UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
Commission File Number 0-15669
ML-LEE ACQUISITION FUND, L.P.
(Exact name of registrant as specified in its Charter)
Delaware 13-3426817
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
World Financial Center
South Tower - 23rd Floor
New York, New York 10080-6123
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:(212) 236-7339
Securities registered pursuant to Section 12(b) of the Act: None
Name of each exchange on which registered: Not Applicable Securities
registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
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 ___.
Aggregate market value of voting securities held by non-affiliates: Not
Applicable.
<PAGE>
ML-LEE ACQUISITION FUND, L.P.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Assets, Liabilities and Partners' Capital
as of June 30, 1998 and December 31, 1997
Statements of Operations - For the Three and Six Months Ended
June 30, 1998 and 1997
Statements of Changes in Net Assets - For the Six Months Ended
June 30, 1998 and 1997
Statements of Cash Flows - For the Six Months Ended
June 30, 1998 and 1997
Statement of Changes in Partners' Capital - June 30, 1998
Schedule of Investments - June 30, 1998
Notes to Financial Statements
Supplemental Schedule of Realized Gains and Losses - Schedule 1
Supplemental Schedule of Unrealized Appreciation and
Depreciation - Schedule 2
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
ML-LEE ACQUISITION FUND, L.P.
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<S> <C> <C>
(Unaudited)
June 30, 1998 December 31, 1997
----------- -----------------
ASSETS:
Investments - Notes 2, 8, 9
Portfolio Investments at fair value
Managed Companies (cost $16,652 at June 30,
1998 and $53,480 at December 31, 1997) $ -- $ 35,227
Non-Managed Companies (cost $0 at June 30,
1998 and $720 at December 31, 1997) -- 26
Temporary Investments, at amortized cost (cost $24,050 at
June 30, 1998 and $4,040 at December 31, 1997) 24,072 18,125
Cash 26 1
Prepaid Loan Fees - Notes 2, 4 -- 384
Prepaid Expenses -- 6
Receivable for Investment Sold (Net of Allowance for
Uncollectable Proceeds) - Note 8 38 3,926
----------- -----------
TOTAL ASSETS $ 24,136 $ 57,695
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities
Legal and Professional Fees Payable $ 49 $ 110
Reimbursable Administrative Expenses Payable 158 116
Independent General Partner Expenses Payable 29 23
----------- -----------
Total Liabilities 236 249
----------- -----------
Partners' Capital - Note 2
Managing General Partner 583 918
Limited Partners (487,489 Units) 23,317 56,528
----------- -----------
Total Partners' Capital 23,900 57,446
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 24,136 $ 57,695
=========== ===========
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML-LEE ACQUISITION FUND, L.P.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
For the Three Months Ended For the Six Months Ended
---------- ---------- ------------- ------------
June 30,1998 June 30,1997 June 30, 1998 June 30,1997
---------- ---------- ------------- ------------
INVESTMENT INCOME - Notes 2, 8, 10:
Interest $ 9 $ 301 $ 15 $ 596
Discount 228 46 424 93
Dividend & Other Income -- -- 1 6
---------- ---------- ---------- ----------
TOTAL INCOME 237 347 440 695
---------- ---------- ---------- ----------
EXPENSES:
Investment Advisory Fee - Note 5 300 297 600 594
Fund Administration Fee - Note 6 75 75 150 150
Uncollectable Receivable Expense - Note 8 1,000 -- 1,000 --
Loan Fees - Notes 2, 4 230 175 403 347
Independent General Partners' Fees and Expenses - Note 7 39 118 79 171
Legal and Professional Fees -- 416 -- 648
Reimbursable Administrative Expenses - Note 6 158 191 291 261
Insurance Expense 5 2 7 4
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,807 1,274 2,530 2,175
---------- ---------- ---------- ----------
NET INVESTMENT LOSS (1,570) (927) (2,090) (1,480)
NET REALIZED GAIN ON INVESTMENTS -
NOTE 8 AND SCHEDULE 1 24,297 5,434 7,095 5,795
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS - NOTE 9 AND SCHEDULE 2
Publicly Traded Securities (25,351) (3,012) (18,959) (2,728)
Nonpublic Securities 254 -- 21,254 --
---------- ---------- ---------- ----------
Subtotal (25,097) (3,012) 2,295 (2,728)
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (2,370) $ 1,495 $ 7,300 $ 1,587
========== ========== ========== ==========
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML-LEE ACQUISITION FUND, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
For the Six Months Ended
------------- -------------
June 30, 1997 June 30, 1998
------------- -------------
FROM OPERATIONS:
Net Investment Loss $ (2,090) $ (1,480)
Net Realized Gain on Investments 7,095 5,795
Net Change in Unrealized Appreciation (Depreciation) on Investments 2,295 (2,728)
---------- ----------
Net Increase in Net Assets Resulting from Operations 7,300 1,587
Cash Distributions to Partners (40,846) (936)
---------- ----------
Total Increase (Decrease) (33,546) 651
NET ASSETS:
Beginning of Period 57,446 97,388
---------- ----------
End of Period $ 23,900 $ 98,039
========== ==========
See the Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML-LEE ACQUISITION FUND, L.P.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
For the Six Months Ended
---------- -------------
June 30, 1998 June 30, 1997
---------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest, Dividends and Discount Income $ 479 $ 997
Investment Advisory Fee (600) (594)
Fund Administration Fee (150) (150)
