o | This [post-effective amendment] designates a new effective date for a previously filed [post-effective amendment] [registration statement]. | |
o | This form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration statement number of the earlier effective registration statement for the same offering is . |
Proposed Maximum | Proposed Maximum | Amount of | ||||||||||
Amount Being | Offering | Aggregate | Registration | |||||||||
Title of Securities Being Registered | Registered | Price per Unit | Offering Price | Fee | ||||||||
Common Stock, $0.01 par value per share(2)
|
||||||||||||
Preferred Stock(2)
|
||||||||||||
Warrants(3)
|
||||||||||||
Debt Securities(4)
|
||||||||||||
Total
|
$100,000,000(5) | $11,770(1) | ||||||||||
(1) | Estimated pursuant to Rule 457 solely for the purpose of determining the registration fee. The proposed maximum offering price per security will be determined, from time to time, by the Registrant in connection with the sale by the Registrant of the securities registered under this registration statement. |
(2) | Subject to Note 5 below, there is being registered hereunder an indeterminate principal amount of common stock or preferred stock as may be sold, from time to time. |
(3) | Subject to Note 5 below, there is being registered hereunder an indeterminate principal amount of warrants as may be sold, from time to time, representing rights to purchase common stock, preferred stock or debt securities. |
(4) | Subject to Note 5 below, there is being registered hereunder an indeterminate principal amount of debt securities as may be sold, from time to time. If any debt securities are issued at an original issue discount, then the offering price shall be in such greater principal amount as shall result in an aggregate price to investors not to exceed $100,000,000. |
(5) | In no event will the aggregate offering price of all securities issued from time to time pursuant to this registration statement exceed $100,000,000. |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer and sale is not permitted. |
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F-1 | ||||||||
5th Amended/Restated Bylaws | ||||||||
Opinion of Counsel and Consent | ||||||||
Consent of Ernst & Young LLP |
1
2
Existing Investment Platform: As of April 30, 2005, we had approximately $194 million in gross assets under management. The Fund made eleven new investments, two follow-on investments, including the acquisition of additional shares of an existing portfolio company through the re-issuance of the Funds treasury stock, pursuant to its new strategy of maximizing capital appreciation and/or income. We believe that our current investment platform provides us with the ability to, among other things, identify unique investment opportunities and conduct marketing activities and extensive due diligence for potential investments. | |
New Capital Sources: We have ongoing access to sources of capital from the public debt and equity markets. This allows us access to different sources of capital versus private funds within a short time frame. | |
Oversight: The public nature of the Fund allows for oversight not normally found in a typical private equity firm. This oversight is provided by the Securities and Exchange Commission, the NYSE, the Funds board of directors and most importantly, the Funds shareholders. The Fund, through its periodic filings with the Securities and Exchange Commission, provides transparency into its investment portfolio and operations thus allowing shareholders access to information about the Fund on a regular basis. | |
Patient Capital: The Funds public nature allows its shareholders to freely trade its stock. Due to this fact, the Fund can be more patient with its invested capital as there is not a limited investment horizon or fund life which is normally seen in typical private equity funds . | |
Seasoned Management Team: We capitalize on our senior management teams more than 75 years of combined experience in investing in leveraged loans, high yield bonds, mezzanine debt, distressed debt, private equity transactions and business operations. Collectively, our investment team has significant capital markets, investing and research experience and has invested and managed during both recessionary and expansionary periods and through full interest rate cycles and financial market conditions. We believe that our senior managements extensive relationships with financial institutions and companies, across a broad range of industries, provides us with the ability to identify and invest in small and middle-market companies. | |
Counsel to Portfolio Companies: We provide support for our portfolio companies in different ways including: offering advice to senior management on strategies for realizing their objectives, advising or participating on their boards of directors, offering ideas to help increase sales, reviewing monthly/quarterly financial statements, offering advice on improving margins and saving costs, helping to augment the management team, and providing access to external resources (e.g., financial, legal, accounting, or technology). | |
Diverse Industry Knowledge: We provide financing to companies in a variety of industries. We generally look at companies with secure market niches and a history of predictable or dependable cash flows in which members of our investment team have prior investment experience. We believe that the ability to invest in portfolio companies in various industries has the potential to give our portfolio greater diversity. | |
Creative and Extensive Transaction Structuring: We are flexible in the types of securities in which we invest and their structures. We believe that our management teams creativity and flexibility in structuring investments, coupled with our ability to invest in portfolio companies across various industries, gives us the ability to identify unique investment opportunities and provides us with the opportunity to be a one-stop capital provider to numerous small and middle-market companies. | |
Disciplined and Opportunistic Investment Philosophy: Our managements investment philosophy and method of portfolio construction involves an assessment of the overall macroeconomic environment, |
3
financial markets and company- specific research and analysis. While the composition of our portfolio may change based on our opportunistic investment philosophy, we continue to seek to provide long-term equity and debt investment capital to small and middle-market companies that we believe will provide us strong returns on our investments while taking into consideration the overall risk profile of the specific investment. | |
Tax Status and Capital Loss Carryforwards: It is the policy of the Fund to meet the requirements for qualification as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). The Fund is not subject to federal income tax to the extent that it distributes substantially all of its investment company taxable income and net realized gains for its taxable year (see Federal Income Tax Matters). This allows us to attract different kinds of investors than other publicly held corporations. The Fund is also exempt from excise tax if it distributes 98% of its ordinary income and/or capital gains during each calendar year. As of October 31, 2004, the Fund had a net capital loss carryforward of $75,484,412 of which $33,469,122 will expire in the year 2010, $4,220,380 will expire in the year 2011 and $37,794,910 will expire in the year 2012. Capital loss carryforwards may be subject to additional limitations as a result of capital share activity. To the extent future capital gains are offset by capital loss carryforwards, such gains need not be distributed. |
4
5
6
| We depend on key personnel, especially Mr. Tokarz, in seeking to achieve our investment objective. | |
| Our returns may be substantially lower than the average returns historically realized by the private equity industry as a whole. | |
| Substantially all of our portfolio investments are recorded at fair value and, as a result, there is a degree of uncertainty regarding the carrying values of our portfolio investments. | |
| Economic recessions or downturns could impair our portfolio companies and harm our operating results. | |
| We may not realize gains from our equity investments. | |
| The market for private equity investments can be highly competitive. In some cases, our status as a regulated business development company may hinder our ability to participate in investment opportunities. | |
| Loss of pass-through tax treatment would substantially reduce net assets and income available for dividends. | |
| Changes in the law or regulations that govern us could have a material impact on our business. | |
| Results may fluctuate and may not be indicative of future performance. | |
| Our stock price is subject to market discount risk. | |
| We have not established a minimum dividend payment level and we cannot assure you of our ability to make distributions to our shareholders in the future. | |
| We may borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. | |
| Changes in interest rates may affect our cost of capital and net investment income. | |
| We may be unable to meet our covenant obligations under our revolving credit facility which could adversely affect our business. | |
| We have a limited operating history upon which you can evaluate our new management team. | |
| The Funds current management team did not select a material portion of our existing investment portfolio. | |
| Under our agreement with our Portfolio Manager, he is entitled to compensation based on our portfolios performance. This arrangement may result in riskier or more speculative investments in an effort to maximize incentive compensation. | |
| There are potential conflicts of interest that could impact our investment returns. | |
| The war with Iraq, terrorist attacks and other acts of violence or war may affect any market for our common stock, impact the businesses in which we invest and harm our operations and our profitability. | |
| Our financial condition and results of operations will depend on our ability to effectively manage our future growth. |
7
| Investing in private companies involves a high degree of risk. | |
| Our investments in portfolio companies are generally illiquid. | |
| Our investments in small and middle-market privately-held companies are extremely risky and the Fund could lose its entire investment. | |
| Our borrowers may default on their payments, which may have an effect on our financial performance. | |
| Our investments in mezzanine and other debt securities may involve significant risks. | |
| When we are a debt or minority equity investor in a portfolio company, we may not be in a position to control the entity, and management of the company may make decisions that could decrease the value of our portfolio holdings. | |
| We may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part of our investment in these companies. | |
| Our portfolio companies may incur obligations that rank equally with, or senior to, our investments in such companies. As a result, the holders of such obligations may be entitled to payments of principal or interest prior to us, preventing us from obtaining the full value of our investment in the event of an insolvency, liquidation, dissolution, reorganization, acquisition, merger or bankruptcy of the relevant portfolio company. | |
| Our portfolio investments may be concentrated in a limited number of portfolio companies, which would magnify the effect if one of those companies were to suffer a significant loss. This could negatively impact our ability to pay dividends and cause you to lose all or part of your investment. | |
| Investments in foreign debt or equity may involve significant risks in addition to the risks inherent in U.S. investments. |
| Our common stock price can be volatile. | |
| Investing in our securities may involve an above average degree of risk. | |
| We may allocate the net proceeds from this offering in ways with which you may not agree. | |
| Sales of substantial amounts of our securities may have an adverse effect on the market price of our securities. | |
| Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which could dilute our existing shareholders and be senior to our common stock for the purposes of distributions, may harm the value of our common stock. |
8
Period Ended | Period Ended | ||||||||||||||||||||||||||||
April 30, | April 30, | Year Ended October 31, | For the Period | ||||||||||||||||||||||||||
