##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

OR

o 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: 814-00127

BRANTLEY CAPITAL CORPORATION

---

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                   
|----------------------------------------------------------------------- |  | --------------------------------------------------
|Maryland
(State or other Jurisdiction of
Incorporation or Organization) |  | 34-1838462
(I.R.S. Employer Identification Number)

3201 Enterprise Parkway, Suite 350, Cleveland, Ohio 44122

(Address of principal executive offices including zip code)

(216) 464-8400

(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 o.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No x.

The number of shares of common stock, $.01 par value, outstanding as of
June 30, 2003 was 3,810,535.





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TABLE OF CONTENTS



|                                      |                                                                                               |                                                 |  |  |                          |  |  | 
|------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  | ------------------------ |  |  | 
|PART I. FINANCIAL INFORMATION        
|                                      | Item 1. Financial Statements                                                                 
|                                      |                                                                                               | BALANCE SHEETS                                 
|                                      |                                                                                               | STATEMENTS OF OPERATIONS                       
|                                      |                                                                                               | STATEMENTS OF OPERATIONS                       
|                                      |                                                                                               | STATEMENTS OF CHANGES IN NET ASSETS            
|                                      |                                                                                               |                                                 |  |  | STATEMENTS OF CASH FLOWS
|                                      |                                                                                               | STATEMENTS OF INVESTMENTS  (Unaudited)        
|                                      |                                                                                               | NOTES TO THE FINANCIAL STATEMENTS  (Unaudited)
|                                      | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                      | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                                      | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION           
|                                      | Item 1. Legal Proceedings                                                                    
|                                      | Items 2.-5.                                                                                  
|                                      | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                           
|EX-31.1 CEO Section 302 Certification
|EX-31.2 CFO Section 302 Certification
|EX-32.1 CEO Section 906 Certification
|EX-32.2 CFO Section 906 Certification



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




BRANTLEY CAPITAL CORPORATION
BALANCE SHEETS

|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |            |            |            | 
|--------------------------------- | ---------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ---------- | ----------- | ---------- | ------------ | ---------- | ---------- | ---------- | 
|                                  |                              |                                                                                                                                                              |                                            |            | June 30,    |            | December 31,
|                                  |                              |                                                                                                                                                              |                                            |            | 2003        |            | 2002        
|                                  |                              |                                                                                                                                                              |                                            |            | (Unaudited) |            | (Audited)   
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |             
|ASSETS                            |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|Investments, at fair value        |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  | Companies 5% to 25% owned    |                                                                                                                                                              | $                                          | 59,091,821 |             |            | $            | 56,074,862 |           
|                                  | Companies less than 5% owned |                                                                                                                                                              |                                            | 6,093,837  |             |            |              | 6,008,973  |           
|Cash and cash equivalents         |                              |                                                                                                                                                              | 103,977                                    |            |             |            | 237,154      |           
|Restricted cash                   |                              |                                                                                                                                                              | 6,000,000                                  |            |             |            | 6,000,000    |           
|Dividends and interest receivable |                              |                                                                                                                                                              | 5,746,976                                  |            |             |            | 5,426,694    |           
|Receivable for investments sold   |                              |                                                                                                                                                              | 84,125                                     |            |             |            |             |           
|Other assets                      |                              |                                                                                                                                                              | 146,044                                    |            |             |            |             |           
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  |                              | Total Assets                                                                                                                                                 |                                            | $          | 77,266,780  |            |              | $          | 73,747,683 |           
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  |                              | LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                         |                                            |            |             |            |              |            |            |           
|Note payable                      |                              | $                                                                                                                                                            | 7,500,000                                  |            |             | $          | 6,000,000    |           
|Advisory fee payable              |                              |                                                                                                                                                              | 459,640                                    |            |             |            | 477,860      |           
|Accrued professional fees         |                              |                                                                                                                                                              | 1,208,416                                  |            |             |            | 1,095,505    |           
|Other liabilities                 |                              |                                                                                                                                                              | 342,778                                    |            |             |            | 273,990      |           
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  |                              | Total Liabilities                                                                                                                                            |                                            |            | 9,510,834   |            |              |            | 7,847,355  |           
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|Stockholders Equity:             |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  |                              | Common Stock, $0.01 par value; 25,000,000 shares authorized and
3,810,535 shares issued and outstanding at June 30, 2003
and December 31, 2002, respectively |                                            |            | 38,105      |            |              |            | 38,105     |           
|                                  |                              | Additional paid in capital                                                                                                                                   |                                            |            | 34,506,838  |            |              |            | 34,506,838 |           
|                                  |                              | Retained earnings                                                                                                                                            |                                            |            | 33,211,003  |            |              |            | 31,355,385 |           
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  |                              |                                                                                                                                                              | Total Stockholders Equity                 |            |             | 67,755,946 |              |            |            | 65,900,328 | 
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|                                  |                              |                                                                                                                                                              | Total Liabilities and Stockholders Equity |            | $           | 77,266,780 |              |            | $          | 73,747,683 | 
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           
|Net Asset Value Per Share         |                              | $                                                                                                                                                            | 17.78                                      |            |             | $          | 17.29        |           
|                                  |                              |                                                                                                                                                              |                                            |            |             |            |              |           

The accompanying notes to the financial statements are an integral part of these statements.





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##### Table of Contents






BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS

|                                                                                   |                                     |                                                |            |                    |          |                    |           |           |         | 
|---------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------------------- | ---------- | ------------------ | -------- | ------------------ | --------- | --------- | ------- | 
|                                                                                   |                                     |                                                |            | For the six months |          | For the six months
|                                                                                   |                                     |                                                |            | ended              |          | ended             
|                                                                                   |                                     |                                                |            | June 30,           |          | June 30,          
|                                                                                   |                                     |                                                |            | 2003               |          | 2002              
|                                                                                   |                                     |                                                |            |                    |          |                   
|Investment Income:                                                                 |                                     |                                                |            |                    |          |                    |           |          
|                                                                                   | Interest and Dividends              |                                                |            |                    |          |                    |           |           |        
|                                                                                   |                                     | Companies owned 5% to 25%                      |            | $                  | 934,627  |                    |           | $         | 990,718 | 
|                                                                                   |                                     | Companies less than 5% owned                   |            |                    |         |                    |           |           |        | 
|                                                                                   |                                     | Write off of Interest and Dividends Receivable |            |                    | (517,886 | )                  |           |           |        | 
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|                                                                                   | Total investment income             |                                                |            | 416,741            |          |                    |           | 990,718   |        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Operating Expenses:                                                                |                                     |                                                |            |                    |          |                    |           |          
|                                                                                   | Advisory fees                       |                                                |            | 934,454            |          |                    |           | 936,321   |        
|                                                                                   | Administration fees                 |                                                |            | 37,192             |          |                    |           | 37,192    |        
|                                                                                   | Professional fees                   |                                                |            | 176,862            |          |                    |           | 98,522    |        
|                                                                                   | Interest and other expenses         |                                                |            | 401,163            |          |                    |           | 368,118   |        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|                                                                                   | Total operating expenses            |                                                |            | 1,549,671          |          |                    |           | 1,440,153 |        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Investment Loss, net                                                               |                                     |                                                | (1,132,930 | )                  |          |                    | (449,435  | )        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Net Realized and Unrealized Gains (Losses)
on Investments:                         |                                     |                                                |            |                    |          |                    |           |          
|                                                                                   | Net realized losses on investments  |                                                |            |                   |          |                    |           | (169,752  | )      
|                                                                                   | Net unrealized gains on investments |                                                |            | 2,988,548          |          |                    |           | 377,610   |        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Net realized and unrealized gains on investment
transactions                       |                                     |                                                | 2,988,548  |                    |          |                    | 207,858   |          
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Net increase (decrease) in net assets resulting
from operations                    |                                     | $                                              | 1,855,618  |                    |          | $                  | (241,577  | )        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Net increase (decrease) in net assets from operations per
share, basic and diluted |                                     | $                                              | 0.49       |                    |          | $                  | (0.07     | )        
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          
|Weighted average number of shares outstanding,
basic and diluted                   |                                     |                                                | 3,810,535  |                    |          |                    | 3,810,535 |          
|                                                                                   |                                     |                                                |            |                    |          |                    |           |          

The accompanying notes to the financial statements are an integral part of these statements.





