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 March 31, 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.
_____________________________________________________________________________
(Exact name of registrant as specified in its charter)
Texas 75-2533518
_____________________________________________________________________________
(State or other jurisdiction (I.R.S. Employer I.D. No.)
of incorporation or organization)
8080 North Central Expressway, Dallas, Texas 75206-1857
_____________________________________________________________________________
(Address of principal executive offices)(Zip Code)
214/891-8294
_____________________________________________________________________________
(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
----- -----
4,142,942 shares of common stock outstanding at May 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)
Assets
<TABLE> <S> <S>
December 31, 1999 March 31, 2000
----------------- --------------
<C> <C>
Cash and cash equivalents $ 5,086,040 $13,230,600
Accounts receivable 224,283 179,732
Investments at fair value, cost of
$34,457,935 and $36,180,473 41,346,302 68,173,271
Other assets 68,497 61,361
----------- -----------
$46,725,122 $81,644,964
=========== ===========
Liabilities and Net Assets
Liabilities:
Accounts payable $ 111,708 $ 2,188,410
Accounts payable - affiliate 213,390 1,985,181
Dividends payable 465,718 -0-
----------- -----------
790,816 4,173,591
----------- -----------
Net Assets:
Common stock, $1 par value; 20,000,000
shares authorized; 4,342,942 issued,
and 4,142,942 outstanding 4,342,942 4,342,942
Additional paid-in capital 36,258,896 36,258,896
Treasury stock at cost, 200,000 shares at
December 31, 1999 and March 31, 2000 (1,665,220) (1,665,220)
Undistributed net investment income 6,997,688 38,534,755
Net assets, equivalent to $11.09 and
$18.70 per share on the shares
outstanding on December 31, 1999 and
March 31, 2000, respectively 45,934,306 77,471,373
----------- -----------
$46,725,122 $81,644,964
=========== ===========
Net asset value per share $ 11.09 $ 18.70
=========== ===========
<FN>
See accompanying notes to financial statements.</FN>
</TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Statement of Operations
(Unaudited)
<TABLE> <S>
Three Months Ended March 31,
1999 2000
----------- -----------
<C> <C>
Investment Income:
Interest $ 494,545 $ 365,529
Dividends 236,164 29,874
Other investment income (9,328) 76,250
---------- -----------
Total investment income 721,381 471,653
---------- -----------
Expenses:
Amortization 83,820 -0-
Bank charges 5,330 8,734
Directors' fees 14,000 14,000
Legal and professional 28,315 63,893
Management fees 210,462 347,506
Taxes -0- (878)
Other 40,389 50,292
---------- -----------
Total expenses 382,316 483,547
---------- -----------
Net investment income 339,065 (11,894)
Realized gain on investments -0- 6,444,540
Unrealized gain (loss) on investments 6,084,720 25,104,421
---------- -----------
Net increase (decrease) in net assets
resulting from operations $6,423,785 $31,537,067
========== ===========
<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>
Three Months Ended March 31,
1999 2000
----------- -----------
<C> <C>
Increase (decrease) in net assets
resulting from operations
Investment income - net $ 339,065 $ (11,894)
Realized gain on investments -0- 6,444,540
Unrealized gain (loss) on investments 6,084,720 25,104,421
----------- -----------
Net increase (decrease) in net assets
resulting from operations 6,423,785 31,537,067
Distributions to shareholders (331,935) -0-
Cost of shares repurchased (3,780) -0-
----------- -----------
Total increase (decrease) 6,088,070 31,537,067
Net assets
Beginning of period 41,475,701 45,934,306
----------- -----------
End of period $47,563,771 $77,471,373
=========== ===========
<FN>
See accompanying notes to financial statements. </FN>
</TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements
March 31, 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 offered to sell shares
in the Fund until closing of the offering on December 31, 1994. The
Prospectus of the Fund required minimum aggregate capital contributions by
shareholders of not less than $2,500,000 and allowed for maximum capital
contributions of $100,000,000. 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 has elected the special income tax
treatment available to "regulated investment companies" under Subchapter
M of the Internal Revenue Code ("IRC") 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. The Fund's policy is to
comply with the requirements of the IRC that are applicable to regulated
investment companies. Such requirements include, but are not limited to
certain qualifying income tests, asset diversification tests and
distribution of substantially all of the Fund's taxable investment income
to its shareholders. It is the intent of management to distribute all of
its taxable investment income and long term capital gains within the
defined period under the IRC to qualify as a regulated investment
company. Therefore, no federal income tax provision is included in the
accompanying financial statements.
