<PAGE> 1
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 THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] 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: 0-25174
SIRROM CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TENNESSEE 62-1583116
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
500 CHURCH STREET, SUITE 200
NASHVILLE, TENNESSEE 37219
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
(615) 256-0701
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.)
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of common
stock, no par value per share, outstanding on August 4, 1998 was 37,229,196.
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
Consolidated Balance Sheets as of December 31,
1997 and June 30, 1998 3
Consolidated Statements of Operations for the Three Months Ended June 30, 1997
and 1998 and for the Six Months Ended June 30, 1997 and 1998 4
Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 1997 and 1998 and for the Six Months Ended
June 30, 1997 and 1998 5
Notes to Consolidated Financial Statements 6
Consolidated Portfolio of Investments as of December 31, 1997 15
Consolidated Portfolio of Investments as of June 30, 1998 28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 39
General 39
Results of Operations 39
Financial Condition, Liquidity and Capital Resources 44
Portfolio Turnover and Credit Quality 45
Year 2000 46
Impact of Inflation 46
Risks 46
PART II. OTHER INFORMATION 47
ITEM 1. LEGAL PROCEEDINGS 47
ITEM 2. CHANGES IN SECURITIES 47
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 47
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 47
ITEM 5. OTHER INFORMATION 48
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 49
SIGNATURES
</TABLE>
2
<PAGE> 3
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------- -------------
(audited) (unaudited)
<S> <C> <C>
ASSETS
Investments, at fair value:
Loans $ 412,005,353 $ 526,023,488
Equity interests 55,210,669 51,343,156
Warrants 24,543,035 48,830,173
Other 2,440,503 1,759,647
------------- -------------
Total investments (cost of $483,417,884 and
$622,583,211, respectively) 494,199,560 627,956,464
Investment in unconsolidated subsidiary 924,959 3,323,579
Cash and cash equivalents 3,024,608 312,432
Interest receivable 4,483,640 5,540,396
Receivable from sale of investment 1,498,240 329,398
Debt financing costs (less accumulated
amortization of $1,776,700 and
$2,319,889, respectively) 3,989,904 5,377,960
Furniture and equipment (less accumulated
depreciation of $198,248 and $346,708,
respectively) 918,253 1,278,982
Other assets 197,235 501,199
------------- -------------
Total assets $ 509,236,399 $ 644,620,410
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures payable to Small Business
Administration $ 90,000,000 $ 101,000,000
Revolving credit facilities 124,250,000 111,169,000
Interest payable 1,576,600 1,804,417
Accounts payable, accrued expenses 5,435,621 6,638,331
and other liabilities
Dividend payable 5,405,267 0
Accrued taxes payable 600,000 400,000
------------- -------------
Total liabilities 227,267,488 221,011,748
------------- -------------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value 251,056,925 397,274,134
Notes receivable from employees (648,442) (499,812)
Undistributed net realized earnings 20,778,752 21,461,098
Unrealized appreciation of investments 10,781,676 5,373,242
------------- -------------
Total shareholders' equity 281,968,911 423,608,662
------------- -------------
Total liabilities and
shareholders' equity $ 509,236,399 $ 644,620,410
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30,1997 JUNE 30, 1998
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Operating Income:
Interest on investments $ 9,623,500 $ 15,389,161 $ 17,651,786 $ 29,501,535
Loan processing and other fees 1,262,462 2,564,475 2,956,783 4,525,721
Other income 12,241 10,703 29,825 22,260
----------- ------------ ------------ ------------
Total operating income 10,898,203 17,964,339 20,638,394 34,049,516
----------- ------------ ------------ ------------
Operating Expenses:
Interest expense 1,818,515 3,238,996 3,960,124 7,417,996
Salaries and benefits 1,087,354 1,696,583 1,878,810 3,359,353
Other operating expenses 811,493 1,473,066 1,425,909 2,617,028
Amortization expense 225,428 310,152 432,954 544,052
----------- ------------ ------------ ------------
Total Operating Expenses 3,942,790 6,718,797 7,697,797 13,938,429
----------- ------------ ------------ ------------
Pre-tax income of unconsolidated subsidiary
(before taxes of $142,995, $581,409,
$215,355 and $1,265,746) 1,020,230 1,703,522 1,261,431 3,664,366
----------- ------------ ------------ ------------
Net operating income 7,975,643 12,949,064 14,202,028 23,775,453
----------- ------------ ------------ ------------
Realized gain (loss) on investments 2,987,316 (5,742,899) 7,444,207 (4,555,493)
Change in unrealized appreciation
(depreciation) of investments 1,293,380 (4,942,194) (3,194,421) (5,408,434)
Provision for income taxes 2,339,008 581,409 4,648,488 1,265,746
----------- ------------ ------------ ------------
Net increase in shareholders'
equity resulting from operations $ 9,917,331 $ 1,682,562 $ 13,803,326 $ 12,545,780
=========== ============ ============ ============
Net operating income per share
Basic $ .26 $ .35 $ .48 $ .68
=========== ============ ============ ============
Diluted $ .25 $ .33 $ .47 $ .64
=========== ============ ============ ============
Net increase in shareholders' equity
resulting from operations per share:
Basic $ .32 $ .05 $ .47 $ .36
=========== ============ ============ ============
Diluted $ .31 $ .04 $ .45 $ .34
=========== ============ ============ ============
</TABLE>
4
<PAGE> 5
SIRROM CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net increase in shareholders' equity resulting
from operations $ 9,917,332 $ 1,682,562 $ 13,803,326 $ 12,545,780
Adjustments to reconcile net increase to
net cash provided by operating activities:
Net unrealized (appreciation)
depreciation of investments (1,293,380) 4,942,194 3,194,421 5,408,434
Realized (gain) loss on investments (2,987,316) 5,742,899 (7,444,207) 4,555,493
Increase in equity of unconsolidated
subsidiary (877,235) (1,122,113) (1,046,076) (2,398,620)
Amortization of debenture costs 160,065 309,287 429,090 542,324
Increase in interest receivable (1,111,553) (594,144) (876,527) (1,056,756)
Increase in accounts payable
and accrued expenses 755,118 1,263,517 623,763 1,712,542
Amortization of organization costs 2,364 864 3,864 1,728
Depreciation of fixed assets 29,560 85,463 41,997 148,460
Increase in other assets (94,332) (62,668) (126,966) (5,710)
Increase (decrease) in accrued taxes payable 2,209,999 0 692,721 (200,000)
Increase (decrease) in interest payable (137,306) 30,604 (42,260) 227,817
------------ ------------- ------------- -------------
Net cash provided by operating
activities 6,573,316 12,278,465 9,253,146 21,481,492
------------ ------------- ------------- -------------
INVESTING ACTIVITIES:
Loan principal repayments 17,362,603 19,978,038 30,935,018 48,564,428
Proceeds from sale of equity, warrant and
other investments 5,805,748 6,277,009 12,868,498 12,296,062
Investments originated or acquired (67,198,413) (109,033,393) (135,598,199) (204,222,304)
Purchase of fixed assets (118,386) (256,849) (147,735) (509,189)
------------ ------------- ------------- -------------
Net cash used in investing activities (44,148,448) (83,035,195) (91,942,418) (143,871,003)
------------ ------------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from debentures payable to Small
Business Administration 0 0 0 11,000,000
Proceeds from revolving credit facilities 18,511,000 134,112,000 36,061,132 218,544,000
Repayment of revolving credit facilities (9,023,000) (54,458,000) (57,431,345) (231,625,000)
Increase in debenture costs (25,336) (1,160,443) (477,757) (1,930,380)
Issuance of common stock 7,344 172,636 109,953,785 144,722,636
Employee shares repurchased 0 0 (102,614) 0
Repayment of employee notes 0 92,333 862,627 148,630
Stock options exercised 140,650 1,145,753 214,650 1,494,573
Payment of dividends (5,319,587) (9,306,659) (9,757,497) (22,677,124)
Distribution of capital gains (716,760) 0 (716,760) 0
------------ ------------- ------------- -------------
Net cash provided by financing
activities 3,574,311 70,597,620 78,606,221 119,677,335
------------ ------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents (34,000,821) (159,110) (4,083,051) (2,712,176)
Cash and cash equivalents, beginning
of period 34,529,302 471,542 4,611,532 3,024,608
------------ ------------- ------------- -------------
Cash and cash equivalents, end of period $ 528,481 $ 312,432 $ 528,481 $ 312,432
============ ============= ============= =============
Supplemental disclosures of cash
flow information:
Interest paid $ 1,954,606 $ 3,519,242 $ 3,910,623 $ 7,223,579
============ ============= ============= =============
Taxes paid $ -- $ 727,000 $ 3,738,278 $ 927,000
============ ============= ============= =============
Loans transferred to other
investments $ -- $ 2,000,000 $ 486,777 $ 2,000,000
============ ============= ============= =============
Loans transferred to equity interests $ 59,469 $ 1,800,000 $ 1,234,469 $ 6,893,712
============ ============= ============= =============
</TABLE>
5
<PAGE> 6
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Sirrom Capital Corporation (the "Company"), a Tennessee Corporation,
was formed in November 1994 and Sirrom Capital, L.P. (the "Partnership") became
a partnership under the laws of the State of Tennessee in November 1991.
Effective February 1, 1995, the partners of the Partnership transferred, in a
tax free conversion, their partnership interests to the Company in exchange for
the issuance of 10,100,232 shares of common stock of the Company. The common
stock was received by each partner in proportion to the partner's percentage
interest in the Partnership. As a result of this exchange, the Partnership was
dissolved and liquidated, with all of the assets and liabilities of the
Partnership (including the SBIC license which was obtained by the Partnership in
May 1992) being thereby assigned and transferred to the Company. This
transaction was accounted for as a reorganization of entities under common
control, in a manner similar to a pooling of interests. The accompanying
financial statements have been prepared on a basis appropriate for investment
companies as enumerated in the American Institute of Certified Public
Accountants' Audit and Accounting Guide on Audits of Investment Companies.
The Company is a specialty finance company that is primarily engaged in
making loans to small businesses. The Company's objectives are to achieve both a
high level of current income from interest on loans and fees and long-term
growth in the value of its shareholders' equity through the appreciation in
value of the equity interests in its portfolio companies that are primarily
small, privately owned companies. The Company targets small businesses that the
Company believes have certain characteristics, including the potential for
significant growth, adequate collateral, experienced management teams,
sophisticated outside equity investors and profitable operations. In addition to
making loans to small businesses, the Company makes investments in micro-cap
public companies that are marketed under the name Tandem Capital, Inc.
("Tandem") and provides merger and acquisition advisory services through its
wholly-owned subsidiary, Harris Williams & Co. ("Harris Williams").
The Company is a non-diversified, closed-end investment company, that
has elected to be treated as a business development company under the Investment
Company Act of 1940, as amended (the "1940 Act"). Prior to August 1996, the
Company was also a small business investment company ("SBIC") licensed under the
Small Business Investment Act of 1958, as amended (the "1958 Act"). The Company
was licensed by the U.S. Small Business Administration (the "SBA") on May 14,
1992. In August 1996, the Company transferred its SBIC operations, including its
SBIC license, and the majority of its assets and liabilities, to its
wholly-owned subsidiary, Sirrom Investments Inc. ("SII"), a Tennessee
corporation. Under applicable SBA regulations, SII is restricted to investing
only in qualified small business concerns in the manner contemplated by the 1958
Act. In December 1996, the Company formed Sirrom Funding Corporation ("SFC"), a
closed-end, non-diversified investment company. SFC is a bankruptcy remote
subsidiary that purchases loans and warrants from the Company on a true-sale
basis and holds them as collateral for a $200.0 million revolving credit
facility. The Company, SII and SFC have each elected to be taxed as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code").
In August 1996, the Company acquired the ownership interests of Harris
Williams & Co., L.P. ("Harris Williams") for 1,796,908 shares of common stock of
the Company. After the acquisition, Harris Williams began operating as a "C"
corporation. Harris Williams is a merger and acquisition advisory services firm
located in Richmond, Virginia, that is being operated as a wholly-owned
subsidiary of the Company. The acquisition of Harris Williams has been accounted
for as a pooling of interests. The consolidated balance sheets as of December
31, 1997 and June 30, 1998 and the consolidated statements of operations and
cash flows for the quarter ended June 30, 1997 and 1998 reflect the operations
of Harris Williams as an unconsolidated subsidiary accounted for by the equity
method of accounting in conformity with the requirements of the 1940 Act.
6
<PAGE> 7
The Company has a 40% ownership interest in a Canadian company, SCC
Canada Inc., that provides loan origination and processing services for loans to
Canadian companies. The Company's ownership interest in SCC Canada Inc. is
immaterial to its financial position and is accounted for under the equity
method of accounting.
2. INTERIM FINANCIAL STATEMENTS
Certain notes and other information have been omitted from the interim
consolidated financial statements presented in this Quarterly Report on Form
10-Q. Therefore, these financial statements should be read in conjunction with
the consolidated financial statements and notes thereto contained in the
Company's 1997 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q
for the period ended March 31, 1998.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, SII and SFC. All intercompany accounts and transactions have been
eliminated in the consolidation.
Valuation of Investments
Portfolio investments are stated at fair value as determined by the
Board of Directors.
Under the Company's valuation policy, the fair values of loans to small
business concerns are based on the Board of Directors' evaluation of the
financial condition of the borrowers and/or the underlying collateral. The
values assigned are considered to be amounts which could be realized in the
normal course of business, assuming the Company holds the loan to maturity and
realizes the face value of the loan. Fair value normally corresponds to cost
unless the borrower's condition or external factors lead to a determination of
fair value at a higher or a lower amount.
Equity interests and warrants for which there is not a public market
are valued based on factors such as significant equity financing by
sophisticated, unrelated new investors, history of positive cash flow from
operations, the market value of comparable publicly traded companies (discounted
for illiquidity) and other pertinent factors. The Board of Directors also
considers recent offers to purchase a portfolio company's securities and the
filings of registration statements in connection with a portfolio company's
initial public offering when valuing warrants.
Shares of stock and warrants of public companies that the Company is
not permitted to sell in the public market as a result of securities law
restrictions, lock-up agreements and other similar restrictions are typically
valued at 80% of market value at June 30, 1998 and 70% of market value at
December 31, 1997. The change in 1998 was a result of the reduction in the
holding period for restricted stock by the Securities and Exchange Commission
from two years to one year. All other publicly traded stocks are typically
valued at 95% of market value at the balance sheet date at June 30, 1998 and 90%
of market value at December 31, 1997. The change in 1998 was the result of an
analysis by the Company of sales of public company stocks in 1996 and 1997 that
evidenced an average valuation in excess of 95% of market price.
At June 30, 1998 and December 31, 1997, the investment portfolio
included investments totaling $620,201,000 and $482,652,000, respectively, whose
values had been estimated by the Board of Directors in the absence of readily
ascertainable market values. Because of the inherent uncertainty of the
valuations, the estimated fair values may differ significantly from the values
that would have been used had a ready market for the securities existed, and the
differences could be material.
Realized and Unrealized Gain or Loss on Investments
Realized gains are recorded upon disposition of investments and are
calculated based upon the difference between the proceeds and the cost basis
determined using the specific identification method. Realized losses are
recorded upon the final disposition of the cost basis of investments according
to federal income tax guidelines and are calculated in the same manner. All
other changes in the valuation of portfolio investments, as determined by the
Board of Directors, are included as changes in the unrealized appreciation or
depreciation of investments in the statement of operations.
7
<PAGE> 8
Description of Loans Terms
The loans to small business concerns included in investments bear
interest at rates ranging from 6.00% to 16.50%. Typically, interest is payable
in monthly or quarterly installments over five years with the entire principal
amount typically due at maturity. These loans are generally collateralized by
liens on the assets of the borrower and/or guarantees. Certain of these liens
may be subject to prior liens.
Interest on Investments
Interest income is recorded on the accrual basis. The accrual of income
is typically suspended when the interest on the related loan becomes 60 days
past due unless management anticipates that accrued amounts will be collected.
Loan Processing Fees
The Company recognizes loan processing fees as income when the related
loan closes.
Cash and Cash Equivalents
The Company defines cash and cash equivalents as cash on hand, cash in
interest bearing and non-interest bearing operating bank accounts and highly
liquid investments such as time deposits with an original maturity of three
months or less.
Debt Financing Costs
SBA debenture costs are amortized over ten years, which represents the
term of the fourteen SBA debentures (See Note 5). Financing costs related to the
revolving credit facilities are amortized over the term of the credit
agreements.
Income Taxes
Beginning in February 1995, the Company elected to be taxed as a RIC
under Subchapter M of the Code. If the Company, as a RIC, satisfies certain
requirements relating to the source of its income, the diversification of its
assets and the distribution of its net income, the Company is generally taxed as
a pass through entity which acts as a partial conduit of income to its
shareholders.
In order to maintain its RIC status, the Company must, in general, (a)
derive at least 90% of its gross income from dividends, interest and gains from
the sale or disposition of securities, (b) meet investment diversification
requirements defined by the Code and (c) distribute to shareholders at least 90%
of its net income (other than long-term capital gains).
The Company currently intends to meet the RIC qualifications in future
years. Therefore, the Company has not provided for federal income taxes on the
unrealized appreciation of investments.
Shareholders' Equity
During November 1994, six employees were granted ownership interests in
the partnership at a purchase price equal to the approximate fair value of each
ownership interest. In connection therewith, each employee executed a promissory
note for the purchase price of such interest. The promissory notes bear interest
at 7.25% per annum with interest payable annually. All notes mature on November
1, 2001. As discussed in Note 1, the interests in the partnership were
subsequently exchanged for the Company's common stock. The stock must be resold
to the Company if the employee is no longer employed by the Company for a period
of not less than three years from the date of purchase. During 1997, 32,080
shares were repurchased by the Company for $102,615 following the termination of
employment of an employee. These shares were reissued by the Company in the
February 1997 offering. In addition, during 1998 and 1997 notes receivable was
reduced to $648,442 and $592,145, respectively, as a result of repayments.
8
<PAGE> 9
Derivative Financial Instruments
The Company uses interest rate swaps to hedge interest costs on its
floating rate revolving credit facilities. Any amounts paid or received on
interest rate swap agreements are recognized as an adjustment to interest
expense. Gains and losses on terminated swaps are recognized over the remaining
life of the underlying obligation as an adjustment to investment income or
interest expense. The fair value of the swap agreements are not recognized in
the consolidated financial statements as they are accounted for as hedges. The
Company does not hold derivative financial instruments for trading or
speculative purposes. The counterparties to the interest rate swap agreements
are major commercial banks. Management believes that losses related to credit
risk are remote.
Net Operating Income Per Share and Net Increase In Shareholders' Equity
Resulting From Operations Per Share
Net operating income per share and net increase in shareholders' equity
resulting from operations per share are calculated in accordance with the
requirements of Statement of Financial Accounting Standards ("SFAS") No. 128.
Under the standards established by SFAS No. 128, per share information is
measured at two levels: basic and diluted. See Note 10 for the Company's
computation of these amounts.
New Accounting Pronouncement
Effective January 1, 1998, the Company adopted two recently issued
Statement of Financial Accounting Standards (SFAS) as follows:
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive, or all inclusive income. This statement
has no effect on net income of the Company.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements.
Because this Statement addresses how supplemental financial information is
disclosed in annual and interim reports, the adoption will have no material
impact on the financial statements. Statement No. 131 is effective for annual
financial statements for fiscal years beginning after December 15, 1997, and
interim comparative financial statements for fiscal years beginning after
December 15, 1998, with early adoption encouraged.
During the second quarter, the Financial Accounting Standards Board
issued SFAS 133 "Accounting for Derivative Instruments and Hedging Activities,"
which will be effective for the Company's fiscal year 2000. This statement
establishes accounting and reporting standards requiring that every derivative
instrument, including certain derivative instruments imbedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company is currently assessing the impact of
this new statement on its consolidated financial position, liquidity, and
results of operations.
Reclassifications
Certain prior period amounts have been reclassified to conform to
current year presentation.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
9
<PAGE> 10
4. INVESTMENTS
Investments consist primarily of loans made to and warrants obtained
from borrowers. Investments are recorded at fair value as determined by the
Board of Directors or by current market prices, if available, in accordance with
the Company's valuation policy (See Note 3). While the Company markets to
borrowers throughout the United States, approximately 55.0% of the investment
portfolio consists of loans and equity investments in companies that are
headquartered in the southeastern United States and Texas.
The aggregate cost basis of loans on non-accrual status, less realized
losses, totaled $27,717,592 and $55,494,332 at December 31, 1997 and June 30,
1998, respectively. The aggregate fair values of these loans as determined by
the Company's Board of Directors totaled $17,052,737 and $30,620,677 at December
31, 1997 and June 30, 1998, respectively.
Included in the investment portfolio at December 31, 1997 are other
investments which consist of rights to royalty payments, a right to receive
payment from a potential arbitration settlement and certain tangible assets.
Included in the investment portfolio at June 30, 1998 are assets which consist
of rights to royalty payments and certain tangible and intangible assets. The
aggregate cost of other investments at December 31, 1997 and June 30, 1998 was
$4,240,503 and $4,099,647, respectively, which represents the cost basis of the
original loans plus capitalized workout expenses. The Company's Board of
Directors has estimated the fair value of these investments to be $2,440,503 and
$1,759,647 at December 31, 1997 and June 30, 1998, respectively.
5. DEBENTURES PAYABLE TO SMALL BUSINESS ADMINISTRATION
As of June 30, 1998, SII had fourteen debentures totaling $101.0
million payable to the SBA with semiannual interest only payments based upon
rates ranging from 6.12% to 8.20% per annum, with scheduled maturity dates as
follows:
<TABLE>
<CAPTION>
DATE AMOUNT
---- -------------
<S> <C>
2002 $ 10,000,000
2003 24,000,000
2004 17,000,000
2005 22,260,000
2006 16,740,000
2008 11,000,000
-------------
$101,000,000
=============
</TABLE>
The debentures are subject to a prepayment penalty if paid prior to
five years from maturity. Interest expense related to these debentures for the
quarters ended June 30, 1997 and 1998 totaled $3,133,404 and $3,321,325,
respectively.
The SBA and the lenders of the $125.0 million revolving credit facility
are equally secured by the assets of SII. The debentures are also guaranteed by
the Company.
6. REVOLVING CREDIT FACILITIES
Revolving credit facilities consist of the following at December 31,
1997 and June 30, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------- ------------
<S> <C> <C>
$125.0 million revolving facility $ 61,500,000 $ 27,669,000
$200.0 million revolving facility 62,750,000 83,500,000
------------ -----------
Total revolving credit facilities $124,250,000 $111,169,000
============ ============
</TABLE>
The $125.0 million revolving credit facility is payable by SII to a
syndicate of lenders. The facility consists of a swingline totaling $15.0
million which bears interest at prime minus 0.5%, and the balance of the
facility bears interest at either LIBOR plus 1.75% or prime plus 0.5% at SII's
discretion. Borrowing under the facility is based on the principal amount of
eligible loans and public securities in SII's
10
<PAGE> 11
portfolio. The revolving credit agreement imposes certain operating restrictions
on the Company and SII such as requiring lender approval of certain mergers and
acquisitions, changes in management, and payment of dividends in excess of those
required to maintain RIC status. The agreement contains financial covenants that
require SII to maintain a certain level of tangible net worth and meet ratios
related to interest coverage, leverage, non-accrual/delinquent loans and loan
losses. As of June 30, 1998, the Company and SII were in compliance with these
covenants. The revolving credit lenders and the SBA are equally secured by all
assets of SII and the revolving credit facility is guaranteed by the Company.
The facility expires on May 31, 2000.
As of June 30, 1998, the Company had entered into an interest rate swap
agreement under the $125.0 million revolving credit facility. In the agreement,
the Company swapped the variable rate on $45.0 million in borrowings to a fixed
rate of 8.12%. This swap expires in May 2000. Interest expense on the revolving
credit facility, including the interest rate swaps and a quarterly fee of .25%
per annum on the total revolving credit facility, for the quarters ended June
30, 1997 and June 30, 1998 was $534,715 and $1,769,169, respectively.
At December 31, 1996 SFC entered into a $100.0 million revolving credit
facility with a financial institution. This credit facility was increased to
$200.0 million in March, 1998. SFC purchases loans and the related warrants
originated by the Company, and funds substantially all such purchases with
borrowings under the facility. The facility is funded by commercial paper sold
by the financial institution, and bears interest at the stated rate on the
commercial paper sold plus 2.25%. SFC is generally able to borrow up to 70% of
the principal amount of conforming loans that are pledged to secure the credit
facility. At June 30, 1998, investments with a cost and fair value of
approximately $129,012,437 and $141,840,769, respectively, had been contributed
or sold to SFC by the Company and were pledged as collateral under the facility.
