<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission file number 814-00141
Venture Lending & Leasing II, Inc.
---------------------------------------------------
(Exact Name of Registrant as specified in its charter)
Maryland 77-0456589
---------- ---------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
or organization) Identification No.)
2010 North First Street, Suite 310, San Jose, CA 95131
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 436-8577
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has (i) filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (ii) has been subject
to such filing requirements for the past 90 days. Yes X No ___
---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding as of October 31, 1998
- ----------------------------------- ------------------------------------------
Common Stock, $.001 par value 33,000
Page 1 of 13; Exhibit Index appears on Page 13
<PAGE>
VENTURE LENDING & LEASING II, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Financial Position 3
September 30, 1998 (Unaudited) and June 30, 1998
Statement of Operations (Unaudited) 4
Three months ended September
30, 1998 and the period from September 15, 1997(commencement of
operations) to September 30, 1997
Statement of Changes in Shareholders' Equity (Unaudited) 5
For the period from September 15, 1997(commencement of operations) to
September 30, 1998
Statement of Cash Flows (Unaudited) 6
Three months ended September
30, 1998 and the period from September 15, 1997(commencement of
operations) to September 30, 1997
Notes to Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis of Financial 11 - 13
Condition and Results of Operations
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits 13
SIGNATURES 13
</TABLE>
2
<PAGE>
VENTURE LENDING & LEASING II, INC.
STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, 1998 June 30, 1998
-------------------------- ----------------------
<S> <C> <C>
Loans and leases, at estimated fair value $ 35,360,035 $ 22,768,445
Investments in warrants, at estimated fair value 775,050 487,850
Investments in stocks, at estimated fair value 635,655 972,347
Cash and cash equivalents 5,661,123 7,091,890
Other assets 254,509 283,192
-------------------------- ----------------------
Total assets 42,686,372 31,603,724
-------------------------- ----------------------
-------------------------- ----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank loans 20,208,210 9,008,210
Management fees payable 687,500 687,500
Accounts payable and other accrued liabilities 440,236 393,052
-------------------------- ----------------------
Total liabilities 21,335,946 10,088,762
-------------------------- ----------------------
Shareholders' equity:
Common stock, $.001 par value:
Authorized--200,000 shares
Issued and outstanding--22,000 shares 22 22
Capital in excess of par value 21,999,978 21,999,978
Accumulated deficit (649,574) (485,038)
-------------------------- ----------------------
Total shareholders' equity 21,350,426 21,514,962
-------------------------- ----------------------
Total liabilities and shareholders' equity $ 42,686,372 $ 31,603,724
-------------------------- ----------------------
-------------------------- ----------------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
VENTURE LENDING & LEASING II, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months *For the Period
Ended Ended
September 30, 1998 September 30, 1997
-------------------------- -------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest on loans and leases $ 1,013,442 $ 4,510
Interest on short-term investments 72,807 12,959
-------------------------- -------------------------
Total investment income 1,086,249 17,469
-------------------------- -------------------------
EXPENSES:
Management fees 687,500 77,244
Interest expense 159,861 0
Professional fees 10,003 0
Bank loan facility fee 43,151 0
Other operating expenses 13,578 21,510
-------------------------- -------------------------
Total expenses 914,093 98,754
-------------------------- -------------------------
Net investment gain (loss) 172,156 (81,285)
-------------------------- -------------------------
UNREALIZED LOSS FROM INVESTMENT TRANSACTIONS (336,692) 0
-------------------------- -------------------------
Net loss $ (164,536) $ (81,285)
-------------------------- -------------------------
-------------------------- -------------------------
BASIC NET LOSS PER SHARE $ (7.48) $ (11.58)
-------------------------- -------------------------
-------------------------- -------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 22,000 7,022
-------------------------- -------------------------
-------------------------- -------------------------
</TABLE>
* From commencement of operations, September 15, 1997 to September 30, 1997.
The accompanying notes are an integral part of these statements.
