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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED: MAY 31, 2001
COMMISSION FILE NUMBER: 817-00807
ACCESS CAPITAL STRATEGIES COMMUNITY INVESTMENT FUND, INC.
(NAME OF ISSUER IN ITS CHARTER)
MARYLAND 04-3369393
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
124 MT. AUBURN STREET, SUITE 200N CAMBRIDGE, MA 02138
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
ISSUER'S TELEPHONE NUMBER: 617-576-5858
SECURITIES REGISTERED UNDER SECTION 12 (b) OF THE EXCHANGE ACT:
COMMON STOCK
NAME OF EXCHANGE ON WHICH REGISTERED:
N/A
SECURITIES REGISTERED UNDER SECTION 12 (g) OF THE EXCHANGE ACT:
NONE
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months
(or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
Days: Yes /X / No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: / /
Documents incorporated by reference: YES
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ACCESS CAPITAL COMMUNITY INVESTMENT FUND, INC.
2001 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
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Item 1. DESCRIPTION OF BUSINESS ..................................... 3
Item 2. PROPERTIES .................................................. 3
Item 3. LEGAL PROCEEDINGS ........................................... 4
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......... 4
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS .............................. 4
Item 6. SELECTED FINANCIAL DATA ..................................... 5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...................... 5
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK .............................................. 9
Item 8. FINANCIAL STATEMENTS ........................................ 12
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ...................... 13
PART III
PAGE
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Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT .............. 13
Item 11. EXECUTIVE COMPENSATION ...................................... 14
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ............................................ 14
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .............. 15
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ................................................... 15
SIGNATURES .................................................. 17
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ITEM 1: DESCRIPTION OF BUSINESS
Access Capital Strategies Community Investment Fund, Inc. (the "Fund") completed
its organization and registration process in early 1998 and commenced operations
on June 23, 1998. This filing is the Form 10-K Annual Report for the Fund for
fiscal year 2001 covering the period from June 1, 2000 to May 31, 2001.
The Fund is a non-diversified closed-end management company electing status as a
business development company under the Investment Company Act (the "1940 Act").
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.
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").
Each of Access Capital Strategies LLC ("Access"), the Fund's manager, and
Merrill Lynch Investment Managers, L.P. ("MLIM"), the Fund's sub-manager, is a
registered investment adviser under the Investment Advisers Act of 1940
("Investment Advisors Act").
As of May 31,2001, the Federal National Mortgage Association ("Fannie Mae"),
through its affiliate Fannie Mae American Communities Fund, held a 32% equity
interest in Access. At May 31, 2001, the Fund held $105,247,017 in Fannie Mae
mortgage-backed securities, representing 86.2% of the Fund's net assets.
The Fund competes with a range of narrowly defined CRA qualified investments
including a few funds that operate on a regional and national basis. However, to
the knowledge of the Fund, there is no other CRA qualified fund in existence
that offers the same risk parameters as the Fund. The Fund competes most
directly with brokers who sell AAA credit quality CRA qualified securities
directly to banking institutions.
The Fund ended the fiscal year on May 31, 2001 with $122,187,672 in net assets
and 1,225.318 shares of common stock ("Shares") owned by twenty-six Fund
investors. The net asset value per Share as of May 31, 2001 was $99,719.15. The
Fund's total return for the fiscal year ended May 31, 2001 was 12.12%.
More information on the Fund is contained in the attached Private Offering
Memorandum and 2001 audited Annual Report.
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ITEM 2: PROPERTIES
None
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ITEM 3. LEGAL PROCEEDINGS
None
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In connection with the Fund's Annual Meeting of Shareholders (the "Meeting")
held on February 20, 2001, a Proxy statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934 was submitted to shareholders on February 14,
2001. The following proposals were described in the Proxy:
1. Approval of a Sub-Management Agreement between Access and MLIM with respect
to the Fund;
2. Election of six Directors to the Fund's Board (three of whom were current
Directors and three of whom were nominees) to serve until the next annual
meeting of shareholders or until their successors are elected and
qualified; and
3. Ratification of the selection of KPMG LLP as the Fund's independent auditor
for the fiscal year ended May 31, 2001.
Each of the proposals was approved at the Meeting. With respect to each
proposal, votes were cast by 16 of the Fund's then 19 shareholders (representing
approximately two-thirds of the amount of Shares at that time), in each case for
the proposal.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information: There is no established public trading market for the
Shares, which are the only class of equity securities authorized or issued by
the Fund.
(b) Holders: At May 31, 2001, the Fund had twenty-six shareholders and 1,225.318
Shares outstanding compared to fifteen shareholders and 525.067 Shares
outstanding at May 31, 2000.
(c) Dividends: 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. Dividends are paid on a calendar quarter basis. 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.
Per Share income dividends totaling $16,414.93 were paid as follows from
inception of the Fund on June 23, 1998 through May 31, 2001:
Dividend
Record Date Payment Date Per Share
30-Sep-98 19-Oct-98 1,389.71
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23-Dec-98 23-Dec-98 1,270.46
31-Mar-99 13-Apr-99 1,227.90
30-Jun-99 6-Jul-99 1,327.30
30-Sep-99 15-Oct-99 1,464.10
30-Dec-99 30-Dec-99 1,557.84
31-Mar-00 17-Apr-00 1,593.26
30-June-00 3-July-00 1,636.09
30-Sep-00 3-Oct-00 1,641.80
31-Dec-00 27-Dec-00 1,668.45
31-Mar-01 5-Apr-01 1,638.02
The Fund has not made any capital gains distributions since inception.
