SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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240.14a-12
Brantley Capital Corp.
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60 Heritage Drive, Pleasantville, NY 10570
(914) 747-5262 // Fax (914) 747-5258
THIS IS THE LETTER ROBERT PINKAS DOES NOT WANT YOU TO READ!
August 26, 2002
Dear Fellow Brantley Capital Shareholder:
Question: What do the following CEO's have in common: Kenneth
Lay, Dennis Kozlowski, John Rigas, Bernard Ebbers and Robert
Pinkas?
Answer: Give yourself a gold star if you said each of them
parlayed his position into a lavish lifestyle at the expense of
the shareholders. You get extra credit if you also said each
served under a board of directors that rubber-stamped anything he
asked for.
The Brantley Scorecard: Pinkas $8 million (and a Rolls Royce),
Shareholders $0
Brantley Capital's IPO in late1996 marked the beginning of Robert
Pinkas's plan to manage a billion dollar business development
company. The sales pitch to investors was that they were being
offered a "unique opportunity" to gain access to an "experienced
management team with a proven track record of success - 35% IRR
over the last 15 years." Another selling point was that they
could expect to eventually receive an annual dividend of
approximately 6% - 8%. As a result, 3.8 million shares of
Brantley were sold to investors at $10 per share.
It is an understatement to say that those investors have been
disappointed. Brantley's market price is currently hovering
around $8.25, far below its net asset value ("NAV") of $17.78.
And the annual dividend has averaged only 2.8%. Mr. Pinkas, on
the other hand, has been well rewarded from Brantley and now
enjoys cruising around Cleveland in his Rolls Royce. That is
because over the past 5-1/2 years, he and his associates have
siphoned off more than $8 million in fees from a company that has
a market capitalization of just $32 million. In addition, Mr.
Pinkas has received 450,000 options. As the corporate scandals
at Enron, Tyco, Adelphia and WorldCom have shown, a large
disparity between a CEO's compensation (like that of Mr. Pinkas)
and shareholder returns should be a warning flag.
Mr. Pinkas Says "No" to Enhancing Shareholder Value
Brantley's shares have traded at a very large discount to their
net asset value ("NAV") for years. Currently, the discount is
more than 50%! A number of shareholders have suggested measures
to address the discount problem - but Mr. Pinkas has rejected
them. For example:
? Repurchase shares in the market at a large discount from
NAV. Buying shares at a discount from NAV is a sure way to
boost shareholder value. Mr. Pinkas' response? "No."
? Distribute some of Brantley's idle cash to shareholders.
Returning a portion of Brantley's cash hoard to shareholders
would send a positive message about management's commitment
to maximize shareholder value. Mr. Pinkas' response? "No."
? Establish a windup date for Brantley. If shareholders knew
that Brantley would be wound up after say, ten years, they
would be assured that they would eventually realize the
intrinsic value of its holdings. Mr. Pinkas' response?
"No."
? Distribute shares of portfolio companies when they become
publicly traded. Shareholders would likely respond
favorably if Brantley adopted a policy to distribute shares
in any portfolio company that completed an IPO. Not only
would this allow shareholders to receive the full value of
the shares of that portfolio company, but it would also
allow them the flexibility to either sell or hold those
shares. Mr. Pinkas' response? "No."
? Link the investment advisory fee to Brantley's stock price.
Tying management's fees to Brantley's stock price aligns the
interests of shareholders and management. Mr. Pinkas'
response? "No."
I believe Mr. Pinkas rejected every one of these suggestions
because each one would have reduced his fees. Mr. Pinkas simply
will not support anything that reduces his fees!
Brantley's "Stepford Directors" Have Failed to Protect
Shareholders
I have served as a director of other companies before I was
elected a director of Brantley. However, I have never seen a
board that was so dominated by management as this one. The board
of directors is supposed to represent shareholders and monitor
conflicts of interest. The fact that the board has continued to
rubber stamp Mr. Pinkas' generous compensation package despite
Brantley's poor stock price performance proves that they are not
doing their job.
