determination to increase the Company's market value
in its Fitness Quest investment in 1997 to $5,440,000 resulting in a 1997
unrealized gain of $4,090,000. This evaluation was based on price to earnings
ratios, cash flow multiples and other appropriate financial measurements of
similar private companies. In 1998, the operating results of Fitness Quest were
adversely impacted by the cyclical nature of its business and one-time expenses
resulting from several acquisition transactions. Consequently, the current
annual sales rate level is approximately $90 million with lower than expected
profit margins.

During 1998, the Company funded a $701,300 commitment to invest with
Brantley Venture Partners III, L.P. in a $2.0 million senior subordinated debt
investment in Fitness Quest. The note matures on March 31, 1999 and calls for a
10% interest rate per annum. In addition, the Company received a warrant to
purchase 72,550 shares of Fitness Quest stock for $.01 per share. The proceeds
of the investment were used to fund Fitness Quest's working capital needs as it
prepared for the 1998 holiday season.

Corporate Wings, Inc.

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 were used by Corporate Wings to continue to execute
an acquisition strategy. Corporate Wings has been in business since 1978 and had
sales of approximately $40 million in 1997.

On December 29, 1998, the Company announced the completion of a second
private equity investment in Corporate Wings, Inc. As a result, the Company
purchased $962,500 of a $5.5 million Preferred Stock transaction led by The
Provident Bank. The Company also agreed to purchase approximately 65,034 shares
of a Class A Convertible Preferred Stock at $14.80 per share. The terms of the
transaction provide for an 8% dividend payable quarterly. Proceeds will be used
to fund the expansion of Corporate Wings' Flight Option program and to continue
to execute an acquisition strategy. During 1998, Corporate Wings completed the
acquisition of Miller Aviation and grew to over $125 million in annual revenues.
As a result of the price of this subsequent financing, which was led by
Provident Bank, and the superior operating performance of Corporate Wings during
1998, the market value of the Company's original investment in Corporate Wings
was increased to $9,531,760 resulting in an unrealized gain of $7,431,760. This
valuation was based on the $14.80 per share price negotiated by The Provident
Bank and approved by the Company's Board of Directors.

8
<PAGE> 11

Disposable Products Company, LLC

On August 10, 1998, the Company entered into an investment led by Banc One
Capital to provide $1.0 million of a $3.0 million subordinated debt facility
with warrants to Disposable Products Company, LLC. ("DPC"). DPC is an
acquisition strategy company in the business of manufacturing and converting of
paper and nonwoven materials into wiping products for sale to commercial,
institutional, industrial and government markets. In addition, DPC is a
converter and reseller of other safety and industrial/janitorial products. Upon
completion of a pending acquisition, DPC will have revenues of approximately $25
million. The terms of the debt facility calls for a 12% interest rate per annum
with a final maturity five years from the closing. Brantley also received a
detachable common stock purchase warrant exercisable into 5% of the
fully-diluted common stock of the company at the time of exercise at a nominal
exercise price. The proceeds of the facility were used to finance acquisitions.

Brantley Venture Partners II, L.P., Brantley Venture Partners III, L.P. and
Brantley Partners IV, L.P. (collectively, the "Partnerships") hold, in the
aggregate, approximately $200 million of venture capital private equity
investments. The Partnerships are related to the Investment Adviser in a manner
that requires exemption from certain provisions of the Act be obtained from the
Commission 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 Commission seeking an exemptive order permitting 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
Commission granted the exemptive order on November 18, 1997.

At December 31, 1998, the Company had stockholders' equity of $49,941,528,
resulting in a net asset value per share of $13.11.

RECENT DEVELOPMENTS

On January 28, 1999, the Company announced the completion of a $3.172
million commitment to invest with Brantley Venture Partners III, L.P. in a
$7.934 million Preferred Stock issue for Pediatric Physicians Alliance, Inc.
Pediatric Physicians Alliance is a physician practice management company that
develops integrated pediatric networks of care. The company's objective is to
develop the leading physician-based integrated pediatric organization in the
United States. The proceeds of the transaction were used to close on the
acquisition of a number of physician practices. Upon acquiring these practices,
Pediatric Physicians Alliance will have annualized revenues of approximately $30
million. The Company agreed to purchase 793,000 shares of Class A-2 Convertible
Preferred Stock. The terms of the transaction provide for a 10% dividend payable
quarterly.

IMPACT OF INFLATION

The Company does not believe that its business is materially affected by
inflation, other than the impact which inflation may have on the securities
markets, the valuations of business enterprises and the relationship of such
valuations to underlying earnings, all of which will influence the value of the
Company's investments.

RISKS

Pursuant to Section 64(b)(1) of the Act, a business development company is
required to describe the risk factors involved in an investment in the
securities of such company due to the nature of the company's investment
portfolio. Accordingly, the Company states that its objective is to achieve
capital appreciation through investments in businesses believed to have
favorable growth potential. Such businesses are often undercapitalized small
companies which can lack management depth and have not yet attained levels of
consistent profitability. The Company's private equity investments often include
securities which are subject to legal or contractual restrictions on resale,
which restrictions adversely affect the liquidity and marketability of such
securities.

9
<PAGE> 12

linked debt securities in private companies. The Company would anticipate no
impact on these investments from modest changes in public market equity prices.
However, should significant changes in market prices occur, there could be a
longer-term effect on valuations of private companies, which could affect the
carrying value and the amount and timing of gains realized on these investments.
A portion of the Company's investment portfolio also consists of common stocks
and warrants to purchase common stocks in publicly traded companies. These
investments are directly exposed to equity price risk, in that a hypothetical
ten percent change in these equity prices would result in a similar percentage
change in the fair value of these investments.

Because of the speculative nature of the Company's investments and the lack
of any market for the securities initially purchased by the Company, there is a
significantly greater risk of loss than is the case with traditional investment
securities. The high-risk, long-term nature of the Company's private equity
investment activities may prevent shareholders of the Company from achieving
price appreciation and dividend distributions.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information set forth under Item 7 -- Risks on pages 9-10 of this
Annual Report Form 10-K is incorporated herein by reference.

10
<PAGE> 13

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BRANTLEY CAPITAL CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents(Note 2)........................... $22,973,379 $24,691,345
Investments, at market...................................... 26,911,160 18,791,178
Dividends and interest receivable........................... 433,874 70,722
Other assets................................................ 137,113 271,490
----------- -----------
TOTAL ASSETS........................................... $50,455,526 $43,824,735
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Advisory fee payable (Note 3)............................... $ 361,153 $ 284,111
Administration fee payable.................................. 12,500 18,750
Professional fees payable................................... 39,319 120,088
Distributions payable....................................... -- 342,948
Organization and offering costs payable..................... 68,117 93,117
Other liabilities........................................... 32,909 54,106
----------- -----------
TOTAL LIABILITIES...................................... $ 513,998 $ 913,120
=========== ===========
STOCKHOLDERS' EQUITY (NOTE 7):
Common Stock, $0.01 par value; 25,000,000 shares
authorized and 3,810,535 shares issued and outstanding
at December 31, 1998 and 1997, respectively........... $ 38,105 $ 38,105
Additional paid in capital............................. 37,505,433 37,611,421
Retained earnings...................................... 12,397,990 5,262,089
----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................. 49,941,528 42,911,615
=========== ===========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $50,455,526 $43,824,735
=========== ===========
NET ASSET VALUE PER SHARE................................... $ 13.11 $ 11.26
=========== ===========
</TABLE>

See accompanying notes to the financial statements.

11
<PAGE> 14

BRANTLEY CAPITAL CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996*
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest and dividend income....................... $1,745,969 $1,712,400 $ 139,529
---------- ---------- ----------
OPERATING EXPENSES:
Advisory fees...................................... 1,325,320 1,126,741 81,898
Administration fees................................ 118,516 117,613 9,450
Professional fees payable.......................... 98,705 150,930 25,000
Other.............................................. 272,442 286,445 30,403
---------- ---------- ----------
TOTAL EXPENSES..................................... 1,814,983 1,681,729 146,751
---------- ---------- ----------
NET (LOSS) INCOME.................................... $ (69,014) $ 30,671 $ (7,222)
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENT
TRANSACTIONS:
Net realized gain (loss) on investment
transactions.................................... (57,414) 421,735 --
Net unrealized appreciation during the period on
investment transactions......................... 7,194,446 5,260,958 --
---------- ---------- ----------
NET GAIN ON INVESTMENT TRANSACTIONS.................. 7,137,032 5,682,693 --
---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS... $7,068,018 $5,713,364 $ (7,222)
========== ========== ==========
INCOME/(LOSS) PER SHARE.............................. $ 1.85 $ 1.50 $ (0.002)
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING........ 3,810,535 3,810,535 3,660,535
========== ========== ==========
</TABLE>

* The Company commenced operation on October 30, 1996.

See accompanying notes to the financial statements.

12
<PAGE> 15

BRANTLEY CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996*
--------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS:........................... $ 7,068,018 $ 5,713,364 $ (7,222)
Adjustments to reconcile net change in
net assets resulting from operations
to net cash provided by operations:
Net realized loss (gain) from
investments...................... $ 57,414 $ (421,735) $ --
Change in unrealized appreciation... (7,194,446) (5,260,958) --
--------------- --------------- -------------
Changes in assets and liabilities:
Advisory fee payable............. 77,042 202,213 81,898
Administration fee payable....... (6,250) 18,750 9,450
Professional fees payable........ (80,769) 95,088 95,088
Organization and offering costs
payable........................ (25,000) (163,010) 181,427
Dividend and interest
receivable..................... (363,152) (70,722) --
Distribution payable............. (342,948) -- --
Other assets..................... 134,377 19,326 (110,815)
Other liabilities................ (21,197) (60,601) 35,168
--------------- --------------- -------------
NET CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES........... (696,911) 71,715 284,994
--------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment
securities....................... (2,663,800) (18,040,089) --
Sales/maturities of investment
securities....................... 1,726,021 2,526,788 --
Purchases of short-term
investments...................... (5,933,395,842) (7,752,694,628) (653,897,000)
Sales/maturities of short-term
investments...................... 5,933,350,671 7,755,099,444 653,897,000
--------------- --------------- -------------
NET CASH (USED FOR) INVESTING
ACTIVITIES....................... (982,950) (13,108,485) 0
--------------- --------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares issued in
initial public offering.......... -- -- 36,044,176
Subsequent shares issued to initial
public offering.................. -- 1,500,000 --
Distributions....................... (38,105) (101,105) --
--------------- --------------- -------------
NET CASH (USED FOR) PROVIDED BY FINANCING
ACTIVITIES............................... (38,105) 1,398,895 36,044,176
--------------- --------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS FOR
THE PERIOD............................... (1,717,966) (11,637,875) 36,329,170
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................... 24,691,345 36,329,220 50
--------------- --------------- -------------
CASH AND CASH EQUIVALENTS, END OF THE
PERIOD................................... $ 22,973,379 $ 24,691,345 $ 36,329,220
=============== =============== =============
</TABLE>

- ---------------

* The Company commenced operation on October 30, 1996. The Company paid no
interest or federal income tax during the period.

