<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 2000
1933 ACT FILE NO.
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM N-2
(Check Appropriate Box or Boxes)
/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No.
/ / Post-Effective Amendment No.
-----------------------------
MEVC DELTA LIFE SCIENCES FUND I, INC.
(Exact name of registrant as specified in charter)
991 FOLSOM STREET, SUITE 301
SAN FRANCISCO, CA 94107
(Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
-----------------------------
(877) 474-6382
(Registrant's Telephone Number, Including Area Code)
------------------------------
ANDREW E. SINGER
meVC DELTA LIFE SCIENCES FUND I, INC.
991 FOLSOM STREET, SUITE 301
SAN FRANCISCO, CA 94107
(Name and Address (Number, Street, City, State, Zip Code) of Agent For Service)
------------------------------
COPIES TO:
R. Charles Miller Robert M. Smith
Kirkpatrick & Lockhart LLP Dewey Ballantine LLP
1800 Massachusetts Avenue, N.W. 333 South Hope Street
Washington, D.C. 20036-1800 Los Angeles, CA 90071-1406
------------------------------
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this Form will be offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933,
other than securities offered in connection with a dividend
reinvestment plan, check the following box. / /
It is proposed that this filing will become effective (check appropriate box):
/X/ when declared effective pursuant to Section 8(c).
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
-------------------------------------------- ------------------- -------------------- ---------------------- ------------------
Proposed Maximum
Aggregate Proposed Maximum
Title of Amount Being Offering Price Aggregate Offering Amount of
Securities Being Registered Registered Per Unit Price (1) Registration Fee
-------------------------------------------- ------------------- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 5,000,000 $20.00 $100,000,000 $26,400
-------------------------------------------- ------------------- -------------------- ---------------------- ------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
------------------------------
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
------------------------------------------------------------------------------
<PAGE>
meVC DELTA LIFE SCIENCES FUND I, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
NO. DESCRIPTION LOCATION
PART A--INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Outside Front Cover Outside Front Cover
Item 2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover
Item 3. Fee Table and Synopsis Fee Table and Synopsis
Item 4. Financial Highlights Not Applicable
Item 5. Plan of Distribution Underwriting
Item 6. Selling Shareholders Not Applicable
Item 7. Use of Proceeds Use of Proceeds
Item 8. General Description of the Registrant Outside Front Cover Page; Prospectus Summary; Business; Risk
Factors
Item 9. Management Management; Directors and Officers; The Investment Adviser;
The Investment Sub-Adviser; Potential Conflicts of Interest
(SAI); Risk Factors
Item 10. Capital Stock, Long-Term Debt and Other Description of Capital Stock; Distributions; Dividend
Securities Reinvestment Plan
Item 11. Defaults and Arrears on Senior Securities Not Applicable
Item 12. Legal Proceedings Not Applicable
Item 13. Table of Contents of the Statement of Table of Contents of the Statement of Additional Information
Additional Information
<CAPTION>
PART B--INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<S> <C> <C>
Item 14. Cover Page Cover Page (SAI)
Item 15. Table of Contents Table of Contents of the Statement of Additional Information
(SAI)
Item 16. General Information and History Not Applicable
Item 17. Investment Objective and Policies Prospectus Summary; Investment Objective and Principal
Strategies; Risk Factors; Business; Investment Company Act
Regulation; Investment Policies (SAI); Investment Company Act
Regulation (SAI)
Item 18. Management Management (Item 9)
Item 19. Control Persons and Principal Holders of Management; The Investment Adviser; The Investment
Securities Sub-Adviser; Potential Conflicts of Interest (SAI)
Item 20. Investment Advisory and Other Services The Investment Adviser; The Investment Sub-Adviser; Transfer
Agent and Registrar; Dividend Disbursing Agent; Custodian;
Sub-Administrator (SAI)
i
<PAGE>
<CAPTION>
NO. DESCRIPTION LOCATION
<S> <C> <C>
Item 21. Brokerage Allocation and Other Practices Fee Table and Synopsis; Prospectus Summary; The Offering;
Underwriting
Item 22. Tax Status Distributions; Federal Income Tax Matters (SAI)
Item 23. Financial Statements Statement of Assets and Liabilities
</TABLE>
PART C--OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
ii
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
FUND MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS Subject to completion May 30, 2000
--------------------------------------------------------------------------------
_______ SHARES
meVC DELTA LIFE SCIENCES FUND I, INC.
A VENTURE CAPITAL AND PRIVATE EQUITY FUND
COMMON STOCK
--------------------------------------------------------------------------------
meVC Delta Life Sciences Fund I, Inc., or the Fund, is offering up to ________
shares of its common stock. We are a closed-end investment company that has
elected to be treated as a business development company under the Investment
Company Act. Our investment objective is long-term capital appreciation
primarily from venture capital, private equity and structured investments in
life sciences companies, including those focused in the biotechnology, genomics,
proteomics, pharmaceuticals, medical devices, drug delivery, diagnostics,
predictive medicine and healthcare information technology sectors. We may invest
a portion of the Fund's assets in other high growth sectors outside the scope of
our stated objective, but generally, we will invest in companies that we believe
have high growth potential over the long term.
You must purchase a minimum of 100 of our shares to participate in this
offering. There is currently no public market for our shares. We intend to apply
for authorization to list our shares on the New York Stock Exchange under the
symbol [HVC]. We also intend to apply for a delay of trading for 90 days from
the date of the offering. Prior to this date, the underwriters do not intend to
make a market in our shares, although we cannot be certain that a limited market
will not develop. Consequently, an investment in our shares will be illiquid, at
least in the short term. Additionally, the stock of closed-end investment
companies frequently trades at a discount to net asset value and we cannot
assure you that our stock will not also be discounted in the market. Due to a
variety of factors, including our lack of prior operating history, the
substantial risk associated with the portfolio companies in which we intend to
invest, the illiquid nature of a substantial majority of our portfolio company
investments and the uncertainty associated with valuing our portfolio
investments, an investment in our stock involves a high degree of risk. You
could lose some or all of your investment.
BEFORE BUYING ANY SHARES, YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS
OF INVESTING IN SHARES OF OUR COMMON STOCK IN "RISK FACTORS" BEGINNING ON
PAGE.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
accuracy or adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
<TABLE>
<CAPTION>
PER SHARE TOTAL
-----------------------------------------------------------------------------
<S> <C> <C>
PUBLIC OFFERING PRICE $ $
----------------------------------------------------------------------------
SALES LOAD $ $
----------------------------------------------------------------------------
PROCEEDS, BEFORE EXPENSES, TO THE FUND $ $
----------------------------------------------------------------------------
</TABLE>
The underwriters may purchase up to additional shares at the public offering
price, less sales load, solely to cover over-allotments, if any. If this option
is exercised in full, the total public offering price, sales load and proceeds
before expenses to the Fund will be $ , $ and $ , respectively.
The underwriters are offering the common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about , 2000.
UBS WARBURG LLC
<PAGE>
Through and including , 2000 (the 25th day after commencement of this
offering), federal securities law may require all dealers selling shares of our
common stock, whether or not participating in this offering, to deliver a
prospectus. This delivery requirement is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
TABLE OF CONTENTS
Prospectus summary..............................
The offering....................................
Fee table and synopsis..........................
Risk factors....................................
Forward looking statements......................
Use of proceeds.................................
Business........................................
Investment objective and principal strategies...
Management......................................
Directors and officers..........................
Investment adviser..............................
Investment sub-adviser..........................
Valuation of portfolio securities...............
Investment Company Act regulation...............
Description of capital stock....................
Distributions...................................
Dividend reinvestment plan......................
Underwriting....................................
Legal matters...................................
Experts.........................................
Table of contents of the statement
of additional information.................
Additional information..........................
Report of independent accountants...............
Financial statements............................
Appendix: "Meet the Management"
presentation.................................
--------------------------------------------------------------------------------
THIS PROSPECTUS CONCISELY PROVIDES THE INFORMATION THAT YOU SHOULD KNOW BEFORE
INVESTING IN SHARES OF OUR COMMON STOCK. YOU SHOULD READ THIS PROSPECTUS
CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE. WE HAVE INCLUDED MORE INFORMATION
ABOUT US IN A STATEMENT OF ADDITIONAL INFORMATION, OR SAI, THAT WE HAVE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SAI IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. WE HAVE INCLUDED THE TABLE OF CONTENTS OF THE
SAI ON PAGE [ ] . YOU MAY OBTAIN A COPY OF THE SAI FREE OF CHARGE BY WRITING TO
US AT 991 FOLSOM STREET, SUITE 301, SAN FRANCISCO, CALIFORNIA 94107, ATTN:
SECRETARY, OR BY CALLING (877) 474-6382. THE PROSPECTUS AND SAI WILL BE
AVAILABLE ON OUR WEBSITE AT [ ] AND ARE AVAILABLE ON THE SEC'S WEBSITE AT
HTTP://www.sec.gov. THE INFORMATION ON THE WEBSITE OF THE PARENT COMPANY OF OUR
INVESTMENT ADVISER, HTTP: //www.meVC.com, IS NOT A PART OF THIS PROSPECTUS.
--------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS AND THE SAI. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT OFFERING SHARES OF OUR
COMMON STOCK FOR SALE IN ANY JURISDICTION WHERE SUCH OFFER OR SALE IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE ON ANY DATE OTHER THAN THE DATE SET FORTH ON THE FRONT COVER OF THIS
PROSPECTUS.
--------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This
summary is not complete and is not intended to contain all of the information
that investors should consider before investing in our shares. You should read
the entire prospectus carefully before purchasing our shares.
THE FUND
We are a newly organized, closed-end investment company that has elected to be
treated as a business development company under the Investment Company Act. Our
investment adviser is meVC Advisers, Inc., or meVC Advisers. Our investment
sub-adviser is Diaz, Altschul & Enright Advisers, LLC, or DAE Advisers. meVC
Advisers is a registered investment adviser under the Investment Advisers Act.
DAE Advisers has filed an application with the Securities and Exchange
Commission to register as an investment adviser under the Investment Advisers
Act.
meVC Advisers will set our strategic and operational direction and will
oversee the management of the Fund through the activities of DAE Advisers.
meVC Advisers will also manage our day-to-day operations, including our
accounting, finance, marketing, record-keeping and regulatory compliance
efforts.
DAE Advisers will identify, structure and negotiate investments for the
Fund, as well as monitor and assist our portfolio companies in the
accomplishment of their operating objectives. The managing
members of DAE Advisers are Reinaldo M. Diaz, Arthur G. Altschul, Jr., and
Patrick G. Enright. They have over 40 years of investment experience, including
experience investing in venture stage companies, as well as entrepreneurial,
professional and managerial experience in the life sciences industry. They have
served on numerous boards of directors and have gained experience building
venture and development stage companies into successful enterprises. Through
their experience as fund managers, principal investors and operating executives,
they have developed an extensive network of contacts throughout the industry
that is expected to generate numerous investment opportunities. Moreover, they
have extensive understanding of the capital markets for life sciences companies,
as well as direct experience investing in common stock, structured equity and
debt of venture and development stage publicly-traded companies. The managing
members of DAE Advisers are also the investment advisers to the Delta Funds, a
group of private investment funds with approximately $100 million in assets. The
Delta Funds focus on making investments in healthcare and life sciences
companies. Since 1996, the managing members of DAE Advisers have structured over
$250 million in investments.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is long-term capital appreciation primarily from
venture capital, private equity and structured investments in life sciences
companies, including those focused in the biotechnology, genomics, proteomics,
pharmaceuticals, medical devices, drug delivery, diagnostics, predictive
medicine and healthcare information technology sectors. Venture capital
investments are typically long-term investments in companies with high growth
potential whose stock is not publicly traded. Private equity investments, in
addition to traditional venture capital investments, include investments in the
assets or securities of operating companies at a later stage of development
through, for example, leveraged buy-outs, roll-ups and going private
transactions. Structured investments are generally long-term investments in
publicly-traded or privately-held companies that are intended to offer
greater protection of principal, such as debt securities whose principal
amount is collateralized by assets owned by the issuer. We may invest up to
25% of the Fund's assets in other high growth sectors outside the scope of
our stated objective, but generally, we will invest in companies that we
believe have high growth potential over the long term. Potential portfolio
companies will be screened according to prescribed investment criteria and
further assessment of all prospects' technologies, products, target markets
and management teams will also be conducted as needed.
After selecting our portfolio companies, we will seek to enhance the value of
portfolio companies particularly through the application of the experience of
managing members of DAE Advisers as investors and as operating executives. In
particular, we plan to use our extensive relationships throughout the life
sciences industry to facilitate strategic initiatives such as mergers and
partnerships, raising capital, attracting key employees, and other value-added
activities.
<PAGE>
INVESTMENT RATIONALE
Life sciences is a dynamic and innovative industry which spans many sectors
and utilizes numerous areas of science and technology. Several of these
sectors have significant impact on the U.S. economy. For example, the
healthcare sector represents about 14% of the U.S. Gross Domestic Product,
with approximately $1.3 trillion in annual outlays. Life sciences sectors
include biotechnology, genomics, proteomics, pharmaceuticals, medical
devices, drug delivery, diagnostics, predictive medicine and healthcare
information technology. We believe the life sciences industry has strong
growth potential driven by the need for new medical treatments, improved
diagnostic tools and more efficient information processing systems. We
believe technological innovation in the life sciences will continue to create
many attractive investment opportunities. We cannot assure you, however, that
we will achieve our investment objective or that the performance of the
companies in which we make investments will be as anticipated.
HISTORICAL PERFORMANCE OF VENTURE CAPITAL AND PRIVATE EQUITY FUNDS
Based upon information provided by Venture Economics, the venture capital and
private equity industries have experienced long-term returns that have generally
outperformed the S&P 500 Index over a one, five and ten year period. According
to Venture Economics, for all reporting private equity funds formed between 1989
and 1999, the historical annual rate of return, net of fees and expenses, as of
December 31, 1999 was as follows:
<TABLE>
<CAPTION>
1 YEAR RETURN 5 YEAR RETURN 10 YEAR RETURN
----------------------------------------------------------------
<S> <C> <C> <C>
Later Stage Venture Capital (1)(2).............. 76.3% 36.5% 33.0%
Balanced Venture Capital (1)(3)................. 144.5% 48.4% 33.0%
All Venture Capital (1)(4)...................... 164.1% 53.9% 36.9%
Other Private Equity (1)(5)........................ 30.5% 19.0% 20.1%
-----------------------------------------------------------------------------------------------------------------
All Venture Capital and Private Equity (1)(6)...... 70.5% 31.4% 27.3%
S&P 500 Index (7)............................... 21.0% 28.6% 18.2%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
-----------------
(1) The venture capital and private equity return figures were calculated by
Venture Economics, a division of Thomson Financial Securities Data. These
figures represent the pooled internal rates of return of venture capital
and private equity funds, or pooled IRR. Unlike the S&P 500 Index, pooled
IRR is a method of calculating an aggregate internal rate of return for a
group of venture capital and private equity funds by summing cash flows
together and calculating the internal rate of return on the portfolio cash
flow. These benchmarks include all funds formed between 1989 and 1999 as of
December 31,1999. Data is net of fees and carried interest.
(2) Later stage venture capital funds generally focus their investments on
mezzanine and expansion rounds of financing.
(3) Balanced venture capital funds invest in all stages of venture financing,
including seed, mezzanine and expansion rounds.
(4) The all venture capital category includes any fund focused on any stage of
venture capital investing including seed, expansion and mezzanine rounds.
(5) The other private equity category includes mezzanine debt funds and
leveraged buy-out funds. Typically, a mezzanine debt fund's investment
strategy involves subordinated debt, or the level of financing senior to
equity and below senior debt. And generally, a leveraged buy-out fund's
investment strategy involves the acquisition of a product or business, from
either a public or private company, utilizing a significant amount of debt
and little or no equity.
(6) The all venture capital and private equity category includes all funds that
invest in the private sector whether their focus is in traditional venture
capital or other forms of private equity.
(7) S&P 500 Index as of December 31, 1999, according to Standard & Poor's.
Past performance of the venture capital industry is not necessarily
indicative of that sector's future performance, nor is it a proxy for predicting
the returns of the Fund. In particular, because of recent market conditions
specifically in the technology sector, one year return information may not
accurately reflect future one year rates of return. The Fund will invest
primarily in the life sciences industry, whereas these general indices reflect
the return of investments in a broader range of industries. We cannot guarantee
that we
5
<PAGE>
will meet the rates of return historically realized by the venture
capital and private equity industries. Moreover, our overall return will be
reduced by certain factors related to our structure as a publicly-traded
business development company. Such factors include the lower return we are
likely to realize on short-term liquid investments during the period in which
we are identifying potential investments, as compared to many venture capital
and private equity funds that draw capital from investors periodically to make
investments and do not commit significant capital to short-term liquid
investments. In addition, periodic disclosure is required of business
development companies, which could result in the Fund being less attractive as
an investor to certain potential portfolio companies.
COMPENSATION OF INVESTMENT ADVISER AND INVESTMENT SUB-ADVISER
As compensation for its investment advisory, management and administrative
services, we have agreed to pay meVC Advisers an annual management fee equal to
2.5% of our average weekly net assets, payable in monthly installments. We have
also agreed to pay meVC Advisers annual incentive compensation equal to 20% of
our annual realized capital gains net of realized and unrealized capital losses.
Payment of this type of incentive compensation, referred to as a "carried
interest," is typical in the venture capital and private equity industries.
Carried interest payments provide an economic incentive for venture capital and
private equity fund managers to select investments with the potential to achieve
the greatest appreciation over time. We believe that payment of a carried
interest is an important component of our ability to attract and retain high
quality fund managers.
As payment for its services as our investment sub-adviser, meVC Advisers has
agreed to pay DAE Advisers 40% of the management fee, or an annual fee equal
to 1.0% of our average weekly net assets, payable in monthly installments.
meVC Advisers has also agreed to pay DAE Advisers additional compensation
equal to 85% of any carried interest payment, or a carried interest equal to
17% of our annual realized capital gains net of realized and unrealized
capital losses.
CLOSED-END FUND STRUCTURE
We are a newly organized, non-diversified closed-end fund. Closed-end funds
differ from open-end funds (which are commonly referred to as mutual funds) in
that closed-end funds generally list their shares for trading on a stock
exchange and do not redeem their shares at the request of a shareholder. With a
mutual fund, shares may be redeemed or bought back by the mutual fund at net
asset value if a shareholder wishes to sell the shares of the fund. With a
closed-end fund, if you wish to sell your shares you must trade them on the
market like any other stock at the price prevailing in the market for the shares
at that time. Trading in our shares will commence not later than 90 days from
the date of the offering. Prior to this date, the underwriters do not intend to
make a market in our shares, although we cannot be certain that a limited market
will not develop. Also, mutual funds generally offer new shares of the fund on a
continuous basis to new investors, whereas closed-end funds do not. In addition,
shares of closed-end funds frequently trade at a discount to their net asset
value. In particular, our shares may trade at a discount even greater than other
closed-end funds since we may not realize a return on our investments for a
considerable amount of time.
LIQUIDATION
Although it has no plan or obligation to do so, our Board of Directors may
elect to liquidate the Fund and distribute to our stockholders any proceeds in
cash or securities after ______ , 2010.
ADDITIONAL INFORMATION
We were incorporated in Maryland on May 19, 2000. Our executive offices
are located at 991 Folsom Street, Suite 301, San Francisco, California 94107 and
our telephone number is (877) 474-6382. Our website address is [ ]. The
information contained on the website of the parent of our investment adviser,
HTTP:// www.meVC.com, is not a part of this prospectus.
6
<PAGE>
THE OFFERING
Shares offered by the Fund........... 5,000,000 shares
Minimum investment................... 100 shares
Investment objective................. Our investment objective is long-term
capital appreciation primarily from
venture capital, private equity and
structured investments in life sciences
companies, including those focused in
the biotechnology, genomics, proteomics,
pharmaceuticals, medical devices, drug
delivery, diagnostics, predictive
medicine and healthcare information
technology sectors. Venture capital
and private equity investments are
typically long-term investments in
companies with a high growth potential
whose stock is not publicly traded.