The facility agreement contains operational restrictions such as requiring
lender approval of certain mergers and acquisitions and changes in management.
The facility agreement also contains financial covenants related to tangible net
worth, loan delinquency and loan defaults. As of June 30, 1998, the Company and
SFC were in compliance with those covenants. The Company may borrow under the
facility until December 31, 2001, and the facility expires on January 5, 2007.
To hedge its exposure under the $200.0 million revolving credit
facility, in 1996 the Company entered into several interest rate swap agreements
which were modified in March 1998. In May 1998, the Company further modified
these previous swap agreements ("First Swap Agreements") and entered into
several new agreements ("Second Swap Agreements"). Under the terms of the First
Swap Agreements, the Company has exchanged variable commercial paper rates on
$100.0 million notional amount. During the period from July 1998 through
December 1999, the Company has swapped the variable commercial paper rate to a
fixed rate of 6.0%. During the period from January 2000 through January 2002,
the Company has put in place a collar that caps the variable commercial paper
rate at 6.35% in exchange for a floor at 6.00%. Under the terms of the Second
Swap Agreements, the Company has exchanged variable commercial paper rates on
$20.0 million notional amount beginning in September 1998, increasing by $20.0
million per month to a total notional amount of $100.0 million in January 2002.
During the period from September 1998 through January 2002, the Company has
swapped the variable commercial paper rate to a fixed rate of 6.0%. The rates
under both the First Swap Agreements and Second Swap Agreements do not include
the 2.25% fee charged by the financial institution on amounts borrowed under the
facility.
Interest expense on the $200.0 million credit facility including the
swaps and a monthly fee of .50% per annum on the unused portion of the facility
totaled $284,666 and $2,327,501 for the quarters ended June 30, 1997 and June
30, 1998, respectively.
7. INCOME TAXES
For the quarters ended June 30, 1997 and 1998 the Company provided for
federal income tax at a 35.0% rate on undistributed realized long-term capital
gains, excise taxes at a 4.0% rate on undistributed taxable net investment
income as defined by the Code and undistributed realized long-term capital gains
and federal and state income taxes on Harris Williams' pre-tax income (See Note
13). For the quarters ended June 30, 1997 and June 30, 1998, the provision for
income taxes totaled $4,648,488 and $1,265,746, respectively.
8. STOCK OPTION PLANS
Employee Stock Option Plans. The Company's two employee stock option
plans, the Amended and Restated 1994 Employee Stock Option Plan (the "1994
Plan"), and the 1996 Employee Stock Incentive Plan (the "1996 Plan") provide for
the granting of options for
11
<PAGE> 12
1,000,000 and 5,707,098 shares, respectively, of common stock to selected
employees at an exercise price not less than the fair market value of the common
stock on the date of the grant. The terms of each award are determined by the
Board of Directors. The options vest over a five-year period from the date of
grant and expire ten years from the date of grant.
A summary of stock option activity related to the plans is as follows:
<TABLE>
<CAPTION>
PRICE RANGE
PER SHARE SHARES
--------- ------
<S> <C> <C>
Outstanding, December 31, 1995 933,932
Granted $ 9.33 - 17.785 1,535,162
Exercised $6.750 - 8.938 30,000
Forfeited $9.25 - 13.167 50,000
---------
Outstanding, December 31, 1996 2,389,094
Granted $13.969 - 23.875 3,118,004
Exercised $ 5.50 - 13.969 134,000
Forfeited $ 9.25 - 17.50 42,000
---------
Outstanding, December 31, 1997 5,331,098
Granted $ 21.50 - 28.75 894,000
Exercised $ 6.75 - 17.375 109,500
Forfeited $ 15.125 60,000
---------
Outstanding, June 30, 1998 6,055,598
</TABLE>
Directors Stock Option Plan. During 1995, the Company adopted the 1995
Stock Option Plan for Non-Employee Directors which permits the issuance of
options to purchase the Company's stock to non-employee directors. This plan was
amended in April of 1998, subject to the approval of the Securities and Exchange
Commission which was received in June 1998. The plan reserves 246,000 shares
of common stock for automatic grant. Directors elected prior to December 1, 1994
received options to purchase 36,000 shares and directors elected after December
1,1994 received options to purchase 24,000 shares. Upon the initial election of
a future non-employee director, an option to acquire 12,000 shares of common
stock will be issued to the director. In addition, upon reelection each director
will receive an option to purchase 4,000 shares beginning with the 1997
reelections. Under the terms of the Plan, the options' exercise price may not be
less than the fair market value of a share of common stock on date of grant. No
options were granted in 1995. In 1996, 168,000 options were granted at an
exercise price of $12.125 which were outstanding at December 31, 1996. In 1997,
12,000 options were granted at an exercise price of $13.968. In 1998, 52,000
shares were granted at an exercise price of $23.625. No shares were exercised
prior to 1997, 11,600 shares were exercised during 1997 and 20,000 shares were
exercised in the second quarter of 1998. No shares have been forfeited to date.
9. SECONDARY OFFERING
In March 1998, the Company completed a public offering of 6,000,000
shares of common stock at a price of $25.50 per share. The net proceeds to the
Company of the offering, after underwriting commissions and expenses were
approximately $144,560,000.
10. NET OPERATING INCOME PER SHARE AND NET INCREASE IN SHAREHOLDERS' EQUITY
RESULTING FROM OPERATIONS PER SHARE
The Company computes net operating income per share and the net
increase in shareholders equity resulting from operations per common share-basic
by dividing the relevant income amount by the weighted average number of common
shares outstanding during the quarter, which was 30,962,000 and 37,203,535 for
the quarters ended June 30, 1997 and 1998, respectively. For the calculation of
net operating income per share and the net increase in shareholders' equity
resulting from operations per common share-diluted, the Company increases the
weighted average number of shares for the potential dilutive effect of
outstanding stock options. The weighted average shares outstanding considering
the effect of the stock options outstanding was 32,070,670 and 39,778,788 for
the quarters ended June 30, 1997 and 1998, respectively.
In December 1997, the Company declared a dividend derived from capital
gains totaling $5,405,267 payable in January 1998. On March 20, 1998, the
Company paid a dividend of $7,929,151 from net investment income to shareholders
of record as of February 27, 1998.
12
<PAGE> 13
On June 16, 1998, the Company paid a dividend of $9,306,660 from net
investment income to shareholders of record as of May 29, 1998.
11. STOCK SPLIT
On January 5, 1998 the Board of Directors declared a two-for-one stock
split on the Company's common stock. One additional share was issued for each
share of common stock held by shareholders of record as of the close of business
on January 16, 1998. The new shares were distributed on January 30, 1998. All
references to the number of common shares and per share amounts have been
restated as appropriate to reflect the effect of the split for all periods
presented.
12. COMMITMENTS AND CONTINGENCIES
As of June 30, 1998, the Company had outstanding loan commitments
totaling $14.4 million, of which $5.8 million are contingent upon the borrower
meeting certain future financial conditions. These commitments were made in the
ordinary course of the Company's business and are generally on the same terms as
loans to existing borrowers.
As of June 30, 1998, the Company had contingent liabilities totaling
$8.1 million relating to guarantees of letters of credit, credit facilities,
performance bonds and operating costs of four portfolio companies. These
liabilities expire at various dates through March 2001.
The Company has made a commitment under a joint venture agreement with
a Canadian bank to fund up to $100.0 million (in Canadian dollars) in loans to
Canadian companies of which approximately $26.7 million has been funded.
13. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
As discussed in Note 1, Harris Williams is accounted for by the equity
method of accounting. The balance sheet for Harris Williams as of December 31,
1997 and June 30, 1998 and statements of income for the quarters ended June 30,
1997 and 1998 and for the six months periods ended June 30, 1997 and 1998 are as
follows:
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 282,913 $1,156,018
Accounts receivable 674,256 4,207,006
Other assets, net 1,645,857 558,341
---------- ----------
Total Assets $2,603,026 $5,921,365
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities $1,678,067 $2,597,785
Shareholders' equity 924,959 3,323,580
---------- ----------
Total liabilities and
shareholders' equity $2,603,026 $5,921,365
========== ==========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------- -----------------------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Fee income $2,674,945 $3,290,502 $3,480,772 $7,281,748
Expense reimbursements and other 130,671 286,775 241,101 475,830
---------- ---------- ---------- ----------
Total revenues 2,805,616 3,577,277 3,721,873 7,757,578
---------- ---------- ---------- ----------
EXPENSES:
Salaries and benefits 1,374,100 1,069,081 1,791,829 2,743,779
Operating expenses 411,286 804,674 668,613 1,349,433
---------- ---------- ---------- ----------
Total expenses 1,785,386 1,873,755 2,460,442 4,093,212
---------- ---------- ---------- ----------
Operating income before taxes 1,020,230 1,703,522 1,261,431 3,664,366
Provision for income taxes 142,995 581,409 215,355 1,265,746
---------- ---------- ---------- ----------
Net income $ 877,235 $1,122,113 $1,046,076 $2,398,620
========== ========== ========== ==========
</TABLE>
13
<PAGE> 14
Advisory services are typically provided by Harris Williams in
accordance with engagement contracts that stipulate a monthly retainer,
reimbursement of direct expenses and success fees. Retainer fees are recognized
ratably over the retainer period, expense reimbursements are recognized monthly
as billed and success fees are recognized at the time of closing.
Subsequent to the acquisition in August 1996, Harris Williams began
operating as a "C" corporation. Accordingly for the quarters ended June 30, 1997
and 1998, Harris Williams has provided federal income taxes of $142,995 and
$581,409, respectively, which is included in provision for income taxes in the
accompanying consolidated statements of operations.
Harris Williams reimburses the Company for certain expenses which
totaled $128,294 and $127,935 for the quarters ended June 30, 1997 and 1998.
Expense reimbursements are reflected as a reduction in operating expenses in the
Company's consolidated statements of operations. Harris Williams has a
receivable from the Company as of June 30, 1998 totaling $3,838,450, which is
included in accounts payable in the Company's consolidated balance sheet.
14
<PAGE> 15
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Action Sports Group, LLC......................... 8/19/02 $ 1,750,000 13.00% $ 1,750,000
Aero Products Corporation........................ 6/9/02 2,500,000 13.00 2,500,000
Aero Products Corporation........................ 12/19/99 1,250,000 14.00 1,250,000
Affinity Fund, Inc. ............................. 6/29/98 1,485,000 12.50 1,500,000
Affinity Fund, Inc. ............................. 3/10/00 1,000,000 14.00 1,000,000
Affinity Fund, Inc. ............................. 12/28/98 495,000 12.50 497,075
Alignis, Inc. ................................... 2/28/02 2,500,000 13.00 2,500,000
American Consolidated Laboratories, Inc.......... 4/25/02 1,458,450 13.50 1,223,990
American Consolidated Laboratories, Inc.......... 12/18/01 520,000 13.00 520,000
American Consolidated Laboratories, Inc.......... 4/25/02 529,238 13.50 534,126
American Corporate Literature, Inc. ............. 9/29/01 1,683,000 14.00 1,687,528
American Corporate Literature, Inc. ............. 1/1/98 500,000 14.00 500,000
American Network Exchange, Inc................... 11/30/98 990,000 13.00 998,350
American Network Exchange, Inc................... 1/18/99 990,000 13.00 998,016
Amscot Holdings, Inc. ........................... 5/26/00 800,000 14.00 800,000
Amscot Holdings, Inc. ........................... 9/20/00 200,000 14.00 200,000
Amscot Holdings, Inc. ........................... 6/28/01 500,000 14.00 500,000
Amscot Holdings, Inc. ........................... 12/27/01 250,000 14.00 250,000
Amscot Holdings, Inc. ........................... 7/30/02 1,000,000 14.00 1,000,000
Anton Airfoods, Inc. ............................ 5/21/02 5,000,000 13.50 5,000,000
ARAC Holding Co., Inc. .......................... 9/27/01 3,000,000 13.50 3,000,000
Ashe Industries, Inc. ........................... 5/18/99 535,546 12.50 185,546
Associated Response Services, Inc. .............. 6/20/99 1,386,000 12.50 1,396,019
Associated Response Services, Inc. .............. 2/15/00 335,000 12.50 335,000
Associated Response Services, Inc. .............. 1/6/00 300,000 12.50 300,000
Associated Response Services, Inc. .............. 11/8/01 500,000 12.50 500,000
Associated Response Services, Inc. .............. 3/27/02 3,000,000 12.50 3,000,000
Assured Power, Inc. ............................. 10/1/00 200,000 13.50 50,000
Atlantic Security Systems, Inc. and affiliates... 1/29/02 2,250,000 13.25 2,250,000
Auburn International, Inc. ...................... 12/31/02 2,850,000 13.50 2,852,500
Austin Innovations, Inc. ........................ 7/1/02 1,950,000 13.75 1,953,448
Avionics Systems, Inc. .......................... 7/19/01 3,000,000 13.50 3,000,000
B & N Company, Inc. ............................. 8/8/00 2,970,000 12.50 2,583,500
B & N Company, Inc. ............................. 3/28/01 990,000 13.00 993,507
BankCard Services Corporation.................... 1/21/98 273,731 13.00 126,631
BiTec Southeast, Inc. ........................... 7/1/99 2,600,321 12.70 2,192,671
BiTec Southeast, Inc. ........................... 8/9/01 950,000 14.00 950,000
BiTec Southeast, Inc. ........................... 4/30/97 350,000 14.00 350,000
BiTec Southeast, Inc. ........................... demand 228,000 14.00 228,000
Bohdan Automation, Inc. ......................... 7/1/02 1,500,000 13.50 1,500,000
Bravo Corporation, Inc. ......................... 3/31/03 3,250,000 12.00 3,250,000
BroadNet, Inc. .................................. 6/9/02 2,500,000 14.00 2,500,000
BUCA, Inc........................................ 10/31/02 1,565,003 13.50 1,572,253
Bug.Z., Inc. .................................... 9/23/02 2,500,000 15.00 2,500,000
C.J. Spirits, Inc. .............................. 6/1/97 750,171 13.50 105,796
Caldwell/VSR Inc. ............................... 2/28/01 1,500,000 12.00 1,500,000
</TABLE>
15
<PAGE> 16
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Caldwell/VSR Inc. ............................... 9/27/01 $ 22,262 14.00% $ 22,262
Cardiac Control Systems, Inc. ................... 3/31/00 1,500,000 13.50 1,500,000
Cartech Holdings, Inc. .......................... 4/29/01 1,500,000 13.00 1,500,000
Carter Kaplan Holdings, LLC...................... 6/22/00 594,000 14.00 44,800
Catalina Food Ingredients, Inc. ................. 3/30/02 3,500,000 13.00 3,500,000
Cedaron Medical, Inc. ........................... 6/28/01 1,500,000 13.50 1,500,000
Cell Call, Inc. ................................. 3/1/98 990,000 12.75 1,000,000
CF Data Corp. ................................... 3/16/00 1,732,500 13.75 1,742,428
Champion Glove Manufacturing Co., Inc. .......... 7/27/00 1,250,000 13.50 50,000
Check Into Cash, Inc. ........................... 11/7/01 3,039,000 14.00 3,138,879
CMHC Systems, Inc. .............................. 7/1/02 1,400,000 13.50 1,400,000
CMP Enterprises, LLC............................. 12/10/02 3,500,000 13.00 3,500,000
Colonial Investments, Inc. ...................... 10/16/00 800,000 13.75 800,000
Colonial Investments, Inc. ...................... 4/1/98 300,000 13.75 300,000
Colonial Investments, Inc. ...................... 4/1/98 60,933 13.75 60,933
Columbus Medical Holdings, LLC................... 1/31/02 4,000,000 13.75 4,000,000
Compression, Inc. ............................... 12/17/02 3,700,000 13.50 3,700,000
Consumat Systems, Inc. .......................... 11/1/00 500,000 14.00 500,000
Consumat Systems, Inc. .......................... 1/1/01 500,000 14.00 500,000
Consumat Systems, Inc. .......................... 3/11/01 500,000 14.00 500,000
Consumat Systems, Inc. .......................... 3/26/02 500,000 14.00 500,000
Consumat Systems, Inc. .......................... 7/15/98 500,000 14.00 500,000
Continental Diamond Cutting Co. ................. 10/28/99 500,000 13.00 500,000
Continental Diamond Cutting Co. ................. 11/16/99 200,000 13.00 200,000
Corporate Link, Inc. ............................ 12/13/01 600,000 14.00 600,000
Corporate Link, Inc. ............................ 1/13/98 300,000 14.00 300,000
Cort Investment Group, Inc. (d/b/a Contract
Network)....................................... 8/27/02 3,320,000 13.50 3,335,000
Creighton Shirtmakers, Inc. and affiliates....... demand 1,969,000 14.00 1,969,000
CSM, Inc. ....................................... 12/31/01 1,400,000 14.00 1,400,000
Cybo Robotics, Inc. ............................. 9/18/02 1,050,000 13.25 1,050,000
Dalts, Inc. ..................................... 4/28/01 2,000,000 13.50 2,000,000
Dartek Industries, Inc........................... 11/20/01 3,800,000 13.50 3,800,000
Dartek Industries, Inc........................... 6/1/99 688,915 13.50 688,915
Data National Corporation........................ 12/10/02 1,050,000 13.75 1,057,500
DentalCare Partners, Inc. ....................... 1/11/01 2,206,023 12.50 2,213,037
DFI/Aeronomics, Inc. ............................ 12/30/02 3,000,000 13.50 3,000,000
Dyad Corporation................................. 12/31/02 2,900,000 14.00 2,910,000
DynaGen, Inc. ................................... 6/17/02 1,733,300 13.50 1,764,415
Dyntec, Inc. .................................... 7/7/02 2,500,000 14.00 2,500,000
Electronic Accessory Specialists Int'l, Inc. .... 6/23/02 1,600,000 13.50 1,600,000
Encor Technologies, Inc. ........................ 3/30/02 1,444,000 13.13 1,444,000
Endeavor Technologies, Inc. ..................... 9/2/02 4,000,000 13.50 4,000,000
Entek Scientific Corporation..................... 5/22/02 1,090,000 13.00 1,108,984
Entek Scientific Corporation..................... 6/28/01 2,500,000 13.00 2,500,000
Express Shipping Centers, Inc. .................. 9/22/00 1,697,598 13.25 1,955,394
</TABLE>
16
<PAGE> 17
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Express Shipping Centers, Inc. .................. 5/1/02 $ 250,000 13.25% $ 250,000
Express Shipping Centers, Inc. .................. 7/14/98 150,000 15.00 150,000
Faxnet Corporation............................... 6/17/02 1,900,000 13.00 1,911,669
FDL, Inc. ....................................... 1/30/02 1,750,000 13.50 1,800,004
Film Technologies International, Inc. ........... 2/27/02 1,500,000 14.00 1,500,000
FoodNet Holdings, LLC............................ 7/22/01 1,500,000 13.50 1,500,000
Fortrend Engineering Corp. ...................... 8/30/01 1,500,000 12.99 1,500,000
Fypro, Inc. ..................................... 12/17/01 1,166,000 8.00 1,016,000
Gardner Wallcovering, Inc. ...................... 3/28/01 235,000 13.50 240,250
General Materials Management, Inc. .............. 7/29/01 2,500,000 13.50 2,250,000
Generation 2 Worldwide LLC....................... 10/31/00 2,000,000 14.00 2,000,000
Global Marine Electronics, Inc. ................. 5/1/01 1,350,000 13.00 1,350,000
Gloves Inc. ..................................... 5/1/02 1,500,000 13.00 1,500,000
Good Food Fast Companies, The.................... 12/10/01 2,500,000 13.50 2,500,000
Gulfstream International Airlines Inc. .......... 7/29/99 1,490,000 13.00 1,498,517
Gulfstream International Airlines Inc. .......... 9/25/00 1,000,000 14.00 1,000,000
Gulfstream International Airlines Inc. .......... 3/19/02 1,500,000 14.00 1,500,000
Gulfstream International Airlines Inc. .......... 12/1/99 2,200,000 14.00 2,200,000
H & H Acq. Corp. ................................ 8/30/01 1,500,000 14.00 1,500,000
Home Link Services, Inc. ........................ 12/30/01 300,000 14.00 300,000
Hunt Assisted Living, LLC........................ 10/17/02 2,999,900 12.00 2,999,904
Hunt Incorporated................................ 3/31/00 3,000,000 14.00 3,000,000
Hydrofuser Industries, Inc. and affiliates....... 7/30/02 885,039 13.00 932,006
I.Schneid Acquisition, LLC....................... 4/1/01 2,000,000 14.00 2,000,000
IJL Holdings, Inc. .............................. 9/12/02 1,250,000 13.50 1,250,000
ILD Communications, Inc.......................... 5/10/01 1,500,000 13.50 1,500,000