See accompanying notes to the financial statements

13
<PAGE> 16

BRANTLEY CAPITAL CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PAID IN EARNINGS STOCKHOLDERS
STOCK CAPITAL (DEFICIT) EQUITY
------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE AT OCTOBER 30, 1996*............. $ 105 $ 105,245 $ 0 $ 105,350
Net increase (decrease) in net assets
from operations........................ -- -- (7,222) (7,222)
Issuance of 3,650,000 shares through
initial public offering................ 36,500 36,007,676 -- 36,044,176
------- ----------- ----------- -----------
BALANCE AT JANUARY 1, 1997............... $36,605 $36,112,921 $ (7,222) $36,142,304
------- ----------- ----------- -----------
Net increase in net assets from
operations............................. -- -- 5,713,364 5,713,364
Distributions from:
Net investment income.................... -- -- (23,084) (23,084)
Realized gains........................... -- -- (420,969) (420,969)
Issuance of 150,000 shares subsequent to
initial public offering................ 1,500 1,498,500 -- 1,500,000
------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997............. $38,105 $37,611,421 $ 5,262,089 $42,911,615
------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations........................ -- -- 7,068,018 7,068,018
Net investment loss reclassification..... -- (105,988) 105,988 --
Distributions from net investment
income................................. -- -- (38,105) (38,105)
------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998............. $38,105 $37,505,433 $12,397,990 $49,941,528
======= =========== =========== ===========
</TABLE>

- ---------------

* The Company commenced operation on October 30, 1996.

See accompanying notes to the financial statements.

14
<PAGE> 17

BRANTLEY CAPITAL CORPORATION

NOTES TO THE FINANCIAL STATEMENTS

1. ORGANIZATION

Brantley Capital Corporation (the "Company"), a Maryland corporation, is a
closed-end, non-diversified investment company which has elected to be treated
as a business development company under the Investment Company Act of 1940, as
amended (the "Act"). The Company was organized on August 1, 1996 and commenced
operations on October 30, 1996. The Company's investment objective is the
realization of long-term capital appreciation in the value of its investments.
To achieve this objective, the Company intends to invest primarily in privately
placed equities and debt and, to a lesser extent, in post venture small-cap
public companies.

The Company invests in securities classified as "restricted securities"
under the Securities Act of 1933. The value of restricted stock investments for
which no public market exists cannot be precisely determined. These securities
will usually be subject to restrictions on resale or otherwise have no
established trading market. The lack of liquidity of these securities may
adversely affect the ability of the Company to dispose of them in a timely
manner and at a fair price when the Company deems it necessary or advantageous.

Privately placed securities typically depend significantly on the
management talents and efforts of one person or a small group of persons. The
loss of the services of one or more of these persons could have a material
adverse affect on the portfolio company. In addition, due to their size and
sometimes limited product diversity, these companies may be more vulnerable to
economic downturns and often require additional capital to expand or compete.

Post venture small-cap public companies may also display more sensitivity
to changes in company, industry and market conditions than more established
public companies. Because small-cap public companies often have fewer
outstanding shares than larger companies, it may be more difficult for the
Company to buy or sell significant amounts of shares without an unfavorable
impact on the prevailing prices.

The Company operates as a non-diversified investment company within the
meaning of the Act and therefore, the Company's investments are likely not to be
substantially diversified.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles followed by the Company in
preparation of its financial statements.

A. Security Valuation

The Company's investment objective is the realization of long-term capital
appreciation in the value of its investments. As a result, any individual
investment in the Company's portfolio may, or may not, produce dividend income.
Privately placed securities are carried at fair value as determined in good
faith by or under the direction of the Board of Directors. Generally, the fair
value of each security will initially be based primarily upon its original cost
to the Company. Cost will be the primary factor used to determine fair value on
an ongoing basis until significant developments or other factors affecting the
investment (such as results of the portfolio company's operations, changes in
the general market conditions, subsequent financings or the availability of
market quotations) provide a basis for value other than cost valuation.

Portfolio investments listed on an exchange or traded on the Nasdaq
National Market System will be valued at the closing price listed on their
respective exchange or system on the date of valuation.

Securities traded in the over-the-counter market will be valued on the
average of the closing bid and asked prices on the day of valuation.

Debt securities with 60 days or less remaining to maturity will be valued
at amortized cost.

portfolio. Accordingly, the Company states that its objective is to achieve
capital appreciation through investments in businesses believed to have
favorable growth potential. Such businesses are often undercapitalized small
companies which can lack management depth and have not yet attained levels of
consistent profitability. The Company's private equity investments often include
securities which are subject to legal or contractual restrictions on resale,
which restrictions adversely affect the liquidity and marketability of such
securities.

The Company considers the management of equity price risk essential to
conducting its business and maintaining its profitability. The Company manages
this risk by maintaining a diverse portfolio of equity and equity-linked debt
securities. A portion of the Company's investment portfolio consists of equity
and equity-linked debt securities in private companies. The Company would
anticipate no impact on these investments from modest changes in public market
equity prices. However, should significant changes in market prices occur, there
could be a longer-term effect on valuations of private companies, which could
affect the carrying value and the amount and timing of gains realized on these
investments. A portion of the Company's investment portfolio also consists of
common stocks and warrants to purchase common stocks in publicly traded
companies. These investments are directly exposed to equity price risk, in that
a hypothetical ten percent change in these equity prices would result in a
similar percentage change in the fair value of these investments.

B. Repurchase Agreements

The Company may invest in repurchase agreements with institutions which the
Company's investment adviser has determined are creditworthy. Each repurchase
agreement is recorded at cost. The Company requires that the securities
purchased in a repurchase agreement be transferred to the Company's custodian in
a manner sufficient to enable the Company to obtain those securities in the
event of counter-party default. The seller is required to maintain the value of
the securities held at not less than the repurchase price, including interest.

C. 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. At December 31, 1998, cash and cash equivalents consisted of
the following:

<TABLE>
<S> <C>
Cash........................................................ $ 266,120
United States Treasury Bill 4.25%, 1/21/1999................ 22,707,259
-----------
$22,973,379
===========
</TABLE>

D. Security Transactions and Related Income

Security transactions are accounted for on a trade date basis. Net realized
gains or losses on sales of securities are determined on the specific
identification method. Interest income and expenses are recognized on the
accrual basis. Dividends are recorded on the ex-dividend date.

E. Dividends and Distributions to Stockholders

The Company intends to make quarterly distributions to its stockholders of
substantially all of its investment company taxable income. The Company may
choose to distribute net realized long-term capital gains, or to retain such
gains to supplement the Company's equity capital and support growth in its
portfolio. Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.

16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

F. Federal Income Taxes

The Company intends to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies as defined in applicable sections of the Internal Revenue Code. For
the year ended December 31, 1998, the Company reclassified $105,988 of net
investment income as a decrease to additional paid in capital on the Balance
Sheet and Statement of Stockholders' Equity. Also at December 31, 1998, the
Company had a capital loss carryforward of $57,414, which may be utilized to
offset any realized capital gains through December 31, 2006.

G. Organization Costs

Costs incurred by the Company in connection with its organization have been
deferred and are being amortized on a straight line basis over their estimated
useful lives.

H. Reclassifications

Certain previously reported amounts have been reclassified to conform to
the current year presentation.

3. INVESTMENT ADVISORY AGREEMENT

The Company has entered into an investment advisory agreement (the
"Advisory 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 Advisory Agreement. The
Advisory Agreement is subject to renewal annually by the Board of Directors. The
current term ends on November 26, 1999. 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. INVESTMENTS

At December 31, 1998, the cost of investments for federal income tax
purposes was the same for financial reporting purposes.

5. TRANSACTIONS WITH RELATED PARTIES

The Company has obtained exemptive relief from certain provisions of the
Act which permit the Company to invest in an offering which affiliates of the
Adviser also intend to invest in. The Company anticipates that, subject to
certain terms and conditions, current and future affiliates of the Adviser may
frequently invest in the same portfolio companies. No violations of the Act
exist as a result of investments made before obtaining exemptive relief.

Certain offering and organization costs were paid by officers of the
Company and the Adviser. No amounts were due to the officers of the Company as
of December 31, 1998 or December 31, 1997. At December 31, 1998 and 1997 the
Company owed $361,153 and $284,111 respectively to the Advisor for management
advisory services.

6. USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions, including the valuation of privately held securities, that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

7. STOCKHOLDERS' EQUITY

The Company is authorized to issue 25,000,000 shares of Common Stock with a
par value $0.01 per share. Shares totaling 3,660,535 were issued through the
organization and initial public offering of the Company at a per share price of
$10.00 per share. On January 15, 1997, the underwriters of the initial offering
of the Company's shares, exercised an option to purchase an additional 150,000
shares of Common Stock at $10 per share resulting in total shares outstanding of
3,810,535. The proceeds of the offerings were reduced by offering costs of
$455,824 before becoming available to the Company for investment.

Under the Company's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), all cash dividends and cash distributions to stockholders are
automatically reinvested unless the stockholder elects to receive their
distributions in cash. If the market value per share of the Common Stock on the
record date equals or exceeds the net asset value per share of Common Stock on
that date, the Company will issue new shares at the net asset value.

If the net asset value exceeds the market price, shares will be purchased
on the open market or in private transactions as soon as is practicable after
such date. If before the open market purchases have been completed, the market
price exceeds the net asset value, the Company will issue new shares at net
asset value to fulfill the purchase requirements.

8. STOCK OPTION PLANS

Concurrent with the offering, the Company adopted the 1996 Stock Option
Plan (the "Plan"), which authorizes the issuance of options to purchase up to
1,175,000 shares of Common Stock to officers and employees of the Company. Upon
closing of the offering, options to purchase 350,000 shares of Common Stock of
the Company were granted to the Company's executive officers. These options
became exercisable as to one-third of the Option Shares on the first anniversary
of the closing of the initial offering of the Company's Common Stock, as to an
additional one third of the Option Shares on the second anniversary of the
closing of the offering and as to the remaining one-third on the third
anniversary of the closing of the offering. Options granted under the Plan will
be exercisable at a price not less than the greater of (i) the current market
value on the date of option grant and (ii) the current net asset value of the
shares of Common Stock. No option may be exercised more than 10 years after the
date on which it is granted. Market value and NAV on the date of grant was
$10.00.

In addition, the Company has adopted a stock option plan relating to 75,000
shares of Common Stock and providing for option grants solely to the
disinterested directors of the Company (the "Director's Plan"), subject to
receipt of an order of the Securities and Exchange Commission approving such a
plan as fair and reasonable and not overreaching of the Company or its
stockholders.

In order to facilitate the purchase of shares under the Plan or Director's
Plan, the Company may make arms-length loans to each plan's participants, under
the terms required by Section 57 (j)(2) of the Act. No loans were outstanding as
of December 31, 1998 or 1997.

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock Based Compensation. The Statement encourages
companies to recognize expense for stock based compensation awards based on
their fair value on the date of grant. Under the Statement, companies may
continue following the existing accounting rules, provided that pro forma
disclosures are made of what net income and earnings per share would have been
had the new fair value method been used. The Company has elected to continue the
existing accounting method and to not adopt the fair value method. Pursuant to
the disclosure requirements of SFAS 123, proforma net change in net assets
resulting from operations for the year ended December 31, 1998 would have been
$6,826,518 or $1.79 net income per share. Management used the Black Scholes
model to perform this assessment. Key assumptions included an estimated
volatility of .235, expected option life of 5 years, an expected dividend yield
of 3.608% and a risk free interest rate of 5.83%.

