UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2000
[ ] 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: 0-20671
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
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(Exact name of registrant as specified in its charter)
Texas 75-2533518
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(State or other jurisdiction (I.R.S. Employer I.D. No.)
of incorporation or organization)
8080 North Central Expressway, Dallas, Texas 75206-1857
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(Address of principal executive offices)(Zip Code)
214/891-8294
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(Registrant's telephone number, including area code)
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
------ ------
4,361,617 shares of common stock were outstanding at November 15, 2000.
The Registrant's Registration Statement on Form N-2 was declared effective by
the Securities and Exchange Commission on May 6, 1994.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
Assets
<S> <S>
December 31, 1999 September 30, 2000
----------------- ------------------
<C> <C>
Cash and cash equivalents $ 5,086,040 $13,474,195
Investments, at fair value, cost of
$34,457,935 and $39,723,986 in 1999
and 2000 respectively 41,346,302 56,638,256
Interest receivable 224,283 331,353
Other assets 68,497 47,016
----------- -----------
$46,725,122 $70,490,820
=========== ===========
Liabilities and Net Assets
Liabilities:
Accounts payable $ 111,708 $ 90,228
Accounts payable - affiliate 213,390 582,318
Accounts payable - brokerage 0 11,000,000
Dividends payable 465,718 0
----------- -----------
790,816 11,672,546
----------- -----------
Net Assets:
Common stock, $1 par value;
20,000,000 shares authorized;
4,561,618 issued, 4,142,942
and 4,361,617 outstanding 4,342,942 4,561,618
Additional paid-in capital 36,258,896 38,799,907
Treasury stock at cost,
200,000 shares at December 31,
1999 and at September 30, 2000 (1,665,220) (1,665,220)
Undistributed net investment income 6,997,688 17,121,969
----------- -----------
Net assets 45,934,306 58,818,274
----------- -----------
$46,725,122 $70,490,820
=========== ===========
Net asset value per share $ 11.09 $ 13.49
=========== ===========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Operations
(Unaudited)
<TABLE> <S> <S>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
<S> <S> <S> <S>
1999 2000 1999 2000
---- ---- ---- ----
Investment Income: <C> <C> <C> <C>
Interest $ 145,033 $ 366,633 $ 960,521 $ 1,125,791
Dividends 26,301 23,403 341,198 84,490
Other investment
income (27,361) 20,375 (27,064) 105,250
---------- ---------- ----------- -----------
Total investment
income 143,973 410,411 1,274,655 1,315,531
---------- ---------- ----------- -----------
Expenses:
Amortization -0- -0- 83,820 -0-
Bank charges 6,575 14,506 17,266 32,686
Directors' fees 15,500 18,000 43,500 51,000
Legal and
professional 40,077 37,923 91,153 154,832
Management fees 229,104 258,461 674,956 848,434
Taxes -0- -0- 27,840 24,884
Other 41,494 42,886 152,114 169,719
---------- ---------- ----------- -----------
Total expenses 332,750 371,776 1,090,649 1,281,555
---------- ---------- ----------- -----------
Net investment
income (188,777) 38,635 184,006 33,976
Realized gain on
investments 5,430,972 -0- 9,255,363 6,444,540
Unrealized gain (loss)
on investments (4,008,753) 3,601,156 3,266,135 10,025,894
---------- ---------- ----------- -----------
Net increase (decrease)
in net assets result-
ing from operations $1,233,442 $3,639,791 $12,705,504 $16,504,410
========== ========== =========== ===========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Changes in Net Assets
(Unaudited)
<TABLE> <S> <S>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
<S> <S> <S> <S>
1999 2000 1999 2000
---- ---- ---- ----
<C> <C> <C> <C>
Increase (decrease)
in net assets
resulting from
operations
Investment income -
net $ (188,777) $ 38,635 $ 184,006 $ 33,976
Realized gain on
investment 5,430,972 -0- 9,255,363 6,444,540
Unrealized gain
(loss) on
investments (4,008,753) 3,601,156 3,266,135 10,025,894
----------- ----------- ----------- -----------
Net increase
(decrease) in net
assets resulting
from operations 1,233,442 3,639,791 12,705,504 16,504,410
Proceeds from shares
issued -0- -0- -0- 2,759,688
Distributions to
shareholders (5,178,677) -0- (8,576,389) (6,380,130)
Cost of shares
repurchased -0- -0- (3,780) -0-
----------- ----------- ----------- -----------
Total increase
(decrease) (3,945,235) 3,639,791 4,125,335 12,883,968
Net assets