In-Store Services, Inc. ......................... 4/19/00 1,188,000 14.00 1,194,600
Johnston County Cable, L.P. ..................... 8/31/00 1,990,000 14.00 1,994,676
Karawia Industries, Inc. ........................ 3/27/02 2,500,000 14.00 2,500,000
KWC Management Co., LLC.......................... 4/25/01 500,000 14.00 50,000
Lane Acquisition Corporation..................... 11/21/01 4,000,000 13.75 4,000,000
Leisure Clubs International, Inc. ............... 4/1/01 1,485,000 14.00 1,490,250
Leisure Clubs International, Inc. ............... 3/27/02 125,000 14.00 125,000
M & M Industries, Inc. .......................... 2/26/02 2,250,000 14.00 2,250,000
Master Graphics, Inc. ........................... 5/31/02 4,300,000 13.25 4,300,000
Mayo Hawaiian Corp. ............................. 6/27/01 2,200,000 14.00 2,200,000
MBA Marketing Corporation........................ 2/4/99 1,782,000 12.50 1,796,100
McAuley's Incorporated........................... 7/31/01 3,000,000 13.00 3,000,000
MCG, Inc. ....................................... 12/23/02 1,500,000 13.50 1,500,000
Mead-Higgs Company, Inc. ........................ 5/19/02 1,400,000 14.00 1,400,000
Merge Technologies, Inc. ........................ 6/30/02 2,000,000 13.50 2,000,000
Mesa International, Inc. ........................ 1/23/02 3,800,000 14.00 3,800,000
Metals Recycling Technologies Corp. ............. 10/31/01 2,000,000 14.00 2,000,000
MetroLease, Inc. ................................ 7/29/02 2,495,000 13.50 2,495,498
Money Transfer Systems, Inc. .................... 7/24/00 247,500 14.00 248,760
Money Transfer Systems, Inc. .................... 12/20/00 148,500 14.00 149,125
</TABLE>
17
<PAGE> 18
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Money Transfer Systems, Inc. .................... 3/1/01 $ 148,500 14.00% $ 149,050
Money Transfer Systems, Inc. .................... 5/2/01 148,500 14.00 148,950
Money Transfer Systems, Inc. .................... 7/8/01 148,500 14.00 148,950
Money Transfer Systems, Inc. .................... 10/1/01 148,500 14.00 148,875
Money Transfer Systems, Inc. .................... 1/5/02 245,000 14.00 245,996
Money Transfer Systems, Inc. .................... 3/6/02 250,000 14.00 250,000
Money Transfer Systems, Inc. .................... 7/15/02 250,000 14.00 250,000
Moore Diversified Products, Inc. ................ 6/16/00 800,000 13.50 800,000
Moore Diversified Products, Inc. ................ 3/27/02 1,000,000 13.50 1,000,000
Multicom Publishing, Inc. ....................... 3/29/01 1,025,000 13.00 1,068,328
Multicom Publishing, Inc. ....................... demand 51,556 14.00 51,556
Multicom Publishing, Inc. ....................... demand 650,000 14.00 650,000
Multicom Publishing, Inc. ....................... demand 70,000 14.00 70,000
Multicom Publishing, Inc. ....................... demand 160,000 14.00 160,000
Multimedia Learning, Inc. ....................... 5/8/00 1,500,000 14.00 1,500,000
Multimedia Learning, Inc. ....................... 4/18/01 500,000 13.50 500,000
Multimedia Learning, Inc. ....................... 9/12/01 750,000 13.50 750,000
Mytech Corporation............................... 9/25/02 1,400,000 13.50 1,400,000
NASC, Inc. ...................................... 6/26/01 1,500,000 13.50 1,500,000
NASC, Inc. ...................................... 12/13/98 500,000 13.50 500,000
National Health Systems, Inc. ................... 10/1/99 420,000 12.50 127,000
Nationwide Engine Supply, Inc. .................. 1/12/99 2,475,000 12.00 2,495,016
Nationwide Engine Supply, Inc. .................. 9/26/01 1,000,000 13.50 1,000,000
NetForce, Inc. .................................. 11/27/02 2,000,000 14.00 2,000,000
NRI Service and Supply L.P. ..................... 2/13/00 2,225,000 14.00 2,239,595
Omni Home Medical, Inc. ......................... 3/30/02 2,000,000 14.00 2,000,000
One Call Comprehensive Care, Inc. ............... 12/19/01 1,500,000 14.00 1,500,000
One Call Comprehensive Care, Inc. ............... 3/31/02 500,000 14.00 500,000
One Call Comprehensive Care, Inc. ............... 1/31/98 300,000 14.00 300,000
One Call Comprehensive Care, Inc. ............... 1/31/98 175,000 14.00 175,000
One Coast Network Corporation.................... 11/17/02 5,000,000 14.00 5,000,000
Orchid Manufacturing Group, Inc. ................ 9/14/00 2,960,000 13.00 2,976,675
Orchid Manufacturing Group, Inc. ................ 12/28/00 1,000,000 13.50 1,000,000
Outdoor Promotions LLC........................... 11/26/02 850,000 13.75 850,000
Pacific Linen, Inc. ............................. 12/3/02 2,951,976 13.50 2,961,110
Palco Telecom Service, Inc. ..................... 11/22/99 1,300,000 12.00 1,300,000
Paradigm Valve Services, Inc. ................... 11/12/01 1,600,000 13.50 1,600,000
Pathology Consultants of America, Inc............ 12/23/02 1,702,368 13.13 1,703,161
Patton Management Corporation.................... 5/26/00 1,900,000 13.50 1,900,000
PaySys International, Inc. ...................... 9/26/02 3,725,158 13.50 3,743,482
Pik:Nik Media, Inc. ............................. 6/23/00 1,000,000 12.00 1,000,000
Pipeliner Systems, Inc. ......................... 9/30/98 980,000 10.00 896,984
Plymouth, Inc. .................................. 9/28/00 1,000,000 13.00 1,000,000
Potomac Group, Inc. ............................. 11/20/01 1,997,409 14.00 1,997,409
PRA International, Inc. ......................... 8/10/00 1,980,000 13.50 1,989,657
Precision Panel Products, Inc. .................. 1/11/02 2,022,781 12.75 2,031,781
</TABLE>
18
<PAGE> 19
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Precision Panel Products, Inc. .................. 1/11/02 $ 2,348,026 14.00% $ 2,348,026
Pritchard Paint & Glass Co. ..................... 2/14/01 767,431 14.00 767,431
Pritchard Paint & Glass Co. ..................... 2/10/01 200,000 14.00 200,000
Proamics Corporation............................. 7/31/02 1,000,000 13.00 1,000,000
Professional Training Services, Inc. ............ 9/30/02 3,400,000 13.25 3,400,000
Protect America, Inc. ........................... 1/30/02 3,905,000 13.50 3,923,996
R & R International, Inc. ....................... 6/30/02 2,000,000 13.25 2,000,000
Ready Personnel, Inc. ........................... 12/3/02 3,000,000 13.25 3,000,000
Recompute Corporation............................ 2/21/02 2,300,000 13.50 2,355,000
Reef Chemical Company, Inc. ..................... 9/23/02 2,700,000 13.75 2,720,000
Relax the Back Corporation....................... 10/1/02 2,500,000 13.00 2,500,000
Rocky Mountain Radio Company LLC................. 11/10/01 3,000,000 13.50 3,000,000
Rynel Ltd., Inc. ................................ 10/1/01 1,250,000 14.00 1,250,000
Saraventures Fixtures Inc. ...................... 5/23/02 8,307,376 14.00 4,807,376
Sheet Metal Specialties, Inc. ................... 6/20/01 250,000 14.00 250,000
Sheet Metal Specialties, Inc. ................... 12/4/01 211,750 12.00 211,750
Sheet Metal Specialties, Inc. ................... 1/24/02 38,250 12.00 38,250
SkillMaster, Inc. ............................... 3/30/02 2,475,000 13.75 2,479,170
SkillSearch Corporation.......................... 2/5/98 496,000 13.00 500,153
Solutioneering, Inc. ............................ 3/31/02 2,000,000 13.75 2,000,000
Southern Specialty Brands, Inc. ................. 6/30/02 1,732,500 14.00 1,739,508
Southern Therapy, Inc. .......................... 4/22/02 1,000,000 13.50 1,000,000
Southern Therapy, Inc. .......................... 7/28/02 500,000 13.50 500,000
Stealth Engineering, Inc. ....................... 12/31/02 1,500,000 13.50 1,500,000
Stratford Safety Products, Inc. ................. 3/1/02 2,125,000 13.50 2,138,750
Sub 1 Corporation (d/b/a Risk Management)........ 10/8/02 750,000 14.00 750,000
Summit Publishing Group, Ltd. ................... 3/17/99 1,485,000 12.00 1,496,500
Summit Publishing Group, Ltd. ................... 7/26/01 625,000 14.00 625,000
Summit Publishing Group, Ltd. ................... 1/16/98 250,000 14.00 250,000
Suncoast Medical Group, Inc. .................... 9/14/99 485,000 13.50 91,998
Suncoast Medical Group, Inc. .................... 6/7/00 495,000 14.00 420,913
Suncoast Medical Group, Inc. .................... 2/23/01 522,000 14.00 447,747
Suncoast Medical Group, Inc. .................... 2/23/01 71,700 14.00 21,700
Suncoast Medical Group, Inc. .................... 12/31/98 625,000 13.50 --
TAC Systems, Inc. ............................... 3/27/02 1,012,000 14.00 1,012,000
TAC Systems, Inc. ............................... 1/31/98 500,000 14.00 500,000
TCOM Systems, Inc. .............................. 3/30/04 397,740 0.00 397,740
TeleCommunication Systems, Inc. ................. 9/20/02 3,000,000 14.00 3,000,000
Telecontrol Systems, Inc. ....................... 9/30/02 2,500,000 14.00 2,500,000
Temps & Co., Inc. ............................... 5/12/02 3,000,000 13.25 3,000,000
The Moorings, LLC................................ 12/31/01 1,655,500 13.00 1,799,050
The Moorings, LLC................................ 11/17/02 2,500,000 13.00 2,500,000
Thomas Holding Company (d/b/a Sports & Social
Clubs of the U.S.)............................. 5/21/02 1,500,000 13.50 1,500,000
Tie and Track Systems, Inc....................... 10/31/02 1,500,000 13.50 1,500,000
Towne Services, Inc. ............................ 12/18/02 1,500,000 14.00 1,500,000
</TABLE>
19
<PAGE> 20
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Trade Am International, Inc. .................... 9/30/00 $ 4,000,000 12.75% $ 4,000,000
TRC Acquisition Corporation...................... 10/21/01 2,000,000 13.50 2,000,000
UltraFab, Inc. .................................. 6/27/01 1,500,000 14.00 1,500,000
Umbrellas Unlimited, LLC......................... 8/21/02 314,691 14.00 264,691
Unicoil, Inc. ................................... 9/28/02 2,000,000 13.50 2,000,000
Unique Electronics, Inc. ........................ 11/30/99 600,000 10.67 600,000
Unique Electronics, Inc. ........................ 10/10/02 300,000 13.00 300,000
UOL Publishing, Inc. ............................ 10/31/99 32,353 6.00 32,348
Valdawn Watch Company............................ 4/13/00 2,160,000 14.00 1,525,000
Valdawn Watch Company............................ 8/21/02 1,000,000 14.00 1,000,000
Valdawn Watch Company............................ 1/30/98 100,000 14.00 100,000
VDW Farms, Ltd. ................................. 11/25/02 1,500,000 14.00 1,500,000
Watts-Finnis Holdings, Inc. ..................... 11/30/02 2,500,000 13.25 2,500,000
Wearever Health Products, LLC.................... 3/31/02 1,500,000 13.50 1,500,000
Wearever Health Products, LLC.................... 12/11/02 450,000 13.50 450,000
Wolfgang Puck Food Company, Inc.................. 5/20/02 5,000,000 12.50 5,000,000
Zahren Alternative Power Corp. .................. 1/30/00 495,000 13.00 497,071
Zahren Alternative Power Corp. .................. 11/27/99 1,980,000 13.00 1,993,619
------------ ------------
Subtotals.............................. 375,031,495 365,465,224
------------ ------------
TANDEM CAPITAL LOANS TO PUBLICLY TRADED COMPANIES
Altris Software, Inc. ........................... 6/27/02 $ 2,415,000 11.50% $ 2,454,000
Berger Holdings, Inc. ........................... 1/2/03 1,796,000 12.25 1,799,400
Bikers Dream, Inc. .............................. 11/17/98 2,390,625 12.00 2,392,448
Cover-All Technologies, Inc. (convertible at
$1.25/sh.)..................................... 3/31/02 3,000,000 12.50 5,150,000
Digital Transmission Systems, Inc. (convertible
at $10.25/sh.)................................. 9/25/02 4,000,000 11.50 4,000,000
Environmental Tectonics Corporation.............. 3/27/04 3,500,770 12.00 3,534,054
Smartchoice Automotive Group (convertible at
$6/sh.)........................................ 3/12/99 3,500,000 12.00 3,500,000
Smartchoice Automotive Group (convertible at
$6/sh.)........................................ 5/13/02 4,000,000 12.00 4,000,000
Teltronics, Inc. (convertible at $4/sh.)......... 2/13/02 4,250,000 11.00 4,250,000
Universal Automotive Industries, Inc. ........... 7/11/02 4,500,000 12.25 4,500,000
------------ ------------
Subtotals.............................. 33,352,395 35,579,902
------------ ------------
CANADIAN LOANS
Century Pacific Greenhouses Ltd.*................ 4/14/02 $ 1,002,794 13.00% $ 1,002,794
Copperhead Chemical Company, Inc. ............... 10/23/02 500,000 12.50 500,000
Daxxes Corporation*.............................. 12/1/02 847,997 13.00 847,997
Eagle Quest Golf Center Inc. .................... 6/20/02 1,600,000 13.50 1,600,000
Executrain (3199673 Canada Inc.)*................ 10/1/02 292,105 13.00 292,105
Executrain (3199673 Canada Inc.)*................ 12/24/02 559,910 13.00 559,910
Glen Oak Inc.*................................... 12/17/02 1,268,678 12.50 1,268,678
Graphic Workshop (1246568 Ontario Inc.)*......... 9/30/02 360,787 12.50 360,787
Newfoundland Career Academy Ltd.*................ 8/8/02 860,172 13.50 860,172
Quadravision Communications Ltd.*................ 4/11/02 437,956 13.00 437,956
Race Face Components, Inc.*...................... 11/1/02 433,463 12.00 433,463
SFG Technologies Inc.*........................... 7/30/02 724,218 13.00 724,218
</TABLE>
20
<PAGE> 21
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
- ----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Sirvys Systems (3404447 Canada Inc.)*............ 12/30/02 $ 704,037 14.00% $ 704,037
Street Level (1216069 Ontario Ltd.)*............. 12/29/02 348,651 13.00 348,651
Supplements Plus Natural Vitamins & Cosmetics,
Ltd.*.......................................... 10/3/03 144,823 16.50 144,823
Systech Group, Inc.*............................. 3/31/02 874,636 13.00 874,636
------------ ------------
Subtotals.............................. $ 10,960,227 $ 10,960,227
------------ ------------
Total Loans............................ $419,344,117 $412,005,353
============ ============
</TABLE>
- ---------------
* Loan cost and fair value are stated in US dollars. Loan principal is
denominated in Canadian dollars.
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
EQUITY INTERESTS SHARES OWNERSHIP VALUE FAIR VALUE
- ---------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
American Consolidated Laboratories, Inc.
Common Stock............................... 1,000,000 9.20% $ 1,000,000 $ 175,000
American Network Exchange, Inc. Common
Stock...................................... 76,222 0.10 21,879 65,741
American Network Exchange, Inc. Common
Stock...................................... 63,429 0.00 0 0
Cardiac Control Systems, Inc. Common Stock... 50,000 2.20 250,000 25,313
Compass Plastics & Technologies Inc. Common
Stock...................................... 447,144 7.70 2,000 2,373,589
Medical Resources Inc. Common Stock.......... 55,549 .30 1,000,000 358,060
Moovies, Inc. Common Stock................... 156,110 1.60 1,561 149,280
Multicom Publishing, Inc. Common Stock....... 844,354 12.50 8,444 41,477
National Vision Associates, Ltd. Common
Stock...................................... 208,698 1.00 1,771,149 1,087,838
Network Event Theaters, Inc. Common Stock.... 412,397 4.20 2,114,772 1,335,135
Premiere Technologies, Inc. Common Stock..... 25,000 .10 0 603,750
QuadraMed Corporation Common Stock........... 11,422 .20 0 209,546
UOL Publishing, Inc. Common Stock............ 32,728 .90 8,494 362,735
Vista Information Solutions, Inc. Common
Stock...................................... 1,015,000 3.20 0 3,387,563
Vista Information Solutions, Inc. Common
Stock...................................... 143,032 0.40 0 371,287
NON-TRADED EQUITY INVESTMENTS IN PUBLIC
COMPANIES
Altris Software, Inc. Preferred
Stock -- convertible at $6.00/sh........... 3,000 -- 3,000,000 3,000,000
American Consolidated Laboratories, Inc.
Preferred Stock -- Series A................ 2,720,141 -- 2,720,141 2,375,000
Berger Holdings, Ltd. Preferred
Stock -- Series A;
convertible at $4.25/sh.................... 25,000 -- 2,500,000 2,500,000
Clinicor, Inc. Preferred Stock -- Series B... 50,000 -- 5,000,000 5,000,000
Environmental Tectonics Corporation Preferred
Stock -- Series A; convertible at
$7.50/sh................................... 25,000 -- 2,500,000 2,500,000
</TABLE>
21
<PAGE> 22
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
EQUITY INTERESTS SHARES OWNERSHIP VALUE FAIR VALUE
- ---------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Multicom Publishing, Inc. Preferred Stock --
Series A................................... 235,000 -- $ 1,175,000 $ 0
Vista Information Solutions, Inc. Preferred
Stock -- Series E; convertible at
$2.75/sh................................... 2,500 -- 2,500,000 2,800,000
Vista Information Solutions, Inc. Preferred
Stock -- Series E; convertible at a price
to be determined in June 1998.............. 2,500 -- 2,500,000 2,500,000
EQUITY INVESTMENTS IN PRIVATE COMPANIES
Bravo Corporation Common Stock............... 69,391 1.20% 106,950 350,000
Caldwell/VSR Inc. Preferred Stock............ 890 -- 890,000 890,000
CellCall, Inc. Common Stock.................. 358 1.40 10,465 100,000
Clearidge, Inc. Preferred Stock -- Series
A.......................................... 10,800,000 -- 2,700,000 2,700,000
Clearidge, Inc. Common Stock................. 4,000,000 17.70 1,000,000 1,000,000
Corporate Flight Management, Inc. Common
Stock...................................... 66,315 6.60 663 663
CSM, Inc. Class A Common Stock............... 99,673 10.00 100,000 100,000
Dentalcare Partners, Inc. Preferred Stock --
Series E................................... 510,617 -- 819,639 300,000
Front Royal, Inc. Common Stock............... 110,000 0.80 275,000 400,000
Fypro, Inc. Preferred Stock -- Series A...... 4,659,480 -- 4,659,480 4,048,480
Gulfstream International Airlines, Inc.
Preferred Stock --Series A................. 216 -- 3,000,000 3,000,000
Home Link, Inc. Preferred Stock.............. 1,000,000 -- 1,000,000 750,000
Kentucky Kingdom, Inc. Common Stock.......... 24,142 5.60 238,316 500,000
Palco Telecom Service Common Stock........... 157,895 5.00 1,579 100,000
Paysys International, Inc. Common Stock...... 150,000 15.90 300 600,000
Pipeliner Systems, Inc. Preferred
Stock -- Series D.......................... 5,000 -- 1,000,000 800,000
Potomac Group, Inc. Preferred Stock -- Series
A.......................................... 800,000 -- 1,000,000 2,000,000
Potomac Group, Inc. Common Stock............. 1,437,681 9.40 292,370 1,799,038
PRA International, Inc. Common Stock......... 148,577 4.20 211,174 2,046,174
Recompute Corporation Common Stock........... 125,000 1.60 250,000 125,000
Relevant Knowledge, Inc. Preferred Stock --
Series B................................... 312,500 -- 500,000 500,000
Relevant Knowledge, Inc. Common Stock........ 75,000 3.30 120,000 120,000
Saraventures Fixtures, Inc. Preferred
Stock...................................... 3,510 -- 1,659,469 0
Skillsearch Corporation Common Stock......... 5,998 19.10 554,035 125,000
Teltrust, Inc. Common Stock.................. 175,677 1.75 0 525,000
Unique Electronics, Inc. Preferred Stock --
Series A................................... 1,000,000 -- 1,000,000 675,000
Valdawn Watch Co. Preferred Stock............ 240 -- 240,000 0
Voice FX Corporation Common Stock............ 24,078 0.80 110,001 25,000
Zahren Alternative Power Corporation Common
Stock...................................... 700 3.90 210,000 210,000
Zahren Alternative Power Corporation
Preferred Stock............................ 200 -- 200,000 200,000
------------ ------------
Total Equity Interests............. $ 50,222,881 $ 55,210,669
============ ============
</TABLE>
22
<PAGE> 23
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
PUBLICLY TRADED COMPANIES
American Consolidated Laboratories,
Inc.................................... 1,050,563 9.69% $ 214,312 $ 183,849
American Network Exchange, Inc........... 13,988 0.00 0 0
Cardiac Control Systems, Inc. ........... 150,000 4.35 0 50,625
Cardiac Control Systems, Inc. ........... 50,000 2.15 0 0
Consumat Systems, Inc. .................. 250,000 20.00 0 84,375
Consumat Systems, Inc. .................. 66,379 5.00 0 0
DynaGen, Inc. ........................... 266,700 0.01 266,700 23,336
Encore Medical Corporation............... 69,841 0.01 0 0
HydroFuser Industries, Inc. ............. 662,245 5.00 469,684 463,572
Moovies, Inc. ........................... 20,000 0.20 0 0
Multicom Publishing, Inc. ............... 163,791 2.40 800,000 10,265
Vista Information Solutions, Inc. ....... 47,582 0.20 0 158,805
Vista Information Solutions, Inc. ....... 10,000 0.05 0 25,958
TANDEM CAPITAL WARRANTS IN PUBLICLY
TRADED COMPANIES
Altris Software, Inc. (exercise price
$6/sh.)................................ 300,000 3.00 585,000 450,000
Berger Holdings, Ltd. (exercise price
$4.25/sh.)............................. 240,000 4.60 204,000 204,000
Bikers Dream, Inc. (exercise price
$1/sh.)................................ 437,500 1.55 109,375 109,375
Environmental Tectonics Corp. (exercise
price $1/sh.).......................... 166,410 5.00 499,230 700,000
Smartchoice Automotive Group, Inc.
(exercise price $3/sh.)................ 300,000 2.50 0 200,000
Universal Automotive Industries, Inc.
