UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2004
[ ] 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 033-89506
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
incorporation or organization) Identification No.)
701 Tama Street, Marion, Iowa 52302
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (319) 447-5700
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest
-----------------------------
Title of Class
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 filings
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether registrant is an accelerated filer (as defined in
Rule 12b-2 of the Securities Exchange Act of 1934). [ ] Yes [X] No
As of June 30, 2004, 10,541 Shares of Beneficial Interest were issued and
outstanding with an aggregate market value of $-0- at that time. As of January
26, 2005, 10,541 Shares of Beneficial Interest were issued and outstanding.
EXHIBIT INDEX AT PAGE 32
BERTHEL GROWTH & INCOME TRUST I
2004 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business................................................. 3
Item 2. Properties............................................... 4
Item 3. Legal Proceedings........................................ 4
Item 4. Submission of Matters to a Vote of Shareholders.......... 4
PART II
Item 5. Market for the Registrant's Common Equity
and Related Shareholder Matters.......................... 4
Item 6. Selected Financial Data.................................. 5
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations......... 5
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk................................................... 10
Item 8. Financial Statements and Supplementary Data.............. 10
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................... 25
Item 9A. Controls and Procedures.................................. 25
PART III
Item 10. Directors and Executive Officers of the Registrant....... 26
Item 11. Executive Compensation................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 29
Item 13. Certain Relationships and Related Transactions........... 29
Item 14. Principal Accountant Fees and Services................... 29
PART IV
Item 15. Exhibits and Financial Statement Schedules............... 30
Signatures............................................... 31
Exhibit Index............................................ 32
2
PART I
Item 1. Business
--------
Berthel Growth & Income Trust I (the Trust), a Delaware business trust that has
elected to be treated as a business development company under the Investment
Company Act of 1940, was organized on February 10, 1995. The Trust's
Registration Statement was declared effective June 21, 1995, at which time the
Trust began offering Shares of Beneficial Interest (shares). The underwriting
period was completed on June 21, 1997, with a total of $10,541,000 raised. The
Trust's principal office is located at 701 Tama Street, Marion, Iowa 52302. The
Trust is a closed-end management investment company intended as a long-term
investment and not as a trading vehicle.
On May 4, 1998, Berthel SBIC, LLC (SBIC), a wholly owned subsidiary of the Trust
within the meaning of Section 2(a)(43) of the Investment Company Act of 1940,
received a license to operate as a Small Business Investment Company from the
Small Business Administration (SBA). The SBIC was formed in 1997. The Trust
initially funded the SBIC with a capital contribution of $5,000,000, the minimum
amount eligible to be contributed in order to receive leverage under the SBA
Small Business Investment Company program. During 2001, the Trust contributed an
additional $700,000 in capital to the SBIC. The Trust Advisor and Independent
Trustees (Trustees) also serve as the Independent Managers of the SBIC. As used
hereinafter, with respect to investment activities, the term "Trust" includes
investment activities of the SBIC.
Berthel Fisher & Company Planning, Inc. (Trust Advisor) is a corporation
organized under the laws of the State of Iowa on March 20, 1989. The Trust
Advisor is a registered investment advisor organized as a wholly owned
subsidiary of Berthel Fisher & Company (Berthel Fisher). Berthel Fisher, a
financial services holding company, was formed in 1985 as an Iowa corporation to
hold the stock of Berthel Fisher & Company Financial Services, Inc. (Financial
Services), a broker-dealer registered with the National Association of
Securities Dealers, Inc. Financial Services was the dealer-manager for the
Trust's offering of its shares.
The Trust will terminate upon the liquidation of all of its investments, but no
later than June 21, 2007. However, the Independent Trustees have the right to
extend the term of the Trust for up to two (2) additional one-year periods if
they determine that such extensions are in the best interest of the Trust and in
the best interest of the shareholders, after which the Trust will liquidate any
remaining investments as soon as practicable but in any event within three
years.
During the years ended December 31, 2004 and 2003, the Trust continues to have a
deficiency in net assets, as well as net investment losses and negative cash
flow from operations during the year ended December 31, 2002. In addition, the
SBIC is in violation of the maximum capital impairment percentage permitted by
the SBA. On August 22, 2002, the SBA notified the SBIC that all debentures,
accrued interest and fees were immediately due and payable. The SBIC was
transferred into the Liquidation Office of the SBA effective August 22, 2002. On
September 1, 2003, management signed a loan agreement with the SBA for
$8,100,000 (after paying $1,400,000 on the $9,500,000 debentures) with a term of
48 months at an interest rate of 7.49%. The loan is secured by substantially all
assets of the SBIC. The loan agreement contains various covenants including
establishment of a reserve account in the amount of $250,000 with excess cash
paid to the SBA, limits on the amounts of expenses, other than interest expense,
that can be incurred and paid. The loan agreement also contains various events
of default, including a decrease in the aggregate value of the SBIC's assets of
10% or greater.
3
As of December 31, 2004, total assets and liabilities of the Trust are
$8,449,498 and $13,701,880, respectively. These factors raise substantial doubt
about the ability of the Trust to continue as a going concern. No assurance can
be given that the Trust will have sufficient cash flow to repay the debt or that
the Trust will be financially viable.
The investment objective of the Trust is to provide capital appreciation
potential and current income by investing primarily in subordinated debt,
preferred stock and related equity securities issued by small and medium sized
companies that the Trust Advisor believes offer the opportunity for growth or
appreciation of equity value while being able, if required to do so, to service
current yield bearing securities. The Trust, through its Trust Advisor, directs
its investment efforts to small and medium sized companies which, in the view of
the Trust Advisor, provides opportunities for significant capital appreciation
and prudent diversification of risk. The Trust seeks investments in a variety of
companies and industries. The securities of portfolio companies purchased by the
Trust typically will be rated below investment grade, and more frequently, not
rated at all. The securities of portfolio companies will often have significant
speculative characteristics.
Item 2. Properties
----------
The Trust does not own or lease any real estate.
Item 3. Legal Proceedings
-----------------
None
Item 4. Submission of Matters to a Vote of Shareholders
-----------------------------------------------
No matters were submitted to a vote of shareholders, through the solicitation of
proxies or otherwise during the period covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
-----------------------------------------------------------------
Matters
-------
The Registrant's shares are not publicly traded. There is no established public
trading market for the shares of the Trust and it is unlikely that any will
develop. The Trust Advisor will resist the development of a public market for
the shares.
Number of Shares of
Number of Shareholders Beneficial Interest
Title of Class at January 26, 2005 at January 26, 2005
----------------------------------------------------------------------------------------
Shares of Beneficial Interest 881 10,541
The Trust accrued an underwriting return based on 10% simple annual interest
computed on a daily basis from the initial closing (August 30, 1995) until June
21, 1997, the final closing. Shareholders were paid $250,000 in July 1996 and
$493,897 in July 1997, leaving $522,791 of the underwriting return remaining to
be paid. There remains to be paid $3,610, which represents interest earned by
the Trust on the investor's funds held in escrow through the initial closing.
Since the final closing, a priority return at 8% simple interest has been
accrued. The earned priority return amounted to $845,590, $843,280, $843,280,
$843,280, and $845,590 in 2000, 2001, 2002, 2003, and 2004, respectively. No
priority return distributions have been paid since 1999. Priority return
distributions payable at December 31 of each year were $1,768,858, $2,612,138,
$3,455,418, $4,298,698, and $5,144,288 for 2000, 2001, 2002, 2003, and 2004
respectively.
4
The Trust intends to make quarterly distributions of all cash revenues to the
extent it has cash available for such distributions. These distributions must be
approved by a majority of the Trustees and made within sixty days of the end of
each quarter. The Trustees declared no distributions during 2004. Distributions
from the SBIC 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
December 31, 2004, the SBIC had a deficit of "earnings available for
distribution" in the amount of $9,023,988 and, accordingly, no distributable
cash.