4
<PAGE>
VENTURE LENDING & LEASING II, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FROM SEPTEMBER 15, 1997* TO SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
------------------------- EXCESS OF RETAINED
SHARES AMOUNT PAR VALUE DEFICIT TOTAL
------------- ----------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 15, 1997 50 $ 0 $ 50,000 $ 0 $ 50,000
Sales of common stock 21,950 22 21,949,978 0 21,950,000
Net loss 0 0 0 (485,038) (485,038)
------------- ----------- ---------------- ---------------- -----------------
BALANCE, JUNE 30, 1998 22,000 22 21,999,978 (485,038) 21,514,962
------------- ----------- ---------------- ---------------- -----------------
------------- ----------- ---------------- ---------------- -----------------
Net loss 0 0 0 (164,536) (164,536)
------------- ----------- ---------------- ---------------- -----------------
BALANCE, SEPTEMBER 30, 1998 22,000 $22 $ 21,999,978 $ (649,574) $ 21,350,426
------------- ----------- ---------------- ---------------- -----------------
</TABLE>
*From commencement of operations to June 30, 1998
The accompanying notes are an integral part of these statements.
5
<PAGE>
VENTURE LENDING & LEASING II, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the Three *For the Period
Months Ended Ended
September 30, September 30,
1998 1997
---------------------- -----------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (164,536) $ (81,285)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Amortization of deferred assets 29,592 3,183
Unrealized (gain) loss from investment transactions 336,692 0
Increase in other assets (910) (82,705)
Increase in management fees payable 0 77,244
Increase in accounts payable and other accrued liabilities 47,184 179,666
---------------------- -----------------------
Net cash provided by operating activities 248,022 96,103
---------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of loans and leases (14,347,355) (616,872)
Principal payments on loans and leases 1,755,766 91,747
Acquisition of warrants and stock (287,200) (36,000)
Payment for deferred expenses 0 (184,609)
---------------------- -----------------------
Net cash used in investing activities (12,878,789) (745,734)
---------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net 0 7,048,500
Loan from bank 11,200,000 0
---------------------- -----------------------
Net cash provided by financing activities 11,200,000 7,048,500
---------------------- -----------------------
Net increase (decrease) in cash and cash equivalents (1,430,767) 6,398,869
---------------------- -----------------------
CASH AND CASH EQUIVALENTS:
Beginning of period 7,091,890 0
---------------------- -----------------------
End of period
$ 5,661,123 $ 6,398,869
---------------------- -----------------------
---------------------- -----------------------
CASH PAID DURING THE PERIOD FOR:
Interest $ 127,211 $ 0
</TABLE>
* From commencement of operations, September 15, 1997 to September 30, 1997.
The accompanying notes are an integral part of these statements.
6
<PAGE>
VENTURE LENDING & LEASING II, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC)
and in Management's opinion, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of results
for such interim periods. Certain information and note disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to SEC rules or
regulations; however, the Fund believes that the disclosures made are
adequate to make the information presented not misleading. The interim
results for the three months ended September 30, 1998 and the period ending
September 30, 1997, are not necessarily indicative of results for the full
year. It is suggested that these financial statements be read in conjunction
with the financial Statements and the notes included in the Fund's Annual
Report for the year ended June 30, 1998.
2. SUMMARY OF INVESTMENTS:
Loans and leases generally are made to borrowers pursuant to commitments whereby
the Fund commits to finance assets up to a specified amount for the term of the
commitments, upon the terms and subject to the conditions specified by such
commitment. The Fund's investments in loans and leases are entirely within the
United States and are diversified among the following industries.