(exercise price will be 80% of average
closing bid price for the 20 days prior
to 7/11/98)............................ 450,000 6.00 0 175,000
PRIVATE COMPANIES
Action Sports Group, LLC................. 3,350 10.00 0 0
Aero Products Corporation................ 30.61 25.00 0 0
Affinity Corporation..................... 550 9.67 20,000 20,000
Alignis, Inc. ........................... 111,684 4.00 0 0
American Corporate Literature, Inc....... 344,392 28.18 17,000 17,000
American Rockwool Acquisition Corp....... 1,100,000 11.00 0 400,000
Amscot Holdings, Inc. ................... 2,421 32.94 0 0
Anton Airfoods, Inc...................... 124 11.00 0 225,000
Associated Response Services, Inc. ...... 559 36.35 14,000 1,000,000
Assured Power, Inc. ..................... 280 12.00 0 0
Atlantic Security Systems, Inc. ......... 99 9.00 0 0
Auburn International, Inc. .............. 175,214 5.50 150,000 150,000
Austin Innovations, Inc. ................ 35,146 3.00 50,000 50,000
Auto Rental Systems, Inc. ............... 144,869 8.00 0 0
Aviation Holdings Ltd. (Newfoundland
affiliate)............................. 1,570 3.60 0 0
Avionics Systems, Inc. .................. 15% of Co. 15.00 0 0
</TABLE>
23
<PAGE> 24
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
B & N Company, Inc. ..................... 81 4.00% $ 40,000 $ 0
BankCard Services Corporation............ 149,261 32.00 3,000 0
BiTec Southeast, Inc. ................... 1,480 15.00 21,000 0
Bohdan Automation, Inc. ................. 404,564 3.00 0 0
BroadNet, Inc. .......................... 265,568 15.00 0 0
BUCA, Inc................................ 96,666 1.27 434,997 434,997
Bug.Z, Inc. and Subsidiaries............. 821,121 12.50 0 0
C.J. Spirits, Inc. ...................... 180,000 10.00 7,500 0
Caldwell/VSR Inc. ....................... 159 15.93 0 0
Cartech Holdings, Inc.................... 280,702 25.00 0 0
Carter Kaplan Holdings, LLC.............. 24% of LLC 24.00 6,100 0
Catalina Food Ingredients, Inc. ......... 10.2 9.25 0 0
Cedaron Medical, Inc. ................... 173,981 4.25 0 0
Century Pacific Greenhouses LTD.......... 177,418 6.30 0 0
CF Data Corp............................. 257 20.50 17,500 150,000
Champion Glove Manufacturing Co., Inc.... 538,614 6.88 0 0
Check Into Cash, Inc. ................... 63,789 5.00 461,000 461,000
Clearidge, Inc. ......................... 442,164 1.30 0 0
CLS Corporation.......................... 126,997 4.22 0 0
CMHC Systems, Inc. ...................... 3,231 4.20 0 0
CMP Enterprises, LLC..................... 15.17% of LLC 15.17 0 0
Colonial Investments, Inc. .............. 360 32.00 0 0
Columbus Medical Holdings, LLC........... 17,455 12.00 0 0
Continental Diamond Cutting Company...... 112 10.00 0 0
Copperhead Chemical Company, Inc. ....... 93 4.20 0 0
Corporate Link, Inc. .................... 190 16.00 0 0
Cort Investment Group, Inc. (d/b/a
Contract Network)...................... 90,000 9.00 180,000 180,000
Creighton Shirtmakers, Inc. ............. 30,250 30.25 0 0
CSM, Inc. ............................... 130,000 13.00 0 0
Cybo Robotics, Inc. ..................... 1,700,000 8.68 0 0
Dalt's, Inc. ............................ 140 28.00 0 0
Data National Corporation................ 275,682 13.00 450,000 450,000
Daxxes Corporation....................... 61,766 2.94 0 0
Delaware Publishing Group, Inc. ......... 8,534 47.67 15,000 0
Dentalcare Partners, Inc. ............... 666,022 4.98 10,000 10,000
DFI/Aeronomics Incorporated.............. 94,525 0.50 0 0
Dyad Corporation......................... 615 5.00 600,000 600,000
Dyntec, Inc. ............................ 126,667 15.00 0 0
Eagle Quest Golf Centers, Inc. .......... 407,135 1.40 0 250,000
Electronic Accessory Specialists Int'l,
Inc.................................... 3,694 3.00 0 250,000
Encor Technologies, Inc. ................ 7.46 6.84 0 0
Endeavor Technologies, Inc. ............. 557,490 5.00 0 550,000
Entek Scientific Corporation............. 260,710 5.75 160,000 850,000
Executrain (3199673 Canada Inc.)......... 18.0012 12.60 0 0
Express Shipping Centers, Inc. .......... 91,352 6.25 552,402 262,622
</TABLE>
24
<PAGE> 25
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
FaxNet Corporation....................... 190,321 2.50% $ 100,000 $ 100,000
FDL, Inc. ............................... 548 16.00 250,000 250,000
Film Technologies International, Inc. ... 8 7.50 0 0
Foodnet Holdings, LLC.................... 12% of LLC 12.00 0 0
Fortrend Engineering Corp................ 437,552 3.25 0 0
Front Royal, Inc. ....................... 240,458 1.85 0 875,000
Fypro, Inc. ............................. 255,882 15.00 0 0
Gardner Wallcovering, Inc. .............. 2 2.00 15,000 15,000
General Materials Management Inc. ....... 600,000 10.00 0 0
Generation 2 Worldwide LLC............... 28% of LLC 28.00 0 0
Glen Oak Inc. ........................... 93 7.50 0 0
Global Marine Electronics, Inc........... 5,137 18.00 0 0
Gloves Inc. ............................. 5,000 5.00 0 0
Good Food Fast Companies, The............ 174,779 17.00 0 0
Graphic Workshop (1246568 Ontario
Inc.).................................. 462 4.62 0 0
Gulfstream International Airlines,
Inc. .................................. 271 39.00 10,000 140,000
H & H Acqu. Corp......................... 3,600 22.50 0 160,000
Home Link Services, Inc. ................ 166,667 20.00 0 0
Hoveround Corporation.................... 850 10.00 0 3,750,000
HPC America, Inc. ....................... 5 2.75 0 0
Hunt Assisted Living, LLC................ 7.2% of Class A 7.20 0 0
Hunt Assisted Living, LLC................ 4.8% of Class B 4.80 100 100
Hunt Incorporated........................ 49 11.00 0 125,000
Hunt Leasing & Rental Corporation........ 295 11.00 0 125,000
I. Schneid Holdings LLC.................. 21% of LLC 21.00 0 0
IJL Holdings, Inc. ...................... 99 9.00 0 0
ILD Communications, Inc.................. 5,429 3.20 0 750,000
In Store Services, Inc. ................. 429 12.50 12,000 12,000
Isthmus, Inc............................. 38.25 3.50 0 0
Johnston County Cable L.P................ 31.94% of LP 31.94 110,000 600,000
K.W.C. Management Corp................... 794 24.40 0 0
Karawia Industries, Inc. ................ 1,391 12.00 0 0
Lane Acquisition Corporation............. 11,667 10.00 0 0
Leisure Clubs International, Inc. ....... 433 25.00 15,000 0
Lovett's Buffet, Inc. ................... 540,424 8.00 0 400,000
M & M Industries, Inc. .................. 1,659,113 15.00 0 0
Master Graphics, Inc. ................... 5 6.00 0 950,000
Mayo Hawaiian Corp....................... 105 9.50 0 0
MBA Marketing Corporation................ 11,785 4.50 18,000 18,000
McAuley's Incorporated................... 64 6.00 0 0
MCG, Inc. ............................... 121,518 4.50 0 0
Mead-Higgs, Inc. ........................ 2,500 10.00 0 0
Merge Technologies, Inc. ................ 21,449 3.25 0 500,000
Mesa International, Inc. ................ 18.51 16.00 0 750,000
Metals Recycling Technologies Corp....... 257,801 5.00 0 0
MetroLease, Inc. ........................ 26,471 20.00 5,000 5,000
</TABLE>
25
<PAGE> 26
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Money Transfer Systems, Inc. ............ 137 12.00% $ 15,000 $ 500,000
Moore Diversified Products, Inc. ........ 17.04 15.00 0 0
Multimedia Learning, Inc. ............... 183,968 10.82 0 650,000
Mytech Corporation....................... 172,098 3.50 0 0
NASC, Inc. .............................. 2,652 23.00 0 0
Nationwide Engine Supply, Inc. .......... 1,337,379 21.34 25,000 25,000
NetForce, Inc. .......................... 67 6.25 0 0
Newfoundland Career Academy Ltd.......... 6,278 3.60 0 0
NRI Service and Supply, L.P.............. 27.5% of LP 27.50 25,000 25,000
Omni Home Medical, Inc. ................. 2,672 15.00 0 0
One Call Comprehensive Care, Inc. ....... 279,481 21.00 0 0
One Coast Network Corporation............ 763,666 15.63 0 0
Orchid Manufacturing, Inc. .............. 1,219,047 2.61 40,000 600,000
Outdoor Promotions LLC................... 5% of LLC 5.00 0 0
P.A. Plymouth, Inc. ..................... 92,647 15.00 0 475,000
Pacific Linen, Inc. ..................... 365,349 7.81 548,024 548,024
Paradigm Valve Services, Inc. ........... 30,000 12.00 0 0
Pathology Consultants, Inc. ............. 317,553 6.00 47,633 47,632
Patton Management Corporation............ 511 12.00 0 185,000
PaySys International, Inc. .............. 37,660 0.40 274,826 150,000
Pipeliner Systems, Inc. ................. 2,400,000 23.34 20,000 0
Precision Panel Products, Inc. .......... 122 8.25 15,000 0
Pritchard Glass, Inc. ................... 12,500 25.00 0 0
Proamics Corporation..................... 382,299 3.50 0 0
Professional Training Services, Inc...... 255,600 2.40 0 0
Protect America, Inc. ................... 12,200 10.00 95,000 95,000
Quadravision Communications Limited...... 10 1.00 0 0
R & R International, Inc. ............... 67,021 6.00 0 0
Race Face Components. Inc. .............. 3,465 11.55 0 0
Ready Personnel, Inc. ................... 101,565 12.50 0 0
Recompute Corporation.................... 611,144 8.00 300,000 600,000
Reef Chemical Company, Inc. ............. 183,215 3.00 300,000 300,000
Relax the Back Corporation............... 1,156,042 10.00 0 0
Rynel Ltd., Inc. ........................ 390,517 15.00 0 0
Saraventures Fixtures, Inc. ............. 25 20.00 0 0
Scandia Technologies, Inc. .............. 327 25.50 0 0
SFG Technologies Inc. ................... 29,814 1.38 0 0
Sheet Metal Specialties, Inc. ........... 587 37.00 0 0
Sirvys Systems (3404447 Canada Inc.)..... 134,400 3.36 0 0
SkillMaster, Inc. ....................... 117 5.51 25,000 25,000
SkillSearch Corporation.................. 2,381 7.59 250,000 50,000
Solutioneering, Inc. .................... 13,135 7.50 0 0
Southern Specialty Brands, Inc. ......... 10,000 10.00 17,500 17,500
Southern Therapy, Inc.................... 333 10.00 0 400,000
Stealth Engineering, Inc. ............... 228,820 14.00 0 0
</TABLE>
26
<PAGE> 27
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Stratford Safety Products, Inc. ......... 114.21 10.25% $ 75,000 $ 75,000
Street Level (1216069 Ontario Ltd.)...... 68,373 5.88 0 0
Sub 1 Corporation (d/b/a Risk
Management)............................ 15 13.00 0 0
Suncoast Medical Group, Inc. ............ 580,159 24.00 25,000 0
Superior Pharmaceutical Co............... 10% of Co. 10.00 0 0
Supplements Plus Natural Vitamins &
Cosmetics, Ltd......................... 1.3125 1.68 0 0
Systech Group, Inc. ..................... 34,330 2.10 0 0
TAC Systems, Inc. ....................... 315,838 3.60 0 0
TeleCommunication Systems, Inc. ......... 96,774 6.00 0 0
Telecontrol Systems, Inc. ............... 530,303 17.50 0 0
Temps & Co., Inc......................... 53 5.00 0 0
The Moorings, LLC........................ 9,493 14.50 344,500 200,000
Thomas Holding Company (d/b/a Sports &
Social Clubs).......................... 11 10.00 0 0
Tie and Track Systems, Inc............... 1,645 14.00 0 0
Towne Services, Inc. .................... 308,982 2.00 0 0
Trade Am International, Inc. ............ 335,106 6.00 0 0
TRC Acquisition Corporation.............. 375,000 12.50 0 0
UltraFab, Inc. .......................... 120,000 12.00 0 0
UltraFab Vessels, Inc. .................. 120,000 12.00 0 0
Unicoil, Inc. ........................... 86,239 8.50 0 0
Unique Electronics, Inc. ................ 30% of Co. 30.00 0 0
Valdawn Watch Co......................... 400 80.00 0 0
VanGard Communications Co., LLC.......... 14.4% of LLC 14.40 0 0
VDW Farms, Ltd........................... 10% of Co. 10.00 0 0
Voice FX Corporation..................... 233,112 8.00 0 250,000
Watts-Finniss Holdings, Inc. ............ 7,146 10.94 0 0
Wearever Healthcare Products, LLC........ 416,359 16.14 250,000 250,000
WJ Holdings, Inc. ....................... 250,000 25.00 0 0
Wolfgang Puck Food Company, Inc.......... 80,065 1.35 0 0
Zahren Alternative Power Corporation..... 1,168 6.54 25,000 400,000
------------ ------------
Total Warrants................. $ 9,610,383 $ 24,543,035
============ ============
OTHER INVESTMENTS (SEE NOTE 3)
SWS3, Inc. -- Expected proceeds from sale
of mfg. plant.......................... -- -- $ 521,926 $ 371,926
Hancock Company -- Royalty stream to be
collected from sale of Gitman brand
name................................... -- -- 1,700,000 300,000
HSA International, Inc. -- Anticipated
proceeds from litigation............... -- -- 1,150,000 1,000,000
Capitalized workout expenses............. -- -- 868,577 768,577
------------ ------------
Total Other Investments........ $ 4,240,503 $ 2,440,503
------------ ------------
Total Investments.............. $483,417,884 $494,199,560
============ ============
</TABLE>
27
<PAGE> 28
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Coupon
Interest
LOANS Maturity Cost Rate Fair Value
----- -------- ---- ---- ----------
<S> <C> <C> <C> <C>
2021. Interactive, LLC 4/6/03 $2,500,000 13.50% $2,500,000
ACT Teleconferencing, Inc. 3/31/03 742,294 13.50 760,678
Action Sports Group, LLC 8/19/02 1,750,000 13.00 1,750,000
Adavest Holdings, LLC 5/15/03 3,500,000 13.75 3,500,000
Aero Products Corporation 12/19/99 1,250,000 14.00 875,000
Aero Products Corporation 6/9/02 2,500,000 13.00 2,500,000
Affinity Fund, Inc. 10/28/98 1,485,000 12.50 1,500,000
Affinity Fund, Inc. 12/28/98 495,000 12.50 497,565
Affinity Fund, Inc. 3/10/00 1,000,000 14.00 1,000,000
Air Age Services of San Antonio, Inc. 4/30/03 3,500,000 13.50 3,500,000
Alignis, Inc. 2/28/02 2,500,000 13.00 2,500,000
American Network Exchange, Inc. 11/30/98 990,000 13.00 999,352
American Network Exchange, Inc. 1/18/99 990,000 13.00 999,018
Amscot Holdings, Inc. 5/26/00 800,000 14.00 800,000
Amscot Holdings, Inc. 9/20/00 200,000 14.00 200,000
Amscot Holdings, Inc. 6/28/01 500,000 14.00 500,000
Amscot Holdings, Inc. 12/27/01 250,000 14.00 250,000
Amscot Holdings, Inc. 7/30/02 1,000,000 14.00 1,000,000
Amscot Holdings, Inc. demand 491,336 14.00 491,336
Anton Airfoods, Inc. 5/21/02 5,000,000 13.50 5,000,000
Ashe Industries, Inc. 5/18/99 472,220 12.50 122,220
Associated Response Services, Inc. 6/20/99 1,386,000 12.50 1,397,417
Associated Response Services, Inc. 8/1/99 750,000 13.50 750,000
Associated Response Services, Inc. 1/6/00 300,000 12.50 300,000
Associated Response Services, Inc. 2/15/00 335,000 12.50 335,000
Associated Response Services, Inc. 11/8/01 500,000 12.50 500,000
Associated Response Services, Inc. 3/27/02 3,000,000 12.50 3,000,000
Auburn International, Inc. 12/31/02 2,850,000 13.50 2,867,500
Austin Innovations, Inc. 7/1/02 1,950,000 13.75 1,958,620
Avionics Systems, Inc. 7/19/01 3,000,000 13.50 3,000,000
B & N Company, Inc. 8/8/00 2,970,000 12.50 2,183,500
B & N Company, Inc. 3/28/01 990,000 13.00 993,841
Bohdan Automation, Inc. 7/1/02 1,500,000 13.50 1,500,000
Bohdan Automation, Inc. 3/5/03 750,000 13.50 750,000
BroadNet, Inc. 6/9/02 2,500,000 14.00 2,500,000
BUCA, Inc. 10/31/02 1,565,003 13.50 1,615,753
BUCA, Inc. 5/30/03 1,673,750 13.50 1,684,626
Bug.Z., Inc. 9/23/02 2,500,000 15.00 2,500,000
Bug.Z., Inc. 9/23/02 600,000 15.00 600,000
C.J. Spirits, Inc. 6/1/97 750,171 13.50 55,796
Caldwell/VSR Inc. 2/28/01 1,500,000 12.00 1,500,000
Caldwell/VSR Inc. 5/31/02 99,000 8.00 99,000
Caldwell/VSR Inc. 5/31/03 1,050,000 8.00 925,000
Caldwell/VSR Inc. 6/23/03 500,000 13.50 500,000
Campbell Software, Inc. 2/11/03 2,000,000 13.50 2,000,000
Capital Sigma Investments, Inc. 4/30/03 2,250,000 13.50 2,250,000
Cardiac Control Systems, Inc. 3/31/00 1,500,000 13.50 1,500,000
Caribou Coffee Company, Inc. 12/31/02 4,153,528 12.50 4,224,068
Cartech Holdings, Inc. 4/29/01 1,500,000 13.00 1,500,000
CarStar A&B, Inc. 6/29/03 2,500,000 13.00 2,500,000
Catalina Food Ingredients, Inc. 3/30/02 3,500,000 13.00 3,500,000
Cedaron Medical, Inc. 6/28/01 1,500,000 13.50 1,500,000
CF Data Corp. 3/16/00 1,732,500 13.75 1,744,180
Check Into Cash, Inc. 11/7/01 539,000 14.00 684,977
Check Into Cash, Inc. 11/7/01 500,000 14.00 500,000
Check Into Cash, Inc. 11/7/01 500,000 14.00 500,000
Check Into Cash, Inc. 11/7/01 500,000 14.00 500,000
Check Into Cash, Inc. 11/7/01 500,000 14.00 500,000
Check Into Cash, Inc. 11/7/01 500,000 14.00 500,000
Check Into Cash, Inc. 11/7/01 750,000 14.00 750,000
Chinese Media Group, LLC 3/27/03 2,100,000 13.50 2,100,000
Clearidge, Inc. 3/30/03 2,000,000 14.00 2,000,000
CMHC Systems, Inc. 7/1/02 1,400,000 13.50 1,400,000
CMP Enterprises, LLC 12/10/02 3,500,000 13.00 3,500,000
Cold Jet, Inc. 6/30/03 1,000,000 14.00 1,000,000
Colonial Investments, Inc. 10/16/00 800,000 13.75 800,000
Columbus Medical Holdings, LLC 1/31/02 4,000,000 13.75 4,000,000
</TABLE>
28
<PAGE> 29
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Coupon
Interest
LOANS Maturity Cost Rate Fair Value
----- -------- ---- ---- ----------
<S> <C> <C> <C> <C>
Co-Mack Technologies, Inc. 6/26/03 $1,600,000 14.00% $1,600,000
Compression, Inc. 12/17/02 3,700,000 13.50 3,700,000
Compression, Inc. 4/30/03 2,073,000 13.50 2,073,000
Consumat Systems, Inc. 7/15/98 250,000 14.00 250,000
Consumat Systems, Inc. 11/1/00 500,000 14.00 500,000
Consumat Systems, Inc. 1/1/01 500,000 14.00 500,000
Consumat Systems, Inc. 3/11/01 500,000 14.00 500,000
Consumat Systems, Inc. 3/26/02 500,000 14.00 500,000
Continental Diamond Cutting Co. 10/28/99 375,000 13.00 375,000
Continental Diamond Cutting Co. 11/16/99 200,000 13.00 200,000
Corporate Link, Inc. 6/13/00 200,000 14.00 200,000
Corporate Link, Inc. 12/13/01 600,000 14.00 600,000
Cort Investment Group, Inc. (d/b/a Contract Network) 8/27/02 3,320,000 13.50 3,353,000
Counsel Press LLC 6/3/03 2,556,300 13.50 2,563,695
Creighton Shirtmakers, Inc. and affiliates demand 1,969,000 14.00 1,969,000
CSM, Inc. 12/31/01 1,400,000 14.00 1,400,000
Cybo Robotics, Inc. 9/29/02 1,050,000 13.25 1,050,000
Cybo Robotics, Inc. 9/29/02 700,000 13.25 700,000
Cybo Robotics, Inc. 9/29/02 1,000,000 13.25 1,000,000
Dalts, Inc. 4/28/01 2,000,000 13.50 1,500,000
Data National Corporation 12/10/02 1,050,000 13.75 1,102,500
DentalCare Partners, Inc. 1/11/01 2,206,023 12.50 2,214,039
Distinction Software, Inc. 6/9/03 1,000,000 14.00 1,000,000
Dyad Corporation 12/31/02 2,900,000 14.00 2,970,000
DynaGen, Inc. 6/17/02 1,733,300 13.50 1,791,085
Dyntec, Inc. 7/7/02 2,500,000 14.00 2,500,000
Electronic Accessory Specialists Int'l, Inc. 6/23/02 1,600,000 13.50 1,600,000
Electronic Accessory Specialists Int'l, Inc. 6/23/02 1,750,000 13.50 1,750,000
Encor Technologies, Inc. 3/30/02 1,444,000 13.13 1,444,000
Endeavor Technologies, Inc. 9/2/02 4,000,000 13.50 4,000,000
Entek Scientific Corporation 6/28/01 2,500,000 13.00 2,500,000
Entek Scientific Corporation 5/22/02 1,090,000 13.00 1,125,256
ERDA, Inc. 5/1/03 2,500,000 13.50 2,500,000
Express Shipping Centers, Inc. 7/14/98 150,000 15.00 150,000
Express Shipping Centers, Inc. 9/22/00 1,697,598 13.25 1,483,015
Express Shipping Centers, Inc. 5/1/02 250,000 13.25 250,000
Faxnet Corporation 6/17/02 1,900,000 13.00 1,921,671
FDL, Inc. 1/30/02 1,750,000 13.50 1,825,006
Film Technologies International, Inc. 2/27/02 1,500,000 14.00 1,500,000
FoodNet Holdings, LLC 7/22/01 1,500,000 13.50 1,500,000
Fortrend Engineering Corp. 8/30/01 1,500,000 12.99 1,500,000
Fulcrum Direct, Inc. 6/4/03 4,500,000 13.88 4,008,333
Fypro, Inc. 12/17/01 198,793 8.00 173,793
Gateway Communications, Inc. 6/16/03 1,732,720 13.00 1,733,008
GC Management, Inc. 7/29/01 2,500,000 13.50 2,000,000
Generation 2 Worldwide LLC 10/31/00 2,000,000 14.00 2,000,000
GerAssist, Inc. 6/26/03 3,000,000 13.50 3,000,000
Gloves Inc. 5/1/02 1,500,000 13.00 1,500,000
Good Food Fast Companies, The 12/10/01 2,500,000 13.50 2,250,000
Good Food Fast Companies, The demand 510,500 13.50 510,500
Graphic Systems Group, Inc. 6/24/03 1,000,000 13.50 1,000,000
Gulfstream International Airlines Inc. 7/29/99 1,490,000 13.00 1,499,519
Gulfstream International Airlines Inc. 12/1/99 2,200,000 14.00 2,200,000
Gulfstream International Airlines Inc. 4/30/00 2,500,000 13.80 2,500,000
H & H Acq. Corp. 8/30/01 1,500,000 14.00 1,500,000
Home Link Services, Inc. 12/30/01 300,000 14.00 25,000
Hunt Assisted Living, LLC 10/17/02 2,999,900 12.00 2,999,916
Hydrofuser Industries, Inc. and affiliates 7/30/02 825,031 13.00 778,309
I.Schneid Acquisition, LLC 4/1/01 2,000,000 14.00 2,000,000
IJL Holdings, Inc. 9/12/02 1,250,000 13.50 1,250,000
IJL Holdings, Inc. 9/12/02 350,000 13.50 350,000
ILD Communications, Inc. 5/10/01 1,500,000 13.50 1,500,000
</TABLE>
29
<PAGE> 30
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Coupon
Interest
LOANS Maturity Cost Rate Fair Value
----- -------- ---- ---- ----------
<S> <C> <C> <C> <C>
Imtek Office Solutions, Inc. 5/28/03 $3,370,000 14.00% $3,370,000
In-Store Services, Inc. 1/1/99 350,000 14.00 350,000
In-Store Services, Inc. 4/19/00 1,188,000 14.00 1,195,800
J. Fegely & Son Hardware Co., Inc. 6/30/03 1,000,000 13.00 1,000,000
Jim Bridges Acquisition Company 3/31/03 1,500,000 14.00 1,500,000
Johnston County Cable, L.P. 8/31/00 1,990,000 14.00 1,995,678
Karawia Industries, Inc. 3/27/02 2,500,000 14.00 2,500,000
KWC Management Co., LLC 4/25/01 500,000 14.00 50,000
Lane Acquisition Corporation 11/21/01 4,000,000 13.75 4,000,000
Leisure Clubs International, Inc. 4/1/01 1,485,000 14.00 1,491,750
Leisure Clubs International, Inc. 3/27/02 125,000 14.00 125,000
M & M Industries, Inc. 2/26/02 2,250,000 14.00 2,250,000
Marmot Mountain, Ltd. 3/27/03 2,750,000 13.00 2,766,668
Mayo Hawaiian Corp. 6/27/01 2,200,000 14.00 2,200,000
MBA Marketing Corporation 2/4/99 1,782,000 12.50 1,797,900
McAuley's Incorporated 7/31/01 3,000,000 13.00 3,000,000
MCG, Inc. 12/23/02 1,500,000 13.50 1,500,000
Mead-Higgs Company, Inc. 5/19/02 1,400,000 14.00 1,400,000
MegaMarketing Corporation 3/5/03 2,800,000 14.00 2,813,332
Mesa International, Inc. demand 5,119,125 14.00 4,619,125
MetroLease, Inc. 7/29/02 2,495,000 13.50 2,495,996
MMS Incentives, LLC 4/15/03 2,250,000 13.00 2,250,000
Moore Diversified Products, Inc. 6/16/00 800,000 13.50 800,000
Moore Diversified Products, Inc. 3/27/02 1,000,000 13.50 1,000,000
Multimedia 2000, Inc. 3/29/01 2,552,569 14.00 2,202,569
Mytech Corporation 9/25/02 1,200,000 13.50 1,200,000
NASC, Inc. 12/13/98 500,000 13.50 500,000
NASC, Inc. 6/26/01 1,500,000 13.50 1,500,000
N&R Printing, Inc. 6/1/03 2,000,000 14.00 2,000,000
Nationwide Engine Supply, Inc. 1/12/99 2,475,000 12.00 496,684