Item 6. Selected Financial Data
-----------------------
Year Ended December 31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------
Total assets $ 8,449,498 $ 8,968,700 $ 9,558,093 $ 11,478,789 $ 13,692,384
Debentures payable 7,426,919 7,709,172 9,500,000 9,500,000 9,500,000
Net increase (decrease) in
net assets (611,176) 1,302,461 (1,907,247) (2,126,852) (3,773,281)
Unrealized gain (loss)
on investments 3,773 1,916,997 1,682,463 (1,157,960) (3,483,551)
Realized gain (loss)
on investments -0- 173,355 (2,978,023) (486,372) -0-
Net increase (decrease) in
net assets per beneficial share (57.98) 123.56 (180.94) (201.78) (357.96)
Distributions per beneficial share -0- -0- -0- -0- -0-
The above selected data should be read in conjunction with the consolidated
financial statements and related notes appearing elsewhere in this report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Critical Accounting Policy
The Trust's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The
financial information contained within these statements is, to a significant
extent, financial information that is based on approximate measures of the
financial effects of transactions and events that have already occurred. Based
on its consideration of accounting policies that involve the most complex and
subjection decisions and assessments, management has identified it most critical
accounting policy to be that related to the valuation of loans and investments.
The Trust's valuation of loans and investments incorporates a variety of risk
considerations, both quantitative and qualitative in establishing a valuation of
loans and investments that management believes is appropriate at each reporting
date. Quantitative factors for the valuation of loans and investments include
the Trust's cost of the investment, terms and liquidity of the 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 prices of securities with
similar quality and yield that are publicly traded and other factors generally
pertinent to the valuation of the investments. Quantitative factors also
incorporate known information about individual loans and investments.
Qualitative factors include the general economic environment in the
Partnership's markets, including economic conditions throughout the Midwest and
in particular the state of certain industries. Management may report a
materially different amount for the provision for loan and lease losses in the
statement of operations to change the valuation of loans and investments if its
assessment of the above factors were different. Although
5
management believes the valuation of loans and investments as of both December
31, 2004 and 2003 were adequate, a decline in local economic conditions, or
other factors, could result in increasing losses that cannot be reasonably
predicted at this time.
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 for the past three years is summarized as follows:
2004 2003 2002
---- ---- ----
Portfolio investments $ 254,567 $ 370,740 $ 513,720
Money market 2,901 14,863 25,180
---------- ---------- ----------
Interest income $ 257,468 $ 385,603 $ 538,900
========== ========== ==========
Changes in interest earned on portfolio investments reflect the level of
investment in interest earning debt securities and loans. Money market interest
reflects cash resources that are invested in highly liquid money market savings
funds. Dividend income was $93,434 in 2004, $142,356 in 2003, and $152,095 in
2002, reflecting dividends earned on preferred stock investments.
Management fees, calculated as 2.5% of the combined temporary investment in
money market securities and loans and investments balances, were $227,834 in
2004, $228,541 in 2003, and $263,906 in 2002. The decrease is a result of the
lower investment base. Management fees are accrued and payable to the Trust
Advisor, in accordance with the management agreement.
Trustee fees represent compensation for services rendered to the Trust. Each
Independent Trustee is paid $1,000 per month plus $1,000 per board meeting
attended, up to a maximum of $24,000 in meeting fees per year.
Professional fees were $95,571, $86,977, and $98,894 in 2004, 2003, and 2002,
respectively, and include legal, accounting, and other expenses. The other
expenses is the accrual of fees, which have been paid by the Trust Advisor, for
an investment banking firm to assist in the process of liquidating the SBIC's
portfolio, with the goal of maximizing values through mergers, sales, etc. of
the portfolio companies.
Other general and administrative expenses were $46,795 in 2004, $243,738 in
2003, and $81,568 in 2002. The increase in 2003 is primarily the result of
amortization expense of $194,987 to write off the remaining deferred financing
costs.
In accordance with the SBA loan agreement, discussed in more detail below, the
Trust continues to accrue the management fees, but is not paying them.
Management fees payable to the Trust Advisor are $304,474 as of December 31,
2004. The Trust does not have sufficient cash available to pay the trustee fees.
Fees payable to the trustees were $42,000 as of December 31, 2004.
Interest expense is on debentures payable to the SBA and was $572,585 in 2004,
$730,356 in 2003, and $794,025 in 2002. The Trust issued debentures totalling
$9,500,000 for which the SBA has demanded repayment; this debt was refinanced
during 2003, as described in the following paragraph.
During the years ended December 31, 2004 and 2003, the Trust continues to have a
deficiency in net assets, as well as net investment losses and negative cash
flow from operations during the year ended December 31, 2002. In addition, the
6
SBIC is in violation of the maximum capital impairment percentage permitted by
the SBA. On August 22, 2002, the SBA notified the SBIC that all debentures,
accrued interest and fees were immediately due and payable. The SBIC was
transferred into the Liquidation Office of the SBA effective August 22, 2002. On
September 1, 2003, management signed a loan agreement with the SBA for
$8,100,000 (after paying $1,400,000 on the $9,500,000 debentures) with a term of
48 months at an interest rate of 7.49%. The loan is secured by substantially all
assets of the SBIC. The loan agreement contains various covenants including
establishment of a reserve account in the amount of $250,000 with excess cash
paid to the SBA, limits on the amounts of expenses, other than interest expense,
that can be incurred and paid. The loan agreement also contains various events
of default, including a decrease in the aggregate value of the SBIC's assets of
10% or greater.
As of December 31, 2004, total assets and liabilities of the Trust are
$8,449,498 and $13,701,880, respectively. These factors raise substantial doubt
about the ability of the Trust to continue as a going concern. No assurance can
be given that the Trust will have sufficient cash flow to repay the debt or that
the Trust will be financially viable.
The changes in unrealized gains and losses and the realized gains and losses on
investments recognized during the previous three years are summarized in the
following table:
Change in unrealized gains (losses):
- ------------------------------------
2004 2003 2002
---- ---- ----
McLeodUSA, Inc. $ -0- $ -0- $ 610,000
Object Space, Inc. -0- -0- 404,800
VoiceFlash Networks, Inc. -0- -0- 784,704
Chequemate International -0- -0- (411,207)
Feed Management. Systems, Inc. -0- -0- 204,913
EDmin.com (631,264) 43,788 20,477
Media Sciences International 635,037 12,545 (31,224)
Futuremed Interventional, Inc. -0- 1,694,694 -0-
IMED Devices, Inc. -0- 165,970 100,000
---------------- --------------- ---------------
$ 3,773 $ 1,916,997 $ 1,682,463
================ =============== ===============
Realized gains (losses):
- ------------------------
2004 2003 2002
---- ---- ----
Futuremed Interventional, Inc. $ -0- $ 35,924 $ -0-
Hicklin Engineering, LLC -0- 137,431 -0-
McLeodUSA, Inc. -0- -0- (609,363)
Object Space, Inc. -0- -0- (404,800)
VoiceFlash Networks, Inc. -0- -0- (1,000,000)
Chequemate International -0- -0- 26,140
ServeCore Business Solutions -0- -0- (990,000)
---------------- --------------- ---------------
$ -0- $ 173,355 $ (2,978,023)
================ =============== ===============
The change in the unrealized gains and losses and the realized gains and losses
are the result of carrying the Trust's portfolio of loans and investments at
fair value. The fair value of the loans and investments are approved by the
Independent Trustees, and in the case of the SBIC, are in accordance with SBA
regulations. The realized gains and losses reflect investments that have either
been sold or written off as deemed to be worthless. Securities that are traded
publicly are valued at the market price less any appropriate discount for
reasons of liquidity or restrictions.
7
Investment Portfolio
The investment objective of the Trust is to provide capital appreciation
potential and current income by investing primarily in subordinated debt,
preferred stock and related equity securities issued by small and medium sized
companies that the Trust Advisor believes offer the opportunity for growth or
appreciation of equity value while being able, if required to do so, to service
current yield bearing securities. The Trust, through its Trust Advisor, directs
its investment efforts to small and medium sized companies which, in the view of
the Trust Advisor, provides opportunities for significant capital appreciation
and prudent diversification of risk. The Trust seeks investments in a variety of
companies and industries. The securities of portfolio companies purchased by the
Trust typically will be rated below investment grade, and more frequently, not
rated at all. The securities of such portfolio companies will often have
significant speculative characteristics. The Trust's investments at December 31,
2004, 2003, and 2002 are summarized by type of investment in the table below.
