-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UZ67ruuyBDptahC9vSbxmj916RpY8JS5ZOil0zKWBJty39k9u3SfEai8js+S+Zht 4w+VY0lTxWhy1MFiYj7TrQ== 0000912057-00-005889.txt : 20000215 0000912057-00-005889.hdr.sgml : 20000215 ACCESSION NUMBER: 0000912057-00-005889 CONFORMED SUBMISSION TYPE: N-2/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEVC DRAPER FISHER JURVESTON FUND I INC CENTRAL INDEX KEY: 0001099941 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943333311 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-2/A SEC ACT: SEC FILE NUMBER: 333-92287 FILM NUMBER: 537120 BUSINESS ADDRESS: STREET 1: 991 FOLSOM STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 BUSINESS PHONE: 4159776150 MAIL ADDRESS: STREET 1: 991 FOLSOM STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 FORMER COMPANY: FORMER CONFORMED NAME: MEVC DRAPER FISHER JURVETSON FUND I INC DATE OF NAME CHANGE: 19991207 N-2/A 1 N-2/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2000 1933 ACT FILE NO. 333-92287 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM N-2 (Check Appropriate Box or Boxes) / / REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ Pre-Effective Amendment No. 2 / / Post-Effective Amendment No.
------------------------------ MEVC DRAPER FISHER JURVETSON FUND I, INC. (Exact name of registrant as specified in charter) 991 FOLSOM STREET, SUITE 301 SAN FRANCISCO, CA 94107 (Address of Principal Executive Offices (Number, Street, City, State, Zip Code) ------------------------------ (415) 977-6150 (Registrant's Telephone Number, Including Area Code) ------------------------------ ANDREW E. SINGER MEVC DRAPER FISHER JURVETSON FUND I, INC. 991 FOLSOM STREET, SUITE 301 SAN FRANCISCO, CA 94107 (Name and Address (Number, Street, City, State, Zip Code) of Agent For Service) ------------------------------ COPIES TO: Michael J. Halloran John L. Donahue Steven N. Robinson Daniel L. Cullum Cleary, Gottlieb, Steen & Hamilton Pillsbury Madison & Sutro LLP 2000 Pennsylvania Avenue, N.W. 50 Fremont Street, P.O. Box 7880 Washington, D.C. 20006 San Francisco, CA 94120-7880
------------------------------ Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration Statement. If any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. / / It is proposed that this filing will become effective (check appropriate box): / / when declared effective pursuant to Section 8(c). A registration fee in the amount of $132,000 was paid concurrently with the initial filing of this Registration Statement on December 7, 1999. ------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MEVC DRAPER FISHER JURVETSON FUND I, INC. CROSS REFERENCE SHEET
NO. DESCRIPTION LOCATION - --------------------- ---------------------------------- ------------------------------------------------- PART A--INFORMATION REQUIRED IN A PROSPECTUS Item 1. Outside Front Cover Outside Front Cover Item 2. Inside Front and Outside Back Inside Front and Outside Back Cover Cover Item 3. Fee Table and Synopsis Fee Table and Synopsis Item 4. Financial Highlights Not Applicable Item 5. Plan of Distribution Underwriting Item 6. Selling Shareholders Not Applicable Item 7. Use of Proceeds Use of Proceeds Item 8. General Description of the Outside Front Cover Page; Prospectus Summary; Registrant Business; Risk Factors Item 9. Management Management; Directors and Officers; The Investment Adviser; The Investment Sub-Adviser; Potential Conflicts of Interest (SAI); Risk Factors Item 10. Capital Stock, Long-Term Debt and Description of Capital Stock; Distributions; Other Securities Dividend Reinvestment Plan Item 11. Defaults and Arrears on Senior Not Applicable Securities Item 12. Legal Proceedings Not Applicable Item 13. Table of Contents of the Statement Table of Contents of the Statement of Additional of Additional Information Information PART B--INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION Item 14. Cover Page Cover Page (SAI) Item 15. Table of Contents Table of Contents of the Statement of Additional Information (SAI) Item 16. General Information and History Not Applicable Item 17. Investment Objective and Policies Prospectus Summary; Investment Objective and Principal Strategies; Risk Factors; Business; Investment Company Act Regulation; Investment Policies (SAI); Investment Company Act Regulation (SAI) Item 18. Management Management (Item 9) Item 19. Control Persons and Principal Management; The Investment Adviser; The Holders of Securities Investment Sub-Adviser; Potential Conflicts of Interest (SAI) Item 20. Investment Advisory and Other The Investment Adviser; The Investment Services Sub-Adviser; Experts; Transfer Agent and Registrar; Dividend Paying Agent; Custodian; Sub-Administrator (SAI)
2
NO. DESCRIPTION LOCATION - --------------------- ---------------------------------- ------------------------------------------------- Item 21. Brokerage Allocation and Other Fee Table and Synopsis; Prospectus Summary; The Practices Offering; Underwriting Item 22. Tax Status Distributions; Federal Income Tax Matters (SAI) Item 23. Financial Statements Statement of Assets and Liabilities
PART C--OTHER INFORMATION Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this Registration Statement. 3 SUBJECT TO COMPLETION-- , 2000 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE FUND MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS - -------------------------------------------------------------------------------- Shares MEVC DRAPER FISHER JURVETSON FUND I, INC. AN INFORMATION TECHNOLOGY VENTURE CAPITAL FUND Common Stock - ---------------------------------------------------------------------- meVC Draper Fisher Jurvetson Fund I, Inc., or the Fund, is offering shares of its common stock. We are a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act. Our investment objective is long-term capital appreciation from venture capital investments in information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries. We will invest in companies that we believe have high growth potential over the long term. Our gain on investments in portfolio companies, net of fees and expenses, will be distributed to our stockholders upon realization, either in cash or in shares of the portfolio companies or the acquiring companies. You must purchase a minimum of 100 of our shares to participate in this offering. There is currently no public market for our shares. We have applied to list our shares on the New York Stock Exchange under the symbol "MVC," but trading will commence not later than 90 days from the date of the offering. Prior to this date, our shares will not be traded on any securities exchange and the underwriters do not intend to make a market in our shares, although we cannot be certain that a limited market will not develop. Consequently, an investment in our shares will be illiquid, at least in the short term. Additionally, the stock of closed-end investment companies frequently trades at a discount to net asset value and we cannot assure you that our stock will not also be discounted in the market. Due to a variety of factors, including our lack of prior operating history, the substantial risk associated with the portfolio companies in which we intend to invest, the illiquid nature of a substantial majority of our portfolio company investments and the uncertainty associated with valuing our portfolio investments, an investment in our stock involves a high degree of risk. You could lose some or all of your investment. We do not presently intend to use borrowed funds to make investments, although we may do so in the future.
Per Share Total Public offering price....................... $ $ Sales load.................................. $ $ Proceeds, before expenses, to the Fund...... $ - $
SEE "RISK FACTORS" ON PAGES 10 TO 15 FOR FACTORS THAT YOU SHOULD CONSIDER BEFORE INVESTING IN SHARES OF OUR COMMON STOCK. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- The underwriters may purchase up to additional shares at the public offering price, less sales load, solely to cover over-allotments, if any. If this option is exercised in full, the total public offering price, sales load and proceeds before expenses to the Fund will be $ , $ and $ , respectively. The underwriters may exercise this option for a period of 30 days from the date our shares begin trading. Delivery and payment for the shares is expected to be on March , 2000. PRUDENTIAL VOLPE TECHNOLOGY A UNIT OF PRUDENTIAL SECURITIES , 2000 [INSIDE FRONT COVER] TABLE OF CONTENTS
PAGE -------- Prospectus Summary.................... 4 The Offering.......................... 7 Fee Table and Synopsis................ 9 Risk Factors.......................... 10 Use of Proceeds....................... 17 Business.............................. 18 Investment Objective And Principal Strategies.......................... 19 Management............................ 23 Directors and Officers................ 23 The Investment Adviser................ 24 The Investment Sub-Adviser............ 25
Valuation of Portfolio Securities..... 30
PAGE -------- Investment Company Act Regulation..... 32 Description of Capital Stock.......... 34 Distributions......................... 37 Dividend Reinvestment Plan............ 37 Underwriting.......................... 39 Legal Matters......................... 41 Experts............................... 41 Table of Contents of the Statement of Additional Information........... 42 Additional Information................ 43 Financial Statements.................. 45
- -------------------------------------------------------------------------------- THIS PROSPECTUS CONCISELY PROVIDES THE INFORMATION THAT YOU SHOULD KNOW BEFORE INVESTING IN SHARES OF OUR COMMON STOCK. YOU SHOULD READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE. WE HAVE INCLUDED MORE INFORMATION ABOUT US IN A STATEMENT OF ADDITIONAL INFORMATION, OR SAI, THAT WE HAVE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SAI IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. WE HAVE INCLUDED THE TABLE OF CONTENTS OF THE SAI ON PAGE 42. YOU MAY OBTAIN A COPY OF THE SAI FREE OF CHARGE BY WRITING TO US AT 991 FOLSOM STREET, SUITE 301, SAN FRANCISCO, CALIFORNIA 94107, ATTN: SECRETARY, OR BY CALLING (800) 830-1822. THE PROSPECTUS AND SAI WILL BE AVAILABLE ON OUR WEBSITE AT HTTP://WWW.MEVC.COM/MEVC DRAPERFUND.ASP AND ARE AVAILABLE ON THE SEC'S WEBSITE AT HTTP://WWW.SEC.GOV. THE INFORMATION ON THE WEBSITE OF THE PARENT COMPANY OF OUR INVESTMENT ADVISER, HTTP://WWW.MEVC.COM, IS NOT A PART OF THIS PROSPECTUS. - -------------------------------------------------------------------------------- YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE SAI. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT OFFERING SHARES OF OUR COMMON STOCK FOR SALE IN ANY JURISDICTION WHERE SUCH OFFER OR SALE IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE ON ANY DATE OTHER THAN THE DATE SET FORTH ON THE FRONT COVER OF THIS PROSPECTUS. - -------------------------------------------------------------------------------- 3 PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary is not complete and is not intended to contain all of the information that investors should consider before investing in our shares. You should read the entire prospectus carefully before purchasing our shares. THE FUND We are a newly organized, closed-end investment company that has elected to be treated as a business development company under the Investment Company Act. Our investment adviser is meVC Advisers, Inc., or meVC Advisers. Our investment sub-adviser is Draper Fisher Jurvetson MeVC Management Co., LLC, or Draper Advisers. Both meVC Advisers and Draper Advisers are registered investment advisers under the Investment Advisers Act. meVC Advisers will implement our investment objective and strategies, and will set our strategic and operational direction. meVC Advisers will also manage our day-to-day operations, including our accounting, finance, marketing, record-keeping and regulatory compliance. Draper Advisers will identify, structure and negotiate investments for the Fund, as well as monitor and assist our portfolio companies. The managing member of Draper Advisers is John M. Grillos, who has over ten years of venture capital experience and twenty years of entrepreneurial, professional and managerial experience in the information technology industry. The non-managing members of Draper Advisers include the senior investment professionals of Draper Fisher Jurvetson and its nationwide network of six affiliated venture capital firms. Collectively, the members of Draper Advisers have over 75 years of investing and entrepreneurial management experience, and have raised over one billion dollars across 15 venture capital funds. The managing member of Draper Advisers will be responsible for the investment recommendations of Draper Advisers. The non-managing members of Draper Advisers will be the source of much of our deal flow by presenting potential investment opportunities to the managing member for evaluation. The non-managing members will also provide post-investment managerial assistance to many of our portfolio companies. The members of Draper Advisers have raised and are managing their own private venture capital funds and we anticipate that many of our investments will be co-investments with these private funds or follow-on investments in portfolio companies in which one or more of our affiliated funds has previously invested. The non-managing members of Draper Advisers will not make or otherwise participate in investment decisions on our behalf and have no obligation to provide services to us on an exclusive basis. INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES Our investment objective is long-term capital appreciation from venture capital investments in information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries. Venture capital investments are typically long-term investments in companies with high growth potential whose stock is not publicly traded. We seek capital appreciation by investing only in companies that we believe have high growth potential over the long term. We intend to invest in companies in various stages of development, with an emphasis on companies in their second or third round of financing, called an expansion round, and companies in their final round of financing prior to an anticipated merger or initial public offering, called a mezzanine round. We believe that mezzanine and expansion round investments will allow us to make larger investments with lower risk and an earlier opportunity for realization of gains. We may also use a portion of our capital to invest in start-up companies in their first round of financing, called a seed round. Seed rounds generally present the potential for larger gains, but are riskier and generally require a longer holding period than mezzanine and expansion round financing. 4 After carefully selecting our portfolio companies, we will seek to enhance their competitiveness by offering to provide managerial assistance, including assistance in preparing for future rounds of private or public financing, recruiting management, refining business strategy, assisting with general business operations and making introductions to venture firms, investment banks and other potential sources of capital. We will seek to provide returns to our stockholders through long-term appreciation in the value of our portfolio companies and through distributions of capital gains on our investments. In addition, if a portfolio company is sold, merged or goes public, we may distribute cash or stock in either the portfolio company or the acquiring company. INVESTMENT RATIONALE Information technology, including Internet, e-commerce, telecommunications, networking, software and information services, is one of the most rapidly growing sectors of the U.S. economy. Many new companies are at the forefront of innovation in these industries. The Internet, in particular, has created a playing field where information technology businesses can grow at an unprecedented pace. By moving quickly, new companies can position themselves as leaders in their respective markets, often attracting key strategic partners and influential early adopting customers. These new companies often build category- defining brands that create an ongoing competitive advantage. We intend to invest in companies that we believe have the greatest potential to become leading information technology businesses. There can be no assurance, however, that we will achieve our investment objective or that the performance of the companies in which we make investments will be as anticipated. HISTORICAL PERFORMANCE OF VENTURE CAPITAL FUNDS Based upon information provided by Venture Economics, the venture capital industry as a whole has experienced long-term returns that have exceeded the S&P 500 Index by over 8% per year for a one, five and ten year period. According to Venture Economics, for all reporting venture capital funds formed between 1988 and 1998, the historical average annual rate of return, net of fees and expenses, as of September 30, 1999 was as follows:
1 YEAR RETURN 5 YEAR RETURN 10 YEAR RETURN ------------- ------------- -------------- Later Stage Venture Capital (1)(2)............ 58.3% 34.6% 29.6% Balanced Venture Capital (1)(3)............... 55.9% 37.0% 24.9% All Venture Capital (1)....................... 68.6% 41.1% 27.6% S&P 500 Index (4)............................. 27.8% 25.0% 16.8%