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BRANTLEY CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                        |                                      |                                                |            |                 |         |                 |           |          |         | 
|----------------------------------------------------------------------- | ------------------------------------ | ---------------------------------------------- | ---------- | --------------- | ------- | --------------- | --------- | -------- | ------- | 
|                                                                        |                                      |                                                |            | For the quarter |         | For the quarter
|                                                                        |                                      |                                                |            | ended           |         | ended          
|                                                                        |                                      |                                                |            | June 30,        |         | June 30,       
|                                                                        |                                      |                                                |            | 2003            |         | 2002           
|                                                                        |                                      |                                                |            |                 |         |                
|Investment Income:                                                      |                                      |                                                |            |                 |         |                 |           |         
|                                                                        | Interest and Dividends               |                                                |            |                 |         |                 |           |          |        
|                                                                        |                                      | Companies owned 5% to 25%                      |            | $               | 423,633 |                 |           | $        | 512,778 | 
|                                                                        |                                      | Companies less than 5% owned                   |            |                 |        |                 |           |          |        | 
|                                                                        |                                      | Write off of Interest and Dividends Receivable |            |                 |        |                 |           |          |        | 
|                                                                        |                                      |                                                |            |                 |         |                 |           |         
|                                                                        | Total investment income              |                                                |            | 423,633         |         |                 |           | 512,778  |        
|                                                                        |                                      |                                                |            |                 |         |                 |           |         
|Operating Expenses:                                                     |                                      |                                                |            |                 |         |                 |           |         
|                                                                        | Advisory fees                        |                                                |            | 468,332         |         |                 |           | 448,197  |        
|                                                                        | Administration fees                  |                                                |            | 18,699          |         |                 |           | 18,699   |        
|                                                                        | Professional fees                    |                                                |            | 138,644         |         |                 |           | 52,906   |        
|                                                                        | Interest and other expense           |                                                |            | 183,644         |         |                 |           | 164,115  |        
|                                                                        |                                      |                                                |            |                 |         |                 |           |          |         | 
|                                                                        | Total operating expenses             |                                                |            | 809,319         |         |                 |           | 683,917  |        
|Investment Loss, net                                                    |                                      |                                                | (385,686   | )               |         |                 | (171,139  | )       
|Net Realized and Unrealized Gains (Losses)
on Investments:              |                                      |                                                |            |                 |         |                 |           |         
|                                                                        | Net realized gains on investments    |                                                |            |                |         |                 |           | 271,482  |        
|                                                                        | Net unrealized losses on investments |                                                |            | (1,874,856      | )       |                 |           | (355,928 | )      
|                                                                        |                                      |                                                |            |                 |         |                 |           |         
|Net realized and unrealized gains (losses) on
investment
transactions   |                                      |                                                | (1,874,856 | )               |         |                 | (84,446   | )       
|                                                                        |                                      |                                                |            |                 |         |                 |           |         
|Net decrease in net assets resulting
from operations                    |                                      | $                                              | (2,260,542 | )               |         | $               | (255,585  | )       
|                                                                        |                                      |                                                |            |                 |         |                 |           |         
|Net decrease in net assets from operations per
share, basic and diluted |                                      | $                                              | (0.59      | )               |         | $               | (0.07     | )       
|                                                                        |                                      |                                                |            |                 |         |                 |           |         
|Weighted average number of shares outstanding,
basic and diluted        |                                      |                                                | 3,810,535  |                 |         |                 | 3,810,535 |         
|                                                                        |                                      |                                                |            |                 |         |                 |           |         

The accompanying notes to the financial statements are an integral part of these statements.





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BRANTLEY CAPITAL CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)

|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|------------------------------------------- |  | ------ | ------ | ------- |  | ---------- | ---------- | ------------ |  | - | ---------- | ----- |  | - | ---------- | -
|                                            |  |        |        |         |  | Additional |            |              |  |   |            | Total
|                                            |  | Common |        | Paid in |  | Retained   |            | Stockholders
|                                            |  | Stock  |        | Capital |  | Earnings   |            | Equity      
|                                            |  |        |        |         |  |            |            |             
|Balance at December 31, 2000                |  | $      | 38,105 |         |  | $          | 37,484,895 |              |  | $ | 14,420,019 |       |  | $ | 51,943,019 |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net increase in net assets from operations: |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net investment loss                         |  |        |       |         |  |            |           |              |  |   | (1,207,676 | )     |  |   | (1,207,676 | )
|Net realized gain                           |  |        |       |         |  |            |           |              |  |   | 1,155,843  |       |  |   | 1,155,843  |  
|Net unrealized gain                         |  |        |       |         |  |            |           |              |  |   | 16,851,583 |       |  |   | 16,851,583 |  
|Distributions from:                         |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net realized gains                          |  |        |       |         |  |            |           |              |  |   | (736,455   | )     |  |   | (736,455   | )
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Balance at December 31, 2001                |  | $      | 38,105 |         |  | $          | 37,484,895 |              |  | $ | 30,483,314 |       |  | $ | 68,006,314 |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net decrease in net assets from operations: |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net investment loss                         |  |        |       |         |  |            | (2,978,057 | )            |  |   | 819,660    |       |  |   | (2,158,397 | )
|Net realized loss                           |  |        |       |         |  |            |           |              |  |   | (402,012   | )     |  |   | (402,012   | )
|Net unrealized gain                         |  |        |       |         |  |            |           |              |  |   | 454,423    |       |  |   | 454,423    |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Balance at December 31, 2002                |  | $      | 38,105 |         |  | $          | 34,506,838 |              |  | $ | 31,355,385 |       |  | $ | 65,900,328 |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net increase in net assets from operations: |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Net investment loss                         |  |        |       |         |  |            |           |              |  |   | (1,132,930 | )     |  |   | (1,132,930 | )
|Net unrealized gain                         |  |        |       |         |  |            |           |              |  |   | 2,988,548  |       |  |   | 2,988,548  |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  
|Balance at June 30, 2003                    |  | $      | 38,105 |         |  | $          | 34,506,838 |              |  | $ | 33,211,003 |       |  | $ | 67,755,946 |  
|                                            |  |        |        |         |  |            |            |              |  |   |            |       |  |   |            |  

The accompanying notes to the financial statements are an integral part of these statements.





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##### Table of Contents






RANTLEY CAPITAL
    CORPORATION



STATEMENTS OF CASH FLOWS


(Unaudited)

|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |            |          |            |  
|------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ------------------ | ---------- | -------- | ---------- | ---------- | -------- | ---------- | -
|                                                       |                                                                                                                        | For the six months                   |                                            | For the six months
|                                                       |                                                                                                                        | ended June 30,                       |                                            | ended June 30,    
|                                                       |                                                                                                                        | 2003                                 |                                            | 2002              
|                                                       |                                                                                                                        |                                      |                                            |                   
|Cash Flows from Operating Activities:                  |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|                                                       | Net change in net assets resulting from operations:                                                                    |                                      | $                                          | 1,855,618          |            |          | $          | (241,577   | )        |           
|                                                       | Adjustments to reconcile net change in net assets resulting
          from operations to net cash used for operations: |                                      |                                            |                    |            |          |            |            |         
|                                                       |                                                                                                                        | Net realized losses from investments |                                            |                    |           |          |            |            | 169,752  |           
|                                                       |                                                                                                                        | Net unrealized gains on investments  |                                            |                    | (2,988,548 | )        |            |            | (377,610 | )         
|                                                       |                                                                                                                        | Changes in assets and liabilities:   |                                            |                    |            |          |            |            |          |           
|                                                       |                                                                                                                        |                                      | Dividend and interest receivable           |                    |            | (320,282 | )          |            |          | (927,557   | )
|                                                       |                                                                                                                        |                                      | Receivable for investments sold            |                    |            | (84,125  | )          |            |          |           |  
|                                                       |                                                                                                                        |                                      | Other assets                               |                    |            | (146,044 | )          |            |          | (112,083   | )
|                                                       |                                                                                                                        |                                      | Advisory fee payable                       |                    |            | (18,220  | )          |            |          | (39,733    | )
|                                                       |                                                                                                                        |                                      | Accrued professional fees                  |                    |            | 112,911  |            |            |          | 48,264     |  
|                                                       |                                                                                                                        |                                      | Distributions payable                      |                    |            |         |            |            |          | (736,455   | )
|                                                       |                                                                                                                        |                                      | Payable for investments purchased          |                    |            |         |            |            |          | (200,000   | )
|                                                       |                                                                                                                        |                                      | Other liabilities                          |                    |            | 68,788   |            |            |          | 3,643      |  
|                                                       |                                                                                                                        |                                      | Purchases of investment securities         |                    |            | (412,275 | )          |            |          | (7,668,421 | )
|                                                       |                                                                                                                        |                                      | Sales/ Maturities of investment securities |                    |            | 299,000  |            |            |          | 5,733,653  |  
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|                                                       | Net cash used for operating activities                                                                                 |                                      |                                            | (1,633,177         | )          |          |            | (4,348,124 | )       
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|Cash Flows from Financing Activities:                  |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|                                                       |                                                                                                                        | Proceeds from notes payable          |                                            |                    | 1,500,000  |          |            |            |         |           
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|                                                       | Net cash provided by financing activities                                                                              |                                      |                                            | 1,500,000          |            |          |            |           |         
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|Net change in cash and cash equivalents for the period |                                                                                                                        |                                      | (133,177                                   | )                  |            |          | (4,348,124 | )         
|Cash and cash equivalents, beginning of period         |                                                                                                                        |                                      | 237,154                                    |                    |            |          | 11,369,345 |           
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|Cash and cash equivalents, end of the period           |                                                                                                                        | $                                    | 103,977                                    |                    |            | $        | 7,021,221  |           
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           
|                                                       |                                                                                                                        |                                      |                                            |                    |            |          |            |           

The accompanying notes to the financial statements are
an integral part of these statements.



