pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
þ Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
(Name of Registrant as Specified In Its Charter)
MVC CAPITAL, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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SEC 1913 (04-04)
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Persons who are to respond to the collection of information contained in this form
are not required to respond unless the form displays a currently valid OMB control number. |
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 14, 2009
MVC CAPITAL, INC.
NOTICE IS HEREBY GIVEN that the annual meeting (the
Meeting) of the stockholders of MVC Capital, Inc.
(the Fund) will be held at the offices of UBS, 299
Park Avenue, New York, NY 10171, on April 14, 2009,
[10:00 a.m.] (Eastern time) for the following purposes:
1. to elect six nominees to serve as members of the Board
of Directors of the Fund;
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2.
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to approve an amended and restated investment advisory and
management agreement between the Fund and its investment
adviser, The Tokarz Group Advisers LLC; and
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3. to transact such other business as may properly come
before the meeting or any adjournment thereof.
The proposals are discussed in greater detail in the Proxy
Statement attached to this Notice. Stockholders of record as of
the close of business on [February 17, 2009] are entitled
to receive notice of and to vote at the Meeting. Each
stockholder is invited to attend the Meeting in person. If you
cannot be present at the Meeting, we urge you to mark, sign,
date and promptly return the enclosed Proxy Card so that the
Meeting can be held and a maximum number of shares may be voted.
If you received more than one Proxy Card, please be sure to
mark, sign, date and return each one.
IT IS
IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY.
If you do not expect to attend the Meeting, you are urged to
mark, sign, date and return without delay the enclosed Proxy
Card(s) in the enclosed envelope, which requires no postage if
mailed in the United States, so that your shares may be
represented at the Meeting. Instructions for the proper
execution of the Proxy Card(s) are set forth at the end of the
attached Proxy Statement. Instructions for telephone and
Internet voting (which may be available to you) are set forth on
the enclosed Proxy Card.
A proxy may be revoked at any time before it is exercised by
the subsequent execution and submission of a revised proxy, by
giving written notice of revocation to the Fund at any time
before the proxy is exercised or by voting in person at the
Meeting.
By Order of the Board of Directors,
Michael Tokarz
Chairman
[March 6, 2009]
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
TABLE OF CONTENTS
ANNUAL
MEETING OF STOCKHOLDERS
OF
MVC CAPITAL, INC.
APRIL 14, 2009
287 Bowman Avenue
2nd Floor
Purchase, New York 10577
(914) 510-9400
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors (the
Board) of MVC Capital, Inc. (the Fund)
for use at the annual meeting of the stockholders of the Fund
(the Meeting), to be held at the offices of UBS, 299
Park Avenue, New York, NY 10171, on April 14, 2009,
[10:00 a.m.] (Eastern time), and at any adjournment
thereof. This Proxy Statement, the accompanying Notice of Annual
Meeting of Stockholders, and the enclosed Proxy Card(s) are
expected to be mailed on or about [March 6, 2009].
A Proxy Card that is properly executed and returned to the Fund
prior to the Meeting will be voted as provided therein at the
Meeting and at any adjournment thereof. A proxy may be revoked
at any time before it is exercised by the subsequent execution
and submission of a revised proxy, by giving written notice of
revocation to the Fund at any time before the proxy is exercised
or by voting in person at the Meeting. Signing and mailing a
Proxy Card will not affect your right to give a later proxy or
to attend the Meeting and vote your shares in person.
The Board intends to bring before the Meeting the proposals that
are set forth in the Notice of Annual Meeting of Stockholders
and that are described in this Proxy Statement. The persons
named as proxies on the enclosed Proxy Card will vote all shares
represented by proxies in accordance with the instructions of
stockholders as specified on the Proxy Card. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum. A broker
non-vote occurs when a broker submits a proxy card with
respect to shares of common stock held in a fiduciary capacity
(typically referred to as being held in street
name), but declines to vote on a particular matter because
the broker has not received voting instructions from the
beneficial owner nor does it have discretionary power to vote on
a particular matter. Under the rules that govern brokers who are
voting with respect to shares held in street name, brokers have
the discretion to vote such shares on routine matters, but not
on non-routine matters. For example, the election of directors
is a routine matter while the proposal to approve the Amended
and Restated Investment Advisory and Management Agreement (the
Amended Agreement) with The Tokarz Group Advisers
LLC (TTG Advisers) is a non-routine matter.
With respect to the election of each nominee to serve as a
member of the Board, abstentions and broker non-votes will not
have any effect on the outcome of the proposal. With respect to
the proposal to approve the Amended Agreement, abstentions and
broker non-votes will have the same effect as a negative vote on
the outcome of the proposal.
In addition to soliciting proxies by mail, officers of the Fund
may solicit proxies by telephone or in person, without special
compensation. The Fund may retain a proxy solicitor to assist in
the solicitation of proxies, for which the Fund would pay usual
and customary fees.
Most beneficial owners whose shares are held in street name will
receive voting instruction forms from their banks, brokers or
other agents, rather than the Funds Proxy Card. A number
of banks and brokerage firms are participating in a program that
offers a means to grant proxies to vote shares via the Internet
or by telephone. If your shares are held in an account with a
bank or broker participating in this program, you may grant a
proxy to vote those shares via the Internet or telephonically by
using the website or telephone number shown on the instruction
form provided to you by your broker or bank.
Only stockholders of record as of the close of business on
[February 17, 2009] (the Record Date) are
entitled to notice of, and to vote at, the Meeting. On the
Record Date, [24,297,087] shares of the Fund were
outstanding.
Each stockholder of record on the Record Date is entitled to one
vote for each share held.
1
The stockholders of the Fund have no dissenters or
appraisal rights in connection with any of the proposals
described herein.
In the event that a quorum is not present at the Meeting or at
any adjournment thereof, or in the event that a quorum is
present at the Meeting but sufficient votes to approve a
proposal are not received, one or more adjournments of the
Meeting may be proposed to permit further solicitation of
proxies. A stockholder vote may be taken with respect to the
Fund on some or all matters before any such adjournment if a
quorum is present and sufficient votes have been received for
approval. Any adjournment will require the affirmative vote of a
majority of the shares represented at the Meeting in person or
by proxy.
The Funds Annual Report on
Form 10-K
for the fiscal year ended October 31, 2008 (the
Report) is being mailed with this Proxy Statement to
the stockholders of the Fund. The Report is not to be regarded
as proxy-soliciting material. This Proxy Statement and the
Report are available on the Funds website at
www.mvccapital.com. The Report may be obtained without charge,
by writing to the Fund at 287 Bowman Avenue, 2nd Floor,
Purchase, New York 10577, or by calling toll-free
1-800-426-5523.
The Funds next quarterly report on
Form 10-Q
is scheduled to be filed with the Securities and Exchange
Commission (SEC) on or before March 12,
2009.
PROPOSAL 1
ELECTION
OF DIRECTORS
At the Meeting, stockholders will vote on a proposal to elect
six nominees to serve as directors of the Fund
(Directors). The nominees include Emilio Dominianni,
Gerald Hellerman, Warren Holtsberg, Robert Knapp, William Taylor
and Michael Tokarz. Each nominee is currently a member of the
Board.
The persons named as proxies on the enclosed Proxy Card intend,
in the absence of contrary instructions, to vote all proxies
they are entitled to vote in favor of the election of the six
nominees named above to serve as the Directors. Each of the
nominees has consented to stand for election and to serve if
elected. If elected, a nominee will serve for a term of one year
until the next annual meeting of stockholders after his
election. If any nominee should be unable to serve, an event
that is not now anticipated, the persons named as proxies will
vote for such replacement nominee as may be recommended by the
presently serving Directors.
Information regarding the nominees and the officers of the Fund,
including brief biographical information, is set forth below.
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(5)
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Number of
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Portfolios in
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(6)
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Fund Complex
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Other
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(2)
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(3)
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(4)
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Overseen by
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Directorships
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Positions(s)
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Term of Office/
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Principal
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Director or
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Held by Director
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(1)
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Held with
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Length of Time
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Occupation(s)
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Nominee for
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or Nominee for
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Name, Address and Age
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the Fund
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Served
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During Past 5 Years
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Director
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Director
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Nominees for
Independent Directors
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Emilio Dominianni
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 77
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Director
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1 year/5 years, 11 months
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Mr. Dominianni is a retired Partner of, and was Special Counsel
to Coudert Brothers LLP, a law firm. He is currently a director
of MVC Acquisition Corp., Stamm International Corporation,
Powrmatic Inc., and Powrmatic of Canada Ltd., manufacturers and
distributors of heating, ventilating, and air conditioning
equipment. He was previously a director of American Air Liquide
Inc., Air Liquide International Corporation, and a Consultant to
Air Liquide America Corp., all manufacturers and distributors of
industrial gases, and Mouli Manufacturing Corp., a distributor
of kitchen and household products.
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None(1)
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See column 4
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2
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(5)
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Number of
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Portfolios in
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(6)
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Fund Complex
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Other
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(2)
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(3)
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(4)
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Overseen by
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Directorships
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Positions(s)
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Term of Office/
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Principal
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Director or
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Held by Director
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(1)
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Held with
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Length of Time
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Occupation(s)
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Nominee for
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or Nominee for
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Name, Address and Age
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the Fund
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Served
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During Past 5 Years
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Director
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Director
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Gerald Hellerman
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 71
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Director
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1 year/5 years, 11 months
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Mr. Hellerman owns and has served as Managing Director of
Hellerman Associates, a financial and corporate consulting firm,
since the firms inception in 1993. Mr. Hellerman currently
serves as a director of MVC Acquisition Corp. and as a director,
chief financial officer and chief compliance officer for The
Mexico Equity and Income Fund, Inc., a director of the Old
Mutual Absolute Return and Emerging Managers fund complex
(consisting of six funds), and a director of Brantley Capital
Corporation. Mr. Hellerman was previously a director of AirNet
Systems, Inc.
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None(1)
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See column 4
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Robert Knapp
Ironsides Partners LLC
100 Summer Street
27th Floor
Boston, MA 02108
Age: 42
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Director
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1 year/5 years, 11 months
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Mr. Knapp is Managing Director of Ironsides Partners LLC, which
was formed in January 2007 to manage an account for Millennium
Partners LP (Millennium), his former employer from
1996-2006. Mr. Knapp specializes in mis-priced assets,
turnaround situations, and closed end fund arbitrage. He is
Chairman of the Africa Opportunity Fund, and former director of
the Vietnam Opportunity Fund, which are Cayman Islands
investment companies listed on the London Stock Exchange. He
also served as a director for the First Hungary Fund, a Channel
Islands private equity fund, trustee of Princeton in Asia and
trustee of Sea Education Association.
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None(1)
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See column 4
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William Taylor
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 66
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Director
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1 year/2 years, 11 months
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Mr. Taylor is a Certified Public Accountant and is currently a
director and Treasurer of Northern Illinois University
Foundation, a Trustee of Writers Theatre and the President and a
Director of The William and Dian Taylor Foundation. From 1976
through May 2005, Mr. Taylor was a Partner at Deloitte &
Touche. From 1997 to 2001, Mr. Taylor was a director of Deloitte
& Touche USA and from 1999 to 2003 Mr. Taylor was a
director of Deloitte Touche Tohmatsu.
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None(1)
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See column 4
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3
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(5)
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Number of
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Portfolios in
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(6)
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Fund Complex
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Other
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(2)
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(3)
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(4)
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Overseen by
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Directorships
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Positions(s)
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Term of Office/
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Principal
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Director or
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Held by Director
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(1)
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Held with
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Length of Time
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Occupation(s)
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Nominee for
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or Nominee for
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Name, Address and Age
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the Fund
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Served
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During Past 5 Years
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Director
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Director
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Officer and Nominees for Interested Directors
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Warren Holtsberg(2)
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 58
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Director
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1 year/1 year, 10 months
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Mr. Holtsberg currently serves as Co-Head Portfolio Management
of TTG Advisers the investment adviser to the Fund (the
Adviser). Mr. Holtsberg founded Motorola Ventures,
the venture capital investment arm for Motorola, Inc. where he
led the worldwide fund for eight years. He was also Corporate
Vice President and Director of Equity Investments at Motorola.
Mr. Holtsberg currently serves as a director of MVC
Acquisition Corp., MVC Partners, LLC. a member of the Board of
Directors of the Illinois Venture Capital Association, the
Chicagoland Entrepreneurship Center, and Illinois Ventures, the
venture investment arm for the University of Illinois, and
serves on the advisory board of the Arcapita Fund.
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None(1)
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See column 4
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4
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(5)
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Number of
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Portfolios in
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(6)
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Fund Complex
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Other
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(2)
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(3)
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(4)
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Overseen by
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Directorships
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Positions(s)
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Term of Office/
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Principal
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Director or
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Held by Director
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(1)
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Held with
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Length of Time
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Occupation(s)
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Nominee for
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or Nominee for
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Name, Address and Age
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the Fund
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Served
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During Past 5 Years
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Director
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Director
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Michael Tokarz(3)
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 59
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Director
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1 year/5 years, 3 months
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Mr. Tokarz currently serves as Chairman and Portfolio Manager of
the Fund and as Manager of TTG Advisers. 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 MVC Acquisition
Corp., Conseco, Inc., Walter Industries, Inc. (Chairman of the
board), Mueller Water Products, Inc., IDEX Corporation,
Stonewater Control Systems, Lomonosov, Athleta, Inc. and Apertio
Ltd. Mr. Tokarz is an active member of the endowment
committee and Board of Trustees of YMCA in Westchester County.
He is also a member of the Board of the Warwick Business School
in England. He is Chairman and is a member of the Board of the
University of Illinois Foundation, and serves on its executive
committee, investment policy committee and is Chairman of the
budget and finance committee; he is also a member of the Venture
Capital Subcommittee and serves as a member of the Board of
Managers for Illinois Ventures, LLC. Mr. Tokarz also serves as
the Chairman of the Illinois Emerging Technology Fund LLC. Mr.
Tokarz serves as a director for the following portfolio
companies of the Fund: Custom Alloy Corporation, Dakota Growers
Pasta Company, Harmony Pharmacy & Health Centers, Inc.,
HuaMei Capital Company, MVC Automotive Group B.V., MVC Partners
LLC, Ohio Medical Corporation, Summit Research Labs, Inc.,
Timberland Machines & Irrigation, Inc., and Turf Products,
LLC.
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None(1)
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See column 4
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5
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(5)
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Number of
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Portfolios in
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(6)
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Fund Complex
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Other
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(2)
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(3)
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(4)
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Overseen by
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Directorships
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Positions(s)
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Term of Office/
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Principal
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Director or
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Held by Director
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(1)
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Held with
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Length of Time
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Occupation(s)
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Nominee for
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or Nominee for
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Name, Address and Age
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the Fund
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Served
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During Past 5 Years
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Director
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Director
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Executive Officers
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Bruce Shewmaker
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 63
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Managing Director
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Indefinite term/5 years, 3 months
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Mr. Shewmaker currently serves as Managing Director of TTG
Advisers and the Fund. Mr. Shewmaker worked directly for
the Fund from November 2003 through October 2006. 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. Mr. Shewmaker served as a director for the following
portfolio companies of the Fund: Baltic Motors Corporation and
Phoenix Coal Corporation. He currently serves on the Boards of
Foliofn, Inc., MVC Partners LLC, Vendio Services, Inc.,
Velocitius B.V. and Vestal Manufacturing Enterprises, Inc. Mr.
Shewmaker also serves on the Board of VIANY.
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N/A
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N/A
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Peter Seidenberg
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 39
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Chief Financial
Officer
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Indefinite term/3 years, 4 months
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Mr. Seidenberg currently serves as Chief Financial Officer of
TTG Advisers, in addition to his service as Chief Financial
Officer of the Fund. Mr. Seidenberg joined the Fund in April
2005 after having previously served as a Principal of Nebraska
Heavy Industries, where he worked on engagements including
serving as the Chief Financial Officer of Commerce One, Inc.