December 31, 2004
-----------------
Cost Fair Value
------------- -------------
Debt securities and loans $ 2,770,079 $ 1,402,101
Preferred stocks 1,094,007 1,094,007
Warrants to purchase common stock 259,058 2,543,569
Common stocks 2,934,286 3,040,105
------------- -------------
$ 7,057,430 $ 8,079,782
============= =============
December 31, 2003
-----------------
Cost Fair Value
------------- -------------
Debt securities and loans $ 3,434,017 $ 2,066,038
Preferred stocks 1,008,915 1,640,180
Warrants to purchase common stock 259,058 2,543,569
Common stocks 2,934,286 2,405,068
------------- -------------
$ 7,636,276 $ 8,654,855
============= =============
December 31, 2002
-----------------
Cost Fair Value
------------- -------------
Debt securities and loans $ 4,963,477 $ 3,595,498
Preferred stocks 1,861,071 2,448,548
Warrants to purchase common stock 281,329 871,146
Common stocks 1,951,572 1,243,839
------------- -------------
$ 9,057,449 $ 8,159,031
============= =============
Whenever possible, the Trust will negotiate enhancements to the securities
purchased in the form of warrants to purchase shares of common stock in
portfolio companies, options to force redemption of securities by portfolio
companies ("Put Options"), and registration rights should a portfolio company
begin to offer its shares in the public market. Agreements with portfolio
companies may also include restrictive covenants that contribute to sound
management practices at portfolio companies. Regardless of terms that the Trust
is able to achieve with any portfolio company, there is no assurance that any
investment made by the Trust will be repaid or redeemed at a profit; and there
is risk of total loss of any investment made by the Trust.
The difference between cost and fair value of the investments represents
accumulated unrealized gains and losses. Accumulated unrealized gains and losses
are reflected in the statements of assets and liabilities. Changes in
accumulated unrealized gains and losses are reflected in the statements of
operations.
8
Liquidity and Capital Resources
Net cash from operating activities was a net source of cash of $293,500 in 2004
compared to a net source of cash of $913,981 in 2003. This decrease in cash flow
is primarily due to the net changes in loans and investments. In 2004, the Trust
had a net use of cash for financing activities of $282,253 relating to the
payment of debt to the SBA.
During the years ended December 31, 2004 and 2003, the Trust continues to have a
deficiency in net assets, as well as net investment losses and negative cash
flow from operations during the year ended December 31, 2002. In addition, the
SBIC is in violation of the maximum capital impairment percentage permitted by
the SBA. On August 22, 2002, the SBA notified the SBIC that all debentures,
accrued interest and fees were immediately due and payable. The SBIC was
transferred into the Liquidation Office of the SBA effective August 22, 2002. On
September 1, 2003, management signed a loan agreement with the SBA for
$8,100,000 (after paying $1,400,000 on the $9,500,000 debentures) with a term of
48 months at an interest rate of 7.49%. The loan is secured by substantially all
assets of the SBIC. The loan agreement contains various covenants including
establishment of a reserve account in the amount of $250,000 with excess cash
paid to the SBA, limits on the amounts of expenses, other than interest expense,
that can be incurred and paid. The loan agreement also contains various events
of default, including a decrease in the aggregate value of the SBIC's assets of
10% or greater.
The loan agreement with the SBA is due as follows:
Maturity Date Amount
------------- ------
September 1, 2007 $7,426,919
As of December 31, 2004, total assets and liabilities of the Trust are
$8,449,498 and $13,701,880, respectively. These factors raise substantial doubt
about the ability of the Trust to continue as a going concern. No assurance can
be given that the Trust will have sufficient cash flow to repay the debt or that
the Trust will be financially viable.
The Trust intends to make quarterly distributions of all cash revenues to the
extent it has cash available for such distributions. These distributions must be
approved by a majority of the Trustees and made within sixty days of the end of
each quarter. The Trustees declared no distributions during 2004. Distributions
from the SBIC 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
December 31, 2004, the SBIC had a deficit of "earnings available for
distribution" in the amount of $9,023,988 and, accordingly, no distributable
cash.
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.
A 10% underwriting return was accrued through the final closing of the offering
on June 21, 1997. Accrued underwriting and priority returns amounted to
$5,670,689, $4,825,099, and $3,981,819 as of December 31, 2004, 2003, and 2002,
respectively. No distributions have been paid to beneficial owners of the Trust
since 1999.
Inflation
The Trust does not believe that moderate rates of inflation experienced in the
United States over the last three years have had a material effect on its
operations.
9
Item 7A. Quantitative and Qualitative Disclosure 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 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 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 December 31, 2004, the portfolio is valued at fair value, as determined by
the 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 rely 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 December 31, 2004, the amount at risk was $8,079,782 and
consisted of the following:
Cost Fair Value
------------ ------------
Debt securities and loans $ 2,770,079 $ 1,402,101
Preferred stocks 1,094,007 1,094,007
Warrants to purchase common stock 259,058 2,543,569
Common stocks 2,934,286 3,040,105
------------ ------------
$ 7,057,430 $ 8,079,782
============ ============
On September 1, 2003, the SBIC signed a loan agreement with the SBA. This debt
is carried on the balance sheet at its principal amount of $7,426,919 as of
December 31, 2004, which represents the fair value of the loan to the SBA.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The following financial statements and related information as of the years ended
December 31, 2004, 2003 and 2002 are included in Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Assets and Liabilities
Consolidated Statements of Operations
Consolidated Statements of Changes in Net Assets (Liabilities)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
10
McGLADREY & PULLEN
Certifiied Public Accountants
Report of Independent Registered Public Accounting Firm
To the Independent Trustees and Stockholders
Berthel Growth & Income Trust I
Marion, Iowa
We have audited the accompanying consolidated statements of assets and
liabilities of Berthel Growth & Income Trust I and subsidiary ("Trust") as of
December 31, 2004 and 2003, and the related consolidated statements of
operations, changes in net assets (liabilities) and cash flows for the years
then ended. These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Berthel Growth & Income Trust I and
subsidiary as of December 31, 2004 and 2003, and the results of their operations
and their cash flows for the years then ended, in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements for the years ended December 31, 2004 and
2003 have been prepared assuming that the Trust will continue as a
going-concern. As discussed in Note 1 to the financial statements, the Trust
continues to have a deficiency in net assets, as well as net losses and negative
cash flow from operations. In addition, Berthel SBIC, LLC, a wholly owned
subsidiary of the Trust, has agreed to liquidate its portfolio assets in order
to pay its indebtedness to the United States Small Business Administration.
These events raise substantial doubt about the Trust's ability to continue as a
going-concern. Management's plans concerning these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
As discussed in Note 1, the investment securities included in the financial
statements have been valued by the Independent Trustees ("Trustees") using
valuation criteria applicable to the licensee. These criteria were established
in accordance with Section 310(d)(2) of the Small Business Investment Act of
1958, as amended, and 13 CFR 107.503(e)(2) of the SBA regulations. Such
investment securities have been valued at $8,079,782 (96% of assets) and
$8,654,855 (97% of assets) as of December 31, 2004 and 2003, respectively, whose
values have been estimated by the Trustees in the absence of readily
ascertainable market values. We have reviewed the procedures used by the
Trustees in preparing the valuations of investment securities and have inspected
the underlying documentation and, in the circumstances, we believe the
procedures are reasonable and the documentation appropriate. However, in the
case of those securities with no readily ascertainable market value, because of
the inherent uncertainty of the valuation, the Trustees' estimate of values may
differ significantly from the values that would have been used had a ready
market existed for the securities and the differences could be material.
/s/ McGladrey & Pullen, LLP
-----------------------------------
McGladrey & Pullen, LLP
Cedar Rapids, Iowa
January 24, 2005
11
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Independent Trustees and Shareholders of
Berthel Growth & Income Trust I
We have audited the accompanying consolidated statements of operations, changes
in net liabilities, and cash flows of Berthel Growth & Income Trust I and
subsidiary (the "Trust") for the year ended December 31, 2002. These financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of The Trust for
the year ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements for the year ended December 31, 2002 have
been prepared assuming that the Trust will continue as a going concern. As
discussed in Note 1 to the financial statements, the Trust continues to have a
deficiency in net assets, as well as net losses and negative cash flow from
operations. In addition, Berthel SBIC, a wholly owned subsidiary of the Trust,
is in default under the terms of its SBA debentures. These events raise
substantial doubt about the Trust's ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As discussed in Note 1 to the consolidated financial statements, loans and
investment securities not readily marketable amounting to $8,159,033 as of
December 31, 2002 have been valued at fair value, as determined by the
Independent Trustees ("Trustees"). We have reviewed the procedures applied by
the Trustees in valuing such investments and have inspected underlying
documentation and, in the circumstances, we believe that the procedures are
reasonable and the documentation appropriate. However, because of the inherent
uncertainty of valuation, the Trustees' estimates of fair values may differ
significantly from the values that would have been used had a ready market
existed for the investments, and the differences could be material.