Structured investments are generally
long-term investments in publicly-traded
or privately-held companies. These
investments are structured using various
financial vehicles in attempts to
provide attractive returns with a
reduced risk of loss of principal. We
may invest up to 25% of the Fund's
assets in investments outside the scope
of our investment objective, including
investments in public and private
companies in other high growth sectors
that we believe have high growth
potential over the long term.
Investment advisory services......... Our investment adviser is meVC Advisers
and our investment sub-adviser is DAE
Advisers.
Principal strategies................. meVC Advisers and DAE Advisers will use
the following principal strategies to
achieve our investment objective:
- emphasize investments in life
sciences companies, primarily in the
biotechnology, genomics, proteomics,
pharmaceuticals, medical devices,
drug delivery, diagnostics,
predictive medicine and healthcare
information technology sectors;
- utilize a flexible model by investing
in venture capital, private equity
and structured financings, with an
emphasis on mezzanine and expansion
round financing as well as other
private investments in later-stage
companies with publicly-traded
shares;
- exercise investment discipline
through extensive due diligence,
diversification and active monitoring
of portfolio companies;
- invest in companies in which
technology risk has been well-defined
and in which we can either identify
value that is not recognized by
others or invest at a valuation that
is low relative to the potential
return of the investment; and
- enhance the competitiveness of
portfolio companies by offering to
provide managerial assistance.
Use of proceeds...................... We will use the net proceeds from the
offering to invest in portfolio
companies in accordance with our
investment objective and strategies. We
plan to reserve approximately 20% of the
net offering proceeds for follow-on
investments and future management fees.
Our intention is to invest the net
proceeds after reserves in accordance
with our investment objective at the
following rate: approximately 10% to 20%
at or about six months from the offering
date, approximately 25% to
7
<PAGE>
50% at or about one year from the
offering date, approximately 75% at or
about two years from the offering date,
and full investment at or about three
years from the offering date. There can
be no assurances that the Fund will be
able to achieve its targeted investment
pace.
Distributions........................ We will distribute at least annually a
minimum of 90% of the net dividend and
interest income we receive from
short-term investments. During the
period in which we are evaluating and
selecting portfolio companies in which
to invest, we will invest our capital
primarily in short-term investment grade
securities. These investments will
generate interest income for
distribution. However, as we invest the
proceeds of this offering in portfolio
companies, we will have less interest
income available for distribution.
Generally, we intend to distribute
realized capital gains, net of realized
and unrealized capital losses and fees
and expenses, that we generate. In
addition, if a portfolio company is
sold, merged or goes public, we may
distribute cash or stock in either the
portfolio company or the acquiring
company. The timing of capital gains
distributions will vary depending on
when we liquidate our investments in
individual portfolio companies.
Suitability requirements............. An investment in our shares involves a
considerable amount of risk. Because it
is possible that you may lose some or
all of your investment, you should not
invest in our shares unless you can
afford a total loss of your investment.
Prior to making your investment
decision, you should (i) consider the
suitability of this investment with
respect to your investment objectives
and personal situation, (ii) consider
factors such as your personal net worth,
income, age, risk tolerance and
liquidity needs, and (iii) consult your
broker and financial adviser to
determine whether the risk profile of
your account is suitable for this
investment.
Listing on national exchange......... We intend to apply for authorization to
list our shares on the New York Stock
Exchange under the symbol [HVC]. We also
intend to apply for a delay of trading
for 90 days from the date of the
offering. Until such time it may be
difficult, if not impossible, for you to
sell your shares.
RISK FACTORS
Purchasing shares of our common stock carries significant of losing some
or all of your investment. Prior to investing in our stock, should consider the
risk factors described on pages to of this prospectus the impact of events that
could adversely affect our business.
8
<PAGE>
FEE TABLE AND SYNOPSIS
You can expect to bear, directly or indirectly, the following costs and expenses
in connection with an investment in shares of our common stock.
OFFERING EXPENSES
STOCKHOLDER TRANSACTION EXPENSES (1)
TRANSACTION EXPENSES (AS A PERCENTAGE OF THE OFFERING PRICE PER SHARE)
<TABLE>
<S> <C>
Sales load............................................................. 5.0%
Dividend Reinvestment Plan fees........................................ None
-----
TOTAL STOCKHOLDER TRANSACTION EXPENSES............................. 5.0%
=====
</TABLE>
-------------------------
(1) Does not include organizational and offering expenses, which are
estimated to be approximately [ ], and which will be shared by meVC
Advisers and the Fund.
ANNUAL EXPENSES
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<S> <C>
Management fee to meVC Advisers (2)..................................... 2.5%
-----
TOTAL ANNUAL EXPENSES............................................... 2.5%
</TABLE>
--------------------------
(2) meVC Advisers has agreed to pay DAE Advisers 40% of this amount, or an
annual fee equal to 1.0% of our average weekly net assets payable in
monthly installments. See "Investment Adviser" and "Investment
Sub-Adviser."
(3) "Other expenses" have been estimated for the current year.
In addition to the management fee, we have agreed to pay meVC Advisers annual
incentive compensation equal to 20% of our annual realized capital gains, net of
realized and unrealized capital losses. In exchange for the services rendered by
DAE Advisers, meVC Advisers has agreed to pay DAE Advisers 85% of the incentive
compensation it receives from the Fund or a carried interest equal to 17% of the
Fund's annual realized capital gains net of realized and unrealized capital
losses. See "Investment Adviser" and "Investment Sub-Adviser."
EXAMPLE OF COSTS AND EXPENSES CALCULATION
THE FOLLOWING EXAMPLE DOES NOT INCLUDE CARRIED INTEREST COMPENSATION, WHICH
IS TIED TO OUR GENERATION OF NET CAPITAL GAINS ON OUR INVESTMENTS.
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Assuming a 5% annual return, you can expect to pay the
following cumulative amounts in management fees
on a $1,000 investment.........................................$26 $81 $138 $292
</TABLE>
Our actual rate of return may be greater or less than the hypothetical 5% return
used above. The 5% return is merely a hypothetical return that is required by
law to be used to demonstrate the costs and expenses of an investment in shares
of our common stock, and does not reflect our expectation of the actual return
that you may or may not realize from an investment in our shares.
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<PAGE>
RISK FACTORS
You should carefully consider the following risk factors in addition to the
other information set forth in this prospectus before purchasing our
shares. Purchasing shares of our common stock carries significant risk of
losing some or all of your investment.
RISKS OF THIS INVESTMENT
INVESTING IN OUR STOCK IS HIGHLY SPECULATIVE AND YOU COULD LOSE SOME OR ALL OF
THE AMOUNT YOU INVEST.
The value of our common stock may decline and may be affected by numerous market
conditions, which could result in the loss of some or all of your investment in
our shares. The securities markets frequently experience extreme price and
volume fluctuation that affect market prices for securities of companies in
general, and life sciences companies in particular. Because of our focus on the
life sciences industry, our stock price is likely to be impacted by these market
conditions. General economic conditions, and general conditions in the life
sciences industries, will also affect our stock price.
INVESTING IN OUR SHARES MAY NOT BE APPROPRIATE FOR YOUR RISK TOLERANCE.
The Fund's investments, in accordance with its investment objective and
principal strategies, may result in an above average amount of risk and
volatility or loss of principal. Our investments in portfolio companies may be
highly speculative and aggressive, and therefore, an investment in our shares
may not be appropriate for your risk tolerance.
RISKS OF VENTURE CAPITAL INVESTING
THE INABILITY OF OUR PORTFOLIO COMPANIES TO COMMERCIALIZE THEIR TECHNOLOGY,
CREATE OR DEVELOP COMMERCIALLY VIABLE PRODUCTS OR SUCCESSFULLY MARKET
THESE PRODUCTS WOULD HAVE A NEGATIVE IMPACT ON OUR INVESTMENT RETURNS.
The possibility that our portfolio companies will not be able to commercialize
their products and technologies presents significant risk. Thus, the ultimate
success of these companies often depends on their ability to continually
innovate in increasingly competitive markets. Additionally, even if our
portfolio companies are able to develop commercially viable products, the
markets for new products and services are highly competitive and rapidly
changing. Commercial success is difficult to predict and the marketing efforts
of our portfolio companies may not be successful. Their inability to do so could
adversely affect our investment returns.
AN INVESTMENT STRATEGY FOCUSED PRIMARILY ON PRIVATELY-HELD COMPANIES PRESENTS
CERTAIN CHALLENGES, INCLUDING A LACK OF AVAILABLE INFORMATION ABOUT THESE
COMPANIES AND A GREATER VULNERABILITY TO ECONOMIC DOWNTURNS.
We intend to invest primarily in privately-held companies and other securities
that are not publicly-traded. Generally, very little public information exists
about these companies and we will be required to rely on the ability of the
members of DAE Advisers to obtain information about these companies. Also,
privately-held companies frequently have less diverse product lines and smaller
market presence than larger competitors. They are thus generally more vulnerable
to economic downturns and may experience substantial variations in operating
results. These factors could adversely affect our investment returns.
OUR PORTFOLIO COMPANIES WILL LIKELY HAVE SIGNIFICANT COMPETITION, BOTH FROM
OTHER EARLY-STAGE COMPANIES AND MORE ESTABLISHED COMPANIES.
Emerging growth companies often face significant competition, both from other
early-stage companies and from more established companies. Early-stage
competitors may have strategic capabilities such as an innovative management
team or an ability to react quickly to changing market conditions, while more
established companies, such as large pharmaceutical companies, may possess
significantly more experience and greater financial resources than our portfolio
companies. These factors could adversely affect our investment returns.
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<PAGE>
OUR INVESTMENT RETURNS WILL DEPEND ON THE SUCCESS OF OUR PORTFOLIO COMPANIES
AND, ULTIMATELY, THE ABILITIES OF THEIR KEY PERSONNEL.
Our success will depend upon the success of our portfolio companies. Their
success, in turn, will depend in large part upon the abilities of their key
personnel. The day-to-day operations of our portfolio companies will remain the
responsibility of their key personnel. Our portfolio companies may not be able
to attract and retain qualified managers and personnel. Any inability to do so
may adversely impact our investment returns.
SOME OF OUR PORTFOLIO COMPANIES MAY NEED ADDITIONAL CAPITAL, WHICH MAY NOT BE
READILY AVAILABLE.
Companies in which we make seed or expansion round investments will often
require substantial additional equity financing to satisfy their continuing
capital requirements. Each round of venture or private equity financing is
typically intended to provide a company with only enough capital to reach the
next stage of development. We cannot predict the circumstances or market
conditions under which our portfolio companies will seek additional capital. It
is likely that one or more of our portfolio companies will not be able to raise
additional financing or may be able to do so only at a price or on terms which
are unfavorable, either of which could adversely impact our investment returns.
RISKS OF THE LIFE SCIENCES INDUSTRY
THE FUND IS CONCENTRATED AND WILL INVEST THE MAJORITY OF ITS ASSETS IN THE LIFE
SCIENCES INDUSTRY.
Because we intend to invest a majority of the Fund's assets in life sciences
companies, you should be aware of certain special considerations and risk
factors relating to investment in such companies. These risks include intense
competition, rapid technological change and obsolescence, and pervasive
regulatory requirements of federal and state governments. Accordingly, in
addition to the risks associated with any strategy seeking capital appreciation,
the Fund's portfolio will bear the additional risks that many life sciences
companies may be subject to, and may be adversely affected by some of the same
general trends relating to demand for products and services. An investment in
the Fund should not be considered a balanced investment program and is intended
to represent a part of a more complete investment program.
THE LIFE SCIENCES INDUSTRY DEPENDS EXTENSIVELY ON THE DEVELOPMENT OF NEW
PRODUCTS AND TECHNOLOGIES.
Certain sectors within the life sciences industry are characterized by rapidly
changing technologies. These changes may render existing products and
technologies obsolete. Unanticipated problems may arise in connection with the
development of new products or technologies, and many such efforts may be
ultimately unsuccessful. Delays in generating products may result in the need to
seek additional capital, potentially diluting the interests of existing
investors, such as the Fund. In addition, liability for products that are later
alleged to be harmful or unsafe may be substantial, and may have a significant
impact on a life sciences company's market value and share price.
THE LIFE SCIENCES INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION. IT IS
ALSO POSSIBLE THAT CURRENT REGULATORY FRAMEWORKS MAY CHANGE AND HAVE AN ADVERSE
EFFECT ON OUR PORTFOLIO COMPANIES.
The extensive government regulation of the life sciences industry creates
additional uncertainty and risks for the Fund. Of particular significance are
the Food and Drug Administration's requirements covering research and
development, testing, manufacturing, quality control, labeling and promotion of
drugs for human use. A pharmaceutical product, for instance, cannot be marketed
in the United States until it has been approved by the FDA, and then can only be
marketed for the indications and claims approved by the FDA. Obtaining these
government approvals can often be lengthy and expensive processes and also have
uncertain outcomes. We cannot be sure that our portfolio companies can obtain
necessary regulatory approvals on a timely basis, if at all, for any of the
products they are developing, and the failure to obtain FDA approval could have
a material, adverse effect on the success of the portfolio companies. If our
portfolio companies fail to comply with regulatory requirements, they could
become subject to fines or penalties. Moreover, it is possible that the current
regulatory framework could change or additional regulations could arise at any
stage during the product development phase of our portfolio companies, which may
affect their ability to obtain approval of their products.
STOCK PRICES AND VALUATIONS OF LIFE SCIENCES COMPANIES CAN BE EXTREMELY
VOLATILE.
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<PAGE>
Stock prices of life science companies have historically been extremely
volatile, particularly when their products are up for regulatory approval under
regulatory scrutiny. While we generally will make investment decisions based on
a belief that actual or anticipated products or services will produce future
earnings, if an anticipated event is delayed or does not occur, or if investor
perceptions about a company change, the company's stock price and valuation may
decline sharply. Consequently, the Fund's performance may sometimes be
significantly worse than that of other types of funds, even those in
other high growth sectors.
MANY LIFE SCIENCES COMPANIES DEPEND EXTENSIVELY ON PATENTS, TRADEMARKS AND
OTHER INTELLECTUAL PROPERTY. THE INABILITY OF OUR PORTFOLIO COMPANIES TO
OBTAIN AND PROTECT THEIR PROPRIETARY RIGHTS CAN BE A DIFFICULT AND COSTLY
ENDEAVOR AND HAVE AN ADVERSE AFFECT ON THE SUCCESS OF THE COMPANIES.
Many of the life sciences companies in which we will consider investing depend
heavily on intellectual property rights, including patents, trademarks and
servicemarks. The ability to effectively enforce patent, trademark and other
intellectual property laws will affect the value of many of these companies.
More specifically, the patent positions of companies in the life sciences
industry can be highly uncertain and involve complex legal and factual
questions. Accordingly, the breadth of claims allowed in these companies'
patents cannot be predicted. Patent disputes are frequent and can preclude
commercialization of products. Patent litigation is costly in its own right and
could subject our portfolio companies to significant liabilities to third
parties. The presence of patents or other proprietary rights belonging to other
parties may lead to the termination of the research and development of a
portfolio company's particular product.
THE UNCERTAINTY OF THIRD PARTY PAYOR APPROVAL MAY LIMIT THE SCOPE BY WHICH OUR
PORTFOLIO COMPANIES CAN SUCCESSFULLY SELL THEIR PRODUCTS.
The availability of reimbursement by governmental and third party payors
affects the market for many life sciences products. These third party payors
continually attempt to contain or reduce the costs of healthcare. In the
United States, there have been a number of legislative and regulatory
proposals to change the healthcare system, and further proposals are likely.
The potential for adoption of these proposals affects our portfolio
companies' ability to obtain collaborative partners and market their
products. Our portfolio companies may not be able to sell their products
profitably if reimbursement is unavailable or limited in scope.
IF ETHICAL AND OTHER CONCERNS SURROUNDING THE USE OF GENETIC INFORMATION BECOME
WIDESPREAD, CERTAIN COMPANIES IN WHICH WE INVEST MAY HAVE LESS DEMAND FOR THEIR
PRODUCTS.
Genetic testing has raised ethical issues regarding confidentiality and the
appropriate uses of the resulting information. For these reasons, governmental
authorities may call for limits on or regulation of the use of genetic testing
or prohibit testing for genetic predisposition to certain conditions,
particularly for those that have no known cure. Any of these scenarios could
reduce the potential markets for products of certain companies in which we may
invest, which could have a material adverse effect on our returns.
RISKS OF THE FUND
THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR SHARES AND TRADING WILL COMMENCE NOT
LATER THAN 90 DAYS AFTER THE DATE OF THE OFFERING. PRIOR TO THIS DATE, THE
UNDERWRITERS DO NOT INTEND TO MAKE A MARKET IN OUR SHARES, ALTHOUGH WE CANNOT BE
CERTAIN THAT A LIMITED MARKET WILL NOT DEVELOP.
There is currently no secondary market for our shares and there is no assurance
that one will develop in the near future, if ever. We intend to apply for
authorization to list our shares on the New York Stock Exchange, but trading
will commence not later than 90 days after the date of the offering. Prior to
this date, the underwriters do not intend to make a market in our shares,
although we cannot be certain that a limited market will not develop.
Consequently, an investment in our shares will be illiquid, at least in the
short term.
WE ARE A CLOSED-END INVESTMENT COMPANY AND WILL NOT REDEEM OUR SHARES.
HISTORICALLY, THE SHARES OF CLOSED-END FUNDS HAVE TRADED AT A DISCOUNT TO THEIR
NET ASSET VALUE.
We are a closed-end fund and will not redeem our shares at the request of
shareholders and shareholders cannot exchange shares of our common stock for
shares of any other fund. This means that if you wish to sell our shares you
must do so on the market at the then prevailing price. Historically, the shares
of closed-end funds have traded at a discount to their net asset value. In
particular, our shares may trade at a discount even greater
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<PAGE>
than other closed-end funds since we may not realize a return on our investments
for a considerable amount of time. Additionally, because we expect it to take
approximately three years to fully invest the net proceeds of the offering, less
an appropriate reserve for follow-on investments and future management fees,
there is an increased risk in the short term that our shares will trade at a
discount.
WE ARE NOT LIKELY TO REALIZE RETURNS ON OUR INVESTMENTS IN PORTFOLIO COMPANIES
FOR SEVERAL YEARS. THUS, AN INVESTMENT IN SHARES OF OUR COMMON STOCK IS ONLY
APPROPRIATE FOR INVESTORS WHO DO NOT NEED SHORT-TERM LIQUIDITY OF THEIR
INVESTMENT IN OUR SHARES.
We intend to make investments as rapidly as possible consistent with our
investment objective. However, it is likely that a significant period of time
will be required before we are able to fully invest the proceeds of this
offering, and a portion of our funds will be held in reserve for follow-on
investments and future management fees. Additionally, venture capital, private
equity and structured investments may take at least several years before the
portfolio company is in a position to sell its shares in a public offering or
engage in a sale or merger. A portion of the securities of our portfolio
companies will be "restricted" under Rule 144 of the Securities Act and thus
cannot be sold unless we satisfy the requirements of Rule 144. Accordingly, it
may be several years before we are able to sell our investments and make any
distributions of gains to our stockholders.
WE HAVE NOT YET IDENTIFIED ANY PORTFOLIO COMPANY INVESTMENTS.
We have not yet identified any potential investments for our portfolio and,
thus, you will not be able to evaluate any specific portfolio company
investments prior to purchasing shares of our common stock. Additionally, our
investments will be selected by the managing members of DAE Advisers, subject
to the approval of our board of directors, and our shareholders will not have
input into our investment decisions. Both of these factors will increase the
uncertainty, and thus the risk, of investing in our shares.
THERE ARE SIGNIFICANT POTENTIAL CONFLICTS OF INTEREST THAT COULD IMPACT OUR
INVESTMENT RETURNS.