The percentage of net assets that each industry group represents is shown with
the industry totals:
<TABLE>
<CAPTION>
OUTSTANDING
SEPTEMBER 30,
INDUSTRY 1998
- --------- -------------------
<S> <C>
Biotech:
Ceres, Inc. $ 1,070,822
Therics Inc. 932,606
-------------------
Total biotech (9.4%) 2,003,428
-------------------
Communications:
Aunet, Inc. 681,023
CoSine Communications 139,907
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDING
SEPTEMBER 30,
INDUSTRY 1998
- --------- -------------------
<S> <C>
Digital Generation Systems, Inc. 3,195,894
Exodus Communications, Inc. 3,297,758
Juniper Networks, Inc. 2,306,881
-------------------
Total communications (45.1%) 9,621,463
-------------------
Computers and peripherals:
Das Devices, Inc. 760,986
Quantum3D, Inc. 234,398
SVision, Inc. 1,188,797
-------------------
Total computers and peripherals (10.2%) 2,184,181
-------------------
Internet:
Adforce 287,689
Keynote Systems Incorporated 194,079
Netratings, Inc. 145,814
Wallop Software, Inc. 2,019,011
-------------------
Total internet (12.4%) 2,646,593
-------------------
Medical device:
Aerogen, Inc. 425,624
Heartstent Corporation 245,220
Intratherapeutics, Inc. 1,230,131
Myelotec, Inc. 286,566
Protein Delivery Inc. 52,815
Spinal Concepts, Inc. 324,524
Survivalink Corporation 1,267,899
-------------------
Total medical device (18.0%) 3,832,779
-------------------
Semiconductors and equipment:
Abpac, Inc. 1,434,639
Icompression, Inc. 139,274
Lightwave Microsystems Corporation 414,584
Obsidian 4,867,000
Poseidon Technology, Inc. 930,162
Telecruz Technology, Inc. 1,199,764
Transmeta Corporation 929,278
O-In Design Automation 224,342
ZSP Corporation 329,890
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDING
SEPTEMBER 30,
INDUSTRY 1998
- --------- -------------------
<S> <C>
-------------------
Total semiconductors and equipment (49.0%) 10,468,852
-------------------
Software:
USInternetworking 4,602,739
-------------------
Total software (21.6%) 4,602,739
-------------------
-------------------
Total $ 35,360,035
-------------------
-------------------
</TABLE>
The Fund provides asset-based financing primarily to start-up and emerging
growth venture-capital-backed companies. As a result, the Fund is subject to
general credit risk associated with such companies. At September 30, 1998,
the Fund has unfunded commitments to borrowers of $66,488,597.
The Fund's investments in warrants are entirely within the United States and
are diversified among the following industries. The percentage of net assets
that each industry group represents is shown with the industry totals:
<TABLE>
<CAPTION>
PERCENTAGE OF NET
INDUSTRY WARRANT VALUE ASSETS
- -------- ----------------- -----------------
<S> <C> <C>
Biotechnology $ 63,000 0.3%
Communications 140,500 0.7
Computer and peripherals 99,000 0.5
Internet 45,250 0.2
Medical devices 89,100 0.4
Semiconductor 233,400 1.1
Software 104,800 0.5
----------------- -----------------
Total warrants $ 775,050 3.6%
----------------- -----------------
----------------- -----------------
</TABLE>
The Fund's investment in common stock at September 30, 1998, consists of an
investment in one security within the United States, Exodus Communications.
This investment, which is in the communications industry, has a carrying
value of $635,655 and represents 1.5 percent of the Fund's net assets.
At September 30, 1998, the Fund held warrants to purchase 2,859,106 shares of
common and preferred stock in 33 companies, of which one company is publicly
traded. The quoted market value of the stock underlying the warrant issued by
the publicly traded company, adjusted for illiquidity, was less than the cost
basis of $55,000. The remainder of the warrants issued by
9
<PAGE>
private companies did not have a readily ascertainable market value and were
assigned a minimal value at the time of acquisition. These warrants had a
value of $720,050 at September 30, 1998.
3. EARNINGS PER SHARE:
The Fund adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share," effective December 31, 1997. SFAS No. 128 replaces
primary and fully diluted earnings per share with basic and diluted earnings
per share calculations. Basic earnings per share are computed by dividing net
income, less dividends on preferred stock, by the weighted average common
shares outstanding. Diluted earnings per share are computed by dividing net
income, less dividends on preferred stock, by the weighted average common
shares outstanding, including the dilutive effects of potential common shares
(e.g., stock options). The Fund has no preferred stock or instruments that
would be potential common shares; thus, reported basic and diluted earnings
are the same.
4. FUTURE FINANCIAL ACCOUNTING STANDARDS:
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows a derivative's gains and losses to offset related results on
the hedged item in the income statement and requires that a company formally
document, designate, and assess the effectiveness of transactions that
receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999, and
the Fund plans to adopt its provisions effective July 1, 1999. From time to
time, the Fund enters into interest rate swaps to hedge its interest rate.