/s/ Deloitte & Touche, LLP
- -----------------------------
Deloitte & Touche, LLP
Cedar Rapids, Iowa
March 15, 2003
12
Berthel Growth & Income Trust I
Consolidated Statements of Assets and Liabilities
December 31, 2004 And 2003
Assets (Note 6) 2004 2003
- -----------------------------------------------------------------------------------------------------
Loans and investments (cost 2004 $7,057,430;
2003 $7,636,276) (Notes 2, 4 and 8) $ 8,079,782 $ 8,654,855
Cash and cash equivalents 259,533 248,286
Interest and dividends receivable, net of allowance for
doubtful accounts (Note 2) 110,183 65,559
------------ ------------
$ 8,449,498 $ 8,968,700
============ ============
Liabilities and Net Assets (Liabilities)
- -----------------------------------------------------------------------------------------------------
Liabilities:
Accrued interest payable $ 97,014 $ 70,176
Accounts payable and other accrued expenses 87,519 66,319
Due to affiliate (Notes 3 and 4) 418,906 87,717
Deferred income 833 5,833
Distributions payable to stockholders (Note 5) 5,670,689 4,825,099
Note payable (Note 6) 7,426,919 7,709,172
------------ ------------
13,701,880 12,764,316
------------ ------------
Net Assets (Liabilities), equivalent to $(498.28) per share in 2004;
$(360.08) per share in 2003:
Shares of beneficial interest, net of syndication costs of $1,507,237;
25,000 shares authorized, 10,541 shares issued and
outstanding in 2004 and 2003 (1,053,694) 406,845
Accumulated net realized losses (5,221,040) (5,221,040)
Accumulated net unrealized gains (losses) 1,022,352 1,018,579
------------ ------------
(5,252,382) (3,795,616)
------------ ------------
$ 8,449,498 $ 8,968,700
============ ============
See Notes to Consolidated Financial Statements
13
Berthel Growth & Income Trust I
Consolidated Statements of Operations
Years Ended December 31, 2004, 2003 and 2002
2004 2003 2002
- ---------------------------------------------------------------------------------------------
Revenue:
Interest income $ 257,468 $ 385,603 $ 538,900
Dividend income 93,434 142,356 152,095
Application, closing and other fees 5,000 7,592 8,111
----------- ----------- -----------
Total revenue 355,902 535,551 699,106
----------- ----------- -----------
Expenses:
Management fees (Note 4) 227,834 228,541 263,906
Administrative services (Note 4) 4,066 9,830 38,400
Trustee fees 24,000 24,000 34,000
Professional fees 95,571 86,977 98,894
Interest expense (Notes 3 and 6) 572,585 730,356 794,025
Other general and administrative expenses 46,795 243,738 81,568
----------- ----------- -----------
Total expenses 970,851 1,323,442 1,310,793
----------- ----------- -----------
Net investment (loss) (614,949) (787,891) (611,687)
----------- ----------- -----------
Change in unrealized gain on investments (Note 2) 3,773 1,916,997 1,682,463
Realized gain (loss) on investments (Note 2) -- 173,355 (2,978,023)
----------- ----------- -----------
Net gain (loss) on investments 3,773 2,090,352 (1,295,560)
----------- ----------- -----------
Net increase (decrease) in net assets $ (611,176) $ 1,302,461 $(1,907,247)
=========== =========== ===========
Per beneficial share data:
Revenue $ 33.76 $ 50.80 $ 66.32
Expenses (92.10) (125.55) (124.35)
----------- ----------- -----------
Net investment (loss) (58.34) (74.75) (58.03)
----------- ----------- -----------
Change in unrealized gain on investments 0.36 181.86 159.61
Realized gain (loss) on investments -- 16.45 (282.52)
----------- ----------- -----------
Net gain (loss) on investments 0.36 198.31 (122.91)
----------- ----------- -----------
Net increase (decrease) in net assets $ (57.98) $ 123.56 $ (180.94)
=========== =========== ===========
Weighted average shares 10,541 10,541 10,541
=========== =========== ===========
See Notes to Consolidated Financial Statements.
14
Berthel Growth & Income Trust I
Consolidated Statements of Changes in Net Assets (Liabilities)
Years Ended December 31, 2004 2003 and 2002
Shares of Beneficial Interest Accumulated Accumulated Total Net
------------------------- Net Realized Net Unrealized Assets
Shares Amount (Losses) Gains (Losses) (Liabilities)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 10,541 $ 3,492,983 $(2,416,372) $(2,580,881) $(1,504,270)
Net investment (loss) -- (611,687) -- -- (611,687)
Unrealized gain on investments -- -- -- 1,682,463 1,682,463
Realized (loss) on investments -- -- (2,978,023) -- (2,978,023)
Distributions payable to stockholders
($80 per beneficial share) -- (843,280) -- -- (843,280)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 10,541 2,038,016 (5,394,395) (898,418) (4,254,797)
Net investment (loss) -- (787,891) -- -- (787,891)
Unrealized gain on investments -- -- -- 1,916,997 1,916,997
Realized gain on investments -- -- 173,355 -- 173,355
Distributions payable to stockholders
($80 per beneficial share) -- (843,280) -- -- (843,280)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2003 10,541 406,845 (5,221,040) 1,018,579 (3,795,616)
Net investment (loss) -- (614,949) -- -- (614,949)
Unrealized gain on investments -- -- -- 3,773 3,773
Realized gain on investments -- -- -- -- --
Distributions payable to stockholders --
($80 per beneficial share) -- (845,590) -- -- (845,590)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2004 10,541 $(1,053,694) $(5,221,040) $ 1,022,352 $(5,252,382)
=========== =========== =========== =========== ===========
See Notes to Consolidated Financial Statements.
15
Berthel Growth & Income Trust I
Consolidated Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002
2004 2003 2002
- ----------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net increase (decrease) in net assets $ (611,176) $ 1,302,461 $(1,907,247)
Adjustments to reconcile net increase (decrease)
in net assets to net cash provided by (used in)
operating activities:
Amortization of deferred financing costs -- 198,336 41,090
Accretion of discount on debt securities (21,062) (29,615) (41,590)
Change in unrealized loss (gain) on investments (3,773) (1,916,997) (1,682,463)
Realized loss (gain) on investments -- (173,355) 2,978,023
Changes in operating assets and liabilities:
Loans and investments 599,908 1,624,145 70,693
Interest and dividends receivable (44,624) 10,032 47,059
Other receivables -- -- 1,631
Accrued interest payable 26,838 (197,152) --
Accounts payable and other accrued expenses 21,200 19,002 (5,139)
Due to affiliate 331,189 84,717 (200)
Deferred income (5,000) (7,593) (8,111)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 293,500 913,981 (506,254)
----------- ----------- -----------
Cash Flows (Used In) Financing Activities,
payment of note payable (282,253) (1,790,828) --
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 11,247 (876,847) (506,254)
Cash and cash equivalents:
Beginning 248,286 1,125,133 1,631,387
----------- ----------- -----------
Ending $ 259,533 $ 248,286 $ 1,125,133
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information,
cash paid for interest $ 545,747 $ 927,508 $ 794,025
Supplemental Disclosure of Noncash Financing Activities,
distributions payable to stockholders 845,590 843,280 843,280
See Notes to Consolidated Financial Statements.
16
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1. Organization and Significant Accounting Policies
Organization:
Berthel Growth & Income Trust I (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a nondiversified, closed-end
management investment company electing status as a business development
company. The Trust was formed on February 10, 1995 under the laws of the
State of Delaware and received approval from the Securities and Exchange
Commission to begin offering shares of beneficial interest (the "Shares")
effective June 21, 1995. 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 to be purchased will consist primarily of subordinated debt,
common stock or preferred stock, combined with equity participation in common
stock or rights to acquire common stock. The Trust offered a minimum of 1,500
shares and a maximum of 50,000 shares at an offering price of $1,000 per
share. The minimum offering of 1,500 shares sold was reached on August 30,
1995. The offering period expired June 21, 1997.
The Trust will terminate upon the liquidation of all of its investments, but
no later than June 21, 2007. However, the Independent Trustees (the
"Trustees") have the right to extend the term of the Trust for up to two
additional one-year periods if they determine that such extensions are in the
best interest of the Trust and in the best interest of the stockholders,
after which the Trust will liquidate any remaining investments as soon as
practicable but in any event within three years.
