<PAGE>   1
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
<TABLE>
<S>          <C>                                                           <C>
 (MARK ONE)
    [X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
    [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
</TABLE>
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998    COMMISSION FILE NUMBER: 814-00127
 
                          BRANTLEY CAPITAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                             <C>
                  MARYLAND                                       34-1838462
--------------------------------------------    --------------------------------------------
      (STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
       INCORPORATION OR ORGANIZATION)
</TABLE>
 
           20600 Chagrin Boulevard, Suite 1150, Cleveland, Ohio 44126
          (Address of principal executive offices including zip code)
 
                                 (216) 283-4800
              (REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          COMMON STOCK, $.01 PAR VALUE
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 22, 1999 was $23,265,576, based on the last sale
price of such stock as quoted by NASDAQ on such date (officers, directors and 5%
shareholders are considered affiliates for purposes of this calculation).
 
     The number of shares of common stock outstanding as of March 22, 1999 was
3,810,535.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of Brantley Capital Corporation's Proxy Statement to be filed on
or about April 15, 1999 (incorporated into Part III of this Form 10-K)
<PAGE>   2
 
                               TABLE OF CONTENTS
 
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<CAPTION>
                                                                            PAGE
                                                                            ----
<S>         <C>                                                             <C>
                                     PART I
Item  1.    Business....................................................      1
Item  2.    Properties..................................................      5
Item  3.    Legal Proceedings...........................................      5
Item  4.    Submission of Matters to a Vote of Security Holders.........      5
 
                                    PART II
Item  5.    Market for Registrant's Common Equity and Related
              Stockholder Matters.......................................      5
Item  6.    Selected Financial Data.....................................      5
Item  7.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations.................................      6
Item  7A.   Quantitative and Qualitative Disclosures About Market
              Risk......................................................     10
Item  8.    Financial Statements and Supplementary Data.................     11
Item  9.    Changes in and Disagreements With Accountants on Accounting
              and Financial Disclosure..................................     23
 
                                    PART III
Item 10.    Directors and Executive Officers of the Registrant..........     23
Item 11.    Executive Compensation......................................     23
Item 12.    Security Ownership of Certain Beneficial Owners and
              Management................................................     23
Item 13.    Certain Relationships and Related Transactions..............     23
 
                                    PART IV
Item 14.    List of Financial Statements, Financial Statement Schedules,
              Exhibits, and Reports on Form 8-K.........................     24
 
Signatures..............................................................     25
Exhibit Index...........................................................     26
</TABLE>
 
                                       -i-
<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Brantley Capital Corporation (the "Company") is a closed-end,
non-diversified investment company incorporated on August 1, 1996 under the
General Corporation Law of the State of Maryland, that has elected to be treated
as a "business development company" under the Investment Company Act of 1940, as
amended (the "Act"). The Company invests primarily in the equity securities (for
example, common stock, preferred stock, convertible preferred stock, or options,
warrants or rights to acquire stock) and equity-linked debt securities (for
example, convertible debt or indebtedness accompanied by warrants, options or
rights to acquire stock) of private companies. The Company also invests a
portion of its assets in small-cap public companies (as defined below). The
Company's investment objective is the realization of long-term capital
appreciation in the value of its investments. In addition, whenever feasible in
light of market conditions and the cash flow characteristics of its portfolio
companies, the Company seeks to provide an element of current income primarily
from interest, dividends and fees paid by its portfolio companies. Finally, the
Company seeks to preserve the long-term value for its shareholders through its
investing and operating policies.
 
     With respect to its investments in private companies, the Company's
principal focus is on industries that it considers to be good candidates for
successful consolidation. The Company also favors investments in private
companies that it believes can achieve the necessary size, profitability,
management depth and sophistication to become public companies or become
candidates for acquisition by merger or otherwise. The Company seeks to enable
its stockholders to participate in investments not typically available to the
public due to the private nature of a substantial majority of the Company's
portfolio companies, the size of the financial commitment often required in
order to participate in such investments, and/or the experience, skill and time
commitment required to identify and take advantage of these investment
opportunities.
 
     The Company is a partner in the growth of its private portfolio companies,
rather than merely a financial participant. The Company offers managerial
assistance to its private portfolio companies and expects that its
representatives will play a role in setting corporate strategies and advising
such companies regarding important decisions affecting their businesses,
including potential acquisitions, recruiting key managers, and securing equity
and debt financing.
 
     With respect to its investments in small-cap public companies, the
Company's primary focus is on post-venture companies that the Investment Adviser
(as defined below) believes to have significant potential for growth in sales
and earnings. A "post-venture" company is a company that has received venture
capital or private equity financing either (a) during the early stages of the
company's business or the early stages of the development of a new product or
service, or (b) as part of a restructuring or recapitalization of the company.
The Company generally limits its post-venture investments to companies which,
within the prior ten (10) years, have received an investment of venture or
private equity capital, have sold or distributed securities to venture or
private equity capital investors, or have completed an initial public offering
of equity securities.
 
     The Company anticipates that its position as an investor in both private
companies and post-venture small-cap public companies will benefit its ultimate
returns on its investments. This benefit will be derived from historic and
future knowledge that the Company and its managers have and will gain regarding
companies, technologies, management, markets and pricing in both public and
private markets. For example, knowledge of emerging technologies and companies
in the private markets can be beneficial in selecting small-cap public stocks.
Conversely, knowledge of public companies and market performance can be
beneficial in pricing and structuring private investments.
 
INVESTMENT ADVISER
 
     Brantley Capital Management, Ltd., 20600 Chagrin Boulevard, Suite 1150,
Cleveland, Ohio 44122, serves as the investment adviser (the "Investment
Adviser") to the Company pursuant to an agreement (the "Investment Advisory
Agreement") with an initial term of two (2) years, renewable from year to year
thereafter if it is approved annually by the Company's Board of Directors or by
vote of a majority of the Company's outstanding
 
                                        1
<PAGE>   4
 
shares of capital stock (including, in either instance, approval by Company
directors who are not interested persons). The Investment Advisory Agreement is
subject to renewal on November 26, 1999. The Investment Adviser is responsible,
on a day-to-day basis, for the selection and supervision of portfolio
investments and for management oversight of the Company's records and financial
reporting requirements. The Company pays the Investment Adviser 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. The Investment Adviser is responsible for the
salaries and expenses of its own personnel, office space costs, and local
telephone and administrative support costs.
 
NATURE OF INVESTMENTS IN PORTFOLIO COMPANIES
 
     The Company currently maintains an investment strategy in which investments
in portfolio companies are, and will continue to be, in the form of equity or
some combination of debt with equity, but will always include some equity
feature through which the Company can participate in the growth in the value of
the underlying businesses. The Company's investment in a given portfolio company
may consist of common stock, preferred stock (which may or may not be
convertible into common stock), debentures (which may or may not be convertible
into common stock and may or may not be subordinated), warrants to purchase
common stock, or some combination thereof. The Company generally structures, and
anticipates that it will continue to generally structure, its investments in
privately-owned portfolio companies with the intention of having the investments
achieve liquidity within eighteen (18) months to three (3) years from the
respective dates of the investments, although there can be no assurance that
such time frame will be met and situations may arise in which the Company may
hold securities for a longer period.
 
TEMPORARY INVESTMENTS
 
     Pending investments in the types of securities described above, the Company
invests its cash in cash items, government securities or high quality debt
securities maturing in one year or less from the time of investment.
 
OPERATIONS
 
     The Investment Adviser locates potential investment opportunities primarily
by making use of an extensive network of investment bankers, commercial bankers,
accountants and other finance professionals; venture capitalists and other
investment professionals; attorneys; business executives; and entrepreneurs.
 
     The investment process includes the identification, evaluation,
negotiation, documentation and closing of the investment. The evaluation of a
potential investment includes due diligence, which involves review of historical
and prospective financial information, and which, particularly in the case of a
privately-owned company, usually involves on-site visits; interviews with
management, employees, customers and vendors of the potential portfolio company;
and background checks and research relating to its management, markets, products
and services.
 