Prior to that, Mr. Seidenberg served as the Director of
Finance and Business Development and as Corporate Controller for
Plumtree Software, Inc. Mr. Seidenberg has also worked at
AlliedSignal and several small manufacturing companies, where he
held roles in finance and operations. Mr. Seidenberg, on behalf
of the Fund, sits on the board of Ohio Medical Corp and serves
as its Corporate Secretary. Mr. Seidenberg also serves on the
Board of MVC Partners LLC and Vitality Foodservice, Inc. and
serves as Chief Financial Officer of MVC Acquisition Corp.
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N/A
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N/A
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6
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(5)
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Number of
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Portfolios in
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(6)
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Fund Complex
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Other
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(2)
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(3)
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(4)
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Overseen by
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Directorships
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Positions(s)
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Term of Office/
|
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Principal
|
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Director or
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Held by Director
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(1)
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Held with
|
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Length of Time
|
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Occupation(s)
|
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Nominee for
|
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or Nominee for
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Name, Address and Age
|
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the Fund
|
|
Served
|
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During Past 5 Years
|
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Director
|
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Director
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Scott Schuenke
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 29
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Chief Compliance
Officer
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Indefinite term/4 years, 4 months
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Mr. Schuenke currently serves as the Controller and Chief
Compliance Officer of TTG Advisers, in addition to his service
as Chief Compliance Officer of the Fund. Prior to joining the
Fund in June 2004, 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. Mr. Schuenke serves on the Board of Vestal Manufacturing
Enterpries, Inc. on behalf of the Fund. Mr. Schuenke is a
Certified Public Accountant.
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N/A
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N/A
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Jaclyn Shapiro
287 Bowman Avenue
2nd Floor
Purchase, NY 10577
Age: 30
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Vice President/
Secretary
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Indefinite term/4 years, 3 months; Indefinite
term/5 years, 1 month
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Ms. Shapiro currently serves as Vice President and Secretary of
TTG Advisers, in addition to her service as Vice President and
Secretary of the Fund. Prior to joining the Fund in June 2002,
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. Ms. Shapiro serves on the board of MVC Partners
LLC.
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N/A
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N/A
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(1)
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Other than the Fund.
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(2)
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Mr. Holtsberg is an
interested person, as defined in the 1940 Act, of
the Fund (an Interested Director) because of his
employment with TTG Advisers.
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(3)
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Mr. Tokarz is an Interested
Director because he serves as an officer of the Fund.
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Board
Meetings and Committees.
The Board has adopted a charter for each of its Audit,
Nominating/Corporate Governance/Strategy and Compensation
Committees, as well as a Corporate Governance Policy. The Audit
Committees charter is annexed hereto as Exhibit B.
The Board has also adopted a Code of Ethics, which applies to,
among others, all of the Funds officers and directors, as
well as a Code of Ethics for Principal Executive and Senior
Financial Executives that applies to and has been signed by the
Principal Executive Officer and the Chief Financial Officer of
the Fund. These materials can be found on the Funds
website at www.mvccapital.com, and may be obtained by written
request to MVC Capital, Inc.,
c/o Corporate
Secretary, 287 Bowman Avenue, 2nd Floor, Purchase, New York
10577. Waivers, if any, of the Funds Code of Ethics or
Code of Ethics for Principal Executive and Senior Financial
Executives will be promptly disclosed on the Funds website.
During the fiscal year ended October 31, 2008, the Board
held ten (10) meetings. During the last fiscal year, each
of the nominees attended 100% of the aggregate number of
meetings of the Board and any committee of the Board on which
such nominee served, except that one nominee did not attend a
special telephonic meeting of the Board held during the fiscal
year. Currently, a majority of the Directors are Independent
Directors (as defined
7
below). Mr. Knapp has been appointed by the Independent
Directors to serve as the Presiding Director over executive
sessions of non-management directors.
Interested parties should communicate with the Presiding
Director or with the non-management directors as a group
according to the following procedures established by the Fund
for stockholders communication with the Board: any
communications intended for the Board should be sent to the Fund
at the Funds address and any such communication will be
forwarded to the Board (or applicable Board member) or disclosed
to the Board (or applicable Board member) at its next regular
meeting.
The Audit Committees primary purposes are:
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oversight responsibility with respect to: (i) the adequacy
of the Funds accounting and financial reporting processes,
policies and practices; (ii) the integrity of the
Funds financial statements and the independent audit
thereof; (iii) the adequacy of the Funds overall
system of internal controls and, as appropriate, the internal
controls of certain service providers; (iv) the Funds
compliance with certain legal and regulatory requirements;
(v) determining the qualification and independence of the
Funds independent auditors; and (vi) the Funds
internal audit function, if any; and
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oversight of the preparation of any report required to be
prepared by the Committee pursuant to the rules of the SEC for
inclusion in the Funds annual proxy statement with respect
to the election of directors.
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Report
of Audit Committee:
The most recent fiscal year of the Fund ended on
October 31, 2008. During that fiscal year, the Audit
Committee held four (4) meetings. In connection with the
Funds audited financial statements for the fiscal year
ended October 31, 2008, the Audit Committee has:
(i) reviewed and discussed with management the Funds
audited financial statements for the fiscal year ended
October 31, 2008; (ii) discussed with
Ernst & Young LLP (E&Y), the
independent auditors of the Fund, the matters required to be
discussed by Statements on Auditing Standards (SAS) No. 61
(Codification of Statements on Auditing Standards, AU
§ 380); (iii) received the written disclosures
and a letter from E&Y regarding, and discussed with
E&Y, its independence; and (iv) recommended to the
Board that the audited financial statements of the Fund for the
fiscal year ended October 31, 2008 be included in the
Funds Annual Report to Stockholders for filing with the
SEC.
Audit Committee members: Emilio Dominianni, Gerald Hellerman and
William Taylor.
Each of the current members of the Audit Committee,
Messrs. Dominianni, Hellerman and Taylor, is considered
independent under the rules promulgated by the New York Stock
Exchange and is not an interested person, as defined
by the 1940 Act, of the Fund (the Independent
Directors). Each member of the Audit Committee meets the
current independence and experience requirements of
Rule 10A-3
of the Securities Exchange Act of 1934, as amended (the
1934 Act), and the Board has determined that
Messrs. Hellerman and Taylor are each an audit
committee financial expert, as defined under
Item 407(d)(5) of
Regulation S-K
of the 1934 Act. Mr. Hellerman is the Chairman of the
Audit Committee.
The Valuation Committee, the principal purpose of which is to
determine the fair values of securities in the Funds
portfolio for which market quotations are not readily available,
is currently comprised of Messrs. Dominianni, Hellerman and
Knapp. Mr. Knapp is the Chairman of the Valuation
Committee. The Valuation Committee held four (4) meetings
during the fiscal year ended October 31, 2008.
The Nominating/Corporate Governance/Strategy Committee (the
Nominating Committee), the principal purposes of
which are to consider and nominate persons to serve as
Independent Directors and oversee the composition and governance
of the Board and its committees and to provide strategic
direction with respect to the Fund, is currently comprised of
Messrs. Dominianni, Hellerman, Knapp and Taylor, each of
whom is an Independent Director. Mr. Dominianni is the
Chairman of the Nominating Committee. The Nominating Committee
was established in January 2004.
The Nominating Committee considers director candidates nominated
by stockholders in accordance with procedures set forth in the
Funds By-Laws. The Funds By-Laws provide that
nominations may be made by any stockholder of record of the Fund
entitled to vote for the election of directors at a meeting,
provided that such
8
nominations are made pursuant to timely notice in writing to the
Secretary. The Nominating Committee then determines the
eligibility of any nominated candidate based on criteria
described below. To be timely, a stockholders notice must
be received at the principal executive offices of the Fund not
less than 60 days nor more than 90 days prior to the
scheduled date of a meeting. A stockholders notice to the
Secretary shall set forth: (a) as to each
stockholder-proposed nominee, (i) the name, age, business
address and residence address of the nominee, (ii) the
principal occupation or employment of the nominee,
(iii) the class, series and number of shares of capital
stock of the Fund that are owned beneficially by the nominee,
(iv) a statement as to the nominees citizenship, and
(v) any other information relating to the person that is
required to be disclosed in solicitations for proxies for
election of directors pursuant to Section 14 of the
1934 Act, and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the
notice, (i) the name and record address of the stockholder
and (ii) the class, series and number of shares of capital
stock of the corporation that are owned beneficially by the
stockholder. The Fund or the Nominating Committee may require a
stockholder who proposes a nominee to furnish any such other
information as may reasonably be required by the Fund to
determine the eligibility of the proposed nominee to serve as
director of the Fund. The Nominating Committee held one
(1) meeting during the fiscal year ended October 31,
2008.
In addition, the Nominating Committee considers potential
director candidates with input from various sources, which may
include: current Directors, members of the management team, or
an outside search firm. The Nominating Committee seeks to
identify candidates that possess, in its view, strong character,
judgment, business experience and acumen. As a minimum
requirement, any eligible candidate who is not proposed to serve
as an Interested Director (i.e., a candidate who is not
employed or proposed to be employed by the Fund or the Adviser)
must not be an interested person, as defined by the
1940 Act, of the Fund. The Nominating Committee also considers,
among other factors, certain other relationships (beyond those
delineated in the 1940 Act) that might impair the independence
of a proposed Director.
The Compensation Committee, the principal purpose of which is to
oversee the compensation of the Independent Directors, is
currently comprised of Messrs. Hellerman and Knapp.
Mr. Hellerman is the Chairman of the Compensation
Committee. The Compensation Committee was established in March
2003. The Compensation Committee held one (1) meeting
during the fiscal year ended October 31, 2008.
The Board has adopted a policy that encourages all Directors, to
the extent reasonable and practicable, to attend the Funds
annual stockholders meetings in person. All of the
Directors attended the last annual meeting.
Director
and Executive Officer Compensation.
The following table sets forth compensation paid by us in all
capacities during the fiscal year ended October 31, 2008 to
all of our Directors and our executive officers. Our Directors
have been divided into two groups Interested
Directors and Independent Directors. The Interested Directors
are interested persons, as defined in the 1940 Act,
of the Fund. No compensation is paid to the Interested
Directors. (The Fund is not part of any Fund Complex.)
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(1)
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Fees Earned or
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All Other
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Name of Person, Position
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Paid in Cash
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Stock Awards
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Compensation
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Total
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Interested Directors
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Warren Holtsberg, Director
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None
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None
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None
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None
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Michael Tokarz, Chairman and Portfolio Manager
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None
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None
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None
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None
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Independent Directors
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Emilio Dominianni, Director
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$55,000
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None
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None
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$55,000
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Gerald Hellerman, Director
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$60,000
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None
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None
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$60,000
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Robert Knapp, Director
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$60,000
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None
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None
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$60,000
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William Taylor, Director
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$50,000
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None
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None
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$50,000
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Executive Officers (who are not directors)(2)
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Peter Seidenberg, Chief Financial Officer
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$49,623
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None
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None
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$49,623
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Scott Schuenke, Chief Compliance Officer
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$14,484
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None
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None
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$14,484
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Jaclyn Shapiro, Vice President and Secretary
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$35,893
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None
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None
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$35,893
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Bruce Shewmaker, Managing Director
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$0
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None
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None
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$0
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9
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(1)
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Directors do not receive any
pension or retirement benefits from the Fund.
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(2)
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Currently, under the existing
investment advisory and management agreement between the Fund
and TTG Advisers, the Fund reimburses TTG Advisers for its
allocable portion of the compensation payable to the Funds
Chief Financial Officer, Chief Compliance Officer and Secretary
in an amount not to exceed $100,000 per year, in the aggregate.
The remaining portion of these individuals compensation is
borne by TTG Advisers.
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The fees payable to Independent Directors and the fees payable
to the Chairman of the Audit Committee, Valuation Committee, and
Nominating Committee are as follows: Each Independent Director
is paid an annual retainer of $50,000 ($60,000 for each of the
Chairman of the Audit Committee and the Chairman of the
Valuation Committee and $55,000 for the Chairman of the
Nominating Committee) for up to five in-person Board meetings
and committee meetings per year. In the event that more than
five in-person Board meetings and committee meetings occur, each
Independent Director will be paid an additional $1,000 for each
in-person meeting. Each Independent Director is also reimbursed
by the Fund for reasonable out-of-pocket expenses. The Directors
do not receive any pension or retirement benefits from the Fund.
Director
Equity Ownership.
The following table sets forth, as of the Record Date, with
respect to each Director and nominee, certain information
regarding the dollar range of equity securities beneficially
owned in the Fund. The Fund does not belong to a family of
investment companies.
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(2)
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(3)
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Dollar Range
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Aggregate Dollar Range of Equity
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of Equity
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Securities of All Funds Overseen or to
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(1)
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Securities in
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be Overseen by Director or Nominee
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Name of Director or Nominee
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the Fund
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in Family of Investment Companies
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Independent Directors
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Emilio Dominianni
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Over $100,000
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Over $100,000
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Gerald Hellerman
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Over $100,000
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Over $100,000
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Robert Knapp
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Over $100,000
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Over $100,000
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William Taylor
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Over $100,000
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Over $100,000
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Interested Directors
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Warren Holtsberg(2)
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$50,001 - $100,000
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$50,001 - $100,000
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Michael Tokarz(3)
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Over $100,000
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Over $100,000
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(1)
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These shares are owned by
Mr. Knapp directly. See Exhibit A (and Note 6
thereto) for more information.
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(2)
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Mr. Holtsberg is an Interested
Director because of his employment with the Adviser.
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(3)
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Mr. Tokarz is an Interested
Director because he serves as an officer of the Fund.
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10
VOTE
REQUIRED
The election of the nominees requires the affirmative vote of
a plurality of the votes present or represented by proxy at the
Meeting and entitled to vote on the election of the nominees.
The Board
recommends a vote FOR the election of all of the
nominees.
PROPOSAL 2
APPROVAL
OF AN AMENDED AND RESTATED INVESTMENT ADVISORY AND MANAGEMENT
AGREEMENT BETWEEN THE FUND AND THE TOKARZ GROUP ADVISERS
LLC
Stockholders of the Fund are being asked to approve an amended
and restated investment advisory and management agreement (the
Amended Agreement) between the Fund and its
investment adviser, TTG Advisers (Proposal 2).
The Amended Agreement is attached as Exhibit C to this
Proxy Statement. At an in-person meeting of the Board held on
December 11, 2008, the Board, including all of the
Independent Directors, unanimously voted to approve the Amended
Agreement, and recommended its approval by the Funds
stockholders.
The
Amended Agreement
Currently, TTG Advisers serves as the Funds investment
adviser pursuant to an Investment Advisory and Management
Agreement with the Fund, dated October 31, 2006 (the
Existing Agreement). That agreement has an initial
term that expired on October 31, 2008 and could be renewed
for additional annual periods thereafter. In anticipation of the
expiration of the initial term and the desire to renew the
Funds relationship with TTG Advisers, the Independent
Directors and TTG Advisers each sought to negotiate a
modification to certain terms of the arrangements to help foster
a longer term relationship. That arms-length negotiation
resulted in the terms reflected in the Amended Agreement, which
was approved by the Board, including all of the Independent
Directors, on December 11, 2008 and is recommended for your
approval. (Because the initial term of the Existing Agreement
expired on October 31, 2008, the Board, as an interim
measure, approved renewal of the Existing Agreement until such
time as the Amended Agreement is approved by stockholders and
takes effect.)