There are significant potential conflicts of interest inherent in our structure
and business model. We do not anticipate having independent managers or
employees and thus must rely upon meVC Advisers and DAE Advisers to provide
administrative services as well as investment advisory services. The principals
of both meVC Advisers and DAE Advisers perform or may perform similar services
for other investment funds and serve as officers or directors of other entities,
and are thus not able to devote all of their time to the Fund. They may also
have obligations to investors in those other investment funds, the fulfillment
of which might not be in the best interests of the Fund. It is possible that new
investment opportunities that meet the Fund's investment objective that are
offered to or reviewed by an affiliated fund may not be offered to or reviewed
by either the managing members of DAE Advisers or the Fund. Both meVC Advisers
and DAE Advisers have an interest in our profits which may impact any decisions
they may make with respect to our investments in portfolio companies.
Additionally, affiliates of DAE Advisers may receive brokerage or investment
banking fees from portfolio companies in which we invest in connection with
structuring investments for, or providing advice to, portfolio companies.
Moreover, our legal counsel may also serve as legal counsel to meVC Advisers and
DAE Advisers. Finally, the interests of a company in which we invest may, from
time to time, conflict with the best interests of one or more of our
shareholders.
VALUING OUR PORTFOLIO IN THE FUTURE WILL BE DIFFICULT AND INEXACT AND MAY NOT
REFLECT THE TRUE VALUE OF OUR INVESTMENTS IN PORTFOLIO COMPANIES.
There is typically no public market for the securities of small, privately-held
companies. Our board of directors will value our portfolio from time to time
based on their best estimate of the value of each of our individual investments
in portfolio companies. Our board of directors may also consult with accounting
firms, investment banks and other consulting firms when needed, to assist in
valuation of our investments. Portfolio valuation, however, is inherently
subjective. The net asset value set by our board of directors may not reflect
the price at which you could sell our shares in the open market.
BOTH THE FUND AND OUR INVESTMENT ADVISER WERE ONLY RECENTLY FORMED, WITH THE
FUND HAVING NO PRIOR OPERATING HISTORY, AND THE INVESTMENT ADVISER HAVING A
LIMITED OPERATING HISTORY. THUS, OUR SUCCESS WILL DEPEND, TO A LARGE DEGREE, ON
THE EXPERTISE AND EXPERIENCE OF THE MANAGING MEMBERS OF DAE ADVISERS.
ADDITIONALLY, A CHANGE IN OUR RELATIONSHIP WITH meVC ADVISERS AND DAE ADVISERS
COULD HAVE AN ADVERSE EFFECT ON OUR ABILITY TO ACHIEVE OUR INVESTMENT OBJECTIVE.
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<PAGE>
Although the managing members of DAE Advisers have considerable experience in
making investments in life sciences companies, both the Fund and meVC Advisers
were only recently formed, with the Fund having no operating history, and meVC
Advisers having a limited operating history. Our success in identifying
investment opportunities and pursuing and managing such investments is, to a
large degree, dependent upon the expertise, experience and contacts of the
managing members of DAE Advisers and its ability to attract and retain quality
personnel. Moreover, during the life of the Fund, the membership in DAE Advisers
may change and could have an adverse effect on our ability to achieve our
investment objective.
Additionally, a change in our relationship with meVC Advisers and DAE Advisers
could have an adverse effect on our ability to achieve our investment objective.
The sub-advisory agreement may be terminated by meVC Advisers, DAE Advisers or
the Fund, and the advisory agreement may be terminated by meVC Advisers or the
Fund, in either case upon delivery of written notice of termination at least 60
days prior to the termination date. Moreover, meVC Advisers and DAE Advisers
have agreed that, in the event either such agreement is terminated involuntarily
with respect to the other party, both parties will be prohibited from providing,
directly or indirectly, future investment advisory services to the Fund. Thus,
if the advisory agreement or sub-advisory agreement is terminated, our success
will depend in large part on our ability to obtain investment advisory services
similar to those offered by DAE Advisers. We are likely to experience difficulty
in obtaining comparable services. If we are unable to obtain these services, or
if we are only able to do so on less favorable terms than those offered by DAE
Advisers, it will have a significant negative impact on our investment returns.
PAST PERFORMANCE OF THE VENTURE CAPITAL AND PRIVATE EQUITY INDUSTRIES AS A WHOLE
IS NOT NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE OF THOSE INDUSTRIES, NOR
IS IT NECESSARILY A GOOD PROXY FOR PREDICTING THE RETURNS OF THE FUND, WHICH
WILL FOCUS ON THE LIFE SCIENCES INDUSTRY.
Past performance of the venture capital and private equity industries is not
necessarily indicative of their future performance, nor is it necessarily a good
proxy for predicting the returns of the Fund. We cannot guarantee that we will
meet the rates of return historically realized by these industries. Moreover,
our overall return will almost certainly be reduced by certain factors related
to our structure as a publicly-traded business development company, including:
the lower return we are likely to realize on short-term liquid
investments during the period in which we are identifying potential
investments, and
the periodic disclosure required of business development companies,
which could result in the Fund being less attractive as an investor to
certain potential portfolio companies.
WE MAY ENGAGE IN HEDGING ACTIVITIES AND THOSE ACTIVITIES INVOLVE RISKS THAT ARE
DIFFERENT FROM THE RISKS INVOLVED WITH TRADITIONAL VENTURE CAPITAL INVESTMENTS.
We may engage in hedging activities, including short sales of securities and
purchase of put and call options, in an effort to protect the value of our
investment portfolio from changes in the market value of securities in which we
have invested, or in the market value of securities into which securities in our
portfolio are convertible. However, hedging activities may not be successful in
protecting against losses, and the cost of hedging activities may result in
lower profits than could have been realized if we did not engage in hedging
activities.
OUR PORTFOLIO COMPANIES MAY DEFAULT ON THEIR OBLIGATIONS TO US.
Some companies in which we invest may experience cash flow problems or other
financial difficulties. A portfolio company may default on its obligations to
pay interest or principal on its outstanding obligations. An issuer of
convertible debt, preferred stock or warrants may default on its obligation to
issue the common shares into which such debt or preferred stock or warrants are
convertible. Portfolio companies may be unable, or default in their obligation,
to register securities which we own.
THE MARKET FOR VENTURE CAPITAL AND PRIVATE EQUITY INVESTMENTS IS HIGHLY
COMPETITIVE. IN SOME CASES, OUR STATUS AS A REGULATED BUSINESS DEVELOPMENT
COMPANY MAY HINDER OUR ABILITY TO PARTICIPATE IN INVESTMENT OPPORTUNITIES.
We will likely face substantial competition in our investing activities from
private venture capital and private equity funds, investment affiliates of large
industrial, technology, service and financial companies, small business
investment companies, wealthy individuals and foreign investors. As a regulated
business development company, we are required to disclose quarterly the name and
business description of portfolio companies and the value of any portfolio
securities. Many of our competitors are not subject to this disclosure
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<PAGE>
requirement. Our obligation to disclose this information could hinder our
ability to invest in certain portfolio companies. Additionally, other
regulations, current and future, may make us less attractive as a potential
investor to a given portfolio company than a private venture capital fund not
subject to the same regulations.
THE VENTURE CAPITAL AND PRIVATE EQUITY INDUSTRIES ARE GROWING, AND WITH MORE
CAPITAL READILY AVAILABLE, OUR SUCCESS WILL BE LARGELY DEPENDENT ON A CONTINUING
SUPPLY OF FAVORABLE INVESTMENT OPPORTUNITIES.
There has been a significant amount of new capital invested in venture capital
and private equity funds in recent years and this trend is likely to continue.
With the amount of capital available, some companies that may have had
difficulty in obtaining funding in the past may be able to do so more easily,
notwithstanding that the chances of success for these investments may be low. In
addition, there is likely to be an increasing amount of competition among
venture capital and private equity funds for the best investment prospects.
Thus, our success will be largely dependent on our ability to find the most
favorable opportunities in a highly competitive venture capital and private
equity market, while avoiding the marginal prospects.
OUR SUCCESS WILL BE SIGNIFICANTLY AFFECTED BY THE STATE OF THE SECURITIES
MARKETS IN GENERAL, AND MORE SPECIFICALLY BY THE MARKET FOR THE LIFE SCIENCES
INDUSTRY.
Any adverse change in the public financial markets could significantly impact
our ability to realize our investment objective. Our ability to achieve
attractive investment returns will also depend upon the availability of
strategic or financial acquirers of our portfolio companies. The interest of
potential buyers in acquiring our portfolio companies will vary with general
economic conditions and the valuations that they are willing to place on our
portfolio companies will vary with the valuations of comparable publicly-traded
companies.
WE MAY INVEST UP TO 25% OF THE FUND'S ASSETS IN HIGH GROWTH INDUSTRIES OTHER
THAN THE LIFE SCIENCES INDUSTRIES.
In addition to investments in life sciences companies, we may invest up to 25%
of the Fund's assets in other high growth industries. Such investments will
consist primarily of venture capital and other private equity investments in
information technology companies, computer hardware and software companies, and
other technology companies that we believe have high growth potential over the
long term. We will screen potential portfolio companies from these other sectors
according to prescribed investment criteria and will assess their technologies,
products, target markets and management teams as we believe necessary. There can
be no assurance that our investments in other high growth industries will
produce a rate of return equal to or greater than our investments in the life
sciences industry.
IF WE ARE UNABLE TO COMPLY WITH SUBCHAPTER M OF THE INTERNAL REVENUE CODE IN ANY
GIVEN YEAR, WE WILL LOSE PASS-THROUGH TAX TREATMENT FOR THAT YEAR, WHICH COULD
SUBSTANTIALLY REDUCE THE AMOUNT OF INCOME AVAILABLE FOR DISTRIBUTION TO OUR
STOCKHOLDERS.
We intend to elect to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code. To qualify for Subchapter M status,
we must meet qualifying income distribution and asset diversification
requirements. In each year in which we are able to meet the requirements of
Subchapter M, we will generally not be subject to federal taxation on net
investment income and net capital gains that we distribute to our stockholders.
If we are not able to meet the requirements of Subchapter M in any given year,
however, our income would be fully taxable at the federal level, which could
result in a substantial reduction in income available for distribution to our
stockholders. If we fail to meet the requirements of Subchapter M in our first
taxable year or, with respect to later years, for more than two consecutive
years and then seek to requalify under Subchapter M, we would be required to
recognize gain to the extent of any unrealized appreciation on our assets. In
that case, any gain recognized by the Fund likely would be distributed to
shareholders as a taxable distribution. For additional information regarding
federal income tax consequences of an investment in the Fund, see the
Statement of Additional Information.
IF YOU ARE AN ERISA PLAN OR AN IRA, YOU MUST DETERMINE THAT THE INVESTMENT IN
SHARES OF OUR COMMON STOCK IS PRUDENT AND MEETS YOUR INVESTMENT GUIDELINES. WE
CAN MAKE NO GUARANTEE THAT OUR ASSETS WILL NOT BE CONSIDERED "PLAN ASSETS" OF
YOUR PLAN OR IRA.
If you are an employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, or ERISA, the fiduciary acting on your behalf when
investing in shares of our common stock should satisfy itself that an investment
in the shares is consistent with the prudence standards of Section 404 of ERISA
and is
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prudent in light of your cash needs and other ERISA requirements. If you are an
ERISA plan or an individual retirement account, or IRA, you should assure
yourself that the investment is not a prohibited transaction under Section 406
of ERISA or Section 4975 of the Internal Revenue Code. The Department of Labor
has issued regulations that characterize the assets of some entities as "plan
assets" of the ERISA plans and IRAs that invest in those entities. We anticipate
that our shares will be considered "publicly offered securities" within the
meaning of the regulations, and our assets would not be considered plan assets.
However, we strongly urge you or your fiduciaries to consult your own advisers
prior to purchasing shares of our common stock.
OUR ARTICLES OF INCORPORATION AND BYLAWS CONTAIN CERTAIN PROVISIONS THAT MAY
SERVE TO DETER A HOSTILE TAKEOVER AND THUS MAY LIMIT YOUR ABILITY TO SELL OUR
SHARES AT A PREMIUM OVER PREVAILING MARKET PRICES.
Our articles of incorporation and bylaws provide for our board of directors to
be divided into three classes of directors serving staggered three-year terms. A
staggered board of directors severely restricts the ability of stockholders to
replace a majority of our directors in a rapid manner. Additionally, other
provisions contained in our articles of incorporation may also serve to limit
the ability of our stockholders to remove a director from office and to convert
from a closed-end investment company to an open-end investment company. Finally,
our bylaws limit the ability of stockholders to call a special meeting. All of
these provisions may serve to deter a hostile takeover and thus may limit your
ability to sell our shares at a premium over prevailing market prices.
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FORWARD-LOOKING STATEMENTS
This prospectus and the SAI include forward-looking statements. We have based
such statements largely on our current expectations and projections about future
events and trends in the life sciences industry, and the state of the public and
private financial markets and the economy in general. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions about
the Fund, including, among other things:
general economic and business conditions and the general state of the
financial markets;
our expectations and estimates concerning the future growth and performance
of the venture capital and private equity industries;
our expectations and estimates concerning the future growth and performance
of life sciences companies;
existing and future laws and regulations imposed on life sciences
companies, including future laws and regulations set forth by the Food and
Drug Administration;
our ability to successfully implement our investment objective and
strategies;
technological changes in the life sciences industry; and
other risk factors described under "Risk Factors" in this prospectus.
In addition, in this prospectus and the SAI, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," and similar
expressions, as they relate to the Fund, meVC Advisers or DAE Advisers and our
investment objective, business or management, are intended to identify
forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise after the date of this prospectus or the SAI. Because of these
risks and uncertainties, the forward-looking events and circumstances
discussed in this prospectus and the SAI may not occur and actual results
could differ materially from those anticipated or implied in the
forward-looking statements.
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USE OF PROCEEDS
We expect the net proceeds to us from the sale of shares of our common stock
in this offering to be approximately , not including net proceeds from
the exercise of the underwriters' over-allotment option. We have not
allocated any portion of the net proceeds to any particular investment. We
intend to use most of the net proceeds for investment in accordance with our
investment objective. Our investment objective is long-term capital
appreciation primarily from venture capital, private equity and structured
investments in life sciences companies, including those focused in the
biotechnology, genomics, proteomics, pharmaceuticals, medical devices, drug
delivery, diagnostics, predictive medicine and healthcare information
technology sectors. We also may invest up to 25% of the Fund's assets in
investments outside the scope of our investment objective, however, remaining
consistent with the general strategy of long-term capital appreciation. Until
we have identified appropriate investments in accordance with our investment
objective, we may invest all of our excess cash in short-term,
interest-bearing investment-grade securities or guaranteed obligations of the
U.S. government.
Our intention is to reserve approximately 20% of the net offering proceeds for
follow-on investments and future management fees. We expect to invest the net
proceeds after reserves in accordance with our investment objective at the
following rate: approximately 10% to 20% at or about six months from the
offering date, approximately 25% to 50% at or about one year from the offering
date, approximately 75% at or about two years from the offering date, and full
investment at or about three years from the offering date. There can be no
assurances that the Fund will be able to achieve its targeted investment pace.
This lengthy period is due to the rigorous review process that the members of
DAE Advisers will undertake in an effort to select for investment portfolio
companies that meet our investment objective. The investment review process will
typically include the following:
analytical approach to identify attractive sectors within
the life sciences industry;
market analysis;
company and technology assessments;
competitive analysis;
evaluation of management;
reference checks;
risk analysis; and
transaction size, pricing and structure.
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BUSINESS
We are a newly organized, non-diversified closed-end investment company that has
elected to be treated as a business development company under the Investment
Company Act. A business development company is an investment company organized
under the laws of, and having its principal place of business in, the United
States that is operated for the purpose of making investments primarily to
foster smaller, developing businesses and making available significant
managerial assistance to the businesses in which it invests. For Internal
Revenue Service purposes, we are classified as a non-diversified investment
company under Subchapter M of the Code. Our investment adviser is meVC Advisers,
and our investment sub-adviser is DAE Advisers. meVC Advisers is a registered
investment adviser under the Investment Advisers Act. DAE Advisers has filed an
application with the Securities and Exchange Commission to register as an
investment adviser under the Investment Advisers Act. Our fiscal year ends on
October 31.
meVC Advisers will set our strategic and operational direction and will oversee
the management of the Fund through the activities of DAE Advisers. meVC
Advisers will also manage our day-to-day operations, including our accounting,
finance, marketing, record-keeping and regulatory compliance efforts.
DAE Advisers will identify, structure and negotiate investments for the
Fund, as well as monitor and assist our portfolio companies in the
accomplishment of their operating objectives. The managing members of DAE
Advisers are Reinaldo M. Diaz, Arthur G. Altschul, Jr., and Patrick G. Enright.
They have over 40 years of investment experience, including experience investing
in venture stage companies, as well as entrepreneurial, professional and
managerial experience in the life sciences industry. They have served on
numerous boards of directors and have gained experience building venture and
development stage companies into successful enterprises. Through their
experience as fund managers, principal investors and operating executives, they
have developed an extensive network of contacts throughout the industry that is
expected to generate numerous investment opportunities. Moreover, they have
extensive understanding of the capital markets for life sciences companies, as
well as direct experience investing in common stock, structured equity and debt
of venture and development stage publicly-traded companies. The managing members
of DAE Advisers are also the investment advisers to the Delta Funds, a group of
private investment funds with approximately $100 million in assets. The Delta
Funds focus on making investments in healthcare and life sciences companies.
Since 1996, the managing members of DAE Advisers have structured over $250
million in investments.
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INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
INVESTMENT OBJECTIVE
Our investment objective is long-term capital appreciation primarily from
venture capital, private equity and structured investments in life sciences
companies, including those focused in the biotechnology, genomics, proteomics,
pharmaceuticals, medical devices, drug delivery, diagnostics, predictive
medicine and healthcare information technology sectors. We will invest in
companies that we believe have high growth potential over the long term.
Potential portfolio companies will be screened according to prescribed
investment criteria and further assessment of all prospects' technologies,
products, target markets and management teams will also be conducted as needed.
After selecting our portfolio companies, we will seek to enhance their
competitive standing by offering to provide managerial assistance, including
assistance in preparing for future rounds of private or public financing,
recruiting management, refining business strategy, assisting with general
business operations and making introductions to venture firms, investment banks
and other potential sources of capital. We will seek to provide returns to our
stockholders through long-term appreciation in the value of our portfolio
companies. We may also invest up to 25% of the Fund's assets in investments
outside the scope of our investment objective, primarily in the securities of
companies in other high growth areas, including information technology companies
that we believe have high growth potential over the long term.
THE FUND'S INVESTMENT RATIONALE
We believe that the existing market demands, the recent technological
developments and the current economic environment have created a compelling
rationale to invest in life sciences companies with the potential for attractive
financial returns. While no specific companies have been selected, we intend to
focus on venture capital, private equity and structured investment opportunities
in the following areas: biotechnology, genomics, proteomics, pharmaceuticals,
medical devices, drug delivery, diagnostics, predictive medicine and healthcare
information technology.
PRINCIPAL INVESTMENT STRATEGIES
We plan to use the following principal strategies to accomplish our investment
objective:
EMPHASIZE LIFE SCIENCES INVESTMENTS. We intend to invest primarily in
companies operating in the life sciences industry, including the
biotechnology, genomics, proteomics, pharmaceuticals, medical devices, drug
delivery, diagnostics, predictive medicine and healthcare information
technology sectors, which we believe have significant growth potential.
In addition to representing high growth areas for investment, these areas
are consistent with the investment and operating experience of the managing
members of DAE Advisers.