18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

9. YEARLY DATA

Financial results for the year ended December 31, 1998 are summarized
below:

<TABLE>
<S> <C>
Total investment income..................................... $1,745,969
Net investment gain......................................... 7,137,032
Net increase in net assets from operations.................. 7,068,018
Income per share............................................ $ 1.85
</TABLE>

10. FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 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.................................................. (.02) 0.01
Net Realized And Unrealized Gain on Investments............. 1.88 1.50
------- -------
Total from investment operations:......................... 1.86 1.51
------- -------
Less Distributions:
Dividends from net investment income........................ (0.01) (0.01)
Dividends from net realized gains........................... -- (.11)
------- -------
Total Distributions....................................... (0.01) (0.12)
Net Asset Value, End of the Period.......................... $ 13.11 $ 11.26
======= =======
Market Value, End of the Period............................. $ 7.125 $ 9.63
======= =======
Total Return, At Market Value............................... (25.89)% 13.90%
Total Return, At NAV........................................ 16.63% 15.40%
</TABLE>

11. SCHEDULE OF INVESTMENTS

19
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------
MARKET
NAME OF ISSUER AND TITLE OF ISSUE SHARES/WARRANTS/PRINCIPAL VALUE
--------------------------------- ------------------------- -----------
<S> <C> <C>
DRUGS & HEALTH CARE
ESC Medical Systems Limited............................ 13,675 143,587
Health Care Solutions.................................. 1,500,001 1,500,100
-----------
1,643,687
-----------
ELECTRONICS
Cambridge Technology Partners.......................... 14,900 329,662
JPM Company............................................ 16,700 233,800
RF Micro Devices, Incorporated......................... 5,000 231,875
Technology Solutions Company........................... 32,725 350,770
-----------
1,146,107
-----------
HOTELS AND RESTAURANTS
Logans Roadhouse, Inc.................................. 19,500 458,250
-----------
LEISURE TIME
Action Performance, Inc................................ 16,000 566,000
-----------
MISCELLANEOUS
SLI, Incorporated - Lighting products.................. 24,850 745,087
Zebra Technologies Corporation - Machinery............. 10,710 307,913
-----------
1,053,000
-----------
RETAIL TRADE
Fitness Quest *........................................ 788,961 5,440,000
Fitness Quest Subordinated Debt with Warrants.......... 773,850 701,300
Just For Feet.......................................... 23,700 411,787
-----------
6,553,087
-----------
SOFTWARE
Axent Technologies, Incorporated....................... 30,523 932,859
Hyperion Solution Corporation.......................... 8,500 153,000
Summit Design, Incorporated............................ 24,200 225,362
-----------
1,311,221
-----------
TOTAL EQUITY AND EQUITY LINKED DEBT INVESTMENTS.......... 26,911,160
-----------
U.S GOVERNMENT SECURITIES
U.S. Treasury Bill 4.25%, 1/21/1999 *.................. 22,761,000 22,707,259
-----------
TOTAL INVESTMENTS -- (COST $37,163,014).................. $49,618,418
===========
</TABLE>

- ---------------

All investments are U.S. companies

* Represents 5% or more of Total Stockholders' Equity

12. YEAR 2000 READINESS (UNAUDITED)

The services provided to the Company by the Adviser, Sub-Administrator,
Transfer Agent and Custodian depend on the continued functioning of their
computer systems. Many computer software systems in use today cannot distinguish
the year 2000 from the year 1900 because of the way dates are encoded and
calculated. The Board of Directors for the Company has made inquiries of the
Adviser, Sub-Administrator, Transfer Agent and Custodian regarding whether they
expect to have their computer systems adjusted for the year 2000 transition.

20
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

The Company has been informed that all of these service providers expect that
their systems will be Year 2000 compliant prior to that time.

21
<PAGE> 24

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Brantley Capital Corporation

We have audited the accompanying balance sheets of Brantley Capital
Corporation as of December 31, 1998 and 1997, the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1998 and 1997, and the period from October 30, 1996 to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brantley Capital Corporation
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended and the period from October 30, 1996 to December
31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Cleveland, Ohio
March 5, 1999

22
<PAGE> 25

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the caption "ELECTION OF DIRECTORS" in the
Company's definitive Proxy Statement to be filed on, or about, April 15, 1999,
for its Annual Meeting of Stockholders to be held May 18, 1998, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, (the "1999 Proxy
Statement") is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "EXECUTIVE COMPENSATION" in the
1999 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the caption "ELECTION OF DIRECTORS" in the
1999 Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Investment Adviser, pursuant to the terms of the Investment Advisory
Agreement, is responsible, on a day-to-day basis, for the selection and
supervision of portfolio investments. Transactions between the Company and the
Investment Adviser, including operational responsibilities, duties and
compensation, are governed by the Investment Advisory Agreement. Throughout the
term of the Investment Advisory Agreement, the Company will pay to the
Investment Adviser an annual management fee of 2.85% of the Company's net
assets, determined at the end of each calendar quarter and payable in arrears.
For the year ended December 31, 1998, the Investment Adviser was owed an
investment advisory fee in the aggregate amount of $361,153. Robert P. Pinkas,
Chairman of the Board, Chief Executive Officer, Treasurer and a director and
Michael J. Finn, President and a director of the Company are officers and
managers of the Investment Adviser, and together own 100% of the Investment
Adviser.

The Company is an investor in DPC as discussed in the Company's Management
Discussion and Analysis of this Annual Report on Form 10-K. Grand River
Industries, Ltd. ("Grand River") owns 85% of DPC. Grand River is a limited
liability company that is 100% owned by Objective Industrial Investments
Partners, L.P. ("Objective"). Robert P. Pinkas, Chairman and Chief Executive
Officer of the Company, is a general partner in Objective. Mr. Pinkas, as a
result of this investment commitment in Objective, owns 20% of Grand River and
approximately 17% of DPC.

23
<PAGE> 26

PART IV

ITEM 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND
REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements -- The following financial statements
of the Company are contained in Item 8 of this Form 10-K:
Balance Sheets -- December 31, 1998 and 1997
Statement of Operations - For the years ended December 31,
1998 and 1997 and for the period from October 30, 1996
through December 31, 1996
Statement of Cash Flows -- For the years ended December 31,
1998 and 1997 and for the period from October 30, 1996
through December 31, 1996
Statement of Stockholders' Equity -- For the years ended
December 31, 1998 and 1997 and for the period from October
30, 1996 through December 31, 1996
Notes to the Financial Statements
Report of Independent Auditors

2. Financial Statement Schedules were omitted as they are not
required or not applicable, or the required information is
included in the Financial Statements

3. Exhibits -- Reference is made to the Exhibit Index which is
found on page 26 of this Form 10-K

(b) No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1998.
</TABLE>

24
<PAGE> 27

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT ON FORM 10-K TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

BRANTLEY CAPITAL CORPORATION

By: /s/ ROBERT P. PINKAS

------------------------------------
Title: Robert P. Pinkas,
Chairman of the Board,
Chief Executive Officer
and Treasurer

Date: March 31, 1999

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT ON FORM 10-K HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE COMPANY IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ ROBERT P. PINKAS Chairman of the Board, Chief Executive March 31, 1999
- ------------------------------------------ Officer, Treasurer and Director
Robert P. Pinkas (principal executive officer and
principal accounting officer)

/s/ TAB A. KEPLINGER Vice President and Chief Financial Officer March 31, 1999
- ------------------------------------------ (principal financial officer)
Tab A. Keplinger

/s/ MICHAEL J. FINN President and Director March 31, 1999
- ------------------------------------------
Michael J. Finn

/s/ PAUL H. CASCIO Secretary, Vice President and Director March 31, 1999
- ------------------------------------------
Paul H. Cascio

/s/ L. PATRICK BALES Director March 31, 1999
- ------------------------------------------
L. Patrick Bales

/s/ BENJAMIN F. BRYAN Director March 31, 1999
- ------------------------------------------
Benjamin F. Bryan

/s/ RICHARD MOODIE Director March 31, 1999
- ------------------------------------------
Richard Moodie

/s/ PETER SALTZ Director March 31, 1999
- ------------------------------------------
Peter Saltz

/s/ JAMES M. SMITH Director March 31, 1999
- ------------------------------------------
James M. Smith

/s/ JAMES P. OLIVER Director March 31, 1999
- ------------------------------------------
James P. Oliver
</TABLE>

25
<PAGE> 28

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 Amendment and Restatement of the Charter of Brantley
Capital Corporation

*(2) Amended and Restated Bylaws of the Company

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 exhibit is 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 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 23 Consents of Experts and Counsel

*(1) Consent of Ernst & Young LLP

EXHIBIT 27* Financial Data Schedule

<PAGE> 1
Exhibit 3.1

ARTICLES OF AMENDMENT AND

RESTATEMENT OF THE CHARTER

BRANTLEY CAPITAL CORPORATION

BRANTLEY CAPITAL CORPORATION, a Maryland corporation having its
principal office in the State of Maryland at 32 South Street, Baltimore,
Maryland 21202 (hereinafter called the "Corporation") hereby certifies to the
State Department of Assessments and Taxation that:

1. The Corporation desires to amend and restate its charter.

2. The amendment and restatement of the Corporation's charter was
advised by the Board of Directors and approved by the stockholders.

3. The following are the Articles of Incorporation of the Corporation
as amended and restated:

FIRST: NAME. The name of the Corporation is BRANTLEY CAPITAL
CORPORATION.

SECOND: PURPOSE. The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or activity for which
corporations may be organized under the Maryland General Corporation Law (the
"MGCL"), including, without limitation, to act as a closed-end, non-diversified
management investment company, electing status as a business development
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); provided, however, that the Corporation may cease to be treated
as a business development company upon compliance with the requirements of the
Investment Company Act with respect thereto.

THIRD: PRINCIPAL OFFICE AND RESIDENT AGENT. The post office address of
the place at which the principal office of the Corporation in the State of
Maryland is located is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name and post office address of the Corporation's
resident agent in the State of Maryland is The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202.

FOURTH: CAPITAL STOCK.

Section 1. The Corporation has authority to issue one class of capital
stock as follows: 25,000,000 shares of common stock of the par value of One Cent
($.01) per share the ("Common Stock"), having an aggregate par value of
$250,000.

Section 2. All preferences, rights, including rights to the dividends,
voting powers, restrictions and qualifications of or with respect to the shares
of Common Stock of the Corporation are and shall be in all respects subject and
subordinate to and limited, qualified and controlled by any and all
prohibitions, limitations, restrictions and qualifications with respect thereto
expressed in

<PAGE> 2
or resulting from compliance with (i) the laws of Maryland, (ii)the terms and
provisions of or with respect to any shares of any class of preferred stock of
the Corporation that are hereafter authorized and whether before or after the
classification thereof and whether the terms and provisions thereof are those
fixed by these Articles of Incorporation or by the Board of Directors pursuant
to any authority or power in these Articles of Incorporation, or (iii) the other
provisions of these Articles of Incorporation.

Section 3. Unless otherwise provided in these Articles of
Incorporation, the Board of Directors shall have the power to issue shares of
capital stock of the Corporation from time to time for such consideration and in
such form as may be fixed from time to time pursuant to the direction of the
Board of Directors.

Section 4. Unless otherwise expressly provided in these Articles of
Incorporation, the holders of each share of capital stock of the Corporation
shall be entitled to one vote for each full share of capital stock, and a
fractional vote for each fractional share of capital stock then outstanding in
his or her name in the books of the Corporation. On any, matter submitted to a
vote of stockholders, all shares of the Corporation then issued and outstanding
and entitled to vote, irrespective of the class of such shares, shall be voted
in the aggregate and not by class; provided, however, that (i) when otherwise
required by the MGCL, (ii) when required by the Investment Company Act, or (iii)
when the matter does not affect any interest of the particular class, then only
stockholders of the affected class shall be entitled to vote thereon unless
otherwise expressly provided in any amendment or supplement to these Articles.
Stockholders of the Corporation shall not be entitled to cumulative voting in
the election of directors or on any other matter unless otherwise expressly
provided in any amendment or supplement to these Articles creating any new class
of stock.

Section 5. The presence in person or by proxy of the holders of record
of the majority of all shares of capital stock of the Corporation issued and
outstanding and entitled to vote there at shall constitute a quorum for the
transaction of any business at all meetings of the stockholders of the
Corporation, except as otherwise provided by the Investment Company Act, the
MGCL or in these Articles of Incorporation.