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BRANTLEY CAPITAL CORPORATION
STATEMENTS OF INVESTMENTS  (Unaudited)June 30, 2003

|                                     |                                                                      |            |  |           |  |   |            |            | 
|------------------------------------ | -------------------------------------------------------------------- | ---------- |  | --------- |  | - | ---------- | ---------- | 
|Name of Issuer and Title of Issue    |                                                                      | Shares/Par |  | Value    
|                                     |                                                                      |            |  |          
|Aviation                             |                                                                      |            |  |           |  |   |            |           
|                                     | Flight Options International Inc. Preferred Stock
and Warrants *#@   |            |  | 3,342,060 |  |   | $          | 32,500,000 | 
|                                     |                                                                      |            |  |           |  |   |            |           
|Business Services                    |                                                                      |            |  |           |  |   |            |           
|                                     | Disposable Products Company, LLC Subordinated Debt
with Warrants #   |            |  | 2,745,992 |  |   |            | 2,814,332  | 
|                                     | The Holland Group, Inc. Convertible Preferred Stock #@               |            |  | 282,530   |  |   |            | 2,125,000  | 
|                                     | International Total Services, Inc. Common Stock                      |            |  | 104,250   |  |   |            | 104        | 
|                                     | Prime Office Products, Inc. Convertible Preferred Stock #@           |            |  | 750,000   |  |   |            | 1,500,000  | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 6,439,436  |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Drugs & Health Care                  |                                                                      |            |  |           |  |   |            |           
|                                     | Integrated Physician Solutions, Inc. Convertible Preferred
Stock #@  |            |  | 793,000   |  |   |            | 3,172,000  | 
|                                     | Integrated Physician Solutions, Subordinated Debt with
Warrants #    |            |  | 297,448   |  |   |            | 292,348    | 
|                                     | Health Care Solutions, Subordinated Debt with Warrants *#            |            |  | 3,378,572 |  |   |            | 3,279,401  | 
|                                     | National Rehabilitation Partners, Inc. Convertible Preferred
Stock#@ |            |  | 2,218,375 |  |   |            | 1,454,285  | 
|                                     | National Rehabilitation Partners, Inc. Subordinated Debt #           |            |  | 27,228    |  |   |            | 27,228     | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 8,225,262  |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Miscellaneous                        |                                                                      |            |  |           |  |   |            |           
|                                     | Streamline Foods, Inc. Convertible Preferred Stock #@                |            |  | 897,572   |  |   |            | 700,000    | 
|                                     | Streamline Foods, Inc. Subordinated Debt with Warrants #             |            |  | 122,500   |  |   |            | 95,000     | 
|                                     | Value Creation Partners, Inc. Convertible Preferred Stock #@         |            |  | 304,989   |  |   |            | 2,225,960  | 
|                                     | Waterlink, Inc. Warrants                                             |            |  | 53,550    |  |   |            |           | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 3,020,960  |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Oil                                  |                                                                      |            |  |           |  |   |            |           
|                                     | Petroleum Partners, Inc. Convertible Preferred Stock #@              |            |  | 850,000   |  |   |            |           | 
|                                     | Petroleum Partners, Inc. Subordinated Debt with Warrants #           |            |  | 1,953,125 |  |   |            |           | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   |           |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Retail Trade                         |                                                                      |            |  |           |  |   |            |           
|                                     | Fitness Quest, Inc. Convertible Preferred Stock *#@                  |            |  | 788,961   |  |   |            | 7,174,372  | 
|                                     | Fitness Quest, Inc. Common Stock *#@                                 |            |  | 679,641   |  |   |            | 6,180,276  | 
|                                     | Fitness Quest, Inc. Warrants #@                                      |            |  | 181,172   |  |   |            | 1,645,352  | 
|                                     |                                                                      |            |  |           |  |   |            |           
|                                     |                                                                      |            |  |           |  |   | 15,000,000 |           
|                                     |                                                                      |            |  |           |  |   |            |           
|Total Investments(Cost $30,359,682) |                                                                      |            |  |           |  | $ | 65,185,658 |           
|                                     |                                                                      |            |  |           |  |   |            |           



---

|All investments are U.S. companies
|----------------------------------
|                                  
|*                                 
|                                  
|#                                 
|                                  
|@                                 

The accompanying notes to financial statements are an integral part of these statements.





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##### Table of Contents






BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS  (Unaudited)

1. Significant Accounting Policies

The interim financial statements have been prepared by Brantley
Capital Corporation (the Company) pursuant to the rules and
regulations of the Securities and Exchange Commission applicable to
quarterly reports on Form 10-Q. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. These
financial statements should be read in conjunction with the audited
financial statements and related notes and schedules included in the
Companys 2002 Annual Report filed on Form 10-K dated December 31, 2002.

The unaudited financial statements reflect, in the opinion of
management, all adjustments necessary to present fairly the financial position of the
Company as of June 30, 2003, the results of its operations for the
quarters ended June 30, 2003 and 2002, the results of its operations for
the six months ended June 30, 2003 and 2002, and its cash flows for the
six months ended June 30, 2003 and 2002. Interim results are not
necessarily indicative of results to be expected for a full fiscal year.

Privately placed securities are carried at fair value as determined
in good faith by or under the direction of the Board of Directors.
Generally, the fair value of each security will initially be based
primarily upon its original cost to the Company. Cost will be the
primary factor used to determine fair value on an ongoing basis until
significant developments or other factors affecting the investment (such
as results of the portfolio companys operations, changes in the general
market conditions, subsequent financings or the availability of market
quotations) provide a basis for value other than cost valuation.

Portfolio investments listed on an exchange or traded on NASDAQ
National Market are valued at the closing price listed on their
respective exchange or system on the date of valuation. Securities
traded in the over-the-counter market will be valued on the average of
the closing bid and asked prices on the day of valuation.

Debt securities with 60 days or less remaining to maturity will be
valued at amortized cost.

2. Investments, Cash and Cash Equivalents



| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of
June 30, 2003 and December 31, 2002, the identified cost
of investments for financial statement and tax reporting purposes was $30,359,682, and $30,274,890, respectively.                                      
|
| | Cash equivalents consist of highly liquid investments with
insignificant interest rate risk and original maturities of three
months or less at acquisition date. Cash and cash equivalents
consisted of the following:

|                |  |             |           |              |  |   |           | 
|--------------- |  | ----------- | --------- | ------------ |  | - | --------- | 
|                |  | June 30,    |           | December 31,
|                |  | 2003        |           | 2002        
|                |  | (Unaudited) |           | (Audited)   
|                |  |             |           |             
|Cash            |  | $           | 103,977   |              |  | $ | 237,154   | 
|Restricted Cash |  | $           | 6,000,000 |              |  | $ | 6,000,000 | 
|                |  |             |           |              |  |   |           | 





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##### Table of Contents



BRANTLEY CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS  (Unaudited)

3. Investment Advisory Agreement



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has entered into an investment advisory agreement
(the Investment Advisory Agreement) with Brantley Capital
Management, L.L.C. (the Investment Adviser) under which the
Investment Adviser is entitled to an annual management fee of 2.85%
of the Companys net assets, determined at the end of each calendar
quarter, and payable quarterly in arrears throughout the term of the
Investment Advisory Agreement. For the six months ended June 30,
2003, the Investment Adviser earned $934,454 under the Investment
Advisory Agreement. Certain officers of the Company are also
officers of the Investment Adviser. No officer of the Investment
Adviser receives any compensation from the Company for serving as
officer of the Company (See Note 5).

4. Financial Highlights

|                                         |                                                 |                                  |        |                    |      |                    |         |       |       |  
|---------------------------------------- | ----------------------------------------------- | -------------------------------- | ------ | ------------------ | ---- | ------------------ | ------- | ----- | ----- | -
|                                         |                                                 |                                  |        | For the six months |      | For the six months
|                                         |                                                 |                                  |        | ended              |      | ended             
|                                         |                                                 |                                  |        | June 30, 2003      |      | June 30, 2002     
|                                         |                                                 |                                  |        |                    |      |                   
|Net Asset Value, Beginning of the Period |                                                 | $                                | 17.29  |                    |      | $                  | 17.85   |      
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Income from investment operations:       |                                                 |                                  |        |                    |      |                    |         |      
|                                         | Net investment loss                             |                                  |        | (0.30              | )    |                    |         | (0.12 | )    
|                                         | Net realized and unrealized gain on investments |                                  |        | 0.79               |      |                    |         | 0.05  |      
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|                                         |                                                 | Total from investment operations |        |                    | 0.49 |                    |         |       | (0.07 | )
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Net Asset Value, End of Period           |                                                 | $                                | 17.78  |                    |      | $                  | 17.78   |      
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Market Value, End of Period              |                                                 | $                                | 8.44   |                    |      | $                  | 9.50    |      
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Total return, at Market Value            |                                                 |                                  | 9.61   | %(1)               |      |                    | (12.76) | %(1) 
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Total return, at Net Asset Value         |                                                 |                                  | 2.83   | %(1)               |      |                    | (.39    | )%(1)
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Total Expenses/Average net assets        |                                                 |                                  | 4.64   | %(2)               |      |                    | 4.28    | %(2) 
|                                         |                                                 |                                  |        |                    |      |                    |         |      
|Net
Investment Loss/Average net assets   |                                                 |                                  | (3.39) | %(2)               |      |                    | (1.34)  | %(2) 
|                                         |                                                 |                                  |        |                    |      |                    |         |      



|(1) |  | Not annualized.
|--- |  | ---------------
|   
|(2) |  | Annualized.    

5. Recent Developments

On March 19, 2003, we entered into a Memorandum of Understanding with
Phillip Goldstein, a director of the Company, pursuant to which Mr. Goldstein
agreed to dismiss the lawsuit he filed against us in September 2002, subject to
compliance with the Investment Company Act of 1940. On June 4, 2003, we filed an application for exemptive relief
from certain provisions of the 1940 Act in order to effect the provisions of
the Memorandum of Understanding. On June 18, 2003, we received comments on our
application from the staff of the Division of Investment Management. We are in
the process of responding to those comments. In addition, we have
proposed a new Memorandum of Understanding that will be submitted to
the staff of the Division of Investment Management with our response
to their comments.