ITEM 6: SELECTED FINANCIAL DATA
Selected Financial Data for the Fiscal Years ended May 31, 2001 and May
31, 2000 and for the period from June 23, 1998 (Commencement of Operations) to
May 31, 1999:
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal year ended Fiscal year ended Period from June 23, 1998
May 31, 2001 May 31, 2000 (Commencement of Operations) to
May 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
SEC Current Yield at end of period 6.51% 7.14% 5.46%
Annualized ratio of net investment 6.63% 6.54% 5.03%
income to average net assets
Total return 12.12% 1.69% 3.17%
Dividends per share $6,584.36 $5,942.50 $3,888.07
Net investment income $4,192,371 $2,247,145 $1,218,785
Net realized loss on investments $661,249 $215,414 -$74,875
Unrealized Gain/Loss $2,736,703 $1,266,025 -$329,661
Management Fees and Expenses $367,446 $199,214 $140,514
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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'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
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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, 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).
Management believes the Fund was in compliance with the above requirements for
the year ended May 31, 2001.
FUND OPERATIONS
INVESTMENT ACTIVITY
During the fiscal year ended May 31, 2001 the Fund made $75.2 million in
purchases of fifty-five CRA securities at yields-to-maturity ranging from 5.9%
to 7.7%. In the prior fiscal year ended May 31, 2000, the Fund made $51.8
million in purchases of fifty-one CRA securities at yields-to-maturity ranging
from 6.9% to 8.1%
During the fiscal year ended May 31, 2001, the Fund made $21.8 million in sales
of nine portfolio holdings. Net realized losses on the sales from June 1, 2000
to May 31, 2001 totaled $661,249. In the prior fiscal year ended May 31, 2000,
the Fund made $16,281,046 in sales of the Federal Home Loan Adjustable Rate MBS
that was the original investment made by the Fund in 1998. Realized losses on
sales from June 1, 1999 to May 31, 2000 totaled $228,075.
The Fund is permitted to use leverage in its investment program, subject to
certain restrictions set forth in its Private Offering Memorandum and the 1940
Act. The Fund had $8.2 million in reverse repurchase agreements at a 4.05% rate
outstanding as of May 31, 2001. For the fiscal year ended May 31, 2001, the
average reverse repurchase agreement was $6.5 million at an average interest
rate of 6.2%. The Fund had a 6.5% $ 8.6 million reverse repurchase agreement
outstanding as of May 31, 2000. For the year ended May 31, 2000, average
borrowings were $6.1 million at an average rate of 5.8%.
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NET ASSETS AND FUND HOLDINGS AT MAY 31, 2001
At May 31, 2001, the Fund's net assets were $122.2 million, or $99,719.15 per
Share. At May 31, 2000, the Fund's net assets were $49.9 million, or $94,992.49
per share.
The $72.3 million, or 145%, year-to-year increase in net assets was due to the
combination of new Shares issued in the aggregate amount of $70 million during
the period June 1, 2000 to May 31, 2001, and an increase in asset values due to
lower interest rates
The $4,726.66, or 4.4%, increase in the net asset value per Share was due to an
increase in the value of Fund investments, which occurred as a result of lower
interest rates.
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 (as discussed below) of $4.19
million for the fiscal year ended May 31, 2001. In the prior fiscal year, net
investment income was $2.24 million. This $1.95 million or 87% increase is due
to the Fund's increase in average invested assets and a 9 basis point increase
in the ratio of net investment income to average net assets compared to the
prior year.
MANAGEMENT FEES AND EXPENSES
Access Capital Strategies LLC ("Access") receives from the Fund 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 annual sub-management fee, paid quarterly, of twenty-five basis points
(0.25%) of the Fund's average monthly gross assets less accrued liabilities,
other than indebtedness for borrowings (or if greater, 50% of the management fee
payable to Access under the Management Agreement).
The Fund is also charged up to six basis points (0.06%) of the Fund's total
assets, including assets purchased with borrowed funds, 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 will
be borne by Access and MLIM.
Combined organizational and offering expenses (primarily legal) for the Fund
were approximately $100,000. Access agreed to pay these expenses and be
reimbursed by the Fund during the offering period. Beginning with the first
closing and continuing until the final closing of Shares, the Fund has been and
will continue to be charged an annual fee of two basis points (0.02%) of the
Fund's total assets, including assets purchased with borrowed funds, paid
quarterly, to reimburse Access up to the amount of combined organizational and
offering expenses. To the extent that Access is not fully reimbursed for these
expenses, they will continue to be borne by Access.
Investors withdrawing from the Fund will in general receive the then current net
asset value per Share
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and have transferred to their account maintained by Access the net proceeds from
liquidation of their Shares in the Fund. Access will then charge their account a
1% withdrawal fee and the assets remaining in their account will then be
returned to the investor. The 1% fee will not be charged on funds withdrawn
after an investor has been in the Fund for three years. For shareholders of the
Fund as of March 1, 2001, the fee will be waived on redemptions subsequent to
March 1, 2004. Any arrangements made by individual shareholders prior to March
1, 2001 will take precedence over this change. For shareholders entering the
Fund after March 1, 2001, the fee will be waived on redemptions subsequent to
their third anniversary of becoming a shareholder.
For the fiscal year ended May 31, 2001, the management fee paid by the Fund was
$316,763 and the reimbursement of operating expenses was $50,683. For the prior
fiscal year, the management fee was $171,736 and the expense reimbursement
$27,478. These increases were due to increases in the net assets of the Fund.
YIELD
For the year ended May 31, 2001 the ratio of net investment income to average
net assets was 6.63% compared to 6.54% in the year ago period. At May 31, 2001,
the SEC current yield was 6.51% compared with an SEC current yield of 7.14% at
May 31, 2000.
REALIZED GAIN/LOSS
For the year ended May 31, 2001, the realized loss was $661,249 compared to the
realized loss of $215,414 for the year ago period.
DIVIDENDS PAID
During the year ended May 31, 2001, the Fund distributed dividends of $6,584.36
per share compared to $5,942.50 per share for the year ago period.
TOTAL RETURN
For the year ended May 31, 2001, the Fund's total return was 12.12% compared to
1.69% for the year ended May 31, 2000. The increase in total return was
primarily due to the decline in interest rates in the latter part of the year
and the corresponding increase in market values for the Fund's holdings.
