SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10/A
Amendment No. 1 to Form 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
Access Capital Strategies Community Investment Fund, Inc.:
-----------------------------------------------------------
Institutional Investor Portfolio
-----------------------------------------------------------
(Exact name of registrant as specified in charter)
-----------------------------------------------------------
Maryland 04-3294780
- ---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
124 Mt. Auburn Street
Suite 200N
Cambridge, Massachusetts 02138
- ------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 576-5858
Securities to be registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------(Title of Class)
Item 1. BUSINESS
(a) General Development of Business
General. Access Capital Strategies Community Investment Fund, Inc.:
Institutional Investor Portfolio (the "Fund") is a newly organized, non-
diversified closed-end management investment company electing status as a
business development company -------- ("BDC") under the Investment Company
Act of 1940 ("1940 Act"). The Fund's investment objective is to invest in
geographically specific private placement debt securities and to earn a
total return over the life of the Fund greater than that of the Access
Benchmark ("Benchmark"), a blend of selected fixed-income indices designed
by Mellon Bond Associates ("Mellon Bond"). The Fund will invest primarily
in private placement debt securities specifically designed to support
underlying economic activities such as affordable housing, education,
small business lending, and job creating activities in areas of the United
States designated by Fund investors. There can be no assurance that the
Fund will achieve its investment objective. The Fund was incorporated in
Maryland on August 30, 1995. Its principal office is located at 124 Mt.
Auburn Street, Suite 200N, Cambridge, MA 02138, and its telephone number
is (617) 576-5858.
The Fund's Manager, Access Capital Strategies Corp. ("Access"), is an
investment adviser registered under the Investment Advisers Act of 1940
("Investment Advisers Act"). References to "Management" or the "Manager" in
this document refer to Access unless otherwise indicated. Access is a wholly-
owned subsidiary of Mellon Bank, N.A. ("Mellon Bank) which is a wholly-owned
subsidiary of Mellon Bank Corporation. The Fund's sub-investment adviser,
solely for purposes of managing the assets during t he Interim Investment
Phase, is Mellon Bank. Mellon Bank will serve pursuant to an agreement with,
and be compensated by Access. The Fund's Custodian is Boston Safe Deposit &
Trust Co. ("Boston Safe") which is an indirect, wholly-owned subsidiary o f
Mellon Bank Corporation.
The Fund commenced operations on November 27, 1995 and has registered its
shares of common stock ("Shares") pursuant to Section 12(g) of the Securities
Exchange Act of 1934 ("1934 Act"), in compliance with the requirement of
Section 54(a)(2) of the 1 940 Act. The Fund is offering its Shares in an
offering pursuant to Regulation D of the 1933 Act ("Regulation D") and is
selling its Shares in that offering solely to "accredited investors," as that
term is defined under Regulation D.
Use of Proceeds. The net proceeds to the Fund from the sale of the Shares
- ---------------
offered hereby, after deducting the organizational and offering expenses to be
paid or reimbursed by the Fund, are estimated at $799,875,000 if the maximum
number of Shares offered hereby are sold. The Fund intends to apply the net
proceeds of this offering to enter into private placement transactions with
eligible portfolio investments in furtherance of its investment objective and
policies. Pending such investment, such proceeds will be invested as
described below. Shares will be sold to subscribers pursuant to one or more
closings to be made from time to time through December 31, 1998. Management
does not intend to proceed to a closing until it is certain that sufficient co-
investors can be found to warrant entrance into a particular Designated Target
Region. It is currently anticipated that all funds subscribed for will be
called, and that a majority of the proceeds of this offering will be invested
in privately-placed debt securities within the earlier of (i) two years after
the termination of this offering or (ii) two and a half years after the Fund
has first accepted subscriptions from investors in the offering, although the
Fund will be permit ted to enter into closings at any time until December 31,
1998.
(b) Financial Information About Industry Segments
Not applicable; the Fund has only recently commenced operations and has
no revenues to report.
(c) Narrative Description of Business
Investment Program.
-------------------
The Fund is designed for investors willing to commit funds for a minimum
of twelve years. Typical investors in the Fund are tax-exempt investors such
as pension funds and endowments.
General
Investment and Economic Objectives. The Fund's investment objective is to
----------------------------------
invest in geographically specific private placement debt securities and to
earn a total return over the life of the Fund greater than that of the
Benchmark. There can be no assurance that the Fund will achieve its investment
objective. The Fund's economic objective is to act as a source of long-term
fixed-rate capital for people, institutions, and communities that do not have
full and efficient access to the traditional banking and/or capital markets.
Business Development Companies. As a BDC, the Fund must invest a
-------------------------------
majority of its total assets in securities of "eligible portfolio companies."
An eligible portfolio company generally is a domestic company which is not an
investment company and: (1) does not have a class of securities registered on
an exchange or included in the Federal Reserve Board's over-the-counter margin
list; or (2) is actively controlled by a BDC and has an affiliate of a BDC on
its board of directors; or (3) meets such other criteria as may be established
by the SEC.
Management has identified the BDC structure as an effective and
efficient mechanism to realize the Fund's objectives. References in this
document to "eligible portfolio investments" refer to "eligible portfolio
companies" as that term is defined in the 1940 Act.
As required by the 1940 Act, the Fund intends to make available
significant managerial assistance to eligible portfolio investments whose
securities it purchases and holds in its portfolio during Phase 2. This
assistance may take the form of helping to design community investment
programs and the debt securities issued to fund them, developing credit
enhancements, and assisting program designers in maximizing the community
economic benefits of these programs. Management believes that, by serving as
an ongoing private sector presence, the Fund can assist in achieving the
investment and community economic goals of these community investments.
The 1940 Act permits the Fund to invest up to 30% of its total assets in
investments that are not eligible portfolio investments (including publicly
traded securities) and/or investments as to which the Fund does not offer to
make available significant managerial assistance. The Fund does not currently
intend to make any such investments except that in certain situations the Fund
may invest in special purpose private placement debt securities issued by
entities that have issued classes of publicly traded securities.
Diversification Standards. The Fund will be classified as a "non-
-------------------------
diversified" closed-end investment company under the 1940 Act. The Manager
will seek to increase the diversification of the Fund's portfolio so as to make
it possible to meet the registered investment company ("RIC") diversification
requirements, as described below. There can be no assurance, however, that the
Fund will be able to meet those requirements.
To qualify as a RIC, the Fund must, among other things, satisfy a
diversification standard under the Code such that, at the close of each quarter
of the Fund's taxable year, (i) not more than 25% of the value of its total
assets is invested in the securities (other than government securities or
securities of other RICs) of a single issuer, or two or more issuers which the
Fund controls (under a 20% test) and which are engaged in the same or similar
trades or business or related trades or businesses, and (ii) at least 50% of
the market value of its total assets is represented by cash, cash items,
government securities, securities of other RICs and other securities (with each
investment in such other securities limited so that not more than 5 % of the
value of the Fund's total assets is invested in the securities of a single
issuer and the Fund does not own more than 10% of the outstanding voting
securities of a single issuer).
Leverage. The Fund may borrow money from and issue debt securities to
--------
banks, insurance companies, and other lenders to obtain additional funds to
invest in private placement debt securities. Under the 1940 Act, the Fund may
not incur borrowings unless, immediately after the borrowing is incurred, such
borrowings would have "asset coverage" of at least 200%. "Asset coverage"
means the ratio which the value of the Fund's total assets, less all
liabilities not represented by the borrowings and any other liabilities
constituting "senior securities" under the 1940 Act, bears to the aggregate
amount of such borrowings and senior securities. The practical effect of this
limitation is to limit the Fund's borrowings and other senior securities to 50%
of its total assets less its liabilities other than the borrowings and other
senior securities. The 1940 Act also requires that, if the Fund borrows money,
provision be made to prohibit the declaration of any dividend or other
distribution on the Shares (other than a dividend payable in Shares), or the
repurchase by the Fund of Shares, if after payment of such dividend or
repurchase of Shares the asset coverage of such borrowings would be below 200%.
If, because of these asset coverage requirements, the Fund is unable to pay
dividends or distributions in the amounts required under the Internal Revenue
Code of 1986 (the "Code"), it might not be able to qualify as a RIC or, if
qualified, to continue to qualify.
The use of leverage increases investment risk. Lenders are expected to
require that the Fund pledge portfolio assets as collateral for loans. If the
Fund is unable to service the borrowings, the Fund may risk the loss of such
pledged assets. Lenders are also expected to require that the Fund agree to
loan covenants limiting the Fund's ability to incur additional debt or
otherwise limiting the Fund's flexibility, and loan agreements may provide for
acceleration of the maturity of the indebtedness if certain financial tests
are not met.
If the Fund does issue debt securities, the Manager will require the
purchaser(s) of debt securities to agree that at a minimum 25% of the net
proceeds of any debt raised will be placed, on a pro rata basis, in Round One
investors' Designated Target Regions as defined in "Investment Guidelines:
Purchasing Phase 2 Securities Geographic Targeting." Purchaser(s) of debt
securities may select a Designated Target Region for the balance of the debt
proceeds.
The Access Benchmark
Mellon Bond designed the Benchmark in 1995 as the best available proxy
for the type of portfolio of private placement debt securities that the Fund
expects to assemble.
The Benchmark is a blend of selected fixed-income indices constructed
to establish a recognized baseline for the Fund's investment activities. The
Benchmark consists of the following:
Components of the Benchmark
Merrill Lynch Index % of Benchmark
------------------- --------------
Federal Home Loan Mortgage Corp. PC All Maturities 50%
Federal Agency All Maturities Master 30%
Investment Grade Corporate Master 20%
Management recognizes and acknowledges the inherent difficulty of using
a blended benchmark drawn from publicly available indices to approximate the
characteristics of a portfolio of private placement debt securities. However,
Management believes that the Benchmark will be beneficial to Fund investors in
that it:
provides a specific risk and return baseline for the Fund's
investment activities; and
provides investors a defined performance yardstick against which
to measure the ability over time of Management to realize the
Fund's investment objective.
Fund Investments, Phase 1: Interim Investments
Upon commitment to the Fund, each investor will choose a Designated
Target Region as its preferred geographic focus for the investment of its
funds. Pending the purchase of securities in Designated Target Regions, an
investor's funds will be managed by the sub-adviser, Mellon Bank, with the
investment objective of replicating the approximate yields and overall
investment risk characteristics of the Benchmark.
Mellon Bank will invest in government, agency, and corporate issues in
order to achieve the objective of equaling the components of the Benchmark.
Mellon Bank will not be asked to outperform the Benchmark or make any
investment judgments about interest rate changes. Mellon Bank will not
purchase any derivative or illiquid securities.
Mellon Bank may purchase short-term cash equivalents to meet liquidity
needs. Access will advise Mellon Bank of the timing of closings for Designated
Target Region(s) investments so that the Fund will have cash or cash
equivalents available as needed to be invested in the Designated Target
Regions.
Fund Investments, Phase 2: Purchasing Securities
Upon receipt of a commitment to invest in the Fund, choice of a
Designated Target Region(s), and investment of funds during Phase 1, the
Manager will begin the search and design process for the private placement debt
securities to be created in the Designated Target Region(s). First, the
Manager will subject potential investments to the due diligence traditionally
employed in evaluating private placement debt securities. Such securities will
be purchased by the Fund only after the due diligence process has been
satisfied. Second, the Manager will analyze potential investments to ensure
that they represent a commitment of capital to underfunded community economic
needs not currently being met by traditional banking and/or capital markets.
Further, the Manager must have a reasonable level of confidence that the
expected rate of return from the proposed investment will contribute to the
Fund's investment objective of earning a total return over the life of the Fund
greater than that of the Benchmark.
Investment opportunities will be brought to the Manager through a
variety of channels. Prospective issuers of securities, including Federal,
state, and other public sector agencies, may contact the Fund with potential
investment programs. Investment bankers or financial advisors may also work
to develop debt securities for the Fund. Alternatively, the Manager may
approach prospective issuers or investment banks with suggestions for debt
securities that could be purchased by the Fund. The Fund will offer to
provide significant managerial assistance in the design, implementation, and
monitoring phases of all of the community investment programs whose debt
securities it purchases.
The second avenue for the creation of Fund investments is through
identifying existing inventories of community investments that do not have
access to capital markets investors. These inventories may be loans issued by
banks and non-bank lenders or other originators such as revolving loan funds,
community development corporations ("CDCs"), community development financial
institutions ("CDFIs"), and state or local economic development authorities.
Community-based loan originators, traditional a nd non-traditional, are often
constrained as to the amount of capital that may be allocated to the extension
of new loans. These originators may be capable of using their skills and
existing presence in the community to originate new loans but cannot do so due
to scarcity of new loan capital. If the Fund can liquify these inventories and
turn the existing, seasoned loans into Fund investments, these originators
could then relend in the community with the proceeds they receive from the sale
of their loan portfolios. Increasing the velocity of capital emanating from
community-based loan originators will help the Fund realize its financial and
economic goals. The Manager will seek assurances from the sellers that they
will use the proceeds from existing loans sold to the Fund to make new loan
capital available to the community.
Finally, the Fund may, at the Manager's discretion, invest in certain
securities such as shared equity mortgages for affordable housing finance or
participation certificates in securitized small business loans. These
securities will be limited to 25 % of the Fund's total assets and will
generally only be purchased in connection with the private placement debt
securities also being purchased by the Fund.
Many transactions are expected to involve the use of a third-party
investment banking firm for structuring, pricing, and related activities. The
Manager will be closely involved in all aspects of designing instruments for
purchase by the Fund; however, the Manager will not receive any investment
banking fees or similar compensation for structuring transactions for the Fund.
Investment Guidelines: Purchasing Phase 2 Securities
The Fund will operate under the following investment guidelines for the
purchase of Phase 2 securities:
Geographic Targeting. Each investor will choose a Designated Target
--------------------
Region as the preferred geographic focus for investment of its assets. A
Designated Target Region may be a state, multi-state region, a metropolitan
area, or the entire United States. An investor may also allocate an
investment commitment among different existing or potential Designated Target
Regions by specifying the percentage of the total commitment to be invested in
each selected Designated Target Region. Management intends to limit the number
of Designated Target Regions to eight. Access will not accept an investor's
preference for a particular Designated Target Region unless it is reasonably
certain that an adequate supply of potential investments can be developed for
the contemplated Designated Target Region. Management intends to seek minimum
commitments totaling $50 million for each Designated Target Region. However,
each investor will be a Shareholder of the Fund, not just of the investments in
its Designated Target Region. The financial returns on an investor's
investment will be determined by its proportionate share of the total assets in
the Fund's blended, geographically diverse portfolio, not just by the
performance of the assets in the Designated Target Region selected by the
investor.
Community Investments. Fund investments will support community
----------------------
economic activities that do not have full or efficient access to the
conventional banking and/or capital markets. Specifically, the Fund intends
to invest in affordable housing, education, small business lending, and other
types of job-creating securities. The Fund generally will not invest in
securities that are routinely created by the capital markets through
repackaging of existing securities. Although Access will make the day-to-day
decisions regarding whether to purchase particular debt securities for the
Fund, the economic focus of the Fund will be reviewed regularly by the Board of
Directors (the "Board"), a majority of whom will be disinterested, for
compliance with the Fund's investment objective.
When making general reference to potential Fund investments as a class,
this document uses the term "community investments," which refers to securities
that are designed to provide for a market rate of return while bridging capital
gaps in the traditional banking and/or capital markets and profiting from
certain inefficiencies in the traditional banking and/or capital markets.
The term "economically targeted investing" ("ETI") is frequently used
to cover a broad spectrum of investments that may encompass community
investing. Such investments are subject to a variety of risks and potential
for investment returns. In a Jun e 1994 Interpretive Bulletin, the United
States Department of Labor defined an ETI as:
an investment that is selected for the economic benefit it creates
in addition to the investment return to the employee benefit plan
investor.
In restating long-standing Department policy, the Interpretive Bulletin
went on to emphasize that:
nothing in ERISA precludes trustees and investment managers from
considering ETIs in constructing plan portfolios. While some of
these asset categories may require special expertise to evaluate,
they may be attractive to sophisticated, long-term investors,
including many pension plans.
In a 1995 report titled PUBLIC PENSION PLANS: Evaluation of
-------------------------------------
Economically Targeted Investment Programs, the United States General Accounting
- -----------------------------------------
Office ("GAO"), analyzed whether previous ETI business development programs
realized competitive returns. For business development areas in which the
Fund may invest, the GAO found ". . . on the average, expected yields on the
ETI bond purchases were somewhat higher than those on comparably rated bonds
with like maturity and sector characteristics. Similarly, expected yields on
federally guaranteed fixed-rate loans generally approximated those on Treasury
securities of comparable maturity." The report continued, "For the most part,
private placements had expected yields somewhat above those of similarly rated
bonds of like sector and maturity."
The GAO further reported that, "[o]ur case study results suggest
cautious optimism concerning the ability of public pension plans to earn
reasonable financial returns through their ETI programs. They demonstrate that
some pension plans have made investments characterized by reasonable expected
yields through their ETI program to promote business development."
There is no assurance that the expected yields and performance reported
by the GAO will have predictive value for any future investment yields or
returns of ETIs generally or for any investments made by the Fund.
Management believes that the current legal, regulatory, and capital-
markets environments all contribute to the ingredients desirable for
successful implementation of the Fund's investment program. However, there
can be no assurance that the relevant federal or local regulatory climates
will remain conducive to the Fund's objectives over the life of the Fund.
Industry Concentration. Under the prevailing definition of the phrase
----------------------
"industry concentration," the Fund will be concentrated in the affordable
housing industry. This means that the Fund will not invest less than 25% of
its total assets in the affordable housing industry. The Fund currently
intends to invest up to 50% of its total assets in securities issued by
providers of affordable housing. As with all Fund investments, affordable
housing investments made by the Fund must meet the Fund's return and credit
quality criteria and must also support economic activity that would not
otherwise be adequately funded through traditional banking and/or capital
markets. At present and for the foreseeable future, Management believes there
are adequate opportunities for Fund investment in the affordable housing
securities industry.
Investors place billions of dollars each year in mortgage-backed
securities in support of market rate single family mortgages. Government
sponsored enterprises ("GSEs") such as Fannie Mae and Freddie Mac offer credit
guarantees for conventional mortgages that create high quality investment
instruments in support of a portion of the housing finance area. Although the
single family conforming mortgage activities of the GSEs have efficient access
to the capital markets, Management believes that additional opportunities
exist to work with the GSEs to create innovative affordable housing programs
that are complementary to and expand upon programs already in place.
Similarly, state housing finance authorities ("HFAs") issue tax-exempt
debt to finance their work in affordable housing. Management believes that HFAs
in Designated Target Regions will be interested in working with the Fund to
develop new programs that could be financed through issuance of taxable HFA
debt to be purchased by the Fund.
There can be no assurance of the continued availability of support from
GSEs, HFAs, or other credit enhancers for Fund activities. Regulatory or
statutory changes may affect the willingness or ability of housing related
entities to work in the affordable housing private placement area. Changes in
credit ratings of GSEs, HFAs, or private credit enhancers may constrain their
value to the Fund as potential sources of credit enhancement.
Credit Quality. Many debt securities purchased by the Fund will have
--------------
one or more forms of credit enhancement. Specifically, the Manager anticipates
that at least 75% of the Fund's total assets will (i) carry a rating within
the four highest rating s categories assigned by a nationally recognized
statistical rating organization ("NRSRO") (e.g., at least "Baa" from Moody's
Investors Service ("Moody's") or "BBB" from Standard & Poor's Corporation
("S&P")); or (ii) be deemed by the Manager under guidelines established by the
Board to be of comparable quality to securities so rated. In addition, the
Manager anticipates that up to 25% of the Fund's total assets may be invested
in securities that are not rated by an NRSRO or deemed by the Manager to be of
comparable quality to securities that carry a rating within the four highest
ratings categories assigned by an NRSRO. Such securities will be limited to
the types of shared equity mortgage or participation certificates identified in
"Fund Investments Phase 2: Purchasing Securities." The Manager has the
flexibility to invest up to approximately 25% of the Fund's total assets in
these securities. Rating agency standards are evolving for many of the special
asset-backed issues the Fund intends to purchase, and until rating standards
are issued by the rating agencies, the Manager may not be able to determine
with certainty the ratings equivalent of a given issue.
The credit quality percentages described above are guidelines
applicable to securities at the time of purchase. Subsequent changes in credit
quality, including upgrades or downgrades due to changes in status of credit
enhancers or changes due to an issue's performance, will not require automatic
action by the Manager.
The Board will review on a regular basis the credit quality
determinations of the Manager as well as any changes to the credit quality of
portfolio securities already owned. The Manager may not make any adjustments
to credit quality guidelines without consent of the Board.
Maturity. Maturities for securities held by the Fund will vary by type
--------
of investment. Mortgage-backed securities will typically have maturities up to
thirty years while securitized small business loan transactions may have
maturities of up to ten years. See "Fund Termination Date" regarding
securities held by the Fund at the time of dissolution.
Significant Managerial Assistance. The Fund will offer to provide
-----------------------------------
significant managerial assistance to the issuers of private placement debt
securities it purchases. It is expected that such issuers will benefit from
the Fund's guidance, advice, and assistance before, during, and after the
creation of investment programs. Management expects that the Fund's ongoing
involvement will help assure that the investment and programmatic goals of each
transaction entered into by the Fund are realized .
Private Placement Securities. Phase 2 investments will be primarily
----------------------------
private placement debt securities. The Fund will often be the sole buyer of
such securities designed for purchase by the Fund. An investor purchasing
Shares of the Fund must recognize that the securities purchased by the Fund
will be, by definition, illiquid investments for which there is currently no
secondary market. Access will seek to obtain a premium for the illiquidity
inherent in holding these securities; however, there can be no assurances as
to the exact amount of premium that will be received.
Mortgage-Related Securities Issued By Nongovernmental Entities. The
---------------------------------------------------------------
Fund may invest in mortgage-related securities issued by nongovernmental
entities. Commercial banks, not-for-profit financial intermediaries, savings
and loan institutions, private mortgage insurance companies, mortgage bankers,
and other secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may also be the
originators of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities. Pools created by such nongovernmental issuers
generally offer a higher rate of interest than government and government-
related pools because there are no direct or indirect government guarantees of
payments in the former pools. However, timely payment of interest and
principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool, and hazard insurance.
These forms of insurance and guarantees are issued by government entities,
private insurers, and the mortgage pooling entities. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered
in determining whether a mortgage-related security meets the Fund's
investment quality standards. Notwithstanding the purchase of the insurance
and guarantees, there can be no assurance that the private insurers will in
every instance meet their obligations under the policies. Moreover, the Fund
may buy mortgage-related securities without insurance or guarantees if,
through an examination of the loan experience and practices of the pooling
entities, Management determines that the securities meet the Fund's credit
quality standards.
Other Investment Policies. The Fund will not invest in venture
-------------------------
capital, commercial real estate, or other asset classes not discussed herein.
The Fund will not sell securities short, purchase securities on margin (except
to the extent the Fund's permitted borrowings are deemed to constitute margin
purchases), write puts or calls, purchase or sell commodities or commodity
contracts, or purchase or sell real estate. The Fund will not underwrite the
securities of other companies, except to the extent the Fund may be deemed an
underwriter upon the disposition of restricted securities acquired in the
ordinary course of the Fund's business.
Investment Guidelines: Sale of Phase 2 Securities
Because the Fund will often be the sole buyer of private placement debt
securities designed for purchase by the Fund, the Fund's portfolio securities
will not be actively traded in a secondary market. However, under certain
conditions, the Manager may determine that attractive opportunities exist to
sell an investment. As the community investment industry develops,
opportunities may emerge for the Fund to sell its portfolio securities and
reinvest in other debt securities that will continue to satisfy the Fund's
investment guidelines. The Fund may sell portfolio investments in the
following circumstances:
Seasoned Private Placements. The seasoning of Fund investments and the
---------------------------
concomitant development of a performance track record for issuers that were
initially innovative and unfamiliar to market participants may create
opportunities to sell Fund investments through traditional banking and capital
market channels.
Reduced Premium for Illiquidity. Management expects the market for
-------------------------------
securitized small business loans to grow during the life of the Fund.
Securities held by the Fund may be attractive investments for new entrants
into the market who may be willing to buy such securities from the Fund at
prices that are favorable to the Fund.
New Types of Credit Enhancement. New types of credit enhancement for
-------------------------------
Fund assets may emerge and, when coupled with a reasonable seasoning period,
may create a securities repackaging process capable of raising the credit
rating of a particular security. For example, a new credit enhancer might be
willing to help repackage an existing debt security with an A rating from an
NRSRO into an AA or AAA rated security and the new debt security so created
might then be sold to other investors.
The Fund's investment objective, investment policies, and investment
guidelines (other than its status as a BDC) are not fundamental policies and
may be changed by the Fund's Board at any time without Shareholder approval.
Risk Factors.
------------
General
Investment in the Fund involves substantial risks and is suitable only
for those persons who meet the investor suitability standards set forth herein
on a continuing basis, have a substantial net worth, have no need for liquidity
from such investment , and are able to bear the loss of the entire investment.
Each prospective investor should consider carefully the risk factors attendant
to the purchase of Shares, including without limitation those discussed below,
and each should review the investment with its own legal, tax, and financial
advisors. In addition, each prospective investor should understand that the
Subscription Agreement materially restricts investors from selling or otherwise
disposing of their Shares.
No Operating History; Reliance on Management. The Fund is newly
--------------------------------------------
organized and does not have an investment track record. The Fund could require
substantial time to become fully invested. The Fund will be wholly dependent
for the selection, structuring, closing, and monitoring of its investments on
the diligence and skill of its Manager, acting under the supervision of the
Board. David F. Sand, the Chief Executive Officer of Access, will have primary
responsibility for the selection of investments, the negotiation of the terms
of such investments, and the monitoring of such investments after they are
made. Mr. Sand's employment agreement provides incentives for him to remain
with Access. However, there can be no assurance that Mr. Sand will remain
associated with Access or that, in the event he ceased to be associated with
Access, Access would be able to find a qualified person or persons to fill the
position.
Limited Transferability of Shares. The Fund has been organized to make
---------------------------------
investments in illiquid debt securities and investors are required to make a
minimum commitment of twelve years when buying Shares of the Fund. The Shares
will not be registered under the federal or state securities laws and are
subject to substantial restrictions on transfer. There will be no trading
market for the Shares, and Shareholders might be required to hold their Shares
until the final liquidation of the assets of the Fund. An investment in the
Fund is therefore illiquid and should be considered appropriate only for
investors which are financially able to maintain their investment for the long
term.
Long-Term Investment. The Fund's Articles of Incorporation provide
--------------------
that, on December 31, 2010, the Fund will be dissolved automatically without
any action by Shareholders. From and after such dissolution, the Fund's
activities will be limited to the winding-up of its affairs, the liquidation
of its remaining assets, and the distribution of the net proceeds thereof to
Shareholders. However, the actual liquidation might not be completed for a
significant period after the Fund's dissolution. In addition, it is possible
that, if certain of the Fund's assets are not liquidated within a reasonable
time after the Fund's dissolution, the Fund may elect to make a distribution in
kind of all or part of such assets to Shareholders. In such case, Shareholders
would bear any expenses attendant to the ultimate liquidation of such assets.
Competition. There is no assurance that there will be a sufficient
-----------
number of attractive potential investments available to the Fund. While
Management believes that the Fund offers a unique investment vehicle at this
time, in some instances, particularly with housing-related investments, it is
possible that there will be competition from other investors seeking to invest
in the same types of privately placed debt securities in the same Designated
Target Regions. Such other investors may have greater resources than the
Fund. Furthermore, the Fund's need to comply with provisions of the 1940 Act
pertaining to BDCs and provisions of the Code pertaining to RICs might restrict
the Fund's flexibility as compared to that of its competitors. The need to
compete for investment opportunities may make it necessary for the Fund to
offer more attractive transaction terms than otherwise might be the case.
Leverage. As discussed elsewhere in this document, Management may
--------
decide to borrow. Although leverage can enhance return on invested capital, if
the return on the investments purchased with borrowed funds fails to cover the
fixed cost of the borrowings, or if the return is negative, the value of the
Fund's net assets will decline more rapidly than would be the case in the
absence of leverage. For this reason, leverage is considered a speculative
investment technique. The Fund expects to be asked to pledge portfolio assets
as collateral for its borrowings. If the Fund is unable to service its
borrowings, the Fund may risk the loss of the pledged assets. In addition, if
the interest rates on floating or variable rate borrowings increase at a time
that the Fund holds fixed-rate securities or that the Fund holds variable rate
securities whose interest rates do not increase as much as the rate on the
Fund's borrowings, the Fund's income and yield will be adversely affected.
In addition, lenders may require that the Fund agree to loan covenants
that could restrict its flexibility in the future. The Fund may be required to
dispose of or seek prepayment of assets at a time it would otherwise not do so
to repay indebtedness in a timely fashion. Under the 1940 Act, if the Fund
borrows money, provision must be made to prohibit the declaration of any
dividend or other distribution on the Shares (other than a dividend payable in
Shares), or the repurchase by the Fund of Shares, if after payment of such
dividend or repurchase of Shares the value of the Fund's total assets, less all
liabilities not represented by the borrowings and any other liabilities
constituting "senior securities" under the 1940 Act, is less than 200% of the
aggregate amount of such borrowings and senior securities. If the Fund is
unable to pay dividends or distributions in the amounts required under the
Code, it might not be able to qualify as a RIC or, if qualified, to continue to
qualify.
Regulation. The Fund has elected to be treated as a BDC under the 1940
----------
Act. Although BDCs are exempt from registration under the 1940 Act and
relieved from compliance with many provisions of the 1940 Act, they are subject
to greater restrictions o n permitted types of investments than closed-end
investment companies generally. Moreover, the applicable provisions of the
1940 Act continue to impose numerous restrictions on the activities of the
Fund, including restrictions on leverage and on the nature of its investments.
There can be no assurance that the BDC provisions of the 1940 Act will be
interpreted or administratively implemented in a manner consistent with the
Fund's objectives or manner of operation.
Legislative and Regulatory Risks
Legislative and Administrative Changes. As discussed throughout this
document, many aspects of the Fund's investment objectives are directly
affected by the national and local legal and regulatory environments. Changes
in laws, regulations or the interpretation of regulations could all pose risks
to the successful realization of the Fund's investment objectives.
In 1995, a bill was introduced in Congress that would have reversed
recent efforts by the United States Department of Labor ("DOL") to clarify its
policy regarding "economically targeted investments." In particular, the
proposed legislation sought to reverse DOL's Interpretive Bulletin 94-1
(issued June 23, 1994) which affirms long-standing policy regarding ERISA
pension funds and their ability to choose investment opportunities of equal
merit by taking non-financial concerns into consideration . Enactment of this
or similar legislation would not directly affect the Fund or Fund operations;
however, it might have a chilling effect on the willingness of various
government and other agencies to cooperate in the process of creating and
supporting community investments. Certain pension funds subject to ERISA who
are potential investors in the Fund might be less likely to invest, while other
investors, who now practice community investing on their own, might be more
likely to turn to outside experts for the creation of community investments.
Enactment of the legislative measures discussed above or other
regulatory changes could adversely impact community investing, the Manager's
ability to invest in fixed income private placements in support of affordable
housing, small business lending and job creating projects, and the realization
of the Fund's investment objectives.
Non-Diversified Status. The Fund will be classified as a "non-
----------------------
diversified" investment company under the 1940 Act. The Fund intends to
qualify as a RIC under the Code and will therefore seek to meet the
diversification standards thereunder. Nevertheless, the Fund's assets may be
subject to a greater risk of loss than if it were more widely diversified.
Tax Status. The Fund must meet a number of requirements, described
----------
under "Federal Income Taxation," to qualify as a RIC and, if qualified, to
continue to qualify. If the Fund experiences difficulty in meeting the
diversification requirement for any fiscal quarter, it might accelerate
capital calls or borrowings in order to increase the portion of the Fund's
total assets represented by cash, cash items, and U.S. government securities as
of the close of the following fiscal quarter and thus at tempt to meet the
diversification requirement. However, the Fund would incur additional interest
and other expenses in connection with any such accelerated borrowings, and
increased investments by the Fund in cash, cash items, and U.S. government
securities (whether the funds to make such investments are derived from called
equity capital or from accelerated borrowings) are likely to reduce the Fund's
return to investors. Furthermore, there can be no assurance that the Fund
would be able to meet the diversification requirements through such actions.
Failure to qualify as a RIC would subject the Fund's distributed and
undistributed income to federal income taxation, and in a year in which the
Fund has taxable income or net realized gain, would have a significant adverse
effect on the return to investors.
Investment Risks
Community Investing. The Fund will focus on Community Investments as
-------------------
described in other sections of this document. This investment specialization
involves risks that include, but are not limited, to those outlined below.
* Economic Conditions. The community investment focus of the Fund
will likely result in the purchase of investments in economically distressed
areas within an investor's Designated Target Region(s). These areas may be in
the process of economic deterioration, stabilization, and/or revitalization.
The value of and return on Fund investments in economically distressed and/or
redeveloping areas could be adversely affected by the fragile nature of the
local economy or unfavorable changes in local, regional, or national economic
conditions.
* Nature of Issuers of Fund Investments. The economic objective of
the Fund will result in investments that represent an extension of
credit to individuals, organizations, and communities that do not
have full and efficient access to conventional banking and/or
capital markets. Such investments could be in the form of private
placement debt securities in support of affordable housing,
education, small business lending, and other job-creating
activities. While many of the Fund's investments will have various
forms of credit enhancement, the initial sources of repayment may be
individuals or organizations that are, in some way, economically
disadvantaged. The disadvantaged economic status or related
circumstances, such as a lack of accumulated savings to employ in
the case of temporary financial hardship, of these primary issuers
of the debt securities could adversely affect their ability to meet
their financial obligations. In the event that a primary issuer of
a Fund investment without credit enhancement were unable to meet its
financial obligations on the investment in a timely manner,
investment returns could be adversely affected and investment losses
could occur.
In the event that a primary issuer is unable to fulfill its
financial obligation on a Fund investment that has credit
enhancement, funds received from the credit enhancer to meet the
financial obligation may result in principal prepayment. Such an e
vent may require the Manager to arrange for another investment as a
replacement in the Fund portfolio. There can be no assurance that
the Manager would be able to arrange an alternative investment with
comparable returns and/or terms to the prepaid investment, or that
the process of arranging such alternative investment would not add
to the costs of managing the Fund.
* Coordinating the Development of Investments. Many of the fixed-
income private placement debt securities purchased as Fund
investments will be uniquely structured to achieve the financial and
economic objectives of the Fund. The Manager will often play a
significant role in the structuring of Fund investments. The
development of such securities will often require the Manager to
cooperate with a variety of organizations, including but not limited
to foundations, state agencies, community groups, national credit
enhancers, and other government entities. A lack of interest of
other entities in developing investments could adversely affect the
realization of the economic and financial objectives of the Fund.
The success of developing credit enhancement for Fund investments
will depend, in large part, on the availability of funds these
organizations have for such activity and/or the amount of payment
they expect to receive for their credit guarantees. A limited or
dwindling supply of funds available for credit enhancement on Fund
investments may adversely affect full realization of the Fund's
objectives.
* Local Community Development Programs. As described above, Fund
investments may be located in economically distressed and/or
redeveloping areas. The successful economic revitalization of a
local community is often dependent upon many fact ors such as the
involvement of various programs and services funded and organized by
community development organizations, government entities, non-profit
groups, religious organizations, and other institutions. If these
organizations are unable to arrange funding for and/or organize the
various programs and services they would normally provide to a local
community, the absence of these community development programs could
impede the economic development of a local community and have
adverse affects on the performance of Fund investments located in
that area. Changes in prevailing national economic and political
environments, along with the grant-making and other activities of
philanthropic institutions, will affect the availability of
financing for local community programs.
Credit Risks. Many investments purchased by the Fund will have one or
------------
more forms of credit enhancement. An investor in a credit enhanced debt
instrument typically relies upon the credit rating of the credit enhancer to
evaluate an issue's credit quality and appropriate pricing level. There can be
no assurance that the credit rating of a public or private entity used as a
credit enhancer on a Fund investment will remain unchanged over the period of
the Fund's ownership of that investment. A ratings upgrade would have a
positive impact on the credit quality of the instrument; while a downgrade
would have a negative impact on the credit quality of the instrument.
Most Fund investments will have a credit rating, or credit rating
equivalent, of investment grade or above. At the Manager's discretion, the
Fund may invest up to 25% of its assets in investments where the credit rating
cannot be determined. These non-rated investments are likely to be limited to
shared equity mortgage investments and securitized small business loan
participation interests. Fund investments that fall within the unrated
category may be deemed to bear some of the risks associated with lower quality
debt securities. The market prices of lower quality debt securities may
decline significantly in periods of economic difficulty.
Investments in unrated, or unratable, securities made by the Fund may
include "back end" investments where the ultimate return to the Fund is not
known for several years. The Manager intends to take advantage of the Fund's
long-term investment horizon by investing in securities that are structured to
have both a current payment and back-end or success payment. These investments
bear the interest rate risk associated with fixed rate investments and the
added risk of non-payment or underperformance on the part of the borrowing
entity. Through enhanced returns on Fund investments, the Manager intends to
seek compensation on behalf of the Fund for the risk involved with agreeing to
delay receipt of payment on certain issues. There can be no assurance that the
Fund will be adequately compensated for the risks associated with back end
participation investments.
Illiquidity of Portfolio Investments. The Fund anticipates that
------------------------------------
substantially all of its portfolio investments will consist of privately placed
debt securities that at the time of acquisition are subject to restrictions on
sale and for which no read y secondary market will exist. Restricted
securities cannot be sold publicly without prior agreement with the issuer to
register the securities under the 1933 Act, or by selling such securities under
Rule 144A or other rules under the 1933 Act which permit only limited sales
under specified conditions. Furthermore, even if the private placement debt
securities owned by the Fund become publicly-traded, the Fund's ability to sell
such securities may be limited by the lack of or limited nature of a trading
market for such securities. If the restricted securities held by the Fund are
sold to the public, the Fund, under certain circumstances, may be deemed an
"underwriter" or a controlling person with respect thereto for the purposes of
the 1 933 Act, and be subject to liabilities as such under that Act.
Fixed Interest Rate Investments. The Fund generally will purchase debt
-------------------------------
securities with fixed interest rates. The market value of these investments
will be directly affected by changes in prevailing interest rates. An increase
in interest rates will generally reduce the value of the portfolio investments
and a decline in interest rates will generally increase the value of those
investments.
Interest Rate Risk Associated with Mortgage Back Securities. The Fund
------------------------------------------------------------
will invest in Mortgage Backed Securities ("MBSs"). The value of MBSs is
based on the underlying pools of mortgages that serve as the asset base for
the securities. The value of MBSs will be significantly influenced by changes
in interest rates because mortgage pool valuations fluctuate with interest
rate changes. Specifically, when interest rates decline, many borrowers
refinance existing mortgages, resulting in principal prepayments which leads
to early payment of the securities. Early payment of an investment in MBSs
can result in a significantly lower return than the return expected at the
time the securities were purchased. In addition, a decline in interest rates
that leads to prepayment of MBSs may result in a reinvestment requirement at a
time when the interest rate environment presents less attractive alternatives
for the Manager to choose from to achieve the objectives of the Fund.
Conflicts of Interest
Indemnification and Exculpation. The Fund's Articles of Incorporation
-------------------------------
provide for indemnification of directors, officers, employees, and agents
(including the Manager) of the Fund to the full extent permitted by Maryland
law and the 1940 Act, including the advance of expenses and reasonable counsel
fees. The Articles of Incorporation also contain a provision eliminating
personal liability, to the extent allowed by the 1940 Act, of a Fund director
or officer or its Shareholders for monetary dam ages for certain breaches of
their duty of care.
Election of Disinterested Directors. As required by the 1940 Act, a
-----------------------------------
majority of the Fund's directors are and will be disinterested directors.
Although the continued tenure of all directors will be subject to annual
election by Shareholders, the initial election of directors, including the
disinterested directors, was made by the Initial Shareholder.
Effect of Borrowing. The Manager's fees will be based on the value of
-------------------
the Fund's total assets, including assets purchased with borrowed funds.
Therefore, decisions by the Manager to cause the Fund to borrow additional
funds will increase the Manager's fees. The Fund's overall borrowing limits,
however, are set by the 1940 Act and also by the Board in the light of its
fiduciary duty to the Shareholders.
Regulation.
----------
After filing its election to be treated as a BDC, a company may not
withdraw its election without first obtaining the approval of holders of a
majority of its outstanding voting securities (as defined under the 1940 Act).
The following is a brief description of the 1940 Act and is qualified in its
entirety by reference to the full text of the 1940 Act and the rules
thereunder.
Generally, to be eligible to elect BDC status, a company must engage in
the business of furnishing capital and offering significant managerial
assistance to "eligible portfolio investments" as defined below. More
specifically, in order to qualify as a BDC, a company must (i) be a domestic
company; (ii) have registered a class of its securities or have filed a
registration statement with the SEC pursuant to Section 12 of the Securities
Exchange Act of 1934 ("1934 Act"); (iii) operate for the purpose of investing
in the securities of certain types of eligible portfolio investments; (iv)
offer to extend significant managerial assistance to such eligible portfolio
investments; (v) have a majority of disinterested directors; and (vi) file (or
under certain circumstances, intend to file) a proper notice of election with
the SEC.
"Making available significant managerial assistance" is defined under
the 1940 Act in relevant part as (i) an arrangement whereby the BDC, through
its officers, directors or employees, offers to provide and, if accepted, does
provide, significant guidance and counsel concerning the management,
operations, or business objectives of a portfolio company; or (ii) the exercise
by a BDC of a controlling influence over the management or policies of the
portfolio company by the BDC acting individually or as part of a group acting
together which controls the portfolio company. The Fund intends to offer to
provide significant managerial assistance, including advice on the design,
implementation, and monitoring phases of the investments, to the issuers whose
private placement debt securities it purchases.
An "eligible portfolio company" generally is a United States company
that is not an investment company and that (i) does not have a class of
securities registered on an exchange or included in the Federal Reserve
Board's over-the-counter margin list ; (ii) is actively controlled by a BDC and
has an affiliate of a BDC on its board of directors; or (iii) meets such other
criteria as may be established by the SEC. Control under the 1940 Act is
presumed to exist where a BDC owns more than 25% of the outstanding voting
securities of the eligible portfolio company.
The 1940 Act prohibits or restricts companies subject to its provisions
from investing in certain types of companies, such as brokerage firms,
insurance companies, investment banking firms, and investment companies.
Moreover, the 1940 Act limits the type of assets that BDCs may acquire to
certain prescribed qualifying assets and certain assets necessary for its
operations (such as office furniture, equipment, and facilities) if, at the
time of acquisition, less than 70% of the value of a BDC's assets consist of
qualifying assets. Qualifying assets include: (i) privately acquired
securities of companies that were eligible portfolio investments at the time
such BDC acquired their securities; (ii) securities of bankrupt or insolvent
companies; (iii) securities of eligible portfolio investments controlled by a
BDC; (iv) securities received in exchange for or distributed in or with
respect to any of the foregoing; and (v) cash items, government securities,
and high-quality short-term debt . The 1940 Act also places restrictions on
the nature of transactions in which, and the persons from whom, securities can
be purchased in order for the securities to be considered qualifying assets.
Such restrictions include limiting purchases to actions not involving a
public offering and the requirement that securities be acquired directly from
either the portfolio company or its officers, directors, or affiliates.
The Fund, as a BDC, may sell its Shares at a price that is below its
net asset value per Share, provided that a majority of the Fund's disinterested
directors has determined that such sale would be in the best interests of the
Fund and its Shareholders and upon the approval by the holders of a majority
of its outstanding voting securities, including a majority of the voting
securities held by non-affiliated persons, of such policy or practice within
one year of such sale. A majority of the disinterested directors also must
determine in good faith, in consultation with the underwriters of the offering
if the offering is underwritten, that the price of the securities being sold is
not less than a price which closely approximates market value of the
securities, less any distribution discounts or commissions. As deemed in the
1940 Act, the term "majority of the outstanding voting securities" of the Fund
means the vote of (i) 67% or more of the Fund's Shares present at a meeting, if
the holders of more than 50% of the outstanding Shares are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding Shares,
whichever is less.
Many transactions involving a company and its affiliates (as well as
affiliates of those affiliates) are permissible for BDCs, including the Fund,
upon the prior approval of a majority of the Fund's disinterested directors and
a majority of the directors having no financial interest in the transactions.
However, certain transactions involving certain persons related to the Fund,
including its directors, officers, and the Manager, may still require the prior
approval of the SEC. In general, (i) any person who owns, controls, or holds
power to vote, more than 5% of the Fund's outstanding Shares, (ii) any
director, executive officer, or general partner of that person, and (iii) any
person who directly or indirectly controls, is controlled by , or is under
common control with, that person, must obtain the prior approval of a majority
of the Fund's disinterested directors, and, in some situations, the prior
approval of the SEC, before engaging in certain transactions involving the
company or any company controlled by the Fund. The 1940 Act generally does not
restrict actions between the Fund and its portfolio companies. While a BDC may
change the nature of its business so as to cease being a BDC (and in connection
therewith withdraw its election to be treated as a BDC) only if authorized to
do so by a majority vote (as deemed by the 1940 Act) of its outstanding voting
securities, Shareholder approval of changes in other fundamental investment
policies of a BDC is generally not required. In contrast, the 1940 Act
requires Shareholder approval for a change in any fundamental investment
policy.
Federal Income Taxation.
-----------------------
Taxation of the Fund. The Fund intends to elect the special income tax
--------------------
treatment available to RICs under the Code in order to be relieved of federal
tax on that part of its net investment income and realized capital gains that
it distributes in a timely manner to Shareholders. The following is a general
summary of certain of the United States federal income tax laws relating to the
Fund and investors in its Shares. This discussion is based on the Code,
regulations, published rulings and procedures and court decisions as of the
date hereof. The tax law, as well as the interpretation thereof, is subject to
change and any such change might interfere with the Fund's ability to qualify
as a RIC. This discussion does not purport to deal with all of the United
States federal tax consequences applicable to the Fund or to all categories of
investors, some of whom may be subject to special rules. In addition, it does
not address state, local, foreign or other taxes to which the Fund or its
investors may be subject, or any proposed changes in applicable tax laws.
Investors should consult their tax advisers with respect to an investment in
Fund Shares.
To be eligible for the special tax treatment accorded RICs, the Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income and any excess of net short-term capital gain over net long-term capital
losses) ("Distribution Requirement") and must meet several additional
requirements. Among the requirements are the following: (a) the Fund must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to loans of securities and gains from the sale
or other disposition of securities or other income derived with respect to its
business of investing in securities ("Income Requirement"); (b) the Fun d must
derive less than 30% of its gross income each taxable year from gains from the
sale or other disposition of securities held for less than three months; (c)
the Fund must diversify its assets so that, at the close of each quarter of the
Fund's taxable year, (i) not more than 25% of the value of its total assets is
invested in the securities of a single issuer or in the securities of two or
more issuers that the Fund controls under a 20% test and that are engaged in
the same or similar trades or businesses or related trades or businesses and
(ii) at least 50% of the value of its total assets is represented by cash, cash
items, government securities, securities of other RICs and other securities
(with each investment in such other securities limited so that not more than
5% of the market value of the Fund's total assets is invested in the securities
of a single issuer and the Fund does not own more than 10% of the outstanding
voting securities of a single issuer) ("Diversification Requirement"); and (d)
the Fund must file an election to be treated as a RIC.
In general, if the Fund fails to distribute in a calendar year
substantially all of its net investment income and substantially all of its
capital gain net income for the one-year period ending October 31 of such year
(plus any amount that was not distributed in previous taxable years), the Fund
will be subject to a 4% excise tax on the retained amounts. The Fund intends
generally to make distributions sufficient to avoid imposition of federal
income or excise taxes, although it may not be able to do so because of the
borrowing coverage requirements under the 1940 Act.
There can be no assurance that the Fund will qualify to be taxed as a
RIC. Because of coverage requirements under the 1940 Act, it may be unable to
satisfy the Distribution Requirement, and the Fund may have difficulty
satisfying the Diversification Requirement, particularly during its start-up
period. If the Fund does not qualify to be taxed as a RIC, the Fund will be
taxed on its net income, and, in addition, all distributions from earnings and
profits, including distributions of net capital gain, will be taxable, to
shareholders not exempt from federal income taxation, as ordinary income. If
the Fund does not qualify as a RIC during its first taxable year, or if the
Fund qualifies as a RIC and thereafter fails to qualify, in order to qualify
or requalify as a RIC thereafter, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
Taxation of Shareholders. Distributions of net investment income and
------------------------
the excess, if any, of net short-term capital gains over net long-term capital
losses, will be taxable to shareholders not exempt from federal income taxation
as ordinary income, a nd are anticipated not to be eligible for the corporate
dividends-received deduction. Designated distributions of the excess, if any,
of net long-term capital gains over net short-term capital losses ("net capital
gain") will be taxable to each shareholder as long-term capital gains, without
regard to how long a shareholder has held Shares of the Fund, and will not
qualify for the corporate dividends-received deduction. Distributions in
excess of the Fund's earnings and profits (generally, its net investment income
and net capital gain) will be treated as a tax-free return of capital to the
extent of the shareholders' basis in their shares and thereafter as capital
gain.
Any dividend declared by the Fund in October, November, or December and
payable to shareholders of record on a date in such a month generally is deemed
to have been received by the shareholders on December 31 of such year, provided
that the dividend actually is paid during January of the following year. The
Fund will notify shareholders each year of the amount and tax status of
dividends and other distributions, including the amount of any distribution of
net capital gain. In general, any gain or loss realized upon a taxable
disposition of shares held by a shareholder as a capital asset will be treated
as long-term capital gain or loss if the shares have been held for more than
twelve months, and otherwise as short-term capital gain or loss.
However, any loss realized upon a taxable disposition of Shares held for
six months or less will be treated as long-term, rather than short-term,
capital loss to the extent of any long-term capital gain distributions
received by the shareholder with respect to those Shares. All or a portion of
any loss realized upon a taxable disposition of Shares will be disallowed if
other Shares are purchased within 30 days before or after the disposition. In
such a case, the basis of the newly purchased Shares will be adjusted to
reflect the disallowed loss.
Individuals and other taxpayers subject to limitations on miscellaneous
itemized deductions are required to include in gross income an amount of
certain Fund expenses relating to the production of income that are allocable
to the shareholder. Such a mount may be deductible by an individual
shareholder as a miscellaneous itemized deduction, subject to the limitation on
miscellaneous itemized deductions not exceeding 2% of adjusted gross income.
Banks and other incorporated entities (other than S corporations) are not
required to include these expenses in gross income.
The Fund generally is required to withhold and remit to the U.S.
Treasury 31% of the taxable dividends and other distributions paid to any
individual or other non-exempt shareholder who fails to furnish the Fund with
a correct taxpayer identification number, who has underreported dividends or
interest income, or who fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number
is his or her social security number.
Tax-Exempt Investors. Qualified plans and investors exempt from
--------------------
taxation under Code Section 501(c)(3) (collectively, "Tax-Exempt Entities") are
generally exempt from taxation except to the extent that they have unrelated
business taxable income ("UBTI") (determined in accordance with Code Sections
511-514). If the Fund is treated as an association taxable as a corporation,
distributions to a Tax-Exempt Entity shareholder that are treated as dividends
should not be considered UBTI and should therefore be exempt from federal
income tax even if the Fund borrows to acquire its investment assets. However,
if a Tax-Exempt Entity borrows money to purchase its shares, a portion of its
income from the Fund will constitute UBTI pursuant to the "debt-financed
property" rules.
Social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal service organizations
that are exempt from taxation under Code Sections 501(c), (7), (9), (17) and
(20), respectively, are subject to different UBTI rules, which may require
them to characterize distributions from the Fund as UBTI. Dividend
distributions by the Fund to a charitable organization that is a private
foundation should constitute investment income for purposes of the excise tax
on net investment income of private foundations imposed by Section 4940 of the
Code.
Employees.
- ---------
The Fund expects to have no employees and will rely on the Manager and
its officers (all of whom are employed and paid by the Manager) to administer
its affairs, subject to the supervision of the Fund's Board of Directors.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
Not applicable. The Fund has not commenced operations and has no data to
report.
Item 2. FINANCIAL INFORMATION
Not applicable. The Fund has not commenced operations and consequently
has no financial data to report.
Item 3. PROPERTIES
Not applicable. The Fund's principal assets will be securities.
Item 4 (a) and (b). SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
On November 27, 1995, Mellon Bank purchased one share at a price of
$100,000 as the Fund's initial capital. Therefore, until immediately
subsequent to the First Closing of the offering of the Fund's Shares, Mellon
Bank will be deemed to "control" the Fund.
(c) Changes In Control
Not applicable.
Item 5. DIRECTORS AND EXECUTIVE OFFICERS
The Fund's Board of Directors, initially elected by the initial
Shareholder and elected annually thereafter by Shareholders, will establish and
review policy for the management of the Fund. A majority of the members of the
Board, as required by Section 56(a) of the 1940 Act, are and will be
disinterested. The Board will meet no less frequently than quarterly. The
Board will review and approve annually the contracts between the Fund, Access,
and all other affiliates of Access. Management will be responsible for all
day-to-day business decisions regarding operations of the Fund. Specifically,
all decisions about buying and selling portfolio investments will be
Management's responsibility. The Board will review and consider the allocation
of actual investments as compared to the allocation indicated by investors'
Designated Target Regions.
Directors and Executive Officers
The directors of the Fund are:
<TABLE>
Name Age Position Other Affiliation
<S> <C> <C> <C>
Joseph S. DiMartino 51 Director Director, approximately 93 mutual funds in the Dreyfus Family of
Funds; Chairman, Noel Group, Inc.; Trustee, Bucknell University;
Director, The Muscular Dystrophy Association, Health Plan Services
Corporation, Belding Heminway, Inc., Curtis Industries, Inc., Simmons
Outdoor Corporation and Staffing Resources, Inc.
Ruth Marie Adams 81 Director Director, approximately 16 mutual funds in the Dreyfus Family of
Funds; Professor English and Vice President Emeritus, Dartmouth
College; Senator, United Chapters of Phi Beta Kappa; Trustee, Woods
Hole Oceanographic Institution
Arthur L. Goeschel 74 Director Director, approximately 16 mutual funds in the Dreyfus Family of
Funds; Director and Chairman of the Board, Rexene Corporation;
Director, Calgon Carbon Corporation and National Picture Frame
Corporation, Trustee, Sewickley Valley Hospital
John J. Sciullo 63 Director Director, approximately 16 mutual funds in the Dreyfus Family of
Funds; Dean Emeritus and Professor of Law, Duquesne University Law
School; Director, Urban Redevelopment Authority of Pittsburgh
Arch S. Jeffery* 78 Director Director, approximately 16 mutual funds in the Dreyfus Family of
Funds; Financial Consultant
Stephen J. Lockwood 48 Director Director, approximately 16 mutual funds in the Dreyfus Family of
Funds; President and CEO, LDG Management Company, Inc.; CEO, LDG
Reinsurance Underwriters, SRRF Management, Inc. and Medical
Reinsurance Underwriters, Inc.
David F. Sand* 38 Director Chairman, CEO and Chief Investment Officer, Access Capital Strategies
Corp.
*An "interested" Director.
</TABLE>
<TABLE>
The officers of the Fund are:
Name Age Position Other Affiliation
<S> <C> <C> <C>
David F. Sand 38 Director, Chairman, CEO Director, CEO & Chief
& Chief Investment Officer Investment Officer; Access Capital
Alton M. Bathrick 56 President President, Access
Capital
Krista L. Kallio 32 Senior Vice President Vice President, Access
Capital
Milton J. Sumption 32 Vice President & Treasurer Analyst, Access Capital
Kevin Mawe 40 Secretary Senior Counsel, Boston
Safe Deposit & Trust
Company
Mark J. Duggan 30 Assistant Secretary Assistant Vice President
and Counsel, Boston Safe
Deposit & Trust Company
David Chittim 49 Senior Portfolio Manager Vice President, Mellon
-- Interim Investments Bank; Senior Vice
President, Mellon Bond
Associates
Laurie A. Carroll 35 Portfolio Manager Vice President, Mellon
-- Interim Investments Bank; Senior Vice
President, Mellon Bond
Associates
Helen J. Qubain 26 Associate Associate, Access
Capital
The business backgrounds of the Fund's directors and officers are as follows:
Name Previous Employers(5 years) Industry Job Description
David F. Access Capital Stragegies Investment CIO & CEO
Sand Corp. Advisor
Commonwealth Capital Investment President
Stragegies Banker
Commonwealth Capital Investment Managing Director
Partners Banker
Ruth Marie Dartmouth College Higher Professor of
Adams Education English and Vice
President
Emeritus
Joseph S. The Dreyfus Corporation Investment President &
DiMartino Adviser Director
(prior to 1995)
Dreyfus Service Corporation Distributor Executive Vice
President &
Director
(prior to 1995)
Noel Group, Inc. Venture Chairman
Capital
Arthur L. Rexene Corporation Thermoplastic Director, Chair-
Goeschel and Petro- man of the Board
chemical
Manufacturing
Arch S. Self Employed Financial Financial
Jeffery Consulting Consultant
Stephen J. LDG Management Company, Inc. Underwriting President and
Lockwood CEO
LDG Reinsurance Underwriters Management CEO
SRRF Management, Inc. Reinsurance CEO
Underwriting
Medical Reinsurance Underwriting CEO
Underwriters, Inc. Management CEO
Reinsurance
Underwriting
John J. Dequesne University Law Legal Dean Emeritus
Sciullo School Education and Professor of
Law
Alton M. Access Capital Strategies Investment President
Bathrick Corp. Advisor
Robert W. Baird & Co. Investment Senior Vice
Advisor President/
Director
Krista L. Access Capital Strategies Investment Vice President
Kallio Corp. Advisor
Christian Community Action Social Service Project Director
Agency
IBM Computer Co. Financial Analyst
Liberty Mutual Insurance Co. Insurance Co. Supervising
Analyst
Milton J. Access Capital Strategies Investment Analyst
Sumption Corp. Advisor
NYC Municipal Water Fin. Public Financial Analyst
Auth. Auth. Asst.
U.S. Senate Off. of Sen. Tom Legislative Asst.
Daschle
US Peace Corps: Cent. Volunteer Volunteer
African Rep. Assistance Org.
Helen Leila Access Capital Stragegies Investment Associate
Qubain Corp. Advisor
American Writing Publisher Consultant
Corporation
Land & Water Establishment Legal Aid Programs
for Studies & Legal Services Director
Noor Al Hussein Foundation Social Service Technical
Agency Consultant
Neighboring Defender Serv. Public Defender Community
of Harlem Worker
David B. Mellon Bank Money Management Vice President
Chittim
Laurie A. Mellon Bank Money Management Vice President
Carroll
Kevin Mawe Boston Safe Deposit & Trust Money Management Senior Counsel
Company
Mellon Bank Banking Staff Attorney
Mark J. Boston Safe Deposit & Trust Money Management Counsel
Duggan Company
The Boston Company Advisors, Mutual Fund Assistant Vice
Inc. Administrator President and
and Advisor Counsel
Ropes & Gray Law Firm Associate
</TABLE>
The Manager
Access was formed in 1994 as a registered investment adviser to focus
exclusively upon managing the assets of institutional investors interested in
community investing. The Fund is the first vehicle offered by Access. Access
is a registered investment advisor and wholly-owned subsidiary of Mellon Bank.
David F. Sand, Chief Executive Officer and Chief Investment Officer of Access,
has more than fifteen years of experience as a portfolio manager and investment
advisor. As a Vice President at Shearson and later as First Vice President of
Drexel Burnham Lambert he worked to combine market returns and economic results
for institutional clients. He also served as Director and Portfolio Manager
for Franklin Research and Development. Mr. Sand received his undergraduate
degree from Princeton and his Masters in Public Administration from Harvard
University. Mr. Bathrick, President of Access, has thirty years of banking and
investment banking experience. Before joining Access Mr. Bathrick was a Senior
Vice President and Director of Robert W. Baird & Company, a Milwaukee based
investment banking firm and Chairman of Baird's Chicago based economic
development affiliate Kane/McKenna & Associates. Throughout his career Mr.
Bathrick has worked in the area of financial guarantees and securitization.
He was one of the founders of the secondary market for SBA/FMHA government
guaranteed loans. Mr. Bathrick received his undergraduate degree from Lake
Forest College. Access' principal business address is 124 Mt. Auburn Street,
Suite 200 N., Cambridge, Massachusetts 02138.
As Chief Investment Officer, David F. Sand will have primary
responsibility for the Fund's investment program. Mr. Sand will have
responsibility for the formulation of recommendations to the Board regarding
policy issues, including the establishment of the Fund's investment criteria
and any proposed changes to the Fund's investment policies and restrictions,
review of the Fund's investment portfolio, and reports thereon to the Board.
Item 6. EXECUTIVE COMPENSATION
The Fund will pay no compensation to its officers who are "interested
persons" (as defined in the 1940 Act) of the Manager or to its directors other
than its disinterested directors. The Fund's disinterested directors will
each receive a per meeting fee from the Fund of $1,000. Such directors also
will be reimbursed by the Fund for their expenses in attending meetings of the
Board or any committee thereof.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
The Manager's services to the Fund are not exclusive. Access
currently manages Access Capital Strategies Community Investment Fund, Inc.:
Bank Portfolio ("Bank Portfolio") and is not prohibited under the Management
Agreement from establishing additional investment entities that will engage in
similar transactions as the Fund.
To the extent that portfolios of other funds advised by the Manager
desire to invest in opportunities available to the Fund, the Manager will
allocate such opportunities among the Fund and such other funds in a manner
deemed fair and equitable considering all of the circumstances in accordance
with procedures approved by the Board (including a majority of the
disinterested directors). The participation by such other funds in the
community investment market could make it more difficult for the Fund to
acquire such private placement debt securities on attractive terms.
The 1940 Act restricts transactions between the Fund and "affiliated
persons" (as defined in the 1940 Act) including the Bank Portfolio. Co-
investments by the Fund and the Bank Portfolio and any future business
development company which controls, is controlled by or is under common
control with Access would require an order from the SEC exempting the Fund
from certain restrictions under the 1940 Act. The Fund has applied for such
an order from the SEC exempting it from certain restrictions on co-investing.
However, until such exemptive relief is obtained, the current restrictions
will apply. There can be no assurance that the Fund will obtain the requested
exemptive relief.
(b) Certain Business Relationships
David F. Sand, a director and officer of the Fund, is an officer and
Shareholder of Access. See "Transactions with Promoters" below for a
description of the Fund's Management Agreement with Access.
(c) Indebtedness of Management.
None.
(d) Transactions with Promoters
Access may be deemed to be a promoter of the Fund. The Fund entered
into a Management Agreement with Access, pursuant to which Access will, subject
to the investment policies and guidelines established by the Board, identify,
evaluate, structure, and close the investments to be made by the Fund, arrange
any debt financing for the Fund, provide portfolio management and servicing of
private placement debt securities held in the Fund's portfolio, and administer
the Fund's day-to-day affairs. Access will supervise all aspects of the
operations of the Fund, including oversight of the Fund's transfer agent and
portfolio accountant.
The Management Agreement provides that the Fund will be required to pay
all organizational and offering expenses (including accounting, legal,
printing, clerical, filing and other expenses) incurred by the Fund. These
expenses, combined with the organizational and offering expenses of the Bank
Portfolio, were approximately $250,000. As of the date of this filing, it is
expected that the Fund's share of these expenses will be approximately
$125,000. The Fund will also pay all operating expense s except those
specifically required to be borne by the Manager, including (i) brokerage and
commission expenses and other transaction costs incident to the acquisition and
dispositions of investments, (ii) federal, state, and local taxes and fees,
including transfer taxes and filing fees, incurred by or levied upon the Fund,
(iii) interest charges and other fees in connection with borrowings, (iv) SEC
fees and expenses and any fees and expenses of state securities regulatory
authorities, (v) expenses of printing and distributing reports and notices to
Shareholders, (vi) costs of proxy solicitation, (vii) costs of meetings of
Shareholders and the Board, (viii) charges and expenses of the Fund's
custodian, transfer agent, and dividend disbursing agent, (ix) compensation
and expenses of the Fund's disinterested directors, and of any of the Fund's
disinterested officers, and expenses of all directors in attending board or
Shareholder meetings, (x) legal and auditing expenses, including expenses
incident to the documentation for, and consummation of, transactions; (xi)
costs of any certificates representing the Shares, (xii) costs of stationery
and supplies, (xiii) the costs of membership by the Fund in any trade
organizations, (xiv) expenses associated with litigation and other
extraordinary or non-recurring expenses, and (xv) any insurance premiums.
The operating expenses required to be borne by the Manager are: (i) all
costs and fees incident to the selection and investigation of prospective Fund
investments, including associated due diligence expenses such as travel
expenses and professional fees (but excluding legal and accounting fees and
other costs incident to the closing, documentation, or consummation of such
transactions); (ii) the cost of adequate office space for the Fund and all
necessary office equipment and services, including telephone service, heat,
utilities, and similar items; (iii) the cost of providing the Fund with such
corporate, administrative, and clerical personnel (including officers and
directors of the Fund who are interested persons of the Manager and are acting
in their respective capacities as officers and directors) as the Board
reasonably deems necessary or advisable to perform the services required to be
performed by the Manager under the Management Agreement; and (iv) the cost of
providing significant managerial assistance offered to and accepted by the
recipients of Fund investments.
As compensation for its services to the Fund, the Manager will receive
an annual management fee of .75% of the Fund's average gross monthly assets
less accrued liabilities, other than indebtedness for borrowings. This fee will
be paid quarterly.
Under the Management Agreement, the Manager will not be liable for any
error in judgment or mistake of law or for any loss suffered by the Fund in
connection with the Management Agreement, except a loss resulting from willful
misfeasance, bad faith o r gross negligence on the part of the Manager in the
performance of its duties or from reckless disregard of its duties and
obligations under the Management Agreement. The Management Agreement will
continue in effect for a period longer than two years from its date of
execution only if such continuation is approved at least annually by the Board
or a majority of the outstanding voting securities of the Fund, and by a
majority of the directors who are not parties to the Management Agreement or
interested persons of such parties. The Management Agreement is terminable by
vote of the Board or by the holders of a majority of the voting securities of
the Fund, at any time without penalty, on 60 days' written notice to the
Manager. The Management Agreement may also be terminated by the Manager on 60
days' written notice to the Fund and will be terminated automatically upon its
assignment, as defined in the 1940 Act.
In addition to the termination provision described above, the
Management Agreement provides that, if a subsequent closing does not occur
within three years of the First Closing, Access will submit to the Board an
offer to resign as Manager.
Item 8. LEGAL PROCEEDINGS
There are no pending legal proceedings against the Fund or the Manager.
Item 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
(a) Market Information
The Shares will not be registered under the Securities Act of 1933
("1933 Act") or any state securities law (collectively, "Securities Laws") and
are subject to substantial restrictions on transfer. There will be no public
trading market for the Shares, and Shareholders might be required to hold
their Shares until the final liquidation of the Fund. No Shares are subject to
outstanding options or warrants to purchase, or securities convertible into,
Shares. The Fund has not agreed to register any Shares of the Fund or to make
a public offering with respect thereto, and has no current intention of doing
so. Because the Shares will be acquired by investors in transactions "not
involving a public offering," they will be "restricted securities" and may be
required to be held indefinitely. Shares may not be sold, transferred,
assigned, pledged or otherwise disposed of without registration under
applicable Securities Laws or pursuant to an exemption from registration (in
which case the shareholder will be at the option of the Fund be required to
provide the Fund with a legal opinion, in form and substance to the Fund, that
registration is not required).
(b) Holders
On November 27, 1995, Mellon Bank purchased one Share pursuant to
Regulation D at a purchase price of $100,000 as the Fund's initial capital.
Therefore, until immediately subsequent to the First Closing of the offering of
the Fund's Shares, Mellon Bank will be deemed to "control" the Fund.
(c) Dividends
The Fund intends to distribute to Shareholders substantially all of its
net investment income and net realized capital gains, if any, as determined for
income tax purposes. Applicable law, including provisions of the 1940 Act, may
limit the amount o f dividends and other distributions payable by the Fund.
Income dividends will generally be paid quarterly in March, June, September and
December to Shareholders of record on the last day of each preceding calendar
quarter end. Substantially all of the Fund's net capital gain (the excess of
net long-term capital gain over net short-term capital loss) and the excess of
net short-term capital gain over net long-term capital loss, if any, will be
distributed annually with the Fund's dividend distribution in December.
The Manager may seek to invest the proceeds of matured, repaid or
resold investments, net of the above distributions to Shareholders, principal
payments on borrowings, and expenses or other obligations of the Fund, in new
private placement debt securities. Alternatively, any such proceeds, net of
any principal repayments on borrowings, expenses or other obligations of the
Fund, and certain other amounts, may be distributed periodically to
Shareholders. Distribution of such amounts is likely to cause annual
distributions to exceed the earnings and profits of the Fund, in which case
such excess will be considered a tax-free return of capital to a Shareholder,
to the extent of the Shareholder's adjusted basis in his Shares, and then as
capital gain.
Item 10. RECENT SALES OF UNREGISTERED SECURITIES
See Item 9(b).
Item 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
General.
-------
The holders of the Fund's outstanding Shares will elect all the
directors (subsequent to the election of the initial Board by the initial
Shareholder) and are entitled to one vote per Share on all matters submitted
to Shareholder vote. All Shares will participate equally in dividends and
distributions and in the proceeds of any liquidation. Shares have no
preference, conversion, exchange, or cumulative voting rights. The Fund has
8,000 Shares authorized.
Annual meetings of Shareholders will be held beginning in 1996 and
special meetings may be called by the Chairman of the Board or President, a
majority of the Board, or Shareholders holding at least 25% of the outstanding
Shares entitled to be voted at a meeting. The Fund anticipates soliciting
proxies from Shareholders for each annual meeting. The Fund's Articles of
Incorporation can be amended by the affirmative vote of two-thirds of all the
votes entitled to be cast on the matter.
The Fund will not issue Share certificates. The ownership of
noncertificated Shares will be recorded on a stock ledger maintained by the
Fund's transfer agent. At the time of issue or registration of transfer of
any noncertificated Shares, the Fund will deliver to the registered holder of
such Shares a nontransferable statement of ownership specifying the number and
class of Shares being issued or offered and certain other information. The
Fund's Articles of Incorporation provide that each holder of Shares will be
required upon demand, to disclose to the Fund such information with respect to
direct or indirect holdings of Shares as is deemed necessary to comply with
provisions of the Internal Revenue Code applicable to the Fund, to comply with
requirements of any other appropriate taxing authority, or to comply with the
provisions of the 1940 Act or ERISA.
Types of Financing.
------------------
The Fund may have two rounds of financing. Round One will raise equity
capital through the sale of common stock. Investors buying Shares in Round One
will elect the Board (subsequent to the initial election of the Board by the
initial Shareholder) and will earn dividends on their Shares based upon the
investment performance of all of the geographically specific private placement
debt securities in the Fund not just by the performance of the assets in the
Designated Target Region selected by an investor.
Round Two will occur if and when Management decides that the Fund will
issue debt securities. If the Fund does issue debt securities, the Manager
will require the purchaser(s) of debt instruments to agree that at a minimum
25% of the net proceeds of any proceeds raised will be placed, on a pro rata
basis, in the Designated Target Region(s) selected by Round One investors.
Purchaser(s) of debt instruments may select a Designated Target Region for the
balance of the proceeds.
There are regulatory limits on the amount of leverage that a BDC may
incur. The Fund may not incur borrowings unless, immediately after the
borrowing is incurred, such borrowings would have asset coverage of at least
200%. In other words, the amount of money borrowed in Round Two is limited to
50% of the prevailing market value of the Fund's net assets.
Management believes that leveraging the Fund may enhance the value of
Share ownership for all investors in that:
the amount borrowed will not expose the Fund to undue risk; and
investors will be rewarded for their commitment through receipt of
added dividends on their Shares if the Fund is able to earn returns on
investment in Round Two greater than the debt service obligations
incurred.
Round Two will be undertaken at the discretion of Management only if
market and other conditions warrant. Leveraging the Fund is not essential to
successful realization of its investment objective. There is no assurance that
Round Two debt financing will occur, or that Management will be successful in
causing the use of leverage to enhance the return of the Fund.
Closing Calls.
-------------
The Fund will commence operations as soon as one or more investor(s)
are prepared to begin the process outlined below. Management intends to hold a
first closing for Round One when $50 million in commitments for a Designated
Target Region have been raised (the "First Closing").
Management anticipates being able to hold subsequent closings soon
after the First Closing. Generally, subsequent closings will be held when $50
million in commitments for other Designated Target Regions has been raised.
Shares will be issued concurrent with such closing for a purchase price of
$100,000 per share. Shares will be issued in subsequent closings at the Fund's
then-current net asset value per Share, which may be more or less than $100,000
per Share. A final closing for Round One investors will be held on or before
December 31, 1998.
According to the terms of the Management Agreement, if a subsequent
closing does not occur within three years of the First Closing, Access intends
to submit its resignation as Manager. The Fund also intends, in that event, to
call a special meeting of shareholders for the purpose of hiring a new manager,
electing a new Board, or dissolving the Fund.
The amount and timing of closings may be affected by the
diversification requirements under the Internal Revenue Code for qualification
as a RIC. See "Federal Income Taxation."
To purchase Shares, a prospective qualified investor must deliver to
the Fund (i) a completed prospective subscriber questionnaire in the form
provided with the Fund's Private Offering Memorandum and (ii) two completed,
executed copies of the Subscription Agreement, such agreement and the
signature page to be in the form provided with the Fund's Private Offering
Memorandum. Upon receipt of notice, the prospective investor must also pay by
wire transfer to an account designated by the Fund, before the due date
specified by the Fund, the payment for the initial number of Shares required to
be purchased under the Subscription Agreement.
Subscriptions may be made only by executing and delivering a
Subscription Agreement in the form specified by the Fund. The rights and
obligations under the Subscription Agreements may not be transferred or
assigned by a subscriber without the consent of the Fund.
The Fund will give investors whose subscriptions have been received and
accepted at least 15 days' written notice of the closing at which the investor
will first purchase Shares. The notices will include payment instructions.
Following the closing at which a subscriber purchases Shares, the Fund
will provide the Subscriber a countersigned copy of the subscriber's
Subscription Agreement and a statement issued by the Fund's transfer agent
indicating that Shares have been credited to the subscriber's account.
Similar statements will be issued after each closing. Shareholders will have
dividend and voting rights only with respect to Shares that have been purchased
at any given time.
Interest will be charged on amounts due under the Subscription
Agreement and received by the Fund later than fourteen business days after the
date the payment is due, calculated at a daily rate equal on an annualized
basis to four percentage points over the highest rate of interest reported
from time to time as a "prime rate" by The Wall Street Journal (but not in
-----------------------
excess of the maximum rate of interest permitted by law). If a default in a
payment under the Subscription Agreement (including interest charges) remains
uncured for 30 days following a payment date, the Fund may, at its option,
pursue any or all of the following remedies: (i) cancel the balance of the
subscriber's Share subscription (including the installment as to which the
subscriber had defaulted), (ii) assign the remaining balance of the subscriber's
Share subscription (including the installment as to which the subscriber has
defaulted) to another investor selected by the Fund and/or (iii) repurchase the
Shares then owned by the defaulting subscriber at a purchase price per Share
equal to the lesser of 90% of the Shares' then-current net asset value or the
price at which the Subscriber purchased the Shares. The election by the Fund
to pursue one or more of these remedies will not preclude the Fund from
pursuing any rights it may have to seek judicial enforcement of the
Subscriber's subscription obligation.
The Fund will offer and sell its shares directly. In addition, Access
may pay commissions to certain persons for assisting in the capital-raising
activities of the Fund. However, the expense of such commissions will be borne
by Access and will not be paid out of the Fund's assets.
Fund Termination Date.
---------------------
General. The Fund will terminate operations on December 31, 2010.
-------
However, if a final closing occurs before December 31, 1998, the Manager
intends, subject to Board approval and the required vote of the Shareholders
under applicable state law, to dissolve the Fund twelve years from the end of
the calendar year in which such final closing occurs. Management will be
responsible for designing a strategy for payments to investors of the Fund by
using the following preference schedule:
Liquidate Fund investments, either individually or as a class, and
pay all proceeds to investors; or
Make an in-kind distribution of Fund investments.
The actual liquidation of the assets of the Fund might not be completed
for a significant period after the termination date.
Dissolution of the Fund. The Fund may, subject to market conditions,
-----------------------
invest the proceeds of any of its investments, net of any principal repayments
on loans or other obligations of the Fund and required distributions to
Shareholders, in additional private placement debt securities until December
31, 2006. Thereafter, the Fund will cease to purchase private placement debt
securities and will distribute to investors the proceeds of repayment,
prepayment or sale of its investments, net of (i) any principal repayments on
borrowings, (ii) expenses or other obligations of the Fund, and (iii) any
follow-on investment to an existing investment made to increase the likelihood
of ultimate disposition of the investment and determined by the Board to be in
the best interests of the Fund. (See "Risk Factors -- Long Term Investments".)
The Fund's Articles of Incorporation provide that, on December 31,
2010, the Fund automatically will be dissolved without any action by
Shareholders. From and after such dissolution, the Fund's activities will be
limited to the winding-up of its affairs, the liquidation of its remaining
assets, and the distribution of the net thereof to Shareholders. Furthermore,
the Fund may not be able to sell Fund investments for a significant period of
time due to legal or contractual restrictions on resale or the absence of a
liquid secondary market. As a result, the liquidation process might not be
completed for a significant period after the Fund's dissolution. In addition,
it is possible that if certain of the Fund's assets are not liquidated within
a reasonable time after the Fund's dissolution, the Fund may elect to make a
distribution in kind of all or part of such assets to Shareholders. In such
case, Shareholders would bear any expenses attendant to the liquidation of such
assets.
Transferability of Shares.
-------------------------
The Shares will not be registered under the 1933 Act or under the
securities laws of the various states (except as necessary to claim a limited
offering exemption) on the grounds that their issuance and sale is exempt from
such registration requirements as not involving a public offering pursuant to
Section 4(2) of the 1933 Act and applicable provisions of the securities laws
of the various states.
Because the Shares will be acquired by investors in transactions not
involving a public offering, they will be "restricted securities" and may be
required to be held indefinitely. Shares may not be sold, transferred,
assigned, pledged, or otherwise disposed of without registration under
applicable federal or state securities laws or pursuant to an exemption from
registration (in which case the Shareholder will at the option of the Fund be
required to provide the Fund with a legal opinion, in form and substance
satisfactory to the Fund, that registration is not required). Accordingly, an
investor must be willing to bear the economic risk of investment in the Shares
until the Fund is liquidated. No sale, transfer, assignment, pledge, or other
disposition, whether voluntary or involuntary, of the Shares may be made except
by registration by the transfer agent on the Fund's books. Each transferee
will be required to execute an instrument agreeing to be bound by these
restrictions and t o execute such other instruments or certifications as are
reasonably required by the Fund or the transfer agent. A transfer of the
Shares owned by a Shareholder will not relieve the Shareholder of any
unfulfilled subscription obligation. Consent o f the Fund is required prior to
the assumption of the transferor's Subscription Agreement by another party.
The Fund may withhold consent to such an assumption at its absolute discretion.
Item 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation law of the State of Maryland, under which the Fund is
incorporated, permits the articles of incorporation of a Maryland corporation
to include a provision limiting the liability of its directors and officers to
the corporation and its stockholders for money damages, subject to specified
restrictions. The law does not, however, allow the liability of directors and
officers to the corporation or its stockholders to be limited to the extent
that (1) it is proved that the person actually received an improper benefit
or profit or (2) a judgment or other final adjudication is entered in a
proceeding based on a finding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the process. The Articles of Incorporation of the
Fund contain a provision limiting the liability of the directors and officers
of the Fund and its Shareholders to the fullest extent permitted from time to
time by the laws of Maryland (but not in violation of the 1940 Act). The
Maryland corporation law also permits a corporation to indemnify its
directors, officers and agents, among others, against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that the
act or omissions of the party seeking to be indemnified was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty, or the party actually received an
improper personal benefit, or, in the case of any criminal proceeding, the
party had reasonable cause to believe that the act or omission was unlawful.
The Fund's Articles of Incorporation and Bylaws require the Fund to
indemnify its directors, officers and agents (including the Manager) to the
fullest extent permitted from time to time by the laws of Maryland, subject to
the limitations on indemnification under the 1940 Act. The Fund's By-Laws
provide that the Fund may purchase and maintain insurance on behalf of any
person who is or was a director, officer, or agent of the Fund against any
liability asserted against that person and incurred by that person in or
arising out of his or her position, whether or not the Fund would have the
power to indemnify him or her against such liability; provided that no such
insurance purchased will protect or purport to protect any officer or director
against liabilities for willful misfeasance, bad faith, gross negligence, or
reckless disregard of duty.
Item 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Not applicable. The Fund has only recently commenced operations and
has no financial data to report. Accordingly, no financial statements are
included in this Registration Statement.
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
For the Fund's first fiscal year, the independent auditors engaged to
audit the Fund's financial statements will be KPMG Peat Marwick LLP;
thereafter, the selection of independent auditors by the Fund's directors will
be ratified annually by Shareholders at the Fund's annual meeting.
Item 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
--------------------
None.
(b) Exhibits.
----------
(3) Articles of Incorporation and Bylaws
(i) Articles of Incorporation are filed herewith.
(ii) Amended Bylaws are filed herewith.
(10) Material Contracts
(i) Management Agreement is filed herewith.
(ii) Sub-Advisory Agreement is filed herewith.
(iii) Custody Agreement is filed herewith.
(iv) Form of Subscription Agreement is filed herewith.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
Access Capital Strategies
Community Investment Fund, Inc.:
Institutional Investor Portfolio
By: /s/ David F. Sand
David F. Sand
Director
Dated: March 7, 1996
ARTICLES OF INCORPORATION
OF
ACCESS CAPITAL STRATEGIES COMMUNITY
INVESTMENT FUND, INC.: INSTITUTIONAL INVESTOR PORTFOLIO
FIRST: Incorporation: The undersigned David F. Sand, whose address is 124 Mt.
Auburn Street, Suite 200N, Cambridge, Massachusetts 02138, being at least
eighteen years of age, does hereby form a corporation under the general laws of
the State of Maryland.
SECOND: Name of Corporation: The name of the Corporation is Access Capital
Strategies Community Investment Fund, Inc.: Institutional Investor Portfolio.
THIRD: Corporate Purposes: The Corporation is formed for the following purpose
or purposes:
A. To conduct, operate, and carry on the business of a close-end,
management investment company that has elected to be treated as a business
development company, pursuant to the Investment Company Act of 1940, as amended
("1940 Act"); provide d, however, that the Corporation may cease to be treated
as a business development company upon compliance with the requirements of the
1940 Act with respect thereto; and
B. To exercise and enjoy all powers, rights and privileges granted to
and conferred upon corporations by the Maryland General Corporation
Law now or hereafter in force.
FOURTH: Address of Principal Office. The post office address of the principal
office of the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202-3242.
FIFTH: Name and Address of Resident Agent. The name and address of the
resident agent of the Corporation in the State of Maryland is The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland 21202-3242.
SIXTH: Shares of Stock:
A. The total number of shares of all classes of capital stock which the
Corporation has authority to issue is 8,000 shares of Common Stock,
$.001 par value, having an aggregate par value of $8.00.
B. Stockholders shall not have preemptive or preferential rights to
acquire any shares of the capital stock of the Corporation, and any or all of
such shares, whenever authorized, may be issued, or may be reissued and
transferred if such share s have been reacquired and have treasury status, to
any person, firm, corporation, trust, partnership, association or other entity
for such lawful consideration and on such terms as the Board of Directors
determines in its discretion without first offering the shares to any such
holder.
C. All shares of the Corporation's authorized capital stock, when issued
for such consideration as the Board of Directors may determine, shall
be fully paid and nonassessable.
D. The Board of Directors of the Corporation may, by adoption of a
resolution or Bylaw, impose restrictions upon the transferability by
shareholders of shares of the Corporation's capital stock.
E. No shares of the Corporation's capital stock shall have any conversion
or exchange rights or privileges or have cumulative voting rights.
F. Except as otherwise required under the 1940 Act, voting power for the
election of directors and for all other purposes shall be vested exclusively in
the holders of the Common Stock. Each holder of a full or fractional share of
Common Stock shall be entitled, in the case of full shares, to one vote for
each such share and, in the case of fractional shares, to a fraction of one vote
corresponding to the fractional amount of each such fractional share, in each
case based upon the number of shares registered in such holder's name on the
books of the Corporation.
G. In the event of the liquidation or dissolution of the Corporation, the
holders of the Common Stock shall be entitled to receive all the net assets of
the Corporation. The assets so distributed to the stockholders shall be
distributed among such stockholders, in cash or in kind at the option of the
directors, in proportion to the number of full and fractional shares of the
class held by them and recorded on the books of the Corporation.
H. Each holder of shares of capital stock shall, upon demand, disclose to
the Corporation such information with respect to direct or indirect holdings of
such shares as the directors or any officer or agent of the Corporation
designated by the directors deem necessary to comply with provisions of the
Internal Revenue Code of 1986 applicable to the Corporation, to comply with
requirements of any other appropriate taxing authority, or to comply with the
provisions of the 1940 Act or of the Employee Retirement Income Security Act of
1974, as any of said laws may be amended from time to time.
SEVENTH: Board of Directors: The Corporation shall have at least three
directors; provided that if there is no stock outstanding, the number of
directors may be less than three but not less than one. David F. Sand shall
act as sole director of the Corporation until his successor has been duly
chosen and qualified.
EIGHTH: Management of the Affairs of the Corporation.
A. All corporate powers and authority of the Corporation shall be vested
in and exercised by the Board of Directors except as otherwise
provided by statute, these Articles, or the Bylaws of the Corporation.
B. The Board of Directors shall have the power to adopt, alter, or repeal
the Bylaws of the Corporation, unless the Bylaws otherwise provide.
C. The Board of Directors shall have the power to determine whether and
to what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Corporation (other than the stock
ledger) shall be open to inspection by stockholders. No stockholder shall have
any right to inspect any account, book, or document of the Corporation except to
the extent permitted by statute or the Bylaws.
D. The Board of Directors shall have the power to determine, in
accordance with generally accepted accounting principles, the Corporation's net
income, its total assets and liabilities, and the net asset value of the shares
of capital stock of the Corporation. The Board of Directors may delegate such
power to any one or more of the directors or officers of the Corporation, its
investment adviser, administrator, custodian, or depositary of the
Corporation's assets, or another agent of the Corporation appointed for such
purposes.
E. Except as otherwise required under the 1940 Act, the Board of
Directors shall have the power to make distributions, including dividends, from
any legally available funds in such amounts, and in a manner and to the
stockholders of record as of such a date, as the Board of Directors may
determine.
NINTH: Stockholder Liability. The stockholders shall not be liable to any
extent for the payment of any debt of the Corporation.
TENTH: Majority of Votes. Except as otherwise provided in these Articles,
under the 1940 Act, or under any provision of Maryland law requiring approval by
a greater proportion than a majority of the votes entitled to be cast in order
to take or authorize any action, any action may be taken or authorized by the
Corporation upon the affirmative vote of a majority of the votes entitled to be
cast thereon.
ELEVENTH: Special Voting Requirements: Control Shares.
A. The Corporation shall not be governed by the provisions of Section 3-
602 of the Maryland General Corporation Law.
B. Any acquisition of shares of the stock of the Corporation, by any
person and at any time, shall be generally exempted from the
requirements of subtitle 7 of Title 3 of the Maryland General
Corporation Law.
TWELFTH: Limitation on Liability.
A. To the maximum extent permitted by the laws of Maryland law (but not
in violation of any applicable requirement or limitation of the 1940
Act), in each case as currently in effect or as may hereafter be
amended:
1. No director or officer of the Corporation shall be liable to the
Corporation or its stockholders for money damages; and
2. The Corporation shall indemnify and advance expenses as provided
in the Bylaws of the Corporation to its present and past directors, officers,
employees and agents (including any person or firm appointed by the Corporation
to serve as investment adviser or any similar function), and persons who are
serving or have served at the request of the Corporation in similar capacities
for other entities.
B. No amendment, alteration, or repeal of this Article or the adoption,
alteration, or amendment of any other provision of these Articles or the Bylaws
of the Corporation inconsistent with this Article, shall adversely affect any
limitation on liability or indemnification of any person under this Article
with respect to any act or failure to act which occurred prior to such
amendment, alteration, repeal, or adoption.
THIRTEENTH: Limited Term of Existence. The Corporation shall have a limited
period of existence and shall cease to exist at the close of business on
December 31, 2010, except that the Corporation shall continue to exist for the
purpose of paying, satisfying, and discharging any existing debts or
obligations, collecting and distributing its assets, and doing all other acts
required to liquidate and wind up its business and affairs. After the close of
business on December 31, 2010, if the Corporation has not liquidated and wound
up its business and affairs, the directors shall become trustees of the
Corporation's assets for purposes of liquidation with the full powers granted to
directors of a corporation which has voluntarily dissolved under subtitle 4 of
Title 3 of the Maryland General Corporation Law or any successor statute as are
necessary to liquidate the Corporation and wind up its affairs, but in no event
with lesser power than the powers granted by such subtitle granted under the
Maryland General Corporation Laws as of the date of incorporation of the
Corporation.
FOURTEENTH: Right of Amendment. Any provision of these Articles may be
amended, altered, or repealed upon the affirmative vote of two-thirds of all the
votes entitled to be cast on the matter.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on this day of August, 1995.
David F. Sand
Access Capital Strategies Community
Investment Fund, Inc.: Institutional Investor Portfolio
A Maryland Corporation
BYLAWS
September 1, 1995
BYLAWS
OF
ACCESS CAPITAL STRATEGIES COMMUNITY
INVESTMENT FUND, INC.: INSTITUTIONAL INVESTOR PORTFOLIO
(A MARYLAND CORPORATION)
ARTICLE I
NAME OF CORPORATION, LOCATION OF
OFFICES AND SEAL
Section 1. Name. The name of the corporation is Access Capital Strategies
Community Investment Fund, Inc.: Institutional Investor Portfolio.
Section 2. Principal Offices. The principal office of the Corporation in the
State of Maryland shall be located in The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202-3242. The Corporation may, in
addition, establish and maintain such other offices and places of business as
the Board of Directors may, from time to time, determine.
Section 3. Seal. The corporate seal of the Corporation shall be circular in
form and shall bear the name of the Corporation, the year of its incorporation,
and the word "Maryland". The form of the seal shall be subject to alteration
by the Board of Directors and the seal may be used by causing it or a facsimile
to be impressed or affixed or printed or otherwise reproduced. Any officer or
director of the Corporation shall have authority to affix the corporate seal of
the Corporation to any document requiring the same.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meetings. An annual meeting of shareholders to elect
directors and transact any other business within the Corporation's powers will
be held at such time as is set by the Board of Directors during the month of
October of each calendar year.
Section 2. Special Meetings. Special meetings of shareholders may be called at
any time by the Chairman of the Board, or President, or by a majority of the
Board of Directors, and shall be held at such time and place as may be stated in
the notice o f the meeting.
Special meetings of the shareholders may be called by the Secretary upon the
written request of the holders of shares entitled to vote not less than twenty-
five percent of all the votes entitled to be cast at such meeting, provided that
(1) such request shall state the purposes of such meeting and the matters
proposed to be acted on, and (2) the shareholders requesting such meeting shall
have paid to the Corporation the reasonably estimated cost of preparing and
mailing the notice thereof, which the Secretary shall determine and specify to
such shareholders. No special meeting shall be called upon the request of
shareholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the shareholders held during the preceding
twelve months, unless requested by the holders of a majority of all shares
entitled to be voted at such meeting.
Section 3. Notice of Meetings. The Secretary shall cause notice of the place,
date, and hour, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, to be mailed, postage prepaid, not less than
ten nor more than ninety days before the date of the meeting, to each
shareholder entitled to vote at such meeting at his or her address as it appears
on the records of the Corporation at the time of such mailing. Notice shall be
deemed to be given when deposited in the United States mail addressed to the
shareholders as aforesaid. Notice of any shareholders' meeting need not be
given to any shareholder who shall sign a written waiver of such notice whether
before or after the time of such meeting, or to any shareholder who is present
at such meeting in person or by proxy. Notice of adjournment of a shareholders'
meeting to another time or place need not be given if such time and place are
announced at the meeting. Irregularities in the notice of any meeting to, or
the nonreceipt of any such notice by, any of the shareholders shall not
invalidate any action otherwise properly taken by or at any such meeting.
Section 4. Quorum and Adjournment of Meetings. The presence at any
shareholders' meeting, in person or by proxy, of shareholders entitled to cast
a majority of the votes shall be necessary and sufficient to constitute a
quorum for the transaction of business. In the absence of a quorum, the
holders of a majority of shares entitled to vote at the meeting and present in
person or by proxy, or, if no shareholder entitled to vote is present in person
or by proxy, any officer present entitled to preside or act as secretary of
such meeting may adjourn the meeting without determining the date of the new
meeting or from time to time without further notice to a date not more than 120
days after the original record date. Any business that might have been
transacted at the meeting originally called may be transacted at any such
adjourned meeting at which a quorum is present.
Section 5. Voting and Inspectors. Except as otherwise provided in the Articles
of Incorporation or by applicable law, at each shareholders' meeting each
shareholder shall be entitled to one vote for each share of stock of the
Corporation validly issued and outstanding and registered in his or her name on
the books of the Corporation on the record date fixed in accordance with Section
5 of Article VI hereof, either in person or by proxy appointed by instrument in
writing subscribed by such share holder or his or her duly authorized attorney,
except that no shares held by the Corporation shall be entitled to a vote.
Except as otherwise provided in the Articles of Incorporation, these Bylaws, as
required by provisions of the Investment Company Act of 1940, as amended ("1940
Act") or as required under Maryland law, all matters shall be decided by a vote
of the majority of the votes validly cast. The vote upon any question shall be
by ballot whenever requested by any person entitled to vote, but, unless such a
request is made, voting may be conducted in any way approved at the meeting.
At any meeting at which there is an election of Directors, the chairman of the
meeting may, and upon the request of the holders of ten percent of the stock
entitled to vote at such election shall, appoint two inspectors of election who
shall first subscribe an oath or affirmation to execute faithfully the duties
of inspectors at such election with strict impartiality and according to the
best of their ability, and shall, after the election, make a certificate of the
result of the vote taken. No candidate for the office of Director shall be
appointed as an inspector.
Section 6. Validity of Proxies. The right to vote by proxy shall exist only if
the instrument authorizing such proxy to act shall have been signed by the
shareholder or by his or her duly authorized attorney. Unless a proxy provides
otherwise, it s hall not be valid more than eleven months after its date. All
proxies shall be delivered to the Secretary of the Corporation or to the person
acting as Secretary of the meeting before being voted, who shall decide all
questions concerning qualification of voters, the validity of proxies, and the
acceptance or rejection of votes. If inspectors of election have been appointed
by the chairman of the meeting, such inspectors shall decide all such questions.
A proxy with respect of stock held in t he name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Corporation receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a shareholder
shall be deemed valid unless challenged at or prior to its exercise.
Section 7. Stock Ledger and List of Shareholders. It shall be the duty of the
Secretary or Assistant Secretary of the Corporation to cause an original or
duplicate stock ledger to be maintained at the office of the Corporation's
transfer agent. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for
visual inspection.
Any one or more persons, each of whom has been a shareholder of record of the
Corporation for more than six months next preceding such request, who owns in
the aggregate five percent or more of the outstanding capital stock of the
Corporation, may submit (unless the Corporation at the time of the request
maintains a duplicate stock ledger at its principal office in Maryland) a
written request to any officer of the Corporation or its resident agent in
Maryland for a list of the shareholders of the Corporation. Within twenty days
after such a request, there shall be prepared and filed at the Corporation's
principal office in Maryland a list containing the names and addresses of all
shareholders of the Corporation and the number of shares of each class held by
each shareholder, certified as correct by an officer of the Corporation, by its
stock transfer agent, or by its registrar.
Section 8. Action Without Meeting. Any action required or permitted to be taken
by shareholders at a meeting of shareholders may be taken without a meeting if
(1) all shareholders entitled to vote on the matter sign a written consent to
the action, ( 2) all shareholders entitled to notice of the meeting but not
entitled to vote at it sign a written waiver of any right to dissent, and (3)
the consents and waivers are filed with the records of the meetings of
shareholders. Such consent shall be treated for all purposes as a vote at the
meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. Except as otherwise provided by operation of law, by the
Articles of Incorporation, or by these Bylaws, the business and affairs of the
Corporation shall be managed under the direction of and all the powers of the
Corporation shall be exercised by or under authority of its Board of Directors.