UTILIZE A FLEXIBLE VENTURE CAPITAL AND PRIVATE EQUITY INVESTMENT
MODEL. We intend to make traditional venture capital investments in
companies at various stages with an emphasis on mezzanine and expansion
round financing, as well as other private equity investments in later stage
firms and companies whose shares are publicly-traded. With respect to other
private equity investments, we may use structured investments in an effort
to provide attractive returns with a reduced risk of loss of principal. We
believe that this investment approach may allow us to commit significant
capital to later stage investments with the potential to realize gains
earlier than would result from traditional venture capital investments.
EXERCISE INVESTMENT DISCIPLINE. We will undertake a rigorous review
process to select for investment the companies that we believe have the
highest growth and return potential. We intend to spread risk by
diversifying the portfolio across various sectors within the life sciences
industry. Additionally, we plan to assess carefully the capital needs of
our portfolio companies and to allocate funding to the companies that we
believe will perform the best in the future.
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Conversely, we will decline follow-on investments in portfolio companies
that we feel no longer have the potential for high growth.
INVEST AT VALUATION INFLECTION POINT. We will seek to invest in
companies in which technology risk has been well-defined and in which we
can either identify value that is not recognized by others or invest at a
valuation that is low relative to the potential return of the investment.
OFFER MANAGERIAL ASSISTANCE TO OUR PORTFOLIO COMPANIES. We plan to
enhance the value of portfolio companies through application of the
experience of the managing members of DAE Advisers as investors and as
operating executives. In particular, we plan to use our extensive
relationships throughout the life sciences industry to facilitate strategic
initiatives such as mergers and partnerships, raising capital, attracting
key employees, and other value-added activities.
EMPHASIZE LIFE SCIENCES INVESTMENTS
We intend to invest in companies operating in the life sciences industry. Life
sciences is a dynamic and innovative industry which spans many sectors and
utilizes numerous areas of science and technology. Several of these sectors have
significant impact on the U.S. economy. For example, the healthcare sector
represents about 14% of the U.S. Gross Domestic Product, with approximately $1.3
trillion in annual outlays. Other significant sectors in the life sciences
industry include the biotechnology, genomics, proteomics, pharmaceuticals,
medical devices, drug delivery, diagnostics, predictive medicine and healthcare
information technology sectors.
We believe the life sciences industry has strong growth potential driven by
the need for new medical treatments, improved diagnostic tools and more
efficient information processing systems. Moreover, we believe the current
landscape of rapid technological and commercial expansion in the life sciences
industry has created an attractive environment for venture capital, private
equity and structured investments. We also believe that the life sciences sector
remains relatively underserved by venture capital and private equity investors.
For example, in the third quarter of 1999, over $5.0 billion was invested in
high technology related ventures, while only approximately $800 million was
invested in healthcare-related enterprises. Attractive fundamentals of the life
sciences industry include:
MARKETPLACE DEMANDS:
Existing therapies do not adequately treat many serious diseases such
as cancer, cardiovascular diseases, metabolic diseases, neurodegenerative
diseases, infectious diseases and genetic diseases;
large and growing elderly population in the U.S. and other major
countries will increase the demand for high quality products; and
major opportunities exist for new technology to improve quality and
reduce total cost of care.
TECHNOLOGICAL DEVELOPMENTS:
Relative maturity of certain technologies such as genetic research,
antibody therapy, gene therapy, drug delivery, robotics and miniaturization
have created investment opportunities with more attractive risk-reward
profiles than in recent years when such technologies were relatively new
and unproven;
the nascent state of Internet-related applications for life sciences
represents an attractive new field for potential investments; and
recent technological advances in genomics, information technology and
semiconductor technology have created new tools to treat and diagnose
serious medical conditions.
ECONOMIC ENVIRONMENT:
High barriers to entry, including significant intellectual property
protection, substantial capital requirements, and large-scale projects;
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opportunity to create high margin businesses based on premium pricing
of highly-differentiated products and services;
large market for life sciences products and services with established
channels of distribution; and
life sciences products and services historically have been affected by
changes in general economic conditions.
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UTILIZE A FLEXIBLE VENTURE CAPITAL AND PRIVATE EQUITY INVESTMENT MODEL
Traditional venture capital financing typically occurs in three stages: seed
stage, expansion round and mezzanine round. A seed round is the first round of
professional venture capital financing received by a newly-formed company. The
proceeds of a seed round are often used to complete product development and to
fund operations of a company's core technical efforts and to attract and hire a
management team. An expansion round is typically the second and/or third round
of professional venture capital financing. The proceeds of an expansion round
are often used to further product development, expand organizational resources,
and build sales, marketing or production capabilities. A mezzanine round is
typically the last round of venture capital financing prior to an anticipated
merger or initial public offering. The proceeds of a mezzanine round are
generally used to attract strategic investors and to enhance the balance sheet
of the venture company prior to effecting an exit event.
We intend to make traditional venture capital investments primarily in life
sciences companies with high growth potential. These investments will be made in
all stages of venture capital financing with an emphasis on
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mezzanine and expansion round financing. We also intend to make other private
equity investments in later stage companies, which in certain instances may
include companies that are publicly-traded.
We may also invest a portion of our capital in start-up companies at the seed
stage, which we believe present the potential for larger gains, but with
increased risk and a longer horizon for the potential realization of gains than
expansion and mezzanine rounds of investment. When searching for and evaluating
seed round investment opportunities, we intend to seek companies with (i) strong
core management and technical teams, (ii) unique product concepts or a business
model indicating high growth potential and (iii) a focus on dynamic markets with
major unmet needs and limited competition. In general, we will seek management
teams with insightful ideas who we believe to be talented and motivated.
When seeking and evaluating expansion round investment opportunities, we intend
to pursue companies with proven technologies, products or service offerings that
require additional capital to achieve sustained growth. Consequently, we will
focus our diligence efforts on (i) the business plans of the enterprise, (ii)
the ability of the management team to execute against this plan, (iii) general
assessment of technical and marketing risk, and (iv) the timeframe to an initial
public offering or other exit event.
When searching for and evaluating mezzanine investment opportunities, we will
seek companies which we believe will produce long-term capital appreciation and
which (i) possess a strong management team, (ii) have a strong board of
directors and investor support, (iii) occupy a leadership position in their
target markets and (iv) expect to effect an exit event within an appropriate
timeframe.
In addition to traditional venture capital investments, we intend to make other
private equity investments that typically will involve companies at a later
stage of development, whether publicly-traded or privately-held. The term
"private equity", in addition to traditional venture capital investments, refers
broadly to investments in the assets or securities of operating companies
through, for example, leveraged buy-outs, roll-ups and going private
transactions.
With regards to private equity in general, the managing members of DAE Advisers
have extensive experience structuring and investing in off-balance sheet
securities, convertible and preferred debt, other equityand revenue-linked
securities, warrants, options and common stock as well as other types of
securities. We intend to pursue private equity investments in later stage
companies that meet our investment criteria and that offer the opportunity for
rapid growth. Such investments may involve larger commitments of capital by us
than would be typical for traditional venture capital investments and,
accordingly, we expect a more attractive risk-reward profile of such
investments.
Where appropriate, we may invest in convertible securities. Typically
convertible securities provide dividend or interest income and greater
protection of principal than common stock, while at the same time permitting an
investor to benefit from appreciation in the value of the underlying common
stock. We may also purchase structured instruments, such as a debt security
whose value is linked to sales of a particular product. In other instances,
there may be opportunities to structure an investment such that the principal
amount is collateralized by other assets owned or controlled by the issuing
company.
Additionally, we may engage in short sales of securities and the
purchase and sale of put and call options for hedging purposes with respect to
investments in our portfolio. We will engage in such hedging transactions in an
effort to protect the value of our investment portfolio from changes in the
market value of securities in which we have invested, or in the market value of
securities into which securities in our portfolio are convertible. There can be
no assurance that our hedging activities will be successful, or that losses will
be avoided, and the cost of hedging activities may result in lower profits than
would have been realized if we did not engage in hedging at all.
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EXERCISE INVESTMENT DISCIPLINE
We will undertake a rigorous review process to select for investment the
companies that we believe meet our investment objectives. We plan to
routinely monitor the status of many life sciences companies in a variety of
sectors through review of journals, attendance at conferences and through
primary research on areas of specific interest. In addition, the managing
members of DAE Advisers have developed extensive relationships with
consultants, advisers, entrepreneurs, bankers and other venture capitalists
that will serve as a source of potential deal flow. For companies presenting
investment opportunities that meet our general criteria, we will perform
extensive due diligence, including company and technology assessments, market
analysis, competitive analysis, evaluation of management, risk analysis, and
transaction size, pricing and structure analysis. To the extent necessary and
appropriate, we will employ consultants or other experts to assist in our
assessment of products, technologies and market dynamics.
DAE Advisers has developed extensive investment expertise through its experience
in the evaluation and selection of life sciences companies and products. Based
on this experience, we have established criteria for the selection of portfolio
companies, which include the following characteristics:
High quality and experienced management team.
An established competitive advantage within a high-growth sector of
the life sciences industry.
Financial stability or clear path to raise additional needed funds.
A potential initial public offering or other exit event.
We plan to diversify our investment portfolio within the life sciences industry
in order to increase the likelihood of investing in companies with high returns,
and in an effort to offset the impact of investments in companies that yield
losses. Monitoring our portfolio companies closely may help us better determine
whether or not they continue to be attractive candidates for further investment.
We plan to decline additional investments in portfolio companies that do not
continue to show promise. However, we will seek to reinvest in the portfolio
companies we believe will perform well in the future, in an effort to achieve
greater positive returns as a whole, and to protect our investments from
dilution.
We believe that risk management is essential to achieving our investment
objective, and we will manage our risk through extensive portfolio
diversification within the life sciences industry. We intend to invest in at
least 20 different companies, although the actual number of companies in which
we invest will be a function of total funds available and the allocation of
funds to seed, expansion round, mezzanine and other private equity transactions.
To ensure that our board of directors has the freedom to select investments in
companies that meet our investment objective, we do not anticipate imposing
formal limits on the amount of our capital that may be invested in individual
portfolio companies. However, we anticipate that no more than [15%] of our
assets, based on the cost of our investments, will be committed at any one
time to any one company.
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INVEST AT VALUATION INFLECTION POINT
The managing members of DAE Advisers have extensive experience evaluating
research and development programs and characterizing associated risks. We
will seek to invest in companies and in research and development programs
within companies where technology risk has been well-defined and where there
is a reasonable likelihood of success, or where we find value that is not
recognized by others, as well as situations where research and development
risk is low relative to the valuation required for investment. We believe
that this approach will enable us to invest in companies with attractive
valuations, increasing the likelihood of generating returns to our
stockholders in a shorter time period than is typical for venture capital and
private equity investments.
We will focus on investment opportunities that provide an opportunity for value
creation. Capital invested by the Fund will enable the portfolio company either
to (i) accomplish an exit event through an initial public offering or other
means or (ii) achieve a goal that results in higher a valuation for the
portfolio company. Assessment of the likelihood of these outcomes will be a
central focus of the Fund's investment process.
MANAGERIAL ASSISTANCE TO OUR PORTFOLIO COMPANIES
We will offer to provide managerial assistance and guidance to our portfolio
companies. Such assistance may include serving on the board of directors of
companies in which we invest, as well as providing expertise in developing and
implementing business strategy and tactics, selecting and recruiting management
personnel, and general business development. We believe that such assistance may
enable us to exercise influence with respect to such matters as research and
development plans, product development strategy, financing, budgeting,
marketing, management selection and exit strategies of our portfolio companies.
We plan to use our extensive relationships throughout industry to facilitate
strategic initiatives such as mergers and partnerships, raising capital, finding
key employees, and other value-added activities.
INVESTMENTS OUTSIDE OF PRINCIPAL INVESTMENT OBJECTIVE
In addition to investments in life sciences companies, we may invest up to
25% of the Fund's assets in other high growth industries.
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MANAGEMENT
DIRECTORS AND OFFICERS
Our board of directors is responsible for all aspects of our management and
day-to-day operations. We have a total of five directors, three of whom are
independent, as required by the Investment Company Act, and two affiliated
directors, one from meVC Advisers and one from DAE Advisers. Our board of
directors will have exclusive control of our business and operations, including
the selection and retention of our Investment Adviser. Except as otherwise
required by law or our articles of incorporation, our stockholders will have no
rights to participate in our business or operations.
PETER S. FREUDENTHAL Mr. Freudenthal is Chairman, Chief Executive Officer and a
director of the Fund. Mr. Freudenthal is also co-founder, President, and
Chairman of the Board of meVC.com, Inc. and the Vice-Chairman and a director of
the meVC Draper Fisher Jurvetson Fund I, Inc. Previously, Mr. Freudenthal was a
Senior Biotechnology Equity Research Analyst and a Vice President with Robertson
Stephens & Company. Before joining Robertson Stephens, Mr. Freudenthal also
served as Director of Healthcare Research at Brean Murray & Company, a
privately-held investment bank in New York. Mr. Freudenthal attended the Yale
School of Medicine where he focused on Neurosurgery and Trauma Surgery. Prior to
medical school, Mr. Freudenthal was Senior Graduate Fellow in the Laboratory of
Immunology & Cellular Physiology at The Rockefeller University in New York, as
well as a National Science Foundation Fellow and a David C. Scott Foundation
Fellow. From 1981 to 1985, Mr. Freudenthal was a Thomas J. Watson Scholar at the
IBM Research Center in Yorktown, New York. Mr. Freudenthal received his B.S.
with a double major in Molecular Biophysics & Biochemistry and Molecular Biology
from Yale College.
PATRICK G. ENRIGHT Mr. Enright is a director of the Fund and a managing
member of DAE Advisers. He has over 16 years of experience in the healthcare
industry as an operating executive and as a principal investor. Mr. Enright
joined Diaz & Altschul Group, LLC in February 1998 and is also managing
member of Diaz & Altschul Advisors, LLC, the investment adviser for the Delta
Funds. Prior to joining Diaz & Altschul Group, LLC, he was Chief Financial
Officer and Vice President of Business Development of Valentis, Inc., a
NASDAQ-traded healthcare company focused on the development of novel delivery
technologies for biological drugs, and remains a member of its board of
directors. Mr. Enright joined Valentis in March 1995 and was instrumental in
developing and executing the company's financing and corporate partnering
strategies. From September 1993 to June 1994, Mr. Enright was Senior Vice
President of Finance and Business Development at Boehringer Mannheim
Therapeutics ("BMT"), a pharmaceutical company with over $1 billion in annual
revenues. BMT was a subsidiary of Corange, Ltd., a multi-national
pharmaceuticals, diagnostics and specialty chemicals company that was
acquired by Hoffmann-La Roche for approximately $10 billion. From September
1989 to September 1993, he was a Vice President at PaineWebber Development
Corporation. From 1984 to 1989, Mr. Enright worked at Sandoz Corporation, a
multi-national life sciences company (renamed Novartis following its merger
with Ciba-Geigy), where he held positions in business development and mergers
and acquisitions, reporting to the Chief Executive Officer. Mr. Enright
received his B.S. in Biological Sciences from Stanford University and his
M.B.A. from the Wharton School of Business at the University of Pennsylvania.
[Three independent directors to be appointed.]
ANDREW E. SINGER Mr. Singer is President of the Fund. Mr. Singer is also
co-founder, Chief Executive Officer and a director of meVC.com, Inc. and the
President of the meVC Draper Fisher Jurvetson Fund I, Inc. Previously, Mr.
Singer was a Senior Associate at Robertson Stephens & Company. Before joining
Robertson Stephens, Mr. Singer was Director of New Business at The Shansby
Group, a venture capital firm managing approximately $120 million of investor
capital. Mr. Singer also served as a Financial Analyst at The Blackstone Group,
a boutique investment bank, where he evaluated investments for Blackstone's $800
million leveraged acquisition fund and provided strategic advisory services to
portfolio companies of the fund. Mr. Singer
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received his B.A. in East Asian Studies, cum laude with distinction in the
major, from Yale College and his M.B.A. with distinction from the Harvard
University Graduate School of Business.
PAUL WOZNIAK Mr. Wozniak is Vice President, Chief Financial Officer and
Treasurer of the Fund. Mr. Wozniak is also Chief Operating Officer for meVC.com,
Inc. and Vice President, Chief Financial Officer, and Treasurer of the meVC
Draper Fisher Jurvetson Fund I, Inc. Mr. Wozniak has fourteen years experience
in international fund management operations. Previously, Mr. Wozniak served in
various operational roles, most recently as Vice President and Director, Mutual
Fund Operations, at GT Global Inc./AIM Funds. At GT Global, Mr. Wozniak was
responsible for the overall management of the mutual fund accounting and pricing
groups for the GT Global mutual fund family, comprising over $10 billion in 37
funds invested worldwide. Mr. Wozniak also served as an officer of both GT
Global Inc. and the GT Global Family of Funds. Mr. Wozniak received his B.S. in
Accounting from the University of Scranton.
KENNETH PRIORE Mr. Priore is Secretary of the Fund. Mr. Priore is also Internal
Counsel and Director of Policy and Compliance for meVC.com, Inc. and Secretary
of the meVC Draper Fisher Jurvetson Fund I, Inc. Formerly, Mr. Priore was
employed with Charles Schwab & Co. in San Francisco. Most recently, Mr. Priore
served as Managing Attorney: Third Party Actions, Arbitration and Litigation,
for the Office of Corporate Counsel at Charles Schwab & Co., where he managed an
active litigation docket of over 400 open matters representing over $100 million
in customer assets. Prior to that, Mr. Priore served as Policy Director, where
he was responsible for strategic planning and participated in product
development teams for retail financial services and e-commerce applications. Mr.
Priore also served as a Corporate Attorney at Charles Schwab & Co. Mr. Priore
received his B.A. from Tufts University and his J.D. from Tulane Law School.
INVESTMENT ADVISER
meVC Advisers is our investment adviser. meVC Advisers was incorporated in
Delaware in December 1999. meVC Advisers is a wholly-owned subsidiary of
meVC.com, Inc. The executive offices of meVC.com and meVC Advisers are located
at 991 Folsom Street, Suite 301, San Francisco, California 94107. meVC Advisers
is a registered investment adviser under the Advisers Act.
meVC Advisers currently has two directors and four officers, all of whom are
our affiliates, as defined in the Investment Company Act. meVC Advisers will
set our strategic and operational direction and oversee the management of the
Fund through the activities of DAE Advisers. meVC Advisers will also manage
our day-to-day operations, including our accounting, finance, marketing,
record-keeping and regulatory compliance efforts.
In return for its services, we have agreed to pay to meVC Advisers an annual
management fee equal to 2.5% of our average weekly net assets, payable in
monthly installments, and annual incentive compensation equal to 20% of our
annual realized capital gains net of realized and unrealized capital losses.
Mr. Singer is Chief Executive Officer of meVC Advisers and a member of its board
of directors.
Mr. Freudenthal is President of meVC Advisers and Chairman of its board of
directors.
Mr. Wozniak is Vice President, Operations of meVC Advisers.
Mr. Priore is Secretary of meVC Advisers.
The Investment Advisory Agreement may be terminated by meVC Advisers or the Fund
and the Investment Sub-Advisory Agreement may be terminated by DAE Advisers,
meVC Advisers or the Fund, in each case with written notice of termination
delivered to each party at least 60 days prior to the termination date. meVC
Advisers and DAE Advisers have agreed that in the event either of them is
terminated involuntarily by the Fund's board of directors, neither of them may
thereafter provide, directly or indirectly, investment advisory services to the
Fund. In the event of a termination of either agreement, our board of directors
will select a new investment adviser to implement our investment objective and
strategies.
INVESTMENT SUB-ADVISER
DAE Advisers will identify, structure and negotiate investments for the Fund,
as well as monitor and assist our portfolio companies in the accomplishment
of their operating objectives. The managing members of DAE Advisers are
Reinaldo M. Diaz, Arthur G. Altschul, Jr., and Patrick G. Enright. They have
over 40 years of investment experience, including experience investing in
venture stage companies, as well as
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entrepreneurial, professional and managerial experience in the life sciences
industry. They have served on numerous boards of directors and have gained
experience building venture and development stage companies into successful
enterprises. Through their experience as fund managers, principal investors and
operating executives, they have developed an extensive network of contacts
throughout the industry that is expected to generate numerous investment
opportunities. Moreover, they have extensive understanding of the capital
markets for life sciences companies, as well as direct experience investing in
common stock, structured equity and debt of venture and development stage
publicly-traded companies. The managing members of DAE Advisers are also the
investment advisers to the Delta Funds, a group of private investment funds with
approximately $100 million in assets. The Delta Funds focus on making
investments in healthcare and life sciences companies. Since 1996, the managing
members of DAE Advisers have structured over $250 million in investments.