Additionally, certain of its investments and long-term borrowings may have
embedded options due to call or put features that would be required to be
accounted for differently under SFAS No. 133 as compared to current
accounting principles. The Fund has not yet quantified the impact of adopting
SFAS No. 133 on its financial statements; however, SFAS No. 133 could
increase the volatility of future earnings.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Venture Lending & Leasing II, Inc. ("Fund") is a closed-end,
non-diversified management investment company electing status as a business
development company under the Investment Company Act of 1940 ("1940 Act").
The Fund's investment objective is to achieve a high total return. The Fund
will provide asset-based financing to carefully selected venture
capital-backed companies, in the form of secured loans, installment sales
contracts or equipment leases. The Fund generally will receive warrants to
acquire equity securities in connection with its portfolio investments.
The Fund's shares of Common Stock, $.001 par value ("Shares") are sold
to subscribers pursuant to one or more capital calls to be made from time to
time until September 15, 2001. The Fund will seek to require payment by
investors pursuant to each capital call of only that portion of the total
dollar amount subscribed for that the Fund expects will be needed to fund
commitments entered into within a reasonable time after such capital call.
The Fund has made two capital calls since inception for a total of 20% of
committed capital. Total committed capital as of September 30, 1998 was $110
million; a total of $22.0 million has been called.
In addition to the historical information contained herein, this
Quarterly Report contains certain forward-looking statements. The reader of
this Quarterly Report should understand that all such forward-looking
statements are subject to various uncertainties and risks that could affect
their outcome. The Fund's actual results could differ materially from those
suggested by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, variances in
the actual versus projected growth in assets, return on assets, loan losses,
expenses, rates charged on loans and earned on securities investments and
competition effects as well as other factors. This entire Quarterly Report
should be read to put such forward-looking statements in context and to gain
a more complete understanding of the uncertainties and risks involved in the
Fund's business.
RESULTS OF OPERATIONS -- FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND
1997
Total investment income for the periods ending September 30, 1998 and
1997 was $1.1 million and $17 thousand, respectively, of which $1.0 million
and $5 thousand, consisted of interest on venture loans outstanding during
the period. The remaining income consisted of interest on the temporary
investment of cash, pending investment in venture loans and leases or
application to the Fund's expenses. As the Fund commenced operations on
September 15, 1997, the period ended September 30, 1997 reflects only a
nominal amount of income. Investment income should increase in future periods
as the Fund's balance of loans outstanding continues to grow.
Expenses for the periods ending September 30, 1998 and 1997 were $914
thousand and $99 thousand, respectively. The Fund posted an unrealized loss
on it's investments of $337 thousand during the period ending September 30,
1998 resulting in net loss of $165 thousand for
11
<PAGE>
the quarter. There were no gains or losses during the period ended September
30, 1997 leaving the Fund with a net loss of $81 thousand during the period.
On a per share basis, for the periods ending September 30, 1998 and 1997 the
net loss was $7.48 and $11.58, respectively.
The primary expense of the Fund was the management fee of $688 thousand
and $77 thousand incurred during the periods, which is imposed at an annual
rate of 2.5% of committed capital. Because the management fee is imposed on
committed capital for the first two years of the Fund's life, it may
represent more than 2.5% of invested assets (and reduce net income
correspondingly).
Interest expense for the quarter ended September 30, 1998 was $160
thousand as the Fund began to borrow against its line of credit. There was no
interest expense in the corresponding period of the prior year as the Fund
had no borrowings at that time. Interest expense is expected to become a
significant portion of the Fund's operating expense as the Fund begins to use
borrowed money in addition to its equity capital to fund loans. Expenses,
other than the management fee and interest expense, are relatively fixed and
should decrease as a percentage of investment income as the Fund's assets
increase.
The Fund incurred $198 thousand in organizational expenses through
September 30, 1998. The Fund reimbursed Westech Advisors for the portion of
these costs that they paid prior to the closing of the Fund. This amount has
been deferred and is being amortized on a straight-line basis over a period
of 60 months from the date the Fund commenced operations.
LIQUIDITY AND CAPITAL RESOURCES -- SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
Total capital committed to the purchase of shares pursuant to
subscription agreements stood at $110 million at December 31, 1997 when the
Fund stopped accepting new subscriptions. As of September 30, 1998, 20% of
this committed capital was called to fund investments in venture loans and
leases and to meet the Fund's expenses. Additional capital may be drawn from
subscribers upon 15 days' notice.