Section 6. Except as otherwise provided by these Articles of
Incorporation or the Bylaws, any corporate action to be taken by a vote of the
stockholders shall be valid and effective if taken or authorized by the
affirmative vote of the holders of a majority of the aggregate number of shares
of capital stock of the Corporation outstanding and entitled to vote thereon.

Section 7. No holder of shares of capital stock of the Corporation
shall, as such holder, have any preemptive right to purchase or subscribe for
any part of any new or additional issue of stock of any class, or of rights or
options to purchase any stock, or of securities convertible into, or carrying
rights or options to purchase, stock of any class, whether now or hereafter
authorized or whether issued for money, for a consideration other than money or
by way of a dividend or otherwise, and all such rights are hereby waived by each
holder of Common Stock and of any other class of stock or securities of the
Corporation that may hereafter be created.

-2-
<PAGE> 3
Section 8. All persons who shall acquire capital stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation.

FIFTH: BOARD OF DIRECTORS. The directors shall initially be divided
into five classes, designated Class I, Class II, Class III, Class IV and Class
V. All classes shall be as nearly equal in number as possible, and the directors
as initially classified shall hold office for terms as follows: the Class I
directors, L. Patrick Bales and Robert P. Pinkas, shall hold office until the
date of the annual meeting of stockholders in 2003 or until their successors
shall be elected and qualified; the Class II director, Michael J. Finn shall
hold office until the date of the annual meeting of stockholders in 1999 or
until his successor shall be elected and qualified; the Class III director,
Richard Moodie shall hold office until the date of the annual meeting of
stockholders in 2000 or until his successor shall be elected and qualified; the
Class IV directors, Paul H. Cascio and Peter Saltz shall hold office until the
date of the annual meeting in 2001 or until their successors shall be elected
and qualified; and the Class V director, Benjamin F. Bryan, shall hold office
until the date of the annual meeting in 2002 or until his successor shall be
elected and qualified. Upon expiration of the term of office of each class as
set forth above, the directors in each such class shall be elected for a term of
five years to succeed the directors whose terms of office expire. Each director
shall hold office until the expiration of his or her term and until his or her
successor shall have been elected and qualified, or until his or her earlier
death, resignation or removal. Removal of a director by stockholders shall
require the affirmative vote of at least seventy-five percent (75%) of the
outstanding shares of capital stock of the Corporation entitled to vote in the
election of directors.

The Corporation may, through its Bylaws, fix the number of directors
and divide the directors into classes and prescribe the tenure of office of the
several classes.

SIXTH: MANAGEMENT OF THE AFFAIRS OF THE CORPORATION.

Section 1. All corporate powers and authority of the Corporation
(except as at the time otherwise provided by statute, by these Articles of
Incorporation or by the Corporation's Bylaws) shall be vested in and exercised
by the Board of Directors.

Section 2. The Board of Directors shall have the power to fix an
initial offering price for the shares of capital stock of the Corporation, which
shall yield to the Corporation not less than the par value thereof, at which
price the shares of capital stock of the Corporation shall be offered for sale,
and to determine from time to time thereafter the offering price which shall
yield to the Corporation not less than the par value thereof from sales of the
shares of its capital stock; provided, however, that sales by the Corporation of
its shares of capital stock for less than net asset value (as defined in the
Investment Company Act) shall be in accordance with the applicable requirements
of the Investment Company Act.

Section 3. The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all classes of
capital stock; provided that dividends or distributions on shares of any class
of capital stock shall be paid only out of earnings, surplus, or other lawfully
available assets belonging to such class.

-3-

<PAGE> 4
Section 4. The Board of Directors shall have the power in its
discretion to distribute to the stockholders of the Corporation in any fiscal
year as dividends, including dividends designated in whole or in part as capital
gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, or any successor
or comparable statute thereof, and regulations promulgated thereunder
(collectively, the "Code"), and to avoid liability of the Corporation for
federal income tax in respect of that year and to make other appropriate
adjustments in connection therewith.

Section 5. The Board of Directors shall have the power, in its
discretion, to make such elections as to the tax status of the Corporation as
may be permitted or required under the Code, without the vote of stockholders of
the Corporation.

Section 6. The Board of Directors shall have the exclusive power to
make, alter or repeal from time to time any of the Bylaws of the Corporation.

Section 7. The Board of Directors shall have the exclusive power from
time to time to determine whether and to what extent, and at what times and
places and under what conditions, the accounts and books of the Corporation or
any of them shall be open to the inspection of stockholders, and no stockholder
shall have any right to inspect any account, book or document of the Corporation
except to the extent required by the MGCL or permitted by the Corporation's
Bylaws.

Section 8. To the extent permitted under the MGCL, the Corporation may
purchase or redeem shares of its capital stock upon such terms and conditions
and for such consideration as the Board of Directors shall deem advisable.

Section 9. The net asset value of the property and assets of the
Corporation shall be determined in accordance with the Investment Company Act,
and at such times as the Board of Directors may direct, by deducting from the
total market or appraised value of all of the property and assets of the
Corporation, all debts, obligations and liabilities of the company (including,
but without limitation of the generality of any of the foregoing, any or all
debts, obligations, liabilities or claims of any and every kind and nature,
whether fixed, accrued, or unmatured, and any reserves or charges, determined in
accordance with generally accepted accounting principles, for any or all
thereof, whether for taxes, including estimated taxes or unrealized book
profits, expenses, contingencies or otherwise).

Section 10. The Board of Directors from time to time may change the
Corporation's name, without the vote or consent of the stockholders of the
Corporation, in any manner and to the extent now or hereafter permitted by the
MGCL and by these Articles of Incorporation.

Section 11. The Corporation may be converted from a closed-end to an
open-end investment company by a vote of at least seventy-five percent (75%) of
the Continuing Directors (as defined below) and by the holders of at least
seventy-five percent (75%) of the shares entitled to be cast on the matter. A
"Continuing Director" for these purposes is any member of the Board of Directors
who (i) is not a person or affiliate of a person who enters or proposes to enter
into a

-4-
<PAGE> 5

business combination, as defined in the MGCL, with the Corporation (an
"Interested Party") and (ii) who has been a member of the Board of Directors of
the Corporation for a period of at least 12 months, or is a successor of a
Continuing Director who is unaffiliated with an Interested Party and has been
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then on the Board of Directors of the Corporation.

Section 12. The Board of Directors shall have the power to classify or
reclassify any authorized and unissued stock of the Corporation from time to
time by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such stock.

Section 13. In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is authorized
to exercise all powers and do all acts that may be exercised or done by the
Corporation pursuant to the provisions of the MGCL, these Articles of
Incorporation and the Bylaws of the Corporation.

SEVENTH: DETERMINATIONS AS TO ACCOUNTING MATTERS. Any determination
made in good faith, so far as accounting matters are involved, in accordance
with generally accepted accounting principles by or pursuant to the authority or
the direction of the Board of Directors, (i) as to the amount of assets,
obligations or liabilities of the Corporation, (ii) as to the amount of net
income of the Corporation from dividends and interest for any period or amounts
at any time legally available for the payment of dividends, (iii) as to the
amount of any reserves or charges set up and the propriety thereof, (iv) as to
the time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created, shall have
been paid or discharged or is then or thereafter required to be paid or
discharged), (v) as to the price of any security owned by the Corporation, (vi)
as to any other matters relating to the issuance, sales, redemption or other
acquisition or disposition of any securities by the Corporation or any
securities or shares of capital stock of the Corporation, or (vii) as to any
reasonable determination made in good faith by the Board of Directors as to
whether any transaction constitutes a purchase of securities on "margin," a sale
of securities "short," or an underwriting or the sale of, or a participation in
any underwriting or selling group in connection with the public distribution of,
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all its stockholders, past, present and future, and shares of
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation shall be
effective to (a) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended (the "Securities Act"), the Investment
Company Act or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (b) protect or purport to protect any director
or officer of the Corporation against any liability to the Corporation or its
security holders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.

-5-

<PAGE> 6
EIGHTH: LIMITATIONS ON LIABILITY; INDEMNIFICATION.

Section 1. To the fullest extent that limitations on the liability of
directors and officers is permitted by Maryland statutory or decisional law, as
amended or interpreted, no director or officer of the Corporation shall have any
liability to the Corporation or its stockholders for monetary damages. This
limitation on liability applies to events occurring at the time a person serves
as a director or officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which liability is
asserted. No amendment of these Articles of Incorporation or repeal of any of
the provisions hereof shall limit or eliminate the benefits provided to
directors and officers under this provision with respect to any act or omission
which occurred prior to such amendment or repeal.

Section 2. Any person who was or is a party or is threatened to be made
a party, in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal administrative or investigative, by reason of the fact
that such person is a current or former director or officer of the Corporation
or is or was serving while a director or officer of the Corporation at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit or proceeding to the fullest extent
permissible under the MGCL, the Securities Act and the Investment Company Act,
as such statutes are now or hereafter in force. In addition, the Corporation
shall also advance expenses to its currently acting and its former directors and
officers to the fullest extent that indemnification of directors and officers is
permitted by the MGCL, the Securities Act and the Investment Company Act. The
Board of Directors may by bylaw, resolution or agreement make further provisions
for indemnification of the directors, officers, employees and agents to the
fullest extent permitted by the MGCL.

Section 3. No provision of this Article EIGHTH shall be effective to
protect or purport to protect any director or officer of the Corporation against
any liability to the Corporation or its stockholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
respective offices.

NINTH: PERPETUAL EXISTENCE. The duration of the Corporation shall be
perpetual.

TENTH: BUSINESS COMBINATIONS. The Corporation hereby elects to be
subject to Title 3, Subtitle 6 of the MGCL which establishes certain voting
requirements in connection with any "Business Combination" (as defined in such
Subtitle).

-6-

<PAGE> 7

ELEVENTH: VOTING RIGHTS OF CERTAIN CONTROL SHARES.

Section 1. For purposes of this Article ELEVENTH, the following words
have the meanings indicated.

(a) "Acquiring person" means a person who makes or proposes to
make a control share acquisition.

(b) "Associate", when used to indicate a relationship with any
person, means:

(1) An "associate" as defined in Section 3-601(c) of
Title 3, Subtitle 6 of the MGCL; or

(2) A person that:

(i) Directly or indirectly controls, or is controlled
by, or is under common control with, the person specified;
or

(ii) Is acting or intends to act jointly or in concert
with the person specified.

(c) (1) "Control shares" means shares of stock of the
Corporation that, except for this Article ELEVENTH, would, if
aggregated with all other shares of stock of the Corporation (including
shares the acquisition of which is excluded from "control share
acquisition" in subsection (d)(2) of this Section) owned by a person or
in respect of which that person is entitled to exercise or direct the
exercise of voting power, except solely by virtue of a revocable proxy,
entitle that person, directly or indirectly, to exercise or direct the
exercise of the voting power of shares of stock of the Corporation in
the election of directors within any of the following ranges of voting
power:

(i) One-fifth or more, but less than one-third of all
voting power;

(ii) One-third or more, but less than a majority of all
voting power; or

(iii) A majority or more of all voting power.

(2) "Control shares" includes shares of stock of the
Corporation only to the extent that the acquiring person, following the
acquisition of the shares, is entitled, directly or indirectly, to
exercise or direct the exercise of voting power within any level of
voting power set forth in this Section for which approval has not been
obtained previously under Section 2 of this Article ELEVENTH.

(d) (1) "Control share acquisition" means the acquisition,
directly or indirectly, by any person, of ownership of, or the power to
direct the exercise of voting power within respect to, issued and
outstanding control shares.