Legal and Professional Fees (60) (457)
Loan Fees and Expenses (19) (9)
Independent General Partners' Fees and Expenses (73) (153)
(Purchase) Sale of Temporary Investments, Net (5,987) (13,838)
Reimbursable Administrative Expenses (250) (173)
Proceeds from Sale of Portfolio Company Investments 47,531 15,303
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 40,871 926
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to Partners (40,846) (936)
---------- ----------
NET CASH APPLIED TO FINANCING ACTIVITIES (40,846) (936)
---------- ----------
Net Increase (Decrease) in Cash 25 (10)
Cash at Beginning of Period 1 10
---------- ----------
CASH AT END OF PERIOD $ 26 $ --
========== ==========
RECONCILIATION OF NET INVESTMENT LOSS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Investment Loss $ (2,090) $ (1,480)
---------- ----------
ADJUSTMENTS TO RECONCILE NET INVESTMENT LOSS
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(Increase) Decrease in Investments 31,560 (4,331)
Decrease in Receivable for Investments Sold
(Net of Allowance for Uncollectable Proceeds) 3,888 --
Decrease in Accrued Interest,
Dividend and Discount Receivables 40 302
Decrease in Prepaid Expenses 391 333
Increase in Independent General Partner Fees Payable 6 18
Increase in Reimbursable Administrative Expenses Payable 41 88
Increase (Decrease) in Legal and Professional Fees Payable (60) 201
Net Realized Gain on Investments 7,095 5,795
---------- ----------
TOTAL ADJUSTMENTS 42,961 2,406
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 40,871 $ 926
========== ==========
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML-LEE ACQUISITION FUND, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Managing
General Limited
Partner Partners Total
------------ ------------ ------------
For the Six Months Ended June 30, 1998
Partners' Capital at January 1, 1998 $ 918 $ 56,528 $ 57,446
Allocation of Net Investment Loss (21) (2,069) (2,090)
Allocation of Net Realized Gain on Investments 71 7,024 7,095
Allocation of Net Change in Unrealized Appreciation 23 2,272 2,295
Cash Distributions to Partners (408) (40,438) (40,846)
------------ ------------ ------------
Partners' Capital at June 30, 1998 $ 583 $ 23,317 $ 23,900
============ ============ ============
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML-LEE ACQUISITION FUND, L.P.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(CONTINUED)
Fair % Of
Investment Investment Value Total
Shares/Warrants Investment Date Cost(d) (Note 2) Investments
<S> <C> <C> <C> <C> <C>
MEZZANINE INVESTMENTS
MANAGED COMPANIES
CHADWICK-MILLER, INC. - Notes 9,14
15,406 Warrants CMI Holding Corp., Preferred Stock Purchase Warrants (a)(b)(c) 12/16/88 $ 12,916 $ -
39,487 Warrants CMI Holding Corp., Common Stock Purchase Warrants (a)(b)(c) Various 3,736 -
(7.5% of fully diluted common equity)
35,161 Shares Common Stock
Purchased 06/30/93 $ 352
Sold 09/03/93 $ 352
Realized Gain $ 0
$5,000 Senior Note
Purchased 12/16/88 $ 5,000
Sold 11/23/94 $ 5,000
Realized Gain $ 0
189,996 Shares Preferred Stock
192,933 Shares Common Stock
100,000 Common Stock Warrants
Purchased Various $ 16,652
Exchanged July 15, 1996
15,406 Preferred Stock Warrants
39,487 Common Stock Warrants $ 16,652
Realized Gain $ 0 ------------------------------
Total Realized Gain $ 0 16,652 - 0.00
-----------------------------
TEMPORARY INVESTMENTS
COMMERCIAL PAPER
$ 10,000 American General Finance Corp., 5.70% due 7/2/98 6/26/98 $ 9,991 $ 9,998 41.54
$ 10,000 Clipper Receivable, 5.70% due 7/2/98 6/26/98 9,991 9,997 41.54
$ 4,075 General Electric Co., 5.50% due 7/1/98 6/19/98 4,068 4,075 16.92
------------------------------
TOTAL INVESTMENT IN COMMERCIAL PAPER 24,050 24,072 100.00
------------------------------
TOTAL TEMPORARY INVESTMENTS 24,050 24,072 100.00
------------------------------
TOTAL INVESTMENT PORTFOLIO $ 40,702 $24,072 100.00
==============================
(a) Restricted non-income producing security.
(b) Non-accrual investment status.
(c) Inclusive of payment-in-kind securities.
(d) Represents original cost and excludes accretion of discount of $22 for Temporary Investments.
</TABLE>
See the Accompanying Notes to Financial Statements.
<PAGE>
ML-LEE ACQUISITION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. Organization and Purpose
ML-Lee Acquisition Fund, L.P. (the "Fund") was formed and the Certificate
of Limited Partnership was filed under the Delaware Revised Uniform Limited
Partnership Act on April 1, 1987. The Fund's operations commenced on October 19,
1987.
The Managing General Partner, subject to the supervision of the Individual
General Partners, is responsible for overseeing and monitoring the Fund's
investments. Mezzanine Investments, L.P. (the "Managing General Partner"), is a
limited partnership in which ML Mezzanine Inc., an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc., is the general partner, and Thomas H.
Lee Advisers I (the "Investment Adviser"), an affiliate of Thomas H. Lee, is the
limited partner. The Individual General Partners are Vernon R. Alden, Joseph L.
Bower and Stanley H. Feldberg (the "Independent General Partners") and Thomas H.
Lee.
The Fund elected to operate as a business development company under the
Investment Company Act of 1940. Its primary investment objective was to provide
current income and long-term capital appreciation by investing in "Mezzanine"
securities consisting primarily of Subordinated Debt and Preferred Stock
combined with an equity participation issued in connection with leveraged
acquisitions or other leveraged transactions.