The Fund established a $35 million credit facility with a syndicate of
major banks to finance the acquisition of asset-based loans and leases. As of
September 30, 1998 there was $20.2 million outstanding under this facility.
Outstanding balances bear interest at either the financial institution's
prime rate or 1.15 percent above LIBOR.
As of September 30, 1998, 13% of the Fund's assets consisted of cash and
cash equivalents. The Fund invested $14.3 million in venture loans and leases
during the last quarter, and net loan amounts outstanding after amortization
stand at approximately $35.4 million. Amounts committed but undrawn increased
to approximately $62.3 million. Because venture loans and leases are
privately negotiated transactions, investments in these assets are relatively
illiquid.
As long as the Fund qualifies as a RIC, it will not pay any federal or
state corporate income tax on income that is distributed to shareholders
(pass-through status). Should the Fund lose its qualification as a RIC, it
could be taxed as an ordinary corporation on its taxable income
12
<PAGE>
for that year (even if that income is distributed to its shareholders), and
all distributions out of its earnings and profits will be taxable to
shareholders as ordinary income.
YEAR 2000 ISSUE
The Fund utilizes software and related information technologies that
will be affected by the date change in the year 2000. The year 2000 issue
exists because many computer systems and applications currently use two-digit
date fields to designate a year. When the century date change occurs, certain
date-sensitive systems may recognize the year 2000 as 1900, or not at all.
This inability to recognize or properly treat the year 2000 may result in a
systems failure or cause systems to process critical financial and
operational information incorrectly. Additionally, many of the Fund's
customers and service providers use software and information technology that
could also be affected by the date change.
Based on ongoing assessments and testing, the Fund believes that there
is no material risk of business interruption as a result of computer errors
or inefficiencies. Consequently, the Fund does not anticipate that the
remediation costs associated with the year 2000 issue will be material. The
Fund is also working with its vendors and customers to obtain reasonable
assurances that they are taking comparable steps with respect to their year
2000 exposures. However, in the event that significant vendors or customers
do not adequately address the year 2000 issue, it could have a material
adverse effect on the Fund's operations and financial position. The steps the
Fund is taking and intends to take do not guarantee complete success or
eliminate the possibility that the Fund will not be adversely affected by the
matters related to the year 2000.
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None
ITEM 6. EXHIBITS
- ------- --------
27. Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
VENTURE LENDING & LEASING II, INC.
(Registrant)
By: /S/ Ronald W. Swenson By: /S/ Salvador O. Gutierrez
--------------------- -------------------------
Ronald W. Swenson Salvador O. Gutierrez
Chairman and Chief Executive Officer President, Chief Financial Officer
and Chief Accounting Officer
Date: November 13, 1998 Date: November 13, 1998
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 36,464
<INVESTMENTS-AT-VALUE> 36,771
<RECEIVABLES> 0
<ASSETS-OTHER> 254
<OTHER-ITEMS-ASSETS> 5,661
<TOTAL-ASSETS> 42,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 20,208
<OTHER-ITEMS-LIABILITIES> 1,128
<TOTAL-LIABILITIES> 21,336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,000
<SHARES-COMMON-STOCK> 22
<SHARES-COMMON-PRIOR> 22
<ACCUMULATED-NII-CURRENT> 172
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 307
<NET-ASSETS> 21,350
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,086
<OTHER-INCOME> 0
<EXPENSES-NET> 914
<NET-INVESTMENT-INCOME> 172
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (337)
<NET-CHANGE-FROM-OPS> (165)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,083
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 688
<INTEREST-EXPENSE> 160
<GROSS-EXPENSE> 914
<AVERAGE-NET-ASSETS> 21,433
<PER-SHARE-NAV-BEGIN> 977.95
<PER-SHARE-NII> 7.82
<PER-SHARE-GAIN-APPREC> (15.32)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 970.45
<EXPENSE-RATIO> .043
<AVG-DEBT-OUTSTANDING> 14,609
<AVG-DEBT-PER-SHARE> 664.02
</TABLE>
