<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______________
COMMISSION FILE NO. 814-143
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC./MA
--------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 04-3369393
------------------------------------- ----------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
124 MT. AUBURN STREET, SUITE 200N CAMBRIDGE, MA 02138
--------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
617-576-5858
--------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
--------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
has been required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [] No [X ]
The registrant had eight shareholders and 256.248 shares of common stock
outstanding as of February 28, 1999.
<PAGE> 2
INDEX
Access Capital Community Investment Fund, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Statements of Assets and Liabilities- February 28, 1999 and
November 30,1998
Statements of Operations - Three months ended February 28,
1999 and November 30, 1998 Nine months ended February 28, 1999
Statements of Changes in Net Assets - Three months ended
February 28, 1999 and November 30, 1998 Nine months ended
February 28, 1999
Financial Highlights - Three months ended February 28, 1999
and November 30, 1998 Nine months ended February 28, 1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal proceedings
Item 2. Changes in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5. Other information
Item 6. Exhibits and reports
Signatures
<PAGE> 3
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
(UNAUDITED)
<TABLE>
<CAPTION>
February 28, 1999 November 30,1998
ASSETS:
<S> <C> <C>
Investments, at market value (cost: $24,626,842.84) $24,318,525.19 $24,815,844.51
Interest Receivable $1,262,772.31 $930,451.55
-------------- --------------
TOTAL ASSETS: $25,581,297.50 $25,746,296.06
============== ==============
LIABILITIES:
Accrued expenses $23,973.36 $25,237.13
TOTAL LIABILITIES: $23,973.36 $25,237.13
---------- ----------
Net Assets $25,557,324.14 $25,721,058.93
NET ASSETS REPRESENTED BY:
Paid-in capital $25,624,837.76 $25,624,837.76
Accumulated undistributed net investment income $208,241.89 $217,469.81
Accumulated net realized loss -46,581.97 -22,897.89
Net unrealized appreciation/(depreciation) on -229,173.80 -98,351.01
investments
Net assets $25,557,324.14 $25,721,058.93
Net asset value per share $99,735.90 $100,374.86
Shares outstanding 256.248 256.248
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
December 1, 1998 to September 1,1998 to June 23,1998
February 28,1999 November 30,1998 (Commencement Of Operations)
to Feb 28, 1999
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $353,172.31 $365,512.47 $993,242.26
EXPENSES:
Administrative fee $1,905.90 $1,954.31 $5,345.02
Management fee $31,765.00 $32,571.86 $89,083.73
Custody fee $1,905.90 $1,954.32 $5,345.02
Organizational expense $1,270.60 $1,302.87 $3,563.35
reimbursement fee --------- --------- ---------
TOTAL EXPENSES: $36,847.40 $37,783.36 $103,337.13
NET INVESTMENT INCOME: $316,324.91 $327,729.11 $889,905.13
----------- ----------- -----------
Net realized loss on investments -23,684.08 -13,857.80 -46,581.97
Change in unrealized -130,822.79 -445,900.54 -229,173.80
appreciation/(depreciation) of ----------- ----------- -----------
investments
Net realized and unrealized -154,506.87 -459,758.34 -275,755.77
gain/loss on investments
NET INCREASE/DECREASE IN NET $161,818.04 -132,029.23 $614,149.36
ASSETS RESULTING FROM OPERATIONS
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 1, 1998 to September 1,1998 to June 23, 1998
February 28, 1999 November 30, 1998 (Commencement of Operations)
to February 28, 1999
NET INCREASE (DECREASE) IN NET AS SETS:
OPERATIONS:
<S> <C> <C> <C>
Net investment income $316,324.91 $ 327,729.11 $889,905.13
Net realized gain/(loss) on investments -23,684.08 -13,857.80 -46,581.97
Change in unrealized -130,822.79 -445,900.54 -229,173.80
appreciation/(depreciation) of investments ----------- ----------- -----------
Increase/(decrease) in net assets $161,818.04 -132,029.23 $614,149.36
resulting from operations
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income $325,552.83 $356,110.41 $681,663.24
----------- ----------- -----------
Total distribution to shareholders $325,552.83 $356,110.41 $681,663.24
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 0 $5,500,000.00 $34,124,838.02
Shares redeemed 0 -5,500,000.00 -8,500,000.00
- ------------- -------------
Change in net assets resulting from 0 - 0 - $25,624,838.02
capital share transactions
Increase (decrease) in net assets -163,734.79 -488,139.64 $25,557,324.14
Net assets at beginning of period $25,721,058.93 $26,209,198.57 0
-------------- -------------- -
NET ASSETS AT END OF PERIOD $25,557,324.14 $25,721,058.93 $25,557,324.14
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
December 1, 1998 to September 1 to June 23,1998
February 28, 1999 November 30, 1998 (Commencement of Operations) to
February 28,1999
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value beginning of $100,374.86 $102,279.80 $100,000.00
period ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
NET INVESTMENT INCOME: $1,234.44 $1,278.94 $3,472.80
Net realized and unrealized -602.95 -1,794.18 -1,076.75
(loss) on investments ------- --------- ---------
Total from investment $631.49 -515.24 $2,396.05
operations ------- ------- ---------
Less distributions from net $1,270.46 $1,389.71 $2,660.17
investment income --------- --------- ---------
Net asset value end of period $99,735.90 $100,374.86 $99,735.90
Net assets, end of period ($ $25.6 $25.7 $25.6
millions)
Ratio of expenses to average 0.58% 0.58% 0.58%
net assets
Ratio of Net investment income 5.0% 5.1% 4.65%
to average net assets
Total return for period 0.63% -0.53% 2.36%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis Of Presentation
The accompanying unaudited condensed consolidated financial statements reflect
the results of operations for Access Capital Strategies Community Investment
Fund, Inc. and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for annual financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the consolidated financial statements have
been included. The results of operations and other data for the three months
ended February 28, 1999 are not necessarily indicative of the results that may
be expected for any other interim period or the fiscal year ending May 31, 1999.
In preparing the financial statements, management is required to make estimates
and assumptions that effect the reported amounts of assets and liabilities as of
the date of the statement of assets and liabilities and revenues and expenses
for the period. Actual results could differ from those estimates; any such
differences are expected to be immaterial to the net assets of the Fund.
This report covers the activity from December 1, 1998 to February 28, 1999.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This quarterly report contains certain statements that may be
considered forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual
results could differ materially from those projected in the
forward-looking statements as a result of, among factors, changes in
interest rates, fluctuations in assets under management and other
sources of fee income, changes in assumptions used in making such
forward-looking statements, as well as the factors listed under "Risk
Factors and Factors Affecting Forward Looking Statements" in the
Company's Annual Report on Form 10-K for the year ended May 31, 1999.
OVERVIEW
Access Capital Strategies Community Investment Fund, Inc. (the "Fund") is a
non-diversified closed-end management company electing status as a business
development company. The Fund is structured to provide a secondary market for
special securities created to meet certain aspects of the Community Reinvestment
Act ("CRA"). Investors in the Fund must designate a particular geography within
the United States as part of their agreement to purchase Fund shares. The Fund's
Manager, Access Capital Strategies LLC ("Access"), agrees to invest only in
areas where Fund shareholders have made targeted designations. In addition to
their geographic specificity, Fund investments must be of U.S. Government Agency
or AAA credit quality and must support Community Reinvestment Activity.
COMPLIANCE
To qualify as a Regulated Investment Company, the Fund must, among other things,
satisfy a
<PAGE> 8
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).
Management believes the Fund was in compliance with the above requirements for
the period ended February 28, 1999.
FUND OPERATIONS
INVESTMENT ACTIVITY
There were no transactions other than short-term investment of portfolio income
during the quarter ended February 28, 1999.
The Fund is permitted to use leverage in its investment program. There was no
leverage for the period ending February 28, 1999.
NET ASSETS AND FUND HOLDINGS AT FEBRUARY 28, 1999
At February 28, 1999 the Fund's Net Asset Value was $25.6 million, or $99,735.90
per share. At the prior quarter end November 30, 1998 the Fund's Net Asset Value
was $25.7million, or $100,374.86 per share. The decline was due to a decline in
value due to a slight increase in short term interest rates
For the quarter ended February 28, 1999 the Net Asset Value per share of
$99,735.90 represented a decrease of $638.96 or -0.6% over the prior quarter
November 30, 1998 Net Asset Value per share of $100,374.86 due to a decline in
interest rates
The Fund owned:
1 Federal Home Loan Mortgage Corp Adjustable Rate Mortgage Backed
Security in the amount of $20.3 million
1 Nellie Mae Corp. commercial paper instrument in the amount of
$3.9 million
1 State Street Bank Repurchase Agreement in the amount of $797.36
INVESTMENT INCOME
The Fund had investment income net of all fees (as discussed below) of $316,325
for the quarter ended February 28, 1999. For the previous quarter ended November
30, 1998 the Fund had investment income net of $327,729. The decline in income
was due to the reinvestment of principal payments on the higher yielding ARM
securities into lower yielding commercial paper.