Beginning of period 49,546,271 55,178,483 41,475,701 45,934,306
----------- ----------- ----------- -----------
End of period $45,601,036 $58,818,274 $45,601,036 $58,818,274
=========== =========== =========== ===========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements
September 30, 2000
1. Organization and Business Purpose
Renaissance Capital Growth & Income Fund III, Inc. (the "Fund"), a Texas
corporation, was formed on January 20, 1994. The Fund sold shares pursuant
to its initial offering throughout 1994, and the final closing of the
initial offering occurred on December 31, 1994. The Fund seeks to achieve
current income and capital appreciation potential by investing primarily in
unregistered equity investments and convertible issues of small and medium
size companies which are in need of capital and which Renaissance Capital
Group, Inc. ("Investment Advisor") believes offers the opportunity for
growth. The Fund is a non-diversified closed-end investment company and has
elected to be treated as a business development company under the Investment
Company Act of 1940, as amended ("1940 Act").
2. Significant Accounting Policies
A. Federal Income Taxes - The Fund intends to elect the special income tax
treatment available to a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code in order to be relieved of
federal income tax on that part of its net investment income and
realized capital gains that it pays out to its shareholders. If a RIC
meets certain diversification and distribution requirements under the
Code, it qualifies for pass-through tax treatment. The Fund would cease
to qualify for pass-through tax treatment if it were unable to comply
with these requirements. Failure to qualify as a RIC would subject the
Fund to federal income tax as if the Fund were an ordinary corporation,
which could result in a substantial reduction in both the Fund's net
assets and the amount of income available for distribution to
shareholders.
B. Distributions to Shareholders - Dividends to shareholders are recorded
on the ex-dividend date. There were no dividends during the quarter
ended September 30, 2000.
C. Management Estimates - The financial statements have been prepared in
conformity with generally accepted accounting principles. The
preparation of the accompanying financial statements requires estimates
and assumptions made by the Investment Adviser as to the valuation of
investments that effect the amounts and disclosures in the financial
statements. Actual results could differ significantly from those
estimates.
D. Financial Instruments - In accordance with the reporting requirements of
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," the Company calculates the fair
value of its financial instruments and includes this additional
information in the notes to the financial statements when the fair value
is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no
additional disclosure is made.
3. Investment Advisory Agreement
The Investment Adviser for the Fund is registered as an investment adviser
under the Investment Advisers Act of 1940. Pursuant to an Investment
Advisory Agreement, the Investment Adviser performs certain services,
including certain management, investment advisory and administrative
services necessary for the operation of the Fund. The Investment Adviser
receives a fee equal to .4375% (1.75% annually) of the Net <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 2000
3. Investment Advisory Agreement
Assets each quarter. The Fund accrued a liability of $258,461 for such
operational management fees performed during the quarter ended September 30,
2000.
In addition to the management fee, the Investment Advisory Agreement
entitles the Investment Adviser to an incentive fee equal to 20% of any net
realized capital gains after allowance for any unrealized capital loss of
the Fund. This management incentive fee is calculated on a quarterly basis.
There were no incentive fees earned for the quarterly period that ended
September 30, 2000.
Finally, the Investment Adviser is reimbursed for administrative expenses
paid by the Investment Adviser on behalf of the Fund. Such reimbursement
was $29,154 for the quarter ending September 30, 2000, and is included in
general and administrative expenses in the accompanying statement of
operations.
4. Capital Share Transactions
As of September 30, 2000 there were 20,000,000 shares of $1 par value
capital stock authorized, 4,561,618 shares issued, 4,361,617 shares
outstanding, and additional paid-in capital aggregating $41,696,306.
