-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HklO8orb29EwKmo3Kw4B/HtjfwObc6eXmdMMQ1gUQIOIaA5/YN2kGQCf3tN482F+ gwksnW+vF5PlAUGp4ku5ag== 0000919567-96-000033.txt : 19960816 0000919567-96-000033.hdr.sgml : 19960816 ACCESSION NUMBER: 0000919567-96-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENAISSANCE CAPITAL GROWTH & INCOME FUND III INC CENTRAL INDEX KEY: 0000919567 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752533518 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11701 FILM NUMBER: 96613638 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPRWY STREET 2: STE 210 LB59 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918294 MAIL ADDRESS: STREET 1: 8080 N CENTRAL EXPWY., SUITE 210 LB 59 CITY: DALLAS STATE: TX ZIP: 75206 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended June 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _________________ Commission File Number: 0-20671 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. --------------------------------------------------------------- (Exact name of registrant as specified in its charter) Texas 75-2533518 --------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer I.D. No.) of incorporation or organization) 8080 North Central Expressway, Dallas, Texas 75206-1857 ---------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 214/891-8294 ---------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes___X___ No_______ 4,321,947 shares of common stock outstanding at June 30, 1996. The Registrant's Registration Statement on Form N-2 was declared effective by the Securities and Exchange Commission on May 6, 1994. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Assets and Liabilities (Unaudited) Assets - ------ December 31, 1995 June 30, 1996 ----------------- ------------- Cash $3,378,905 $ 4,460,347 Accounts receivable 3,163,359 262,883 Temporary investments at market value cost of $21,348,889 and $17,353,780 21,550,005 17,923,571 Investments, at market value, cost of $12,948,546 and $18,154,182 13,445,700 20,157,292 Organizational costs, net of accumulated amortization 457,946 396,105 ----------- ---------- 41,995,915 43,200,198 Liabilities ----------- Liabilities: Accounts payable - related parties 307,607 254,579 Accounts payable - trade - 6,474 Subscriptions payable - 394,321 Dividends payable 1,188,136 655,374 --------- --------- 1,495,743 1,310,748 --------- --------- Net Assets: Common stock, $1 par value; 20,000,000 shares authorized; 4,244,630 and 4,385,352 shares issued and outstanding 39,776,354 40,560,958 Accumulated undistributed income (loss) 723,818 1,983,866 ----------- ---------- Net assets $40,500,172 $42,544,824 =========== =========== Net asset value per share $ 9.54 $ 9.71 =========== =========== See accompanying notes to financial statements. 3 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, LTD. STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 1995 1996 1995 1996 -------- -------- -------- -------- Investment Income: Interest $ 583,475 $ 656,243 $ 1,325,394 $ 1,114,141 Dividends 60,714 75,247 128,214 156,190 Other income 54,179 48,500 67,679 118,500 ----------- --------- --------- --------- Total investment income 698,368 779,990 1,521,287 1,388,831 ----------- -------- --------- --------- Expenses: Amortization 31,092 31,092 61,842 61,842 Bank charges 5,751 - 16,548 5,851 Directors' fees 15,000 18,000 25,500 32,000 Legal and professional 48,879 47,343 94,511 99,150 Management fees 175,494 198,230 346,259 375,575 Taxes 5,574 31,965 44,267 31,965 Other 37,788 71,877 45,073 92,559 --------- --------- --------- --------- Total expenses 319,578 398,507 634,000 698,942 --------- --------- --------- -------- Net investment income 378,790 381,483 887,287 689,889 Net unrealized gain (loss) on investments 881,581 652,151 (116,964) 1,401,441 ---------- ---------- -------- --------- Net increase in net assets resulting from operations $1,260,371 $1,033,634 $770,323 $2,091,330 ========== ========== ======== ==========