- ------------------------------ (1) The venture capital return figures were calculated by Venture Economics. These benchmarks include all funds formed between 1988 and 1998 as of September 30, 1999. Data is net of fees and carried interest. (2) Later stage venture capital funds generally focus their investments on mezzanine and expansion rounds of financing. (3) Balanced venture capital funds invest in all stages of venture financing, including seed, mezzanine and expansion rounds. (4) S&P 500 Index as of September 30, 1999, according to Standard & Poor's. Past performance of the venture capital industry is not neccesarily indicative of that sector's future performance, nor is it necessarily a good proxy for predicting the returns of the Fund. We cannot guarantee that we will meet or exceed the rates of return historically realized by the venture capital industry as a whole. Moreover, our overall return will be reduced by certain factors related to our structure as a publicly-traded business development company. Such factors include the lower return we are likely to realize on short-term liquid investments during the period in which we are identifying potential investments, and the periodic disclosure required of business development companies, which could result in the Fund being less attractive as an investor to certain potential portfolio companies. 5 COMPENSATION OF INVESTMENT ADVISER AND INVESTMENT SUB-ADVISER As compensation for its investment advisory and management and administrative services, we have agreed to pay meVC Advisers an annual management fee equal to 2.5% of our average weekly net assets, payable in monthly installments. We have also agreed to pay meVC Advisers annual incentive compensation equal to 20% of our annual realized capital gains net of realized and unrealized capital losses. Payment of this type of incentive compensation, referred to as a "carried interest," is typical in the venture capital industry. Carried interest payments provide an economic incentive for venture capital fund managers to select investments with the potential to achieve the greatest increase in value over time. We believe that payment of a carried interest is an important component of our ability to attract and retain high quality venture capital fund managers. As payment for its services as our Investment Sub-Adviser, meVC Advisers has agreed to pay Draper Advisers 40% of the management fee, or an annual fee equal to 1.0% of our average weekly net assets, payable in monthly installments. meVC Advisers has also agreed to pay Draper Advisers additional compensation equal to 90% of any carried interest payment it receives from us. CLOSED-END FUND STRUCTURE We are a newly-organized closed-end fund. Closed-end funds differ from open-end funds (which are commonly referred to as mutual funds) in that closed-end funds, unlike mutual funds, generally list their shares for trading on a stock exchange and do not redeem their shares at the request of a shareholder. This means that if you wish to sell your shares of a closed-end fund you must trade them on the market like any other stock at the price prevailing in the market for the shares at that time. Trading in our shares will commence not later than 90 days from the date of the offering. Prior to this date, our shares will not be traded on any securities exchange and the underwriters do not intend to make a market in our shares, although we cannot be certain that a limited market will not develop. With a mutual fund, shares may be redeemed or bought back by the mutual fund at "net asset value" if a shareholder wishes to sell the shares of the fund. Also, mutual funds generally offer new shares of the fund on a continuous basis to new investors, whereas closed-end funds do not. In addition, shares of closed-end funds frequently trade at a discount to their net asset value. In particular, our shares may trade at a discount even greater than other closed-end funds since we may not realize a return on our investments for a considerable amount of time. LIQUIDATION Our board of directors may elect to liquidate the Fund and distribute to our stockholders any proceeds in cash or securities after March , 2010 if it believes doing so would be in our stockholders' best interests. ADDITIONAL INFORMATION We were incorporated in Delaware in December 1999. Our executive offices are located at 991 Folsom Street, Suite 301, San Francisco, California 94107, our telephone number is (800) 830-1822 and our fax number is (415) 977-6160. Our website address is HTTP://WWW.MEVC.COM/MEVCDRAPERFUND.ASP. The information contained on the website of the parent of our investment adviser, HTTP://WWW.MEVC.COM, is not a part of this prospectus. 6 THE OFFERING Shares offered by the Fund................ shares Minimum investment........................ 100 shares Investment objective...................... Our investment objective is long-term capital appreciation from venture capital investments in information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries. Venture capital investments are typically long-term investments in companies with a high growth potential whose stock is not publicly traded. We seek capital appreciation by investing in companies that we believe have high growth potential over the long term. Investment advisory services.............. Our investment adviser is meVC Advisers, Inc., or meVC Advisers, and our investment sub-adviser is Draper Fisher Jurvetson MeVC Management Co., LLC, or Draper Advisers. Principal strategies...................... meVC Advisers and Draper Advisers will use the following principal strategies to achieve our investment objective: - Focus on mezzanine and expansion round venture capital investments. - Build on the expertise, contacts and deal flow of Draper Fisher Jurvetson and its growing venture capital affiliate network. - Direct our investments to information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries, and to companies operating in other new or emerging markets. - Exercise investment discipline through proactive risk management and diversification. - Enhance the competitiveness of our portfolio companies by offering to provide managerial assistance. Use of proceeds........................... We will use the net proceeds from the offering to invest in portfolio companies in accordance with our investment objective and strategies. The maximum gross proceeds to be raised in this offering will be limited to $500 million not including any proceeds from over-allotments. We plan to reserve approximately 20% of the net offering proceeds for follow-on investments and future management fees. We expect to invest the net proceeds after reserves in accordance with our investment objective at the following rate: approximately 20% to 25% at or about six months from the offering date, approximately 50% at or about one year from the offering date, and full investment at or about two years from the offering date. There can be no assurances that the Fund will be able to achieve its targeted investment pace.
7 Distributions............................. We will distribute annually at least 90% of the net dividend and interest income we receive from short-term investments. During the period in which we are evaluating and selecting portfolio companies in which to invest, we will invest our capital primarily in short-term investment grade securities. These investments will generate interest income for distribution to our stockholders. However, as we invest the proceeds of this offering in portfolio companies, we will have less interest income available for distribution to you. We also intend to distribute any realized capital gains, net of realized and unrealized capital losses, we generate. In addition, if a portfolio company is sold, merged or goes public, we may distribute cash or stock in either the portfolio company or the acquiring company. The timing of capital gains distributions will vary depending on when we liquidate our investments in individual portfolio companies. Suitability requirements.................. An investment in our shares involves a considerable amount of risk. Because it is possible that you may lose some or all of your investment, you should not invest in our shares unless you can afford a total loss of your investment. Prior to making your investment decision, you should (i) consider the suitability of this investment with respect to your investment objectives and personal situation, (ii) consider factors such as your personal net worth, income, age, risk tolerance and liquidity needs, and (iii) consult your broker and financial advisor to determine whether the risk profile of your account is suitable for this investment. Listing on national exchange.............. We have applied to list our shares on the New York Stock Exchange under the symbol "MVC," but trading will commence not later than 90 days from the date of the offering. Until such time it may be difficult, if not impossible, for you to sell your shares.
RISK FACTORS Purchasing shares of our common stock carries significant risk of losing some or all of your investment. Prior to investing in our stock, you should consider the risk factors described on pages 10 to 15 of this prospectus and the impact of events that could adversely affect our business. 8 FEE TABLE AND SYNOPSIS You can expect to bear, directly or indirectly, the following costs and expenses in connection with an investment in shares of our common stock. OFFERING EXPENSES STOCKHOLDER TRANSACTION EXPENSES (1) TRANSACTION EXPENSES (AS A PERCENTAGE OF THE OFFERING PRICE PER SHARE) Sales load.................................................. % Dividend Reinvestment Plan fees............................. None ------ TOTAL STOCKHOLDER TRANSACTION EXPENSES.................. % ======
- ------------------------ (1) Does not include organizational and offering expenses, which are estimated to be approximately $ , and which will be shared by meVC Advisers and the Fund. ANNUAL EXPENSES ANNUAL EXPENSES ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS) Management fee to meVC Advisers (2)......................... 2.50% ------ TOTAL ANNUAL EXPENSES................................... 2.50% ======
- ------------------------ (2) meVC Advisers has agreed to pay Draper Advisers 40% of this amount, or an annual fee equal to 1.0% of our average weekly net assets payable in monthly installments. See "Management--The Investment Adviser" and "--The Investment Sub-Adviser." In addition to the management fee, we have agreed to pay meVC Advisers annual incentive compensation equal to 20% of our annual realized capital gains, net of realized and unrealized capital losses. In exchange for the services rendered by Draper Advisers, meVC Advisers has agreed to pay Draper Advisers 90% of the incentive compensation it receives from the Fund. See "Management--The Investment Adviser" and "--The Investment Sub-Adviser." EXAMPLE OF COSTS AND EXPENSES CALCULATION THE FOLLOWING EXAMPLE DOES NOT INCLUDE CARRIED INTEREST COMPENSATION, WHICH IS TIED TO OUR GENERATION OF NET CAPITAL GAINS ON OUR INVESTMENTS.
1 3 5 10 Year Years Years Years -------- -------- -------- -------- Assuming a 5% annual return, you can expect to pay the following amount in management fees on a $1,000 investment................................................ $26 $81 $138 $292
Our actual rate of return may be greater or less than the hypothetical 5% return used above. The 5% return is merely a hypothetical return that is required by law to be used to demonstrate the costs and expenses of an investment in shares of our common stock, and does not reflect our expectation of the actual return that you may or may not realize from an investment in our shares. 9 RISK FACTORS You should carefully consider the following risk factors in addition to the other information set forth in this prospectus before purchasing our shares. Investing in our common stock involves a high degree of risk. Purchasing shares of our common stock carries significant risk of losing some or all of your investment. INVESTMENT RISK INVESTING IN OUR STOCK IS HIGHLY SPECULATIVE AND YOU COULD LOSE SOME OR ALL OF THE AMOUNT YOU INVEST. The value of our common stock may decline and may be affected by numerous market conditions, which could result in the loss of some or all of your investment in our shares. The securities markets frequently experience extreme price and volume fluctuation which affect market prices for securities of companies generally, and technology companies in particular. Because of our focus on the technology sector, our stock price is likely to be impacted by these market conditions. General economic conditions, and general conditions in the Internet and information technology industries, will also affect our stock price. INVESTING IN OUR SHARES MAY BE INAPPROPRIATE FOR YOUR RISK TOLERANCE. Investing in our shares may be inappropriate for your risk tolerance. The Fund's investments in accordance with its investment objective and principal strategies may result in an above average amount of risk and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our shares may not be suitable for you. VENTURE CAPITAL RISKS THE INABILITY OF OUR PORTFOLIO COMPANIES TO COMMERCIALIZE THEIR TECHNOLOGY OR CREATE OR DEVELOP COMMERCIALLY VIABLE PRODUCTS OR BUSINESSES WOULD HAVE A NEGATIVE IMPACT ON OUR INVESTMENT RETURNS. The possibility that our portfolio companies will not be able to commercialize their technology, product or business concept presents significant risk. Additionally, although some of our portfolio companies may already have a commercially successful product or product line when we invest, information technology products and services often have a more limited market or life span than products in other industries. Thus, the ultimate success of these companies often depends on their ability to continually innovate in increasingly competitive markets. Their inability to do so could affect our investment returns. THE INABILITY OF OUR PORTFOLIO COMPANIES TO SUCCESSFULLY MARKET THEIR PRODUCTS WOULD HAVE A NEGATIVE IMPACT ON OUR INVESTMENT RETURNS. Even if our portfolio companies are able to develop commercially viable products, the market for new products and services is highly competitive and rapidly changing. Commercial success is difficult to predict and the marketing efforts of our portfolio companies may not be successful. AN INVESTMENT STRATEGY FOCUSED PRIMARILY ON PRIVATELY-HELD COMPANIES PRESENTS CERTAIN CHALLENGES, INCLUDING THE LACK OF AVAILABLE INFORMATION ABOUT THESE COMPANIES, A DEPENDENCE ON THE TALENTS AND EFFORTS OF ONLY A FEW INDIVIDUAL PORTFOLIO COMPANY MANAGERS AND A GREATER VULNERABILITY TO ECONOMIC DOWNTURNS. We will invest primarily in privately-held companies. Generally, very little public information exists about these companies and we will be required to rely on the ability of the principals of Draper Advisers to obtain adequate information to evaluate the potential returns from investing in these companies. Also, privately-held companies frequently have less diverse product lines and smaller market presence than larger competitors. They are thus generally more vulnerable to economic downturns and may experience substantial variations in operating results. These factors could affect our investment returns. 