B. Distributions to Shareholders - Dividends to shareholders are recorded on
the ex-dividend date. The Fund declared no dividends during the quarter
ended March 31, 2000. On April 7, 2000, the Fund declared a dividend of
$1.54 per share payable June 9, 2000 to holders of record at May 26,
2000. The ex-dividend date is May 24, 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 management of the Fund as to the valuation of
investments that effect the amounts and disclosures in the financial
statements. Actual results could differ from these 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.
<PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
March 31, 2000
3. Organization Expenses
In connection with the offering of its shares, the Fund paid Renaissance
Capital Group, Inc. (the "Investment Adviser") organizational expenses of
$623,544. Such expenses are deferred and amortized on a straight-line
basis over a five-year period. These expenses were fully amortized in a
prior period.
4. Investment Advisory Agreement
The Investment Advisor for the Fund is registered as an investment advisor
under the Investment Advisors Act of 1940. Pursuant to an Investment
Advisory Agreement, the Investment Advisor performs certain services,
including certain management, investment advisory and administrative services
necessary for the operation of the Fund. The Investment Advisor receives a
fee equal to .4375% (1.75% annually) of the Net Assets each quarter. The
Fund accrued a liability of $347,506 for such operational management fees
performed during the quarter ended March 31, 2000.
In addition, the Fund has agreed to pay the Investment Advisor 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. In the first quarter, the Fund realized
capital gains of $8,055,674.79 on the sale of 2,846,154 shares of Simtek
Corporation, and the redemption of the Optical Security Group, Inc.
convertible debenture. The gain is shown on the accompanying statement of
operations net of the $1,611,135 management incentive fee payable to the
Investment Advisor.
Finally, the Investment Advisor is reimbursed for administrative expenses
paid by the Investment Advisor on behalf of the Fund. Such reimbursement was
$17,180 for the quarter ending March 31, 2000, and is included in general and
administrative expenses in the accompanying statement of operations.
5. Capital Share Transactions
As of March 31, 2000 there were 20,000,000 shares of $1 par value capital
stock authorized, 4,342,942 shares issued, 4,142,942 shares outstanding, and
additional paid-in capital aggregating $38,936,619. There are no capital
stock transactions during the current year.
<PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
March 31, 2000
6. Investments
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. These investments are carried in the statements of assets and
liabilities as of March 31, 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, but is not otherwise
restricted. The Fund may register and sell such securities at any time with
the Fund paying the costs of registration. Interest on the convertible
securities are 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.
INVESTMENT VALUATION SUMMARY
<TABLE> <S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
Bentley Pharmaceuticals, Inc.
Common Stock $ 1,536,029 $ 7,785,900 $ 7,708,040
CEREUS Technology Partners, Inc.
Common Stock 512,500 1,819,375 1,660,212
Warrants to purchase 4,000 shares -0- 794,375 746,713
Communications World Intl., Inc.
8% Convertible Debenture 250,000 687,500 646,250
Warrants to purchase 100,000 shares 2,000 352,500 281,350
Dexterity Surgical, Inc.
9% Convertible Debenture 1,500,000 2,062,500 1,888,750
8% Convertible Preferred Stock 1,000,000 1,000,000 1,000,000
Common Stock 635,000 357,500 336,051
Display Technologies, Inc.
8.75% Convertible Debenture 1,750,000 1,750,000 1,750,000
5.25% Convertible Preferred Stock 500,000 500,000 500,000
Common Stock 1,049,741 915,798 906,640
Warrants to purchase 126,000 shares -0- -0- -0-
</TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
March 31, 2000
6. Investments (continued)
INVESTMENT VALUATION SUMMARY
<TABLE> <S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
The Dwyer Group, Inc.