See accompanying notes to financial statements. 4 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Changes in Net Assets (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 1995 1996 1995 1996 -------- -------- -------- -------- Decrease in net assets resulting from operations Investment income - net $ 378,790 $ 381,483 887,287 689,889 Unrealized gain (loss) on investments 881,581 652,151 (116,964) 1,401,441 ---------- ----------- --------- --------- Net increase in net assets resulting from operations 1,260,371 1,033,634 770,323 2,091,330 Distributions to shareholders from net investment income (294,757) (394,321) (501,727) (831,284) Capital share transactions 110,514 163,931 86,234 784,606 ---------- --------- -------- --------- Total increase 1,076,128 803,244 754,830 2,044,652 Net assets Beginning of period 38,861,227 41,741,579 39,182,525 40,500,172 ---------- ---------- ---------- ---------- End of period $39,937,355 $42,544,823 $39,937,355 $42,544,824 =========== =========== =========== ===========
See accompanying notes to financial statements. 5 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements June 30, 1996 1. ORGANIZATION AND BUSINESS PURPOSE Renaissance Capital Growth & Income Fund III, Inc. (the "Fund"), a Texas Corporation, was incorporated on January 20, 1994 and had no operations prior to June 24, 1994. The Fund seeks to achieve current income and capital appreciation potential by investing primarily in unregistered preferred stock investments of small and medium size companies which are in need of capital and which it believes offer the opportunity for growth. The Fund has elected to be treated as a business development company under the Investment Company Act of 1940, as amended ("1940 Act"). 2. SIGNIFICANT ACCOUNTING POLICIES A. Federal Income Taxes - The Fund intends to elect the special income tax treatment available to "regulated investment companies" under Subchapter M of the Internal Revenue Code in order to be relieved of federal income tax on that part of its net investment income and realized capital gains that it pays out to its shareholders. The Fund's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required. B. Distributions to Shareholders - Dividends to shareholders are recorded on the ex-dividend date. The Fund declared dividends of $390,542 for the quarter ended June 30, 1996. C. Management Estimates - The financial statements have been prepared in conformity with generally accepted accounting principles. The preparation of the accompanying financial statements requires estimates and assumptions made by management of the Fund that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and income and expenses for the period. Actual results could differ significantly from those estimates. D. Financial Instruments - In accordance with the reporting requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the Company calculates the fair value of its financial instruments and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made. 3. ORGANIZATION EXPENSES In connection with the offering of its shares, the Fund paid Renaissance Capital Group, Inc. (the "Investment Adviser") organizational expenses of $623,544. Such expenses are deferred and amortized on a straight-line basis over a five-year period. Amortization expense for the quarter ended June 30, 1996, was $31,092. 6 4. INVESTMENT ADVISORY AGREEMENT The Investment Adviser for the Fund is registered as an investment adviser under the Investment Advisers Act of 1940. Pursuant to an Investment Advisory Agreement, the Investment Adviser performs certain services, including certain management, investment advisory and administrative services necessary for the operation of the Fund. The Investment Adviser receives a fee equal to .4375% (1.75% annually) of the Net Assets each quarter. The Fund accrued a liability of $189,205 for such operational management fees performed during the quarter ended June 30, 1996. In addition, the Fund has agreed to pay the Investment Adviser an incentive fee equal to 20% of any net realized capital gains after allowance for any unrealized capital loss of the Fund. This management incentive fee is calculated on an annual basis. 