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 the Period Ended June 30, 2001
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 33-89506
BERTHEL GROWTH & INCOME TRUST I
(Exact name of Registrant as specified in its charter)
DELAWARE 52-1915821
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
701 Tama Street, Marion, Iowa 52302
(Address of principal executive offices) (Zip Code)
(319) 447-5700
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
--- ---
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Shares of Beneficial Interest - 10,541 shares as of July 27, 2001
2
BERTHEL GROWTH & INCOME TRUST I
INDEX
Part I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements (unaudited)
Consolidated Statements of Assets and Liabilities -
June 30, 2001 and December 31, 2000 3
Consolidated Statements of Operations -
three months ended June 30, 2001 and June 30, 2000 4
Consolidated Statements of Operations -
six months ended June 30, 2001 and June 30, 2000 5
Consolidated Statements of Changes in Net Assets -
six months ended June 30, 2001 and June 30, 2000 6
Consolidated Statements of Cash Flows -
six months ended June 30, 2001 and June 30, 2000 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Part II. OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings 15
SIGNATURES 16
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BERTHEL GROWTH & INCOME TRUST I
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
June 30, 2001 December 31, 2000
------------- -----------------
ASSETS
Loans and investments (Note B) $ 12,209,367 $ 12,559,951
Cash and cash equivalents 472,416 684,244
Interest and dividends receivable, net of reserve
of $-0- at June 30, 2001 and $48,868 at
December 31, 2000 161,474 156,119
Deferred financing costs 265,483 284,780
Other receivables 1,583 7,290
---------------- ----------------
TOTAL ASSETS 13,110,323 13,692,384
---------------- ----------------
LIABILITIES
Accrued interest payable 260,801 257,385
Accounts payable and other accrued expenses 54,029 39,207
Due to affiliate 38,700 105,024
Deferred income 25,592 29,647
Distributions payable to shareholders 2,713,433 2,295,259
Debentures (Note C) 9,500,000 9,500,000
---------------- ----------------
TOTAL LIABILITIES 12,592,555 12,226,522
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
NET ASSETS (equivalent to $49.12 per share
at June 30, 2001 and $139.06 per share
at December 31, 2000) $ 517,768 $ 1,465,862
================ ================
Net assets consist of:
Shares of beneficial interest (25,000 shares
authorized; 10,541 shares issued
and outstanding) $ 4,249,510 $ 4,818,783
Accumulated net realized losses (1,930,000) (1,930,000)
Accumulated net unrealized losses (1,801,742) (1,422,921)
---------------- ----------------
$ 517,768 $ 1,465,862
================ ================
See notes to consolidated financial statements.
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BERTHEL GROWTH & INCOME TRUST I
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
June 30, 2001 June 30, 2000
------------- -------------
REVENUES:
Interest income $ 230,630 $ 212,792
Dividend income 18,000 76,356
Application, closing, and other fees 2,028 5,028
------------- -------------
Total revenues 250,658 294,176
------------- -------------
EXPENSES:
Management fees 82,503 95,860
Administrative services 9,600 9,600
Trustee fees 8,000 8,000
Professional fees 14,286 10,729
Interest expense 200,766 169,711
Other general and administrative expenses 18,032 23,622
------------- -------------
Total expenses 333,187 317,522
------------- -------------
Net investment loss (82,529) (23,346)
Unrealized gain (loss) on investments (555,483) 5,300,963
------------- -------------
Net increase (decrease) in net assets $ (638,012) $ 5,277,617
============= =============
Per beneficial share amounts:
Net increase (decrease) in net assets $ (60.53) $ 500.68
============= =============
Weighted average shares 10,541 10,541
============= =============
See notes to consolidated financial statements.
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BERTHEL GROWTH & INCOME TRUST I
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended
June 30, 2001 June 30, 2000
------------- -------------
REVENUES:
Interest income $ 461,407 $ 389,141
Dividend income 52,667 152,712
Application, closing, and other fees 4,805 6,715
------------- -------------
Total revenues 518,879 548,568
------------- -------------
EXPENSES:
Management fees 164,955 169,535
Administrative services 19,200 19,200
Trustee fees 16,000 16,000
Professional fees 32,466 28,709
Interest expense 402,184 299,421
Other general and administrative expenses 35,173 44,581
------------- -------------
Total expenses 669,978 577,446
------------- -------------
Net investment loss (151,099) (28,878)
Unrealized gain (loss) on investments (378,821) 5,598,713
------------- -------------
Net increase (decrease) in net assets $ (529,920) $ 5,569,835
============= =============
Per beneficial share amounts:
Net increase (decrease) in net assets $ (50.27) $ 528.40
============ =============
Weighted average shares 10,541 10,541
============= =============
See notes to consolidated financial statements.