Common Stock 1,966,631 1,940,625 1,921,219
eOriginal, Inc.
5% Convertible Preferred Stock,
Series B-3 107,280 107,280 107,280
5% Convertible Preferred Stock,
Series B-1 392,700 392,700 392,700
5% Convertible Preferred Stock,
Series A 1,500,000 1,500,000 1,500,000
Warrants to purchase 659 shares 165 165 165
Fortune Natural Resources Corp.
Common Stock 545,500 909,146 841,094
Warrants to purchase 200,000 shares -0- -0- -0-
Grand Adventures Tour & Travel
Publishing Corp.
10% Convertible Debenture 350,000 666,667 576,667
Common Stock 130,089 227,500 225,225
Integrated Security Systems, Inc.
Promissory Notes 490,000 520,601 496,265
9% Convertible Debenture 2,084,101 2,254,170 2,133,955
9% Convertible Preferred Stock 150,000 133,605 133,605
Common Stock 215,899 233,517 231,182
Warrants to purchase 814,299 shares 3,750 20,071 19,092
Interscience Computer Corporation
Common Stock 4,625,000 17,156,250 16,744,062
Warrants to purchase 500,000 shares -0- 500,000 500,000
JAKKS Pacific, Inc.
Common Stock 3,324,126 12,644,670 12,518,223
Laserscope
8% Convertible Debenture 1,500,000 2,362,560 2,170,806
Medical Action Industries, Inc.
Common Stock 555,392 580,000 574,200
Play by Play Toys & Novelties, Inc.
8% Convertible Debenture 2,500,000 2,500,000 2,500,000
Poore Brothers, Inc.
9% Convertible Debenture 859,047 1,610,713 1,514,070
Common Stock 1,104,123 2,010,580 1,839,945
Warrants to purchase 85,000 shares -0- 44,375 41,713
</TABLE> <PAGE>
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
Notes to Financial Statements (Continued)
March 31, 2000
6. Investments (continued)
INVESTMENT VALUATION SUMMARY
<TABLE> <S> <S> <S>
CONVERSION FAIR
COST OR FACE VALUE VALUE
<C> <C> <C>
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 2,281,300 2,094,422
SiVault, Inc.
Common Stock 350,000 350,000 350,000
ThermoView Industries, Inc.
Common Stock 500,000 131,250 73,375
Voice It Worldwide, Inc.
Investment 3,496,400 2,459,400 750,000
----------- ----------- ----------
$36,180,473 $72,062,593 $68,173,271
<FN>
Generally, pursuant to procedures established by the Investment Advisor, the
fair value of each investment will be initially based upon its original 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. The fair value of the conversion
features of a security, if any, are based on fair values as of this 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 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 March 31,
2000 (portfolio companies are herein referred to as the "Company"):
Bentley Pharmaceuticals, Inc. (BNT) In the first quarter ended March 31,
2000, the Company called all of its outstanding 12% Convertible Senior
Subordinated Debentures due February 13, 2006. Upon notice of the call, the
Fund had the option to convert its debentures into common stock of the Company
at a rate of $2.50 per share or to have the debentures redeemed at a value equal
to 105% of par plus accrued interest, which equaled $1,050 per $1,000 worth of
debentures plus accrued interest. The Fund chose to convert all of its
debentures, having a principal amount of $800,000, into 320,000 shares of common
stock, increasing the Fund's total ownership of Bentley common stock to 865,100
shares.
Renaissance US Growth and Income Trust PLC ("RUSGIT") also converted its
remaining debentures in the Company into shares of common stock pursuant to the
redemption provisions of the Convertible Debenture and Loan Agreements.
CEREUS Technology Partners, Inc. (CEUS) In the first quarter of 2000, the
Fund invested $512,500 into 102,500 shares of CEREUS common stock and also
received warrants to purchase 102,500 shares of the Company's common stock. The
common stock position is unregistered and restricted from transfer pursuant to
Rule 144 of the Securities Act of 1933. The warrants are exercisable at $10.00
per share on or before February 2003 and are subject to a call provision
allowing the Company to call the warrants at any time following the date of
issuance if the Company's common stock is bid at a 100% premium to the exercised
price of the warrant for twenty consecutive business days. The warrant call
provision will not take effect until after one year from the February 2000
issuance date unless a registration statement covering the shares of common
stock underlying the warrants is then in effect. The Fund does have piggyback
registration rights with regard to both the common stock and the warrants.