The Amended Agreement provides for TTG Advisers continued
management of the Fund and is identical, in all material
respects, to the Existing Agreement, except for the following
modifications: (i) the Amended Agreement secures
Mr. Tokarzs service as the portfolio manager of the
Fund for an additional two fiscal years; (ii) the Amended
Agreement extends the period for which an expense cap would
apply for an additional two fiscal years, and increases the
expense cap to 3.5%; and (iii) the calculation of the
capital gains portion of the incentive fee (the Capital
Gains Fee) under the Amended Agreement reflects a revision
so that unrealized depreciation on an investment would not
reduce the Capital Gains Fee to the extent it has already been
reduced by unrealized depreciation on the same investment in
prior fiscal years (the Modified Capital Gains Fee).
All of these changes are further discussed below under
Terms of the Amended Agreement. Certain other
non-material changes are also reflected in the Amended
Agreement, including a clarification that the terms of the
agreement do not cover TTG Advisers furnishing of
portfolio management or other management services to an
investment vehicle other than the Fund (e.g., a private
equity fund, business development company (BDC) or
managed account of an operating company) (Third-Party
Vehicle), pursuant to a separate arrangement approved by
the Independent Directors (a Separate Agreement).
In approving the Amended Agreement, the Independent Directors
considered numerous factors discussed below under The
Boards Consideration of the Amended Agreement.
Terms of
the Amended Agreement
Other than the modifications discussed above, all other material
terms of the Amended Agreement are substantially identical to
those set forth under the Existing Agreement. The following is a
summary of all of the key terms of the Amended Agreement. The
summary below is qualified in its entirety by reference to the
Amended Agreement attached as Exhibit C.
11
As with the Existing Agreement, under the terms of the Amended
Agreement, TTG Advisers determines the composition of our
portfolio, the nature and timing of the changes to our portfolio
and the manner of implementing such changes, identifies,
evaluates and negotiates the structure of the investments we
make (including performing due diligence on our prospective
portfolio companies), closes and monitors the investments we
make, determines the securities and other assets that we
purchase, retain or sell and oversees the administration,
recordkeeping and compliance functions of the Fund
and/or third
parties performing such functions for the Fund. TTG
Advisers services under the Amended Agreement are not
exclusive, and it may furnish similar services to other entities.
Pursuant to the Amended Agreement, the Fund would continue to
pay TTG Advisers a fee for investment advisory and management
services consisting of two components a base
management fee and an incentive fee.
As with the Existing Agreement, the base management fee is
calculated at an annual rate of 2% of our total assets
(excluding: (i) cash, (ii) the value of any investment
in a Third-Party Vehicle covered by a Separate Agreement and
(iii) the value of any investment by the Fund not made in a
portfolio company (Non-Eligible Assets); but
including assets purchased with borrowed funds that are not
Non-Eligible Assets) (the Base Management Fee). The
Base Management Fee is payable quarterly in arrears. The Base
Management Fee is calculated based on the value of our total
assets (excluding Non-Eligible Assets, but including assets
purchased with borrowed funds that are not Non-Eligible Assets)
at the end of the most recently completed fiscal quarter. Base
Management Fees for any partial month or quarter will be
appropriately pro rated.
The incentive fee is comprised of the following two parts:
One part is calculated and payable quarterly in arrears based on
our pre-incentive fee net operating income, which calculation is
unchanged from the Existing Agreement. Pre-incentive fee net
operating income means interest income, dividend income and any
other income (including any other fees paid to the Fund and MVC
Financial Services, Inc. (MVCFS), such as
directors, commitment, origination, structuring, diligence
and consulting fees or other fees that we receive from portfolio
companies) accrued during the fiscal quarter, minus the
Funds and MVCFS operating expenses for the quarter
(including the Base Management Fee and any interest expense and
dividends paid on any outstanding preferred stock, but excluding
the incentive fee (whether paid or accrued)). Pre-incentive fee
net operating income includes, in the case of investments with a
deferred interest feature (such as market discount, debt
instruments with
payment-in-kind
interest, preferred stock with
payment-in-kind
dividends and zero coupon securities), accrued income that we
have not yet received in cash. TTG Advisers is not under any
obligation to reimburse us for any part of the incentive fee it
received that was based on accrued income that we never receive
as a result of a default by an entity on the obligation that
resulted in the accrual of such income.
Pre-incentive fee net operating income does not include any
realized capital gains, realized capital losses or unrealized
capital appreciation or depreciation. Because of the structure
of the incentive fee, it is possible that we may pay an
incentive fee in a quarter where we incur a loss. For example,
if we receive pre-incentive fee net operating income in excess
of the hurdle amounts (explained below) for a quarter, we will
pay the applicable incentive fee even if we have incurred a loss
in that quarter due to realized and unrealized capital losses.
In calculating the income portion of the incentive fee
(Income Incentive Fee) under the Existing Agreement
and the Amended Agreement, pre-incentive fee net operating
income, at the end of the immediately preceding fiscal quarter,
will be compared to two hurdle amounts: 1.75% of the
Funds net assets (defined as total assets less total
liabilities) (Lower Hurdle Amount) and 2.1875% of
the Funds net assets (Higher Hurdle Amount).
The Fund would pay the Adviser the Income Incentive Fee with
respect to the Funds pre-incentive fee net operating
income in each fiscal quarter as follows:
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no Income Incentive Fee in any fiscal quarter in which the
Funds pre-incentive fee net operating income does not
exceed the Lower Hurdle Amount;
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100% of the Funds pre-incentive fee net operating income
with respect to that portion of such pre-incentive fee net
operating income, if any, that exceeds the Lower Hurdle Amount
but is less than the Higher Hurdle Amount in any fiscal
quarter; and
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12
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20% of the amount of the Funds pre-incentive fee net
operating income, if any, that exceeds the Higher Hurdle Amount
in any fiscal quarter.
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Under the Amended Agreement, the second part of the incentive
fee, the Capital Gains Fee, is determined and payable in arrears
as of the end of each fiscal year (or upon termination of the
Amended Agreement, as of the termination date), commencing with
the fiscal year ending October 31, 2009, and will equal 20%
of: (i) the Funds cumulative aggregate net realized
capital gains on the Funds investments made after
November 1, 2003 (the Funds New
Portfolio) (exclusive of any realized gains on an
investment in a Third-Party Vehicle covered by a Separate
Agreement or that are subject to an SPV Incentive Allocation, as
defined below); minus (ii) the cumulative aggregate
unrealized capital depreciation of the Funds New Portfolio
calculated from November 1, 2003. If the Capital Gains Fee
is positive at the end of such year, then the aggregate amount
of Capital Gains Fees paid in all prior years shall be
subtracted from the Capital Gains Fee for such year. For
purposes of this calculation, neither the Funds
contribution of an investment to a wholly-owned subsidiary nor
the Funds distribution of an investment to the Funds
stockholders shall be deemed to be a realization event.
The Amended Agreement provides for a cumulative calculation of
net realized gains (see clause (i) above), which has the
effect of eliminating double counting of unrealized depreciation
(i.e, it does not reduce the Capital Gains Fee to the
extent it already has been reduced in prior years by the same
unrealized depreciation on the same investment). It should be
noted that the Existing Agreements Cap (as defined and
described below) on the Capital Gains Fee remains intact and
unaffected by this modification. For more information on the
rationale for this modification, see The Boards
Consideration of the Amended Agreement.
In addition, as with the Existing Agreement, under the Amended
Agreement, the Fund has authorized TTG Advisers to create or
arrange for the creation of one or more special purpose vehicles
for which it may serve as the general partner or managing member
for purposes of making investments on behalf of the Fund (each,
an SPV). It is proposed that TTG Advisers, in its
role as the general partner or managing member of an SPV,
receive an incentive allocation equal to 20% of the net profits
of the SPV (the SPV Incentive Allocation). In no
event would any SPV Incentive Allocation received by TTG
Advisers cause the total compensation received by TTG Advisers
under the Amended Agreement to exceed the limits imposed by the
Investment Advisers Act of 1940, as amended.
Both the Existing Agreement and Amended Agreement provide for
the following cap on Capital Gains Fees: in no event shall the
sum of the Capital Gains Fee and the SPV Incentive Allocation,
if any, for any fiscal year exceed:
(i) 20% of (a) the Funds cumulative aggregate
realized capital gains on the Funds investments (the
Funds Total Portfolio) (including any realized
gains attributable to an SPV Incentive Allocation), minus
(b) the sum of the Funds cumulative aggregate
realized capital losses on, and aggregate unrealized capital
depreciation of, the Funds Total Portfolio; minus
(ii) the aggregate amount of Capital Gains Fees paid and
the value of SPV Incentive Allocations made in all prior years
(the Cap). For purposes of calculating the Cap:
(i) the initial value of any investment held by the Fund on
November 1, 2003 shall equal the fair value of such
investment on November 1, 2003; and (ii) the initial
value of any investment made by the Fund after November 1,
2003 shall equal the accreted or amortized cost basis of such
investment. Furthermore, in the event that the Capital Gains Fee
for any fiscal year exceeds the Cap (Uncollected Capital
Gains Fees), all or a portion of such amount shall be
accrued and payable to TTG Advisers following any subsequent
fiscal year in which the Amended Agreement is in effect, but
only to the extent the Capital Gains Fee, plus the amount of
Uncollected Capital Gains Fees, each calculated as of the end of
such subsequent fiscal year, do not exceed the Cap. Any
remaining Uncollected Capital Gains Fees shall be paid following
subsequent fiscal years in accordance with the same process,
provided the Amended Agreement is in effect during such fiscal
year.
Examples
of Modified Capital Gains Fee Calculations Under the Amended
Agreement
Assumptions
Year 1:
$20 million investment made in Company A (Investment
A), $30 million investment made in Company B
(Investment B) and $10 million investment in
Company C (Investment C).
13
Year 2:
Investment A is sold for $50 million, fair market value
(FMV) of Investment B is $32 million and FMV of
Investment C is $5 million.
Year 3:
FMV of Investment B is $32 million and FMV of Investment C
is $0.
Year 4:
Investment B is sold for $50 million and FMV of Investment
C is $0.
|
|
|
|
|
|
|
Calculation of Modified Capital Gains Fee under Amended
Agreement
(20% of: cumulative aggregate net realized capital gains on
the Funds investments made after November 1, 2003 (the
Funds New Portfolio) minus the
cumulative aggregate unrealized capital depreciation on the
Funds New Portfolio calculated from November 1, 2003) If
the Modified Capital Gains Fee is positive at the end of a year,
then the aggregate amount of the Modified Capital Gains Fee paid
in all prior years shall be subtracted from the Modified Capital
Gains Fee
|
|
Calculation of Capital Gains Fee under Existing Agreement
(20% of: net realized capital gains, during the fiscal year,
on the Funds New Portfolio minus the aggregate
unrealized capital depreciation on the Funds New Portfolio
calculated from November 1, 2003)
|
Year 1
|
|
20% of: ($0 cumulative aggregate realized capital gains on the
Funds New Portfolio minus $0 cumulative aggregate realized
losses on the Funds New Portfolio) minus ($0
cumulative aggregate unrealized capital depreciation on the
Funds New Portfolio) = $0
|
|
20% of: ($0 realized capital gains on the Funds New
Portfolio minus $0 realized losses on the Funds New
Portfolio) minus ($0 aggregate unrealized capital
depreciation on the Funds New Portfolio) = $0
|
Year 2
|
|
20% of: ($30 million cumulative aggregate realized capital gains
on the Funds New Portfolio minus $0 cumulative aggregate
realized losses on the Funds New Portfolio) minus
($5 million cumulative aggregate unrealized capital
depreciation on the Funds New
Portfolio) = $5 million
|
|
20% of: ($30 million realized capital gains on the Funds
New Portfolio minus $0 realized losses on the Funds New
Portfolio) minus ($5 million aggregate unrealized
capital depreciation on the Funds New Portfolio)
= $5 million
|
Year 3
|
|
(i) 20% of: ($30 million cumulative aggregate realized capital
gains on the Funds New Portfolio minus $0 cumulative
aggregate realized losses on the Funds New Portfolio)
minus ($10 million cumulative aggregate unrealized
capital depreciation on the Funds New Portfolio) less
(ii) $5 million capital gains fee received in
Year 2 = $0
|
|
20% of: ($0 realized capital gains on the Funds New
Portfolio minus $0 realized losses on the Funds New
Portfolio) minus ($10 million aggregate unrealized
capital depreciation on the Funds New Portfolio) =
$0
|
Year 4
|
|
(i) 20% of: ($50 million cumulative aggregate realized capital
gains on the Funds New Portfolio minus $0 cumulative
aggregate realized losses on the Funds New Portfolio)
minus ($10 million cumulative aggregate unrealized
capital depreciation on the Funds New Portfolio) less
(ii) $5 million capital gains fee received in
Year 2 = $3 million
|
|
20% of: ($20 million realized capital gains on the Funds
New Portfolio minus $0 realized losses on the Funds New
Portfolio) minus ($10 million aggregate unrealized
capital depreciation on the Funds New Portfolio)
= $2 million
|
Payment
of our expenses
As with the Existing Agreement, under the Amended Agreement, all
investment professionals of TTG Advisers and its staff, when and
to the extent engaged in providing services required to be
provided by TTG
14
Advisers under the Amended Agreement, and the compensation and
routine overhead expenses of such personnel allocable to such
services, are provided and paid for by TTG Advisers and not by
the Fund, except that costs or expenses relating to the
following items are borne by the Fund: (i) the cost and
expenses of any independent valuation firm; (ii) expenses
incurred by TTG Advisers payable to third parties, including
agents, consultants or other advisors, in monitoring financial
and legal affairs for the Fund and in monitoring the Funds
investments and performing due diligence on its prospective
portfolio companies, provided, however, the retention by
TTG Advisers of any third party to perform such services shall
require the advance approval of the Board (which approval shall
not be unreasonably withheld) if the fees for such services are
expected to exceed $30,000; once the third party is approved,
any expenditure to such third party will not require additional
approval from the Board; (iii) interest payable on debt and
other direct borrowing costs, if any, incurred to finance the
Funds investments or to maintain its tax status;
(iv) offerings of the Funds common stock and other
securities; (v) investment advisory and management fees;
(vi) fees and payments due under any administration
agreement between the Fund and its administrator;
(vii) transfer agent and custodial fees;
(viii) federal and state registration fees; (ix) all
costs of registration and listing the Funds shares on any
securities exchange; (x) federal, state and local taxes;
(xi) Independent Directors fees and expenses;
(xii) costs of preparing and filing reports or other
documents required by governmental bodies (including the SEC);
(xiii) costs of any reports, proxy statements or other
notices to stockholders, including printing and mailing costs;
(xiv) the cost of the Funds fidelity bond, directors
and officers/errors and omissions liability insurance, and any
other insurance premiums; (xv) direct costs and expenses of
administration, including printing, mailing, long distance
telephone, copying, independent auditors and outside legal
costs; (xvi) the costs and expenses associated with the
establishment of an SPV; (xvii) the allocable portion of
the cost (excluding office space) of the Funds Chief
Financial Officer, Chief Compliance Officer and Secretary in an
amount not to exceed $200,000, per year, in the aggregate (an
increase of $100,000 from the Existing Agreement);
(xviii) subject to a cap of $150,000 in any fiscal year of
the Fund, fifty percent of the unreimbursed travel and other
related (e.g., meals) out-of-pocket expenses (subject to
item (ii) above) incurred by TTG Advisers in sourcing
investments for the Fund; provided that, if the
investment is sourced for multiple clients of TTG Advisers, then
the Fund shall only reimburse fifty percent of its allocable pro
rata portion of such expenses; and (xix) all other expenses
incurred by the Fund in connection with administering the
Funds business (including travel and other out-of-pocket
expenses (subject to item (ii) above) incurred in providing
significant managerial assistance to a portfolio company).