Year-to-date transactions in capital stock are as follows:
<TABLE> <S> <S>
Shares Amount
------ ------
<C> <C>
Balance December 31, 1999 4,142,942 $38,936,618
Shares repurchased 218,675 2,759,688
--------- -----------
Balance September 30, 2000 4,361,617 $41,696,306
========= ===========
</TABLE>
5. Temporary Investments
At September 30, 2000, temporary investments were held in a money market
fund made up of U.S. Treasury obligations and a U.S. Treasury bill. As
additional cash is realized from the liquidation of investments, temporary
investments will also be comprised of U. S. Government and Agency
obligations having slightly higher yields and maturity dates of three months
or less. These investments qualify for investment as permitted in Section
55(a) (1) through (5) of the 1940 Act.
The Fund invests primarily in convertible securities and equity investments
of companies that qualify as Eligible Portfolio Companies as defined in
Section 2(a)(46) of the 1940 Act or in securities that otherwise qualify for
investment as permitted in Section 55(a)(1) through (5). Under the
provisions of the 1940 Act at least 70% of the Fund's assets, as defined
under the 1940 Act, must be invested in Eligible Portfolio Companies. In
the event the Fund has less than 70% of its assets in eligible portfolio
investments, then it will be prohibited from making non-eligible investments
until such time as the percentage of eligible investments again exceeds the
70% threshold. At September 30, 2000, the Fund had over 70% of its assets
in eligible portfolio investments.
<PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 2000
6. Investments
The Fund's investments are carried in the statements of assets and
liabilities as of September 30, 2000 at fair value as determined in good
faith by the Investment Advisor. The convertible debt securities held by
the Fund generally have maturities between five and seven years and are
convertible into the common stock of the issuer at a set conversion price at
the discretion of the Fund. The common stock underlying these securities
is generally unregistered and thinly to moderately traded. In certain
instances, the Fund has registration rights. In addition, the Fund may sell
restricted securities pursuant to Rule 144 of the Securities Act of 1933
(the "Act") if certain holding periods, volume requirements, and other
conditions of the Act are met.
Interest on convertible debentures is generally payable monthly. The
convertible debt securities generally contain embedded call options giving
the issuer the right to call the underlying issue. In these instances, the
Fund has the right of redemption or conversion. The embedded call option
will generally not vest until certain conditions are achieved by the issuer.
Such conditions may require that minimum thresholds be met relating to
underlying market prices, liquidity, and other factors.
<TABLE> INVESTMENT VALUATION SUMMARY
<S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
Bentley Pharmaceuticals, Inc. <C> <C> <C>
Common Stock $ 1,947,142 $ 9,859,896 $ 9,761,297
Options -0- -0- -0-
CaminoSoft Corp.
Common Stock 4,625,000 8,086,051 7,865,345
Warrants to purchase 500,000 shares -0- 500,000 500,000
CareerEngine Network, Inc.
12% Convertible Debenture 250,000 250,000 250,000
Warrants to purchase 62,500 shares -0- -0- -0-
Warrants to purchase 62,500 shares -0- -0- -0-
CEREUS Technology Partners, Inc.
Common Stock 512,500 858,438 756,932
Warrants to purchase 102,500 shares -0- -0- -0-
Communications World Intl., Inc.
8% Convertible Debenture 250,000 270,833 254,583
Warrants to purchase 100,000 shares 2,000 102,500 46,350
Dexterity Surgical, Inc.
9% Convertible Debenture 1,500,000 1,500,000 1,500,000
8% Convertible Preferred Stock 1,000,000 312,538 312,538
Common Stock 635,000 105,639 49,301
Display Technologies, Inc.
8.75% Convertible Debenture 1,750,000 1,750,000 1,750,000
5.25% Convertible Preferred Stock 500,000 472,973 472,973
Common Stock 1,049,741 699,336 692,342
Warrants to purchase 126,000 shares -0- -0- -0-
<PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 2000
6. Investments (continued)
</TABLE>
<TABLE> INVESTMENT VALUATION SUMMARY
<S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
The Dwyer Group, Inc.
Common Stock 1,966,632 1,645,312 1,628,859
eOriginal, Inc.
5% Convertible Preferred Stock 4,000,030 8,997,250 8,577,419
Warrants to purchase 659 shares 165 448,285 371,388
Fortune Natural Resources Corp.