March 31, 2000 to | |||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | 2001 | October 31, 2000 | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||||
Operating Data:
|
|||||||||||||||||||||||||||||
Interest and related portfolio income:
|
|||||||||||||||||||||||||||||
Interest and dividends
|
$ | 3,844 | $ | 1,170 | $ | 3,086 | $ | 2,870 | $ | 3,740 | $ | 9,046 | $ | 9,326 | |||||||||||||||
Fee income
|
307 | | 836 | 25 | | | | ||||||||||||||||||||||
Other income
|
283 | 55 | 64 | | | | | ||||||||||||||||||||||
Total interest and related portfolio income
|
4,434 | 1,225 | 3,986 | 2,895 | 3,740 | 9,046 | 9,326 | ||||||||||||||||||||||
Expense:
|
|||||||||||||||||||||||||||||
Employee
|
986 | 454 | 1,366 | 2,476 | 696 | | | ||||||||||||||||||||||
Administrative
|
1,493 | 1,699 | 2,893 | 8,911 | (1) | 2,573 | | | |||||||||||||||||||||
Incentive compensation (See Note 8)
|
395 | | | | | | | ||||||||||||||||||||||
Management fee
|
| | | | 3,593 | 7,388 | 4,615 | ||||||||||||||||||||||
Total operating expenses
|
2,874 | 2,153 | 4,259 | 11,387 | 6,862 | 7,388 | 4,615 | ||||||||||||||||||||||
Litigation recovery of management fees (See Note 13, 14)
|
| | 370 | | | | | ||||||||||||||||||||||
Net investment income (loss) before taxes
|
1,560 | (928 | ) | 97 | (8,492 | ) | (3,122 | ) | 1,658 | 4,711 | |||||||||||||||||||
Tax expense (benefit)
|
(143 | ) | | 79 | | | | | |||||||||||||||||||||
Net investment income (loss)
|
1,703 | (928 | ) | 18 | (8,492 | ) | (3,122 | ) | 1,658 | 4,711 | |||||||||||||||||||
Net realized and unrealized gains (losses):
|
|||||||||||||||||||||||||||||
Net realized gain (losses)
|
(8,257 | ) | (10,305 | ) | (37,795 | ) | (4,220 | ) | (33,469 | ) | 5 | (1 | ) | ||||||||||||||||
Net change in unrealized appreciation (depreciation)
|
13,578 | 14,642 | 49,382 | (42,771 | ) | (21,765 | ) | (52,994 | ) | (4,913 | ) | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments
|
5,321 | 4,337 | 11,587 | (46,991 | ) | (55,234 | ) | (52,989 | ) | (4,914 | ) | ||||||||||||||||||
Net increase (decrease) in net assets resulting from operations
|
$ | 7,024 | $ | 3,409 | $ | 11,605 | $ | (55,483 | ) | $ | (58,356 | ) | $ | (51,331 | ) | $ | (203 | ) | |||||||||||
Per Share:
|
|||||||||||||||||||||||||||||
Net increase (decrease) in net assets per share resulting from
operations
|
$ | 0.41 | $ | 0.25 | $ | 0.91 | $ | (3.42 | ) | $ | (3.54 | ) | $ | (3.12 | ) | $ | (0.01 | ) | |||||||||||
Dividends per share
|
$ | | $ | | $ | 0.12 | $ | | $ | 0.04 | $ | 0.34 | $ | | |||||||||||||||
Balance Sheet Data:
|
|||||||||||||||||||||||||||||
Portfolio at value
|
$ | 94,814 | $ | 23,121 | $ | 78,520 | $ | 24,071 | $ | 54,194 | $ | 90,926 | $ | 107,554 | |||||||||||||||
Portfolio at cost
|
154,297 | 130,923 | 151,582 | 146,515 | 133,864 | 148,886 | 112,554 | ||||||||||||||||||||||
Total assets
|
193,501 | 109,248 | 126,577 | 137,880 | 196,511 | 255,050 | 312,115 | ||||||||||||||||||||||
Shareholders equity
|
184,068 | 108,846 | 115,567 | 137,008 | 195,386 | 254,472 | 311,447 | ||||||||||||||||||||||
Shareholders equity per share (net asset value)
|
$ | 9.64 | $ | 8.85 | $ | 9.40 | $ | 8.48 | $ | 11.84 | $ | 15.42 | $ | 18.88 | |||||||||||||||
Common shares outstanding at period end
|
19,086 | 12,293 | 12,293 | 16,153 | 16,500 | 16,500 | 16,500 | ||||||||||||||||||||||
Other Data:
|
|||||||||||||||||||||||||||||
Number of Investments funded in period
|
6 | 1 | 7 | 5 | 10 | 11 | 16 | ||||||||||||||||||||||
Investments funded($) in period
|
$ | 22,229 | $ | 1,450 | $ | 55,710 | $ | 21,955 | $ | 26,577 | $ | 36,332 | $ | 102,056 |
(1) | The administrative expenses for the year ended October 31, 2003 included approximately $4.0 million of proxy/litigation fees and expenses. These are non-recurring expenses. |
9
2005
2004
2003
Qtr 2
Qtr 1
Qtr 4
Qtr 3
(1)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
(In thousands except per share data)
$
2,439
$
1,995
$
1,811
$
951
$
508
$
716
$
742
$
776
$
811
$
566
1,216
882
665
281
(498
)
(430
)
(847
)
(559
)
(5,031
)
(2,055
)
395
821
882
665
281
(498
)
(430
)
(847
)
(559
)
(5,031
)
(2,055
)
4,360
2,665
3,274
4,922
1,104
2,305
(4,660
)
(14,382
)
(6,649
)
(29,792
)
0.23
0.18
0.27
0.41
0.09
0.14
(0.29
)
(0.89
)
(0.41
)
(1.83
)
9.64
9.41
9.40
9.25
8.85
8.76
8.48
8.77
9.66
10.06
(1) | Data for 2004 differs from that which was filed on Form 10-Q on September 9, 2004, due to a reclassification of investment income and related expenses which had previously been accrued for. |
Shareholder Transaction Expenses
|
|||||
Sales load
|
%(1) | ||||
Offering expenses borne by us (as a percentage of offering price)
|
%(2) | ||||
Total shareholder transaction expenses (as a percentage of
offering price)
|
%(3) | ||||
Annual Expenses (as a percentage of consolidated net assets
attributable to common stock)
(4)
|
|||||
Operating expenses
|
3.74 | %(5) | |||
Management fees
|
0.00 | %(6) | |||
Interest payments on borrowed funds
|
0.00 | %(7) | |||
Total annual expenses
|
3.74 | % | |||
(1) | In the event that the securities to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load. |
(2) | The related prospectus supplement will disclose the estimated amount of offering expenses, the offering price and the offering expenses borne by us as a percentage of the offering price. |
(3) | The related prospectus supplement will disclose the offering price and the total shareholder transaction expenses as a percentage of the offering price. |
(4) | Consolidated net assets attributable to common stock equals net assets ( i.e. , total consolidated assets less total consolidated liabilities) at October 31, 2004. |
(5) | Operating expenses for the year ending October 31, 2004 included a one-time expense recovery of approximately $250,000. Without this one-time recovery, this percentage would have been 3.95%. This percentage for the year ended October 31, 2003 was 7.01%. |
10
(6) | We are internally managed by Mr. Tokarz and as such do not pay any management fees. Mr. Tokarz is compensated by us pursuant to the terms of his employment agreement (See Compensation of Executive Officers and Directors Employment Agreements). |
(7) | The Interest payments on borrowed funds represents our interest expense for the year ending October 31, 2004. As of the date of this prospectus, we had no outstanding borrowings; however, we may incur indebtedness and may therefore pay interest in respect thereof in the future pursuant to our credit facility or any offering of debt securities made pursuant to this prospectus or otherwise. For more information, see Risk Factors We may borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us and Managements Discussion and Analysis of Financial Condition and Results of Operations. |
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
You would pay the following cumulative expenses on a $1,000
investment, assuming a 5.0% annual return
|
$ | 34 | $ | 103 | $ | 175 | $ | 365 |
11
We depend on key personnel, especially Mr. Tokarz, in seeking to achieve our investment objective. |
Our returns may be substantially lower than the average returns historically realized by the private equity industry as a whole. |
| the lower return we are likely to realize on short-term liquid investments during the period in which we are identifying potential investments, and | |
| the periodic disclosure required of business development companies, which could result in the Fund being less attractive as an investor to certain potential portfolio companies. |
12
Economic recessions or downturns could impair our portfolio companies and harm our operating results. |
We may not realize gains from our equity investments. |
The market for private equity investments can be highly competitive. In some cases, our status as a regulated business development company may hinder our ability to participate in investment opportunities. |
Loss of pass-through tax treatment would substantially reduce net assets and income available for dividends. |
13
Changes in the law or regulations that govern us could have a material impact on our business. |
Results may fluctuate and may not be indicative of future performance. |
Our stock price is subject to market discount risk. |
We have not established a minimum dividend payment level and we cannot assure you of our ability to make distributions to our shareholders in the future. |
We may borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. |
14
Changes in interest rates may affect our cost of capital and net investment income. |
We may be unable to meet our covenant obligations under our revolving credit facility which could adversely affect our business. |
We have a limited operating history upon which you can evaluate our new management team. |
15
The Funds current management team did not select a material portion of our existing investment portfolio. |
Under our agreement with our Portfolio Manager, he is entitled to compensation based on our portfolios performance. This arrangement may result in riskier or more speculative investments in an effort to maximize incentive compensation. |
There are potential conflicts of interest that could impact our investment returns. |
The war with Iraq, terrorist attacks and other acts of violence or war may affect any market for our common stock, impact the businesses in which we invest and harm our operations and our profitability. |
Our financial condition and results of operations will depend on our ability to effectively manage our future growth. |
16
Investing in private companies involves a high degree of risk. |
Our investments in portfolio companies are generally illiquid. |
Our investments in small and middle-market privately-held companies are extremely risky and the Fund could lose its entire investment. |
| Small and middle-market companies may have limited financial resources and may not be able to repay the loans we make to them. Our strategy includes providing financing to companies that typically do not have capital sources readily available to them. While we believe that this provides an attractive opportunity for us to generate profits, this may make it difficult for the borrowers to repay their loans to us upon maturity. | |
| Small and middle-market companies typically have narrower product lines and smaller market shares than large companies. Because our target companies are smaller businesses, they may be more vulnerable to competitors actions and market conditions, as well as general economic downturns. In addition, smaller companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing and other capabilities, and a larger number of qualified managerial and technical personnel. | |
| There is generally little or no publicly available information about these privately-held companies. Because we seek to make investments in privately-held companies, there is generally little or no publicly available operating and financial information about them. As a result, we rely on our investment professionals to perform due diligence investigations of these privately-held companies, their operations and their prospects. We may not learn all of the material information we need to know regarding these companies through our investigations. | |
| Small and middle-market companies generally have less predictable operating results. We expect that our portfolio companies may have significant variations in their operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a |
17
substantial risk of obsolescence, may require substantial additional capital to support their operations, finance expansion or maintain their competitive position, may otherwise have a weak financial position or may be adversely affected by changes in the business cycle. Our portfolio companies may not meet net income, cash flow and other coverage tests typically imposed by their senior lenders. | ||
| Small and middle-market businesses are more likely to be dependent on one or two persons. Typically, the success of a small or middle-market company also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us. | |
| Small and middle-market companies are likely to have greater exposure to economic downturns than larger companies. We expect that our portfolio companies will have fewer resources than larger businesses and an economic downturn may thus more likely have a material adverse effect on them. | |
| Small and middle-market companies may have limited operating histories. We may make debt or equity investments in new companies that meet our investment criteria. Portfolio companies with limited operating histories are exposed to the operating risks that new businesses face and may be particularly susceptible to, among other risks, market downturns, competitive pressures and the departure of key executive officers. |