Unlike any other public company that I know, Brantley's board of
directors did not have an in-person meeting for more than one
year after I was elected in July, 2001. During that time, I was
unable to look any director in the eye to ask him why he is so
subservient to Mr. Pinkas. Instead, all the board meetings were
via telephone, often on a few days' notice. Moreover, the
directors were often given only a day or two to review written
materials. Recently, we were asked to approve a 40-page SEC
filing that we received via e-mail just two hours before a board
meeting. I objected to voting without adequate preparation but
no other director seemed at all concerned.
Frankly, it is almost eerie being the only director that ever
challenges Mr. Pinkas. I think of the others as "Stepford
Directors." (If you are not familiar with the film, "The
Stepford Wives," it is about a suburban town in which the
husbands have replaced all their wives with robotic-like
"perfect" clones who speak in trivialities and live only to
please their husbands.) At the beginning of a board meeting, a
director might say: "How about those Indians?" or "I hope this
doesn't take more than half an hour." After that, the
domineering Mr. Pinkas takes over and he does virtually all the
talking. Not once have I heard any director other than me ask
him a pointed question. If any of them ever actually disagreed
with him, I think I would fall out of my chair. In a nutshell,
the current directors are "perfect" - perfect, that is, for
Robert Pinkas!
If you think I am exaggerating, let me describe how the board of
directors approved a very controversial secondary stock offering.
I received the material describing the offering the day before
the board meeting. When I read it, I was shocked to see that it
would dilute NAV by more than 20% while increasing management
fees by more than $1 million per year. The board meeting itself
was largely a sales pitch by the proposed underwriters, who stood
to collect $3 million for selling the new stock. I anticipated a
thorough discussion by the board about the conflicts of interest
faced by Mr. Pinkas and the underwriters. Yet, no other director
seemed interested in a substantive discussion. Finally, after an
hour or so, Mr. Pinkas cut the meeting short over my protest and
demanded a vote. Every director except me voted to approve the
offering. (Fortunately, shareholders themselves later voted it
down.)
After the meeting, I sent a follow-up memo to each director in
which I stated: "We must be skeptical about endorsing actions
that might enrich parties like the underwriters and the
investment advisor at the expense of our stockholders." I
recommended that (1) an in-person board meeting be held to
consider the secondary offering, (2) the independent directors
meet separately and retain their own legal counsel and (3) we
obtain a fairness opinion. At the next telephonic meeting, the
"Stepford directors" dutifully voted down each of my proposals.
It is clear that shareholders cannot rely on the "Stepford
directors" to protect them from Mr. Pinkas' self-dealing schemes.
That is why I am nominating - and I strongly urge shareholders to
elect -- Gerald Hellerman and Andrew Dakos, two men who do not
owe Mr. Pinkas any favors and will not be rubber stamps for him.
How to Maximize Shareholder Value ("Show Us The Money")
With its stock price languishing at 50% below its NAV, Mr.
Pinkas' original plan to grow Brantley has been a dismal failure
as far as shareholders are concerned. "Not to worry," he says.
This time, he has another plan that he is "confident will reduce
the discount between our stock price and net asset value." That
plan is to issue more shares of Brantley via a dilutive rights
offering, borrow double the proceeds from the rights offering at
high interest rates from the Small Business Administration, and
make risky loans to companies that can't borrow from banks.
Also, he wants to get paid 2.85% per year on the proceeds of the
rights offering and on the borrowed funds. As with all his
plans, Mr. Pinkas wants to be rewarded even if it fails to
benefit shareholders. The board of directors has already
approved this ill-conceived scheme over my objections. You can
be sure Mr. Pinkas will move to implement it quickly unless
Messrs. Hellerman and Dakos are elected.
I am convinced that the surest way to maximize shareholder value
is through an orderly liquidation of Brantley as soon as
practicable. I call this plan: "Show us the money." Here is how
it works. First, no new investments will be made and any excess
cash will be distributed to shareholders. Second, the existing
holdings will be gradually liquidated at the best possible
prices. Contrary to what Mr. Pinkas has said, an orderly
liquidation does not require a "fire sale" or "attempting to
realize premature liquidity events." In fact, the complete
liquidation of Brantley might take several years. Finally, the
investment advisory agreement should be terminated and a new
agreement negotiated at a substantially reduced fee to reflect
the new role of the advisor as a liquidator of assets.