Common Stock 545,500 495,898 490,939
Warrants to purchase 200,000 shares -0- -0- -0-
Grand Adventures Tour & Travel
Publishing Corp.
10% Convertible Debenture 350,000 350,000 350,000
8% Convertible Debenture 1,000,000 1,000,000 1,000,000
Common Stock 130,089 108,063 106,982
Integrated Security Systems, Inc.
Promissory Notes 515,000 515,000 515,000
Convertible Note 375,000 375,000 375,000
9% Convertible Debenture 2,084,101 2,084,101 1,453,750
9% Convertible Preferred Stock 150,000 150,000 -0-
Common Stock 215,899 215,899 -0-
Warrants to purchase 814,299 shares 3,750 3,750 -0-
JAKKS Pacific, Inc.
Common Stock 3,324,125 5,524,762 5,469,514
Laserscope
8% Convertible Debenture 1,500,000 2,250,000 2,065,000
Medical Action Industries, Inc.
Common Stock 555,392 630,000 623,700
Play by Play Toys & Novelties, Inc.
8% Convertible Debenture 2,450,250 2,450,250 2,450,250
Poore Brothers, Inc.
9% Convertible Debenture 859,047 2,362,379 2,220,636
Common Stock 1,104,123 2,948,851 2,721,920
Warrants to purchase 85,000 shares -0- 118,750 111,625
Options -0- 14,375 13,513
RailAmerica, Inc.
6% Convertible Debenture 500,000 500,000 500,000
Warrants to purchase 15,000 shares -0- -0- -0-
Simtek Corporation
Common Stock 195,000 850,000 749,000
<PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
September 30, 2000
6. Investments (continued)
</TABLE>
<TABLE> INVESTMENT VALUATION SUMMARY
<S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
SiVault, Inc.
Common Stock 350,000 350,000 350,000
ThermoView Industries, Inc.
Common Stock 500,000 -0- -0-
Voice It Worldwide, Inc.
Investment 3,028,500 3,028,500 282,100
----------- ----------- -----------
$39,723,986 $62,184,629 $56,638,256
=========== =========== ===========
<FN>
Pursuant to procedures established by the Investment Adviser, the fair value of
each investment will initially be based upon its cost to the Fund. Costs will
be the primary factor used to determine fair value until significant
developments affecting the investee company provide a basis for use in an
appraisal valuation. The fair value of debt securities and preferred securities
convertible into common stock is the sum of (a) the value of such securities
without regard to the conversion feature, and (b) the value, if any, of the
conversion feature. The fair value of debt securities without regard to
conversion features is determined on the basis of the terms of the debt
security, the interest yield and the financial condition of the issuer. The
fair value of preferred securities without regard to conversion features is
determined on the basis of the terms of the preferred security, its dividend,
and its liquidation and redemption rights and absent special circumstances will
typically be equal to the lower of cost or 120% of the value of the underlying
common stock. The fair value of the conversion features of a security, if any,
are based on fair values as of the relevant date less an allowance, as
appropriate, for costs of registration, if any, and selling expenses. Publicly
traded securities, or securities that are convertible into publicly traded
securities, are valued at the last sale price, or in the event no closing price
exists at the average closing bid and asked price, as of the valuation date.
While these valuations are believed to represent fair value, these values do not
necessarily reflect amounts which may be ultimately realized upon disposition of
such securities. </FN> </TABLE> <PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
(1) Material Changes in Financial Condition
The following portfolio transactions are noted for the quarter ended
September 30, 2000 (portfolio companies are herein referred to as the
"Company"):
Bentley Pharmaceuticals, Inc. (BNT) In the third quarter ended September
30, 2000, the Fund purchased 52,100 shares of the Company's common stock on the
open market for $411,082, a price per share of $7.89.
CEREUS Technology Partners, Inc. (VRSO) On September 29, 2000, the
Company announced it had completed its merger with Eltrax Systems, Inc. and the
combined Company's name was changed to Verso Technologies, Inc. Pursuant to the
plan of merger, CEREUS shareholders received 1.75 shares of Eltrax common stock
for each share of CEREUS common stock, giving the Fund 179,375 shares of Verso
common stock and also entitling the Fund to warrant coverage equal to the number
of shares of common owned by the Fund. Verso now trades under the trading
symbol VRSO on the NASDAQ National Market.