FUND DESIGNATED TARGET REGIONS AT MAY 31, 2001
The Fund's Designated Target Regions ("DTR") are provided by Fund shareholders
at the time of investment. At May 31, 2001 DTRs were:
DTRs AMOUNT
- ------------------------------ ---------------------------
Boston & Cambridge, MA $500,000
California 7,000,000
Connecticut 500,000
Florida 500,000
Texas/Louisiana 5,000,000
Massachusetts 13,750,000
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MA/NH/CT 1,000,000
MA/NH 1,000,000
New England 17,123,838
NY/DC 10,000,000
NY/NJ/TX/FL/CAL/MD/DE 10,000,000
New Jersey 26,000,000
Texas 5,000,000
Utah/NJ 25,000,000
TOTAL $122,373,838
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.
As of May 31, 2001, the Fund's investments had outstanding loans to 1660
homebuyers with incomes below 80% of median income from the following states in
the following numbers.
California 81
Connecticut 89
Delaware 12
Florida 5
Louisiana 26
Maryland 73
Massachusetts 583
New Hampshire 5
New Jersey 265
New York 56
Rhode Island 77
Texas 137
Utah 192
Washington, D.C. 59
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Total 1660
As of May 31, 2001, the Fund's investments had outstanding loans to sponsors of
1027 multi-family affordable housing rental units in Low Income Housing Tax
Credit or HUD insured subsidized properties from the following states in the
following amounts.
California 152
Louisiana 48
Massachusetts 504
New York 157
Texas 166
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Total 1,027
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The Fund also owned a U.S. Housing & Urban Development guaranteed security
supporting community development in low-income areas of Boston, Massachusetts.
ITEM 7A. 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 U.S.
Government Agency or AAA credit quality. Fund investments will typically have
one or more forms of credit enhancement.
LIQUIDITY RISK. Securities purchased by the Fund will generally be privately
placed debt instruments. The market for resale of these securities may be
limited. Furthermore, the Fund may pay a premium for CRA securities purchased
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 May 31, 2001:
- -------------------------------------------------------------------------------------------------
Investments (at market) Variable Rate Fixed Rate
- -------------------------------------------------------------------------------------------------
Maturities less than 1 year - $818,934 Federal Home Loan Bank 3.9%
Discount Note
Maturities (or weighted average - $523,398 FannieMae 5 1/2% MBS
lives) greater than 1 year less $492,348 FannieMae 6% MBS
than 7 $638,018 FannieMae 6 1/2% MBS
$1,030,331 FannieMae 7% MBS
Maturities (or weighted average - $474,305 FannieMae 5% MBS
lives) greater than 7 years less $1,680,979 FannieMae 5 1/2% MBS
than 10 $2,938,922 FannieMae 6% MBS
$3,979,601 FreddieMac 6% MBS
$42,834,857 FannieMae 6 1/2% MBS
$7,687,381 FreddieMac 6 1/2% MBS
$1,307,054 US Gov't 6.85% HUD note
$17,651,515 FannieMae 7% MBS
$12,955,440 FreddieMac 7% MBS
$84,263 FannieMae 7 1/4% MBS
$3,892,087 FreddieMac 7 1/2% MBS
$21,417,431 FannieMae 7 1/2% MBS
$2,312,378 FannieMae 7.9% MBS
$3,187,867 FannieMae 8% MBS
- -------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------
Maturities (or weighted average - $268,256 FannieMae 6.53% Multi-family
lives) greater than 10 years housing MBS
$8,242,038 FannieMae 7.12% Multi-family
housing MBS
$656,664 FannieMae 7.58% Multi-Family
housing MBS
$813,447 FannieMae 7.97% Multi-Family
housing MBS
$1,947,604 GinnieMae 8.25% Project loan
- ----------------------------------------------------------------------------------------------------------
TOTAL 137,835,118
- ----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Borrowings Variable Rate Fixed Rate
- -----------------------------------------------------------------------------------------------------------
Maturities less than 1 year ($8,207,380) Reverse
repurchase
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 - -
- -----------------------------------------------------------------------------------------------------------
TOTAL ($8,207,380)
- -----------------------------------------------------------------------------------------------------------
Excludes $8,554,662 in assets held at brokers pending trade settlements and
$8,513,415 in liabilities for securities sold short with settlements in less
than thirty days.
All Fund activities occur in U.S. dollars.