Section 2. Number and Term of Directors. Except for the initial Board of
Directors, the Board of Directors shall consist of not fewer than three nor more
than five Directors, as specified by a resolution of a majority of the entire
Board of Director s. Directors need not be shareholders of the Corporation. All
acts done at any meeting of the Directors or by any person acting as a Director,
so long as his or her successor shall not have been duly elected or appointed,
shall, notwithstanding that it be afterwards discovered that there was some
defect in the election of the Directors or of such person acting as a Director
or that they or any of them were disqualified, be as valid as if the Directors
or such other person, as the case may be, h ad been duly elected and were or was
qualified to be Directors or a Director of the Corporation. Each Director shall
hold office until his or her successor is elected and qualified or until his or
her earlier death, resignation, or removal.
Section 3. Election. Unless otherwise required by the 1940 Act, at each annual
meeting of shareholders, Directors shall be elected by vote of the holders of a
majority of the shares present in person or by proxy and entitled to vote
thereon. A plurality of all the votes cast at a meeting at which a quorum is
present is sufficient to elect a Director.
Section 4. Vacancies and Newly Created Directorships. If any vacancies shall
occur in the Board of Directors by reason of death, resignation, removal, or
otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies (if not
previously filled by the shareholders) may be filled by a majority of the
Directors then in office, although less than a quorum, except that a newly
created Directorship may be filled only by a majority vote of the entire Board
of Directors; provided, however, that if, at any time that there are
shareholders of the Corporation, immediately after filling such vacancy at least
two-thirds (2/3) of the Directors then holding office shall have be en elected
to such office by the shareholders of the Corporation. In the event that at any
time, other than the time preceding the first annual shareholders' meeting, less
than a majority of the Directors of the Corporation holding office at that time
were elected by the shareholders, a meeting of the shareholders shall be held
promptly and in any event within sixty days for the purpose of electing
Directors to fill any existing vacancies in the Board of Directors, unless the
Securities and Exchange Commission shall by order extend such period.
Section 5. Removal. At any shareholders' meeting duly called, provided a quorum
is present, the shareholders may remove any director from office (either with or
without cause) and may elect a successor or successors to fill any resulting
vacancies for the unexpired terms of the removed director or directors. A
majority of all the votes entitled to be cast for the election of directors is
sufficient to remove a Director.
Section 6. Annual and Regular Meetings. The annual meeting of the Board of
Directors for choosing officers and transacting other proper business shall be
held at such other time and place as the Board may determine. The Board of
Directors from time to time may provide by resolution for the holding of
regular meetings and fix their time and place within or outside the State of
Maryland. Except as otherwise provided in the 1940 Act, notice of such annual
and regular meetings need not be given, provided that notice of any change in
the time or place of such meetings shall be sent promptly to each Director not
present at the meeting at which such change was made, in the manner provided
for notice of special meetings. Except as otherwise provided under the 1940
Act, members of the Board of Directors or any committee designated thereby may
participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment that allows all persons
participating in the meeting to hear each other at the same time.
Section 7. Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board, the Vice Chairman, the
President (or, in the absence or disability of the President, by any Vice
President), the Treasurer, or by two or more Directors, at the time and place
(within or without the State of Maryland) specified in the respective notice or
waivers of notice of such meetings. Notice of special meetings, stating the
time and place, shall be (1) mailed to each Director at his or her residence or
regular place of business at least three days before the day on which a special
meeting is to be held or (2) delivered to him or her personally or transmitted
to him or her by telegraph, telecopy, telex, cable, or wireless at least one
day before the meeting.
Section 8. Waiver of Notice. No notice of any meeting need be given to any
Director who is present at the meeting or who waives notice of such meeting in
writing (which waiver shall be filed with the records of such meeting) either
before or after t he time of the meeting.
Section 9. Quorum and Voting. At all meetings of the Board of Directors, the
presence of one half or more of the number of Directors then in office shall
constitute a quorum for the transaction of business, provided that, at any time
that there shall be more than one director, there shall be present at least two
directors. In the absence of a quorum, a majority of the Directors present may
adjourn the meeting, from time to time, until a quorum shall be present. The
action of a majority of the Directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors, unless concurrence of a
greater proportion is required for such action by law, by the Articles of
Incorporation, or by these Bylaws.
Section 10. Action Without a Meeting. Except as otherwise provided under the
1940 Act, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written consent to such action is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
Section 11. Compensation of Directors. Directors shall be entitled to receive
such compensation from the Corporation for their services as may from time to
time be determined by resolution of the Board of Directors.
ARTICLE IV
COMMITTEES
Section 1. Organization. By resolution adopted by the Board of Directors, the
Board may designate one or more committees of the Board of Directors, including
an Executive Committee. The Chairmen of such committees shall be elected by the
Board of Directors. Each committee must be comprised of two or more members,
each of whom must be a Director and shall hold committee membership at the
pleasure of the Board. The Board of Directors shall have the power at any time
to change the members of such committees and to fill vacancies in the
committees. The Board may delegate to these committees any of its powers,
except the power to declare a dividend or distribution on stock, authorize the
issuance of stock, recommend to shareholders any action requiring shareholders'
approval, amend these Bylaws, approve any merger or share exchange which does
not require shareholder approval, approve or terminate any contract with an
"investment adviser" or "principal underwriter," as those terms are defined in
the 1940 Act, or to take any other action required by the 1940 Act to be taken
by the Board of Directors.
Section 2. Executive Committee. Unless otherwise provided by resolution of the
Board of Directors, when the Board of Directors is not in session, the Executive
Committee, if one is designated by the Board, shall have and may exercise all
powers of t he Board of Directors in the management of the business and affairs
of the Corporation that may lawfully be exercised by an Executive Committee.
The President and Chairman shall automatically be members of the Executive
Committee.
Section 3. Proceedings and Quorum. In the absence of an appropriate resolution
of the Board of Directors, each committee may adopt such rules and regulations
governing its proceedings, quorum, and manner of acting as it shall deem proper
and desirable. In the event any member of any committee is absent from any
meeting, the members thereof present at the meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member.
Section 4. Other Committees. The Board of Directors may appoint other
committees, each consisting of one or more persons, who need not be Directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Directors, but shall not
exercise any power which may lawfully be exercised only by the Board of
Directors or a committee thereof.
ARTICLE V
OFFICERS
Section 1. General. The officers of the Corporation shall be a Chairman; Chief
Executive Officer; Vice President; Treasurer; and Secretary and may include one
or more Vice Presidents, Assistant Secretaries, or Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 11 of this Article.
Section 2. Election, Tenure and Qualifications. The officers of the
Corporation, except those appointed as provided in Section 11 of this Article
V, shall be elected by the Board of Directors at its first meeting or such
subsequent meetings as shall be held prior to its first annual meeting, and
thereafter annually at its annual meeting. If any officers are not elected at
any annual meeting, such officers may be elected at any subsequent regular or
special meeting of the Board. Except as otherwise provided in this Article V,
each officer elected by the Board of Directors shall hold office until the next
annual meeting of the Board of Directors and until his or her successor shall
have been elected and qualified. Any person may hold one or more offices of
the Corporation except that no one person may serve concurrently as both
President and Vice President. A person who holds more than one office in the
Corporation may not act in more than one capacity to execute, acknowledge, or
verify an instrument required by law to be executed, acknowledged, or verified
by more than one officer. No officer, other than the Chairman or [Vice
Chairman], need be a Director.
Section 3. Vacancies and Newly Created Officers. If any vacancy shall occur in
any office by reason of death, resignation, removal, disqualification, or other
cause, or if any new office shall be created, such vacancies or newly created
offices may be filled by the Board of Directors at any regular or special
meeting or, in the case of any office created pursuant to Section 11 hereof, by
any officer upon whom such power shall have been conferred by the Board of
Directors.
Section 4. Removal and Resignation. Any officer may be removed from office by
the vote of a majority of the members of the Board of Directors given at a
regular meeting or any special meeting called for such purpose. Any officer may
resign from off ice at any time by delivering a written resignation to the Board
of Directors, the President, the Chairman, the Secretary, or any Assistant
Secretary. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 5. Chief Executive Officer. The Chief Executive Officer shall be the
chief executive officer of the Corporation and, in the absence of the Chairman,
shall preside at all shareholders' meetings and at all meetings of the Board of
Directors. Subject to the supervision of the Board of Directors, the Chief
Executive Officer shall have general charge of the business, affairs, and
property of the Corporation and general supervision over its officers,
employees, and agents. Except as the Board of Directors may otherwise order,
the Chief Executive Officer may sign in the name and on behalf of the
Corporation all deeds, bonds, contracts, or agreements. The Chief Executive
Officer shall exercise such other powers and perform such other duties as from
time to time may be assigned by the Board of Directors.
Section 6. Chairman. The Chairman shall be an executive officer of the
Corporation and shall preside at all shareholders' meetings and at all meetings
of the Board of Directors, and may be ex officio a member of all committees of
the Board of Directors. Except as the Board of Directors may otherwise order,
the Chairman may sign in the name and on behalf of the Corporation all deeds,
bonds, contracts, or agreements. The Chairman shall exercise such other powers
and perform such other duties as from time to time may be assigned by the Board
of Directors.
Section 7. Vice President. The Board of Directors may from time to time elect
one or more Vice Presidents who shall have such powers and perform such duties
as from time to time may be assigned to them by the Board of Directors or the
President. The Board of Directors may establish titles among the Vice
Presidents denoting their relative seniority. At the request of, or in the
absence or in the event of the disability of, the President, the Vice President
(or, if there are two or more Vice Presidents, then the senior of the Vice
Presidents present and able to act) may perform all the duties of the President
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the President.
Section 8. Treasurer and Assistant Treasurers. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, the Treasurer shall have
general supervision of the funds and property of the Corporation and of the
performance by the Custodian of its duties with respect thereto. The Treasurer
shall render to the Board of Directors, whenever directed by the Board, an
account of the financial condition of the Corporation and of all transactions as
Treasurer; and as soon as possible after the close of each financial year the
Treasurer shall make and submit to the Board of Directors a like report for
such financial year. The Treasurer shall perform all acts incidental to the
office of Treasurer, subject of the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries. The Secretary shall attend to
the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the shareholders and Directors in books to be
kept for that purpose. The Secretary shall keep in safe custody the seal of
the Corporation, and shall have responsibility for the records of the
Corporation, including the stock books and such other books and papers as the
Board of Directors may direct and such books, reports, certificates, and other
documents required by law to be kept, all of which shall at all reasonable times
be open to inspection by any Director. The Secretary shall perform such other
duties which appertain to this office or as may be required by the Board of
Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
Section 10. Subordinate Officers. The Board of Directors from time to time may
appoint such other officers and agents as it may deem advisable, each of whom
shall have such title, hold office, for such period, have such authority, and
perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities, and duties. Any officer or
agent appointed in accordance with the provisions of this Section 11 may be
removed, either with or without cause, by any officer upon whom such power of
removal shall have been conferred by the Board of Directors.
Section 11. Remuneration. The salaries or other compensation, if any, of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors in the manner provided by Section 9 of Article III,
except that the Board of Directors may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 11 of this Article V.
Section 12. Surety Bond. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the 1940 Act and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder) to the Corporation in such sum
and with such surety or sureties as the Board of Directors may determine,
conditioned upon the faithful performance of his or her duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. The interest of each shareholder of the
Corporation may be evidenced by certificates for shares of stock in such form as
the Board of Directors may from time to time authorize; provided, however, the
Board of Direct ors may, in its discretion, authorize the issuance of non-
certificated shares. No certificate shall be valid unless it is signed by the
Chairman, President, or a Vice President and countersigned by the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation and sealed with the seal of the Corporation, or bears the facsimile
signatures of such officers and a facsimile of such seal. In case any officer
who shall have signed any such certificate, or whose facsimile signature has
been placed thereon, shall cease to be such an officer (because of death,
resignation, or otherwise) before such certificate is issued, such certificate
may be issued and delivered by the Corporation with the same effect as if he or
she were such officer at the date of issue.
In the event that the Board of Directors authorizes the issuance of non-
certificated shares of stock, the Board of Directors may, in its discretion and
at any time, discontinue the issuance of share certificates and may, by written
notice to the registered owners of each certificated share, require the
surrender of share certificates to the Corporation for cancellation. Such
surrender and cancellation shall not affect the ownership of shares of the
Corporation.
Section 2. Transfer of Shares. Subject to the provisions of the next sentence
of this Section 2 of Article VI, Shares of the Corporation shall be
transferable on the books of the Corporation by the holder of record thereof in
person or by his or her duly authorized attorney or legal representative (i)
upon surrender and cancellation of any certificate or certificates for the same
number of shares of the same class, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signature as the Corporation or its agents may reasonably require, or (ii)
as otherwise prescribed by the Board of Directors. the Board of Directors may,
from time to time, adopt limitations and rules and regulations with reference
to the transfer of the shares of stock of the Corporation to comply with the
requirements of the Securities Act of 1933, as amended, or other applicable
laws. The Corporation shall be entitled to treat the holder of record of any
share of stock as the absolute owner thereof for all purposes, and accordingly
shall not be bound to recognize any legal, equitable, or other claim or
interest in such share on the part of any other person, whether or not it shall
have express o r other notice thereof, except as otherwise expressly provided
by law or the statutes of the State of Maryland.
Section 3. Stock Ledgers. The stock ledgers of the Corporation, containing the
names and addresses of the shareholders and the number of shares held by them
respectively, shall be kept at the principal offices of the Corporation or, if
the Corporation employs a transfer agent, at the offices of the transfer agent
of the Corporation.
Section 4. Transfer Agents and Registrars. The Board of Directors may from time
to time appoint or remove transfer agents and registrars of transfers for shares
of stock of the Corporation, and it may appoint the same person as both transfer
agent a nd registrar. Upon any such appointment being made, all certificates
representing shares of capital stock thereafter issued shall be countersigned by
one of such transfer agents or by one of such registrars or by both and shall
not be valid unless s o countersigned. If the same person shall be both transfer
agent and registrar, only one countersignature by such person shall be required.
Section 5. Fixing of Record Date. The Board of Directors may fix in advance a
date as a record date for the determination of the shareholders entitled to
notice of or to vote at any shareholders' meeting or any adjournment thereof, or
to express con sent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion, or
exchange of stock, or for the purpose of any other lawful action, provided that
(1) such record date shall be within ninety days prior to the date on which the
particular action requiring such determination will be taken; (2) the transfer
books shall not be closed for a period longer than twenty days; and (3) in the
case of a meeting of shareholders, the record date shall be at least ten days
before the date of the meeting.
Section 6. Lost, Stolen or Destroyed Certificates. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen, or
destroyed, the Board of Directors or any officer authorized by the Board may, in
its discretion, require the owner of the lost, stolen, or destroyed certificate
(or his or her legal representative) to give the Corporation a bond or other
indemnity, in such form and in such amount as the Board or any such officer may
direct and with such surety or sureties as may be satisfactory to the Board or
any such officer, sufficient to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss, theft, or destruction of
any such certificate or the issuance of such new certificate.
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT
Section 1. Fiscal Year. The fiscal year of the Corporation shall, unless
otherwise ordered by the Board of Directors, be twelve calendar months ending on
the 31st day of March.
Section 2. Accountant.
A. The Corporation shall employ an independent public accountant or a firm of
independent public accountants as its Accountant to examine the accounts of the
Corporation and to sign and certify financial statements filed by the
Corporation. The Accountant's certificates and reports shall be addressed both
to the Board of Directors and to the shareholders. The employment of the
Accountant shall be conditioned upon the right of the Corporation to terminate
the employment forthwith without any penalty by vote of a majority of the
outstanding voting securities at any shareholders' meeting called for that
purpose.
B. A majority of the members of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of the Corporation shall select the
Accountant at any meeting held within thirty days before or after the beginning
of the fiscal y ear of the Corporation or before the annual shareholders'
meeting in that year. The selection shall be submitted for ratification or
rejection at the next succeeding annual shareholders' meeting. If the selection
is rejected at that meeting, the Accountant shall be selected by majority vote
of the Corporation's outstanding voting securities, either at the meeting at
which the rejection occurred or at a subsequent meeting of shareholders called
for the purpose of selecting an Accountant.
C. Any vacancy occurring between annual meetings due to the resignation of the
Accountant may be filled by the vote of a majority of the members of the
Board of Directors who are not interested persons.
ARTICLE VIII
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Corporation shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments owned by the
Corporation. The Custodian (and any sub-custodian) shall be a bank or trust
company of good standing having an aggregate capital, surplus, and undivided
profits not less than fifty million dollars ($50,000,000) or such other
financial institution or other entity as shall be permitted by rule or order of
the Securities and Exchange Commission. The Custodian shall be appointed from
time to time by the Board of Directors, which shall fix its remuneration.
Section 2. Termination of Custodian Agreement. Upon termination of the
agreement for services with the Custodian or inability of the Custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
Custodian, but in the event that no successor Custodian can be found who has
the required qualifications and is willing to serve, the Board of Directors
shall call as promptly as possible a special meeting of the shareholders to
determine whether the Corporation shall function without a Custodian or shall
be liquidated. If so directed by resolution of the Board of Directors or by
vote of the holders of a majority of the outstanding shares of stock of the
Corporation, the Custodian shall deliver and pay over all property of the
Corporation held by it as specified in such vote.
Section 3. Other Arrangements. The Corporation may make such other arrangements
for the custody of its assets (including deposit arrangements) as may be
required by any applicable law, rule, or regulation.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
Section 1. Indemnification of Officers, Directors, Employees and Agents. The
Corporation shall indemnify its present and past directors, officers, employees,
and agents (including any "investment adviser" or "principal underwriter," as
those terms a re defined in the 1940 Act), and any persons who are serving or
have served at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or
enterprise, to the full extent provided and allowed by Section 2-418 of the
Annotated Corporations and Associations Code of Maryland concerning
corporations, as amended from time to time or any other applicable provisions of
law. Notwithstanding anything herein to the contrary, no director, officer,
investment adviser, or principal underwriter of the Corporation shall be
indemnified in violation of Sections 17(h) and (i) of the 1940 Act. Expenses
incurred by any such person in defending any proceeding to which he or she is a
party by reason of service in the above-referenced capacities shall be paid in
advance or reimbursed by the Corporation to the full extent permitted by law,
including Sections 17(h) and (i) of the 1940 Act.
Section 2. Insurance of Officers, Directors, Employees and Agents. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against that person and incurred by
that person in or arising out of his or her position, whether or not the
Corporation would have the power to indemnify him or her against such liability.
Notwithstanding the foregoing, any such insurance so purchased will not protect
or purport to protect any officer or director against liabilities for willful
misfeasance, bad faith, gross negligence, or reckless disregard of duty.
Section 3. Amendment. No amendment, alternation, or repeal of this Article or
the adoption, alteration, or amendment of any other provision of the Articles
of Incorporation or Bylaws inconsistent with this Article shall adversely
affect any right or protection of any person under this Article with respect to
any act or failure to act which occurred prior to such amendment, alteration,
repeal, or adoption.
ARTICLE X
AMENDMENTS
Section 1. General. Except as provided in Section 2 of this Article X, all
Bylaws of the Corporation, whether adopted by the Board of Directors or the
shareholders, shall be subject to amendment, alteration, or repeal, and new
Bylaws may be made by the affirmative vote of a majority of either: (1) the
holders of record of the outstanding shares of stock of the Corporation entitled
to vote, at any annual or special meeting, the notice or waiver of notice of
which shall have specified or summarized the proposed amendment, alteration,
repeal, or new Bylaw; or (2) the Directors, at any regular or special meeting
the notice or waiver of notice of which shall have specified or summarized the
proposed amendment, alteration, repeal, or new Bylaw.
Section 2. By Shareholders Only. No amendment of any section of these Bylaws
shall be made except by the shareholders of the Corporation if the Bylaws
provide that such section may not be amended, altered, or repealed except by the
shareholders. From and after the issue of any shares of the capital stock of
the Corporation, no amendment, alteration, or repeal of this Article X shall be
made except by the affirmative vote of the holders of either: (a) more than two-
thirds of the Corporation's outstanding shares present at a meeting at which
the holders of more than fifty percent of the outstanding shares are present in
person or by proxy, or (b) more than fifty percent of the Corporation's
outstanding shares.
MANAGEMENT AGREEMENT
Management Agreement ("Agreement") made as of November 27, 1995 between Access
Capital Strategies Community Investment Fund, Inc.: Institutional Investor
Portfolio ("Fund"), a Maryland corporation, and Access Capital Strategies
Corporation ("Access"), a Massachusetts corporation. Access is sometimes
referred to herein as the "Manager."
WHEREAS the Fund is a newly organized, non-diversified closed-end management
investment company that has elected status as a business development company
("BDC") under the Investment Company Act of 1940 ("1940 Act"); and
WHEREAS the Manager is an investment adviser registered as such under the
Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS the Fund desires to retain the Manager to furnish certain investment
advisory, portfolio management, and administrative services to the Fund and the
Manager is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Access as Manager for the
period and on the terms set forth in this Agreement. Access accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided .
2. Investment Duties. Subject to the supervision of the Fund's Board of
Directors ("Board"), the Manager will provide a continuous investment program
for the Fund and will determine from time to time what securities and other
investments will be purchased, retained, or sold by the Fund. Subject to
investment policies and guidelines established by the Board, the Manager will
identify, evaluate, and structure the investments to be made by the Fund,
arrange debt financing for the Fund, provide portfolio management and servicing
of securities held in the Fund's portfolio, and administer the Fund's day-to-day
affairs.
3. Administrative Duties. The Manager will administer the affairs of
the Fund subject to the supervision of the Board and the following
understandings:
(a) The Manager will supervise all aspects of the operations of the
Fund, including oversight of transfer agency, custodial, and accounting
services; provided, however, that nothing herein contained shall be deemed to
relieve or deprive the Board of its responsibility for and control of the
conduct of the affairs of the Fund.
(b) The Manager will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as required) of the Fund's registration
statement under the Securities Exchange Act of 1934 ("1934 Act"), proxy
material, tax returns , and required reports to the Fund's shareholders and the
Securities and Exchange Commission ("SEC") and other appropriate federal or
state regulatory authorities.
(c) The Manager will maintain or oversee the maintenance of all books
and records with respect to the Fund, and will furnish the Board with such
periodic and special reports as the Board reasonably may request. In compliance
with the requirements of Rule 31a-3 under the 1940 Act, the Manager hereby
agrees that all records which it maintains for the Fund are the property of the
Fund, agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any records which it maintains for the Fund and which are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Fund any records which it maintains for the Fund upon request by
the Fund.
(d) All cash, securities, and other assets of the Fund will be
maintained in the custody of one or more banks in accordance with the provisions
of Section 17(f) of the 1940 Act and the rules thereunder; the authority of the
Manager to instruct the Fund's custodian(s) to deliver and receive such cash,
securities, and other assets on behalf of the Fund will be governed by a
custodian agreement between the Fund and each such custodian, and by resolution
of the Board.
4. Use of Sub-Investment Adviser. The Manager may, subject to the
approvals required under the 1940 Act, employ a sub-investment adviser to assist
the Manager in the performance of its duties under this Agreement. Such use
does not relieve the Manager of any duty or liability it would otherwise have
under this Agreement. Compensation of any such sub-investment adviser for
services provided and expenses assumed under any agreement between the Manager
and such sub-investment adviser permitted under this paragraph is the sole
responsibility of the Manager.
5. Further Duties. In all matters relating to the performance of this
Agreement, the Manager will act in conformity with the Articles of Incorporation
and By-Laws of the Fund and with the instructions and directions of the Board
and will comply with the requirements of the 1940 Act, the rules thereunder,
and all other applicable federal and state laws and regulations.
6. Services Not Exclusive. The services furnished by the Manager
hereunder are not to be deemed exclusive and the Manager shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired there by. Nothing in this Agreement shall limit or restrict
the right of any director, officer, or employee of the Manager, who may also be
a director, officer, or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or dissimilar nature.
