<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 000-28405
MEVC DRAPER FISHER JURVETSON FUND I, INC.
(Exact name of the registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 94-3346760
incorporation or organization) (I.R.S. Employer Identification No.)
991 Folsom Street
San Francisco, California 94107-1020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (877) 474-6382
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock New York Stock Exchange
------------------- ---------------------------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of September 12, 2000 there were 16,500,000 shares of Registrant's common
stock, $.01 par value (the "Shares"), outstanding. The net asset value of a
share at July 31, 2000 was $19.09.
<PAGE>
meVC Draper Fisher Jurvetson Fund I, Inc.
(A Delaware Corporation)
Index
<TABLE>
<CAPTION>
Part I. Financial Information Page
Item 1. Financial Statements
Balance Sheet
<S> <C>
- July 31, 2000.......................................................... 01
Statement of Operations
- Three months ended July 31, 2000 and March 31, 2000 to July 31, 2000... 02
Statement of Cash Flows
- March 31, 2000 to July 31, 2000........................................ 03
Statement of Shareholders' Equity
- March 31, 2000 to July 31, 2000........................................ 04
Selected Per Share Data and Ratios
- March 31, 2000 to July 31, 2000........................................ 05
Schedule of Investments
- July 31, 2000.......................................................... 06
Notes to Financial Statements.............................................. 09
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................ 16
Item 3. Quantitative and Qualitative Disclosure about Market Risk................... 19
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................................ 20
SIGNATURE............................................................................... 21
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEVC DRAPER FISHER JURVETSON FUND I, INC.
BALANCE SHEET
JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in preferred stocks, at fair value
(cost $100,504,475), (Note 2)............................... $ 100,504,475
Investments in short-term securities, at market value
(cost $45,355,418), (Note 2)................................ 45,365,686
Cash and cash equivalents (Note 2)................................ 169,314,217
Interest receivable............................................... 388,076
---------------
TOTAL ASSETS...................................................... 315,572,454
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Management fee payable (Notes 3, 5)............................... 666,110
-----------------
SHAREHOLDERS' EQUITY:
Common Stock, $0.01 par value; 150,000,000 shares
authorized and 16,500,000 outstanding
at July 31, 2000......................................... 165,000
Additional paid in capital.................................... 311,485,000
Retained earnings............................................. 3,256,344
---------------
TOTAL SHAREHOLDERS' EQUITY........................................ 314,906,344
---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................ $ 315,572,454
===============
NET ASSET VALUE PER SHARE......................................... $ 19.09
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD
MONTHS ENDED MARCH 31, 2000*
JULY 31, 2000 TO JULY 31, 2000
<S> <C> <C>
INVESTMENT INCOME:
Interest income............................. $ 4,244,988 $ 5,879,046
---------------- ----------------
OPERATING EXPENSES:
Management fees (Notes 3, 5)................ 1,971,996 2,632,928
---------------- ----------------
NET INVESTMENT INCOME................................ 2,272,992 3,246,118
---------------- ----------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENT TRANSACTIONS:
Net realized loss on
investment transactions..................... (42) (42)
Net unrealized appreciation on
investment transactions..................... 14,752 10,268
---------------- ----------------
Realized and unrealized gain (loss) on
investment transactions..................... 14,710 10,226
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................................... $ 2,287,702 $ 3,256,344
================ ===============
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS PER SHARE............................ $ 0.14 $ 0.20
================ ================
DIVIDENDS DECLARED PER SHARE......................... $ 0.00 $ 0.00
================ ================
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 31, 2000* TO JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations.......... $ 3,256,344
Adjustments to reconcile net cash provided by operations:
Change in unrealized depreciation........................ (10,268)
Changes in assets and liabilities:
Management fee payable.............................. 666,110
Interest receivable................................. (388,076)
----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 3,524,110
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities....................... (100,504,475)
Purchases of short-term investments...................... (45,355,418)
Purchases of cash equivalents............................ (2,007,432,920)
Sales/Maturities of cash equivalents..................... 2,007,432,920
----------------
NET CASH USED FOR INVESTING ACTIVITIES................... (145,859,893)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from initial public offering.............. 330,000,000
Sales load............................................... (16,500,000)
Advisory fee, Prudential Securities Incorporated......... (1,500,000)
Deferred offering costs.................................. (350,000)
Redemption of seed money................................. (5,000)
-----------------
NET CASH USED FOR FINANCING ACTIVITIES................... 311,645,000
-----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD............ 169,309,217
-----------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................... 5,000
-----------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD...................... $ 169,314,217
===================
</TABLE>
* Commencement of operations.
The Company paid no interest or federal income tax during the period.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD MARCH 31, 2000* TO JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCE AT MARCH 31, 2000 $ 3 $ 4,997 $ - $ 5,000
Issuance of 16,500,000 shares through
Initial public offering (Net of Offering Costs) 165,000 311,485,000 - 311,650,000
Redemption of seed shares (3) (4,997) - (5,000)
Net increase in net assets from operations - - 3,256,344 3,256,344
------------- ------------- ------------- --------------
BALANCE AT JULY 31, 2000 $ 165,000 $ 311,485,000 $ 3,256,344 $ 314,906,344
------------- ------------- ------------- --------------
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
SELECTED PER SHARE DATA AND RATIOS
FOR THE PERIOD MARCH 31, 2000* TO JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Net proceeds from initial public offering (a)........ 18.89
Income (loss) from investment operations:
Net investment income............................. 0.20
Less distributions from and in excess of:
Net investment income............................. -
Net realized and unrealized gain.................. -
------------
Total distributions............................... -
------------
Net asset value, end of period ...................... $ 19.09
============
Market Value, end of period ......................... $ 15.25
============
TOTAL RETURN - AT NAV (b, e).......................... 1.06%
TOTAL RETURN - AT MARKET (b, c, e).................... (23.75)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. 314,906
Ratios to average net assets:
Expenses (d) (Note 3)................................ 2.50%
Net investment income (e)............................ 1.04%
</TABLE>
NOTES TO SUPPLEMENTAL INFORMATION:
* Commencement of operations.