The initial term of the Fund expired on June 15, 1998 and the Fund has five
years to liquidate its remaining investments. However, the Fund expects to
liquidate its remaining assets, including the Promissory Note related to the
sale of BeefAmerica , (as described below and in Note 8) by the end of 1998. The
expiration of the Fund's term has caused the Management Agreement between the
Investment Adviser and the Fund to expire. The Investment Adviser is continuing
to manage the Fund's remaining investments.
As of July 13, 1998, the Fund's remaining investment in Portfolio Companies
consist of a $1 million Promissory Note related to the sale of the Fund's
interest in BeefAmerica Inc. (see Note 8) Because the Fund no longer generates
sufficient cash to pay current obligations, the Fund has available approximately
$3.8 million of cash reserves to cover future expenses including all expenses
related to the winding up of the Fund's affairs such as administrative and
custodial expenses, and audit and tax preparation fees. Proceeds received from
the Promissory Note related to the Fund's investment in BeefAmerica Inc., if
any, as well as any remaining cash reserves in excess of amounts required to pay
the Fund's obligations prior to its termination (as discussed in Note 12) will
be distributed as a final liquidating distribution to Limited Partners. Such
liquidating distribution is expected to be distributed to Limited Partners
during 1998.
2. Significant Accounting Policies
Basis of Accounting
For financial reporting purposes, the records of the Fund are maintained
using the accrual method of accounting. For Federal income tax reporting
purposes, the results of operations are adjusted to reflect statutory
requirements arising from book to tax differences.
Valuation of Investments
Securities for which market quotations were readily available were valued
by reference to such market quotation, using the last trade price (if reported)
or the last bid price for the period. For securities without a readily
ascertainable market value (including securities restricted as to resale for
which a corresponding publicly traded class exists), fair value was determined,
on a quarterly basis, in good faith by the Managing General Partner and the
Investment Adviser with final approval from the Individual General Partners of
the Fund. For privately issued securities in which the Fund typically invested,
the fair value of an investment was its original cost plus accrued value in the
case of original issue discount or deferred pay securities. Such investments
were revalued if there was an objective basis for doing so at a different price.
Investments were written down in value if the Managing General Partner and
Investment Adviser believe adverse credit developments of a significant nature
required a write-down of such securities. Investments were written up in value
only if there has been an arms'-length third party transaction to justify the
increased valuation. Although the Managing General Partner and Investment
Adviser used their best judgment in estimating the fair value of these
investments, there were inherent limitations in any estimation technique.
Therefore, the fair value estimates presented herein are not necessarily
indicative of the amount which the Fund could realize in a current transaction.
<PAGE>
Temporary Investments with maturities of less than 60 days are stated at
amortized cost, which approximates market.
The information presented herein is based on pertinent information
available to the Managing General Partner and Investment Adviser as of June 30,
1998. Although the Managing General Partner and Investment Adviser are not aware
of any factors not disclosed herein that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued since that time.
Payment-In-Kind Securities
All payment-in-kind securities received in lieu of cash interest payments
by the Fund's portfolio companies were recorded at face value (which
approximates accrued interest), unless the Investment Adviser and the Managing
General Partner determine that there is no reasonable assurance of collecting
the full principal amounts of such securities. As of June 30, 1998, the Fund had
in its portfolio of investments $2.9 million of payment-in-kind equity
securities, however subsequent to the sale of Chadwick Miller, on July 9, 1998
there were no payment in kind securities remaining in the Fund. (See Note 14)
Investment Transactions
The Fund records investment transactions on the date on which it obtains an
enforceable right to demand the securities or payment therefor. The Fund records
Temporary Investment transactions on the trade date.
Realized gains and losses on investments are determined on the basis of
specific identification for accounting and tax purposes.
Loan Facility and Advisory Fees
Loan Facility and Advisory Fees were being amortized over the life (7
years) of the Facility. All such fees have been fully amortized as of June 30,
1998.
Partners' Capital
Partners' Capital represents the Fund's equity divided in proportion to the
Partners' Capital Contributions. Profits and losses, when realized, are
allocated in accordance with the provisions of the Partnership Agreement
summarized in Note 3.
3. Allocation of Profits and Losses
Pursuant to the Partnership Agreement, all profits from Temporary
Investments generally are allocated 99% to the Limited Partners and 1% to the
Managing General Partner. Profits from Mezzanine Investments are, in general,
allocated as follows:
first, if the capital accounts of any partners have negative balances, to
such partners in proportion to the negative balances in their capital
accounts until the balances of all such capital accounts equal zero,
second, 99% to the Limited Partners and 1% to the Managing General Partner
until the sum allocated to the Limited Partners equals any previous losses
allocated together with a cumulative Priority Return of 10% on the average
daily balance of Mezzanine securities, and any outstanding Compensatory
Payments,
third, 69% to the Limited Partners and 31% to the Managing General Partner
until the Managing General Partner has received 21% of the total profits
allocated,
thereafter, 79% to the Limited Partners and 21% to the Managing General
Partner.
Losses will be allocated in reverse order of profits previously allocated
and thereafter 99% to the Limited Partners and 1% to the Managing General
Partner.
4. Leverage
The Fund entered into an amended credit agreement, dated as of August 13,
1991, with a lending group led by the First National Bank of Chicago, which
provided the Fund with a maximum credit facility of $140 million. The Credit
Facility was due to expire on July 31, 1998, however, due to the expiration of
the term of the Fund on June 15, 1998, and in order to stop incurring Unused
Commitment Fees (as noted below) the credit agreement was amended to instead
expire at June 30, 1998. All fees incurred in connection with the credit
agreement have been fully amortized as of June 30, 1998. Such amortization
amounted to $384,079 during the six months ended June 30, 1998.