     Upon the completion of due diligence and a decision to proceed with an
investment in a private company, the Investment Adviser creates an investment
memorandum containing information pertinent to the investment for presentation
to the Company's Board of Directors, which must approve the investment.
Additional due diligence with respect to any investment by the Company may be
conducted by the Company's attorneys and independent accountants prior to the
closing of the investment.
 
SELECTION OF INVESTMENTS
 
     As a general rule, most of the Company's investments are, and the Company
anticipates that they will continue to be, in small- to medium-sized companies
with total assets or annual sales under $500,000,000. Many of these companies
may have very limited operating histories. The Company's main criteria for the
selection of investments in portfolio companies have remained consistent since
the Company's formation. Each investment includes portfolio companies that have
the potential for substantial growth in sales and earnings. The Company seeks to
identify companies which management believes have significant opportunities in
the markets they serve or that have devised innovative products, services or
ways of doing business that afford them a distinct competitive advantage. Such
companies might achieve growth either internally or by acquisition. In addition,
the
                                        2
<PAGE>   5
 
Company invests in companies seeking to consolidate fragmented industries.
Often, such consolidations can improve performance by bringing experienced
management, economies of scale and greater capital resources to bear on
businesses that might have lacked such management, economies and resources in
the past.
 
     In evaluating potential portfolio companies, the Company pays particular
attention to the following characteristics:
 
     MANAGEMENT. The Company seeks investments in companies whose management
teams consist of talented individuals of high integrity with significant
experience. The Company pays particular attention to the depth of the management
team and the extent to which key managers have an ownership interest in the
portfolio company.
 
     OPPORTUNITY FOR SIGNIFICANT INFLUENCE. The Company favors investments in
companies in which it has the opportunity to become a partner in the building of
such companies, rather than being a mere financial participant. In addition, the
Company seeks investments in which its representatives will play a role in
setting corporate strategies for the portfolio companies, and will be in a
position to advise such companies regarding important decisions affecting their
businesses, including acquisitions for such companies, recruiting key managers,
and securing equity and debt financing.
 
     MARKET DYNAMICS. The Company prefers investments in companies that are
addressing a large, unfulfilled market demand with long-term high-growth
prospects and that can reasonably expect to achieve and maintain a significant
market share through proprietary products and services. The Company also favors
investments in companies that deliver products and services with significant
performance and cost advantages and for which there exist significant barriers
to effective competition by others. In addition, with respect to its investments
in private companies, the Company will be attracted to industries that it
considers to be good candidates for successful consolidation.
 
     ABILITY TO ACHIEVE LIQUIDITY. With respect to its investments in private
companies, the Company considers the potential and likely means for achieving
the liquidity that would ultimately enable the Company to achieve cash value for
its equity investments. Possible ways of achieving liquidity include an initial
public offering of the portfolio company, a sale of the portfolio company to a
third party or a purchase by the portfolio company (or its managers) of the
Company's equity interest.
 
     GROWTH AT A REASONABLE PRICE. With respect to investments in post-venture
small-cap public companies, the Company targets companies whose current and
projected price/earnings ("P/E") ratios are less than their respective growth
rates. This growth at a reasonable price discipline is anticipated to result in
attractive stock appreciation as a result of both earnings growth and P/E
multiple expansion. The majority of these post-venture public investments are
expected to be in companies with prior financial support from professional
venture capitalists and private equity funds, and these companies often have
stronger management teams, better financial controls and significant competitive
advantages.
 
POTENTIAL CO-INVESTMENTS AND FOLLOW-ON INVESTMENTS
 
     The Company has, and anticipates, "co-investing" with existing affiliates
of the Company and the Investment Adviser, as well as with other future
affiliates, in specified amounts and on terms and conditions that are the same
in all material respects, subject to the availability of capital for investment
on the part of the Company and each such affiliate and certain other conditions.
At the present time, affiliates of the Company and the Investment Adviser
include certain venture capital investment partnerships in which certain
officers and directors of the Company and officers of the Investment Adviser
serve as general partners of such investment partnerships' general partner.
Theses investment partnerships include Brantley Venture Partners II, L.P.,
Brantley Venture Partners III, L.P. and Brantley Partners IV, L.P. On November
18, 1997, the Company received an exemptive order from the Securities and
Exchange Commission (the "Commission") that, subject to certain terms and
conditions, relieves the Company from certain provisions of the Act to permit
certain joint transactions with the investment partnerships. No violations of
the Act existed as a result of investments made before obtaining exemptive
relief.
 
                                        3
<PAGE>   6
 
ELIGIBLE PORTFOLIO COMPANIES
 
     The Company, as a "business development company" under the Act, may not
acquire any assets other than "Eligible Assets" unless, at the time the
acquisition is made, Eligible Assets represent at least 70% of the Company's
total assets (other than certain assets necessary for its operation, such as
office furniture, equipment and facilities). "Eligible Assets" are defined in
Section 55(a) of the Act. The principal categories of Eligible Assets relevant
to the business of the Company are the following:
 
     (1) Securities purchased in transactions not involving any public offering
from the issuer of such securities, which issuer is an eligible portfolio
company. An "eligible portfolio company" is defined in the Act as any issuer
which:
 
          (a) is organized under the laws of, and has its principal place of
              business in, the United States;
 
          (b) is not an investment company other than a small business
              investment company wholly-owned by the business development
              company; and
 
        (c) (i) does not have any class of securities with respect to which a
            broker or dealer may extend margin credit;
 
            (ii) is actively controlled by a business development company and
            has an affiliate of a business development company on its board of
            trustees or directors; or
 
            (iii) meets other such criteria as may be established by the
            Commission.
 
     (2) Securities of any eligible portfolio company which is controlled by the
business development company.
 
     (3) Securities received in exchange for or distributed on or with respect
to securities described in (1) or (2) above, or pursuant to the exercise of
options, warrants or rights relating to such securities.
 
     (4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.
 
     In addition, the business development company must have been organized (and
have its principal place of business) in the United States for the purpose of
making investments in the types of securities described in (1) or (2) above.
Moreover, in order for securities of portfolio companies to constitute Eligible
Assets for the purpose of the 70% test described above, the Company must make
available to the issuer of the securities significant managerial assistance;
except that, where the Company purchases such securities in conjunction with one
or more other persons acting together, one of the other persons in the group may
make available such managerial assistance.
 
     The Company may invest up to 30% of its assets in portfolio investments
that are not eligible assets. This portion of the Company's portfolio consists
primarily of investments in post-venture small-cap public companies.
 
COMPETITION
 
     The Company's primary competitors include financial institutions, venture
capital and private equity firms, mutual funds concentrating on post-venture
small-cap companies, and other nontraditional investors. Many of these entities
have greater financial and managerial resources than the Company. The Company
competes with such entities primarily on the basis of the quality of its
services, the quality of the investment entities previously managed by
affiliates of the Investment Advisor, the Company's investment analysis and
decision-making processes, and on the investment terms the Company offers in
respect of the securities to be issued by its portfolio companies.
 
EMPLOYEES
 
     The Company has no employees. Pursuant to the terms of the Investment
Advisory Agreement, the Investment Adviser supplies all of the personnel
necessary to operate the Company's business.
 
                                        4
<PAGE>   7
 
ITEM 2. PROPERTIES
 
     The Company does not own or lease any properties or other intangible
assets.
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is not a party to any material pending legal proceedings.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of security holders during the quarter
ended December 31, 1998.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
MARKET PRICE
 
     The Company's common stock is traded on the NASDAQ Small Cap Market System
("NASDAQSCM") under the symbol "BBDC." The following table sets forth, for the
period indicated, high and low closing prices per share:
 
<TABLE>
<CAPTION>
                                           HIGH         LOW
                                          -------      ------
<S>                                       <C>          <C>
January 1, 1998 -- March 31, 1998.......  $10.875      $8.875
April 1, 1998 -- June 30, 1998..........  $11.50       $9.50
July 1, 1998 -- September 30, 1998......  $ 9.813      $6.75
October 1, 1998 -- December 31, 1998....  $ 8.125      $6.125
January 1, 1997 -- March 31, 1997.......  $10.00       $8.875
April 1, 1997 -- June 30, 1997..........  $10.00       $8.50
July 1, 1997 -- September 30, 1997......  $ 9.75       $8.50
October 1, 1997 -- December 31, 1997....  $ 9.625      $8.625
</TABLE>
 
     At March 22, 1999, there were approximately 80 shareholders of record of
the Company's common stock with a market price of $7.25 per share. There are
10,535 unregistered shares of common stock issued by the Company pursuant to a
sale of such shares to the Company's Chief Executive and Chief Operating
Officers at the Company's formation. The sale was subject to the terms,
conditions and price of the initial public offering.
 