(a) Net of initial sales load, underwriting and offering costs of $1.11 per
share.
(b) Total investment return does not include sales charges.
(c) For the period June 26, 2000 (commencement of trading on the NYSE) to July
31, 2000.
(d) Annualized.
(e) Not Annualized.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
SCHEDULE OF INVESTMENTS
JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Date of
Initial
Description Shares/Principal Investment Cost Value
--------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS-31.92% (a, b) (Note 6)
<S> <C> <C> <C> <C>
Annuncio Software Inc, Series E ........... 625,000 July 2000 $ 5,000,000 $ 5,000,000
AuctionWatch.com, Inc. Series C ........... 1,047,619 June 2000 5,500,000 5,500,000
*Endymion Systems, Inc. Series A ............ 7,156,760 June 2000 7,000,000 7,000,000
*eOnline, Inc.:
Series C.............................. 1,360,544 May 2000 9,999,998 9,999,998
Series C Warrants, expire 5/25/03..... 136,054 May 2000 - -
*EXP.com, Inc. Series C ..................... 1,748,252 June 2000 10,000,001 10,000,001
*eYak, Inc., Series C ....................... 2,590,674 June 2000 10,000,000 10,000,000
*FolioFN, Inc. Series C ..................... 5,802,259 June 2000 15,000,000 15,000,000
InfoImage, Inc.:
Series C ............................ 432,000 June 2000 2,004,480 2,004,480
Series C Warrants, expire 6/2/10 .... 259,200 June 2000 - -
*INFOUSA.com Series B ....................... 2,145,922 June 2000 9,999,997 9,999,997
*Pagoo.com Series C ......................... 3,412,969 July 2000 9,999,999 9,999,999
Personic Software, Inc.:
Series G ............................. 2,481,390 May 2000 10,000,000 10,000,000
Series G Warrants, expire 5/12/05..... 1,000,000 May 2000 - -
*ShopEaze.com Series B ...................... 2,097,902 May 2000 6,000,000 6,000,000
----------- ------------
TOTAL PREFERRED STOCKS..................................................... 100,504,475 100,504,475
----------- -----------
SHORT-TERM SECURITIES-14.41% (b)
CORPORATE BONDS-5.61%
Associates Corp. North America
5.875%, 05/16/2001 ................... 10,000,000 May 2000 9,865,100 9,895,389
General Motors Acceptance Corp.
6.620%, 01/16/2001 ................... 8,000,000 July 2000 7,752,853 7,755,039
-------------- --------------
TOTAL CORPORATE BONDS 17,617,953 17,650,428
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
SCHEDULE OF INVESTMENTS
JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Date of
Initial
Description Shares/Principal Investment Cost Value
--------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES (CONTINUED)
CERTIFICATE OF DEPOSIT-0.95%
Bank Nova Scotia
<S> <C> <C> <C> <C>
6.695%, 02/12/2001 ................... 3,000,000 April 2000 $ 2,999,361 $ 3,000,000
-------------- --------------
U.S. GOVERNMENT & AGENCY SECURITIES-7.85%
Federal Farm Credit Banks
5.125%, 04/02/2001 ................... 10,000,000 April 2000 9,903,854 9,889,949
Federal National Mortgage Assoc. Disc. Note
6.120%, 10/05/2000 ................... 15,000,000 April 2000 14,834,250 14,825,309
-------------- --------------
TOTAL U.S. GOVERNMENT & AGENCY 24,738,104 24,715,258
-------------- --------------
TOTAL SHORT TERM SECURITIES............................................... 45,355,418 45,365,686
------------- -------------
CASH AND CASH EQUIVALENTS-53.76%
COMMERCIAL PAPER-53.76%
ABB Treasury Centre (USA), Inc.
6.480%, 08/21/2000 ................... 9,800,000 July 2000 9,764,720 9,764,720
American Express Credit Corp.
6.520%, 08/11/2000 ................... 11,000,000 July 2000 10,980,081 10,980,081
American Telephone & Telegraph Company
6.480%, 08/24/2000 ................... 9,000,000 July 2000 8,962,740 8,962,740
Associates Corp. North America
6.500%, 09/08/2000 ................... 9,100,000 July 2000 9,037,564 9,037,564
Bell South Capital Funding Corp.
6.480%, 09/14/2000 ................... 10,000,000 July 2000 9,920,800 9,920,800
BMW U.S. Capital Corp.
6.500%, 08/16/2000 ................... 10,000,000 July 2000 9,972,917 9,972,917
Cargill Global Funding
6.640%, 08/01/2000 ................... 11,190,000 July 2000 11,190,000 11,190,000
DaimlerChrysler
6.480%, 08/22/2000 ................... 6,290,000 July 2000 6,266,224 6,266,224
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
MEVC DRAPER FISHER JURVETSON FUND I, INC.