10 OUR PORTFOLIO COMPANIES WILL LIKELY HAVE SIGNIFICANT COMPETITION, BOTH FROM OTHER EARLY-STAGE COMPANIES AND MORE ESTABLISHED COMPANIES. Emerging growth companies often face significant competition, both from other early-stage companies and from more established companies. Early-stage competitors may have strategic capabilities such as an innovative management team or an ability to react quickly to changing market conditions, while more established companies may possess significantly more experience and greater financial resources than our portfolio companies. These factors could affect our investment returns. OUR INVESTMENT RETURNS WILL DEPEND ON THE SUCCESS OF OUR PORTFOLIO COMPANIES AND, ULTIMATELY, THE ABILITIES OF THEIR KEY PERSONNEL. Our success will depend upon the success of our portfolio companies. Their success, in turn, will depend in large part upon the abilities of their key personnel. The day-to-day operations of our portfolio companies will remain the responsibility of their key personnel. Competition for qualified personnel is intense at any stage of a company's development and high turnover of personnel is common in information technology companies. The loss of one or a few key managers can hinder or delay a company's implementation of its business plan. Our portfolio companies may not be able to attract and retain qualified managers and personnel. Any inability to do so may negatively impact our investment returns. SOME OF OUR PORTFOLIO COMPANIES MAY NEED ADDITIONAL CAPITAL, WHICH MAY NOT BE READILY AVAILABLE. Companies in which we make seed or expansion round investments will often require substantial additional equity financing to satisfy their continuing working capital requirements. Each round of venture financing is typically intended to provide a company with only enough capital to reach the next stage of development. We cannot predict the circumstances or market conditions under which our portfolio companies will seek additional capital. It is possible that one or more of our portfolio companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable to us, either of which could negatively impact our investment returns. RISKS OF THE FUND THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR SHARES AND TRADING WILL COMMENCE NOT LATER THAN 90 DAYS FROM THE DATE OF THE OFFERING. PRIOR TO THIS DATE, OUR SHARES WILL NOT BE TRADED ON ANY SECURITIES EXCHANGE AND THE UNDERWRITERS DO NOT INTEND TO MAKE A MARKET IN OUR SHARES, ALTHOUGH WE CANNOT BE CERTAIN THAT A LIMITED MARKET WILL NOT DEVELOP. ADDITIONALLY, BECAUSE WE ARE A CLOSED-END INVESTMENT COMPANY, OUR SHARES MAY TRADE AT A DISCOUNT TO NET ASSET VALUE. There is currently no secondary market for our shares and there is no assurance that one will develop in the near future, if ever. We have applied to list our shares on the New York Stock Exchange, but trading will commence not later than 90 days after the date of the offering. Prior to this date, our shares will not be traded on any securities exchange and the underwriters do not intend to make a market in our shares, although we cannot be certain that a limited market will not develop. Consequently, an investment in our shares will be illiquid, at least in the short term. Additionally, because we are a closed-end investment company, we cannot redeem our shares on an ongoing basis and our stockholders cannot exchange their shares of our common stock for shares of any other fund. Even after the development of a secondary trading market, shares of closed-end investment companies often trade below their net asset value. WE ARE A CLOSED-END INVESTMENT COMPANY AND WILL NOT REDEEM OUR SHARES. HISTORICALLY, THE SHARES OF CLOSED-END FUNDS HAVE TRADED AT A DISCOUNT TO THEIR NET ASSET VALUE. We are a closed-end fund and we do not intend to redeem our shares at the request of shareholders. This means that if you wish to sell our shares you must do so on the market at the then prevailing price. Historically, the shares of closed-end funds have traded at a discount to their net asset value. In particular, our shares may trade at a discount even greater than other closed-end funds since we may not realize a return on our investments for a considerable amount of time. Additionally, because we expect it to take approximately two years to fully invest the net proceeds of the offering, less an appropriate reserve for 11 follow-on investments and future management fees, there is an increased risk in the short term that our shares will trade at a discount. WE ARE NOT LIKELY TO REALIZE RETURNS ON OUR INVESTMENTS IN PORTFOLIO COMPANIES FOR SEVERAL YEARS. THUS, AN INVESTMENT IN SHARES OF OUR COMMON STOCK IS ONLY APPROPRIATE FOR INVESTORS WHO DO NOT NEED SHORT-TERM LIQUIDITY IN AN INVESTMENT IN OUR SHARES. We intend to make investments as rapidly as possible consistent with our investment objective. However, it is likely that a significant period of time will be required before we are able to fully invest the proceeds of this offering, and a portion of our funds will be held in reserve for follow-on investments and future management fees. Additionally, a venture capital investment typically takes at least several years before the portfolio company is in a position to sell its shares in a public offering or engage in a sale or merger. The securities of our portfolio companies will be "restricted" under Rule 144 of the Securities Act and thus can not be sold unless we satisfy the requirements of Rule 144. Accordingly, it will likely be several years before we are able to sell our investments and make any distributions of gains to our stockholders. WE HAVE NOT YET IDENTIFIED ANY PORTFOLIO COMPANY INVESTMENTS. We have not yet identified any potential investments for our portfolio and, thus, you will not be able to evaluate any specific portfolio company investments prior to purchasing shares of our common stock. Additionally, our investments will be selected by the managing member of Draper Advisers, subject to the approval of our Board of Directors, and our shareholders will not have input into our investment decisions. Both of these factors will increase the uncertainty, and thus the risk, of investing in our shares. THERE ARE SIGNIFICANT POTENTIAL CONFLICTS OF INTEREST WHICH COULD IMPACT OUR INVESTMENT RETURNS. There are significant potential conflicts of interest inherent in our structure and business model. We do not anticipate having independent managers or employees and thus must rely upon meVC Advisers and Draper Advisers to provide administrative services as well as investment advisory services. The principals of both meVC Advisers and Draper Advisers perform or may perform similar services for other investment funds, and serve as officers or directors of other entities, and are thus not able to devote all of their time to the Fund. They may also have obligations to investors in those other investment funds, the fulfillment of which might not be in the best interests of the Fund. It is possible that new investment opportunities that meet the Fund's investment objective may not be offered to or reviewed by meVC Advisers. Additionally, both meVC Advisers and Draper Advisers have an interest in our profits and losses which may impact any decisions they may make with respect to our investments in portfolio companies. Moreover, our legal counsel may also serve as legal counsel to meVC Advisers and Draper Advisers. Finally, the interests of a company in which we invest may, from time to time, conflict with the best interests of one or more of our shareholders. VALUING OUR PORTFOLIO IN THE FUTURE WILL BE DIFFICULT AND INEXACT AND MAY NOT REFLECT THE TRUE VALUE OF OUR INVESTMENTS IN PORTFOLIO COMPANIES. Our board of directors will value our portfolio from time to time based on their best estimate of the value of each of our individual investments in portfolio companies. There is typically no public market for the securities of small, privately-held companies. Our board of directors may also consult with accounting firms, investment banks and other consulting firms when needed, to assist in valuation of our investments. Portfolio valuation, however, is inherently subjective. The net asset value set by our board of directors may not reflect the price at which you could sell our shares in the open market. BOTH THE FUND AND OUR INVESTMENT ADVISER WERE ONLY RECENTLY FORMED AND HAVE NO PRIOR OPERATING HISTORY. THUS, OUR SUCCESS WILL DEPEND, TO A LARGE DEGREE, ON THE EXPERTISE AND EXPERIENCE OF THE MEMBERS OF DRAPER ADVISERS. Although the members of Draper Advisers have considerable experience in making venture capital investments, both the fund and meVC Advisers were only recently formed and have no operating history. Our success in identifying investment opportunities and pursuing and managing such investments is, to a large degree, dependent upon the expertise and experience of the members of Draper Advisers and its ability to attract and retain quality personnel. 12 A CHANGE IN OUR RELATIONSHIP WITH DRAPER ADVISERS COULD HAVE AN ADVERSE EFFECT ON OUR ABILITY TO ACHIEVE OUR INVESTMENT OBJECTIVE. Achieving our investment objective depends in large part on our ability to leverage the experience, contacts and specialized knowledge in venture capital investing of the members of Draper Advisers. The sub-advisory agreement may be terminated by meVC Advisers, Draper Advisers or the Fund, and the advisory agreement may be terminated by meVC Advisers or the Fund, in either case upon delivery of written notice of termination at least 60 days prior to the termination date. Moreover, meVC Advisers and Draper Advisers have agreed that, in the event either such agreement is terminated involuntarily with respect to the other party, both parties will be prohibited from providing, directly or indirectly, future investment advisory services to the Fund. Thus, if the advisory agreement or sub-advisory agreement is terminated, our success will depend in large part on our ability to obtain investment advisory services similar to those offered by Draper Advisers. We are likely to experience difficulty in obtaining comparable services. If we are unable to obtain these services, or if we are only able to do so on less favorable terms than those offered by Draper Advisers, it will have a significant negative impact on our investment returns. CHANGES IN THE COMPOSITION OF DRAPER ADVISERS MAY HAVE AN ADVERSE EFFECT ON OUR ABILITY TO ACHIEVE OUR INVESTMENT OBJECTIVE. Achieving our investment objective depends in large part on our ability to leverage the experience, contacts and specialized knowledge in venture capital investing of the members of Draper Advisers. Over the life of the fund, membership in Draper Advisers may change, having an adverse effect on our ability to achieve our investment objective. OUR ABILITY TO ACHIEVE OUR INVESTMENT OBJECTIVE DEPENDS UPON OUR ABILITY TO LEVERAGE THE NATIONAL VENTURE CAPITAL PRESENCE OF THE DRAPER FISHER JURVETSON AFFILIATE NETWORK. Our success depends, in large part, on our ability to leverage the experience, contacts and specialized knowledge of the venture capital fund managers employed by Draper Advisers. We expect that many of our investments will be made in portfolio companies in which an affiliate of Draper Advisers has already invested or in portfolio companies in which we will co-invest with an affiliate of Draper Advisers. The Investment Company Act limits our ability to perform transactions with affiliated parties. We intend to apply to the SEC for exemptive relief that will allow us to make co-investments with affiliated parties. Although the SEC has routinely granted similar relief in the past, we cannot be certain that our specific request will be granted. Even if we are granted the requested relief, it will likely be subject to conditions. Specifically, we expect that prior to investing with an affiliated party, meVC Advisers will be required to present the investment opportunity to our board of directors for its review and, furthermore, that at least a majority of our independent directors must conclude that: - The terms of the proposed transaction are reasonable and fair to us and our stockholders, - The transaction is consistent with the interests of our stockholders and with our investment objective and policies, - We will not be disadvantaged by making, maintaining or disposing of the investment, and - The terms of our participation in the investment are at least as good as the terms given to our affiliated entity at the time of our investment. Our board of directors has adopted these policies for the review of all affiliated investments. OUR RETURNS MAY BE SUBSTANTIALLY LOWER THAN THE AVERAGE RETURNS HISTORICALLY REALIZED BY THE VENTURE CAPITAL INDUSTRY AS A WHOLE. Past performance of the venture capital industry is not necessarily indicative of that sector's future performance, nor is it necessarily a good proxy for predicting the returns of the Fund. We cannot guarantee that we will meet or exceed the rates of return historically realized by the venture capital industry as a whole. Additionally, our overall return will almost certainly be reduced by certain factors related to our structure as a publicly-traded business development company, including: - the lower return we are likely to realize on short-term liquid investments during the period in which we are identifying potential investments, and 13 - the periodic disclosure required of business development companies, which could result in the Fund being less attractive as an investor to certain potential portfolio companies. OUR RETURNS MAY BE SIGNIFICANTLY LOWER THAN THOSE EXPERIENCED BY OTHER FUNDS MANAGED BY MEMBERS OF DRAPER ADVISERS. Although we intend to leverage the national venture capital presence of Draper Advisers and in many cases to co-invest with one or more private investment funds managed by the members of Draper Advisers, our investment strategy is different from that of our affiliated funds. Moreover, we will require a substantial period of time before we have invested a majority of our capital in portfolio companies. Thus, our investment returns or operating results could be substantially lower than the returns and results achieved by our affiliated funds. THE MARKET FOR VENTURE CAPITAL INVESTMENTS IS HIGHLY COMPETITIVE. IN SOME CASES, OUR STATUS AS A REGULATED BUSINESS DEVELOPMENT COMPANY MAY HINDER OUR ABILITY TO PARTICIPATE IN INVESTMENT OPPORTUNITIES. We will likely face substantial competition in our investing activities from private venture capital funds, investment affiliates of large industrial technology, service and financial companies, small business investment companies, wealthy individuals and foreign investors. As a regulated business development company, we are required to disclose quarterly the name and business description of portfolio companies and value of any portfolio securities. Many of our competitors are not subject to this disclosure requirement. Our obligation to disclose this information could hinder our ability to invest in certain portfolio companies. Additionally, other regulations, current and future, may make us less attractive as a potential investor to a given portfolio company than a private venture capital fund not subject to the same regulations. OUR SUCCESS DEPENDS GREATLY ON INCREASED USE OF THE INTERNET BY BUSINESSES AND INDIVIDUALS. Our success depends greatly on increased use of the Internet. Commercial use of the Internet is currently at an early stage of development and the future success of Internet-based companies is not guaranteed. Because a significant portion of our capital will likely be invested in companies operating in the Internet space, our returns may be negatively impacted if use of the Internet fails to grow in the future. IF THE UNITED STATES OR OTHER GOVERNMENTS INCREASE REGULATION OF THE INTERNET, OUR INVESTMENTS IN INTERNET-RELATED PORTFOLIO COMPANIES COULD BE NEGATIVELY IMPACTED. Because of the Internet's popularity and increasing use, new laws and regulations may be adopted. These laws and regulations may cover issues such as privacy, pricing, content and taxation. The enactment of any additional laws or regulations may impede the growth of the Internet and our investments in Internet-related companies could be negatively impacted. THE VENTURE CAPITAL BUSINESS IS GROWING, AND WITH MORE CAPITAL READILY AVAILABLE, OUR SUCCESS WILL BE LARGELY DEPENDENT ON A CONTINUING SUPPLY OF FAVORABLE INVESTMENT OPPORTUNITIES. There has been a significant amount of new capital invested in venture capital funds in recent years and this trend is likely to continue. With the amount of capital available, some companies that may have had difficulty in obtaining funding in the past may be able to do so, notwithstanding that the chances for success in these investments may be marginal. In addition, there is likely to be an increasing amount of competition among venture capital funds for the best investment prospects, particularly in the Internet and information technology sectors. Thus, our success will be largely dependent on our ability to find the most favorable opportunities in a highly competitive venture capital market, while avoiding the marginal prospects. OUR SUCCESS WILL BE SIGNIFICANTLY AFFECTED BY THE STATE OF THE SECURITIES MARKETS IN GENERAL, AND MORE SPECIFICALLY BY THE MARKET FOR INITIAL PUBLIC OFFERINGS AND THE MARKET FOR THE INFORMATION TECHNOLOGY SECTOR. We anticipate that a substantial portion of our returns will be realized through initial public offerings of our portfolio companies. The market for initial public offerings is cyclical in nature. Thus, we cannot be certain that the securities markets will be receptive to initial public offerings, particularly those of early-stage companies. Any adverse change in the market for public offerings could significantly impact our 14 ability to realize our investment objective. Our ability to achieve attractive investment returns will also depend upon the availability of strategic or financial acquirers for our portfolio companies. The interest of potential buyers in acquiring our portfolio companies will vary with general economic conditions and the valuations that they are willing to place on our portfolio companies will vary with the valuations of comparable publicly-traded companies. IF WE ARE UNABLE TO COMPLY WITH SUBCHAPTER M OF THE INTERNAL REVENUE CODE IN ANY GIVEN YEAR, WE WILL LOSE PASS-THROUGH TAX TREATMENT FOR THAT YEAR, WHICH COULD SUBSTANTIALLY REDUCE THE AMOUNT OF INCOME AVAILABLE FOR DISTRIBUTION TO OUR STOCKHOLDERS. We intend to elect to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. To qualify for Subchapter M status, we must meet qualifying income distribution and asset diversification requirements. In each year in which we are able to meet the requirements of Subchapter M, we will generally not be subject to federal taxation on net investment income and net capital gains that we distribute to our stockholders. If we are not able to meet the requirements of Subchapter M in any given year, however, our income would be fully taxable at the federal level, which could result in a substantial reduction in income available for distribution to our stockholders. If the Company fails to meet the requirements of Subchapter M in its first taxable year or, with respect to later years, for more than two consecutive years and then seeks to requalify under Subchapter M, it would be required to recognize gain to the extent of any unrealized appreciation on its assets. In that case, any gain recognized by the Company likely would be distributed to shareholders as a taxable distribution. For additional information regarding Federal income tax consequences of an investment in the Company, see the Statement of Additional Information. IF YOU ARE AN ERISA PLAN OR AN IRA, YOU MUST DETERMINE THAT THE INVESTMENT IN SHARES OF OUR COMMON STOCK IS PRUDENT AND MEETS YOUR INVESTMENT GUIDELINES. WE CAN MAKE NO GUARANTEE THAT OUR ASSETS WILL NOT BE CONSIDERED "PLAN ASSETS" OF YOUR PLAN OR IRA. If you are an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, or ERISA, the fiduciary acting on your behalf when investing in shares of our common stock should satisfy itself that an investment in the shares is consistent with the prudence standards of Section 404 of ERISA and is prudent in light of your cash needs and other ERISA requirements. If you are an ERISA plan or an individual retirement account, or IRA, you should assure yourself that the investment is not a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code. The Department of Labor has issued regulations that characterize the assets of some entities as "plan assets" of the ERISA plans and IRAs that invest in those entities. We anticipate that our shares will be considered "publicly offered securities" within the meaning of the regulations, and our assets would not be considered plan assets. However, we strongly urge you or your fiduciaries to consult your own advisers prior to purchasing shares of our common stock. OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN CERTAIN PROVISIONS WHICH MAY SERVE TO DETER A HOSTILE TAKEOVER AND THUS MAY LIMIT YOUR ABILITY TO SELL OUR SHARES AT A PREMIUM OVER PREVAILING MARKET PRICES. Our certificate of incorporation and bylaws provide for our board of directors to be divided into three classes of directors serving staggered three-year terms. A staggered board of directors severely restricts the ability of stockholders to replace a majority of our directors in a timely manner. Additionally, other provisions contained in our certificate of incorporation may also serve to limit the ability of our stockholders to remove a director from office and to convert from a closed-end investment company to an open-end investment company. Finally, our bylaws limit the ability of stockholders to call a special meeting. All of these provisions may serve to deter a hostile takeover and thus may limit your ability to sell our shares at a premium over prevailing market prices. 