Our borrowers may default on their payments, which may have an effect on our financial performance. |
Our investments in mezzanine and other debt securities may involve significant risks. |
When we are a debt or minority equity investor in a portfolio company, we may not be in a position to control the entity, and management of the company may make decisions that could decrease the value of our portfolio holdings. |
18
We may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part of our investment in these companies. |
Our portfolio companies may incur obligations that rank equally with, or senior to, our investments in such companies. As a result, the holders of such obligations may be entitled to payments of principal or interest prior to us, preventing us from obtaining the full value of our investment in the event of an insolvency, liquidation, dissolution, reorganization, acquisition, merger or bankruptcy of the relevant portfolio company. |
Our portfolio investments may be concentrated in a limited number of portfolio companies, which would magnify the effect if one of those companies were to suffer a significant loss. This could negatively impact our ability to pay you dividends and cause you to lose all or part of your investment. |
Investments in foreign debt or equity may involve significant risks in addition to the risks inherent in U.S. investments. |
19
Offering risks are risks that are associated with an offering of our securities. |
Our common stock price can be volatile. |
| price and volume fluctuations in the overall stock market from time to time; | |
| significant volatility in the market price and trading volume of securities of business development companies or other financial services companies; | |
| volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity participation securities, or LEAPs, or short trading positions; | |
| changes in regulatory policies or tax guidelines with respect to business development companies or RICs; | |
| actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts; | |
| general economic conditions and trends; | |
| loss of a major funding source; or | |
| departures of key personnel. |
Investing in our securities may involve an above average degree of risk. |
We may allocate the net proceeds from this offering in ways with which you may not agree. |
Sales of substantial amounts of our securities may have an adverse effect on the market price of our securities. |
Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which could dilute our existing shareholders and be senior to our common stock for the purposes of distributions, may harm the value of our common stock. |
20
21
Closing Sale | |||||||||||||||||||||||||
Price | Premium/Discount | Premium/Discount | |||||||||||||||||||||||
of High Sales | of Low Sales | Declared | |||||||||||||||||||||||
NAV (1) | High | Low | Price to NAV | Price to NAV | Dividends | ||||||||||||||||||||
Year ended October 31, 2003
|
|||||||||||||||||||||||||
First Quarter
|
$ | 10.06 | $ | 8.60 | $ | 7.90 | (14.51 | )% | (21.47 | )% | | ||||||||||||||
Second Quarter
|
9.66 | 8.68 | 7.85 | (10.14 | )% | (18.74 | )% | | |||||||||||||||||
Third Quarter
|
8.77 | 8.48 | 7.89 | (3.31 | )% | (10.03 | )% | | |||||||||||||||||
Fourth Quarter
|
8.48 | 8.36 | 7.92 | (1.42 | )% | (6.60 | )% | | |||||||||||||||||
Year ending October 31, 2004
|
|||||||||||||||||||||||||
First Quarter
|
$ | 8.76 | $ | 8.47 | $ | 7.83 | (3.31 | )% | (10.62 | )% | | ||||||||||||||
Second Quarter
|
8.85 | 9.20 | 8.19 | 3.95 | % | (7.46 | )% | | |||||||||||||||||
Third Quarter
|
9.25 | 9.72 | 8.81 | 5.08 | % | (4.76 | )% | | |||||||||||||||||
Fourth Quarter
|
9.40 | 9.47 | 8.94 | 0.74 | % | (4.89 | )% | $ | .12 | ||||||||||||||||
Year ending October 31, 2005
|
|||||||||||||||||||||||||
First Quarter
|
$ | 9.41 | $ | 9.55 | $ | 8.95 | 1.49 | % | (4.89 | )% | | ||||||||||||||
Second Quarter
|
9.64 | 9.50 | 9.17 | (1.45 | )% | (4.88 | )% | | |||||||||||||||||
Third Quarter
|
10.07 | 11.34 | 9.41 | 12.61 | % | (6.55 | )% | $ | .12 |
(1) | Net asset value is currently calculated and published on a monthly basis. The net asset value shown is as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on shares outstanding at the end of each period. |
22
For the Six Month Period Ended April 30, 2005 |
23
For the Six Month Period Ended April 30, 2004 |
For the Year Ended October 31, 2004 |
For the Year Ended October 31, 2003 |
For the Year Ended October 31, 2002 |
For the Six Month Period Ended April 30, 2005 |
24
For the Six Month Period Ended April 30, 2004 |
For the Year Ended October 31, 2004 |
25
For the Year Ended October 31, 2003 |
For the Year Ended October 31, 2002 |
26
For the Six Month Period Ended April 30, 2005 |
For the Six Month Period Ended April 30, 2004 |
For the Year Ended October 31, 2004 |
27
For the Year Ended October 31, 2003 |
For the Year Ended October 31, 2002 |
28
For the Six Month Period Ended April 30, 2005 |
For the Six Month Period Ended April 30, 2004 |
For the Year Ended October 31, 2004 |
For the Year Ended October 31, 2003 |
29
For the Year Ended October 31, 2002 |
For the Six Month Period Ended April 30, 2005 |
For the Six Month Period Ended April 30, 2004 |
For the Year Ended October 31, 2004 |
For the Year Ended October 31, 2003 |
For the Year Ended October 31, 2002 |
30
For the Six Month Period Ended April 30, 2005 |
31
For the Year Ended October 31, 2004 |
32
For the Year Ended October 31, 2003 |
Portfolio Companies |
33
34
35
36
37
38
39
40
Liquidity and Capital Resources |
41
Subsequent Events |
42
43
Total Amount | ||||||||||||||||
Outstanding | Involuntary | |||||||||||||||
Exclusive of | Asset | Liquidating | Average | |||||||||||||
Treasury | Coverage | Preference | Market Value | |||||||||||||
Class and Year | Securities(1) | per Unit(2) | per Unit(3) | per Unit(4) | ||||||||||||
Revolving Lines of Credit
|
||||||||||||||||
2000
|
$ | | $ | | $ | | N/A | |||||||||
2001
|
$ | | $ | | $ | | N/A | |||||||||
2002
|
$ | | $ | | $ | | N/A | |||||||||
2003
|
$ | | $ | | $ | | N/A | |||||||||
2004
|
$ | 10,025,000 | $ | 11,531.18 | $ | | N/A |
(1) | Total amount of each class of senior securities outstanding at the end of the period presented. |
(2) | The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage Per Unit. |
(3) | The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. |
(4) | Not applicable, as senior securities are not registered for public trading. |
44
45
46
Percentage of Our Net Assets | ||||||||
As of | As of | |||||||
Type of Investment | April 30, 2005 | October 31, 2003 | ||||||
Senior/ Subordinated Loans
|
24.93 | % | 9.1 | % | ||||
Common Stock/ Equity
|
14.93 | % | | % | ||||
Warrants
|
0.59 | % | | % | ||||
Preferred Stock/ Equity
|
11.06 | % | 8.47 | % | ||||
Other Debt Instruments
|
| % | | % | ||||
Other Rights
|
| % | | % |
47
| Businesses with secure market niches and predictable profit margins; | |
| The presence or availability of highly qualified management teams; | |
| The line of products or services offered and their market potential; | |
| The presence of a sustainable competitive advantage; | |
| Favorable industry and competitive dynamics; and | |
| Stable free cash flow of the business. |
| private mezzanine and equity investors; | |
| investment banks; |
48
| business brokers; | |
| merger and acquisition advisors; | |
| financial services companies; and | |
| banks, law firms and accountants. |
49
| Initial investment screening by deal person or investment team; | |
| Investment professionals present an investment proposal containing key terms and understandings (verbal and written) to the entire investment team; | |
| Our Chief Compliance Officer reviews the proposed investment for compliance with the 1940 Act, the Code and all other relevant rules and regulations; | |
| Investment professionals are provided with authorization to commence due diligence; |
50
| Any investment professional can call a meeting, as deemed necessary, to: (i) review the due diligence reports; (ii) review the investment structure and terms; (iii) or to obtain any other information deemed relevant; | |
| Once all due diligence is completed, the proposed investment is rated using a proprietary rating system which tests several factors including, but not limited to, cash flow, EBITDA growth, management and business stability. We use this proprietary rating system as the base line for tracking the investment in the future; | |
| Our Chief Compliance Officer confirms that the proposed investment will not cause us to violate the 1940 Act, the Code or any other applicable rule or regulation; | |
| Mr. Tokarz approves the transaction; and | |
| The investment is funded. |
51
52
53
Percentage | |||||||||
Nature of its | Title of Securities | of Class | |||||||
Name and Address of Portfolio Company | Principal Business | Held by the Company | Held(1) | ||||||
Companies More Than 25% Owned
|
|||||||||
Baltic Motors Corporation(2)
|
Automotive Dealership | Common Stock | 100.00 | % | |||||
31513 Northwestern Highway
|
Loan due 6/24/2007 | ||||||||
Suite 201
|
|||||||||
Farmington Hills, MI 48334
|
|||||||||
Sanierungsgesellschaft für Deponien und Altlasten mbH
(SGDA)(2)
|
Soil Remediation | Term Loan | |||||||
98544 Zella-Mehlis, Bahnhofsstraße 66
|
Common Equity | 53.50 | % | ||||||
Germany
|
|||||||||
Timberland Machines & Irrigation, Inc.(3)
|
Landscaping Equipment & | Common Stock | 45.00 | % | |||||
One Niblick Road
|
Irrigation Products | Warrants | 60.00 | % | |||||
PO Box 1190
|
Distributor | Senior Subordinated | |||||||
Enfield, CT 06083
|
Debt due 8/4/2009
Sub Bridge Note due 1/31/2006 |
||||||||
Vendio Services, Inc.(3)
|
Online Auction Enabler | Series A Preferred | 37.80 | % | |||||
851 Traeger Ave, Ste 100
|
Common Stock | 0.40 | % | ||||||
San Bruno, CA 94066
|
54
Percentage | |||||||||
Nature of its | Title of Securities | of Class | |||||||
Name and Address of Portfolio Company | Principal Business | Held by the Company | Held(1) | ||||||
Vestal Manufacturing Enterprises(3)
|
Iron Foundry | Common Stock | 90.00 | % | |||||
176 Industrial Park Road
|
Senior Subordinated | ||||||||
Sweetwater, TN 37874
|
Debt due 4/29/2011 | ||||||||
Companies 5% to 25% Owned
|
|||||||||
Dakota Growers Pasta Company, Inc.(3)
|
Manufacturer of | Common Stock | 6.91 | % | |||||
One Pasta Avenue
|
Packaged Foods | ||||||||
Carrington, ND 58421
|
|||||||||
Endymion Systems, Inc.
|
Software Applications | Series A Preferred | 23.12 | % | |||||
80 Swan Way, #250
|
|||||||||
Oakland, CA 94621
|
|||||||||
Folio
fn
, Inc.(3)
|
Financial Services | Series C Preferred | 49.36 | % | |||||
PO Box 3068
|
Technology | ||||||||
Merrifield, VA 22116
|
|||||||||
Impact Confections, Inc.(3)
|
Confections | Class A Voting | 9.96 | % | |||||
888 Garden of the Gods Road, #200
|
Manufacturing & | Common Stock | |||||||
Colorado Springs, CO 80907
|
Distribution | Class B Non-voting | 100 | % | |||||
Common Stock Subordinated Debt due 7/30/2009 | |||||||||
ProcessClaims, Inc.(3)
|
Automobile Insurance | Series C Preferred | 48.30 | % | |||||
1600 Rosecrans Ave.
|
Claims Processing | Series D Preferred | 15.39 | % | |||||
Building 7, Suite 300
|
Series E Warrants | 20.00 | % | ||||||
Manhattan Beach, CA 90266
|
|||||||||
ShopEaze Systems, Inc.
|
Online Commerce | Series B Preferred | 30.20 | % | |||||
Santa Clara, CA
|
|||||||||
Sonexis, Inc.
|
Web Conferencing | Common Stock | 13.16 | % | |||||
400 Network Center Drive, Suite 210
|
|||||||||
Tewksbury, MA 01876
|
|||||||||
Sygate Technologies, Inc.
|
Network Security | Series D Preferred | 22.93 | % | |||||
6595 Dumbarton Circle
|
Software | ||||||||
Fremont, CA 94555
|
|||||||||
Vitality Foodservice Holding Corp.(3)
|
Holding company of | Common Stock | 11.28 | % | |||||
400 North Tampa St., Suite 2000
|
subsidiary companies that | Series A | |||||||
Tampa, FL 33602
|
are non-alcoholic | Convertible Preferred | 100 | % | |||||
beverage suppliers | Warrants | 13.46 | % | ||||||
Yaga, Inc.
|
Digital Content Delivery | Series A Preferred | 5.30 | % | |||||
114 Sansome Street, 6th Floor
|
Series B Preferred | 12.27 | % | ||||||
San Francisco, CA 94104
|
|||||||||
Companies Less Than 5% Owned
|
|||||||||
Actelis Networks, Inc.
|
Telecommunications | Series C Preferred | 10.81 | % | |||||
6150 Stevenson Blvd.
|
|||||||||
Fremont, CA 94538
|
|||||||||
Arcot Systems, Inc.
|
Ecommerce Software | Common Warrants | 0.37 | % | |||||
3200 Patrick Henry Drive
|
Convertible Credit | ||||||||
Santa Clara, CA 95054
|
Facility due 12/31/2005 | ||||||||
DPHI, Inc.