Pursuant to the proposed new Memorandum of Understanding we would agree,
among other things:



| |  | to cause there to be four (4) directors who are not interested
persons as defined under the 1940 Act and cause the board to be
exactly seven (7) directors in total;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | if Mr. Goldstein or Gerald Hellerman is no longer a director of the
Company then whichever of Mr. Goldstein or Mr. Hellerman remains on the
board shall have the right to select a nominee;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | to not convert the Company from being an advised fund to an
internally managed fund unless a majority of the independent directors
agree;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | to allow any independent director to request independent counsel,
subject to the approval of the board, which cannot be unreasonably
withheld; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | to refrain from making defamatory remarks about any party to the
agreement.
|- |  | ---------------------------------------------------------------------------

In addition, the proposed new Memorandum of Understanding provides that at the
next Annual Meeting of Stockholders:



| |  | we would ask shareholders to approve a plan of orderly disposition
of the assets of the Company or a sale of the assets with the goal of
prompt cash distribution to shareholders;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we would ask shareholders to approve a new investment advisory
agreement pursuant to which:
|- |  | -------------------------------------------------------------------------------------------



| |  | the advisors fees would be reduced from 2.85% to 2.5% of our net asset value;
|- |  | ------------------------------------------------------------------------------



| |  | all stock options would be forfeited and cancelled; and
|- |  | -------------------------------------------------------



| |  | the advisor would be entitled to receive a fee equal to
20% of the aggregate distributions made by the Company in excess
of $10.00 per share; however, none of the amount would be paid
until aggregate distributions totaled $12.50 per share.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The new proposed Memorandum of Understanding also includes provisions that
would require the parties to take all steps necessary to accomplish the goals
of the Memorandum, including voting their shares in favor of the proposals.
Under the new proposed memorandum, we would also be required to reimburse Mr.
Goldstein for certain expenses (not to exceed $275,000) he incurred in
connection with the proxy solicitation and litigation related to the Annual
Meeting of Stockholders on September 17, 2002. Mr. Goldstein would also agree
not to engage in, lead or fund a proxy contest while the agreement is in effect. The term of the new
proposed Memorandum of Understanding would run until December 31, 2006.

The new proposed Memorandum of Understanding is subject to approval by our
board of directors, our shareholders, and the receipt of exemptive relief from
the Securities and Exchange Commission. If the new proposed
Memorandum of Understanding becomes effective it would replace the
previous Memorandum of Understanding. There can be no assurances that this
relief would be granted or that it would not be subject to unfavorable terms
and conditions that would cause us to abandon the application and the new
proposed Memorandum of Understanding.







---



##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

General

Overview

We are a non-diversified investment company that is regulated as a
business development company under the Investment Company Act of 1940. We
provide equity and long-term debt financing to small and medium-sized private
companies in a variety of industries throughout the United States. Our
investment objective is to achieve long-term capital appreciation in the value
of our investments and to provide current income primarily from interest,
dividends and fees paid by our portfolio companies.

Historically, we have focused our investing activities on private equity
securities. We generally structure our private equity investments as
participating preferred stock with an 8% to 10% dividend yield that accumulates
and is paid upon a liquidity event. Our private equity investments typically
range from $1 million to $5 million, and we generally expect these investments
to achieve liquidity within three to five years. We typically do not receive a
cash return on our private equity investments until a liquidity event occurs,
but instead seek to achieve long-term capital appreciation in net asset value
through such investments.

On March 19, 2003, we entered into a Memorandum of Understanding with
Phillip Goldstein, a director of the Company, pursuant to which Mr. Goldstein
agreed to dismiss the lawsuit he filed against us in September 2002, subject to
compliance with the Investment Company Act of 1940. See Part
II, Item 1. Legal
Proceedings. On June 4, 2003, we filed an application for exemptive relief
from certain provisions of the 1940 Act in order to effect the provisions of
the Memorandum of Understanding. On June 18, 2003, we received comments on our
application from the staff of the Division of Investment Management. We are in
the process of responding to those comments. In addition, we have
proposed a new Memorandum of Understanding that will be submitted to
the staff of the Division of Investment Management with our response
to their comments.

Pursuant to the proposed new Memorandum of Understanding we would agree,
among other things:



| |  | to cause there to be four (4) directors who are not interested
persons as defined under the 1940 Act and cause the board to be
exactly seven (7) directors in total;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | if Mr. Goldstein or Gerald Hellerman is no longer a director of the
Company then whichever of Mr. Goldstein or Mr. Hellerman remains on the
board shall have the right to select a nominee;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | to not convert the Company from being an advised fund to an
internally managed fund unless a majority of the independent directors
agree;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | to allow any independent director to request independent counsel,
subject to the approval of the board, which cannot be unreasonably
withheld; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | to refrain from making defamatory remarks about any party to the
agreement.
|- |  | ---------------------------------------------------------------------------

In addition, the proposed new Memorandum of Understanding provides that at the
next Annual Meeting of Stockholders:



| |  | we would ask shareholders to approve a plan of orderly disposition
of the assets of the Company or a sale of the assets with the goal of
prompt cash distribution to shareholders;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we would ask shareholders to approve a new investment advisory
agreement pursuant to which:
|- |  | -------------------------------------------------------------------------------------------



| |  | the advisors fees would be reduced from 2.85% to 2.5% of our net asset value;
|- |  | ------------------------------------------------------------------------------



| |  | all stock options would be forfeited and cancelled; and
|- |  | -------------------------------------------------------



| |  | the advisor would be entitled to receive a fee equal to
20% of the aggregate distributions made by the Company in excess
of $10.00 per share; however, none of the amount would be paid
until aggregate distributions totaled $12.50 per share.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The new proposed Memorandum of Understanding also includes provisions that
would require the parties to take all steps necessary to accomplish the goals
of the Memorandum, including voting their shares in favor of the proposals.
Under the new proposed memorandum, we would also be required to reimburse Mr.
Goldstein for certain expenses (not to exceed $275,000) he incurred in
connection with the proxy solicitation and litigation related to the Annual
Meeting of Stockholders on September 17, 2002. Mr. Goldstein would also agree
not to engage in, lead or fund a proxy contest while the agreement is in effect. The term of the new
proposed Memorandum of Understanding would run until December 31, 2006.

The new proposed Memorandum of Understanding is subject to approval by our
board of directors, our shareholders, and the receipt of exemptive relief from
the Securities and Exchange Commission. If the new proposed
Memorandum of Understanding becomes effective it would replace the
previous Memorandum of Understanding. There can be no assurances that this
relief would be granted or that it would not be subject to unfavorable terms
and conditions that would cause us to abandon the application and the new
proposed Memorandum of Understanding.





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##### Table of Contents



Proceeds
we receive from liquidity events are intended to be distributed to
shareholders after retaining sufficient cash for operations including
any follow-on investments in accordance with the proposed memorandum
of understanding.  The proceeds from the liquidity events will be held
in short term investments until such time as they may be distributed
to shareholders.  Such distributions may not be made in accordance
with such
memorandum until we receive both regulatory and shareholder
approvals.  There can be no assurance when or in what amount any
potential distributions will be made or when such approvals may be
received.

Critical Accounting Policies and Estimates

Privately placed equity and mezzanine securities are carried at fair value
as determined in good faith by our board of directors. Initially, the fair
value of each such security is based upon its original cost. Cost is also the
primary factor used to determine fair value on an ongoing basis until
significant developments or other factors affecting the investment (such as
results of subsequent financings, the availability of market quotations, the
portfolio companys operations and changes in general market conditions)
provide a basis for value other than cost.

Portfolio investments listed on a securities exchange or traded on the
Nasdaq Stock Market are valued at the closing price listed on the relevant
exchange or quotation system on the date of valuation. Securities traded in the
over-the-counter market are valued based on the average of the closing bid and
asked prices on the date of valuation. Interest income is recorded on mezzanine
investments when the payment is contractually due unless a loan is more than 30
days past due. Interest is not accrued on any loans that are more than 30 days
past due. Dividend income is recorded on cumulative preferred equity securities
on an accrual basis to the extent that such amounts are expected to be
collected and on common equity securities on the record date for private
companies or on the ex-dividend date for publicly traded companies. We assess
the collectibility of dividends and interest income receivables in connection
with our determination of the fair value of the related security. To the extent
that there are adverse future developments, previously recognized dividend and
interest income may not be realized.

We account for our operations utilizing accounting principles generally
accepted in the United States for investment companies. On this basis, the
principal measure of our financial performance is captioned Net change in net
assets resulting from operations, which is the sum of two elements. The first
element is Investment income (loss), net, which is the difference between (1)
our income from interest, dividends and fees, and (2) our operating expenses.
The second element is Net gain (loss) on investments, which is the sum of (1)
the difference between the proceeds received from our dispositions of portfolio
securities and their stated cost (Net realized gain (loss) on investments),
and (2) the net change in the fair value of our investment portfolio (Net
unrealized gain (loss) on investments). Net realized gain (loss) on
investments and Net unrealized gain (loss) on investments are directly
related. For example, in the period during which a security is sold to realize
a gain, net unrealized gain on investments decreases, and net realized gain on
investments increases.

Historically, we have focused our investing activities on private equity
securities. We began making such investments in 1997 and are now entering into
a phase of the business plan which emphasizes positioning our more mature
portfolio companies for appropriate liquidity events. As a result, we are
continuously monitoring portfolio company results and evaluating opportunities
to maximize the valuation of our investments. In that regard, we periodically
evaluate potential acquisitions, financing transactions, initial public
offerings, strategic alliances, and sale opportunities involving our portfolio
companies. Any such transaction could have an impact on the valuation of our
investments. These transactions and activities are generally not disclosed to
our stockholders and the investing public until such time as the transactions
are publicly announced or completed, as the case may be.