Additionally, any unsatisfied payment obligation to TTG Advisers
of a wholly-owned subsidiary of the Fund, which arises under the
Amended Agreement, will be the sole responsibility of the Fund
and not the subsidiary. Notwithstanding the foregoing, absent
the consent of the Board, any fees or income earned, on the
Funds behalf, by any officer, director, employee or agent
of the Adviser in connection with the monitoring or closing of
an investment or disposition by the Fund or for providing
managerial assistance to a portfolio company (which includes,
for example, service on the board of directors of a portfolio
company but does not include the Advisers furnishing of
portfolio management or other management services to a
Third-Party Vehicle) will inure to the Fund.
The
Expense Cap
Under the Existing Agreement, for each of the 2007 and 2008
fiscal years, TTG Advisers agreed to absorb or reimburse
operating expenses of the Fund (promptly following the
completion of such year), to the extent necessary to limit the
Funds Expense Ratio for such year to 3.25% (the
Expense Cap). As noted above, under the Amended
Agreement, an expense cap of 3.5% would apply to fiscal years
2009 and 2010. For purposes of the calculation of the expense
cap, the Funds Expense Ratio is calculated,
under both the Amended Agreement and the Existing Agreement, as
of October 31 of any such year and means: (i) the
consolidated expenses of the Fund (which expenses include any
amounts payable to TTG Advisers under the Base Management Fee,
but exclude the amount of any interest, taxes, incentive
compensation, and extraordinary expenses (including, but not
limited to, any legal claims and liabilities and litigation
costs and any indemnification related thereto, and the costs of
any spin-off or other similar type transaction contemplated by
the Amended Agreement)), as a percentage of (ii) the
average net assets of the Fund (i.e., average consolidated
assets less average consolidated liabilities) during such fiscal
year as set forth in the Funds financial statements
contained in the Funds annual report on
Form 10-K.
15
Indemnification
As with the Existing Agreement, the Amended Agreement provides
that, absent willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of the reckless
disregard of its duties and obligations, TTG Advisers, its
members and their respective officers, managers, partners,
agents, employees, controlling persons, members and any other
person or entity affiliated with it (collectively, the
Indemnified Parties) are entitled to indemnification
from the Fund for any damages, liabilities, costs and expenses
(including reasonable attorneys fees and amounts
reasonably paid in settlement) arising from the rendering of TTG
Advisers services under the Amended Agreement or otherwise
as an investment adviser of the Fund. In addition, TTG Advisers
has agreed to indemnify the Fund for losses or damages arising
out of the willful misfeasance, bad faith or gross negligence in
the performance of an Indemnified Partys duties or by
reason of the reckless disregard of its duties and obligations
under the Amended Agreement.
2008 Fees
Paid to Our Investment Adviser
Under the Existing Agreement, during the 2008 fiscal year, the
Fund paid TTG Advisers an aggregate of $8.5 million in fees
for services provided to the Fund. If the Amended Agreement were
in effect for the 2008 fiscal year, it is estimated that the
Fund would have paid an identical amount of fees to TTG Advisers
for the 2008 fiscal year. However, if the Amended Agreement were
in effect for the 2008 fiscal year, the Funds other
expenses would have been increased immaterially, as a result of
a $100,000 increase in the compensation payable by the Fund to
officers of the Fund under the Amended Agreement.
Below is a table (unaudited) depicting: (i) the Funds
actual expense ratio for the fiscal year ended October 31,
2008; and (ii) a restated, pro forma, expense ratio for the
same period that assumes implementation of the Amended Agreement
at the beginning of the fiscal year (November 1, 2007).
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Net Assets as of the End of Period
|
|
$
|
421,870,812
|
|
|
$
|
421,870,812
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Base Management Fee at 2%
|
|
|
8,989,491
|
|
|
|
8,989,491
|
|
Incentive Fees*
|
|
|
10,822,127
|
|
|
|
10,822,127
|
|
Interest and other borrowing costs
|
|
|
4,463,823
|
|
|
|
4,463,823
|
|
Other Expenses
|
|
|
3,619,438
|
|
|
|
3,719,438
|
|
Tax expense (benefit)
|
|
|
(936,396)
|
|
|
|
(936,396)
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
26,958,483
|
|
|
|
27,058,483
|
|
Ratio of Total Operating
Expenses to Average Net Assets (excluding tax expense
(benefit))
|
|
|
7.00%
|
|
|
|
7.03%
|
|
Ratio of Total Operating
Expenses to Average Net Assets (including tax expense
(benefit))
|
|
|
6.77%
|
|
|
|
6.79%
|
|
Ratio of Total Operating
Expenses to Average Net Assets (excluding Incentive Fees)
|
|
|
4.05%
|
|
|
|
4.08%
|
|
Ratio of Total Operating
Expenses to Average Net Assets (excluding Incentive Fees and
interest and other borrowing costs)
|
|
|
2.93%
|
|
|
|
2.95%
|
|
|
|
|
*
|
|
Calculated based on incentive fees
accrued during the fiscal year, which may be paid only if a
realization event occurs.
|
There is no assurance that the comparative unaudited results
shown above would remain the same in the future. The Amended
Agreement could result in higher expenses than those estimated
above. Whether expenses increase in future periods depends on a
number of factors that are difficult to predict including, for
example: (i) the extent of net realized gains and operating
income generated by the Fund; (ii) the extent of net
unrealized appreciation and depreciation generated by the Fund;
(iii) the amount of total assets of the Fund; (iv) the
amount of assets held in cash and portfolio company investments;
(v) the amount of assets that will be invested pursuant to
the Funds investment strategy; and (vi) the amount of
operating expenses (excluding advisory fees) that are incurred
by the Fund.
16
The
Boards Consideration of the Amended Agreement
At in-person meetings held on December 11, 2008 and
October 23, 2008, as well as during various special
telephonic meetings, the Independent Directors considered and
negotiated the various terms of the Amended Agreement with TTG
Advisers. (Throughout this process, the Independent Directors
were represented by their independent, separate counsel and TTG
Advisers was represented by its separate counsel.) At the
in-person meeting held on December 11, 2008, the Board,
including all of the Independent Directors, voted to approve the
Amended Agreement and recommended that stockholders approve such
agreement. The Independent Directors had the opportunity to
consult in executive sessions with their counsel regarding the
approval of the Amended Agreement. During their deliberations,
the Independent Directors reviewed a significant amount of
information and considered, among other things:
(i) the nature, extent and quality of the advisory and
other services provided to the Fund by TTG Advisers during the
two-year period of the Existing Agreement;
(ii) the investment performance of the Fund since
Mr. Tokarz assumed his role as Portfolio Manager of the
Fund in November 2003;
(iii) the costs of the services provided by TTG Advisers
(including the assessment of any impact of the modifications on
the Funds overall expense ratio);
(iv) TTG Advisers profitability with respect to
managing the Fund; and
(v) the modified terms reflected in the Amended Agreement,
individually, and in their totality.
In particular, all of the Independent Directors considered the
following:
Nature, Extent and Quality of Services. The
Independent Directors considered the nature, quality and level
of services provided by TTG Advisers to the Fund and reviewed
various presentations from management in this regard. The
Independent Directors examined the organizational structure of
TTG Advisers and its financial resources. The Independent
Directors considered the experience of the members of TTG
Advisers management team, their involvement with the
management of the Fund and its portfolio companies and prior
experience in connection with the types of investments made by
the Fund. The Independent Directors also took into account that,
in addition to the investment advisory services provided to the
Fund under the Existing Agreement, TTG Advisers also provides
certain administrative and other services necessary for the
operation of the Fund, including its oversight of the
Funds day-to-day operations and Fund accounting services.
The Independent Directors accorded particular weight to the
provision in the Amended Agreement securing
Mr. Tokarzs continued service as Portfolio Manager of
the Fund for at least an additional two years (absent the
occurrence of certain extraordinary events), as his prior
commitment to the Fund had expired on November 1, 2008.
Investment Performance. The Independent
Directors reviewed the long-term (since Mr. Tokarz and his
team assumed their responsibilities in November 2003) and
short-term investment performance of the Fund, as well as
comparative data with respect to the long-term and short-term
investment performance of other comparable BDCs and the
performance of broad market indices. The Independent Directors
found that the Fund outperformed most of its BDC peer group and
the broader market indices.
Additional Benefits Derived by TTG
Advisers. The Independent Directors considered
the potential additional benefits to be derived by TTG Advisers
as a result of its relationship with the Fund. The Independent
Directors considered that under the Amended Agreement, for a
period of three years from November 1, 2008, TTG Advisers
must provide 30 days advance written notice to the
Independent Directors before taking on any assignment of
material significance (including the taking on of any new
clients). The Independent Directors also considered TTG
Advisers representation in the Amended Agreement that it
would not manage a BDC, a private equity fund or other similar
vehicle with the investment objective of investing in certain
investments described in the agreement, without the consent of
the Independent Directors. They also took into account the
possibility that, following the completion of current
negotiations, they are likely to retain TTG Advisers to provide
portfolio management services to one or more Third Party
Vehicles sponsored or managed by the Fund or a subsidiary and,
in particular, they considered the potential economic benefits
that could accrue to TTG Advisers as a result of those
relationships.
17
Costs of the Services Provided to the
Fund. The Independent Directors considered
comparative data with respect to services rendered and the
advisory fees (including the management fees and incentive fees)
of other BDCs with similar investment strategies, as well as the
Funds operating expenses and expense ratio compared to
other BDCs with similar investment strategies. The Independent
Directors observed, in particular, that the Modified Capital
Gains Fee could result in increased payments to TTG Advisers in
future years. The Independent Directors considered, however,
that the Capital Gains Fee formula should provide for a
compensation mechanism that fairly reflects the actual
performance of the Fund. In this regard, it was considered that,
under the current Capital Gains Fee formula, the fee paid could
be reduced year after year by the same aggregate unrealized
depreciation on the same investment (even if the value of the
investment has not changed during those years). This result
seemed unduly punitive and potentially not reflective of the
Funds performance. In addition, the Independent Directors
considered that this formula may have the effect of
incentivizing management to prematurely sell an investment it
expects may depreciate, rather than further managing the
investment. The Independent Directors also accorded particular
weight to the fact that under the Amended Agreement, the Capital
Gains Fee would be capped in an identical manner to the Existing
Agreement.
The Independent Directors also considered that had the Amended
Agreement been in effect during the Funds last fiscal
year, the Funds total expense ratio for that year would
have approximated the Funds actual expense ratio for the
year. The Independent Directors also accorded particular weight
to the Amended Agreements provision for a cap on overall
expenses for two additional fiscal years, which cap would have
otherwise expired under the Existing Agreement. Based upon its
review, the Independent Directors determined that the fees to be
paid under the Amended Agreement are fair and comparable to
those payable under agreements of comparable BDCs described in
the market data then available.
Profitability of TTG Advisers. The
profitability realized by the Adviser was also considered. The
Board relied principally on information provided by management
relating to the costs and profitability of TTG Advisers from its
relationship with the Fund, as well as an estimate of TTG
Advisers expected profitability under the Amended
Agreement. The Independent Directors observed that TTG
Advisers profitability level appeared reasonable and
within the range of what would be expected.
Other Factors. Additionally, the Independent
Directors accorded particular weight to the fact that the
modifications reflected in the Amended Agreement were the
by-product of their good faith, arms length negotiation
with TTG Advisers. The Independent Directors considered
information about the potential for stockholders to experience
economies of scale as the Fund grows in size. They concluded
that there is limited potential for economies of scale that
would inure to the benefit of our stockholders given the
closed-end nature of the Fund.
Conclusions. In view of the wide variety of
factors that the Independent Directors considered in connection
with its evaluation of the Amended Agreement, it is not
practical to assign relative weights to the specific factors
they considered in reaching their decision. Rather, the
Independent Directors based their approval on the totality of
information presented to, and the investigation conducted by,
them. In considering the factors discussed above, individual
Directors may have given different weights to different factors.
Based on their review of the abovementioned factors and their
various deliberations concerning the Amended Agreement, the
Independent Directors determined that the fees to be paid under
the Amended Agreement were fair and reasonable in light of the
services to be provided. The Independent Directors then approved
the Amended Agreement and directed that the Amended Agreement be
submitted to stockholders for approval with the Independent
Directors unanimous recommendation that stockholders of
the Fund vote to approve the Amended Agreement.
If the Funds stockholders approve Proposal 2, the
Amended Agreement will remain in full force and effect for one
year from the date of the annual meeting, and will automatically
renew for successive annual periods thereafter, but only so long
as such continuance is specifically approved at least annually
by both (i) the board of directors of the Fund or by a
majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, and (ii) the vote of a majority of
the Independent Directors, cast in person at a meeting called
for the purpose of voting on such approval. The Existing
Agreement will be amended and restated in its entirety upon the
effective date of the Amended Agreement.
18
VOTE
REQUIRED
The approval of the Amended Agreement requires the
affirmative vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act). Such a
majority means the affirmative vote of the holders of
(a) 67% or more of the shares of the Fund present at the
Meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or
(b) more than 50% of the outstanding shares of the Fund,
whichever is less.
The Board
recommends a vote FOR the approval of the Amended
Agreement.
VOTING
INFORMATION
A quorum is constituted by the presence in person or by proxy of
the holders of a majority of the outstanding shares of the Fund
entitled to vote at the Meeting. For purposes of determining the
presence of a quorum for transacting business at the Meeting,
abstentions and broker non-votes will be treated as shares that
are present at the Meeting.
In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient
votes to approve any proposal are not received, the persons
named as proxies, or their substitutes, may propose one or more
adjournments of the Meeting to permit the further solicitation
of proxies. Any adjourned session or sessions may be held after
the date set for the Meeting without notice, except announcement
at the Meeting (or any adjournment thereof); provided, that if
the Meeting is adjourned to a date that is more than
30 days after the date for which the Meeting was originally
called, written notice will be provided to stockholders. Any
adjournment will require the affirmative vote of a majority of
the shares represented at the Meeting in person or by proxy. In
the event an adjournment is proposed because a quorum is not
present, for Proposal 1, the persons named as proxies will
vote those proxies they are entitled to vote FOR all of the
nominees in favor of such adjournment, and will vote those
proxies required to WITHHOLD on any nominee, against any such
adjournment. In the event a quorum is present but sufficient
votes to approve Proposal 2 are not received, the persons
named as proxies will vote those proxies they are entitled to
vote FOR Proposal 2 in favor of such adjournment, and will
vote those proxies required to be voted AGAINST Proposal 2,
against any such adjournment.
Most beneficial owners whose shares are held in street name will
receive voting instruction forms from their banks, brokers or
other agents, rather than the Funds Proxy Card. A number
of banks and brokerage firms are participating in a program that
offers a means to grant proxies to vote shares via the Internet
or by telephone. If your shares are held in an account with a
bank or broker participating in this program, you may grant a
proxy to vote those shares via the Internet or telephonically by
using the website or telephone number shown on the instruction
form received from your broker or bank.
EXPENSES
OF SOLICITATION
The cost of preparing, assembling and mailing this Proxy
Statement, the Notice of Annual Meeting of Stockholders and the
enclosed Proxy Card, as well as the costs associated with the
proxy solicitation, will be borne by the Fund.
OTHER
MATTERS AND ADDITIONAL INFORMATION
Other
Business at the Meeting.
The Board does not intend to bring any matters before the
Meeting other than as stated in this Proxy Statement, and is not
aware that any other matters will be presented for action at the
Meeting. If any other matters properly come before the Meeting,
it is the intention of the persons named as proxies to vote on
such matters in accordance with their best judgment, unless
specific instructions have been given.
19
Future
Stockholder Proposals.