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BERTHEL GROWTH & INCOME TRUST I
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
--------------- ----------------
Shares of Shares of
Beneficial Beneficial
Interest Amount Interest Amount
---------- ------ ----------- ------
Net investment loss --- $ (151,099) --- $ (28,878)
Unrealized gain (loss) on investments --- (378,821) --- 5,598,713
Distributions payable to shareholders --- (418,174) --- (420,485)
Net assets at beginning of period 10,541 1,465,862 10,541 6,084,733
------ ------------ ------ --------------
Net assets at end of period 10,541 $ 517,768 10,541 $ 11,234,083
====== ============ ====== ==============
See notes to consolidated financial statements.
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BERTHEL GROWTH & INCOME TRUST I
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30, 2001 June 30, 2000
------------- -------------
OPERATING ACTIVITIES:
Net increase (decrease) in net assets $ (529,920) $ 5,569,835
Adjustments to reconcile net increase in net assets
to net cash flows from operating activities:
Amortization 22,052 19,693
Accretion of discount on debt securities (45,313) -0-
Unrealized loss (gain) on investments 378,821 (5,598,713)
Provision for possible losses 922 -0-
Changes in operating assets and liabilities
Loans and investments 17,076 (3,448,442)
Interest and dividends receivable (5,355) (48,138)
Due from affiliate -0- (1,898)
Deferred financing costs (2,755) -0-
Other receivables 4,785 6,171
Other assets -0- (7,573)
Accrued interest payable 3,416 108,240
Accounts payable and other accrued expenses 14,822 (17,390)
Due to affiliate (66,324) (30,744)
Deferred income (4,055) 22,037
------------- --------------
Net cash flows from operating activities (211,828) (3,426,922)
------------- --------------
FINANCING ACTIVITIES:
Deferred financing costs incurred -0- (60,000)
Proceeds from issuance of debentures -0- 2,400,000
------------- --------------
Net cash flows from financing activities -0- 2,340,000
------------- --------------
NET DECREASE IN CASH (211,828) (1,086,922)
CASH AT BEGINNING OF PERIOD 684,244 1,137,535
------------- --------------
CASH AT END OF PERIOD $ 472,416 $ 50,613
=============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 398,768 $ 191,181
Noncash financing activities:
Distributions payable to shareholders 418,174 420,485
See notes to consolidated financial statements.
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BERTHEL GROWTH & INCOME TRUST I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the Trust's Form
10-K for the year ended December 31, 2000, filed with the Securities and
Exchange Commission. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair representation
have been included. Operating results for the six months ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2001.
The preparation of the Trust's financial statements in conformity with
accounting principles generally accepted in the United States of America
necessarily 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 financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Deferred financing costs consist of a 1% Small Business Administration ("SBA")
commitment fee, which is amortized over the commitment period using the
straight-line method, and a 2.5% SBA leverage and underwriting fee, which is
amortized over the life of the loan using the straight-line method. The
straight-line method approximates the interest method and the relating
amortization is reported as amortization expense.
Certain amounts in the 2000 financial statements have been reclassified to
conform with the 2001 financial statement presentation.
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NOTE B -LOANS AND INVESTMENTS
June 30, 2001 December 31, 2000
------------------------------ ------------------------------
Cost Valuation Cost Valuation
Communications and Software:
McLeodUSA, Inc.
38,877 shares of common stock $ 610,000 $ 166,911 $ 610,000 $ 444,494
Object Space, Inc.
108,108 shares of Series B
convertible preferred stock 404,800 --- 404,800 200,000
Edmin.com, Inc.
200,000 shares of 9%, Series A
cumulative convertible preferred stock and
warrants to purchase 20,000 shares of common
stock at $4.00 per share 728,000 1,295,000 728,000 728,000
Chequemate International, Inc.