SCHEDULE OF INVESTMENTS
JULY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Date of
Initial
Description Shares/Principal Investment Cost Value
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONT.)
<S> <C> <C> <C> <C>
DuPont E.I. de Nemours & Company
6.540%, 08/17/2000 ................... 12,000,000 May 2000 $ 11,965,120 $ 11,965,120
Ford Motor Credit Corp.
6.470%, 08/14/2000 ................... 9,700,000 July 2000 9,677,337 9,677,337
General Electric Capital Corp.
6.500%, 09/05/2000 ................... 9,000,000 July 2000 8,943,125 8,943,125
Gillette Company
6.500%, 08/11/2000 ................... 10,000,000 July 2000 9,981,944 9,981,944
H J Heinz Corp.
6.480%, 09/13/2000 ................... 9,300,000 July 2000 9,228,018 9,228,018
IBM Credit Corp.
6.480%, 08/23/2000 ................... 6,000,000 July 2000 5,976,240 5,976,240
International Lease Finance Corp.
6.500%, 09/06/2000 ................... 12,000,000 July 2000 11,922,000 11,922,000
National Rural Utilities Corp.
6.480%, 08/23/2000 ................... 9,200,000 July 2000 9,163,568 9,163,568
Paccar Financial Corp.
6.480%, 08/03/2000 ................... 11,000,000 July 2000 10,996,040 10,996,040
Wal Mart Stores, Inc.
6.480%, 09/12/2000 ................... 5,400,000 July 2000 5,359,176 5,359,176
-------------- -------------
TOTAL COMMERCIAL PAPER 169,307,614 169,307,614
-------------- -------------
MONEY MARKET FUNDS-0.00%
SSgA Money Market Fund
6.368% ............................... 6,603 July 2000 6,603 6,603
-------------- -------------
TOTAL CASH AND CASH EQUIVALENTS........................................... 169,314,217 169,314,217
-------------- -------------
TOTAL INVESTMENTS......................................................... $ 315,174,110 $ 315,184,378
============= =============
</TABLE>
(a) These securities are restricted from public sale without prior registration
under the Securities Act of 1933. The Fund negotiates certain aspects of
the method and timing of the disposition of these investments, including
registration rights and related costs.
(b) Percentages are based on net assets of $314,906,344.
* Affiliated Issuers (Total Market Value of $77,999,995): companies in which
the Fund owns at least 5% of the voting securities.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
meVC Draper Fisher Jurvetson Fund I, Inc.
Notes to Financial Statements
July 31, 2000
(Unaudited)
1. ORGANIZATION AND BUSINESS PURPOSE
meVC Draper Fisher Jurvetson Fund I, Inc. (the "Fund"), a closed-end
investment company sponsored by meVC.com, Inc. ("meVC.com"), was organized as a
Delaware corporation on December 2, 1999 and commenced operations on March 31,
2000. The Fund seeks to achieve long-term capital appreciation from equity and
equity-oriented securities issued by privately owned companies in transactions
negotiated directly with such companies ("Portfolio Companies"). The Fund seeks
to make venture capital investments in information technology companies,
primarily in the Internet, e-commerce, telecommunications, networking, software
and information services industries. The Fund's investments in portfolio
companies will consist principally of equity securities such as common and
Preferred Stock, but may also include other equity-oriented securities such as
debt convertible into common or Preferred Stock or debt combined with warrants,
options or other rights to acquire common or Preferred Stock. Current income is
not a significant factor in the selection of portfolio company investments. The
Fund has elected to be treated as a business development company under the
Investment Company Act of 1940, as amended ("the Act"). The shares of the Fund
commenced trading on the New York Stock Exchange (the "Exchange") under the
symbol MVC on June 26, 2000. As described in the Fund's definitive Prospectus,
dated March 28, 2000 (the "Public Offering Date"), the Shares had been
authorized to list on the Exchange, subject to official notice of issuance, but
the Fund and the Exchange mutually agreed that the commencement of trading would
be delayed until not later than 90 days from the Public Offering Date. The Fund
has entered into an advisory agreement with meVC Advisers, Inc. ("meVC
Advisers"), a wholly-owned subsidiary of meVC.com. meVC Advisers has entered
into a sub-advisory agreement with Draper Fisher Jurvetson MeVC Management Co.,
LLC (the "Sub-Adviser").
2. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS - The interim financial statements have been
prepared by meVC Draper Fisher Jurvetson Fund I, Inc. pursuant to the rules and
regulations of the Securities and Exchange Commission applicable to quarterly
reports on Form 10-Q. The unaudited financial statements reflect, in the opinion
of management, all adjustments which are of a normal recurring nature necessary
for a fair presentation of the information presented herein. Interim results are
not necessarily indicative of results to be expected for a full fiscal year.
VALUATION OF INVESTMENTS - Investments in Preferred Stock are carried at fair
value with the net change in unrealized appreciation or depreciation included in
the determination of net assets. Cost is used to approximate fair value of these
investments until significant developments affecting an investment provide a
basis for valuing such investment at a number other than cost.