     During the year ended December 31, 1998 the Company declared a $.01
dividend on July 31, 1998. During the year ended December 31, 1997, the Company
declared the following dividends.
 
<TABLE>
<S>                                     <C>
April 15, 1997........................  $.01
July 15, 1997.........................  $.01
October 16, 1997......................  $.01
December 18, 1997.....................  $.09
</TABLE>
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The information set forth under Item 8 is incorporated herein by reference.
 
                                        5
<PAGE>   8
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     Brantley Capital Corporation (the "Company") is a closed end,
non-diversified investment company that has elected to be treated as a "business
development company" under the Investment Company Act of 1940, as amended (the
"Act"). The Company invests primarily in the equity and equity-linked debt
securities of private companies. The Company's principal investment objective is
the realization of long-term capital appreciation in respect of such
investments.
 
     The Annual Report on Form 10-K contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company and its investment portfolio companies. Such
statements are only predictions and the actual events or results may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those relating to investment capital demand, pricing, market acceptance, the
effect of economic conditions, litigation and the effect of regulatory
proceedings, competitive forces, the results of financing and investing efforts,
the ability to complete transactions and other risks identified below or in the
Company's filings with the Securities and Exchange Commission. The following
analysis of the financial condition and results of operation of the Company
should be read in conjunction with the Financial Statements, the Notes thereto
and the other financial information included elsewhere in this report.
 
RESULTS OF OPERATIONS
 
     The Company began operations upon the completion of an initial public
offering on December 3, 1996. Its principal investment objective is the
realization of long-term capital appreciation from investing primarily in the
equity and equity-linked debt securities of private companies. In addition, the
Company can invest, and has invested, a portion of its assets in post-venture
small-cap public companies.
 
     Pending the completion of equity and equity-linked debt security
investments that meet the Company's investment objectives, available funds are
invested in short-term securities. In addition, whenever feasible in light of
market conditions and the cash flow characteristics of its portfolio companies,
the Company seeks to provide an element of current income primarily from
interest, dividends and fees paid by its portfolio companies. Dividend and
interest income on investments was $361,085 and $1,745,969 respectively, for the
quarter and twelve months ended December 31, 1998. The significant components of
total operating expenses were fees of $1,325,320 to the Investment Adviser
during the year ended December 31, 1998, and other professional fees.
 
     During the quarter and twelve months ended December 31, 1998, the Company's
equity and equity-linked debt security investments resulted in net realized and
unrealized gains on investment transactions of $8,946,106 and $7,137,032,
respectively. During 1998, the Company was invested in small capitalization
public stocks which are subject to general stock market conditions and the five
private investments described below. The 1998 unrealized gains (losses) were
significantly influenced by general market conditions and the operating
performance of Corporate Wings, Inc. as more fully described below.
 
     Like other business development companies, mutual funds, financial and
business organizations and individuals around the world, the Company could be
adversely affected if the computer systems used by the Investment Adviser and
third party administrator, custodian and transfer agent do not properly process
and calculate date-related information from and after January 1, 2000.
Significant accounting and custodial services of the Company are provided by
State Street Bank & Trust Company. In addition, transfer agency services are
provided by Boston Equiserv. The Company has made inquiries to the Investment
Adviser, State Street Bank & Trust Company, and Boston Equiserv regarding
whether they expect to have their computer systems year 2000 compliant. Reports
describing the progress of State Street Bank & Trust Company and Boston Equiserv
in preparing for January 1, 2000 are reviewed on a regular basis. While there
can be no assurances that the steps being taken by the service providers will be
sufficient to avoid any adverse impact on the Company, all of these service
providers have reported that they expect their systems to be in compliance with
year 2000 requirements prior to that time. While all of the Company's service
providers are reporting an appropriate state of readiness, the risk of a service
provider failing to be year 2000 compliant could mean many things based upon the
specific conditions of non-compliance. As such, the Company is regularly
monitoring the projected readiness of its service providers to establish optimal
time frames in which to invoke contingency efforts should a year 2000
                                        6
<PAGE>   9
 
transition plan fail. These contingency efforts may involve the development of
alternative operational procedures or, in a worse case scenario, requests for
proposals to identify alternative service providers prior to January 1, 2000.
Because the Company uses third parties for nearly all of its operating and
administrative activities, it has no material computer systems to maintain
itself, and as such, the cost of complying with the year 2000 issue is expected
to be minimal.
 
     Year 2000 issues can also increase the risks of the Company's investments.
To assess the potential effect of year 2000 issues, the Adviser reviews
information regarding the year 2000 readiness of issuers of securities the
Company may purchase. However, this may be difficult with certain issuers. For
example, the Company primarily invests in the equity and equity-linked debt
securities of private companies which are not required to publish detailed
information regarding their year 2000 readiness. The financial impact of these
year 2000 issues is under continual evaluation. There can be no assurance that
potential year 2000 problems of issuers of securities purchased by the Company
would not have a material adverse effect on the Company's performance.
 
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
 
     The Company completed an initial public offering of common stock of $36.5
million on December 3, 1996 and a related over-allotment option of $1.5 million
on January 15, 1997. The Company believes that the net proceeds of this offering
will be adequate to fund the growth of the Company's investment portfolio
through 1999.
 
     At December 31, 1998, the Company had $22,973,379 in cash and cash
equivalents. The Company invested the proceeds of the initial public offering on
a short-term basis pending completion of investments in equity and equity-linked
debt securities of private companies and post-venture small-cap public
companies. At December 31, 1998, the cash was primarily invested in a United
States Treasury security.
 
     At December 31, 1998, the cost of equity and equity-linked debt security
investments made to date was $14,455,755 and their aggregate market value was
$26,911,160. Management believes the companies identified have significant
potential for long-term growth in sales and earnings. On a quarterly basis the
Board of Directors reviews and approves the valuation of each of the Company's
private investments and the Company's private investment portfolio as a whole.
Equity and equity-linked debt security investments that individually represent
more than 3% of the total assets of the Company at December 31, 1998 were
comprised of the following transactions:
 
  Waterlink, Inc.
 
     On April 21, 1997, in connection with the Company's commitment to provide
$2.1 million of a $10 million senior subordinated note facility for Waterlink,
Inc. ("Waterlink"), the Company received warrants to purchase 26,250 shares of
Waterlink common stock at an exercise price of $4.50 per share (the "Waterlink
Warrants"). Waterlink is a consolidation strategy company in the industrial
water and wastewater treatment market. On June 27, 1997, Waterlink completed its
initial public offering of common stock. As a result, Waterlink sold 4,500,000
shares at an $11.00 per share price. Following the Waterlink initial public
offering, Waterlink terminated its senior subordinated note facility. At its
termination, the facility had not been drawn down and no notes were issued to
the Company. The Company still holds the Waterlink Warrants. At December 31,
1998, the market price of Waterlink common Stock (NYSE:WLK) closed at $3 5/8.
Therefore the Company reported no market value at December 31, 1998 for the
Warrants.
 
  Health Care Solutions, Inc.
 
     On September 30, 1997, the Company funded a $1.5 convertible junior
subordinated promissory note facility for Health Care Solutions, Inc. ("Health
Care Solutions"). Health Care Solutions is an acquisition strategy company in
the home health care services market and is currently at a $50 million annual
sales rate with a strong presence in the Midwest and Great Lakes States region.
The terms of the notes call 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 are convertible into common stock at a
price of $3.50 per share. In connection with its commitment to provide this
facility, the Company received warrants to purchase up to $450,000 of common
stock
                                        7
<PAGE>   10
 
valued at an exercise price of 10% of an initial public offering ("IPO") 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 IPO. The warrants are
currently exercisable. The proceeds of the notes were used by Health Care
Solutions to help finance acquisitions.
 