|
Digital Media | Series A-1 Preferred | 30.12 | % | |||||
2580 55th Street
|
|||||||||
Boulder, CO 80301
|
|||||||||
Integral Development Corporation
|
Foreign Exchange | Common Warrants | 0.50 | % | |||||
2027 Stierlin Court
|
Software | Convertible Credit | |||||||
Mountain View, CA 94043
|
Facility due 12/31/2005 | ||||||||
JDC Lighting, LLC
|
Electrical Distribution | Debt due 1/31/2009 | |||||||
45 West
36
th
Street,
5
th
Floor
|
|||||||||
New York, NY 10018
|
55
Percentage
Nature of its
Title of Securities
of Class
Name and Address of Portfolio Company
Principal Business
Held by the Company
Held(1)
Network Search &
Series A Preferred
4.30
%
Security Software
Series B Preferred
1.49
%
Satellite & Broadcast
Common Stock
2.83
%
Communications
Electronic Design
Common Stock
0.11
%
Automation
Asset Management
LLC Interest
4.94
%
Warrants
9.55
%
Subordinated Debt due
5/7/2011
Revolving Line of Credit (5/06/2007)
Network Security
Series A Ordinary
2.90
%
Software
Specialty Glassware &
Term Loan B
Equipment
(3/31/2010)
Subordinated Debt due 3/31/2012
(1) | Percentages shown for securities held by us represent percentage of the class owned and do not necessarily represent voting ownership. Percentages shown for equity securities other than warrants or options represent the actual percentage of the class of security held before dilution. Percentages shown for warrants and options held represent the percentage of class of security we may own, on a fully diluted basis, assuming we exercise our warrants or options. |
(2) | We directly or indirectly own more than 50% of the voting securities of the company, or control the board of directors, or are the controlling member. |
(3) | The portfolio company is deemed to be an affiliated person under the 1940 Act because we hold one or more seats on the portfolio companys board of directors, are the general partner, or are the managing member. |
56
57
58
59
(5) | ||||||||||||||||||
Number of | ||||||||||||||||||
Portfolios | (6) | |||||||||||||||||
(2) | (3) | in Fund | Other | |||||||||||||||
Position(s) | Term of Office/ | (4) | Complex | Directorship | ||||||||||||||
(1) | Held with | Length of Time | Principal Occupation(s) | Overseen | Held by | |||||||||||||
Name, Address and Age | the Fund | Served | During Past 5 Years | by Director | Director | |||||||||||||
Independent Directors
|
||||||||||||||||||
Emilio Dominianni
287 Bowman Avenue 2 nd Floor Purchase, NY 10577 Age: 73 |
Director | 1 year/2 years | Mr. Dominianni is a retired Partner of, and is currently Special Counsel to, the law firm of Coudert Brothers LLP. He also is a Consultant to Air Liquide America Corp., an industrial gas corporation | None(1 | ) | See column 4 | ||||||||||||
Robert Everett
Everett & Solsvig, Inc. 10 Rockefeller Plaza Suite 815 New York, NY 10020 Age: 41 |
Director | 1 year/1 year | Mr. Everett is a Managing Director of Everett & Solsvig, Inc., a firm that assists equity and debt holders who own positions in troubled companies. From 2002 through 2004, he served as Chief Restructuring Officer of Cornerstone Propane Partners, L.P., a propane distribution company, and as an Officer of its subsidiary, Cornerstone Propane, L.P. Mr. Everett also is a Director and Chairman of Pangborn Corp., and previously founded Kulen Capital, L.P., a middle-market private investment fund, and has served as Managing Director of | None(1 | ) | See column 4 |
60
(5) | ||||||||||||||||||
Number of | ||||||||||||||||||
Portfolios | (6) | |||||||||||||||||
(2) | (3) | in Fund | Other | |||||||||||||||
Position(s) | Term of Office/ | (4) | Complex | Directorship | ||||||||||||||
(1) | Held with | Length of Time | Principal Occupation(s) | Overseen | Held by | |||||||||||||
Name, Address and Age | the Fund | Served | During Past 5 Years | by Director | Director | |||||||||||||
Kulen Capital Corp. Mr. Everett served as interim Chief Executive Officer of the Fund from March 2003 until November 2003. | ||||||||||||||||||
Gerald Hellerman
287 Bowman Avenue 2 nd Floor Purchase, NY 10577 Age: 67 |
Director | 1 year/2 years | Mr. Hellerman has been the Principal of Hellerman Associates, a financial and corporate consulting firm, since the firms inception in 1993. He is currently a Director of The Mexico Equity and Income Fund, Inc., a Director and President of Innovative Clinical Solutions, Ltd., a company formerly engaged in clinical trials and physician network management which is currently in liquidation, a Director of Franks Nursery & Crafts, Inc., a company which operated the nations largest chain of lawn and garden retail stores, which filed for bankruptcy protection under Chapter 11 and, after liquidating its assets under Bankruptcy Court supervision, is currently attempting to emerge from bankruptcy as a real estate company operating the properties it owns, and a Director of Brantley Capital Corporation. Mr. Hellerman is presently serving as Manager- Investment Advisor for a U.S. Department of Justice Settlement Trust. Mr. Hellerman has served as a Trustee or Director of Third Avenue Value Trust, a Trustee of Third Avenue Variable Series Trust, and a Director of Clemente Global Growth Fund, Inc. | None(1 | ) | See column 4 | ||||||||||||
Robert Knapp
Millenco, L.P. 666 Fifth Avenue, 8th Floor New York, NY 10103 |
Director | 1 year/2 years | Mr. Knapp is a Managing Director of Millennium Partners where he specializes in mis-priced assets, turnaround | None(1 | ) | See column 4 |
61
(5)
Number of
Portfolios
(6)
(2)
(3)
in Fund
Other
Position(s)
Term of Office/
(4)
Complex
Directorship
(1)
Held with
Length of Time
Principal Occupation(s)
Overseen
Held by
Name, Address and Age
the Fund
Served
During Past 5 Years
by Director
Director
situations, and emerging markets arbitrage. He also is a
Director of the Vietnam Opportunity Fund, a Cayman Islands
private equity fund listed on the London Stock Exchange, and the
First Hungary Fund, a Channel Islands private equity fund. In
2001 and 2002, he served as a Director of Vietnam Frontier Fund,
a Cayman Islands investment company.
287 Bowman Avenue
2
nd
Floor
Purchase, NY 10577
Age: 55
Director, Chairman, and Portfolio Manager
1 year/1 year and 5 months
Mr. Tokarz currently serves as Chairman and Portfolio
Manager of the Fund. Mr. Tokarz also is Chairman of The
Tokarz Group, a private merchant bank, since 2002. Prior to
this, Mr. Tokarz was a senior General Partner and
Administrative Partner at Kohlberg Kravis Roberts &
Co., a private equity firm specializing in management buyouts.
He also currently serves on the corporate boards of Conseco,
Inc., Walter Industries, Inc., IDEX Corporation, Stonewater
Control Systems, Lomonosov, Athleta, Inc. and Apertio Ltd.
Mr. Tokarz also serves on the Board of the University of
Illinois Foundation and its Investment, and Executive
committees, as well as Chairman of the finance and budget
committees, and as Chairman for Illinois Emerging Technology
Fund. Mr. Tokarz serves as a director for the following
portfolio companies of the Fund: Baltic Motors Corporation,
Dakota Growers Pasta Company, Timberland Machines &
None(1
)
See column 4
62
(5) | ||||||||||||||||||
Number of | ||||||||||||||||||
Portfolios | (6) | |||||||||||||||||
(2) | (3) | in Fund | Other | |||||||||||||||
Position(s) | Term of Office/ | (4) | Complex | Directorship | ||||||||||||||
(1) | Held with | Length of Time | Principal Occupation(s) | Overseen | Held by | |||||||||||||
Name, Address and Age | the Fund | Served | During Past 5 Years | by Director | Director | |||||||||||||
Irrigation, Inc., and Vestal Manufacturing, Inc. | ||||||||||||||||||
Executive Officers
|
||||||||||||||||||
Bruce Shewmaker
287 Bowman Avenue 2 nd Floor Purchase, NY 10577 Age: 58 |
Managing Director(3) | Indefinite term/ 1 year and 5 months | Until June 2003, Mr. Shewmaker served as Managing Director of Crossbow Ventures Inc., and as a Vice President of Crossbow Venture Partners Corp., the general partner of Crossbow Venture Partners LP, a licensed small business investment company. Mr. Shewmaker also is a co-founder and Director of Infrared Imaging Systems, Inc., a medical devices company. From 1999 to 2001, he was a Managing Director of E*OFFERING Corp., an investment banking firm which merged into Wit SoundView Group in 2000. He has also served as a General Partner of ML Oklahoma Venture Partners, L.P., a business development company. Mr. Shewmaker serves as a director for the following portfolio companies of the Fund: Baltic Motors Corporation, Foliofn, Inc., and Vestal Manufacturing, Inc. | None | None | |||||||||||||
Frances Spark
287 Bowman Avenue 2 nd Floor Purchase, NY 10577 Age: 46 |
Chief Financial Officer | Indefinite term/ 1 year and 4 months | Ms. Spark has served as Principal of Spark Consulting LLC, a consulting company, since 1999. Since 2002, Ms. Spark has had a consulting relationship with Everett & Solsvig, Inc. Ms. Spark is President, Secretary, and Chief Financial Officer of Baltic Motors Corporation, a portfolio company of the Fund. Ms. Spark also serves as a director for Baltic Motors Corporation. | None | None |
63
(5)
Number of
Portfolios
(6)
(2)
(3)
in Fund
Other
Position(s)
Term of Office/
(4)
Complex
Directorship
(1)
Held with
Length of Time
Principal Occupation(s)
Overseen
Held by
Name, Address and Age
the Fund
Served
During Past 5 Years
by Director
Director
287 Bowman Avenue
2
nd
Floor
Purchase, NY 10577
Age: 25
Chief Compliance Officer
Indefinite term/ 6 months
Mr. Schuenke served as a Compliance Officer with
U.S. Bancorp Fund Services, LLC, from 2002 until he
joined MVC Capital, Inc. in 2004. Mr. Schuenke also served
as the Secretary of The Mexico Equity & Income Fund,
Inc. and Assistant Secretary of Tortoise Energy Infrastructure
Corporation during his tenure at U.S. Bancorp
Fund Services, LLC.
None
None
287 Bowman Avenue
2
nd
Floor
Purchase, NY 10577
Age: 26
Vice President and Secretary
Indefinite term/ 5 months Indefinite term/ 1 year and 3 months
Ms. Shapiro has worked for the Fund since June 2002. Prior
to that, she was an Associate and Business Manager with Draper
Fisher Jurvetson meVC Management Co. LLC, the former investment
sub-adviser to the Fund, and an Associate at The Bank Companies
(acquired by Newmark & Co. Real Estate), a commercial
real estate company.
None
None
(1) | Other than the Fund. |
(2) | Mr. Tokarz is an interested person, as defined in the 1940 Act, of the Fund (an Interested Director) because he serves as an officer of the Fund. |
(3) | Mr. Shewmaker served as Director of the Fund from March 2003 to March 2004. |
| oversight responsibility with respect to: (a) the adequacy of the Funds accounting and financial reporting processes, policies and practices; (b) the integrity of the Funds financial statements and the independent audit thereof; (c) the adequacy of the Funds overall system of internal controls and, as appropriate, the internal controls of certain service providers; (d) the Funds compliance with certain |
64
legal and regulatory requirements; (e) determining the qualification and independence of the Funds independent auditors; and (f) the Funds internal audit function, if any; and | ||
| oversight of the preparation of any report required to be prepared by the Audit Committee pursuant to the rules of the SEC for inclusion in the Funds annual proxy statement with respect to the election of directors. |
65
(3) | (4) | (5) | ||||||||||||||
Pension or | Estimated | Total | ||||||||||||||
(2) | Retirement | Annual | Compensation | |||||||||||||
Aggregate | Benefits Accrued | Benefits | from Fund and | |||||||||||||
(1) | Compensation | as Part of Fund | Upon | Fund Complex | ||||||||||||
Name of Person, Position | from Fund(3) | Expenses(1) | Retirement | Paid to Directors | ||||||||||||
Interested Director
|
||||||||||||||||
Michael Tokarz,
Chairman and Portfolio Manager
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Independent Directors
|
||||||||||||||||
Emilio Dominianni,
Director
|
$ | 29,500 | $ | 0 | $ | 0 | $ | 29,500 | ||||||||
Robert Everett,
Director
|
$ | 18,871 | $ | 0 | $ | 0 | $ | 18,871 | ||||||||
Gerald Hellerman,
Director
|
$ | 43,500 | $ | 0 | $ | 0 | $ | 43,500 | ||||||||
Robert Knapp,
Director
|
$ | 28,625 | $ | 0 | $ | 0 | $ | 28,625 | ||||||||
Executive Officers (who are not directors)
|
||||||||||||||||
Bruce Shewmaker,
Managing Director
(2)
|
$ | 152,000 | $ | 0 | $ | 0 | $ | 152,000 | ||||||||
Frances Spark,
Chief Financial Officer
|
$ | 206,000 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Jaclyn Shapiro,
Vice President and Secretary
|
$ | 155,583 | $ | 0 | $ | 0 | $ | 0 |
(1) | Directors do not receive any pension or retirement benefits from the Fund. |
(2) | As of the Annual Meeting of Shareholders on March 29, 2004, Mr. Shewmaker was no longer a member of the Board. |
(3) | The following table provides detail as to aggregate compensation paid during fiscal 2004 as to our three highest paid executive officers: |
Bonus and | ||||||||
Salary | Awards | |||||||
Mr. Shewmaker*
|
$ | 150,000 | $ | 0 | ||||
Ms. Spark**
|
$ | 60,000 | $ | 20,000 | ||||
Ms. Shapiro***
|
$ | 112,833 | $ | 30,000 |
* | During the last fiscal year, in addition to his salary, Mr. Shewmaker received $2,000 for his service as a Director. |
** | During the last fiscal year, Ms. Spark received $80,000 from Baltic Motors Corporation, a portfolio company of the Fund, for serving as its President, Secretary, and Chief Financial Officer. As of October 31, 2004, in addition to her salary, Ms. Spark received $126,000 during the fiscal year for providing services to the Fund. |
*** | During the last fiscal year, in addition to her salary, Ms. Shapiro received $12,750 for providing contract employment services to the Fund. |
66
(1) | These shares are owned by Mr. Knapp directly. |
(2) | Mr. Tokarz is an Interested Director of the Fund because he serves as an officer of the Fund. |
67
Amount of | Percentage of | |||||||
Shareholder Name and Address | Shares Owned | Fund Held | ||||||
The Anegada Fund Limited
|
2,797,550 | (1) | 15.61 | % | ||||
The Cuttyhunk Fund Limited
|
||||||||
Tonga Partners, L.P.