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<PAGE> 8

(2) "Control share acquisition" does not include the
acquisition of shares:

(i) Under the laws of descent and distribution;

(ii) Under the satisfaction of a pledge or other
security interest charged in good faith and not for the
purpose of circumventing this Article ELEVENTH; or

(iii) Under a merger, consolidation, or share exchange
effected under Subtitle 1 of Title 3 of the MGCL if the
Corporation is a party to the merger, consolidation, or
share exchange.

(3) Unless the acquisition entitles any person, directly or
indirectly, to exercise or direct the exercise of voting power in the
election of directors in excess of the range of voting power
previously authorized or attained under an acquisition that is exempt
under paragraph (2) of this subsection, "control share acquisition"
does not include the acquisition of shares of the Corporation in good
faith and not for the purpose of circumventing this Article ELEVENTH
by or from:

(i) Any person whose voting rights have previously been
authorized by stockholders in compliance with this Article
ELEVENTH; or

(ii) Any person whose previous acquisition of shares of
stock of the Corporation would have constituted a control
share acquisition but for paragraph (2) of this subsection.

(e) "Interested shares" means shares of the Corporation in
respect of which any of the following persons is entitled to exercise
or direct the exercise of the voting power of shares of stock of the
Corporation in the election of directors:

(1) An acquired person;

(2) An officer of the Corporation; or

(3) An employee of the Corporation who is also a director
of the Corporation.

(f) "Person" includes an associate of the person.

Section 2. (a) Control shares of the Corporation acquired in a control
share acquisition have no voting rights except to the extent approved by the
stockholders at a meeting held under Section 4 of this Article ELEVENTH by the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter, excluding all interested shares.

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<PAGE> 9

(b) This Article ELEVENTH does not apply to the voting
rights of shares of stock if the acquisition of the shares
specifically, generally, or generally by types, as to specifically
identified or unidentified existing or future shareholders or their
affiliates or associates, has been approved or exempted by a provision
contained in these Articles or the Bylaws of the Corporation and
adopted at any time before the acquisition of the shares.

(1) Shares acquired within 90 days of shares acquired
under a plan to make a control share acquisition are
considered to have been acquired in the same acquisition;
and

(2) A person may not be deemed to be entitled to
exercise or direct the exercise of voting power with respect
to shares held for the benefit of others if the person:

(i) Is acting in the ordinary course of business, in
good faith and not for the purpose of circumventing the
provisions of this Section; and

(ii) Is not entitled to exercise or to direct the
exercise of the voting power of the shares unless the
person first seeks to obtain the instruction of another
person.

Section 3. Any person who proposes to make or who has made a control
share acquisition may deliver an acquiring person statement to the Corporation
at the Corporation's principal office. The acquiring person statement shall set
forth all of the following:

(1) The identity of the acquiring person and each other member
of any group of which the person is a part for purposes of determining
control shares;

(2) A statement that the acquiring person statement is given
under this Article ELEVENTH;

(3) The number of shares of the Corporation owned (directly or
indirectly) by the acquiring person and each other member of any group;

(4) The applicable range of voting power as set forth in
Section 1(c) of this Article ELEVENTH; and

(5) The control share acquisition has not occurred:

(i) A description in reasonable detail of the terms of the
proposed control share acquisition; and

(ii) Representations of the acquiring person, together with
a statement in reasonable detail of the facts on which they are
based, that:

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<PAGE> 10

1. The proposed control share acquisition, if
consummated, will not be contrary to law; and

2. The acquiring person has the financial capacity,
through financing to be provided by the acquiring person
and any additional specified sources of financing required
under Section 5 of this Article ELEVENTH to make the
proposed control share acquisition.

Section 4. (a) Except as provided in Section 5 of this Article
ELEVENTH, if the acquiring person requests, at the time of delivery of an
acquiring person statement, and gives a written undertaking to pay the
Corporation's expenses of a special meeting, except the expenses of opposing
approval of the voting rights, within 10 days after the day on which the
Corporation receives both the request and undertaking, the directors of the
Corporation shall call a special meeting of stockholders of the Corporation for
the purpose of considering the voting rights to be accorded the shares acquired
or to be acquired in the control share acquisition.

(b) The directors may require the acquiring person to give
bond, with sufficient surety, to reasonably assure the corporation that
this undertaking will be satisfied.

(c) Unless the acquiring person agrees in writing to another
date, the special meeting of stockholders shall be held within 50 days
after the day on which the Corporation has received both the request
and the undertaking.

(d) If the acquiring person makes a request in writing at the
time of delivery of the acquiring person statement, the special meeting
may not be held sooner than 30 days after the day on which the
Corporation receives the acquiring person statement.

(e) (1) If no request is made under subsection (a) of this
Section, the issue of the voting rights to be accorded the shares
acquired in the control shares acquisition may, at the option of the
Corporation, be presented for consideration at any meeting of
stockholders.

(2) If no request is made under subsection (a) of this
Section and the Corporation proposes to present the issue of
the voting rights to be accorded the shares acquired in a
control share acquisition for consideration at any meeting of
stockholders, the Corporation shall provide the acquiring
person with written notice of the proposal not less than 20
days before the date on which notice of the meeting is given.

Section 5. (a) A call of a special meeting of stockholders of the
Corporation is not required to be made under Section 4(a) of this Article
ELEVENTH unless, at the time of delivery of an acquiring person statement under
Section 3 of this Article ELEVENTH, the acquiring person has:

(1) Entered into a definitive financing agreement or
agreements with one or more responsible financial institutions
or other entities that have the necessary

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<PAGE> 11
financial capacity, providing for any amount of financing of
the control share acquisition not to be provided by the
acquiring person; and

(2) Delivered a copy of the agreements to the Corporation.

(b) In addition, the Board of Directors shall not be obligated
to call of a special meeting of stockholders of the Corporation under
Section 4(a) of this Article ELEVENTH if the Board of Directors makes a
determination within ten days after receipt of the acquiring person
statement that such acquiring person statement was not given in good
faith, that the proposed control share acquisition would not be in the
best interests of the Corporation or that the proposed control share
acquisition could not be consummated for financial or legal reasons.

(c) A director, in determining whether the proposed control
share acquisition would be in the best interests of the Corporation,
shall consider the interests of the Corporation's stockholders and, in
his or her discretion, may consider any of the following: the interests
of the Corporation's employees, suppliers, creditors and customers; the
economy of the state and nation; community and societal considerations;
and the long term as well as short term interests of the Corporation
and its stockholders, including the possibility that these interests
may be best served by the continued independence of the Corporation.

(e) For purposes of making a determination that a special
meeting of shareholders should not be called, no such determination
shall be deemed void or voidable with respect to the Corporation merely
because one or more of its directors or officers who participated in
making such determination may be deemed to be other than disinterested,
if in any such case the material facts of the relationship giving rise
to a basis for self-interest are known to the directors and the
directors, in good faith reasonably justified by the facts, make such
determination by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors
constitute less than a quorum. For purposes of this paragraph,
"disinterested directors" shall mean directors whose material contacts
with the Corporation are limited principally to activities as a
director or shareholder. Persons who have substantial, recurring
business or professional contacts with the Corporation shall not be
deemed to be "disinterested directors" for purposes of this provision.
A director shall not be deemed to be other than a "disinterested
director" merely because he or she would no longer be a director if the
proposed control share acquisition were approved and consummated.

(f) The Board of Directors may adjourn any special meeting
called pursuant to this Article ELEVENTH if, prior to such meeting, the
Corporation has received an acquiring person statement from any other
person and the Board of Directors has determined that the control share
acquisition proposed by such other person or a merger, consolidation or
sale of assets of the Corporation should be presented to shareholders
at an adjourned meeting or at a special meeting held at a later date.

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<PAGE> 12
Section 6. (a) If a special meeting of stockholders is required to be
called under the provisions of Sections 4 and 5 of this Article ELEVENTH, notice
of the special meeting shall be given as promptly as reasonably practicable by
the Corporation to all stockholders of record as of the record date set for the
meeting, whether or not the stockholder is entitled to vote at the meeting.

(b) Notice of the special or annual meeting of stockholders at
which the voting rights are to be considered shall include or be
accompanied by the following:

(1) A copy of the acquiring person statement delivered to
the corporation under Section 3 of this Article ELEVENTH; and

(2) A statement by the Board of Directors of the
Corporation setting forth the position or recommendation of
the Board, or stating that the Board is taking no position or
making no recommendation, with respect to the issue of voting
rights to be accorded the control shares.

Section 7. (a) If an acquiring person statement has been delivered on
or before the 10th day after the control share acquisition, the Corporation may,
at its option, redeem any or all control shares, except control shares for which
voting rights have been previously approved under Section 2 of this Article
ELEVENTH, at any time during a 60-day period commencing on the day of a meeting
at which voting rights are considered under Section 4 of this Article ELEVENTH
and are not approved.

(b) In addition to the redemption rights authorized under
subsection (a) of this section, if an acquiring person statement has
not been delivered on or before the 10th day after the control share
acquisition, the Corporation may, at its option, redeem any or all
control shares, except control shares for which voting rights have been
previously approved under Section 2 of this Article ELEVENTH, at any
time during a period commencing on the 11th day after the control share
acquisition and ending 60 days after a statement has been delivered.

(c) Any redemption of control shares under this section shall
be at the fair value of the shares. For purposes of this section, "fair
value" shall be determined:

(1) As of the date of the last acquisition of control
shares by the acquiring person in a control share acquisition
or, if a meeting is held under Section 4 of this Article
ELEVENTH, as of the date of the meeting; and

(2) Without regard to the absence of voting rights for the
control shares.

Section 8. (a) Before a control share acquisition has occurred, if
voting rights for control shares are approved at a meeting held under Section 4
of this Article ELEVENTH and the acquiring person is entitled to exercise or
direct the exercise of a majority or more of all voting power, all stockholders
of the corporation (other than the acquiring person) have the rights of
objecting stockholders as provided in Subtitle 2 of Title 3 of the MGCL.

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<PAGE> 13

(b) For purposes of applying the provisions of Subtitle 2 of
Title 3 of the MGCL to stockholders under this Section, the Corporation
shall be deemed to be a successor in a merger and the date of the most
recent approval of voting rights referred to in subsection (a) of this
Section shall be deemed to be the date of filing of articles of merger
for record with the Department of Assessments and Taxation.

(c) The notice required by Section 7 of this Article ELEVENTH
shall also state that stockholders (other than the acquiring person)
are entitled to the rights of objecting stockholders under Subtitle 2
of Title 3 of the MGCL and shall include a copy of this Section and
Subtitle 2 of Title 3 of the MGCL.

(d) For purposes of applying the provisions of Subtitle 2 of
Title 3 of the MGCL to this Section:

(1) "Fair Value" may not be less than the highest price
per share paid by the acquiring person in the control share
acquisition; and

(2) Sections 3-202(c) and 3-203(a)(1) and (2) of Title 3
of the MGCL do not apply.

TWELFTH: AMENDMENTS. The Corporation reserves the right to make any
amendment of these Articles of Incorporation, now or hereafter authorized by
law, including any amendment which alters the contract rights, as expressly set
forth in these Articles of Incorporation, of any outstanding shares of stock.
Except as otherwise provided in this Article TWELFTH, from time to time any of
the provisions of these Articles of Incorporation may be amended, altered or
repealed (including any amendment that changes the terms of any of the
outstanding shares of capital stock by classification, reclassification or
otherwise), and other provisions that may, under the MGCL, the Investment
Company Act, securities law, or other laws in force at the time, be lawfully
contained in articles of incorporation may be added or inserted upon the vote of
a majority of the shares of capital stock of the Corporation outstanding and
entitled to vote thereon, including a majority of any class entitled to vote
thereon. Notwithstanding the foregoing, the provisions of Articles FIFTH,
EIGHTH, TENTH, ELEVENTH and TWELFTH of these Articles of Incorporation may not
be amended, altered, repealed or superseded in any manner, and no amendment,
alteration or repeal of any provision of these Articles of Incorporation which
would be inconsistent with or have the effect of amending, altering, repealing
or superseding any provision of the Bylaws shall be effective, unless approved
by the affirmative vote of holders of seventy-five percent (75%) of the
outstanding voting power of the Corporation entitled to vote thereon. All rights
at any time conferred upon the stockholders of the Corporation by these Articles
of Incorporation are subject to the provisions of this Article TWELFTH.