  Fitness Quest, Inc.
 
     On December 16, 1997, the Company 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. ("Fitness Quest"). As a result, the Company
purchased approximately 788,961 shares of Fitness Quest Series A Convertible
Preferred Stock at $1.71 per share. Fitness Quest is a direct marketing and
distribution company launching an acquisition strategy. A portion of 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 the remainder was used for acquisitions. Fitness Quest
has been in the fitness promotional products business since 1994 and, at the
time of the purchase, had revenues at a $100 million annual sales rate level.
The terms of the Preferred Stock provide for payment of a 10% dividend, payable
quarterly.
 
     During 1997, Fitness Quest grew to $120 million in sales and improved its
operating margins and profits. The Company's Board of Directors, after a
complete evaluation, made a determination to increase the Company's market value
in its Fitness Quest investment in 1997 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 1998, the operating results of Fitness Quest were
adversely impacted by the cyclical nature of its business and one-time expenses
resulting from several acquisition transactions. Consequently, the current
annual sales rate level is approximately $90 million with lower than expected
profit margins.
 
     During 1998, the Company funded a $701,300 commitment to invest with
Brantley Venture Partners III, L.P. in a $2.0 million senior subordinated debt
investment in Fitness Quest. The note matures on March 31, 1999 and calls for a
10% interest rate per annum. In addition, the Company received a warrant to
purchase 72,550 shares of Fitness Quest stock for $.01 per share. The proceeds
of the investment were used to fund Fitness Quest's working capital needs as it
prepared for the 1998 holiday season.
 
  Corporate Wings, Inc.
 
     On December 23, 1997, the Company completed a $2.1 million investment with
Brantley Venture Partners III, L.P. to purchase a $6.0 million preferred stock
issue for Corporate Wings, Inc. ("Corporate Wings"). The Company's investment
consists of approximately 644,000 shares of Corporate Wings Series A Convertible
Preferred Stock at $3.26 per share. The terms of the transaction provide for an
8% dividend, payable quarterly. Corporate Wings' businesses include fixed base
operations, related flight management services and inertial navigation systems
repair services for private and commercial aircraft from six locations. The
proceeds of the transaction were used by Corporate Wings to continue to execute
an acquisition strategy. Corporate Wings has been in business since 1978 and had
sales of approximately $40 million in 1997.
 
     On December 29, 1998, the Company announced the completion of a second
private equity investment in Corporate Wings, Inc. As a result, the Company
purchased $962,500 of a $5.5 million Preferred Stock transaction led by The
Provident Bank. The Company also agreed to purchase approximately 65,034 shares
of a Class A Convertible Preferred Stock at $14.80 per share. The terms of the
transaction provide for an 8% dividend payable quarterly. Proceeds will be used
to fund the expansion of Corporate Wings' Flight Option program and to continue
to execute an acquisition strategy. During 1998, Corporate Wings completed the
acquisition of Miller Aviation and grew to over $125 million in annual revenues.
As a result of the price of this subsequent financing, which was led by
Provident Bank, and the superior operating performance of Corporate Wings during
1998, the market value of the Company's original investment in Corporate Wings
was increased to $9,531,760 resulting in an unrealized gain of $7,431,760. This
valuation was based on the $14.80 per share price negotiated by The Provident
Bank and approved by the Company's Board of Directors.
 
                                        8
<PAGE>   11
 
  Disposable Products Company, LLC
 
     On August 10, 1998, the Company entered into an investment led by Banc One
Capital to provide $1.0 million of a $3.0 million subordinated debt facility
with warrants to Disposable Products Company, LLC. ("DPC"). DPC is an
acquisition strategy company in the business of manufacturing and converting of
paper and nonwoven materials into wiping products for sale to commercial,
institutional, industrial and government markets. In addition, DPC is a
converter and reseller of other safety and industrial/janitorial products. Upon
completion of a pending acquisition, DPC will have revenues of approximately $25
million. The terms of the debt facility calls for a 12% interest rate per annum
with a final maturity five years from the closing. Brantley also received a
detachable common stock purchase warrant exercisable into 5% of the
fully-diluted common stock of the company at the time of exercise at a nominal
exercise price. The proceeds of the facility were used to finance acquisitions.
 
     Brantley Venture Partners II, L.P., Brantley Venture Partners III, L.P. and
Brantley Partners IV, L.P. (collectively, the "Partnerships") hold, in the
aggregate, approximately $200 million of venture capital private equity
investments. The Partnerships are related to the Investment Adviser in a manner
that requires exemption from certain provisions of the Act be obtained from the
Commission in order to permit, under certain circumstances, the Company, the
Investment Adviser and the Partnerships to invest in the same portfolio
companies. As a result, the Company and the Partnerships filed an application on
March 6, 1997 with the Commission seeking an exemptive order permitting the
Company, under certain circumstances, to invest in securities of issuers in
which one of the Partnerships also intends to invest. The staff of the
Commission granted the exemptive order on November 18, 1997.
 
     At December 31, 1998, the Company had stockholders' equity of $49,941,528,
resulting in a net asset value per share of $13.11.
 
RECENT DEVELOPMENTS
 
     On January 28, 1999, the Company announced the completion of a $3.172
million commitment to invest with Brantley Venture Partners III, L.P. in a
$7.934 million Preferred Stock issue for Pediatric Physicians Alliance, Inc.
Pediatric Physicians Alliance is a physician practice management company that
develops integrated pediatric networks of care. The company's objective is to
develop the leading physician-based integrated pediatric organization in the
United States. The proceeds of the transaction were used to close on the
acquisition of a number of physician practices. Upon acquiring these practices,
Pediatric Physicians Alliance will have annualized revenues of approximately $30
million. The Company agreed to purchase 793,000 shares of Class A-2 Convertible
Preferred Stock. The terms of the transaction provide for a 10% dividend payable
quarterly.
 
IMPACT OF INFLATION
 
     The Company does not believe that its business is materially affected by
inflation, other than the impact which inflation may have on the securities
markets, the valuations of business enterprises and the relationship of such
valuations to underlying earnings, all of which will influence the value of the
Company's investments.
 
RISKS
 
     Pursuant to Section 64(b)(1) of the Act, a business development company is
required to describe the risk factors involved in an investment in the
securities of such company due to the nature of the company's investment
portfolio. Accordingly, the Company states that its objective is to achieve
capital appreciation through investments in businesses believed to have
favorable growth potential. Such businesses are often undercapitalized small
companies which can lack management depth and have not yet attained levels of
consistent profitability. The Company's private equity investments often include
securities which are subject to legal or contractual restrictions on resale,
which restrictions adversely affect the liquidity and marketability of such
securities.
 
     The Company considers the management of equity price risk essential to
conducting its business and maintaining its profitability. The Company manages
this risk by maintaining a diverse portfolio of equity and equity-linked debt
securities. A portion of the Company's investment portfolio consists of equity
and equity-
 
                                        9
<PAGE>   12
 
linked debt securities in private companies. The Company would 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
longer-term effect on valuations of private companies, which could affect the
carrying value and the amount and timing of gains realized on these investments.
A portion of the Company's investment portfolio also consists of common stocks
and warrants to purchase common stocks in publicly traded companies. These
investments are directly exposed to equity price risk, in that a hypothetical
ten percent change in these equity prices would result in a similar percentage
change in the fair value of these investments.
 
     Because of the speculative nature of the Company's investments and the lack
of any market for the securities initially purchased by the Company, there is a
significantly greater risk of loss than is the case with traditional investment
securities. The high-risk, long-term nature of the Company's private equity
investment activities may prevent shareholders of the Company from achieving
price appreciation and dividend distributions.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     The information set forth under Item 7 -- Risks on pages 9-10 of this
Annual Report Form 10-K is incorporated herein by reference.
 