|
||||||||
GS Cannell Portfolio, LLC and
|
||||||||
Pleiades Investment Partners, LP
|
||||||||
c/o Cannell Capital LLC
|
||||||||
150 California Street, 5th Floor
|
||||||||
San Francisco, CA 94111
|
||||||||
Millenco, L.P.
|
1,369,770 | (2) | 7.18 | % | ||||
Millennium Global Estate, L.P.
|
||||||||
Millennium USA, L.P.
|
||||||||
Millennium Partners, L.P. and
|
||||||||
Millennium International, Ltd.
|
||||||||
c/o Millennium Management, LLC
|
||||||||
666 Fifth Avenue, 8th Floor
|
||||||||
New York, NY 10103
|
68
Amount of | Percentage of | |||||||
Shareholder Name and Address | Shares Owned | Fund Held | ||||||
Western Investment Hedged Partners LP
|
1,369,100 | (3) | 7.23 | % | ||||
Western Investment Institutional Partners LLC
|
||||||||
Western Investment Activism Partners LLC
|
||||||||
Western Investment Total Return Master Fund Ltd. and
|
||||||||
Arthur D. Lipson
|
||||||||
c/o Western Investment LLC
|
||||||||
2855 East Cottonwood Parkway
|
||||||||
Suite 110
|
||||||||
Salt Lake City, UT 84121
|
||||||||
Wynnefield Partners Small Cap Value, L.P.
|
1,150,700 | (4) | 6.00 | % | ||||
Wynnefield Partners Small Cap Value, L.P. I
|
||||||||
Wynnefield Small Cap Value Offshore Fund,
|
||||||||
Ltd. Channel Partnership II, L.P.
|
||||||||
Wynnefield Capital Management, LLC
|
||||||||
Wynnefield Capital, Inc.
|
||||||||
Nelson Obus
|
||||||||
c/o Wynnefield Capital Management LLC
|
||||||||
450 Seventh Avenue
|
||||||||
Suite 509
|
||||||||
New York, NY 10123
|
||||||||
MFP Investors, LLC
|
999,700 | (5) | 5.24 | % | ||||
51 John F. Kennedy Parkway, 2nd Floor
|
||||||||
Short Hills, NJ 07078
|
(1) | Based upon information contained in a Form 4 filed with the SEC on August 15, 2005. |
(2) | Based upon information contained in Schedule 13D/ A filed with the SEC on January 19, 2005. |
(3) | Based upon information contained in Schedule 13G filed with the SEC on January 18, 2005. |
(4) | Based upon information contained in Schedule 13G filed with the SEC on January 20, 2005. |
(5) | Based upon information contained in Schedule 13G filed with the SEC on January 20, 2005. |
| At least 90% of our gross income for each taxable year must be from dividends, interest, payments with respect to securities loans, and gains from sales or other disposition of stock, securities or foreign |
69
currencies, other income derived with respect to our business of investing in such stock, securities or currencies, or net income derived from an interest in a qualified publicly traded partnership (generally, a publicly traded partnership other than one where at least 90% of its gross income is gross income that would otherwise be qualifying gross income for a RIC), | ||
| As diversification requirements, as of the close of each quarter of our taxable year: | |
| at least 50% of the value of our assets must consist of cash, cash items, U.S. government securities, the securities of other RICs and other securities to the extent that (1) we do not hold more than 10% of the outstanding voting securities of an issuer of such other securities and (2) such other securities of any one issuer do not represent more than 5% of our total assets, and | |
| no more than 25% of the value of our total assets may be invested in the securities of one issuer (other than U.S. government securities or the securities of other RICs), of two or more issuers that are controlled by us and are engaged in the same or similar or related trades or businesses, or of one or more qualified publicly traded partnerships. |
70
71
72
73
(1) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which: |
(a) is organized under the laws of, and has its principal place of business in, the United States; | |
(b) is not an investment company (other than a small business investment company wholly owned by the business development company) or a company that would be an investment company but for certain exclusions under the 1940 Act; and | |
(c) satisfies any of the following: |
| does not have any class of securities with respect to which a broker or dealer may extend margin credit; | |
| is controlled by a business development company or a group of companies including a business development company and the business development company has an affiliated person who is a director of the eligible portfolio company; or | |
| is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million. |
(2) Securities of any eligible portfolio company which we control. | |
(3) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. |
74
(4) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company. | |
(5) Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. | |
(6) Cash, cash equivalents, U.S. Government securities or high-quality debt maturing in one year or less from the time of investment. |
75
76
77
| the name or names of any underwriters, dealers or agents and the amounts of securities underwritten or purchased by each of them; | |
| the offering price of the securities and the proceeds to us and any discounts, commissions or concessions allowed or reallowed or paid to dealers; and | |
| any securities exchanges on which the securities may be listed. |
78
79
Page | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-6 | ||
F-7 | ||
F-8 | ||
F-16 | ||
F-31 |
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
F-29
F-30
F-31
PART C
OTHER INFORMATION
Item 25. Financial Statements and Exhibits
1. Financial Statements.
The following financial statements of MVC Capital, Inc. (the Company or the Registrant)
are included in this registration statement in Part A: Information Required in a Prospectus:
2. Exhibits.
Item 26. Marketing Arrangements
The information contained under the heading Plan of Distribution in this Registration
Statement is incorporated herein by reference and any information concerning any underwriters for a
particular offering will be contained in the prospectus supplement related to that offering.
Item 27. Other Expenses of Issuance and Distribution
Item 28. Persons Controlled by or Under Common Control with Registrant
Direct Subsidiaries
Set forth below is the name of our subsidiary, the state or country under whose laws the
subsidiary is organized, and the percentage of voting securities or membership interests owned by
us in such subsidiary:
Our subsidiary is consolidated for financial reporting purposes.
Item 29. Number of Holders of Securities
The following table sets forth the approximate number of record holders of our common stock at
July 31, 2005.
Item 30. Indemnification
The Certificate of Incorporation of the Registrant provides that its directors and officers
shall, and its agents in the discretion of the board of directors may be indemnified to the fullest
extent permitted from time to time by the laws of Delaware, provided, however, that such
indemnification is limited by the Investment Company Act of 1940 or by any valid rule, regulation
or order of the Securities and Exchange Commission thereunder. The Registrants Fourth Amended and
Restated Bylaws, however, provide that the Registrant may not indemnify any director or officer
against liability to the Registrant or its security holders to which he or she might otherwise be
subject by reason of such persons willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office unless a determination is made
by final decision of a court, by vote of a majority of a quorum of directors who are disinterested,
non-party directors or by independent legal counsel that the liability for which indemnification is
sought did not arise out of such disabling conduct.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant pursuant to the
provisions described above, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person in the successful defense of an action, suit or proceeding)
is asserted by a director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will be governed by the
final adjudication of the court of the issue.
The Registrant carries liability insurance for the benefit of its directors and officers on a
claims-made basis of up to $20,000,000, subject to a $1,000,000 retention and the other terms
thereof.
Item 31. Business and Other Connections of Investment Adviser
Not applicable.
Item 32. Location of Accounts and Records
We maintain at our principal office physical possession of each account, book or other
document required to be maintained by Section 31(a) of the 1940 Act and the rules thereunder.
Item 33. Management Services
Not applicable.
Item 34. Undertakings
We hereby undertake:
(1) to suspend the offering of shares until the prospectus is amended if (a) subsequent
to the effective date of this registration statement, our net asset value declines more than
ten percent from our net asset value as of the effective date of this registration statement
or (b) our net asset value increases to an amount greater than our net proceeds as stated in
the prospectus;
(2) Not applicable.
(3) Not applicable.
(4) (a) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(b) that, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of those securities at that
time shall be deemed to be the initial bona fide offering thereof; and
(c) to remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
(5) that, for the purpose of determining any liability under the Securities Act of
1933, (i) the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of prospectus
filed by us under Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective; and (ii) each
post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering thereof.
(6) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Westchester, in the State of New York,
on this day, August 29, 2005.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities indicated on
August 29, 2005.
* Signed by
Frances Rebecca Spark pursuant to a power of attorney signed by each
individual and filed with this registration statement on
June 20, 2005.