For example, consider Brantley's largest holding, Flight Options.
The fair value of Flight Options is $32.5 million or $8.52 for
each share of Brantley. If and when Brantley's shares of Flight
Options are registered for trading, a distribution of those
shares could be made to Brantley shareholders who could then sell
them or hold them. Over time, all of Brantley's assets will be
distributed as either cash or stock so that shareholders will
ultimately be able to realize their full value.
A challenge to Mr. Pinkas
It is hardly surprising that Mr. Pinkas adamantly opposes an
orderly liquidation of Brantley Capital. Who would want to give
up a job that pays the kind of money he is getting, especially
with a Rolls Royce to maintain? (I drive a Toyota Camry.)
Sadly, Mr. Pinkas has resorted to smearing me with half-truths,
distortions and blatant lies. Space prevents me from responding
to each allegation here but you can call me at (914) 747-5262 or
e-mail me at OPLP@att.net if you want more details. However, I
want to set the record straight about his accusation that I
attempted to "greenmail" Brantley Capital. Here is what actually
happened. After I informed Mr. Pinkas that I would call for a
shareholder vote on an orderly liquidation of Brantley, he
threatened to "crush" me. When that didn't work, he made an
unsolicited offer to buy my shares for $13 per share. Now, he
has twisted the story and says that I attempted to "greenmail"
Brantley. That is a despicable lie and I have told him I intend
to sue him for slander.
I understand that it can be difficult for shareholders to sort
out the truth when opponents are hurling charges at each other.
Therefore, I would like to issue a challenge to Mr. Pinkas. At
the Annual Shareholder Meeting on September 17th, we can both
take a polygraph examination to determine whether or not Mr.
Pinkas made an unsolicited offer to buy my shares at $13 per
share. Whichever one of us is shown to be a liar will give up
his position with Brantley Capital.
What do you say, Mr. Pinkas?
Very truly yours,
Phillip Goldstein
PROXY STATEMENT IN OPPOSITION TO THE SOLICITATION BY THE BOARD OF
DIRECTORS OF BRANTLEY CAPITAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS (To be held on September 17, 2002)
My name is Phillip Goldstein. I am a director and a large
shareholder of Brantley Capital Corporation ("Brantley"). I am
sending this proxy statement and the enclosed GREEN proxy card to
holders of record on June 28, 2002 (the "Record Date") of
Brantley. I am soliciting a proxy to vote your shares at the
2002 Annual Meeting of Shareholders of Brantley (the "Meeting")
and at any and all adjournments or postponements of the Meeting.
Please refer to Brantley's proxy soliciting material for
additional information concerning the Meeting and a full
description of the matters to be considered by the shareholders
at the Meeting.
This proxy statement and the enclosed GREEN proxy card are
first being sent to shareholders of Brantley on or about August
26, 2002.
INTRODUCTION
There are two matters that Brantley has scheduled to be voted
upon at the Meeting:
1. The election of two directors to serve until 2007.
2. To ratify the selection of KPMG LLP as Brantley's
independent accountant.
In addition, I intend to submit two proposals for a vote by
shareholders:
3. To recommend that the board of directors take action to
commence an orderly liquidation of Brantley as soon as
practicable.
4. To terminate the existing investment advisory agreement and
to request that the board negotiate a new advisory
agreement at a reduced fee.
With respect to these matters, I am soliciting a proxy to vote
your shares FOR the election of Gerald Hellerman and Andrew Dakos
as directors of Brantley and FOR each of the other proposals.
How Proxies Will Be Voted
All of the proposals scheduled by Brantley to be voted on at the
Meeting are included on the enclosed GREEN proxy card. If you
wish to vote FOR the election of my nominees to the Board, you
may do so by completing and returning a GREEN proxy card.