                                       10
<PAGE>   13
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                          BRANTLEY CAPITAL CORPORATION
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                              --------------------------
                                                                 1998           1997
                                                              -----------    -----------
<S>                                                           <C>            <C>
ASSETS
Cash and cash equivalents(Note 2)...........................  $22,973,379    $24,691,345
Investments, at market......................................   26,911,160     18,791,178
Dividends and interest receivable...........................      433,874         70,722
Other assets................................................      137,113        271,490
                                                              -----------    -----------
     TOTAL ASSETS...........................................  $50,455,526    $43,824,735
                                                              ===========    ===========
 
            LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Advisory fee payable (Note 3)...............................  $   361,153    $   284,111
Administration fee payable..................................       12,500         18,750
Professional fees payable...................................       39,319        120,088
Distributions payable.......................................           --        342,948
Organization and offering costs payable.....................       68,117         93,117
Other liabilities...........................................       32,909         54,106
                                                              -----------    -----------
     TOTAL LIABILITIES......................................  $   513,998    $   913,120
                                                              ===========    ===========
STOCKHOLDERS' EQUITY (NOTE 7):
     Common Stock, $0.01 par value; 25,000,000 shares
      authorized and 3,810,535 shares issued and outstanding
      at December 31, 1998 and 1997, respectively...........  $    38,105    $    38,105
     Additional paid in capital.............................   37,505,433     37,611,421
     Retained earnings......................................   12,397,990      5,262,089
                                                              -----------    -----------
     TOTAL STOCKHOLDERS' EQUITY.............................   49,941,528     42,911,615
                                                              ===========    ===========
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............  $50,455,526    $43,824,735
                                                              ===========    ===========
NET ASSET VALUE PER SHARE...................................  $     13.11    $     11.26
                                                              ===========    ===========
</TABLE>
 
See accompanying notes to the financial statements.
 
                                       11
<PAGE>   14
 
                          BRANTLEY CAPITAL CORPORATION
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                         FOR THE         FOR THE         FOR THE
                                                        YEAR ENDED      YEAR ENDED     PERIOD ENDED
                                                       DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                           1998            1997           1996*
                                                       ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>
INVESTMENT INCOME:
  Interest and dividend income.......................   $1,745,969      $1,712,400      $  139,529
                                                        ----------      ----------      ----------
OPERATING EXPENSES:
  Advisory fees......................................    1,325,320       1,126,741          81,898
  Administration fees................................      118,516         117,613           9,450
  Professional fees payable..........................       98,705         150,930          25,000
  Other..............................................      272,442         286,445          30,403
                                                        ----------      ----------      ----------
  TOTAL EXPENSES.....................................    1,814,983       1,681,729         146,751
                                                        ----------      ----------      ----------
NET (LOSS) INCOME....................................   $  (69,014)     $   30,671      $   (7,222)
                                                        ----------      ----------      ----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENT
  TRANSACTIONS:
  Net realized gain (loss) on investment
     transactions....................................      (57,414)        421,735              --
  Net unrealized appreciation during the period on
     investment transactions.........................    7,194,446       5,260,958              --
                                                        ----------      ----------      ----------
NET GAIN ON INVESTMENT TRANSACTIONS..................    7,137,032       5,682,693              --
                                                        ----------      ----------      ----------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS...   $7,068,018      $5,713,364      $   (7,222)
                                                        ==========      ==========      ==========
INCOME/(LOSS) PER SHARE..............................   $     1.85      $     1.50      $   (0.002)
                                                        ==========      ==========      ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING........    3,810,535       3,810,535       3,660,535
                                                        ==========      ==========      ==========
</TABLE>
 
* The Company commenced operation on October 30, 1996.
 
See accompanying notes to the financial statements.
 
                                       12
<PAGE>   15
 
                          BRANTLEY CAPITAL CORPORATION
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                 FOR THE            FOR THE           FOR THE
                                               YEAR ENDED         YEAR ENDED       PERIOD ENDED
                                              DECEMBER 31,       DECEMBER 31,      DECEMBER 31,
                                                  1998               1997              1996*
                                             ---------------    ---------------    -------------
<S>                                          <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET CHANGE IN NET ASSETS RESULTING FROM
     OPERATIONS:...........................  $     7,068,018    $     5,713,364    $      (7,222)
  Adjustments to reconcile net change in
     net assets resulting from operations
     to net cash provided by operations:
       Net realized loss (gain) from
          investments......................  $        57,414    $      (421,735)   $          --
       Change in unrealized appreciation...       (7,194,446)        (5,260,958)              --
                                             ---------------    ---------------    -------------
       Changes in assets and liabilities:
          Advisory fee payable.............           77,042            202,213           81,898
          Administration fee payable.......           (6,250)            18,750            9,450
          Professional fees payable........          (80,769)            95,088           95,088
          Organization and offering costs
            payable........................          (25,000)          (163,010)         181,427
          Dividend and interest
            receivable.....................         (363,152)           (70,722)              --
          Distribution payable.............         (342,948)                --               --
          Other assets.....................          134,377             19,326         (110,815)
          Other liabilities................          (21,197)           (60,601)          35,168
                                             ---------------    ---------------    -------------
          NET CASH (USED FOR) PROVIDED BY
            OPERATING ACTIVITIES...........         (696,911)            71,715          284,994
                                             ---------------    ---------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of investment
          securities.......................       (2,663,800)       (18,040,089)              --
       Sales/maturities of investment
          securities.......................        1,726,021          2,526,788               --
       Purchases of short-term
          investments......................   (5,933,395,842)    (7,752,694,628)    (653,897,000)
       Sales/maturities of short-term
          investments......................    5,933,350,671      7,755,099,444      653,897,000
                                             ---------------    ---------------    -------------
       NET CASH (USED FOR) INVESTING
          ACTIVITIES.......................         (982,950)       (13,108,485)               0
                                             ---------------    ---------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from shares issued in
          initial public offering..........               --                 --       36,044,176
       Subsequent shares issued to initial
          public offering..................               --          1,500,000               --
       Distributions.......................          (38,105)          (101,105)              --
                                             ---------------    ---------------    -------------
NET CASH (USED FOR) PROVIDED BY FINANCING
  ACTIVITIES...............................          (38,105)         1,398,895       36,044,176
                                             ---------------    ---------------    -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS FOR
  THE PERIOD...............................       (1,717,966)       (11,637,875)      36,329,170
CASH AND CASH EQUIVALENTS, BEGINNING OF
  PERIOD...................................       24,691,345         36,329,220               50
                                             ---------------    ---------------    -------------
CASH AND CASH EQUIVALENTS, END OF THE
  PERIOD...................................  $    22,973,379    $    24,691,345    $  36,329,220
                                             ===============    ===============    =============
</TABLE>
 
---------------
 
* The Company commenced operation on October 30, 1996. The Company paid no
  interest or federal income tax during the period.
 
See accompanying notes to the financial statements
 
                                       13
<PAGE>   16
 
                          BRANTLEY CAPITAL CORPORATION
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                      ADDITIONAL      RETAINED          TOTAL
                                           COMMON       PAID IN       EARNINGS      STOCKHOLDERS
                                            STOCK       CAPITAL       (DEFICIT)        EQUITY
                                           -------    -----------    -----------    -------------
<S>                                        <C>        <C>            <C>            <C>
BALANCE AT OCTOBER 30, 1996*.............  $   105    $   105,245    $         0     $   105,350
Net increase (decrease) in net assets
  from operations........................       --             --         (7,222)         (7,222)
Issuance of 3,650,000 shares through
  initial public offering................   36,500     36,007,676             --      36,044,176
                                           -------    -----------    -----------     -----------
BALANCE AT JANUARY 1, 1997...............  $36,605    $36,112,921    $    (7,222)    $36,142,304
                                           -------    -----------    -----------     -----------
Net increase in net assets from
  operations.............................       --             --      5,713,364       5,713,364
Distributions from:
Net investment income....................       --             --        (23,084)        (23,084)
Realized gains...........................       --             --       (420,969)       (420,969)
Issuance of 150,000 shares subsequent to
  initial public offering................    1,500      1,498,500             --       1,500,000
                                           -------    -----------    -----------     -----------
BALANCE AT DECEMBER 31, 1997.............  $38,105    $37,611,421    $ 5,262,089     $42,911,615
                                           -------    -----------    -----------     -----------
Net increase (decrease) in net assets
  from operations........................       --             --      7,068,018       7,068,018
Net investment loss reclassification.....       --       (105,988)       105,988              --
Distributions from net investment
  income.................................       --             --        (38,105)        (38,105)
                                           -------    -----------    -----------     -----------
BALANCE AT DECEMBER 31, 1998.............  $38,105    $37,505,433    $12,397,990     $49,941,528
                                           =======    ===========    ===========     ===========
</TABLE>
 
---------------
 
* The Company commenced operation on October 30, 1996.
 
