Back to GetFilings.com
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 August 31, 2002
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. 817-00807
Access Capital Strategies Community Investment Fund, Inc.
-----------------------------------------------------------
(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 [X] No [_]
The registrant had 59 shareholders and 20,536,796 shares of common stock
outstanding as of August 31, 2002.
Access Capital Strategies Community Investment Fund, Inc.
August 31, 2002 Form 10-Q Quarterly Report
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Statements of Assets and Liabilities - ................... 3
August 31, 2002 (unaudited), May 31, 2002
and August 31, 2001 (unaudited)
Statements of Operations (unaudited) - ................... 4
Three months ended August 31, 2002 and August 31, 2001
Statements of Changes in Net Assets (unaudited) - ........ 5
Three months ended August 31, 2002 and August 31, 2001
Statements of Cash Flows(unaudited) - .................... 6
Three months ended August 31, 2002 and August 31, 2001
Financial Highlights - ................................... 7
Three months ended August 31, 2002 (unaudited) and
August 31, 2001 (unaudited) and years ended May 31,
2002 and May 31, 2001
Schedule of Investments (unaudited) - .................... 8
August 31, 2002
Notes to Financial Statements ............................ 10
Item 2. Management's Discussion and Analysis of Financial ............. 11
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about ................ 16
Market Risk
PART II. OTHER INFORMATION ....................................................... 18
Item 1. Legal proceedings ............................................. 18
Item 2. Changes in securities ......................................... 18
Item 3. Defaults upon senior securities ............................... 18
Item 4. Submission of matters to a vote of security holders ........... 18
Item 5. Other information ............................................. 18
Item 6. Exhibits and reports .......................................... 18
Signatures .............................................................. 19
Certification ........................................................... 20
2
Access Capital Strategies Community Investment Fund, Inc.
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 2002 August 31, 2001
(unaudited) May 31, 2002 (unaudited)
------------- ------------- -------------
Assets:
Investments, at value* $ 252,904,814 $ 210,540,038 $ 159,669,290
Cash 745,701 560,043 211,705
Deposits with broker - 21,094,066 8,496,570
Receivables:
Securities sold - 4,988,156 -
Interest 1,470,475 1,215,148 960,098
Principal paydowns 270,266 - -
Variation margin - 18,094 -
Prepaid expenses and other assets 62,545 278,375 25,402
------------- ------------- -------------
Total assets 255,453,801 238,693,920 169,363,065
------------- ------------- -------------
Liabilities:
Securities sold short (proceeds received -
$21,094,066 and $8,496,570, respectively) - 21,315,000 8,559,520
Payables:
Reverse repurchase agreements (including
accrued interest of $25,745, $34,812 and $28,347,
respectively) 27,125,745 25,234,812 15,628,347
Securities purchased 16,844,238 6,981,698 2,825,393
Investment advisor 204,612 184,928 117,838
Variation margin 48,109 - -
Accrued expenses and other liabilities 40,036 93,663 55,024
------------- ------------- -------------
Total liabilities 44,262,740 53,810,101 27,186,122
------------- ------------- -------------
Net Assets:
Net Assets $ 211,191,061 $ 184,883,819 $ 142,176,943
============= ============= =============
Net Assets Consist of:
Paid-in capital $ 205,633,904 $ 181,128,349 $ 138,364,007
------------- ------------- -------------
Undistributed investment income - net 942,894 944,689 782,100
Accumulated realized capital losses on
investments-net (4,817,718) (1,475,351) (1,080,496)
Unrealized appreciation on investments-net 9,431,981 4,286,132 4,111,332
------------- ------------- -------------
Total accumulated earnings-net 5,557,157 3,755,470 3,812,936
------------- ------------- -------------
Net Assets $ 211,191,061 $ 184,883,819 $ 142,176,943
============= ============= =============
Net Asset Value Per Share $ 10.28 $ 10.19 $ 10.20
============= ============= =============
- ------------------------------------------------------------------------------------------------------
*Identified Cost. $ 243,196,612 $ 205,524,832 $ 155,495,008
Shares issued and outstanding. 20,536,796 18,139,657 13,938,916
- ------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
3
Access Capital Strategies Community Investment Fund, Inc.