Also in the first quarter of 2000, RUSGIT purchased 102,500 shares of CEREUS
common stock and 102,500 warrants to purchase the Company's common stock under
the same terms and conditions as the Fund's investment.
Dexterity Surgical, Inc. (DEXT) In the first quarter of 2000, the Fund had
the conversion price on its convertible debenture reduced from $1.60 per share
to $1.00 per share and also agreed to take payment of interest owing on the
debentures in common stock of the Company at a rate of $1.00 per share. The
total shares received for the interest was 135,000 shares, and represents
interest the Company is obligated to pay from February 1, 2000 through January
31, 2001.
RUSGIT also had the conversion price on its convertible debenture reduced
from $1.60 to $1.00 per share and also agreed to take payment of interest in
shares of the Company's common stock under the same terms and conditions as the
Fund's agreement.
eOriginal, Inc. In the first quarter of 2000, the Fund invested an
additional $107,280 to purchase 447 shares of the Company's Series B-3
Cumulative Convertible Preferred Stock (the "Preferred"). The Preferred
entitles the Fund to a 5% cumulative dividend as well as 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, 2000 in an amount equal to 125% of the Fund's liquidation preference. The
Preferred is convertible into the Company's common stock at $240 per share.
In addition to the Fund's investment in the Preferred, RUSGIT also invested
an additional $107,040 to purchase 446 shares of the Company's Series B-3
Cumulative Convertible Preferred Stock. With the exception of the dollar amount
invested, the investment was made under identical terms and conditions as the
Fund's investment.
Fortune Natural Resources Corporation (FPXA) In February 2000, the Fund
agreed to convert all of its convertible debentures, having a cost basis of
$350,000, into 1,061,728 shares of the Company's common stock. As additional
<PAGE>
consideration for the Fund's willingness to convert, it received one year's
worth of future interest payments on the debentures paid in common stock of the
Company at $0.75 per share, giving the Fund an additional 56,000 shares.
Finally, the Fund agreed to convert interest that had accrued on the debentures
in January 2000 into common stock of the Company at a rate of $0.75 per share
giving the Fund an additional 4,666 shares of common stock.
Also in February 2000, the Fund agreed to invest an additional $150,000 to
purchase 200,000 shares of the Company's common stock at $0.75 per share and as
additional consideration the Fund received warrants to purchase 200,000 shares
of the Company's common stock on or before February 2003. Warrants on 100,000
shares are exercisable at $1.50 per share while warrants on the second tranche
of shares are exercisable at $2.25 per share. These positions are all
unregistered securities and are restricted from transfer pursuant to Rule 144
of the Securities Act of 1933.
RUSGIT also participated in the debenture conversion and further invested an
additional $150,000 to purchase 200,000 shares of the Company's common stock and
200,000 warrants. The conversion as well as the new investments were made under
identical terms and conditions as the Fund's conversion and investments.
Integrated Security Systems, Inc. (IZZI) In January 2000, the Fund agreed
not to convert or receive scheduled principal repayments on the debenture
obligations due from the Company for the period December 1999 through March
2000.
RUSGIT also agreed not to convert or receive scheduled principal repayments
on the debenture obligations of the Company from December 1999 through March
2000 under identical terms and conditions as the Fund's agreement.
CaminoSoft Corporation (aka Interscience Computer Corp.) (IEIC) In the
first quarter of 2000, the Fund exercised its 250,000 share warrant by paying
the Company $125,000 in exchange for 250,000 shares of common stock. In
February 2000, the Fund participated in a private placement by purchasing an
additional 250,000 shares of the Company's common stock for $500,000. The
shares are unregistered and are restricted from transfer pursuant to Rule 144 of
the Securities Exchange Act of 1933.
At December 31, 1999, RUSGIT did not have an investment in the Company.