The fair value of investments for which no market exists and for which our
Board of Directors has determined that the original cost of the investment is no
longer an appropriate valuation will be determined on the basis of procedures
established in good faith by our Board of Directors. Valuations will be based
upon such factors as the financial and/or operating results of the most recent
fiscal period, the performance of the company relative to planned
budgets/forecasts, the issuer's financial condition and the markets in which it
does business, the prices of any recent transactions or offerings regarding such
securities or any proxy securities, any available analysis, media, or other
reports or information regarding the issuer, or the markets or industry in which
it operates, the nature of any restrictions on disposition of the securities and
other analytical data. In the case of unsuccessful operations, the valuation may
be based upon anticipated liquidation proceeds.
Because of the inherent uncertainty of the valuation of portfolio securities
which do not have readily ascertainable market values, the Fund's estimate of
fair value may significantly differ from the fair market value
9
<PAGE>
that would have been used had a ready market existed for the securities.
Appraised values do not reflect brokers' fees or other normal selling costs
which might become payable on disposition of such investments.
Investments in companies whose securities are publicly traded are valued at
their quoted market price, less a discount to reflect the estimated effects of
restrictions on the sale of such securities ("Valuation Discount"), if
applicable.
Short-term investments having maturities of 60 days or less are stated at
amortized cost, which approximates fair value. Other fixed income securities are
stated at fair value. Fair value of these securities is determined at the most
recent bid or yield equivalent from dealers that make markets in such
securities.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME - Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividend income on investment
securities is recorded on the ex-dividend date. Interest income, which includes
accretion of discount and amortization of premium, if applicable, is recorded on
the accrual basis.
CASH FLOWS - For the purpose of the Statement of Cash Flows, the Fund
considers all money market and all highly liquid temporary cash investments
purchased with an original maturity of three months or less to be cash
equivalents.
RESTRICTED SECURITIES - The Fund will invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and a
prompt sale at an acceptable price may be difficult.
INCOME TAXES - It is the policy of the Fund to meet the requirements for
qualification as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. The Fund is not subject to income or
excise taxes to the extent that it distributes all of its investment company
taxable income and net realized gains for its fiscal year.
ACCOUNTING ESTIMATES - The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statement. Actual results could differ
from those estimates.
3. MANAGEMENT
The Fund has entered into a management agreement with meVC Advisers, Inc.
(the "Adviser"), a Delaware corporation. Pursuant to such agreement, the Adviser
performs certain services including certain management and administrative
services necessary for the operation of the Fund. The Adviser receives a
management fee equal to 2.5% of the average weekly net assets of the Fund, paid
monthly in arrears. A portion of this fee is also used to pay the Fund's
Sub-Adviser. The Adviser also receives compensation equal to 20.0% of the Fund's
annual realized capital gains net of realized and unrealized capital losses
("Carried Interest"). The Adviser is a wholly owned subsidiary of a privately
owned corporation.
The Adviser has entered into a sub-advisory agreement with Draper Fisher
Jurvetson MeVC Management Co., LLC (the "Sub-Adviser"). The Sub-Adviser provides
all investment opportunities for approval by the Fund's Board of Directors. For
the Sub-Adviser's services, the Adviser pays the Sub-Adviser an annual
investment sub-advisory fee equal to 1.0% of the Fund's average weekly net
assets, paid monthly in arrears. The Adviser shall also pay the Sub-Adviser an
amount equal to 90.0% of any carried interest paid by the Fund to the Adviser.
The sub-advisory fees are not an additional expense to the Fund.
10
<PAGE>
The Adviser has entered into a sub-advisory agreement with Fleet Investment
Advisors, Inc. (the "Investment Manager"). The Investment Manager provides all
short-term management of the Fund's uninvested cash. The sub-advisory fees are
not an additional expense to the Fund.
meVC Advisers has agreed to pay compensation to the directors and officers
for any and all services rendered to the Fund. As compensation for such
services, each director who is not an officer of the Fund receives an annual fee
of $4,800 paid monthly in arrears, a fee of $10,000 for each meeting of the
Board of Directors, or a committee of the Board of Directors, in which each such
independent director participates, whether attended in person or by telephone,
and reimbursement of all out-of-pocket expenses relating to attendance at such
meetings.
meVC Advisers has agreed to pay all Fund expenses above and beyond the 2.5%
Management Fee paid to meVC Advisers by the Fund.
4. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Fund declared no dividends during the period ended July 31, 2000. Income
dividends and capital gain distributions, if any, are recorded on the
ex-dividend date. Dividends and capital gain distributions are generally
declared and paid annually. An additional distribution may be paid by the Fund
to avoid imposition of federal income tax on any remaining undistributed net
investment income and capital gains. Distributions can be made payable by the
Fund either in the form of a cash distribution or a stock dividend.
5. TRANSACTIONS WITH RELATED PARTIES
The Fund has been granted exemptive relief from certain provisions of the
Investment Company Act of 1940, as amended, to permit the Fund to make
co-investments with certain affiliates of Draper Fisher Jurvetson. The Fund
anticipates that it may, subject to certain terms and conditions, frequently
invest in the same portfolio companies as current and future affiliates of the
Adviser.
The Fund has accrued $666,110 payable to the Adviser. For the four months
ended July 31, 2000, the Adviser has paid Draper Fisher Jurvetson MeVC
Management Co., LLC (the "Sub-Adviser") sub-advisory fees amounting to
$1,053,171, its portion of the 2.5% management fee.
6. PORTFOLIO INVESTMENTS
During the period ended July 31, 2000, the Fund invested $100,504,475 in
twelve new companies and made no follow-on investments. The individual equity
and equity-linked security holdings of the Company at July 31, 2000 were
comprised of the following investments:
Personic, Inc.