Additionally, the Fund paid Unused Commitment Fees of 1/2 of 1% per annum
of the unused line of credit, which was $7.5 million during the six months ended
June 30, 1998. The Unused Commitment Fees paid during the six months ended June
30, 1998 was $18,854.
<PAGE>
5. Investment Advisory Fee
The Investment Adviser provided for the identification, management and
liquidation of investments for the Fund. As compensation for services rendered
to the Fund, the Investment Adviser received a quarterly fee at the annual rate
of $1.2 million. The Investment Advisory Fee was paid quarterly, in advance. For
the six months ended June 30, 1998 and 1997, the Fund paid $600,000 and
$594,000, respectively, in Investment Advisory Fees to Thomas H. Lee Advisers I.
The expiration of the Fund's term has caused the Management Agreement
between the Investment Adviser and the Fund to expire. However, the Investment
Adviser is continuing to manage the Fund's remaining investments.
6. Fund Administration Fees & Expenses
ML Fund Administrators Inc. (the "Fund Administrator") (an affiliate of the
Managing General Partner) performs the operational and administrative services
necessary for the management of the Fund. Beginning October 19, 1995, the Fund
Administration Fee is calculated at an annual fee of $300,000 plus out-of-pocket
expenses incurred by the Fund Administrator, as described below. The Fund
Administration Fee is paid quarterly, in advance. For the six months ended June
30, 1998 and 1997, the Fund paid $150,000, respectively, in Fund Administration
Fees.
In accordance with the Partnership Agreement, the Fund Administrator is
being reimbursed by the Fund for 100% of administrative expenses incurred.
Actual out-of-pocket expenses ("reimbursable expenses") primarily consist of
printing, audits, tax preparation and custodian fees. For the six months ended
June 30, 1998 and 1997, reimbursable expenses totalled $291,062 and $261,320,
respectively. For the three months ended June 30, 1998, reimbursable expenses
totalled $158,007.
The Fund Administrator will continue to perform all operational and
administrative services required by the Fund until the Fund is terminated and
all such administrative functions are no longer required.
7. Independent General Partners' Fees
As compensation for services rendered to the Fund, each of the three
Independent General Partners receives $40,000 annually in quarterly
installments, $1,000 for each meeting of the General Partners attended and
$1,000 for each committee meeting attended ($500 if a committee meeting is held
on the same day as a meeting of the General Partners) plus reimbursement for any
legal and out-of-pocket expenses. Compensation for the Independent General
Partners is reviewed annually by the Individual General Partners.
For the six months ended June 30, 1998 and 1997, the Fund incurred $78,621
and $170,598, respectively, in Independent General Partners' Fees and Expenses.
For the three months ended June 30, 1998 and 1997, Independent General Partner's
Fees and Expenses totalled $39,089 and $117,653, respectively.
8. Investment Transactions
On January 6, 1998 the Fund and affiliates of the Thomas H. Lee Company
(the "Lee Affiliates"), together with the Fund, the ("Selling Stockholders")
sold their remaining holdings of common stock in Stanley Furniture Co.
("Stanley"). The common stock of each of the Selling Stockholders was sold
pursuant to a Form S-3 Registration Statement, which was filed by Stanley on
December 22, 1997 and declared effective by the Securities and Exchange
Commission on December 23, 1997. In connection with the sale, the Fund sold its
remaining 400,719 shares of common stock and received net proceeds of $10.8
million or $27 per share. On February 12, 1998, the Independent General Partners
established a reserve of $1.65 million from these proceeds to pay future
expenses of the Fund. Net Distributable Capital Proceeds from the sale, as
defined in the Partnership Agreement, of $9.2 million or $18.63 per Unit were
distributed to Limited Partners of record as of January 6, 1998.
<PAGE>
On February 28, 1998, Signature Brands USA and Sunbeam Corporation
("Sunbeam") executed a definitive merger agreement whereby Sunbeam agreed to
acquire all the outstanding shares of Signature Brands USA Common Stock for
approximately $250 million ($8.25 per share) by means of a tender offer (the
"Tender Offer"), and assume all the debt of Signature Brands USA. Pursuant to
the Tender Offer, the Fund tendered all its shares of Signature Brands USA
Common Stock and received proceeds of approximately $13 million. Net
Distributable Capital Proceeds of $26.19 per Unit were distributed on April 23,
1998, to the Fund's Limited Partners of record as of April 2, 1998, the
expiration date of this Tender Offer.
On March 3, 1998, the Fund sold its remaining investment in BeefAmerica,
consisting of 14,000 shares Sr. Preferred Stock and 10,000 shares Jr. Preferred
Stock (the "Securities"), for $1 million to Lajara II LLC, a limited Liability
Company owned by the Management of BeefAmerica Operating Company. The proceeds
consisted of a $1 million Promissory Note payable to the Fund. The Securities
have been pledged to secure the obligation of Lajara II, LLC under the
Promissory Note and the Fund recognized a loss of $23 million. The financial and
operating performance at BeefAmerica has continued to deteriorate. As a result,
the Fund does not expect to collect any additional proceeds and has fully
reserved against the $1 million Promissory Note.
On May 27, 1998, Playtex Products Inc., ("Playtex"), completed a public
offering in the international markets of approximately 4 million shares of
Common Stock at a net price of $13.215 per share (the "Playtex Offering"). Of
the 4 million shares offered, approximately 3.8 million shares were offered by
affiliates of the Thomas H. Lee Company, including the Fund. As part of the
Playtex Offering, the Fund sold its remaining investment in Playtex, consisting
of approximately 1.4 million shares of Common Stock. The Fund received proceeds
of $18.5 million and recognized a gain on the sale of approximately $15.3
million. Net Distributable Proceeds of $37.74 per Unit were distributed on July
21, 1998, to Limited Partners of record as of May 27, 1998.