371,823 shares of common stock --- 56,517 --- 92,956
8% convertible note receivable
due April, 2002 Warrants to purchase 17,838 199,241 --- 181,403
416,441 shares of common stock at $1.00 per share --- --- --- ---
Cadapult Graphic Systems, Inc.
100,000 shares of 11.5%, Series A convertible
preferred stock, options to purchase 15,000 shares
of common stock at $2.19-$3.13 per share, and
warrants to purchase 323,000 shares of common stock 930,000 930,000 930,000 930,000
at $4.50 per share
iBEAM Broadcasting Corporation
545,442 shares of common stock 486,372 232,722 486,372 577,259
---------- ----------
Total Communications and Software
(23.6% and 25.1% of total loans and
investments as of June 30, 2001 and
December 31,2000, respectively) 2,880,391 3,154,112
---------- ----------
Healthcare Products and Services:
Physicians Total Care, Inc.
10% promissory note due September, 2004
and warrants to purchase
350,000 shares of common stock for
at $.035-5.00 per share 807,795 400,000 807,795 400,000
700 shares of common stock 4,000 --- 4,000 ---
Options to purchase 5,000 shares of
common stock at $4.00 per share --- --- --- ---
Inter-Med, Inc.
1,743.248 shares of common stock 650,000 650,000 650,000 650,000
12% promissory notes due July, 2005-June, 2006 181,187 181,187 134,742 134,742
Warrants to purchase 561.0413 shares of
common stock at $.01 per share 22,271 22,271 16,953 16,953
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June 30, 2001 December 31, 2000
------------------------------ ------------------------------
Cost Valuation Cost Valuation
Futuremed Interventional, Inc.
13.5% promissory note due February, 2005 924,731 924,731 914,467 914,467
Warrants to purchase 383,111 shares of
common stock at $.01 per share 102,640 102,640 102,640 102,640
----------- ----------
Total Healthcare Products and Services
(18.7% and 17.7% of total loans and
investments as of June 30, 2001 and
December 31,2000, respectively) 2,280,829 2,218,802
---------- ----------
Manufacturing:
Childs & Albert
12.5% promissory note due October, 2005 738,749 738,749 731,543 731,543
Warrants to purchase 833.334 shares of
common stock at $10 per share 72,065 72,065 72,065 72,065
Easy Systems, Inc.
11% subordinated debenture due March,
2004 and warrants to purchase
291,393 shares of stock at $2.10 per share 777,422 100,000 777,422 100,000
142,857 shares of Series B preferred stock
and warrants to purchase
240,000 shares of common stock at $2.10 per share 300,000 --- 300,000 ---
Hicklin Engineering, L.C.
10% subordinated note due June, 2003 400,000 400,000 400,000 400,000
Warrant for 6,857 membership interests at $.01
per share --- --- --- ---
12% subordinated note due January, 2001
through December, 2004 13,800 13,800 13,800 13,800
The Schebler Company
13% promissory note due March, 2005 158,448 158,448 157,353 157,353
Warrants to purchase 1.66% of common stock at
$.01 per share 11,504 11,504 11,504 11,504
166,666 shares of 10% convertible
cumulative preferred stock 166,667 166,667 166,667 166,667
166,666 shares of common stock 166,667 166,667 166,667 166,667
---------- ----------
Total Manufacturing (15.0% and 14.5% of total
loans and investments
as of June 30, 2001 and December 31, 2000,
respectively) 1,827,900 1,819,599
----------- ----------
Other Service Industries:
Bristol Retail Solutions
500,000 shares of 12% cumulative convertible
preferred stock --- --- 820,083 820,083
Warrants to purchase 464,979 shares of
common stock at $.01 per share --- --- 179,917 151,273
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June 30, 2001 December 31, 2000
------------------------------ ------------------------------
Cost Valuation Cost Valuation
Voiceflash Networks, Inc.
500,000 shares of 12% cumulative convertible
preferred stock 820,083 538,287 --- ---
Warrants to purchase 302,236 shares of
common stock at $.01 per share 179,917 329,840 --- ---
Options to purchase 32,500 shares of common
stock at $.61 per share --- 15,968 --- ---
International Pacific Seafoods, Inc.