STATEMENTS OF OPERATIONS (UNAUDITED)
June 1, 2002 June 1, 2001
to August to August
31, 2002 31, 2001
Investment Interest .......................................................... $ 3,557,144 $2,590,412
Income:
Expenses: Management fees ................................................... 286,669 189,526
Interest .......................................................... 131,343 123,696
Professional fees ................................................. 22,659 13,546
Accounting services ............................................... 20,780 12,523
Organizational fees ............................................... 9,934 6,834
Director's fees and expenses ...................................... 7,935 5,874
Transfer agent fees ............................................... 5,065 4,409
Custodian fees .................................................... 5,376 1,772
Pricing fees ...................................................... 2,466 1,123
Other ............................................................. 6,113 4,263
------------ ----------
Total expenses before reimbursement ............................... 498,340 363,566
Reimbursement of expenses ......................................... (40,277) (22,766)
------------ ----------
Total expenses after reimbursement ................................ 458,063 340,800
------------ ----------
Investment income-net ............................................. 3,099,081 2,249,612
------------ ----------
Realized & Realized loss on investments-net .................................. (3,342,367) (128,958)
Unrealized Change in unrealized appreciation on investments-net .............. 5,145,849 2,970,314
------------ ----------
Gain (Loss) on Total realized and unrealized gain on investments-net ............. 1,803,482 2,841,356
------------ ----------
Investments-Net: Net Increase in Net Assets Resulting from Operations .............. $ 4,902,563 $5,090,968
============ ==========
See Notes to Financial Statements.
4
Access Capital Strategies Community Investment Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
June 1, 2002 June 1, 2001
to August to August
Increase (Decrease) in Net Assets: 31, 2002 31, 2001
Operations: Investment income-net ...................................................... $ 3,099,081 $ 2,249,612
Realized loss on investments-net ........................................... (3,342,367) (128,958)
Change in unrealized appreciation on investments-net ....................... 5,145,849 2,970,314
------------ ------------
Net increase in net assets resulting from operations ....................... 4,902,563 5,090,968
------------ ------------
Dividends to Dividends to shareholders from investment income-net ....................... (3,100,876) (2,090,734)
------------ ------------
Shareholders:
------------ ------------
Capital Share Change in net assets resulting from capital share transactions ............. 24,505,555 16,989,037
------------ ------------
Transactions:
Net Assets: Increase in net assets ..................................................... 26,307,242 19,989,271
Beginning of period ........................................................ 184,883,819 122,187,672
------------ ------------
End of period* ............................................................. $211,191,061 $142,176,943
============ ============
* Undistributed investment income-net ........................................ $ 942,894 $ 782,100
============ ============
See Notes to Financial Statements.
5
Access Capital Strategies Community Investment Fund, Inc.
STATEMENTS OF CASH FLOWS (UNAUDITED)
June 1, 2002 June 1, 2001
to August to August
31, 2002 31, 2001
Cash Net increase in net assets resulting from operations $ 4,902,563 $ 5,090,968
Provided by Adjustments to reconcile net increase in net assets
Operating Resulting from operations to net cash provided by operating activities:
Activities: Increase in receivables (237,333) (129,545)
Decrease in deposits from brokers 21,094,066 -
(Increase) decrease in other assets 215,830 (25,402)
Increase (decrease) in other liabilities (21,309,901) 119,022
Realized and unrealized gain on investments-net (1,803,482) (2,841,356)
Amortization of premium and discount (14,501) (102,957)
Change in unrealized depreciation on financial
futures contracts - net 231,919 -
Change in unrealized depreciation on short sales - net 220,934 (7,504)
Realized losses on financial futures contracts - net (2,853,102) (14,603)
Realized losses on short sales - net (6,012) -
------------------------------
Net cash provided by operating activities 441,081 2,088,623
------------------------------
Cash Used Proceeds from sales of long-term investments 57,349,627 31,171,633
for Purchases of long-term investments (80,909,729) (56,174,273)
Investing Proceeds from paydowns, sales and maturities of short-term
Activities: investments-net - 823,873
------------------------------
Net cash used for investing activities (23,560,102) (24,178,767)
------------------------------
Cash Cash receipts from issuance of common stock 23,331,723 16,189,997
Provided by Cash receipts from borrowings 14,516,657 20,300,000
Financing Cash payments on borrowings (12,616,657) (12,900,000)
Activities: Dividends paid to shareholders (1,927,044) (1,291,694)
------------------------------
Net cash provided by financing activities 23,304,679 22,298,303
------------------------------
Cash: Net increase in cash 185,658 208,159
Cash at beginning of period 560,043 3,546
------------------------------
Cash at end of period $ 745,701 $ 211,705
==============================
Cash Flow
Information: Cash paid for interest $ 140,410 $ 122,062
==============================
Non-Cash
Financing Capital shares issued in reinvestment of dividends paid to
Activities: shareholders $ 1,173,832 $ 799,040
==============================
See Notes to Financial Statements.