As of June 30, 1998, the Fund sold all but one of its remaining Portfolio
Company investments (the last Portfolio Company investment, Chadwick Miller, was
subsequently sold on July 9, 1998. See Note 14 for more information.) On April
7, 1998, pursuant to Rule 144 of the Securities Act of 1933, the Fund sold its
investment of 25,500 shares of TLC Beatrice International Holdings Common Stock
for $1.3 million or $51.25 per share. During May 1998, the Fund sold its
investment in SWO Holdings, consisting of 250,000 shares of SWO Holdings Common
Stock, 1,430 shares of Homeland Holdings Common Stock, and 1,506 Homeland
Holdings Common Stock Purchase Warrants and received aggregate proceeds of
$11,102. The Fund also sold 567 Cole National Common Stock Purchase Warrants
during May 1998, and received proceeds of $15,593. Additionally, on May 4, 1998,
the Fund sold 2,067 Common Stock Purchase Warrants of Magellan Health Services
for $5,168. The sale of these Portfolio Company investments have generated total
proceeds to the Fund of $1.34 million and were distributed to Limited Partners
on July 21, 1998.
9. Unrealized Appreciation and Depreciation of Investments
For the six months ended June 30, 1998, the Fund recorded net unrealized
appreciation of $2.3 million. As of June 30, 1998, the Fund's cumulative net
unrealized depreciation on investments totalled $16.7 million.
For additional information, please refer to the Supplemental Schedule of
Unrealized Appreciation and Depreciation - Schedule 2.
10. Litigation
On April 10, 1998, the parties to Seidel v. Thomas H. Lee, et al, No.
93-494 (JJF), a putative class action brought on behalf of limited partners of
the Fund, filed with United States District Court for the District of Delaware,
a Stipulation of Settlement preliminarily settling the action.
The settlement, which was approved by the Court at a hearing on July 16,
1998, provides for dismissal with prejudice of all claims against the Fund, the
Fund's Investment Adviser and certain of its affiliates, the Fund's Managing
General Partner and certain of its affiliates, and the Fund's Independent
General Partners. Defendants, other than the Fund, have agreed to provide cash
of $2.5 million and certain other considerations to settle the claims asserted
in this action. Defendants continue to deny all liability in this action.
The Fund had previously advanced legal expenses incurred by certain
defendants and has included such expenses in Legal and Professional Fees in the
Financial Statements.
11. Related Party Transactions
Certain of the Mezzanine Investments and Bridge Investments which were made
by the Fund involved co-investments with entities affiliated with the Investment
Adviser. Such co-investments are generally prohibited absent exemptive relief
from the Securities and Exchange Commission (the "Commission"). As a result of
these affiliations and the Fund's expectation of engaging in such
co-investments, the Fund sought an exemptive order from the Commission allowing
such co-investment, which was received on September 23, 1987. An additional
exemptive order allowing co-investment with ML-Lee Acquisition Fund II, L.P.
("Fund II") and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.
("Retirement Fund") was received from the Commission on September 1, 1989. The
Fund's investments in Managed Companies, and in certain cases its investments in
Non-Managed Companies, typically involve the entry by the Fund and other equity
security holders into stockholders' agreements. While the provisions of such
stockholders' agreements vary, such agreements may include provisions as to
corporate governance, registration rights, rights of first offer or first
refusal, rights to participate in sales of securities to third parties, rights
of majority stockholders to compel minority stockholders to participate in sales
of securities to third parties, transfer restrictions and preemptive rights.
Thomas H. Lee Company, a sole proprietorship owned by Thomas H. Lee, an
Individual General Partner of the Fund and an affiliate of the Investment
Adviser, typically performs certain management services for Managed Companies
and receives management fees in connection therewith, usually pursuant to
written agreements with such companies. In addition, certain of the Portfolio
Companies have contractual or other relationships pursuant to which they do
business with one another.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") is an
affiliate of the Managing General Partner. MLPF&S and certain of its affiliates,
in the ordinary course of their business, perform various financial services for
various portfolio companies of the Fund, which may include investment banking
services, broker/dealer services and economic forecasting, and receive in
consideration therewith various fees, commissions and reimbursements.
Furthermore, MLPF&S and its affiliates or investment companies advised by
affiliates of MLPF&S may, from time to time, purchase or sell securities issued
by portfolio companies of the Fund in connection with their ordinary investment
operations.
For the six months ending June 30, 1998, the Managing General Partner
received cash distributions in the amount of $420,366 representing its 1%
interest in the Fund.
12. Reserves
In February 1993, the Fund established a $15 million reserve to provide
funds for follow-on investments and to pay expenses. On February 12, 1998, the
Independent General Partners approved an additional reserve of $1.65 million to
fund anticipated cash shortfalls. This reserve was established from the proceeds
received from the sale of Stanley Furniture Common Stock in January 1998.
Because the Fund no longer generates sufficient cash to pay current
obligations, the Fund has approximately $3.8 million available of these
remaining cash reserves to cover future expenses including all expenses related
to the winding up of the Fund's affairs such as administrative and custodial
expenses, and audit and tax preparation fees. Proceeds, if any, received from
the Promissory Note related to the Fund's investment in BeefAmerica Inc. (see
Note 8) as well as any remaining cash reserves in excess of amounts required to
pay the Fund's obligations prior to its termination will be distributed as a
final liquidating distribution to Limited Partners. The Fund estimates that such
a liquidating distribution would be made during 1998.