Pursuant to the terms of merger, RUSGIT also had its common share ownership
increased to 179,375, and also had its warrant coverage increase proportionately
according to the merger terms.
Communications World International, Inc. (CWII) Subsequent to September
30, 2000, the Fund advanced the Company $125,000 pursuant to an 8% Convertible
Promissory Note. The Note is convertible at $1.50 per share, calls for monthly
interest payments and matures on the earlier to occur of September 30, 2002, or
receipt by the Company of gross cash proceeds from an equity financing in excess
of $4,000,000, or the completion of a merger of the Company into another company
in which the Company's shareholders receive a minimum of $10,000,000. The Note
also contains standard anti-dilution and registration provisions, and as
additional consideration for advancing monies to the Company, the Fund received
payment for all accrued and outstanding interest through October 13, 2000 on the
Fund's $250,000 Promissory Note, which represents the Fund's initial investment
into the Company.
Subsequent to September 30, 2000, RUSGIT advanced the Company $250,000
pursuant to an 8% Convertible Promissory Note. With the exception of the dollar
amount invested, the RUSGIT investment was made under identical terms and
conditions as the Fund's investment, and also allowed RUSGIT to receive payment
for all accrued and outstanding interest owed by the Company on a prior
investment by RUSGIT in the Convertible Notes of the Company.
eOriginal, Inc. (Private) On September 25, 2000, the Fund purchased
2,353 shares of the Company's Series C-l Cumulative Convertible Preferred Stock
for $2,000,050, representing a price per share of $850. The Series C-1
Preferred entitles the Fund to a 5% dividend which accrues quarterly on a
cumulative basis and entitles the Fund to voting rights and a liquidation
preference equal to 100% of the dollar amount invested by the Fund. The
Preferred also contains anti-dilution provisions, provides for automatic
conversion into the Company's common stock in the event of a qualified initial
public offering and may be redeemed by the Company at any time after December
31, 2002 in an amount equal to 125% of the Fund's liquidation preference. The
Preferred is convertible into the Company's common stock at $850 per share.
In addition to the Fund's investment in the Series C-1 Preferred, RUSGIT
also invested an additional $1,500,250 to purchase 1,765 shares of the Company's
Series C-1 Cumulative Convertible Preferred Stock. With the exception of the
dollar amount invested, the RUSGIT investment was made under identical terms and
conditions as the Fund's investment.
Grand Adventures Tour and Travel Publishing Corp. (GATT) On July 14, 2000,
the Fund made a follow-on investment in the Company by purchasing $500,000 in 8%
Convertible Debentures convertible into the Company's common stock at $3.10 per
share. On September 14, 2000, the Fund made another follow-on investment in the
Company by purchasing $500,000 in 8% Convertible Debentures convertible into the
Company's common stock at $3.00 per share. Except for the different conversion
prices, both sets of debentures carry identical terms. They have a four year
term, accrue interest quarterly, and may be redeemed by the Company if the per
share price of the common stock at the close of trading on each of the ten
business days preceding the delivery date of the notice of redemption equals or
<PAGE>
exceeds $8.50 per share and at least thirty days' notice is given to the Fund of
the redemption. As consideration for making the investments, the Fund received
piggyback registration rights for all of its investments.
RUSGIT also made two $500,000 follow-on investments in the 8% Convertible
Debentures of the Company on July 14 and September 14, 2000. The investments by
RUSGIT were made pursuant to the same terms and conditions as the Fund's
investments, and also entitle RUSGIT to the same registration rights on all
RUSGIT investments as was obtained by the Fund.
Integrated Security Systems, Inc. (IZZI) In August 2000, the Fund agreed
to advance the Company up to $250,000 in Senior Secured Promissory Notes bearing
interest at 9% and maturing ninety days from the date of initiation. The Senior
Secured Notes are covered by the Security Agreement previously executed by the
Company in favor of the Fund and entitles the Fund to be secured by all of the
assets of the parent Company and all of its operating subsidiaries. The Fund
advanced $100,000 to the Company on August 25, 2000, $100,000 on September 15,
2000, and the remaining $50,000 was advanced to the Company on September 29,
2000, all advances being made pursuant to the Notes.