6
Access Capital Strategies Community Investment Fund, Inc.
FINANCIAL HIGHLIGHTS
The following per share data and ratios have
been derived from information provided June 1, 2002 June 1, 2001
in the financial statements. to August to August Year Year
31, 2002 31, 2001 Ended Ended
Increase (Decrease) in Net Asset Value: (unaudited) (unaudited) May 31, 2002 May 31, 2001
Per Share Net asset value, beginning of period ................. $ 10.19 $ 9.97 $ 9.97 $ 9.50
-------- -------- -------- --------
Operating Investment income-net ............................ .16++ .17 .64 .63
Performance:## Realized and unrealized gain on investments-net .. .09 .22 .22 .50
-------- -------- -------- --------
Total from investment operations ..................... .25 .39 .86 1.13
-------- -------- -------- --------
Less dividends from investment income-net ............ (.16) (.16) (.64) (.66)
-------- -------- -------- --------
Net asset value, end of period ....................... $ 10.28 $ 10.20 $ 10.19 $ 9.97
======== ======== ======== ========
Total Based on net asset value per share ................... 2.51% # 3.99% # 8.88% 12.12%
======== ======== ======== ========
Investment
Return:**
Ratios to Expenses, net of reimbursement and excluding
Average Net interest expense ..................................... .66% * .58% * .64% .58%
======== ======== ======== ========
Assets:+ Expenses, excluding interest expense ................. .74% * .58% * .77% .58%
======== ======== ======== ========
Expenses ............................................. 1.00% * .58% * 1.06% .58%
======== ======== ======== ========
Investment income-net ................................ 6.24% * 6.01% * 6.41% 6.63%
======== ======== ======== ========
Ratios to Expenses, net of reimbursement and excluding
Average Net interest expense ..................................... .58% * - .58% -
======== ======== ======== ========
Assets, Expenses, excluding interest expense ................. .65% * - .68% -
======== ======== ======== ========
Including Expenses ............................................. .88% * - .94% -
======== ======== ======== ========
Borrowings:+ Investment income-net ................................ 5.47% * - 5.73% -
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) ............. $211,191 $142,177 $184,884 $122,188
======== ======== ======== ========
Data:
* Annualized.
** Total investment returns exclude the effects of sales charges.
# Aggregate total investment return.
## Per share operating performance figures have been adjusted to
reflect a 10,000 for 1 stock split that occurred on July 9,
2001.
+ Prior to fiscal 2002, Access paid the Fund's operating
expenses and received six basis points for reimbursement and
the amounts paid by Access in excess of reimbursement were
disclosed in the notes to the financial statements. Commencing
in fiscal 2002, the Fund's operating expenses are being
recorded by the Fund and the Fund is being Reimbursed by
Access and MLIM for operating expenses in excess of six basis
points.
++ Based on average shares outstanding.
See Notes to Financial Statements.
7
Access Capital Strategies Community Investment Fund, Inc.