On May 12, 2000, the Fund entered into a $10,000,000 investment in a
Convertible Preferred Stock issue for Personic, Inc ("Personic"). The Fund's
investment consists of 2,481,390 shares of Series G Convertible Preferred
Stock ("Series G Preferred Stock") at $4.03 per share. The Fund also received
1,000,000 warrants to purchase 1,000,000 shares of Series G Preferred Stock.
The warrants expire on May 12, 2005.
Personic's marketplace and ebusiness solutions provide the communications and
transaction infrastructure to enable organizations and staffing agencies to
attract, qualify, hire and retain a superior workforce.
The Series G Preferred Stock ranks equally ("pari passu"), with respect to
liquidation preference, to the Series A Preferred Stock, the Series B Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock and senior
to the Series C Preferred Stock, Series D Preferred Stock and Common Stock. In
the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series B
Preferred Stock, as converted to Common Stock, will not be transferred in a
public distribution prior to one hundred and eighty days after the date of the
final prospectus used in such Qualified IPO.
11
<PAGE>
ShopEaze.com, Inc.
On May 25, 2000, the Fund entered into a $6,000,000 investment in a
Convertible Preferred Stock issue for ShopEaze.com, Inc. ("ShopEaze"). The
Fund's investment consists of 2,097,902 shares of Series B Convertible Preferred
Stock ("Series B Preferred Stock") at $2.86 per share.
ShopEaze's strategy is to provide brick and mortar retailers with a
completely outsourced online shopping solution that allows them to promote their
own established brands and local store presence while leveraging ShopEaze's
service capabilities and technology.
The Series B Preferred Stock ranks senior, with respect to liquidation
preference, to the Common Stock and any series of Preferred Stock issued prior
to the Series B. In the event of a Qualified Initial Public Offering ("Qualified
IPO"), the Series B Preferred Stock, as converted to Common Stock, will not be
transferred in a public distribution prior to one hundred and eighty days after
the date of the final prospectus used in such Qualified IPO.
eOnline, Inc.
On May 26, 2000, the Fund entered into approximately a $10,000,000 investment
in a Convertible Preferred Stock issue for eOnline, Inc ("eOnline"). The Fund's
investment consists of 1,360,544 shares of Series C Convertible Preferred Stock
("Series C Preferred Stock") at $7.35 per share. The Fund also received 136,054
warrants to purchase 136,054 shares of Series C Preferred Stock at a purchase
price of $7.35 per share (as adjusted). The warrants expire at the earlier of
(i) May 26, 2003 or (ii) eOnline's Qualified Initial Public Offering ("Qualified
IPO").
eOnline delivers leading enterprise business applications in a hosted,
managed environment to provide end-to-end eBusiness solutions. eOnline is SAP
and Ariba certified and leads the market for SAP solutions in the application
service provider (ASP) model.
The Series C Preferred Stock ranks pari passu, with respect to liquidation
preference, to the Series A Preferred Stock and the Series B Preferred Stock and
senior to the Common Stock. In the event of a Qualified IPO, the Series C
Preferred Stock, as converted to Common Stock, will not be transferred in a
public distribution prior to one hundred and eighty days after the date of the
final prospectus used in such Qualified IPO.
INFOUSA.com
On June 2, 2000, the Fund entered into a $10,000,000 investment in a
Convertible Preferred Stock issue for INFOUSA.com. The Fund's investment
consists of 2,145,922 shares of Series B Convertible Preferred Stock ("Series
B Preferred Stock") at $4.66 per share.
INFOUSA.com provides comprehensive and accurate directory information plus
targeted mailing lists for Internet and wireless users. The INFOUSA.com site
provides customizable sales leads, business and consumer information and
database marketing services that enable businesses to compete more effectively.
The Series B Preferred Stock ranks pari passu, with respect to liquidation
preference, to the Series A Preferred Stock and senior to the Common Stock. In
the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series C
Preferred Stock, as converted to Common Stock, will not be transferred in a
public distribution prior to one hundred and eighty days after the date of the
final prospectus used in such Qualified IPO.
Endymion Systems, Inc.
On June 2, 2000, the Fund entered into a $7,000,000 investment in a
Convertible Preferred Stock issue for Endymion Systems, Inc. ("Endymion
Systems"). The Fund's investment consists of 7,156,760 shares of Series A
Convertible Preferred Stock ("Series A Preferred Stock") at $.9781 per share.
Endymion Systems is an information technology consultancy that provides
full-service e-commerce solutions to its clients. From computing environments,
networks and back-office applications to middleware and websites, Endymion
Systems assists customers in moving their business models to the Web.
The Series A Preferred Stock ranks senior, with respect to liquidation
preference, to the Series B Preferred Stock and the Common Stock. In the event
of a Qualified Initial Public Offering ("Qualified IPO"), the Series
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A Preferred Stock, as converted to Common Stock, will not be transferred in a
public distribution prior to one hundred and eighty days after the date of the
final prospectus used in such Qualified IPO.
EXP.com, Inc.
On June 6, 2000, the Fund entered into approximately a $10,000,000 investment
in a Convertible Preferred Stock issue for EXP.com, Inc. ("EXP"). The Fund's
investment consists of 1,748,252 shares of Series C Convertible Preferred Stock
("Series C Preferred Stock") at $5.72 per share.