Table of Contents
For the Period
For the Period
For the Year
For the Year
For the Year
November 1, 2004
November 1, 2003
Ended
Ended
Ended
to April 30, 2005
to April 30, 2004
October 31, 2004
October 31, 2003
October 31, 2002
(Unaudited)
(Unaudited)
$
3,168,379
$
1,169,492
$
3,085,966
$
2,870,370
$
3,730,148
675,700
9,745
307,275
50,001
836,314
24,944
283,111
5,059
64,104
4,434,465
1,224,552
3,986,384
2,895,314
3,739,893
3,592,757
4,037,327
985,726
453,748
1,365,913
2,476,068
696,399
394,528
330,409
579,818
959,570
1,058,776
134,421
279,970
443,129
810,848
1,514,549
998,436
81,527
121,729
175,956
455,292
307,200
123,765
89,246
154,938
102,102
155,000
65,442
73,859
146,509
126,490
546,952
223,827
232,305
369,085
110,374
99,190
104,485
125,897
62,901
51,707
102,593
138,512
67,500
173,438
(73,668
)
90,828
1,281,054
166,483
35,537
54,666
80,278
86,328
97,512
12,359
2,472
2,873,914
2,152,436
4,258,990
11,386,872
6,861,850
370,000
1,560,551
(927,884
)
97,394
(8,491,558
)
(3,121,957
)
(143,209
)
325
78,927
(142,884
)
78,927
1,703,435
(927,884
)
18,467
(8,491,558
)
(3,121,957
)
(8,238,438
)
(10,304,739
)
(37,794,910
)
(4,220,380
)
(33,469,122
)
(18,687
)
13,578,324
14,641,676
49,381,974
(42,771,460
)
(21,765,310
)
5,321,199
4,336,937
11,587,064
(46,991,840
)
(55,234,432
)
$
7,024,634
$
3,409,053
$
11,605,531
$
(55,483,398
)
$
(58,356,389
)
$
0.41
$
0.25
$
0.91
$
(3.42
)
$
(3.54
)
$
$
$
0.12
$
$
0.04
Table of Contents
For the Period
For the Period
For the Year
For the Year
For the Year
November 1, 2004
November 1, 2003
Ended
Ended
Ended
to April 30, 2005
to April 30, 2004
October 31, 2004
October 31, 2003
October 31, 2002
(Unaudited)
(Unaudited)
$
7,024,634
$
3,409,053
$
11,605,531
$
(55,483,398
)
$
(58,356,389
)
8,257,125
10,304,739
37,794,910
4,220,380
33,469,122
(13,578,324
)
(14,641,676
)
(49,381,974
)
42,771,460
21,765,310
(573,672
)
(108,823
)
(235,524
)
67,200
(289,692
)
63,394
180,632
(328,608
)
(171,738
)
192,231
(361,331
)
(50,672
)
(143,209
)
(87,278
)
(7,729
)
(38,425
)
(45,445
)
(100,000
)
379,632
(379,632
)
8,448,435
(469,998
)
112,361
(252,393
)
546,296
(315,000
)
(450,000
)
(34,210,000
)
(1,999,997
)
(22,076,694
)
(20,514,050
)
(1,000,000
)
(20,950,000
)
(19,955,000
)
(4,500,000
)
(142,869,445
)
(165,089,498
)
(315,857,435
)
(365,017,933
)
(157,541,221
)
(55,467,670
)
(53,301,844
)
(83,131,240
)
(586,995,355
)
(1,119,326,199
)
(550,000
)
8,295,018
165,790
4,300,991
1,884,848
9,955,664
3,315,558
6,627,225
8,478,894
3,239,364
134,415,684
194,365,752
395,819,875
277,144,371
35,097,303
26,929,027
52,851,689
82,350,711
624,390,240
1,328,465,233
(37,456,573
)
32,534,269
36,161,440
(75,971,718
)
67,248,753
(31,571,184
)
(31,571,184
)
(2,894,917
)
(10,025,000
)
10,025,000
(1,475,165
)
(728,690
)
(10,025,000
)
(31,571,184
)
(23,021,349
)
(2,894,917
)
(728,690
)
60,478,127
60,478,127
12,996,554
963,085
13,140,091
(78,866,635
)
66,520,063
13,146,941
6,850
6,850
78,873,485
12,353,422
$
26,143,495
$
969,935
$
13,146,941
$
6,850
$
78,873,485
Table of Contents
Table of Contents
Fund
Additional
Total
Total
Shares
Common
Paid in
Treasury
Accumulated
Shareholders
Issued
Stock
Capital
Stock
Deficit
Equity
16,500,000
$
165,000
$
311,485,000
$
$
(57,178,444
)
$
254,471,556
(728,690
)
(728,690
)
(58,356,389
)
(58,356,389
)
16,500,000
$
165,000
$
311,485,000
$
$
(116,263,523
)
$
195,386,477
16,500,000
$
165,000
$
311,485,000
$
$
(116,263,523
)
$
195,386,477
(347,400
)
(2,894,917
)
(2,894,917
)
(55,483,398
)
(55,483,398
)
16,152,600
$
165,000
$
311,485,000
$
(2,894,917
)
$
(171,746,921
)
$
137,008,162
16,152,600
$
165,000
$
311,485,000
$
(2,894,917
)
$
(171,746,921
)
$
137,008,162
(13,078,605
)
13,078,605
(3,859,558
)
(31,571,184
)
(31,571,184
)
(10,072
)
(10,072
)
(1,465,093
)
(1,465,093
)
11,605,531
11,605,531
12,293,042
$
165,000
$
298,406,395
$
(34,466,101
)
$
(148,537,950
)
$
115,567,344
16,152,600
$
165,000
$
311,485,000
$
(2,894,917
)
$
(171,746,921
)
$
137,008,162
(11,613,512
)
11,613,512
(3,859,558
)
(31,571,184
)
(31,571,184
)
3,409,053
3,409,053
12,293,042
$
165,000
$
299,871,488
$
(34,466,101
)
$
(156,724,356
)
$
108,846,031
12,293,042
$
165,000
$
298,406,395
$
(34,466,101
)
$
(148,537,950
)
$
115,567,344
6,645,948
66,459
60,411,668
60,478,127
146,750
177,568
1,222,432
1,400,000
(402,296
)
(402,296
)
7,024,634
7,024,634
19,085,740
$
231,459
$
358,593,335
$
(33,243,669
)
$
(141,513,316
)
$
184,067,809
Table of Contents
For the Period
For the Period
For the
For the
For the
November 1, 2004
November 1, 2003
Year Ended
Year Ended
Year Ended
to April 30, 2005
to April 30, 2004
October 31, 2004
October 31, 2003
October 31, 2002
(Unaudited)
(Unaudited)
$
9.40
$
8.48
$
8.48
$
11.84
$
15.42
0.09
(0.07
)
(0.53
)
(0.19
)
0.32
0.32
0.91
(2.89
)
(3.35
)
0.41
0.25
0.91
(3.42
)
(3.54
)
(0.12
)
(0.04
)
(0.12
)
(0.04
)
0.12
0.13
0.06
(0.17
)
$
9.64
$
8.85
$
9.40
$
8.48
$
11.84
$
9.41
$
9.08
$
9.24
$
8.10
$
7.90
(2.39
)%
2.60%
(1.70
)%
(4.48
)%
(33.28
)%
2.55
%
4.36%
12.26
%
(28.38
)%
(22.88
)%
1.84
%
12.10%
15.56
%
2.53
%
(14.22
)%
$
184,068
$
108,846
$
115,567
$
137,008
$
195,386
3.71
%(b)
3.66
%(d)
3.68
%(d)
7.01
%(c)
3.02
%
2.01
%(b)
(1.58
)%
0.08
%
(5.22
)%(c)
(1.37
)%
3.52
%(b)
3.66
%(d)
3.74
%(d)
7.01
%(c)
3.02
%
2.20
%(b)
(1.58
)%
0.02
%
(5.22
)%(c)
(1.37
)%
(a)
Total annual return is historical and assumes changes in share
price, reinvestments of all dividends and distributions, and no
sales charge for the year.
(b)
Annualized.
(c)
The expense ratio for the year ended October 31, 2003
included approximately $4.0 million of proxy/litigation
fees and expenses. When these fees and expenses are excluded,
the Funds expense ratio was 4.52% and the net investment
loss was (2.74%).
(d)
The expense ratio for the six month period ended April 30,
2004 and the year ended October 31, 2004, included a
one-time expense recovery of approximately $250,000 (See
Note 13). For the six month period ended April 30,
2004, without this one-time recovery, the expense ratio
excluding and including tax expense would have been 4.09%. For
the year ended October 31, 2004, without this one-time
recovery, the expense ratio, excluding and including tax expense
would have been 3.89% and 3.95%, respectively.
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Fair Value
54,947
June 2004
$
6,000,000
$
6,000,000
252
July 2004
2,700,000
2,700,000
450
Aug. 2004
4,500,000
4,500,000
150
Aug. 2004
4,500,000
4,500,000
5
June 2004
668,823
1,172,004
1
May 2004
550,000
1,069,457
1,218,823
2,241,461
81,000
Apr. 2004
1,850,000
2,800,000
909,091
July 2004
5,000,000
5,000,000
500,000
Sept. 2004
5,000,000
5,000,000
1,000,000
Sept. 2004
10,259,884
10,259,884
1,000,000
Sept. 2004
15,259,884
15,259,884
26,750
Feb. 2005
315,000
315,000
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Fair Value
150,602
May 2001
$
5,000,003
$
602,131
May 2002
4,520,350
7,156,760
June 2000
7,000,000
5,802,259
June 2000
15,000,000
384,615
Oct. 2000
250,000
43,511
266,846
June 2002
156,489
156,489
5,786
Aug. 2002
3,750,000
82,283
Nov. 2001
480,008
6,250,000
June 2001
2,000,000
2,000,000
849,257
May 2002
400,000
400,000
873,362
May 2002
20
2,106,378
Dec. 2000
4,015,402
2,097,902
May 2000
6,000,000
131,615
June 2000
10,000,000
9,756,098
Oct. 2002
4,000,001
5,500,000
10,476
June 2000
5,499,900
6,443,188
Jan. 2002
1,134,001
2,000,000
300,000
Nov. 2000
300,000
1,000,000
June 2001
2,000,000
71,506,174
10,100,000
108,349,881
48,916,345
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Fair Value
10.00%,
06/24/2007
4,500,000
June 2004
$
4,500,000
$
4,500,000
17.00%, 07/30/2009
5,112,821
July 2004
5,008,207
5,112,821
17.00%, 08/04/2009
6,178,501
Aug. 2004
6,086,482
6,178,501
12.50%, 01/31/2006
1,250,000
Dec. 2004
1,223,110
1,250,000
7,309,592
7,428,501
17.00%, 01/31/2009
3,021,822
Jan. 2005
2,950,149
3,021,822
6.86%, 05/06/2007
1,500,000
April 2005
1,500,000
1,500,000
5,102,504
May 2004
4,486,300
4,596,198
5,986,300
6,096,198
12.00%, 04/29/2011
1,000,000
Apr. 2004
1,000,000
1,000,000
12.86%, 03/31/2010
4,000,000
March 2005
3,920,983
4,000,000
17.00%, 03/31/2012
6,500,000
March 2005
6,240,421
6,500,000
10,161,404
10,500,000
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Fair Value
7.00%, 08/25/2009
4,579,050
Feb. 2005
$
4,274,303
$
4,274,303
10.75%, 12/31/2005
2,805,552
Dec. 2002
2,798,615
2,000,000
10.75%, 12/31/2005
1,963,884
Dec. 2002
1,959,028
1,963,884
4,757,643
3,963,884
45,947,598
45,897,529
Market Value
2.98%, 06/02/2005
5,000,000
March 2005
4,986,844
4,986,844
3.08%, 07/19/2005
5,000,000
April 2005
4,966,850
4,966,850
2.03%, 06/02/2005
4,000,000
March 2005
3,989,938
3,989,938
3.03%, 05/31/2005
4,000,000
March 2005
3,989,967
3,989,967
2.86%, 06/01/2005
3,000,000
March 2005
2,992,659
2,992,659
2.86%, 06/02/2005
4,000,000
March 2005
3,989,902
3,989,902
3.11%, 07/20/2005
3,000,000
April 2005
2,979,658
2,979,658
27,895,818
27,895,818
2.30%, 05/19/2005
1,153,000
Feb. 2005
1,151,599
1,151,599
2.56%, 07/07/2005
35,200,000
April 2005
35,032,947
35,032,947
2.88%, 07/28/2005
7,000,000
April 2005
6,953,115
6,953,115
43,137,661
43,137,661
71,033,479
71,033,479
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Market Value
3,632,221
April 2005
3,632,221
3,632,221
21,161,729
Oct. 2004
21,161,729
21,161,729
24,793,950
24,793,950
$
250,124,908
$
190,641,303
(a)
These securities are restricted from public sale without prior
registration under the Securities Act of 1933. The Fund
negotiates certain aspects of the method and timing of the
disposition of these investments, including registration rights
and related costs.
(b)
Percentages are based on net assets of $184,067,809 as of
April 30, 2005.
(c)
The Fund owns more than 25% of the outstanding voting securities
of Baltic Motors Corporation, SGDA Sanierungsgesellschaft fur
Deponien und Altlasten, Timberland Machines &
Irrigation, Inc., Vendio Services, Inc., and Vestal
Manufacturing Enterprises, Inc. Accordingly, as
control is defined in the Investment Company Act of
1940, the Fund is presumed to own controlling interests in these
portfolio companies.
(d)
All of the Funds equity and debt investments are issued by
eligible portfolio companies, as defined in the Investment
Company Act of 1940, except Baltic Motors Corporation, SafeStone
Technologies PLC and SGDA Sanierungsgesellschaft fur Deponien
und Altlasten. The Fund makes available significant managerial
assistance to all of the portfolio companies in which it has
invested.
(e)
Company in dissolution.
(f)
Non-income producing assets.
(g)
Also received warrants to purchase a number of shares of
preferred stock to be determined upon exercise.
(h)
These shares are held in escrow until September 1, 2005 and
have been valued at zero by the Funds Valuation Committee.
The Fund has no way to determine the amount of shares, if any,
it will receive from the escrow.
(i)
These securities accrue a portion of their interest/dividends in
payment in kind interest/dividends which is
capitalized to the investment.
(j)
The principal operations of these portfolio companies are
located outside of the United States.
*
Affiliated Issuers (Total Market Value of $68,790,509):
companies in which the Fund owns at least 5% of the voting
securities.
Denotes zero cost/fair value.