15 FORWARD-LOOKING STATEMENTS This prospectus and the SAI include forward-looking statements. We have based such statements largely on our current expectations and projections about future events and trends in the technology sector, the venture capital industry and the state of the financial markets and the economy in general. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about the Fund, including, among other things: - general economic and business conditions and the general state of the financial markets; - our expectations and estimates concerning the future growth and performance of the venture capital sector; - our expectations and estimates concerning the future growth and performance of information technology companies, particularly Internet companies; - existing and future laws and regulations imposed on information technology companies, including future laws and regulations governing the Internet; - our ability to successfully implement our investment objective and strategies; - our relationship with Draper Fisher Jurvetson and its network of affiliated venture capital firms; - technological changes in the Internet industry; and - other risk factors described under "Risk Factors" in this prospectus. In addition, in this prospectus and the SAI, the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," and similar expressions, as they relate to the Fund, meVC Advisers or Draper Advisers and our investment objective, business or management, are intended to identify forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus or the SAI. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus and the SAI may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. 16 USE OF PROCEEDS We expect the net proceeds to us from the sale of shares of our common stock in this offering to be approximately $ . We have not allocated any portion of the net proceeds to any particular investment. We intend to use substantially all of the net proceeds for investment in accordance with our investment objective. Our investment objective is long-term capital appreciation from venture capital investments in information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries. Until we have identified appropriate investments in accordance with our investment objective, we may invest all of our excess cash in short-term, interest-bearing investment-grade securities or guaranteed obligations of the U.S. government. The maximum gross proceeds to be raised in this offering will be limited to $500 million not including any proceeds from over-allotments. We plan to reserve approximately 20% of the net offering proceeds for follow-on investments and future management fees. We expect to invest the net proceeds after reserves in accordance with our investment objective at the following rate: approximately 20% to 25% at or about six months from the offering date, approximately 50% at or about one year from the offering date, and full investment at or about two years from the offering date. There can be no assurances that the Fund will be able to achieve its targeted investment pace. This lengthy period is due to the rigorous review process that the principals of Draper Advisers will undertake in an effort to select the best possible portfolio companies for investment. The investment review process will typically include: - Management interviews - Reference checks - Company and industry assessment - Market analysis - Competitive analysis - Risk analysis We anticipate that we will only invest in a small percentage of the companies and business plans that Draper Advisers evaluates as potential investment opportunities. 17 BUSINESS We are a newly organized, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act. A business development company is an investment company organized under the laws of, and having its principal place of business in, the United States that is operated for the purpose of making investments primarily to foster smaller, developing businesses and makes available significant managerial assistance to the businesses in which it invests. For Internal Revenue Service purposes, we are classified as a non-diversified investment company under Subchapter M of the Code. Our investment adviser is meVC Advisers, Inc., or meVC Advisers. Our investment sub-adviser is Draper Fisher Jurvetson MeVC Management Co., LLC, or Draper Advisers. Both meVC Advisers and Draper Advisers are registered investment advisers under the Advisers Act. meVC Advisers will implement our investment objective and strategies and will set our strategic and operational direction. meVC Advisers will also manage our day-to-day operations, including our accounting, finance, marketing, record-keeping and regulatory compliance efforts. Draper Advisers will identify, structure and negotiate investments for the Fund, as well as monitor and assist our portfolio companies. The managing member of Draper Advisers is John M. Grillos, who has over ten years of venture capital experience and twenty years of entrepreneurial, professional and managerial experience in the information technology industry. The non-managing members of Draper Advisers include the senior investment professionals of Draper Fisher Jurvetson and its nationwide network of six affiliated venture capital firms. Collectively, the members of Draper Advisers have over 75 years of investing and entrepreneurial management experience, and have raised over one billion dollars across 15 venture capital funds. The managing member of Draper Advisers will be responsible for the investment recommendations of Draper Advisers. The non-managing members of Draper Advisers will be the source of much of our deal flow by presenting potential investment opportunities to the managing member for evaluation. The non-managing members will also provide post-investment managerial assistance to many of our portfolio companies. The members of Draper Advisers have raised and are managing their own private venture capital funds and we anticipate that many of our investments will be co-investments with these private funds or follow-on investments in portfolio companies in which one or more of our affiliated funds has previously invested. The non-managing members of Draper Advisers will not make or otherwise participate in investment decisions on our behalf and have no obligation to provide services to us on an exclusive basis. 18 INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES INVESTMENT OBJECTIVE Our investment objective is long-term capital appreciation from venture capital investments in information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries. We will invest in companies that we believe have high growth potential over the long term. After carefully selecting our portfolio companies, we will seek to enhance their competitiveness by offering to provide managerial assistance, including assistance in preparing for future rounds of private or public financing, recruiting management, refining business strategy, assisting with general business operations and making introductions to venture firms, investment banks and other potential sources of capital. We will seek to provide returns to our stockholders through long-term appreciation in the value of our portfolio companies and through distributions of capital gains on our investments. In addition, if a portfolio company is sold, merged or goes public, we may distribute cash or stock in either the portfolio company or the acquiring company. PRINCIPAL STRATEGIES We plan to use the following principal strategies to accomplish our investment objective: FOCUS ON MEZZANINE AND EXPANSION ROUND VENTURE CAPITAL INVESTMENTS - We intend to make venture capital investments in information technology companies with high growth potential. These investments will be made in various stages of venture capital financing with an emphasis on mezzanine and expansion round financing. We believe that mezzanine and expansion round investments will allow us to make larger investments with lower risk and an earlier opportunity for realization of gains than seed round financing. LEVERAGE NATIONAL VENTURE CAPITAL PRESENCE OF DRAPER FISHER JURVETSON - Build on the expertise, contacts and deal flow of Draper Fisher Jurvetson and its growing venture capital affiliate network. EMPHASIZE INFORMATION TECHNOLOGY BUSINESSES - Focus our investments on companies operating in the information technology markets, primarily the Internet, e-commerce, telecommunications, networking, software and information services industries, which we believe have significant high growth potential. - Direct our investments to companies in new markets and to companies in existing markets with new technologies or business models that we believe have the greatest possibility of success in the marketplace. EXERCISE INVESTMENT DISCIPLINE - Undertake a rigorous review process to select for investment the portfolio companies we believe to have the highest growth potential. - Spread our risk by investing in many companies located throughout the country and in many different sectors of information technology. - Provide additional funding to the companies we believe will perform the best in the future and, conversely, decline follow-on investments in portfolio companies that we feel no longer have the potential for high growth. 19 ENHANCE THE COMPETITIVE ADVANTAGE OF THE COMPANIES IN WHICH WE INVEST - Assist our portfolio companies in operations and general business strategy with a goal of positioning them for high value follow-on rounds of financing or liquidity events such as an initial public offering or sale or merger. - Help build superior management teams for the companies in which we invest. FOCUS ON MEZZANINE AND EXPANSION ROUND VENTURE CAPITAL INVESTMENTS Venture capital financing typically occurs in three stages. A seed round is the first round of professional venture capital financing received by a newly-formed company in a high-growth industry. The proceeds of a seed round are often used to complete product development and to fund operations of a company's core technical and management team. An expansion round is the second or third round of professional venture capital financing. The proceeds of an expansion round are often used to expand sales, marketing or production capabilities, to further develop corporate infrastructure and to add necessary staffing. A mezzanine round is anticipated to be the last round of venture capital financing prior to an initial public offering or sale of the company. The proceeds of a mezzanine round are generally used for strategic purposes. We intend to make venture capital investments in information technology companies with high-growth potential. Our investment strategy will emphasize mezzanine and expansion round financing. We believe that mezzanine and expansion round investments will allow us to make larger investments with lower risk and an earlier opportunity for realization of gains. We may also invest a portion of our capital in start-up companies in their seed round of financing. We believe seed round investments present a potential for larger gains, but with increased risk and a longer horizon for the potential realization of gains. We intend to invest in companies in various stages of development which we believe exhibit desirable risk/reward characteristics generally consistent with our business objectives. When searching for and evaluating mezzanine round investment opportunities, we will seek companies which we believe will produce excellent investment returns and which (i) possess a complete and strong management team, (ii) have a strong board of directors and investor support, (iii) occupy a position as a clear market niche leader and (iv) expect a liquidity event within 12 to 18 months. When searching for and evaluating expansion round investment opportunities, we intend to seek companies with proven technologies, products or service offerings that require additional capital to achieve sustained growth. When searching for and evaluating seed round investment opportunities, we intend to seek companies in the earliest stage of development with (i) a strong core management and technical team, (ii) unique product concepts or a business model indicating high growth potential and (iii) a focus on dynamic markets. We will seek management teams with insightful ideas who we believe to be unusually talented and motivated. LEVERAGE NATIONAL VENTURE CAPITAL PRESENCE We intend to utilize the investment expertise, contacts, networks, access to deal flow and company monitoring and managerial assistance capabilities of Draper Fisher Jurvetson and its venture capital affiliates. We expect a significant number of our mezzanine, expansion and seed round investments to be referred by Draper Fisher Jurvetson and its venture capital affiliates. The remainder of our investments will be sourced through our relationships with other venture capital firms, investment banks and other intermediaries. Draper Fisher Jurvetson has established and continues to expand its network of venture capital affiliates located in several metropolitan regions of the United States. We believe that many regions throughout the country continue to be underserved by venture capital. Draper Fisher Jurvetson's presence in many regions of the United States improves the Fund's ability to monitor portfolio companies located throughout the country. Additionally, Draper Fisher Jurvetson's national network of contacts and expertise 20 is designed to help portfolio companies recruit managers, identify potential customers and strategic partners and share best practices. We intend to leverage the specialized investment knowledge and local presence of the Draper Fisher Jurvetson venture capital affiliate network to provide us with investment opportunities and portfolio company oversight. The following is a current list of the name and location of venture capital firms comprising the Draper Fisher Jurvetson affiliate network: - Draper Fisher Jurvetson, Redwood City, CA - Zone Ventures, Los Angeles, CA - Draper Atlantic, Reston, VA - Draper Triangle Ventures, Pittsburgh, PA - Wasatch Venture Fund, Salt Lake City, UT - Timberline Venture Partners, Vancouver, WA - Draper Fisher Jurvetson Gotham Ventures, New York City, NY In addition to working closely with the main office of Draper Fisher Jurvetson in Redwood City, California, we intend to initiate a program of frequent direct communication with the principals of the affiliate network, who are the non-managing members of Draper Advisers, to discuss portfolio companies, potential investment opportunities and the likely schedule for upcoming seed, expansion and mezzanine rounds of financing. We also intend to track and visit on an ongoing basis portfolio companies of Draper Fisher Jurvetson and its affiliate network that we anticipate will seek financing in the near term. In addition, we intend to increase the number and breadth of investment opportunities that are presented to us by developing relationships with a network of other venture capital firms, investment banks and other financial intermediaries. EMPHASIZE INFORMATION TECHNOLOGY BUSINESSES We plan to emphasize investments in information technology companies, primarily in the Internet, e-commerce, telecommunications, networking, software and information services industries. We believe that the information technology sector offers outstanding growth opportunities, and many new markets in which emerging companies can thrive. We seek to identify markets where technology will lead to rapid change in customer behavior. We are particularly focused on sectors driven by increased demand for Internet applications and services by consumers and businesses. We also believe that the hardware and software telecommunications and networking infrastructure required to support such