SCHEDULE OF INVESTMENTS
August 31, 2002 (unaudited)
Face Market
Amount Value
---------------- ------------------
MORTGAGE-BACKED SECURITIES (119.1%):
Federal National Mortgage Association (FNMA) (89.0%):
15 Year Fixed Rate Single Family Mortgage-Backed Securities
5.50%, 3/1/16 $ 497,304 $ 514,771
6.00%, 4/1/14 425,293 445,381
6.50%, 6/1/14 - 12/1/14 507,871 535,509
7.00%, 1/1/15 396,176 421,355
30 Year Fixed Rate Single Family Mortgage-Backed Securities
5.00%, 3/1/29 - 2/1/32 (a) 20,467,532 19,869,769
5.50%, 1/1/29 1,444,777 1,463,574
6.00%, 7/1/29 - 8/1/32 31,401,595 32,228,792
6.48%, 3/1/32 722,657 755,873
6.50%, 5/1/17 - 7/1/32 84,713,582 88,042,822
6.61%, 3/1/20 1,107,863 1,193,722
6.70%, 6/1/19 669,004 730,612
7.00%, 5/1/29 - 3/1/31 10,843,745 11,358,751
7.25%, 12/1/29 81,300 85,847
7.50%, 7/1/29 - 2/1/31 12,081,245 12,785,755
7.90%, 1/1/18 2,153,507 2,652,049
8.00%, 2/1/30 - 4/1/30 1,583,959 1,695,754
-----------------
Total single family mortgage-backed securities 174,780,336
-----------------
Multi-Family Mortgage-Backed Securities
6.53%, 6/1/16 270,079 302,003
7.12%, 9/1/10 7,862,875 9,121,670
7.42%, 10/1/18 1,970,348 2,222,868
7.58%, 5/1/18 623,873 753,026
7.97%, 9/1/17 756,193 914,450
-----------------
Total multi-family mortgage-backed securities 13,314,017
-----------------
Total Federal National Mortgage Association securities 188,094,353
-----------------
Federal Home Loan Mortgage Corporation (26.9%):
30 Year Fixed Rate Single Family Mortgage-Backed Securities
5.50%, 9/1/29 4,936,408 4,996,221
6.00%, 3/1/31 - 4/1/32 (a) 10,346,979 10,622,688
6.50%, 6/1/29 - 8/1/32 (a) 29,262,365 30,417,364
7.00%, 10/1/29 - 3/1/32 8,062,380 8,441,483
7.50%, 12/1/29 - 3/1/30 2,179,631 2,307,838
-----------------
Total Federal Home Loan Mortgage Corporation
Single family mortgage-backed securities 56,785,594
-----------------
GNMA Pool (3.2%):
8
Multi-Family Mortgage-Backed Securities
6.00%, 12/15/31 $ 1,128,774 $ 1,165,684
6.50%, 4/15/32 - 4/20/32 2,238,803 2,333,224
7.00%, 4/15/32 1,111,449 1,169,611
8.25%, 12/15/32 1,736,344 2,030,667
-------------
Total GNMA Pool multi-family mortgage-backed
securities 6,699,186
-------------
Total mortgage-backed securities 251,579,133
-------------
GUARANTEED NOTES (0.6%):
Boston, MA, U.S. Government Guaranteed Notes
6.85%, 8/1/07 1,290,000 1,325,681
-------------
Total guaranteed notes 1,325,681
-------------
Total investments (cost $243,196,612) - 119.7% 252,904,814
Variation margin on financial futures contracts* - 0.0% (48,109)
Liabilities in excess of other assets - (19.7%) (41,665,644)
-------------
Net assets - 100.0% $ 211,191,061
=============
(a) Includes a "to-be-announced" (TBA) transaction. The Fund has committed to
purchasing securities for which all specific information is not available
at this time.
* Pursuant to the final futures contracts, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments, which are settled the following
business day, are known as variation margin and are recorded by the Fund as
unrealized gains or losses. Financial futures contracts sold as of August
31, 2002 were as follows:
-----------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
-----------------------------------------------------------------
105 US Treasury Bonds December 2002 $11,737,031
194 US Treasury Bonds December 2002 21,567,344
-----------------------------------------------------------------
Total financial futures contracts sold
(Total contract price-$33,028,154) $33,304,375
===========
-----------------------------------------------------------------
See Notes to Financial Statements.
9
Access Capital Strategies Community Investment Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements reflect
the results of operations for Access Capital Strategies Community Investment
Fund, Inc. (the "Fund") and have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for annual financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals and adjustments)
considered necessary for a fair presentation have been included. The results of
operations and other data for the quarter ended August 31, 2002 are not
necessarily indicative of the results that may be expected for any other future
interim period or the fiscal year ending May 31, 2003. The information in this
report should be read in conjunction with the financial statements and
accompanying notes included in the May 31, 2002 Annual Report on Form 10-K. The
Fund has not changed its accounting and reporting policies from those disclosed
in its May 31, 2002 financial statements.
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 revenue 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 June 1, 2002 to August 31, 2002.
2. Realized Gain/Loss
For the quarter ended August 31, 2002, the realized loss was $3,342,367. This
compares to a realized loss of $128,958 for the quarter ended August 31, 2001.
The increase in realized losses was primarily due to the Fund's hedging
activities. During the quarter, the Fund closed its short Treasury futures
position in the September contract and opened its short Treasury futures
position in the December contract, incurring a loss of $2.85 million. The
balance of the losses came from security sales and paydowns. Realized losses
during the quarter were offset by unrealized gains on the new hedges of $231,919
and $4.9 million in unrealized gains on CRA investments including securities
purchased and hedged with the aforementioned Treasury futures.
10
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 Fund'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 Fund's Annual Report on Form 10-K for the year ended May
31, 2002. The Fund's investment objective is to invest in geographically
specific private placement debt securities located in portions of the
United States designated by Fund investors.
Overview
The Fund is a non-diversified closed-end management company electing status as a
business development company. The Fund's investment objective is to invest in
geographically specific private placement debt securities located in portions of
the United States designated by Fund investors. The Fund invests primarily in
private placement debt securities specifically designed to support underlying
community development activities targeted to low- and moderate-income
individuals such as affordable housing, education, small business lending, and
job-creating activities in areas of the United States designated by Fund
investors.
Investors in the Fund must designate a particular geography within the United
States as part of their agreement to purchase Fund shares. The Fund invests only
in areas where Fund shareholders have made targeted designations.
In addition to their geographic specificity, Fund investments must carry a AAA
credit rating or carry credit enhancement from a AAA-rated credit enhancer or be
issued or guaranteed by the U.S. Government, government agencies or
government-sponsored enterprises. The Fund expects (but cannot guarantee) that
all investments made by the Fund will be considered eligible for regulatory
credit under the Community Reinvestment Act ("CRA").
Compliance
To qualify as a Regulated Investment Company ("RIC"), the Fund must, among other
things, satisfy a diversification standard under the Internal Revenue Code (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 quarter ended August 31, 2002.
11
Fund Operations
Investment Activity
Purchases
For the quarter ended August 31, 2002, the Fund purchased $90.8 million
aggregate principal amount of new CRA securities. In the quarter ended August
31, 2001, the Fund had purchased $58.0 million aggregate principal amount of new
CRA securities.
Sales
For the quarter ended August 31, 2002, the Fund sold $42.4 million aggregate
principal amount of securities, (excluding securities sold short in connection
with hedging activities in respect of new investments in the Fund and sales of
short-term securities). In the quarter ended August 31, 2001, the Fund did not
sell any securities, (excluding securities sold short in connection with hedging
activities in respect of new investments in the Fund and sales of short-term
securities).
The Fund is permitted to use leverage in its investment program, subject to
certain restrictions set forth in its Private Offering Memorandum and the
Investment Company Act of 1940 (the "1940 Act"). For the quarter ended August
31, 2002, the Fund averaged approximately $27.9 million in borrowings at an
average rate of approximately 1.87% compared to the quarter ended August 31,
2001 when the Fund averaged approximately $12 million in borrowings at an
average rate of approximately 4%. In both periods, the total proceeds from
borrowings were primarily used to support additional investments in the Fund's
Designated Target Regions.
Net Assets and Fund Holdings at August 31, 2002
At August 31, 2002, the Fund's Net Asset Value was $211.2 million, or $10.28 per
share. At the end of the most recent fiscal year, May 31, 2002, the Net Asset
Value was $184.9 million, or $10.19 per share. A year ago at August 31, 2001,
the Fund's Net Asset Value was $142.2 million, or $10.20 per share.
The $26.3 million, or 14.2%, quarter-to-quarter increase in net assets from
$184.9 million to $211.2 million was primarily attributable to the sale of new
shares in the Fund. The $69.0 million, or 48.5%, year-to-year increase in net
assets was also primarily attributable to the sale of new shares in the Fund.
The Fund's primary investments are listed on the Schedule of Investments
included with this report.
Investment Income
The Fund had investment income net of all fees and expenses (as discussed below)
of $3.10 million for the quarter ended August 31, 2002, an increase of
approximately $0.85 million, or 37.8%, from net investment income of $2.25
million for the quarter ended August 31, 2001. The increase is largely due to an
increase in average net assets invested.
Management Fees & Expenses
Access Capital Strategies LLC ("Access"), 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. Merrill Lynch Investment Managers, L.P. ("MLIM") receives from
Access an
12
annual sub-management fee, paid quarterly, of twenty-five basis points (0.25%)
of the Fund's average gross monthly assets less accrued liabilities, other than
indebtedness for borrowings.
For the quarter ended August 31, 2002, the management fee paid by the Fund was
$286,669. For the year ago quarter ended August 31, 2001, the management fee was
$189,526. The fee increases were primarily due to increases in the net assets of
the Fund.
The Fund is also charged at an annual rate of up to six basis points (0.06%) of
the Fund's monthly net assets for custody and portfolio accounting services and
operating expenses. To the extent such expenses exceed six basis points (0.06%)
of the Fund's total assets, they are borne by Access and MLIM. The amount of
such expenses borne by Access and MLIM (ie., reimbursed by Access and MLIM to
the Fund) for the current period is indicated on the Statement of Operations
included in this Form 10-Q.
In addition, the Fund is currently charged at an annual rate of two basis points
(0.02%) of the Fund's monthly net assets to reimburse Access for organizational
and offering expenses previously paid by Access.
Yield
For the quarter ended August 31, 2002, the SEC current yield was 6.08%; the SEC
current yield was 6.2% for the quarter ended August 31, 2001. For the quarter
ended August 31, 2002, the ratio of net investment income to average net assets
was 6.24% compared to 6.01% for the year ago quarter ended August 31, 2001. In
each case the modest decline was largely the result of a corresponding decline
in interest rates.
Realized Gain/Loss
For the quarter ended August 31, 2002, the realized loss was $3,342,367. This
compares to a realized loss of $128,958 for the quarter ended August 31, 2001.
The increase in realized losses was primarily due to the Fund's hedging
activities. During the quarter, the Fund closed its short Treasury futures
position in the September contract and opened its short Treasury futures
position in the December contract, incurring a loss of $2.85 million. The
balance of the losses came from security sales and paydowns. Realized losses
during the quarter were offset by unrealized gains on the new hedges of $231,919
and $4.9 million in unrealized gains on CRA investments including securities
purchased and hedged with the aforementioned Treasury futures.
Dividends 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, are distributed annually with the
Fund's dividend distribution in December.
The Fund pays dividends on a calendar quarter basis. The Fund paid a quarterly
dividend of $0.161 per share on July 10, 2002 to shareholders of record as of
July 1, 2002. A year ago, the Fund paid a quarterly dividend of $0.158 per share
on July 25, 2001 to shareholders of record as of June 30, 2001. The moderately
higher dividends, despite a lower interest rate environment, are attributable
primarily to the Fund's existing holdings of investments purchased at higher
coupons, the position in multi-family securities with pre-payment protection and
the benefits of the Fund's leverage policies.
13
Total Return
For the quarter ended August 31, 2002, the total return was 2.51% compared to a
total return of 3.99% in the comparable period ended August 31, 2001. The
decline is largely attributable to lower interest rate levels, as well as a
shortening of the duration of mortgage-backed securities during the quarter
ended August 31, 2002 which combined with lower interest levels and prepayment
risk compressed the price increases resulting from the lower interest rate
levels.
Fund Designated Target Regions at August 31, 2002
The Fund's Designated Target Regions ("DTRs") are provided by Fund shareholders
at the time of investment. At August 31, 2002 DTRs were:
DTRs AMOUNT
AL/FL/GA/LA/MS $ 5,000,000
Arizona $ 10,000,000
Boston & Cambridge, MA 500,000
California 12,595,810
Connecticut 2,031,929
CA/TX/AZ/NV/NYC 8,000,000
Florida 500,000
Illinois 500,000
Texas/Louisiana 5,000,000
Massachusetts 24,794,487
MA/NH/CT 1,000,000
MA/NH 1,000,000
MA/PA/NJ/CT/RI 10,000,000
New England 17,123,838
NY/DC 10,000,000
NY/NJ/TX/FL/CA/MD/DE 10,000,000
New Jersey 4,250,000
New Mexico/Nevada 6,000,000
NM/TX 600,000
Oregon 500,000
Pennsylvania 2,000,000
PA/CA/DC/VA 650,000
Rhode Island 250,000
South Carolina 500,000
South Dakota 3,120,575
Texas 12,737,566
Utah 1,000,000
Utah/NJ 59,186,508
Washington 1,000,000
Washington/Oregon 2,000,000
TOTAL $211,840,713
14
Fund Impact per the Community Reinvestment Act
The Fund invests in securities that support community development economic
activity as defined in the CRA.
At August 31, 2002, the Fund's investments had outstanding loans to 2,971
homebuyers with incomes below 80% of median income from the following states in
the following numbers.