See accompanying notes to the financial statements.
 
                                       14
<PAGE>   17
 
                          BRANTLEY CAPITAL CORPORATION
 
                       NOTES TO THE FINANCIAL STATEMENTS
 
1. ORGANIZATION
 
     Brantley Capital Corporation (the "Company"), a Maryland corporation, is a
closed-end, non-diversified investment company which has elected to be treated
as a business development company under the Investment Company Act of 1940, as
amended (the "Act"). The Company was organized on August 1, 1996 and commenced
operations on October 30, 1996. The Company's investment objective is the
realization of long-term capital appreciation in the value of its investments.
To achieve this objective, the Company intends to invest primarily in privately
placed equities and debt and, to a lesser extent, in post venture small-cap
public companies.
 
     The Company invests in securities classified as "restricted securities"
under the Securities Act of 1933. The value of restricted stock investments for
which no public market exists cannot be precisely determined. These securities
will usually be subject to restrictions on resale or otherwise have no
established trading market. The lack of liquidity of these securities may
adversely affect the ability of the Company to dispose of them in a timely
manner and at a fair price when the Company deems it necessary or advantageous.
 
     Privately placed securities typically depend significantly on the
management talents and efforts of one person or a small group of persons. The
loss of the services of one or more of these persons could have a material
adverse affect on the portfolio company. In addition, due to their size and
sometimes limited product diversity, these companies may be more vulnerable to
economic downturns and often require additional capital to expand or compete.
 
     Post venture small-cap public companies may also display more sensitivity
to changes in company, industry and market conditions than more established
public companies. Because small-cap public companies often have fewer
outstanding shares than larger companies, it may be more difficult for the
Company to buy or sell significant amounts of shares without an unfavorable
impact on the prevailing prices.
 
     The Company operates as a non-diversified investment company within the
meaning of the Act and therefore, the Company's investments are likely not to be
substantially diversified.
 
2. SIGNIFICANT ACCOUNTING POLICIES
 
     The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles followed by the Company in
preparation of its financial statements.
 
  A. Security Valuation
 
     The Company's investment objective is the realization of long-term capital
appreciation in the value of its investments. As a result, any individual
investment in the Company's portfolio may, or may not, produce dividend income.
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 the Nasdaq
National Market System will be 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.
 
     Pursuant to Section 64(b)(1) of the Act, a business development company is
required to describe the risk factors involved in an investment in the
securities of such company due to the nature of the company's investment
                                       15
<PAGE>   18
                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED
 
portfolio. Accordingly, the Company states that its objective is to achieve
capital appreciation through investments in businesses believed to have
favorable growth potential. Such businesses are often undercapitalized small
companies which can lack management depth and have not yet attained levels of
consistent profitability. The Company's private equity investments often include
securities which are subject to legal or contractual restrictions on resale,
which restrictions adversely affect the liquidity and marketability of such
securities.
 
     The Company considers the management of equity price risk essential to
conducting its business and maintaining its profitability. The Company manages
this risk by maintaining a diverse portfolio of equity and equity-linked debt
securities. A portion of the Company's investment portfolio consists of equity
and equity-linked debt securities in private companies. The Company would
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 longer-term effect on valuations of private companies, which could
affect the carrying value and the amount and timing of gains realized on these
investments. A portion of the Company's investment portfolio also consists of
common stocks and warrants to purchase common stocks in publicly traded
companies. These investments are directly exposed to equity price risk, in that
a hypothetical ten percent change in these equity prices would result in a
similar percentage change in the fair value of these investments.
 
     Because of the speculative nature of the Company's investments and the lack
of any market for the securities initially purchased by the Company, there is a
significantly greater risk of loss than is the case with traditional investment
securities. The high-risk, long-term nature of the Company's private equity
investment activities may prevent shareholders of the Company from achieving
price appreciation and dividend distributions.
 
  B. Repurchase Agreements
 
     The Company may invest in repurchase agreements with institutions which the
Company's investment adviser has determined are creditworthy. Each repurchase
agreement is recorded at cost. The Company requires that the securities
purchased in a repurchase agreement be transferred to the Company's custodian in
a manner sufficient to enable the Company to obtain those securities in the
event of counter-party default. The seller is required to maintain the value of
the securities held at not less than the repurchase price, including interest.
 
  C.  Cash and Cash Equivalents
 
     Cash equivalents consist of highly liquid investments with insignificant
interest rate risk and original maturities of three months or less at
acquisition date. At December 31, 1998, cash and cash equivalents consisted of
the following:
 
<TABLE>
<S>                                                           <C>
Cash........................................................  $   266,120
United States Treasury Bill 4.25%, 1/21/1999................   22,707,259
                                                              -----------
                                                              $22,973,379
                                                              ===========
</TABLE>
 
  D. Security Transactions and Related Income
 
     Security transactions are accounted for on a trade date basis. Net realized
gains or losses on sales of securities are determined on the specific
identification method. Interest income and expenses are recognized on the
accrual basis. Dividends are recorded on the ex-dividend date.
 
  E. Dividends and Distributions to Stockholders
 
     The Company intends to make quarterly distributions to its stockholders of
substantially all of its investment company taxable income. The Company may
choose to distribute net realized long-term capital gains, or to retain such
gains to supplement the Company's equity capital and support growth in its
portfolio. Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
 
                                       16
<PAGE>   19
                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED
 
  F. Federal Income Taxes
 
     The Company intends to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies as defined in applicable sections of the Internal Revenue Code. For
the year ended December 31, 1998, the Company reclassified $105,988 of net
investment income as a decrease to additional paid in capital on the Balance
Sheet and Statement of Stockholders' Equity. Also at December 31, 1998, the
Company had a capital loss carryforward of $57,414, which may be utilized to
offset any realized capital gains through December 31, 2006.
 
  G. Organization Costs
 
     Costs incurred by the Company in connection with its organization have been
deferred and are being amortized on a straight line basis over their estimated
useful lives.
 
  H. Reclassifications
 
     Certain previously reported amounts have been reclassified to conform to
the current year presentation.
 
3. INVESTMENT ADVISORY AGREEMENT
 
     The Company has entered into an investment advisory agreement (the
"Advisory Agreement") with Brantley Capital Management, L.L.C. (the "Adviser")
under which the 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 Advisory Agreement. The
Advisory Agreement is subject to renewal annually by the Board of Directors. The
current term ends on November 26, 1999. Certain officers of the Company are also
officers of the Adviser. No officer of the Adviser receives any compensation
from the Company for serving as officer of the Company.
 
4. INVESTMENTS
 
     At December 31, 1998, the cost of investments for federal income tax
purposes was the same for financial reporting purposes.
 
5. TRANSACTIONS WITH RELATED PARTIES
 
     The Company has obtained exemptive relief from certain provisions of the
Act which permit the Company to invest in an offering which affiliates of the
Adviser also intend to invest in. The Company anticipates that, subject to
certain terms and conditions, current and future affiliates of the Adviser may
frequently invest in the same portfolio companies. No violations of the Act
exist as a result of investments made before obtaining exemptive relief.
 
     Certain offering and organization costs were paid by officers of the
Company and the Adviser. No amounts were due to the officers of the Company as
of December 31, 1998 or December 31, 1997. At December 31, 1998 and 1997 the
Company owed $361,153 and $284,111 respectively to the Advisor for management
advisory services.
 
6. USE OF ESTIMATES
 
     The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions, including the valuation of privately held securities, that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
 
                                       17
<PAGE>   20
                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED
 
7. STOCKHOLDERS' EQUITY
 
     The Company is authorized to issue 25,000,000 shares of Common Stock with a
par value $0.01 per share. Shares totaling 3,660,535 were issued through the
organization and initial public offering of the Company at a per share price of
$10.00 per share. On January 15, 1997, the underwriters of the initial offering
of the Company's shares, exercised an option to purchase an additional 150,000
shares of Common Stock at $10 per share resulting in total shares outstanding of
3,810,535. The proceeds of the offerings were reduced by offering costs of
$455,824 before becoming available to the Company for investment.
 