If you return a GREEN proxy card to me or to my agent, your
shares will be voted on each matter as you indicate. If you do
not indicate how your shares are to be voted on a matter, they
will be voted FOR the election of the above persons to the Board
and For Proposals 2, 3, and 4.
If you return a GREEN proxy card, you will be granting the
persons named as proxies discretionary authority to vote on any
other matters of which they are not now aware that may come
before the Meeting. These may include, among other things,
matters relating to the conduct of the Meeting.
Voting Requirements
If a quorum is not present at the Meeting, or if a quorum is
present but sufficient votes to approve any of the proposals are
not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation
of proxies, consideration of matters of which I am not aware at
this time, or negotiations with the incumbent directors. If an
adjournment of the Meeting is proposed, the persons named as
proxies on the GREEN proxy card will vote for or against such
adjournment in their discretion. Please refer to Brantley's
proxy statement for the voting requirements for Proposals 1 and
2. Proposal 3 will be approved if a majority of the votes cast
favors the proposal. Proposal 4 will be approved if shareholders
representing either (i) 50% of the shares outstanding or (ii) 67%
of the shares present at the Meeting vote in favor of the
proposal.
Revocation of Proxies
You may revoke any proxy you give to management or to me prior to
its exercise by (i) delivering a written revocation of your proxy
to Brantley; (ii) executing and delivering a later dated proxy to
me or to Brantley or to our respective agents; or (iii) voting in
person at the Meeting. (Attendance at the Meeting will not in
and of itself revoke a proxy.) There is no limit on the number
of times you may revoke your proxy prior to the Meeting. Only
the latest dated, properly signed proxy card will be counted.
Information Concerning the Soliciting Shareholder
The shareholder making this solicitation is Phillip Goldstein, 60
Heritage Drive, Pleasantville, NY 10570. I am an investment
manager who presently manages investment portfolios having assets
of approximately $70 million. Since December 1, 1992, I have
been the president and 50% shareholder of a company that serves
as the general partner of a private investment partnership which
is a shareholder in Brantley. Since 1996, I have taken an active
role in urging the management of certain registered closed-end
investment companies to take various actions that I believe would
benefit those companies and their shareholders.
As of June 28, 2002, I am deemed to be the beneficial owner of
253,400 shares of Brantley common stock held in brokerage
accounts by my clients and me, representing approximately 6.65%
of Brantley's outstanding common stock, substantially all of
which are held in margin accounts at brokerage firms by my
clients and me. We purchased 57,300 shares between June 28, 2000
and December 31, 2000, 25,000 shares in 2001 and no shares in
2002. We have not sold any shares.
REASON FOR THE SOLICITATION
There are two primary reasons I am conducting this solicitation:
? The shares of Brantley have traded at a very large discount
from net asset value for a long time. Currently the
discount is in excess of 50%. I believe the surest way to
close the gap between net asset value and market price is to
commence an orderly liquidation of Brantley.
? I believe the primary goal of Robert Pinkas, Brantley's CEO,
is to siphon off as much money from Brantley for himself as
possible. Brantley needs more directors that will not let
him get away with that.
The directors of Brantley are supposed to be "watchdogs" for the
shareholders, i.e., a check on management. Yet, no other
director except I was willing to stand up to Mr. Pinkas after he
proposed a scheme to issue new shares that would have
significantly diluted shareholders and increased his management
fees. It seems the only trick these "watchdogs" know is to roll
over and play dead whenever Mr. Pinkas gives them the command.
Shareholders deserve better from their directors than that.
This solicitation is intended to afford shareholders an
opportunity to vote (1) for directors that will provide an
independent check on Mr. Pinkas' self-dealing tendencies, (2)
for a proposal to maximize shareholder value by recommending that
an orderly liquidation of Brantley be commenced as soon as
practicable, and (3) for a proposal to terminate the advisory
agreement and reduce the management fee.