13. Income Taxes (Statement of Financial Accounting Standards No. 109)
No provision for income taxes has been made because all income and losses
are allocated to the Fund's partners for inclusion in their respective tax
returns.
Pursuant to the Statement of Financial Accounting Standards No. 109
Accounting for Income Taxes, the Fund is required to disclose any difference in
the tax basis of the Fund's assets and liabilities versus the amounts reported
in the financial statements. As of December 31, 1997, the tax basis of the
Fund's assets are greater than the amounts reported in the financial statements
by $4.9 million. This difference is primarily attributable to unrealized
appreciation and depreciation recorded on investments which has not been
recognized for tax purposes.
14. Subsequent Events
On July 1, 1998, the Individual General Partners approved the second
quarter 1998 cash distribution totalling $19,967,334 (which includes Return of
Capital of $3,332,808), from the sale of the Fund's remaining portfolio holdings
effected during the quarter, the following distributions: a cash distribution to
Limited Partners in the amount of $40.55 per Unit and a cash distribution to the
Managing General Partner of $199,656 in proportion to its Capital Contribution,
all such distributions were distributed on July 21, 1998.
On July 9, 1998, pursuant to a purchase and sale agreement, the Fund sold
its remaining Warrants to purchase Common and Preferred Stock of Chadwick
Miller, (which includes all payment-in-kind securities) and received proceeds of
$100. The Fund recognized a loss of $16.5 million on the transaction in the
third quarter 1998. The Fund had previously recorded $16.5 million in unrealized
depreciation on this investment.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
ML-LEE ACQUISITION FUND, L.P.
SUPPLEMENTAL SCHEDULE OF REALIZED GAINS AND LOSSES
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Number of Investment Realized
SECURITY Shares/Principal Cost Net Proceeds Gain/(Loss)
- ----------------------------------- ----------------- --------- ------------ -----------
For the Three Months March 31, 1998
Stanley Furniture Company Inc.
Common Stock 400,719 $ 5,021 $ 10,819 $ 5,798
BeefAmerica Incorporated
Jr. and Sr.Preferred Stock 24,000 24,000 1,000(a) (23,000)
------- -------- ---------
Total For the Three Months Ended March 31, 1998 29,021 11,819 (17,202)
------- -------- --------
For the Three Months Ended June 30, 1998
Signature Brands USA
Common Stock 1,563,053 4,552 12,895 8,343
Playtex Products Inc.
Common Stock 1,406,204 3,255 18,583 15,328
TLC Beatrice Int'l Holdings
Common Stock 25,500 25 1,313 1,288
SWO Holdings Corp.
SWO Holdings Common Stock 250,000 250 -- (b) (250)
Homeland Holdings Corp. Common Stock 1,430 440 11 (429)
Homeland Holdings Corp. Purchase Warrants 1,506 -- -- (b) --
Magellan Health Services Inc.
Warrants 2,067 4 5 1
Cole National Corp.
Warrants 5,563 -- 16 16
------- -------- --------
Total for the Three Months Ended June 30, 1998 8,526 32,823 24,297
------- -------- --------
Total for the Six Months Ended June 30, 1998 $ 37,547 $ 44,642 $ 7,095
======== ========= ========
(a) Proceeds received in the form of a Promissory Note which has been fully
reserved against at June 30, 1998. See Note 8 to the Financial Statements
for further information.
(b) Proceeds are less than $1,000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2
ML-LEE ACQUISITION FUND, L.P.
SUPPLEMENTAL SCHEDULE OF UNREALIZED APPRECIATION AND DEPRECIATION
FOR THE PERIOD ENDED June 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Unrealized Unrealized
Appreciation Appreciation
(Depreciation) (Depreciation) Total Unrealized Total Unrealized
For the Three For the Six Appreciation Appreciation
Investment Fair Months Ended Months Ended (Depreciation) at (Depreciation)
SECURITY Cost Value June 30, 1998 June 30, 1998 December 31, 1997 at June 30, 1998
- ---------------------------------------- ----------- -------- ------------- ------------- ------------------ ----------------
Non-Public Securities
Chadwick-Miller, Inc. *
Common Stock Purchase Warrants $ 3,736 $ -- $ -- $ -- $ (3,736) $ (3,736)
Preferred Stock Purchase Warrants 12,916 -- -- -- (12,916) (12,916)
--------- ---------- ---------- ---------
$ -- $ -- $ (16,652) $ (16,652)
--------- ---------- ---------- ---------
(Depreciation) for Investments Sold
Stanley (1)
Common Stock $ -- $ -- $ -- $ (6,149) $ 6,149 $ --
BeefAmerica Incorporated
Jr. and Sr.Preferred Stock (2) -- -- -- 21,000 (21,000) --
Signature Brands USA
Common Stock (1) -- -- (8,294) (2,091) 2,091 --
Playtex
Common Stock (1) -- -- (17,487) (11,159) 11,159 --
SWO Holdings Corporation
SWO Holdings Common Stock (2) -- -- 250 250 (250) --
Homeland Holdings Common Stock (1) -- -- 430 440 (440) --
Magellan Health Service
Common Stock Warrants (2) -- -- 4 -- (4) --
---------- ---------- ---------- ---------
Total Unrealized Appreciation/(Depreciation)
for Investments Sold: $ (25,097) $ 2,295 $ (2,295) $ --
---------- ---------- ---------- ---------
Net Unrealized Appreciation (Depreciation) $ (25,097) $ 2,295 $ (18,947) $ (16,652)
========== ========== ========= ==========
(1) Publicly Traded Security
(2) Non-public Security
* The Fund's Investment in Chadwick Miller was sold on July 9, 1998 and all
unrealized depreciation was reversed. See Note 14 to the Financial
Statements for more information.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity & Capital Resources
The initial term of the Fund expired on June 15, 1998. The Fund has five
additional years to liquidate its remaining investments however, the Fund
expects to liquidate its remaining assets, including the Promissory Note related
to the sale of the Fund's investment in BeefAmerica (as described in Note 8 to
the Financial Statements) by the end of 1998.