     Under the Company's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), all cash dividends and cash distributions to stockholders are
automatically reinvested unless the stockholder elects to receive their
distributions in cash. If the market value per share of the Common Stock on the
record date equals or exceeds the net asset value per share of Common Stock on
that date, the Company will issue new shares at the net asset value.
 
     If the net asset value exceeds the market price, shares will be purchased
on the open market or in private transactions as soon as is practicable after
such date. If before the open market purchases have been completed, the market
price exceeds the net asset value, the Company will issue new shares at net
asset value to fulfill the purchase requirements.
 
8. STOCK OPTION PLANS
 
     Concurrent with the offering, the Company adopted the 1996 Stock Option
Plan (the "Plan"), which authorizes the issuance of options to purchase up to
1,175,000 shares of Common Stock to officers and employees of the Company. Upon
closing of the offering, options to purchase 350,000 shares of Common Stock of
the Company were granted to the Company's executive officers. These options
became exercisable as to one-third of the Option Shares on the first anniversary
of the closing of the initial offering of the Company's Common Stock, as to an
additional one third of the Option Shares on the second anniversary of the
closing of the offering and as to the remaining one-third on the third
anniversary of the closing of the offering. Options granted under the Plan will
be exercisable at a price not less than the greater of (i) the current market
value on the date of option grant and (ii) the current net asset value of the
shares of Common Stock. No option may be exercised more than 10 years after the
date on which it is granted. Market value and NAV on the date of grant was
$10.00.
 
     In addition, the Company has adopted a stock option plan relating to 75,000
shares of Common Stock and providing for option grants solely to the
disinterested directors of the Company (the "Director's Plan"), subject to
receipt of an order of the Securities and Exchange Commission approving such a
plan as fair and reasonable and not overreaching of the Company or its
stockholders.
 
     In order to facilitate the purchase of shares under the Plan or Director's
Plan, the Company may make arms-length loans to each plan's participants, under
the terms required by Section 57 (j)(2) of the Act. No loans were outstanding as
of December 31, 1998 or 1997.
 
     In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock Based Compensation. The Statement encourages
companies to recognize expense for stock based compensation awards based on
their fair value on the date of grant. Under the Statement, companies may
continue following the existing accounting rules, provided that pro forma
disclosures are made of what net income and earnings per share would have been
had the new fair value method been used. The Company has elected to continue the
existing accounting method and to not adopt the fair value method. Pursuant to
the disclosure requirements of SFAS 123, proforma net change in net assets
resulting from operations for the year ended December 31, 1998 would have been
$6,826,518 or $1.79 net income per share. Management used the Black Scholes
model to perform this assessment. Key assumptions included an estimated
volatility of .235, expected option life of 5 years, an expected dividend yield
of 3.608% and a risk free interest rate of 5.83%.
 
                                       18
<PAGE>   21
                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED
 
9. YEARLY DATA
 
     Financial results for the year ended December 31, 1998 are summarized
below:
 
<TABLE>
<S>                                                             <C>
Total investment income.....................................    $1,745,969
Net investment gain.........................................     7,137,032
Net increase in net assets from operations..................     7,068,018
Income per share............................................    $     1.85
</TABLE>
 
10. FINANCIAL HIGHLIGHTS
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED      YEAR ENDED
                                                              DECEMBER 31,    DECEMBER 31,
                   FOR THE PERIODS ENDED                          1998            1997
                   ---------------------                      ------------    ------------
<S>                                                           <C>             <C>
Net Asset Value, Beginning of the Period....................    $ 11.26         $  9.87
Income from investment operations:
Net Income..................................................       (.02)           0.01
Net Realized And Unrealized Gain on Investments.............       1.88            1.50
                                                                -------         -------
  Total from investment operations:.........................       1.86            1.51
                                                                -------         -------
Less Distributions:
Dividends from net investment income........................      (0.01)          (0.01)
Dividends from net realized gains...........................         --            (.11)
                                                                -------         -------
  Total Distributions.......................................      (0.01)          (0.12)
Net Asset Value, End of the Period..........................    $ 13.11         $ 11.26
                                                                =======         =======
Market Value, End of the Period.............................    $ 7.125         $  9.63
                                                                =======         =======
Total Return, At Market Value...............................     (25.89)%         13.90%
Total Return, At NAV........................................      16.63%          15.40%
</TABLE>
 
11. SCHEDULE OF INVESTMENTS
 
<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 1998
                                                           ----------------------------------------
                                                                                          MARKET
            NAME OF ISSUER AND TITLE OF ISSUE              SHARES/WARRANTS/PRINCIPAL       VALUE
            ---------------------------------              -------------------------    -----------
<S>                                                        <C>                          <C>
AUTO PARTS
  Gentex Corporation.....................................             38,800            $   776,000
                                                                                        -----------
AVIONICS
  Corporate Wings*.......................................            644,000              9,531,200
  Corporate Wings Subordinated Debt with Warrants........          1,027,534                962,500
                                                                                        -----------
                                                                                         10,493,700
                                                                                        -----------
BUSINESS SERVICES
  Barra Incorporated.....................................             21,285                502,858
  Disposable Products Company............................          1,000,000              1,000,000
  Norrell Corp. GA.......................................             16,161                238,375
  CCC Information Svcs Group Inc.........................             19,500                336,375
                                                                                        -----------
                                                                                          2,077,608
                                                                                        -----------
CHEMICALS
  Nova Corp. GA..........................................             24,000                832,500
                                                                                        -----------
</TABLE>
 
                                       19
<PAGE>   22
                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED
 
<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 1998
                                                           ----------------------------------------
                                                                                          MARKET
            NAME OF ISSUER AND TITLE OF ISSUE              SHARES/WARRANTS/PRINCIPAL       VALUE
            ---------------------------------              -------------------------    -----------
<S>                                                        <C>                          <C>
DRUGS & HEALTH CARE
  ESC Medical Systems Limited............................             13,675                143,587
  Health Care Solutions..................................          1,500,001              1,500,100
                                                                                        -----------
                                                                                          1,643,687
                                                                                        -----------
ELECTRONICS
  Cambridge Technology Partners..........................             14,900                329,662
  JPM Company............................................             16,700                233,800
  RF Micro Devices, Incorporated.........................              5,000                231,875
  Technology Solutions Company...........................             32,725                350,770
                                                                                        -----------
                                                                                          1,146,107
                                                                                        -----------
HOTELS AND RESTAURANTS
  Logans Roadhouse, Inc..................................             19,500                458,250
                                                                                        -----------
LEISURE TIME
  Action Performance, Inc................................             16,000                566,000
                                                                                        -----------
MISCELLANEOUS
  SLI, Incorporated - Lighting products..................             24,850                745,087
  Zebra Technologies Corporation - Machinery.............             10,710                307,913
                                                                                        -----------
                                                                                          1,053,000
                                                                                        -----------
RETAIL TRADE
  Fitness Quest *........................................            788,961              5,440,000
  Fitness Quest Subordinated Debt with Warrants..........            773,850                701,300
  Just For Feet..........................................             23,700                411,787
                                                                                        -----------
                                                                                          6,553,087
                                                                                        -----------
SOFTWARE
  Axent Technologies, Incorporated.......................             30,523                932,859
  Hyperion Solution Corporation..........................              8,500                153,000
  Summit Design, Incorporated............................             24,200                225,362
                                                                                        -----------
                                                                                          1,311,221
                                                                                        -----------
TOTAL EQUITY AND EQUITY LINKED DEBT INVESTMENTS..........                                26,911,160
                                                                                        -----------
U.S GOVERNMENT SECURITIES
  U.S. Treasury Bill 4.25%, 1/21/1999 *..................         22,761,000             22,707,259
                                                                                        -----------
TOTAL INVESTMENTS -- (COST $37,163,014)..................                               $49,618,418
                                                                                        ===========
</TABLE>
 
---------------
 
All investments are U.S. companies
 
* Represents 5% or more of Total Stockholders' Equity
 
12. YEAR 2000 READINESS (UNAUDITED)
 
     The services provided to the Company by the Adviser, Sub-Administrator,
Transfer Agent and Custodian depend on the continued functioning of their
computer systems. Many computer software systems in use today cannot distinguish
the year 2000 from the year 1900 because of the way dates are encoded and
calculated. The Board of Directors for the Company has made inquiries of the
Adviser, Sub-Administrator, Transfer Agent and Custodian regarding whether they
expect to have their computer systems adjusted for the year 2000 transition.
 