CERTAIN CONSIDERATIONS
In deciding whether to give me your proxy, you should consider
the following:
If elected, my nominees will constitute a minority of the board
and will not be able to cause Brantley to take any action without
the support of other directors, which is not assured. Also,
implementation of certain Board actions may require shareholder
approval, and no assurance can be given that such approval will
be obtained. In addition, various costs, which would be borne
indirectly by shareholders, may be associated with certain
actions, including but not limited to those associated with
holding a special meeting of shareholders. I believe that such
costs are far outweighed by the benefits to most shareholders of
these actions. In addition, certain actions may have adverse tax
consequences for some shareholders that cannot be quantified at
this time.
I believe that all shareholders of Brantley will benefit if any
actions taken to reduce or eliminate the discount from NAV are
successful. However, my clients who hold shares of Brantley pay
me fees. These fees are based upon a share of the profits the
client earns and will be greater if the value of Brantley's
shares increases.
ELECTION OF DIRECTORS
At the Meeting, I will nominate the following persons for
election as directors for a term expiring in 2007. Each nominee
has consented to serve if elected and to being named in this
proxy statement.
Andrew Dakos (Age 36), 14 Mill Street, Lodi, NJ 07644
Private investor. President and CEO of UVitec Printing Ink, Inc.
since 1997. Mr. Dakos was a director of the Dresdner RCM
Strategic Global Income Fund from 2000 to 2002 and he has been a
director of The Mexico Equity and Income Fund since 2000.
Gerald Hellerman (Age 64), 10965 Eight Bells Lane, Columbia, MD
21044
Managing Director of Hellerman Associates, a financial and
corporate consulting firm; Trustee of Third Avenue Value Trust
since 1993; Trustee of the Third Avenue Variable Series Trust
since 1999; director of Clemente Strategic Value Fund from 1998
to 2000; director of The Mexico Equity and Income Fund since
2000.
As of June 28, 2002, Mr. Dakos beneficially owned 6,900 shares of
Brantley. Mr. Hellerman does not own any shares. Other than
fees that may be payable by Brantley to its directors, none of my
nominees has any arrangement or understanding with any person
with respect to any future employment by Brantley or by any
affiliate of Brantley.
The persons named as proxies on the enclosed GREEN proxy card
intend, in the absence of contrary instructions, to vote all
proxies they are entitled to vote FOR the election of the above
persons, each of whom have consented to stand for election and to
serve if elected. If any nominee is unable to serve, an event
not now anticipated, the proxies will be voted for such other
person (who shall be disinterested), if any, as is designated by
the persons named as proxies.
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANT
Unless instructed otherwise, the persons named as proxies will
vote FOR the selection of KPMG LLP as Brantley's independent
accountant for the year ending December 31, 2002.
PROPOSAL 3: TO RECOMMEND THAT THE BOARD OF DIRECTORS TAKE ACTION
TO COMMENCE AN ORDERLY LIQUIDATION OF BRANTLEY AS SOON AS
POSSIBLE
I believe the surest way to close the gap between net asset value
and market price is to commence an orderly liquidation of
Brantley. An orderly liquidation means that (1) no new
investments will be made and (2) when a liquidity event occurs,
e.g., a sale of a portfolio holding for cash or stock or an
initial public offering of a portfolio company, a distribution of
cash and/or securities in the portfolio company will be made to
Brantley shareholders. This process has no definite timetable
and, in contrast to what Mr. Pinkas has said, will not require a
"fire sale" of any securities. It will insure that all of the
net assets of Brantley will be distributed to shareholders over
time so that any discount to net asset value should be eventually
eliminated.
Please note that even if this proposal is approved, the board of
directors will not be legally bound to implement it.
PROPOSAL 4: TO TERMINATE THE EXISTING INVESTMENT ADVISORY
AGREEMENT AND TO REQUEST THAT THE BOARD NEGOTIATE A NEW ADVISORY
AGREEMENT AT A REDUCED FEE
The submission of this proposal for a vote will be contingent on
the approval of Proposal No. 3. The existing advisory agreement
provides for an annual fee of 2.85% of NAV. As stated above, I
believe the surest way to maximize shareholder value is to
commence an orderly liquidation of Brantley as soon as possible.