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Financial Statements
May 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Access Capital Strategies Community Investment Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Access
Capital Strategies Community Investment Fund, Inc. (the "Fund") as of May 31,
2001, including the schedule of investments, and the related statements of
operations and cash flows for the year then ended, the statements of changes in
net assets for each of the two years then ended and the financial highlights for
the period from June 23, 1998 (commencement of operations) to May 31, 1999 and
each of the years in the two-year period ended May 31, 2001. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 2001 by correspondence with the custodian. As to
securities purchased but not yet received, we performed other appropriate
auditing procedures. Our audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Access
Capital Strategies Community Investment Fund, Inc. as of May 31, 2001 and the
results of its operations, changes in its net assets, cash flows and the
financial highlights for the periods noted above in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
July 23, 2001
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ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Schedule of Investments
May 31, 2001
MARKET
PAR VALUE VALUE
---------------- ---------------
MORTGAGE-BACKED SECURITIES (111.1%):
Federal National Mortgage Association (FNMA) (86.2%):
15 Year Fixed Rate Single Family Mortgage Backed Securities
5.50%, 3/1/16 $ 535,961 $ 523,398
6.00%, 4/1/14 494,982 492,348
6.50%, 12/1/14 - 6/1/14 641,422 638,018
7.00%, 1/1/15 1,003,977 1,030,331
30 Year Fixed Rate Single Family Mortgage Backed Securities
5.00%, 3/1/29 518,545 474,305
5.50%, 1/1/29 1,791,853 1,680,979
6.00%, 3/1/31 - 4/1/31 3,032,756 2,938,922
6.50%, 6/1/14 - 6/1/31 43,715,701 42,834,857
7.00%, 5/1/29 - 3/1/31 17,412,098 17,651,515
7.25%, 12/1/29 82,309 84,263
7.50%, 7/1/29 - 2/1/31 20,837,928 21,417,431
7.90%, 1/1/18 2,176,276 2,312,378
8.00%, 2/1/30 - 4/1/30 3,063,430 3,187,867
---------------
Total single family mortgage-backed securities 95,266,612
---------------
Multi-Family Mortgage Backed Securities
6.53%, 6/1/16 273,906 268,256
7.12%, 9/1/10 7,954,615 8,242,038
7.58%, 5/1/18 630,319 656,664
7.97%, 9/1/17 769,444 813,447
---------------
Total multi-family mortgage-backed securities 9,980,405
---------------
Total Federal National Mortgage Association securities 105,247,017
---------------
Federal Home Loan Mortgage Corporation (23.3%):
30 Year Fixed Rate Single Family Mortgage Backed Securities
6.00%, 3/1/31 - 4/1/31 4,102,681 3,979,601
6.50%, 6/1/29 - 3/1/31 7,733,317 7,687,381
7.00%, 10/1/29 - 4/1/31 12,788,487 12,955,440
7.50%, 12/1/29 - 3/1/30 3,787,919 3,892,087
---------------
Total Federal Home Loan Mortgage Corporation
single family mortgage-backed securities 28,514,509
---------------
2 (Continued)
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ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Schedule of Investments
May 31, 2001
MARKET
PAR VALUE VALUE
-------------- -------------
GNMA Pool (1.6%):
Multi-Family Mortgage Backed Security
8.25%, 12/15/32 $ 1,884,048 $ 1,947,604
-------------
Total mortgage-backed securities 135,709,130
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GUARANTEED AND DISCOUNT NOTES (1.7%):
Boston, MA, U.S. Government Guaranteed Notes
6.85%, 8/1/07 1,290,000 1,307,054
Cash Equivalent Discount Note
3.90%, 6/13/01 820,000 818,934
-------------
Total guaranteed and discount notes 2,125,988
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Total investments (cost $136,707,405) 137,835,118
-------------
OTHER ASSETS AND LIABILITIES (12.8%) (15,647,446)
-------------
Net assets $ 122,187,672
=============
SECURITIES SOLD SHORT (NOTE 3):
Market
Mortgage-backed securities: Par value value
--------------- -------------
FNMA, 7.00%, 12/1/99 5,500,000 $ 5,548,125
FNMA, 6.50%, 4/29/01 3,000,000 2,965,290
-------------
Total (proceeds $8,526,720) $ 8,513,415
=============
See accompanying notes to financial statements.
3
17
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Statement of Assets and Liabilities
As of May 31, 2001
ASSETS
Investments, at market value (cost $136,707,405) $ 137,835,118
Deposits with broker 8,554,662
Cash 3,546
Interest receivable 772,461
-------------
147,165,787
-------------
LIABILITIES
Payable for investments purchased 8,136,408
Payable for reverse repurchase agreements
(including accrued interest of $7,380) 8,207,380
Accrued expenses 101,579
Securities sold short (proceeds received $8,526,720) 8,513,415
Interest payable 19,333
-------------
24,978,115
-------------
$ 122,187,672
=============
NET ASSETS
Net assets represented by:
Paid-in capital $ 121,374,970
Accumulated undistributed net investment income 623,222
Accumulated net realized loss on investment transactions (951,538)
Net unrealized appreciation on investments and securities sold short 1,141,018
-------------
Net assets $ 122,187,672
=============
Net asset value per share $ 99,719
=============
Shares outstanding 1,225.318
=============
See accompanying notes to financial statements.
4
18
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Statement of Operations
Year ended May 31, 2001
Investment income:
Interest $ 4,970,231
Expenses:
Management fee 316,763
Administrative fees 19,006
Custody and accounting fees 19,006
Organizational expenses 12,671
Interest expense - reverse repurchase agreements 410,414
-----------
Total expenses 777,860
-----------
Net investment income 4,192,371
-----------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments (661,249)
Change in unrealized appreciation of investments 2,736,703
-----------
Net realized and unrealized gain on investments 2,075,454
-----------
Net increase in net assets resulting from operations $ 6,267,825
===========
See accompanying notes to financial statements.
5
19
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Statements of Changes in Net Assets
Years ended May 31, 2001 and 2000
2001 2000
------------- ------------
Net increase (decrease) in net assets:
Operations:
Net investment income $ 4,192,371 2,247,145
Net realized loss on investments (661,249) (215,414)
Change in unrealized appreciation (depreciation) of investments 2,736,703 (1,266,025)
------------- ------------
Increase in net assets resulting from operations 6,267,825 765,706
------------- ------------
Distributions to shareholders from:
Net investment income (3,957,576) (2,081,193)
------------- ------------
Total distribution to shareholders (3,957,576) (2,081,193)
------------- ------------
Capital share transactions:
Proceeds from sale of shares 69,999,999 25,750,135
------------- ------------
Increase in net assets resulting from capital share transactions 69,999,999 25,750,135
------------- ------------
Increase in net assets 72,310,248 24,434,648
Net assets at beginning of year 49,877,424 25,442,776
------------- ------------
Net assets at end of year $ 122,187,672 49,877,424
============= ============
Accumulated undistributed net investment income $ 623,222 388,427
============= ============
See accompanying notes to financial statements.