Berthel SBIC, LLC (the "SBIC"), a wholly owned subsidiary of the Trust within
the meaning of Section 2(a)(43) of the Investment Company Act of 1940, was
formed during 1997 and received a license to operate as a Small Business
Investment Company from the Small Business Administration ("SBA") on May 4,
1998. The Trust funded the SBIC with a capital contribution of $5,000,000,
the minimum amount eligible to be contributed in order to receive leverage
under the SBA Small Business Investment Company program. During 2001, the
Trust contributed an additional $700,000 in capital to the SBIC. The Trustees
also serve as the Independent Managers of the SBIC.
Berthel Fisher & Company Planning, Inc. (the "Trust Advisor") is the Trust's
investment advisor and manager. TJB Capital Management, Inc. (the "Corporate
Trustee") provides certain management services necessary for the conduct of
the Trust's business. Shares were offered by Berthel Fisher & Company
Financial Services, Inc. (the "Dealer Manager"). Each of these three entities
is a wholly or majority owned subsidiary of Berthel Fisher & Company.
Going-concern considerations: During the years ended December 31, 2004 and
2003, the Trust continues to have a deficiency in net assets, as well as net
investment losses and negative cash flow from operations for the year ended
December 31, 2002. In addition, the SBIC was in violation of the maximum
capital impairment percentage permitted by the SBA. The SBIC received notice
of default from the Small Business Administration advising that the SBIC must
cure its default on the outstanding debentures prior to March 22, 2002. Since
March 2002, the capital impairment violation has not been cured.
On August 22, 2002, the SBA notified the SBIC that all debentures, accrued
interest and fees were immediately due and payable. The SBIC was transferred
into the Liquidation Office of the SBA effective August 22, 2002. On
September 1, 2003, management signed a loan agreement with the SBA for
$8,100,000 (after paying $1,400,000 on the $9,500,000 debentures) with a term
of 48 months at an interest rate of 7.49%. The note payable is secured by
substantially all assets of the SBIC. The loan agreement contains various
covenants including establishment of a reserve account in the amount of
$250,000 with excess cash paid to the SBA, limits on the amounts of operating
expenses that can be incurred and paid. The loan agreement also contains
various events of default, including a decrease in the aggregate value of the
SBIC's assets of 10% or greater.
17
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1. Organization and Significant Accounting Policies (Continued)
The assets and liabilities of the SBIC are $8,439,417 and $7,901,197,
respectively. These factors may raise substantial doubt about the ability of
the Trust to continue as a going-concern. No assurance can be given that the
Trust will have sufficient cash flow to repay the debt or that the Trust will
be financially viable.
Consolidation: The consolidated financial statements include the accounts of
the Trust and its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
Use of estimates: The preparation of the Trust's consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America 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 revenues and expenses during the
reporting period. Actual results could differ significantly from those
estimates. Material estimates that are particularly susceptible to
significant change in the near-term relate to the valuation by the Trustees
of not readily marketable securities and allowance for doubtful accounts.
Loans and investments: In accordance with accounting practices, investments
that are not readily marketable are valued at fair value, as determined by
the Trustees. The resulting difference between cost and market is included in
the consolidated statements of operations.
In determining fair value for securities and warrants not readily marketable,
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, in making
their evaluation, have relied on financial data of the portfolio companies
provided by the management of the portfolio companies.
Deferred financing costs: Deferred financing costs as of December 31, 2002
primarily consisted of a 1% SBA commitment fee, which is amortized over the
commitment period using the straight-line method, and 2.5% SBA leverage and
underwriting fee, which is amortized over the life of the loan using the
straight-line method, which approximates the interest method. The
straight-line method approximates the interest method and the relating
amortization is reported as amortization expense. In conjunction with the
refinancing discussed previously, these costs were expensed in 2003.
Deferred income: Deferred income represents unearned closing fees received in
connection with the purchase of debt portfolio securities and are amortized
over the life of the debt security using the straight-line method, which
approximates the interest method. The related amortization is reported as
application, closing and other fees.
Net income (loss) per beneficial share: Net income (loss) per beneficial
share is based on the weighted average number of shares outstanding.
18
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- ----------------------------------------------------------------------------------------------------------------------------------
Note 2. Loans and Investments
Valuation
-----------------
Company Security 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Communications and Software:
EDmin.com, Inc. 249,835 and 228,562 shares of 9% Cumulative
- --------------- Redeemable Convertible Series A Preferred Stock a
Provider of internet-based software of December 31, 2004 and 2003, respectively; call
product technology planning and systems options beginning May 2004; unrealized gain (loss
integration to educational institutions of $(586,264) in 2004 and $43,788 in 2003 based on
air market value; cost $927,340 (at December 31,
2004). $ 927,340 $ 1,428,513
Warrant to purchase 20,000 common shares at $4 per
share expiring December 2004, unrealized loss of
$(45,000) recognized in 2004 due to operations of
the company, cost $0. * -- 45,000
Media Sciences International, Inc. Warrants and options to purchase 118,000 common
- ---------------------------------- shares at prices ranging from $.65 to $3.75 per
(Formerly Cadapult Graphic Systems, Inc.) share, expiring beginning March 2005, cost $0. * -- --
- ----------------------------------------
Provider of computer graphic systems,
peripherals, supplies and services to
visual communicators and graphics 1,112,797 shares of common stock; unrealized gain
professionals of $635,037 in 2004 and unrealized gain of $12,545
in 2003 due to market conditions, cost basis
$1,012,777 (at December 31, 2004). * 1,629,135 994,098
----------- -----------
Total communications and software (32% and 29% of total loans and investments as of
December 31, 2004 and 2003, respectively) 2,556,475 2,467,611
----------- -----------
Health Care Products and Services:
Physicians Total Care, Inc. 10% uncollateralized note due on demand, cost $807,795* -- --
- ---------------------------
Provider of Prescrition medication Warrants to purchase 350,000 common shares at
systems to physicians' offices for $.035 to $5 per share (upon the occurrence of a
point-of care dispensing to patients specified event, 210,000 shares have an exercise -- --
price of $1 per share), expiring September 2006
with put options beginning October 2004 and
terminating upon the occurrence of a specified
event, cost $0*.
700 shares of common stock, cost $4,000 (at December
31, 2003).* -- --
Inter-Med, Inc.
- ---------------
Manufacturer and Importer of products 2,491.3031 common shares; put options beginning
for U.S. dental Market May 2006 and call options beginning May 2007, both
expiring upon the occurrence of a specified event,
cost $672,279. * 672,279 672,279
12% promissory note, $150,000, due July 2005,
$50,000 due July 2006, cost $196,792 (at December
31, 2004). 196,792 192,333
----------- -----------
Subtotal forward $ 869,071 $ 864,612
19
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- ----------------------------------------------------------------------------------------------------------------------------------
Note 2. Loans and Investments (Continued)
Valuation
-----------------
Company Security 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Subtotal forward $ 869,071 $ 864,612
Futuremed Interventional, Inc. Warrants to purchase 383,111 shares of common
- ------------------------------ stock at $.01 per share, expiring February 2007
Medical device manufacturer with put options beginning February 2005 or upon
the occurrence of a specified event, unrealized
gain of $1,694,694 in 2003 based on operating
results, cost $102,640. * 2,460,000 2,460,000
1,899,783 shares of IMED common stock (a Futuremed
affiliate); unrealized gains of $165,970 in 2003
and $100,000 in 2002 based on operating results,
cost $0. * 265,970 265,970
----------- -----------
Total health care products and services (44% and 41% of total loans and investments as of
December 31, 2004 and 2003, respectively) 3,595,041 3,590,582
----------- -----------
Manufacturing:
Feed Management Systems 435,590 shares of Feed Management Systems common stock,
- ----------------------- converted from Easy Systems Series B Cumulative
(Formerly Easy Systems, Inc.) Redeemable Preferred Stock and 11% unsecured
- ----------------------------- subordinated debenture, unrealized gain of $204,914 in
Provides control systems and proprietary 2002 due to operations of the company, cost $1,077,422.
