<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period Commission file number:
ended JUNE 30, 1996 0-18016
------------- -----------------------
ALLIED CAPITAL CORPORATION II
------------------------------------------------------
(exact name of Registrant as specified in its charter)
MARYLAND 52-1628801
- ----------------------- -----------------------
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W.
9TH FLOOR
WASHINGTON, DC 20006
-------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 331-1112
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as 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
--- ----- -- -----
On August 5, 1996 there were 7,292,570 shares outstanding of the Registrant's
common stock, $1 par value.
<PAGE> 2
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statement of Operations - For the Three and Six
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Net Assets - For the Six
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows - For the Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 8
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE> 3
PART I - Financial Information
Item 1. Financial Statements
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except number of shares)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Investments at value:
Loans and debt securities (cost: 1996 - $80,171; 1995 -
$86,474) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,917 $ 84,235
Equity securities (cost: 1996 - $5,076; 1995 - $5,538) . . . . 13,227 13,548
Other investment assets (cost: 1996 - $1,035; 1995 - $1,514) . 995 1,424
------- -------
Total investments . . . . . . . . . . . . . . . . . . . 90,139 99,207
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . 16,989 6,227
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,601 1,735
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . $108,729 $107,169
======= =======
Liabilities
Investment advisory fee payable . . . . . . . . . . . . . . . . . $ 599 $ 639
Dividends and distributions payable . . . . . . . . . . . . . . . - 3,403
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 218 1,146
------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . 817 5,188
------- --------
Commitments and Contingencies
Shareholders' Equity
Common stock, $1 par value; 20,000,000 shares authorized;
7,292,570 and 7,104,005 shares issued and outstanding at
6/30/96 and 12/31/95 . . . . . . . . . . . . . . . . . . . . . 7,293 7,104
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 95,181 92,225
Notes receivable from sale of common stock . . . . . . . . . . . (2,970) (2,495)
Net unrealized appreciation on investments . . . . . . . . . . . 3,857 5,681
Undistributed (distributions in excess of) accumulated earnings . 4,551 (534)
------- -------
Total shareholders' equity . . . . . . . . . . . . . . 107,912 101,981
------- -------
Total liabilities and shareholders' equity . . . . . . $108,729 $107,169
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
<PAGE> 4
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------- -------------
1996 1995 1996 1995
--------- --------- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,054 $ 2,585 $ 6,087 $ 5,450
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 223 46 290
------ ------ ------ ------
Total investment income . . . . . . . . . . . . . . . . . . . . . 3,079 2,808 6,133 5,740
------ ------ ------ ------
Expenses:
Investment advisory fee . . . . . . . . . . . . . . . . . . . . . . 599 623 1,228 1,214
Legal and accounting fees . . . . . . . . . . . . . . . . . . . . . 83 55 153 183
Other operating expenses . . . . . . . . . . . . . . . . . . . . . 167 151 224 232
------ ------ ------- -------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 849 829 1,605 1,629
------ ------ ------ ------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . 2,230 1,979 4,528 4,111
Net realized gains on investments . . . . . . . . . . . . . . . . . . 2,889 56 5,457 96
------ ------ ------ ------
Net investment income before net unrealized
appreciation (depreciation) on investments . . . . . . . . . . . . 5,119 2,035 9,985 4,207
Net unrealized appreciation (depreciation) on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,907) 3,613 (1,824) 4,384
------ ------ ------ ------
Net increase in net assets resulting from operations . . . . . . . . $ 2,212 $ 5,648 $ 8,161 $ 8,591
====== ====== ====== ======
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.30 $ 0.81 $ 1.13 $ 1.24
====== ====== ====== ======
Weighted average number of shares and share
equivalents outstanding . . . . . . . . . . . . . . . . . . . . . . 7,276 6,963 7,239 6,952
======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
<PAGE> 5
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------
1996 1995
---- ----
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . $ 4,528 $ 4,111
Net realized gains on investments . . . . . . . . . . . . . . . . . . 5,457 96
Net unrealized appreciation (depreciation) on investments . . . . . . (1,824) 4,384
------- -------
Net increase in net assets resulting from operations . . . . . . 8,161 8,591
------- -------
Distributions to shareholders . . . . . . . . . . . . . . . . . . . . . . (4,900) (3,607)
------- -------
Capital share transactions:
Net (increase) decrease in notes receivable from sale of common stock . (475) 99
Issuance of common shares upon the exercise of stock options . . . . . 800 -
Issuance of common shares in lieu of cash distributions . . . . . . . . 2,345 -
------- -------
Net increase in net assets resulting from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 2,670 99
------- -------
Net Increase in Net Assets . . . . . . . . . . . . . . . . . . . . . . . 5,931 5,083
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . 101,981 97,475
------- -------
Net assets at end of period . . . . . . . . . . . . . . . . . . . . . . . $107,912 $102,558