RUSGIT also advanced $250,000 to the Company, which advances were made in
the same amounts and on the same dates as the Fund's investments, and which
investments were made pursuant to 9% Senior Secured Promissory Notes bearing
identical terms and conditions as the Fund's promissory notes.
Subsequent to September 30, 2000, the Company announced that it plans to
submit to IZZI shareholders for approval a financial restructuring plan that
involves many of the investment instruments owned by the Fund and RUSGIT. The
Fund and RUSGIT have agreed to exchange all its convertible debentures,
convertible notes, promissory notes, and accrued interest into a new class of
preferred stock (the "Class E Preferred") that would carry a 5% dividend that
accrues but is not paid until redemption, and would be convertible into shares
of the Company's common stock at $0.20 per share. The Class E Preferred would
be redeemable in years three through five or earlier from proceeds of the sale
of certain assets that currently make up a portion of the collateral security
for the Fund's investment.
As an additional term of the restructuring plan, the Fund and RUSGIT agreed
to advance up to $1,000,000 to the Company ($500,000 per Fund) in 120 day
convertible promissory notes which will be exchangeable into an additional class
of preferred stock of the Company (the "Class F Preferred"). The Class F
Preferred will carry a 5% dividend which accrues for two years and will be
convertible into common stock of the Company at $0.20 per share. If the
convertible promissory notes are not converted into the Class F Preferred in the
first 120 days of the note period, then the notes will mature with interest at
8% and be secured by the Security Agreement previously executed by the Company
in favor of the Fund. On October 20, 2000, the Fund and RUSGIT each advanced
$100,000 pursuant to the convertible notes, and on November 3, 2000, the Fund
and RUSGIT each advanced an additional $100,000 pursuant to the convertible
notes.
Play By Play Toys & Novelties, Inc. (PBYP) In the quarter ended
September 30, 2000, the Company repaid $49,750 of the principal balance of the
Convertible Debentures outstanding. The Company now has an outstanding
principal balance of $2,450,250.
The Company also made principal payments to RUSGIT in an identical amount
as the Fund's repayments and the principal balance outstanding on its Debenture
at September 30, 2000 was also $2,450,250.
Voice It Worldwide, Inc. In the quarter ended September 30, 2000, the
Fund received a payment from the estate of $467,900 as part of the Joint Plan of
Liquidation being carried out by the Liquidation Trustee. The estate has not
yet been fully liquidated, and the Fund expects another payment before the
liquidation will be complete.
***
Pending investment in portfolio investments, funds are invested in
temporary cash accounts and in government securities. At September 30, 2000,
all of these funds were held in a money market fund made up of U.S. Treasury
obligations. As additional cash is realized from the liquidation of
investments, temporary investments will also be comprised of U. S. Government
and Agency obligations having slightly higher yields and maturity dates of three
months or less. These investments qualify for investment as permitted in
Section 55(a) (1) through (5) of the 1940 Act.
<PAGE>
(2) Material Changes in Operations
For the quarter ended September 30, 2000, the Fund had net investment
income of $38,635, an increase of 121% over the net investment loss of
$(188,777) realized in the third quarter of 1999. The increase was primarily
attributable to a 152% increase in interest income versus the same period of
fiscal 1999, which increase was partially offset by a 12% rise in operating
expenses versus the third quarter of 1999. Expenses increased primarily due to
higher management fees resulting from an increase in the value of the Fund's
investment portfolio.
For the nine months ended September 30, 2000, the Fund had net investment
income of $33,976 versus net investment income of $184,006 for the comparable
period of 1999. The decrease is attributable to a 17.5% increase in operating
expenses over the same period of fiscal 1999, due to increased legal fees and
higher management fees resulting from an increase in the value of the Fund's
investment portfolio.
During the third quarter, the Fund experienced $3,601,156 of unrealized
gains as a result of higher market prices for securities held in the investment
portfolio. For the year to date, the Fund has experienced $10,025,894 in
unrealized gains on its investments.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Fund
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
November 15, 2000 /S/
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Russell Cleveland, Chairman and President
(Principal Executive Officer)
November 15, 2000 /S/
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Barbe Butschek, Chief Financial Officer
(Principal Financial Officer)
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