growth will present numerous attractive areas for venture capital investing. Although new areas of investment opportunity will continue to emerge, the following are examples of the areas of investment interest we have today: - Internet applications and services - Optoelectronics and fiber optics - Intranet applications (front office and back office automation) - Data communications, telecommunications and wireless advances - E-commerce (business-to-business and business-to-consumer) - Bandwidth improvement software and hardware - Semiconductors with high intellectual property content 21 - Groupware applications - Knowledge management applications - Telephony software applications - Networking software advances - Service organizations that support Internet business development and business function outsourcing In addition, we plan to identify and invest in attractive new technology markets as they develop. EXERCISE INVESTMENT DISCIPLINE We will undertake a rigorous review process to select for investment the companies that meet our investment objective. For companies presenting investment opportunities, we will perform extensive due diligence including company visits, management interviews, reference checks, company and industry assessments as well as market and risk analyses. We plan to diversify our investment portfolio in order to increase our chances of investing in companies with high returns, and in an effort to offset the impact of investments in companies that yield losses. We intend to monitor our portfolio companies closely to determine whether or not they continue to be attractive candidates for further investment. We plan to decline additional investments in portfolio companies that do not continue to show promise. We will, however, seek to reinvest in the portfolio companies we believe will perform well in the future, in an effort to reap greater positive returns as a whole, and to protect our investments from dilution. We believe that risk management is essential to achieving our investment objective. We will manage our risk through extensive portfolio diversification. We intend to invest in at least 50 different companies, although the actual number of companies in which we invest will be a function of total funds available. To ensure our board of directors has the freedom to select investments in companies that meet our investment objective, we do not anticipate imposing formal limits on the amount of our capital that may be invested in individual portfolio companies. However, we anticipate that no more than 5% of our assets, based on the cost of our investments, will be committed at any one time to any one company. We also intend to balance our portfolio by industry and geography: - INDUSTRY. We intend to invest in a number of different sectors of information technology, including the Internet, e-commerce, telecommunications, networking, software and information services industries. - GEOGRAPHY. We intend to invest in several regions throughout the country. Our initial focus will be in many areas where high growth potential information technology companies are being created, including the Northeast, Mid-Atlantic, Southwest and Northwest regions of the United States. Many of these regions are not as well served by existing venture capital firms as northern California, and therefore may offer improved opportunities for venture capital investing. We will seek to continue to expand our efforts into promising regions of technological innovation. OFFER MANAGERIAL ASSISTANCE TO OUR PORTFOLIO COMPANIES We will offer to provide managerial assistance and guidance to our portfolio companies. Such assistance may include serving on the board of directors of many of the companies in which we invest, as well as providing expertise in developing and implementing business strategy and tactics, selecting and recruiting management personnel, and general business development. We believe that such assistance will enable us to exercise significant influence with respect to such matters as financing, budgeting, marketing, management selection and exit strategy of our portfolio companies. We will also introduce the companies in which we invest to appropriate business partners and sources of capital for larger rounds of follow-on financing. 22 MANAGEMENT DIRECTORS AND OFFICERS Our board of directors is responsible for all aspects of our management and day-to-day operations. Initially, we intend to have five directors, three of whom are independent, as required by the Investment Company Act, and two affiliated directors, one from meVC Advisers and one from Draper Advisers. Our board of directors will have exclusive control of our business and operations, including the selection and retention of our Investment Adviser. Except as otherwise required by law or our certificate of incorporation, our stockholders will have no rights to participate in our business or operations. JOHN M. GRILLOS is Chairman, Chief Executive Officer and a director of the Fund. Mr. Grillos is also the Managing Member of Draper Advisers. He is also founder and Managing General Partner of ITech Partners, L.P., a seed stage information technology fund. Mr. Grillos has over ten years experience in information technology venture capital investing and twenty years of entrepreneurial, professional and managerial experience in information technology. Most recently, Mr. Grillos served as the Executive Vice President, Chief Operating Officer and as a director of SmartForce PLC (formerly CBT Group PLC), or SmartForce, a leading supplier of e-learning products with revenues exceeding $200 million. From 1997 to 1998, Mr. Grillos served as Managing Director at SoundView Venture Partners, L.P., where he was responsible for managing the venture capital business activities of SoundView Financial Group, an information technology-focused investment bank recently acquired by Wit Capital. From 1988 to 1997, Mr. Grillos was Managing Director responsible for Information Technology Venture Capital investing for Robertson, Stephens & Co., a San Francisco-based investment bank focused on high technology and high growth industries. From 1985 to 1987, Mr. Grillos served as President and Chief Operating Officer of SPSS, Inc., a leading supplier of statistical analysis, graphics and decision support software. From 1983 to 1985, Mr. Grillos served as President and Chief Executive Officer of Tesseract Corporation, a venture- backed supplier of payroll and human resource software. From 1972 to 1983, Mr. Grillos held various management positions with American Management Systems, an information technology consulting and custom application development company. For the last five of his 11 years with AMS, Mr. Grillos was Vice President and Business Unit Manager responsible for the operations of AMS on the West Coast. From 1968 to 1972, Mr. Grillos worked as a Development Manager and Principal Designer for the Institute for Computer Research, University of Chicago, where he was responsible for developing computerized control and data acquisition systems for several departments of the University. From 1965 to 1968, Mr. Grillos worked as a Staff Engineer for Bell Labs and Western Electric Company. Mr. Grillos received his M.B.A. from the University of Chicago in 1971 and his B.S. in Electrical Engineering and Computer Science from the Illinois Institute of Technology in 1969. PETER S. FREUDENTHAL is Vice-Chairman and a director of the Fund. Mr. Freudenthal is also co-founder, President, and Chairman of the Board of meVC.com, Inc. Previously, Mr. Freudenthal was a Senior Biotechnology Equity Research Analyst and a Vice President with Robertson Stephens & Company. Before joining Robertson Stephens, Mr. Freudenthal also served as Director of Healthcare Research at Brean Murray & Company, a privately held investment bank in New York. Mr. Freudenthal attended the Yale School of Medicine where he focused on Neurosurgery and Trauma Surgery. Prior to medical school, Mr. Freudenthal was Senior Graduate Fellow in the Laboratory of Immunology & Cellular Physiology at The Rockefeller University in New York, as well as a National Science Foundation Fellow and a David C. Scott Foundation Fellow. From 1981 to 1985, Mr. Freudenthal was a Thomas J. Watson Scholar at the IBM Research Center in Yorktown, New York. Mr. Freudenthal received his B.S. with a double major in Molecular Biophysics & Biochemistry and Molecular Biology from Yale College. ANDREW E. SINGER is President of the Fund. Mr. Singer is also co-founder, Chief Executive Officer and a director of meVC.com, Inc. Previously, Mr. Singer was a Senior Associate at Robertson Stephens & Company. Before joining Robertson Stephens, Mr. Singer was Director of New Business at The Shansby Group, a venture capital fund managing approximately $120 million of investor capital. Mr. Singer also served as a Financial Analyst at The Blackstone Group, a boutique investment bank, where he evaluated 23 investments for Blackstone's $800 million leveraged acquisition fund and provided strategic advisory services to portfolio companies of the fund. Mr. Singer received his B.A. in East Asian Studies, cum laude with distinction in the major, from Yale College and his M.B.A. with distinction from the Harvard Business School. PAUL WOZNIAK is Vice President, Chief Financial Officer and Treasurer of the Fund. Mr. Wozniak is also Chief Operating Officer for meVC.com, Inc. Mr. Wozniak has fourteen years experience in international fund management operations. Previously, Mr. Wozniak served in various operational roles, most recently as Vice President and Director, Mutual Fund Operations, at GT Global Inc./AIM Funds. At GT Global, Mr. Wozniak was responsible for the overall management of the mutual fund accounting and pricing groups for the GT Global mutual fund family, comprising over $10 billion in 37 funds invested worldwide. Mr. Wozniak also served as an officer of both GT Global Inc. and the GT Global Family of Funds. Mr. Wozniak received his B.S. in Accounting from the University of Scranton. KENNETH PRIORE is Secretary of the Fund. Mr. Priore is also Internal Counsel and Director of Policy and Compliance for meVC.com, Inc. Formerly, Mr. Priore was employed with Charles Schwab & Co. in San Francisco. Most recently, Mr. Priore served as Managing Attorney: Third Party Actions, Arbitration and Litigation, for the Office of Corporate Counsel at Charles Schwab & Co., where he managed an active litigation docket of over 400 open matters representing over $100 million in customer assets. Prior to that, Mr. Priore served as Policy Director, where he was responsible for strategic planning and participated in product development teams for retail financial services and e-commerce applications. Mr. Priore also served as a Corporate Attorney at Charles Schwab & Co. Mr. Priore received his B.A. from Tufts University and his J.D. from Tulane Law School. LEGAL PROCEEDINGS Mr. Grillos, serving in his capacity as a director of SmartForce, has been named a defendant, along with SmartForce and certain of its former and current officers and directors, in class action lawsuits filed in state and federal courts alleging violation of the federal securities laws. These lawsuits allege that the defendants misrepresented and/or omitted to state material facts regarding SmartForce's business and financial condition and prospects in order to artificially inflate and maintain the price of SmartForce's securities. The lawsuits further allege that the defendants misrepresented and/or omitted to state material facts in the registration statement and prospectus issued in connection with SmartForce's merger with ForeFront Group, Inc., the result of which was to artificially inflate the price of SmartForce's securities. The state court class action has been stayed. The federal class action was dismissed, with leave to amend, in July 1999. A motion to dismiss the amended complaint is pending. Mr. Grillos and various other officers and directors of SmartForce have also been named in a derivative action in California state court. The allegations in the derivative action are substantially similar to those of the class action complaints. Mr. Grillos is covered under SmartForce's directors' and officers' insurance policy. Mr. Grillos and SmartForce believe that these actions are without merit and intend to defend vigorously against these claims. THE INVESTMENT ADVISER meVC Advisers is our investment adviser. meVC Advisers was incorporated in Delaware in December 1999. meVC Advisers is a wholly-owned subsidiary of meVC.com, Inc. The executive offices of meVC.com and meVC Advisers are located at 991 Folsom Street, Suite 301, San Francisco, California 94107. meVC Advisers is a registered investment adviser under the Advisers Act. meVC Advisers currently has two directors and four officers, all of whom are our affiliates, as defined in the Investment Company Act. meVC Advisers will implement our investment objective and strategies, and will set our strategic and operational direction. meVC Advisers will also manage our day-to-day operations, including our accounting, finance, marketing, record-keeping and regulatory compliance. 24 In return for its services, we have agreed to pay to meVC Advisers an annual management fee equal to 2.5% of our average weekly net assets, payable in monthly installments, and annual incentive compensation equal to 20% of our annual realized capital gains net of realized and unrealized capital losses. Mr. Singer is Chief Executive Officer of meVC Advisers and a member of its board of directors. Mr. Freudenthal is President of meVC Advisers and Chairman of its board of directors. Mr. Wozniak is Vice President, Operations of meVC Advisers. Mr. Priore is Secretary of meVC Advisers. The Investment Advisory Agreement may be terminated by meVC Advisers or the Fund and the Investment Sub-Advisory Agreement may be terminated by Draper Advisers, meVC Advisers or the Fund, in each case with written notice of termination delivered to each party at least 60 days prior to the termination date. meVC Advisers and Draper Advisers have agreed that in the event either of them is terminated involuntarily by the Fund's board of directors, neither of them may thereafter provide, directly or indirectly, investment advisory services to the Fund. In the event of a termination of either agreement, our board of directors will select a new investment adviser to implement our investment objective and strategies. THE INVESTMENT SUB-ADVISER Draper Advisers, our Investment Sub-Adviser, was formed in November 1999. Draper Advisers will identify, structure and negotiate investments for the Fund, as well as monitor and assist our portfolio companies. The members of Draper Advisers include the senior investment professionals of Draper Fisher Jurvetson and its nationwide network of six affiliated venture capital firms. The managing member of Draper Advisers, John M. Grillos, will be responsible for the investment recommendations of Draper Advisers. The non-managing members of Draper Advisers will be the source of much of our deal flow by presenting potential investment opportunities to Mr. Grillos. The non-managing members will also provide post-investment managerial assistance to many of our portfolio companies. The non-managing members of Draper Advisers will not make investment decisions on our behalf and have no obligation to provide services to us on an exclusive basis. The executive offices of Draper Advisers are located at 400 Seaport Court, Suite 250, Redwood City, California 94063. Draper Advisers is a registered investment adviser under the Advisers Act. In return for its services as Investment Sub-Adviser, Draper Advisers will receive from meVC Advisers an amount equal to 40% of the management fee we pay to meVC Advisers. meVC Advisers has also agreed to pay Draper Advisers 90% of the carried interest it receives from the fund. The investment sub-advisory agreement may be terminated by meVC Advisers, Draper Advisers or us upon written notice of such termination to each of the other parties at least 60 days prior to the effective date of termination. JOHN M. GRILLOS is the Managing Member of Draper Advisers. TIMOTHY C. DRAPER is a Non-Managing Member of Draper Advisers. Mr. Draper is also Managing Director of Draper Fisher Jurvetson Funds VI and V, of Draper Fisher Associates Funds III and IV, a General Partner of Draper Associates II, and sole Managing Partner of Draper Associates. He is also a Managing Director of Draper Franchise, LLC and Draper Network Affiliates, LLC, entities that establish and manage affiliated venture capital funds. Since 1985, various funds with which he is affiliated have funded more than 150 companies. Before founding Draper Associates, Mr. Draper worked in high-technology corporate finance for Alex. Brown & Sons. Before that, he worked as a Marketing Engineer for Hewlett-Packard, and was Assistant to the President at Apollo Computer. Mr. Draper currently serves on the board of directors of GoTo.com, PLX Technology, Tumbleweed Communications and various private companies, including meVC.com. Mr. Draper received his B.S. in Electrical Engineering from Stanford University and his M.B.A. from the Harvard Business School. 