Subsequent to the year end, RUSGIT participated in the Company's February 2000
private placement by investing $1,000,000 to purchase 500,000 shares of the
Company's common stock. With the exception of the amount invested, RUSGIT's
investment was made under identical terms and conditions as the Fund's
investment in the private placement.
Laserscope (LSCP) Effective February 11, 2000, the Fund invested $1,000,000
in 8% Convertible Debentures of the Company, maturing February 11, 2007, and
convertible into the Company's common stock at $1.25 per share. The debentures
have mandatory monthly principal repayments beginning February 11, 2002 and
continuing on the first day of each successive month thereafter prior to
maturity, and are secured by substantially all of the assets of the Company.
The debentures may be redeemed by the Company at 101% of par if certain price
and volume thresholds are met, as defined, and other conditions are met relating
to the market for the Company's shares including, but not limited to, a full
registration of the underlying shares. The redemption right is subject to the
Fund's right to convert the debentures into the Company's common stock. The
debentures have standard anti-dilution provisions and also contain a one-time
adjustment to the conversion price if the Company fails to meet its budgeted
pretax income level for the year ending December 31, 2000, and the closing bid
price of the common stock as defined is below the Fund's conversion price in
effect at the time of the automatic reset.
In addition to the Fund's investment in the Company, RUSGIT also invested
$1,500,000 into the 8% Convertible Debentures of the Company, which investment
was made under identical terms and conditions as the Fund's investment.
Medical Action Industries, Inc. (MDCI) In the first quarter of 2000, the
Fund purchased an additional 56,200 shares of the Company's common stock on the
open market for $202,268, or $3.60 per share.
RUSGIT also purchased an additional 56,200 shares of the Company's common
stock on the open market in the first quarter of 2000 for $202,268, or $3.60 per
share.
<PAGE>
Simtek Corporation (SRAM) In the first quarter of 2000, the Fund converted
its entire $750,000 debenture position into 3,846,154 shares of the Company's
common stock. Also in the first quarter, the Fund sold 2,846,154 shares of the
Company's common stock pursuant to Rule 144 of the Securities Act of 1933 and
realized proceeds of $8,565,675, representing a gain to the Fund before
incentive fees of $8,010,675.
RUSGIT also converted its entire debenture position into 3,846,154 shares of
the Company's common stock in the first quarter of 2000, and also sold 2,846,154
shares in the open market realizing identical proceeds and gains as the Fund.
Voice-It Worldwide Inc. (Liquidating) Effective January 19, 2000, the
Bankruptcy Court approved a joint liquidation plan for the Company, which
liquidation is proceeding. We cannot say when the liquidation and dissolution
will be complete, but we expect it to occur sometime this year. We are also
unable to quantify the amount of recovery to the Fund at this time, but we are
following the matter closely and at this time we estimate the recovery to be at
least $750,000, the fair value of the Voice It investments on the Fund's
portfolio at March 31, 2000. We will continue to closely monitor the situation
and reassess the value of the Fund's position as events warrant.
(2) Material Changes in Operations
Net investment income decreased $350,959 for the quarter ended March 31,
2000 in comparison to the three months ended March 31, 1999. This reported
decrease is primarily attributable to a conversion of debt investments to common
stock resulting in a decrease of current income, along with an increase in
operating expenses resulting from appreciation in portfolio assets. During the
first quarter, the Fund experienced $25,104,421 of unrealized gains resulting
from an increase in the fair value of its investments.
Pending investment in portfolio investments, funds are invested in temporary
cash accounts and in government securities. At March 31, 2000, all of these
funds were held either in a money market fund made up of U.S. Treasury
obligations or in triple-A rated obligations backed by the full faith and credit
of the U.S. Government.
During the quarter ended March 31, 2000, the Registrant paid dividend
distributions to shareholders in the amount of $497,307. On April 7, 2000, the
Fund declared a dividend of $1.54 per share payable June 9, 2000 to holders of
record at May 26, 2000. The ex-dividend date is May 24, 2000.
(3) Year 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $3,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
<PAGE>
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.
May 15, 2000 /S/
--------------------------------------------------
Russell Cleveland, President and Chairman
May 15, 2000 /S/
--------------------------------------------------
Barbe Butschek, Corp. Secretary and Treasurer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
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