                                       20
<PAGE>   23
                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED
 
The Company has been informed that all of these service providers expect that
their systems will be Year 2000 compliant prior to that time.
 
     Year 2000 issues can also increase the risks of the Company's investments.
To assess the potential effect of year 2000 issues, the Adviser reviews
information regarding the year 2000 readiness of issuers of securities the
Company may purchase. However, this may be difficult with certain issuers. For
example, the Company primarily invests in the equity and equity-linked debt
securities of private companies which are not required to publish detailed
information regarding their year 2000 readiness. The financial impact of these
year 2000 issues is under continual evaluation. There can be no assurance that
potential year 2000 problems of issuers of securities purchased by the Company
would not have a material adverse effect on the Company's performance.
 
                                       21
<PAGE>   24
 
                         REPORT OF INDEPENDENT AUDITORS
 
Board of Directors
Brantley Capital Corporation
 
     We have audited the accompanying balance sheets of Brantley Capital
Corporation as of December 31, 1998 and 1997, the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1998 and 1997, and the period from October 30, 1996 to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brantley Capital Corporation
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended and the period from October 30, 1996 to December
31, 1996, in conformity with generally accepted accounting principles.
 
                                          Ernst & Young LLP
 
Cleveland, Ohio
March 5, 1999
 
                                       22
<PAGE>   25
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information set forth under the caption "ELECTION OF DIRECTORS" in the
Company's definitive Proxy Statement to be filed on, or about, April 15, 1999,
for its Annual Meeting of Stockholders to be held May 18, 1998, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, (the "1999 Proxy
Statement") is incorporated herein by reference.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     The information set forth under the caption "EXECUTIVE COMPENSATION" in the
1999 Proxy Statement is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information set forth under the caption "ELECTION OF DIRECTORS" in the
1999 Proxy Statement is incorporated herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The Investment Adviser, pursuant to the terms of the Investment Advisory
Agreement, is responsible, on a day-to-day basis, for the selection and
supervision of portfolio investments. Transactions between the Company and the
Investment Adviser, including operational responsibilities, duties and
compensation, are governed by the Investment Advisory Agreement. Throughout the
term of the Investment Advisory Agreement, the Company will pay to the
Investment Adviser an annual management fee of 2.85% of the Company's net
assets, determined at the end of each calendar quarter and payable in arrears.
For the year ended December 31, 1998, the Investment Adviser was owed an
investment advisory fee in the aggregate amount of $361,153. Robert P. Pinkas,
Chairman of the Board, Chief Executive Officer, Treasurer and a director and
Michael J. Finn, President and a director of the Company are officers and
managers of the Investment Adviser, and together own 100% of the Investment
Adviser.
 
     The Company is an investor in DPC as discussed in the Company's Management
Discussion and Analysis of this Annual Report on Form 10-K. Grand River
Industries, Ltd. ("Grand River") owns 85% of DPC. Grand River is a limited
liability company that is 100% owned by Objective Industrial Investments
Partners, L.P. ("Objective"). Robert P. Pinkas, Chairman and Chief Executive
Officer of the Company, is a general partner in Objective. Mr. Pinkas, as a
result of this investment commitment in Objective, owns 20% of Grand River and
approximately 17% of DPC.
 
                                       23
<PAGE>   26
 
                                    PART IV
 
ITEM 14.  FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND
          REPORTS ON FORM 8-K
 
<TABLE>
<C>     <S>
 
   (a)  The following documents are filed as part of this report:
 
    1.  Financial Statements -- The following financial statements
        of the Company are contained in Item 8 of this Form 10-K:
        Balance Sheets -- December 31, 1998 and 1997
        Statement of Operations - For the years ended December 31,
        1998 and 1997 and for the period from October 30, 1996
        through December 31, 1996
        Statement of Cash Flows -- For the years ended December 31,
        1998 and 1997 and for the period from October 30, 1996
        through December 31, 1996
        Statement of Stockholders' Equity -- For the years ended
        December 31, 1998 and 1997 and for the period from October
        30, 1996 through December 31, 1996
        Notes to the Financial Statements
        Report of Independent Auditors
 
    2.  Financial Statement Schedules were omitted as they are not
        required or not applicable, or the required information is
        included in the Financial Statements
 
    3.  Exhibits -- Reference is made to the Exhibit Index which is
        found on page 26 of this Form 10-K
 
   (b)  No reports on Form 8-K were filed by the Company during the
        quarter ended December 31, 1998.
</TABLE>
 
                                       24
<PAGE>   27
 
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT ON FORM 10-K TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                          BRANTLEY CAPITAL CORPORATION
 
                                          By: /s/ ROBERT P. PINKAS
 
                                            ------------------------------------
                                            Title: Robert P. Pinkas,
                                               Chairman of the Board,
                                               Chief Executive Officer
                                               and Treasurer
 
                                          Date: March 31, 1999
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT ON FORM 10-K HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE COMPANY IN THE CAPACITIES AND ON THE DATES INDICATED.
 
<TABLE>
<CAPTION>
                SIGNATURE                                     TITLE                            DATE
                ---------                                     -----                            ----
<C>                                         <S>                                         <C>
 
           /s/ ROBERT P. PINKAS             Chairman of the Board, Chief Executive          March 31, 1999
------------------------------------------    Officer, Treasurer and Director
             Robert P. Pinkas                 (principal executive officer and
                                              principal accounting officer)
 
           /s/ TAB A. KEPLINGER             Vice President and Chief Financial Officer      March 31, 1999
------------------------------------------    (principal financial officer)
             Tab A. Keplinger
 
           /s/ MICHAEL J. FINN              President and Director                          March 31, 1999
------------------------------------------
             Michael J. Finn
 
            /s/ PAUL H. CASCIO              Secretary, Vice President and Director          March 31, 1999
------------------------------------------
              Paul H. Cascio
 
           /s/ L. PATRICK BALES             Director                                        March 31, 1999
------------------------------------------
             L. Patrick Bales
 
          /s/ BENJAMIN F. BRYAN             Director                                        March 31, 1999
------------------------------------------
            Benjamin F. Bryan
 
            /s/ RICHARD MOODIE              Director                                        March 31, 1999
------------------------------------------
              Richard Moodie
 
             /s/ PETER SALTZ                Director                                        March 31, 1999
------------------------------------------
               Peter Saltz
 
            /s/ JAMES M. SMITH              Director                                        March 31, 1999
------------------------------------------
              James M. Smith
 
           /s/ JAMES P. OLIVER              Director                                        March 31, 1999
------------------------------------------
             James P. Oliver
</TABLE>
 
                                       25
<PAGE>   28
 
                                 EXHIBIT INDEX
 
     The following exhibits are filed with this report or are incorporated
herein by reference to a prior filing, in accordance with Rule 12b-32 under the
Securities Exchange Act of 1934. (Asterisk denotes exhibits filed with this
report.)
 
EXHIBIT 3  Articles of Incorporation and By-laws
 
       *(1) Articles of Amendment and Restatement of the Charter of Brantley
            Capital Corporation
 
       *(2) Amended and Restated Bylaws of the Company
 
EXHIBIT 4  Form of Share Certificate (Exhibit 2.d to amendment No. 1 to the
           Registration Statement filed on October 30, 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 Registrant and the
           Investment Advisor (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)
 
EXHIBIT 23  Consents of Experts and Counsel
 
       *(1) Consent of Ernst & Young LLP
 
EXHIBIT 27*  Financial Data Schedule
 
                                       26