25 JOHN H. N. FISHER is a Non-Managing Member of Draper Advisers. Mr. Fisher is also a Managing Director of Draper Fisher Jurvetson based in Redwood City, California. Previously, Mr. Fisher was a venture capitalist at ABS Ventures. In addition to his venture capital experience, Mr. Fisher served as Strategy Consultant to software maker Abacus Concepts (acquired by SAS Institute), as Financial Analyst in investment banking for Alex. Brown & Sons and as Account Executive in the Capital Markets Group at Bank of America. Mr. Fisher currently serves on the board of directors of Wit Capital and various private companies. He also served on the board of directors of Medior prior to its acquisition by America Online, WebLine Communications prior to its acquisition by Cisco Systems, and C2B prior to its acquisition by Inktomi. Mr. Fisher received his B.S. magna cum laude from Harvard College and his M.B.A. from the Harvard Business School. STEVEN T. JURVETSON is a Non-Managing Member of Draper Advisers. Mr. Jurvetson is a Managing Director of Draper Fisher Jurvetson based in Redwood City, California. Previously, Mr. Jurvetson was an R&D Engineer at Hewlett-Packard. His prior technical experience also includes computer and instrumentation design, materials science research, and programming at HP's PC Division, the Center for Materials Research, and Mostek. He has also worked in product marketing at Apple Computer and NeXT. Additionally, Mr. Jurvetson was a Consultant at Bain & Company. He currently serves on the board of directors of Kana Communications and various private companies. He served on the board of directors of Hotmail from its inception through its acquisition by Microsoft. Mr. Jurvetson also serves on the Merrill Lynch Technical Advisory Board and the Microsoft Advisory Board for the Silicon Valley Developer Center. Mr. Jurvetson received his B.S. in Electrical Engineering as the Henry Ford Scholar as well as his M.S. in Electrical Engineering from Stanford University. He also received his M.B.A. from the Stanford Graduate School of Business, where he was an Arjay Miller Scholar. WARREN PACKARD is a Non-Managing Member of Draper Advisers. Warren Packard is also a Director at Draper Fisher Jurvetson based in Redwood City, California. Mr. Packard co-founded Angara Database Systems, a venture funded software firm focused on commercializing a high performance, main-memory database technology. Prior to co-founding Angara, he was an Associate at Institutional Venture Partners. Mr. Packard also served as a Senior Principal Engineer in the New Business and Advanced Product Development Group at Baxter International. He currently serves on the board of directors of Digital Impact, Direct Hit Technologies, Fogdog Sports and various private companies. Mr. Packard received his B.S. and M.S. in Mechanical Engineering: Smart Product Design from Stanford University and is a member of Phi Beta Kappa. He also received his M.B.A. from the Stanford Graduate School of Business, where he was an Arjay Miller Scholar. JENNIFER SCOTT FONSTAD is a Non-Managing Member of Draper Advisers. Ms. Fonstad is also a Director at Draper Fisher Jurvetson based in Redwood City, California. Previously, she worked with SensAble Technologies, a start-up pioneering three-dimensional haptics solutions. Ms. Fonstad also worked at the Planning Technologies Group, where she focused on strategy development for companies in the software and healthcare information industries, and led a team in the design, prototyping, testing, and launch of a novel health-information system. In addition, Ms. Fonstad worked for a start-up in Central Europe and as an Associate Consultant with Bain & Company. She served on the board of directors of iShip.com until it was purchased by Stamps.com, and currently serves on the boards of NetZero and various private companies. She received her B.S. cum laude from Georgetown University and her M.B.A. with distinction from the Harvard Business School. ANDREAS STAVROPOULOS is a Non-Managing Member of Draper Advisers. Andreas Stavropoulos is also a Director at Draper Fisher Jurvetson based in Redwood City, California. Most recently with McKinsey & Company in San Francisco, Mr. Stavropoulos worked with senior management teams of corporate clients with an emphasis on information technology. Prior to McKinsey, he was a Senior Analyst at Cornerstone Research, a financial and economic consulting firm that helps resolve issues arising in high-profile business litigation. He currently serves on the Boards of AppStream, etang, Everdream and Headlight.com. Mr. Stavropoulos received his B.S. in Computer Science, summa cum laude from Harvard College, where he 26 was a member of Phi Beta Kappa. He also received his M.S. in Computer Science from Harvard University and his M.B.A. from Harvard Business School, where he was a Baker Scholar. RAJ ATLURU is a Non-Managing Member of Draper Advisers. He is also a Senior Associate at Draper Fisher Jurvetson based in Redwood City, California. Prior to joining Draper Fisher Jurvetson, he was a venture capitalist with TL Ventures where he focused on early stage Internet business-to-business services and applications companies. Before that, Raj worked for three years in the Leveraged Finance Group and Asian Investment Banking Group of Credit Suisse First Boston, in New York, Hong Kong and Singapore. He currently serves on the boards of Digitalwork.com and Syncra Systems. He received his B.S. and M.S. in Environmental Engineering from Stanford University and his M.B.A. from the Stanford Graduate School of Business. JOHN BACKUS is a Non-Managing Member of Draper Advisers. Mr. Backus is also a Managing Partner of Draper Atlantic based in Reston, Virginia. Prior to founding Draper Atlantic, Mr. Backus was a founding investor and the President and Chief Executive Officer of US Order/InteliData Technologies, leading US Order from initial revenue generation through a $65 million initial public offering in 1995. During the past 15 years he has negotiated over 15 merger, acquisition, divestiture, venture investment, and corporate finance transactions with a combined value in excess of $500 million. Mr. Backus currently serves on the board of directors of Amazing Media, iSay.com, Singleshop.com, and World Airways and is the Vice-Chairman of the Northern Virginia Technology Council. Mr. Backus received his B.A. in Economics from Stanford University and his M.B.A. from the Stanford Graduate School of Business. JIM LYNCH is a Non-Managing Member of Draper Advisers. Mr. Lynch also serves as a Managing Partner of Draper Atlantic based in Reston, Virginia. Prior to founding Draper Atlantic, Mr. Lynch served as a general partner for the Polaris Fund, an investor in Redgate Communications and Medior, both acquired by America Online. Prior to joining the Polaris Fund, Mr. Lynch taught finance at INCAE, a Costa Rican based graduate school of business affiliated with Harvard University. On behalf of Draper Atlantic, Mr. Lynch currently serves on the board of directors of MultiCity.com, Roku and 2Wrongs.com. Mr. Lynch received his B.A. cum laude in Economics from Yale College and his M.B.A. from the Harvard Business School. DANIEL RUA is a Non-Managing Member of Draper Advisers. Mr. Rua is also a Principal of Draper Atlantic based in Reston, Virginia. Prior to joining Draper Atlantic, Mr. Rua advised International Fiberoptic Technologies on strategic, marketing and funding issues. Mr. Rua also provided Internet customer value analysis and strategic planning for TotalSports, an Internet sports information startup. His consulting efforts have been recognized by the NC Small Business and Technology Development Center. Prior to his consulting efforts, Mr. Rua worked 7 years in IBM's Networking Software group. He currently serves on the board of directors of AuctionRover.com, neoButler.com and 2Wrongs.com. Mr. Rua received his B.S. in Computer Engineering from the University of Florida. He also received his J.D. with honors from the University of North Carolina School of Law and his M.B.A. with Dean's Scholar distinction from the Kenan-Flagler Business School. TODD J. STEVENS is a Non-Managing Member of Draper Advisers. Mr. Stevens is also Managing Director of the Wasatch Venture Fund based in Salt Lake City, Utah. At Wasatch, Mr. Stevens has overseen investments in over 40 early-stage high-technology companies. Prior to establishing the Wasatch Venture Fund, Mr. Stevens was an experienced finance executive, having raised over $450 million in debt and equity for Utah companies during the pervious ten years. He also worked in real estate development, planning and control for Homart Development (a subsidiary of Sears) and as Treasurer for a Utah-based publicly traded company. Mr. Stevens serves on the board of directors of several portfolio companies including InsurQuote Systems and Sandbox Entertainment, as well as MACC Private Equities Inc. He recieved his B.S. in Accounting and Management from the University of Utah and his M.B.A. from the Harvard Business School. 27 KENT I. MADSEN is a Non-Managing Member of Draper Advisers. Mr. Madsen is also a Partner of the Wasatch Venture Fund based in Salt Lake City, Utah. Previously, Mr. Madsen worked for Ford Motor Company in the Advanced Technology Group. He then transferred to Ford's China Operations where he helped to write, present and negotiate joint venture proposals. Mr. Madsen then relocated to head the Product Development efforts at the newly established joint venture in China. Presently, Mr. Madsen serves on the board of directors of theDial, EdgeMail Technologies, 1800weddings, Alta Technology and ZZSoft. Mr. Madsen received his B.S. in Mechanical Engineering and Applied Mechanics from the University of Pennsylvania. He also received his M.S. in Mechanical Engineering from the University of Michigan and his M.A. in International Studies, earned as a Lauder Fellow, from the Lauder Institute at the University of Pennsylvania. Mr. Madsen also received his M.B.A. is from The Wharton School. FRANK M. CREER is a Non-Managing Member of Draper Advisers. Mr. Creer is also a Managing Director and a co-founder of Zone Ventures based in Los Angeles, California. Mr. Creer is also a Partner of the Wasatch Venture Fund based in Salt Lake City, Utah. Mr. Creer has worked in management consulting for small to medium size technology businesses and has also placed financing for a diverse range of real estate developments. Mr. Creer also worked in the development group of a publicly traded company where he was involved in financial analysis and economic feasibility studies of proposed projects. Mr. Creer currently serves on the board of directors of AllPets, Inc., emWare, Inc., e-Style, Inc., GoWarehouse.com, Perks.com, and ZKey.com. Mr. Creer received his B.S. in University Studies with a Finance and Entrepreneurial emphasis from the University of Utah. DAVID L. CREMIN is a Non-Managing Member of Draper Advisers. Mr. Cremin is also a Partner and co-founder of Zone Ventures based in Los Angeles, California. With over nine year of experience working as an entrepreneur, Mr. Cremin specializes in developing high growth businesses. Prior to Zone Ventures, he served as President of Vis-a-Vis Entertainment, a start up entertainment information content provider, where he continues to serve as a director. Before that, Mr. Cremin worked in strategic planning at Citicorp Credit Services. Mr. Cremin currently serves on the board of directors of Digitoy, Inc. (Rocket Radio), LassoPower, Inc., ShowBIZ Data, Inc. and Zone Communications, Inc. As an advocate for the growth of a technology culture in Southern California, Mr. Cremin founded the Zone Club, a non-profit civic organization, which serves to unite isolated Southern California groups, companies, associations and entrepreneurs related to technology and new media. Mr. Cremin received his B.S. in Industrial Engineering from Stanford University. N. DARIUS SANKEY is a Non-Managing Member of Draper Advisers. Dr. Sankey is also a Partner of Zone Ventures based in Los Angeles, California. Dr. Sankey has over five years of experience working on communications, optoelectronics and network technologies. Previously, Dr. Sankey was a Consultant at McKinsey & Company. Prior to McKinsey, Dr. Sankey worked in strategic planning, consulting and R&D positions at Portland Software, AT&T Solutions, RAND and AT&T Bell Laboratories. In addition, Dr. Sankey has focused research efforts on business development and product marketing for e-commerce businesses in the areas of communications services, enterprise software systems, financial services, and digital content management. He currently sits on the boards of StaticOnline.com, ElectricPal.com, and 3GA, Inc. Dr. Sankey received his B.S. degrees in Physics and Electrical Engineering from M.I.T. and his Ph.D. in Optical Engineering from the Institute of Optics, University of Rochester. WILLIAM R. KALLMAN is a Non-Managing member of Draper Advisers. Mr. Kallman is also Managing Partner of Timberline Ventures in Vancouver, Washington. Mr. Kallman has over 14 years of high-technology industry operating and entrepreneurial experience as a board member, CEO/President, and business development executive. Mr. Kallman has guided and managed multi-stage technology venture development, assembled and led senior management and technical teams, and raised venture capital, venture leasing, and corporate partner strategic funding for early-stage companies. He serves on the board of directors of the Oregon Entrepreneur Forum and several Timberline portfolio companies including Applied Inference, Bidpath.com, MusicCity.com, and Zairmail. Mr. Kallman has additional prior experience in marketing and sales, operations, and engineering from Kollmorgen, Cray Research, and Hewlett- 28 Packard. Mr. Kallman received his B.A. in Chemistry from Reed College, his M.S. in Material Science & Engineering from Stanford University, and his M.B.A. from the Harvard Business School. JEFFREY C. TUNG is a Non-Managing member of Draper Advisers. Mr. Tung is also Managing Partner of Timberline Ventures in Vancouver, Washington. Mr. Tung has over 14 years of experience as an early-stage information technology venture capital investor, including Documentum. From its inception in 1989 to its completion in 1997, Mr. Tung was a Vice President and a Partner of Xerox Technology Ventures (XTV), a corporate-backed venture capital fund. Prior to XTV, Mr. Tung was an Associate Partner at KBA Partners, a $100 million technology venture investment fund. Before that, Mr. Tung worked as a Product Manager for Networking Products at Intel and a Project Leader at Lockheed Martin. Mr. Tung has served on the board of directors and interim CEO for many portfolio companies including XTV, Documentum, and presently at Timberline's Virtual Relocation, eTrieve. Mr. Tung received his B.S. and his M.S. degrees in Electrical Engineering from M.I.T. and his M.B.A. from the Harvard Business School. ROSS H. GOLDSTEIN is a Non-Managing member of Draper Advisers. Mr. Goldstein is also a Managing Partner and co-founder of Draper Fisher Jurvetson Gotham Ventures based in New York City. Prior to co-founding Draper Fisher Jurvetson Gotham, Mr. Goldstein was Executive Vice President and Chief Financial Officer of Interactive Imaginations, Inc., the predecessor company to 24/7 Media, Inc. Prior to joining Interactive Imaginations, Mr. Goldstein was with Morgan Stanley for 13 years, where he had most recently been a senior banker responsible for equity financings for the firm's technology, telecommunications and media clients such as Netscape, America Online, Silicon Graphics and Applied Materials. Mr. Goldstein serves on the advisory board of directors of PassLogix, Inc. Mr. Goldstein received his B.S. in Applied Mathematics-Economics, magna cum laude from Brown University and his M.B.A. from the Stanford University Graduate School of Business. DANIEL J. SCHULTZ is a Non-Managing member of Draper Advisers. Mr. Schultz is also a Managing Partner and a co-founder of Draper Fisher Jurvetson Gotham Ventures based in New York City. Mr. Schultz has spent his career advising, financing and investing in emerging technology, telecom and other growth companies. Over the last 14 years, Mr. Schultz has held various senior equity positions with Lehman Brothers in New York and London. Most recently, Mr. Schultz managed the firm's venture capital and private equity financing department raising over $300 million in 16 transactions for a variety of Internet, software, new media, information services and healthcare companies. Prior to that Mr. Schultz was responsible for securing, structuring and executing equity offerings for emerging growth companies in the U.S., Europe and Israel. Mr. Schultz is a Limited Partner in an existing international technology venture capital fund and is an investor in a number of private venture-stage companies, including Active Impulse Systems, PassLogix and System Management ARTS. He is a member of the Investment Committee of the endowment fund of the American Friends of The Hebrew University and is the Assistant Treasurer for the group. Mr. Schultz received his A.B. in Economics from Columbia University. JOSEPH A. KATARINCIC, JR. is a Non-Managing member of Draper Advisers. Mr. Katarincic is also a Manging Director of Draper Triangle Ventures. He is also a Principal of Triangle Capital Corporation and of Lycos Ventures. Previously, Mr. Katarincic served as Vice President - Corporate Development and General Counsel of J. Edward Connelly Associates, Inc., a diversified holding company, where he was responsible for all corporate acquisitions, divestitures and financings. Prior to that, Mr. Katarincic was an Associate at Skadden, Arps, Slate, Meagher & Flom, an international law firm. Mr. Katarincic serves on the board of directors of Exonic Systems Corp. Mr. Katarincic received his B.A. in Economics from the College of the Holy Cross, his J.D. from the University of Pittsburgh School of Law and his M.B.A. from the Carnegie Mellon University Graduate School of Industrial Administration. 