6
20
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Financial Highlights
Years ended May 31, 2001 and 2000, and period from June 23, 1998
(commencement of operations) to May 31, 1999
2001 2000 1999
-------------- ------------ ------------
Per share operating performance:
Net asset value, beginning of period $ 94,992.49 99,288.88 100,000.00
-------------- ------------ ------------
Income from investment operations:
Net investment income 6,353.22 5,814.07 4,756.27
Net realized and unrealized gain (loss)
on investments 4,957.80 (4,167.96) (1,579.32)
-------------- ------------ ------------
Total from investment operations 11,311.02 1,646.11 3,176.95
-------------- ------------ ------------
Less distributions from net investment income 6,584.36 5,942.50 3,888.07
-------------- ------------ ------------
Net asset value, end of period $ 99,719.15 94,992.49 99,288.88
============== ============ ============
Total return 12.12% 1.69% 3.17%
Ratios/supplemental data:
Net assets, end of period (in thousands) $ 122,188 49,877 25,443
Ratio of expenses to average net assets 0.58% 0.58% 0.58%(a)
Ratio of net investment income to average
net assets 6.63% 6.54% 5.03%(a)
Portfolio turnover rate 25% 57% 29%
(a) Annualized.
See accompanying notes to financial statements.
7
21
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Statements of Cash Flows
Year ended May 31, 2001
Cash flows from operating activities:
Net increase in net assets from operations $ 6,267,825
Adjustments to reconcile net increase in net assets from
operations to net cash used in operating activities:
Net accretion of discount/premium on long-term securities (49,292)
Increase in deposits with broker (8,554,662)
Decrease (increase) in interest receivable (391,696)
(Decrease) increase in liability for reverse repurchase
agreement (403,490)
Increase in liability for investments purchased 8,136,408
Increase in accrued expenses 53,675
Unrealized (appreciation) depreciation on investments (2,736,703)
Net realized loss on investments 661,249
Increase in securities sold short 8,513,415
Net appreciation of security sold short 13,304
Increase in interest payable 19,333
Purchase of investment securities (102,340,184)
Proceeds from disposition of investment securities 18,645,132
Proceeds from mortgage-backed securities paydowns 6,941,540
Purchase and sales of short-term investment securities, net (814,731)
-------------
Net cash used by operating activities (66,038,877)
-------------
Cash flows from financing activities:
Capital stock subscriptions 69,999,999
Cash distributions paid (3,957,576)
-------------
Net cash provided by financing activities 66,042,423
-------------
Net increase in cash 3,546
Cash, beginning of year --
-------------
Cash, end of year $ 3,546
=============
Cash paid for interest $ 394,571
=============
See accompanying notes to financial statements.
8
22
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Notes to Financial Statements
May 31, 2001
(1) ORGANIZATION
Access Capital Strategies Community Investment Fund, Inc. (the
"Fund"), a Maryland Corporation, is organized as a 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 commenced operations on June 23, 1998.
The Fund's investment objective is to invest in geographically
specific private placement debt securities specifically designed to
support underlying economic activities such as affordable housing,
education, small business lending, and community development.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of the financial
statements. The policies are in conformity with accounting principles
generally accepted in the United States of America which require
management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the
net assets of the Fund.
(a) VALUATION OF SECURITIES
Portfolio securities, the principal market for which is a
securities exchange will be valued at the closing sales price
on that exchange on the day of computation, or, if there have
been no sales during such day, at the bid quotations. If no
such bid prices are available, then the securities will be
valued in good faith at their respective fair market values
using methods determined by or under the supervision of the
Board of Directors of the Fund. Portfolio securities, the
principal market for which is not a securities exchange and for
which bid and ask prices are not available but for which the
Custodian can obtain a price from an independent pricing agent
for a comparable security without Community Reinvestment Act
characteristics shall be valued at the price obtained from the
independent pricing agent by the Custodian plus a markup of 1/2
of a point. Portfolio securities, the principal market for
which is not a securities exchange and for which the Custodian
cannot obtain a price from an independent pricing agent shall
be valued by the Custodian by using a pricing matrix designed
to maintain fair value of that security as provided by the
Adviser. All other assets and securities including securities
for which market quotations are not readily available are
valued at their fair value as determined in good faith under
the general supervision of the Board of Directors of the Fund.
9 (Continued)
23
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Notes to Financial Statements
May 31, 2001
(b) REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to
take possession, to have legally segregated in the Federal
Reserve Book entry system all securities held as collateral
in support of the repurchase agreement investments.
Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each
repurchase agreement's underlying securities to ensure the
existence of a proper level of collateral.
The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's advisor to be
creditworthy pursuant to guidelines established by the
Directors. Risk may arise from potential inability of
counterparties to honor the terms of the repurchase
agreement. Accordingly, the fund could receive less than the
repurchase price on the sale of the collateral securities.
(c) REVERSE REPURCHASE AGREEMENTS
To obtain short-term financing, the Fund may enter into
reverse repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are
deemed by the Fund's advisor to be creditworthy pursuant to
the guidelines established by the Directors. Interest on the
value of the reverse repurchase agreements is based upon
competitive market rates at the time of issuance. At the time
the Fund enters into a reverse repurchase agreement, it will
establish and maintain a segregated account with the
custodian containing qualifying assets having a value not
less than the repurchase price, including accrued interest.
If the counterparty to the transaction is rendered insolvent,
the ultimate realization of the securities to be repurchased
by the Fund may be delayed or limited.
(d) DERIVATIVES
The Fund may use derivative instruments, including futures,
forwards, options, indexed securities and inverse securities
for hedging purposes only. Derivatives allow the Fund to
increase or decrease its risk exposure more quickly and
efficiently than other types of instruments.
(e) 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.
(f) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on trade date. Realized
gains and losses from security transactions are reported on
an identified-cost basis. Income and expenses are recorded
on the accrual basis. Premiums and discounts on
mortgage-backed securities are amortized and accreted into
interest income using the effective-yield method.
10 (Continued)
24
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Notes to Financial Statements
May 31, 2001
For federal income tax purposes at May 31, 2001, the cost of
investments is $136,698,796 and the appreciation and
depreciation on investments and securities sold short are
$1,136,322 and $0, respectively.