The term "Articles of Incorporation" or "Charter" as used herein and in
the Bylaws of the Corporation shall be deemed to mean these Articles of
Incorporation as from time to time amended, restated or supplemented.

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<PAGE> 14

IN WITNESS WHEREOF, BRANTLEY CAPITAL CORPORATION has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on December 22, 1998.

BRANTLEY CAPITAL CORPORATION

By /s/ Michael J. Finn
-----------------------------------
Michael J. Finn, President

ATTEST:

/s/ Paul H. Cascio
- ------------------------------------
Paul H. Cascio, Secretary

ACKNOWLEDGEMENT

The undersigned, Michael J. Finn, President of BRANTLEY CAPITAL
CORPORATION, who executed on behalf of said Corporation the foregoing Articles
of Amendment and Restatement of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles of Amendment and Restatement to be the corporate act of said
Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under penalties of
perjury.

By /s/ Michael J. Finn
-----------------------------------
Michael J. Finn, President

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<PAGE> 1
Exhibit 3.2

AMENDED AND RESTATED BYLAWS

BRANTLEY CAPITAL CORPORATION
(a Maryland Corporation)

These bylaws ("Bylaws") are made as of the 17th day of February, 1998 and
adopted pursuant to the Articles of Incorporation establishing Brantley Capital
Corporation "Corporation") dated August 1, 1996, as from time to time amended,
restated or (the supplemented (hereinafter called the "Articles"). All words
and terms capitalized in these Bylaws shall have the meaning or meanings set
forth for such words or terms in the Articles unless otherwise noted.

ARTICLE I

OFFICES

The registered office of the Corporation in the State of Maryland shall be
at 32 South Street, Baltimore, Maryland 21202.

The principal executive office of the Corporation shall be at 20600 Chagrin
Boulevard, Suite 1150, Cleveland, Ohio 44122.

The Corporation may have such other offices in such places as the Board of
Directors of the Corporation may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.1. ANNUAL MEETING. An annual meeting of the stockholders of the
Corporation shall be held on such date and at such hour as may from time to time
be designated by the Board of Directors and stated in the notice of such meeting
for the purpose of electing directors and for the transaction of such other
business as may be properly brought before the meeting.

Section 2.2. SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose or purposes may be called by the Chairman of the Board, the Chief
Executive Officer, the President or the Board of Directors. Special meetings of
stockholders shall also be called by the Secretary upon receipt of the request
in writing signed by stockholders entitled to cast at least a majority of all
votes entitled to be cast at such meeting. Such request shall state the purpose
or purposes of the proposed meeting and the matters proposed to be acted on at
such proposed meeting. The Secretary shall inform the stockholders who make
such request of the reasonably estimated costs of preparing and mailing such
notice of meeting and upon payment to the

<PAGE> 2
Corporation of such costs, the Secretary shall give notice as required in this
Article to all stockholders entitled to notice of such meeting. Unless
requested by stockholders entitled to cast a majority of all votes entitled to
be cast at the meeting, a special meeting need not be called to consider any
matter which is substantially the same as a matter voted upon at any special
meeting of stockholders held during the preceding 12 months. At a special
meeting of stockholders, no business shall be transacted and no corporate action
taken other than that stated in the notice of said meeting unless all of the
stockholders of the Corporation entitled to vote thereat are present in person
or by proxy, in which case any and all business may be transacted at the meeting
even though the meeting is held without notice.

Section 2.3. PLACE OF MEETINGS. Any annual or special meeting of the
stockholders shall be held at such place within the United States as the Board
of Directors may from time to time designate.

Section 2.4. NOTICE OF MEETINGS; WAIVER OF NOTICES. Written notice of the
place, date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
personally or by mail, not less than 10 nor more than 60 days before the date of
such meeting, to each stockholder entitled to notice of the meeting. Notice by
mail shall be deemed to be duly given when deposited in the United States mail
or similar means addressed to the stockholder at the stockholder's address as it
appears on the records of the Corporation, with postage or any fees thereon
prepaid.

Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless after the adjournment the Board of Directors shall fix
a new record date for any adjourned meeting or the adjournment is for more than
30 days, notice of such adjourned meeting need not be given if the time and
place to which the meeting shall be adjourned is announced at the meeting at
which the adjournment is taken.

Section 2.5. QUORUM AND ADJOURNMENT. At any meeting of the stockholders,
the holders of a majority in number of shares of stock of the Corporation
entitled to vote at the meeting present in person or by proxy shall constitute
a quorum for the transaction of any business, except as otherwise provided by
statute or by the Articles or these Bylaws. A meeting of stockholders convened
on the date for which it was called may be adjourned as permitted under the laws
of the State of Maryland. If a quorum shall not be present or represented at
such meeting of stockholders, a majority of the stockholders entitled to vote
thereat present in person or represented by proxy, shall have the power to
adjourn the meeting. At any adjourned session of a meeting at which a quorum
shall be present or represented, any business may be transacted that might have
been transacted at the meeting as originally noticed. The absence from any
meeting of holders of a number of shares of stock of the Corporation which
may be required by the Maryland General Corporation Law (the "MGCL"), the
Investment Company Act of 1940, as amended (the "Investment Company Act") or any
other applicable statute, the Articles, or these Bylaws, for action on any given
matter shall not prevent action at the same meeting on any other matter or
matters

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<PAGE> 3
which may properly come before the meeting if the holders of the number of
shares of stock of the Corporation required for action on such matters are
present at such meeting in person or by proxy.

Section 2.6. ORGANIZATION. At each meeting of the stockholders, the
Chairman of the Board, or in his or her absence or inability to act, the Chief
Executive officer, or in his or her absence, the President, shall act as
chairman of the meeting. The Secretary, or in the Secretary's absence or
inability to act, any person appointed by the chairman of the meeting, shall act
as secretary of the meeting and keep the minutes thereof.

Section 2.7. ORDER OF BUSINESS. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.

Section 2.8. VOTING. Except as otherwise provided by statute or the
Articles, each holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the stockholders to one vote
for every share of such stock outstanding in the name of such stockholder on the
record of stockholders of the Corporation as of the record date determined
pursuant to Article X hereof.

Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof, unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed valid
unless challenged on or prior to its exercise. Except as otherwise provided by
applicable law, the Articles or these Bylaws, any corporate action to be taken
by vote of the stockholders shall be authorized by a majority of the total votes
cast at a meeting of stockholders by the stockholders present in person or
represented by proxy and entitled to vote on such action.

Section 2.9. INSPECTORS OF ELECTION. In advance of any meeting of the
stockholders, the Board of Directors may appoint inspectors of election to act
at the meeting or any adjournment thereof (the "Inspectors of Election"). If
Inspectors of Election are not so appointed, the chairman, if any, of any
meeting of the stockholders may, and on the request of any stockholder or his or
her proxy shall, appoint Inspectors of Election of the meeting. The number of
Inspectors of Election shall be either one or more. If appointed at the meeting
on the request of one or more stockholders or proxies, a majority of votes cast
shall determine whether one or more Inspectors of Election are to be appointed,
but failure to allow such determination by the stockholders shall not affect the
validity of the appointment of Inspectors of Election. In case any person
appointed as Inspector of Election fails to appear or fails or refuses to act,
the vacancy may be filled by appointment made by the Board of Directors in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. Inspectors, before entering upon the discharge of their duties, I
shall and sign an oath to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of their ability.
The Inspectors of Election shall determine the number of outstanding shares of
stock owned by stockholders, the voting power of

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<PAGE> 4
each, the shares of stock represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies, shall receive votes,
ballots or consents, shall hear and determine all challenges and questions in
any way arising in connection with the right to vote, shall count and tabulate
all votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all stockholders. If
there are three or more Inspectors of Election, the decision, act or certificate
of a majority is effective in all respects as the decision, act or certificate
of all. On request of the chairman, if any, of the meeting, or of any
stockholder or his or her proxy, the Inspectors of Election shall make a report
in writing of any challenge or question or matter determined by them and shall
execute a certificate of any facts found by them. No director or candidate for
office of director shall act as inspector of an election of directors.
Inspectors of Election need not be stockholders.

Section 2.10. RECORDS OF MEETINGS OF STOCKHOLDERS. At each meeting of the
stockholders there shall be open for inspection the minutes of the last previous
meeting of stockholders and a list of the stockholders, certified to be true and
correct by the Secretary or other proper agent of the Corporation, as of the
record date of the meeting. Such list of stockholders shall contain the name of
each stockholder in alphabetical order, the stockholder's address and shares of
stock owned by such stockholder.

Section 2.11. ADVANCE NOTICE PROVISIONS FOR ELECTION OF DIRECTORS. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof), or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 2.11 and on the record date for the
determination of stockholders entitled to vote at such meeting, and (ii) who
complies with the notice procedures set forth in this Section 2.11.

In addition to any other applicable requirements, for a nomination to be
made by a stockholder such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.

To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation, in
the case of an annual meeting or special meeting, not less than 60 days nor more
than 90 days prior to the date of the meeting; provided, however, that in the
event that less than 70 days notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholders in
order to be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the meeting
was mailed or such public disclosure of the date of the meeting was made,
whichever first occurs.

To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or

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<PAGE> 5
employment of the person, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
the person, and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder; and (b)
as to the stockholder giving notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice,
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.

No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this
Section 2.11. If the chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.

Section 2.12. ADVANCE NOTICE PROVISIONS FOR BUSINESS TO BE TRANSACTED AT A
STOCKHOLDER MEETING. No business may be transacted at any meeting of
stockholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof), or (c) otherwise properly brought before
the meeting by any stockholder of the Corporation (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 2.12
and on the record date for the determination of stockholders entitled to vote at
such meeting, and (ii) who complies with the notice procedures set forth in this
Section 2.12.

In addition to any other applicable requirements, for business to be
properly brought before a meeting by a stockholder, such stockholder must
have given timely notice thereof in proper written form to the Secretary of the
Corporation.

To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the date of the stockholder
meeting; provided, however, that in the event that less than 70 days notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of

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business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure of the date of the
meeting was made, whichever first occurs.

To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the
stockholder meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business, and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.

No business shall be conducted at any meeting of stockholders except
business brought before the meeting in accordance with the procedures set forth
in this Section 2.12; provided, however, that once business has been properly
brought before the annual meeting in accordance with such procedures, nothing in
this Section 2.12 shall be deemed to preclude discussion by any stockholder of
any such business. If the chairman of any stockholder meeting determines that
business was not properly brought before the meeting in accordance with the
foregoing procedures, the chairman shall declare to the meeting that the
business was not properly brought before the meeting and such business shall not
be transacted.

ARTICLE III

BOARD OF DIRECTORS

Section 3.1. MANAGEMENT OF THE CORPORATION. The property, business and
affairs of the Corporation shall be managed under the direction of its Board of
Directors, and all of the powers of the Corporation may be exercised by or under
authority of the Board of Directors except as conferred upon or reserved to the
stockholders by law, by the Articles or by these Bylaws.