======= =======
Net asset value per share . . . . . . . . . . . . . . . . . . . . . . . . $ 14.80 $ 14.78
======= =======
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . 7,293 6,938
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE> 6
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------
1996 1995
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net increase in net assets resulting from operations . . . . . . . . . $ 8,161 $ 8,591
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Net unrealized (appreciation) depreciation on investments . . . . . 1,824 (4,384)
Net realized gains on investments . . . . . . . . . . . . . . . . . (5,457) (96)
Amortization of loan discounts . . . . . . . . . . . . . . . . . . . (809) (429)
Changes in assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 335
Investment advisory fee payable . . . . . . . . . . . . . . . . . . (40) 44
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (928) (366)
------ ------
Net cash provided by operating activities . . . . . . . . . . . . 2,885 3,695
------ ------
Cash Flows From Investing Activities:
Investments in small business concerns . . . . . . . . . . . . . . . (4,844) (16,040)
Collections of loans and debt securities and other investment assets 12,033 11,382
Net proceeds from sale of equity securities . . . . . . . . . . . . 6,321 36
Net purchase of U.S. government securities . . . . . . . . . . . . . - (338)
Collections of notes receivable from sale of common stock . . . . . 25 99
------ ------
Net cash provided by (used in) investing activities . . . . . . . 13,535 (4,861)
------ ------
Cash Flows From Financing Activities:
Issuance of common shares . . . . . . . . . . . . . . . . . . . . . 300 -
Dividends and distributions paid . . . . . . . . . . . . . . . . . . (5,958) (5,967)
------ ------
Net cash used in financing activities . . . . . . . . . . . . . . (5,658) (5,967)
------ ------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . 10,762 (7,133)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 6,227 11,591
------ ------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . $16,989 $ 4,458
====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE> 7
ALLIED CAPITAL CORPORATION II AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1. GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements of Allied Capital Corporation II and subsidiaries
(the Company) contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the Company's
consolidated financial position as of June 30, 1996 and the results of
operations, changes in net assets, and cash flows for the periods
indicated. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto
included in the Company's December 31, 1995 Annual Report. The
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the operating results to be expected for the
full year. Certain reclassifications have been made to the 1995
financial statements in order to conform to the 1996 presentation.
NOTE 2. DISTRIBUTIONS
The Company's board of directors declared a second quarter dividend
equivalent to $0.35 per share payable on June 28, 1996 to shareholders
of record on June 14, 1996. In connection with this dividend, the
Company paid cash of $1,830,000 and distributed new shares of common
stock to participants in the dividend reinvestment plan with a value
of $708,000 for a total dividend of $2,538,000. In addition, the
Company's board of directors declared a first quarter dividend
equivalent to $0.33 per share payable on March 29, 1996 to
shareholders of record on March 15, 1996. In connection with this
dividend, the Company paid cash of $1,684,000 and distributed new
shares of common stock to participants in the dividend reinvestment
plan with a value of $678,000 for a total dividend of $2,362,000.
NOTE 3. COMMITMENTS
The Company had loan commitments outstanding equal to $7,051,000 at
June 30, 1996 to invest in various existing and prospective portfolio
companies.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the Second Quarter Ended June 30, 1996 and 1995.
The net increase in net assets resulting from operations for the
quarter ended June 30, 1996 was $2.2 million, a decrease of 61%
compared to the net increase in net assets resulting from operations
for the quarter ended June 30, 1995 of $5.6 million. Earnings were
$0.30 per share for the second quarter of 1996 as compared to $0.81
per share for the same quarter in 1995.
Net investment income increased 12.7% to $2.2 million for the quarter
ended June 30, 1996 from $2.0 million for the quarter ended June 30,
1995. Total investment income increased 9.7% in the second quarter of
1996 as compared to the same quarter of 1995. These increases are
primarily attributable to the Company increasing its investments in
loans and debt securities that earn a current return and increased
amortization of loan discounts and points.
Total expenses increased 2.4% to $849,000 for the quarter ended June
30, 1996 from $829,000 for the comparable period last year. The
Company's investment advisory fee decreased 3.9% to $599,000 for the
quarter ended June 30, 1996 as compared to $623,000 in the previous
comparable period. While total assets of $108.7 million at June 30,
1996 were higher than $104.3 million at June 30, 1995, cash and cash
equivalents at June 30, 1996 were $11.4 million higher than the prior
year. The advisory fee declined because of the lower fee paid on cash
and cash equivalents, as compared to the fee paid on assets invested
in small business concerns. Legal and accounting fees increased from
$55,000 for the six months ended June 30, 1995 to $83,000 for the six
months ended June 30, 1995. This increase is due to the increased
legal cost of various corporate matters in 1996. Other operating
expenses increased 10.6% for the second quarter of 1996 as compared to
the second quarter of 1995.