(g) FEDERAL INCOME TAXES
No provision for federal income or excise taxes is required
since the Fund intends to continue to qualify as a regulated
investment company and distribute all of its taxable income to
its shareholders.
(h) RECLASSIFICATION OF CAPITAL ACCOUNTS
Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. Accordingly, periodic reclassifications are made
within the Fund's capital accounts to reflect income and gains
available for distribution under income tax regulations. There
were no such reclassifications made during fiscal 2001.
(i) DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and distributes dividends quarterly from net
investment income and annually from net realized capital gains,
if any, after offsetting capital-loss carryovers.
(3) SECURITIES SOLD SHORT
The Fund maintains securities sold short that are shown as a
liability in the accompanying statements of assets and liabilities.
To settle this liability, the Fund would be required to purchase the
previously shorted securities at the prevailing market price. These
short sales may involve a level of risk in excess of the liability
recognized in the accompanying statements of assets and liabilities.
The extent of such risk cannot be quantified.
(4) INVESTMENT MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES
Access Capital Strategies LLC ("Access") serves as the Fund's
Investment Manager. Access is a registered investment adviser under
the Investment Advisers Act 1940 ("Investment Advisers Act"). As of
May 31, 2001, the Federal National Mortgage Association ("Fannie
Mae") through its affiliate the FannieMae American Community Fund
holds 32% equity interest in Access. At May 31, 2001, the Fund held
$105,247,017 in Fannie Mae mortgage-backed securities representing
86.2% of the Fund's net assets.
11 (Continued)
25
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Notes to Financial Statements
May 31, 2001
Access receives from the Fund 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. Under
the terms of the management agreement, Access has agreed to pay all
operating expenses of the Fund. In turn, Access charges the Fund a fee
equal to the lesser of three basis points (0.03%) of average monthly net
assets, paid quarterly, or cumulative administrative expenses incurred
by Access less cumulative administrative expenses reimbursed by the
Fund. As of March 1, 2001, Access entered into a sub-management
agreement with Merrill Lynch Investment Managers, L.P. ("ML"), by which
ML will assume Access and all fund expenses. For the period June 1, 2000
to May 31, 2001, Access incurred $140,586 in administrative expenses and
the Fund reimbursed Access $19,006 for such expenses. Since inception,
Access has incurred $499,792 in administrative expenses, $36,578 of
which has been reimbursed by the Fund. In the event the management
agreement between Access and the Fund is terminated, the Fund will have
no obligation to continue to pay Access for non-reimbursed
administrative expenses.
ML acts as investment sub-advisor to the Fund. ML is entitled to receive
from Access, as compensation for its sub-advisory services to the Fund,
an annual sub-management fee, paid quarterly, at an annual rate of 0.25%
of the fund's average gross monthly assets, less accrued liabilities
other than indebtedness for borrowings (or if greater, 50% of the
management fee payable to the manager under the management agreement).
Upon launch of the Fund, Access agreed to pay all organization and
offering costs of the Fund. In turn, the Fund is charged two basis
points (.02%) of the Fund's average monthly net assets, paid quarterly,
to reimburse Access up to the amount of combined organizational and
offering expenses. Since inception, the Fund incurred $78,508 in
organizational expenses and the Fund reimbursed Access $12,671 and
$6,869 for such expenses in 2001 and 2000, respectively. Since
inception, Access has incurred $78,508 in organizational and offering
costs, $24,385 of which has been reimbursed by the Fund. In the event
the management agreement between Access and the Fund is terminated, the
Fund will have no obligation to continue to pay Access for
non-reimbursed organization and offering costs.
Also, the Fund is charged three basis points (0.03%) of the Fund's
monthly net assets for custody and fund accounting services.
For certain issues purchased by the Fund, the issuer may pay a 100 basis
point (1%) structuring fee to the Fund. In the event that the Fund
receives a structuring fee from an issuer, Access charges the Fund an
investment structuring fee equal to 100 basis points (1%). For the
period from June 1, 2000 to May 31, 2001, the Fund received $0 in
structuring fees from issuers and accordingly, the Fund paid Access $0
in structuring fees.
Access maintains a shareholder account for each investor in the Fund.
Investors making a commitment to the Fund pay Access a one-time
commitment fee of 25 basis points (0.25%) of the commitment. During the
period from June 1, 2000 to May 31, 2001, Access received $177,508 in
commitment fees gross of $131,250 payable to third parties.
12 (Continued)
26
ACCESS CAPITAL STRATEGIES
COMMUNITY INVESTMENT FUND, INC.
Notes to Financial Statements
May 31, 2001
(5) CAPITAL SHARE TRANSACTIONS
The Fund has authorized 10,000 shares of $.01 par value common stock.
At May 31, 2001, there were 1,309.45 shares issued and 1,225.32
shares outstanding.
Investors withdrawing from the Fund receive the then current net
asset value and the total redemption proceeds are subject to 1%
withdrawal fee. During the period from June 1, 2000 to May 31, 2001,
no withdrawals were made. Access charges withdrawal fees if investors
withdraw from the Fund within three years. After three years of
investment, no withdrawal fees are charged.
(6) CAPITAL LOSS CARRYFORWARD
For federal income tax purposes, the Fund had capital loss carryovers
at May 31, 2001 of $807,130 which, if not offset by subsequent
capital gains, $16,310 will expire in 2007, $137,249 will expire in
2008 and $653,571 will expire in 2009. It is unlikely that the Board
of Directors will authorize distribution of any net realized capital
gains until the available capital loss has been offset or expired.