In February 1993, the Fund established a $15 million reserve to provide
funds for follow-on investments and to pay expenses. On February 12, 1998, the
Independent General Partners approved an additional reserve of $1.65 million to
fund anticipated cash shortfalls of the Fund. This reserve was established from
the proceeds received from the sale of Stanley Furniture Common Stock in January
1998.
Because the Fund no longer generates sufficient cash to pay current
obligations, the Fund has available approximately $3.8 million of cash reserves
to cover future expenses including all expenses related to the winding up of the
Fund's affairs such as administrative and custodial expenses, and audit and tax
preparation fees. Any proceeds received from the Promissory Note related to the
Fund's investment in BeefAmerica Inc. (see Note 8) as well as any remaining cash
reserves in excess of amounts required to pay the Fund's obligations prior to
its termination will be distributed as a final liquidating distribution to
Limited Partners.
Investment in High-Yield Securities
The Fund originally invested primarily in subordinated debt and preferred
stock securities ("High-Yield Securities"), generally linked with an equity
participation, issued in conjunction with the mezzanine financing of privately
structured, friendly leveraged acquisitions, recapitalizations and other
leveraged financings. High-Yield Securities are debt and preferred equity
securities that are unrated or are rated by Standard & Poor's Corporation as BB
or lower and by Moody's Investor Services, Inc. as Ba or lower. Risk of loss
upon default by the issuer is significantly greater with High-Yield Securities
than with investment grade securities because High-Yield Securities are
generally unsecured and are often subordinated to other creditors of the issuer.
Also, these issuers usually have high levels of indebtedness and are more
sensitive to adverse economic conditions, such as recession or increasing
interest rates, than investment grade issuers.
Results of Operations
Investment Income and Expenses
For the six months ended June 30, 1998, the Fund had a net investment loss
of $2,091,444 as compared to a net investment loss of $1,480,716 for the same
period in 1997. The increase in net investment loss represents a decrease in
interest and discount income received by the Fund and an increase in the
amortization of loan fees due to the termination of the Fund's Credit Facility.
Additionally, at June 30, 1998, the Fund recorded a $1 million Allowance for
Uncollectable Proceeds Expense related to the sale of the Fund's investment in
BeefAmerica. (See Note 8 to the financial statements for further information.)
As compensation for services rendered to the Fund, each of the three
Independent General Partners receives $40,000 annually in quarterly
installments, $1,000 for each meeting of the General Partners attended and
$1,000 for each committee meeting attended ($500 if a committee meeting is held
on the same day as a meeting of the General Partners) plus reimbursement for any
legal and out-of-pocket expenses. Compensation for the Independent General
Partners is reviewed annually by the Individual General Partners.
For the six months ended June 30, 1998 and 1997, the Fund incurred $78,621
and $170,598, respectively, in Independent General Partners' Fees and Expenses.
For the three months ended June 30, 1998 and 1997, Independent General Partner's
Fees and Expenses totalled $39,089 and $117,653, respectively.
The Investment Adviser provided for the identification, management and
liquidation of investments for the Fund. As compensation for services rendered
to the Fund, the Investment Adviser received a quarterly fee at the annual rate
of $1.2 million. The Investment Advisory Fee was paid quarterly, in advance. For
the six months ended June 30, 1998 and 1997, the Fund paid $600,000 and
$594,000, respectively, in Investment Advisory Fees to Thomas H. Lee Advisers I.
The term of the Fund expired on June 15, 1998. The expiration of the Fund's
term has caused the Management Agreement between the Investment Adviser and the
Fund to expire, however, the Investment Adviser is continuing to manage the
Fund's remaining investments.
<PAGE>
In accordance with Partnership Agreement, the Fund Administration Fee
amounts to an annual fee of $300,000 plus 100% of Reimbursable Administrative
Expenses (accounting, printing, tax preparation and other administrative
services) incurred by the Fund Administrator. For the three months ended June
30, 1998 and 1997, the Fund Administration Fee was $75,000. For the six months
ended June 30, 1998 and 1997 Reimbursable Administration Expenses totalled
$291,062 and $261,320, respectively.
The Fund Administrator will continue to perform all operational and
administrative services required by the Fund until the Fund is terminated and
all such administrative functions are no longer required.
The Fund entered into an amended credit agreement, dated as of August 13,
1991, with a lending group led by the First National Bank of Chicago, which
provided the Fund with a maximum credit facility of $140 million. The Credit
Facility was due to expire on July 31, 1998, however, due to the expiration of
the term of the Fund on June 15, 1998, and in order to stop incurring Unused
Commitment Fees (as noted below) the credit agreement was amended to instead
expire at June 30, 1998. All fees incurred in connection with the credit
agreement have been fully amortized as of June 30, 1998. Such amortization
amounted to $384,079 during the six months ended June 30, 1998.
Additionally, the Fund paid Unused Commitment Fees of 1/2 of 1% per annum
of the unused line of credit, which was $7.5 million during the six months ended
June 30, 1998. The Unused Commitment Fees paid during the six months ended June
30, 1998 was $18,854.
Net Assets
The Fund's net assets decreased by $33,547,039 during the six months ended
June 30, 1998, due to a net investment loss of $2,091,444, partially offset by
net realized gains of $7,094,849 and net unrealized depreciation of $2,295,258
and cash distributions of $40,845,702.