The executive offices of DAE Advisers are located at 950 Third Avenue, New York,
New York 10022 and at 3000 Sand Hill Road, Menlo Park, California 94025. DAE
Advisers has filed an application with the Securities and Exchange Commission to
register as an investment adviser under the Advisers Act.
In return for its services as Investment Sub-Adviser, DAE Advisers will receive
from meVC Advisers an amount equal to 40% of the management fee we pay to meVC
Advisers. meVC Advisers has also agreed to pay DAE Advisers 85% of the carried
interest it receives from the Fund. The Investment Sub-Advisory Agreement may be
terminated by meVC Advisers, DAE Advisers or us upon written notice of such
termination to each of the other parties at least 60 days prior to the effective
date of termination.
REINALDO M. DIAZ Mr. Diaz is a managing member of DAE Advisers. He has
been active in the investment banking industry for over 19 years. He is also a
founder of Diaz & Altschul Group, LLC, whose subsidiary, Diaz & Altschul
Advisors, LLC is the investment adviser of the Delta Funds. From 1993 to 1996,
Mr. Diaz was Managing Director and Head of the Healthcare Group at Schroder
Wertheim & Co., Inc., where he was responsible for establishing and developing
the firm's investment banking presence in the healthcare sector. From 1981 to
1993, Mr. Diaz was with PaineWebber Incorporated. From 1981 to 1985, he was a
member of the Investment Banking Department, where he focused on Healthcare and
Technology clients. In 1985, Mr. Diaz co-founded PaineWebber Development
Corporation ("PWDC") and in 1990, he became PWDC's President. PWDC provided
financial advisory services to healthcare clients, managed over $225 million of
capital invested principally in the healthcare sector, and raised approximately
$700 million to fund the development of novel biopharmaceutical and medical
device products, including Genentech's Activase (t-PA) and Protropin (Hgh),
Amgen's Neupogen (GCSF), Centocor's ReoPro, Genzyme's hyaluronic acid-based
products, and Becton Dickinson's FACS instrument line. Mr. Diaz has served on
the board of directors of Alkermes, Inc., Amgen Development Corporation,
Genentech Development Corporation III, Genzyme Development Corporation and
several private companies. Mr. Diaz serves on the board of directors of Berkeley
HeartLabs, Inc., an e-healthcare company, and Medrium, Inc., a company
developing Internet-based tools for physicians' practices management software.
He is a graduate of Harvard College and of Harvard University Graduate School of
Business.
ARTHUR G. ALTSCHUL, JR. Mr. Altschul is a managing member of DAE Advisers. He
is also a founder of Diaz & Altschul Group, LLC, whose subsidiary, Diaz &
Altschul Advisors, LLC is the investment adviser of the Delta Funds. Between
1985 and 1991, Mr. Altschul worked in the Equity and Fixed-Income trading
departments at Goldman, Sachs & Co., was a founding limited partner of The
Maximus Fund, LP, and worked in the Equity Research department at Morgan
Stanley & Co. From its founding in 1992 through 1996, Mr. Altschul worked at
SUGEN, Inc., a biopharmaceutical company focused on cancer drug development,
which was recently acquired by The Pharmacia and Upjohn Corporation for $650
million. Additionally, Mr. Altschul has been responsible in various
capacities for numerous venture capital investments and sits on the board of
directors of a number of venture companies. Currently, Mr. Altschul serves on
the board of directors of General American Investors, Inc., a NYSE-traded
closed-end investment company with over $1 billion in gross assets; General
American is one of the oldest publicly-traded closed-end funds in the United
States. He also sits on the boards of Medicis Pharmaceuticals, a NYSE-traded
healthcare company focused on the dermatology market; ValiGen, Inc., a
privately-held European-based genomics company focused on the identification
and validation of novel targets for drug discovery and
29
<PAGE>
development; Microbes, Inc., a bioremediation company focused on the petroleum
industry; the Delta Opportunity Fund; and The Overbrook Foundation, a $150
million not-for-profit foundation. Additionally, Mr. Altschul is Chairman of
Soliloquy, Inc., a software company focused on natural language dialogue. Mr.
Altschul received his B.Sc. in Computer Science from Columbia University.
PATRICK G. ENRIGHT Mr. Enright is a director of the Fund and a managing
member of DAE Advisers. He has over 16 years of experience in the healthcare
industry as an operating executive and as a principal investor. He joined
Diaz & Altschul Group, LLC in February 1998 and is also managing member of
Diaz & Altschul Advisors, LLC, the investment adviser for the Delta Funds.
Prior to joining Diaz & Altschul Group, LLC, he was Chief Financial Officer
and Vice President of Business Development of Valentis, Inc., a NASDAQ-traded
healthcare company focused on the development of novel delivery technologies
for biological drugs, and remains a member of its board of directors. Mr.
Enright joined Valentis in March 1995 and was instrumental in developing and
executing the company's financing and corporate partnering strategies. From
September 1993 to June 1994, Mr. Enright was Senior Vice President of Finance
and Business Development at Boehringer Mannheim Therapeutics ("BMT"), a
pharmaceutical company with over $1 billion in annual revenues. BMT was a
subsidiary of Corange, Ltd., a multi-national pharmaceuticals, diagnostics
and specialty chemicals company that was acquired by Hoffmann-La Roche for
approximately $10 billion. From September 1989 to September 1993, he was a
Vice President at PaineWebber Development Corporation. From 1984 to 1989, Mr.
Enright worked at Sandoz Corporation, a multi-national life sciences company
(renamed Novartis following its merger with Ciba-Geigy), where he held
positions in business development and mergers and acquisitions, reporting to
the Chief Executive Officer. Mr. Enright received his B.S. in Biological
Sciences from Stanford University and his M.B.A. from the Wharton School of
Business at the University of Pennsylvania.
STRATEGIC ADVISORY BOARD
Our Board of Directors has established a Strategic Advisory Board whose members
are, in the judgment of the Directors, highly knowledgeable about life sciences
in general with particular experience and expertise in areas consistent with the
investment objective and strategies of the Fund. The Advisory Board will
consult from time to time with the Board of Directors, meVC Advisers and DAE
Advisers, primarily with respect to scientific, technical and regulatory
developments and trends affecting companies in the life sciences industry.
The members of the Advisory Board will assist in identifying target sectors
for investment, but will not review or approve specific investment decisions.
The Advisory Board will have no power to determine that any security or other
investment be purchased or sold by the Fund.
The members of the Advisory Board, and their current or former principal
occupations, are as follows:
[Advisory Board members to be appointed.]
<PAGE>
VALUATION OF PORTFOLIO SECURITIES
As a general principle, the current fair value of an investment is the amount
that we might reasonably expect to receive for the asset if it were currently
sold by us. There is a range of values that is reasonable for investments in
private companies at any particular time. Generally, our board of directors will
initially set the fair value of each of our investments at cost. Upon the
occurrence of a significant development or other factor affecting a portfolio
company, including results of operations, changes in general market conditions,
subsequent financing or the availability of market quotations, our board of
directors will determine whether such events provide a basis for valuing such
investment at a number other than cost.
We anticipate that many of our investments for which a public market does not
exist will be restricted securities under the Securities Act. Whenever possible,
DAE Advisers will negotiate for registration rights for us in connection with
our investments. The value for investments for which no public market exists
cannot be precisely determined. Generally, our board of directors will value
such investments on a going concern basis without considering disposition costs.
On a quarterly basis, and at such other times as deemed appropriate under the
circumstances, our board of directors will prepare a valuation of our assets. We
will publish our net asset value on a weekly basis.
Our board of directors will value our portfolio investments for which market
quotations are readily available and which are freely transferable as follows:
(i) securities traded on a securities exchange or the Nasdaq Market will be
valued at the closing price on the day the securities are being valued and (ii)
securities traded in the over-the-counter market will be valued at the average
of the closing bid and asked prices for the trading day the securities are being
valued. Our board of directors will value those portfolio investments for which
market quotations are readily available but are restricted from free trading in
the public securities markets, including stock subject to Rule 144 under the
Securities Act, by discounting the closing price or the closing bid and asked
prices for the last trading day prior to the date of valuation to reflect the
illiquidity imposed by the Rule 144 restrictions, but taking into consideration
whether we have any contractual registration rights. For this purpose, an
investment that is exercisable for or convertible into a security for which
market quotations are readily available or otherwise contains the right to
acquire such a security will be deemed to be an investment for which market
quotations are readily available, but the value of the security will be reduced
by any consideration to be paid by us in connection with the exercise or
conversion.
With respect to any debt securities in our portfolio with a maturity date within
60 days of the valuation date, our board of directors will value such securities
using the amortized cost method. Securities with a maturity date of more than 60
days after the valuation date for which there is a market and which are freely
transferable will be valued at the most recent bid price or yield equivalent as
obtained from dealers that make markets in such securities. Certificates of
deposit held in our portfolio will generally be valued at their face value, plus
accrued interest.
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 earnings and net worth, the market price of similar
securities of comparable companies and an assessment of future financial
prospects. In the case of unsuccessful operations, the valuation may be based
upon anticipated liquidation proceeds.
Our board of directors may also consider, when available, a follow-on investment
in a portfolio company's securities as the basis of valuation. This method of
valuing a follow-on investment will be used only with respect to completed
transactions. Publicly-traded securities with legal, contractual or practical
restrictions on transfer may be valued at a discount from their value determined
by the foregoing methods to reflect these restrictions.
Our board of directors will review its valuation policies from
time to time and make any necessary adjustments. Our board of directors may also
hire independent consultants to review our valuation procedures or to conduct an
independent valuation.
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<PAGE>
To determine the net asset value per share of our common stock, the value of our
assets, including our portfolio securities, will be determined by our board of
directors, and our liabilities, if any, will be subtracted, and the difference
will be divided by the number of outstanding shares of our common stock on the
date of valuation.
The value of our portfolio securities is inherently subjective. Our net asset
value, as determined by the board of directors, may also not fully reflect the
price at which you could sell your shares in the secondary market, if a
secondary market for our shares were to develop.
32
<PAGE>
INVESTMENT COMPANY ACT REGULATION
We have elected to be regulated as a business development company under the
Investment Company Act. A business development company is defined as a domestic,
closed-end company that is operated for the purpose of making specific types of
investments and that makes available significant managerial assistance to the
companies in which it invests.
Business development companies are exempt from certain provisions of the
Investment Company Act of 1940 and the Investment Advisers Act of 1940.
Specifically, as a business development company we are regulated only by those
portions of the Investment Company Act pertaining to business development
companies, are not required to register as an investment company and are
otherwise exempt from the majority of the provisions of the Investment Company
Act. The provisions to which we are subject are somewhat less stringent than
those pertaining to registered investment companies. In addition, as a business
development company we are able to base the compensation that we pay to our
investment adviser and investment sub-adviser on our performance, which is
otherwise prohibited by the Investment Advisers Act. We believe that this
compensation structure will assist us in attracting highly qualified investment
advisers and investment sub-advisers.
As a business development company, we are required to:
have least 70% of our investments in eligible assets before investing
in non-eligible assets; and
provide or make available significant managerial assistance to our
portfolio companies.
ELIGIBLE ASSETS
Eligible assets include:
- securities of an eligible portfolio company which are purchased from
that company in a private transaction. An eligible portfolio company is a
company that:
- is organized and has its principal place of business in the United
States;
- subject to certain narrowly defined exceptions, is not itself a
registered investment company;
- has no class of securities listed on a national securities exchange
or on a dealers' margin list;
- is actively controlled by a business development company, either
alone or acting as part of a controlling group, and an affiliate of
the business development company serves on such company's board of
directors; or
- meets certain other criteria as may be established from time to time
by the Securities and Exchange Commission pursuant to its
rule-making authority;
- securities received by the business development company in
connection with its ownership of securities of an eligible portfolio
company; or
- cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.
SIGNIFICANT MANAGERIAL ASSISTANCE
Significant managerial assistance includes:
- any arrangement in which a business development company offers to
provide, and, if accepted, provides, significant guidance and counsel
concerning the management, operations, or business objectives and
policies of a portfolio company; or
- the exercise by a business development company of a controlling
influence over the management or policies of a portfolio company by the
business development company acting individually or as part of a group
acting together which controls the portfolio company.
33
<PAGE>
REGULATORY RESTRICTIONS
The Investment Company Act requires that at least a majority of our board of
directors be composed of individuals who are not "interested persons," as such
term is defined in the Investment Company Act.
The Investment Company Act also places certain restrictions on our ability to
take certain actions. We may not alter or change our investment objectives,
strategies or policies such that we cease to be a business development company,
nor can we voluntarily withdraw our election to be regulated as a business
development company, without the approval of the holders of a majority, as
defined in the Investment Company Act, of our outstanding voting securities.
Such approval is also required before we may change our status as a
non-diversified investment company.
We are also prohibited by the Investment Company Act from knowingly
participating in a joint transaction, including a co-investment in a
portfolio company with an affiliated person, including any of our directors,
meVC Advisers, DAE Advisers or any of their affiliates. We intend to apply to
the SEC for exemptive relief from this provision to allow the Fund to make
co-investments with affiliates of DAE Advisers and follow-on co-investments
with such affiliates in portfolio companies in which the Fund is an existing
investor. Although the SEC has granted similar relief in the past, we cannot
be certain that our application for such relief will be granted.
34
<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The table below sets forth certain information about our capital stock.
<TABLE>
<CAPTION>
(4)
AMOUNT
(2) (3) OUTSTANDING
(1) AMOUNT AMOUNT HELD BY THE FUND EXCLUSIVE OF AMOUNT
TITLE OF CLASS AUTHORIZED OR FOR ITS ACCOUNT SHOWN UNDER (3)
-------------- ---------- ------------------ ---------------
<S> <C> <C> <C>
Common Stock, $.001 par value................. 1,000,000,000 (0) 100
</TABLE>
Holders of shares of our common stock are entitled to one vote per share on all
matters submitted for action by our stockholders. Our stockholders do not have
cumulative voting rights with respect to the election of directors and, thus,
the holders of a majority of our outstanding shares can, if they choose to do
so, elect all of our directors. The holders of shares of our common stock are
entitled to receive dividends when, as and if declared by our board of directors
out of funds legally available for this purpose.
If we are liquidated, dissolved or wound up, holders of our common stock are
entitled to share ratably in all of our remaining assets after payment of any
outstanding liabilities. Holders of shares of our common stock have no
conversion or exchange rights or privileges nor do shares of our common stock
carry redemption rights. All of the outstanding shares of our common stock are,
and the shares offered in this offering, when issued against payment for them,
will be, fully-paid and non-assessable.
CERTAIN ASPECTS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
CLASSIFIED BOARD
Our articles of incorporation provide for a classified board of directors
consisting of three classes of directors, each serving staggered three-year
terms. As a result, a portion of our board of directors will be elected each
year. Peter S. Freudenthal and have been designated Class I directors
whose terms expire at the [ ] annual meeting of stockholders. has
been designated as a Class II director whose term expires at the [ ] annual
meeting of stockholders. and have been designated as
Class III directors whose terms expire at the [ ] annual meeting of
stockholders. This classification of the board of directors may delay or prevent
a change in control of our company or in our management.
EXECUTIVE OFFICERS
Executive officers are appointed by the board of directors on an annual basis
and serve until their successors have been duly elected and qualified. There are
no family relationships among any of our directors, officers or key employees.
BOARD COMMITTEES
Our board of directors has established an audit committee. The audit committee
currently consists of Messrs. and . The audit committee
reviews our internal accounting procedures and consults with and reviews the
services provided by our independent accountants.
EXECUTIVE COMPENSATION
Since we are newly organized, we have not yet paid compensation to any of our
directors or officers.
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
35
<PAGE>
Our articles of incorporation limit the liability of directors to the maximum
extent permitted by applicable law, including Maryland law and the Investment
Company Act. In the event of any litigation or other proceeding against a
director, Maryland law permits the Fund to indemnify the director for certain
expenses and to advance money for such expenses unless:
it is established that the act or omission of the director was
material to the matter giving rise to the proceeding and the act or
omission was committed in bad faith or was the result of active and
deliberate dishonesty;
the director actually received an improper personal benefit in
money, property, or services; or
in the case of any criminal proceeding, the director had
reasonable cause to believe the act or omission was unlawful.
This limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission. Our articles of incorporation
and bylaws provide that we shall indemnify our directors and executive officers
and may indemnify our other officers and employees and other agents to the
fullest extent permitted by applicable law. Our bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether our bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for expenses, judgments, fines and settlement amounts
incurred by any such person in any action or proceeding arising out of such
person's services as a director or executive officer or at our request. We
believe that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
The limited liability and indemnification provisions in our articles of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative litigation, if successful, might otherwise benefit us and
our stockholders. A stockholder's investment in us may be adversely affected to
the extent we pay the costs of settlement or damage awards against our directors
or officers under these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of our
directors, officers or employees in which indemnification is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
MARYLAND ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS
Provisions of Maryland law and our articles of incorporation and bylaws could
make the following more difficult:
the acquisition of us by means of a tender offer;
acquisition of us by means of a proxy contest or otherwise; or
the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage coercive takeover
practices and inadequate takeover bids. These provisions are also designed to
encourage persons seeking to acquire control of us to first negotiate with our
board. We believe that the benefits of increased protection of our potential
ability to negotiate with the proponent of an unfriendly or unsolicited proposal
to acquire or restructure us outweigh the disadvantages of discouraging such
proposals because negotiation of such proposals could result in an improvement
of their terms.
36
<PAGE>
ELECTION AND REMOVAL OF DIRECTORS. Our board of directors is
divided into three classes. The directors in each class will serve for a
three-year term, one class being elected each year by our stockholders. This
system of electing and removing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of us
because it generally makes it more difficult for stockholders to replace a
majority of the directors.
STOCKHOLDER MEETINGS. Under our articles of incorporation, the board of
directors, the Chairman of the Board, Chief Executive Officer or President may
call special meetings of stockholders. A special meeting also may be called at
the written request of holders of shares entitled to vote not less than 75% of
all votes entitled to be cast at such meeting.
ADOPTION, AMENDMENT OR REPEAL OF OUR BYLAWS. Our articles of incorporation
provide that any adoption, amendment or repeal of our Bylaws will require the
approval of:
at least 66-2/3% of the total number of our authorized directors,
irrespective of any vacancies that may exist on the board of
directors at the time; or
the holders of at least 66-2/3% of the then outstanding shares
of our capital stock entitled to vote on the matter.
REMOVAL OF DIRECTORS. Our articles of incorporation provide that our
stockholders may remove one or more of our directors only for cause and only
with the affirmative approval of the holders of at least 75% of the then
outstanding shares of our capital stock entitled to vote on the matter.
CONVERSION TO OPEN-END INVESTMENT COMPANY. Our articles of incorporation provide
that any proposal to convert us from a closed-end investment company to an
open-end investment company will require the affirmative approval of (i) at
least 75% of our directors and (ii) the holders of at least 75% of the then
outstanding shares of our capital stock entitled to vote on the matter.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND PROPOSALS.
Our bylaws establish advance notice procedures with respect to stockholder
proposals and the nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of directors.
AMENDMENT OF CHARTER PROVISIONS. The amendment of any of the above provisions
would require approval by holders of at least 66-2/3% of the then outstanding
shares of our capital stock entitled to vote on the matter.
ANNUAL MEETINGS
We intend to hold annual meetings of our stockholders to elect our directors and
take such other action as may be necessary or appropriate if we are required to
do so under applicable law or rules of exchanges or other applicable regulatory
agencies.