(7) SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales and paydowns of investment
securities (excluding short-term securities) were as follows for the
year ended May 31, 2001:
COST OF PURCHASES PROCEEDS FROM SALES PROCEEDS FROM PAYDOWNS
----------------- ------------------- ----------------------
$ 102,340,184 $ 18,645,132 $ 6,941,540
The Fund had the following reverse repurchase agreements outstanding
at May 31, 2000:
REPURCHASE AMOUNT COUNTERPARTY INTEREST RATE MATURITY DATE
----------------- ------------ ------------- -------------
$ 3,700,000 Credit Suisse First Boston 4.05% 6/13/01
4,500,000 Credit Suisse First Boston 4.05% 6/13/01
The average daily balance, weighted average interest rate and maximum
amount outstanding under these agreements were as follows:
AVERAGE DAILY WEIGHTED MAXIMUM
BALANCE AVERAGE INTEREST AMOUNT
OUTSTANDING RATE OUTSTANDING(*)
----------- ---- --------------
$ 6,500,000 6.21% 14,800,000
(*) The maximum amount outstanding under reverse repurchase
agreements includes accrued interest.
13
27
Access Capital Strategies Community Investment Fund, Inc.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None during the fiscal year ended May 31, 2001.
The Fund has retained Deloitte & Touche LLP as the Fund's independent auditor
for the fiscal year ending May 31, 2002. The retention of Deloitte & Touche LLP
was unanimously approved by the Fund's Board of Directors. The Board's Audit
Committee, comprised of each Director of the Fund that is not an "interested"
Director, had unanimously recommended that the Board of Directors approve the
retention of Deloitte & Touch LLP.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Fund's Board of Directors establishes and reviews policy for the management
of the Fund. A majority of the members of the Board of Directors, as required by
Section 56(a) of the 1940 Act, are disinterested. The Board meets no less
frequently than quarterly. The Board reviews and approves annually the contracts
between the Fund, Access, and any other affiliates of Access. Management is
responsible for all day-to-day business decisions regarding operations of the
Fund. Specifically, all decisions about buying and selling portfolio investments
are be Management's responsibility. The Board reviews and considers the
allocation of actual investments as compared to the allocation indicated by
investors' Designated Target Regions.
At May 31, 2001, the Fund's Directors were:
- ------------------------------------------------------------------------------------------------------------------------
Name, Age and Offices with the Fund Principal Occupation During At Least Past Five Years and Public Directorships as
of March 1, 2001
- ------------------------------------------------------------------------------------------------------------------------
Stephen B. Swensrud, 67 Chairman of Fernwood Advisors (investment adviser) since 1996; Principal of
Director since 2001 Fernwood Associates (financial consultant) since 1975; Director and Chairman,
RPP Corporation, since 1999; Director, International Mobile Communications, Inc.
since 1999.
In addition, Mr. Swensrud is a director of 44 registered investment companies
consisting of 91 portfolios advised by Merrill Lynch Investment Managers, L.P. or
its affiliates.
- ------------------------------------------------------------------------------------------------------------------------
M. Colyer Crum, 68 James R. Williston Professor of Investment Management Emeritus, Harvard
Director since 2001 Business School since 1996; James R. Williston Professor of Investment
Management, Harvard Business School, from 1971 to 1996; director of
Cambridge Bancorp.
In addition, Mr. Crum is a Director of 26 registered investment companies
consisting of 51 portfolios advised by Merrill Lynch Investment Managers, L.P. or
its affiliates.
- ------------------------------------------------------------------------------------------------------------------------
Terry K. Glenn(*), 60 Executive Vice President of Merrill Lynch Investment Managers, L.P. and Fund
Director since 2001 Asset Management, L.P. since 1983; Executive Vice President and Director of
Princeton Services, Inc. since 1993; President of FAM Distributors, Inc. since 1986
and Director thereof since 1991; President of Princeton Administrators, L.P. since
1988.
- ------------------------------------------------------------------------------------------------------------------------
13
28
- ------------------------------------------------------------------------------------------------------------------------
In addition, Mr. Glenn is President of and a Director of substantially all investment
companies advised by Merrill Lynch Investment Managers, L.P. or its affiliates.
- ------------------------------------------------------------------------------------------------------------------------
Peter J. Blampied, 58 President, Corcoran Management Company, a real estate firm since 1998. Vice
Director since 1997 Chairman Citizens Bank of Massachusetts (1993-94). Chairman, President & CEO
Boston Five Bancorp (1989-1993).
In addition Mr. Blampied is a director of A.W. Perry, Inv. (1998-present) and
Environmental Power Corp. (1998-present) and a Trustee of Northeast Investors
Trust (2000-present).
- ------------------------------------------------------------------------------------------------------------------------
Ronald A. Homer(*), 54 CEO & Co-Managing Member, Access Capital Strategies LLC (the Manager) since
Director since 1997 1997. President & CEO Boston Bank of Commerce (1983-1996).
In addition Mr. Homer is a Director of Sallie Mae (GSE).
- ------------------------------------------------------------------------------------------------------------------------
Kevin J. Mulvaney, 52 President, Strategic Advisors Group, a management-consulting firm since 1997.
Director since 1997 Formerly President of DRI/McGraw Hill (1994-97). Executive Vice President Bank
of Boston (prior to 1993).
- ------------------------------------------------------------------------------------------------------------------------
(*)An "interested" Director.
Officers
At May 31, 2001, the officers of the Fund were:
NAME POSITION OTHER AFFILIATION
---- -------- -----------------
Ronald A. Homer Chairman CEO & Co-Managing Member, Access Capital
Strategies LLC
David F. Sand CEO President & Co-Managing Member, Access
Capital Strategies LLC
David W. Clayton Secretary Vice President - Legal Advisory, Merrill Lynch
Investment Managers, L.P.