12% subordinated note due June 2003-June
2005 and warrants
to purchase 1,501 shares of common stock
for $.76 per share 1,000,000 1,000,000 1,000,000 1,000,000
Kinseth Hospitality Company, Inc.
14% note due May, 2003 1,732,923 1,732,923 2,000,000 2,000,000
Warrants for 25% of the outstanding
common stock at $0.01 per share --- --- --- ---
Pickerman's Development Company
12% promissory notes due April, 2005-March,
2006 540,380 540,380 353,476 353,476
Warrants to purchase 2,406,250 shares and
1,043,294 shares of common stock
at June 30, 2001 and December 31, 2000,
respectively, at $0.01 per share 72,849 72,849 52,606 52,606
ServeCore Business Solutions, Inc.
3,663 shares of common stock 990,000 990,000 990,000 990,000
----------- ---------
Total Other Service Industries (42.7% and 42.7%
of total loans and investments
as of June 30, 2001 and December 31, 2000,
respectively) 5,220,247 5,367,438
----------- ---------
TOTAL LOANS AND INVESTMENTS $ 12,209,367 $ 12,559,951
============ ============
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NOTE C - DEBENTURES
The Trust has debentures payable to the SBA totalling $9,500,000 as of June 30,
2001. The debentures require the semiannual payment of interest at annual
interest rates ranging from 6.353% to 7.64%. In addition to interest payments,
the Trust is required to pay an annual 1% SBA loan fee on the outstanding
debentures balance. The debentures contain certain pre-payment penalties and are
subject to all of the regulations promulgated under the Small Business
Investment Act of 1958, as amended. Debentures totalling $1,000,000, $6,575,000,
$725,000, and $1,200,000 are to be paid in full on September, 2009, March, 2010,
September, 2010, and March, 2011, respectively.
As of June 30, 2001, the SBIC has unused leverage commitments totalling $500,000
and will be required to pay a 2.5% leverage and underwriting fee totalling
$12,500 that will be deducted pro rata as proceeds are drawn. Each issuance of
debentures is conditioned upon the SBIC's credit worthiness and compliance with
specified regulations, as determined by the SBA. The SBA may also limit the
amount that may be drawn each year. The SBA commitment expires September 30,
2004.
NOTE D - COMMITMENTS AND CONTINGENCIES
As of June 30, 2001, the Trust was in violation of the maximum capital
impairment percentage permitted by the SBA and has not obtained a waiver from
the SBA. The remedies available to the SBA include prohibiting the SBIC from
making any additional investments other than investments under existing legally
binding commitments, prohibiting distributions to investors, reviewing and
redetermining management expenses, and declaring the Debentures immediately due
and payable.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations Results of Operations Net investment income (loss) reflects the
Trust's revenues and expenses excluding realized and unrealized gains and losses
on portfolio investments. Interest income consists of the following:
Three Months Ending June 30 Six Months Ending June 30
2001 2000 2001 2000
--------------- ---------------- -------------- ---------------
Portfolio investments $ 228,305 $ 211,511 $ 453,757 $ 382,792
Money market 2,325 1,281 7,650 6,349
----------- ----------- ----------- -----------
Interest income $ 230,630 $ 212,792 461,407 389,141
=========== =========== =========== ===========
Dividend income $ 18,000 $ 76,356 52,667 152,712
=========== =========== =========== ===========
Changes in interest and dividends earned on portfolio investments reflect the
level of investment in interest and dividend earning securities. Money market
interest reflects cash resources that are invested in highly liquid money market
savings funds. The decrease in dividend income is due to the discontinuation of
dividends paid by two portfolio companies, Cadapult Graphic Systems and Bristol
Retail Solutions.
Management fees, calculated as 2.5% of the combined temporary investment in
money market securities and loans and investments balances, were $164,955 for
the first six months of 2001 and $169,535 the same period a year ago. The
decrease in management fees is due to a decreased value in the portfolio of
loans and investments. Management fees are paid quarterly to the Trust Advisor,
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in accordance with the management agreement.