If a stockholder intends to present a proposal at the annual
meeting of stockholders of the Fund to be held in 2010 and
desires to have the proposal included in the Funds proxy
statement and form of proxy for that meeting, the stockholder
must deliver the proposal to the Secretary at the principal
executive office of the Fund, 287 Bowman Avenue, 2nd Floor,
Purchase, New York 10577, and such proposal must be received by
the Secretary within a reasonable time before the Fund begins to
print and send its proxy materials. The submission of a proposal
does not guarantee its inclusion in the proxy statement and is
subject to limitations under the 1934 Act. The proposals
must be submitted in a manner consistent with applicable law and
the Funds By-Laws.
Results
of Voting.
Stockholders will be informed of the voting results of the
Meeting in the Funds quarterly report for the quarter
ending April 30, 2009 on
Form 10-Q,
which will be filed with the SEC on or before June 9, 2009.
ADDITIONAL
INFORMATION ABOUT THE FUND
Other
Information about the Investment Adviser.
The following individuals are the principal executive officers
of our investment adviser. The principal business address of
each such person is
c/o TTG
Advisers, at 287 Bowman Avenue, 2nd Floor, Purchase, NY
10577. The principal occupations of the following individuals
are set forth under Election of Directors in
Proposal 1 above.
|
|
|
Name
|
|
Position
|
|
Michael Tokarz
|
|
Manager
|
Warren Holtsberg
|
|
Co-Head of Portfolio Management
|
Bruce Shewmaker
|
|
Managing Director
|
Peter Seidenberg
|
|
Chief Financial Officer
|
Scott Schuenke
|
|
Controller and Chief Compliance Officer
|
Jaclyn Shapiro
|
|
Vice President and Secretary
|
Brokerage.
During the 2008 fiscal year, the Fund paid no brokerage
commissions to any broker: (i) that is an affiliated person
of the Fund; (ii) that is an affiliated person of such
person; or (iii) an affiliated person of which is an
affiliated person of the Fund, any principal underwriter,
administrator or TTG Advisers.
Administrator.
U.S. Bancorp Fund Services, LLC, located at
777 E. Wisconsin Avenue, Milwaukee, WI 53202, serves
as the administrator, custodian and accounting agent of the Fund.
Certain
Relationships and Related Transactions.
The Fund has procedures in place for the review, approval and
monitoring of transactions involving the Fund and certain
persons related to the Fund. For example, the Fund has a Code of
Ethics that generally prohibits, among others, any officer or
director of the Fund from engaging in any transaction where
there is a conflict between such individuals personal
interest and the interests of the Fund. As a business
development company, the 1940 Act also imposes regulatory
restrictions on the Funds ability to engage in certain
related party transactions. However, the Fund is permitted to
co-invest in certain portfolio companies with its affiliates to
the extent consistent with applicable law or regulation and, if
necessary, subject to specified conditions set forth in an
exemptive order obtained from the SEC. During the past five
fiscal years, no transactions were effected pursuant to the
exemptive order. As a matter of policy, our Board has required
that any related-party transaction (as defined in Item 404
of
Regulation S-K)
must be subject to the advance consideration and approval of the
Independent Directors, in accordance with applicable procedures
set forth in Section 57(f) of the 1940 Act.
20
The principal equity owner of TTG Advisers is Mr. Tokarz,
our Chairman. Our senior officers and Mr. Holtsberg have
other financial interests in TTG Advisers (i.e., based on
TTG Advisers performance). In addition, our officers and
the officers and employees of TTG Advisers may serve as
officers, directors or principals of entities that operate in
the same or related line of business as we do or of investment
funds managed by TTG Advisers or our affiliates. However, TTG
Advisers intends to allocate investment opportunities in a fair
and equitable manner. Our Board has approved a specific policy
in this regard which was set forth in our
Form 10-K
filed on December 29, 2008.
Section 16(a)
Beneficial Ownership Reporting Compliance.
Section 16(a) of the 1934 Act, and Section 30(h)
of the 1940 Act, taken together, require that the Directors,
officers of the Fund and beneficial owners of more than 10% of
the equity securities of the Fund (collectively, Reporting
Persons) file with the SEC reports of their beneficial
ownership and changes in their beneficial ownership of the
Funds securities. Based solely on its review of the copies
of such reports, the Fund believes that each of the Reporting
Persons who was a Reporting Person during the fiscal year ended
October 31, 2008 has complied with applicable filing
requirements.
Exhibit A attached hereto identifies holders of more than
5% of the shares of the Funds common stock as of the
Record Date.
Independent
Public Accountants.
The Board, upon approval and recommendation of the Audit
Committee, at a meeting held on January 27, 2009, selected
E&Y to serve as the independent accountants for the Fund
for the fiscal year ending October 31, 2009. E&Y has
served in such capacity since October 27, 2003. A
representative of E&Y will attend the Meeting to respond to
appropriate questions and make a statement, if
he/she so
desires.
Audit
Fees:
The aggregate fees billed for professional services rendered by
E&Y for the audit of the Funds annual financial
statements for the fiscal year ended October 31, 2008 were
$328,000.
The aggregate fees billed for professional services rendered by
E&Y for the audit of the Funds annual financial
statements for the fiscal year ended October 31, 2007 were
$258,000.
Audit-Related
Fees:
For the fiscal year ended October 31, 2008, the aggregate
fees billed by E&Y for assurance and related services that
were reasonably related to the performance of the audit or
review of our financial statements were $60,000.
For the fiscal year ended October 31, 2007, the aggregate
fees billed by E&Y for assurance and related services that
were reasonably related to the performance of the audit or
review of our financial statements were $0.
Tax
Fees:
For the fiscal year ended October 31, 2008, the aggregate
fees billed by E&Y for services rendered with respect to
tax compliance, tax advice and tax planning were $58,845.
For the fiscal year ended October 31, 2007, the aggregate
fees billed by E&Y for services rendered with respect to
tax compliance, tax advice and tax planning were $44,250.
All
Other Fees:
For the fiscal year ended October 31, 2008, the aggregate
fees billed by E&Y for any other products or services were
$110,000.
For the fiscal year ended October 31, 2007, the aggregate
fees billed by E&Y for any other products or services were
$92,300.
21
The Audit Committee has considered whether E&Y has
maintained its independence during the fiscal year ended
October 31, 2008.
The Audit Committee Charter requires that the Audit Committee
pre-approve all audit and non-audit services to be provided to
the Fund by the independent accountants; provided, however,
that the Audit Committee may specifically authorize its
Chairman to pre-approve the provision of any non-audit service
to the Fund. Further, the foregoing pre-approval policy may be
waived, with respect to the provision of any non-audit services,
consistent with the exceptions provided for in the federal
securities laws. All of the audit and tax services provided by
E&Y for the fiscal year ended October 31, 2008 were
pre-approved by the Audit Committee or its Chairman. For the
fiscal year ended October 31, 2008, the Funds Audit
Committee did not waive the pre-approval requirement with
respect to any non-audit services provided to the Fund by
E&Y.
By Order of the Board of Directors
Michael Tokarz
Chairman
[March 6, 2009]
Stockholders who do not expect to be present at the Meeting
and who wish to have their shares voted are requested to mark,
sign and date the enclosed Proxy Card and return it in the
enclosed envelope. No postage is required if mailed in the
United States. Alternatively, you may have the ability to vote
your shares by the Internet or by telephone.
22
EXHIBIT A
The following table sets forth, as of January 20, 2009,
each stockholder who owned more than 5% of the Funds
outstanding shares of common stock, each current director, each
nominee for director, the Funds executive officers, and
the directors and executive officers as a group. Unless
otherwise indicated, the Fund believes that each beneficial
owner set forth in the table has sole voting and investment
power.
|
|
|
|
|
|
|
|
|
|
|
Amount of
|
|
|
Percentage of
|
|
Shareholder Name and
Address
|
|
Shares Owned
|
|
|
Fund Held
|
|
|
The Anegada Master Fund Ltd
|
|
|
1,776,596
|
(1)
|
|
|
7.31
|
%
|
Nashuk Partners, L.P.
Texada Capital, LLC
The Cuttyhunk Fund Limited
Cannell Capital, LLC
Tonga Partners, L.P.
c/o Cannell
Capital LLC
P.O. Box 3459
240 E. Deloney Ave
Jackson, WY 83001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millenco, L.P.
|
|
|
1,469,770
|
(2)
|
|
|
6.05
|
%
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Investment, LLC
|
|
|
1,823,130
|
(3)
|
|
|
7.50
|
%
|
Western Investment Hedged Partners LP
Western Investment Institutional Partners LLC
Western Investment Activism Partners LLC
Western Investment Total Return Master Fund Ltd.
Western Investment Total Return Partners, L.P. and
Arthur D. Lipson
c/o Western
Investment LLC
7050 S. Union Park Center
Suite 590
Midvale, UT 84047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wynnefield Partners Small Cap Value, L.P.
|
|
|
2,588,500
|
(4)
|
|
|
10.65
|
%
|
Wynnefield Partners Small Cap Value, L.P. I
Wynnefield Small Cap Value Offshore Fund, Ltd.
Channel Partnership II, L.P.
Wynnefield Capital, Inc. Profit Sharing and Money Purchase
Plans
Wynnefield Capital Management, LLC
Wynnefield Capital, Inc.
Nelson Obus
c/o Wynnefield
Capital Management LLC
450 Seventh Avenue
Suite 509
New York, NY 10123
|
|
|
|
|
|
|
|
|
A-1
|
|
|
|
|
|
|
|
|
|
|
Amount of
|
|
|
Percentage of
|
|
Shareholder Name and
Address
|
|
Shares Owned
|
|
|
Fund Held
|
|
|
Interested Directors
|
|
|
|
|
|
|
|
|
Warren Holtsberg
|
|
|
6,000.00
|
|
|
|
*
|
|
Michael Tokarz
|
|
|
601,384.00
|
|
|
|
2.48
|
%
|
|
|
|
|
|
|
|
|
|
Independent Directors
|
|
|
|
|
|
|
|
|
Emilio Dominianni
|
|
|
24,357.71
|
|
|
|
*
|
|
Gerald Hellerman
|
|
|
47,630.12
|
|
|
|
*
|
|
Robert Knapp(5)
|
|
|
1,932,484.87
|
|
|
|
7.95
|
%
|
William Taylor
|
|
|
38,005.66
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
Bruce Shewmaker
|
|
|
15,000.29
|
|
|
|
*
|
|
Peter Seidenberg
|
|
|
3,453.63
|
|
|
|
*
|
|
Scott Schuenke
|
|
|
1,589.99
|
|
|
|
*
|
|
Jaclyn Shapiro
|
|
|
1,650.00
|
|
|
|
*
|
|
All directors and executive officers as a group (9 in
total)
|
|
|
2,671,556.28
|
|
|
|
10.99
|
%
|
|
|
|
*
|
|
Less than 1%.
|
|
(1)
|
|
Based upon information contained in
Schedule 13G filed with the SEC on August 8, 2008.
|
|
(2)
|
|
Based upon information provided by
Millennium Partners, L.P.
|
|
(3)
|
|
Based upon information contained in
Schedule 13G/A filed with the SEC on February 14, 2008.
|
|
(4)
|
|
Based upon information contained in
Form 4 filed with the SEC on November 14, 2008.
|
|
(5)
|
|
1,469,770 shares are owned by
Millennium Partners, L.P. and/or its affiliates
(Millennium). Mr. Knapp is Managing Director of
Ironsides Partners LLC, which manages a securities account for
Millennium. Mr. Knapp has disclaimed all beneficial
ownership in these shares to the extent permitted under
applicable law. In addition, Mr. Knapp transferred all of
his other shares in the Fund previously held in his individual
name to Ironsides Holdings LLC, which is owned 100% by Robert
Knapp.
|
A-2
EXHIBIT B
AMENDED
AND RESTATED AUDIT COMMITTEE CHARTER
MVC
CAPITAL, INC.
January 23,
2008
This charter sets forth the purpose, authority and
responsibilities of the Audit Committee of the Board of
Directors (the Board) of MVC Capital, Inc. (the
Fund), a Delaware corporation.
Purposes
The Audit Committee of the Board (the Committee) has
as its primary purposes:
(i) 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 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
(ii) oversight of the preparation of any report required to
be prepared by the Committee pursuant to the rules of the
Securities and Exchange Commission (SEC) for
inclusion in the Funds annual proxy statement with respect
to the election of directors.
Authority
The Committee has been duly established by the Board and shall
have the resources and authority appropriate to discharge its
responsibilities, including the authority to retain counsel and
other experts or consultants at the expense of the Fund. The
Committee has the authority and responsibility to retain and
terminate the Funds independent auditors. In connection
therewith, the Committee must evaluate the independence of the
Funds independent auditors and receive the auditors
specific representations as to their independence.
Composition
and Term of Committee Members
The Committee shall be comprised of a minimum of three Directors
of the Board. To be eligible to serve as a member of the
Committee, a Director must be an Independent
Director, which term shall mean a Director who is not an
interested person, as defined in the Investment
Company Act of 1940, as amended, of the Fund. The members of the
Committee shall designate one member to serve as Chairman of the
Committee.
Each member of the Committee shall serve until a successor is
appointed.
The Board must determine whether: (i) the Committee has at
least one member who is an audit committee financial
expert, (ACFE) as such term is defined in the
rules adopted under Section 407 of the Sarbanes-Oxley Act
of 2002; (ii) the Committee has at least one member who
possesses accounting and financial management
expertise (as such term is described under the New York
Stock Exchange Listing Requirements) which may be based on past
employment expertise, professional certification in accounting
or other comparable experience or background that indicates an
individuals financial sophistication; and (iii) each
member of the Committee possesses sufficient financial
literacy, as required under the New York Stock Exchange
Listing Requirements. The designation of a person as an ACFE is
not intended to impose any greater responsibility or liability
on that person than the responsibility and liability imposed on
such person as a member of the Committee, nor does it decrease
the duties and obligations of other Committee members or the
Board.
Meetings
The Committee shall meet on a regular basis and no less
frequently than quarterly. The Committee shall meet, at a
minimum, within 90 days prior to the filing of each annual
and quarterly report of the Fund on
Forms 10-K
and 10-Q,
respectively. Periodically, the Committee shall meet to discuss
with management the annual audited financial
B-1
statements and quarterly financial statements, including the
Funds disclosures under Managements Discussion
and Analysis of Financial Condition and Results of
Operations. Periodically, the Committee should meet
separately with each of management, any personnel responsible
for the internal audit function and, if deemed necessary, the
Funds administrator and independent auditors to discuss
any matters that the Committee or any of these persons or firms
believe should be discussed privately. The Committee may request
any officer or employee of the Fund, or the Funds legal
counsel (or counsel to the Independent Directors of the Board)
or the Funds independent auditors to attend a meeting of
the Committee or to meet with any members of, or consultants to,
the Committee.
Minutes of each meeting will be taken and circulated to all
members of the Committee in a timely manner.
Any action of the Committee requires the vote of a majority of
the Committee members present, whether in person or otherwise,
at the meeting at which such action is considered. At any
meeting of the Committee, (i) any two members of the
Committee or (ii) one member of the Committee if this
member is the Chairman of the Committee, shall constitute a
quorum for the purpose of taking any action.