Unrealized Appreciation and Depreciation and Non-Accrual of Investments
For the six months ended June 30, 1998, the Fund recorded net unrealized
appreciation of $2,295,258 as compared to net unrealized depreciation of
$2,727,632 for the same period in 1997. This decrease in unrealized depreciation
reflects the reversal of net unrealized deprecation for portfolio investments
sold during the period from June 30, 1997 to June 30, 1998.
The information presented herein is based on pertinent information
available to the Managing General Partner and Investment Adviser as of June 30,
1998. Although the Managing General Partner and Investment Adviser are not aware
of any factors not disclosed herein that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued since that time; and the current estimated fair value of these
investments may have changed significantly since that point in time.
For additional information, please refer to the Supplemental Schedule of
Unrealized Appreciation and Depreciation - Schedule 2.
Realized Gains and Losses
The net realized gains on investments sold for the six months ended June
30, 1998 was $7,094,849 compared to a net realized gains of $5,795,392 for the
same period in 1997.
For additional information, please refer to the Supplemental Schedule of
Realized Gains and Losses - Schedule 1.
<PAGE>
Cash Distributions
On July 1, 1998, the Individual General Partners approved the second
quarter 1998 cash distribution totalling $19,967,334 (which includes Return of
Capital of $3,332,808), from the sale of the Fund's remaining portfolio holdings
effected during the quarter, the following distributions: a cash distribution to
Limited Partners in the amount of $40.55 per Unit and a cash distribution to the
Managing General Partner of $199,656 in proportion to its Capital Contribution,
all such distributions were distributed on July 21, 1998.
Because all of the Fund's debt holdings were previously sold or redeemed,
remaining portfolio income expected to be received by the Fund is not sufficient
to cover the Fund's expenses. As a result, any income received will be used to
pay Fund expenses and may not be available for distribution.
As of July 13, 1998, the Fund's remaining investment in Portfolio Companies
consist of a $1 million Promissory Note related to the sale of the Fund's
interest in BeefAmerica Inc. Because the Fund no longer generates sufficient
cash to pay current obligations, the Fund has available approximately $3.8
million of cash reserves to cover future expenses including all expenses related
to the winding up of the Fund's affairs such as administrative and custodial
expenses, and audit and tax preparation fees. Proceeds received from the
Promissory Note related to the Fund's investment in BeefAmerica Inc., if any,
(see Note 8) as well as any remaining cash reserves in excess of amounts
required to pay the Fund's obligations prior to its termination will be
distributed as a final liquidating distribution to Limited Partners.
Should a Limited Partner decide to sell his Units, any such sale will be
recorded on the books and records of the Fund quarterly, only upon the
satisfactory completion and acceptance of the Fund's transfer documents. There
can be no assurances that such transfer will be effected before any specified
date. Additionally, pursuant to the Partnership Agreement, until a transfer is
recognized, the Limited Partner of record (i.e. the transferor) is entitled to
receive all the benefits and burdens of ownership of Units, and any transferee
has no rights to distributions of sale proceeds generated at any time prior to
the recognition of the transfer and assignment. Accordingly, Distributable Cash
from Investments for a quarter and Distributable Capital Proceeds from sales
after transfer or assignment have been entered into, but before such transfer
and assignment is recognized, would be payable to the transferor and not the
transferee.
<PAGE>
Part II - Other Information
Items 1 - 5 are herewith omitted as the response to all items is either
none or not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule for the second quarter ended
June 30, 1998.
(b) Reports on form 8-K: Form 8-K
Filed June 12, 1998 related to the
Termination of the Fund
Form 8-K
Filed May 29, 1998 related to
Playtex Sales
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 10th day of
August, 1998.
ML-LEE ACQUISITION FUND, L.P.
By: Mezzanine Investments, L.P.,
Managing General Partner
By: ML Mezzanine Inc.,
its General Partner
Dated: August 10, 1998 /s/ Audrey Bommer
Audrey Bommer
Vice President and Treasurer
(Chief Financial Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 10th day of
August, 1998.
ML-LEE ACQUISITION FUND, L.P.
By: Mezzanine Investments, L.P.,
Managing General Partner
By: ML Mezzanine Inc.,
its General Partner
Dated: August 10, 1998 _____________________________
Audrey Bommer
Vice President and Treasurer
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the second
quarter of 1998 Form 10-Q Balance Sheets and Statements of Operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-START> JAN-01-1998
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 40,700,512
<INVESTMENTS-AT-VALUE> 24,071,833
<RECEIVABLES> 37,673
<ASSETS-OTHER> 26,343
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,135,849
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 236,617
<TOTAL-LIABILITIES> 236,617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 487,489
<SHARES-COMMON-PRIOR> 487,489
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,651,928)
<NET-ASSETS> 23,899,231
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 438,326
<OTHER-INCOME> 532
<EXPENSES-NET> 2,530,302
<NET-INVESTMENT-INCOME> (2,091,444)
<REALIZED-GAINS-CURRENT> 7,094,849
<APPREC-INCREASE-CURRENT> 2,295,258
<NET-CHANGE-FROM-OPS> 7,298,663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 206,745
<DISTRIBUTIONS-OF-GAINS> 17,933,145
<DISTRIBUTIONS-OTHER> 23,119,269
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 33,547,039
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 600,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,530,302
<AVERAGE-NET-ASSETS> 40,672,749
<PER-SHARE-NAV-BEGIN> 115.96
<PER-SHARE-NII> (4.25)
<PER-SHARE-GAIN-APPREC> 4.66
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 82.95
<RETURNS-OF-CAPITAL> 9.76
<PER-SHARE-NAV-END> 47.83
<EXPENSE-RATIO> 0.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