5. CAPITAL SHARE TRANSACTIONS As of June 30, 1996 there were 20,000,000 shares of $1 par value capital stock authorized and capital paid-in aggregated $40,560,958. Year-to-date transactions in capital stock are as follows: Shares Amount ------ ------ Balance December 31, 1995 4,244,630 $39,776,354 Shares issued Six months ended June 30, 1996: Shares issued to original stockholders 10,000 -- Shares issued in lieu of cash distributions 130,722 784,604 --------- ----------- Balance June 30, 1996 4,385,352 $40,560,958 ========= =========== The Fund received $357,250 from its shareholders during the prior quarter. This, combined with $231,076 from the dividend reinvestment program, provided $588,326 with which to purchase shares. The Fund purchased 46,000 shares for $424,035 on the open market, and 17,403 shares for $164,291 from treasury stock. These shares were purchased before June 14, 1996. 6. RELATED PARTY TRANSACTIONS The Investment Adviser is reimbursed by the Fund for certain administrative expenses under the Investment Advisory Agreement. Such reimbursements were $186,371 for the quarter ended June 30, 1996. 7. SHORT-TERM INVESTMENTS Short-term investments are comprised of U. S. Government and Agency obligations maturing between April 25, 1996 and December 31, 1996. Such investments qualify for investment as permitted in Section 55(a) (1) through(5) of the 1940 Act. 8. INVESTMENTS The Fund invests primarily in convertible securities and equity investments of companies that qualify as Eligible Portfolio Companies as defined in Section 2(a) (46) of the 1940 Act or in securities that otherwise qualify for investment as permitted in Section 55(a) (1) through (5). Under the provisions of the 1940 Act at least 70% of the Fund's assets must be invested in Eligible Portfolio Companies. These stocks are carried on the Statement of Assets and Liabilities as of June 30, 1996 at fair value, as determined in good faith 7 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) June 30, 1996 8. INVESTMEMTS (continued) by the Investment Adviser. The securities held by the Fund are unregistered and their value does not necessarily represent the amounts that may be realized from their immediate sale or disposition. The investments held by the Fund are convertible, generally after five years, into the common stock of the issuer at a set conversion price. The common stock acquired upon exercise of the conversion feature is generally unregistered and is thinly to moderately traded but is not otherwise restricted. The Fund generally may register and sell such securities at any time with the Fund paying the costs of registration. Dividends are generally payable monthly. The stocks often have call options, usually commencing three years subsequent to issuance, at prices specified in the stock agreements. INVESTMENT VALUATION SUMMARY CONVERSION FAIR COST OR FACE VALUE VALUE Interscience Computer Corporation Series A Cumulative Convertible $4,000,000 $4,000,000 $4,000,000 Redeemable Preferred Stock Bentley Pharmaceutical Convertible Debenture 800,000 2,010,000 2,010,000 and Warrants Dwyer Group, Inc. Common Stock 2,054,182 2,187,500 2,068,125 Packaging Research Corp. Convertible Debenture 3,200,000 3,200,000 3,200,000 Poore Bros., Inc. Convertible Debenture 2,100,000 2,100,000 2,100,000 Topro, Inc. Convertible Debentures 2,500,000 3,541,667 3,279,167 Convertible Debenture 1,000,000 1,000,000 1,000,000 Voice It Worldwide, Inc. 8% Convertible Debenture 2,450,000 2,450,000 2,450,000 Warrants 50,000 50,000 50,000 ----------- ----------- ----------- $18,154,182 $20,539,167 $20,157,292 =========== =========== =========== The Fund has purchased an additional 123,500 shares of Dwyer Group, Inc., for an additional $309,675. The Fund also purchased 4,000 shares of Interscience Computer Corporation Series B convertible preferred stock for $400,000. 8 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (1) Material Changes in Financial Condition Discuss material changes from end of preceding fiscal year to date of most recent interim balance sheet provided. If necessary for an understanding discuss seasonal fluctuations. The following portfolio transactions are noted for the quarter. Portfolio companies are referred to as the "Company": THE DWYER GROUP - During the quarter ended June 30, 1996, the Registrant has purchased an additional 123,600 shares of common stock of the Company at an average price of $2.51 for a total aggregate consideration of $309,924.77. The Registrant now holds 700,000 shares of the Company for an aggregate cost of $2,054,181.72. TOPRO, INC. - On June 17, 1996, the Registrant additionally invested $1,000,000 in a 9% Convertible Debenture with a conversion price of $2.25. Mandatory