---



##### Table of Contents



Results of Operations

Dividend and Interest Income

Dividend and interest income on investments for the three months ended
June 30, 2003, and 2002 was $423,633, and $512,778, respectively. Dividend and
interest income on investments for the six months ended June 30, 2003, and 2002
was $934,627, and $990,718, respectively. The decrease in interest and
dividend income during the three and six months ended June 30, 2003 was
primarily due to the 2003 write-down of our investment in Petroleum Partners,
Inc. as more fully described below. In addition, dividend and interest income
for the six months ended June 30, 2003 was offset by the
write-down of $517,886
of previously accrued interest and dividends relating to our investment in
Petroleum Partners, Inc.

Operating Expenses

Total operating expenses during the three months ended June 30, 2003, and
2002 were $809,319 and $683,917, respectively. Total
operating expenses included advisory fees of $468,332 and $448,197 earned by our
investment adviser during the three months ended June 30, 2003 and 2002,
respectively and interest and other expenses of $183,644 and $164,115 during the three months
ended June 30, 2003 and 2002 respectively. The increase in interest and other
expenses during 2003 reflects the increased interest costs associated with the
increased note payable balance and increased directors and officer liability
insurance costs.

Total operating expenses during the six months ended June 30, 2003, and
2002 were $1,549,671 and $1,440,153, respectively. Total operating
expenses included advisory fees of $934,454 and $936,321 earned by
our investment adviser during the six months ended June 30, 2003 and 2002,
respectively and interest and other expenses of $401,163 and $368,118 during the six months
ended June 30, 2003 and 2002 respectively. The increase in interest and other
expenses during 2003 reflects the increased interest costs associated with the
increased note payable balance and increased directors and officer liability
insurance costs.

Net Realized and Unrealized Gains on Investment Transactions

During the six months ended June 30, 2003 and 2002, valuation of our
equity and mezzanine investments resulted in net realized and unrealized gains
on investments of $2,988,548 and $207,858, respectively. At June 30, 2003 and
December 31, 2002, we had investments in eleven privately-held companies which
are subject to general stock market and business conditions. The unrealized
gains (losses) during such periods were primarily due to a 2003
increase in the valuation of Fitness Quest, Inc.
and a 2003 write-down in the valuation of Petroleum Partners, Inc. as more fully discussed below.

Financial Condition, Liquidity and Capital Resources

At June 30, 2003 and December 31, 2002, we had $103,977 and $237,154,
respectively, in cash and cash equivalents which were primarily invested in
United States Treasury securities. Restricted cash is held under direction of
the lender and is not readily available to fund investments or pay operating
expenses.  See Recent Developments.

Our management generally believes that our cash and cash equivalents,
together with proceeds from our investments, will provide us with the liquidity
necessary to pay our operating expenses and make follow-on investments as
necessary. In July 2003 Fitness Quest, Inc. and Health Care
Solutions, Inc. made cash distributions to the Company as more fully
described below. However, because of the inherent uncertainty with respect to the
timing of liquidity events, the Company entered into a $1.5 million short-term
note arrangement with Huntington National Bank in March 2003 for the purpose of
paying operating expenses pending potential liquidity events. The note is
unsecured and carries an interest rate of prime plus 1% (5.25% at June 30,
2003). As of June 30, 2003, $1.5 million has been drawn down on the note.

At
June 30, 2003 and December 31, 2002, we had stockholders equity of
$67,755,946 and $65,900,328, respectively, resulting in a net asset value per
share of $17.78 and $17.29, respectively. At June 30, 2003 and December 31,
2002, we had $7,500,000 and $6,000,000 of outstanding indebtedness,





---



##### Table of Contents



respectively. For the six months ended June 30, 2003, the weighted average
interest rate on this indebtedness was 4.65%.

Brantley Venture Partners II, L.P., Brantley Venture Partners III, L.P.
and Brantley Partners IV, L.P. hold, in the aggregate, approximately $156
million of private equity investments. These partnerships are related to our
investment adviser in a manner that required the receipt, from the Securities
and Exchange Commission, of an exemption from certain provisions of the
Investment Company Act of 1940 in order to permit us, under certain
circumstances, to invest in the same portfolio companies as the other private
investment funds managed by our investment adviser.

Consistent
with the Memorandum of Understanding (See Overview and
Part II, Item
1. Legal Proceedings), we intend to use our cash to fund operations, make
follow on investments in our existing portfolio companies, and distribute any
remaining proceeds from liquidity events to stockholders (see Overview).

At June 30, 2003 and December 31, 2002, the aggregate cost of the
investments we made to date was $30.4 million and $30.3 million, respectively,
and their aggregate fair value was $65.2 million and $62.1 million,
respectively, for an aggregate fair value appreciation of 114% and 105%,
respectively.

Portfolio Company Investments

The following is a list of the companies in which we had an
investment and the cost and fair value of such securities at June 30, 2003.

|                                     |  |                                               |  |      |            |            |  |   |            | 
|------------------------------------ |  | --------------------------------------------- |  | ---- | ---------- | ---------- |  | - | ---------- | 
|Name of Company                      |  | Nature of its Principal Business              |  | Cost |            | Fair Value
|                                     |  |                                               |  |      |            |           
|Disposable Products Company, LLC     |  | Non-Woven Paper Products Manufacturer         |  |      | 2,820,993  |            |  |   | 2,814,332  | 
|Fitness Quest, Inc.                  |  | Fitness Products Direct Marketer              |  |      | 3,846,358  |            |  |   | 15,000,000 | 
|Flight Options International, Inc.   |  | Private Air Travel Services                   |  |      | 5,562,500  |            |  |   | 32,500,000 | 
|Health Care Solutions, Inc.          |  | Home Health Care Provider                     |  |      | 3,250,000  |            |  |   | 3,279,401  | 
|The Holland Group, Inc.              |  | Temporary Staffing                            |  |      | 2,125,000  |            |  |   | 2,125,000  | 
|National Rehab Partners, Inc.        |  | Rehabilitation Services                       |  |      | 1,481,513  |            |  |   | 1,481,513  | 
|Integrated Physician Solutions, Inc. |  | Pediatric Physician Practice Management Group |  |      | 3,439,448  |            |  |   | 3,464,348  | 
|Petroleum Partners, Inc.             |  | Petroleum Distribution Maintenance Services   |  |      | 3,325,000  |            |  |   | 0          | 
|Prime Office Products, Inc.          |  | Office Products Distributor                   |  |      | 1,500,000  |            |  |   | 1,500,000  | 
|Streamline Foods, Inc.               |  | Food Products Manufacturer and
Distributor    |  |      | 795,000    |            |  |   | 795,000    | 
|Value Creation Partners, Inc.        |  | Food Products Manufacturer and
Distributor    |  |      | 2,145,460  |            |  |   | 2,225,960  | 
|International Total Services, Inc.   |  | Security                                      |  |      | 68,410     |            |  |   | 104        | 
|                                     |  |                                               |  |      |            |            |  |   |            | 
|                                     |  | Total                                         |  | $    | 30,359,682 |            |  | $ | 65,185,658 | 
|                                     |  |                                               |  |      |            |            |  |   |            | 





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##### Table of Contents



Our individually significant equity and mezzanine investments at June 30,
2003 are described below:

Disposable Products Company, LLC

On August 10, 1998, we entered into an investment led by Banc One Capital
to provide $1.0 million of a $3.0 million subordinated debt facility with
warrants for Disposable Products Company, LLC. Disposable Products is an
acquisition strategy company in the business of manufacturing and converting
paper and non-woven materials into wiping products for sale to commercial,
institutional, industrial and government markets. In addition, Disposable
Products is a converter and reseller of other safety and industrial/janitorial
products. Proceeds of the transaction were used to complete Disposable
Products first acquisition. The terms of the debt facility call for a 12%
interest rate per annum with a final maturity in late 2003. We also received a
detachable capital stock purchase warrant exercisable for 65% of the
fully-diluted capital stock of Disposable Products at the time of exercise at a
nominal exercise price. In addition, through June 30, 2003 we funded additional
12% promissory notes of $1,820,993 from Disposable Products.

Fitness Quest, Inc

On December 16, 1997, we funded a $1.35 million commitment to invest with
Brantley Venture Partners III, L.P. in a $3.85 million preferred stock issue
for Fitness Quest, Inc. As a result, we purchased approximately 788,961 shares
of Fitness Quest Series A 10% Convertible Preferred Stock at $1.71 per share.
Fitness Quest is a direct marketing and distribution company. The proceeds were
used by Fitness Quest for a management buy-out of the company from its previous
owner, The Time Warner Music Group, a 100% wholly owned subsidiary of Time
Warner, Inc., and for other acquisitions. Fitness Quest has been in the fitness
promotional products business since 1994. Fitness Quest operates in a highly
competitive industry and is dependent on the management talent and efforts of
key personnel for its success. We do not believe that Fitness Quest is
dependent on a single or small number of customers, possesses significant
intellectual property, or is operating in an unusually regulated industry.