The business backgrounds not shown above of the Fund's directors and
officers are as follows:
Name Employers (prior 5 years) Industry Job Description
---- ------------------------- -------- ---------------
David F. Sand Access Capital Strategies LLC Investment Adviser President & Co-Managing Member (1997-
present)
Access Capital Strategies Corp. Investment Adviser CIO & CEO (prior to 1997)
Commonwealth Capital Strategies Investment Banking President (prior to 1995)
Commonwealth Capital Partners Investment Banking Managing Director (prior to 1994)
David W. Clayton Milbank Tweed Hadley & Legal Attorney (1997-2000)
McCloy
Blake, Cassels & GraydonAccess Legal Attorney (1995-1997)
ITEM 11. EXECUTIVE COMPENSATION
The Fund pays no compensation to its officers who are "interested persons" (as
defined in the 1940 Act) of the Fund or to its directors who are officers,
directors or employees of Access, MLIM or any "affiliated person" (as defined in
the 1940 Act) of Access or MLIM. The Fund's disinterested directors received
$2,000 per meeting. There were 4 meetings during the reporting period. Such
directors also are reimbursed by the Fund for their expenses in attending
meetings of the Board or any committee thereof.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
14
29
Beneficial Owners:
At May 31, 2001, Merrill Lynch Bank & Trust Company owned 20.4%, Merrill Lynch
Bank USA 20.4%, FleetBoston 14%, Amalgamated Bank 8.5% and JP Morgan Chase 8.2%
of the Fund's outstanding Shares.
Management:
Access Capital Strategies LLC, the manager of the Fund, owned 0.01 Fund shares
at May 31, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Fund may invest in securities guaranteed and issued by FannieMae. An
affiliate of FannieMae is an investor in Access Capital Strategies LLC, the
Fund's manager. The Fund Directors have adopted policies and procedures to
govern the direct purchase of FannieMae mortgage-backed securities by the Fund
from the FannieMae Customer Service Trading Desk.
At May 31, 2001, the Fund owned $105 million in FannieMae mortgage-backed
securities representing 86% of the Fund's total investments.
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
(a)(1) The following financial statements are incorporated by reference from
Item 8 hereof:
Statements of Assets and Liabilities as of May 31, 2000 and 1999
Statements of Operations for the fiscal year ended May 31, 2000 and the period
June 23, 1998 (Commencement of Operations) to May 31, 1999
Statements of Changes in Net Assets for the fiscal year ended May 31, 2000 and
the period June 23, 1998 (Commencement of Operations) to May 31, 1999
Financial Highlights for the fiscal year ended May 31, 2000 and the period June
23, 1998 (Commencement of Operations) to May 31, 1999
Notes to Financial Statements
Independent Auditors' Report
(a)(2) All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are omitted
because of the absence of conditions under which they are required or because
the required information is included in the financial statements and related
notes thereto.
(a)(3) The following exhibits are included as part of this Form 10-K.
15
30
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) N/A
(9) None
(10) (i) Private Offering Memorandum is filed herewith
(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) Consent of Independent Public Accountants is filed
herewith
(24) None
(25) N/A
(26) N/A
(27) N/A
(b) Reports on Form 8-K
None.
16
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Section 13 or 15(d) of report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: 8/28/01 Access Capital Strategies Community Investment
Fund, Inc.
*/s/ DAVID.F. SAND
-----------------
David F. Sand, Chief Executive Officer and
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: 8/28/01 */s/ KEVIN J. MULVANEY
----------------------
Kevin J. Mulvaney, Director
Date: 8/28/01 */s/ PETER BLAMPIED
-------------------
Peter Blampied, Director
Date: 8/28/01 */s/ RONALD A. HOMER
--------------------
Ronald A. Homer, Chairman of the Board
*/s/ TERRY K. GLENN
Date: 8/28/01 ---------------------------------------
Terry K. Glenn, Director
*Executed on behalf of the indicated person by the undersigned, pursuant to
power of attorney attached hereto.
By: /s/ ALYSSA ALBERTELLI
-----------------------
Alyssa Albertelli
Attorney-In-Fact
17
32
POWER OF ATTORNEY
-----------------
David F. Sand, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker and Alyssa Albertelli, each individually, his
true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Access Capital
Strategies Community Investment Fund, Inc. ("the "Fund"), to comply with the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof and any state filings, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director and/or officer of the Fund
any and all such documents filed with the Securities and Exchange Commission
under said Acts, and any and all such documents filed with the state
authorities, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 7/10/98 /s/ DAVID F. SAND
------- -----------------
33
POWER OF ATTORNEY
-----------------
Ronald S. Homer, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker and Alyssa Albertelli, each individually, his
true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Access Capital
Strategies Community Investment Fund, Inc. ("the "Fund"), to comply with the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof and any state filings, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director and/or officer of the Fund
any and all such documents filed with the Securities and Exchange Commission
under said Acts, and any and all such documents filed with the state
authorities, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 7/10/98 /s/ RONALD S. HOMER
------- -------------------
34
POWER OF ATTORNEY
-----------------
Peter J. Blampied, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable Access Capital
Strategies Community Investment Fund, Inc. ("the "Fund"), to comply with the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof and any state filings, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director and/or officer of the Fund
any and all such documents filed with the Securities and Exchange Commission
under said Acts, and any and all such documents filed with the state
authorities, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 7/20/98 /s/ PETER J. BLAMPIED
------- ---------------------
35
POWER OF ATTORNEY
-----------------
Kevin J. Mulvaney, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable Access Capital
Strategies Community Investment Fund, Inc. ("the "Fund"), to comply with the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof and any state filings, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director and/or officer of the Fund
any and all such documents filed with the Securities and Exchange Commission
under said Acts, and any and all such documents filed with the state
authorities, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: 7/17/98 /s/ KEVIN J. MULVANEY
------- ---------------------
36
POWER OF ATTORNEY
-----------------
Terry K. Glenn, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker and Alyssa Albertelli, each individually, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Access Capital Strategies Community Investment
Fund, Inc. ("the "Fund"), to comply with the Investment Company Act of 1940, as
amended, the Securities Act of 1933, as amended, and the Securities Exchange Act
of 1934, as amended, ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof and any state filings,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Fund any and all such documents filed with the
Securities and Exchange Commission under said Acts, and any and all such
documents filed with the state authorities, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: August 28, 2001 /s/ Terry K. Glenn
-------------------
Terry K. Glenn