principle begins June 1, 1999, and monthly interest installments begin July 1, 1996. This brings the Registrant's total investment in Topro to $3,500,000. Topro, Inc. is a provider of control systems integration services based in Denver, Colorado. INTERSCIENCE COMPUTER CORPORATION - Subsequent to the end of the quarter, on April 4, 1996, the Registrant invested $400,000 in 4,000 shares of Series B Convertible Preferred Stock. This brings the Registrant's total investment in Interscience's preferred stock to $4,000,000. CONTOUR MEDICAL, INC. - Subsequent to the quarter on July 12, 1996, the Registrant invested $2,500,000 for the purchase of a 9% Convertible Debenture maturing in 7 years and convertible into 1,000,000 shares of Contour Medical, Inc. common stock. The Company manufactures orthopedic and rehabilitative products as well as a full line of disposable medical products. The Registrant, pursuant to its dividend reinvestment plan that allows existing shareholders to make additional share purchases, received $231,075.77 in additional funds for investment. These shares may be purchased either from the Registrant at the calculated Net Asset Value or purchased in the open market. The Registrant received $357,250.00 from its shareholders during the prior quarter. This, combined with $231,075.77 from the dividend reinvestment program, provided $588,325.77 with which to purchase shares. The Plan Agent purchased 46,000 shares for $424,035.00 on the open market, and 17,403.6832 shares for $164,290.77 from treasury stock. These shares were purchased before June 14, 1996. (2) MATERIAL CHANGES IN OPERAITONS Discuss material changes with respect to the most recent year-to-date period and corresponding period for prior year, if most recent quarter included also covers changes for quarterly period. 9 Pending investment in Portfolio investments, funds are invested in temporary cash accounts and in government securities and income and expenses are essentially stable. The Registrant anticipates an increase in income as investments are made and an aggressive search for potential investments is ongoing. On April 30, 1996, the Registrant's shares began trading on the NASDAQ under the symbol "RENN". The Registrant made dividend distributions of income to the shareholders in the amount of $436,963 and accrued dividend payables to shareholders in the amount of $394,321. 10 PART II - OTHER INFORMATION 1. LEGAL PROCEEDINGS. None. 2. CHANGES IN SECURITIES. None. 3. DEFAULTS UPON SENIOR SECURITIES. None. 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS. None. 5. OTHER INFORMATION. None. 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. August 13, 1996 /s/ Russell Cleveland ----------------------------------------------- Russell Cleveland, President and Chairman August 13, 1996 /s/ Barbe Butschek ----------------------------------------------- Barbe Butschek, Corp. Secretary and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE
6 YEAR 6-MOS 6-MOS 3-MOS 3-MOS DEC-31-1995 DEC-31-1996 DEC-31-1995 DEC-31-1996 DEC-31-1995 DEC-31-1995 JUN-30-1996 JUN-30-1995 JUN-30-1996 JUN-30-1995 34,297,435 35,507,962 0 0 0 34,995,705 38,080,863 0 0 0 3,163,359 262,883 0 0 0 3,836,851 4,856,452 0 0 0 0 0 0 0 0 41,995,915 43,200,198 0 0 0 0 0 0 0 0 0 0 0 0 0 1,495,743 1,310,748 0 0 0 1,495,743 1,310,748 0 0 0 0 0 0 0 0 39,776,354 40,560,958 0 0 0 4,244,630 4,385,352 0 0 0 0 0 0 0 0 723,818 1,983,866 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40,500,172 42,544,824 0 0 0 0 156,190 128,214 75,247 60,714 0 1,114,141 1,325,394 656,243 583,475 0 118,500 67,679 48,500 54,179 0 698,942 634,000 398,507 319,578 0 689,889 887,287 381,483 378,790 0 0 0 0 0 0 1,401,441 (116,964) 652,151 881,581 0 2,091,330 770,323 1,033,634 1,260,371 0 0 0 0 0 0 (831,284) (501,727) (394,321) (294,757) 0 0 0 0 0 0 784,606 486,234 163,931 110,514 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,044,652 754,830 803,244 1,076,128 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 375,575 346,259 198,230 175,494 0 0 0 0 0 0 698,942 634,000 398,507 319,578 0 0 0 0 0 0 9.54 9.42 9.66 9.24 0 .16 .21 .09 .09 0 .32 (.03) .15 .21 0 0 0 0 0 0 (.19) (.12) (.09) (.07) 0 (.12) 0 (.10) .01 0 9.71 9.48 9.71 9.48 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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