Nationwide Engine Supply, Inc. 9/26/01 1,000,000 13.50 1,000,000
Nationwide Engine Supply, Inc. 12/12/98 782,479 prime + 2.5% 782,479
NetForce, Inc. 11/27/02 2,000,000 14.00 2,000,000
NRI Service and Supply L.P. 2/13/00 2,225,000 14.00 2,017,097
Nunn Acquisition Corporation 5/12/03 4,000,000 14.00 4,000,000
Omni Home Medical, Inc. 3/30/02 2,000,000 14.00 2,000,000
Omni Products of Palm Beach, Inc. 2/19/03 2,900,000 14.00 2,908,335
One Call Comprehensive Care, Inc. 12/30/98 180,369 14.00 180,369
One Call Comprehensive Care, Inc. 12/30/98 175,000 14.00 175,000
One Call Comprehensive Care, Inc. 12/19/01 1,500,000 14.00 1,200,000
One Call Comprehensive Care, Inc. 12/19/01 500,000 14.00 500,000
One Call Comprehensive Care, Inc. 3/31/02 500,000 14.00 500,000
One Call Comprehensive Care, Inc. 7/1/98 50,000 14.00 50,000
One Coast Network Corporation 11/17/02 5,000,000 14.00 5,000,000
Online Resources & Communications Corp. 3/30/03 6,000,000 12.75 6,000,000
Online Resources & Communications Corp. 3/30/03 2,000,000 12.75 2,000,000
Orchid Manufacturing Group, Inc. 9/14/00 2,960,000 13.00 2,980,677
Orchid Manufacturing Group, Inc. 12/28/00 1,000,000 13.50 1,000,000
Outdoor Promotions LLC 8/31/98 950,000 13.75 950,000
Pacific Linen, Inc. 12/3/02 2,951,976 13.50 3,015,914
Pacific Plus, Inc. 5/1/03 2,325,000 13.50 2,330,834
Palco Telecom Service, Inc. 11/22/99 650,000 12.00 650,000
Paradigm Valve Services, Inc. 11/12/01 1,600,000 13.50 1,600,000
PaySys International, Inc. 9/26/02 3,725,158 13.50 3,770,968
Pharmed Group Holdings, Inc. 6/25/03 4,500,000 13.00 4,500,000
Physicians Surgical Care, Inc. 5/29/03 857,000 13.50 861,766
Piedmont Hardwood Flooring, LLC 6/8/03 2,500,000 13.00 2,500,000
Pik:Nik Media, Inc. 6/23/00 1,000,000 12.00 1,000,000
Plymouth, Inc. 9/28/00 750,000 13.00 750,000
PRA International, Inc. 8/10/00 1,980,000 13.50 1,991,655
Precision Panel Products, Inc. 1/11/02 2,022,781 12.75 500,000
Precision Panel Products, Inc. 1/11/02 4,019,683 12.75 0
</TABLE>
30
<PAGE> 31
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Coupon
Interest
LOANS Maturity Cost Rate Fair Value
----- -------- ---- ---- ----------
<S> <C> <C> <C> <C>
Precision Panel Products, Inc. demand $ $92,524 12.75% $ 0
Precision Panel Products, Inc. demand 150,000 12.75 3,487
Precision Panel Products, Inc. demand 500,000 12.75 500,000
Precision Panel Products, Inc. demand 356,000 12.75 0
Precision Panel Products, Inc. demand 125,000 12.75 0
Precision Panel Products, Inc. demand 227,000 12.75 0
Price Systems, LLC 6/1/03 1,000,000 13.50 1,000,000
Pritchard Glass, Inc. 2/10/01 200,000 14.00 200,000
Pritchard Glass, Inc. . 2/14/01 767,431 14.00 767,431
Proamics Corporation 7/31/02 1,000,000 13.00 1,000,000
Professional Training Services, Inc. 9/30/02 3,400,000 13.25 3,400,000
Pro-Style Acquisition Corporation 2/26/03 6,000,000 13.59 6,000,000
Protect America, Inc. 1/30/02 4,880,000 13.50 4,910,718
QSS Acquisition, Inc. 6/25/03 3,750,000 14.00 3,750,000
R & R International, Inc. 6/30/02 2,000,000 13.25 2,000,000
Ready Personnel, Inc. 12/3/02 4,500,000 13.25 4,500,000
Recompute Corporation 2/21/02 2,300,000 13.50 2,385,000
Reef Chemical Company, Inc. 9/23/02 2,700,000 13.75 2,750,000
Relax the Back Corporation 10/1/02 5,000,000 13.00 5,000,000
Relevant Knowledge, Inc. 9/15/98 283,000 10.00 283,000
Rocky Mountain Radio Company LLC 11/10/01 2,500,000 13.50 2,500,000
Rocky Mountain Radio Company LLC 11/10/01 500,000 13.50 500,000
Rynel Ltd., Inc. 10/1/01 1,250,000 14.00 1,100,000
Rynel Ltd., Inc. 10/1/01 307,500 14.00 307,500
Saraventures Fixtures Inc. 5/23/02 1,645,926 14.00 0
Saraventures Fixtures Inc. demand 108,825 14.00 0
SBX Holding Company 3/26/03 4,100,000 13.13 4,100,000
Sheet Metal Specialties, Inc. 6/20/01 250,000 14.00 250,000
Sheet Metal Specialties, Inc. 12/4/01 211,750 12.00 211,750
Sheet Metal Specialties, Inc. 1/24/02 38,250 12.00 38,250
SkillSearch Corportion 3/31/99 496,000 13.00 500,000
Solutioneering, Inc. 3/31/02 2,000,000 13.75 2,000,000
Southern Specialty Brands, Inc. 6/30/02 1,732,500 14.00 1,741,260
Southern Therapy, Inc. 4/24/02 1,000,000 13.50 1,000,000
Southern Therapy, Inc. 4/24/02 500,000 13.50 500,000
Southern Therapy, Inc. 4/24/02 500,000 13.50 500,000
Southern Therapy, Inc. 4/24/02 1,000,000 13.50 1,000,000
Stealth Engineering, Inc. 12/31/02 1,500,000 13.50 1,500,000
Stratford Safety Products, Inc. 3/1/02 2,125,000 13.50 2,146,250
Sub 1 Corporation (d/b/a Risk Management) 10/8/02 750,000 14.00 750,000
Summit Publishing Group, Ltd. 1/16/98 250,000 14.00 250,000
Summit Publishing Group, Ltd. 3/17/99 1,485,000 12.00 0
Summit Publishing Group, Ltd. 7/26/01 625,000 14.00 146,500
SWS6, Inc. 12/31/98 1,950,000 12.70 1,700,000
SWS6, Inc. demand 837,349 14.00 837,349
Synaxis Group, Inc. 3/31/03 2,500,000 13.00 2,500,000
TAC Systems, Inc. 9/30/98 850,000 14.00 850,000
TAC Systems, Inc. 3/27/02 1,012,000 14.00 1,012,000
Talent Metal Products, Inc. 5/19/03 2,300,000 14.00 2,300,000
Talus Solutions, Inc. 12/30/02 3,000,000 13.50 3,000,000
Talus Solutions, Inc. 12/30/02 2,000,000 13.50 2,000,000
TCOM Systems, Inc. 3/30/04 358,804 0.00 108,804
TeleCommunication Systems, Inc. 8/2/98 275,000 14.00 275,000
TeleCommunication Systems, Inc. 9/20/02 3,000,000 14.00 3,000,000
Telecontrol Systems, Inc. 9/30/02 2,500,000 14.00 2,500,000
Telemate Software, Inc. 3/27/03 1,000,000 14.00 1,000,000
Telequestion, Inc. 6/30/03 4,500,000 13.75 4,500,000
Temps & Co., Inc. 5/12/02 3,000,000 13.25 3,000,000
The Moorings, LLC 12/31/01 1,655,500 13.00 1,833,502
The Moorings, LLC 11/17/02 2,500,000 13.00 2,500,000
Therapeutic Services of America, Inc. 1/4/03 2,750,000 13.25 2,750,000
Thomas Holding Company (d/b/a Sports & Social Clubs) 5/21/02 1,500,000 13.50 1,500,000
</TABLE>
31
<PAGE> 32
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Coupon
Interest
LOANS Maturity Cost Rate Fair Value
----- -------- ---- ---- ----------
<S> <C> <C> <C> <C>
Tie and Track Systems, Inc. 10/31/02 $ 1,500,000 13.50% $ 1,500,000
Toccoa Associates, LLC 2/18/03 2,110,000 13.50 2,110,000
Towne Services, Inc. 12/18/02 1,500,000 14.00 1,500,000
Trade Am International, Inc. 9/30/00 4,000,000 12.75 4,000,000
TRC Acquisition Corporation 10/21/01 2,000,000 13.50 2,000,000
Tulsa Industries, Inc. 2/26/03 6,000,000 13.00 6,000,000
UltraFab, Inc. 6/27/01 1,500,000 14.00 1,500,000
Umbrellas Unlimited, LLC 8/21/02 264,691 14.00 214,691
Unicoil, Inc. 9/28/02 1,300,000 13.50 1,300,000
Unicoil, Inc. 9/28/02 700,000 13.50 700,000
Unique Electronics, Inc. 11/30/99 600,000 10.67 600,000
Unique Electronics, Inc. 10/10/02 300,000 13.00 300,000
UOL Publishing, Inc. 10/31/99 32,352 6.00 32,352
Valdawn Watch Company 12/31/98 100,000 14.00 100,000
Valdawn Watch Company 2/14/00 450,000 14.00 450,000
Valdawn Watch Company 8/21/02 2,160,000 14.00 0
Valdawn Watch Company 8/21/02 1,000,000 14.00 50,000
VDW Farms, Ltd. 11/25/02 1,500,000 14.00 1,500,000
Vision 2000, Inc. 4/25/02 2,552,865 13.50 877,865
Vision Software, Inc. 2/26/03 5,000,000 12.75 5,000,000
Watts-Finnis Holdings, Inc. 11/30/02 2,500,000 13.25 2,500,000
Wearever Health Products, LLC 3/31/02 1,500,000 13.50 925,000
Wearever Health Products, LLC 12/11/02 650,000 14.00 650,000
Westcorp Software Systems, Inc. 3/6/03 2,000,000 14.00 2,000,000
Wolfgang Puck Food Company, Inc. 5/20/02 5,000,000 12.50 5,000,000
Zahren Alternative Power Corp. 11/27/99 1,980,000 13.00 1,995,617
Zahren Alternative Power Corp. 1/30/00 495,000 13.00 497,569
------------ ------------
Subtotals $474,507,374 $451,199,580
------------ ------------
TANDEM CAPITAL LOANS TO PUBLICLY TRADED COMPANIES*
Altris Software, Inc. (Gross principal of $3,000,000) 6/27/02 $ 2,415,000 11.50% $ 2,512,500
Berger Holdings, Inc. (Gross principal of $2,000,000) 1/2/03 1,796,000 12.25 1,819,800
Bikers Dream, Inc. (Gross principal of $4,500,000) 6/22/01 4,390,625 12.00 4,447,138
Compass Plastics & Technologies, Inc. (Gross principal of $7,000,000) 2/27/03 6,615,205 12.25 6,647,270
Cover-All Technologies, Inc.(Convertible at $1.25/sh) 3/31/02 3,000,000 12.50 4,575,000
Digital Transmission Systems, Inc.(Convertible at $10.25/sh) 9/25/02 4,000,000 11.50 3,600,000
Diplomat Direct Marketing Corporation (Gross principal of $5,000,000) 6/29/03 4,947,925 12.00 4,948,793
Environmental Tectonics Corporation (Gross principal of $4,000,000) 3/27/04 3,500,770 12.00 3,583,980
Ergobilt, Inc. (Gross principal of $4,000,000) 1/15/03 3,818,400 11.50 3,430,924
Great Train Store Company (Gross principal of $3,000,000) 6/30/03 2,500,000 12.00 2,508,333
Smartchoice Automotive Group(Convertible at $6.00/sh) 3/12/99 3,500,000 12.00 3,500,000
Smartchoice Automotive Group(Convertible at $3.67/sh) 5/13/02 4,000,000 12.00 4,450,000
Tava Technologies, Inc. (Gross principal of $4,000,000) 1/31/01 3,685,350 11.50 3,713,318
Teltronics, Inc. (Gross principal of $1,750,000) 2/13/02 1,571,500 12.00 1,590,095
Teltronics, Inc. (Gross principal of $1,000,000) 2/25/99 875,900 12.00 927,610
Teltronics, Inc. 10/1/00 269,506 12.00 269,506
Universal Automotive Industries, Inc. 7/11/02 4,500,000 12.25 4,500,000
------------ ------------
Subtotals $ 55,386,181 $ 57,024,266
------------ ------------
CANADIAN LOANS
Business Press Group Inc. 6/4/03 $ 300,000 13.00% $ 300,000
Century Pacific Greenhouses Ltd.* 4/14/02 1,002,794 13.00 1,002,794
Copperhead Chemical Company, Inc. 10/23/02 500,000 12.50 500,000
Daxxes Corporation* 12/1/02 847,997 13.00 0
DEC Interactive Inc.* 3/8/03 75,000 11.00 75,000
</TABLE>
- ------------
* For Tandem Capital loans, if the loan is convertible into Common Stock, the
conversion price is shown in parentheses. If the gross principal amount owed
under the loan is higher than its cost basis, the gross principal is shown in
parentheses.
32
<PAGE> 33
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Coupon
Interest
LOANS Maturity Cost Rate Fair Value
----- -------- ---- ---- ----------
<S> <C> <C> <C> <C>
DEC Interactive Inc.* 5/12/03 $ 75,000 11.00% $ 75,000
DEC Interactive Inc.* 6/6/03 69,784 11.00 69,784
Family Golf Centers, Inc. 6/20/02 1,600,000 13.50 1,600,000
Family Golf Centers, Inc. 4/3/03 180,000 13.00 180,000
Executrain (3199673 Canada Inc.)* 10/1/02 292,105 13.00 292,105
Executrain (3199673 Canada Inc.)* 12/24/02 559,910 13.00 559,910
FEI Refrigerated Services LLC 1/14/03 2,000,000 12.50 2,000,000
Gavel & Gown Software Inc.* 6/30/03 326,820 14.00 326,820
Glen Oak Inc. 12/17/02 1,268,678 12.50 1,268,678
G/Comm Marketing Inc.* 9/30/02 360,787 12.50 360,787
Hunt Industries 2/1/03 1,071,560 15.00 971,560
Just Vacations, Inc.* 5/11/03 837,404 14.00 837,404
Kos Corp. Industries 8/6/03 2,000,000 14.00 2,000,000
Newfoundland Career Academy Ltd.* 8/8/02 860,172 13.50 860,172
Newfoundland Career Academy Ltd.* 9/30/98 300,000 13.50 300,000
Race Face Components, Inc.* 11/1/02 433,463 12.00 433,463
SFG Technologies Inc.* 7/30/02 735,078 13.00 610,078
SFG Technologies Inc.* 7/30/02 60,000 13.00 60,000
Sirvys Systems (3404447 Canada Inc.)* 12/30/02 704,037 14.00 704,037
Street Level (1216069 Ontario Ltd.)* 12/29/02 348,651 13.00 348,651
Supplements Plus Natural Vitamins & Cosmetics, Ltd.* 10/3/03 144,823 16.50 144,823
Systech Group, Inc.* 3/31/02 874,636 13.00 874,636
Traf-O-Data Investment Corporation* 7/14/98 180,000 14.00 180,000
Traf-O-Data Investment Corporation* 10/5/98 164,688 14.00 164,688
West Sun International, Inc.* 1/14/03 699,252 13.00 699,252
------------ ------------
Subtotals $ 18,872,638 $ 17,799,641
------------ ------------
Total loans $548,766,193 $526,023,488
============ ============
</TABLE>
*Loan cost and fair value are stated in U.S. dollars. Loan principal is
denominated in Canadian dollars.
Note: Total gross principal owed under all loans outstanding at June 30, 1998
was $562,141,675.
33
<PAGE> 34
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Cost or
Number of Contribution
EQUITY INTERESTS Shares Rate Fair Value
---------------- ------ ---- ----------
<S> <C> <C> <C> <C>
Publicly Traded Investments
American Network Exchange , Inc. Common Stock 76,222 $ 21,879 $ 0
American Network Exchange , Inc. Common Stock 63,429 0 0
Cardiac Control Systems, Inc. Common Stock 50,000 250,000 8,550
Compass Plastics & Technologies Inc. Common Stock 447,144 2,000 864,478
Consumat Systems, Inc. Common Stock 100,000 600,100 35,625
Family Golf Centers Common Stock 18,238 0 369,016
Master Graphics, Inc. Common Stock 66,664 0 488,869
Medical Resources Inc. Common Stock 55,549 1,000,000 161,613
Merge Technologies, Inc. Common Stock 108,942 0 328,642
National Vision Associates, Ltd. Common Stock 208,698 1,771,149 1,319,689
Network Event Theaters, Inc. Common Stock 412,397 2,114,772 1,412,460
PMTS Services, Inc. Common Stock 79,800 1 1,596,000
Premiere Technologies, Inc. Common Stock 25,000 0 195,816
Recompute Corporation Common Stock 125,000 250,000 125,000
UOL Publishing, Inc. Common Stock 32,728 8,494 166,913
Video Update Inc. Common Stock 85,000 1,561 116,919
Vista Information Solutions, Inc. Common Stock 274,731 0 2,030,863
Non-traded Equity Investments in Public Companies
Altris Software, Inc. Preferred Stock - convertible at $6.00/sh 3,000 3,000,000 1,950,000
Berger Holdings, Ltd. Preferred Stock - Series A; convertible at $4.25/sh 25,000 2,500,000 2,400,000
Clinicor, Inc. Preferred Stock - Series B; convertible at $3.00/sh 50,000 5,000,000 4,725,000
Environmental Tectonics Corporation Preferred Stock - Series A; convertible at $7.50/sh 25,000 2,500,000 2,900,000
Smart Choice Automotive Group, Inc. Preferred Stock - Series D; convertible at $6.00/sh 100 1,000,000 1,000,000
Teltronic, Inc. Preferred Stock - Series B; convertible at $2.75/sh 25,000 2,500,000 2,800,000
Vista Information Solutions, Inc. Preferred Stock - Series E; convertible at $4.00/sh 2,500 2,500,000 3,250,000
Vista Information Solutions, Inc. Preferred Stock - Series F; convertible at $6.37/sh 2,500 2,500,000 2,650,000
Equity Investments in Private Companies
Affinity Fund, Inc. Common Stock 1,738 15,000 15,000
Associated Response Services, Inc. Common Stock 96 500,000 500,000
Bravo Corporation Common Stock 69,391 106,950 350,000
Clearidge, Inc. Preferred Stock - Series A 11,895 2,700,000 2,700,000
Clearidge, Inc. Common Stock 4,000 1,000,000 1,000,000
Corporate Flight Management, Inc. Common Stock 66,315 663 663
CSM, Inc. Class A Common Stock 99,673 100,000 100,000
Dentalcare Partners, Inc. Preferred Stock - Series E 510,617 819,639 300,000
Front Royal, Inc. Common Stock 110,000 275,000 550,000
Fypro, Inc. Preferred Stock - Series A 4,659,480 4,659,480 375,000
Gulfstream International Airlines, Inc. Preferred Stock - Series A 216 3,000,000 3,000,000
Home Link, Inc. Preferred Stock 1,000,000 1,000,000 0
HPC America, Inc. Common Stock 5.04 0 0
Kentucky Kingdom, Inc. Common Stock 24,142 238,316 500,000
Micro Optics Design Corporation Common Stock 166,667 33 33
Micro Optics Design Corporation Preferred Stock - Series IV 166,667 299,967 299,967
Multimedia 2000, Inc. Common Stock 900 8,444 0
Multimedia 2000, Inc. Preferred Stock - Series A 2,609,988 2,274,556 0
Palco Telecom Service, Inc. Common Stock 157,895 1,579 100,000
Paysys International, Inc. Common Stock 150,000 300 425,000
Potomac Group, Inc. Preferred Stock - Series A 800,000 1,000,000 1,400,000
Potomac Group, Inc. Common Stock 479,115 289,779 824,033
Potomac Group, Inc. Common Stock 958,566 2,591 1,675,000
PRA International, Inc. Common Stock 292,696 211,166 2,046,166
Relevant Knowledge, Inc. Preferred Stock - Series B 312,500 500,000 500,000
Relevant Knowledge, Inc. Common Stock 75,000 120,000 120,000
Skillsearch Corporation Common Stock 13,350 1,060,875 431,840
SWS6, Inc. Preferred Stock 2,449,321 2,449,321 800,000
Teltrust , Inc. Common Stock 175,677 0 1,350,000
Unique Electronics, Inc. Preferred Stock - Series A 1,000,000 1,000,000 675,000
Valdawn Watch Co. Preferred Stock 240 240,000 0
Vision 2000, Inc. Common Stock 1,000,000 1,000,000 0
Vision 2000, Inc. Preferred Stock - Series A 2,720,141 2,720,141 0
Vision 2000, Inc. Preferred Stock - Series B 520,000 527,136 0
Zahren Alternative Power Corporation Common Stock 700 210,000 210,000
Zahren Alternative Power Corporation Preferred Stock 200 200,000 200,000
----------- -----------
TOTAL EQUITY INTERESTS $56,050,894 $51,343,156
=========== ===========
</TABLE>
34
<PAGE> 35
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
-------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
PUBLICLY TRADED COMPANIES
ACT Teleconferencing, Inc. (exercise price $7/sh.) 183,853 3.33% $367,706 $ 369,238
Cardiac Control Systems, Inc. 250,000 4.35 0 90,250
Cardiac Control Systems, Inc. (exercise price $5/sh.) 50,000 2.15 0 0
Consumat Systems, Inc. 250,000 27.80 0 89,063
Consumat Systems, Inc. (exercise price $2.25/sh.) 66,379 5.00 0 0
DynaGen, Inc. 26,670 0.01 266,700 9,779
Encore Medical Corporation (exercise price $7/sh.) 69,841 0.01 0 0
HydroFuser Industries, Inc. 662,245 5.00 469,684 132,449
Recompute Corporation 611,144 8.00 300,000 600,000
Video Update Inc. (exercise price $10.80/sh.) 20,000 0.20 0 0
TANDEM CAPITAL
WARRANTS & OPTIONS IN PUBLICLY TRADED COMPANIES
Altris Software, Inc. (exercise price $6/sh) 300,000 3.00 585,000 0
Berger Holdings, Ltd. (exercise price $4.25/sh) 240,000 4.60 204,000 200,000
Bikers Dream, Inc. (exercise price $5/sh) 87,500 1.55 109,375 75,000
Bikers Dream, Inc. (exercise price $4.07/sh) 370,000 6.77 0 0
Compass Plastics & Technologies, Inc. (exercise price $6.75/sh) 420,000 7.92 384,795 150,000
Diplomat Direct Marketing Corporation(exercise price $2.35/sh) 208,300 1.85 52,075 52,075
Environmental Tectonics Corp. (exercise price $1/sh) 166,410 5.00 499,230 850,000
Ergobilt, Inc. (exercise price $10/sh) 100,000 1.67 181,600 0
Great Train Store Company(exercise price $3.75/sh) 175,000 3.50 500,000 500,000
Smartchoice Automotive Group, Inc. (exercise price $3/sh) 300,000 2.50 0 625,000
Tava Technologies, Inc. (exercise price $6.25/sh) 155,000 1.00 314,650 550,000
Teltronics, Inc. (exercise price $2.75/sh) 890,000 16.90 302,600 850,000
Universal Automotive Industries, Inc. (exercise price $.92/sh) 450,000 6.00 0 100,000
PRIVATE COMPANIES
2021. Interactive, LLC 10.25% of LLC 10.25 0 0
Action Sports Group, LLC 3,350 10.00 0 0
Adavest Holdings, LLC 18.75% of LLC 18.75 0 0
Aero Products Corporation 30.61 25.00 0 0
Affinity Corporation 1,402 6.79 5,000 5,000
Air Age Services of San Antonio, Inc. 149 13.00 0 0
Alignis, Inc. 111,685 4.00 0 0
American Rockwool Acquisition Corp. 1,100,000 11.00 0 1,075,000
Amscot Holdings, Inc. 7,377 75.24 0 0
Anton Airfoods, Inc. 124 11.00 0 225,000
Associated Response Services, Inc. 611 39.73 14,000 1,000,000
Assured Power, Inc. 280 12.00 0 0
Atlantic Security Systems, Inc. 1 1.00 0 0
Auburn International, Inc. 175,214 5.50 150,000 150,000
Austin Innovations, Inc. 35,146 3.00 50,000 50,000
Aviation Holdings Ltd. (Newfoundland affiliate) 4,713 9.69 0 0
Avionics Systems, Inc. 15% of Co. 15.00 0 0
B & N Company, Inc. 91 10.63 40,000 0
Bohdan Automation, Inc. 571,048 4.25 0 475,000
BroadNet, Inc. 265,568 15.00 0 0
BUCA, Inc. 193,332 3.40 761,247 761,247
Bug.Z, Inc. and Subsidiaries 994,971 14.90 0 0
Business Press Group, Inc. 4,573 4.20 0 0
C.J. Spirits, Inc. 180,000 10.00 7,500 0
Caldwell/VSR Inc. 69.3 6.93 0 0
Campbell Software, Inc. 748,942 1.50 0 0
Capital Sigma Investments, Inc. 331,825 22.00 0 0
Caribou Coffee Company, Inc. 125,418 1.70 846,472 846,472
CarStar A&B, Inc. 200 5.00 0 0
CarStar Automotive, Inc. 492,136 20.00 0 0
Cartech Holdings, Inc. 280,702 25.00 0 0
Catalina Food Ingredients, Inc. 14.0 12.25 0 0
Cedaron Medical, Inc. 185,168 4.50 0 0
Century Pacific Greenhouses LTD 177,418 6.30 0 0
CF Data Corp. 257 20.50 17,500 150,000
Champion Glove Manufacturing Co., Inc. 538,614 6.88 0 0
Check Into Cash, Inc. 64,512 5.05 461,000 4,300,000
</TABLE>
35
<PAGE> 36
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
-------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
Chinese Media Group, LLC 17.5% of LLC 17.50% $ 0 $ 0
Clearidge, Inc. 44,217 1.07 0 0
CLS Corporation 126,997 4.22 0 0
CMHC Systems, Inc. 3,231 4.20 0 0
CMP Enterprises, LLC 15.17% of LLC 15.17 0 0
Cold Jet, Inc. 819.826 3.00 0 0
Colonial Investments, Inc. 369 32.50 0 0
Columbus Medical Holdings, LLC 17,455 12.00 0 300,000
Co-Mack Technologies, Inc. 245,217 11.75 400,000 400,000
Compression, Inc. 422,498 4.60 0 0
Continental Diamond Cutting Company 112 10.00 0 0
Copperhead Chemical Company, Inc. 93 4.20 0 0
Corporate Link, Inc. 190 16.00 0 0
Cort Investment Group, Inc.(d/b/a Contract Network) 90,000 9.00 180,000 180,000
Counsel Press LLC 678,146 8.33 443,700 443,700
Creighton Shirmakers, Inc. 30,250 30.25 0 0
CSM, Inc. 130,000 13.00 0 150,000
Cybo Robotics, Inc. 2,835,960 13.68 0 0
Dalt's, Inc. 160.88 31.00 0 0
Data National Corporation 275,682 13.00 450,000 450,000
Daxxes Corporation 61,766 2.94 0 0
DEC Interactive 35,409 2.68 0 0
Delaware Publishing Group, Inc. 5,817 32.49 15,000 0
Dentalcare Partners, Inc. 666,022 4.98 10,000 0
Distinction Software, Inc. 17,746 1.50 0 0
Dyad Corporation 615 5.00 600,000 600,000
Dyntec, Inc. 126,667 15.00 0 350,000
Electronic Accessory Specialists Int'l, Inc. 264,172 2.32 0 1,850,000
Encor Technologies, Inc. 7.46 6.84 0 0
Endeavor Technologies, Inc. 557,490 5.00 0 5,575,000
Entek Scientific Corporation 260,710 5.25 160,000 850,000
ERDA, Inc. 433,130 7.00 0 0
Executrain (3199673 Canada Inc.) 18.0012 12.60 0 0
Express Shipping Centers, Inc. 113,352 7.76 552,402 0
FaxNet Corporation 190,321 2.50 100,000 425,000
FDL, Inc. 548 16.00 250,000 250,000
Film Technologies International, Inc. 8 7.50 0 0
Foodnet Holdings, LLC 12% of LLC 12.00 0 0
Fortrend Engineering Corp. 437,552 3.25 0 0
Front Royal, Inc. 240,458 1.85 0 1,225,000
Fulcrum Direct, Inc. 1,600,831 5.00 500,000 0
Fypro, Inc. 255,882 15.00 0 0
G/Comm Marketing Inc. 462 4.62 0 0
Gardner Wallcovering, Inc. 2 2.00 0 0
Gateway Communications, Inc. 8.4 7.75 17,280 17,280
Gavel & Gown 3,285 1.68 0 0
General Materials Management Inc. 600,000 10.00 0 0
Generation 2 Worldwide LLC 28% of LLC 28.00 0 0
GerAssist, Inc. 334,021 3.00 0 0
Glen Oak Inc. 93 7.50 0 0
Global Marine Electronics, Inc. 5,137 18.00 0 0
Gloves Inc. 5,000 5.00 0 0
Good Food Fast Companies, The 174,779 17.00 0 0
Graphic Systems Group, Inc. 3.818 3.50 0 0
Gulfstream International Airlines, Inc. 271 39.00 10,000 10,000
H & H Acqu. Corp. 3,600 22.50 0 160,000
Home Link Services, Inc. 166,667 20.00 0 0