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Fair Value
54,947
June 2004
$
6,000,000
$
6,000,000
252
July 2004
2,700,000
2,700,000
450
Aug. 2004
4,500,000
4,500,000
150
Aug. 2004
4,500,000
4,500,000
5
June 2004
560,000
560,000
1
May 2004
550,000
550,000
1,110,000
1,110,000
40,500
Apr. 2004
450,000
450,000
909,091
July 2004
5,000,000
5,000,000
500,000
Sept. 2004
5,000,000
5,000,000
1,000,000
Sept. 2004
10,000,000
10,000,000
1,000,000
Sept. 2004
15,000,000
15,000,000
1,506,025
May 2001
5,000,003
753,350
Apr. 2002
11,999,995
602,131
May 2002
4,520,350
7,156,760
June 2000
7,000,000
5,802,259
June 2000
15,000,000
384,615
Oct. 2000
250,000
43,511
266,846
June 2002
156,489
156,489
5,786
Aug. 2002
3,750,000
603,396
Nov. 2001
3,519,988
7,023,529
82,283
Nov. 2001
480,008
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Fair Value
6,666,667
Jan. 2002
$
1,000,000
$
6,250,000
June 2001
2,000,000
2,000,000
849,257
May 2002
400,000
400,000
873,362
May 2002
20
2,106,378
Dec. 2000
4,015,402
2,097,902
May 2000
6,000,000
131,615
June 2000
10,000,000
9,756,098
Oct. 2002
4,000,000
5,500,000
10,476
June 2000
5,500,000
6,443,188
Jan. 2002
1,134,001
1,134,001
300,000
Nov. 2000
300,000
1,000,000
June 2001
2,000,000
88,026,256
16,257,530
122,786,256
51,017,530
10.0000%, 06/24/2007
4,500,000
June 2004
4,500,000
4,500,000
17.0000%, 07/30/2009
5,000,000
July 2004
4,887,382
5,000,000
17.0000%, 08/04/2009
6,042,164
Aug. 2004
5,943,114
6,042,164
15.0000%, 05/07/2011
5,059,696
May 2004
4,414,971
4,530,286
12.0000%, 04/29/2011
1,000,000
Apr. 2004
1,000,000
1,000,000
10.0000%, 12/31/2005
3,647,220
Dec. 2002
3,631,940
2,000,000
12.0000%, 01/31/2006
1,632,222
Feb. 2003
1,624,753
1,624,753
2,229,955
Feb. 2003
10.0000%, 12/31/2005
2,805,552
Dec. 2002
2,793,798
2,805,552
8,050,491
6,430,305
28,795,958
27,502,755
Table of Contents
Date of
Initial
Description
Shares/Principal
Investment
Cost
Market Value
1.0000%, 11/04/2004
400,000
Aug. 2004
$
399,956
$
399,956
1.4350%, 11/18/2004
1,064,000
Aug. 2004
1,063,332
1,063,332
1.4700%, 11/26/2004
700,000
Aug. 2004
699,319
699,319
1.6200%, 01/06/2005
3,490,000
Oct. 2004
3,480,147
3,480,147
1.8000%, 01/27/2005
28,600,000
Oct. 2004
28,472,038
28,472,038
34,114,792
34,114,792
34,114,792
34,114,792
1,834,229
Oct. 2004
1,834,229
1,834,229
10,098,175
Oct. 2004
10,098,175
10,098,175
11,932,404
11,932,404
$
197,629,410
$
124,567,481
(a)
These securities are restricted from public sale without prior
registration under the Securities Act of 1933. The Fund
negotiates certain aspects of the method and timing of the
disposition of these investments, including registration rights
and related costs.
(b)
These shares are freely tradable with no restrictions to their
sale.
(c)
Percentages are based on net assets of $115,567,344 as of
October 31, 2004.
(d)
The Fund owns more than 25% of the outstanding voting securities
of Baltic Motors Corporation, Timberland Machines &
Irrigation, Inc., Vendio Services, Inc., and Vestal
Manufacturing Enterprises, Inc. Accordingly, as
control is defined in the Investment Company Act of
1940, the Fund is presumed to own controlling interests in these
portfolio companies.
(e)
All of the Funds preferred and common stock and debt
investments are issued by eligible portfolio companies, as
defined in the Investment Company Act of 1940, except Baltic
Motors Corporation and SafeStone Technologies PLC. The Fund
makes available significant managerial assistance to all of the
portfolio companies in which it has invested.
(f)
Company in dissolution.
(g)
Non-income producing assets.
(h)
Also received warrants to purchase a number of shares of
preferred stock to be determined upon exercise.
(i)
These shares are held in escrow until September 1, 2005 and
have been valued at zero by the Funds Valuation Committee.
The Fund has no way to determine the amount of shares, if any,
it will receive from the escrow. See Note 9 for further
information.
*
Affiliated issuers (Total Market Value of $42,684,001):
companies in which the Fund owns at least 5% of the voting
securities.
Denotes zero cost/fair value.
Table of Contents
1.
Organization and Business Purpose
Table of Contents
2.
Consolidation
3.
Significant Accounting Policies
The preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts and disclosures
in the consolidated financial statements. Actual results could
differ from those estimates.
Valuation of Portfolio Securities
Pursuant to the requirements of the Investment Company Act, the
Fund values its portfolio securities at their current market
values or, if market quotations are not readily available, at
their estimates of fair values. Because the Funds
portfolio company investments generally do not have readily
ascertainable market values, the Fund records these investments
at fair value in accordance with Valuation Procedures adopted by
its board of directors. The Funds board of directors may
also hire independent consultants to review its Valuation
Procedures or to conduct an independent valuation of one or more
of its portfolio investments.
Pursuant to the Funds Valuation Procedures, the
Funds valuation committee (Valuation
Committee) (which is currently comprised of three
Independent Directors) determines fair valuations of portfolio
company investments on a quarterly basis (or more frequently, if
deemed appropriate under the circumstances). Any changes in
valuation are recorded in the statements of operations as
Net unrealized gain (loss) on investments.
Currently, the Funds net asset value per share is
calculated and published on a daily basis. The fair values
determined as of the most recent quarter end are reflected, in
the next calculated net asset value per share. (If the Valuation
Committee determines to fair value an investment more frequently
than quarterly, the most recently determined fair value would be
reflected in the published net asset value per share.) Since
February 1, 2005, the Fund publishes its net asset value
per share on a monthly basis (unless determined otherwise by its
Valuation Committee).
The Fund calculates its net asset value per share by subtracting
all liabilities from the total value of its portfolio securities
and other assets and dividing the result by the total number of
outstanding shares of its common stock on the date of valuation.
At October 31, 2004 and April 30, 2005, approximately
56.48% and 49.0%, of the Funds total assets represented
portfolio investments recorded at fair value, respectively.
Pursuant to our Valuation Procedures, our valuation committee
(Valuation Committee) (which is currently comprised
of three independent directors) reviews, considers and
determines fair valuations on a quarterly basis (or more
frequently, if deemed appropriate under the circumstances). Any
changes in valuation are recorded in the statements of
operations as Net unrealized gain (loss) on
investments.
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Initially, portfolio securities for which a reliable market
value cannot be determined are valued at cost (absent the
existence of circumstances warranting, in managements and
the Valuation Committees view, a different initial value).
During the period that such a portfolio security is held by the
Fund, its original cost may cease to represent an appropriate
valuation, and other factors must be considered. No
pre-determined formula can be applied to determine fair values.
Rather, the Valuation Committee makes fair value assessments
based upon the estimated value at which the securities of the
portfolio company could be sold in an orderly disposition over a
reasonable period of time between willing parties (other than in
a forced or liquidation sale). The liquidity event whereby the
Fund exits an investment is generally a sale, merger,
recapitalization or, in some cases, the initial public offering
of the portfolio company.
There is no one methodology to determine fair value and, in
fact, for any portfolio security, fair value may be expressed as
a range of values, from which we derive a single estimate of
fair value. To determine the fair value of a portfolio security,
the Valuation Committee analyzes the portfolio companys
financial results and projections. The Fund generally requires,
where practicable, portfolio companies to provide annual audited
and more regular unaudited financial statements, and/or annual
projections for the upcoming fiscal year.
The fair value of the Funds portfolio securities is
inherently subjective. Because of the inherent uncertainty of
fair valuation of portfolio securities that do not have readily
ascertainable market values, the Funds estimate of fair
value may significantly differ from the fair market value that
would have been used had a ready market existed for the
securities. Such values also do not reflect brokers fees
or other selling costs which might become payable on disposition
of such investments.
The Funds equity interests in portfolio companies for
which there is no liquid public market are valued at their fair
value. Generally, fair value of an equity interest is based upon
the enterprise value of the portfolio company. The
Valuation Committees analysis of enterprise value may
include various factors, such as multiples of EBITDA, cash flow,
net income or revenues, or in limited instances, book value or
liquidation value. All of these factors may be subject to
adjustment based upon the particular circumstances of a
portfolio company. For example, adjustments to EBITDA may take
into account compensation to previous owners or an acquisition,
a recapitalization, a restructuring or related items.
The Valuation Committee may also look to private merger and
acquisition statistics, public trading multiples discounted for
illiquidity and other factors, or industry practices and trends
in determining fair value. The Valuation Committee may also
consider the size and scope of a portfolio company and its
specific strengths and weaknesses, as well as any other factors
it deems relevant in assessing enterprise value. The determined
fair values are generally discounted to account for restrictions
on resale and minority control positions.
Generally, the value of the Funds equity interests in
public companies for which market quotations are readily
available is based upon the most recent closing public market
price. Portfolio securities that carry certain restrictions on
sale are typically valued at a discount from the public market
value of the security.
For loans and debt securities, fair value generally approximates
cost unless there is a reduced enterprise value or the overall
financial condition of the portfolio company or other factors
indicate a lower fair value for the loan or debt security.
Generally, in arriving at a fair value for a debt security or a
loan, the Valuation Committee focuses on the portfolio
companys ability to service and repay the debt and
considers its underlying assets. With respect to a convertible
debt security, the Valuation Committee also analyzes the excess
of the value of the underlying security over the conversion
price as if the security was converted when the conversion
feature is in the money (appropriately discounted if
restricted). If the security is not currently
Table of Contents
convertible, the use of an appropriate discount in valuing the
underlying security is typically considered. If the fair value
of the underlying security is less than the conversion price,
the Valuation Committee focuses on the portfolio companys
ability to service and repay the debt.
When the Fund receives nominal cost warrants or free equity
securities (nominal cost equity) with a debt
security, the Fund allocates its cost basis in its investment
between debt securities and nominal cost equity at the time of
origination.
Interest income is recorded on an accrual basis to the extent
that such amounts are expected to be collected. Loan origination
fees, original issue discount and market discount are deferred
and then amortized into interest income using the effective
interest method. The weighted average yield on loans and debt
securities is computed as the: (i) annual stated interest
rate earned plus the annual amortization of loan origination
fees, original issue discount and market discount earned on
accruing loans and debt securities, divided by; (ii) total
loans and debt securities at value. The weighted average yield
is computed as of the balance sheet date. Prepayment premiums
are recorded on loans when received.
For loans and debt securities with contractual payment-in-kind
interest, which represents contractual interest accrued and
added to the loan balance that generally becomes due at
maturity, the Fund will not accrue payment-in-kind interest if
the portfolio company valuation indicates that the
payment-in-kind interest is not collectible. However, the Fund
may accrue payment-in-kind interest if the health of the
portfolio company and the underlying securities are not in
question.
Investment Transactions and Related Investment
Income
Investment transactions and related
revenues and expenses are accounted for on the trade date (the
date the order to buy or sell is executed). The cost of
securities sold is determined on a first-in, first-out basis,
unless otherwise specified. Dividend income on investment
securities is recorded on the ex-dividend date. Interest income,
which includes accretion of discount and amortization of
premium, if applicable, is recorded on the accrual basis. Fee
income includes fees for guarantees and services rendered by the
Fund or its wholly-owned subsidiary to portfolio companies and
other third parties such as due diligence, structuring,
transaction services, monitoring services, and investment
advisory services. Guaranty fees are recognized as income over
the related period of the guaranty. Due diligence, structuring,
and transaction services fees are generally recognized as income
when services are rendered or when the related transactions are
completed. Monitoring and investment advisory services fees are
generally recognized as income as the services are rendered. Any
fee income determined to be loan origination fees, original
issue discount, and market discount are capitalized and then
amortized into interest income using the effective interest
method. Upon the prepayment of a loan or debt security, any
unamortized loan origination fees are recorded as interest
income and any unamortized original issue discount or market
discount is recorded as a realized gain.
Cash and Cash Equivalents
For the
purpose of the Consolidated Balance Sheets and Consolidated
Statements of Cash Flows, the Fund considers all money market
and all highly liquid temporary cash investments purchased with
an original maturity of less than three months to be cash
equivalents.
Restricted Securities
The Fund will
invest in privately placed restricted securities. These
securities may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming
negotiations and expense, and a prompt sale at an acceptable
price may be difficult.
Income Taxes
It is the policy of the
Fund to meet the requirements for qualification as a
regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. The Fund is not
subject to federal income tax to the extent that it distributes
all of its investment company taxable income and net realized
gains for its taxable year. The Fund is also exempt
Table of Contents
from excise tax if it distributes most of its ordinary income
and/or capital gains during each calendar year.