During 1997, Fitness Quest increased its revenue and improved its
operating margins and profits. After a complete evaluation, our board of
directors re-valued our Fitness Quest investment to $5,440,000, resulting in a
1997 unrealized gain of $4,090,000. This evaluation was based on price to
earnings ratios, cash flow multiples and other appropriate financial
measurements of similar private companies. In addition to the above Series A
10% Convertible Preferred Stock, we funded $1,751,300 to invest with Brantley
Venture Partners III, L.P. in a $3.5 million 10% senior subordinated debt
investment in Fitness Quest in 2000. In addition, we received a warrant to
purchase 181,172 shares of Fitness Quest common stock for $0.01 per share. The
proceeds of this investment were used to fund Fitness Quests
working capital needs. During the fourth quarter of 2000, we exchanged the
senior subordinated debt investment and related unpaid interest for 679,641
shares of Fitness Quest common stock.

Through March 31, 2003, Fitness Quest has continued to increase its
revenues, improve its operating margins, and reduce its debt. As a result, the
Board of Directors increased the value of our investment to $15,000,000 resulting in an
unrealized gain of $6,341,959 for the quarter.

On July 31, 2003, Fitness Quest successfully completed a recapitalization
of the company. As a result of this transaction, we received a distribution
from Fitness Quest of $7.3 million, of which $567,000 was in repayment of
previously accrued preferred stock dividends. Post this transaction, we will
maintain a 15.1% ownership interest in the company with an estimated fair
market value of $8.3 million.

Flight Options International, Inc. (Formerly Corporate Wings, Inc.)

On December 23, 1997, we funded $2.1 million to invest with Brantley
Venture Partners III, L.P. in a $6.0 million preferred stock issue for Flight
Options International, Inc. Our investment consists of approximately 2,576,000
shares of Flight Options Series A 8% Convertible Preferred Stock at $0.8152 per
share. Flight Options provides complete private air travel service through the
sale of fractional interests in pre-owned jet aircraft. The proceeds of the
transaction were used by Flight Options to continue to execute an acquisition
strategy. We believe Flight Options is one of the top five providers of
fractional interests in aircraft in the United States, a highly competitive
industry and is dependent on the management talent and
efforts of key personnel for its success. Flight Options is subject to certain
regulations of the Federal





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Aviation Administration. We do not believe it is
dependent on a single or small number of customers or possesses significant
intellectual property.

On December 29, 1998, we completed a second private equity investment in
Flight Options. In this investment, we purchased $962,500 of a $5.5 million
preferred stock transaction led by The Provident Bank. Our purchase represents
approximately 260,135 shares of Class A 8% Convertible Preferred Stock at $3.70
per share. The proceeds were used by Flight Options to fund the expansion of
its fractional ownership program and to continue to execute its acquisition
strategy. During 1998, Flight Options completed the acquisition of Miller
Aviation. Based upon the price of this subsequent financing and the operating
performance of Flight Options during 1998, the fair value of our original
investment was increased to $9,531,760, resulting in an unrealized gain of
$7,431,760. This valuation was based on the $3.70 per share price negotiated by
The Provident Bank and was approved by our board of directors.

On August 31, 1999, Flight Options sold $20 million of Series B 8%
Preferred Stock to a third party private equity group at $4.365 per share.
Consistent with our investment valuation guidelines, this transaction resulted
in a valuation increase on our Flight Options investment of $1,886,030 or $0.50
per share.

On July 11, 2000, we guaranteed a portion of Flight Options third-party
borrowings. As a result, we were issued a warrant to purchase 36,000 shares of
Flight Options common stock at a price of $0.01 per share. This guarantee was
terminated prior to December 12, 2000.

On December 12, 2000 we purchased 469,925 shares of Flight Options Class C
8% Preferred Stock at $5.32 per share for a total investment of $2.5 million.
The proceeds of the transaction were used by Flight Options to fund the
continued expansion of its fractional ownership program.

On June 30, 2001, Flight Options received offers from institutional
investors to purchase convertible preferred stock or subordinated debt
securities of Flight Options which support the valuation used to complete the
December 12, 2000 Class C 8% Preferred Stock transaction described in the
preceding paragraph. As a result, and consistent with our investment valuation
guidelines, our board of directors approved a valuation increase on the Flight
Options investment which resulted in our reporting an unrealized gain of
$2,742,889 or $0.72 per share for the quarter ended June 30, 2001.

On December 21, 2001, Flight Options, Inc. and Raytheon Travel Air, a
Wichita, Kansas-based unit of Raytheon Company, a Lexington, Mass. based
defense contractor, agreed to combine operations into one fractional aircraft
ownership program to be known as Flight Options.  The transaction was completed during the quarter
ended March 31, 2002. During the second quarter of 2003,
Raytheon Company provided additional debt and equity financing to Flight
Options.

As a result of the transactions described above, our board of directors
have met each quarter to review the terms of the then current transactions.
Consistent with our valuation guidelines, the board has used private market
methods to value our investment in Flight Options, Inc. and approved increases
in the value of our investment in Flight Options, Inc. to its current $32.5
million. At June 30, 2003, the financial statement value of our investment in
Flight Options represents an increase of more than 484% from its original
purchase price.

The commentary above reflects a four-for-one stock split executed in 2000.
All share and per share amounts have been adjusted to reflect such stock split.

Health Care Solutions, Inc.

On September 30, 1997, we funded a $1.5 million convertible junior
subordinated promissory note facility for Health Care Solutions, Inc. Health
Care Solutions is an acquisition strategy company in the
home healthcare services market with a strong presence in the Midwest and Great
Lakes regions. The terms





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of the notes called for an 18% interest rate per annum
during the first year and 12% per annum thereafter, with final maturity two
years from the closing. After the first year, the notes were convertible into
common stock at a price of $3.50 per share. In connection with our commitment
to provide this facility, we received warrants to purchase up to $450,000 of
common stock valued at an exercise price of 10% of an initial public offering
price completed during the term of the notes, or at $3.50 per share should the
warrants be exercised other than in connection with an initial public offering.
The warrants are currently exercisable. The proceeds of the notes were used by
Health Care Solutions to help finance acquisitions.

In 2000, Health Care Solutions completed a re-capitalization plan,
including a two-for-one reverse stock split. As a result, we agreed to exchange
our convertible junior subordinated promissory note and accrued interest
thereon for 246,994 shares of Series C 8% Convertible Preferred Stock at an
exchange rate of $7.50 per share. The warrants to purchase up to $450,000 of
common stock at an exercise price of 10% of an initial public offering price or
at $3.50 per share remain outstanding and have been adjusted to reflect the
reverse stock split.

In addition to the above Series C 8% Convertible Preferred Stock, we
funded $500,000 and $299,000 12% Convertible Subordinated Notes from Health
Care Solutions in 2000. As part of this transaction, we received a warrant to
purchase up to $50,000 of Health Care Solutions common stock at an exercise
price equal to the lower of the price determined by an initial public offering
or $7.50 per share. On March 7, 2001, we agreed to exchange the $500,000
Convertible Subordinated Note for 71,880 shares of Series D Convertible
Preferred Stock. On January 29, 2002, we funded a $1,250,000 12% Convertible
Subordinated Note from Health Care Solutions.

On May 1, 2003, Health Care Solutions sold its respiratory division
assets. Through July 31, 2003, Health Care Solutions sold its remaining
operating assets. As a result of these transaction, we have received
approximately $1.6 million in proceeds and expect to receive additional proceeds
of approximately $2.0 million over the next 18 months. The remaining corporate
assets of Health Care Solutions are presently being marketed for a projected
sale in 2003. The current valuation approximates the total proceeds expected to
be received from these sales.

The Holland Group, Inc.

On July 13, 2000, we funded a $2.1 million commitment to invest with
Brantley Partners IV, L.P. in a $8.5 million preferred stock issue of The
Holland Group, Inc. The Holland Group is a provider of temporary staffing and
human resource management services that currently operates 35 branches in five
states. In this transaction, we purchased 282,530 shares of The Holland Groups
Series A 8% Convertible Preferred Stock. In February 2002 we purchased a
$50,000 12% convertible subordinated note from The Holland Group which was
repaid with interest in December 2002.

National Rehab Partners, Inc.

On August 10, 1999, we funded $1.4 million of a $1.5 million commitment to
invest with Brantley Partners IV, L.P. and a third party equity group in a
$12.0 million preferred stock issue for National Rehab Partners, Inc. Pursuant
to this commitment, we purchased 2.2 million shares of Class A 8% Convertible
Preferred Stock. The proceeds of this transaction were used to complete the
acquisition of a group of rehabilitation management service providers. The
remainder of the commitment has been funded upon the successful closing of
additional acquisitions. National Rehab Partners is a Brentwood, Tennessee rehabilitation
management service company providing rehabilitation services through acute care
hospitals and hospital systems throughout the United States. National Rehab
Partners is the only national rehabilitation company focused exclusively on
helping hospitals develop their outpatient rehabilitation services.





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On January 10, 2001, we funded a $26,126 10% promissory note from National
Rehab Partners. On June 13, 2001, the $26,126 note and the related accrued
interest were cancelled and replaced with a $27,228 10% promissory note.

Integrated Physician Solutions, Inc. (Formerly Pediatric Physicians
Alliance, Inc.)

On January 28, 1999, we funded a $3.2 million commitment to invest with
Brantley Venture Partners III, L.P. in a $7.9 million preferred stock issue for
Integrated Physician Solutions, Inc. Pursuant to our commitment, we purchased
793,000 shares of Class A-2 10% Convertible Preferred Stock. Integrated
Physician Solutions is a physician practice management systems provider. Their
objective is to develop the leading integrated physician practice management
system in the United States. Integrated Physician Solutions is dependent on the
management talent and effort of key personnel for its success in this highly
competitive industry. We do not believe it is dependent on a single or small
number of customers, possesses significant intellectual property or that it is
subject to significant regulations. The proceeds of the transaction were used
to complete the acquisition of a number of physician practices.