Net realized gains on investments were $2.9 million for the quarter
ended June 30, 1996, as the Company successfully liquidated certain
equity investments in the portfolio and received early payoffs of
outstanding loans in its portfolio. Net realized gains on investments
were $56,000 for the second quarter of 1995. Net gains are realized
when the Company sells or otherwise liquidates its investments, and as
a result may vary significantly from quarter to quarter.
Net unrealized depreciation for the three months ended June 30, 1996
was $2.9 million as compared to net unrealized appreciation of $3.6
million for the three months ended June 30, 1995. The Company sold
one portfolio investment during the second quarter that had unrealized
appreciation at March 31, 1996 of $2.1 million. When sold, net
unrealized appreciation was reduced by $2.1 million and the actual net
gain realized on this investment was included in net realized gains.
The remaining net unrealized depreciation of $825,000 for the second
quarter of 1996 is due primarily to the decrease in the value of the
Company's investment in SunStates Refrigerated Services, Inc. of $1.4
million.
For the Six Months Ended June 30, 1996 and 1995.
Net increase in net assets resulting from operations was $8.2 million,
or $1.13 per share, for the six months ended June 30, 1996, compared
to $8.6 million, or $1.24 per share, for the same period in 1995. Net
investment income and net realized gains for the six months ended June
30, 1996 increased 10% and 5,584%, respectively, over the comparable
six-month period of the prior year. These increases, however, were
offset by a significant decline in the net unrealized appreciation in
the investment portfolio.
During the six months ended June 30, 1996, the Company realized net
gains on the sale of investments which had net unrealized appreciation
totaling $3.8 million, or $0.53 per share, that had been previously
recognized into net income as net unrealized appreciation. Thus, upon
the realization of these gains, the year-to-date 1996 net increase in
net assets resulting from operations reflects an offsetting decrease
in net unrealized appreciation for the same amount. As investments in
the portfolio appreciate, the increase in value is recognized into net
income as the change in net unrealized appreciation. When gains are
realized on sale, the effect on net income is
6
<PAGE> 9
computed by reducing net income by an amount equal to any unrealized
appreciation on the investment recognized in prior periods, and
increasing net income by the amount of the recognized gain.
LIQUIDITY AND CAPITAL RESOURCES
Total assets increased $1.6 million to $108.7 million as of June 30,
1996 from $107.2 million as of December 31, 1995. Total investments
as of June 30, 1996 decreased $9.1 million from December 31, 1995 as
total repayments and changes in investment valuations during the first
six months of 1996 were greater than new investments to small
businesses of $4.8 million. Cash and cash equivalents increased to
$17.0 million as of June 30, 1996 from $6.2 million at December 31,
1995 due to principal repayments on loans and debt securities and
proceeds received from investment dispositions.
The Company believes that it has adequate capital to continue to
satisfy its operating needs, commitments and other future investment
opportunities that may arise over the year.
PORTFOLIO CHANGES
For the six months ended June 30, 1996, the Company's portfolio
depreciated, net of appreciation, by $1.8 million due to the sale of
certain investments which resulted in realized gains, changes in
investment values from the change in market prices for public equity
investments, and changes in value of certain private investments.
The sale of certain portfolio investments resulted in unrealized
appreciation (depreciation) and the recognition of realized gains
(losses) during the six months ended June 30, 1996 as follows:
<TABLE>
<CAPTION>
Unrealized Realized
Appreciation Gain
(Depreciation) (Loss)
-------------- -------------
<S> <C> <C>
Garden Ridge Corporation (stock) * $(1,190,000) $1,349,000
Garden Ridge Corporation (warrants) (1,703,000) 3,060,000
June Broadcasting, Inc. (1,530,000) 1,714,000
SunStates Refrigerated Services, Inc. * 579,000 (579,000)
</TABLE>
* Sale of certain stock only.
The Company's public equity investments which appreciated
(depreciated) in value during the six months ended June 30, 1996 were:
<TABLE>
<CAPTION>
Unrealized
Appreciation
(Depreciation)
--------------
<S> <C>
Allied Waste Industries, Inc. $1,064,000
Esquire Communications, Ltd. 29,000
Garden Ridge Corporation 1,491,000
Labor Ready, Inc. 1,280,000
Nobel Education Dynamics, Inc. 769,000
Quality Software Products Holdings, PLC (197,000)
</TABLE>
In addition, the Company's investments in the following private
companies also had unrealized depreciation during the six months
ended June 30, 1996 -- Enviroplan, Inc. - $340,000; SunStates
Refrigerated Services, Inc. - $1,441,000; and Williams Brothers Lumber
Company - $346,000. The remaining investment portfolio had net
unrealized depreciation during the six months ended June 30, 1996 of
$289,000.