Hoveround Corporation 850 10.00 0 4,050,000
Hunt Assisted Living, LLC 7.2% of Class 7.20 0 0
Hunt Assisted Living, LLC 4.8% of Class 4.80 100 100
Hunt Holdings 1,612 6.30 0 0
I. Schneid Holdings LLC 21% of LLC 21.00 0 150,000
IJL Holdings, Inc. 139 12.50 0 0
ILD Communications, Inc. 5,429 2.09 0 1,250,000
Imtek Office Solutions, Inc. 119,891 1.50 0 0
In Store Services, Inc. 429 12.50 12,000 12,000
Isthmus, Inc. (Proamics affiliate) 38.25 3.50 0 0
J. Fegely & Son Hardware Co., Inc. 180 7.00 0 0
Jim Bridges Acquisition Company 10,728 15.00 0 0
Johnston County Cable L.P. 31.94% of LP 31.94 110,000 600,000
</TABLE>
36
<PAGE> 37
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
-------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
Just Vacations, Inc. 89,508 6.83% $ 0 $ 0
K.W.C. Management Corp. 794 24.40 0 0
Karawia Industries, Inc. 1,391 12.00 0 0
Kos Corp. Industries 265,263 2.10 0 0
Lane Acquisition Corporation 11,667 10.00 0 0
Leisure Clubs International, Inc. 525 29.50 15,000 0
Lovett's Buffet, Inc. 743,083 11.00 0 725,000
M & M Industries, Inc. 1,659,113 15.00 0 0
Marmot Mountain, Ltd. 64,840 2.25 250,000 250,000
Mayo Hawaiian Corp. 130 11.50 0 0
MBA Marketing Corporation 15,147 4.62 18,000 18,000
McAuley's Incorporated 64 6.00 0 0
MCG, Inc. 121,518 4.50 0 0
Mead-Higgs, Inc. 2,500 10.00 0 525,000
MegaMarketing Corporation 260,192 4.00 200,000 200,000
Mesa International, Inc. 22.73 21.00 0 0
Metals Recycling Technologies Corp. 257,801 5.00 0 0
MetroLease, Inc. 26,471 20.00 5,000 475,000
MMS Incentives, LLC 281,687 10.00 0 0
Moore Diversified Products, Inc. 17.04 15.00 0 200,000
Moorings, LLC 9,493 14.50 344,500 200,000
Multimedia Learning, Inc. 0.00 0 200,000
Mytech Corporation 172,098 3.50 0 175,000
N&R Printing, Inc. 25.39 23.00 0 0
NASC, Inc. 2,652 23.00 0 250,000
Nationwide Engine Supply, Inc. 1,410,844 22.52 25,000 0
NetForce, Inc. 67 6.25 0 0
Newfoundland Career Academy Ltd. 19,159 9.87 0 0
NRI Service and Supply, L.P. 28.5% of LP 28.50 25,000 25,000
Nunn Acquisition Corporation 16,280 14.00 0 0
Omni Home Medical, Inc. 3,211 17.50 0 0
Omni Products of Palm Beach, Inc. 149,925 16.00 0 0
Omni Products of Palm Beach, Inc. for preferred stock 19,048 16.00 100,000 100,000
One Call Comprehensive Care, Inc. 1,290,312.96 52.63 0 0
One Coast Network Corporation 763,666 15.63 0 1,700,000
Online Resources & Communications Corp. 350,000 1.26 0 0
Orchid Manufacturing, Inc. 1,219,047 2.61 40,000 600,000
Outdoor Promotions LLC 22% of LLC 22.00 0 125,000
P.A. Plymouth, Inc. 92,647 15.00 0 475,000
Pacific Linen, Inc. 365,349 7.81 548,020 548,020
Pacific Plus, Inc. 3,087 9.25 175,000 175,000
Paradigm Valve Services, Inc. 30,000 12.00 0 0
Pathology Consultants, Inc. 317,553 6.00 0 500,000
PaySys International, Inc. 66,100 1.80 274,842 175,000
Pharmed Group Holdings, Inc. 930,286 12.50 0 0
Physicians Surgical Care, Inc. 286,000 4.86 143,000 143,000
Piedmont Hardwood Flooring, LLC 8% of LLC 8.00 0 0
Precision Panel Products, Inc. 137 9.25 15,000 0
PRICE Systems, LLC 8% of LLC 8.00 0 0
Pritchard Glass, Inc. 12,500 25.00 0 425,000
Proamics Corporation 382,299 3.50 0 0
Professional Training Services, Inc. 369,493 3.65 0 0
Pro-Style Acquisition Corporation 121,993 10.00 0 0
Protect America, Inc. 14,592 12.00 120,000 300,000
QSS Acquisition, Inc. 156,503 14.63 0 0
R & R International, Inc. 49,646 4.00 0 325,000
Race Face Components. Inc. 3,465 11.55 0 0
Ready Personnel, Inc. 101,510 12.50 0 1,100,000
Reef Chemical Company, Inc. 183,215 3.00 300,000 300,000
Relax the Back Corporation 1,156,042 6.69 0 1,350,000
Relevant Knowledge, Inc. 121,283 1.09 0 150,000
Rynel Ltd., Inc. 916,523 22.50 0 0
Saraventures Fixtures, Inc. 25 20.00 0 0
SBX Holding Company 101,928 9.25 0 0
SFG Technologies Inc. 31,304 1.38 0 0
Sheet Metal Specialties, Inc. 587 37.00 0 0
Sirvys Systems (3404447 Canada Inc.) 134,400 3.36 0 0
Solutioneering, Inc. 13,135 7.50 0 0
Southern Specialty Brands, Inc. 10,000 10.00 17,500 17,500
Southern Therapy, Inc. 333 10.00 0 400,000
</TABLE>
37
<PAGE> 38
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (Continued)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
-------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
Stealth Engineering, Inc. 228,820 14.00% $ 0 $ 0
Stratford Safety Products, Inc. 114.21 10.25 75,000 250,000
Street Level (1216069 Ontario Ltd.) 68,373 5.88 0 0
Sub 1 Corporation (d/b/a Risk Management) 13 13.00 0 0
Superior Pharmaceutical Co.(Dynagen affiliate) 10% of Co. 10.00 0 0
Supplements Plus Natural Vitamins & Cosmetics, Ltd. 1.3125 1.68 0 0
Synaxis Group, Inc. 331,819 5.50 0 0
Systech Group, Inc. 41,417.76 2.52 0 0
TAC Systems, Inc. 522,902 5.47 0 0
Talent Metal Products, Inc. 227 18.50 0 0
Talus Solutions, Inc. 94,525 0.50 0 300,000
TeleCommunication Systems, Inc. 290,322 6.00 0 300,000
Telecontrol Systems, Inc. 530,303 17.50 0 0
Telemate Software, Inc. 20,202 1.00 0 0
Telequestion, Inc. 2,995,975 25.00 0 0
Temps & Co., Inc. 53 5.00 0 0
Therapeutic Services of America, Inc. 20,000 14.00 0 0
Thomas Holding Company (d/b/a Sports & Social Clubs) 11 10.00 0 0
Tie and Track Systems, Inc. 1,645 14.00 0 0
Toccoa Associates, LLC 99.17 15.47 0 0
Towne Services, Inc. 308,982 2.00 0 1,500,000
Trade Am International, Inc. 335,106 6.00 0 0
TRC Acquisition Corporation 375,000 12.50 0 0
Tulsa Industries, Inc. 2,564 2.50 0 0
UltraFab Vessels, Inc. 131,494.25 13.00 0 0
UltraFab, Inc. 131,494.25 13.00 0 0
Unicoil, Inc. 86,239 8.50 0 0
Unique Electronics, Inc. 30% of Co. 30.00 0 0
Valdawn Watch Co. 400 80.00 0 0
VanGard Communications Co., LLC 12% of LLC 12.00 0 0
VDW Farms, Ltd. 10.1% of Co. 10.10 0 0
Vision Software, Inc. 36,740 2.08 0 0
Watts-Finniss Holdings, Inc. 7,146 10.94 0 0
Wearever Healthcare Products, LLC 501,274 17.33 250,000 0
West Sun International, Inc. 224 1.26 0 0
Westcorp Software Systems, Inc. 887,066 4.00 0 0
WJ Holdings, Inc. 250,000 25.00 0 0
Wolfgang Puck Food Company 115,452 1.99 0 350,000
Zahren Alternative Power Corporation 1,366 5.00 25,000 400,000
------------ ------------
Total Warrants $ 13,666,478 $ 48,830,173
OTHER INVESTMENTS
-----------------
SWS3, Inc. (balance of proceeds from sale of mfg. plant) $ 524,926 $ 124,926
Hancock Company(royalty stream to be collected from sale of Gitman brand name) 1,675,097 125,097
Metals Recycling Technologies Corp. (expected proceeds from sale of patent rights
to technology) 1,749,216 1,399,216
Capitalized workout expenses - SCC 150,408 110,408
------------ ------------
Total Other Investments $ 4,099,647 $ 1,759,647
------------ ------------
Total Investments $622,583,211 $627,956,464
============ ============
</TABLE>
38
<PAGE> 39
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's principal investment objectives are to achieve a high
level of income from the collection of interest and processing and financial
advisory fees and long-term growth in its shareholders' equity through the
appreciation in value of equity interests in its portfolio companies. The
Company's and SII's loans are typically in the form of secured debt with
relatively high fixed interest rates accompanied by warrants to purchase equity
securities of the borrower. In addition to interest on investments, the Company
and SII also typically collect an up-front processing fee on each loan they
originate. Harris Williams typically obtains a monthly retainer fee for each
merger and acquisition transaction for which it is retained and, in addition, a
success fee when the transaction is consummated.
RESULTS OF OPERATIONS
The Company's financial performance in the Statements of Operations is
comprised of four primary elements. The first is "net operating income," which
is the difference between the Company's income from interest, dividends, fees
and Harris Williams' pretax income, and its total operating expenses, including
interest expense. The second element is "realized gain (loss) on investments,"
which is the difference between the proceeds received from the disposition of
portfolio assets and their stated costs at the beginning of the period. The
third element is the "change in unrealized appreciation (depreciation) of
investments," which is the net change in the fair values of the Company's
portfolio assets compared with their fair values at the beginning of the period
or their stated costs, as appropriate. Generally, "realized gain (loss) on
investments" and "change in unrealized appreciation (depreciation) of
investments" are inversely related in that when an appreciated asset is sold to
realize a gain, a decrease in unrealized appreciation occurs since the gain
associated with the asset is transferred from the "unrealized" category to the
"realized" category. Conversely, when a loss is realized on a depreciated
portfolio asset, the reclassification of the loss from "unrealized" to
"realized" causes an increase in unrealized appreciation and an increase in
realized loss. The fourth element is "provision for income taxes," which
primarily consists of taxes on the pre-tax income of Harris Williams.
Net Operating Income. During the quarter ended June 30, 1998, the
Company earned interest on investments of $15.4 million, a 60% increase over the
$9.6 million earned in the same quarter of 1997. For the six month period ended
June 30, 1998, interest on investments was $29.5 million, a 67% increase over
the $17.7 million earned in the same period of 1997. In addition to interest on
investments, the Company also collects an up-front processing fee for each loan
it originates. During the second quarter of 1998, the Company earned $2.6
million in processing fees, a 100% increase over the $1.3 million earned in the
second quarter of 1997. During the first six months of 1998, the Company earned
$4.5 million in processing fees, a 50% increase over the $3.0 million earned in
the first six months of 1997. These increases in interest income and processing
fees are a result of increases in the dollar amount of loans outstanding and
originated during the applicable periods. The Company's loan portfolio increased
to $526.0 million at June 30, 1998, an increase of 68% over the $312.4 million
loan portfolio balance at June 30, 1997. The $107.1 million of loans originated
during the second quarter of 1998 was a 74% increase over the $61.6 million of
loans originated during the second quarter of 1997, and the weighted average
interest rate charged on the loan portfolio at June 30, 1998 and 1997 was 13.25%
and 13.18%, respectively. The $201.8 million of loans originated in the first
half of 1998 was a 57% increase over the $128.7 million of loans originated in
the first half of 1997.
The Company's interest expense increased to $3.2 million in the second
quarter of 1998, a 78% increase from the $1.8 million expensed in the second
quarter of 1997. Interest expense was $7.4 million in the first half of 1998, an
85% increase over the $4.0 million of such expenses in the first half of 1997.
The increase in interest expense in the 1998 periods versus the 1997 periods
resulted from increased amounts borrowed under the
39
<PAGE> 40
Company's two revolving credit facilities and from the SBA. The Company's total
borrowings were $212.2 million on June 30, 1998 and $99.5 million on June 30,
1997.
Overhead and amortization of borrowing costs totaled $3.5 million in
the second quarter of 1998, a 67% increase over the $2.1 million of such
expenses in the second quarter of 1997 and $6.5 million in the first half of
1998, a 76% increase over the $3.7 million of such expenses in the first half of
1997. These increases can be largely attributed to the increase in the number of
employees to 62 in June 1998 from 35 in June 1997 (excluding Harris Williams
employees) and the increase in the Company's loan portfolio.
During the second quarter of 1998, Harris Williams had revenues of $3.6
million, a 29% increase from $2.8 million in the second quarter of 1997. For the
first half of 1998, Harris Williams had revenues of $7.8 million, a 111%
increase over the $3.7 million for the first half of 1997. During the second
quarter of 1998, Harris Williams had pre-tax income of $1.7 million, a 70%
increase from $1.0 million in pre-tax income in the second quarter of 1997 and
during the first half of 1998, had pre-tax income of $3.7 million, a 185%
increase over the $1.3 million in pre-tax income for the first half of 1997.
These increases were due to an increase in the number and size of transactions
on which Harris Williams provided advisory services. Since a significant
percentage of Harris Williams fees are paid at the closing of advised
transactions, the timing of such closings may cause significant variations in
its revenues from quarter to quarter. Income taxes of $581,409 and $142,995 were
accrued on Harris Williams' pre-tax income in the second quarter of 1998 and
1997, respectively.
Realized Gain (Loss) on Investments. The Company's net realized loss on
investments was $5.7 million during the second quarter of 1998 and $4.6 million
during the first half of 1998, as compared to net realized gains of $3.0 million
and $7.4 million for the second quarter and first half of 1997, respectively.
The net realized loss in 1998 is primarily attributable to loans made to
Saraventures Fixtures, Inc., whose manufacturing operations were consolidated
with those of its parent, Precision Panel Products, Inc., during 1998 as part of
a restructuring strategy that the Company now believes is not likely to result
in full repayment of the outstanding loans to those borrowers. The Company also
recorded significant unrealized depreciation this quarter against the loans made
to Precision Panel Products, Inc. as detailed in the schedule included in the
"Change in Unrealized Appreciation (Depreciation) of Investments" section below.
The following table sets forth the details of realized gains and losses that
occurred during the first quarter and first half of 1998 and 1997.
40
<PAGE> 41
Schedule of realized gains (losses) for the three month period and six month
period ending June 30, 1997 and June 30, 1998.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- -------------------------
1997 1998 1997 1998
------ ------- ------ -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Argenbright Holdings Ltd. Warrant $ 750 $ 750
Ashe Industries, Inc. Loan (2,608) (2,608)
Assured Power, Inc. Loan $ (200)
Atlantic Security Systems, Inc. Warrants $ 434 434
BankCard Services, Inc. Loan (277) (277)
CellCall, Inc. Common Stock 228 228
Champion Glove Manufacturing, Inc. Loan (1,250) (1,250)
Eastern Food Group LLC Loan (1,265)
Global Finance & Leasing, Inc. Warrant 409 409
Global Marine Electronics, Inc. Warrants 200 200
Gold Medal Products, Inc. Loan (825)
Golf Video, Inc. Loan (500)
H.S.A. International, Inc. Other Investment (441)
Hunt Leasing & Rental Corporation Warrants 598 598
Innotech, Inc. Common Stock 901
IOL 2000/Suncoast Medical Group Loan (1,517)
Master Graphics, Inc. Common Stock 1,860 1,860
Merge Technologies, Inc. Common Stock 196
Miscellaneous (10) (36) (26) (10)
Multimedia Learning, Inc. Warrant 925
National Health Systems, Inc. Loan (420) (420)
Patton Management Corporation Warrants 303 303
Premier Technologies, Inc. Common Stock 2,044 7,170
QuadraMed Corporation Common Stock 357
Quadravision Communications Limited Warrant 156
Radiant Systems, Inc. Common Stock 716
Radio Systems Corporation Warrant 1,800 1,800
Saraventures Fixtures, Inc. Loan (7,223) (7,223)
Saraventures Fixtures, Inc. Preferred Stock (1,659) (1,659)
Skillmaster, Inc. Warrant 200
Sqwincher Corporation Warrant 320
Union Planters, Inc. Common Stock 170 170
Video Update, Inc. Common Stock 99
Virtual Resources, Inc. Warrant 432 432
Vista Information Solutions, Inc. Common Stock 1,499 2,687
Voice FX Corporation Common Stock 199
------ ------- ------ -------
$2,987 $(5,743) $7,444 $(4,555)
====== ======= ====== =======
</TABLE>
Change in Unrealized Appreciation (Depreciation) of Investments. For
the quarter ended June 30, 1998, the Company recorded change in unrealized
depreciation of investments of $4.9 million and for the quarter ended June 30,
1997, the Company recorded change in unrealized appreciation of investments of
$1.3 million. For the six month periods ended June 30, 1998 and 1997, the
Company recorded a change in unrealized depreciation of investments of $5.4
million and change in unrealized appreciation of investments of $3.2 million,
respectively. These changes are the result of the Company's quarterly
revaluation of its portfolio in accordance with its valuation policy to reflect
the fair value of each of its portfolio assets and include the effect of the
additional net unrealized depreciation taken against the loans made to the two
borrowers described in the "Realized Gain (Loss) on Investments" section above.
The following table sets forth information regarding significant changes in
unrealized appreciation (depreciation) of assets in the Company's portfolio made
during the second quarter of 1998 and 1997 and the first half of 1998 and 1997.
41
<PAGE> 42
Schedule of significant unrealized appreciation (depreciation) for the three
month period and six month period ending June 30, 1997 and June 30, 1998.
<TABLE>
<CAPTION>
Three Months
Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
1997 1998 1997 1998
----- ----- ----- -----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
LOANS:
Aero Products Corporation (375) (375)
Argenbright Holdings, Ltd. (750) (750)
Ashe Industries, Inc. 2,450 2,300
B&N Company, Inc. (400)
C. J. Spirits, Inc. (250) (400) (50)
Carter Kaplan Holdings LLC 549
Champion Glove Manufacturing Co., Inc. (875) 1,200 (1,000) 1,200
Coverall Technologies, Inc. (725) (575)
Dalts, Inc. (500) (500)
Daxxes Corporation (848) (848)
Digital Transmission Systems, Inc. (400) (400)
Eastern Food Group LLC 1,265
Ergobilt, Inc. (400) (400)
Express Shipping Centers, Inc. (500) (500)
Fulcrum Direct, Inc. (500) (500)
Golf Corporation of America (350) (625)
Golf Video, Inc. 450
Home Link Services, Inc. (275) (275)
IOL 2000, Inc. 1,225
Mesa International, Inc. (150) (500)
Metals Recycling Technologies Corp. (200) (350)
National Health Systems, Inc. 400 300
Nationwide Engine Supply, Inc. (2,000) (2,000)
One Call Comprehensive Care, Inc. (50) (300)
Precision Panel, Inc. (6,500) (6,500)
Saraventures Fixtures, Inc. 3,745 1,745
Smartchoice Automotive Group 450 450
Summit Publishing Group, Ltd. (200) (1,975)
SWS3, Inc. (350) (50) (350) (250)
SWS6, Inc. 475 175
Tower Environmental, Inc. (125) (1,710)
Valdawn Watch Company (400) (1,575) (400) (2,475)
Vision 2000, Inc. (1,425) (1,425)
Wearever Health Products, LLC (575) (575)
PRIVATE COMPANY WARRANTS AND
EQUITY SECURITIES:
AB Plastics Holding Corporation 2,875 2,875
Affinity Corporation (365) (365)
American Rockwool Acquisition Corp. 675
Argenbright Holdings Ltd. 375
Atlantic Security Systems, Inc. (375) 0
Bohdan Automation, Inc. 475 475
Check into Cash, Inc. 2,500 3,839
Columbus Medical Holdings, LLC 300 300
DentalCare Partners, Inc. (280) (280) (10)
Dyntec, Inc. 350 350
Endeavor Technologies, Inc. 4,150 5,025
Express Shipping Centers, Inc. (290) (262)
FaxNet Corporation 325 325
Front Royal Inc. 350
Fulcrum Direct, Inc. (500) (500)
Fypro, Inc. (2,673) (3,673)
Global Finance & Leasing, Inc. (425)
Home Link, Inc. (375) (750)
Hoveround Corporation 300 300
Hunt Leasing & Rental Corporation (400) (250)
ILD Communications, Inc. 500
Lovetts Buffet, Inc. 325 325
Master Graphics, Inc. 1,050
MeadHiggs, Inc. 525 525
Mesa International, Inc. (750)
Metrolease, Inc. 470
Mobility Electronics, Inc. 650 1,600
Multimedia 2000, Inc. (225) (225) (351)
Multimedia Learning, Inc. (450)
One Coast Network Corporation 1,700 1,700
Pathology Consultants of America, Inc. 48 500
Patton Management Corporation (275) (185)
Potomac Group, Inc. common stock 700 700
Potomac Group, Inc. preferred stock (600) (600)
PRA International, Inc. 1,170
Pritchard Glass, Inc. 425 425
R&R International, Inc. 325
Radio Systems Corporation (1,000) (1,000)
Ready Personnel, Inc. 1,100 1,100
Relax the Back Corporation 1,350 1,350
Saraventures Fixtures, Inc. 1,659 1,659
SWS6, Inc. (1,000) (1,628)
Talus Solutions, Inc. 300 300
Telecommunication Systems, Inc. 300 300
Teltrust, Inc. 825
Towne Services, Inc. 800 1,500
Vision 2000, Inc. (442) (2,345) (442) (3,047)
Wolfgang Puck Food Company, Inc. 350
PUBLIC COMPANY WARRANTS AND
EQUITY SECURITIES:
Altris Software, Inc. common stock (600)
Altris Software, Inc. preferred stock (450) (900)
Clinicor, Inc. preferred stock (275) (275)
Compass Plastics & Technologies, Inc. stock (1,438) (1,509)
Consumat Systems, Inc. common stock 178 178 (558)
Educational Medical, Inc. common stock 268 518
Encore Medical, Inc. common stock 669 1,166
Environmental Tectonics Corporation preferred
stock 400 400
Ergobilt, Inc. warrant (150) (182)
Hydrofuser Industries, Inc. warrant (331)
Innotech, Inc. common stock (454)
Master Graphics, Inc. common stock (1,511) (1,511)
PMT Services, Inc. common stock 483 1,096
Premiere Technologies, Inc. common stock (1,206) (633) (6,563) (408)
Radiant Systems, Inc. warrant (109) 705
Smart Choice Automotive Group, Inc. warrant 225 425
Teltronics, Inc. preferred stock 300 300
Teltronics, Inc. warrant 547 547
Vista Information Solutions, Inc. common stock 1,334 (1,334) 1,334 (1,913)
Vista Information Solutions, Inc. preferred stock 400 600
</TABLE>
42
<PAGE> 43
Provision for Income Taxes. Beginning in February 1995, the Company
elected to be taxed as a regulated investment company (a "RIC") under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). If the Company,
as a RIC, satisfies certain requirements relating to the source of its income,
the diversification of its assets and the distribution of its net income, the
Company is generally taxed as a pass through entity that acts as a partial
conduit of income to its shareholders. In order to maintain its RIC status, the
Company must, in general, derive at least 90% of its gross income from
dividends, interest and gains from the sale or disposition of securities; meet
investment diversification requirements defined by the Code; and distribute to
shareholders 90% of its net investment income. The Company presently intends to
meet the RIC qualifications in 1998. However, no assurance can be given that the
Company will continue to elect or qualify for such treatment after 1998.