37
<PAGE>
DISTRIBUTIONS
At least one time per year, we will make distributions of cash and securities to
you of at least 90% of the net investment income we receive from interest and
dividends plus net short-term capital gains. We intend to make the first
distribution, which will likely be comprised entirely of investment income from
short-term investments in accordance with our investment objective, by December
31, 2000. If we incur indebtedness, however, the Investment Company Act limits
our ability to make distributions if at any time our "asset coverage ratio" is
below 300%.
We may also distribute from time to time any capital gains, net of realized and
unrealized capital losses and fees and expenses, we realize from our investments
in portfolio companies. In addition, if any of our portfolio companies elects to
sell its shares in an initial public offering, or if we receive publicly-traded
stock from an acquirer of one of our portfolio companies, the board of directors
may distribute pro rata our shares or a portion of our shares of that company's
capital stock. Any shares we distribute may be subject to certain transfer
restrictions, including a lock-up period which may prohibit you from selling the
distributed shares for up to six months. The timing of capital gains
distributions will vary depending on when we liquidate our investments in
individual portfolio companies. However, in some cases we may not distribute
realized capital gains.
We intend to qualify for the special tax treatment provided under Subchapter M
of the Internal Revenue Code. To qualify for such treatment, we must distribute
to our stockholders for each taxable year at least 90% of our investment company
taxable income (consisting generally of net investment income and net short-term
capital gains). These distributions will be taxable to you as ordinary income or
capital gains. You may be proportionately liable for taxes on income and gains
of the Fund, but, if you are not subject to tax on your income, should not be
required to pay tax on amounts distributed to you. We will inform stockholders
regularly of the amount and nature of our income and gains. A more detailed
discussion of the federal income tax considerations applicable to us and to an
investment in shares of our common stock is included in the SAI under the
heading "Federal Income Tax Matters."
38
<PAGE>
DIVIDEND REINVESTMENT PLAN
All of our stockholders who hold shares of common stock in their own name will
automatically be enrolled in our Dividend Reinvestment Plan, or the Plan. All
such stockholders will have their cash dividends and distributions automatically
reinvested by State Street Bank and Trust Company, or the Plan Agent, in
additional shares of our common stock. Any stockholder may, of course, elect to
receive his or her dividends and distributions in cash. For any of our shares
that are held by banks, brokers or other entities that hold our shares as
nominees for individual stockholders, the Plan Agent will administer the Plan on
the basis of the number of shares certified by any nominee as being registered
for stockholders that have not elected to receive dividends and distributions in
cash. To receive your dividends and distributions in cash, you must notify the
Plan Agent, or your broker or other nominee, as the case may be, in writing.
The Plan Agent serves as agent for the stockholders in administering the Plan.
When we declare a dividend or distribution payable in cash or in additional
shares of our common stock, those stockholders participating in the Plan will
receive their dividend or distribution in additional shares of our common stock.
Such shares will be either newly issued by us or purchased in the open market by
the Plan Administrator. If the market value of a share of our common stock on
the record date for such dividend or distribution equals or exceeds the net
asset value per share on that date, we will issue new shares at the net asset
value. If the net asset value exceeds the market price, the Plan Agent will
purchase in the open market such number of shares as is necessary to complete
the distribution.
The Plan Agent will maintain all stockholder accounts in the Plan and furnish
written confirmation of all transactions. Shares of our common stock in the Plan
will be held in the name of the stockholder and such stockholder will be
considered the beneficial owner of such shares for all purposes.
There is no charge to stockholders for participating in the Plan or for the
reinvestment of dividends and distributions. We will not incur brokerage fees
with respect to newly issued shares issued in connection with the Plan.
Stockholders will, however, be charged a pro rata share of any brokerage fee
charged for open market purchases in connection with the Plan.
We may terminate the Plan at any time. We may also amend the Plan upon providing
written notice to stockholders participating in the Plan at least thirty days
prior to such amendment. You may withdraw from the Plan upon written request to
the Plan Agent. You may obtain additional information about the Plan from the
Plan Agent.
39
<PAGE>
UNDERWRITING
The Fund and the underwriters for the offering named below have entered into an
underwriting agreement concerning the shares being offered. Subject to
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. UBS Warburg LLC is the representative
of the underwriters.
<TABLE>
<CAPTION>
Underwriter Number of Shares
-----------------------------------------------------------------------------
<S> <C>
UBS Warburg LLC
----------
----------
Total
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy up to an additional
______ shares from the Fund. If any shares are purchased under this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following tables show the per share and total sales load we will pay to the
underwriters. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase up to an additional ______
shares.
<TABLE>
<CAPTION>
No Exercise Full Exercise
------------------------------------------------------------------------------
<S> <C> <C>
Per share $ $
Total $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount
40
<PAGE>
of up to $ per share from the initial offering price. If all the shares are
not sold at the initial public offering price, the representative may change the
offering price and the other selling terms.
[The underwriters have informed us that they do not expect discretionary sales
to exceed __% of the shares of common stock to be offered.]
The Fund, meVC Advisers and DAE Advisers have agreed with the underwriters not
to offer, sell, contract to sell, hedge or otherwise dispose of, directly or
indirectly, or file with the SEC a registration statement under the Securities
Act relating to, any of its common stock or securities convertible into or
exchangeable for shares of common stock during the period from the date of this
prospectus continuing through the date 180 days after the date of this
prospectus, without the prior written consent of UBS Warburg LLC.
In order to meet the requirements for listing the Shares on the New York Stock
Exchange the underwriters have undertaken to sell lots of 100 or more shares
to a minimum of 2,000 beneficial holders. The minimum investment requirement is
100 Shares (or $2,000).
In the ordinary course of their businesses, , some of the other
underwriters and their respective affiliates have in the past engaged, and in
the future may engage in investment banking and financial transactions with the
Fund, meVC Advisers, DAE Advisers or their affiliates.
In connection with the offering, the underwriters may purchase and sell shares
of our common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of our common stock while the offering
is in progress.
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representative has repurchased
shares sold by or for the account of that underwriter in stabilizing or short
covering transactions.
41
<PAGE>
These activities by the underwriters may stabilize, maintain or affect the
market price of our common stock. As a result, the price of our common stock may
be higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time.
We have agreed to indemnify the several underwriters against liabilities,
including liabilities under the Securities Act of 1933, and to contribute to
payments that the underwriters may be required to make in respect thereof.
42
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the offering will be passed upon for the
Fund by Kirkpatrick & Lockhart LLP, Washington, D.C. and for the underwriters by
Dewey Ballantine LLP, Los Angeles, California.
EXPERTS
Our Statement of Assets and Liabilities as of May 26, 2000, has been included
herein in reliance upon the report of PricewaterhouseCoopers LLP, Boston,
Massachusetts, independent auditors to the Fund, appearing elsewhere herein,
given on the authority of the same firm as experts in auditing and accounting.
43
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
----
Investment Policies........................................................
Management.................................................................
Investment Company Act Regulation..........................................
Potential Conflicts of Interest............................................
Federal Income Tax Matters.................................................
ERISA Matters..............................................................
Transfer Agent and Registrar...............................................
Dividend Disbursing Agent..................................................
Custodian..................................................................
Sub-Administrator..........................................................
44
<PAGE>
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form N-2 with respect to the shares of our Common Stock offered by
this prospectus. This prospectus, which is a part of the registration statement,
does not contain all of the information set forth in the Registration Statement
or the exhibits and schedules which are a part of the registration statement.
Additional information concerning us and our common stock is included in the
Registration Statement and its exhibits and schedules. You may read and copy any
document we file at the SEC's public reference room in Washington, DC. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. Our SEC filings are also available to the public from the SEC's website at
http://www.sec.gov.
Upon completion of this offering, we will be subject to the information and
periodic reporting requirements of the Securities Exchange Act and will file
periodic reports, proxy statements and other information with the SEC. Such
periodic reports, proxy statements and other information will be available for
inspection and copying at the SEC's public reference room, from the SEC's
website at http://www.sec.gov and from our website at [ ].
45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Directors of
meVC Delta Life Sciences Fund I, Inc.:
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of meVC Delta
Life Sciences Fund I, Inc. (the Fund), at May 26, 2000, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes, examining on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 26, 2000
46
<PAGE>
meVC DELTA LIFE SCIENCES FUND I, INC.
STATEMENT OF ASSETS AND LIABILITIES
MAY 26, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash....................................................................................... $ 2,000
Deferred offering costs.................................................................... 900,000
-----------
Total Assets.......................................................................... 902,000
-----------
LIABILITIES
Liabilities and accrued expenses 900,000
-----------
Total Liabilities..................................................................... 900,000
-----------
NET ASSETS................................................................................. $ 2,000
===========
NET ASSETS CONSIST OF:
Shares of common stock, $.001 par value;
1,000,000,000 shares authorized, 100 shares of which are issued and outstanding........... $ 1
Paid in capital in excess of par.......................................................... 1,999
-----------
NET ASSETS................................................................................ $ 2,000
===========
Net Asset Value Per Share................................................................. $ 20
</TABLE>
--------------------------------------------
Based on net assets of $2,000 and 100 shares issued and outstanding.
The accompanying notes are an integral part of this financial statement.
47
<PAGE>
meVC DELTA LIFE SCIENCES FUND I, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 26, 2000
1. ORGANIZATION:
meVC Delta Life Sciences Fund I, Inc. (the Fund) was organized as a
Maryland corporation on May 19, 2000, and has elected to be regulated as a
Business Development Company under the Investment Company Act of 1940. To date,
the Fund has not had any transactions other than those related to organizational
matters and the sale of 100 shares of beneficial interest to meVC.com, Inc., the
parent company of meVC Advisers, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES:
a. Deferred Offering Costs:
The Fund has deferred certain initial public offering costs. These costs
will be charged to paid-in capital upon sale of the shares.
b. Organization Costs:
Costs relating to the organization of the Fund will be borne by meVC
Advisers, Inc.
c. 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. INVESTMENT ADVISORY AND OTHER AGREEMENTS:
a. The Fund has substantially agreed to the terms of an investment advisory
agreement with meVC Advisers, Inc. (the Adviser). Pursuant to the
investment advisory agreement, the Adviser is responsible for oversight of
asset management and administration of the fund. The Fund pays the Adviser
a monthly fee at the annual rate of 2.5% of the Fund's average weekly net
assets, a portion of which is used to pay the Fund's Sub-Adviser. The Fund
shall also pay an annual incentive fee to the Adviser in an amount equal to
20% of the Fund's annual realized capital gains on its investments, net of
realized losses and unrealized capital depreciation.
b. The Adviser has substantially agreed to the terms of a sub-advisory
agreement with Diaz, Altschul & Enright Advisers, LLC (the Sub-Adviser).
The Sub-Adviser provides all investment opportunities for approval by the
Fund's board. For the Sub-Adviser's services, the Adviser pays the
Sub-Adviser an annual investment sub-advisory fee equal to 1% of the Fund's
average net assets. Adviser shall also pay the Sub-Adviser an amount equal
to 85% of the annual incentive fee paid by the Fund to the Adviser. The
sub-advisory fees are not an additional expense of the Fund.
48
<PAGE>
meVC DELTA LIFE SCIENCES FUND I, INC.
DIVIDEND REINVESTMENT PLAN
meVC Delta Life Sciences Fund I, Inc. (the "Fund") has adopted a Dividend
Reinvestment Plan. Please be aware that all dividends and distributions will be
automatically reinvested in shares of the Fund's common stock, $.001 par value
("Common Stock"), at no cost to the stockholder.
Acquisitions of shares of Common Stock for reinvestment may be made by the Fund
through the issuance of new shares of Common Stock by the Fund at the then
current net asset value ("NAV") and/or by acquisition by the Fund of its shares
of Common Stock that are selling at a discount to NAV. Reinvested dividends and
distributions will be used by the Fund for general investment and operating
purposes, including additional investments in portfolio companies.
Shares of Common Stock acquired by the Fund in accordance with the Plan will be
held in the name of the Fund in unissued form by the Fund's Registrar and
Transfer Agent. Each stockholder will receive a quarterly statement from the
Fund setting forth the number of shares of Common Stock such stockholder owns in
the Plan. These shares can be issued to the individual stockholder, or can be
liquidated upon delivery of written instructions to State Street Bank and Trust
Company (the "Agent").
If you wish to not participate in the Plan and to have dividends and
distributions sent to you instead of held for reinvestment, please complete and
execute the following section.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, OR OTHER NOMINEE,
YOU SHOULD CONTACT YOUR NOMINEE TO SEE IF IT WILL DISCONTINUE YOUR PARTICIPATION
IN THE PLAN.
IF YOU WISH TO DISCONTINUE YOUR PARTICIPATION IN THE PLAN, BUT YOUR BROKERAGE
FIRM, BANK, OR OTHER NOMINEE IS UNABLE TO HONOR YOUR REQUEST, YOU SHOULD REQUEST
IT TO RE-REGISTER YOUR SHARES IN YOUR OWN NAME WHICH WILL ENABLE YOU TO
DISCONTINUE PARTICIPATION IN THE PLAN.
ELECTION TO RECEIVE DIVIDENDS AND NOT PARTICIPATE IN THE PLAN
The undersigned elects not to participate in all the Dividend Reinvestment Plan
of meVC Delta Life Sciences Fund I, Inc. and requests that all dividends and
distributions be deposited to the following account or forwarded to the
following address:
Name of Stockholder: ___________________________________________________________
Account Number for Deposit: ____________________________________________________
Bank or Custodial Name: ________________________________________________________
Address for Dividend Mailing: __________________________________________________
--------------------------------------------------------------------------------
Telephone:_________________________ Fax:_________________________________
Date:______________________________ _____________________________________
Signature of Registered Holder
Return this election to: State Street Bank and Trust Company
c/o Equiserve
PO Box 8200
Boston, MA 02266-8200
800-426-5523
<PAGE>
APPENDIX
"MEET THE MANAGEMENT" PRESENTATION FOR
meVC DELTA LIFE SCIENCES FUND I, INC.
Prospective investors will be able to log onto a website maintained by [ ] at
[ ], where a prospectus is available for review. Within designated sections of
the prospectus, including the table of contents, an embedded hyperlink {click
here for "Meet the Management" Presentation} will provide exclusive access to
the "Meet the Management" Presentation. This presentation is a part of the
prospectus and highlights selected information contained elsewhere in the
prospectus. This presentation does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the "Risk Factors" and our financial statements
and notes to those financial statements, before making an investment decision.
[Script of "Meet the Management" Presentation to be added.]
<PAGE>
--------------------------------------------------------------------------------
Until 2000 all dealers effecting transactions in these securities whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligation of the dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
--------------------------------------------------------------------------------
Additional information about the Fund has been included in a statement of
additional information, or SAI, that has been filed with the Securities and
Exchange Commission. A copy of the SAI may be obtained free of charge by writing
to the Secretary of the Fund at 991 Folsom Street, Suite 301, San Francisco,
California 94107, or by calling (877) 474-6382. This address and telephone
number may also be used to obtain additional information about the Fund and to
make stockholder inquiries. This prospectus and the SAI, as well as certain
other information, will also be available on the Fund's website at []. Such
information may also be reviewed and copied at the SEC's Public Reference Room,
Washington, D.C. 20549. Information about the Public Reference Room may be
obtained by calling (202) 942-8090. Reports and other information about the Fund
are available on the EDGAR database on the SEC's website at http://www.sec.gov,
and copies of such information may be obtained upon payment of a duplicating
fee by electronic request to [email protected] or by written request to the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
--------------------------------------------------------------------------------
meVC DELTA LIFE SCIENCES FUND I, INC.
A VENTURE CAPITAL AND PRIVATE EQUITY FUND
UBS WARBURG LLC
--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION - MAY 30, 2000
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
__________ SHARES
meVC DELTA LIFE SCIENCES FUND I, INC.
A VENTURE CAPITAL AND PRIVATE EQUITY FUND
COMMON STOCK
--------------------------------------------------------------------------------
This SAI is not a prospectus. This SAI relates to and should be read in
conjunction with the prospectus of meVC Delta Life Sciences Fund I, Inc., dated
May 26, 2000. A copy of the prospectus may be obtained by contacting us as set
forth below.
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
--------------------------------------------------------------------------------
meVC DELTA LIFE SCIENCES FUND I, INC.
991 FOLSOM STREET, SUITE 301
SAN FRANCISCO, CALIFORNIA 94107
TELEPHONE: (877) 474-6382
May 30, 2000
<PAGE>
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Investment policies.....................................................
Management..............................................................
Investment Company Act regulation.......................................
Potential conflicts of interest.........................................
Federal income tax matters..............................................
ERISA matters...........................................................
Transfer agent and registrar............................................
Dividend disbursing agent...............................................
Custodian...............................................................
Sub-administrator.......................................................
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THE PROSPECTUS AND
IN THIS SAI. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT OR
ADDITIONAL INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THE
PROSPECTUS OR IN THE STATEMENT OF ADDITIONAL INFORMATION IS ACCURATE ON ANY DATE
OTHER THAN THE DATE SET FORTH ON THE FRONT COVER OF THE PROSPECTUS OR OF THIS
SAI.
THE PROSPECTUS AND THIS SAI CONTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES,"
"PLANS," "EXPECTS," "FUTURE," "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING
STATEMENTS ATTRIBUTED TO THIRD PARTY SOURCES RELATING TO ESTIMATES REGARDING
VENTURE CAPITAL INVESTING AND THE GROWTH OF THE LIFE SCIENCES AND RELATED
INDUSTRIES. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING THE RISKS FACED BY
US DESCRIBED IN "RISK FACTORS" AND ELSEWHERE IN THE PROSPECTUS AND IN THIS SAI.
2
<PAGE>
INVESTMENT POLICIES
COMMON STOCK: CONVERTIBLE PREFERRED STOCK
Our venture capital, private equity and structured investments
will typically be negotiated directly with the issuer in private
transactions. Although our investments in portfolio companies may be in
common stock, our investments will often be in the form of preferred stock
that is convertible to common stock under certain circumstances, including
the sale by the company of shares of its common stock in an initial public
offering. Preferred stock offers many advantages over common stock, including:
- In the event the company is liquidated or sold, the holders of
preferred stock receive payment prior to and in preference to the
holders of common stock.
- Preferred stockholders typically have protective provisions that can
have the effect of prohibiting certain transactions, including a
sale of the company, unless the holders of a majority of the
preferred stock approve such transaction.
- Holders of preferred shares are often granted the right to elect one
or more members of the company's board of directors.
DEBT SECURITIES
Our investments in portfolio companies are not limited to common and
preferred stock. We have the investment flexibility to invest in portfolio
companies through other types of instruments if we believe that such
alternative investments are in your best interests. Such other investments
might include debt securities (which may or may not be convertible into
equity securities) and structured debt securities whose value is linked to
the sales of a particular product. Debt securities in which we may invest may
be unsecured or they may be collateralized by other assets owned or
controlled by the issuing company.
WARRANTS AND OTHER RIGHTS TO PURCHASE EQUITY OR DEBT SECURITIES
When we believe it appropriate, we may acquire warrants and other
rights to purchase at a later date equity or debt securities of our portfolio
companies. Warrants are securities permitting, but not obligating, their
holder to subscribe for other securities. Warrants typically do not carry
with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not
represent any rights in the assets of the portfolio company. As a result,
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to its expiration date.
TEMPORARY INVESTMENTS
Pending investments in the types of securities described above, we will
invest our cash in:
- U. S. Government securities,
- Repurchase agreements with federally-insured banks with a maturity
date of seven days or less, the underlying instruments of which are
securities issued or guaranteed by the federal government,
3
<PAGE>
- Certificates of deposit in a federally insured bank with a maturity
date of one year or less and in a maximum amount equal to the limit
on federal deposit insurance,
- Deposit accounts maintained in a federally insured bank subject to
withdrawal restrictions of one year or less, up to the limit of
federal deposit insurance, and
- Certificates of deposit or deposit accounts in federally insured
banks in excess of the maximum amount of deposit insurance if the
insured bank is deemed to be well-capitalized by the Federal Deposit
Insurance Corporation.
FOLLOW-ON INVESTMENTS
After our initial investment, we anticipate that we will often provide
additional or follow-on financing to the portfolio companies. Follow-on
investments may be made pursuant to rights to acquire additional securities or
otherwise increase our ownership position in a successful or promising company.
We may choose to provide follow-on investments for a number of other reasons,
including providing necessary financing for a company to implement its business
plan, or develop a new line of business or product.
INDEBTEDNESS
We may use leverage to raise all or a portion of the funds required to
make follow-on investments and to meet operating expenses. Such borrowing would
normally occur in the later years of our operations when our investment
portfolio may have significant value but limited liquidity.
AVERAGE INVESTMENT
Our investment in any one of our portfolio companies will vary depending
on the stage of the company's growth, the quality and completeness of its
management team, the perceived business opportunity, the size of the investment
sought by the issuing company and the expected return from our investment.
MARGIN
We will not purchase any securities on margin, except for use of
short-term credit necessary for the clearance of transactions.
CERTAIN INVESTMENT TECHNIQUES FOR HEDGING PURPOSES
As described in the prospectus, we may use certain investment techniques
to provide hedging with respect to investments in our portfolio. We will engage
in such hedging transactions in an effort to protect the value of our investment
portfolio from changes in the market value of securities in which we have
invested, or in the value of securities into which securities in our portfolio
are convertible. There can be no assurance that our hedging activities will be
successful, or that losses will be avoided, and the cost of hedging activities
may result in lower profits than would have been realized if we did not engage
in hedging at all.
We may engage in the following hedging transactions:
- SHORT SALES. We may make short sales of securities. A short sale is
a transaction in which the Fund sells a security in anticipation
that the market price of that security will decline. We may
4
<PAGE>
make short sales as a form of hedging to offset potential declines
in long positions in securities that we own, or anticipate
acquiring, or in similar securities.
When we make a short sale of a security that we do not own, we must
borrow the security sold short and deliver it to the broker/dealer
or other intermediary through which we make the short sale. We may
have to pay a fee to borrow particular securities and we will often
be obligated to pay over any payments received on such borrowed
securities.
Our obligation to replace the borrowed security when the borrowing
is called our expires will be secured by collateral deposited with
the intermediary. We will also be required to deposit collateral
with our custodian to the extent, if any, necessary so that the
value of collateral deposits in the aggregate is at all times equal
to at least 100% of the current market value of the security sold
short. Depending on arrangements made with the intermediary from
which we borrowed the security regarding payment of any amount
received on such security, we may not receive any payments
(including interest) on our collateral deposited with such
intermediary.
If the price of the security sold short increases between the time
of the short sale and the time we replace the borrowed security, we
will incur a loss; conversely, if the price declines, we will
realize a gain. Any gain will be decreased, and any loss increased,
by the transaction costs associated with the transaction. Although
our gain is limited by the price at which we sold the security
short, our potential loss theoretically is unlimited.
- OPTIONS. We may use options on securities to attempt to hedge
against the overall level of investment risk associated with the
Fund's portfolio investments. We may purchase or sell put and call
options on equity and debt securities to hedge against the risk of
fluctuations in the prices of securities held by the Fund or that
we intend or have the right to include in the Fund's portfolio
holdings.
The use of options involves special considerations and risks. First,
the successful use of options depends upon our ability to predict
movements of the overall securities markets, which requires
different skills than predicting changes in individual securities.
While the Sub-Adviser is experienced in the use of options, there
can be no assurance that any particular strategy will work. Second,
there might be an imperfect correlation, or even no correlation,
between price movements of an option and price movements of the
investments being hedged. Such a lack of correlation might occur due
to factors unrelated to the value of the investments being hedged,
such as speculative or other pressure on the markets in which the
hedging instrument is traded. Finally, option hedging strategies, if
successful, can reduce risk of loss by wholly or partially
offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments.
When we purchase put options, we generally have the right to sell
the underlying security at the exercise price at any time until or
on the expiration date. We may enter into closing sale transactions
with respect to such options, exercise such options, or permit such
options to expire. We may purchase a put option on an underlying
security owned by the Fund in order to protect against an
anticipated decline in the value of the security. We may also
purchase put options at a time when we do not own the underlying
security. By purchasing options on a security that the Fund does not
own, we seek to benefit from a decline in the market price of the
underlying security. The premium paid for the put option and any
transaction costs would reduce any profit otherwise available for
distribution when the security is eventually sold. In order for the
purchase of a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise
price to cover the premium and transaction
5
<PAGE>
costs (unless the put option is sold in a closing sale
transaction). If the put option is not sold when it has remaining
value, and if the market price of the underlying security
remains equal to or greater than the exercise price during
the life of the put option, we will lose our entire investment
in that put option.
When we purchase call options, we generally have the right to buy
the underlying security at the exercise price at any time until or
on the expiration date. We may enter into closing sale transactions
with respect to such options, exercise such options, or permit such
options to expire. Call options may be purchased by the Fund for the
purpose of acquiring the underlying security for our portfolio at an
established price by protecting against increases in the cost of the
security. Used in this manner, the purchase of call options would
enable the Fund to acquire the security at the exercise price of the
call option plus the premium paid. In order for the purchase of a
call option to be profitable, the market price of the underlying
security must increase sufficiently above the exercise price to
cover the premium and transaction costs (unless the call option is
sold in a closing sale transaction). At times, the net cost of
acquiring the security in this manner may be less than the cost of
acquiring the security directly.
We may sell, or write, covered or uncovered put or call options.
A covered call option, which is a call option with respect to
which the Fund owns the underlying security sold by the Fund,
exposes the Fund during the term of the option to possible loss of
the opportunity to realize appreciation in the market price of the
underlying security, and does not affect the Fund's continued
exposure to depreciation in the market price of the security held. A
put option written by the Fund exposes the Fund during the term of
the option to a decline in price of the underlying security.
Uncovered call and put options are options sold by the Fund which
are not covered by securities held in the Fund's portfolio, and
expose the Fund to the risk of loss if the value of the securities
subject to the option appreciate in value (in the case of a call
option) or depreciate in value (in the case of a put option).
6
<PAGE>
MANAGEMENT
<TABLE>
<CAPTION>
(1) (2) (3)
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH REGISTRANT DURING PAST FIVE YEARS
--------------------- ---------------- -----------------------
<S> <C> <C>
Peter S. Freudenthal* 36 Chairman, Chief Chairman, President and Director, meVC.com, Inc., San
meVC DELTA LIFE SCIENCES Executive Officer Francisco, California; Vice-Chairman and Director,
FUND I, INC. and Director meVC Draper Fisher Jurvetson Fund I, Inc., San
991 FOLSOM STREET, SUITE 301 Francisco, California; Vice President and Senior
SAN FRANCISCO, CALIFORNIA 94107 Equity Research Analyst, Robertson Stephens &
Company, San Francisco, California.
Patrick G. Enright* 38 Director Managing Member, Diaz, Altschul & Enright Advisers, LLC,
meVC DELTA LIFE SCIENCES Menlo Park, California; Managing Member, Diaz & Altschul
FUND I, INC. Group, LLC, New York, New York; Director, Valentis, Inc.,
991 FOLSOM STREET, SUITE 301 Burlingame, California; Chief Financial Officer and
SAN FRANCISCO, CALIFORNIA 94107 Vice President of Business Development, Valentis, Inc.,
Burlingame, California.
[Insert Director] Director
meVC DELTA LIFE SCIENCES
FUND I, INC.
991 FOLSOM STREET, SUITE 301
SAN FRANCISCO, CALIFORNIA 94107
[Insert Director] Director
meVC DELTA LIFE SCIENCES
FUND I, INC.
991 FOLSOM STREET, SUITE 301
SAN FRANCISCO, CALIFORNIA 94107
[Insert Director] Director
meVC DELTA LIFE SCIENCES
FUND I, INC.
991 FOLSOM STREET, SUITE 301
SAN FRANCISCO, CALIFORNIA 94107
Andrew E. Singer 29 President Chief Executive Officer and Director, meVC.com, Inc.,
meVC DELTA LIFE SCIENCES San Francisco, California; President, meVC Draper
FUND I, INC. Fisher Jurvetson Fund I, Inc., San Francisco,
991 FOLSOM STREET, SUITE 301 California; Senior Associate, Robertson Stephens &
SAN FRANCISCO, CALIFORNIA 94107 Company, San Francisco, California; Director of New
Business, The Shansby Group, San Francisco,
California.
7
<PAGE>
<CAPTION>
(1) (2) (3)
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH REGISTRANT DURING PAST FIVE YEARS
--------------------- ---------------- -----------------------
<S> <C> <C>
Paul Wozniak 36 Vice President, Chief Operating Officer, meVC.com, Inc., San
meVC DELTA LIFE SCIENCES Chief Financial Francisco, California; Vice President, Chief
FUND I, INC. Officer and Financial Officer and Treasurer, meVC Draper Fisher
991 FOLSOM STREET, SUITE 301 Treasurer Jurvetson Fund I, Inc., San Francisco, California;
SAN FRANCISCO, CALIFORNIA 94107 Vice President and Director, Mutual Fund Operations,
GT Global, Inc. / AIM Funds, San Francisco,
California.
Kenneth Priore 30 Secretary Internal Counsel and Director of Policy and
meVC DELTA LIFE SCIENCES Compliance, meVC.com, Inc., San Francisco,
FUND I, INC. California; Secretary, meVC Draper Fisher Jurvetson
991 FOLSOM STREET, SUITE 301 Fund I, Inc., San Francisco, California; Managing
SAN FRANCISCO, CALIFORNIA 94107 Attorney: Third Party Actions, Arbitration and
Litigation, Office of Corporate Counsel, Charles
Schwab & Co., San Francisco, California.
</TABLE>
-----------
* Interested person as defined in Section 2(a)(19) of the Investment
Company Act.
Our independent directors will receive payment of certain fees and
reimbursement of their expenses as follows:
- Compensation of $[ ] per month.
- Compensation of $[ ] for each meeting of our board of directors,
or a committee of the board of directors, in which each such
independent director participates, either in person or by telephone,
up to a maximum of six per year for attendance at meetings of the
full board of directors.
- Reimbursement for out-of-pocket expenditures relating to attendance
at meetings of the full board of directors or a committee of the
board of directors and for other expenses.
meVC Advisers will bear all fees and expenses associated with our
independent directors.
Pursuant to the investment advisory agreement with meVC Advisers, and
subject to the supervision and oversight of our board of directors, meVC
Advisers will be responsible for our day-to-day operations, administration and
regulatory compliance, including the following:
- Setting and maintaining our strategic direction;
- Maintaining our financial records;
- Preparing financial and accounting reports for presentation to our
board of directors and stockholders and for filing with governmental
agencies;
- Calculating and publishing our net asset value;
8
<PAGE>
- Overseeing the preparation and filing of our tax returns;
- Preparing and providing reports to our board of directors and
stockholders; and
- Overseeing generally the payment of our expenses and the performance
of administrative and professional services rendered to us by
others.
meVC Advisers will also have responsibility, subject to oversight by our
board of directors, of evaluating, investigating and selecting investments for
our portfolio, including follow-on and temporary investments and borrowing.
meVC Advisers will pay its own costs and expenses, including any costs
and expenses incurred by it when acting on our behalf, and has also agreed to
pay certain of our costs and expenses, including the following:
- Operating expenses incurred in the ordinary conduct of our business,
including expenses associated with our office facilities and
clerical, bookkeeping and record keeping services,
- All expenses related to calculating and publishing our net asset
value,
- All of the fees and expenses payable to our independent directors,
- All fees and expenses of our legal counsel, independent accountants,
outside consultants, custodian and transfer agent and registrar,
- All expenses related to printing and mailing share certificates,
reports and notices to stockholders and proxy statements,
- All expenses related to meetings of our directors and stockholders,
and
- All federal and state registration fees.
Subject to the oversight and supervision of our board of directors, DAE
Advisers will be responsible for:
- Negotiating and structuring investments and implementing our
investment objective, including analyzing and selecting our
portfolio investments, and
- Providing managerial assistance and guidance to the companies in
which we invest by serving on the boards of directors, assisting in
the selection of management personnel, performing market and product
analysis, and the formulating marketing and financing strategies.
DAE Advisers will pay all of its own costs and expenses, including any
costs and expenses incurred by it when acting on our behalf for meVC Advisers.
INVESTMENT COMPANY ACT REGULATION
As described in the prospectus, the Investment Company Act places
certain restrictions on the types of assets we may hold to maintain our
qualification as a business development company, and requires us to provide or
make available significant managerial assistance to the companies in which we
invest. In addition, we are prohibited from investing in certain types of
companies, including brokerage firms, insurance companies and investment banking
firms.
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As a business development company, we are permitted, under certain
specified conditions, to issue multiple classes of senior debt and a single
class of interests senior to the shares of our common stock offered for sale
pursuant to the prospectus. We can do so, however, only if our asset coverage,
as defined in the Investment Company Act, is at least 200% after the issuance of
the debt or the senior interests, and we do not make any distribution to our
stockholders or repurchase any shares of our common stock at any time when our
asset coverage ratio has fallen below 200%.
As a business development company, we may not change the nature of our
business so as to cease to be, or to withdraw our election as, a business
development company, without the affirmative vote of a majority of our
outstanding shares.
POTENTIAL CONFLICTS OF INTEREST
OTHER ACTIVITIES OF THE INVESTMENT ADVISERS
We do not anticipate having independent management or employees and
will rely upon our directors, meVC Advisers and DAE Advisers for management
and administration of the Fund, as well as the selection of our investments.
The directors, officers and members of meVC Advisers and DAE Advisers may
have conflicts of interest in allocating their time to, and performing
services for, us and for other funds in which they are involved. In addition,
meVC.com, the parent of meVC Advisers, may also sponsor additional funds with
similar investment objectives. Nevertheless, we believe that meVC Advisers,
meVC.com and DAE Advisers have sufficient personnel to satisfy all of their
responsibilities. The members of DAE Advisers have legal and financial
obligations with respect to their other funds that are similar to their
obligations to us.
TIMING OF DISPOSITION OF FUND INVESTMENTS
meVC Advisers and DAE Advisers each have an interest in our profits and
losses. Their interests may, in some cases, be inconsistent with your interests
with respect to the timing of disposition of our investments in portfolio
companies. Our directors will, however, exercise supervisory and oversight
authority over their actions. Our directors have a fiduciary duty imposed by
applicable law to act in our best interests.
LEGAL REPRESENTATION
Our legal counsel may also provide services to meVC Advisers. If a
conflict in representation arises and cannot be resolved, or if the consent of
the respective parties cannot be obtained to the continuance of such dual
representation after full disclosure of such conflict, such counsel will
withdraw from the representation of one or both of the parties with conflicting
interests with respect to the matter involved. Our legal counsel has not acted
and will not act on the behalf of any purchaser of shares of our common stock in
connection with this offering. Each prospective purchaser of our shares should
consult with its own counsel prior to purchasing our shares.
CONFLICTS WITH PORTFOLIO COMPANIES
The interests of a company in which we invest may, from time to time,
conflict with your best interests. If meVC Advisers or DAE Advisers becomes
actively involved in the management of any of our portfolio companies, they will
resolve such conflicts of interest in what they consider to be your best
interests.
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FEDERAL INCOME TAX MATTERS
You should consult your own tax adviser with respect to the tax
considerations applicable to a purchase of shares of our common stock. This
discussion does not address all aspects of federal income taxation relevant
to holders of our common stock in light of their personal circumstances, or
to certain types of holders subject to special treatment under federal income
tax laws, including foreign taxpayers. This discussion does not address any
aspects of foreign, state or local tax laws.
We intend to qualify for treatment as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.
To qualify for such treatment, we must distribute to our stockholders for
each taxable year at least 90% of our investment company taxable income
(consisting generally of net investment income from interest and dividends
and net short-term capital gains). We must also meet several additional
requirements, including:
- At least 90% of our gross income for each taxable year must be
from dividends, interest, payments with respect to securities
loans, and gains from sales or other disposition of stock,
securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures and forward
contracts) derived with respect to our business of investing in
securities; and
- As of the close of each quarter of our taxable year:
- at least 50% of the market value of our total assets must
consist of cash, cash items, U.S. government securities, the
securities of other regulated investment companies and other
securities to the extent that (1) we do not hold more than
10% of the voting securities of any issuer of such other
securities and (2) such other securities of any one issuer
do not represent more than 5% of our total assets; and
- no more than 25% of the value of our total assets may be
invested in the securities of one issuer (other than U.S.
government securities or the securities of other regulated
investment companies), or of two or more issuers that are
controlled by us and are engaged in the same or similar or
related trades or businesses.
The diversification requirements outlined above are liberalized in the case
of certain investment companies. In particular, if we, as a business
development company, meet certain requirements described below, the 50%
diversification requirement is modified so that we may include in our 50%
pool of investments the value of the securities of any issuer (even if we
hold more than 10% of the issuer's voting securities) so long as at the time
of the latest investment in that issuer's securities the tax basis we have in
all securities issued by the issuer does not exceed 5% of the total value of
all of our assets. This exception does not apply if we have continuously held
any securities of that issuer (or any predecessor) for a period of ten or
more years.
For the modified diversification requirement rule to apply for any taxable
year, the SEC must determine and certify to the Internal Revenue Service, or
the IRS, no more than 60 days prior to the close of that taxable year that we
are principally engaged in furnishing capital to corporations that themselves
are principally engaged in the development or exploitation of inventions,
technological improvements, new processes, or products not previously
available. For purposes of these determinations, a corporation is considered
principally engaged in such development or exploitation for at least ten
years after our first acquisition of any security in such corporation (or any
predecessor) if, at the date of the original acquisition, the issuer
corporation (or any predecessor) was principally so engaged. In addition, we
will be considered at
11
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any date to be furnishing capital to any corporation whose securities we hold,
if within ten years before that date, we acquired securities in that
corporation.
The modified diversification requirement rule does not apply to any quarter
if, at the close of that quarter (and for at least thirty days thereafter),
more than 25% of the value of our total assets is represented by securities
of issuers with respect to each of which (i) we hold more than 10% of its
outstanding voting securities and (ii) we have continuously held any security
of that issuer (or a predecessor) for ten or more years.
If we were unable to qualify for treatment as a regulated investment company
for any taxable year, we would be subject to tax on our ordinary income and
capital gains at regular corporate rates. We would not be able to deduct
distributions to stockholders, nor would they be required to be made.
Distributions would be taxable to our stockholders as ordinary dividend
income to the extent of our current and accumulated earnings and profits.
Subject to certain limitations under the Code, corporate distributees would
be eligible for the dividends-received deduction. Distributions in excess of
current and accumulated earnings and profits would be treated first as a
return of capital to the extent of the stockholder's tax basis, and any
remaining distributions would be treated as a gain realized from the sale or
exchange of property. If we fail to meet the requirements of Subchapter M in
our first taxable year or, with respect to later years, for more than two
consecutive years and then seeks to requalify under Subchapter M, we may be
required to recognize gain to the extent of any unrealized appreciation on
our assets.
If, for any taxable year, we qualify as a regulated investment company and
distribute to stockholders at least 90% of our "investment company taxable"
income as defined in the Code, we will not be subject to federal income tax
on the portion of that taxable income and gains we distribute to stockholders
for that year. We will be subject to regular corporate income tax (currently
at rates up to 35%) on any undistributed net investment income and
undistributed net capital gain. In addition, if we distribute in a timely
manner the sum of at least (i) 98% of our ordinary income for each calendar
year and (ii) 98% of our capital gain net income for the one-year period
ending October 31 in that calendar year plus (iii) any income not distributed
in prior years, we will not be subject to the 4% nondeductible federal excise
tax on certain undistributed income of regulated investment companies. We
will be subject to alternative minimum tax, but any tax preference items
would be apportioned between us and our stockholders in the same proportion
that dividends (other than capital gain dividends) paid to each stockholder
bear to our taxable income determined without regard to the dividends paid
deduction.