Section 3.2. NUMBER OF DIRECTORS. The authorized number of directors of the
Corporation shall, until further action is taken by the Board of Directors, be
nine. By vote of a majority of the entire Board of Directors, the number of
directors fixed by the Articles or by these Bylaws may be increased or decreased
from time to time up to a maximum of nine, but shall never be less than three.

Section 3.3. TENURE AND CLASSES OF DIRECTORS. The directors shall initially
be divided into five classes, designated Class I, Class II, Class III, Class IV
and Class V. All classes shall be as nearly equal in number as possible, and the
directors as initially classified shall hold office for terms as follows: the
Class I directors shall hold office until the date of the annual meeting of
stockholders in 2003 or until their successors shall be elected and qualified;
the Class II directors shall hold office until the date of the annual meeting of
stockholders in 1999 or until their successors shall be elected

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and qualified; the Class III directors shall hold office until the date of the
annual meeting of stockholders in 2000 or until their successors shall be
elected and qualified; the Class IV directors shall hold office until the date
of the annual meeting in 2001 or until their successors shall be elected and
qualified; and the Class V director shall hold office until the date of the
annual meeting in 2002 or until their successors shall be elected and qualified.
Upon expiration of the term of office of each class as set forth above, the
directors in each such class shall be elected for a term of five years to
succeed the directors whose terms of office expire. Each director shall hold
office until the expiration of his or her term and until his or her successor
shall have been elected and qualified, or until his or her earlier death,
resignation or removal.

Section 3.4. VACANCIES. Except as otherwise required by the Investment
Company Act, any vacancy occurring in the Board of Directors for any cause other
than by reason of an increase in the number of directors may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum. Any vacancy occurring by reason of an increase
in the number of directors may be filled by an action of a majority of the
entire Board of Directors. A director elected by the Board of Directors to fill
a vacancy shall be elected to hold office until the next annual meeting of
stockholders or until a successor is elected and qualified. If at any time less
than 50% of all directors holding office were elected by the stockholders, a
meeting of the stockholders must be held within 60 days to fill vacancies.

At any annual meeting of stockholders, stockholders shall be entitled to
elect directors to fill any vacancies in the Board of Directors that have arisen
since the preceding annual meeting of stockholders (whether or not any such
vacancy has been filled by election of a new director by the Board of Directors)
and any director not elected by the stockholders shall hold office until his or
her successor shall be elected and shall qualify.

Section 3.5. REMOVAL. Any director may be removed in the manner provided by
Article FIFTH of the Articles of Incorporation of the Corporation.

Section 3.6. COMPENSATION OF DIRECTORS. Directors may receive compensation
for services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board
of Directors.

Section 3.7. POWER TO ISSUE AND SELL STOCK. The Board of Directors may from
time to time authorize by resolution the issuance and sale of any of the
Corporation's authorized shares of stock to such persons as the Board of
Directors shall deem advisable.

Section 3.8. POWER TO DECLARE DIVIDENDS. The Board of Directors, from time
to time as it may deem advisable, may declare and the Corporation may pay
dividends, in cash, property, or shares of stock of the Corporation, out of any
source available for dividends, to the stockholders according to their
respective rights and interests.

ARTICLE IV

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MEETINGS OF THE BOARD OF DIRECTORS

Section 4.1. PLACE OF MEETINGS. Meetings of the Board of Directors, regular
or special, may be held at any place in or out of the State of Maryland as the
Board of Directors may from time to time determine or as shall be specified in
the notice of such meeting.

Section 4.2. ANNUAL MEETINGS. The first meeting of each newly elected Board
of Directors shall be held as soon as practicable after the meeting of
stockholders at which the directors were elected or, in the absence of such
annual stockholders' meeting, at such time and place as the Board of Directors
may provide. No notice of such meeting shall be necessary, if held immediately
after the adjournment, and at the site, of the meeting of stockholders.

Section 4.3. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.

Section 4.4. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held upon the call of the Chairman of the Board, the Chief Executive
Officer or the President, at such time, on such day and at such place, as
shall be designated in the notice of the meeting.

Section 4.5. NOTICE. Notice of every special meeting shall be given by mail
(which term shall include next business day courier service) or by electronic
transmission (which term shall include cablegram, telecopy or facsimile) or
delivered personally, to each director at his or her business address as set
forth in the records of the Corporation. Such notice shall be delivered not less
than two days preceding the meeting. Notice of a meeting of directors may be
waived before or after any meeting by signed written waiver. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be stated in the notice or waiver of notice of such meeting, and
no notice need be given of action proposed to be taken by written consent. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting.

Section 4.6. CHAIRMAN OF THE BOARD; RECORDS. The Board of Directors shall
elect a Chairman of the Board from among their number, pursuant to the
provisions of Article V of these Bylaws. Such Chairman of the Board shall act as
chairman at all meetings of the Board of Directors; in his or her absence the
Chief Executive Officer shall act as chairman; in the absence of the Chairman
of the Board and the Chief Executive Officer, the President shall act as
chairman; and, in the absence of the Chairman of the Board, the Chief Executive
Officer and the President, the directors present shall elect one of their number
to act as temporary chairman. The results of all actions taken at a meeting of
the Board of Directors, or by written consent of the directors, shall be
recorded by the Secretary.

Section 4.7. COMMITTEES. The Board of Directors may appoint from among its
members an Executive Committee and other committees composed of two or more
directors, and may delegate to such committees any or all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation except the power to declare dividends or distributions on stock, to
issue stock, to recommend to stockholders any action that requires

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<PAGE> 9
stockholders' approval, to fill a vacancy on the Board of Directors, to amend
these Bylaws or to approve any merger or share exchange which does not require
stockholder approval. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the Board of Directors to act in the place of such
absent member. Committees shall keep minutes of their proceedings and shall
report the same to the Board of Directors at the meeting next succeeding, and
any action by a committee shall be subject to revisions and alteration by the
Board of Directors, provided that no rights of third persons shall be affected
by any such revision or alteration.

Section 4.8. QUORUM. At all meetings of the Board of Directors, a majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business and the action of a majority of the directors present at any meeting
at which a quorum is present shall be the action of the Board of Directors
unless the concurrence of a greater proportion is required for such action by
the General Corporation Law of the State of Maryland, the Articles or these
Bylaws. If a quorum shall not be present at any meeting of directors, the
directors present thereat may by a majority vote adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.

Section 4.9. CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted by
the Articles of Incorporation or by these Bylaws, the members of the Board of
Directors or any committee designated by the Board of Directors, may participate
in a meeting of the Board of Directors or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.

Section 4.10. CONSENT OF DIRECTORS IN LIEU OF MEETING. Any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent to such
action is signed by all members of the Board of Directors or of such committee,
as the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.

ARTICLE V

OFFICERS

Section 5.1. OFFICERS OF THE CORPORATION; COMPENSATION. The officers of the
Corporation shall be elected by the Board of Directors and shall consist of a
Chairman of the Board, a Chief Executive Officer, a President, a Secretary, a
Treasurer and such other officers or assistant officers, including Vice
Presidents, as may be designated from time to time by the Board of Directors.
Any two or more of the offices may be held by the same person, provided,
however, that no one person may serve as both President and Vice President, if
any, and provided further, that any person who holds more than one office in the
Corporation may not act in more than one capacity to execute, acknowledge or
verify any instrument required by law to be executed, acknowledged or verified
by more than one officer. The Board of Directors may designate a Vice President,
if any, as

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an Executive Vice President and may designate the order in which any other Vice
Presidents may act. No officer of the Corporation need be a director. The Board
of Directors may determine what, if any, compensation shall be paid to officers
of the Corporation.

Section 5.2. ELECTION AND TENURE. The Board of Directors shall elect the
Chairman of the Board, Chief Executive Officer, President, Secretary, Treasurer
and such other officers as the Board of Directors shall deem necessary or
appropriate in order to carry out the business of the Corporation. The Chairman
of the Board and such officers shall hold office until resignation or removal in
accordance with Section 5.3 and until their successors have been duly elected
and qualified. The Board of Directors may fill any vacancy in or add any
additional officers at any time.

Section 5.3. REMOVAL OF OFFICERS; RESIGNATION. Any officer may be removed
at any time, with or without cause, by action of a majority of the directors
whenever in the judgment of the Board of Directors the best interests of the
Corporation will be served thereby. This provision shall not prevent the making
of a contract of employment for a definite term with any officer and shall have
no effect upon any cause of action which any officer may have as a result of
removal in breach of a contract of employment. Any officer may resign at any
time by notice in writing signed by such officer and delivered or mailed to the
Chairman of the Board of the Chief Executive Officer, and such resignation shall
take effect immediately, or at a later date according to the terms of such
notice in writing.

Section 5.4. BONDS AND SURETY. Any officer may be required by the Board of
Directors to be bonded for the faithful performance of his or her duties in such
amount and with such sureties as the Board of Directors may determine.

Section 5.5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if
present, preside at meetings of the stockholders and, if present, meetings of
the Board of Directors of the Corporation. The Chairman of the Board may sign
and execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments. The Chairman shall, when requested, counsel with and advise
the other officers of the Corporation and shall perform such other duties as
he may agree with the President or as the Board of Directors may from time
to time determine.

Section 5.6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the chief executive officer of the Corporation, and shall have the powers and
perform the duties incident to that position. Subject to the Board of Directors,
the Chief Executive Officer shall be in general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy-making
officer. The Chief Executive Officer shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or as provided
in these Bylaws. In the absence of the Chairman of the Board, the Chief
Executive Officer shall preside at all meetings of the stockholders and at all
meetings of the Board of Directors. The Chief Executive Officer shall be, ex
officio, a member of all standing committees. Subject to direction of the Board
of Directors, the Chief Executive Officer shall have the power, in the name and
on behalf of the Corporation, to execute any and all loan documents, contracts,
agreements, deeds, mortgages, and other instruments in writing, and to employ
and discharge employees and agents of the Corporation. Unless otherwise directed
by the Board of Directors, the Chief Executive Officer shall have full authority
and power,

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on behalf of all of the directors, to attend and to act and to vote, on behalf
of the Corporation at any meetings of business organizations in which the
Corporation holds an interest, or to confer such powers upon any other persons,
by executing any proxies duly authorizing such persons.

Section 5.7. PRESIDENT AND VICE-PRESIDENTS. The President shall be the
chief operating officer of the Corporation and, subject to the Board of
Directors, shall have general supervision, direction and control of the business
of the Corporation and of its employees and shall exercise such general powers
of management as are usually vested in the office of president of a corporation.
In the absence of the Chairman of the Board and the Chief Executive Officer, the
President shall preside at all meetings of the stockholders and at all meetings
of the Board of Directors. The President shall be, ex officio, a member of all
standing committees. Subject to direction of the Board of Directors, the
President shall have the power, in the name and on behalf of the Corporation, to
execute any and all loan documents, contracts, agreements, deeds, mortgages, and
other instruments in writing, and to employ and discharge employees and agents
of the Corporation. Unless otherwise directed by the Board of Directors, the
President shall have full authority and power, on behalf of all of the
directors, to attend and to act and to vote, on behalf of the Corporation at any
meetings of business organizations in which the Corporation holds an interest,
or to confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The President shall have such further authorities and
duties as the Board of Directors shall from time to time determine. In the
absence or disability of the President, the Vice Presidents in order of their
rank or the Vice President, if any, designated by the Board of Directors, shall
perform all of the duties of the President, and when so acting shall have all
the powers of and be subject to all of the restrictions upon the President.
Subject to the direction of the Chairman of the Board, the Chief Executive
Officer, the President and the Treasurer, any Vice President shall have the
power in the name and on behalf of the Corporation to execute any and all loan
documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer, or the President.