EXP provides individuals seeking advice with access to qualified experts and
service providers in over 300 topic areas within the business, technology, and
personal interests categories. Their site attracts millions of visitors each
month, enabling interaction with experts via email, chat session, and phone.
The Series C Preferred Stock ranks senior, with respect to liquidation
preference, to the Common Stock and any series of Preferred Stock issued prior
to the Series C. In the event of a Qualified Initial Public Offering ("Qualified
IPO"), the Series C Preferred Stock, as converted to Common Stock, will not be
transferred in a public distribution prior to one hundred and eighty days after
the date of the final prospectus used in such Qualified IPO.
InfoImage, Inc.
On June 7, 2000, the Fund entered into a $2,004,480 investment in a
Convertible Preferred Stock issue for InfoImage, Inc. ("InfoImage"). The Fund's
investment consists of 432,000 shares of Series C Convertible Preferred Stock
("Series C Preferred Stock") at $4.64 per share. The Fund also received 259,200
warrants to purchase 259,200 shares of Series C Preferred Stock. The warrants
expire on the date of InfoImage's Qualified Initial Public Offering ("Qualified
IPO").
InfoImage has helped companies increase their decision-making efficiency with
intranet/extranet solutions using Web and collaborative technologies. The
cornerstone of its product and service offerings is InfoImage freedom, a
decision portal software product allowing access to structured and unstructured
data, advanced personalization, intuitive search, business intelligence and
collaboration tools. With the recent release of freedom 2, InfoImage teamed with
Microsoft Corp. to provide enterprise digital dashboard solutions that help
companies work more efficiently by consolidating key information from disparate
data sources into a unified desktop view.
The Series C Preferred Stock ranks senior, with respect to liquidation
preference, to the Common Stock and any series of Preferred Stock issued prior
to the Series C. In the event of a Qualified IPO, the Series C Preferred Stock,
as converted to Common Stock, will not be transferred in a public distribution
prior to one hundred and eighty days after the date of the final prospectus used
in such Qualified IPO.
AuctionWatch.com
On June 20, 2000, the Fund entered into a $5,500,000 investment in a
Convertible Preferred Stock issue for AuctionWatch.com ("AuctionWatch"). The
Fund's investment consists of 1,047,619 shares of Series C Convertible
Preferred Stock ("Series C Preferred Stock") at $5.25 per share.
AuctionWatch's services provide businesses with the tools and software
necessary to efficiently distribute merchandise and acquire customers, while
providing a convenient comparison-shopping service for buyers to locate and
purchase these products. AuctionWatch's services fall into three main
categories: seller services, buyer services, and post sale management solutions.
The Series C Preferred Stock ranks pari passu, with respect to liquidation
preference, to the Series A Preferred Stock and the Series B Preferred Stock and
senior to the Common Stock. In the event of a Qualified Initial Public Offering
("Qualified IPO"), the Series C Preferred Stock, as converted to Common Stock,
will not be transferred in a public distribution prior to one hundred and eighty
days after the date of the final prospectus used in such Qualified IPO.
FolioFN, Inc.
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On June 21, 2000, the Fund entered into a $15,000,000 investment in a
Convertible Preferred Stock issue for FolioFN, Inc. ("FolioFN"). The Fund's
investment consists of 5,802,259 shares of Series C Convertible Preferred Stock
("Series C Preferred Stock") at $2.59 per share.
FOLIOFN together with its wholly-owned brokerage subsidiary FOLIOFN
Investments, Inc. is harnessing the power of the Internet to enable individual
and smaller institutional investors to invest and trade better, smarter, and
easier. FOLIOFN's first product, FOLIO INVESTING, offers a whole new way to
invest and trade, combining many of the best qualities of mutual funds,
traditional brokerage services, and on-line trading. FOLIO INVESTING, lets
investors buy and sell personalized baskets of stocks - known as "FOLIOs".
The Series C Preferred Stock ranks pari passu, with respect to liquidation
preference, to any series of Preferred Stock issued prior to the Series C and
senior to the Common Stock. In the event of a Qualified IPO, the Series C
Preferred Stock, as converted to Common Stock, will not be transferred in a
public distribution prior to one hundred and eighty days after the date of the
final prospectus used in such Qualified IPO.
eYak, Inc.
On June 26, 2000, the Fund entered into a $10,000,000 investment in a
Convertible Preferred Stock issue for eYak, Inc. ("eYak"). The Fund's investment
consists of 2,590,674 shares of Series C Convertible Preferred Stock ("Series C
Preferred Stock") at $3.86 per share.
eYak is building the first native IP conferencing and enhanced services
platform that combines the power of the Internet with the quality of the
telephone. The company has two services groups: (i) Business Services, which
expects to become a leading provider of wholesale, enhanced teleconferencing
services and (ii) Internet Services, which expects to revolutionize online
communications.
The Series C Preferred Stock ranks pari passu, with respect to liquidation
preference, to any series of Preferred Stock issued prior to the Series C and
senior to the Common Stock. In the event of a Qualified Initial Public Offering
("Qualified IPO"), the Series C Preferred Stock, as converted to Common Stock,
will not be transferred in a public distribution prior to one hundred and eighty
days after the date of the final prospectus used in such Qualified IPO.
Annuncio Software, Inc.
On July 10, 2000, the Fund entered into a $5,000,000 investment in a
Convertible Preferred Stock issue for Annuncio Software, Inc. ("Annuncio"). The
Fund's investment consists of 625,000 shares of Series E Convertible Preferred
Stock ("Series E Preferred Stock") at $8.00 per share ("Original Issue Price").