If we acquire debt obligations that were originally issued at a discount, or
that bear interest at rates that are not fixed (or certain "qualified
variable rates") or that is not payable at regular intervals over the life of
the obligation, we will be required to include in taxable income each year a
portion of the "original issue discount" that accrues over the life of the
obligation, regardless of whether the income is received by us, and we may be
required to make distributions to continue to qualify for treatment as a
regulated investment company or to avoid the 4% excise tax on certain
undistributed income. In that event, we might be required to sell temporary
investments or other assets to meet the distribution requirement.
For any period during which we qualify for treatment as a regulated
investment company for federal income tax purposes, distributions to
stockholders attributable to our ordinary income (including dividends,
interest and original issue discount) and net short-term capital gains
generally will be taxable as ordinary income to stockholders to the extent of
our current or accumulated earnings and profits. Distributions in excess of
our earnings and profits will first be treated as a return of capital which
reduces the stockholder's adjusted basis in his or her shares of common stock
and then as gain from the sale of shares of our common stock. Distributions
of our net long-term capital gains (designated by us as capital gain
dividends) will be taxable to each stockholder as long-term capital gains
regardless of the stockholder's holding period for his or her common stock.
Corporate stockholders generally will be eligible for the 70%
dividends-received deduction with respect to
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ordinary income (but not capital gain) dividends to the extent of the dividends
we received from domestic corporations. Any dividend declared by us in October,
November or December of any calendar year, payable to stockholders of record on
a date in such a month and actually paid during January of the following year,
will be treated as if it were paid by us and received by the stockholders on
December 31 of the previous year. In addition, we may elect to relate a
dividend back to the prior taxable year if we (i) declare such dividend prior
to the due date for filing our return for that taxable year, (ii) make the
election in that return, and (iii) distribute the amount in the 12 month
period following the close of the taxable year but not later than the first
regular dividend payment following the declaration. Any such election will
not alter the general rule that a stockholder will be treated as receiving a
dividend in the taxable year in which the distribution is made (subject to
the October, November, December rule described above).
To the extent that we retain any net long-term capital gains, we may
designate them as "deemed distributions" and pay tax thereon for the benefit
of our stockholders. In that event, each stockholder will report his or her
share of the retained long-term capital gains on his or her individual tax
returns as if that share had been received and will be entitled to a credit
for the tax paid thereon by us. The amount of the deemed distribution net of
such tax then will be added to the stockholder's cost basis for his or her
common stock. Since we expect to pay tax on capital gains at regular
corporate tax rates and the rate payable by individuals on those gains can be
as low as 20%, the amount of credit that individual stockholders may take is
expected to exceed the amount of tax they would be required to pay on capital
gains. Stockholders who are not subject to federal income tax or tax on
capital gains should be able to file a return on the appropriate form or a
claim for refund that allows them to recover the taxes paid on their behalf.
Section 1202 of the Code permits the exclusion, for federal income tax
purposes, of 50% of any gain (subject to certain limitations) realized upon
the sale or exchange of "qualified small business stock" held for more than
five years. Generally, qualified small business stock is stock of a domestic
corporation acquired on original issue (directly or through an underwriter)
from the issuing corporation, which must (i) at all times up to the date of
issuance and immediately thereafter have assets of not more than $50 million
and (ii) throughout substantially all of the holder's holding period for the
stock be actively engaged in the conduct of a "qualified trade or business."
If we acquire qualified small business stock, hold that stock for at least
five years and dispose of that stock at a profit, a stockholder who held
shares of our Common Stock at the time we purchased the qualified small
business stock and at all times thereafter until we disposed of that stock
would be entitled to exclude from taxable income 50% of that stockholder's
share of such gain. 42% (28% for stock the holding period for which begins
after December 31, 2000) of any amount so excluded would be treated as a tax
preference item for alternative minimum tax purposes. Comparable rules apply
under the qualified small business stock "rollover" provisions of section
1045 of the Code, under which gain otherwise reportable by individuals with
respect to sales by us of qualified small business stock held for more than
six months can be deferred if we reinvest the sales proceeds within 60 days
in other qualified small business stock.
A stockholder may recognize taxable gain or loss if the stockholder sells or
exchanges shares of our common stock. Any gain or loss from the sale or
exchange of common stock generally will be treated as capital gain or loss if
the common stock is held as a capital asset and will be treated as long-term
capital gain or loss if the stockholder has held the common stock for more
than one year. However, any capital loss from a sale or exchange of shares of
common stock held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends (or
undistributed capital gains) received with respect to those shares of common
stock.
We may be required to withhold federal income tax at the rate of 31% of all
taxable distributions payable to certain non-corporate stockholders who fail
to provide us with their correct taxpayer identification number or a
certificate that the stockholder is exempt from backup withholding, or if the
IRS notifies us that the stockholder is subject to backup withholding. Any
amounts withheld may be credited against a stockholder's U.S. federal income
tax liability.
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Federal withholding taxes at a 30% rate (or a lesser treaty rate) may apply
to distributions to stockholders that are nonresident aliens or foreign
partnerships, trusts or corporations. Foreign stockholders should consult
their tax advisers with respect to the possible U.S. federal, state and local
and foreign tax consequences of an investment in the Fund.
Unless an exception applies, we will mail to each stockholder, as promptly as
possible after the end of each taxable year, a notice detailing, on a per
distribution basis, the amounts includible in the stockholder's taxable
income for that year as ordinary income, as net realized capital gains (if
applicable) and as "deemed" distributions of capital gains, including taxes
paid by us with respect thereto. In addition, absent an exemption, the
federal tax status of each year's distributions will be reported to the IRS.
Distributions may also be subject to additional state, local and foreign
taxes depending on each stockholder's particular situation. Stockholders
should consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
Under our Dividend Reinvestment Plan, all cash distributions to stockholders
will be automatically reinvested in additional whole and fractional shares of
our common stock unless you elect to receive cash. For federal income tax
purposes, however, you will be deemed to have constructively received cash
and the amount thereof should be included in your income to the extent the
constructive distribution otherwise represents a taxable dividend for the
year in which such distribution is credited to your account. The amount of
the distribution is the value of the shares of common stock acquired through
the Plan.
The use of hedging strategies, such as purchasing options, involves complex
rules that will determine for income tax purposes the amount, character and
timing of recognition of the gains and losses we realize in connection
therewith. Gains from options we derive with respect to our business of
investing in securities will be treated as qualifying income under the
90%-of-gross-income requirement outlined above.
Certain listed nonequity options (such as those on a securities index) in
which we may invest will be subject to section 1256 of the Code ("section
1256 contracts"). Any section 1256 contracts we hold at the end of our
taxable year generally must be "marked-to-market" (that is, treated as having
been sold at that time for their fair market value) for federal income tax
purposes, with the result that unrealized gains or losses will be treated as
though they were realized. Sixty percent of any net gain or loss recognized
on these deemed sales, and 60% of any net realized gain or loss from any
actual sales of section 1256 contracts, will be treated as long-term capital
gain or loss, and the balance will be treated as short-term capital gain or
loss. Section 1256 contracts also may be marked-to-market for purposes of the
excise tax on certain undistributed income and gains mentioned above. These
rules may operate to increase the amount that we must distribute (I.E., with
respect to the portion treated as short-term capital gain), which will be
taxable to stockholders as ordinary income, and to increase the net capital
gain we recognize, without in either case increasing the cash available to
us. We may elect not to have the foregoing rules apply to any "mixed
straddle" (that is, a straddle, clearly identified by us in accordance with
the regulations under the Code, at least one (but not all) of the positions
of which are section 1256 contracts).
Code section 1092 (dealing with straddles) also may affect the taxation of
certain options in which we may invest. That section defines a "straddle" as
offsetting positions with respect to actively traded personal property; for
these purposes, options are positions in personal property. Under that
section, any loss from the disposition of a position in a straddle generally
may be deducted only to the extent the loss exceeds the unrealized gain on
the offsetting position(s) of the straddle. In addition, these rules may
postpone the recognition of loss that otherwise would be recognized under the
mark-to-market
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rules discussed above. The regulations under section 1092 also provide certain
"wash sale" rules, which apply to transactions where a position is sold at a
loss and a new offsetting position is acquired within a prescribed period, and
"short sale" rules applicable to straddles. If we make certain elections, the
amount, character and timing of recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences of straddle
transactions are not entirely clear.
If a call option we purchased lapses, we will realize short-term or
long-term capital loss, depending on our holding period for the security subject
thereto. If we exercise a purchased call option, the premium we paid for the
option will be added to the basis of the subject securities.
If we have an "appreciated financial position" -- generally, an interest
(including an interest through an option or short sale) with respect to any
stock, debt instrument (other than "straight debt") or partnership interest the
fair market value of which exceeds its adjusted basis -- and enter into a
"constructive sale" of the position, we will be treated as having made an actual
sale thereof, with the result that we will recognize gain at that time. A
constructive sale generally consists of a short sale or an offsetting notional
principal contract entered into by us or a related person with respect to the
same or substantially identical property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of the
underlying property or substantially identical property will be deemed a
constructive sale. The foregoing will not apply, however, to any transaction
during any taxable year that otherwise would be treated as a constructive sale
if the transaction is closed within 30 days after the end of that year and we
hold the appreciated financial position unhedged for 60 days after that closing
(I.E., at no time during that 60-day period is our risk of loss regarding that
position reduced by reason of certain specified transactions with respect to
substantially identical or related property, such as having an option to sell,
being contractually obligated to sell, making a short sale or granting an option
to buy substantially identical stock or securities).
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ERISA MATTERS
The provisions of the Employee Retirement Income Security Act of 1974,
as amended, or ERISA, are complex. Consequently, if you are subject to ERISA,
you should consult with your own financial and legal advisers prior to investing
in our shares of common stock.
If you are fiduciary of a pension, profit-sharing or other employee
benefit plan which is subject to ERISA or a person purchasing our shares on
behalf of an Individual Retirement Account, may wish to consider the
requirements of ERISA and/or the Internal Revenue Code, as applicable, in the
context of your particular circumstances before purchasing our shares of common
stock. Among other factors, you may wish to consider:
- Whether an investment in our shares satisfies the prudence
requirements of Section 404(a)(1)(B) of ERISA;
- Whether an investment in our shares satisfies the diversification
requirements of Section 404(a)(1)(C) of ERISA;
- Whether an investment in our shares is in accordance with your
governing documents as required by Section 404(a)(1)(D) of ERISA;
- Whether an investment in our shares will trigger a prohibited
transaction in violation of Section 406 of ERISA or Section
408(e)(2) or 4975 of the Internal Revenue Code; and
- To what extent the definition of "plan assets" under ERISA and
Department of Labor regulations may affect an investment in our
shares.
Neither ERISA nor the Internal Revenue Code defines "plan assets."
However, pursuant to Department of Labor regulations, the assets of certain
pooled investment vehicles, including certain partnerships, may be treated as
"plan assets." If our assets are deemed to be "plan assets" of an employee
benefit plan or an IRA that purchases our shares of common stock:
- The prudence standards and other ERISA provisions will be deemed
applicable to our investments in portfolio companies;
- Those who have investment discretion over your assets will be liable
under ERISA for our investments in portfolio companies that do not
conform to the ERISA standards; and
- Certain transactions that we may enter into in the future in the
ordinary course of our business might constitute prohibited
transactions under ERISA and/or the Internal Revenue Code. A
prohibited transaction, in addition to imposing potential personal
liability upon fiduciaries of plans subject to ERISA, may also
result in the imposition of an excise tax under the Internal Revenue
Code upon the disqualified person participating in the prohibited
transaction. Such an event could also result in disqualification of
the IRA.
Our assets would not be considered "plan assets" under ERISA and
Department of Labor regulations as long as our shares of common stock are
"publicly-offered securities". Under the regulations, a share will be considered
a "publicly- offered security" if it is widely held, freely transferable, and
sold to an ERISA plan or IRA pursuant to an effective registration statement
under the Securities Act of 1933, as
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amended, provided that our shares are registered under the Securities Exchange
Act of 1934 within a specified time period. Whether a security is considered
"freely transferable" depends on the facts and circumstances of each case.
Generally, if the security is part of an offering in which the minimum
investment is $10,000 or less, certain restrictions, by themselves, will not
prevent the security from being considered freely transferable. The minimum
investment permitted in our shares is $2,000 and we have imposed no restrictions
on transfer or assignment of the shares, other than the limitations set forth
under "Suitability requirements." A class of securities is considered
"widely-held" if, immediately after the initial offering, it is owned by 100 or
more investors independent of the issuer and of one another.
We believe that our shares of common stock will be considered
"publicly-offered securities" and that our assets will not be considered "plans
assets" of the ERISA plans and IRAs that buy our shares.
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company will act as our Transfer Agent and
Registrar.
DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company will act as our Dividend Disbursing
Agent.
CUSTODIAN
State Street Bank and Trust Company will act as our Custodian with
responsibility for the safekeeping of our assets covered under the Custodian
Agreement.
SUB-ADMINISTRATOR
State Street Bank and Trust Company will act as our Sub-Administrator.
17
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and exhibits are filed as part of the
Registration Statement.
1. Financial Statements.
* Statement of Assets and Liabilities of Registrant, dated as
of May 26, 2000.
2. Exhibits:
+ a Articles of Incorporation of Registrant.
+ b Bylaws of Registrant.
c Not applicable.
* d Form of share certificate.
* e Form of Dividend Reinvestment Plan.
f Not applicable.
* g(1) Form of Investment Advisory Agreement between Registrant
and meVC Advisers, Inc.
* g(2) Form of Investment Sub-Advisory Agreement between meVC
Advisers, Inc. and Diaz, Altschul & Enright Advisers, LLC.
* h Form of Underwriting Agreement.
i Not applicable.
* j Form of Custodian Agreement between Registrant and
.
* k(1) Form of Registrar, Transfer Agency and Service Agreement
between Registrant and .
* k(2) Form of Sub-Administration Agreement between
and meVC Advisers, Inc. on behalf of Registrant.
* k(3) Form of Indemnification Agreement for Registrant's
directors and officers.
* l Opinion and Consent of Kirkpatrick & Lockhart LLP,
Washington, D.C.
m Not applicable.
+ n Consent of PricewaterhouseCoopers, Boston, Massachusetts.
o Not applicable.
p Not applicable.
q Not applicable.
------------------------
+ filed herewith
* to be filed by amendment
C-1
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ITEM 25. MARKETING ARRANGEMENTS.
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration fees..............................................$
Legal fees.....................................................
NASD fees......................................................
Accounting fees................................................
Printing fees..................................................
Miscellaneous fees............................................._______
Total fees $
=======
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Each of the following entities may be deemed to be under common control with the
Registrant:
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES.
As of May 26, 2000:
------------------------------------- -----------------------------
TITLE OF CLASS HOLDERS OF RECORD
------------------------------------- -----------------------------
------------------------------------- -----------------------------
Common Stock, $.001 par value 1
------------------------------------- -----------------------------
ITEM 29. INDEMNIFICATION.
Reference is made to the provisions of Article Twelfth of Registrant's
Articles of Incorporation and Article IX of Registrant's Bylaws, each of
which is filed as an exhibit to this Registration Statement. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, Registrant
has been advised by the Securities and Exchange Commission that such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person
in connection with the securities being registered, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
meVC Advisers, Inc., a Delaware corporation, is Registrant's investment
adviser. meVC Advisers is a wholly-owned subsidiary of meVC.com, Inc., a
Delaware corporation. Other than the services provided to Registrant and
described in this Registration Statement, meVC Advisers provides investment
management and advisory services to one other business development company, meVC
Draper Fisher Jurvetson Fund I, Inc. The list required by this Item 30 of
officers and directors of meVC Advisers, together with information as to any
other business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of the Form ADV, filed by meVC
Advisers with the Securities and Exchange Commission pursuant to the Investment
Advisers Act of 1940, as amended (SEC File No. 801-57346), on February 24, 2000.
Diaz, Altschul & Enright Advisers, LLC, a Delaware limited liability
company, is an investment adviser under contract as an investment sub-adviser
with meVC Advisers. DAE Advisors is a newly organized company with no prior
operating history. Other than the services provided to meVC Advisers and
described in this Registration Statement, DAE Advisers currently provides no
investment management or advisory services to any other person or entity. The
list required by this Item 30 of members, officers and directors of DAE
Advisers, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such members,
officers and directors during the past two years, is incorporated by reference
to Schedules C and D of the Form ADV, filed by DAE Advisers with the Securities
C-2
<PAGE>
and Exchange Commission pursuant to the Investment Advisers Act of 1940, as
amended (SEC File No. 801-57617), on May 16 2000.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
Fund: meVC Delta Life Sciences Fund I, Inc.
991 Folsom Street, Suite 301
San Francisco, California 94107
Custodian: State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Investment Adviser: meVC Advisers, Inc.
991 Folsom Street, Suite 301
San Francisco, California 94107
ITEM 32. MANAGEMENT SERVICES.
Not Applicable.
ITEM 33. UNDERTAKINGS.
1. Registrant undertakes to suspend the offering of shares until the
prospectus is amended if, subsequent to the effective date of its
registration statement, the net asset value declines more than ten
percent from its net asset value as of the effective date of the
registration statement.
2. Registrant undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to the registration
statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of those
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
3. Registrant undertakes that:
(a) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
4. Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of
receipt of a written or oral request, Registrant's Statement of
Additional Information.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on the 26th day of May, 2000.
MEVC DELTA LIFE SCIENCES FUND I, INC.
By: /s/ PETER S. FREUDENTHAL
-------------------------------
Peter S. Freudenthal
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Each of the undersigned directors and officers of meVC Delta Life Sciences
Fund I, Inc. ("Fund") hereby severally constitutes and appoints Peter S.
Freudenthal, Andrew E. Singer and Kenneth Priore, and each of them individually,
his attorneys-in-fact and agents, with full power of substitution and
resubstitution, in his name and stead, in his capacity as a director and/or
officer, as the case may be, of meVC Delta Life Sciences Fund I, Inc., to sign
and file such amendments to this Registration Statement, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining thereto, with full power and authority to do and perform
all acts and things requisite and necessary to be done on the premises.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been executed by the following persons in the
capacities indicated on May 26, 2000.
NAME TITLE
/S/ PETER S. FREUDENTHAL Chairman, Chief Executive
------------------------- Officer and Director (principal
Peter S. Freudenthal executive officer and director)
/S/ PATRICK G. ENRIGHT Director
-------------------------
Patrick G. Enright
/S/ PAUL WOZNIAK Vice President, Treasurer,
------------------------- and Chief Financial Officer
Paul Wozniak (principal financial and accounting
officer)
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<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
+ a Articles of Incorporation of Registrant.
+ b Bylaws of Registrant.
* d Form of Share Certificate.
* e Form of Dividend Reinvestment Plan.
* g(1) Form of Investment Advisory Agreement between Registrant and
meVC Advisers, Inc.
* g(2) Form of Investment Sub-Advisory Agreement between meVC
Advisers, Inc. and Diaz, Altschul & Enright Advisers, LLC.
* h Form of Underwriting Agreement.
* j Form of Custodian Agreement between Registrant and .
* k(1) Form of Registrar, Transfer Agency and Service Agreement
between Registrant and .
* k(2) Form of Sub-Administration Agreement between
and meVC Advisers, Inc. on behalf of Registrant.
* k(3) Form of Indemnification Agreement for Registrant's directors
and officers.
* l Opinion and Consent of Kirkpatrick & Lockhart LLP,
Washington, D.C.
+ n Consent of PricewaterhouseCoopers, Boston, Massachusetts.
------------------------
+ Filed herewith
* To be filed by amendment
<PAGE>
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
meVC DELTA LIFE SCIENCES FUND I, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------------------------------------------------------------
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