Interest expense was first incurred by the Trust in 1999 when it issued
debentures payable to the SBA through its wholly owned subsidiary, Berthel SBIC
LLC. The Trust has issued debentures totalling $9,500,000. The debentures
require the semiannual payment of interest at annual interest rates ranging from
6.353% to 7.64%. In addition to interest payments, the Trust is required to pay
an annual 1% SBA loan fee on the outstanding debentures balance. The debentures
contain certain pre-payment penalties and are subject to all of the regulations
promulgated under the Small Business Investment Act of 1958, as amended.
Prepayment penalties are not applicable within five years of maturity. As of
June 30, 2001, the Trust was in violation of the maximum capital impairment
percentage permitted by the SBA and has not obtained a waiver from the SBA. The
remedies available to the SBA include prohibiting the SBIC from making any
additional investments other than investments under existing legally binding
commitments, prohibiting distributions to investors, reviewing and redetermining
management expenses, and declaring the Debentures immediately due and payable.
Debentures totalling $1,000,000, $6,575,000, $725,000, and $1,200,000 are to be
paid in full on September, 2009, March, 2010, September, 2010, and March, 2011,
respectively.
The change in unrealized gains and losses recognized is summarized in the
following table:
Three Months Ending June 30 Six Months Ending June 30
2001 2000 2001 2000
---------------------------------- ----------------- ----------------
Bristol Retail Solutions $ (137,179) $ 64,169 $ 28,644 $ 64,169
Chequemate International (2,975) -0- (36,439) -0-
Edmin.com, Inc. -0- -0- 567,000 -0-
iBEAM Broadcasting
Corporation (180,912) 7,404,356 (344,537) 7,404,356
LIVEware5, Inc. -0- -0- -0- 297,750
McLeodUSA, Inc. (118,512) 95,618 (277,584) 95,618
Object Space, Inc. -0- -0- (200,000) -0-
VisionComm, Inc. -0- (1,350,000) -0- (1,350,000)
Voiceflash Networks, Inc. (115,905) -0- (115,905) -0-
Webcasts.com, Inc. -0- (913,180) -0- (913,180)
------------- ------------- ------------- -------------
Unrealized gain (loss) $ (555,483) $ 5,300,963 (378,821) $ 5,598,713
============= ============= ============= =============
LIVEware5, Inc. was acquired by McLeodUSA, Inc. ("McLeod"). The Trust received
38,877 shares of McLeod in exchange for the investments in LIVEware5, Inc. stock
and debentures in April, 2000 (adjusted for the April 25, 2000 three-for-one
stock split). The McLeod shares were subject to a twelve-month restriction on
sales. McLeod common stock is publicly traded. Valuation of McLeod stock is
based upon actual market value less appropriate reserves to reflect restrictions
on sales.
Webcasts.com, Inc. merged with iBEAM Broadcasting Corporation ("iBEAM") on April
30, 2000. The Trust received 545,442 shares of iBEAM common stock and a 10%
unsecured note, which was been paid in full in 2000. The iBEAM common stock was
subject to a lockup period through November, 2000 and is subject to Rule 144 of
the Securities and Exchange Commission thereafter. iBEAM common stock is
publicly traded. The iBEAM common stock is valued based upon public market
prices less appropriate reserves to reflect restrictions on trading.
EDmin.com received an $3,000,000 investment from a strategic investor on March
13, 2001. The
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investment was in the form of Series B Preferred Stock and is
subordinate to the Trust's Series A Preferred Stock. The increase in unrealized
gain on Edmin.com is a result of the increased valuation resulting from the new
strategic investment.
Chequemate International, Inc. acquired the Trust's equity position in
VisionComm on December 30, 2000, in exchange for Chequemate common stock, a note
receivable, and warrants. Chequemate common stock is publicly traded. Valuation
of the Chequemate investment is based upon actual market value less appropriate
reserves to reflect restrictions on sales.
Voiceflash Networks, Inc. acquired Bristol Retail Solutions in June, 2001.
Voiceflash Networks common stock is publicly traded. Valuation of the Voiceflash
Networks investment is based upon actual market value less appropriate reserves.
ObjectSpace is attempting to sell its consulting business. An outlook on the
proceeds of a sale are too difficult to estimate at this time with the given
market conditions. The unrealized loss reflects a reserve of the remaining value
for this investment.