software primarily for the agricultural * 304,913 304,913
The Schebler Company 13% subordinated note due March 2005, cost $166,118
- -------------------- (at December 31, 2004). 166,118 163,927
Manufacturer of industrial equipment
Warrants to purchase 1.66% of common shares at $.01 per
share, with put options beginning January 2007 and
ending January 2022 or upon the occurrence of a
specified event, cost $11,504. * 11,504 11,504
166,666 shares of 10% convertible cumulative
preferred stock, with put options beginning
January 2007 and ending January 2022 or upon the
occurrence of a specified event, cost $166,667. 166,667 166,667
166,666 shares of common stock, with put options
beginning January 2007 and ending January 2022 or
upon the occurrence of a specified event, cost
$166,667. * 166,667 166,667
----------- -----------
Subtotal forward $ 815,869 $ 813,678
20
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- ----------------------------------------------------------------------------------------------------------------------------------
Note 2. Loans and Investments (Continued)
Valuation
-----------------
Company Security 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Subtotal forwarded $ 815,869 $ 813,678
Childs & Albert
- ---------------
Racing engine component manufacturer 12.5% promissory note due October 2005, cost $789,191
(at December 31, 2004). 789,191 744,776
Warrants to purchase 833.334 shares of common
stock at $10 pe share expiring September 2010; put
and call options beginning September 2005 and
ending September 2008, subject to the occurrence
of specified events, cost $72,065. * 72,065 72,065
----------- -----------
Total maunfacturing (21% and 19% of total loans and investments as of
December 31, 2004 and 2003, respectively) 1,677,125 1,660,521
----------- -----------
Other Service industries:
Kinseth Hospitality Company, Inc. 15% secured note receivable due March 2007, cost
- --------------------------------- $250,000. 250,000 250,000
Hotel and restaurant industries
International Pacific Seafoods, Inc. 12% subordinated note, $585,000 and $195,000 repaid in
- ------------------------------------ 2004 and 2003, respectively. -- 685,000
Provider of seafood and supplemental
products to wholesale, retail and food
service industry 1,501 shares of common stock, cost $1,141.* 1,141 1,141
Pickman's Development Company 12% prommissory notes due Aprial 2005 to March 2006,
- ----------------------------- cost $547,663.* -- --
Food service franchise development
company 12% promissory notes due on demand, cost $12,520.* -- --
Warrants to purchase 1,829,350 shares of common
stock at $.01 per share, expiring April 2010 to
March 2011; put options beginning April 2006 and
call options beginning April 2005, cost $72,849. * -- --
----------- -----------
Total other service industries (3% and 11% of total loans and investments of
December 31, 2004 and 2003, respectively) 251,141 936,141
----------- -----------
Total loans and investments $ 8,079,782 $ 8,654,855
=========== ===========
* Non-income producing investment
21
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 3. Due to Affiliates
Due to affiliates is comprised of the following as of December 31, 2004 and
2003:
2004 2003
--------------------
Accrued management fees $304,474 $ 76,640
Note payable to Trust Advisor (non-interest bearing) 10,000 --
Other amounts due Trust Advisor 104,432 11,077
-------- --------
Due to affiliates $418,906 $ 87,717
======== ========
Note 4. Related Party Transactions
The Trust has entered into a management agreement with the Trust Advisor that
provides for incentive compensation to the Trust Advisor based on the capital
appreciation of the Trust's investments. The Trust pays the Trust Advisor an
annual management fee equal to 2.5% of the combined temporary investment in
money market securities and loans and investments of the Trust. The management
fee is paid quarterly, in arrears, and is determined by reference to the value
of the assets of the Trust as of the first day of that quarter. Management fees
incurred during the years ended December 31, 2004, 2003 and 2002 relating to
this agreement aggregated $227,834, $228,541 and $263,906, respectively. As part
of the loan agreement with the SBA, these expenses can continue to be accrued,
but cannot be paid until the SBA loan is paid in full.
In addition, the Trust pays a fee for administration of stockholder accounts and
other administrative services. During each of the years ended December 31, 2004,
2003 and 2002, administrative fees totaling $4,066, $9,830 and $38,400,
respectively, were paid to the Trust Advisor.
Note 5. Distributions Payable to Stockholders
Distributions payable represents a 10% accrued underwriting return
("Underwriting Return") and an 8% accrued priority return ("Priority Return").
The Underwriting Return is based on actual interest earned by the Trust on the
investors funds held in escrow through the initial closing, plus 10% simple
annual interest, computed on a daily basis from the initial closing (August 31,
1995) until the final closing (June 21, 1997). The Priority Return is based on
8% simple annual interest computed from final closing on each stockholder's
investment balance in the Trust.
22
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 5. Distributions Payable to Stockholders (Continued)
The Trust intends to make quarterly distributions of all cash revenues to the
extent that the Trust has cash available for such distributions. These
distributions must be approved by a majority of the Independent Trustees and
made within 60 days of the end of each quarter. SBA regulations govern the
amount of the SBIC's income available for distributions. As of December 31, 2004
and 2003, no amounts were available for distribution within the SBIC under the
SBA regulations. The distributions payable balance comprises the following:
Underwriting Priority
Return Return Total
----------------------------------------
Balance, December 31, 2002 $ 526,401 $3,455,418 $3,981,819
Distributions earned -- 843,280 843,280
---------- ---------- ----------
Balance, December 31, 2003 526,401 4,298,698 4,825,099
Distributions earned -- 845,590 845,590
---------- ---------- ----------
Balance, December 31, 2004 $ 526,401 $5,144,288 $5,670,689
========== ========== ==========
Note 6. Note Payable
The SBIC issued debentures payable to the SBA totalling $9,500,000 since
inception. The original debenture terms required semiannual payments of interest
at annual interest rates ranging from 6.353% to 7.64%. In addition to interest
payments, the SBIC was required to pay an annual 1% SBA loan fee on the
outstanding debentures balance.
On August 22, 2002, the SBA notified the SBIC that all debentures, accrued
interest and fees were immediately due and payable. The SBIC submitted a plan of
debt and interest repayment to the SBA on January 31, 2003 and received a
response dated February 21, 2003. On September 1, 2003, management signed a loan
agreement ("Agreement") with the SBA for $8,100,000 (after paying $1,400,000 on
the $9,500,000 debentures) with a term of 48 months at an interest rate of
7.49%. The Agreement requires principal payments on the debt to the extent the
SBIC receives cash proceeds exceeding $250,000 for the sale or liquidation of
investments. As of December 31, 2004, $7,426,919 is outstanding under the loan
agreement. The note payable is secured by substantially all assets of the SBIC.
The loan agreement contains various covenants, including limits on the amounts
of expenses, other than interest expense, that can be incurred and paid. The
loan agreement also contains various events of default, including a decrease in
the aggregate value of the SBIC's assets of 10% or greater.
Note 7. Federal Income Taxes
The Trust has received an opinion from counsel that it will be treated as a
partnership for federal income tax purposes. As such, under present income tax
laws, no income taxes will be reflected in these financial statements as taxable
income or loss of the Trust is included in the income tax returns of the
investors.
23
Berthel Growth & Income Trust 1
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 8. Financial Highlight Information
In accordance with newly issued financial reporting requirements applicable to
investment companies including funds that are exempt from registration
requirements, the Trust was required to disclose certain financial highlight
information.
Due to the net liability position of the Trust as of December 31, 2004, the
negative ratios do not represent meaningful data and will, therefore, be
excluded from disclosure in the footnotes.
Note 9. Quarterly Financial Information (Unaudited)
First Second Third Fourth Total
-----------------------------------------------------------------------
2004
-----------------------------------------------------------------------
Total revenue $ 94,294 $ 91,621 $ 64,926 $ 105,061 $ 355,902
Net investment (loss) (140,402) (165,772) (161,777) (146,998) (614,949)
Unrealized gain on investments 29,374 589,003 56,752 (671,356) 3,773
Net increase (decrease) in net assets (111,028) 423,231 (105,025) (818,354) (611,176)
Increase (decrease) in net assets
per beneficial share $ (10.53) $ 40.15 $ (9.96) $ (77.64) $ (57.98)
2003
-----------------------------------------------------------------------
Total revenue $ 185,612 $ 136,503 $ 116,186 $ 97,250 $ 535,551
Net investment (loss) (293,222) (161,453) (178,144) (155,072) (787,891)
Unrealized gain on investments 11,369 136,523 1,641,120 127,985 1,916,997
Realized gain on investments -- 35,924 137,431 -- 173,355
Net increase (decrease) in net assets (281,853) 10,994 1,600,407 (27,087) 1,302,461
Increase (decrease) in net assets
per beneficial share $ (26.74) $ 1.04 $ 151.83 $ (2.57) $ 123.56
24
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
On October 13, 2003, the Trust notified Deloitte & Touche (Deloitte) that it
would be dismissing Deloitte and appointing a new independent certifying
accountant for the current fiscal year. The Trust has engaged McGladrey &
Pullen, LLP as its new independent certifying accountant for the current fiscal
year.