During the second quarter of 1998, the Company paid dividends of $9.3
million compared to the $6.0 million paid in the second quarter of 1997 from net
investment income.
43
<PAGE> 44
For the quarters ended June 30, 1998 and 1997, the Company provided for
federal income tax at a 35% rate on undistributed realized long-term capital
gains, excise taxes at a 4% rate on undistributed taxable net investment income
as defined by the Code and undistributed realized long-term capital gains and
federal and state income taxes on Harris Williams' pre-tax income (See Note 13).
For the quarters ended June 30, 1997 and 1998, the provision for income taxes
totaled $2.3 million and $581,409, respectively.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $300,000 in cash and cash
equivalents. At June 30, 1998, the Company's investment portfolio included
investments in stocks and warrants of publicly-traded companies that had an
ascertainable market value and were being carried at a fair value of
approximately $10.5 million and represent an additional source of liquidity.
However, the Company's ability to realize such values on a short-term basis is
limited by market conditions and various securities law restrictions.
Traditionally, the Company's principal sources of capital to fund its
portfolio growth have been borrowings through the SBA-sponsored SBIC debenture
program, sales of the Company's equity securities, both privately and publicly,
and funds borrowed from banking institutions. In February 1995, the Company
consummated an initial public offering and has completed four additional public
offerings since that time, including the public offering of 6,000,000 shares
completed in March 1998, that have generated net proceeds of $361.5 million in
the aggregate. The Company has used the proceeds of these offerings to
temporarily repay debt and to originate new loans.
At June 30, 1998, total SBA borrowings were $101.0 million, the maximum
amount of SBA loans available to an SBIC. Each borrowing from the SBA has a term
of ten years, is secured by the assets of SII, is guaranteed by the Company and
can be prepaid without penalty after five years. The average interest rate on
these borrowings was 6.9% as of June 30, 1998, and none of these borrowings
mature prior to 2002.
As of June 30, 1998, SII had $27.7 million outstanding under its $125.0
million revolving credit facility (the "Revolving Credit Facility") with First
Union National Bank and a syndicate of other banks. The Revolving Credit
Facility is secured by a lien on all of SII's assets and a pledge of SII's stock
and guaranteed by the Company. In order to manage the interest rate risk
associated with the variable interest rate provided for under the Revolving
Credit Facility, SII has entered into various hedging arrangements. The
Revolving Credit Facility matures on May 31, 2000. The Revolving Credit Facility
requires that SII obtain the lenders' consent prior to, among other things,
encumbering its assets, merging or consolidating with another entity and making
investments other than those permitted by the SBA. In addition, the Revolving
Credit Facility provides that the repayment of any amounts outstanding can be
accelerated if either George M. Miller, II or David M. Resha ceases to be
employed by the Company.
The Company has also established a $100.0 million credit facility (the
"ING Credit Facility") with Holland Limited Securitization, Inc., a multi-seller
commercial paper conduit sponsored by ING Baring (U.S.) Capital Markets, Inc.
(individually and collectively, "ING"). During the second quarter of 1998, the
facility was increased to $200.0 million. Sirrom Funding Corporation ("SFC"), a
wholly-owned, special purpose, bankruptcy remote subsidiary of the Company, is
the borrower under the ING Credit Facility. SFC purchases loans originated by
the Company and the related warrants and uses these loans and warrants as
collateral to secure borrowings from ING. SFC is generally able to borrow up to
70% of the principal amount of conforming loans collateralizing the ING Credit
Facility. As of January 3, 1997, the Company made an initial capital
contribution to SFC of approximately $25.0 million of loans, which served as
initial collateral for the ING Credit Facility. At June 30, 1998, $83.5 million
was outstanding under the ING Credit Facility and $129.0 million and $141.8
million of loans and warrants at cost and fair value, respectively, had been
contributed or sold to SFC by the Company and were collateralizing the ING
Credit Facility. In order to manage interest rate risk associated with the
variable interest rate provided for under the ING Credit Facility, the Company
has entered into various hedging arrangements. The Company may borrow under the
ING Credit Facility until December 31, 2001, and it expires on January 5, 2007.
The ING Credit Facility is not guaranteed by the Company. However, certain
actions by the Company can trigger an event of default under the ING Credit
Facility, which will result in termination of further funding thereunder and the
application of the collateral pledged for repayment of the
44
<PAGE> 45
amounts outstanding thereunder. In addition, the ING Credit Facility provides
that an event of default is triggered if any two of George M. Miller, II, David
M. Resha and Carl W. Stratton are no longer employed by the Company.
The Company believes that anticipated borrowings under the Revolving
Credit Facility and the increased ING Credit Facility, together with cash on
hand, loan repayments and cash flow from operations plus realized gains on
investments (after distributions to shareholders), will be adequate to fund the
continuing growth of the Company's investment portfolio through the fourth
quarter of 1998. In order to provide the funds necessary for the Company to
continue its growth strategy beyond that period, the Company expects to incur,
from time to time, additional short and long-term borrowings from other sources,
and to issue, in public or private transactions, its equity and debt securities.
The availability and terms of any such borrowings will depend upon interest
rate, market and other conditions. There can be no assurances that such
additional funding will be available on terms acceptable to the Company.
PORTFOLIO TURNOVER AND CREDIT QUALITY
During the quarter ended June 30, 1998, the Company made loans to 67
companies totaling approximately $107.1 million and received repayments (either
partial or full) from 21 companies aggregating $20.0 million. During the quarter
ended June 30, 1997, the Company made loans to 45 companies totaling
approximately $61.6 million and received repayments (either partial or full)
from 13 companies aggregating $17.4 million. Since inception, the Company has
originated $801.0 million in total loans and $173.8 million, or 22%, have been
repaid. The Company cannot control changes in its portfolio of investments, as
borrowers have the right to prepay loans made by the Company without penalty.
The Company has implemented a system by which it grades all loans on a
scale of 1 to 6. The system was intended to reflect the performance of the
borrower's business, as well as the collateral coverage of the loans and other
factors considered relevant. To monitor and manage the risk in the overall
portfolio, management tracks, among other things, the weighted average portfolio
grade. The weighted average grade was 3.14 and 3.11 at June 30, 1998 and 1997,
respectively. The Company believes that weighted average grades between 2.75 and
3.25 represent the current normal range for the portfolio.
Loans graded 4 typically involve a borrower that the Company believes
is performing marginally below the Company's expectations and that the Company
believes has short-term negative trends or negative events that have created
some concern. The Company believes loans in this category require a proactive
action plan to be executed by the borrower's management and monitored by the
responsible Company officer. A grade 4 is a temporary rating that the Company
expects would be followed by an upgrade or downgrade, typically within six
months, as the borrower's business improves or declines. Loans graded 5 and 6
are placed on the Company's Credit Watch List and are serviced by a member of
the Company's workout group. Loans with a grade 5 are generally in default and
interest is generally not being accrued, but the Company's management believes
the borrower's management is capable of executing a plan to return the borrower
to an acceptable risk level. Loans with a grade 6 involve an unacceptable level
of risk with substantial probability of loss. These loans are on non-accrual and
the Company has charged off or expects to charge off some part of the loan.
As of June 30, 1998 and 1997, the Company's portfolio consisted of 18
and 22 loans, respectively, graded 4. The aggregate principal balance of loans
graded 4 at June 30, 1998 and 1997, respectively, was $36.0 million and $41.3
million, which represented 6.4% and 12.7%, respectively, of the total portfolio
balance at such dates. At June 30, 1998 and 1997, the Company had loans to 23
companies with an aggregate principal balance of $55.5 million, and 15 companies
with an aggregate principal balance of $20.8 million, respectively, that were
graded a 5 or 6, which represented 9.9% and 6.4%, respectively, of the total
loan portfolio balance. At June 30, 1998, the aggregate principal balance of
loans graded 4,5 or 6 as a percentage of the total loan portfolio was 16.5%,
which was unchanged from March 30, 1998 and down from 19.0% at June 30, 1997.
Since late 1995 when the Company redefined the loan grading system to
reflect management's additional experience in monitoring its growing portfolio,
the percentage of the principal balance of loans graded 4 to the total portfolio
balance has typically ranged between 10% and 15%, with an occasional decrease
below that range, and the percentage of the principal balance of loans graded 5
and 6 to the total portfolio balance has typically ranged between 6% and 10%
also, with an occasional decrease below that range. Given the nature of the
Company's business, making loans to small businesses, and the risks associated
therewith, the Company expects significant variability in the absolute dollar
amount of and the ratio of grade 4, 5 and 6 loans to the total portfolio,
individually and in the aggregate, on a quarter to quarter basis. The Company
believes the current percentage of grade 4 loans to be below the current normal
range of variability.
45
<PAGE> 46
The Company also believes that the percentage of grade 5 and 6 loans to be at
the high end of the current normal range of variability. While the Company is
closely monitoring the recent upward trend in this ratio, management believes
that the ratio of grade 4, 5 and 6 loans to the total loan portfolio, which has
remained constant since last quarter and is down from the same period last year
to be a positive trend. However, no assurance can be given that the trends in
total loans classified in the lower three loan categories will continue, or that
the total loans classified 5 and 6 will not exceed the normal range for such
loans, particularly if overall economic conditions nationally or in the
Southeastern United States were to materially decline.
YEAR 2000
To address Year 2000 issues, the Company has formed a Year 2000 Team
consisting of the Chief Financial Officer, the Chief Credit Officer, the Credit
Administrator, MIS Director and legal counsel for the Company.
The Company has reviewed the Year 2000 issue and has identified three
primary areas in which it believes the Company could be adversely affected.
First, the Company utilizes two primary software programs, one of which tracks
its investment portfolio and one of which provides accounting functions. Both
software vendors have indicated to the Company that their programs are Year 2000
compatible. Therefore, the Company believes that it has no material exposure in
this area, although the Company has not run any tests to confirm such
compatibility. Second, the Company utilizes standard cash management software
provided by its commercial banks. Although the Company believes the possibility
is remote that a major commercial bank would leave any such problems unresolved
it has not received confirmation from such banks that such software is Year 2000
compatible and believes further investigation and testing is required in 1998.
Third, the Company has begun an investigation of the impact of the Year 2000
issue on its portfolio companies. In February 1998, the Company submitted
questionnaires to all of its portfolio companies as of December 31, 1997 to
determine their potential exposure to Year 2000 problems and the adequacy of
their plans to address any exposure. Additionally, since January 1998, the
Company has performed due diligence regarding the Year 2000 issue for all new
borrowers. Companies with loans totaling 73% of the Company's portfolio as of
June 30, 1998 have provided responses concerning their Year 2000 contingency
plans. Based upon the disclosure which has been received from responding
companies, the Company currently believes that companies whose loans represent
approximately 50% of the portfolio have either no material exposure to Year 2000
issues or have adequate plans in place to address their exposure. On August 7,
1998, the Company sent out a more detailed questionnaire to the remaining 50%
and is in the process of performing a review of those portfolio companies whom
the Company believes have material exposure and inadequate contingency plans.
Given the size and age of its portfolio companies and the service-based
industries in which they primarily operate, the Company anticipates that few of
its portfolio companies will face any material issues regarding the Year 2000.
However, no assurance can be given that certain of the Company's portfolio
companies will not suffer material adverse effects from Year 2000 issues, and if
such adverse effects impact such companies ability to repay their loans, the
Company's operating results and financial condition could be adversely effected.
IMPACT OF INFLATION
The Company does not believe that its business is materially affected
by inflation, other than the impact which inflation may have on the securities
markets, the valuations of business enterprises and the relationship of such
valuations to underlying earnings, all of which could influence the value of the
Company's investments.
RISKS
The significant risks inherent in the Company's business, which
primarily consists of making loans to small businesses, are set forth in the
Company's most recent Registration Statement on Form N-2 (Registration No.
333-46051) and should be kept in mind when evaluating the Company's financial
performance.
46
<PAGE> 47
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 13, 1998, a purported class action was filed in U.S.
District Court for the Middle District of Tennessee against the Company and
certain officers, directors and affiliates (Trinity Holdings Corporation v.
Sirrom Capital Corporation, John A. Morris, Jr., George M. Miller, II, Carl W.
Stratton, H. Hiter Harris, III and Christopher H. Williams, Case No. 3-98-0643,
United States District Court for the Middle District of Tennessee, Nashville)
alleging violations of federal securities laws related to a secondary offering
of securities that was made pursuant to a Registration Statement that was
declared effective on March 5, 1998, certain press releases and oral
communications with analysts. The plaintiff purports to sue on its own behalf
and on behalf of all persons who purchased or otherwise acquired common stock of
the Company between March 5, 1998 and July 9, 1998, including all persons who
purchased common stock in connection with the March 5, 1998 secondary offering.
The plaintiff seeks unspecified monetary damages as well as reasonable costs and
expenses.
Another purported class action was filed on the same date by
Scott Orrock in the Chancery Court for Davidson County, Tennessee against Sirrom
Capital Corporation and certain officers, directors and affiliates (Scott Orrock
v. Sirrom Capital Corporation, David Resha, Christopher H. Williams, H. Hiter
Harris, III, John A. Morris, Jr., George M. Miller, II and Sirrom Partners,
L.P., Docket No. 98-2103-111, Chancery Court, Davidson County, Tennessee),
alleging violations of state securities laws in connection with the March 5,
1998 secondary offering, certain periodic reports filed with the Securities and
Exchange Commission, certain press releases and oral communications with
analysts. The plaintiff purports to sue on his own behalf and on behalf of all
persons who purchased common stock of the Company between January 20, 1998 and
July 10, 1998. The plaintiff seeks unspecified monetary damages with interest,
reasonable costs and expenses, and equitable relief.
The Company believes that these actions are without merit and
will vigorously defend the claims brought against it. The Company is unable,
however, to predict the outcome of these lawsuits or the costs to be incurred in
connection with their defense. The Company does not believe that these actions
will have a material adverse effect on the operations of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The Company's Annual Shareholder's Meeting was held on April
17, 1998 to (i) elect the directors of the Company for the
ensuing year, (ii) approve an amendment to the Company's 1996
Incentive Stock Option Plan increasing the number of shares
available for grant thereunder, (iii) approve an amendment to
the Company's 1995 Stock Option Plan for Non-Employee
Directors providing for the automatic issuance of stock
options for Non-Employee Directors upon their re-election to
the Board of Directors and increasing the number of shares
available for grant thereunder, (iv) approve an amendment the
Company's Amended and Restated Charter increasing the number
of authorized number of shares of Common Stock to 75,000,000,
(v) approve an amendment to the Company's fundamental
investment policies necessitated by the growth of the
Company's public company securities portfolio, and (vi) ratify
the selection of Arthur Andersen LLP to serve as independent
public accountants for the Company for the year ending
December 31, 1998.
47
<PAGE> 48
b. The following directors were elected at the Annual Meeting of
Shareholders:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
E. Townes Duncan 23,130,761 19,957
William D. Eberle 23,124,961 25,757
Edward J. Mathias 23,130,361 20,357
Robert A. McCabe, Jr. 23,124,961 25,757
George M. Miller, II 23,130,961 19,757
John A. Morris, Jr. 23,130,961 19,757
Raymond H. Pirtle, Jr. 23,130,961 19,757
Keith M. Thompson 23,130,961 19,757
Christopher A. Williams 23,130,961 19,757
L. Edward Wilson, P.E. 23,130,961 19,757
</TABLE>
c. The resolutions passed were as follows:
1. To approve an amendment to the Company's 1996
Incentive Stock Option Plan increasing the number of
shares available for grant thereunder:
FOR AGAINST WITHHELD
13,405,165 5,893,828 27,794
2. To approve an amendment to the Company's 1995 Stock
Option Plan for Non-Employee Directors providing for
the automatic issuance of stock options for
Non-Employee Directors upon their re-election to the
Board of Directors and increasing the number of
shares available for grant thereunder:
FOR AGAINST WITHHELD
21,734,429 671,764 32,595
3. To approve an amendment the Company's Amended and
Restated Charter increasing the number of authorized
number of shares of Common Stock to 75,000,000:
FOR AGAINST WITHHELD
23,102,418 21,125 27,175
4. To approve an amendment to the Company's fundamental
investment policies necessitated by the growth of the
Company's public company securities portfolio:
FOR AGAINST WITHHELD
19,244,808 20,205 28,497
5. To ratify the selection of Arthur Andersen LLP to
serve as independent public accountants for the
Company for the year ending December 31, 1998.
FOR AGAINST WITHHELD
23,115,877 5,416 29,425
ITEM 5. OTHER INFORMATION
None.
48
<PAGE> 49
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 3.1 Amended and Restated Charter of the
Company (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration
Statement on Form S-8, filed with the
Commission on April 30, 1998)
Exhibit 3.2 Bylaws of the Company (incorporated by reference to
exhibit b. contained in the Registrant's Registration
Statement on Form N-2, as amended (File No. 33-86680),
filed with the Commission on November 23, 1994)
Exhibit 4.1 Instruments defining rights of holders
of securities: See Paragraph 6 of the
Company's Amended and Restated Charter
(incorporated by reference to Exhibit 3.1 to
the Registrant's Quarterly Report on Form
10-Q for the period ending September 30,
1996, filed with the Commission on November
14, 1996)
Exhibit 10.1 Letter Agreement, dated as of May 7, 1998, by and between
the Company and Chase Bank of Texas National Association
regarding Rate Cellar Transaction
Exhibit 10.2 Letter Agreement, dated as of May 7, 1998, by and between
the Company and Chase Bank of Texas National Association
regarding Swap Transaction.
Exhibit 10.3 Amendment No. 1 to the Series 1996-1 Supplement, dated as
of March 31, 1998, by and among SFC, SCC, First Trust
National Association and ING.
Exhibit 10.4 Amended and Restated Revolving Note, Series 1996-1, dated
as of March 31, 1998 with a principal amount of
$200,000,000 made by SFC in favor of Holland Limited
Securitization, Inc.
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
49
<PAGE> 50
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 thereunto duly authorized.
SIRROM CAPITAL CORPORATION
Date: August 14, 1998 By: /s/ Carl W. Stratton
-----------------------------------
Carl W. Stratton
Chief Financial Officer
50
<PAGE> 51
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 3.1 Amended and Restated Charter of the
Company (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration
Statement on Form S-8, filed with the
Commission on April 30, 1998)
Exhibit 3.2 Bylaws of the Company (incorporated by reference to
exhibit b. contained in the Registrant's Registration
Statement on Form N-2, as amended (File No. 33-86680),
filed with the Commission on November 23, 1994)
Exhibit 4.1 Instruments defining rights of holders
of securities: See Paragraph 6 of the
Company's Amended and Restated Charter
(incorporated by reference to Exhibit 3.1 to
the Registrant's Quarterly Report on Form
10-Q for the period ending September 30,
1996, filed with the Commission on November
14, 1996)
Exhibit 10.1 Letter Agreement, dated as of May 7, 1998, by and between
the Company and Chase Bank of Texas National Association
regarding Rate Cellar Transaction
Exhibit 10.2 Letter Agreement, dated as of May 7, 1998, by and between
the Company and Chase Bank of Texas National Association
regarding Swap Transaction.
Exhibit 10.3 Amendment No. 1 to the Series 1996-1 Supplement, dated as
of March 31, 1998, by and among SFC, SCC, First Trust
National Association and ING.
Exhibit 10.4 Amended and Restated Revolving Note, Series 1996-1, dated
as of March 31, 1998 with a principal amount of
$200,000,000 made by SFC in favor of Holland Limited
Securitization, Inc.
Exhibit 27 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
[CHASE LOGO]
CAPITAL MARKETS
Dated as of May 7, 1998 707 Travis Street
Houston, Texas 77002-8095
(713) 216-6548
WATS (800) 732-5519
Fax (713) 216-4919
Sirrom Capital Corporation
500 Church St., Suite 200
Nashville, TN 37219
Attn: Carl Stratton
Re: Rate Collar Transaction (Our Reference No. 135)
Ladies and Gentlemen:
THIS SHALL AMEND AND RESTATE OUR CONFIRMATION SENT TO YOU DATED MARCH 19, 1998
The purpose of this letter agreement is to set forth the terms and
conditions of the Rate Collar Transaction entered into between us on the Trade
Date referred to below (the "Rate Collar Transaction"). This Confirmation
evidences a complete binding agreement between you and Chase Bank of Texas
National Association ("CBT") as to the terms of the Rate Collar Transaction to
which this Confirmation relates. In addition, upon the execution by you and CBT
of a Master Agreement (the "Agreement"), in the form published by the
International Swap Dealers Association, Inc., with such modifications as you and
CBT shall in good faith agree, this Confirmation will supplement, form a part of
and be subject to the Agreement. All provisions contained or incorporated by
reference in such Agreement upon its execution shall govern this Confirmation
except as expressly modified below.
The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc. ("ISDA")) (the
"Definitions") are incorporated into this Confirmation. In the event of any
inconsistency between the Definitions and provisions and this Confirmation, this
Confirmation will govern.
All provisions contained or incorporated by reference in the Agreement
shall govern this Confirmation except as expressly modified below. Each party
represents to the other that it is authorized to enter into the Rate Collar
Transaction contemplated by this Confirmation.
The terms of the particular Rate Collar Transaction to which this
Confirmation relates are as follows:
<PAGE> 2
Type of Transaction: Rate Collar Transaction
Notional Amount: $100,000,000
Trade Date: March 19, 1998
Effective Date: January 3, 2000
Termination Date: January 2, 2002
FIXED AMOUNTS:
Fixed Rate Payer: Sirrom Capital Corporation
("Counterparty")
Fixed Rate Payer Payment Date: MAY 11, 1998
Fixed Amount: USD 40,000
FLOATING AMOUNTS:
Floating Rate Payer (Cap): Chase Bank of Texas National
Association
Cap Rate: 6.35 PERCENT
Floating Rate Payer (Floor): Counterparty
Floor Rate: 6.00 percent
Designated Maturity: One month
Floating Rate Day Count Fraction: Actual/360
Floating Rate Payment Dates: The 2nd day of each month of
each year commencing
February 2, 2000 to and
including the Termination
Date, subject to adjustment
in accordance with the
Modified Following Business
Day convention.
Floating Rate Option: USD-CP-H.15
2
<PAGE> 3
Reset Dates: Each Business Day of each
Calculation Period
Business Days: New York Business Days
Method of Averaging: Unweighted Average
Calculation Agent: CBT
Assignment: This Rate Collar Transaction
may be assigned only with
prior written consent.
Legal and Out-of-Pocket Expenses: For each party's own account
Governing Law: The Laws of the State of
Texas
Payments to CBT: Chase Bank of Texas - Houston
ABA No. 113-000-609 Capital
Markets Dept. - Rate Swaps
CR Acct. No. 00100381608
Attn: Tony Reyes
Other provisions: Counterparty agrees to
deliver to CBT an opinion
of counsel in form and
substance satisfactory to
CBT.
Each party has entered into this Rate Collar Transaction solely in reliance on
its own judgement. Neither party has any fiduciary obligation to the other party
relating to this Rate Collar Transaction. In addition, neither party has held
itself out as advising, or has held out any of its employees or agents as having
the authority to advise, the other party as to whether or not the other party
should enter into this Rate Collar Transaction, any subsequent actions relating
to this Rate Collar Transaction or any other matters relating to this Rate
Collar Transaction. Neither party shall have any responsibility or liability
whatsoever in respect of any advice of this nature given, or views expressed, by
it or any of such persons to the other party relating to this Rate Collar
Transaction, whether or not such advice is given or such views are expressed at
the request of the other party.