Duties
and Powers and of the Committee
The duties and powers of the Committee include, but are not
limited to, the following:
|
|
|
|
|
bears direct responsibility for the appointment, compensation,
retention and oversight of the work of the Funds
independent auditors (including resolution of disagreements
between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for
the Fund, and the independent auditors must report directly to
the Committee;
|
|
|
|
set the compensation for the independent auditors, such amount
to be paid by the Fund;
|
|
|
|
evaluate the independence of the Funds independent
auditors and receive the auditors specific representations
as to their independence;
|
|
|
|
to the extent required by applicable law, pre-approve:
(i) all audit and non-audit services that the Funds
independent auditors provide to the Fund and (ii) all
non-audit services that the Funds independent auditors
provide to the Funds investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the Fund,
if the engagement relates directly to the operations and
financial reporting of the Fund (To the extent specifically
authorized by the Audit Committee, the Chairman of the Audit
Committee may pre-approve the provision of any non-audit
services to the Fund.);
|
|
|
|
meet with the Funds independent auditors, including
private meetings, as necessary to (i) review the
arrangements for and scope of the annual audit and any special
audits; (ii) discuss any matters of concern relating to the
Funds financial statements, including any adjustments to
such statements recommended by the auditors, or other results of
the audit; (iii) review any audit problems or difficulties
with managements response; (iv) consider the
auditors comments with respect to the Funds
financial policies, procedures and internal accounting controls
and managements responses thereto; and (v) review the
form of opinion the auditors propose to render to the Directors
and the shareholders of the Fund;
|
|
|
|
review reports prepared by the Funds independent auditors
detailing the fees paid to the Funds independent auditors
for: (i) audit services (includes all services necessary to
perform an audit, services provided in connection with statutory
and regulatory filings or engagements and other services
generally provided by independent auditors, such as comfort
letters, statutory audits, attest services, consents and
assistance with, and review of, documents filed with the SEC);
(ii) audit-related services (covers assurance and due
diligence services, including, employee benefit plan audits, due
diligence related to mergers and acquisitions, consultations and
audits in connection with acquisitions, internal control reviews
and consultations concerning financial accounting and reporting
standards); (iii) tax services (services performed by a
professional staff in the accounting firms tax division,
except those services related to the audit, including tax
|
B-2
|
|
|
|
|
compliance, tax planning and tax advice); and (iv) other
services (includes financial information systems implementation
and design);
|
|
|
|
|
|
ensure that the Funds independent auditors prepare and
deliver annually to the Committee a written statement (the
Auditors Statement) describing: (i) the
auditors internal quality control procedures;
(ii) any material issues raised by the most recent internal
quality control review or peer review of the auditors, or by any
inquiry or investigation by governmental or professional
authorities within the preceding five years respecting one or
more independent audits carried out by the auditors, and any
steps taken to deal with any such issues; and (iii) all
relationships between the independent auditors and the Fund,
including each non-audit service provided to the Fund and the
matters set forth in Independence Standards Board No. 1;
|
|
|
|
|
|
prior to filing an annual report with the SEC, receive and
review a written report, as of a date 90 days or less prior
to the filing, to the Committee from the Funds independent
auditors regarding any: (i) critical accounting policies to
be used; (ii) alternative accounting treatments that have
been discussed with the Funds management along with a
description of the ramifications of the use of such alternative
treatments and the treatment preferred by the independent
auditors; and (iii) material written communications between
the auditor and management of the Fund;
|
|
|
|
oversee the Funds internal controls and annual and
quarterly financial reporting process, including results of the
annual audit. Oversee internal accounting controls relating to
the activities of the Funds custodian, investment adviser
and administrator through the periodic review of reports,
discussions with appropriate officers and consideration of
reviews provided by internal audit staff;
|
|
|
|
establish procedures for: (i) the receipt, retention and
treatment of complaints received by the Fund from any source
regarding accounting, internal accounting controls or auditing
matters; and (ii) the confidential, anonymous submission
from employees of the Fund and its service providers of concerns
regarding questionable accounting or auditing matters;
|
|
|
|
review of any issues brought to the Committees attention
by independent public accountants or the Funds management,
including those relating to any deficiencies in the design or
operation of internal controls which could adversely affect the
Funds ability to record, process, summarize and report
financial data, any material weaknesses in internal controls and
any fraud, whether or not material, that involves management or
other employees who have a significant role in the Funds
internal controls;
|
|
|
|
review and evaluate the qualifications, performance and
independence of the lead partner of the Funds independent
auditors;
|
|
|
|
require the Funds independent auditors to report any
instance of an audit partner of those auditors earning or
receiving compensation based on that partner procuring
engagements with the Fund to provide any services other than
audit, review or attest services;
|
|
|
|
resolve any disagreements between the Funds management and
independent auditors concerning the Funds financial
reporting;
|
|
|
|
to the extent there are Directors who are not members of the
Committee, report its activities to the Board on a regular basis
and to make such recommendations with respect to the above and
other matters as the Committee may deem necessary or appropriate;
|
|
|
|
discuss and approve any Fund press releases relating to its
financial statements (to the extent such releases are not
discussed and approved by the Valuation Committee, the Board or
the Chairman of the Committee);
|
|
|
|
discuss any policies with respect to risk management;
|
|
|
|
set clear hiring policies for employees or former employees of
the independent auditors;
|
|
|
|
conduct an annual performance evaluation of the Committee;
|
|
|
|
review the Committees charter at least annually and
recommend any material changes to the Board; and
|
|
|
|
review such other matters as may be appropriately delegated to
the Committee by the Board.
|
B-3
EXHIBIT C
FORM OF
AMENDED AND RESTATED INVESTMENT ADVISORY
AND MANAGEMENT AGREEMENT
BETWEEN
MVC CAPITAL, INC.
AND
THE TOKARZ GROUP ADVISERS LLC
Agreement made this
[ ] day
of
[ ],
by and between MVC Capital, Inc., a Delaware corporation (the
Fund), and The Tokarz Group Advisers LLC, a Delaware
limited liability company (the Adviser).
Whereas, the Fund is a closed-end management investment company
that has elected to be regulated as a business development
company (BDC) under the Investment Company Act of
1940 (the Investment Company Act); and
Whereas, the Adviser is an investment adviser that has
registered under the Investment Advisers Act of 1940, as amended
(the Advisers Act); and
Whereas, on October 31, 2006, the Fund and the Adviser
entered into an Investment Advisory and Management Agreement
(the Original Agreement), pursuant to which the
Adviser agreed to furnish investment advisory services to the
Fund, that they now wish to amend and restate in its
entirety; and
Now, therefore, in consideration of the premises and for other
good and valuable consideration, the parties hereby agree that
the Original Agreement is hereby amended and restated in its
entirety to read as follows:
|
|
1.
|
Duties of
the Adviser.
|
(a) The Fund hereby employs the Adviser to act as the
investment adviser to the Fund and to manage the investment and
reinvestment of the assets of the Fund, subject to the
supervision of the Board of Directors of the Fund (the
Board), for the period and upon the terms herein set
forth: (i) in accordance with the investment objectives,
policies and restrictions that are determined by the Board from
time to time and disclosed to the Adviser, which objectives,
policies and restrictions shall initially be those set forth in
the Funds Registration Statement on
Form N-2,
filed with the Securities and Exchange Commission (the
SEC) on January 18, 2008 (the
Registration Statement); (ii) in accordance
with the Investment Company Act; and (iii) during the term
of this Agreement in accordance with all other applicable
federal and state laws, rules and regulations, and the
Funds charter and by-laws. References in this Agreement to
the Fund shall also include any wholly-owned
subsidiary of the Fund, where appropriate and as applicable.
Without limiting the generality of the foregoing, the Adviser
shall, during the term and subject to the provisions of this
Agreement: (i) determine the composition of the portfolio
of the Fund, the nature and timing of the changes therein and
the manner of implementing such changes; (ii) identify,
evaluate and negotiate the structure of the investments made by
the Fund; (iii) close and monitor the Funds
investments; (iv) determine the securities and other assets
that the Fund will purchase, retain, or sell; (v) perform
due diligence on prospective portfolio companies;
(vi) provide the Fund with such other investment advisory,
research and related services as the Fund may, from time to
time, reasonably require for the investment of its funds;
(vii) oversee the performance of the Funds outside
service providers, including the Funds administrator,
transfer agent and custodian; (viii) oversee compliance by
the Fund with U.S. federal, state and other applicable laws
and regulations; (ix) provide the Fund with office space;
and (x) pay the salaries, fees and expenses of such of the
Funds directors, officers or employees who are directors,
officers, principals or employees of the Adviser or any of its
affiliates, except that the Fund will reimburse the Adviser for
(a) its allocable portion of the compensation payable to
its chief financial officer (CFO), chief compliance
officer (CCO) and secretary in an amount not to
exceed $200,000 per year, in the aggregate, (b) travel
expenses, or an appropriate portion of such expenses (in the
event such expenses are not otherwise reimbursed by a portfolio
company or third party), that relate to attendance at meetings
of the Board or any committees thereof and the Funds
portfolio companies or performing other managerial assistance
for portfolio companies and (c) unreimbursed travel and
other related out-of-pocket expenses in connection with the
sourcing of
C-1
investments for the Fund as set forth in Section 2(xviii).
The Adviser may delegate any of the foregoing duties to a third
party with the consent of the Board. The Adviser shall have the
power and authority on behalf of the Fund to effectuate its
investment decisions for the Fund, including the execution and
delivery of all documents relating to the Funds
investments and the placing of orders for other purchase or sale
transactions on behalf of the Fund. In the event that the Fund,
in consultation with the Adviser, determines to incur debt
financing, the Adviser will arrange for such financing on the
Funds behalf, subject to the approval of the Board.
Furthermore, the Fund shall consult with the Adviser prior to
issuing any preferred stock. The Adviser will offer, and provide
where requested, on the Funds behalf
and/or on
behalf of a subsidiary of the Fund, significant managerial
assistance to the issuers of securities in which the Fund is
invested. The Adviser shall make available to the Fund
individuals to serve as directors
and/or
officers of the Fund, as deemed necessary by the Board.
(b) The Adviser shall manage the Funds day-to-day
operations and oversee the administration, recordkeeping and
compliance functions of the Fund
and/or third
parties performing such functions for the Fund. Without limiting
the generality of the foregoing, the Adviser specifically shall
be responsible for overseeing: (i) the preparation of
periodic financial statements; (ii) the preparation of
financial and accounting reports for presentation to the
Funds Board and for stockholders and governmental
agencies; (iii) the preparation and filing of the
Funds tax returns (and those of any wholly-owned
subsidiary involved with the Funds operations);
(iv) the preparation and providing of such reports and
analyses to the Funds Board and stockholders as may from
time to time be considered necessary or appropriate by the
Funds Board; (v) the arrangement of the payment of
the Funds expenses and the performance of administrative
and professional services rendered to the Fund by others;
(vi) the preparation of any proxy statements and arranging
and conducting meetings of stockholders of the Fund;
(vii) the procurement of insurance for the Fund, its
subsidiaries
and/or its
officers and directors, as directed by the Board; and
(viii) such other operational, administrative and
regulatory compliance duties as shall from time to time arise as
a result of the Funds operations and investing activities.
(c) The Adviser hereby accepts such employment and agrees
during the term hereof to render the services described herein
for the compensation provided herein. The parties acknowledge
and agree that, subject to the approval of the directors who are
not interested persons (as defined under the 1940
Act) of the Fund and who constitute a majority of the Board (the
Independent Board), the Fund may retain the Adviser,
under an arrangement separate from this Agreement (a
Separate Agreement), pursuant to which the Adviser
would agree to furnish portfolio management or other management
services to an investment vehicle other than the Fund
(e.g., a private equity fund, BDC or managed account of
an operating company) where that investment vehicle is comprised
substantially of assets other than the Funds assets (a
Third-Party Vehicle). Notwithstanding anything to
the contrary in this Agreement, the terms and obligations under
this Agreement shall not cover the Advisers services
rendered to a Third-Party Vehicle covered under a Separate
Agreement.
(d) Subject to the requirements of the Investment Company
Act, the Adviser is hereby authorized to enter into one or more
sub-advisory agreements with other investment advisers (each, a
Sub-Adviser) pursuant to which the Adviser may
obtain the services of the Sub-Adviser(s) to assist the Adviser
in providing the investment advisory services (i.e., the
making of investment recommendations or decisions for the Fund)
required to be provided by the Adviser under Section 1(a)
of this Agreement. Specifically, the Adviser may retain a
Sub-Adviser to recommend specific securities or other
investments based upon the Funds investment objectives and
policies. The Adviser, and not the Fund, shall be responsible
for any compensation payable to any Sub-Adviser. Any
sub-advisory agreement entered into by the Adviser shall be in
accordance with the requirements of the Investment Company Act
and other applicable federal and state law. Nothing in this
subsection (d) will obligate the Adviser to pay any
expenses that are the expenses of the Fund under Section 2.
(e) The Adviser, and any Sub-Adviser, shall for all
purposes herein provided each be deemed to be an independent
contractor and, except as expressly provided or authorized
herein, shall have no authority to act for or represent the Fund
in any way or otherwise be deemed an agent of the Fund.
(f) The Adviser shall keep and preserve for the period
required by the Investment Company Act any books and records
relevant to the provision of its investment advisory services to
the Fund and shall specifically maintain all books and records
with respect to the Funds portfolio transactions and shall
render to the Board such periodic and special reports as the
Board may reasonably request. The Adviser agrees that all
records that it maintains for the
C-2
Fund are the property of the Fund and will surrender promptly to
the Fund any such records upon the Funds request, provided
that the Adviser may retain a copy of such records. Upon
termination of this Agreement, the Adviser shall have no further
obligations under this Section 1(f).
(g) Prior to the Effective Date (as defined in
Section 10 below), the Adviser shall adopt and implement
written policies and procedures reasonably designed to prevent
its violation of the Federal Securities laws. Also prior to the
Effective Date, the Adviser shall have provided to the Fund, and
shall provide the Fund at such times in the future as the Fund
shall reasonably request, a copy of such policies and procedures
(and any amendments thereto) and a report of such policies and
procedures. Such report shall be of sufficient scope and in
sufficient detail, as may reasonably be required to comply with
Rule 38a-1
under the Investment Company Act
(Rule 38a-1)
and to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, the report shall so state.
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2.
|
Funds
Responsibilities and Expenses Payable by the Fund.
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All investment professionals of the Adviser and its staff, when
and to the extent engaged in providing services required to be
provided by the Adviser under Section 1(a) and (b), and the
compensation and routine overhead expenses of such personnel
allocable to such services, will be provided and paid for by the
Adviser and not by the Fund, except that costs or expenses
relating specifically to items identified in the next sentence
shall be borne by the Fund, as appropriate. The Fund will bear
all costs and expenses of its operations and transactions,
including, without limitation, those relating to: (i) the
cost and expenses of any independent valuation firm;
(ii) expenses incurred by the Adviser payable to third
parties, including agents, consultants or other advisors, in
monitoring financial and legal affairs for the Fund and in
monitoring the Funds investments and performing due
diligence on its prospective portfolio companies, provided,
however, the retention by the Adviser of any third party to
perform such services shall require the advance approval of the
Board (which approval shall not be unreasonably withheld) if the
fees for such services are expected to exceed $30,000; once the
third party is approved any expenditure to such third party will
not require additional approval from the Board;
(iii) interest payable on debt and other direct borrowing
costs, if any, incurred to finance the Funds investments
or to maintain its tax status; (iv) offerings of the
Funds common stock and other securities;
(v) investment advisory and management fees; (vi) fees
and payments due under any administration agreement between the
Fund and its administrator; (vii) transfer agent and
custodial fees; (viii) federal and state registration fees;
(ix) all costs of registration and listing the Funds
shares on any securities exchange; (x) federal, state and
local taxes; (xi) independent directors fees and
expenses; (xii) costs of preparing and filing reports or
other documents required by governmental bodies (including the
SEC); (xiii) costs of any reports, proxy statements or
other notices to stockholders, including printing and mailing
costs; (xiv) the cost of the Funds fidelity bond,
directors and officers/errors and omissions liability insurance,
and any other insurance premiums; (xv) direct costs and
expenses of administration, including printing, mailing, long
distance telephone, copying, independent auditors and outside
legal costs; (xvi) the costs and expenses associated with
the establishment of an SPV (as defined in Section 3(c)
below); (xvii) the allocable portion of the cost (excluding
office space) of the Funds CFO, CCO and secretary (subject
to the limit set forth in Section 1(a));
(xviii) subject to a cap of $150,000 in any fiscal year of
the Fund, fifty percent of the unreimbursed travel and other
related (e.g., meals) out-of-pocket expenses (subject to
item (ii) above) incurred by the Adviser in sourcing
investments for the Fund; provided that, if the
investment is sourced for multiple clients of the Adviser, then
the Fund shall only reimburse fifty percent of its allocable pro
rata portion of such expenses; and (xix) all other expenses
incurred by the Fund in connection with administering the
Funds business (including travel and other out-of-pocket
expenses (subject to item (ii) above) incurred in providing
significant managerial assistance to a portfolio company).