Prior to such notification, the Trust did not consult with McGladrey & Pullen,
LLP regarding the application of accounting principles to a specific completed
or contemplated transaction or any matter that was either the subject of a
disagreement or a reportable event. The Trust also did not consult with
McGladrey & Pullen, LLP regarding the type of opinion that might be rendered on
the Trust's consolidated financial statements.
The report of Deloitte on the Trust's consolidated financial statements for the
fiscal year ended December 31, 2002 contained no adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles other than disclosed in Note 1 of the financial
statements. In connection with its audits for the fiscal year ended December 31,
2002 and the subsequent interim accounting period preceding the Trust's
notification to Deloitte of its intention to dismiss such firm, there have been
no disagreements with Deloitte on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure that,
if not resolved to the satisfaction of Deloitte, would have caused such firm to
make reference to the subject matter of the disagreement(s) in connection with
this report.
The Audit Committee of the Parent of the Trust Advisor participated in and
approved the decision to change the Trust's external auditors and the Board made
the appointment.
Item 9A. Controls and Procedures
-----------------------
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of
the Trust's management, including the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), of the effectiveness of our disclosure controls and
procedures. Based on that evaluation, the CEO and CFO concluded that as of the
end of the period covered by this report, our disclosure controls and procedures
are effective to provide reasonable assurance that information required to be
disclosed by us in reports that we file or submit under the Securities Exchange
of 1934 is recorded, processed, summarized, and timely reported as provided in
the SEC's rules and forms.
Changes in Internal Controls
No changes occurred since the quarter ended September 30, 2004 in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
25
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
A management board consisting of the Independent Trustees and the Trust Advisor
is responsible for the management of the Trust and its business.
Trustees of the Registrant:
- ---------------------------
Corporate Trustee - TJB Capital Management, Inc. was organized as a
Delaware corporation on January 25, 1995 for the purpose of organizing the
Trust. The principal office of the Corporate Trustee is located at 1105 N.
Market Street, Suite 1300, Wilmington, Delaware, 19801. The Corporate
Trustee is an affiliate of the Trust Advisor.
Henry T. Madden (age 75) - Mr. Madden is an Independent Trustee of the
Trust. He was awarded a B.S.M.E. from the University of Notre Dame in 1951
and an M.B.A. from the University of Pittsburgh in 1966. He began his
career as an Industrial Engineer, then Quality Control Manager in Technical
Ceramics for 3M Company in Chattanooga, Tennessee. He became Manager of
Production Engineering, then Manager for a 1,500 employee, $50 million in
sales Allis-Chalmers Plant, manufacturing power and distribution
transformers in Pittsburgh, Pennsylvania. In 1966, he became General Plant
Manager of the Allis-Chalmers, Cedar Rapids, Iowa Plant manufacturing
construction machinery. In 1969, Mr. Madden became Division Manager for
Hydraulic Truck Cranes for Harnischfeger Corporation. In 1975 Mr. Madden
became President, Harnischfeger GMBH in Dortmund, West Germany, a joint
venture with August Thyssen A.G. of West Germany, manufacturing truck
cranes, creating a 100 million deutsche mark business. He also served as
Managing Director for Harnischfeger International Corporation for Europe,
East Europe, and North and West Africa, responsible for all product sales
in those areas. In 1981, Mr. Madden became a consultant to and assumed the
responsibilities of General Manager of Oak Hill Engineering Inc., in Cedar
Rapids, Iowa, a manufacturer of wire harnesses. In 1983, he started a
company, Enertrac Inc., designing, manufacturing and marketing
communications systems. Mr. Madden financed Enertrac Inc. through an
initial public offering and merged it into another company in 1986. Mr.
Madden organized the Institute for Entrepreneurial Management in the
University of Iowa College of Business Administration in 1986, advising
potential and new entrepreneurs and teaching courses on entrepreneurship in
the MBA program, along with courses in Corporate Strategy in the Executive
MBA and MBA programs. Mr. Madden has been consulting with developmental
stage companies since 1981.
Mary Quass (age 55) - Ms. Quass was elected as an Independent Trustee,
effective February 5, 1999. She received a BA Degree from the University of
Northern Iowa in 1972. In 1981, she was appointed General Sales Manager of
KSO and later in 1982 became Vice President and General Manager of KHAK
AM/FM. In 1988, Ms. Quass formed Quass Broadcasting Company, Inc., which
merged with CapStar Broadcasting Partners to form Central Star
Communications, Inc. in 1998. She held the position of President of Quass
Broadcasting until 1998. Upon the merger, Quass served as President and CEO
of Central Star Communications. In 1999 Central Star/Capstar Partners
merged with Chancellor Media to form AMFM, Inc. and Quass continued to
serve as CEO and President of Central Star Communications under AMFM until
she left the company in early 2000. Quass formed a LLC to acquire
businesses and provide consulting services. In 2002 she formed NewRadio
Group, LLC which owns and operates radio stations.
Executive Officers and Directors of the Trust Advisor:
- ------------------------------------------------------
Thomas J. Berthel (age 53) - Mr. Berthel was elected President of the Trust
Advisor in August, 2001, and also serves as Chief Executive Officer and
Chairman of the Board of the Trust Advisor and as Chief Executive Officer
of Berthel Fisher and Financial Services. He has held these positions since
1985. Until June, 1993, Mr. Berthel served as President of the Financial
Services. From 1993 until the present he has served as Chief Executive
Officer and as a Director of the Financial Services. Mr. Berthel is also
President and a Director of various other subsidiaries of Berthel Fisher
that act or have acted as general partners of separate private leasing
programs and two publicly sold leasing programs. He serves as the Chairman
of the Board of Amana Colonies Golf Course, Inc., and, served on the Board
of Directors of Intellicall, Inc., an advanced telecommunications
technologies company in Carrollton, Texas, from November, 1995 to December,
1999. Mr. Berthel holds a Financial and Operation Principal license issued
by the National Association of Securities Dealers, Inc. He is also a
Certified Life Underwriter. Mr. Berthel holds a bachelor's degree from St.
Ambrose College in Davenport, Iowa (1974). He also holds a Master's degree
in Business Administration from the University of Iowa in Iowa City, Iowa
(1993).
26
Henry Royer (Age 73) - Mr. Royer was elected Executive Vice President of
the Trust Advisor in August, 2001. Mr. Royer was President of the Trust
Advisor from July, 1999 to August, 2001. Mr. Royer served as an Independent
Trustee of the Trust from its date of inception through February 5, 1999,
when he resigned as Trustee. He graduated in 1953 from Colorado College
with a B.A. in Money and Banking. From 1950 until 1962, Mr. Royer was
employed for four years by Pillsbury Mills and for four years by Peavey
Company as a grain merchandiser. From 1962 through 1965 he was employed as
Treasurer and served on the Board of Lehigh Sewer Pipe and Tile. Mr. Royer
joined First National Bank of Duluth in 1965, where he served in various
capacities, including Assistant Cashier, Assistant Vice President,
Assistant Manager of the Commercial Loan Department and Senior Vice
President in Charge of Loans. When he left the bank in 1983 he was serving
as Executive Vice President/Loans. He then joined The Merchants National
Bank of Cedar Rapids (currently Firstar Bank Cedar Rapids, N.A.) where he
served as Chairman and President until August, 1994. Mr. Royer served as
the President and Chief Executive Officer of River City Bank, Sacramento,
California from September 1994 through December 31, 1997.
Ronald O. Brendengen (Age 50) - Mr. Brendengen is the Chief Operating
Officer, Chief Financial Officer, Treasurer and a Director of the Trust
Advisor. He has served since 1985 as Controller and since 1987 as the
Treasurer and a Director of Berthel Fisher. He was elected Secretary and
Chief Financial Officer in 1994, and Chief Operating Officer in January
1998, of Berthel Fisher & Company. He also serves as Chief Financial
Officer, Treasurer and a Director of each subsidiary of Berthel Fisher. Mr.