7
<PAGE> 10
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not a defendant in any material pending legal
proceeding and no such material proceedings are know to be
contemplated.
Item 2. CHANGES IN SECURITIES
No material changes have occurred in the securities of the Registrant.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Allied Capital Corporation II held its annual meeting of shareholders
on May 10, 1996 in North Bethesda, Maryland. The following directors
were elected as proposed in the proxy material to serve until the next
annual shareholders meeting:
<TABLE>
<CAPTION>
DIRECTOR FOR WITHHELD
-------- --- --------
<S> <C> <C>
David Gladstone 6,694,274 29,181
George C. Williams, Jr. 6,692,835 30,620
William F. Dunbar 6,694,274 29,181
Lawrence I. Hebert 6,694,274 29,181
John D. Reilly 6,694,274 29,181
Smith T. Wood 6,694,274 29,181
John I. Leahy 6,694,274 29,181
John D. Firestone 6,693,731 29,724
</TABLE>
Shareholders also ratified the selection of Matthews Carter & Boyce to
serve as independent accountants until the next shareholders meeting.
The Company received 6,662,440 shares voting in favor of ratification,
17,273 shares voting against the ratification, and 43,737 shares
abstaining from voting.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
11 Statement of Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1996.
8
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ALLIED CAPITAL CORPORATION II
-----------------------------
(Registrant)
/s/ Jon A. DeLuca
-------------------------------------
Date: August 12, 1996 Jon A. DeLuca
--------------- Executive Vice President and
Chief Financial Officer
9
<PAGE> 1
Allied Capital Corporation II and Subsidiaries
Exhibit 11 Statement of Computation of Earnings Per Common Share
Form 10-Q
June 30, 1996
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Net Increase in Net Assets Resulting
from Operations $2,212,000 $5,648,000 $8,161,000 $8,591,000
=========================== ===========================
Weighted average number of
shares outstanding 7,214,944 6,938,191 7,178,527 6,938,191
Weighted average number of
shares issuable on exercise
of outstanding stock options 61,318 25,059 60,072 14,221
--------------------------- ---------------------------
Weighted average number of shares and
share equivalents outstanding 7,276,262 6,963,250 7,238,599 6,952,412
=========================== ===========================
Earnings per Share $0.30 $0.81 $1.13 $1.24
=========================== ===========================
Fully Diluted Earnings Per Share:
Net Increase in Net Assets Resulting
from Operations $2,212,000 $5,648,000 $8,161,000 $8,591,000
=========================== ===========================
Weighted average number of
shares and share equivalents
outstanding as computed for
primary earnings per share 7,276,262 6,963,250 7,238,599 6,952,412
Weighted average of additional
shares issuable on exercise
of outstanding stock options 16,119 - 17,039 -
--------------------------- ---------------------------
Weighted average of shares and
share equivalents outstanding, as adjusted 7,292,381 6,963,250 7,255,638 6,952,412
=========================== ===========================
Earnings per Share $0.30 $0.81 $1.12 $1.24
=========================== ===========================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Allied
Capital Corporation II and subsidiaries' consolidated balance sheet and
consolidated statements of operations, changes in net assets and cash flows and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 86,282
<INVESTMENTS-AT-VALUE> 90,139
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 18,590
<TOTAL-ASSETS> 108,729
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 817
<TOTAL-LIABILITIES> 817
<SENIOR-EQUITY> 7,293
<PAID-IN-CAPITAL-COMMON> 95,181
<SHARES-COMMON-STOCK> 7,293
<SHARES-COMMON-PRIOR> 7,104
<ACCUMULATED-NII-CURRENT> 4,551
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,857
<NET-ASSETS> 107,912
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,087
<OTHER-INCOME> 46
<EXPENSES-NET> 1,605
<NET-INVESTMENT-INCOME> 4,528
<REALIZED-GAINS-CURRENT> 5,457
<APPREC-INCREASE-CURRENT> (1,824)
<NET-CHANGE-FROM-OPS> 8,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,528
<DISTRIBUTIONS-OF-GAINS> 372
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 134
<NET-CHANGE-IN-ASSETS> 5,931
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,228
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,605
<AVERAGE-NET-ASSETS> 104,947
<PER-SHARE-NAV-BEGIN> 14.36
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> 0.68
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.80
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