Additionally, any unsatisfied payment obligation to the Adviser
of a wholly-owned subsidiary of the Fund, which arises under
this Agreement, shall be the sole responsibility of the Fund and
not the subsidiary, and such unsatisfied payments are
specifically acknowledged as neither loans nor capital
contributions to the subsidiary, and the Fund will not seek
reimbursement from the subsidiary of such unsatisfied payments.
Notwithstanding the foregoing, absent the consent of the Board,
any fees or income earned, on the Funds behalf, by any
officer, director, employee or agent of the Adviser in
connection with the monitoring or closing of an investment or
disposition by the Fund or for providing managerial assistance
to a portfolio company (which includes, for example, service on
the board of directors of a portfolio company but does not
include the Advisers furnishing of portfolio management or
other management services to a Third-Party Vehicle) shall inure
to the Fund.
C-3
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3.
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Compensation
of the Adviser.
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The Fund agrees to pay, and the Adviser agrees to accept, as
compensation for the services provided by the Adviser hereunder,
a base management fee (Base Management Fee) and an
incentive fee (Incentive Fee) as hereinafter set
forth. The Fund shall make any payments due hereunder to the
Adviser or to the Advisers designee as the Adviser may
otherwise direct. To the extent permitted by applicable law, the
Adviser may elect, or the Fund may adopt a deferred compensation
plan pursuant to which the Adviser may elect, to defer all or a
portion of its fees hereunder for a specified period of time.
(a) The Base Management Fee shall be 2.00% per annum of the
Funds total assets (excluding: (i) cash,
(ii) the value of any investment in a Third-Party Vehicle
covered by a Separate Agreement and (iii) the value of any
investment by the Fund not made in a portfolio company
(Non-Eligible Assets); but including assets
purchased with borrowed funds that are not Non-Eligible Assets).
The Base Management Fee will be payable quarterly in arrears.
The Base Management Fee will be calculated based on the value of
the Funds total assets (excluding Non-Eligible Assets, but
including assets purchased with borrowed funds that are not
Non-Eligible Assets) at the end of the most recently completed
fiscal quarter. Base Management Fees for any partial fiscal
quarter will be appropriately pro rated.
(b) The Incentive Fee shall consist of two parts, as
follows:
(i) One part will be calculated and payable quarterly in
arrears based on the Pre-Incentive Fee net operating income for
the fiscal quarter (the Income Incentive Fee).
Pre-Incentive Fee net operating income means
interest income, dividend income and any other income (including
any other fees paid to the Fund such as directors,
commitment, origination, structuring, diligence and consulting
fees or other fees that the Fund receives from portfolio
companies) accrued by the Fund during the fiscal quarter, minus
the Funds operating expenses for the fiscal quarter
(including the Base Management Fee and any interest expense and
dividends paid on any issued and outstanding preferred stock,
but excluding the Incentive Fee (whether paid or accrued)).
Pre-Incentive Fee net operating income includes, in the case of
investments with a deferred interest feature (such as market
discount, debt instruments with
payment-in-kind
interest, preferred stock with
payment-in-kind
dividends and zero coupon securities), accrued income that has
not yet been received in cash. Pre-Incentive Fee net operating
income does not include any realized capital gains, realized and
unrealized capital losses or unrealized capital appreciation or
depreciation.
In calculating the amount of the Income Incentive Fee,
pre-Incentive Fee net operating income, at the end of the
immediately preceding fiscal quarter, will be compared to two
hurdle amounts: 1.75% of the Funds net assets
(defined as total assets less total liabilities) (the
Lower Hurdle Amount) and 2.1875% of the Funds
net assets (the Higher Hurdle Amount). The Fund will
pay the Adviser the Income Incentive Fee with respect to the
Funds pre-Incentive Fee net operating income in each
fiscal quarter as follows:
(A) no Income Incentive Fee in any fiscal quarter in which
the Funds pre-Incentive Fee net operating income does not
exceed the Lower Hurdle Amount;
(B) 100% of the Funds pre-Incentive Fee net operating
income with respect to that portion of such pre-Incentive Fee
net operating income, if any, that exceeds the Lower Hurdle
Amount but is less than the Higher Hurdle Amount in any fiscal
quarter; and
(C) 20% of the amount of the Funds pre-Incentive Fee
net operating income, if any, that exceeds the Higher Hurdle
Amount in any fiscal quarter.
These calculations will be appropriately pro rated for any
period of less than three months and adjusted for any share
issuances or repurchases during the current fiscal quarter.
(ii) The second part of the Incentive Fee (the
Capital Gains Fee) will be determined and payable in
arrears as of the end of each fiscal year (or upon termination
of this Agreement as set forth below), commencing with the
fiscal year ending on October 31, 2009, and will equal 20%
of: (a) the Funds cumulative aggregate net realized
capital gains on the Funds investments made after
November 1, 2003 (the Funds New
Portfolio) (exclusive of any realized gains on an
investment in a Third-Party Vehicle covered by
C-4
a Separate Agreement or that are subject to an SPV Incentive
Allocation, as defined below); minus (b) the aggregate
unrealized capital depreciation of the Funds New Portfolio
calculated from November 1, 2003. If the Capital Gains Fee
is positive at the end of such year, then the aggregate amount
of Capital Gains Fees paid in all prior years shall be
subtracted from the Capital Gains Fee for such year. If the
Capital Gains Fee is negative, then there will be no Capital
Gains Fee payable for such year. If this Agreement shall
terminate as of a date that is not a fiscal year end, the
termination date shall be treated as though it were a fiscal
year end for purposes of calculating and paying a Capital Gains
Fee. Furthermore, upon the tender of a notice of termination of
this Agreement, all unrealized capital gains on the Funds
New Portfolio shall be deemed realized at their net asset value
last determined by the Valuation Committee of the Board and the
Capital Gains Fee shall be determined and deemed payable as of
the date of a tender of a notice of termination of this
Agreement. Any Capital Gains Fee due upon the tender of a notice
of termination of this Agreement shall be paid as soon as
practicable after the Capital Gains Fee is permitted to be paid
under applicable law. Any Capital Gains Fee to be made under
this Section 3 shall be paid as soon as practicable
following the completion of the audit of the financial
statements of the Fund for the applicable fiscal year performed
in accordance with generally accepted accounting principles.
For
purposes of this Section 3(b)(ii):
Cumulative aggregate net realized capital gains
means cumulative aggregate realized capital gains minus
cumulative aggregate realized capital losses.
Cumulative aggregate realized capital gains
are calculated as the sum of the differences, if positive,
between (a) the net sales price of each investment in the
Funds New Portfolio when sold and (b) the accreted or
amortized cost basis of such investment.
Cumulative aggregate realized capital losses
are calculated as the sum of the amounts by which
(a) the net sales price of each investment in the
Funds New Portfolio when sold is less than (b) the
accreted or amortized cost basis of such investment.
Aggregate unrealized capital depreciation
means the sum of the differences, if negative, between
(a) the valuation of each investment in the Funds New
Portfolio, as of the applicable Capital Gains Fee calculation
date and (b) the accreted or amortized cost basis of such
investment.
Notwithstanding the foregoing, in no event shall either the
Funds contribution of an investment to a Subsidiary (as
defined in Section 4) or the Funds distribution
of an investment to the Funds stockholders be deemed to be
a realization event.
(iii) Notwithstanding the foregoing, in no event shall the
sum of the Capital Gains Fee and the SPV Incentive Allocation
(as defined below), if any, for any fiscal year exceed:
(a) 20% of (i) the Funds cumulative aggregate
realized capital gains on the Funds investments (the
Funds Total Portfolio) (including any realized
gains attributable to an SPV Incentive Allocation (as defined
below)), minus (ii) the sum of the cumulative aggregate
realized capital losses on, and aggregate unrealized capital
depreciation of, the Funds Total Portfolio; minus
(b) the aggregate amount of Capital Gains Fees paid and the
value of SPV Incentive Allocations made in all prior years (the
Cap). Furthermore, in the event that the Capital
Gains Fee for any fiscal year exceeds the Cap (Uncollected
Capital Gains Fees), all or a portion of such amount shall
be accrued and payable to the Adviser following any subsequent
fiscal year in which the Agreement is in effect, but only
to the extent the Capital Gains Fee, plus the amount of
Uncollected Capital Gains Fees, each calculated as of the end of
such subsequent fiscal year, do not exceed the Cap. Any
remaining Uncollected Capital Gains Fees shall be paid in
following subsequent fiscal years in accordance with the same
process, provided the Agreement is in effect during such fiscal
year.
For
purposes of this Section 3(b)(iii):
Cumulative aggregate realized capital gains
are calculated as the sum of the differences, if positive,
between (a) the net sales price of each investment in the
Funds portfolio when sold and (b) with respect to
C-5
investments held by the Fund on November 1, 2003, the fair
value of such investment on November 1, 2003, and with
respect to all other investments, the accreted or amortized cost
basis of such investment.
Cumulative aggregate realized capital losses
are calculated as the sum of the amounts by which
(a) the net sales price of each investment in the
Funds portfolio when sold is less than (b) with
respect to investments held by the Fund on November 1,
2003, the fair value of such investment on November 1,
2003, and with respect to all other investments, the accreted or
amortized cost basis of such investment.
Aggregate unrealized capital depreciation is
calculated as the sum of the differences, if negative, between
(a) the valuation of each investment in the Funds
portfolio as of the applicable Capital Gains Fee calculation
date and (b) with respect to investments held by the Fund
on November 1, 2003, the fair value of such investment on
November 1, 2003, and with respect to all other
investments, the accreted or amortized cost basis of such
investment.
(c) The Fund hereby authorizes the Adviser to create or
arrange for the creation of one or more special purpose vehicles
for which it may serve as the general partner or managing
member, as applicable, for purposes of making investments on
behalf of the Fund (each, an SPV). A Third-Party
Vehicle shall not be considered an SPV. Furthermore, the Fund
authorizes the Adviser, in its role as the general partner or
managing member, as applicable, of an SPV, to receive an
incentive allocation equal to 20% of the net profits of the SPV
(the SPV Incentive Allocation). The Adviser
acknowledges and agrees that: (i) prior to the SPV
conducting any investment activities, the Board must approve the
SPVs organizational documents; and (ii) subject to
the approval of the Board, the Adviser will establish procedures
for every SPV to ensure that any SPV Incentive Allocation
received by the Adviser will not cause the total compensation
received by the Adviser under this Agreement to exceed the
limits imposed by Section 205(b)(3) of the Advisers Act.
In addition, for each of fiscal years 2009 and 2010, the Adviser
hereby agrees to absorb or reimburse operating expenses of the
Fund (promptly following the completion of such year), to the
extent necessary to limit the Funds Expense Ratio for any
such year to 3.50% (the Expense Cap); provided,
however, if on October 31, 2009, the Funds net
assets have not increased by at least 5% from October 31,
2008, the dollar value of the Expense Cap shall increase by 5%
for fiscal 2010. For purposes of this paragraph, the Funds
Expense Ratio shall be calculated as of October 31
of any such year and mean: (i) the consolidated expenses of
the Fund (which expenses shall include any amounts payable to
the Adviser under the Base Management Fee, but shall exclude the
amount of any interest and other direct borrowing costs, taxes,
incentive compensation, and extraordinary expenses (including,
but not limited to, any legal claims and liabilities and
litigation costs and any indemnification related thereto, and
the costs of any spin-off or other similar type transaction
contemplated by this Agreement)), as a percentage of
(ii) the average net assets of the Fund (i.e.,
average consolidated assets less average consolidated
liabilities) during such fiscal year as set forth in the
Funds financial statements contained in the Funds
annual report on
Form 10-K.
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4.
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The
Advisers Management of Private Equity Funds.
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As consideration for the Fund entering into this Agreement, the
Adviser acknowledges the parties objective of having the
Funds stockholders participate in private investment funds
managed by the Adviser. During the term of this Agreement, the
Adviser agrees that, absent the consent of the Board, the
Adviser shall not establish a private investment fund managed by
the personnel of the Adviser with the investment objective of:
(a) investing in mezzanine and debt securities; or
(b) making equity or other non-debt investments
that are: (i) at the time of the formation of the private
fund, expected to be equal to or less than the lesser of 10% of
the Funds net assets or $25 million; and
(ii) issued by U.S. companies with less than
$150 million in revenues (Targeted
Investments). If the Board approves the formation of a new
private investment fund for investment in Targeted Investments,
this private investment fund may have a general partner or
managing member (a Private Fund General
Partner) that is a Subsidiary (as defined below), is owned
(directly or indirectly) 100% by a Subsidiary, or is jointly
owned by the Adviser and a Subsidiary. In such cases, Private
Fund General Partners shall be entitled to the entire
portion of incentive allocations paid by the private investment
funds managed by the Adviser, unless a portion thereof is
allocated to a third party that is not affiliated with, and
independent of, the Adviser. The Fund represents that the
Independent Board resolved to establish a wholly-owned
subsidiary of the Fund (a Subsidiary) that would,
among other things, have the authority to invest (directly or
indirectly) in, or serve as, a Private Fund General
Partner. It is
C-6
understood that the Fund may pursue a spin-off of a Subsidiary
to all stockholders (on a pro-rata basis), at such time as the
Independent Board deems appropriate (e.g., when suitable
market conditions are deemed to exist), the specific terms of
which would be subject to the due diligence of, and the
consideration and approval by, the Independent Board. In
addition, the Adviser will use its reasonable efforts to include
the Subsidiary in opportunities to participate in other new
private investment funds formed to pursue investments other than
Targeted Investments.
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5.
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Registration
of the Adviser.
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The Adviser covenants that it is registered as an investment
adviser under the Advisers Act. The Adviser agrees that its
activities will at all times be in compliance in all material
respects with all applicable federal and state laws governing
its operations and investments.
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6.
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Brokerage
Commissions.
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The Adviser is hereby authorized, to the fullest extent now or
hereafter permitted by law, to cause the Fund to pay a member of
a national securities exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of
the amount of commission another member of such exchange, broker
or dealer would have charged for effecting that transaction, if
the Adviser determines in good faith, taking into account such
factors as price (including the applicable brokerage commission
or dealer spread), size of order, difficulty of execution, and
operational facilities of the firm and the firms risk and
skill in positioning blocks of securities, that such amount of
commission is reasonable in relation to the value of the
brokerage
and/or
research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or its
overall responsibilities with respect to the Funds
portfolio, and constitutes the best net results for the Fund.
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7.
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Limitations
on the Business of the Adviser.
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The services of the Adviser to the Fund are not exclusive, and
the Adviser may engage in any other business or render similar
or different services to others including, without limitation,
the direct or indirect sponsorship or management of other
investment based accounts or commingled pools of capital,
however structured, having investment objectives similar to
those of the Fund, and subject to compliance with applicable law
and adherence to Section 4. Nothing in this Agreement shall
limit or restrict the right of any member, manager, partner,
officer or employee of the Adviser to engage in any other
business or to devote his or her time and attention in part to
any other business, whether of a similar or dissimilar nature,
or to receive any fees or compensation in connection therewith.