Reclassifications
Certain amounts from
prior years have had to be reclassified to conform to the
current year presentation.
4.
Management
For the Six Months Ended April 30, 2005
For the Year Ended October 31, 2004
For the Years Ended October 31, 2003, 2002 and
2001
5.
Dividends and Distributions to Shareholders
Table of Contents
For the Six Months Ended April 30, 2005
For the Year Ended October 31, 2004
For the Year Ended October 31, 2003
For the Year Ended October 31, 2002
6.
Transactions With Other Parties
Table of Contents
7.
Concentration of Market and Credit Risk
8.
Incentive Compensation
Table of Contents
9.
Portfolio Investments
For the Six Month Period Ended April 30,
2005
Table of Contents
For the Year Ended October 31, 2004
Table of Contents
For the Year Ended October 31, 2003
Table of Contents
10.
Commitments and Contingencies
11.
Certain Repurchases of Equity Securities by the Issuer
Table of Contents
12.
Certain Issuances of Equity Securities by the Issuer
13.
Legal Proceedings
14.
Recovery of Expenses and Unusual Income Item
15.
Tax Matters
Table of Contents
(75,484,412
)
(73,388,912
)
(148,661,659
)
298,406,395
165,000
(34,466,101
)
115,443,635
186,023,989
10,072
1,465,093
16.
Segment Data
MVC
MVCFS
Consolidated
$
3,842,686
$
1,393
$
3,844,079
122,086
185,189
307,275
283,111
283,111
4,247,883
186,582
4,434,465
2,745,414
128,500
2,873,914
1,502,469
58,082
1,560,551
(142,884
)
(142,884
)
1,502,469
200,966
1,703,435
(8,257,125
)
(8,257,125
)
13,578,324
13,578,324
$
6,823,668
$
200,966
$
7,024,634
Table of Contents
MVC
MVCFS
Consolidated
3,085,966
3,085,966
96,720
739,594
836,314
64,104
64,104
3,246,790
739,594
3,986,384
3,885,739
3,251
3,888,990
(638,949
)
736,343
97,394
78,927
78,927
(638,949
)
657,4163
18,467
(37,794,910
)
(37,794,910
)
49,381,974
49,381,974
10,948,115
657,416
11,605,531
17.
Subsequent Events (Unaudited)
Table of Contents
Table of Contents
/s/ Ernst & Young LLP
Page
F-2
F-3
F-4
F-6
F-7
F-8
F-16
F-31
Table of Contents
Exhibit
Number
Description
Certificate of Incorporation.
(Previously filed as Exhibit
99.a filed with the Registrants Pre-Effective Amendment
No. 5 to registration statement on Form N-2 (File No.
333-92287) filed on March 28, 2000).
Fifth Amended and Restated Bylaws.
Not applicable.
Form of Share Certificate.
((Previously filed as Exhibit
99.d filed with Registrants registration Statement on Form
N-2/A (File No. 333-119625) filed on November 23, 2004).
Dividend Reinvestment Plan, as amended.
(Previously filed
as Exhibit 99.e filed with Registrants registration
Statement on Form N-2/A (File No. 333-119625) filed on
November 23, 2004).
Not applicable.
Not applicable.
Not applicable.
Sublease for 287 Bowman Avenue, Purchase, New York 10577.
(Previously filed as Exhibit 10 with Registrants Annual
Report on Form 10-Q (File No. 814-00201) filed on June 8,
2005.)
Agreement between the Registrant and Michael Tokarz.
(Previously filed as Exhibit 10.2 filed with Annual Report
on Form 10-K (File No. 814-00201) filed on January 29,
2004.)
Form of Custody Agreement between Registrant and U.S. Bank
National Association
. (Previously filed as Exhibit 99.j.1
filed with Registrants registration Statement on Form
N-2/A (File No. 333-119625) filed on November 23, 2004).
Form of Amendment to Custody Agreement between Registrant
and U.S. Bank National Association.
(Previously filed as
Exhibit 99.j.2 filed with Registrants registration
Statement on Form N-2/A (File No. 333-119625) filed on
November 23, 2004).
Form of Custodian Agreement between Registrant and LaSalle
Bank National Association.
(Previously filed as Exhibit
99.j.3 filed with Registrants registration Statement on
Form N-2/A (File No. 333-119625) filed on November 23,
2004).
Form of Registrar, Transfer Agency and Service Agreement
with Registrant and State Street Bank and Trust Company.
(Incorporated by reference to Exhibit 99.k(1) filed with
the Registrants pre-effective amendment no. 2 to the
registration statement on Form N-2/A (File No. 333-92287)
filed on February 11, 2000).
Form of Transfer Agency Letter Agreement with Registrant
and EquiServe Trust Company, N.A.
(Previously filed as
Exhibit 99.k.2 filed with Registrants registration
Statement on Form N-2/A (File No. 333-119625) filed on
November 23, 2004).
Form of Loan Agreement with Registrant and LaSalle Bank
National Association.
(Previously filed as Exhibit 99.k.3
filed with Registrants registration Statement on Form
N-2/A (File No. 333-119625) filed on November 23, 2004).
Form of Custody Account Pledge Agreement with Registrant
and LaSalle Bank National Association.
(Previously filed
as Exhibit 99.k.4 filed with Registrants registration
Statement on Form N-2/A (File No. 333-119625) filed on
November 23, 2004).
Form of Fund Administration Servicing Agreement with
Registrant and U.S. Bancorp Fund Services, LLC.
(Previously filed as Exhibit 99.k.5 filed with Registrants
registration Statement on Form N-2/A (File No. 333-119625)
filed on November 23, 2004).
Form of Amendment to the Fund Administration Servicing
Agreement.
(Previously filed as Exhibit 99.k.6 filed with
Registrants registration Statement on Form N-2/A (File No.
333-119625) filed on November 23, 2004).
Form of Fund Accounting Servicing Agreement with Registrant
and U.S. Bancorp Fund Services, LLC.
(Previously filed as
Exhibit 99.k.7 filed with Registrants registration
Statement on Form N-2 (File No. 333-119625) filed on
November 23, 2004).
Form of Amendment to the Fund Accounting Servicing
Agreement.
(Previously filed as Exhibit 99.k.8 filed with
Registrants registration Statement on Form N-2/A (File No.
333-119625) filed on November 23, 2004).
Table of Contents
$
11,770
10,500
350,000
*
200,000
*
400,000
*
$
972,270
*
*
Figures are estimates.
100
%
Table of Contents
Number of
Title of Class
Record Holders
7,800
Table of Contents
(i)
to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii)
to reflect in the prospectus any facts or
events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii)
to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
Table of Contents
Exhibit
Fifth Amended and Restated Bylaws
Opinion of counsel and consent to its use
Consent of Ernst & Young LLP
Table of Contents
MVC Capital, Inc.
By:
/S/ MICHAEL T. TOKARZ
Michael T. Tokarz
Chairman of the Board
SIGNATURE
TITLE
Chairman of the Board
Director
Director
Director
Director
Principal Financial Officer
Page | ||||||
ARTICLE 1 OFFICES | 1 | |||||
1.1
|
Principal Office | 1 | ||||
1.2
|
Additional Offices | 1 | ||||
ARTICLE 2 MEETING OF STOCKHOLDERS | 1 | |||||
2.1
|
Place of Meeting | 1 | ||||
2.2
|
Annual Meeting | 1 | ||||
2.3
|
Special Meetings | 2 | ||||
2.4
|
Action Without a Meeting | 3 | ||||
2.5
|
Notice of Meetings | 3 | ||||
2.6
|
Business Matter of a Special Meeting | 3 | ||||
2.7
|
List of Stockholders | 3 | ||||
2.8
|
Organization and Conduct of Business | 4 | ||||
2.9
|
Quorum and Adjournments | 4 | ||||
2.10
|
Voting Rights | 4 | ||||
2.11
|
Majority Vote | 4 | ||||
2.12
|
Record Date for Stockholder Notice and Voting | 4 | ||||
2.13
|
Proxies | 5 | ||||
2.14
|
Inspectors of Election | 5 | ||||
ARTICLE 3 DIRECTORS | 6 | |||||
3.1
|
Number; Election; Tenure and Qualifications | 6 | ||||
3.2
|
Vacancies | 7 | ||||
3.3
|
Resignation and Removal | 7 | ||||
3.4
|
Powers | 7 | ||||
3.5
|
Place of Meetings | 7 | ||||
3.6
|
Annual Meetings | 7 | ||||
3.7
|
Regular Meetings | 7 | ||||
3.8
|
Special Meetings | 8 | ||||
3.9
|
Quorum and Adjournments | 8 | ||||
3.10
|
Action Without Meeting | 8 | ||||
3.11
|
Telephone Meetings | 8 | ||||
3.12
|
Waiver of Notice | 8 | ||||
3.13
|
Fees and Compensation of Directors | 8 | ||||
3.14
|
Rights of Inspection | 9 | ||||
3.15
|
Committees of Directors | 9 | ||||
ARTICLE 4 OFFICERS | 10 | |||||
4.1
|
Officers Designated | 10 | ||||
4.2
|
Appointment of Officers | 10 | ||||
4.3
|
Subordinate Officers | 10 | ||||
4.4
|
Removal and Resignation of Officers | 10 | ||||
4.5
|
Vacancies in Offices | 10 | ||||
4.6
|
Compensation | 10 |
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Page | ||||||
4.7
|
The Chairman of the Board | 10 | ||||
4.8
|
The Vice Chairman | 11 | ||||
4.9
|
The Chief Executive Officer | 11 | ||||
4.10
|
The President | 11 | ||||
4.11
|
The Vice President | 11 | ||||
4.12
|
The Secretary | 11 | ||||
4.13
|
The Assistant Secretary | 12 | ||||
4.14
|
The Chief Financial Officer | 12 | ||||
4.15
|
Bond | 12 | ||||
4.16
|
Delegation of Authority | 12 | ||||
ARTICLE 5 INDEMNIFICATION | 12 | |||||
5.1
|
Right to Indemnification | 12 | ||||
5.2
|
Right to Advancement of Expenses | 14 | ||||
5.3
|
Right of Indemnitee to Bring Suit | 14 | ||||
5.4
|
Non-Exclusivity of Rights | 15 | ||||
5.5
|
Insurance | 15 | ||||
5.6
|
Indemnification of Employees and Agents of the Corporation | 15 | ||||
5.7
|
Nature of Rights | 15 | ||||
ARTICLE 6 CAPITAL STOCK | 15 | |||||
6.1
|
Certificates for Shares | 15 | ||||
6.2
|
Signatures on Certificates | 16 | ||||
6.3
|
Transfer of Stock | 16 | ||||
6.4
|
Registered Stockholders | 16 | ||||
6.5
|
Lost, Stolen or Destroyed Certificates | 16 | ||||
ARTICLE 7 CERTAIN TRANSACTIONS | 17 | |||||
7.1
|
Transactions with Interested Parties | 17 | ||||
7.2
|
Quorum | 17 | ||||
ARTICLE 8 GENERAL PROVISIONS | 17 | |||||
8.1
|
Dividends | 17 | ||||
8.2
|
Dividend Reserve | 17 | ||||
8.3
|
Checks | 18 | ||||
8.4
|
Corporate Seal | 18 | ||||
8.5
|
Fiscal Year | 18 | ||||
8.6
|
Execution of Corporate Contracts and Instruments | 18 | ||||
8.7
|
Representation of Shares of Other Corporations | 18 | ||||
ARTICLE 9 AMENDMENTS | 18 |
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(a) | who shall have been adjudicated, by the court or other body before which the proceeding was brought, to be liable to the corporation or its stockholders by reason of such officers or directors willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office (collectively, disabling conduct); or | ||
(b) | with respect to any proceeding disposed of (whether by settlement, pursuant to a consent decree or otherwise) without an adjudication by the court or other body before which the proceeding was brought that such officer or director was liable to corporation or its stockholders by reason of disabling conduct, unless there has been a determination that such officer or director did not engage in disabling conduct by: |
(i) | at least a majority of those directors who are neither interested persons of the corporation (as such term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (1940 Act) nor are parties to the proceeding based upon a review of readily available facts (as opposed to a full trial-type inquiry); or | ||
(ii) | written advice of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry); |
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