29 VALUATION OF PORTFOLIO SECURITIES As a general principle, the current fair value of an investment is the amount that we might reasonably expect to receive for the asset if it were currently sold by us. There is a range of values that is reasonable for investments in private companies at any particular time. Generally, our board of directors will initially set the fair value of each of our investments at cost. Upon the occurrence of a significant development or other factor affecting a portfolio company, including results of operations, changes in general market conditions, subsequent financing or the availability of market quotations, our board of directors will determine whether such events provide a basis for valuing such investment at a number other than cost. We anticipate that many of our investments for which a public market does not exist will be restricted securities under the Securities Act. Whenever possible, Draper Advisers will negotiate for registration rights for us in connection with our investments. The value for investments for which no public market exists cannot be precisely determined. Generally, our board of directors will value such investments on a going concern basis without considering disposition costs. On a quarterly basis, and at such other times as deemed appropriate under the circumstances, our board of directors will prepare a valuation of our assets. We will publish our net asset value on a weekly basis. Our board of directors will value our portfolio investments for which market quotations are readily available and which are freely transferable as follows: (i) securities traded on a securities exchange or the Nasdaq Market will be valued at the closing price on the day the securities are being valued and (ii) securities traded in the over-the-counter market will be valued at the average of the closing bid and asked prices for the trading day the securities are being valued. Our board of directors will value those portfolio investments for which market quotations are readily available but are restricted from free trading in the public securities markets, including stock subject to Rule 144 under the Securities Act, by discounting the closing price or the closing bid and asked prices for the last trading day prior to the date of valuation to reflect the illiquidity imposed by the Rule 144 restrictions, but taking into consideration whether we have any contractual registration rights. For this purpose, an investment that is exercisable for or convertible into a security for which market quotations are readily available or otherwise contains the right to acquire such a security will be deemed to be an investment for which market quotations are readily available, but the value of the security will be reduced by any consideration to be paid by us in connection with the exercise or conversion. With respect to any debt securities in our portfolio with a maturity date within 60 days of the valuation date, our board of directors will value such securities using the amortized cost method. Securities with a maturity date of more than 60 days after the valuation date for which there is a market and which are freely transferable will be valued at the most recent bid price or yield equivalent as obtained from dealers that make markets in such securities. Certificates of deposit held in our portfolio will generally be valued at their face value, plus accrued interest. The fair value of investments for which no market exists and for which our board of directors has determined that the original cost of the investment is no longer an appropriate valuation will be determined on the basis of procedures established in good faith by our board of directors. Valuations will be based upon such factors as earnings and net worth, the market price of similar securities of comparable companies and an assessment of future financial prospects. In the case of unsuccessful operations, the valuation may be based upon anticipated liquidation proceeds. Our board of directors may also consider, when available, a follow-on investment in a portfolio company's securities as the basis of valuation. This method of valuing a follow-on investment will be used only with respect to completed transactions. Publicly-traded securities with legal, contractual or practical restrictions on transfer may be valued at a discount from their value determined by the foregoing methods to reflect these restrictions. 30 Our board of directors will review its valuation policies from time to time and make any necessary adjustments. Our board of directors may also hire independent consultants to review our valuation procedures or to conduct an independent valuation. To determine the net asset value per share of our common stock, the value of our assets, including our portfolio securities, will be determined by our board of directors, and our liabilities, if any, will be subtracted, and the difference will be divided by the number of outstanding shares of our common stock on the date of valuation. The value of our portfolio securities is inherently subjective. Our net asset value, as determined by the board of directors, may also not fully reflect the price at which you could sell your shares in the secondary market, if a secondary market for our shares were to develop. 31 INVESTMENT COMPANY ACT REGULATION We have elected to be regulated as a business development company under the Investment Company Act. A business development company is defined as a domestic, closed-end company that is operated for the purpose of making specific types of investments and that makes available significant managerial assistance to the companies in which it invests. Business development companies are exempt from certain provisions of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Specifically, as a business development company we are regulated only by those portions of the Investment Company Act pertaining to business development companies, are not required to register as an investment company and are otherwise exempt from the majority of the provisions of the Investment Company Act. The provisions that we are subject to are somewhat less stringent than those pertaining to registered investment companies. In addition, as a business development company we are able to base the compensation that we pay to our investment adviser and investment sub-adviser on our performance, which is otherwise prohibited by the Investment Advisers Act. We believe that this compensation structure will assist us in attracting highly qualified investment advisers and investment sub-advisers. As a business development company, we are required to have: - At least 70% of our investments in eligible assets before investing in non-eligible assets, and - We must provide or make available significant managerial assistance to our portfolio companies. ELIGIBLE ASSETS Eligible assets include: - Securities of an eligible portfolio company which are purchased from that company in a private transaction. An eligible portfolio company is a company that: - is organized and has its principal place of business in the United States, - subject to certain narrowly defined exceptions, is not itself a registered investment company, - has no class of securities listed on a national securities exchange or on a dealers' margin list, - is actively controlled by a business development company, either alone or acting as part of a controlling group, and an affiliate of the business development company serves on such company's board of directors, or - meets certain other criteria as may be established from time to time by the Securities and Exchange Commission pursuant to its rule-making authority. - Securities received by the business development company in connection with its ownership of securities of an eligible portfolio company, or - Cash, cash items, government securities, or high quality debt securities maturing in one year or less from the time of investment. SIGNIFICANT MANAGERIAL ASSISTANCE Significant managerial assistance includes: - Any arrangement in which a business development company offers to provide, and, if accepted, provides, significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company, or 32 - The exercise by a business development company of a controlling influence over the management or policies of a portfolio company by the business development company acting individually or as part of a group acting together which controls the portfolio company. REGULATORY RESTRICTIONS The Investment Company Act requires that at least a majority of our board of directors be composed of individuals who are not "interested persons," as such term is defined in the Investment Company Act. The Investment Company Act also places certain restrictions on our ability to take certain actions. We may not alter or change our investment objectives, strategies or policies such that we cease to be a business development company, nor can we voluntarily withdraw our election to be regulated as a business development company, without the approval of the holders of a majority, as defined in the Investment Company Act, of our outstanding voting securities. Such approval is also required before we may change our status as a non-diversified investment company. We are also prohibited by the Investment Company Act from knowingly participating in a joint transaction, including a co-investment in a portfolio company with an affiliated person, including any of our directors, meVC Advisers, Draper Advisers or any entity managed or advised by any of them. To allow co-investments with Draper Fisher Jurvetson and its network of venture capital affiliates, we have applied to the SEC for exemptive relief from this provision of the Investment Company Act. 33 DESCRIPTION OF CAPITAL STOCK COMMON STOCK The table below sets forth certain information about our capital stock.
(4) AMOUNT (2) (3) OUTSTANDING (1) AMOUNT AMOUNT HELD BY THE FUND EXCLUSIVE OF AMOUNT TITLE OF CLASS AUTHORIZED OR FOR ITS ACCOUNT SHOWN UNDER (3) -------------- ----------- ----------------------- ------------------- Common Stock, $.01 par value.............. 150,000,000 (0) 250
Holders of shares of our common stock are entitled to one vote per share on all matters submitted for action by our stockholders. Our stockholders do not have cumulative voting rights with respect to the election of directors and, thus, the holders of a majority of our outstanding shares can, if they choose to do so, elect all of our directors. The holders of shares of our common stock are entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for this purpose. If we are liquidated, dissolved or wound up, holders of our common stock are entitled to share ratably in all of our remaining assets after payment of any outstanding liabilities. Holders of shares of our common stock have no conversion, preemptive or other subscription rights, nor do shares of our common stock carry redemption rights. All of the outstanding shares of our common stock are, and the shares offered in this offering, when issued against payment for them, will be, fully-paid and non-assessable. CERTAIN ASPECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS CLASSIFIED BOARD Our certificate of incorporation provides for a classified board of directors consisting of three classes of directors, each serving staggered three-year terms. As a result, a portion of our board of directors will be elected each year. John M. Grillos and Peter S. Freudenthal have been designated Class I directors whose terms expire at the 2000 annual meeting of stockholders. has been designated as a Class II director whose term expires at the 2001 annual meeting of stockholders. and have been designated as Class III directors whose terms expire at the 2002 annual meeting of stockholders. This classification of the board of directors may delay or prevent a change in control of our company or in our management. EXECUTIVE OFFICERS Executive officers are appointed by the board of directors on an annual basis and serve until their successors have been duly elected and qualified. There are no family relationships among any of our directors, officers or key employees. BOARD COMMITTEES Our board of directors has established an audit committee. The audit committee currently consists of Messrs. and . The audit committee reviews our internal accounting procedures and consults with and reviews the services provided by our independent accountants. EXECUTIVE COMPENSATION Since we are newly organized, we have not yet paid compensation to any of our directors or officers. 34 LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following: - any breach of their duty of loyalty to the corporation or its stockholders; - acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; - unlawful payments of dividends or unlawful stock repurchases or redemptions; or - any transaction from which the director derived an improper personal benefit. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission. Our certificate of incorporation also provides that, to the fullest extent permitted under Delaware law, our directors may participate in other business or investing activities, even if such other activities are in competition with our business. Moreover, in the event any of our directors are involved in any such activities: - they may, but are not obligated to, offer us the opportunity to participate in such activities; - the Fund will have no claim on or right to receive any income or profit which such directors may derive from any such activities; and - such directors will not be liable to the Fund or its stockholders for monetary damages for loss of corporate opportunity or otherwise because of their participation in any such activities. Our certificate of incorporation and bylaws provide that we shall indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by applicable law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether our bylaws would permit indemnification. We have entered into agreements to indemnify our directors and executive officers, in addition to indemnification provided for in our bylaws. These agreements, among other things, provide for indemnification of our directors and executive officers for expenses, judgments, fines and settlement amounts incurred by any such person in any action or proceeding arising out of such person's services as a director or executive officer or at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. The limited liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty and may reduce the likelihood of derivative litigation against our directors and officers, even though a derivative litigation, if successful, might otherwise benefit us and our stockholders. A stockholder's investment in us may be adversely affected to the extent we pay the costs of settlement or damage awards against our directors or officers under these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. 35 DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS Provisions of Delaware law and our certificate of incorporation and bylaws could make the following more difficult: - the acquisition of us by means of a tender offer; - acquisition of us by means of a proxy contest or otherwise; or - the removal of our incumbent officers and directors. These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals because negotiation of such proposals could result in an improvement of their terms. ELECTION AND REMOVAL OF DIRECTORS. Our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for stockholders to replace a majority of the directors. STOCKHOLDER MEETINGS. Under our certificate of incorporation, only the board of directors, the Chairman of the Board, Vice Chairman, Chief Executive Officer or President may call special meetings of stockholders. ADOPTION, AMENDMENT OR REPEAL OF OUR BYLAWS. Our certificate of incorporation provides that any adoption, amendment or repeal of our Bylaws will require the approval of: - at least 66-2/3% of the total number of our authorized directors, irrespective of any vacancies that may exist on the board of directors at the time; or - the holders of at least 66-2/3% of the then outstanding shares of our capital stock entitled to vote on the matter. REMOVAL OF DIRECTORS. Our certificate of incorporation provides that our stockholders may remove one or more of our directors only for cause and only with the affirmative approval of the holders of at least 75% of the then outstanding shares of our capital stock entitled to vote on the matter. CONVERSION TO OPEN-END INVESTMENT COMPANY. Our certificate of incorporation provides that any proposal to convert us from a closed-end investment company to an open-end investment company will require the affirmative approval of (i) at least 75% of our continuing directors and (ii) the holders of at least 75% of the then outstanding shares of our capital stock entitled to vote on the matter. A continuing director is any director: - who is not a person or affiliate of a person who enters or proposes to enter into a business combination with us; and - who has been a director for at least 12 months; or - who is a successor of a continuing director who is not a person or affiliate of a person who enters or proposes to enter into a business combination with us and was appointed to the board of directors by a majority of the continuing directors. 