Brendengen holds a certified public accounting certificate and worked in
public accounting during 1984 and 1985. From 1979 to 1984, Mr. Brendengen
worked in various capacities for Morris Plan and MorAmerica Financial
Corp., Cedar Rapids, Iowa. Mr. Brendengen attended the University of Iowa
before receiving a bachelor's degree in Accounting and Business
Administration with a minor in Economics from Mt. Mercy College, Cedar
Rapids, Iowa in 1978.
Leslie D. Smith (Age 57) - Mr. Smith is a Director and the Secretary of the
Trust Advisor. In 1994 Mr. Smith was named General Counsel of Berthel
Fisher & Company. Mr. Smith was awarded his B.A. in Economics in 1976 from
Iowa Wesleyan College, Mount Pleasant, Iowa, and his J.D. in 1980 from the
University of Dayton School of Law, Dayton, Ohio. Mr. Smith was employed as
Associate Attorney and as a Senior Attorney for Life Investors Inc., Cedar
Rapids, Iowa, from 1981 through 1985 where he was responsible for managing
mortgage and real estate transactions. From 1985 to 1990 Mr. Smith was
General Counsel for LeaseAmerica Corporation, Cedar Rapids, Iowa. In that
capacity, Mr. Smith performed all duties generally associated with the
position of General Counsel. From 1990 to 1992, Mr. Smith was Operations
Counsel for General Electric Capital Corporation located in Cedar Rapids,
Iowa. From 1993 to 1994, Mr. Smith was employed as Associate General
Counsel for Gateway 2000, Inc. in North Sioux City, South Dakota.
27
Item 11. Executive Compensation
----------------------
Set forth is the information relating to all direct remuneration paid or accrued
by the Registrant.
(A) (B) (C) (C1) (C2) (D)
Cash and Securities of property Aggregate of
cash equivalent insurance benefits contingent
Name of individual and Year forms of or reimbursement or forms
capacities in which served Ended remuneration Fees personal benefits of remuneration
- ------------------------------------------------------------------------------------------------------------------------------------
TJB Capital Management, Inc. 2004 $0 $ 0 $0 $0
Corporate Trustee 2003 $0 $ 0 $0 $0
2002 $0 $ 0 $0 $0
Henry T. Madden 2004 $0 $ 12,000 $0 $0
Independent Trustee 2003 $0 $ 12,000 $0 $0
2002 $0 $ 17,000 $0 $0
Mary Quass 2004 $0 $ 12,000 $0 $0
Independent Trustee 2003 $0 $ 12,000 $0 $0
2002 $0 $ 17,000 $0 $0
Berthel Fisher & Company Planning, Inc. 2004 $0 $ 231,900 $0 $0
Trust Advisor 2003 $0 $ 238,371 $0 $0
2002 $0 $ 302,306 $0 $0
28
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
No person owns of record, or is known by the Registrant to own beneficially,
more than five percent of the shares.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Related party transactions are described in notes 3 and 4 of the notes to the
consolidated financial statements.
Item 14. Principal Accountant Fees and Services
--------------------------------------
Audit and Non-Audit Fees
The following table presents fees for professional audit services rendered by
McGladrey & Pullen, LLP for the audit of Berthel Growth & Income I's annual
financial statements for the years ended December 31, 2004 and 2003, and fees
billed for other services rendered by McGladrey & Pullen, LLP and RSM McGladrey,
Inc. (an affiliate of McGladrey & Pullen, LLP).
2004 2003
---- ----
Audit Fees (1) $ 45,900 $ 38,500
Audit-Related Fees (2) 2,400 2,000
Tax Services (3) 3,800 -0-
All Other Fees -0- -0-
----------- -----------
$ 52,100 $ 40,500
=========== ===========
(1) Audit fees consist of fees for professional services rendered for the audit
of Berthel Growth & Income Trust I's financial statements and review of
financial statements included in the Trust's third quarter report and services
normally provided by the independent auditor in connection with statutory and
regulatory filings or engagements.
(2) Audit-related fees consist of fees for professional services rendered for
the custody report examination required by rule 17f-1 and rule 17f-2 under the
Investment Company Act of 1940 of Berthel Growth & Income Trust I and its
wholly-owned subsidiary, Berthel SBIC, LLC.
(3) Tax services consist of preparation of the Trust's tax return.
29
PART IV
Item 15. Exhibits and Financial Statement Schedules
----------------------------------------
(a) Documents filed as part of this report.
1. Consolidated Financial Statements Page No. Page No.
--------
Consolidated Statements of Assets and Liabilities
as of December 31, 2004 and 2003 13
Consolidated Statements of Operations for the
Years Ended December 31, 2004, 2003 and 2002 14
Consolidated Statements of Changes in Net Assets (Liabilities)
for the Years Ended December 31, 2004, 2003 and 2002 15
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2004, 2003 and 2002 16
Notes to Consolidated Financial Statements 17
2. Financial Statement Schedules
Financial statement schedules are omitted as they are not required or
are not applicable, or the required information is shown in the
consolidated financial statements and the accompanying notes thereto.
3. Exhibits
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
99.1 Fidelity Bond
(b) Exhibits
Exhibits to the Form 10-K required by item 601 of Regulation S-K are
attached or incorporated herein by reference as stated in the Index to
Exhibits.
(c) Financial Statements Excluded from Annual Report to Shareholders Pursuant to
Rule 14a3(b)
Not applicable.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Thomas J. Berthel
-------------------------------------
Date: March 22, 2005 THOMAS J. BERTHEL,
Chief Executive Officer
(principal executive officer)
of Berthel Fisher & Company
Planning, Inc., Trust Advisor
By: /s/ Ronald O. Brendengen
-------------------------------------
Date: March 22, 2005 RONALD O. BRENDENGEN,
Chief Operating Officer, Chief
Financial Officer and Treasurer
(principal financial officer)
of Berthel Fisher & Company
Planning, Inc., Trust Advisor
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Thomas J.Berthel
----------------------------------------
Date: March 22, 2005 THOMAS J. BERTHEL, Chairman and
Director of Berthel Fisher & Company
, Berthel Fisher & Company Planning,
Inc., Trust Advisor
/s/ Ronald O. Brendengen
----------------------------------------
Date: March 22, 2005 RONALD O. BRENDENGEN, Director of
Berthel Fisher & Company Planning,
Inc., Trust Advisor
/s/ Henry Royer
----------------------------------------
Date: March 22, 2005 HENRY ROYER, President of Berthel
Fisher & Company Planning, Inc.,
Trust Advisor
/s/ Leslie D. Smith
----------------------------------------
Date: March 22, 2005 LESLIE D. SMITH, Director of Berthel
Fisher & Company Planning, Inc.,
Trust Advisor
/s/ Henry T. Madden
----------------------------------------
Date: March 22, 2005 HENRY T. MADDEN, Independent Trustee
of Berthel Growth & Income Trust I
/s/ Mary Quass
----------------------------------------
Date: March 22, 2005 MARY QUASS, Independent Trustee of
Berthel Growth & Income Trust I
/s/ Thomas J. Berthel
----------------------------------------
Date: March 22, 2005 THOMAS J. BERTHEL, Chairman of the
Board and Chief Executive Officer of
TJB Capital Management, Inc.,
Trustee of Berthel Growth & Income
Trust I
/s/ Daniel P. Wegmann
----------------------------------------
Date: March 22, 2005 DANIEL P. WEGMANN, Controller of
Berthel Fisher & Company Planning,
Inc., Trust Advisor
31
EXHIBIT INDEX
3.1 Certificate of Trust (1)
3.2 Declaration of Trust (2)
10.1 Management Agreement between the Trust and the Trust Advisor (3)
10.2 Safekeeping Agreement between the Trust and Firstar Bank Cedar Rapids,
N.A. (4)
16.0 Letter re change in certifying accountant (5)
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
99.1 Fidelity Bond
(1) Incorporated by reference to the Trust's Registration Statement on
Form N-2, filed with the Commission on February 14, 1995 (File No.
33-89605).
(2) Incorporated by reference to Pre-Effective Amendment No. 3 to the
Trust's Registration Statement on Form N-2, filed with the Commission
on June 21, 1995 (File No. 33-89605).
(3) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Trust's Registration Statement on Form N-2, filed with the Commission
on May 9, 1995 (File No. 33-89605).
(4) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Trust's Registration Statement on Form N-2, filed with the Commission
on June 12, 1995 (File No. 33-89605).
(5) Incorporated by reference to Form 8-K filed with the Commission on
October 13, 1995 (File No. 33-89605).
32