For the period from inception on June 23, 1998 through February 28, 1999 the
Fund had net investment income of $889,905.
<PAGE> 9
MANAGEMENT FEES & EXPENSES
Access Capital Strategies LLC, the Fund's Manager is paid an annual management
fee, paid quarterly, of fifty basis points (0.50%) of the Fund's average monthly
gross assets less accrued liabilities, other than indebtedness for borrowing.
Access pays all expenses incurred for the organization and operation of the
Fund, including Custody of Fund assets. Access is reimbursed for these expenses
up to a total of eight basis points (0.08%) of the Fund's monthly net assets;
three basis points (0.03%) of the Fund's monthly net assets for Custody; three
basis points (0.03%) of the Fund's monthly net assets for Administration; and
two basis points (0.02%) of the Fund's monthly net assets as reimbursement for
organizational expenses.
For the quarter ended February 28, 1999 the Management Fee was $31,765 and the
combined reimbursement of operating expenses were $5,082. For the prior quarter
ended November 30, 1998 the Management Fee was $32,572 and the combined
reimbursement fees were $5,212 due to the decline in Fund assets
For the period from inception on June 23, 1998 through February 28, 1999 the
Management Fee was $89,084 and the combined reimbursement fees were $14,253.
YIELD
At the quarter end on February 28, 1999 the SEC current yield was 4.87% compared
to the SEC current yield of 5.13% at the prior quarter ended November 30, 1998.
The decline was due to lower yields on the reinvestment of principal paydowns.
For the quarter ending February 28, 1999 the ratio of net investment income to
average net assets was 5.0% compared to 5.1% in the prior quarter. The decrease
in yields is due to the higher percentage of cash equivalents held in the Fund.
For the period from inception on June 23, 1998 through February 28, 1999 the
ratio of net investment income to average assets was 4.7%.
REALIZED GAIN/LOSS
For the quarter ended February 28, 1999 the realized loss was $23,684 an
increase from the realized loss of $13,858 in the prior quarter. These losses
are due to principal payments on securities with unrealized losses as a result
of an increase in interest rates.
For the period from inception on June 23, 1998 through February 28, 1999
realized losses totaled $46,582.
DIVIDEND PAID
The Fund distributes 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 of dividends and other distributions payable by the Fund. 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.
<PAGE> 10
The Fund pays dividends on a calendar quarter. The Fund paid a quarterly
dividend of $1,270.46 per share on December 23, 1998 to shareholders of record
that date. The Fund paid a quarterly dividend of $1,389.71, in the previous
quarter. The lower dividend is attributable to the decline in net interest
income due to the reinvestment of principal payments in lower yielding cash
equivalents.
For the period from inception on June 23, 1998 through February 28, 1999 total
dividends paid were $2,660.17 per share.
TOTAL RETURNS
For the quarter ended February 28, 1999 the total return was 0.63% compared to a
total return of -0.53% in the prior quarter. The increase in total return was
due to a decline in interest rates and appreciation in longer-term spreads of
Agency MBS over U.S. Treasuries, which offset declines in income.
For the period from inception on June 23, 1998 through February 28, 1999 total
return was 2.36%.
FUND DESIGNATED TARGET REGIONS AT FEBRUARY 28, 1999
The Fund's Designated Target Regions ("DTRs") are provided by Fund shareholders
at the time of investment. At February 28, 1999 DTRs were:
DTRS AMOUNT
Boston & Cambridge, MA $500,000
Massachusetts 8,000,000
New England $17,123,838
TOTAL $25,623,838
FUND IMPACT PER THE COMMUNITY REINVESTMENT ACT.
The Fund invests in securities that support community development economic
activity as defined in the Community Reinvestment Act.