During February 2001, the Trust entered into an agreement with Kinseth
Hospitality Company, Inc. ("Kinseth"), in which the Trust agreed to release its
warrants to purchase 25% of Kinseth common shares at $0.01 per share in exchange
for a lender's commitment to refinance the existing mortgage on certain Kinseth
property. The Lender's commitment was received on April 3, 2001. The proceeds
received from the lenders commitment must be used to pay off the outstanding
debt and accrued interest to the Trust by June 30, 2001. Kinseth paid off a
portion of the Trust's note receivable in June, 2001 and is expected to pay off
the remainder of the note receivable in the third quarter.
Liquidity and Capital Resources
Cash and cash equivalents amounted to $472,416 at June 30, 2001 and $684,244 at
December 31, 2000. Net cash from operating activities was a net use of cash of
$211,828 for the six months ending June 30, 2001, and a net use of cash of
$3,426,922 for the same period in 2000. This change in cash flow is primarily
due to the change in loans and investments. The Trust's primary source of cash
is interest income and the primary uses of cash are interest expense and
management fees.
The Trust intends to make quarterly distributions of all cash revenues to the
extent cash is available for such distributions. The Trustees declared no
distribution for the quarter ended June 30, 2001. Distributions from the Trust's
wholly-owned subsidiary, Berthel SBIC, LLC, to the Trust are restricted under
SBA regulations. Under SBA regulations, the SBIC subsidiary is not able to
distribute income to the parent unless it has "earnings available for
distribution" as defined by the SBA. At June 30, 2001, the SBIC's deficit of
"earnings available for distribution" was $3,881,665.
Regardless of the ability to make current distributions in cash, the Trust has
accrued an 8% priority return to beneficial owners of the Trust since June 1997.
Distributions payable of $2,713,433 have been accrued as of June 30, 2001.
The effect of interest rate fluctuations and inflation on the current Trust
investments is negligible.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Trust's investment objective is to achieve capital appreciation in the value
of its net assets and to achieve current income principally by making
investments through private placements in securities of small and medium sized
privately and publicly owned companies. Securities consist of subordinated debt,
preferred stock, or common stock combined with equity participation in common
stock or rights to acquire common stock. Securities held for investment at June
30, 2001 are not held for trading purposes.
The primary risk of the portfolio is derived from the underlying ability of
investee companies to satisfy debt obligations and their ability to maintain or
improve common equity values. Levels of interest rates are not expected to
impact the Trust's valuations, but could impact the capability of investee
companies to repay debt or create and maintain shareholder value.
As of June 30, 2001, the portfolio is valued at fair value, as determined by the
Independent Trustees ("Trustees"). In determining fair value for securities and
warrants, investments are initially stated at cost until significant subsequent
events and operating trends require a change in valuation. Among the factors
considered by the Trustees in determining fair value of investments are the cost
of the investment, terms and liquidity of warrants, developments since the
acquisition of the investment, the sales price of recently issued securities,
the financial condition and operating results of the issuer, earnings trends and
consistency of operating cash flows, the long-term business potential of the
issuer, the quoted market price of securities with similar quality and yield
that are publicly traded, and other factors generally pertinent to the valuation
of investments. The Trustees relied on financial data of the portfolio companies
provided by the management of the portfolio companies.
The Trust Advisor maintains ongoing contact with management of the portfolio
companies including participation on their Boards of Directors and review of
financial information.
There is no assurance that any investment made by the Trust will be repaid or
re-marketed. Accordingly, there is a risk of total loss of any investment made
by the Trust. At June 30, 2001, the amount at risk was $12,209,367 and consisted
of the following:
Cost Valuation
--------------- ----------------
Debt securities and loans $ 7,293,273 $ 6,389,459
Preferred stocks 3,349,550 2,929,954
Common stock 2,907,040 2,262,817
Warrants and options to purchase common stock 461,246 627,137
--------------- ----------------
Total loans and investments $ 14,011,109 $ 12,209,367
=============== ================
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
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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.
BERTHEL GROWTH & INCOME TRUST I
(Registrant)
Date: August 10, 2001 /s/Ronald O. Brendengen
--------------- ----------------------------------
Ronald O. Brendengen,
Chief Financial Officer, Treasurer
Date: August 13, 2001 /s/Daniel P. Wegmann
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Daniel P. Wegmann, Controller
Date: August 13, 2001 /s/Henry Royer
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Henry Royer, President
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