Notwithstanding the foregoing, the Adviser will not undertake
any conflicting duties of loyalty which would affect its prior
fiduciary duty to the Fund. In furtherance of this requirement,
for a period of three years from November 1, 2008 (unless
this Agreement ceases to be in effect), the Adviser shall give
the Fund 30 days advance notice in writing of
any proposed undertaking by it of material significance
(including the taking on of any new clients) and will provide
the Fund and the Funds independent directors with all
information relevant to a determination of the effect of such
undertaking on the Advisers ability to carry out its
obligations to the Fund under this Agreement. Furthermore,
during the term of this Agreement, the Adviser shall not manage
another business development company, a private equity fund or
other similar vehicle with the investment objective of investing
in Targeted Investments, without the consent of the Board. So
long as this Agreement or any extension, renewal or amendment
remains in effect, the Adviser shall be the only investment
adviser for the Fund, subject to the Advisers right to
enter into sub-advisory agreements (in accordance with the
requirements under the Investment Company Act). The Adviser
assumes no responsibility under this Agreement other than to
render the services called for hereunder. It is understood that
directors, officers, employees and stockholders of the Fund are
or may become interested in the Adviser and its affiliates, as
directors, officers, employees, partners, stockholders, members,
managers or otherwise, and that the Adviser and directors,
officers, employees, partners, stockholders, members and
managers of the Adviser and its affiliates are or may become
similarly interested in the Fund as stockholders or otherwise.
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8.
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Responsibility
of Dual Directors, Officers and/or Employees.
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If any person who is a manager, partner, officer, principal or
employee of the Adviser is or becomes a director, officer
and/or
employee of the Fund and acts as such in any business of the
Fund, then, when acting on behalf of the Fund, such manager,
partner, officer
and/or
employee of the Adviser shall be deemed to be acting in such
capacity
C-7
solely for the Fund, and not as a manager, partner, officer or
employee of the Adviser or under the control or direction of the
Adviser or the Administrator, even if paid by the Adviser.
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9.
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Limitation
of Liability of the Adviser; Indemnification.
|
The Adviser, its members and their respective officers,
managers, partners, agents, employees, controlling persons,
members and any other person affiliated with any of them
(collectively, the Indemnified Parties), shall not
be liable to the Fund for any action taken or omitted to be
taken by the Adviser in connection with the performance of any
of its duties or obligations under this Agreement or otherwise
as an investment adviser of the Fund, except: (a) to the
extent specified in Section 36(b) of the Investment Company
Act concerning loss resulting from a breach of fiduciary duty
(as the same is finally determined by judicial proceedings) with
respect to the receipt of compensation for services; or
(b) with respect to any loss by the Fund caused by the
willful misfeasance, bad faith or gross negligence in the
performance of any Indemnified Partys duties under this
Agreement, or the reckless disregard of the Advisers
duties and obligations under this Agreement (as the same shall
be determined in accordance with the Investment Company Act and
any interpretations or guidance by the SEC or its staff
thereunder). The Fund shall indemnify, defend and protect the
Indemnified Parties (each of whom shall be deemed a third party
beneficiary hereof) and hold them harmless from and against all
damages, liabilities, costs and expenses (including reasonable
attorneys fees and amounts reasonably paid in settlement)
incurred by the Indemnified Parties in or by reason of any
pending, threatened or completed action, suit, investigation or
other proceeding (including an action or suit by or in the right
of the Fund or its security holders) arising out of or otherwise
based upon the performance of any of the Advisers duties
or obligations under this Agreement or otherwise as an
investment adviser of the Fund. Notwithstanding the foregoing
provisions of this Section 9 to the contrary, nothing
contained herein shall protect or be deemed to protect the
Indemnified Parties against or entitle or be deemed to entitle
the Indemnified Parties to indemnification in respect of, any
liability to the Fund or its security holders to which the
Indemnified Parties would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of any Indemnified Partys duties or by reason
of the reckless disregard of the Advisers duties and
obligations under this Agreement (as the same shall be
determined in accordance with the Investment Company Act and any
interpretations or guidance by the SEC or its staff thereunder).
Furthermore, the Adviser shall indemnify, defend and protect the
Fund and hold it harmless in connection with losses or damages
arising out of conduct identified in clauses (a) and
(b) of this Section 9.
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10.
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Effectiveness,
Duration and Termination of Agreement.
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This Agreement shall become effective as of the date first
written above (the Effective Date). This Agreement
shall remain in effect for one year after such date, and
thereafter shall continue automatically for successive annual
periods, provided that such continuance is specifically approved
at least annually by: (a) the vote of the Board, or by the
vote of a majority of the outstanding voting
securities of the Fund (as such term is defined in
Section 2(a)(42) of the Investment Company Act); and
(b) the vote of a majority of the Funds directors who
are not parties to this Agreement and are not interested
persons (as such term is defined in Section 2(a)(19)
of the Investment Company Act) of any party to this Agreement,
in accordance with the requirements of the Investment Company
Act. This Agreement may be terminated at any time without the
payment of any penalty, upon 60 days written notice,
by: (a) the Adviser, at any time, in the event (i) a
majority of the current members of the Independent Board ceases
to serve as directors of the Fund; or (ii) the Fund
undergoes a change in control (as such term is
defined by Section 2(a)(9) of the Investment Company Act)
not caused by the Adviser; or (b) the Adviser, at any time,
following October 31, 2010; or (c) the vote of the
stockholders holding a majority of the outstanding voting
securities of the Fund (as such term is defined by
Section 2(a)(42) of the Investment Company Act); or
(d) the action of the Funds directors.
This Agreement will automatically terminate in the event of its
assignment (as such term is defined for purposes of
Section 15(a)(4) of the Investment Company Act). Under no
circumstances shall this agreement be assigned or transferred
without the consent of the Funds Board. Following the
termination of this Agreement, the Fund shall not have any
obligation or liability to the Adviser or to the principals,
officers
and/or
employees of the Adviser other than the obligation to pay the
Adviser any outstanding amounts owed under Section 3
calculated until and through the date of termination of the
Agreement. Notwithstanding anything to the contrary, the
provisions of
C-8
Section 10 (Limitation of Liability of the Adviser;
Indemnification) shall continue in full force and effect and
apply to the Adviser and its representatives as and to the
extent applicable.
This amendment and restatement of the Original Agreement shall
not be treated as a termination of the Original Agreement.
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11.
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The
Funds Portfolio Manager.
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The Adviser represents that it will enter into an agreement with
Mr. Tokarz pursuant to which Mr. Tokarz will agree to
serve as the portfolio manager primarily responsible for the
day-to-day management of the Funds portfolio for the
fiscal years 2009 and 2010 (subject to the termination of the
Agreement in accordance with the provisions of Section 10).
In addition, the parties hereby acknowledge that Mr. Tokarz
is the current Portfolio Manager of the Fund and the Adviser
covenants that throughout the term of this Agreement it will not
undertake any action that would cause Mr. Tokarz to cease
to serve as the Funds primary Portfolio Manager,
including, without limitation, transferring any controlling
interest in the Adviser to another entity or person.
Notwithstanding the foregoing, it is understood by the Fund that
Mr. Tokarz is not required to devote his full business time
and attention to his duties as the Funds Portfolio Manager
or to the Adviser. In addition, as of the effective date of the
Original Agreement, the employment agreement between
Mr. Tokarz and the Fund dated November 1, 2003, as
extended on October 31, 2005 (the Employment
Agreement), terminated and any outstanding obligations
under that agreement are superseded by those under this
Agreement.
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12.
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Coordination
with Code Section 409A.
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This Agreement is intended to comply with the short-term
deferral rule described in the final regulations promulgated
under Section 409A of the U.S. Internal Revenue Code
of 1986, as amended (the Code), and therefore to be
exempt from Code Section 409A. Specifically, with respect
to the Base Management Fee described in Section 3(a) and
payable quarterly in arrears, all payments made with respect to
the first quarter of a fiscal year (i.e., November 1 through
January 31) shall be paid no later than the later of March
15 of the fiscal year, or the last date that would enable the
payment to satisfy the short-term deferral rule and maintain the
Code Section 409A exemption. Similarly, with respect to the
first part of the Incentive Fee (also called the Income
Incentive Fee) described in Section 3(b)(i) and
payable quarterly in arrears, all such Income Incentive Fee
payments made with respect to the first quarter of a fiscal year
(i.e., November 1 through January 31) shall be paid no
later than the later of March 15 of the fiscal year, or the last
date that would enable the payment to satisfy the short-term
deferral rule and maintain the Code Section 409A exemption.
With respect to the second part of the Incentive Fee (also
called the Capital Gains Fee) described in
Section 3(b)(ii) and payable in arrears at the end of each
fiscal year, all such Capital Gains Fee payments shall be paid
no later than the later of March 15 following the end of the
fiscal year, or the last date that would enable the payment to
satisfy the short-term deferral rule and maintain the Code
Section 409A exemption.
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13.
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Use of
the Funds Name.
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The Adviser acknowledges that the name of the Fund is the
Funds property and, as such, the Adviser shall not,
without the prior written consent of the Board, use, or cause to
be used, the Funds name or any derivative thereof,
including, but not limited to, the term MVC.
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14.
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Amendments
of this Agreement.
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This Agreement may not be amended or modified except by an
instrument in writing signed by all parties hereto, but the
consent of the Fund must be obtained in conformity with the
requirements of the Investment Company Act.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, including without
limitation
Sections 5-1401
and 5-1402 of the New York General Obligations Law and New York
Civil Practice Laws and Rules 327(b), and the applicable
provisions of the Investment Company Act, if any. To the
C-9
extent that the applicable laws of the State of New York, or any
of the provisions herein, conflict with the applicable
provisions of the Investment Company Act, if any, the latter
shall control. The parties unconditionally and irrevocably
consent to the exclusive jurisdiction of the courts located in
the State of New York and waive any objection with respect
thereto, for the purpose of any action, suit or proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby.
The failure of either party to enforce at any time for any
period the provisions of or any rights deriving from this
Agreement shall not be construed to be a waiver of such
provisions or rights or the right of such party thereafter to
enforce such provisions, and no waiver shall be binding unless
executed in writing by all parties hereto.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public
policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party.
The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
This Agreement may be executed in one or more counterparts, each
of which when executed shall be deemed to be an original
instrument and all of which taken together shall constitute one
and the same agreement.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by
delivery in person, by overnight courier service (with signature
required), by facsimile, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective
parties at their respective principal executive office addresses.
This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all
prior agreements and undertakings (including the Original
Agreement and the Employment Agreement), both written and oral,
between the parties with respect to such subject matter.
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22.
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Certain
Matters of Construction.
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(a) The words hereof, herein,
hereunder and words of similar import shall refer to
this Agreement as a whole and not to any particular Section or
provision of this Agreement, and reference to a particular
Section of this Agreement shall include all subsections thereof.
(b) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and references
to the masculine, feminine or neuter gender shall include each
other gender.
(c) The word including shall mean including
without limitation.
C-10
In witness whereof, the parties hereto have caused this
Agreement to be duly executed on the date above written.
MVC Capital, Inc.
Name:
The Tokarz Group Advisers LLC
Name:
C-11
INSTRUCTIONS FOR
SIGNING PROXY CARDS
The following general rules for signing Proxy Cards may be of
assistance to you and avoid the time and expense involved in
validating your vote if you fail to sign your Proxy Card
properly.
1. Individual Accounts: Sign your name
exactly as it appears in the registration on the Proxy Card.
2. Joint Accounts: Either party may sign,
but the name of the party signing should conform exactly to the
name shown in the registration on the Proxy Card.
3. All Other Accounts: The capacity of
the individual signing the Proxy Card should be indicated unless
it is reflected in the form of registration. For example:
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Registration
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Valid Signatures
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CORPORATE ACCOUNTS
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(1) ABC Corp.
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ABC Corp.
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(2) ABC Corp.
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John Doe, Treasurer
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(3) ABC Corp.
c/o John
Doe, Treasurer
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John Doe
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(4) ABC Profit Sharing Plan
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John Doe, Treasurer
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TRUST ACCOUNTS
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(1) ABC Trust
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Jane B. Doe, Trustee
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(2) Jane B. Doe, Trustee u/t/d 12/28/78
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Jane B. Doe
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CUSTODIAL OR ESTATE ACCOUNTS
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(1) John B. Smith, Cust. f/b/o John B. Smith Jr. UGMA
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John B. Smith
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(2) John B. Smith
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John B. Smith, Jr., Executor
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DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
MVC CAPITAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
APRIL 14, 2009
This proxy is solicited on behalf of the Board of Directors of MVC Capital, Inc. (the Fund) for
use at the annual meeting of stockholders to be held at
[10:00 a.m.] (Eastern time), on April 14, 2009, at the
offices of UBS, 299 Park Avenue, New York, New York 10171 (the
Meeting), and relates to the proposal with respect to the Fund set forth in the Notice of Annual
Meeting of Stockholders dated [March 6, 2009].
The
undersigned hereby appoints Michael Tokarz and Peter Seidenberg and each of them proxies for the
undersigned, with full power of substitution and revocation, to represent the undersigned and to
vote, as designated, on behalf of the undersigned at the Meeting and any adjournment thereof, all
shares of the Fund which the undersigned is entitled to vote at the Meeting and any adjournment
thereof.
Your vote is important. If this proxy is properly executed and received by the Fund prior to the
Meeting, shares represented by this proxy will be voted as instructed. Unless indicated to the
contrary, this proxy will be voted FOR the proposal and to grant discretionary authority to vote
upon such other business as may properly come before the Meeting or any adjournment thereof. The
undersigned hereby revokes any proxy previously given.
Please mark, sign, date and return promptly in the enclosed envelope if you are not voting by
telephone or the Internet.
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SEE REVERSE SIDE
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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SEE REVERSE SIDE |
MVC CAPITAL, INC.
C/O COMPUTERSHARE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
Your vote is important. Please vote immediately.
Vote-by-Internet
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Log on to the Internet and go to
[http://www.eproxyvote.com/mvc]
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OR
Vote-by-Telephone
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Call toll-free
[1-877-PRX-VOTE (1-877-779-8683)]
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If you vote over the Internet or by telephone, please do not mail your card.
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DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL |
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ZMVC71 |
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x
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Please mark
votes as in
this example.
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3453 |
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The Board of Directors of MVC Capital, Inc. (the Fund) recommends that you vote FOR the proposal[s] set forth below.
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1.
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To elect six nominees to serve as
members of the Board of Directors of the
Fund:
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3. |
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In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the Meeting
or any adjournment thereof. |
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(01) Emilio
Dominianni |
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(05) William Taylor |
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(02) Gerald
Hellerman |
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(06) Michael Tokarz |
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(03) Warren Holtsberg
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(04) Robert Knapp
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FOR
ALL
NOMINEES
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o
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o
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WITHHELD
FROM ALL
NOMINEES |
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o
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For all nominees except as noted above |
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2.
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To approve an Amended and Restated
Investment Advisory
and Management
Agreement between
the Fund and TTG
Advisers as
described in the
proxy statement.
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FOR
o
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AGAINST
o
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ABSTAIN
o
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MARK HERE FOR ADDRESS CHANGE AND NOTE AT
LEFT
o |
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Please sign exactly as name(s) appears hereon.
If shares are held in the name of joint owners,
each should sign. |
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Attorneys-in-fact, executors, administrators,
trustees, guardians, etc. should so indicate. If
stockholder is a corporation or partnership,
please sign in full corporate or partnership name
by authorized person. |
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The undersigned hereby acknowledges receipt of
the notice of annual meeting of stockholders and
the proxy statement, dated , 2009. |
Signature:
Date:
Signature:
Date: