SHERRY LANE GROWTH FUND INC, 497, 1996-06-04

SHERRY LANE GROWTH FUND INC
497, 1996-06-04

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<PAGE>

PROSPECTUS 5,000,000 SHARES RULE 497(c)
SHERRY LANE GROWTH FUND, INC. 1933 ACT FILE NO.33-96108
1940 ACT FILE NO. 814-180
COMMON STOCK
All of the 5,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), offered hereby are being offered by Sherry Lane Growth Fund,
Inc., a newly organized Delaware corporation (the "Company"). The Company is a
closed-end, non-diversified investment company which has elected to be treated
as a business development company (a "Business Development Company") under the
Investment Company Act of 1940 (the "Investment Company Act"). Sherry Lane
Capital Advisors, Inc. (the "Investment Adviser"), a registered investment
advisor under the Investment Advisers Act of 1940 (the "Advisers Act"), will
act as administrator and adviser to the Company.

The Company's principal objective is the realization of long-term
capital appreciation on its investments in portfolio companies. In addition,
the Company will seek to structure its investments to provide an element of
current income through interest, dividends and fees whenever feasible in
light of market conditions and the cash flow characteristics of its portfolio
companies. The Company will distribute 90% of its investment company taxable
income (net investment income from interest and dividends and net short-term
capital gains) to stockholders on a quarterly basis. The Company may choose
to distribute long term capital gains, or to retain such gains, net of
applicable taxes, to supplement equity capital and to support growth in its
portfolio. See "Federal Income Tax Matters".

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. RISK FACTORS
INCLUDE THE COMPANY'S LACK OF PRIOR OPERATING HISTORY, THE RISKY NATURE OF THE
COMPANY'S INVESTMENTS, RISKS ASSOCIATED WITH BORROWING BY THE COMPANY, LIMITED
LIQUIDITY OF THE COMPANY'S INVESTMENTS, AND UNCERTAINTY REGARDING THE VALUE OF
THE COMPANY'S INVESTMENTS. SHARES OF CLOSED-END INVESTMENT COMPANIES HAVE IN
THE PAST FREQUENTLY TRADED AT DISCOUNTS FROM THEIR NET ASSET VALUES AND INITIAL
OFFERING PRICES. THE RISK OF LOSS ASSOCIATED WITH THIS CHARACTERISTIC OF
CLOSED-END INVESTMENT COMPANIES MAY BE GREATER FOR INVESTORS EXPECTING TO SELL
SHARES OF COMMON STOCK PURCHASED IN THIS OFFERING SOON AFTER THE COMPLETION OF
THIS OFFERING. SEE "RISK FACTORS" ON PAGE 6 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF COMMON STOCK.

PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK, AND THERE CAN BE NO ASSURANCE THAT ANY SUCH MARKET WILL DEVELOP.
TRANSFERS WILL BE RESTRICTED DURING AND FOR SIX MONTHS FOLLOWING THE FIRST SALE
OF COMMON STOCK IN THIS OFFERING.

This Prospectus sets forth concisely the information about the Company
that a prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information has been
filed with the Securities and Exchange Commission and is available upon
written or oral request and without charge. See "Additional Information."
__________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

- -----------------------------------------------------------------------------
PRICE TO PROCEEDS TO
PUBLIC (1) SALES LOAD COMPANY (1)(2)
- -----------------------------------------------------------------------------
Per Share . . . . . $ 10.00 $ .725 $ 9.275
- -----------------------------------------------------------------------------
Total Minimum(1) . $15,000,000 $1,087,500 $13,912,500
- -----------------------------------------------------------------------------
Total Maximum . . . $50,000,000 $3,625,000 $46,375,000
- -----------------------------------------------------------------------------

(1) The shares are offered on a best efforts basis. The Price to Public per
share will be $9.85 for each investor who purchases a minimum of 50,000
shares in the offering. The offering terminates on August 31, 1996,
provided the Company and the Principal Underwriter may agree to extend the
offering until December 31, 1996. Subscriptions will be placed in escrow
with Continental Stock Transfer & Trust Company, New York, New York,
pending attainment of the minimum offering. See "Plan of Distribution."

(2) The Sales Load will be $.575 for sales to each investor who purchases a
minimum of 50,000 shares in the offering. Before deducting organizational
and other expenses of the offering estimated to be $450,000.

The Common Stock is offered by Marion Bass Securities Corporation (the
"Principal Underwriter") and by other members of the NASD authorized as selling
agents (collectively, the "Broker/Dealers"). The Common Stock is offered when,
as and if delivered to and accepted by the Principal Underwriter and subject to
the approval of certain legal matters by counsel and to certain other
conditions. The Principal Underwriter reserves the right to withdraw, cancel
or modify the offering and to reject any order in whole or in part. If the
minimum number of shares is not subscribed for, all funds deposited by investors
will be returned, together with accrued interest and without the deduction of
any expenses. Share certificates will be delivered on or about 30 days after
subscription acceptance and upon release of escrow funds. The Company has
agreed to indemnify the Principal Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933. For information
regarding these matters see "Plan of Distribution."

MARION BASS SECURITIES CORPORATION
June 3, 1996

<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form N-2 (the "Registration
Statement") under the Securities Act of 1933 (the "Securities Act"), and the
Investment Company Act with respect to the shares of 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 thereto. For further
information with respect to the Company and the Common Stock, reference is
made to the Registration Statement, including the exhibits and schedules
thereto. The Registration Statement and the exhibits and schedules thereto
filed with the Commission may be inspected, without charge, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices located at Seven World Trade Center, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.

The Company will furnish to its stockholders annual reports containing
audited financial statements, quarterly unaudited statements and such other
periodic reports as it may determine to furnish or as may be required by law.

IN CONNECTION WITH THIS OFFERING, THE PRINCIPAL UNDERWRITER MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

ALL ARIZONA INVESTORS MUST HAVE EITHER A (I) MINIMUM ANNUAL INCOME OF
$60,000 AND MINIMUM NET WORTH OF $150,000 (EXCLUSIVE OF HOME, HOME FURNISHINGS
AND AUTOMOBILES); OR (II) NET WORTH OF $250,000 (EXCLUSIVE OF HOME, HOME
FURNISHINGS AND AUTOMOBILES).

ALL CALIFORNIA INVESTORS MUST HAVE EITHER A (I) MINIMUM OF $65,000 ANNUAL
GROSS INCOME AND $250,000 OF NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND
AUTOMOBILES); OR (II) MINIMUM NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS
AND AUTOMOBILES) OF $500,000.

ALL MISSOURI INVESTORS MUST HAVE EITHER (I) A NET WORTH OF AT LEAST
$45,000 (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) AND AN ANNUAL
GROSS INCOME OF AT LEAST $45,000; OR (II) A NET WORTH OF AT LEAST $150,000
(EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES).

ALL NORTH CAROLINA INVESTORS MUST HAVE EITHER (I) A NET WORTH OF AT LEAST
$60,000 (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) AND AN ANNUAL
GROSS INCOME OF AT LEAST $60,000; OR (II) A NET WORTH OF AT LEAST $225,000
(EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES).

ALL WISCONSIN INVESTORS MUST HAVE EITHER (I) A NET WORTH OF AT LEAST
$45,000 (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) AND AN ANNUAL
GROSS INCOME OF AT LEAST $45,000; OR (II) A NET WORTH OF AT LEAST $150,000
(EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES).

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE HEREIN. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY.

THE COMPANY

Sherry Lane Growth Fund, Inc. (the "Company") is a closed-end,
non-diversified investment company which has been formed primarily to invest
in the equity and equity-linked debt securities of small to medium-sized
companies. It is expected that the securities in which the Company invests
will include common stock, preferred stock, convertible debt securities,
warrants and options. It is expected that most of the Company's investments
will be in small to medium-sized companies with total assets and annual sales
under $100,000,000. It is contemplated that most of these companies will
be privately owned and may have very limited operating history. It is
anticipated that investments will be made mainly in enterprises located in
the southwestern and south central United States, provided, however, that the
Company will participate in selected opportunities outside this region. The
Company's principal objective is the realization of long-term capital
appreciation on its investments in portfolio companies. In addition, the
Company will seek to structure its investments to provide an element of
current income through interest, dividends and other fees whenever feasible
in light of market conditions and the cash flow characteristics of its
portfolio companies. The Company will locate investment opportunities
primarily through referrals from finance and other professionals, business
executives and entrepreneurs known to the Company's management from prior
business, investment and professional relationships. The Company will offer
managerial assistance to its portfolio companies. See "The Company."

The Company's main criterion for the selection of portfolio companies is
the potential for above average long-term growth in sales, earnings and
enterprise value. The Company will consider a number of factors in
evaluating prospective investments in portfolio companies including, among
others, the quality, depth and experience of management; the existence of
potentially large unfulfilled markets for the portfolio companies' products
and services; the nature of the portfolio companies' products and services,
with a strong preference for proprietary characteristics that create barriers
to competition; and the structure, price and terms of investments in the
portfolio companies. The Company will focus particular attention on
industries that it considers to be good candidates for successful
consolidation. The Company will also favor investments in companies that it
believes can achieve the necessary size, profitability and management depth
and sophistication to become public companies. See "Investment Objectives
and Policies."

The Company has elected to be treated as a Business Development Company
under the Investment Company Act. As such, the Company must distribute 90%
of its investment company taxable income (net investment income from interest
and dividends and net short-term capital gains) to stockholders on a
quarterly basis. The Company may choose to distribute long-term capital
gains, or to retain such gains, net of applicable taxes, to supplement equity
capital and to support growth in its portfolio. See "Federal Income Tax
Matters."

Sherry Lane Capital Advisors, Inc., based in Tulsa, Oklahoma, with a
branch office in Houston, Texas, will serve as the Investment Adviser. It
will be responsible, on a day-to-day basis, for the selection and supervision
of portfolio investments and for management of the Company's records and
financial reporting requirements. The Company will pay the Investment
Adviser an annual management fee of 2.0% of the Company's net asset value,
payable quarterly. In addition, the Company will pay the Investment Adviser
an incentive fee of 20% of net realized capital gains after adjusting for any
net unrealized depreciation. See "Management," "The Investment Adviser," and
"The Investment Advisory Agreement."

The Company was incorporated in Delaware on July 24, 1995. Its
principal office is located at 320 South Boston, Suite 1000, Tulsa, Oklahoma
74103-3703 and its telephone number is (918) 584-7272.

<PAGE>

THE OFFERING

COMMON STOCK OFFERED
BY THE COMPANY . . . . . . . . 5,000,000 shares

INVESTMENT
PER INVESTOR . . . . . . . . . Minimum of 500 shares (200 shares in the
case of an individual retirement account)
and larger purchases in 100 share
increments.

COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING . . . . . . 5,002,000 shares. See "Description of
Capital Stock."

USE OF PROCEEDS . . . . . . . . To make investments in accordance with the
Company's investment policies and
objectives. See "Use of Proceeds."

OFFERING TERMINATION . . . . . The offering will terminate on August 31,
1996, provided that the Company and the
Principal Underwriter may agree to extend
the offering from time to time until
December 31, 1996. See "Plan of
Distribution."

DISTRIBUTIONS . . . . . . . . . The Company intends to distribute quarterly
to its stockholders 90% of its investment
company taxable income (net investment
income from interest and dividends and net
short-term capital gains). See "Federal
Income Tax Matters."

REINVESTMENT PLAN . . . . . . . All cash distributions to stockholders will
be reinvested automatically under the
Company's Dividend Reinvestment and Cash
Purchase Plan (the "Reinvestment Plan") in
additional whole and fractional shares of
Common Stock unless a stockholder or its
representative elects to receive cash. See
"Dividend Reinvestment Plan" and "Federal
Income Tax Matters."

LEVERAGE AND BORROWING . . . . The Company does not intend to use borrowed
funds to make investments. However, the
Company may borrow on a short term basis
against maturities of other investments for
purposes of meeting short term cash needs.
Also, it may borrow funds from time to time
and at quarter end solely in order to
maintain sufficient cash assets necessary to
meet the requirements for qualification as a
Business Development Company and the
diversification requirements to qualify as a
regulated investment company for federal
income tax purposes. See "Investment and
Objectives Policies."

RISK FACTORS . . . . . . . . . The securities offered hereby involve a high
degree of risk including, but not limited
to, the Company's lack of prior operating
history; the risky nature of the Company's
investments; risks associated with borrowing
by the Company; limited liquidity of the
Company's portfolio investments; competition
for investments; and risks relating to
regulation, conflicts of interest and a
limited public market for Common Stock of
the Company. See "Risk Factors."

<PAGE>

FEES AND EXPENSES

The purpose of the following table is to assist the investor in
understanding the various costs and expenses that an investor in the Company
will bear directly or indirectly.

SALES LOAD (AS A PERCENTAGE OF OFFERING PRICE)(1)

Underwriting commission. . . . . . . . . . . . . . . . . . . . 6.75%
Principal Underwriter non-accountable expense allowance(2) . . 0.50%
-----
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 7.25%
-----
-----

ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSET VALUE)

Management fees(3) . . . . . . . . . . . . . . . . . . . . . . 2.00%
Other expenses(4). . . . . . . . . . . . . . . . . . . . . . . 0.50%
-----
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.50%
-----
-----

______________________________
(1) Not including the organizational and other expenses of this offering, which
are estimated to be $450,000. The underwriting commission will be 5.25%
for sales to each investor who purchases a minimum of 50,000 shares in the
offering, resulting in total stockholder transaction expenses of 5.75% for
sales to each such investor.

(2) Up to 50% of which shall be repaid to the Company to reimburse it for
marketing expenses previously advanced by the Company.

(3) Management fees represent the Investment Adviser's operating expenses and
consist primarily of compensation and employee benefits, travel and
marketing expenses, rent and other similar expenses. See "The Company -
Expenses of the Company."

(4) Includes estimated accounting, legal, stockholder relations, transfer
agent, stock record and custodian expenses and directors' fees and assumes
that 5,000,000 shares of Common Stock are sold in this offering. Not
including the Investment Adviser's 20% management incentive fee on net
realized capital gains. See "The Investment Advisory Agreement," "The
Company - Expenses of the Company" and "Management."

EXAMPLE

The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Company. These amounts assume no
additional leverage and are based upon payment by an investor of a 7.25%
sales load and payment by the Company of operating expenses at the levels set
forth in the table above.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses, cumulatively,
on a $1,000 investment, assuming a 5.0% annual return . . . . $106 $175 $248 $412
</TABLE>

This example should not be considered a representation of the future
expenses of the Company, and actual expenses may be greater or less than
those shown. Moreover, while the example assumes (as required by the
Commission) a 5.0% annual return, the Company's performance will vary and may
result in a return greater or less than 5.0%. In addition, while the example
assumes reinvestment of all dividends and distributions at net asset value,
participants in the Reinvestment Plan may receive shares purchased by the
Reinvestment Plan administrator at the market price in effect at the time,
which may be at, above or below net asset value. See "Dividend Reinvestment
Plan."

<PAGE>

RISK FACTORS

THE PURCHASE OF THE SHARES OFFERED BY THIS PROSPECTUS INVOLVES A NUMBER
OF SIGNIFICANT RISKS. AS A RESULT, THERE CAN BE NO ASSURANCE THAT THE
COMPANY WILL ACHIEVE ITS INVESTMENT OBJECTIVES. IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD
BE CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT IN THE COMMON STOCK.

LACK OF OPERATING HISTORY; DEPENDENCE UPON INVESTMENT ADVISER

The Company has recently been organized to make investments in portfolio
companies selected by the Investment Adviser. While Barry M. Davis, Chairman
and Chief Executive Officer, and Philip A. Tuttle, President of the Investment
Adviser, have a prior record of making and managing investments similar to those
to be made by the Company, the Company itself has no operating history. The
Company is dependent for the selection, structuring, closing and monitoring of
its investments upon the diligence and skill of the Investment Adviser and
Mr. Davis and Mr. Tuttle, the loss of whose services could have a material
adverse effect on the operations of the Company. See "Management."

UNSPECIFIED USE OF PROCEEDS

The Company has not identified the particular uses for the net proceeds
from this offering other than to make future unspecified investments.
Therefore, prospective investors must rely on the ability of the Investment
Adviser to identify and make portfolio investments consistent with the
Company's investment objectives. Investors will not have the opportunity to
evaluate personally the relevant economic, financial and other information
which will be utilized by the Investment Adviser in deciding whether to make
a particular investment or to dispose of any investment.

INVESTMENTS IN SMALL PRIVATELY-OWNED COMPANIES

The portfolio of the Company is expected to consist primarily of
investments in small businesses, many privately owned. There is generally no
publicly available information about such companies, and the Company must
rely on the diligence of its Investment Adviser to obtain information in
connection with the Company's investment decisions. Typically, small
businesses depend for their success on the management talents and efforts of
one person or a small group of persons, and the death, disability or
resignation of one or more of these persons could have a material adverse
impact on their company. Moreover, small businesses frequently have smaller
product lines and market shares than their competition. Small companies may
be more vulnerable to economic downturns and often need substantial
additional capital to expand or compete. Such companies may also experience
substantial variations in operating results. Therefore, investment in small
businesses involves a high degree of business and financial risk, which can
result in substantial losses. See "Investment Objectives and Policies."

RISKS OF VENTURE CAPITAL INVESTING

Venture capital investments of the type to be made by the Company
generally take several years, perhaps as long as ten years, to achieve the
favorable return originally anticipated at the time the investment was made.
On the other hand, a venture capital investment which does not achieve the
favorable return expected often encounters trouble fairly quickly. Accordingly,
there is substantial risk that the shares of Common Stock will have a market
value of less than their original cost during the first several years of
operation of the Company as investments which are not going to be successful
may result in losses at an early stage and it may be several years before any
value is realized from successful investments.

USE OF LEVERAGE

Although the Company does not intend to borrow for investment purposes,
the Company may borrow on a short term basis against maturities of other
investments for purposes of meeting short term cash needs. Also, the Company
may borrow funds from time to time and at quarter end solely in order to
maintain sufficient cash assets necessary to satisfy the requirements for
qualification as a Business Development Company and the diversification
requirements to qualify as a regulated investment company for federal income
tax purposes. See "Regulation" and

<PAGE>

"Federal Income Tax Matters." Any such borrowing by the Company will be
subject to the requirements of Section 18 of the Investment Company Act, as
modified by Section 61 of the Investment Company Act, including the
requirement that any amount borrowed must have asset coverage of at least 200
percent of the amount borrowed. Such borrowing by the Company could increase
the investment risk and the volatility of the price of the Company's shares
of Common Stock because (i) leverage exaggerates any increase or decrease in
the value of the Company's portfolio, (ii) the costs of borrowing may exceed
the income from the portfolio assets mortgaged or pledged to secure the
borrowing, (iii) a decline in net asset value results if the investment
performance of the portfolio assets mortgaged or pledged to secure the
borrowing fails to cover the repayment of the borrowing together with
interest and other costs associated with the borrowing, (iv) a decline in net
asset value could affect the ability of the Company to make Common Stock
dividend payments, (v) a failure to pay dividends or make distributions could
affect the ability of the Company to qualify as a regulated investment
company under the Internal Revenue Code, and (vi) if the asset coverage for
the debt securities issued to effect the borrowing declines to less than two
hundred percent (as a result of market fluctuations or otherwise), the
Company may be required to sell a portion of its investments when it may be
disadvantageous to do so. The officers and directors of the Company will
seek to manage the Company's borrowings in such a manner to mitigate or avoid
these risks, but there is no assurance that they will be successful in this
regard.

ILLIQUIDITY OF PORTFOLIO INVESTMENTS

Many of the investments of the Company will be securities acquired
directly from small, privately owned companies. The Company's portfolio
securities will usually be subject to restrictions on resale or otherwise
have no established trading market. The illiquidity of most of the Company's
portfolio securities may adversely affect the ability of the Company to
dispose of such securities in a timely manner and at a fair price at times
when the Company deems it necessary or advantageous.

CONFLICTS OF INTEREST

Two of the officers of the Company are officers, directors and
shareholders of Alliance Business Investment Company which is also engaged in
venture capital investing, but is currently in the process of liquidating its
portfolio and has no plans for further investment. Barry M. Davis, Chairman
and Chief Executive Officer, and Philip A. Tuttle, President of the Investment
Adviser, serve as general partners of the general partners of two venture
capital investment partnerships and, as such, may encounter conflicts of
interest regarding the selection of investment opportunities and the allocation
of management time. One of these, Davis Venture Partners, L.P., which was
formed in 1986, is in the process of liquidating its portfolio and will not
make any further investments. The other, Davis Venture Partners II, L.P., was
formed in October 1995 with capital commitments of approximately $11,000,000
and is currently raising additional funds, and has investment objectives
substantially similar to those of the Company. The Company and the Investment
Adviser have submitted an application to the Commission for exemptive relief
to permit the Company and Davis Venture Partners II, L.P. to invest together in
the same portfolio companies where such is consistent with investment
objectives, investment positions, investment policies, investment strategies,
investment restrictions, regulatory requirements and other pertinent factors.
Although the principals of the Investment Adviser intend to select investments
for the Company and for Davis Venture Partners II, L.P. separately considering
in each case only the investment objectives, investment position, available
funds and other pertinent factors of the particular investment fund, it is
expected that if the application for exemptive relief is granted, the Company
and Davis Venture Partners II, L.P. may frequently invest in the same portfolio
companies, with each of the Company and Davis Venture Partners II, L.P. taking
a position in the portfolio company. Before a co-investment transaction is
effected, the Investment Adviser will make a written investment presentation
regarding the proposed co-investment to the independent directors of the Company
and the independent directors of the Company will review the Investment
Adviser's recommendation. Prior to committing to a co-investment, a majority
of the independent directors of the Company will conclude that (i) the terms
of the proposed transaction are reasonable and fair to the Company and its
stockholders and do not involve overreaching of the Company and its stockholders
on the part of any person concerned; (ii) the transaction is consistent with the
interests of the stockholders of the Company and is consistent with the
investment objective and policies of the Company; and (iii) the investment by
the affiliated co-investor would not disadvantage the Company in making its
investment, maintaining its investment position, or disposing of such investment
and that participation by the Company would not be on a basis different from or
less advantageous than that of the affiliated co-investor. See "Management"
and "Regulation."

<PAGE>

VALUATION OF PORTFOLIO

There is typically no public market for the securities of small,
privately owned companies. As a result, the valuation of such securities in
the Company's portfolio is subject to the good faith determination of the
Company's Board of Directors. The value of portfolio securities may be very
difficult to ascertain. Valuation of portfolio securities by the Board of
Directors is, by necessity, subjective and may bear no relationship to the
price at which such securities could be sold. The net asset value, as
determined by the Board of Directors, may not be reflective of the price at
which an investor could sell his shares in the open market. See "Valuation
of Portfolio Securities." There can be no assurance that the values so
determined reflect the amounts that will ultimately be realized on these
investments.

COMPETITIVE MARKET FOR INVESTMENT OPPORTUNITIES

A large number of entities and individuals compete for the types of
investments to be made by the Company. Many of these entities and individuals
have greater financial resources than the Company. As a result of this
competition, the Company may from time to time be precluded from entering into
attractive transactions. There can be no assurance that the Company will be able
to identify and complete investments that satisfy the Company's investment
objectives or that it will be able to invest fully its available capital.

DEPENDENCE ON PUBLIC OFFERING MARKET OR AVAILABILITY OF STRATEGIC BUYERS

The success of the investment strategy of the Company will be affected
in large part by the state of the securities markets in general and the
market for public financings in particular. Changes in the securities
markets and general economic conditions, including economic downturns,
fluctuations in interest rates, the availability of credit, inflation and
other factors, may affect the value of the Company's investments. The market
for initial public offerings is cyclical in nature and, accordingly, there
can be no assurance that the securities markets will be receptive to initial
public offerings, particularly those of emerging growth companies. Any
adverse change in the market for public offerings could have a material
adverse effect on the Company and could severely limit the Company's ability
to realize its investment objectives. The availability of strategic buyers
for the companies in which the Company invests may also fluctuate from time
to time. Such availability will also be affected by the state of the
securities markets and general economic conditions.

LACK OF DIVERSIFICATION

Based on the amount of funds to be realized from this offering, it is
unlikely that the Company will be able to commit its funds to the acquisition
of securities of a large number of companies or to direct its investments to
diverse areas. Although the Company intends to elect Subchapter M status
under the Internal Revenue Code of 1986, as amended (the "Code"), and will,
therefore, be required to meet certain diversification requirements
thereunder, the Company intends to operate as a non-diversified investment
company within the meaning of the Investment Company Act and, therefore, the
Company's investments may not be substantially diversified. In any event,
the Company will not be able to achieve the same level of diversification as
much larger entities engaged in similar activities.

POSSIBLE LOSS OF PASS-THROUGH TAX TREATMENT

The Company intends to qualify for and elect to be treated as a
regulated investment company under Subchapter M of the Code. To qualify, the
Company must meet certain income distribution and diversification requirements.
In any year in which the Company so qualifies, it generally will not be
subjected to federal income tax on net investment income and net short-term
capital gains distributed to its stockholders. If the Company were to fail
to qualify under Subchapter M and its income became fully taxable, a
substantial reduction in the amount of income available for distribution to the
Company's stockholders could result. See "Federal Income Tax Matters" and
"Regulation."

LIMITED PUBLIC MARKET FOR COMMON STOCK; TRADING BELOW NET ASSET VALUE

There has been no prior trading market for the Common Stock and there
can be no assurance that a regular trading market will develop, or that, if
developed, it will be sustained. The Company may seek to have the Common

<PAGE>

Stock listed on a national stock exchange or quoted on The Nasdaq Stock Market.
The Company will not seek such listing or quotation until, at the earliest,
six months following the first sale of Common Stock in this offering. No
assurances can be given that the Company will seek such listing or quotation
or that a stock exchange or The Nasdaq Stock Market will agree to list or
quote the Common Stock. In addition, shares of closed-end investment companies,
such as the Company, often trade below their net asset value.

RESTRICTION ON TRANSFER OF COMMON STOCK

No shares of Common Stock may be transferred by any investor during and
for the first six months following the first sale of Common Stock in this
offering.

SALE OF SMALL NUMBER OF SHARES

This offering may be consummated by the Company with the sale of as few
as 1,500,000 shares of Common Stock. In the event that only a small portion
of the maximum offering amount of 5,000,000 shares of Common Stock is sold by
the Company, the performance of individual portfolio companies will have a
greater effect on the ability of the Company to realize long-term
appreciation on its investments. In addition, certain of the Company's
expenses will not vary in proportion with the amount of capital of the
Company and will be relatively higher if only a small portion of the shares
are sold than if a large portion of the shares are sold. See "The
Company--Expenses of the Company" and "Plan of Distribution."

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. Under Delaware law, in the case of a corporation having a
classified board, stockholders may remove a director only for cause. As a
result, the stockholders will be unable in the absence of having cause to
remove the incumbent directors and simultaneously gain control of the Board
of Directors by filling the vacancies created by such removal with new
nominees.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock
offered hereby are estimated to be approximately $13,462,500 if 1,500,000
shares of Common Stock are sold in this offering and $45,925,000 if 5,000,000
shares of Common Stock are sold in this offering. No portion of the net
proceeds of the offering has been allocated to any particular investment.
The proceeds will be used to invest in portfolio companies and for working
capital and general corporate purposes. Pending such uses, such proceeds
will be invested, in compliance with the Investment Company Act, in U.S.
government securities or deposited in federally insured accounts of banks or
in money market accounts of other financial institutions.

The Company intends to invest at least one-half of its total assets in
portfolio companies within the earlier of (i) two years after the completion
of this offering or (ii) two and one-half years after the effective date of
this Prospectus.

DISTRIBUTIONS

The Company intends to make quarterly distributions to its stockholders
of 90% of its investment company taxable income (net investment income from
interest and dividends and net short-term capital gains) and to declare the
first distribution during the period ending December 31, 1996, which shall be
payable shortly thereafter. Net realized long-term capital gains will be
retained to supplement the Company's equity capital and support growth in its
portfolio, unless the Company's Board of Directors determines in certain
cases to make a distribution. Pursuant to the Company's Dividend Reinvestment
Plan, a stockholder whose shares are registered in his own name will have all
distributions reinvested automatically in additional shares of Common Stock
by the Company's transfer agent, Continental Stock Transfer & Trust Company,
New York, New York, as administrator of the Dividend Reinvestment Plan (the
"Reinvestment Plan Administrator"), unless the stockholder elects, by letter
to the Company received prior to the

<PAGE>

corresponding record date, to receive cash. No assurances can be given that
the Company will achieve investment results that will permit any specified
level of cash distributions. See "Regulation" and "Federal Income Tax
Matters."

THE COMPANY

GENERAL

The Company is a newly organized, closed-end, non-diversified investment
company which has elected to be treated as a Business Development Company
under the Investment Company Act. The Company intends to invest primarily in
the equity and equity-linked debt securities, including common stock, preferred
stock, convertible debt securities, warrants, and options, of companies that
the Investment Adviser believes to have significant potential for growth in
sales, earnings and enterprise value. As a Business Development Company, the
Company will distribute 90% of its net investment income (net investment income
from interest and dividends plus net short term capital gains) to stockholders
on a quarterly basis. The Company may choose to distribute long term capital
gains, or to retain such gains, net of applicable taxes, to supplement equity
capital and to support growth in its portfolio.

INVESTMENT ADVISER

Sherry Lane Capital Advisors, Inc., based in Tulsa, Oklahoma with a
branch office in Houston, Texas, will serve as the Investment Adviser to the
Company. It will be responsible, on a day-to-day basis, for the selection and
supervision of portfolio investments and for management of the Company's
records and financial reporting requirements. The Company will pay the
Investment Adviser an annual management fee of 2.0% of net asset value,
payable quarterly. In addition, the Company will pay the Investment Adviser
an incentive fee of 20.0% of net realized capital gains from portfolio
investments after adjusting for any net unrealized depreciation. See "The
Investment Advisory Agreement."

Barry M. Davis, Chairman and Chief Executive Officer, and Philip A.
Tuttle, President of the Investment Adviser, have substantial experience in
identifying, evaluating, selecting, negotiating and closing investments
similar to those being sought by the Company. See "Management," "The
Investment Adviser," and "The Investment Advisory Agreement."

NATURE OF INVESTMENTS IN PORTFOLIO COMPANIES

The Company's investments in portfolio companies may be styled as debt
or equity, or some combination, but will always include some equity feature
through which the Company can participate in the growth in the value of the
underlying business. The Company's investment in a given portfolio company
may consist of common stock, preferred stock (which may or may not be
convertible into common stock), debentures (which may or may not be
convertible into common stock and may or may not be subordinated), warrants
to purchase common stock, or some combination thereof. The Company's
investments in preferred stock and debentures will, whenever practical in
light of competitive considerations and the cash-flow capabilities of the
portfolio companies, be structured to provide an element of current income to
the Company. The Company's investments in portfolio companies will generally
be structured with the intention of having the initial investment capital
repaid within five years and the equity feature of the investments realized
in cash within five to ten years. Although the Company expects to dispose of
investments after a certain limited time, situations may arise in which it
may hold equity securities for a longer period.

<PAGE>

TEMPORARY INVESTMENTS

Pending investments in the types of securities described above, the
Company will invest its cash in (i) federal government or agency issued or
guaranteed securities that mature in 15 months or less; (ii) repurchase
agreements with banks whose deposits are insured by the Federal Deposit
Insurance Corporation (an "insured bank"), with maturities of seven days or
less, the underlying instruments of which are securities issued or guaranteed
by the federal government; (iii) certificates of deposit in an insured bank
with maturities of one year or less, up to the amount of the deposit
insurance; (iv) deposit accounts in an insured bank subject to withdrawal
restrictions of one year or less, up to the amount of deposit insurance; and
(v) certificates of deposit or deposit accounts in an insured bank in amounts
in excess of the insured amount if the insured bank is deemed
"well-capitalized" by the Federal Deposit Insurance Corporation.

OPERATIONS

The Investment Adviser will locate potential investment opportunities
primarily by making use of an extensive network of investment bankers,
commercial bankers, accountants and other finance professionals; venture
capitalists and other investment professionals; attorneys; business executives;
and entrepreneurs.

The investment process includes the identification, evaluation,
negotiation, documentation and closing of the investment. The Investment
Adviser has extensive experience in all phases of the investment process.
The evaluation of a potential investment includes due diligence, which
usually involves on-site visits; review of historical and prospective
financial information; interviews with management, employees, customers and
vendors of the potential portfolio company; and background checks and
research relating to its management, markets, products and services.

Upon the completion of due diligence and a decision to proceed with an
investment, the Investment Adviser will create an investment memorandum
containing information pertinent to the investment for presentation to the
Company's Board of Directors, which must approve the investment. Additional
due diligence may be conducted by the Company's attorneys and independent
accountants prior to the closing of the investment.

SELECTION OF INVESTMENTS

The Company's main criterion for the selection of investments in portfolio
companies is the potential for substantial growth in sales, earnings and
enterprise value. The Company will seek to identify companies which have
extraordinary opportunities in the markets they serve or that have devised
innovative products, services or ways of doing business that afford them a
distinct competitive advantage. Such companies might achieve growth either
internally or by acquisition. In addition, the Company intends to invest in
companies seeking to consolidate fragmented industries. Often, such
consolidations can improve performance by bringing extraordinary management
talent, economies of scale and greater capital resources to bear on businesses
that might have lacked such talent, economies and resources in the past.

In evaluating potential portfolio companies, the Company will pay
particular attention to the following characteristics:

MANAGEMENT. The Company will favor investments in companies whose
management teams consist of talented individuals of high integrity with
significant experience. The Company intends to pay particular attention to the
depth of the management team and the extent to which key managers have an
ownership interest in the company.

MARKET. The Company will favor investments in companies that are
addressing a large, unfulfilled market demand with long-term high-growth
prospects and that can reasonably expect to achieve and maintain a significant
market share through proprietary products and services. The Company will also
favor investments in companies that deliver products and services with
significant performance and cost advantages and for which there exist
significant barriers to effective competition by others.

ABILITY TO ACHIEVE SIZE AND BECOME PUBLIC. The Company will favor
investments in companies that can achieve the necessary size, profitability and
management depth and sophistication to become public companies.

<PAGE>

In selecting investments, the Company will consider the potential and
likely means for achieving the liquidity that would ultimately enable the
Company to achieve cash value for its equity investments. Possible ways of
achieving liquidity include an initial public offering, a sale of the portfolio
company or a purchase by the portfolio company of the Company's equity interest
in the portfolio company.

ELIGIBLE PORTFOLIO COMPANIES

The Company, as a Business Development Company, will be required by
statute to invest at least 70% of its total assets in securities of companies
that qualify as "Eligible Portfolio Companies" as defined under the
Investment Company Act. An Eligible Portfolio Company generally is any
United States company that is not an investment company, provided that it
does not have a class of securities listed on a securities exchange or
included in the Federal Reserve Board's over-the-counter margin list. The
Company will be required by statute to make available significant managerial
assistance to each of the Eligible Portfolio Companies in which it invests.

The Company may invest up to 30% of its assets in other portfolio
investments. The Company intends to retain maximum flexibility in connection
with its investments and, therefore, does not have a policy as to the minimum
percentage of its assets that will be so invested. Such investments, if made,
would be primarily in securities of companies that are regularly traded on a
recognized exchange or in the over-the-counter market and which the Investment
Adviser believes have significant potential for appreciation in value.

COMPETITION

The Company's primary competitors include financial institutions,
venture capital firms and other non-traditional investors. Many of these
entities have greater financial and managerial resources than the Company.
The Company believes that it will compete with such entities primarily on the
basis of the quality of its services, its reputation, the timely investment
analysis and decision-making processes it will follow, and, to a
significantly lesser degree, on the investment terms it offers on the
securities to be issued by its portfolio companies.

EMPLOYEES

The Company currently has six employees. The Company believes that its
relations with its employees are excellent. The Company will maintain a
relatively low overhead as a result of outsourcing of certain job functions not
directly related to the evaluation, selection, negotiation or management of
portfolio company investments or the executive management of the Company.

EXPENSES OF THE COMPANY

In addition to the fees paid to the Investment Adviser, the Company will
pay all of its own expenses, including directors' fees; taxes; fees and
expenses of the Company's legal counsel, independent accountants and transfer
agent; expenses of printing and mailing share certificates, stockholder
reports, notices to stockholders and proxy statements; reports to
governmental offices; brokerage and other expenses in connection with the
execution, recording and settlement of portfolio security transactions;
expenses of stockholders' meetings; Commission and state blue sky
registration fees; and the Company's other business and operating expenses
not covered in the Advisory Agreement. See "The Investment Advisory
Agreement."

On the basis of the anticipated size of the Company immediately
following the closing of the offering, and assuming sale of the maximum
amount of shares of Common Stock being offered hereby, it is estimated that
the Company's annual operating expenses, including the Management Fee paid to
the Investment Adviser, will be approximately $1,148,125 (approximately 2.50%
of the net proceeds of this offering). While the foregoing estimates have
been made in good faith, there can be no assurance that actual annual
expenses will not be substantially greater than such estimates as a result of
increases in the cost of transfer agent activities and professional and
similar services that cannot be predicted and are beyond the control of the
Company.

<PAGE>

Organizational and other expenses of the offering are estimated to be
approximately $450,000 and will be paid by the Company. Offering expenses,
excluding the underwriting discounts and commissions and non-accountable
expense allowance, will be charged to capital at the time of issuance of such
shares.

TRANSFER AGENT

Continental Stock Transfer & Trust Company, New York, New York, will serve
as Transfer Agent for the Common Stock.

INVESTMENT OBJECTIVES AND POLICIES

The Company's principal objective is the realization of long-term
capital appreciation on its net investments in portfolio companies. In
addition, the Company will seek to structure its investments to provide an
element of current income through interest, dividends and fees whenever
feasible in light of market conditions and the cash flow characteristics of
the portfolio companies. The planned investment strategy of the Company will
be to invest in a diversified portfolio of companies which have the potential
for rapid growth in sales, earnings and enterprise value. It is expected
that the Company, after completion of the initial investment phase, will
maintain a portfolio of investments in 10 to 20 companies in diverse
industries. Most of the portfolio companies, at the time of investment, will
be private, although some may be very small capitalization public companies.
The Company will focus its investment activity on private companies, in most
cases not technology intensive, which in the judgment of the Investment
Adviser can provide superior investment returns, either because they are
presented with extraordinary opportunities to which they are especially well
suited to respond, or because they have devised innovative products,
services, or ways of doing business which afford them distinct, defensible,
competitive advantages. It is expected that investments will be made mainly
in enterprises located in the southwestern and south central United States,
provided, however, that the Company will participate in selected
opportunities outside this region.

In addition to the growth investment opportunities described above, the
Company will look for investments in companies seeking to consolidate
fragmented industries. In many instances, such consolidations can improve
performance by bringing excellent, professional management, economics of
scale, and adequate capital resources, to bear on businesses which have
lacked these resources. Also, in industry consolidations, often a company can
be built through a series of acquisitions at a relatively low multiple of
earnings, then sold or taken public at a higher price-earnings ratio.

Although technology is not an area of emphasis for the Company, the
Company will consider investments in companies having innovative,
technology-based products which satisfy large, unfulfilled market needs. The
Company will also consider investments in "classic" leveraged acquisitions of
companies which can be acquired for attractive prices, although this will not
be an area of emphasis for the Company. The Company has chosen not to
emphasize this area because of the large amount of investment funds already
devoted to leveraged buyouts and because the Company believes that the talent
of its management can be more effectively employed in building companies than
in financial engineering.

The Investment Adviser believes that maintaining a high level of
involvement and influence in portfolio companies is an important factor in
achieving the desired result. In the past, the executive officers of the
Investment Adviser have been most successful as a substantial, preferably
lead, investor with a high degree of control over the investment management
and the Company building process. This control is accomplished through a
significant ownership position, presence on the board of directors, and close
working relationships with portfolio company management. The Company will
focus on being a partner in building companies rather than being merely a
financial participant. It is expected that the Company's representatives
will play a role in setting corporate strategy for portfolio companies, and
will advise such companies regarding important decisions affecting their
business, including acquisitions for such companies, recruiting key managers,
and securing equity and debt financing. Except for the fundamental policies
described below, the Company's investment objectives and investment
strategies may be changed by a majority vote of its Board of Directors.

In making investments and managing its portfolio, the Company will
adhere to the following fundamental policies, which policies may not be
changed without the approval of the holders of a majority, as defined in the

<PAGE>

Investment Company Act, of the outstanding shares of Common Stock. The
percentage restrictions set forth below, as well as those contained elsewhere
in this Prospectus, apply at the time a transaction is effected, and a
subsequent change in a percentage resulting from market fluctuations or any
other cause other than an action by the Company will not require the Company
to dispose of portfolio securities or to take other action to satisfy the
percentage restriction.

The Company will at all times conduct its business so as to retain its
status as a Business Development Company. In order to retain that status,
the Company may not acquire any assets (other than non-investment assets
necessary and appropriate to its operations as a Business Development
Company) if, after giving effect to such acquisition, the value of its
"qualifying assets" amounts to less than 70% of the value of its total
assets. For a summary definition of "qualifying assets," see "Regulation."
The Company believes that the securities it proposes to acquire, as well as
temporary investments that it will make with its idle funds, will generally
be qualifying assets. Securities of public companies, on the other hand, are
generally not qualifying assets unless they were acquired in a distribution
in exchange for, or upon the exercise of, a right relating to securities that
were qualifying assets.

The Company will not concentrate its investments in any particular
industry or particular group of industries. Therefore, the Company will not
acquire any securities (except upon the exercise of a right related to
previously acquired securities) if, as a result, 30% or more of the value of
its total assets consists of securities of companies in the same industry.

The Company will not (i) act as an underwriter of securities of other
issuers (except to the extent that it may be deemed an "underwriter" of
securities purchased by it that subsequently must be registered under the
Securities Act before they may be offered or sold to the public), (ii)
purchase or sell real estate or interests in real estate or real estate
investment trusts (except that the Company may purchase and sell real estate
or interests in real estate in connection with the orderly liquidation of
investments or the foreclosure of mortgages held by the Company), (iii) sell
securities short, (iv) purchase securities on margin, (v) write or buy put or
call options (except to the extent of warrants or conversion privileges
obtained in connection with its investments, and rights to require the
issuers of such investments or their affiliates to repurchase such securities
under certain circumstances), (vi) engage in the purchase or sale of
commodities or commodity contracts, including futures contracts (except where
necessary in working out distressed loan or investment situations), (vii)
purchase interests in oil and gas exploration, development or production,
except as they may be acquired as a small part of a merger, consolidation or
acquisition of assets, and only if they are to be immediately sold or
disposed of as part of the transaction, (viii) invest in other financial
derivative instruments or securities other than such instruments and
securities issued by portfolio companies, or (ix) acquire the voting stock
of, or invest in any securities issued by, any other investment company,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets.

The Company may make selective bridge loans to public and, to a lesser
extent, private companies. These bridge loans may be either secured or
unsecured and convertible into common stock of the issuer or issued together
with warrants for equity participation, or both. These loans will generally
be designed to carry the portfolio company to a private placement, an initial
or secondary public offering, a merger and acquisition transaction, or other
financing within three years from the date of investment. Bridge loans carry
the risk that the event which the loan is intended to bridge to may not
occur. It is intended that every effort will be made to minimize such risk,
but it will be present. In addition to equity participation, the Company may
receive fees in connection with providing bridge financings.

The Company may invest as "other portfolio investments" in marketable
securities of public companies which the Company's management believes have
significant potential for price appreciation. Investments in such other
portfolio companies may be made in the form of common stock, preferred stock or
securities convertible into or exchangeable for common stock or preferred
stock.

The Company does not intend to borrow for investment purposes. However,
the Company may borrow on a short term basis against maturities of other
investments for purposes of meeting short term cash needs. Normally, such
investments will have a maturity of less than one year. Also, it may borrow
funds from time to time and at quarter end solely in order to maintain
sufficient cash assets necessary to meet the requirements for qualification
as a Business Development Company and the diversification requirements to
qualify as a regulated investment company for federal income tax purposes.
See "Regulation" and "Federal Income Tax Matters." Additionally, the Company
may enter into

<PAGE>

standby agreements or agree to subordinate its investments in a portfolio
company to other lenders to such company. Other than pursuant to such
borrowing, the Company will not issue senior securities.

MANAGEMENT

The business and affairs of the Company are managed under the direction of
its Board of Directors. All of the Company's directors are subject to election
at each annual meeting of stockholders. The Board of Directors elects the
Company's officers who serve at the pleasure of the Board of Directors.

DIRECTORS AND OFFICERS

The following table sets forth certain information regarding the directors
and officers of the Company.

<TABLE>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Barry M. Davis (1) 55 Chairman of the Board, Chief Executive
Officer and Director
Philip A. Tuttle(1) 54 President and Director
James A. O'Donnell(2) 42 Director
David L. Daniel(2) 49 Director
Terry K. Dorsey(2) 48 Director
Elmer C. Wilkening 70 Vice President, Secretary and Treasurer
</TABLE>
_______________

(1) "Interested Person" as defined in Section 2(a)(19) of the Investment
Company Act.

(2) independent director for purposes of the Investment Company Act.

BARRY M. DAVIS is Chairman of the Board and Chief Executive Officer of
Sherry Lane Capital Advisors, Inc. Since 1975 he has served as President and a
director of Alliance Business Investment Company, a privately owned small
business investment company organized in 1959 which has made venture capital
investments similar to the investments to be made by the Company. Since 1986
Mr. Davis has also been the managing general partner in Davis Venture Group,
which is the general partner of Davis Venture Partners, L.P. ("Davis Venture
Partners I"), a Delaware limited partnership formed in 1986 to make venture
capital investments similar to the investments to be made by the Company. Mr.
Davis is also the managing general partner of Davis Venture Group II, L.P., a
Delaware limited partnership which is the general partner of Davis Venture
Partners II, L.P. ("Davis Venture Partners II"), a Delaware limited partnership
formed in October 1995 to make venture capital investments similar to the
investments to be made by the Company. In addition to his roles with the
entities described above, Mr. Davis is a partner in the Davis Companies
energy/natural resource group with primary activities in the southwest.
Mr. Davis has served on the board of directors of four portfolio companies in
which Davis Venture Partners I has invested: Coleman Natural Products, Inc.;
LMS Holding Company; Numar Corporation; and Wallace and Tiernan Group Inc. Mr.
Davis has over 25 years of experience in making venture capital investments and
currently serves on the board of directors of the National Venture Capital
Association. In 1980, Mr. Davis was elected Chairman of the Board of Governors
of the National Association of Small Business Investment Companies, a venture
capital industry trade association, and he has served as president of the
organization's Southwest Regional Association. In 1975, he received the
National Achievement Award in the venture capital industry for his efforts in
founding the Venture Capital Management Institute, the formal training program
for a significant portion of the venture capital managers in the United States.
In addition, Mr. Davis lectures at public forums and universities about venture
capital and strategies for emerging growth companies and was a founder of the
Oklahoma Private Enterprise Forum. He has served on numerous boards of civic
organizations and is past Chairman of the Board of Hillcrest Healthcare
Corporation as well as a current trustee of the University of Tulsa. He is a
graduate of the University of Oklahoma with a B.B.A. degree in corporate
finance.

<PAGE>

PHILIP A. TUTTLE is President of Sherry Lane Capital Advisors, Inc.
From August 1987 to June 1989, Mr. Tuttle was Chief Executive Officer of OMNA
Corporation, a home healthcare provider. From 1982 to August 1987 Mr. Tuttle
served as the President of Allied Bancshares Capital Corporation, a bank
owned, federally licensed small business investment company which grew from
$5 million to $40 million in capital during his tenure. He has since June
1989, been a general partner of Davis Venture Group, the general partner of
Davis Venture Partners I, a private investment partnership which raised $32
million from institutional investors to invest primarily in business located
in the southwestern and south central United States. He is also a general
partner in Davis Venture Group II, L.P. the general partner of Davis Venture
Partners II. Mr. Tuttle has served on the board of directors of four
portfolio companies in which Davis Venture Partners I has invested: Drypers
Holding Corp., Quality Tubing, Inc., Taylor Medical, Inc. and WCC Holding
Corp. Mr. Tuttle currently serves on the board of directors of Medical
Innovations, Inc., a publicly traded company listed on NASDAQ that provides
home intravenous therapies, specialized home nursing care and other
outpatient health care services, the board of directors of Zydeco Energy,
Inc., a publicly traded company listed on NASDAQ engaged in acquiring oil and
gas leases, drilling and producing reserves utilizing focused geologic
concepts and advanced 3D seismic and computer aided exploration technology,
and the board of directors of Drypers Holding Corp., a publicly traded
company listed on NASDAQ that manufactures and distributes disposable
diapers. Mr. Tuttle is a founder and was formerly a President of the Houston
Venture Capital Association and was President and is currently a Director of
The Houston Chapter of the Association for Corporate Growth. He has served
as Chairman of the Accounting Council at Rice University-Jones Graduate
School of Administration and as a member of the Board of Governors of the
National Association of Small Business Investment Companies. He currently
serves as a member of the Board of Trustees of Child Advocates Endowment,
Inc. Mr. Tuttle earned a B.A. degree from Rice University and an M.B.A.
degree from Northwestern University. He is a certified Public Accountant and
Fellow of the Institute of Directors, London, England.

JAMES A. O'DONNELL is currently a general partner of CGW Southeast
Partners III, L.P., a partnership being formed to engage in management buy
outs. He is a Chartered Financial Analyst with more than 15 years of
experience in investing in emerging companies. Since 1989, Mr. O'Donnell has
been a general partner of O'Donnell & Masur, L.P., a private equity
partnership. He is also a general partner of Sherry Lane Partners, L.P., a
private equity partnership formed in 1991. From 1983 through 1988, he was
President and Chief Executive Officer of First Republic Venture Group and its
predecessor, InterFirst Venture Corp., a venture capital firm with assets
valued at approximately $100 million in 1988. From 1981 through 1982, Mr.
O'Donnell was Senior Vice President and Manager of the Corporate Finance
Department for InterFirst Bank, Dallas, then the largest bank in Texas.
Previously, Mr. O'Donnell worked for The Equitable Life Assurance Society of
the U.S. as a Regional Investment Manager for the Southeastern United States.
Mr. O'Donnell serves as a director of several public and private companies,
including Bestway Rental, Inc. (a rental company), Gardiner Communications
Corp. (a developer and manufacturer of telecommunications equipment and
software), MBS Holdings (a wholesaler of building supplies), Chatwins Group,
Inc. (a diversified manufacturer of industrial products) and RailTex, Inc. (a
short-line railroad company). Mr. O'Donnell graduated with distinction from
Rhodes College with a B.A. and received his M.B.A. from the Wharton Graduate
Division of the University of Pennsylvania. Mr. O'Donnell currently has no
interest in the Investment Adviser or the Company.

DAVID L. DANIEL has served, since 1992, as the President and Chief
Executive Officer of Quality Tubing, Inc., a manufacturer of steel coil
tubing for the Energy Services Industry. For the seven years prior thereto,
he was employed by Baker Hughes Inc., a New York Stock Exchange-listed
company engaged in the Energy Services Industry, most recently as President
of its tubular services subsidiary. Mr. Daniel also served from 1975 to 1983
in numerous executive positions with NL Industries, a company engaged in the
Energy Services Industry. Mr. Daniel earned a B.S. degree in Mathematics
from Southern Methodist University and an M.B.A. degree from Harvard Business
School.

TERRY K. DORSEY, PH.D. has served since July 1987 as the Chief Executive
Officer of TVA, Inc. a firm which provides financial advisory and management
services. From November 1984 to June 1987, Dr. Dorsey served as President of
United Capital Ventures, Inc. a venture capital company. From April 1983
until November 1984, Dr. Dorsey served as an investment director of Churchill
International, an international venture capital fund. Dr. Dorsey earned a
B.B.A. degree and an M.B.A. degree from Texas Tech University and Ph.D. from
the University of Texas at Austin.

ELMER C. WILKENING is Vice President, Secretary and Treasurer of Sherry
Lane Capital Advisors, Inc. Since 1959 he has been Secretary-Treasurer and a
director of Alliance Business Investment Company. In 1986 he became

<PAGE>

a general partner in Davis Venture Group, the general partner of Davis
Venture Partners I. He is also a general partner in Davis Venture Group II,
L.P., the general partner of Davis Venture Partners II. He has served as a
director of two portfolio companies of Davis Venture Partners I:
Photometrics, Ltd. and LMS Holding Company. Mr. Wilkening holds a B.S.
degree in accounting from the University of Illinois and is a Certified
Public Accountant.

The Company's Certificate of Incorporation provides, among other things,
for a Board of Directors divided into three classes, designated Class I,
Class II and Class III. Directors serve for staggered terms of three years
each, except that initially the Class I director will serve until the
Company's 1996 annual meeting of stockholders, the Class II director until
the 1997 meeting and the Class III director until the 1998 meeting. The
Class I director is Mr. Daniel, the Class II directors are Mr. O'Donnell and
Mr. Tuttle and the Class III directors are Mr. Davis and Dr. Dorsey.

It is currently anticipated that the officers of the Company will be
compensated solely by the Investment Adviser. Non-management directors will
each receive a monthly fee of $500 for serving on the Board of Directors and
will receive an additional $1,000 for each meeting of the Board of Directors
or a committee thereof that he attends.

It is estimated that the amounts which would be paid by the Company
during its first fiscal year of operations to its officers and directors
would be as follows:

<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL BENEFITS FROM COMPANY AND
NAME OF COMPENSATION ACCRUED AS PART OF UPON COMPANY COMPLEX
PERSON, POSITION FROM COMPANY COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS
- ------------------------------ ------------ ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Barry M. Davis,
Chairman of the Board,
Chief Executive Officer None None None None
and Director

Philip A. Tuttle,
President and Director None None None None

Elmer C. Wilkening,
Vice President, Secretary
and Treasurer None None None None

James A. O'Donnell,
Director $10,000 None None $10,000

David L. Daniel,
Director $10,000 None None $10,000

Terry K. Dorsey,
Director $10,000 None None $10,000
</TABLE>

INDEMNITY AGREEMENTS

The Company intends to enter into indemnity agreements with each of its
directors and officers upon the closing of this offering. Pursuant to these
agreements, the Company will, to the extent permitted under applicable law,
indemnify these persons against all expenses, judgments, fines and penalties
incurred in connection with the defense or settlement of any actions brought
against them by reason of the fact that they are or were directors or
officers of the Company or that they assumed certain responsibilities at the
direction of the Company. In addition, the Company's Certificate of
Incorporation and Bylaws provide for certain limitations on director
liability.

<PAGE>

PRIOR EXPERIENCE OF PRINCIPALS OF
THE INVESTMENT ADVISER

As indicated above, Barry M. Davis, Philip A. Tuttle and Elmer C.
Wilkening have substantial experience managing partnerships which have made
investments substantially similar to the investments which will be made by
the Company. The most recent activity of this type in which these persons
have been engaged is Davis Venture Partners I ("DVP I"), an investment
partnership formed in 1986 with committed capital of approximately $32
million from thirteen corporate and public pension funds. Messrs. Davis,
Tuttle and Wilkening are general partners of the general partner of DVP I, as
well as of the general partner of Davis Venture Partners II, a new investment
partnership similar to DVP I.

Since 1975, Mr. Davis has served as President of Alliance Business
Investment Company ("ABIC"), a small business investment company ("SBIC") he
joined in 1966. ABIC, based in Tulsa, Oklahoma, is one of the oldest
privately held SBIC's in the United States. Between 1974 and 1990, ABIC made
27 investments in either early stage financings, expansion financings or
acquisition or buy-out financings. Mr. Davis has been responsible for the
selection of investments by ABIC since 1974.

From 1982 to 1987, Mr. Tuttle served as President of Allied Bancshares
Capital Corporation ("Allied"), another SBIC. During this time, Mr. Tuttle
was responsible for selecting investments for Allied. During Mr. Tuttle's
tenure, Allied made 24 investments in early stage financings, expansion
financings, acquisition or buy-out financings or special situations.

The DVP I portfolio, which has geographic focus and investments
substantially similar to the Company's, typically reflects a five to ten year
investment cycle. The following DVP I investments were selected by Messrs.
Davis and Tuttle:

- Numar Corporation, headquartered outside of Philadelphia, but with primary
operations in Houston, is the creator and developer of a new application of
nuclear magnetic resonance to a proprietary $400,000,000 market segment
within the petroleum industry, a sector that is open to rapid penetration
and nearly exclusive possession.

- Taylor Medical, Inc. ("Taylor"), of Beaumont, Texas, is a national
distributor of medical supplies and equipment to the physician and
alternate site health care market. The investment was made in July 1989
and in August 1995, Taylor was merged into Physician's Sales & Service,
Inc., a leading national health care company.

- Coleman Natural Meats, Inc. ("Coleman"), headquartered in Denver, Colorado,
is the largest natural beef producer and marketer in the United States,
delivering residue-free lowfat meats into a Coleman dominated market niche
that targets food safety and environmental concerns.

- Wallace & Tiernan Group, Inc., located in Belleville, New Jersey, at the
time of the investment exit was an environmental company manufacturing
water and waste-water treatment equipment and instrumentation with annual
gross sales of $120,000,000 with facilities in the United Kingdom, Germany,
and four other countries.

- WCC Capital Holding Corporation ("WCC"), headquartered in Dallas, Texas,
was the largest national distributor of bicycles and bicycle accessories in
the United States. WCC's concept eliminated the wholesaler in the
distribution chain from factory to retail outlet. WCC has now been
liquidated.

- Drypers Corporation, of Houston, Texas, is the third largest national
branded line of disposable diapers. It has recently expanded production
into Latin America and has achieved distribution in the Pacific Rim.

- Quality Tubing, Inc. uses proprietary technology to manufacture and market
premium grade coil steel tubing to customers world wide. The majority of
its products are sold to the oilwell services industry for use in downhole
applications.

- LMS Holding Company ("LMS"), of Tulsa, Oklahoma, was a regional service
company operating a chain of 7-11 convenience stores under a license from
Southland Corporation. This license has terminated and LMS is no longer
operating.

<PAGE>

Like DVP I, ABIC and Allied, the Company, through its strategically
placed offices in Tulsa and Houston, will primarily aim to provide venture
capital for businesses in the following states: Oklahoma, Texas, Colorado,
Kansas, Missouri, Arkansas, Louisiana, New Mexico, and Arizona. Also like
DVP I, ABIC and Allied, the Company will focus on emerging and expanding
businesses with strong positions in basic industries, especially those
capitalizing on advanced technologies for production or marketing
superiority, and will seek ventures with experienced management teams who can
expand their companies into global markets. Like DVP I, ABIC and Allied, the
Company will also participate nationally in selected, attractive investment
opportunities. Accordingly, the investment policies and objectives of DVP I,
ABIC and Allied are essentially the same as those of the Company.

During the period from 1974 to the present, Messrs. Davis and Tuttle, on
behalf of these entities, managed investments in a total of 59 companies, 47
of which were located in the southwest/south central region targeted by the
Company. Also, 46 of the total investments were in companies engaged in
basic industries and technologies.

The following table provides information about the stage of development
and number of portfolio companies in which Messrs. Davis and Tuttle invested
during the periods described above:(1)

DVP I DVP I
(DAVIS) ABIC (TUTTLE) ALLIED TOTAL
------- ---- -------- ------ -----
Stage of Enterprise Development:
Early Stage Financings(2) . . . . 1 10 0 11 22
Expansion Financings(3) . . . . . 2 12 3 4 21
Acquisition/Buy-Out Financings(4) 1 5 1 7 14
Special Situations . . . . . . . 0 0 0 2 2

The Company's investment strategy will build on the investment
philosophy and valuation methods, as well as the network of business and
professional relationships and the successful track record developed by
Messrs. Davis and Tuttle in the management of DVP I, ABIC and Allied. Of
course, investors in the Company are not acquiring an interest in DVP I, ABIC
or Allied or any other entity in which Messrs. Davis and Tuttle are involved.
The past performance of DVP I, ABIC or Allied or of Messrs. Davis and Tuttle
is no guaranty of future performance.

__________________________

(1) As Messrs. Davis and Tuttle were primarily responsible for selecting
the portfolio investments, a record of Mr. Wilkening, who is principally a
financial manager, as opposed to an investment manager, has not been
presented. Also, this table does not reflect the investment records of
certain individuals who were responsible for selecting certain early
investments of DVP I, but who have since resigned or are not involved with
the Investment Adviser.

(2) These companies are at an early stage of product and market
development, but are run by qualified management. Accordingly, the highest
priority will be given to companies with management teams with established
records of technical and managerial achievements in closely related fields.
Such firms will have launched operations or will have assembled key
management, prepared a business plan, have a product ready for market,
effected market studies, and be generally well set to do business.

(3) These companies have already created a product or service they are
marketing with some success. They need further funds to finance the growth
of their businesses and to achieve profitability. In addition, companies in
this category may be established and profitable, but still need expansion
capital to fuel further growth.

(4) Acquisition financing provides funds to a company to finance its
acquisition of another enterprise. Buyout financing usually comprises two
categories: (a) large divisions or subsidiaries of diversified corporations
being divested because of a poor strategic fit; or (b) privately owned
companies available because the owner desires liquidity for various reasons,
including estate planning. In both cases members of existing management will
participate in the company's ownership and ongoing operation. These are
usually mature enterprises with stable earnings history and a positive cash
flow.

<PAGE>

THE INVESTMENT ADVISORY AGREEMENT

Pursuant to the Investment Advisory Agreement dated September 21, 1995,
Sherry Lane Capital Advisors, Inc. serves as investment adviser to the Company.
The Investment Adviser will, subject to the overall supervision of the
Company's Board of Directors, administer the Company's business affairs and
furnish the Company with office facilities and clerical, bookkeeping and
record keeping services at such facilities. See "Management."

The Investment Adviser will be responsible for the financial records
required to be maintained by the Company and will prepare financial
information for reports to stockholders and reports filed with the
Commission. In addition, the Investment Adviser will assist the Company in
determining and publishing the Company's net asset value, oversee both the
preparation and filing of the Company's tax returns, the printing and
dissemination of stockholder reports, and generally oversee the payment of
the Company's expenses and the performance of administrative and professional
services rendered to the Company by others.

In return for its services, the Company will pay to the Investment
Adviser an annual management fee of two percent of the Company's net assets,
determined and payable quarterly, throughout the term of the Investment
Advisory Agreement and a management incentive fee of 20% of net realized
capital gains after adjusting for any net unrealized depreciation.

The Investment Adviser will be responsible for the salaries and expenses
of its own personnel, any costs of office space, local telephone and
administrative support to be provided to the Company by the Investment
Adviser, expenses relating to calculating and publishing the Company's net
asset value and all other expenses incurred by either the Investment Adviser
or the Company in connection with administering the ordinary course of the
Company's business, other than the organizational expenses described above,
and direct costs such as printing, mail, long distance telephone, staff,
independent accountants and outside legal costs.

The Investment Advisory Agreement was approved by the Board of Directors
on September 21, 1995 and is effective until it is terminated by either party
upon at least 60 days' notice to the other, provided that its continuance is
approved annually by the Company's Board of Directors or the holders of the
Common Stock, including, in either case, approval by the directors of the
Company who are not interested persons.

REGULATION

After filing its election to be treated as a Business Development
Company under the Investment Company Act, a company may not withdraw its
election without first obtaining the approval of holders of a majority of its
outstanding voting securities (as defined under the Investment Company Act).
The following is a brief description of the Investment Company Act and is
qualified in its entirety by reference to the full text of the Investment
Company Act and the rules thereunder.

Generally, to be eligible to elect Business Development Company status,
a company must engage in the business of furnishing capital and offering
significant managerial assistance to companies that do not have ready access
to capital through conventional financial channels. Such portfolio companies
are termed "eligible portfolio companies." More specifically, in order to
qualify as a Business Development Company, a company must (i) be a domestic
company; (ii); have registered a class of its securities or have filed a
registration statement with the Commission pursuant to Section 12 of the
Exchange Act; (iii) operate for the purpose of investing in the securities of
certain types of eligible portfolio companies, namely less seasoned or
emerging companies and businesses suffering or just recovering from financial
distress; (iv) offer to extend significant managerial assistance to such
eligible portfolio companies; (v) have a majority of directors who are not
"interested persons" (as defined in the Investment Company Act); and (vi)
file (or under certain circumstances, intend to file) a proper notice of
election with the Commission.

An eligible portfolio company generally is a United States company that
is not an investment company and that (i) does not have a class of securities
registered on an exchange or included in the Federal Reserve Board's
over-the-counter margin list; or (ii) is actively controlled by a Business
Development Company and has an affiliate of a Business Development Company on
its board of directors; or (iii) meets such other criteria as may be
established by the

<PAGE>

Commission. Control under the Investment Company Act is presumed to exist
where a Business Development Company owns more than 25% of the outstanding
voting securities of the eligible portfolio company.

Making available significant managerial assistance by a business
development company means any arrangement whereby a business development
company, through its directors, officers or employees, offers to provide, and,
if accepted, does so provide, significant guidance and counsel concerning the
management, operations, or business objectives and policies of a portfolio
company. It is expected that one of Barry M. Davis, Philip A. Tuttle or Elmer
C. Wilkening will offer to serve on the board of directors of each portfolio
company in which the Company invests and, if such offer is not accepted, will
offer to enter into a consulting contract with the management of each portfolio
company. In such capacity, such person will offer his substantial experience
in strategic management and, if requested, will lend his assistance in
arranging financings, managing relationships with financing sources, recruiting
management personnel, and evaluating acquisition and divestiture opportunities.
Such person will be able to call on the experience of the others, as well,
if needed.

The Investment Company Act prohibits or restricts companies subject to
the Investment Company Act from investing in other investment companies.
Moreover, the Investment Company Act limits the type of assets that Business
Development Companies may acquire to certain prescribed qualifying assets and
certain assets necessary for its operations (such as office furniture,
equipment and facilities) if, at the time of acquisition, less than 70% of
the value of the Business Development Company's assets consist of qualifying
assets. Qualifying assets include (i) privately acquired securities of
companies that were eligible portfolio companies at the time the Business
Development Company acquired the securities; (ii) securities of bankrupt or
insolvent companies; (iii) securities of eligible portfolio companies controlled
by a Business Development Company; (iv) securities received in exchange for or
distributed in or with respect to any of the foregoing; and (v) cash items,
government securities and high-quality short term debt. The Investment Company
Act also places restrictions on the nature of the transactions in which, and
the persons from whom, securities can be purchased in order for the securities
to be considered qualifying assets. Such restrictions include limiting purchases
to transactions not involving a public offering and the requirement that
securities be acquired directly from either the portfolio company or its
officers, directors or affiliates.

Many of the transactions involving a company and its affiliates (as well
as affiliates of those affiliates) which were prohibited without the prior
approval of the Commission under the Investment Company Act prior to its
amendment in 1980 are permissible for Business Development Companies.
However, certain transactions involving certain persons related to the
Company, including its directors, officers and employees, may still require
the prior approval of the Commission. In general, (i) any person who owns,
controls or holds power to vote more than 5% of the Company's outstanding
Common Stock; (ii) any director, executive officer or general partner of that
person; and (iii) any person who directly or indirectly controls, is
controlled by, or is under common control with, that person, must obtain the
prior approval of a majority of the Company's disinterested directors and, in
some situations, the prior approval of the Commission, before engaging in
certain transactions involving the Company or any company controlled by the
Company. The Investment Company Act generally does not restrict transactions
between the Company and its eligible portfolio companies.

While a Business Development Company may change the nature of its business
so as to cease being a Business Development Company (and in connection therewith
withdraw its election to be treated as a Business Development Company) only if
authorized to do so by a majority vote (as defined in the Investment Company
Act) of its outstanding voting securities, changes in other fundamental
investment policies of a Business Development Company do not require stockholder
approval (in contrast to the general Investment Company Act requirement which
requires stockholder approval for a change in any fundamental investment
policy). The Company is entitled to change its non-diversification status
without stockholder approval. The Company may, in the future, seek to become
exempt from Investment Company Act regulation.

The Investment Company Act prohibits an investment company such as the
Company from knowingly participating in a joint transaction with an affiliate
of any director or investment adviser to the investment company. Accordingly,
the Company may not, without exemptive relief, participate in a joint
transaction with DVP II or any other entity managed by the persons who are
the principals of the Investment Adviser. The Investment Adviser believes
that it will be advantageous for the Company to co-invest with DVP II where
such is consistent with investment objectives, investment positions,
investment policies, investment strategies, investment restrictions,
regulatory requirements and other pertinent factors. The Investment Adviser
believes that co-investment by the Company and DVP II will afford

<PAGE>

the Company the ability to achieve greater diversification and, together with
DVP II, the opportunity to exercise greater influence on the portfolio
companies in which the Company and DVP II invest together. Accordingly, the
Company and the Investment Adviser have submitted an application to the
Commission for exemptive relief to permit the Company and DVP II to invest
together in the same portfolio companies where such is consistent with
investment objectives, investment positions, investment policies, investment
strategies, investment restrictions, regulatory requirements and other
pertinent factors. Although the principals of the Investment Adviser intend
to select investments for the Company and for DVP II separately considering
in each case only the investment objectives, investment position, available
funds and other pertinent factors of the particular investment fund, it is
expected that if the application for exemptive relief is granted, the Company
and DVP II may frequently invest in the same portfolio companies, with each
of the Company and DVP II taking a position in the portfolio company. If the
application is granted, it is expected that the Company and DVP II will
invest together in proportion to their respective amounts of capital
available for investment where such is consistent with their respective
investment objectives, investment positions, investment policies, investment
strategies, investment restrictions, regulatory requirements and other
pertinent factors. There is no assurance, however, that any such joint
investments will in fact be in proportion to their respective amounts of
capital available for investment. It is expected that the application for
exemptive relief will be granted only upon the conditions, among others, that
before a co-investment transaction is effected, the Investment Adviser will
make a written investment presentation regarding the proposed co-investment
to the independent directors of the Company and the independent directors of
the Company will review the Investment Adviser's recommendation. It is
expected that prior to committing to a co-investment, a "required majority"
(as defined in Section 57(o) of the Investment Company Act) of the
independent directors of the Company will conclude that (i) the terms of the
proposed transaction are reasonable and fair to the Company and its
stockholders and do not involve overreaching of the Company and its
stockholders on the part of any person concerned; (ii) the transaction is
consistent with the interests of the stockholders of the Company and is
consistent with the investment objective and policies of the Company; and
(iii) the investment by the affiliated co-investor would not disadvantage the
Company in making its investment, maintaining its investment position, or
disposing of such investment and that participation by the Company would not
be on a basis different from or less advantageous than that of the affiliated
co-investor. There is no assurance that the application for exemptive relief
will be granted. Accordingly, there is no assurance that the Company will be
permitted to co-invest with DVP II.

VALUATION OF PORTFOLIO SECURITIES

On a quarterly basis, and at such other times as deemed appropriate
under the circumstances, the Company's Board of Directors will prepare a
valuation of the assets of the Company. Valuations of portfolio securities
will be done in accordance with generally accepted accounting principles and
the financial reporting policies of the Commission. The applicable methods
prescribed by such principles are described below.

As a general principle, the current "fair value" of an investment being
valued by the Company's Board of Directors would be the amount which the
Company might reasonably expect to receive for it upon its current sale.
There is a range of values that are reasonable for such investments at any
particular time. Generally, pursuant to procedures established by the Company's
Board of Directors, the fair value of each such investment will be initially
based primarily upon its original cost to the Company. Cost will be the primary
factor used to determine fair value until significant developments or other
factors affecting the portfolio company (such as results of operations, changes
in general market conditions or the availability of market quotations) provide
a basis for value other than a cost valuation.

The Company anticipates that many future investments made in securities
for which a public market exists will be "restricted securities" by virtue of
the Securities Act. Generally, in such instances, the Company will negotiate
for securities registration rights necessary for a public offering thereof on
specified terms whenever deemed to be reasonably feasible by management. The
value for restricted stock investments for which no public market exists
cannot be precisely determined. Generally, such investments will be valued
on a "going concern" basis without giving effect to any disposition costs.
There is a range of values that is reasonable for such investments at any
particular time.

Portfolio investments for which market quotations are readily available
and which are freely transferable will be valued as follows: (i) securities
traded on a securities exchange or NASDAQ will be valued at the closing price
on the last trading day prior to the date of valuation; and (ii) securities
traded in the over-the-counter market (pink sheets) will be valued at the
average of the closing bid and asked prices for the last trading day prior to
the date of valuation. Securities for which market quotations are readily
available but are restricted from free trading in the public securities
markets (such as Rule 144 stock) will be valued by discounting the closing
price or the closing bid and asked prices,

<PAGE>

as the case may be, for the last trading day prior to the date of valuation
to reflect the illiquidity caused by such restrictions, but taking into
consideration the existence, or lack thereof, of any contractual right to
have the securities registered and freed from such trading restrictions. For
this purpose, an investment that is 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.

Debt securities with maturities of 60 days or less remaining will be
valued under the amortized cost method. The amount to be amortized will be
the value on the 61st day if the security was obtained with more than 60 days
remaining to maturity. Securities with maturities of more than 60 days
remaining 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 purchased by the Company generally will be valued at their face
value, plus interest accrued to the date of valuation.

The fair value of investments for which no market exists will be
determined on the basis of appraisal procedures established in good faith by
the Company's Board of Directors. Appraisal valuations will be based upon
such factors as the portfolio company's earnings and net worth, the market
prices for similar securities of comparable companies and an assessment of
the company's future financial prospects. In the case of unsuccessful
operations, the appraisal may be based upon liquidation value. Appraisal
valuations are necessarily subjective.

The Company may also use, when available, third-party transactions in a
portfolio company's securities as the basis of valuation (the "private market
method"). The private market method will be used only with respect to
completed transactions or firm offers made by sophisticated, independent
investors. 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 such restrictions.

The Company's Board of Directors will review the Company's valuation
policies from time to time to determine their appropriateness. The Company's
Board of Directors may also hire independent firms to review the Investment
Adviser's methodology of valuation or to conduct a valuation, which shall be
binding and conclusive.

In order to determine the net asset value per share of the Common Stock,
(i) the value of the assets of the Company, including its portfolio
securities, will be determined by the Company's Board of Directors; (ii) the
Company's liabilities, if any, will be subtracted therefrom; and (iii) the
difference will be divided by the number of outstanding shares of Common
Stock. However, there can be no assurance that such value will represent the
return that might ultimately be realized by the Company from the investments
or that stockholders might ultimately realize on their stockholdings.

The value of portfolio securities may be very difficult to ascertain.
Valuation of portfolio securities by the Board of Directors is, by necessity,
subjective and may bear no relationship to the price at which such securities
could be sold. The net asset value, as determined by the Board of Directors,
may not be reflective of the price at which an investor could sell his shares
in the open market.

FEDERAL INCOME TAX MATTERS

THE FOLLOWING DISCUSSION IS A GENERAL SUMMARY OF THE MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO THE COMPANY AND TO AN
INVESTMENT IN THE COMMON STOCK AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION
OF THE TAX CONSIDERATIONS APPLICABLE TO SUCH AN INVESTMENT. PROSPECTIVE
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSIDERATIONS WHICH PERTAIN TO THEIR PURCHASE OF THE COMMON STOCK. THIS
SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION RELEVANT TO
HOLDERS OF THE COMPANY'S 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 SUMMARY DOES NOT DISCUSS ANY
ASPECTS OF FOREIGN, STATE OR LOCAL TAX LAWS.

The Company intends to qualify for treatment as a "regulated investment
company" under Subchapter M of the Code. If the Company qualifies as a
regulated investment company and distributes to stockholders each year in a
timely manner at least 90% of its "investment company taxable income" as
defined in the Code (i.e., net investment income from interest and dividends
and net short-term capital gains), it will not be subject to federal income
tax on the portion of its taxable income and gains it distributes to
stockholders. In addition, if the Company distributes in a timely

<PAGE>

manner (or treats as "deemed distributed" as described below) 98% of its
capital gain net income for each one year period ending on October 31 (or
December 31, if so elected by the Company), and distributes 98% of its
ordinary income for each calendar year (as well as any income not distributed
in prior years), it will not be subject to the 4% nondeductible federal
excise tax on certain undistributed income of regulated investment companies.
The Company would be subject to regular corporate income tax (currently at
rates up to 35%) on any undistributed net investment income and any
undistributed net capital gain. The Company would also be subject to
alternative minimum tax, but any tax preference items would be apportioned
between the Company and its stockholders in the same proportion that
dividends (other than capital gain dividends) paid to each stockholder bear
to the taxable income of the Company determined without regard to the
dividends paid deduction.

In order to qualify as a regulated investment company for federal income
tax purposes, the Company must elect to be treated as a regulated investment
company and, among other things, (a) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with respect to
securities, loans, gains from the sale or other disposition of stock or
securities or other income derived with respect to its business of investing
in such stock or securities; (b) derive in each taxable year less than 30% of
its gross income from the sale of stock or securities held for less than
three months; (c) diversify its holdings so that at the end of each quarter
of the taxable year (i) at least 50% of the value of the Company's assets
consists of cash, cash items, government securities, the securities of other
regulated investment companies and other securities if such other securities
of any one issuer do not represent more than 5% of the Company's total assets
and 10% of the outstanding voting securities of the issuer and (ii) no more
than 25% of the value of the Company's total assets are 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 the Company and are engaged in the same or similar or
related trades or businesses; and (d) distribute at least 90% of its investment
company taxable income each taxable year.

If the Company acquires debt obligations that were originally issued at
a discount, or that bear interest rates that are not fixed (or certain
"qualified variable rates") or payable at regular intervals over the life of
the obligation, it 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 the Company, and
may be required to make distributions in order to continue to qualify as a
regulated investment company or to avoid the 4% excise tax on certain
undistributed income. In this event, the Company may borrow funds or sell
temporary investments or other assets to meet the distribution requirements.
See "Investment Objectives and Policies."

For any period during which the Company qualifies as a regulated
investment company for federal income tax purposes, distributions to
stockholders attributable to the Company's 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 the Company's current or accumulated earnings and profits.
Distributions in excess of the Company's earnings and profits will first be
treated as a return of capital which reduces the stockholder's adjusted basis
in his Common Stock and then as gain from the sale of Common Stock.
Distributions of the Company's net long-term capital gains (designated by the
Company as capital gain dividends) will be taxable to stockholders as
long-term capital gains regardless of the stockholder's holding period in his
shares. Corporate stockholders are generally eligible for the 70% dividends
received deduction with respect to ordinary income (but not capital gain)
dividends to the extent such amount designated by the Company does not exceed
the dividends received by the Company from domestic corporations. Any
dividend declared by the Company in October, November or December of any
calendar year, payable to stockholders of record on a specified date in such
a month and actually paid during January of the following year, will be
treated as if it were paid by the Company and received by the stockholders on
December 31 of the previous year. In addition, the Company may elect to
relate a dividend back to the prior taxable year for the purposes of (i)
determining whether the 90% distribution requirement is satisfied, (ii)
computing investment company taxable income and (iii) determining the amount
of capital gain dividends paid during the prior taxable year if the Company
makes such election prior to filing its return for the taxable year and
distributes the amount in the 12 month period following the close of the
taxable year. 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.

To the extent that the Company retains any capital gains, it may
designate them as "deemed distributions" and pay a tax thereon for the
benefit of its stockholders. In that event, the stockholders report their
share of retained realized capital gains on their individual tax returns as
if it had been received, and report a credit for the tax paid thereon by the
Company. The amount of the deemed distribution net of such tax is then added
to the stockholder's cost basis for his

<PAGE>

shares. Since the Company expects to pay tax on capital gains at the regular
corporate tax rate of 34% and the maximum rate payable by individuals on such
gains is 28%, the amount of credit that individual stockholders may report
will exceed the amount of tax that 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.

The Budget Reconciliation Act of 1993 added Section 1202 to the Code
which 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 small business corporation
acquired directly from the issuing corporation, which must at the time of
issuance and immediately thereafter have assets of not more than $50 million
and be actively engaged in the conduct of a trade or business not excluded by
law. If the Company acquires "qualified small business stock," holds such
stock for five years and disposes of such stock at a profit, a stockholder
who held his shares in the Company at the time the Company purchased the
qualified small business stock and at all times thereafter until disposition
of the stock by the Company would be entitled to exclude from his taxable
income 50% of such stockholder's share of such gain. One half of any amount
so excluded would be treated as a preference item for alternative minimum tax
purposes.

If at least 50% of the value of the total assets of a regulated
investment company at the close of each quarter of the taxable year consists
of tax exempt obligations, the regulated investment company may designate all
or a portion of any dividend (other than a capital gain dividend) as an
exempt interest dividend to the extent of the regulated investment company's
net income from tax exempt obligations. An exempt interest dividend would be
treated by the stockholder as excludable from gross income under Section
103(a) of the Code, but would also be treated as a preference item by the
stockholder for alternative minimum tax purposes.

A stockholder may recognize taxable gain or loss if the stockholder
sells or exchanges his shares of Common Stock. Any gain arising from the
sale or exchange of shares generally will be treated as a capital gain or
loss except in the case of a dealer or a financial institution, and will be
treated as a long-term capital gain or loss if the stockholder has held his
shares for more than one year. However any capital loss arising from the a
sale or exchange of shares 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 gain) received with respect to such shares.

The Company may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to stockholders who fail to
provide the Company with their correct taxpayer identification number or a
certificate that he is exempt from backup withholding, or the Internal
Revenue Service notifies the Company that the stockholder is subject to
backup withholding. Any amounts withheld may be credited against a
stockholder's U.S. federal income tax liability.

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 advisors with respect to the possible U.S. federal, state and local
and foreign tax consequences of an investment in the Company.

If the offering is consummated at or close to the minimum level of
shares of Common Stock that may be sold, the Company may have difficulty
structuring its investments in a manner to cause the Company to qualify as a
Business Development Company under the Investment Company Act, while at the
same time satisfying the diversification requirements necessary to be treated
as a regulated investment company under Subchapter M of the Code. If the
Company were unable to meet the regulated investment company diversification
requirements, it would be subject to tax on its ordinary income and capital
gains (including gains realized on the distribution of appreciated property)
at regular corporate rates. Distributions to stockholders would not be
deductible by the Company, nor would they be required to be made.
Distributions would be taxable to the stockholders as ordinary dividend
income to the extent of the Company's 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 shareholder's
tax basis, and any remaining distributions would be treated as a gain
realized from the sale or exchange of property.

<PAGE>

The Company will mail to each stockholder, as promptly as possible after
the end of each fiscal year, a notice detailing, on a per distribution basis,
the amounts includable in such stockholder's taxable income for such year as
net investment income, as net realized capital gains (if applicable), as
"deemed" distributions of capital gains and as taxes paid by the Company with
respect thereto. In addition, the federal tax status of each year's
distributions will be reported to the Internal Revenue Service.
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 Company.

Under the Company's Dividend Reinvestment Plan, all cash distributions
to stockholders will be automatically reinvested in additional whole and
fractional shares of Common Stock unless a stockholder or its representative
elects to receive cash. Such distributions that are invested in additional
shares of Common Stock are considered to be constructively received by the
stockholder for federal income tax purposes and are included in his income to
the extent such constructive distribution otherwise represents a taxable
dividend for the year in which such distribution is credited to his account.
The amount of the distribution is the value of the shares acquired through
the Dividend Reinvestment Plan. See "Dividend Reinvestment Plan."

DIVIDEND REINVESTMENT PLAN

Pursuant to the Company's Dividend Reinvestment Plan, any stockholders
whose shares of Common Stock are registered in their own names will be deemed
to have elected to have all cash dividends and cash distributions
automatically reinvested by Continental Stock Transfer & Trust Company, New
York, New York (the "Plan Agent") in shares of Common Stock pursuant to the
Dividend Reinvestment Plan unless and except for each such stockholder who
individually elects to receive such on a current basis in lieu of
reinvestment. In the case of stockholders such as banks, brokers or nominees
that hold shares for others who are beneficial owners ("Nominee
Stockholders"), the Plan Agent will administer the Dividend Reinvestment Plan
on the basis of the number of shares certified by such Nominee Stockholders
as registered for stockholders that have not elected to receive dividends and
distributions in cash. Investors that own shares registered in the name of a
Nominee Stockholder should consult with such nominee as to participation or
withdrawal from the Dividend Reinvestment Plan.

The Plan Agent serves as agent for the stockholders in administering the
Dividend Reinvestment Plan. When the Company declares a dividend or
distribution payable in cash or in Common Stock, the non-participants will
receive cash and the participants will receive Common Stock to be issued by
the Company or purchased by the Plan Agent in the open market. If the market
value per share on the valuation date equals or exceeds the net asset value
per share on that date, the Company will issue new shares at the net asset
value. If the net asset value exceeds the market price, the Plan Agent will,
as agent for the participant, buy Common Stock in the open market or in
private transactions as soon as practicable after such date. If before the
Plan Agent has completed the purchases the market price exceeds the net asset
value, the Plan Agent may suspend purchasing in the market and the Company
will issue new shares at net asset value to fulfill the purchase requirements.

Participants also have the option commencing on January 1st of each
year, of making additional annual cash payments to the Dividend Reinvestment
Plan in any amount of $l,000 or more up to $10,000. Larger amounts may be
accepted with the prior approval of the Plan Agent. The Plan Agent will use
all funds received from participants to purchase shares of Common Stock to be
issued by the Company or purchased in the open market on or about February
28. Any voluntary funds must be received no later than ten days prior to
such date and any prior deposit may be withdrawn if written request for
withdrawal is received by the Plan Agent no later than ten days prior to such
date.

The Plan Agent will maintain all stockholder accounts in the Dividend
Reinvestment Plan and furnish written confirmation of all transactions in an
account. Shares in the Dividend Reinvestment Plan will be held in the name of
the participant and each stockholder's proxy will include any Dividend
Reinvestment Plan holdings.

There is no charge to the participants for reinvesting dividends and
distributions or for voluntary cash payments. The Plan Agent's fees will be
paid by the Company. There will be no brokerage charges with respect to shares
issued directly by the Company for participants in the Dividend Reinvestment
Plan. However, each participant will pay a pro rata share of brokerage charges
for shares purchased in the market.

<PAGE>

The Company and the Plan Agent reserve the right to terminate the
Dividend Reinvestment Plan. Further, the Dividend Reinvestment Plan may be
amended by agreement between the Company and the Plan Agent upon 30 days
notice to participants. A participant may withdraw from the Dividend
Reinvestment Plan upon written request to the Plan Agent, in which event, no
further share purchases will be made for such withdrawing participant and all
shares and funds held for such participant will be forwarded to the
participant or to his order. All communications regarding the Dividend
Reinvestment Plan should be directed to Continental Stock Transfer & Trust
Company, New York, New York.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.01 per share. The holders of Common Stock are entitled to one
vote per share on all matters submitted for action by the stockholders.
There is no provision for cumulative voting rights with respect to the
election of directors. Accordingly, the holders of more than 50% of the
shares of Common Stock can, if they choose to do so, elect all of the
directors. In such event, the holders of the remaining shares will not be
able to elect any directors. The holders of shares of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are, and the shares of Common Stock offered hereby, when issued
against the consideration set forth in this Prospectus, will be, fully-paid
and non-assessable.

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. Under Delaware law, in the case of a corporation having a
classified board, stockholders may remove a director only for cause. As a
result, the stockholders will be unable in the absence of having cause to
remove incumbent directors and simultaneously gain control of the Board of
Directors by filling the vacancies created by such removal with new nominees
without cause. See "Management."

These provisions have been included in the Certificate of Incorporation
to provide greater likelihood of continuity of management for the Company
since the nature of the Company's investments is such that continuity of
management for a substantial period may be necessary to realize the full
value of the investments made by the Company. Although the presence of
these provisions may reduce the likelihood that stockholders would be able to
sell their shares at a premium in a takeover situation, the directors of the
Company believe that such is unlikely for a Business Development Company such
as the Company and the positive benefit of continuity of management outweighs
the possible detriment of these provisions. Any removal of the directors of
the Company would be in accordance with the law of the state of Delaware
pertaining to the removal of directors who are serving on a classified
board.

ANNUAL MEETINGS

The Company will hold annual meetings of stockholders for the election of
directors and other matters if required to do so under applicable laws or rules
of exchanges or other applicable regulatory agencies.

TRANSFER AND DIVIDEND PAYING AGENT

Continental Stock Transfer & Trust Company, New York, New York, will act
as the Company's transfer and dividend paying agent and registrar.

<PAGE>

PLAN OF DISTRIBUTION

The shares of Common Stock offered hereby are being offered on a best
efforts basis by the Principal Underwriter, whose office is at 4000 Park Road,
Charlotte, North Carolina 28209.

The Principal Underwriter has agreed, subject to the terms and
conditions contained in the Underwriting Agreement, to offer up to 5,000,000
shares of Common Stock to the public at the offering prices set forth on the
cover page of this Prospectus. The purchase price must be paid upon
subscription. All payments shall be forwarded to the Escrow Agent by noon of
the next business day after receipt pending attainment of the minimum
offering and thereafter until acceptance by the Company. Interest on
escrowed funds will be paid to the Company. If the minimum offering of
1,500,000 shares of Common Stock is not attained by August 31, 1996, all
funds will be returned to investors and accrued interest will be paid to the
investors pro rata to the date of their subscription. In the event the
minimum offering is not achieved, any offering expenses incurred must be
borne by the promoters. The Principal Underwriter may enter into selling
agreements with certain Broker/Dealers who are members of the NASD for sale
of the shares and will pay a 5.5% sales commission (or, if a sale is made to
a purchaser of at least 50,000 shares, a 4.0% sales commission) to such
Broker/Dealers.

Each investor must purchase a minimum of 500 shares of Common Stock in
this offering (except that an individual retirement account must purchase a
minimum of 200 shares of Common Stock in this offering). Any larger number
of shares must be purchased in 100 share increments.

The Company has agreed to pay to the Principal Underwriter a
non-accountable expense allowance of one half percent of the gross proceeds
of this offering. The Company has also agreed to pay all expenses in
connection with qualifying the shares of Common Stock offered hereby for sale
under the laws of such states as the Principal Underwriter may designate,
including expenses of counsel retained for such purposes by the Principal
Underwriter.

The Company anticipates that the selling Broker/Dealers or their
affiliates may, from time to time, subject to the regulations set forth in
the Investment Company Act, act as brokers or dealers in connection with the
execution of the Company's investments after the Principal Underwriter ceases
to be the underwriter.

The Company has agreed to indemnify the Principal Underwriter against
certain civil liabilities, including liabilities under the federal securities
laws. However, such indemnification is subject to the provisions of Section
17(1) of the Investment Company Act which provides, in part, that no
agreement shall contain a provision which protects or purports to protect an
underwriter of an investment company or Business Development Company against
any liability to such company or its security holders to which it would
otherwise be subject due to its misfeasance, bad faith or gross negligence in
the performance of its duties, or reckless disregard of its obligations and
duties under such agreement.

The Principal Underwriter may act as a market maker with respect to the
Common Stock. The Principal Underwriter and the Company have agreed that no
transfers of shares will be allowed during the offering period and until six
months following the termination of the offering except in accordance with laws
of descent and in certain non-public transactions.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Vinson & Elkins L.L.P., Houston, Texas. Certain
matters will be passed upon for the Principal Underwriter by Kramer, Levin,
Naftalis & Frankel, New York, New York.

EXPERTS

The Statement of Assets and Liabilities of the Company as of July 26,
1995 has been included herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of the same
firm as experts in auditing and accounting.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . F-2

Statement of Assets and Liabilities as of July 26, 1995. . . . . . . . . . F-3

Notes to Statement of Assets and Liabilities as of July 26, 1995 . . . . . F-4

Statement of Assets and Liabilities as of April 30, 1996 . . . . . . . . . F-5

Notes to Statement of Assets and Liabilities as of April 30, 1996. . . . . F-6

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sherry Lane Growth Fund, Inc.

We have audited the accompanying statement of assets and liabilities of
Sherry Lane Growth Fund, Inc. (the Company) as of July 26, 1995. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit of a statement of
assets and liabilities includes examining, on a test basis, evidence
supporting the amounts and disclosures in that financial statement. An audit
of a statement of assets and liabilities also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit of the statement of assets and liabilities provides a
reasonable basis for our opinion.

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Sherry
Lane Growth Fund, Inc. as of July 26, 1995, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Fort Worth, Texas
July 31, 1995

F-2

<PAGE>

SHERRY LANE GROWTH FUND, INC.

Statement of Assets and Liabilities

July 26, 1995

ASSETS
------

Cash $ 20,000
Organization expenses (note 2) 22,441
--------
42,441

LIABILITIES
-----------

Liabilities:
Accrued organization expenses (note 2) 22,441
--------

Net Assets (20,000,000 shares of $.01 par value shares of common
stock authorized; 2,000 shares issued and outstanding) $ 20,000
--------
--------

Net asset value per share $ 10.00
--------
--------

See accompanying notes to statement of assets and liabilities.

F-3

<PAGE>

SHERRY LANE GROWTH FUND, INC.

Notes to Statement of Assets and Liabilities

July 26, 1995

(1) ORGANIZATION AND BUSINESS PURPOSE

Sherry Lane Growth Fund, Inc. (the Company), a Delaware corporation, was
incorporated on July 21, 1995, and has had no operations to date other than
matters relating to its organization and registration as a closed-end
nondiversified investment company organized as a business development
company under the Investment Company Act of 1940, and the sale and issuance
to Sherry Lane Capital Advisors, Inc. (the Investment Adviser) of 2,000
shares of common stock for an aggregate purchase price of $20,000. The
registration and offering of the Company's common stock is for a maximum of
5,000,000 shares at a proposed maximum offering price per share of $10.

(2) ORGANIZATION EXPENSES

Organization expenses relating to the Company incurred and to be incurred
by the Investment Adviser will be reimbursed by the Company. Such expenses
will be deferred and amortized on a straight-line basis for a five-year
period beginning at the commencement of operations of the Company.
Offering costs, estimated at $250,000, will be paid from the proceeds of
the offering and charged to capital at the time of the issuance of such
shares.

(3) INVESTMENT ADVISORY AGREEMENT

The Company will enter into an investment advisory agreement with the
Investment Adviser pursuant to which the Investment Adviser will, among
other things, provide investment advisory services to the Company and will
be responsible for the management of the Company's portfolio in accordance
with the Company's investment policies and for making decisions to buy,
sell, or hold particular securities.

The Company will pay the Investment Adviser an annual fee for its
management services at an annual rate of 2.0% of the Company's net assets,
determined and paid quarterly, and an incentive management fee of 20% of
net realized capital gains after adjusted for any net unrealized
depreciation unrealized losses (defined in the investment advisory
agreement).

F-4

<PAGE>
SHERRY LANE GROWTH FUND, INC.

Statement of Assets and Liabilities

Unaudited

April 30, 1996

ASSETS
------

Cash $ 20,000
Organization expenses (note 2) 222,831
---------
Total Assets 242,831
---------
---------

LIABILITIES
-----------

Liabilities:
Accrued organization expenses (note 2) $222,831

Net Assets (20,000,000 shares of $.01 par value shares of common
stock authorized; 2,000 shares issued and outstanding) 20,000
---------
Total Liabilities and Net Equity $242,831
---------
---------

Net asset value per share $ 10.00
---------
---------

See accompanying notes to statement of assets and liabilities.

F-5

<PAGE>

SHERRY LANE GROWTH FUND, INC.

Notes to Statement of Assets and Liabilities

Unaudited

April 30, 1996

(1) ORGANIZATION AND BUSINESS PURPOSE

Sherry Lane Growth Fund, Inc. (the Company), a Delaware corporation, was
incorporated on July 21, 1995, and has had no operations to date other than
matters relating to its organization and registration as a closed-end
nondiversified investment company organized as a business development
company under the Investment Company Act of 1940, and the sale and issuance
of 2,000 shares of common stock for an aggregate purchase price of $20,000.
The registration and offering of the Company's common stock is for a
maximum of 5,000,000 shares at a proposed maximum offering price per share
of $10.

(2) ORGANIZATION EXPENSES

Organization expenses relating to the Company incurred and to be incurred
by the Investment Adviser will be reimbursed by the Company. Such expenses
will be deferred and amortized on a straight-line basis for a five-year
period beginning at the commencement of operations of the Company.
Offering costs, estimated at $450,000, will be paid from the proceeds of
the offering and charged to capital at the time of the issuance of such
shares.

(3) INVESTMENT ADVISORY AGREEMENT

F-6

<PAGE>

SUBSCRIPTION AND TAX QUALIFICATION PAGE
SHERRY LANE GROWTH FUND, INC.

Investments must be made through a participating NASD Broker/Dealer by
confirmation or by subscription utilizing this application. By signature
below, the undersigned investor subscribes for and agrees to purchase shares
of Common Stock, par value $.01 per share ("Common Stock"), of the Company as
provided below at a price of Ten Dollars ($10) per share ($9.85 for investors
who purchase at least 50,000 shares of Common Stock), such subscription being
tendered pursuant to the prospectus to which this page is attached (the
"Prospectus"). This subscription is subject to the terms and conditions
discussed in the Prospectus and on the reverse side hereof.

ESCROW

Payments pursuant hereto shall be placed in an escrow account at
Continental Stock Transfer & Trust Company, New York, New York, to be
returned to the investor with interest and without deduction for any expense
if (i) this subscription has not been accepted or is subsequently rejected by
the Company or (ii) less than 1,500,000 shares of Common Stock are subscribed
by the date of closing of the subscription period as specified in the
Prospectus or as extended pursuant thereto. Costs of escrow and any interest
on escrowed funds will accrue to the Company. At such time as the minimum
subscription and all other requirements are met, whether by the closing date
or before, all subscription funds tendered, along with interest thereon,
shall be released to the general account of the Company in accordance with
the terms of the offering of the Common Stock contemplated by the Prospectus.
If the investor is allocated less than the full amount of shares subscribed,
any overpayment of funds shall be promptly refunded, without interest.

TERMS AND CONDITIONS OF SUBSCRIPTION AGREEMENT
ACCEPTANCE OR REJECTION

The Company, in its sole discretion and for any reason, shall have the
right to accept or reject this subscription in whole or in part. The investor
hereby agrees that the investor is not entitled to cancel, terminate or revoke
this subscription except as otherwise required under applicable law, and that
such subscription and agreement shall survive the death or disability of the
investor.

OFFERING INFORMATION

The investor acknowledges the investor's receipt and review of the
Prospectus; that the offering was made only through direct communication
between the investor and a duly authorized representative of the Company;
that the investor has been offered and has obtained all further information
desired to verify or supplement the information contained in the Prospectus;
and that the investor has been advised by the Company that a purchaser of the
shares of Common Stock must be prepared to bear the risk of such investment
for an indefinite time because, among other things, of the possible
illiquidity of the offering and the lack of a prior market. The investor
also acknowledges that no person except the officers of the Company and its
duly authorized selling agents have been authorized to make any
representations on behalf of the Company relating to this offering other
than as set forth in the Prospectus and, if given or made, such
representations must not be relied upon.

SUITABILITY REQUIREMENTS

The investor represents that the shares of Common Stock are being
purchased solely for investment purposes and that the investor has read the
risk factors discussed in the Prospectus. The investor (if an individual) is
of majority age and under no disability with respect to entering into in the
Subscription Agreement. In addition, the investor understands that no
federal or state agency has made any finding or determination as to the
fairness of an investment in the shares of Common Stock by the public at
large or any recommendations or endorsement of such shares. The investor, if
acting herein in a fiduciary capacity, represents that the representations
and warranties herein contained are true and correct as to the investor's
principals, that the investor has full and complete authority to execute this
Agreement on behalf of all parties whom it purports to represent and to bind
them to the terms hereof. If the investor is acting on

<PAGE>

behalf of an entity, such entity was not organized for the specific purpose
of acquiring the shares of Common Stock. The investor agrees, to the fullest
extent permitted by law, to indemnify and hold the Company and the officers,
directors, agents and representatives of the Company harmless from all loss,
damage, liability, cost or expense (including attorneys' fees and court
costs) arising out of any misrepresentation or warranty of the investor
contained herein.

ALL CALIFORNIA INVESTORS MUST HAVE EITHER A (I) MINIMUM OF $65,000
ANNUAL GROSS INCOME AND $250,000 OF NET WORTH (EXCLUSIVE OF HOME, HOME
FURNISHINGS AND AUTOMOBILES); OR (II) MINIMUM NET WORTH (EXCLUSIVE OF HOME,
HOME FURNISHINGS AND AUTOMOBILES) OF $500,000.

ALL MINNESOTA INVESTORS MUST COMPLETE AND EXECUTE A SEPARATE ACCREDITED
INVESTOR CERTIFICATE IN ADDITION TO THIS SUBSCRIPTION AGREEMENT.

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The investor authorizes the Company to pay all commissions and fees due
hereunder to the named Broker/Dealer.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The investor authorizes the Company to pay all dividends and distributions to
Continental Stock Transfer & Trust Company pursuant to the Dividend
Reinvestment Plan unless and until the Company is notified by the investor of
the investor's election to not participate in such plan.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

DELAWARE LAW

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF DELAWARE.

<PAGE>

Number of Shares purchased hereby (MINIMUM PURCHASE OF 500 SHARES (EXCEPT THAT
THE MINIMUM PURCHASE FOR AN INDIVIDUAL RETIREMENT ACCOUNT IS 200 SHARES) AND
GREATER PURCHASES IN 100 SHARE INCREMENTS ONLY) _____________________________

Purchase price for Shares (AT $10 PER SHARE ($9.85 FOR INVESTORS WHO PURCHASE
AT LEAST 50,000 SHARES OF COMMON STOCK) included herewith $__________________

MAKE CHECK PAYABLE TO:

CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
AS ESCROW AGENT FOR SHERRY LANE GROWTH FUND, INC.

FORWARD CHECK AND THIS SIGNED TAX QUALIFICATION AND SUBSCRIPTION PAGE TO
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004

INDICATE MANNER OF OWNERSHIP

<TABLE>
<S> <C> <C>
Individual [_____] Separate Property [_____] Joint Tenants [_____]
Community [_____] Partnership [_____] Corporation [_____]
"S" Corp. [_____] Trust [_____] Other [_____] (describe): _____________
</TABLE>

ENTER

Social Security Number ____ _____ _____ or Tax Identification Number ____
__________

PRINT NAMES IN WHICH SHARES OF COMMON STOCK ARE TO BE REGISTERED

- ------------------------------------------------------------------------------
First Name M.I. Last Name
- ------------------------------------------------------------------------------
For Individual(s),
Print Names here

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For Trust, Print Trust Name here

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For Corporation or Other
Business, Print Name here
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ADDITIONAL SUBSCRIPTION INFORMATION - PLEASE PRINT

REGISTERED STOCKHOLDER'S ADDRESS
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Residency Address
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City State Zip
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ADDITIONAL ADDRESS FOR STOCKHOLDER COMMUNICATIONS
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Mail Address
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City State Zip
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Office Phone (___) Home Phone (___) Fax (___)
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ADVISOR'S ADDRESS (CPA, ATTORNEY, CFP, RIA)
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Name and Firm
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Mail Address
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City State Zip
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Office Phone (___) Home Phone (___) Fax (___)
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INFORMATION TO BE COMPLETED BY ACCOUNT EXECUTIVE - PLEASE PRINT
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Broker Dealer Firm
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Branch Office Name
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ACCOUNT EXECUTIVE
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Name Signature
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OFFICE ADDRESS
Street Address City State Zip
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Office Phone (___) Home Phone (___) Fax (___)
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SIGNATURE

I certify that (1) the Taxpayer ID number is correct as shown and (2) I am
not subject to backup withholding as a result of failure to report all interest
or dividends, or the Internal Revenue Service has notified me I am no longer
subject to withholding under Section 3406(a)(1)(C) of the Internal Revenue Code
of 1986, as amended.

Dated Signature
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Dated Signature
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ACCREDITED INVESTOR CERTIFICATE

The undersigned Investor hereby certifies that he is an "accredited
investor" as that term is defined in Regulation D adopted pursuant to the
Securities Act of 1933. The specific category(s) of accredited investor
applicable to the undersigned is checked below.

______ a. an individual whose individual net worth, or joint net worth with
that individual's spouse, exceeds $1,000,000;

______ b. an individual who had an individual income in excess of $200,000 in
1994 and 1995 or who had joint income with that individual's spouse in
excess of $300,000 in each of those years and who reasonably expects
to have that income level in 1996;

______ c. a bank as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended (the "Act"), or a savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Act whether acting
in its individual or fiduciary capacity; a broker or dealer registered
pursuant to section 15 of the Securities Exchange Act of 1934; an
insurance company as defined in Section 2(13) of the Act; an
investment company registered under the Investment Company Act of 1940
(the "1940 Act") or a business development company as defined in
Section 2(a)(48) of the 1940 Act; a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a State, its political subdivisions, or
any agency or instrumentality of a State or its political subdivisions
for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; or an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and
loan association, insurance company or registered investment adviser,
or if the employee benefit plan has total assets in excess of
$5,000,000; or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors;

______ d. a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;

______ e. an organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;

______ f. a trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase
is directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Act;

______ g. an individual who is a director or executive officer of Sherry Lane
Growth Fund, Inc.; or

______ h. an entity in which all of the equity owners are accredited investors.

IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor
Certificate this _____ day of ______, 1996.

______________________________
Signature

______________________________
Printed Name

<PAGE>

SHERRY LANE GROWTH FUND, INC.
DIVIDEND REINVESTMENT PLAN

The Company has adopted a Dividend Reinvestment Plan (the "Plan").

Please be aware that all dividends and distributions will be
automatically reinvested in shares of Common Stock, par value $.01 per share,
of the Company ("Common Stock") at no cost to the stockholder.

Stockholders may make additional cash purchases of shares of Common
Stock in accordance with the Plan. Acquisitions of shares of Common Stock
for reinvestment or cash purchases of Common Stock will be made by the
Company from shares selling at a discount to the Company's Net Asset Value
("NAV") or through the issuance of new shares by the Company at NAV.
Reinvested dividends and distributions will be used by the Company for
general investment and operating purposes, including additional investments
in portfolio companies.

Shares of Common Stock acquired by the Company in accordance with the
Plan will be held in the name of the Company in unissued form by the
Company's transfer agent and investors will receive a quarterly statement
reflecting the number of shares of Common Stock owned in the Plan. These
shares can be issued to the individual investor, or can be liquidated upon
written instructions of the registered investor.

IF YOU WISH TO HAVE YOUR DIVIDENDS SENT TO YOU INSTEAD OF HELD FOR
REINVESTMENT, PLEASE COMPLETE AND EXECUTE THE FOLLOWING SECTION.

ELECTION TO RECEIVE DIVIDENDS AND NOT PARTICIPATE IN THE PLAN

The undersigned elects not to participate in the Dividend Reinvestment
Plan and requests all dividends and distributions to be forwarded to the
following address:

Name of Stockholder _______________________________________________________

Address for Dividend Mailing______________________________ City ___________

State_________ Zip________

Phone (___) ___ ____ Fax (___) ___ ____

Account Number for Deposit ________________________________________________

Bank or Custodial Name ____________________________________________________

Date____________ Signature of Registered Holder ________________________

___________________________________________________________________________
RETURN THIS ELECTION TO THE FUND

CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
AS AGENT FOR SHERRY LANE GROWTH FUND, INC.
2 BROADWAY, 19TH FLOOR
NEW YORK, NEW YORK 10004

<PAGE>

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No dealer, salesman or any other
person has been authorized to give
any information or to make any
representations other than those
contained or incorporated by
reference in this Prospectus in
connection with the offer made by
this Prospectus and, if given or
made, such information or
representations must not be relied
upon as having been authorized by the
Company or by any Underwriter. This
Prospectus does not constitute an
offer of any securities other than
those to which it relates or an offer
to sell, or a solicitation of an
offer to buy, to any person in any
jurisdiction where such an offer or
solicitation would be unlawful.
Neither the delivery of this
Prospectus nor any sale made
hereunder shall under any
circumstances create an implication
that there has been no change in the
affairs of the Company since the date
hereof.

____________________

TABLE OF CONTENTS
Page
----
Additional Information . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . 9
Distributions . . . . . . . . . . . . . . . . . 9
The Company . . . . . . . . . . . . . . . . . . 10
Investment Objectives and Policies. . . . . . . 13
Management . . . . . . . . . . . . . . . . . . 15
Prior Experience of Principals of
The Investment Adviser . . . . . . . . . . . . 18
The Investment Advisory Agreement . . . . . . . 20
Regulation . . . . . . . . . . . . . . . . . . 20
Valuation of Portfolio Securities . . . . . . . 22
Federal Income Tax Matters . . . . . . . . . . 23
Dividend Reinvestment Plan. . . . . . . . . . . 26
Description of Capital Stock . . . . . . . . . 27
Plan of Distribution . . . . . . . . . . . . . 28
Legal Matters . . . . . . . . . . . . . . . . . 28
Experts . . . . . . . . . . . . . . . . . . . . 28
Index to Financial Statements. . . . . . . . . F-1
_____________

Until June 28, 1996 (25
days after the date of this
Prospectus), all dealers
effecting transactions in the
Common Stock, whether or not
participating in this
distribution, may be required
to deliver a Prospectus. This
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.

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5,000,000 SHARES

SHERRY LANE

GROWTH FUND, INC.

COMMON STOCK

____________________

PROSPECTUS
JUNE 3, 1996
____________________

MARION BASS SECURITIES
CORPORATION

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