In addition to the above Class A-2 10% Convertible Preferred Stock, in
2000 we funded $267,448 to invest with Brantley Venture Partners III, L.P. in
$668,619 of promissory notes, with detachable warrants, in Integrated Physician
Solutions. The detachable warrants are for the purchase of 30,000 shares of
Integrated Physician Solutions common stock at $4.00 per share.

Petroleum Partners, Inc.

On June 7, 2001, we entered into a $2.7 million commitment to invest with
Brantley Partners IV, L.P. in a $15.0 million preferred stock and subordinated
debt issue for Petroleum Partners, Inc. In connection with this commitment, we
purchased 250,000 shares of Class A 8% Convertible Preferred Stock at $1.00 per
share, 600,000 shares of Class B 8% Convertible Preferred Stock at $2.00 per
share, and funded a $1,250,000 10% Convertible Subordinated Note with a
detachable warrant for the purchase of 78,125 shares of common stock at $0.01
per share. Petroleum Partners, based in Cleveland, Ohio, is a provider of
outsourced maintenance services to the petroleum industrys retailers and
refineries. The proceeds from the transaction were used to acquire a company
which is a leading provider of petroleum and petrochemical handling equipment
and outsourced facilities maintenance services to providers of fuel delivery
systems such as gasoline retailers and refineries. The equipment distributed by
the company includes petroleum storage tanks, pumps, fuel dispensers, flexible
piping, tank valves, leak detection gauges, canopies, air compressors and
service station lighting equipment.

In
addition to the above investment, we funded $625,000 of 10%
Convertible Subordinated Notes through December 31, 2002. The proceeds of the
notes were used for operating purposes.

As a
result of adverse operating performance in 2003, the Board of Directors
approved a valuation reduction of our investment to $1,874,219 thereby
generating a $1,450,781 unrealized loss for the quarter ended March 31, 2003.
At that time, the Board of Directors also approved a write-down of all interest
and dividends receivable relating to this investment of $517,886. For the
quarter ended June 30, 2003, the Board of Directors approved a second valuation
reduction in our investment by $1,874,219 thereby generating a year to date
unrealized loss of $3,325,000.

Prime Office Products, Inc. (Formerly Business Essentials, Inc.)

On April 22, 1999, we entered into a $1.7 million commitment to invest
with Brantley Partners IV, L.P. and Massey Burch Capital Corp. in a $10.0
million preferred stock issue for Prime Office Products, Inc. Pursuant to our
commitment, we purchased 510,000 shares of Class A 8% Convertible Preferred
Stock at $2.00 per share. Prime Office Products is an office products marketing
and distribution company based in Nashville, Tennessee. The first part of the
commitment was funded to launch an acquisition strategy focused on office
distribution companies serving primarily commercial and industrial customers.
The remainder of the commitment is being funded upon the closing of additional
acquisitions. On January 8, 2002, we purchased an additional 200,000 shares of
Class A 8% Convertible Preferred Stock at $2.00 per





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share. On July 31, 2002, we purchased an additional 40,000 shares of Class A 8%
Convertible Preferred Stock at $2.00 per share.

Streamline Foods, Inc.

On February 7, 2002 we funded a $795,000 commitment to invest with
Brantley Partners IV, L.P. in a $7,950,000 preferred stock and subordinated
debt issue for Streamline Foods, Inc. Pursuant to our commitment we purchased
approximately 898,000 shares of Series A 8% Convertible Preferred Stock at
$0.78 per share and a $95,000 13% Convertible Subordinated Note with warrants
to purchase 27,500 shares of common stock at $0.01 per share. The proceeds were
used by Streamline Foods for a buy-out of the company from its previous owner.
Streamline Foods, Inc. sources, blends, packages and distributes high sugar
content food products for branded multi-national food companies and private
label manufacturers.

Value Creation Partners, Inc.

On June 14, 2000, we completed a $2.1 million commitment to invest with
Brantley Partners IV, L.P. and several other private equity investors in a
$23.8 million preferred stock issue for Value Creation Partners, Inc. Pursuant
to this commitment, we purchased approximately 35,000 shares and 269,989 shares
of 8% Convertible Preferred Stock at $5.00 and $7.30 per share, respectively.
Value Creation Partners is an acquisition strategy company in the food
industry. The proceeds of the transaction were used to complete the acquisition
of Best Brands, Inc., one of the six largest manufacturers and distributors of
a complete line of premium ingredients, mixes and products, including
equipment, for all segments of the baking industry. Their products are sold
primarily to retail bakeries, bakery distributors, supermarket in-store
bakeries, food wholesalers and food service establishments.

Impact of Inflation

We do not believe that our business is materially affected by inflation,
other than the impact that inflation may have on the securities markets, the
valuations of business enterprises and the relationship of such valuations to
underlying earnings, all of which will influence the value of our investments.

Disclosure Regarding Forward-Looking Statements

Information contained in this Quarterly Report on Form 10-Q may contain
forward-looking statements which can be identified by the use of
forward-looking terminology such as may, will, expect, intend,
anticipate, estimate or continue or the negative thereof or other
variations or similar words or phrases. The matters described throughout this
Quarterly Report on Form 10-Q and in any exhibits of which this Quarterly
Report is a part constitute cautionary statements identifying important factors
with respect to any such forward-looking statements, including certain risks
and uncertainties, that could cause actual results to differ materially from
those in such forward-looking statements.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

We invest in small and medium-sized companies, and our investments are
considered speculative in nature. Our investments often include securities that
are subject to legal or contractual restrictions on resale that adversely
affect the liquidity and marketability of such securities. As a result, we are
subject to risk of loss which may prevent our stockholders from achieving price
appreciation and dividend distributions. The portion of our portfolio
consisting of investments in private companies is also subject to valuation
risk. We value our privately held investments based on a determination of their
fair value made in good faith by our board of directors on a quarterly basis in
accordance with our established guidelines. In the absence of a readily
ascertainable market value, the estimated values of our investments may differ
significantly from
the values that would exist if a ready market for these securities existed. Any
changes in valuation are recorded in our consolidated statements of operations
as Net unrealized gain (loss) on investments.





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##### Table of Contents



We consider the management of equity price risk essential to conducting
our business and maintaining our profitability. Our portfolio consists of
investments in private companies. We anticipate no impact on these investments
from modest changes in public market equity prices. However, should significant
changes in market prices occur, there could be a long-term effect on valuations
of private companies, which could affect the carrying value and the amount and
timing of gains realized on these investments. This could also affect our
ability to generate cash through the sale of private equity investments, since
there may not be realistic initial public offering opportunities.




Item 4. Controls and Procedures

(a)  As of the end of the period covered by this quarterly report on Form
10-Q, the Companys chief executive officer and chief financial officer
conducted an evaluation of the Companys disclosure controls and procedures (as
defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934).
Based upon this evaluation, the Companys chief executive officer and chief
financial officer concluded that the Companys disclosure controls and
procedures are effective in timely alerting them of any material information
relating to the Company that is required to be disclosed by the Company in the
reports it files or submits under the Securities Exchange Act of 1934.

(b)  There have been no changes in the Companys internal control over
financial reporting that occurred during the quarter ended June 30, 2003, that
have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings

On September 25, 2002, Phillip Goldstein, a director and shareholder of
the Company filed a lawsuit in the District Court for the Northern District of
Ohio against us, Robert Pinkas, James Oliver, Benjamin Bryan and IVS
Associates, Inc. alleging, among other things, that the Company engaged in
wrongdoing and that the individual defendants breached their fiduciary duties
during the Annual Meeting of Stockholders held on September 17, 2002. Mr.
Goldstein alleges that the Companys actions surrounding the closing of the
polls disenfranchised certain shareholders. Mr. Goldstein sought to have votes
for which he had proxies, which were submitted after the polls were closed,
counted. He also sought an order declaring his nominees to be directors of the
Company. The Company also asserted a counterclaim against Mr. Goldstein
alleging violations of the proxy rules and the failure to disclose his
participation in a group as required by Regulation 13D. Mr. Goldstein denied
the allegations of the counterclaims. Mr. Goldsteins motion for a temporary
restraining order was denied, and a hearing for a preliminary injunction was
held on November 18-21, 2002. On December 18, 2002, Magistrate Jack B. Streepy
issued a report and recommendation that Mr. Goldsteins motion for a
preliminary injunction be granted. Both parties filed objections to the
Magistrates report. No order has been issued by the Court to date. On February
13, 2003, the judge set a trial date of March 19, 2003, and on March 19, 2003, the judge
issued a 60 day stay of the proceeding.





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On March 19, 2003, we entered into a Memorandum of Understanding with
Phillip Goldstein, a director of the Company, pursuant to which Mr. Goldstein
agreed to dismiss the lawsuit he filed against us in September 2002, subject to
compliance with the Investment Company Act of 1940. On June 4, 2003, we filed an application for exemptive relief
from certain provisions of the 1940 Act in order to effect the provisions of
the Memorandum of Understanding. On June 18, 2003, we received comments on our
application from the staff of the Division of Investment Management. We are in
the process of responding to those comments. In addition, we have
proposed a new Memorandum of Understanding that will be submitted to
the staff of the Division of Investment Management with our response
to their comments.

Pursuant to the proposed new Memorandum of Understanding we would agree,
among other things:



| |  | to cause there to be four (4) directors who are not interested
persons as defined under the 1940 Act and cause the board to be
exactly seven (7) directors in total;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | if Mr. Goldstein or Gerald Hellerman is no longer a director of the
Company then whichever of Mr. Goldstein or Mr. Hellerman remains on the
board shall have the right to select a nominee;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | to not convert the Company from being an advised fund to an
internally managed fund unless a majority of the independent directors
agree;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | to allow any independent director to request independent counsel,
subject to the approval of the board, which cannot be unreasonably
withheld; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | to refrain from making defamatory remarks about any party to the
agreement.
|- |  | ---------------------------------------------------------------------------

In addition, the proposed new Memorandum of Understanding provides that at the
next Annual Meeting of Stockholders:



| |  | we would ask shareholders to approve a plan of orderly disposition
of the assets of the Company or a sale of the assets with the goal of
prompt cash distribution to shareholders;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we would ask shareholders to approve a new investment advisory
agreement pursuant to which:
|- |  | -------------------------------------------------------------------------------------------



| |  | the advisors fees would be reduced from 2.85% to 2.5% of our net asset value;
|- |  | ------------------------------------------------------------------------------



| |  | all stock options would be forfeited and cancelled; and
|- |  | -------------------------------------------------------



| |  | the advisor would be entitled to receive a fee equal to
20% of the aggregate distributions made by the Company in excess
of $10.00 per share; however, none of the amount would be paid
until aggregate distributions totaled $12.50 per share.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The new proposed Memorandum of Understanding also includes provisions that
would require the parties to take all steps necessary to accomplish the goals
of the Memorandum, including voting their shares in favor of the proposals.
Under the new proposed memorandum, we would also be required to reimburse Mr.
Goldstein for certain expenses (not to exceed $275,000) he incurred in
connection with the proxy solicitation and litigation related to the Annual
Meeting of Stockholders on September 17, 2002. Mr. Goldstein would also agree
not to engage in, lead or fund a proxy contest while the agreement is in effect. The term of the new
proposed Memorandum of Understanding would run until December 31, 2006.

The new proposed Memorandum of Understanding is subject to approval by our
board of directors, our shareholders, and the receipt of exemptive relief from
the Securities and Exchange Commission. If the new proposed
Memorandum of Understanding becomes effective it would replace the
previous Memorandum of Understanding. There can be no assurances that this
relief would be granted or that it would not be subject to unfavorable terms
and conditions that would cause us to abandon the application and the new
proposed Memorandum of Understanding.

Proceeds
we receive from liquidity events are intended to be distributed to
shareholders after retaining sufficient cash for operations including
any follow-on investments in accordance with the proposed memorandum
of understanding.  The proceeds from the liquidity events will be held
in short term investments until such time as they may be distributed
to shareholders.  Such distributions may not be made in accordance
with such
memorandum until we receive both regulatory and shareholder
approvals.  There can be no assurance when or in what amount any
potential distributions will be made or when such approvals may be
received.



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##### Table of Contents



indication by the staff of that office that any violation of law has occurred,
or as a reflection upon any person or entity that may be involved.

On October 8, 2002, Thomas
Kornfield and Robert Strougo filed a purported class action lawsuit
against the Company, the directors of the Company excluding Phillip
Goldstein, IVS Associates, Inc. and JMP Securities LLC, alleging a
series of derivative and direct claims that the directors have
breached their fiduciary duties and that the Company engaged in
wrongdoing with respect to the Annual Meeting of Stockholders held on
September 17, 2002. The factual allegations are substantially
similar to the complaint filed by Mr. Goldstein and also include
allegations of conversion of corporate funds. The complaint seeks,
among other things, an order declaring Mr. Goldsteins nominees
to be directors of the Company, an order declaring that the
investment advisory agreement be terminated and damages for breach of
fiduciary duty. On January 12, 2003, the plaintiffs filed a
motion to consolidate this lawsuit with the lawsuit by Goldstein
discussed above, which was subsequently denied.

On October 4, 2002, the Company
received notice from the Midwest Regional Office (MRO) of
the SEC that they were inquiring into activities involving the Annual
Meeting. The Company has and will cooperate with the inquiry. The
letter from the MRO states that the inquiry should not be construed
as an indication by the staff of that office that any violation of
law has occurred, or as a reflection upon any person or entity that
may be involved.




Items 2.-5.

Not
Applicable.




Item 6. Exhibits and Reports on Form 8-K

a.     Exhibits

|           |  |                                                                                                                                                                                                                                  
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3  |  | Articles of Incorporation and By-laws                                                                                                                                                                                            
|           |  |                                                                                                                                                                                                                                  
|(1)        |  | Articles of Amendment and Restatement of the Charter of the
Company (Exhibit 3.1 to the Annual Report on Form 10-K filed
on March 31, 1999, which exhibit is incorporated herein by
reference)                                   
|           |  |                                                                                                                                                                                                                                  
|(2)        |  | Amended and Restated Bylaws of the Company (Exhibit 3.2 to the
Annual Report on Form 10-K filed on March 31, 1999, which
exhibit is incorporated herein by reference)                                                            
|           |  |                                                                                                                                                                                                                                  
|(3)        |  | Amendment to the Charter of the Company (Exhibit 3.3 to the
Registration Statement filed on October 26, 2001, which
exhibit is incorporated herein by reference)                                                                 
|           |  |                                                                                                                                                                                                                                  
|Exhibit 4  |  | Form of Share Certificate (Exhibit 2.d to amendment No. 1 to
the Registration Statement filed on October 31, 1996, which
exhibit is incorporated herein by reference)                                                            
|           |  |                                                                                                                                                                                                                                  
|Exhibit 10 |  | Material Contracts                                                                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                  
|(1)        |  | Dividend Reinvestment and Cash Purchase Plan (Exhibit 2.e to
Amendment No. 3 to the Registration Statement filed on
November 26, 1996, which exhibit is incorporated herein by
reference)                                        
|           |  |                                                                                                                                                                                                                                  
|(2)        |  | Form of Investment Advisory Agreement between the Company and
the Investment Adviser (Exhibit 2.g to Amendment No. 3 to the
Registration Statement filed on November 26, 1996, which
exhibit is incorporated herein by reference)
|           |  |                                                                                                                                                                                                                                  
|(3)        |  | Stock Option Plan and Form of Option Grants (Exhibit 2.i.1 to
Amendment No. 2 to the Registration Statement filed on
November 22, 1996, which exhibit is incorporated herein by
reference)                                       
|           |  |                                                                                                                                                                                                                                  
|(4)        |  | Disinterested Director Option Plan and Form of Option Grants
(Exhibit 2.i.2 to Amendment No. 2 to the Registration
Statement filed on November 22, 1996, which exhibit is
incorporated herein by reference)                      
|           |  |                                                                                                                                                                                                                                  
|(5)        |  | Form of Custodian Contract (Exhibit 2.j to Amendment No. 2 to
the Registration Statement filed on November 22, 1996, which
exhibit is incorporated herein by reference)                                                          
|           |  |                                                                                                                                                                                                                                  
|(6)        |  | Form of Registrar, Transfer Agency and Service Agreement
(Exhibit 2.k.1 to Amendment No. 2 to the Registration
Statement filed on November 22, 1996, which exhibit is
incorporated herein by reference)                          
|           |  |                                                                                                                                                                                                                                  
|(7)        |  | Form of Administration Agreement (Exhibit 2.k.2 to Amendment
No. 2 to the Registration Statement filed on November 22,
1996, which exhibit is incorporated herein by reference)                                                  
|           |  |                                                                                                                                                                                                                                  
|(8)        |  | Form of Indemnification Agreement for Directors and Officers
(Exhibit 2.s to Amendment No. 2 to the Registration Statement
filed on November 22, 1996, which exhibit is incorporated
herein by reference)                        
|           |  |                                                                                                                                                                                                                                  
|(9)        |  | Memorandum of Understanding dated March 19, 2003 (Exhibit 99.1
to Form 80K filed March 20, 2003.)                                                                                                                                
|           |  |                                                                                                                                                                                                                                  
|Exhibit 31 |  |                                                                                                                                                                                                                                  
|           |  |                                                                                                                                                                                                                                  
|(1)        |  | Certification of Chief Executive Officer Pursuant to Rules
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as
amended.                                                                                            
|           |  |                                                                                                                                                                                                                                  
|(2)        |  | Certification of Chief Financial Officer Pursuant to Rules
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as
amended.                                                                                            
|           |  |                                                                                                                                                                                                                                  
|Exhibit 32 |  | Other                                                                                                                                                                                                                            
|           |  |                                                                                                                                                                                                                                  
|(1)        |  | Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                  
|           |  |                                                                                                                                                                                                                                  
|(2)        |  | Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                  



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##### Table of Contents



b.     Reports on Form 8-K

None.



| | 
| | 




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.

|                      |  |                              |  |                                                                                         
|--------------------- |  | ---------------------------- |  | ----------------------------------------------------------------------------------------
|                      |  | BRANTLEY CAPITAL CORPORATION
|                      |  |                              |  |                                                                                         
|Date: August 14, 2003 |  | By:                          |  | /s/ ROBERT P. PINKAS

Robert P. Pinkas
Chairman of the Board and
Chief Executive Officer
|                      |  |                              |  |                                                                                         
|Date: August 14, 2003 |  | By:                          |  | /s/ TAB A. KEPLINGER

Tab A. Keplinger
Vice President and
Chief Financial Officer