7. Expenses.
(a) The Fund will pay all expenses (including without limitation
accounting, legal, printing, clerical, filing, and other expenses) incurred by
the Fund, the Manager or its affiliates on behalf of the Fund in connection with
the organization of the Fund and the initial offering of its shares. Except as
otherwise expressly provided for in Section 7(b) of this Agreement, during the
term of this Agreement the Fund will bear all of its expenses incurred in its
operations including but not limited to the following: (i) brokerage and
commission expense and other transaction costs incident to the acquisition and
dispositions of investments, (ii) federal, state, and local taxes and fees,
including transfer taxes and filing fees, incurred b y or levied upon the Fund,
(iii) interest charges and other fees in connection with borrowings, (iv) SEC
fees and expenses and any fees and expenses of state securities regulatory
authorities, (v) expenses of printing and distributing reports and not ices to
shareholders, (vi) costs of proxy solicitation, (vii) costs of meetings of
shareholders and the Board, (viii) charges and expenses of the Fund's custodian,
transfer and dividend disbursing agent, and fund accountant, (ix) compensation
and expenses of the Fund's directors who are not interested persons of the Fund
or the Manager, and of any of the Fund's officers who are not interested persons
of the Manager, and expenses of all directors in attending board or shareholder
meetings, (x) legal and auditing expenses, including expenses incident to the
documentation for, and consummation of, transactions, (xi) costs of any
certificates representing the Shares, (xii) costs of stationery and supplies,
(xiii) the costs of membership by the Fund in any trade organizations, (xiv)
expenses associated with litigation and other extraordinary or non-recurring
expenses and (xv) any insurance premiums.
(b) The expenses to be borne by the Manager are limited to the
following: (i) all costs and fees incident to the selection and investigation of
prospective Fund investments, including associated due diligence expenses such
as travel expenses and professional fees (but excluding legal and accounting
fees and other costs incident to the closing, documentation, or consummation of
such transactions), (ii) the cost of adequate office space for the Fund and all
necessary office equipment and services, including telephone service, heat,
utilities, and similar items, (iii) the costs of providing the Fund with such
corporate, administrative, and clerical personnel (including officers and
directors of the Fund who are interested persons of the Manager and are acting
in their respective capacities as officers and directors) as the Board
reasonably deems necessary or advisable to perform the services required to be
performed by the Manager under this Agreement, and (iv) the costs of providing
significant managerial assistance offered to an accepted by the recipient of
Fund investments.
(c) The Fund may pay directly any expenses incurred by it in its normal
operations and, if any such payment is consented to by the Manager and
acknowledged as otherwise payable by the Manager pursuant to this Agreement, the
Fund may reduce the fee payable to the Manager pursuant to Paragraph 8 thereof
by such amount. To the extent that such deductions exceed the fee payable to
the Manager on any quarterly payment date, such excess shall be carried forward
and deducted in the same manner from the fee payable on succeeding quarterly
payment dates.
(d) The payment or assumption by the Manager of any expense of the Fund
that the Manager is not required by this Agreement to pay or assume shall not
obligate the Manager to pay or assume the same or any similar expense of the
Fund on any sub sequent occasion.
8. Compensation.
(a) For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Manager a fee ("Management Fee"), paid
quarterly, at an annual rate of .75% of the Fund's average gross monthly
assets, less accrued liabilities other than indebtedness for borrowings.
(b) If this Agreement becomes effective or terminates before the end of
any fiscal quarter, the Management Fee for the period from the effective day to
the end of the fiscal quarter or from the beginning of such quarter to the date
of termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full fiscal quarter in which such
effectiveness or termination occurs.
(c) If (i) the Manager, (ii) an officer, director, or employee of the
Manager, (iii) a company controlling, controlled by, or under common control
with a Manager, or (iv) an officer, director, or employee of any such company
receives any compensation from a company whose securities are held in the
Fund's portfolio in connection with the provision to that company of significant
managerial assistance, the compensation due to the Manager hereunder shall be
reduced by the amount of such fee. If such amounts have not been fully offset
at the time of termination of this Agreement, the Manager shall pay such excess
amounts to the Fund upon termination.
9. Limitation of Liability of Manager. The Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates except a loss
resulting from willful misfeasance, bad faith, or gross negligence on their
part in the performance of their duties or from reckless disregard by them of
their obligations and duties under this Agreement. Any person, even though also
an officer, director, employee, or agent of the Manager, who may be or become
an officer, director, employee, or agent of the Fund shall be deemed, when
rendering services to the Fund or acting with respect to any business of the
Fund, to be rendering such service to or acting solely for the Fund and not as
an officer, director, employee, or agent or one under the control or direction
of the Manager even though paid by it.
10. Duration and Termination.
(a) This Agreement shall become effective upon the date hereabove
written provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those directors of the Fund who are
not parties to t his Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Fund's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, this Agreement shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of those directors of the
Fund who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of the Fund.
(c) Notwithstanding the foregoing, this Agreement may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote
of a majority of the outstanding voting securities of the Fund on sixty days'
written notice to the Manager or by the Manager at any time, without the
payment of any penalty, on sixty days' written notice to the Fund. This
Agreement will automatically terminate in the event of its assignment.
(d) Notwithstanding the foregoing, if a subsequent Closing with respect
to the Fund does not occur within three years from the date of the First
Closing, Access will submit to the Board an offer of resignation as Manager.
The terms "First Closing" and "Closing" have the meanings ascribed to them in
the Private Offering Memorandum.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought, and no amendment of this Agreement shall
be effective until approved by vote of a majority of the Fund's outstanding
voting securities.
12. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Maryland, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent
that the applicable laws of the State of Maryland conflict with the applicable
provisions of the 1940 Act, the latter shall control.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities",
"affiliated person", "interested person", "assignment", "broker", "investment
adviser", "national securities exchange", "net assets", "security ", and
"significant managerial assistance" shall have the same meaning as such terms
have in the 1940 Act, subject to such exemption as may be granted by the SEC by
any rule, regulation, or order. Where the effect of a requirement of the 1940
Act reflected in any provision of this Agreement is relaxed by a rule,
regulation, or order of the SEC, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation, or
order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
ACCESS CAPITAL STRATEGIES COMMUNITY
INVESTMENT FUND, INC.: INSTITUTIONAL INVESTOR PORTFOLIO
By: __________________
Name:
Title:
ACCESS CAPITAL STRATEGIES CORPORATION
By: __________________
Name:
Title:
INVESTMENT SERVICES AGREEMENT
THIS AGREEMENT made and entered into as of November 27, 1995, by and between
Access Capital Strategies Corp. ("Access Capital"), and Mellon Bank, N.A.
("MBNA").
WHEREAS, certain clients of Access Capital ("Clients") have placed funds under
Access Capital's management for investment in one or more investment vehicles
managed by Access Capital; and
WHEREAS, Access Capital desires to have the Clients' funds invested in liquid
fixed-incomes securities on a temporary basis while Access Capital locates
suitable long term investments for the clients; and
WHEREAS, MBNA is willing and able to assist Access Capital in investing the
Clients' funds in liquid fixed-incomes securities on a temporary basis:
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree
as follows:
l. MBNA will invest such funds of Access Capital's Clients as Access
Capital may provide to it in MBNA's products ("Products") designated
by Access Capital, subject to the following limitations:
(a) The investment guidelines of the Products are described in
Schedule 1, Part A. MBNA may not change the nature or operation of the Products,
insofar as Access Capital's Clients' funds are invested in it, without the
written approval of Access Capital.
(b) MBNA may use the types of investment vehicles described in
Schedule 1, Part B, in operating the Products for Access Capital's Clients'
funds. MBNA may not use other types of investment vehicles without the written
approval of Access Capital.
(c) The investment vehicles used by MBNA in the operation of the
Products for Access Capital's Client's funds are subject to
the credit standards and limits set out in Schedule 1, Part C.
(d) In effecting transactions involving Access Capital's Client's
funds, MBNA may use such brokers, dealers, or other agents, as
it in its discretion deems advisable, subject to the
limitations set out in Schedule 1, Part D.
(e) MBNA will cause a written confirmation of each transaction
involving Access Capital's Client's funds to be promptly sent to Access Capital
by the broker, dealer or other agent effecting the transaction, or, in the case
of deposits, by the institution maintaining the deposit.
(f) MBNA will prepare monthly and quarterly reports for Access
Capital's Clients as set out in Schedule 2.
(g) Access Capital's Clients, and their trustees or custodians,
will be responsible for determining the custody arrangements
for funds invested pursuant to this Agreement.
(h) Access Capital may change the terms of Schedules 1 and 2 upon
delivery of written notice to MBNA.
(i) MBNA, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Articles of Incorporation, By-
Laws and Registration Statements of the Clients and with the instructions and
directions of the Boards of Directors of the Clients and shall conform to and
comply with the applicable requirements of the 1940 Act and all other applicable
federal and state laws and regulations.
(j) MBNA agrees to preserve for the periods prescribed by Rule
31a-2 of the Securities and Exchange Commission (the "Commission") under the
Investment Company Act of 1940, as amended (the "1940 Act"), any such records
as are required to be maintained by Rule 31a-1(f) of the Commission under the
1940 Act.
2. Access Capital may, at any time, cause its Clients' funds to be
invested in another manner.
3. In exchange for the investment services rendered hereunder by MBNA,
Access Capital shall pay MBNA fees in accordance with the attached Schedule 3.
MBNA shall submit to Access Capital, quarterly, its invoice for fees, costs, and
expenses charged and incurred as contemplated by this Agreement.
4. In the absence of: (a) willful misfeasance, bad faith or gross
negligence on the part of MBNA in the performance of its obligations and duties
hereunder; (b) reckless disregard by MBNA of its obligations and duties
hereunder; or (c) a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act), MBNA shall not be subject to any liability whatsoever to Access
Capital, any Client or the shareholders of any Client, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation,
for any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of any Client.
5. The investment advisory services of MBNA hereunder are not to be
deemed exclusive, and MBNA shall be free to render similar services
to others.
6. This Agreement shall be governed and construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts and of the United
States, and shall be binding upon and inure to the benefit of, the successors
and permitted assigns of the parties hereto.
7. This Agreement is personal to Access Capital and MBNA and neither
party may assign any right or delegate any duty hereunder without the
permission of the other party.
8. This Agreement may not be amended except by an agreement in writing
signed by the parties hereto.
9. This Agreement, unless sooner terminated as provided herein, shall
continue until November 27, 1997, and thereafter shall continue automatically
for periods of one year so long as such continuance is specifically approved at
least annually with respect to each Client: (a) by the vote of a majority of
those members of the Board of Directors of each Client who are not "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting such approval; and (b) by
the Board of Director of each Client or by the vote of a majority of the
outstanding voting securities of each Client. As to each Client, this
Agreement may be terminated without penalty (i) by Access Capital upon 60 days'
notice to MBNA, (ii) by any Client's Board of Directors or by vote of the
holders of a majority of such Client's shares upon 60 days' notice to MBNA, or
(iii) by MBNA upon 60 days' notice to MBNA and the Clients. This Agreement
will also terminate automatically, as to the relevant Client, in the event of
its assignment (as defined in the 1940 Act).
10. Any notices required to be given hereunder shall be given to the
parties hereto as follows:
If to Access Capital: Access Capital Strategies Corp.
Mt. Auburn Street
Suite 200
Cambridge, MA 02138
Attn.: David F. Sand
Phone: (617) 576-5858
Fax: (617) 864-5693
If to MBNA: Mellon Bank, N.A.
One Mellon Bank Center
41st Floor
Pittsburgh, PA 15258
Attn.: Paul R. McCann
Phone: (412) 234-3839
Fax: (415) 234-9763
(or such other addresses as shall be specified in writing by the relevant person
to the other person listed above). Communications shall be mailed, faxed, hand
delivered, or delivered by express courier and shall be effective on receipt
(but if faxed shall subsequently be confirmed by letter).
11. Each party authorizes the other to rely in connection with the
respective rights and obligations under this Agreement upon approvals and other
actions on the parties' behalf by any representative specified in writing, or by
any person designated in substitution or addition by written notice to the
party so replying.
WITNESS the due execution hereof the day and year first above written.
ACCESS CAPITAL STRATEGIES CORP.
Date:____________________________ By:______________________________
MELLON BANK, N.A.
Date:____________________________ By:_______________________________
Investment Services Agreement
Between Access Capital Strategies Corp. and Mellon Bank, N.A.
Schedule 1
Part A: Investment Guidelines for Mellon Bank, N.A. Products
The investment objective for assets managed by Mellon Bank, N.A. will be to
replicate the approximate yield and overall risk characteristics of the Access
Capital Benchmark ("Benchmark"). Mellon Bank, N.A. is not required to
outperform the Benchmark . The Benchmark is comprised of the following indices:
Merrill Lynch Index % of Benchmark
Federal Home Loan Mortgage Corp. PC All Maturities 50%
Federal Agency All Maturities Master 30%
Investment Grade Corporate Master 20%
The investment services provided by Mellon Bank, N.A. will also be subject to
the provisions of the Investment Company Act of 1940, including the regulations
governing the activities of Business Development Companies and Registered
Investment Companies. Mellon Bank, N.A. will not purchase derivative
securities (as defined by the Comptroller of the Currency) or illiquid
securities.
Part B: Investment Instruments
Mellon Bank, N.A. will be permitted to invest in U.S. Government securities,
agency securities (including Mortgage Backed Securities), and corporate issues.
All securities should be U.S. $-pay fixed-income instruments.
Part C: Credit Standards of Investment Instruments
The investment instruments used by Mellon Bank, N.A. will be rated as investment
grade quality at the time of purchase.
Part D: Limitations on Brokers, Dealers, or other Agents used by Mellon Bank,
N.A. when executing the terms of the Investment Services Agreement
Mellon Bank, N.A. may use various brokers, dealers, and other agents at its own
discretion, and no additional limits or restrictions will be placed on their
selection of these service providers for the execution of the Investment
Services Agreement. Investment Services Agreement
Between Access Capital Strategies Corp. and Mellon Bank, N.A.
Schedule 2
The periodic reports provided by Mellon Bank, N.A. will be those it routinely
provides to its clients investing in a similar fashion. Investment Services
Agreement
Between Access Capital Strategies Corp. and Mellon Bank, N.A.
Schedule 3
Mellon Bank will assist Access Capital Strategies Corp. in investing the funds
of Access Capital's clients in accordance with the terms of the accompanying
Investment Services Agreement, as that agreement may be amended from time to
time. As consideration for such services, Access Capital will pay Mellon Bank
fees in accordance with the following schedule:
.0010 of 1% on the first $25,000,000
.0008 of 1% thereafter.
Fees will be payable monthly as an intrabank charge and will be calculated on
the basis of the market value of the managed assets as of the last business day
of the prior month.
Mellon Bank, N.A.
Date: ________________ By:___________________
Paul McCann
Senior Vice President
Access Capital Strategies Corp.
Date: ________________ By:___________________
David Sand
CEO & CIO
CUSTODY AGREEMENT
AGREEMENT dated as of November 27, 1995, between ACCESS CAPITAL STRATEGIES
INVESTMENT FUND, INC.: INSTITUTIONAL INVESTOR PORTFOLIO, a corporation
electing status as a business development company organized under the laws of
the State of Maryland (the "Fund"), having its principal office and place of
business at 124 Mt. Auburn Street, Suite 200, Cambridge, Massachusetts 02138,
and BOSTON SAFE DEPOSIT AND TRUST COMPANY (the "Custodian"), a Massachusetts
trust company with its principal place of business at One Boston Place,
Boston, Massachusetts 02108.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
(a) "Affiliated Person" shall have the meaning of the term within Section
2(a)3 of the 1940 Act.
(b) "Authorized Person" shall be deemed to include the President, and any
Vice President, the Secretary, the Treasurer or any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund and listed in the certification annexed
hereto as Appendix A or such other certification as may be received by the
Custodian from time to time.
(c) "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency Securities, its successor or
successors and its nominee or nominees.
(d) "Business Day" shall mean any day on which the Fund, the Custodian,
the Book-Entry System and appropriate clearing corporation(s) are
open for business.
(e) "Certificate" shall mean any notice, instruction or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian, which is actually received by the Custodian and signed on behalf of
the Fund by any two Authorized Persons or any two officers thereof.
(f) "Articles of Incorporation" shall mean the Articles of Incorporation
of the Fund dated August 30, 1995 as the same may be amended from
time to time.
(g) "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Custodian is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in a Certificate authorized to
act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees.
(h) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the government of the United States or agencies or instrumentalities thereof
("U.S. government securities"), commercial paper, bank certificates of
deposit, bankers' acceptances and short-term corporate obligations, where the
purchase or sale of such securities normally requires settlement in federal
funds on the same day as such purchase or sale , and repurchase and reverse
repurchase agreements with respect to any of the foregoing types of securities.
(i) "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from a person reasonably believed by the Custodian
to be an Authorized Person.
(j) "Private Placement Memorandum" shall mean the Fund's private
placement memorandum relating to its offer and sale of securities
pursuant to exemptions from registration under the Securities Act of
1933, as amended.
(k) "Shares" refers to shares of common stock, $.001 par value per share,
of the Fund.
(l) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities, commodities interests and investments from time to
time owned by the Fund.
(m) "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent
functions for the Fund.
(n) "Written Instructions" shall mean a written communication actually
received by the Custodian from a person reasonably believed by the Custodian to
be an Authorized Person by any system, including, without limitation,
electronic transmission s, facsimile and telex.
(o) The "1940 Act" refers to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as custodian
of all the Securities and monies at the time owned by or in the
possession of the Fund during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth, including
such duties set forth in Schedule C attached hereto.
3. Compensation.
(a) The Fund will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in the Fee Schedule
annexed hereto as Schedule A and incorporated herein. Such Fee Schedule does
not include out-of -pocket disbursements of the Custodian for which the
Custodian shall be entitled to bill separately. Out-of-pocket disbursements
shall include, but shall not be limited to, the items specified in the Schedule
of Out-of-Pocket charges annexed hereto as Schedule B and incorporated herein,
which schedule may be modified by the Custodian upon not less than thirty days
prior written notice to the Fund.
(b) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule A of this Agreement a revised Fee
Schedule, dated and signed by an Authorized Officer or authorized
representative of each party hereto.
(c) The Custodian will bill the Fund as soon as practicable after the end
of each calendar month, and said billings will be detailed in accordance with
Schedule A, as amended from time to time. The Fund will promptly pay to the
Custodian the a mount of such billing. If the Custodian submits an invoice and
the Fund has requested further information or documentation with respect to one
or more items in the invoice, the Fund shall nonetheless promptly make payment
with respect to those items for which the Fund has made no such request.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets.
The Fund will deliver or cause to be delivered to the Custodian all Securities
and monies owned by it at any time during the period of this Agreement. The
Custodian will not be responsible for such Securities and monies until actually
received by it . The Fund shall instruct the Custodian from time to time in
its sole discretion, by means of Written Instructions, or, in connection with
the purchase or sale of Money Market Securities, by means of Oral Instructions
confirmed in writing in accordance with Section 11(i) hereof or Written
Instructions, as to the manner in which and in what amounts Securities and
monies are to be deposited on behalf of the Fund in the Book-Entry System or
the Depository; provided, however, that prior to the deposit of Securities of
the Fund in the Book-Entry System or the Depository, including a deposit in
connection with the settlement of a purchase or sale, the Custodian shall have
received a Certificate specifically approving such deposits by the Custodian
in the Book-Entry System or the Depository. Securities and monies of the Fund
deposited in the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including but not limited to accounts for which the Custodian acts in a
fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for the Fund and shall credit to the
separate account all monies received by it for the account of such
Fund and shall disburse the same only:
1. In payment for Securities purchased for the Fund, as provided in
Section 5 hereof;
2. In payment of dividends or distributions with respect to the
Shares, as provided in Section 7 hereof;
3. In payment of original issue or other taxes with respect to the Shares, as
provided in Section 8 hereof;
4. In payment for Shares which have been redeemed by the Fund, as
provided in Section 8 hereof;
5. Pursuant to Written Instructions setting forth the name and
address of the person to whom the payment is to be made, the amount to be paid
and the purpose for which payment is to be made, provided that in the event of
disbursements pursuant to this Sub-section 4(b)(5), the Fund shall indemnify
and hold the Custodian harmless from any claims or losses arising out of such
disbursements in reliance on such Written Instructions which it, in good faith,
believes to be received from duly Authorized Persons; or
6. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as
provided in Sections 11(h) and 11(j).
(c) Confirmation and Statements. Promptly after the close of business on
each day, the Custodian shall furnish the Fund with confirmations and a summary
of all transfers to or from the account of the Fund during said day. Where
securities purchased by the Fund are in a fungible bulk of securities
registered in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Depository or the Book-Entry System,
the Custodian shall by book entry or otherwise identify the quantity of those
securities belonging to the Fund. At least monthly, the Custodian shall
furnish the Fund with a detailed statement of the Securities and monies held
for the Fund under this Agreement.
(d) Registration of Securities and Physical Separation. All Securities
held for the Fund which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the Custodian
in that form ; all other Securities held for the Fund may be registered in the
name of the Fund, in the name of the Custodian, in the name of any duly
appointed registered nominee of the Custodian as the Custodian may from time to
time determine, or in the name of the Book-Entry System or the Depository or
their successor or successors, or their nominee or nominees. The Fund reserves
the right to instruct the Custodian as to the method of registration and
safekeeping of the Securities. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee or in
the name of the Book-Entry System or the Depository, any Securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to the Fund which are not held in the Book-
Entry System or the Depository in a separate account for the Fund in the name
of the Fund physically segregated at all times from those of any other person
or persons. Except as provided in Section 11(j) herein, the Custodian shall
have no power or authority to assign, hypothecate, pledge or otherwise dispose
of any of the Securities, except pursuant to the directive of the Fund and only
for the account of the Fund as set forth in this Agreement. The Custodian
shall commence procedures to replace Securities lost due to robbery, burglary,
or theft while such Securities are within its control or that of its agents or
employees upon discovery of such loss.
(e) Segregated Accounts. Upon receipt of a Written Instruction the
Custodian will establish segregated accounts on behalf of the Fund to hold
liquid or other assets as it shall be directed by a Written Instruction and
shall increase or decrease the assets in such segregated accounts only as it
shall be directed by subsequent Written Instruction.
(f) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by a Written Instruction, the Custodian by
itself, or through the use of the Book-Entry System or the Depository with
respect to Securities therein deposited, shall with respect to all Securities
held for the Fund in accordance with this Agreement:
1. Collect all income due or payable. In the event that a payment
(interest or dividend) from a Fund investment is not received by
the Custodian on the date that such payment is due, the
Custodian shall so notify an officer of the Fund;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, retired or otherwise become
payable. Notwithstanding the foregoing, the Custodian shall have no
responsibility to the Fund for monitoring or ascertaining any call, redemption
or retirement dates with respect to put bonds which are owned by the Fund and
held by the Custodian or its nominees. Nor shall the Custodian have any
responsibility or liability to the Fund for any loss by the Fund for any missed
payments or other defaults resulting therefrom; unless the Custodian received
timely notification from the Fund specifying the time, place and manner for the
presentment of any such put bond owned by the Fund and held by the Custodian or
its nominee. The Custodian shall not be responsible and assumes no liability
to the Fund for the accuracy or completeness of any notification the Custodian
may furnish to the Fund with respect to put bonds;
3. Surrender Securities in temporary form for definitive Securities;
4. Execute any necessary declarations or certificates of ownership
under the Federal income tax laws or the laws or regulations of
any other taxing authority now or hereafter in effect; and
5. Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of the Fund all
rights and similar Securities issued with respect to any Securities held by the
Custodian hereunder for the Fund.
(g) Delivery of Securities and Evidence of Authority. Upon receipt of a
Written Instruction and not otherwise, except for subparagraphs 5, 6, 7, and 8
of this section 4(g) which may be effected by Oral or Written Instructions, the
Custodian, directly or through the use of the Book-Entry System or the
Depository, shall:
1. Execute and deliver or cause to be executed and delivered to such
persons as may be designated in such Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the authority of the Fund as
owner of any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held for the Fund
in exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
3. Deliver or cause to be delivered any Securities held for the Fund
to any protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate account for the Fund such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of the Fund and take
such other steps as shall be stated in Written Instructions to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
5. Deliver Securities upon sale of such Securities for the account
of the Fund pursuant to Section 5;
6. Deliver Securities upon the receipt of payment in connection with
any repurchase agreement related to such Securities entered into
by the Fund;
7. Deliver Securities owned by the Fund to the issuer thereof or its
agent when such Securities are called, redeemed, retired or otherwise become
payable; provided, however, that in any such case the cash or other
consideration is to be delivered to the Custodian. Notwithstanding the
foregoing, the Custodian shall have no responsibility to the Fund for
monitoring or ascertaining any call, redemption or retirement dates with
respect to the put bonds which are owned by the Fund and held by the Custodian
or its nominee. Nor shall the Custodian have any responsibility or liability
to the Fund for any loss by the Fund for any missed payment or other default
resulting therefrom; unless the Custodian received timely notification from the
Fund specifying the time, place and manner for the presentment of any such put
bond owned by the Fund and held by the Custodian or its nominee. The Custodian
shall not be responsible and assumes no liability to the Fund for the accuracy
or completeness of any notification the Custodian may furnish to the Fund with
respect to put bonds;
8. Deliver Securities for delivery in connection with any loans of
Securities made by the Fund but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund which may be in the
form of cash or U.S. government securities or a letter of credit;
9. Deliver Securities for delivery as security in connection with
any borrowings by the Fund requiring a pledge of Fund assets, but
only against receipt of amounts borrowed;
10. Deliver Securities upon receipt of Written Instructions from the
Fund for delivery to the Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described from time to time in
the Fund's Prospect us, in satisfaction of requests by holders of Shares for
repurchase or redemption;
11. Deliver Securities as collateral in connection with short sales
by the Fund of common stock for which the Fund owns the stock or owns preferred
stocks or debt securities convertible or exchangeable, without payment or
further consideration, into shares of the common stock sold short;
12. Deliver Securities for any purpose expressly permitted by and in
accordance with procedures described in the Fund's Prospectus; and
13. Deliver Securities for any other proper business purpose, but
only upon receipt of, in addition to Written Instructions, a certified copy of
a resolution of the Board of Directors signed by an Authorized Person and
certified by the Secretary of the Fund, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper business purpose, and naming the person
or persons to whom delivery of such Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account of
the Fund.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, a Written Instruction, and (ii) with
respect to each purchase of Money Market Securities, either a Written
Instruction or Oral Instruction, in either case specifying with respect to each
purchase: (1) the name of the issuer and the title of the Securities; (2) the
number of shares or the principal amount purchased and accrued interest, if
any; (3) the date of purchase and settlement; (4) the purchase price per unit;
(5) the total amount payable upon such purchase; (6) the name of the person
from whom or the broker through whom the purchase was made , if any; (7)
whether or not such purchase is to be settled through the Book-Entry System or
the Depository; and (8) whether the Securities purchased are to be deposited in
the Book-Entry System or the Depository. The Custodian shall receive the
Securities purchased by or for the Fund and upon receipt of Securities shall pay
out of the monies held for the account of the Fund the total amount payable
upon such purchase, provided that the same conforms to the total amount payable
as set forth in such Written or Oral Instruction.
(b) Promptly after each sale of Securities of the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, a Written Instruction, and (ii) with respect to
each sale of Money Market Securities, either Written Instruction or Oral
Instructions, in either case specifying with respect to such sale: (1) the
name of the issuer and the title of the Securities; (2) the number of shares
or principal amount sold, and accrued interest, if any; (3) the date of sale;
(4) the sale price per unit; (5) the total amount payable to the Fund upon
such sale; (6) the name of the broker through whom or the person to whom the
sale was made; and (7) whether or not such sale is to be settled through the
Book-Entry System or the Depository. The Custodian shall deliver or cause to
be delivered the Securities to the broker or other person designated by the
Fund upon receipt of the total amount payable to the Fund upon such sale,
provide d that the same conforms to the total amount payable to the Fund as
set forth in such Written or Oral Instruction. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
6. Voting and Other Action
The Custodian shall not exercise any voting rights attributable to the
Securities held hereunder by or for the account of the Fund except in
accordance with the instructions contained in a Certificate.
The Custodian shall use its best efforts, in cooperation with the Fund, to
obtain and deliver (or have obtained and delivered) to the Fund all notices,
proxies, and proxy soliciting materials with relation to such Securities, such
proxies to be executed by the registered holder of such Securities (if
registered otherwise than in the name of the Fund), but without indicating the
manner in which such proxies are to be voted.
7. Payment of Dividends or Distributions.
(a) The Fund shall furnish to the Custodian the vote of the Board of
Directors of the Fund certified by the Secretary (i) authorizing the
declaration of distributions on a specified periodic basis and authorizing the
Custodian to rely on Oral o r Written Instructions specifying the date of the
declaration of such distribution, the date of payment thereof, the record date
as of which shareholders entitled to payment shall be determined, the amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any distribution by the Fund, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per share to the shareholders of record
as of the record date and the total amount payable to the Transfer Agent on the
payment date.
(b) Upon the payment date specified in such vote, Oral Instructions or
Written Instructions, as the case may be, the Custodian shall pay out
the total amount payable to the Transfer Agent of the Fund.
8. Sale and Redemption of Shares of the Fund.
(a) Whenever the Fund shall sell any Shares, the Fund shall deliver or
cause to be delivered to the Custodian a Written Instruction duly
specifying:
1. The number of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian for the sale
of such Shares.
The Custodian understands and agrees that Written Instructions may be furnished
subsequent to the purchase of Shares and that the information contained therein
will be derived from the sales of Shares as reported to the Fund by the
Transfer Agent.
(b) Upon receipt of money from the Transfer Agent, the Custodian shall
credit such money to the separate account of the Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 8, the Custodian shall pay all original issue or
other taxes required to be paid in connection with such issuance upon the
receipt of a Written Instruct ion specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares are redeemed, the
Fund shall cause the Transfer Agent to promptly furnish to the
Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information contained in such
Written Instructions will be derived from the redemption of Shares as reported
to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the
number of Shares received by the Transfer Agent for redemption and that such
Shares are valid and in good form for redemption, the Custodian shall make
payment to the Transfer Agent of the total amount specified in a Written
Instruction issued pursuant to paragraph (d) of this Section 8.
9. Indebtedness.
(a) The Fund will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Fund borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian Written Instructions stating with respect to each such
borrowing: (1) the name of the bank; (2) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement; (3) the
time and date, if known, on which the loan is to be entered into (the
"borrowing date"); (4) the date on which the loan becomes due and payable; (5)
the total amount payable to the Fund on the borrowing date; (6) the market
value of Securities to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities; (7) whether the Custodian is to deliver such
collateral through the Book-Entry System or the Depository; and (8) a statement
that such loan is in conformance with the 1940 Act and the Fund's Private
Placement Memorandum.
(b) Upon receipt of the Written Instruction referred to in subparagraph
(a) above, the Custodian shall deliver on the borrowing date the specified
collateral and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that the same
conforms to the total amount payable as set forth in the Written Instruction.
The Custodian may, at the option of the lending bank, keep such collateral in
its possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan agreement. The
Custodian shall deliver as additional collateral in the manner directed by the
Fund from time to time such Securities as may be specified in Written
Instruction to collateralize further any transaction described in this Section
9. The Fund shall cause all Securities released from collateral status to be
returned directly to the Custodian, and the Custodian shall receive from time
to time such return of collateral as may be tendered to it. In the event that
the Fund fails to specify in Written Instruction all of the information
required by this Section 9, the Custodian shall inform the Fund of such failure
and the Custodian shall not be under any obligation to deliver any Securities
until the Fund has provided the required information. Collateral returned to
the Custodian shall be held hereunder as it was prior to being used as
collateral.
10. Persons Having Access to Assets of the Fund.
(a) No trustee or agent of the Fund, and no officer, director, employee
or agent of the Fund's investment adviser, of any sub-investment adviser of the
Fund, or of the Fund's administrator, shall have physical access to the assets
of the Fund held by the Custodian or be authorized or permitted to withdraw
any investments of the Fund, nor shall the Custodian deliver any assets of the
Fund to any such person. No officer, director, employee or agent of the
Custodian who holds any similar position with the Fund's investment adviser,
with any sub-investment adviser of the Fund or with the Fund's administrator
shall have access to the assets of the Fund. Access to the assets of the Fund
will be authorized pursuant to a resolution and pursuant to the requirements
of Rule 17f-2(d) under the 1940 Act.
(b) Nothing in this Section 10 shall prohibit any duly authorized
officer, employee or agent of the Fund, or any duly authorized officer,
director, employee or agent of the investment adviser, of any sub-investment
adviser of the Fund or of the Fund's administrator, from giving Oral
Instructions or Written Instructions to the Custodian or executing a
Certificate so long as it does not result in delivery of or access to assets
of the Fund prohibited by paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. Notwithstanding any other provision of this
Agreement, neither the Custodian nor its nominee shall be liable for any loss,
damage, cost, judgment, expense or any other liability, including reasonable
counsel fees, resulting from its action or omission to act or otherwise,
except for any such loss, damage, cost, judgment, expense or any other
liability, including reasonable counsel fees, arising out of the negligence or
willful misconduct of the Custodian or any of its employees, Sub-Custodians or
agents. The Custodian may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel to the Fund or, subject to the prior
approval of the Fund, of its own counsel, and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with such
advice or opinion. The Custodian shall not be liable to the Fund for any loss,
damage, cost, judgment, expense or any other liability, including reasonable
counsel fees, resulting from the use of the Book-Entry System or the
Depository, absent negligence or willful misconduct of the Custodian or its
nominees. The Custodian shall be liable for and shall indemnify the Fund for
and hold the Fund harmless from and defend the Fund against, any loss, damage,
cost, judgment, expense, or any other liability, including reasonable counsel
fees, incurred by the Fund directly related to or arising from the failure of
the Custodian to act as provided in specific, unambiguous, and complete
instructions, relating to the movement of cash or Securities of the Fund,
timely received by the Custodian in the manner required hereunder from an
Authorized Person or such person as otherwise provided herein, provide d that,
in the event the Custodian reasonably requests, the Fund shall provide the
Custodian with a letter indemnifying the Custodian against any loss incurred as
a result of the requested action.
(b) Limit of Duties. Without limiting the generality of the foregoing,
the Custodian shall be under no duty or obligation to inquire into,
and shall not be liable for:
1. The validity of the issue of any Securities purchased by the
Fund, the legality of the purchase thereof, or the propriety of
the amount paid therefor;
2. The legality of the sale of any Securities by the Fund or the
propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor;
5. The legality of the declaration or payment of any distribution of
the Fund;
6. The legality of any borrowing for temporary or emergency
administrative purposes;
7. The qualification of the Fund as a business development company
pursuant to the 1940 Act.
(c) No Liability Until Receipt. The Custodian shall not be liable for,
or considered to be the Custodian of, any money, whether or not represented by
any check, draft, or other instrument for the payment of money, received by it
on behalf of t he Fund until the Custodian actually receives and collects such
money directly or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not be under
any duty or obligation to take action to effect collection of any amount due to
the Fund from the Transfer Agent nor to take any action to effect payment or
distribution by the Transfer Agent of any amount paid by the Custodian to the
Transfer Agent in accordance with this Agreement, except as indicated on
Schedule C attached hereto.
(e) Collection Where Payment Refused. The Custodian shall not be under
any duty or obligation to take action to effect collection of any amount, if
the Securities upon which such amount is payable are in default, or if payment
is refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by a Certificate and (b) it shall be assured to
its satisfaction of reimbursement of its costs and expenses in connection with
any such action.
(f) Appointment of Agents and Sub-Custodians. The Custodian may appoint
one or more banking institutions to act as Depository or Depositories
or as Sub-Custodian or as Sub-Custodians of Securities and monies at
any time owned by the Fund.
(g) No Duty to Ascertain Authority. The Custodian shall not be under any
duty or obligation to ascertain whether any Securities at any time delivered to
or held by it for the Fund are such as may properly be held by the Fund under
the provisions of the Articles of Incorporation and the Prospectus.
(h) Compensation of the Custodian. The Custodian shall be entitled to
receive, and the Fund agrees to pay to the Custodian, such compensation as has
been agreed upon between the Custodian and the Fund as set forth in Schedule A
and Schedule B to this Agreement. The Custodian may charge against any monies
held on behalf of the Fund pursuant to this Agreement such compensation and any
expenses incurred by the Custodian in the performance of its duties pursuant to
this Agreement. The Custodian shall also be entitled to charge against any
money held on behalf of the Fund pursuant to this Agreement the amount of any
loss, damage, liability or expense incurred with respect to the Fund, including
reasonable counsel fees, for which it shall otherwise be entitled to
reimbursement under the provisions of this Agreement.
The expenses which the Custodian may charge against such account include, but
are not limited to, the expenses of Sub-Custodians and foreign branches of the
Custodian incurred in settling transactions outside of Boston, Massachusetts or
New York City , New York involving the purchase and sale of Securities.
(i) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any Certificate, notice or other instrument in writing
received by the Custodian and reasonably believed by the Custodian to be
genuine and to be signed by an officer or Authorized Person of the Fund. The
Custodian shall be entitled to rely upon any Written Instructions or Oral
Instructions actually received by the Custodian pursuant to the applicable
Sections of this Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person. The Fund agrees to forward to
the Custodian Written Instructions from an Authorized Person confirming such
Oral Instructions in such manner so that such Written Instruction s are
received by the Custodian, whether by hand delivery, telex or otherwise, by the
close of business on the same day that such Oral Instructions are given to the
Custodian. The Fund agrees that the fact that such confirming instructions are
not received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no liability to the Fund
in acting upon Oral Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear to have been
received from a duly Authorized Person.
(j) Overdraft Facility and Security for Payment. In the event that the
Custodian is directed by Written Instruction (or Oral Instructions confirmed
in writing in accordance with Section 11(i) hereof) to make any payment or
transfer of monies on behalf of the Fund for which there would be, at the
close of business on the date of such payment or transfer, insufficient monies
held by the Custodian on behalf of the Fund, the Custodian may, in its sole
discretion, provide an overdraft (an "Over draft") to the Fund in an amount
sufficient to allow the completion of such payment or transfer. Any Overdraft
provided hereunder: (a) shall be payable on the next Business Day, unless
otherwise agreed by the Fund and the Custodian; and (b) shall accrue interest
from the date of the Overdraft to the date of payment in full by the Fund at a
rate agreed upon in writing, from time to time, by the Custodian and the Fund.
The Custodian and the Fund acknowledge that the purpose of such Overdraft is
to temporarily finance the purchase of Securities for prompt delivery in
accordance with the terms hereof, to meet unanticipated or unusual redemption,
to allow the settlement of foreign exchange contracts or to meet other
emergency expenses not reasonably foreseeable by the Fund. The Custodian
shall promptly notify the Fund in writing (an "Overdraft Notice") of any
Overdraft by facsimile transmission or in such other manner as the Fund and the
Custodian may agree in writing. To secure payment of any Overdraft, the Fund
hereby grants to the Custodian a continuing security interest in and right of
setoff against the Securities and cash in the Fund's account from time to time
in the full amount of such Overdraft. Should the Fund fail to pa y promptly
any amounts owed hereunder, the Custodian shall be entitled to use available
cash in the Fund's account and to liquidate Securities in the account as is
necessary to meet the Fund's obligations under the Overdraft. In any such
case, and without limiting the foregoing, the Custodian shall be entitled to
take such other actions(s) or exercise such other options, powers and rights as
the Custodian now or hereafter has as a secured creditor under the
Massachusetts Uniform Commercial Code or any other applicable law.
(k) Inspection of Books and Records. The Custodian will (a) set up and
maintain proper books of account and complete records of all transactions in
the accounts maintained by the Custodian hereunder in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and (b) preserve for the periods prescribed by applicable Federal
statute or regulation all records required to be so preserved. The books and
records of the Custodian shall be open to inspection and audit at reasonable
times by officers and auditors employed by the Fund and by the appropriate
employees of the Securities and Exchange Commission. Such audit and inspection
shall include the audits required by Rule 17f-2(f), under the 1940 Act, for so
long as such rule so requires.
The Custodian shall provide the Fund with any report obtained by the Custodian
on the system of internal accounting control of the Book-Entry System or the
Depository and with such reports on its own systems of internal accounting
control as the Fund
may reasonably request from time to time.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter
until such time as this Agreement may be terminated in accordance
with the provisions hereof.
(b) Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of receipt of
such notice. In the event such notice is given by the Fund, it shall be
accompanied by a certified vote of the Board of Directors of the Fund,
electing to terminate this Agreement and designating a successor custodian or
custodians, which shall be a person qualified to so act under the 1940 Act.
In the event such notice is given by the Custodian, the Fund shall, on or
before the termination date, deliver to the Custodian a certified vote of the
Board of Directors of the Fund, designating a successor custodian or
custodians. In the absence o f such designation by the Fund, the Custodian may
designate a successor custodian, which shall be a person qualified to so act
under the 1940 Act. If the Fund fails to designate a successor custodian, the
Fund shall upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities (other than
Securities held in the Book-Entry System which cannot be delivered to the Fund)
and monies then owned by the Fund, be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and responsibilities pursuant
to this Agreement, other than the duty with respect to Securities held in the
Book-Entry System which cannot be delivered to the Fund.
(c) Upon the date set forth in such notice under paragraph (b) of this
Section 12, this Agreement shall terminate to the extent specified in such
notice, and the Custodian shall upon receipt of a notice of acceptance by the
successor custodian on that date deliver directly to the successor custodian
all Securities and monies then held by the Custodian on behalf of the Fund,
after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
13. Limitation of Liability.
The Fund and the Custodian agree that the obligations of the Fund under this
Agreement shall not be binding upon any of the Directors, shareholders,
nominees, officers, employees or agents, whether past, present or future, of
the Fund, individually, but are binding only upon the assets and property of
the Fund, as provided in the Articles of Incorporation. The execution and
delivery of this Agreement have been authorized by the Directors of the Fund,
and signed by an authorized officer of the Fund, acting as such, and neither
such authorization by such Directors nor such execution and delivery by such
officer shall be deemed to have been made by any of them or any shareholder of
the Fund individually or to impose any liability on any of them or any
shareholder of the Fund personally, but shall bind only the assets and property
of the Fund as provided in the Articles of Incorporation.
14. Force Majeure.
The Custodian shall not be liable or accountable for any loss or damage
resulting from any condition or event beyond its reasonable control; provided,
however, that the Custodian shall promptly use its best efforts to mitigate
any such loss or damage to the Fund as a result of any such condition or
event. For the purposes of the foregoing, the actions or inactions of the
Custodian's domestic sub-custodians and other agents shall not be deemed to be
beyond the reasonable control of the Custodian .
15. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by the
Secretary of the Fund setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully protected in
acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last delivered
certification.
(b) Annexed hereto as Appendix B is a certification signed by the
Secretary of the Fund setting forth the names and the signatures of the present
officers of the Fund. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event any such present officer ceases to
be an officer of the Fund or in the event that other or additional officers are
elected or appointed. Until such new certification shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement upon the signature of an officer as set forth in the last delivered
certification.
(c) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at One
Boston Place, Boston, Massachusetts 02108 or at such other place as the
Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its offices at 124 Mt.
Auburn Street, Suite 200, Cambridge, MA 02138 or at such other place as the
Fund may from time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement, (i) authorized, or ratified, and approved by a vote of the Board of
Directors of t he Fund, including a majority of the members of the Board of
Directors of the Fund who are not "interested persons" of the Fund (as defined
in the 1940 Act), or (ii) authorized, or ratified, and approved by such other
procedures as may be permitted o r required by the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund
authorized or approved by a vote of the Board of Directors of the Fund
provided, however, that the Custodian may assign the Agreement to an Affiliated
Person and any attempted assignment without such written consent shall be null
and void. Nothing in this Agreement shall give or be constructed to give or
confer upon any third party any rights hereunder.
(g) The Fund represents that a copy of the Articles of Incorporation is
on file with the Secretary of the State of Maryland.
(h) This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
(i) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(j) This agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives duly authorized as of the day and
year first above written.
ACCESS CAPITAL STRATEGIES INVESTMENT FUND, INC.:
INSTITUTIONAL INVESTOR PORTFOLIO
By: /s/ David F. Sand
Name: David F. Sand
Title: CEO
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ Patricia Weisgerber
Name: Patricia Weisgerber
Title: Assitant Vice President
APPENDIX A
I, Kevin Mawe, the Secretary of ACCESS CAPITAL STRATEGIES INVESTMENT FUND,
INC.: INSTITUTIONAL INVESTOR PORTFOLIO, a corporation organized under the laws
of the State of Maryland (the "Fund"), do hereby certify that:
The following individuals have been duly authorized as Authorized Persons to
give Oral Instructions and Written Instructions on behalf of the Fund and the
specimen signatures set forth opposite there respective names are their true
and correct signatures:
Name Signature
David Sand /s/ David F. Sand
Milton Sumption /s/ Milton J. Sumption
/s/ Kevin F. Mawe
Secretary
Dated: November 27, 1995
APPENDIX B
I, Mark J. Duggan, the Assistant Secretary of ACCESS CAPITAL STRATEGIES
INVESTMENT FUND, INC.: INSTITUTIONAL INVESTOR PORTFOLIO, a corporation
organized under the laws of the State of Maryland (the "Fund"), do hereby
certify that:
The following individuals serve in the following positions with the Fund and
each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Fund's Articles of Incorporation and
the specimen signatures set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
David Sand Chairman of the Board, /s/ David F. Sand
Chief Executive Officer and
Chief Investment Officer
Alton M. Bathrick President /s/ Alton M. Bathrick
Milton Sumption Treasurer /s/ Milton J. Sumption
Kevin F. Mawe Secretary /s/ Kevin F. Mawe
Krista L. Kallio Senior Vice President /s/ Krista L. Kallio
Milton Sumption Vice President /s/ Milton J. Sumption
/s/ Mark J. Duggan
Assistant Secretary
Dated: November 27, 1995
SCHEDULE A
FEE SCHEDULE
Services of the Custodian Include:
* Safekeeping
* Transaction Settlement
* Income Collection
* Corporate Actions Processing
* Tax Reclaim
* Trade Date, Tax Lot, Amortized, Accounting
* Monthly Fund Valuation and Subscription Periods
* Online Reporting
* Participant Recordkeeping
I. Structural Charges
$10,000 first fund
$ 5,000 per additional fund
$ 1,000 per participant account
II. Administrative Fee
3.0 basis points on all US assets
III. Custody Network Charges
$12 per book entry buy/sell transaction
$25 per physical buy/sell transaction
Separate schedule available for non-USD security transactions
IV. Cash Sweep Vehicle Options
STIF (Collective Employee Benefit Trusts Only)
Laurel/Dreyfus Money Market Funds
Reserve Deposit Account (RDA)
Late Money Deposit Account (LMDA)
Active Cash Management Reserves
V. Other Fees
The Securities Lending program features a 60/40 income split.
Performance Measurement Service - separate schedule attached
Options and Futures
$ 250 per first time broker relationship
(Assumes utilization of BSDT boilerplate agreement)
$ 25 per futures transaction
$ 15 per margin variation wire
$ 40 per options roundtrip
Unrelated Business Taxable Income: $125 per hour to prepare UBTI forms with a
minimum of $500 per form.
The Custodian will pass through all out-of-pocket costs associated with
international custody including, but not limited to, registration fees, stamp
duties, cable charges, postage, courier, legal and consulting costs, etc.
The Fund will be responsible for communications and hardware expenses including
terminals, printers, and leased lines required to support data transmission
to/from the Custodian.
Minimum Fee: $30,000 per year for US portfolios not including transaction
charges.
The Custodian reserves the right to amend its fees if the service requirements
change in a way that materially affects our responsibilities or costs.
Support of other derivative investment strategies or special processing
requirements (e.g. external cash sweeps , etc.) may result in additional fees.
*All fees are quoted on an annual basis except where otherwise noted
Global Performance, Analytics and Advanced Reporting
Fee Schedule
Monthly Performance Measurement Service
Total Portfolio Performance $500 per portfolio/consolidation
Asset Class Performance $750 per portfolio/consolidation
Attribution $1,500 per portfolio/consolidation
Analytics $2,000 per portfolio/consolidation
Trade Cost Measurement $2,250 per portfolio/consolidation
Daily Performance Measurement Service
Performance $2,750 per portfolio/consolidation
Analytics $3,250 per portfolio/consolidation
Vendor Data
Morgan Stanley Capital
International $10,000 per year
BARRA E2 Risk Factors $500 per portfolio/per year
IRRC South Africa Free Indicators $2,000 per year
Client Reporting Service (CRS)
Level I CRS On-Line Basic Report Package
First User Free of Charge
Each Additional User $3,500 per user/per year
Level II CRS On-Line Standard Package
First User $7,500 per year
Each Additional User $3,500 per user/per year
Level III CRS Workstation
First User $12,500 per year
Next 5 Users $ 7,500 per user/per year
Remaining Users $ 5,000 per user/per year
Note: Each level of subscription includes access to all of the reports
available from the previous level, when applicable.
Note: The costs of any commercial PC hardware and software is
incurred by the Fund. Additionally, if it is determined that customized
reports t are necessary, a fee will be assessed based on development and
maintenance.
Customized Report Development
Development Fee $1,000
Annual Maintenance Fee $ 500
Historical Holdings
As a standard, CRS maintains current, previous month-end and previous fiscal
year-end positions. The storage charge for additional months is $2,000 per
month.
Special Projects
$150 per hour
SCHEDULE B
OUT-OF-POCKET EXPENSES
The Fund will pay to the Custodian as soon as possible after the end of each
month all out-of-pocket expenses reasonably incurred in connection with the
assets of the Fund, including, but not limited to, legal fees, consulting fees,
postage and courier expenses, cable fees and customized programing fees.
SCHEDULE C
TRANSFER AGENCY AND OTHER PORTFOLIO ACCOUNTING SERVICES
The Custodian shall perform the services set forth below:
A. GENERAL:
1. Maintain and preserve accounts, books and records, and other documents as
are required of the Fund under the Investment Company Act of 1940,
including the processing of new accounts;
2. Record the current day's trading activity and such other proper bookkeeping
entries as are necessary for determining the Fund's net asset value;
3. Render such statements or copies of records as are required or from time to
time are reasonably requested by the Fund; and such other information as the
Fund may reasonably request and that the Custodian is in position to reasonably
provide, including acknowledging address changes and processing other routine
file maintenance adjustments;
4. Facilitate audits of accounts by the Fund's auditors or by any other
auditors employed or engaged by the Fund or by any regulatory body with
jurisdiction over the Fund;
5. Research and respond to all participant inquiries; and
6. Compute the net asset value per share of the Fund as of the time or times
specified in the Fund's then-current offering memorandum or as directed by
resolution of the Fund's Board of Directors.
B. Dividend Services:
1. Prepare and wire quarterly dividends;
2. Coordinate with Fund's auditors the preparation of dividend list as of each
dividend record date; and
3. Coordinate with Fund's auditors the preparation of Federal Information
Returns (Form 1099) of dividends paid in a year and mailing a statement to
each participant.
C. VALUATION OF SECURITIES:
1. Securities will be valued in accordance with the specified instructions
accompanying each security held by the Fund. The Fund shall instruct the
Custodian as to the pricing methodology to be employed with respect to each
security. The Custodian will then be responsible for determining the fair
market value of the security in accordance with the agreed upon pricing
methodology.
2. The Custodian may use one or more external pricing services as authorized
by the Fund from time to time. The Custodian shall not be liable for any
loss, cost, damage, claim, or other matter incurred by or assessed against the
Fund, regardless of how characterized, based on or resulting from the
inaccuracy or other deficiency in any information or data provided to the
Custodian by the Fund so long as the Custodian will use reasonable efforts to
assess the accuracy of such information or data .
D. RELIANCE ON INSTRUCTIONS AND ADVICE:
In maintaining the Fund's books of account and making the necessary
computations, the Custodian shall be entitled to receive, and may rely upon,
information furnished it by any person certified to the Custodian as being
authorized by the Board of Directors of the Fund relating to:
1. The manner and amount of accrual of expenses to be recorded on the books of
the Fund;
2. The source of quotations to be used for such securities as may not be
available through the Custodian's normal pricing services;
3. The value to be assigned to any asset for which no price quotations are
readily available;
4. If applicable, the manner of computation of the net asset value and such
other computations as may be necessary; and
5. Notification of transactions in portfolio securities.
E. MISCELLANEOUS:
1. Items not included in the fees set forth in this Agreement are to be billed
separately;
2. Services required by legislation or regulatory fiat which become effective
after the date of this Schedule shall be billed by appraisal;
3. All out-of-pocket expenses will be billed as incurred; all services not
specifically covered under this Agreement will be billed in accordance with
the Custodian's Fee Schedule, or by appraisal, as applicable; and
4. Invoices will be tendered and payable on a monthly basis.
Access Capital Strategies Community Investment Fund, Inc.:
Institutional Investor Portfolio
SUBSCRIPTION AGREEMENT
The undersigned (the "Subscriber"), hereby subscribes to purchase shares of
Common Stock, $0.001 par value ("Shares"), issued by Access Capital Strategies
Investment Fund, Inc.: Institutional Investor Portfolio a Maryland corporation
(the "Fund"), i n the amount set forth on the signature page below (the
"Commitment"), on the terms and conditions set forth herein. Capitalized terms
used and not defined in this Agreement have the meanings assigned to them in the
Private Offering Memorandum ("Memorandum") referred to below.
1. Sale and Purchase of Shares. Subject to the terms and conditions set
forth in this Agreement, and in reliance upon the representations and
warranties of the respective parties set forth in this Agreement, the Fund
hereby agrees to sell to the Subscriber, and the Subscriber irrevocably
subscribes for and agrees to purchase from the Fund, Shares in the amount of
its Commitment.
2. Acceptance of Subscription. This subscription, if submitted to the
Fund on or before December 31, 1998 (the "Offering Termination Date"), is
subject to acceptance by the Fund with respect to the Commitment subscribed for
herein, or such smaller Commitment as the Fund may, in its sole discretion,
determine, at a closing to be held on such date on or before December 31, 1998
as is designated by the Fund ("Closing"). The Fund may hold one or more
Closings involving different investors on or before December 31, 1998. At the
Closing, the Fund shall execute and deliver to the Subscriber a duplicate
original of this Agreement indicating the amount of the Commitment as to which
the Subscription has been accepted, which shall thereafter be deemed the
Subscriber's Commitment for all purposes hereunder. This subscription shall
expire if and to the extent not accepted by the Fund on or before December 31,
1998.
3. Closing Calls. Subscriber agrees to purchase Shares with a purchase
price equal to the amount of the Subscriber's Commitment, in one or more
installments and in the amounts and on the dates specified by the Fund in one or
more written not ices ("Closing Call") conforming to the requirements of this
Agreement. Except as otherwise stated below, the purchase price of the Shares
purchased pursuant to each Closing Call will be the Fund's net asset value per
Share ("Net Asset Value") on the date of each purchase, as determined in
conformity with the requirements of the Investment Company Act of 1940, as
amended ("1940 Act").
Closing Calls shall be deemed made when mailed to the Subscriber not later than
15 days before the date for the purchase of Shares specified in the Closing
Call, by first class mail to the Subscriber's address specified on the signature
page of this Agreement or such other address as the Subscriber shall notify the
Fund in writing. No Closing Call shall be made after December 31, 1998, and any
uncalled portion of the Subscriber's Commitment as of that date will lapse as
to the uncalled portion of the Commitment.
4. Manner of Payment. Payments made to purchase Shares specified in a
Closing Call shall be made on or before the payment date specified in the
Closing Call therefore (the "Payment Date"). Payments shall be made by wire
transfer in accordance with the following instructions:
Federal Reserve Bank of Boston
Boston Safe Deposit & Trust
ABA#: 011001234
DDA#: 108111
For: Acct. ETIF1002-00-2
5. Payment Default. If a payment for the purchase of shares is received
by the Fund from the Subscriber later than 14 days after the Payment Date,
interest will be charged on the overdue amount, calculated at a daily rate equal
on an annualized basis to four percentage points over the highest rate of
interest reported from time to time as "prime rate" by The Wall Street Journal
(provided that, if such rate is in excess of the maximum rate of interest
permitted by law, interest will be charged at such maximum rate). If a default
in a payment under this Subscription Agreement (including interest charges)
remains uncured for 30 days following a payment date, the Fund may, at its
option, pursue any or all of the following remedies: (i ) cancel the balance of
the Subscriber's subscription (including the installment as to which the
Subscriber had defaulted), (ii) assign the remaining balance of the Subscriber's
subscription (including the installment as to which the Subscriber has
defaulted) to another investor selected by the Fund and/or (iii) repurchase the
Shares then owned by the Subscriber at a purchase price per Share equal to the
lesser of 90% of the Shares' then-current Net Asset Value or the prices at which
the Subscriber purchased the Shares. The election by the Fund to pursue one or
more of these remedies will not preclude the Fund from pursuing any rights it
may have to seek judicial enforcement of the Subscriber's subscription
obligation.
6. Restriction on Assignment of Subscription Agreement. Except as
provided in Section 5 hereof with respect to rights of the Fund, neither this
Agreement nor any rights or interests herein may be assigned by the Subscriber
or by the Fund nor may the obligations of the Subscriber be assumed or
performed by another, other than a successor to the entire business and affairs
of the Subscriber, without the express prior written consent of the Fund. The
Fund may withhold consent to the assignment of this Agreement in its sole
discretion.
7. Restriction on Transfer or Assignment of Shares. Neither the Shares
to be issued hereunder nor any right or interest therein may be sold, assigned,
pledged, or otherwise transferred by the Subscriber without the consent of the
Fund. The Fund may withhold consent to a proposed transfer if the Fund
reasonably determines that any of the following requirements are not met:
(i) The transfer is made to an institution who the Fund determines would
have been eligible to participate in the initial offering of the Shares, in a
transaction that, in the opinion of counsel for the Subscriber and counsel for
the Fund, complies with the requirements of the Securities Act of 1933 (the
"1933 Act") and any applicable state securities laws;
(ii) The transfer is made in a transaction that the Fund determines,
after consideration of an opinion of counsel for the proposed transferee and
such additional counsel as the Fund may wish to consult on the matter, will not
make it more difficult for the Fund to comply with the requirements applicable
to the Fund and its operations of the 1933 Act, applicable state securities
laws, the 1940 Act, the Internal Revenue Code of 1986, as amended (the "Code")
or the Employee Retirement Income Security Act of 1974 ("ERISA"); and
(iii) The transfer is made to a transferee who agrees to be bound by all
the provisions of this Agreement that pertain to an owner of
Shares.
To facilitate compliance with Section 6 and this Section 7 and with the
pertinent provisions of the Articles of Incorporation of the Fund, the
Subscriber will not effect a transaction restricted by either such Section
without advance notice to the Fund and prior written approval by the Fund.
8. Representations and Warranties of the Fund. The Fund represents and
warrants that:
(i) The Fund is duly organized, validly existing, and in good standing
under the laws of the State of Maryland and has the power and authority to carry
on its business as now conducted and as proposed to be conducted in the Fund's
Private Offering Memorandum ("Memorandum") and to issue the Shares subscribed
for hereby. This Agreement and any other documents executed and delivered by
the Fund in connection herewith have been duly authorized, executed, and
delivered by the Fund, and are the legal, valid, and binding obligations of the
Fund enforceable in accordance with their respective terms.
(ii) The execution and delivery of this Agreement and any other documents
executed and delivered by the Fund in connection herewith do not, and the
performance and consummation of the transactions set forth or contemplated
herein will not, contravene or result in a default under any provision of
existing law or regulations to which the Fund is subject, the provisions of the
trust instrument, charter, by-laws, or other governing documents of the Fund or
any indenture, mortgage, or other instrument or agreement to which the Fund is
a party or by which it is bound and does not require on the part of the Fund any
approval, authorization, license, or filing from or with any federal, state,
municipal, or foreign board or agency (except such approvals, authorizations,
licenses, or filings as have been obtained or made).
(iii) The Fund has filed an election with the Securities and Exchange
Commission, pursuant to Section 54(a) of the 1940 Act, to be
subject to the provisions of Sections 55 through 65 of the 1940
Act.
9. Representations and Warranties of Subscriber. The Subscriber
represents and warrants that:
(i) The Subscriber is duly organized, validly existing, and in good
standing under the laws of the jurisdiction wherein it is organized and has the
power and authority to carry on the activities in which it is engaged and to
purchase the Share s subscribed for hereby. This Agreement and any other
documents executed and delivered by the Subscriber in connection herewith have
been duly authorized, executed, and delivered by the Subscriber, and are the
legal, valid, and binding obligations of the Subscriber enforceable in
accordance with their respective terms.
(ii) The execution and delivery of this Agreement and any other documents
executed and delivered by the Subscriber in connection herewith do not, and the
performance and consummation of the transactions set forth or contemplated
herein will not, contravene or result in a default under any provision of
existing law or regulations to which the Subscriber is subject, the provisions
of the trust instrument, charter, by-laws, or other governing documents of the
Subscriber, or any indenture, mortgage, or other instrument or agreement to
which the Subscriber is a party or by which it is bound and does not require on
the part of the Subscriber any approval, authorization, license, or filing from
or with any federal, state, municipal, or foreign board or agency (except such
approvals, authorizations, licenses, or filings as have been obtained or made).
(iii) The Subscriber, if an employee benefit plan as defined in ERISA (an
"ERISA Plan"), has caused this Agreement to be executed by one or more of its
fiduciaries thereunto duly authorized and, such fiduciaries, by executing and
delivering this Agreement on behalf of such ERISA Plan, represent and warrant
that (A) they and their co-fiduciaries, if any, have been informed of the Fund's
investment objectives, policies, and strategies; (B) the decision to invest plan
assets in the Fund was made with appropriate consideration of relevant
investment factors with regard to such ERISA Plan; and (C) such decision was
made by such fiduciaries without reliance on any investment advice or
recommendation provided by the Fund or its Manager, and is consistent with the
duties and responsibilities imposed upon fiduciaries with regard to their
investment decisions under ERISA.
(iv) The Shares being subscribed for by the Subscriber will be purchased
for the account of the Subscriber for investment only and not with a view to, or
with any intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein. The Subscriber acknowledges that the
Shares have not been registered under the 1933 Act or any state securities laws,
and cannot be disposed of unless they are subsequently registered under the 1933
Act and any applicable state securities laws, or an exemption from registration
is available. The Subscriber further understands that the Fund is not obligated
to file a registration statement or a notification of registration under the
1933 Act or any state securities law and has no intention to do so, nor does
the Fund have any other obligation to take or refrain from taking any action
that would make available any exemption for the sale of Shares without
registration.
(v) The Subscriber acknowledges that the Fund will accept this
subscription, and issue the Shares in a transaction intended to be exempt from
registration under the 1933 Act under Regulation D thereunder, in reliance upon
the information provided by the Subscriber in its Prospective Subscriber
Questionnaire ("Questionnaire"), including information supporting the Fund's
treatment of Subscriber as an "accredited investor" under Regulation D. The
Subscriber represents and warrants that all information that the Subscriber has
provided to the Fund concerning the qualifications of the Subscriber, including
information furnished in the Prospective Subscriber Questionnaire, is correct
and complete as of the date of this subscription.
(vi) The Subscriber has received and carefully reviewed the Memorandum
and understands that any information provided other than in the Memorandum has
been furnished on the understanding that the Subscriber will refer to the
Memorandum for an authoritative statement on all matters covered therein with
respect to the Fund and other information concerning the Offering. The
Subscriber has had a reasonable time and opportunity to ask questions and
receive answers concerning the terms and conditions of the offering and the
proposed operations of the Fund, and has received responses to such questions
that it has chosen to ask.
(vii) The Subscriber recognizes that an investment in the Fund involves
certain risks and it has taken full cognizance of and understands the risk
factors relating to a purchase of Shares, including those set forth under the
headings "Risk Factors" in the Memorandum. The Subscriber is capable of
bearing a high degree of risk, including the possibility of a loss of its
investment and the lack of a public market such that it will not be possible to
readily liquidate the investment. The Subscriber has such knowledge and
experience in business and financial matters as to be capable of evaluating the
merits and risks of an investment in the Shares and protecting its own interest
in connection with the investment in the Shares.
(viii) The Subscriber acknowledges that it has not relied upon the Fund,
its Manager, or any of their employees, directors, officers, or agents for any
investment, tax, legal, or ERISA advice in connection with its purchase of
Shares and that the Subscriber has consulted, to the extent necessary, its own
advisers with respect to the investment, tax, legal, or ERISA considerations of
a purchase of Shares.
(ix) The Subscriber acknowledges that there have been no guarantees or
warranties made to it by the Fund, its Manager, or any of their employees,
directors, officers, or agents, expressly or by implication, other than as
contained in the Memorandum, with respect to (i) the approximate length of
time that it will be required to remain an owner of its shares; or (ii) the
percentage of profit and/or the amount or type of consideration, profit, or loss
to be realized as a result of its investment.
10. Covenants of the Subscriber. The Subscriber agrees with the Fund
that:
(i) For so long as the Subscriber owns Shares, the Subscriber shall, upon
request, disclose to the Fund such information with respect to direct or
indirect holdings for such Shares as the Fund deems necessary to comply with
provisions of the C ode applicable to the Fund, to comply with requirements of
any other appropriate taxing authority, to comply with the provisions of the
Securities Exchange Act of 1934 or to comply with the provisions of the 1940
Act, as any of said laws may be amend ed from time to time.
(ii) The Subscriber, if an ERISA Plan, will furnish to the Fund promptly
upon its request the information called for by applicable "prohibited
transaction" regulations of the Department of Labor and any other information
with respect to Subscriber's parties in interest as the Fund may reasonably
require.
(iii) The Subscriber will indemnify and hold the Fund harmless from and
against any and all loss, damage, or liability due to or arising out of a
breach of any representation or warranty of the Subscriber in this Agreement or
any other document furnished by it to the Fund.
13. Notices. The address of the Subscriber for all purposes shall be
the address set forth on the signature page to this Agreement, or such other
address of which the Fund has received notice in accordance with the provisions
hereof. The ad dress of the Fund for all purposes shall be 124 Mt. Auburn
Street, Suite 200N, Cambridge, Massachusetts 02138, attention David F. Sand,
or such other address of which the Subscriber has received notice in accordance
with the provisions hereof. Any notice or communication to be given under this
Agreement shall be made in writing and, unless otherwise herein provided, shall
be deemed to have been given when sent by first class mail to such party at such
address.
14. Applicable Law. This agreement and the rights and obligations of
the parties hereunder shall be construed in accordance with and
governed by the laws of the State of
Maryland.
15. Counterparts; Other Agreements. This Agreement may be executed in
any number of counterparts, and each of such counterparts shall, for all
purposes, constitute one agreement binding on all the parties, notwithstanding
that all parties are not signatories to the same counterpart.
16. Miscellaneous. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives, and assigns. This
Agreement constitutes the entire agreement among the parties pertaining to the
subject matter contained in this Agreement and supersedes all prior
understandings of the parties. The invalidity or unenforceability of any one
provision of this Agreement shall in no way affect the validity of any other
provision, and all other provisions shall remain in full force and effect. No
waiver by any party of any breach of any term hereof shall be construed as a
waiver of any subsequent breach of that term or any other term of the same or of
a different nature.
20. Tax Certification. The Subscriber certifies that (1) the taxpayer
identification provided above the Subscriber signature is correct and (2) the
Subscriber is not subject to backup withholding because (i) the Subscriber has
not been notified that the Subscriber is subject to backup withholding as a
result of failure to report interest and dividends or (ii) the Internal Revenue
Service has not notified the Subscriber that the Subscriber is subject to backup
withholding. [Strike out clause (2) if incorrect.]
IN WITNESS WHEREOF, this Agreement has been executed by the Subscriber as of the
date of the Subscriber's signature set forth on the attached signature page and,
if accepted by the Fund, becomes an Agreement binding on the Fund as of the date
of the signature signifying acceptance set forth on the attached signature page.
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.:
Institutional Investor Portfolio
The information requested in this Questionnaire is needed to determine whether
the undersigned's subscription to purchase shares of Common Stock, $.001 par
value ("Shares"), of Access Capital Strategies Community Investment Fund, Inc.;
Investor Portfolio (the "Fund") may be accepted.
I. GENERAL INFORMATION
(a) Subscriber:
Exact Name of Subscriber:
Taxpayer Identification Number:
Address:
Mailing Address (if different):
Telephone:
State in Which Incorporated:
Date of Incorporation:
Number of Shareholders:
Name of Officer Signing for
Subscriber:
Address of Signing Officer, if
Different Than Subscriber Address:
II. CORPORATION QUALIFICATION
a) The Subscriber is either:
-- a corporation or endowment that has total assets in excess of
$5,000,000 and was not formed for the purpose of investing in the Shares; or
--a bank, as defined in Section 3(a)(2) of the Securities Act of
1933 (the "1933 Act") or a savings and loan association or other institution,
as defined in Section 3(a)(5)(A) of the 1933 Act, whether acting in its
individual or fiduciary capacity; or
--a qualified insurance company; or
--an organization described in Section 501(c)(3) of the Internal
Revenue Code with total assets in excess of $5,000,000.
b) Each Shareholder of the Subscriber is a natural person who:
--Has an individual net worth* or joint net worth with the grantor's
spouse of at least $1,000,000; or
--Has had an individual income* in excess of $200,000 in each of the
past two years and reasonably expects an individual income in excess of $200,000
in the current year; or
--Has had, together with the Partner's spouse, a joint income in
excess of $300,000 in each of the past two years and reasonably expects a joint
income in excess of $300,000 in the current year.
_____________
* "Net worth" means the excess of total assets over total liability.
"Income" means adjusted gross income plus (a) any tax-exempt income received,
(b) losses reported as a limited partner in a limited partnership, (c)
deductions claimed for depletion, (d) contributions to an individual retirement
account or Keogh retirement plan, (e) alimony payments, and (f) any amounts by
which income from long-term capital gains has been reduced in arriving at
adjusted gross income.
c) Each Shareholder of the Subscriber is:
--a bank, as defined in Section 3(a)(2) of the Securities Act of
1933 (the "1933 Act") or a savings and loan association or other institution, as
defined in Section 3(a)(5)(A) of the 1933 Act, whether acting in its individual
or fiduciary capacity; or
--a qualified insurance company; or
-- an employee benefit trust within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"), if (1) the investment
decision is made by a plan fiduciary, as defined in Section 3 (21) of ERISA and
such plan fiduciary is either a bank, savings and loan association, insurance
company or registered investment adviser, (2) such employee benefit plan has
total assets in excess of $5,000,000, or (3) such plan is a self-directed plan
with investment decisions made solely by persons who are accredited investors
(as described in (b) above); or
-- a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; or
--a corporation, Massachusetts or similar business trust,
partnership or organization described in Section 501(c)(3) of the Internal
Revenue Code, not formed for the purpose of investing in the Shares, with total
assets in excess of $5,000,000.
d) Each Shareholder of the Subscriber is a person or entity described
in either (b) or (c) above. [If this box is checked, please answer the
following:]
Number of shareholders described in (b) above: ____
Number of shareholders described in (c) above: ____
III. CERTIFICATION AND SIGNATURE
By signing this Questionnaire, the Subscriber hereby confirms that (a) the
answers of the Subscribers to the foregoing questions are true and complete to
the best of the information and belief of the Subscriber, (b) if any
representation is made as to the financial condition of shareholders of the
Subscriber, the Subscriber has made such reasonable investigation as is required
to ascertain that such representations are correct, and will provide the Fund
additional information about the financial condition of such shareholders upon
request, and (c) the Fund will be notified promptly of any changes in the
foregoing answers.
CORPORATION/ENDOWMENT SIGNATURE:
_________________________________________
Name of Signatory:
Title of Signatory:
Date: ____________________
ADDENDUM NO. ___ TO
SUBSCRIPTION AGREEMENT
SELECTION OF DESIGNATED TARGET REGION
I, ____________________________, the undersigned Subscriber, hereby select the
following as the Designated Target Region for my investment:
CHECK ONE:
The State of ________________________.
The multi-state region including ______________________.
The metropolitan area of ____________________________.
The entire United States.
I understand that this choice is irrevocable, provided, however, that in the
event that, in the opinion of Management, suitable investments can not be found
in the Designated Target Region within a period of _______________, I may
either select a new Designated Target Region or select an alternate existing
Designated Target Region for the reallocation of my investment. I understand
that Management will endeavor to invest in private placement debt securities
within my Designated Target Region, but there is no guarantee that Management
will be able to do so.
Signed: ________________________ Approved: _________________________
Subscriber Access Capital Strategies
Investment Fund, Inc.:
Institutional Investor
Portfolio