Section 5.8. SECRETARY. The Secretary shall keep the minutes of all
meetings of, and record all votes of, stockholders, Board of Directors and any
committees of directors, provided that, in the absence or disability of the
Secretary, the Board of Directors may appoint any other person to keep the
minutes of a meeting and record votes. The Secretary shall attest the signature
or signatures of the officer or officers executing any instrument on behalf of
the Corporation. The Secretary shall also perform any other duties commonly
incident to such office in a Maryland corporation and shall have such other
authorities and duties as the Board of Directors shall from time to time
determine.

Section 5.9. TREASURER. Except as otherwise directed by the Board of
Directors, the Treasurer shall have the general supervision of the monies,
funds, securities, notes receivable and other valuable papers and documents of
the Corporation, and shall have and exercise under the supervision of the Board
of Directors, the Chairman of the Board and the President all powers and duties
normally incident to his or her office. He or she may endorse for deposit or
collection all notes, checks and other instruments payable to the Corporation or
to its order. He or she shall deposit all funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of

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the Board, the Chief Executive Officer or the President. He or she shall keep
accurate account of the books of the Corporation's transactions which shall be
the property of the Corporation and which, together with all other property of
the Corporation in his or her possession, shall be subject at all times to the
inspection and control of the Board of Directors. Unless the Board of Directors
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Corporation and shall also be the principal financial officer of
the Corporation. He or she shall have such other duties and authorities as the
Board of Directors shall from time to time determine. Notwithstanding anything
to the contrary herein contained, the Board of Directors may authorize any
adviser or administrator to maintain bank accounts and deposit and disburse
funds on behalf of the Corporation.

Section 5.10. OTHER OFFICERS AND DUTIES. The Board of Directors may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of the
Corporation. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of his or
her office. Each officer, employee and agent of the Corporation shall have such
other duties and authority as may be conferred upon him or her by the Board of
Directors or delegated to him or her by the Chairman of the Board, the Chief
Executive Officer or the President.

ARTICLE VI

CUSTODY OF SECURITIES

Section 6.1. EMPLOYMENT OF CUSTODIAN. The Corporation shall have the option
to act as a self-custodian in accordance with the provisions set forth in
Section 17(f) of the Investment Company Act and Rule 17f-2 thereunder or place,
and at all times maintain, in the custody of a custodian (including any
sub-custodian for the custodian) all funds, securities and similar investments
owned by the Corporation. The custodian, if any, (and any sub-custodian) shall
be an institution conforming to the requirements of Section 17(f) of the
Investment Company Act and the rules of the United States Securities and
Exchange Commission (the "Commission") thereunder. The custodian, if any, shall
be appointed from time to time by the Board of Directors which shall fix its
remuneration.

Section 6.2. APPOINTMENT AND DUTIES. The Board of Directors may at any time
employ a custodian or custodians with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these Bylaws:

(1) to hold the securities owned by the Corporation and deliver the
same upon written order;

(2) to receive and receipt for any moneys due to the Corporation and
deposit the same in its own banking affiliate or elsewhere as the Board of
Directors may direct;

(3) to disburse such funds upon orders or vouchers;

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(4) if authorized to do so by the Board of Directors, to keep the
books and accounts of the Corporation and furnish clerical and accounting
services; and

(5) if authorized to do so by the Board of Directors, to compute the
net income and net assets of the Corporation;

all upon such basis of compensation as will be agreed upon between the Board of
Directors and the custodian. The Board of Directors may also authorize the
custodian to employ one or more sub-custodians, from time to time, to perform
such of the acts and services of the custodian and upon such terms and
conditions as may be agreed upon between the custodian and such sub-custodian
and approved by the Board of Directors.

Section 6.3. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Board of Directors may direct the
custodian to deposit all or any part of the securities owned by the Corporation
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or with any
such other person or entity with which the Board of Directors may authorize
deposit in accordance with the Investment Company Act, pursuant to which system
all securities of any particular class or series of any issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities. All such
deposits shall be subject to withdrawal only upon the order of the Corporation.

Section 6.4. TERMINATION OF CUSTODIAN AGREEMENT. Upon termination of the
custodian agreement, if any, or inability of the custodian to continue to serve,
the Board of Directors shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Board of Director shall call as
promptly as possible a special meeting of the stockholders to determine whether
the Corporation shall function without a custodian or shall be liquidated. If so
directed by vote of the holders of a majority of the outstanding shares of stock
of the Corporation entitled to vote, the custodian shall deliver and pay over
all property of the Corporation held by it as specified in such vote.

ARTICLE VII

CAPITAL STOCK

Section 7.1. ISSUANCE OF CERTIFICATES. A certificate or certificates
representing the number of shares of stock of the Corporation owned by
stockholders shall be available upon request to each stockholder. A certificate
shall state (i) the name of the Corporation, (ii) the name of the stockholder or
other person to whom it is issued and (iii) the class of stock and number of
shares represented by the certificate.

Section 7.2. STOCK LEDGER; TRANSFER OF STOCK. The Corporation shall
maintain at the offices of its transfer agent an original stock ledger
containing the names and addresses of all

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stockholders and the number of shares of stock held by each stockholder. Such
stock ledger may be in written form or any other form capable of being converted
into written form within a reasonable time for visual inspection.

The Corporation shall be entitled to recognize the exclusive rights of a
person registered on its books as the owner of shares of stock, and shall not be
bound to recognize any legal, equitable or other claim to or interest in such
shares of stock on the part of any other person, whether or not it shall have
received express or other notice thereof, except as otherwise provided by the
laws of the State of Maryland.

Transfers of shares of stock of the Corporation shall be made on the stock
records of the Corporation only by the registered holder thereof, or by his or
her attorney thereunto authorized by power of attorney duly executed and filed
with the Secretary or with the transfer agent or transfer clerk and accompanied
by a duly executed stock transfer power and the payment of all taxes thereon.

ARTICLE VIII

INDEMNIFICATION AND INSURANCE

Section 8.1. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
The Corporation shall indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, agent, partner or
trustee of another corporation, partnership, joint venture, trust or other
enterprise, against all judgments, penalties, fines and settlements and against
all reasonable expenses, including actually incurred by him or her in connection
with such Proceeding to the attorneys' fees, attorneys' fees, actually incurred
by him or her in connection with such Proceeding to the fullest extent permitted
by law, provided that:

(a) such person acted in good faith and (i) in the case of conduct in
such person's official capacity with the Corporation, in a manner he or she
reasonably believed to be in the best interests of the Corporation and (ii)
in all other cases, in a manner he or she reasonably believed not opposed
to the best interests of the Corporation;

(b) with respect to any criminal proceeding, such person had no
reasonable cause to believe his or her conduct was unlawful;

(c) unless ordered or permitted by a court, indemnification shall be
made only as authorized in the specific case upon (i) a determination that
indemnification of such person is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in subparagraphs
(a) and (b) above, and (ii) such other authorizations and determinations as
may be required by law to be made, by (A) the Board of Directors of the

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Corporation by the vote of a majority of a quorum consisting of directors
who are neither "interested persons" of the Corporation as defined in the
Investment Company Act nor parties to such Proceeding or if such quorum
cannot be obtained, by a majority vote of a committee of the Board of
Directors consisting solely of two or more such directors who are duly
designated to act in the matter by a majority vote of the full Board of
Directors, or (B) independent legal counsel in a written opinion, which
counsel shall be selected in accordance with such procedures as may be
required by law; provided, however, that such counsel shall make only such
determinations and authorizations as are permitted by law to be made by
independent counsel, or (C) the stockholders of the Corporation acting in
accordance with the Articles and the Bylaws of the Corporation and
applicable law;

(d) in the case of a Proceeding by or in the right of the Corporation
to procure a judgment in its favor, no indemnification shall be made except
for the payment of expenses reasonably incurred by such person in
connection therewith; provided, however, that if such person shall have
been adjudged to be liable for negligence or misconduct in the performance
of his or her duties to the Corporation, no indemnification shall be made
with respect to the expense incurred by such person in connection with such
Proceeding unless, and only to the extent that, the court in which such
Proceeding is brought, or a court of equity in the county or other local
jurisdiction in which the Corporation has its principal office, shall
determine upon application that, despite adjudication of liability but in
view of all the circumstances of the case, he or she is fairly and
reasonably entitled to indemnity for such expenses which such court shall
deem proper; and

(e) no indemnification or other protection shall be made or given to
any director or officer of the Corporation against any liability to the
Corporation or to its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their
respective offices.

Expenses (including attorneys' fees) incurred in defending a Proceeding
will be paid by the Corporation in advance of the final disposition thereof to
the fullest extent permitted by law.

The termination of any Proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that such person has not met the applicable
standard of conduct set forth in subparagraphs (a) and (b) above.

Section 8.2. INSURANCE OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
partner, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her and
incurred by him or her in or arising out of his or her position, whether or not
the Corporation would have the power to indemnify him or her against such
liability. However, any insurance purchased will not protect or purport to
protect any officer or director against liabilities for willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.

- 15 -
<PAGE> 16
ARTICLE IX

CORPORATE SEAL

The Corporation shall not have or use a corporate seal.

ARTICLE X

RECORD DATE

The Board of Directors may fix, in advance, a date as the record date for
the purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment of any
dividend or distribution or the allotment of any rights, or in order to make a
determination of stockholders for any other purpose. Such date in any case shall
be not more than 90 days, and in case of a meeting of stockholders not less than
10 days, prior to the date on which the particular action requiring such
determination of stockholders is to be taken.

ARTICLE XI

MISCELLANEOUS

Section 11.1. DEPOSITORIES. In accordance with Article VI of these Bylaws,
the funds of the Corporation shall be deposited in such depositories as the
Board of Directors shall designate and shall be drawn out on checks, drafts or
other orders signed by such officer, officers, agent or agents (including any
adviser or administrator), as the Board of Directors may from time to time
authorize.

Section 11.2. SIGNATURE. All contracts and other instruments shall be
executed on behalf of the Corporation by such officer, officers, agent or
agents, as provided in these Bylaws or as the Board of Directors may from time
to time by resolution or authorization provide.

Section 11.3. FISCAL YEAR. The fiscal year of the Corporation shall end on
December 31 of each year, subject, however, to change from time to time by the
Board of Directors.

Section 11.4. BOOKS AND RECORDS. The books and records of the Corporation
shall be kept at such places as the Board of Directors may determine, provided
however, that the original or a certified copy of these Bylaws, including any
amendments thereto, shall be kept at the Corporation's principal executive
office.

- 16 -

<PAGE> 17

Section 11.5. NET ASSET VALUE. The value of the Corporation's net assets
shall be determined at such times and by such method as set forth in the
Corporation's Articles of Incorporation.

ARTICLE XII

AMENDMENT OF BYLAWS

Section 12.1 AMENDMENT AND REPEAL OF BYLAWS. Except to the extent that any
amendment or alteration of these Bylaws would conflict with the provisions in
ARTICLE TWELFTH of the Articles, the Board of Directors shall have the power to
alter, amend or repeal these Bylaws or adopt new bylaws at any time. The Board
of Directors shall in no event adopt bylaws that are in conflict with the
Articles, the General Laws of the State of Maryland, the Investment Company Act
or other applicable federal securities laws.

- 17 -

<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 34-1838462) pertaining to the 1996 Stock Option Plan for Officers
and Employees of Brantley Capital Corporation of our report dated March 20,
1998, with respect to the financial statements of Brantley Capital Corporation
included in its Annual Report (Form 10-K) for the period ended December 31,
1998.

ERNST & YOUNG LLP

March 30, 1999

<ARTICLE> 6

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