THE AGREEMENT AND THIS WRITTEN CONFIRMATION REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
3
<PAGE> 4
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding within two (2) Business Days be returning via
facsimile an executed copy of this letter agreement to the attention of JIM
SHIELDS (facsimile no. (713) 216-4919; telephone no. (713) 216-5482.)
Chase Bank of Texas is please to have concluded this transaction with you.
Very truly yours,
CHASE BANK OF TEXAS
NATIONAL ASSOCIATION
By: /s/ Steve Shipley
---------------------------
Steve Shipley
Vice President
Accepted and confirmed as
of the date first written:
SIRROM CAPITAL CORPORATION
By: /s/ Carl Stratton
-------------------------------
Name: Carl W. Stratton
Title: CFO
4
<PAGE> 1
[CHASE LOGO]
CAPITAL MARKETS
Dated as of May 7, 1998 707 Travis Street
Houston, Texas 77002-8095
(713) 216-6548
WATS (800) 732-5519
Fax (713) 216-4919
Sirrom Capital Corporation
500 Church St., Suite 200
Nashville, TN 37219
Attn: Carl Stratton
Re: SWAP TRANSACTION (OUR REFERENCE NO. 992)
Ladies and Gentlemen:
The purpose of this letter agreement is to set forth the terms and conditions of
the Swap Transaction entered into between us on the Trade Date below (the "Swap
Transaction"). It constitutes a "Confirmation" as referred to in the Master
Agreement described below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swap Dealers Association, Inc., now known as the
International Swaps and Derivatives Association, Inc. ("ISDA")) are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will govern.
Each party represents and warrants to the other that (i) it is duly authorized
to enter into this Swap Transaction and to perform its obligations hereunder and
(ii) the person executing this Confirmation is duly authorized to execute and
deliver it.
1. This Confirmation supplements, forms part of, and is subject to, the Master
Agreement inthe form published by ISDA (the "Agreement"), as if you and we
had executed that agreement (but without any Schedule thereto) and the
Agreement shall be governed by and construed in accordance with the laws of
the State of Texas. All provisions contained or incorporated by reference
in the Agreement shall govern this Confirmation except as expressly modified
below. In addition, you and we agree to use our best efforts promptly to
negotiate, execute and deliver a Master Agreement (in the form published by
ISDA). Upon execution and delivery to you and us of that agreement (i) this
Confirmation shall supplement, form a part of, and be subject to that
agreement and (ii) all provisions contained or incorporated by reference in
that agreement shall govern this Confirmation except as expressly modified
below.
2. The terms of the particular Rate Swap Transaction to which this Confirmation
relates are as follows:
<PAGE> 2
Notional Amount: $100,000,000
Trade Date: May 7, 1998
Effective Date: September 1, 1998
Termination Date: January 2, 2002
FIXED AMOUNTS:
Fixed Rate Payer: Sirrom Capital Corporation
("Counterparty")
Fixed Rate Payer Payment Dates: The 1st day of each month of
each year, commencing October
1, 1998 to and including the
Termination Date, subject to
adjustment in accordance with
the Modified Following
Business Day Convention.
Fixed Rate: 6.00 percent
Fixed Rate Day Count Fraction: Actual/360
FLOATING AMOUNTS:
Floating Rate Payer: Chase Bank of Texas National
Association ("CBT")
Floating Rate Payer Payment Dates: Same as the Fixed Rate Payer
Payment Dates
Floating Rate for the Initial
Calculation Period: To be determined
Floating Rate Option: USD-CP-H.15
"USD-CP-H.15" means that the rate for a Reset Date will be the Money
Market Yield of the rate set forth in H.15(519) for that day opposite
the Designated Maturity under the caption "Commercial
Paper-Nonfinancial". If on the Calculation Date for a Calculation
Period such rate for a Reset Date in that Calculation Period is not yet
published in H.15(519), the rate for that Reset Date will be determined
as if the parties had specified "USD-CP-Reference Dealers" as the
applicable Floating Rate Option.
2
<PAGE> 3
"USD-CP-Reference Dealers" means that the rate for a Reset Date will be
the Money Market Yield of the arithmetic mean of the offered rates of
the Reference Dealers as of 11:00 am, New York City time, on that day
for the U.S. Dollar commercial paper of the Designated Maturity placed
for industrial issuers whose bond rating is "Aa" or the equivalent
froma nationally recognized rating agency.
Designated Maturity: One month
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each Business Day of each
Calculation Period
Business Days: New York Business Days
Method of Averaging: Unweighted Average
Calculation Agent: CBT
Payments to CBT: Chase Bank of Texas - Houston
ABA No. 113-000-609
Capital Markets Dept. - Rate
Swaps
CR Acct. No. 00100381608
Attn: Ginger Vollert
Payments to Counterparty: Counterparty to provide
information to CBT
Governing Law: The laws of the State of Texas
Other provisions: Counterparty agrees to deliver
to CBT an opinion of counsel
in form and substance
satisfactory to CBT.
Each party has entered into this Swap Transaction solely in reliance on its own
judgement. Neither party has any fiduciary obligation to the other party
relating to this Swap Transaction. In addition, neither party has held itself
out as advising, or has held out any of its employees or agents as having the
authority to advise, the other party as to whether or not the other party should
enter into this Swap Transaction, any subsequent actions relating to this Swap
Transaction or any other matters relating to this Swap Transaction. Neither
party shall have any responsibility or liability whatsoever in respect of any
advice of this nature given, or views expressed, by it or any of such persons to
the other party relating to this Swap Transaction, whether or not such advice is
given or such views are expressed at the request of the other party.
3
<PAGE> 4
THE AGREEMENT AND THIS WRITTEN CONFIRMATION REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding within two (2) Business Days be returning via
facsimile an executed copy of this letter agreement to the attention of JIM
SHIELDS (facsimile no. (713) 216-4919; telephone no. (713) 216-5482.)
Chase Bank of Texas is please to have concluded this transaction with you.
Very truly yours,
CHASE BANK OF TEXAS
NATIONAL ASSOCIATION
By: /s/ Steve Shipley
--------------------------------
Steve Shipley
Vice President
Accepted and confirmed as
of the date first written:
SIRROM CAPITAL CORPORATION
By: /s/ Carl Stratton
----------------------------
Name: Carl W. Stratton
Title: CFO
4
<PAGE> 5
SIRROM CAPITAL CORPORATION
ACCRETION SCHEDULES/SWAP #992
<TABLE>
<CAPTION>
Calculation Period Calculation Period USD Notional
- ------------------ ------------------ ------------
Start Date End Date Amount
---------- -------- ------
<S> <C> <C>
09/01/98 10/01/98 $20,000,000
10/01/98 11/02/98 $40,000,000
11/02/98 12/01/98 $60,000,000
12/01/98 01/04/99 $80,000,000
01/04/99 02/01/99 $100,000,000
02/01/99 03/01/99 $100,000,000
03/01/99 04/01/99 $100,000,000
04/01/99 05/03/99 $100,000,000
05/03/99 06/01/99 $100,000,000
06/01/99 07/01/99 $100,000,000
07/01/99 08/02/99 $100,000,000
08/02/99 09/01/99 $100,000,000
09/01/99 10/01/99 $100,000,000
10/01/99 11/01/99 $100,000,000
11/01/99 12/01/99 $100,000,000
12/01/99 01/03/00 $100,000,000
01/03/00 02/01/00 $100,000,000
02/01/00 03/01/00 $100,000,000
03/01/00 04/03/00 $100,000,000
04/03/00 05/01/00 $100,000,000
05/01/00 06/01/00 $100,000,000
06/01/00 07/03/00 $100,000,000
07/03/00 08/01/00 $100,000,000
08/01/00 09/01/00 $100,000,000
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Calculation Period Calculation Period USD Notional
- ------------------ ------------------ ------------
Start Date End Date Amount
---------- -------- ------
<S> <C> <C>
09/01/00 10/02/00 $100,000,000
10/02/00 11/01/00 $100,000,000
11/01/00 12/01/00 $100,000,000
12/01/00 01/02/01 $100,000,000
01/02/01 02/01/01 $100,000,000
02/02/01 03/01/01 $100,000,000
03/01/01 04/02/01 $100,000,000
04/02/01 05/01/01 $100,000,000
05/01/01 06/01/01 $100,000,000
06/01/01 07/02/01 $100,000,000
07/02/01 08/01/01 $100,000,000
08/01/01 09/04/01 $100,000,000
09/04/01 10/01/01 $100,000,000
10/01/01 11/01/01 $100,000,000
11/01/01 12/03/01 $100,000,000
12/03/01 01/02/00 $100,000,000
</TABLE>
6
<PAGE> 1
AMENDMENT NO. 1 TO THE SERIES 1996-1 SUPPLEMENT, dated as of
March 31, 1998 (the "Amendment") made by and among SIRROM FUNDING CORPORATION, a
Delaware corporation, as issuer (the "Issuer"), SIRROM CAPITAL CORPORATION, a
Tennessee corporation, as initial Servicer (in such capacity, the "Servicer"),
FIRST TRUST NATIONAL ASSOCIATION, as Trustee (in such capacity, together with
any successor in such capacity, the "Trustee") and ING BARING (U.S.) CAPITAL
MARKETS, INC.("ING"), as Program Agent (the "Program Agent"). Capitalized terms
used herein which are not otherwise defined herein shall have the meanings
assigned to such terms as under the Indenture.
PRELIMINARY STATEMENT
A. The Issuer, the Servicer, and the Trustee are parties to
that certain Master Trust Indenture and Security Agreement dated as of December
31, 1996 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Indenture");
B. The Issuer, the Servicer, the Trustee and the Program Agent
have entered into that certain Series 1996-1 Supplement (the "Supplement") to
provide for the issuance of the Revolving Notes, Series 1996-1 with the
Principal Terms as set forth therein;
C. Pursuant to that certain Note Purchase Agreement dated as
of December 31, 1996 among the Issuer, Holland Limited Securitization, Inc. (as
"Purchaser") and the Program Agent, the Purchaser acquired the Revolving Note,
Series 1996-1 in the Stated Amount of $100,000,000 (the "Note") issued by the
Issuer pursuant to the Indenture and the Supplement;
D. Each of the parties hereto agree to amend the Supplement
and increase the Stated Amount of the Note pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments. Subject to the satisfaction of the
conditions precedent set forth in Section 2 below, the Supplement is hereby
amended as follows:
(a) The second sentence in Section 1.01 (a) of the Supplement
is hereby amended be deleting the amount "$100,000,000" and substituting
"$200,000,000" therefor; and
(b) The defined term "Stated Amount" as set forth in Section
1.02 of the Supplement is hereby amended by deleting the amount "$100,000,000"
and substituting "$200,000,000" therefor.
<PAGE> 2
SECTION 2. Conditions Precedent. This Amendment shall become
effective and shall hereby be deemed effective as of the date first above
written and upon:
(a) the receipt of the Program Agent of:
(i) signed counterparts of this Amendment duly executed by
each of the parties hereto;
(ii) written consent of the Purchaser (representing the holder
of 100% of the Outstanding Principal Balance of the Series 1996-1
Notes) and the Enhancement Agent, approving the amendments as herein
set forth;
(iii) evidence that the Trustee has delivered executed copies
of this Amendment to each Noteholder under Series 1996-1, the
Enhancement Provider, Standard & Poor Corporation and Fitch Investors
Service, L.P.;
(iv) receipt by the Purchaser of all amounts due and payable
in respect to the increase in the Stated Amount of the Series 1996-1
Note pursuant to the terms of that certain Fee Agreement is dated as of
December 31, 1996 among the Servicer, the Issuer and the Program Agent;
and
(v) amendments to the Swap Agreement in form and substance
satisfactory to the Program Agent;
(b) delivery by the Purchaser of the Note to the Issuer, which
shall be delivered to the Trustee for cancellation upon receipt by the Trustee;
and
(c) receipt by the Purchaser of an Amended and Restated Series
1996-1 Revolving Note, substantially in the form of Exhibit A hereto, in favor
of the Purchaser, executed by the Issuer and authenticated and delivered by the
Trustee pursuant to the terms of the Indenture and the Supplement.
SECTION 3. Miscellaneous.
3.1 Ratification and Acknowledgment. As amended hereby, the
Supplement is in all respects ratified and confirmed and the Supplement, as so
supplemented by this Amendment shall be read, taken and so construed as one and
the same instrument. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of any party under
the Indenture nor the Supplement, nor constitute a waiver of any provision
contained therein, except as specifically set forth herein.
- 2 -
<PAGE> 3
3.2 Amendment. The terms of this Amendment shall not be
waived, altered, modified, amended or supplemented in any manner whatsoever
except by written instrument executed by all parties hereto.
3.3 Representations and Warranties. Each of the parties hereto
represents and warrants that this Amendment has been duly authorized, executed
and delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws affecting creditors' rights generally and by
general principles of equity, whether in a proceeding at law or in equity.
3.4 Parties; Severability. Whenever in this Amendment there is
a reference made to any of the parties hereto, such reference shall also be a
reference to the successors and assigns of such party, including, without
limitation, a debtor-in-possession or trustee. The provisions of this Amendment
shall be binding upon and inure to the benefit of the successors and assigns of
the parties hereto. Whenever possible, each provision of this Amendment shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Amendment shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Amendment.
3.5 Execution in Counterparts; Governing Law This Amendment
may be executed in any numbers of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same instrument. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
3.6 Section Titles. The section titles contained in this
Amendment are and shall be without substance, meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to
the Series 1996-1 Supplement to be executed and delivered by their respective
officers thereunto duly authorized, as of the date first above written.
SIRROM FUNDING CORPORATION,
the Issuer
By: /s/ Carl Stratton
-----------------------------------
Name: Carl W. Stratton
Title: CFO
SIRROM CAPITAL CORPORATION,
the Servicer
By: /s/ Carl Stratton
--=---------------------------------
Name: Carl W. Stratton
Title: CFO
FIRST TRUST NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee
By: /s/ S. Christopherson
-----------------------------------
Name: S. Christopherson
Title: V.P.
ING BARING (U.S.) CAPITAL MARKETS, INC.,
as Program Agent
By: /s/ Richard Wisniewski
------------------------------------
Name: Richard Wisniewski
Title: V.P.
- 4 -
<PAGE> 5
EXHIBIT A
to
Amendment No.1
to
Series 1996-1 Supplement
(Attached.)
- 5 -
<PAGE> 1
THE ISSUER MAKES NO REPRESENTATION HEREUNDER THAT AN
INVESTMENT IN THIS NOTE MEETS THE RELEVANT LEGAL REQUIREMENTS WITH
RESPECT TO INVESTMENTS BY ANY PARTICULAR "EMPLOYEE BENEFIT PLAN" (AS
DEFINED IN THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA")) OR "PLAN" (AS DEFINED IN THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE")) (SUCH "EMPLOYEE BENEFIT PLAN" OR
"PLAN" BEING REFERRED TO HEREIN AS A "PLAN") OR THAT SUCH INVESTMENT IS
APPROPRIATE FOR ANY PARTICULAR PLAN. EACH PLAN THAT PURCHASES THIS NOTE
WILL BE DEEMED TO REPRESENT AND WARRANT THAT THE ACQUISITION AND
HOLDING OF THIS NOTE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED
TRANSACTION UNDER ERISA OR THE CODE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES OF
AMERICA. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS
NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
IF (I) SUCH SALE IS TO A PERSON THAT SUCH HOLDER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF ANOTHER PERSON THAT IS A QUALIFIED INSTITUTIONAL
BUYER, WHICH PERSON IS AWARE THAT THE PROPOSED SALE IS BEING MADE IN
RELIANCE ON RULE 144A AND TO WHOM SUCH SALE IS BEING MADE PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE
STATE SECURITIES LAWS, AND, PRIOR TO THE PROPOSED SALE, SUCH
TRANSFERRING HOLDER HAS EXECUTED AND DELIVERED TO THE TRUSTEE AND THE
ISSUER AN INVESTOR LETTER IN THE FORM OF EXHIBIT B-1 TO THE SUPPLEMENT
REFERRED TO BELOW, OR (II) THE TRANSFEREE TO WHOM SUCH SALE IS BEING
MADE IS A SOPHISTICATED INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED
INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, AND TO WHOM SUCH SALE IS BEING MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE
STATE SECURITIES LAWS, AND, PRIOR TO THE PROPOSED SALE, SUCH
TRANSFERRING HOLDER HAS EXECUTED AND DELIVERED TO THE TRUSTEE AND THE
ISSUER AN INVESTOR LETTER IN THE FORM OF EXHIBIT B-2 TO THE SUPPLEMENT
REFERRED TO BELOW, AND IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES OF AMERICA OR OTHER APPLICABLE
JURISDICTION AND SECURITIES AND BLUE SKY LAWS OF THE STATES OF THE
UNITED STATES
<PAGE> 2
OF AMERICA. THE HOLDER OF THIS NOTE AGREES THAT IT WILL, AND EACH
SUBSEQUENT NOTEHOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE
OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND
MAY NOT BE OFFERED OR SOLD IN CONTRAVENTION OF THAT ACT. THIS NOTE WILL
NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION
OF EVIDENCE SATISFACTORY TO THE TRUSTEE (AS DEFINED IN THE INDENTURE)
THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE INDENTURE HAVE BEEN
COMPLIED WITH.
Definitive Note
Sirrom Funding Corporation
Amended and Restated Revolving Note, Series 1996-1
Stated Amount: $200,000,000
Sirrom Funding Corporation, a corporation duly organized and
existing under the laws of Delaware (herein called the "Issuer," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to the order of HOLLAND LIMITED
SECURITIZATION, INC. or its registered assigns (the "Holder"), on the "Stated
Maturity Date" (as defined in the "Supplement" referred to below), the principal
amount of TWO HUNDRED MILLION & NO/100 DOLLARS ($200,000,000), or, if less, the
aggregate unpaid principal amount of all Advances made by the Holder from time
to time, and to pay interest on the outstanding principal balance hereof as set
forth in the Indenture and the Supplement.
This Amended and Restated Revolving Note (the "Amended and
Restated Note") is one of a duly authorized issue of securities of the Issuer
designated as its "Revolving Notes, Series 1996-1" (herein called the "Notes"),
issued pursuant to (a) that certain Master Trust Indenture and Security
Agreement dated as of December 31, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), among the Issuer, as
issuer, Sirrom Capital Corporation, a Tennessee corporation, as servicer (the
"Servicer", which term includes any successor Servicer under the Indenture), and
First Trust National Association, as trustee (the "Trustee," which term includes
any successor Trustee under the Indenture), and (b) that certain Series 1996-1
Supplement dated as of December 31, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Supplement") among the Issuer, as
- 2 -
<PAGE> 3
issuer, the Servicer, as servicer, and the Trustee, as trustee. Reference is
hereby made to the Indenture and the Supplement for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Issuer, the Servicer, the Trustee and each of the Series 1996-1 Noteholders
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. All terms used in this Amended and Restated Note which are not
defined herein shall have the meanings assigned to them in the Indenture and
Supplement.
The unpaid balance of the indebtedness evidenced by that
certain Revolving Note, Series 1996-1 dated as of December 31, 1996, in the
Stated Amount of $100,000,000 (the "Original Note"), remains outstanding as of
the date hereof and shall continue to be secured pursuant to the terms under the
Indenture and the Supplement. The principal balance of this Amended and Restated
Note includes the indebtedness hitherto evidenced by the Original Note and to
the extent such indebtedness is included in this Amended and Restated Note, this
Amended and Restated Note (i) merely re-evidences the indebtedness hitherto
evidenced by the Original Note, (ii) is given in substitution for, and not as
payment of the Original Note, and (iii) is in no way intended to constitute a
novation of the Original Note.
The Holder hereof shall and is hereby authorized to record on
the grid attached to this Amended and Restated Note (or at such Holder's option,
in its internal books and records) the date and amount of each Advance made by
it, the amount of each repayment of the principal amount represented by this
Amended and Restated Note and any reductions to the Stated Amount of this Note
made pursuant to Section 6.08 of the Supplement; provided however, that failure
to make any such recordation on the grid or records or any error in the grid or
records shall not adversely affect the Holder's rights to receive all payments
of principal and interest with respect to the Advances evidenced hereby.
Payment of the principal of (and premium, if any) and interest
on this Amended and Restated Note will be made in accordance with the Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee or any authenticating agent designated by it by manual
signature, this Amended and Restated Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
As provided in the Indenture, the Notes are secured by the
Pledged Assets. The Trustee shall be entitled to the benefits of a perfected,
first priority security interest in the Pledged Assets, subject only to
permitted Liens, for the benefit of each holder accepting a Note.
The Indenture and the Supplement may be amended and the rights
and obligations of the parties thereto and of the Holder of this Amended and
Restated Note may be modified as set forth in the Indenture and the Supplement.
This Amended and Restated Note is subject to prepayment and/or
redemption, prior to the Stated Maturity Date as set forth in the Indenture and
the Supplement.
- 3 -
<PAGE> 4
The Indenture contains provisions for satisfaction and
discharge of the Indenture upon compliance by the Issuer with certain conditions
set forth therein, which provisions apply to this Amended and Restated Note.
This Amended and Restated Note represents a limited recourse
obligation of the Issuer and the Holder's sole recourse for payment of amounts
owed hereunder will be to its allocable share of the Pledged Assets as described
in the Indenture and the Supplement. This Amended and Restated Note is
non-recourse to the Issuer's assets other than such Holder's allocable share of
the Pledged Assets and is non-recourse to the Servicer and any of the Issuer's
Affiliates. To the extent that amounts owing under this Amended and Restated
Note cannot be satisfied out of such Holder's allocable share, the Holder shall
have no Claim against the Issuer for such deficiency.
The Notes are issuable only in denominations of $250,000 or in
integral multiples of $100,000 in excess thereof.
Prior to due presentment of this Amended and Restated Note for
registration of transfer, the Issuer, the Servicer, the Trustee or any agent of
any of them may treat the Person in whose name this Amended and Restated Note is
registered as the owner hereof for all purposes, whether or not this Amended and
Restated Note is overdue, and neither the Issuer, the Servicer, the Trustee nor
any such agent shall be affected by notice to the contrary.
THIS AMENDED AND RESTATED NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO CONFLICT OF LAWS PRINCIPLES EXCEPT AS CONTEMPLATED IN SECTION 5-104
OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be duly executed under its corporate seal.
Dated: March 31, 1998 SIRROM FUNDING CORPORATION
[CORPORATE SEAL] By:
---------------------------
Title:
- 4 -
<PAGE> 5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
FIRST TRUST NATIONAL ASSOCIATION
By:
------------------------------
as Authenticating Agent
By:
------------------------------
Authorized Officer
- 5 -
<PAGE> 6
SCHEDULE A
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Type of Transaction Amount of Increase
(Advance/ (Decrease) in
Repayment/ Change Outstanding
in Stated Amount) Principal Amount or Principal Amount
Stated Amount Following Stated Amount Signature of
Date of Transaction Transaction Following Authorized Officer
Transaction
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 6 -
<PAGE> 7
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 622,583,211
<INVESTMENTS-AT-VALUE> 627,956,464
<RECEIVABLES> 9,540,396
<ASSETS-OTHER> 11,123,550
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 644,620,410
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 212,169,000
<OTHER-ITEMS-LIABILITIES> 8,842,748
<TOTAL-LIABILITIES> 221,011,748
<SENIOR-EQUITY> 397,274,134
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 37,229,196
<SHARES-COMMON-PRIOR> 37,119,138
<ACCUMULATED-NII-CURRENT> 12,949,064
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,324,308)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,373,242
<NET-ASSETS> 423,608,662
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,389,161
<OTHER-INCOME> 4,278,700
<EXPENSES-NET> 6,718,797
<NET-INVESTMENT-INCOME> 12,949,064
<REALIZED-GAINS-CURRENT> (5,742,892)
<APPREC-INCREASE-CURRENT> (4,942,194)
<NET-CHANGE-FROM-OPS> 1,682,562
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,306,659
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 107,500
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 2,558
<NET-CHANGE-IN-ASSETS> 74,734,740
<ACCUMULATED-NII-PRIOR> 33,033,832
<ACCUMULATED-GAINS-PRIOR> 10,722,158
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 3,238,996
<GROSS-EXPENSE> 6,718,797
<AVERAGE-NET-ASSETS> 426,715,350
<PER-SHARE-NAV-BEGIN> 11.58
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> (.28)
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.38
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 172,342,000
<AVG-DEBT-PER-SHARE> 4.63
</TABLE>