Annuncio Software provides e-marketing software and services that enable
companies to turn prospects into customers and build the long-term, loyal
customer relationships that drive revenues and profitability. The Annuncio suite
of e-marketing applications allows business users to define, automate and
analyze marketing and e-merchandising campaigns and personalize Web sites and
Web stores.
The Series E Preferred Stock ranks senior, with respect to liquidation
preference, to the Common Stock and any series of Preferred Stock issued prior
to the Series E. In the event of a Qualified Initial Public Offering ("Qualified
IPO"), the Series E Preferred Stock, as converted to Common Stock, will not be
transferred in a public distribution prior to one hundred and eighty days after
the date of the final prospectus used in such Qualified IPO.
Pagoo, Inc.
On July 11, 2000, the Fund entered into approximately a $10,000,000
investment in a Convertible Preferred Stock issue for Pagoo, Inc. ("Pagoo"). The
Fund's investment consists of 3,412,969 shares of Series C Convertible Preferred
Stock ("Series C Preferred Stock") at $2.93 per share.
Pagoo is a leading provider of comprehensive Internet Protocol (IP)-based
voice solutions. The applications that Pagoo has developed and patented are the
first to make VoIP a true alternative to voice over traditional telephone
networks.
The Series C Preferred Stock ranks pari passu, with respect to liquidation
preference, to any series of Preferred Stock issued prior to the Series C and
senior to the Common Stock. In the event of a Qualified Initial Public Offering
("Qualified IPO"), the Series C Preferred Stock, as converted to Common Stock,
will not be
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transferred in a public distribution prior to one hundred and eighty days after
the date of the final prospectus used in such Qualified IPO.
8. SUBSEQUENT EVENTS
On August 31, 2000 the Fund entered into an investment of $7,000,000 of
Series D Preferred Stock of Cidera, Inc.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains certain statements of a forward-looking nature relating
to future events or the future financial performance of the Company and its
investment portfolio companies. Words such as "may," "will," "expect,"
"believe," "anticipate," "intend," "could," "estimate," "might," or "continue"
or the negative or other variations thereof or comparable terminology are
intended to identify forward-looking statements. Forward-looking statements are
included in this report pursuant to the "Safe Harbor" provision of the Private
Securities Litigation Reform Act of 1995. Such statements are only predictions
and the actual events or results may differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those relating
to investment capital demand, pricing, market acceptance, the effect of economic
conditions, litigation and the effect of regulatory proceedings, competitive
forces, the results of financing and investing efforts, the ability to complete
transactions and other risks identified below or in the Company's filings with
the Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events. The following analysis of the financial
condition and results of operation of the Company should be read in conjunction
with the Financial Statements, the Notes thereto and the other financial
information included elsewhere in this report.
GENERAL INVESTMENT CLIMATE
The overall investment climate was generally positive in the second quarter.
Because of the continued volatility in the public markets, a number of
attractive companies chose to seek further rounds of venture capital funding
rather than risk an initial public offering (IPO). Furthermore, given the
correction in publicly traded technology stock prices, the valuations of many
companies seeking additional financing were reasonable compared to March highs.
Uncertainty continues to affect publicly traded technology stocks, but we
believe that this uncertainty does not warrant the amount of negative press that
this sector has received from time to time. In our view, many companies that
received funding in 1999 did not have solid business models or survivability
strategies, and in many cases were brought to market prematurely. We believe
that this trend has now run its course. We do not believe, however, that the
pace of growth in new technologies and markets is decelerating. To the contrary,
we believe that it is accelerating and that new markets are being created,
leading to exciting investment opportunities. Looking forward, we also
anticipate an improvement in the IPO market. In our opinion, issues are now
being priced more attractively to encourage investors to revisit technology.
Against this background our favorite area remains telecommunications,
including wireless applications and Internet telephony. The Internet is rapidly
gaining global acceptance as the preeminent communications medium. There are
already an estimated 325 million users worldwide and industry analysts expect
this number to exceed 600 million in the next three years. As a result, the
growth in data traffic is driving very strong demand for communications
bandwidth - several leading carriers already estimate that the relative load of
data traffic exceeds voice traffic on their networks. But the existing networks
were not designed for data traffic. Continued development of technologies such
as DSL, cable modems and optical switching are crucial to meeting the growing
demand for high speed connections: connections capable of delivering rich
content such as streaming audio and video to businesses and homes. The demand
for data is not only confined to fixed line communications; the wireless sector
is also likely to benefit. We believe that the introduction of third generation
wireless service should lead to increasing opportunities in the mobile Internet
services sector.
RESULTS OF OPERATIONS
The Fund began operations upon the completion of an initial public offering
on March 31, 2000. Its principal investment objective is the realization of
long-term capital appreciation from investing primarily in equity and
equity-linked debt securities of private companies. Pending the completion of
equity and equity-linked debt security investments that meet the Fund's
investment objective, available funds are invested in short-
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term securities. Due to the Company's limited operating history, the Company's
financial performance at July 31, 2000 is primarily composed of interest on
temporary investments, net of the management fee accrual.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2000, the Fund had $100,504,475 of its net assets of $314,906,344
invested in portfolio securities of twelve companies and $214,679,903 of its net
assets invested in temporary cash investments consisting of Certificates of
Deposit, Commercial Paper, Money Market Funds, and US Government and Agency
Securities. Current balance sheet resources are believed to be sufficient to
finance any future commitments.