At February 28, 1999 the Fund's investments made loans to 226 homebuyers with
incomes below 80% of median income from the following states in the following
numbers.
Connecticut 13
Massachusetts 144
Rhode Island 69
--
226
LIQUIDITY DISCUSSION
SALE AND REDEMPTION OF FUND SHARES
Fund shares are sold only to qualified investors who complete a Subscription
Agreement. All investors in the Fund must provide a Designated Target Region as
the desired location for their investment.
<PAGE> 11
For the period from inception on June 23, 1998 through February 28, 1999 total
Fund shares sold totaled $34.12 million, or 340.41 shares.
As discussed in the Private Offering Memorandum, the Fund allows shareholders to
redeem their shares in accordance with Rule 23c-3 of the Investment Company Act
of 1940.
For the period from inception on June 23, 1998 through February, 1999 Fund
shares redeemed totaled $8.5 million, or 84.16 shares.
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A full discussion of the risks associated with ownership of Fund shares appears
in the Fund's Private Offering Memorandum. The Fund's market risks may be
summarized as follows:
CREDIT RISK. All investments made by the Fund must be in securities of Agency or
AAA credit quality. Fund investments will typically have one or more form of
Agency or AAA credit enhancement. All credit risk of default will be borne by
the credit enhancer.
LIQUIDITY RISK. Securities purchased by the Fund will be privately placed debt
instruments. The market for resale of these securities may be limited.
Furthermore, the Fund may pay a premium for securities with special CRA
characteristics without any assurance that a comparable premium can be received
upon sale of the security.
INTEREST RATE RISK The Fund will generally invest in fixed rate investments that
have their market values directly affected by changes in prevailing interest
rates. An increase in rates will generally reduce the value of Fund investments
and a decline in interest rates will generally increase the value of those
investments. There may be exceptions due to shifts in the yield curve, the
performance of individual securities and other market factors.
Market Risk Associated with Fund portfolio holdings at February 28, 1999:
<TABLE>
<CAPTION>
Investments (at market) Variable Rate Fixed Rate
<S> <C> <C>
Maturities less than 1 year - $3,981,460.22 Nellie Mae Corp commercial paper
$797.36 State Street repurchase agreement
Maturities (or weighted average lives) - $20,336,266.73 Fed Home Loan Adjustable Rate
greater than 1 year less than 7 MBS
Maturities (or weighted average lives) - -
greater than 7 year less than 10
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C>
Maturities (or weighted average lives) - -
greater than 10 years
TOTAL $24,318,525
</TABLE>
<TABLE>
<CAPTION>
Borrowings Variable Rate Fixed Rate
<S> <C> <C>
Maturities less than 1 year - -
Maturities (or weighted average lives) greater than 1 year less - -
than 7
Maturities (or weighted average lives) greater than 7 year less - -
than 10
Maturities (or weighted average lives) greater than 10 years - -
</TABLE>
All Fund activities occur in U.S. dollars.
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports
The following Exhibits are filed as part of this Report:
(a) (1) N/A
(2) None
(3) (i) Incorporated by Reference from an exhibit filed in
Form 10-Q for the period ended August 31, 1998
(ii) Incorporated by Reference from an exhibit filed in
Form 10-Q for the period ended August 31, 1998
(4) N/A
(5) N/A
(8) N/A
(9) None
(10) (i) Incorporated by Reference from an exhibit filed in
Form 10-Q for the period ended August 31, 1998
(iii) (A) Incorporated by Reference from an exhibit filed
in Form 10-Q for the period ended August 31, 1998
(11) N/A
(12) N/A
(13) N/A
(15) N/A
(16) None
(17) N/A
(18) None
(19) N/A
(20) N/A
(21) None
(22) None
(23) None
(24) None
(25) N/A
(26) N/A
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
December 18, 2000 /s/ RONALD A. HOMER
---------------------------------
Ronald A. Homer
Chairman of the Board of Directors
December 18, 2000 /s/ KEVIN J. MULVANEY
---------------------------------
Kevin J. Mulvaney
Director
December 18, 2000 /s/ PETER BLAMPIED
----------------------------------
Peter Blampied
Director
December 18, 2000 /s/ DAVID F. SAND
----------------------------------
David F. Sand
Chief Executive Officer, Principal Financial
Officer, Principal Accounting Officer,