An orderly liquidation does not require the degree of active
management that the existing contract currently requires. If
this proposal is approved, the existing contract will be
terminated and a new contract can be negotiated at a
substantially reduced fee with an investment advisor that will
serve more as a "caretaker" for the orderly liquidation of
Brantley's existing investments than as an active manager.
THE SOLICITATION
I am making this solicitation personally. Banks, brokerage
houses and other custodians, nominees and fiduciaries will be
requested to forward this proxy statement and the enclosed GREEN
proxy card to the beneficial owners of shares of Common Stock for
whom they hold shares of record. I will reimburse these
organizations for their reasonable out-of-pocket expenses.
Initially, I will personally bear all of the expenses related to
this proxy solicitation. Because I believe that the shareholders
will benefit from this solicitation, I intend to seek
reimbursement of these expenses from Brantley. Shareholders will
not be asked to vote on the reimbursement of my solicitation
expenses, which I estimate to be about $ 10,000. As of August
26, 2002, I expect to have incurred approximately $5,000 in
expenses. If I am not reimbursed by Brantley, I may seek partial
reimbursement from one or more of my clients or from the general
partner of the investment partnership that I manage.
I am not and, within the past year, have not been a party to any
contract, arrangement or understanding with any person with
respect to any securities of Brantley although I do expect Mr.
Dakos to vote his shares in accordance with my recommendations.
In addition, there is no arrangement or understanding involving
either myself or any affiliate that relates to future employment
by Brantley or any future transaction with Brantley.
ADDITIONAL PROPOSALS
I know of no business that will be presented for consideration at
the Meeting other than that set forth in this proxy statement and
in Brantley's proxy statement. If any other matters are properly
presented for consideration at the Meeting, it is the intention
of the persons named as proxies in the enclosed GREEN proxy card
to vote in accordance with their own best judgment on such
matters.
DATED: August 26, 2002
PROXY SOLICITED IN OPPOSITION TO THE BOARD OF DIRECTORS OF THE
BRANTLEY CAPITAL CORPORATION BY PHILLIP GOLDSTEIN, A DIRECTOR AND
A SHAREHOLDER
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 17, 2002
The undersigned hereby appoints Andrew Dakos and Phillip
Goldstein, and each of them, as the undersigned's proxies, with
full power of substitution, to attend the Annual Meeting of
Shareholders of Brantley Capital Corporation ("Brantley") to be
held on September 17, 2002 and any adjournment or postponement
thereof, and to vote on all matters that may come before the
Meeting and any such adjournment or postponement the number of
shares that the undersigned would be entitled to vote, with all
the power the undersigned would possess if present in person, as
specified below. The proxies may vote in their discretion with
respect to such other matter or matters as may come before the
Meeting and with respect to all matters incident to the conduct
of the Meeting.
(INSTRUCTIONS: Mark votes by placing an "x" in the appropriate [
].)
1. ELECTION OF TWO DIRECTORS.
FOR Andrew Dakos and Gerald Hellerman [ ]
WITHHOLD AUTHORITY [ ]
(except as indicated to the contrary below)
to vote for both nominees
To withhold authority to vote for one or more nominees,
enter the name(s) of the nominee(s) below.
________________________________________________________
2. To ratify the selection of KPMG LLP as Brantley's
independent accountant.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To recommend that the board of directors take action to
commence an orderly liquidation of Brantley as soon as
practicable.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To terminate the existing investment advisory agreement and
to request that the board negotiate a new advisory
agreement at a reduced fee.
FOR [ ] AGAINST [ ] ABSTAIN[ ]
Important - - Please sign and date below. Your shares will be
voted as directed. If no direction is made, this proxy will be
voted for the election of the nominees named above and will be
voted FOR all other proposals. The undersigned hereby
acknowledges receipt of the proxy statement dated August 26, 2002
of Phillip Goldstein and revokes any proxy previously executed.
(Important - Please be sure to enter date.)
SIGNATURE(S)_____________________________________________
Dated: ___________