Net cash provided by operating activities was $1,977,503 for the three months
ended July 31, 2000 and $3,524,110 for the four months ended July 31, 2000.
Net investment income and net realized gains from the sales of portfolio
investments are intended to be distributed at least annually. Management
believes that its cash reserves and the ability to sell its investments in
publicly traded securities are adequate to provide payment for any expenses and
contingencies of the Fund.
The Fund reserves the right to retain net long-term capital gains in excess
of net short-term capital losses for reinvestment or to pay contingencies and
expenses. Such retained amounts, if any, will be taxable to the Fund as
long-term capital gains and shareholders will be able to claim their
proportionate share of the federal income taxes paid by the Fund on such gains
as a credit against their own federal income tax liabilities. Shareholders will
also be entitled to increase the adjusted tax basis of their Fund shares by the
difference between their undistributed capital gains and their tax credit.
INVESTMENT INCOME AND EXPENSES
Net investment income after all expenses amounted to $2,272,992 for the three
months ended July 31, 2000 and $3,246,118 for the four months ended July 31,
2000.
The Adviser receives management fee compensation at an annual rate of 2.5% of
the average weekly net assets of the Fund, paid monthly in arrears. Such fees
amounted to $1,971,996 for the three months ended July 31, 2000 and $2,632,928
during the four months ended July 31, 2000.
REALIZED GAINS AND LOSSES ON SALES OF PORTFOLIO SECURITIES
The Fund realized a net capital loss of $42 from the sale of securities
during the three months ended July 31, 2000 and the same net capital loss of $42
from the sale of securities for the four months ended July 31, 2000.
UNREALIZED APPRECIATION AND DEPRECIATION OF PORTFOLIO SECURITIES
The Fund had a net unrealized appreciation of $14,752 for the three months
ended July 31, 2000. The Fund had a net unrealized appreciation on investments
amounting to $10,268 during the four months ended July 31, 2000. Such net
increase resulted from increases in the market value of the securities of the
Fund's investment in Associates Corp North America Bond, 5.875%, due May 16,
2001, General Motors Acceptance Corp, 6.62% due January 16, 2001, and Bank Nova
Scotia, 6.695%, due February 12, 2001 aggregating in $33,114 and decreases in
the market value of the securities of the Fund's investment in the Federal Farm
Credit Bank Bond, 5.125%, due April 2, 2001 and the Federal National Mortgage
Association Discount Note, due October 5, 2000 aggregating in $22,846.
DIVIDENDS
No dividends were declared for the four months ended July 31, 2000.
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PORTFOLIO INVESTMENTS
At July 31, 2000 the cost of equity and equity-linked security investments
made by the Fund to date was $100,504,475 and their aggregate market value was
unchanged at $100,504,475. Management believes the companies identified have
significant potential for long-term growth in sales and earnings. The
Sub-Adviser continuously evaluates opportunities to maximize the valuation of
its investments. In that regard, the Adviser will periodically evaluate
potential acquisitions, financing transactions, initial public offerings,
strategic alliances, and sale opportunities involving the Fund's portfolio
companies. These transactions and activities are generally not disclosed to the
Fund's shareholders and the investing public until such time as the transactions
are publicly announced or completed, as the case may be. However, any such
pending transaction could have an impact on the valuation of an investment which
may be adjusted prior to the transaction being publicly announced or completed.
SUBSEQUENT EVENTS
On August 31, 2000 the Fund entered into an investment of $7,000,000 of
Series D Preferred Stock of Cidera, Inc.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Fund is subject to financial market risks, including changes in interest
rates with respect to its investments in debt securities as well as changes in
marketable equity security prices. The Fund does not use derivative financial
instruments to mitigate any of these risks. The return on the Fund's investments
is generally not affected by foreign currency fluctuations.
The Fund's investment in portfolio securities consists of some fixed rate
debt securities. Since the debt securities are generally priced at a fixed rate,
changes in interest rates do not directly impact interest income. The Fund's
debt securities are generally held to maturity and their fair values are
determined on the basis of the terms of the debt security and the financial
condition of the issuer.
Concentrations of market and credit risk exist with respect to debt and
equity investments in portfolio companies which are subject to significant risk
usual to companies in various stages of start-up. Generally, there is no ready
market for the Fund's investments, as they are closely held, generally not
publicly traded or, in circumstances where an investment is publicly traded, the
Fund may be subject to certain trading restrictions for a specified period of
time.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The required Exhibits are included in this Form 10-Q or have been
previously filed in the Company's Registration Statement on Form N-2
(Reg. No. 333-92287).
(b) Reports on Form 8-K
During the quarter ended July 31, 2000, the Fund filed one report on
Form 8-K, dated June 29, 2000, to report the June 26, 2000
commencement of trading of its shares on the New York Stock Exchange.
EXHIBIT INDEX
Exhibit 27 Financial Data Schedule
Only submitted to SEC in electronic format
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed by the
undersigned, thereunto duly authorized.
MEVC DRAPER FISHER JURVETSON FUND I, INC.
Date: September 12, 2000 /s/ JOHN M GRILLOS
-------------------------------------------
John M. Grillos
Chairman, Chief Executive Officer, Director
Date: September 12, 2000 /s/ PAUL WOZNIAK
-------------------------------------------
Paul Wozniak
Vice President, Treasurer, Chief Financial Officer
21