Whole Loans
Alabama 25
Arizona 87
California 154
Connecticut 91
Delaware 12
Florida 50
Georgia 8
Illinois 12
Louisiana 26
Maryland 73
Massachusetts 816
Mississippi 3
Nevada 33
New Hampshire 5
New Mexico 35
New Jersey 545
New York 72
Oregon 12
Pennsylvania 132
Rhode Island 90
South Carolina 10
South Dakota 38
Texas 304
Utah 262
Virginia 12
Washington 14
Washington D.C. 50
-----
2,971
As of August 31, 2002, the Fund's investments had outstanding loans to sponsors
of 1,324 multi-family, 14 community based non-profit affordable housing rental
units and 61 Acorn affordable housing units in Low Income Housing Tax Credit or
HUD insured subsidized properties from the following states in the following
amounts.
Multi-Family Units
California 222
Louisiana 144
Massachusetts 504
New York 157
Texas 227
Utah 70
----
1324
15
Community Based Non-Profit
Rhode Island 14
--
14
Acorn Affordable Housing
Massachusetts 61
--
61
The Fund also owned a U.S. Housing & Urban Development guaranteed security
supporting community development in low-income areas of Boston, Massachusetts.
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.
During the quarter ended August 31, 2002, new shareholders purchased an
additional 2.3 million shares of the Fund for total proceeds of $23.3 million.
In addition, dividend reinvestments resulted in 117,126 additional new shares
being issued by the Fund for total proceeds of $1.2 million. During the quarter
ended August 31, 2001, 8 new shareholders purchased an additional 1.6 million
shares for total proceeds of $16.2 million and dividend reimbursements resulted
in 80,860 additional new shares being issued by the Fund for a total proceeds of
$0.7 million.
As discussed in the Private Offering Memorandum, the Fund allows shareholders to
redeem their shares in accordance with Rule 23c-3 of the 1940 Act.
There were no redemptions of Fund shares during the quarter ended August 31,
2002. There were no redemptions in the year ago quarter ended August 30,
2001.
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
16
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.
A summary of the Fund's portfolio holdings is contained in Item 1 of this Report
on Form 10-Q.
17
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) Articles of Incorporation are incorporated by
reference from an exhibit filed on Form 10-Q for
the period ended August 31, 1998.
(ii) By-Laws are incorporated by reference from an
exhibit filed on Form 10-Q for the period ended
August 31, 1998.
(4) N/A
(5) N/A
(8) None
(10) (i) Private Offering Memorandum is incorporated by
reference from an exhibit filed on Form 10-K for
the period ended May 31, 2001.
(iii)(A) Management Agreement is incorporated by
reference from an exhibit filed on 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) N/A
(25) N/A
(26) N/A
(27) N/A
(b) Reports on Form 8-K
None.
18
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.
Date: 10/15/02 /s/ Ronald A. Homer
---------------------------------------
Ronald A. Homer, Chairman
Date: 10/15/02 /s/ Kevin J. Mulvaney
---------------------------------------
Kevin J. Mulvaney, Director
Date: 10/15/02 /s/ Peter Blampied
---------------------------------------
Peter Blampied, Director
Date: 10/15/02 /s/ M. Colyer Crum
---------------------------------------
M. Colyer Crum, Director
Date: 10/15/02 /s/ Terry K. Glenn
---------------------------------------
Terry K. Glenn, Director
Date: 10/15/02 /s/ Stephen B. Swensrud
---------------------------------------
Stephen B. Swensrud, Director
Date: 10/15/02 /s/ David F. Sand
---------------------------------------
David F. Sand, Chief Executive Officer,
Principal Accounting Officer, Principal Financial Officer
19
CERTIFICATION
I, David F. Sand, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Access Capital
Strategies Community Investment Fund Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of Evaluation Date:
5. I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors;
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
October 15, 2002
/s/ DAVID F. SAND
- ------------------------------------
David F. Sand
Chief Executive Officer and
Principal Financial Officer
20
CERTIFICATION OF PERIODIC REPORT
I, David F. Sand, Chief Executive Officer and Principal Financial Officer
of Access Capital Strategies Community Investment Fund, Inc. (the "Fund"),
certify, pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, 18 U.S.C.
Section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Fund for the fiscal quarter
ended August 31, 2002, as filed with the Securities and Exchange
Commission or the date hereof (the "Quarterly Report") fully complies
with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) the information contained in the Quarterly Report fairly presents, in
all material respects, the financial condition and results of
operations of the Fund.
/s/ David F. Sand
--------------------------------
David F. Sand
Chief Executive Officer and
Principal Financial Officer
Dated: October 15, 2002