36 REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND PROPOSALS. Our bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors. AMENDMENT OF CHARTER PROVISIONS. The amendment of any of the above provisions would require approval by holders of at least 66-2/3% of the then outstanding shares of our capital stock entitled to vote on the matter. ANNUAL MEETINGS We intend to hold annual meetings of our stockholders to elect our directors and take such other action as may be necessary or appropriate if we are required to do so under applicable law or rules of exchanges or other applicable regulatory agencies. DISTRIBUTIONS At least one time per year, we will make distributions of cash and securities to you of at least 90% of the net investment income we receive from interest and dividends plus net short-term capital gains. We intend to make the first distribution, which will likely be comprised entirely of investment income from short-term investments in accordance with our investment objective, by December 31, 2000. If we incur indebtedness, however, the Investment Company Act limits our ability to make distributions if at any time our "asset coverage ratio" is below 300%. We will also distribute from time to time any capital gains we realize from our investments in portfolio companies. In addition, if any of our portfolio companies elects to sell its shares in an initial public offering, or if we receive publicly-traded stock from an acquirer of one of our portfolio companies, the board of directors may distribute pro rata our shares or a portion of our shares of that company's capital stock. Any shares we distribute may be subject to certain transfer restrictions, including a lock-up period which may prohibit you from selling the distributed shares for up to six months. The timing of capital gains distributions will vary depending on when we liquidate our investments in individual portfolio companies. We intend to qualify for the special tax treatment provided under Subchapter M of the Internal Revenue Code. To qualify for such treatment, we must distribute to our stockholders for each taxable year at least 90% of our investment company taxable income (consisting generally of net investment income and net short-term capital gains). These distributions will be taxable to you as ordinary income or capital gains. You may be proportionately liable for taxes on income and gains of the Fund, but, if you are not subject to tax on your income, should not be required to pay tax on amounts distributed to you. We will inform stockholders regularly of the amount and nature of our income and gains. A more detailed discussion of the federal income tax considerations applicable to us and to an investment in shares of our common stock is included in the SAI under the heading "Federal Income Tax Matters." DIVIDEND REINVESTMENT PLAN All of our stockholders who hold shares of common stock in their own name will automatically be enrolled in our Dividend Reinvestment Plan, or the Plan. All such stockholders will have their cash dividends and distributions automatically reinvested by State Street Bank and Trust Company, or the Plan Agent, in additional shares of our common stock. Any stockholder may, of course, elect to receive his or her dividends and distributions in cash. For any of our shares that are held by banks, brokers or other entities that hold our shares as nominees for individual stockholders, the Plan Agent will administer the Plan on the basis of the number of shares certified by any nominee as being registered for stockholders that have not elected to receive dividends and distributions in cash. To receive your dividends and distributions in cash, you must notify the Plan Agent, or your broker or other nominee, as the case may be, in writing. 37 The Plan Agent serves as agent for the stockholders in administering the Plan. When we declare a dividend or distribution payable in cash or in additional shares of our common stock, those stockholders participating in the Plan will receive their dividend or distribution in additional shares of our common stock. Such shares will be either newly issued by us or purchased in the open market by the Plan Administrator. If the market value of a share of our common stock on the record date for such dividend or distribution equals or exceeds the net asset value per share on that date, we will issue new shares at the net asset value. If the net asset value exceeds the market price, the Plan Agent will purchase in the open market such number of shares as is necessary to complete the distribution. The Plan Agent will maintain all stockholder accounts in the Plan and furnish written confirmation of all transactions. Shares of our common stock in the Plan will be held in the name of the stockholder and such stockholder will be considered the beneficial owner of such shares for all purposes. There is no charge to stockholders for participating in the Plan or for the reinvestment of dividends and distributions. We will not incur brokerage fees with respect to newly issued shares issued in connection with the Plan. Stockholders will, however, be charged a pro rata share of any brokerage fee charged for open market purchases in connection with the Plan. We may terminate the Plan at any time. We may also amend the Plan upon providing written notice to stockholders participating in the Plan at least thirty days prior to such amendment. You may withdraw from the Plan upon written request to the Plan Agent. You may obtain additional information about the Plan from the Plan Agent. 38 UNDERWRITING We have entered into an underwriting agreement with the underwriters named below, for whom Prudential Securities Incorporated and are acting as representatives. We are obligated to sell, and the underwriters are obligated to purchase, all of the shares offered hereby, if any are purchased. Subject to the terms and conditions of the underwriting agreement, each underwriter has generally agreed to purchase the shares indicated opposite its name:
NUMBER UNDERWRITERS OF SHARES - ------------ --------- Prudential Securities Incorporated.......................... ------ Total............................................... ======
The underwriters may sell more shares than the total number of shares offered on the cover page of this prospectus and they have, for a period of 30 days from the date our shares begin trading, an over-allotment option to purchase up to additional shares from the Fund. If any additional shares are purchased, the underwriters will severally purchase the shares in the same proportion as purchased in the table above. The representatives of the underwriters have advised us that the shares will be offered to the public at the offering price indicated on the cover page of this prospectus. The underwriters may allow to selected dealers a concession not in excess of $ per share and such dealers may reallow a concession not in excess of $ per share to certain other dealers. After the shares are released for sale to the public, the representatives may change the offering price and the concessions. The representatives have informed us that the underwriters do not intend to sell shares to any investor who has granted them discretionary authority. We have agreed to pay the underwriters the following sales load, assuming both no exercise and full exercise of the underwriters' over-allotment applied to purchase additional shares:
TOTAL SALES LOAD -------------------------------------------------------- PER WITHOUT EXERCISE OF FULL EXERCISE OF SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION -------- --------------------- --------------------- Sales load paid by the Fund.................... $ $ $
The Fund, meVC Advisers and Draper Advisers have each agreed to indemnify the several underwriters or to contribute to the losses arising out of certain liabilities, including liabilities under the Securities Act. The Fund has agreed to pay an advisory fee to Prudential Securities Incorporated. We, our officers and directors, the officers and directors of meVC Advisers and the members of Draper Advisers have entered into lock-up agreements pursuant to which we and they have agreed not to offer or sell any shares of common stock or securities convertible into or exchangeable or exercisable for shares of common stock for a period of 180 days from the date of this prospectus without the prior written consent of Prudential Securities Incorporated on behalf of the underwriters. Prudential Securities Incorporated may, at any time and without notice, waive the terms of these lock-up agreements specified in the underwriting agreement. 39 In order to meet the requirements for listing the Shares on a national exchange the underwriters have undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial holders. The minimum investment requirement is 100 Shares (or $ ). Prior to this offering there has been no public market for the shares or any other securities of the Fund. Prior to completion of this offering, meVC Advisers will control the Fund. In the ordinary course of their businesses, Prudential Securities Incorporated, some of the other underwriters and their respective affiliates have in the past engaged, and in the future may engage in investment banking and financial transactions with the Fund, meVC Advisers, Draper Advisers or their affiliates. Prudential Securities Incorporated, on behalf of the underwriters, may engage in the following activities in accordance with applicable securities rules: - over-allotments involving sales in excess of the offering size, creating a short position. Prudential Securities Incorporated may elect to reduce this short position by exercising some or all of the over-allotment options. - stabilizing and short covering; stabilizing bids to purchase the shares are permitted if they do not exceed a specified maximum price. After the distribution of shares has been completed, short covering purchases in the open market may also reduce the short position. These activities may cause the price of the shares to be higher than would otherwise exist in the open market. - penalty bids permitting the representatives to reclaim concessions from a syndicate member for the shares purchased in the stabilizing or short covering transactions. Such activities, which may be commenced and discontinued at any time, may be effected on a national securities market, in the over-the-counter market or otherwise. Each underwriter has represented that it has complied and will comply with all applicable laws and regulations in connection with the offer, sale or delivery of the shares and related offering materials in the United Kingdom, including: - the Public Offers of Securities Regulation 1995, - the Financial Services Act 1986, and - the Financial Services Act 1986, (Investment Advertisements) (Exemptions) Order 1986 (as amended). Prudential Securities Incorporated facilitates the marketing of new issues online through its PrudentialSecurities.com division. Clients of Prudential Advisor-SM-, a full service brokerage firm program, may view offering terms and a prospectus online and place orders through their financial advisors. 40 LEGAL MATTERS Certain legal matters with respect to the offering will be passed upon for the Fund by Pillsbury Madison & Sutro LLP, San Francisco, California, and for the underwriters by Cleary, Gottlieb, Steen & Hamilton, Washington, D.C. EXPERTS Our Statement of Assets and Liabilities as of December 8, 1999 has been included herein in reliance upon the report of PricewaterhouseCoopers LLP, San Francisco, California, independent auditors to the Fund, appearing elsewhere herein, given on the authority of the same firm as experts in auditing and accounting. 41 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE -------- Investment Policies......................................... 2 Management.................................................. 4 Investment Company Act Regulation........................... 6 Potential Conflicts of Interest............................. 8 Federal Income Tax Matters.................................. 9 ERISA Matters............................................... 12 Transfer Agent and Registrar................................ 13 Dividend Disbursing Agent................................... 13 Custodian................................................... 13 Sub-Administrator........................................... 13
42 ADDITIONAL INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form N-2 with respect to the shares of our Common Stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information set forth in the Registration Statement or the exhibits and schedules which are a part of the registration statement. Additional information concerning us and our common stock is included in the Registration Statement and its exhibits and schedules. You may read and copy any document we file at the SEC's public reference room in Washington, DC. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC's website at HTTP://WWW.SEC.GOV. Upon completion of this offering, we will be subject to the information and periodic reporting requirements of the Securities Exchange Act and will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference room, from the SEC's website at HTTP:// WWW.SEC.GOV and from our website at HTTP://WWW.MEVC.COM/MEVCDRAPERFUND.ASP. 43 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholder and Directors of meVC Draper Fisher Jurvetson Fund I, Inc.: In our opinion, the accompanying statement of assets and liabilities presents fairly, in all material respects, the financial position of meVC Draper Fisher Jurvetson Fund I, Inc. (the Fund), at December 8, 1999, in conformity with generally accepted accounting principles. This financial statement is the responsibility of the Fund's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this financial statement in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP San Francisco, California December 13, 1999 44 MEVC DRAPER FISHER JURVETSON FUND I, INC. STATEMENT OF ASSETS AND LIABILITIES DECEMBER 8, 1999 ASSETS Cash........................................................ $ 5,000 Deferred offering costs..................................... 350,000 -------- Total Assets............................................ 355,000 -------- LIABILITIES Liabilities and accrued expenses............................ 350,000 -------- Total Liabilities....................................... 350,000 -------- NET ASSETS.................................................. $ 5,000 ======== NET ASSETS CONSIST OF: Shares of common stock, $.01 par value; 150,000,000 shares authorized, 250 shares of which are issued and outstanding.................................... $ 3 Paid in capital in excess of par............................ 4,997 -------- NET ASSETS.................................................. $ 5,000 ======== Net Asset Value Per Share................................... $ 20
- ------------------------ Based on net assets of $5,000 and 250 shares issued and outstanding. The accompanying notes are an integral part of this financial statement. 45 MEVC DRAPER FISHER JURVETSON FUND I, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 8, 1999 1. ORGANIZATION: meVC Draper Fisher Jurvetson Fund I, Inc. (the Fund) was organized as a Delaware corporation on December 2, 1999, and has elected to be regulated as a Business Development Company under the Investment Company Act of 1940. To date, the Fund has not had any transactions other than those related to organizational matters and the sale of 250 shares of beneficial interest to meVC.com, Inc., the parent company of meVC Advisers, Inc. 2. SIGNIFICANT ACCOUNTING POLICIES a. Deferred Offering Costs: The Fund has deferred certain initial public offering costs. These costs will be charged to paid-in capital upon sale of the shares. b. Organization Costs: Costs relating to the organization of the Fund will be borne by meVC Advisers, Inc. c. Accounting Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statement. Actual results could differ from those estimates. 3. INVESTMENT ADVISORY AND OTHER AGREEMENTS: a. The Fund has substantially agreed to the terms of an investment advisory agreement with meVC Advisers, Inc. (the Adviser). Pursuant to the investment advisory agreement, the Adviser is responsible for oversight of asset management and administration of the fund. The Fund pays the Adviser a monthly fee at the annual rate of 2.5% of the Fund's average weekly net assets, a portion of which is used to pay the Fund's Sub-Adviser. The Fund shall also pay an annual incentive fee to the Adviser in an amount equal to 20% of the Fund's annual realized capital gains on its investments, net of realized losses and unrealized capital depreciation. b. The Adviser has substantially agreed to the terms of a sub-adivsory agreement with Draper Fisher Jurvetson MeVC Management Co., LLC (the Sub-Adviser). The Sub-Adviser provides all investment opportunities for approval by the Fund's board. For the Sub-Adviser's services, the Adviser pays the Sub-Adviser an annual investment sub-advisory fee equal to 1% of the Fund's average net assets. Adviser shall also pay the Sub-Adviser an amount equal to 90% of the annual incentive fee paid by the Fund to the Adviser. The sub-advisory fees are not an additional expense of the Fund. 46 [INSIDE BACK COVER OF PROSPECTUS] 47 MEVC DRAPER FISHER JURVETSON FUND I, INC. DIVIDEND REINVESTMENT PLAN meVC Draper Fisher Jurvetson Fund I, Inc. (the "Fund") has adopted a Dividend Reinvestment Plan. Please be aware that all dividends and distributions will be automatically reinvested in shares of the Fund's common stock, $.01 par value ("Common Stock"), at no cost to the stockholder. Acquisitions of shares of Common Stock for reinvestment may be made by the Fund through the issuance of new shares of Common Stock by the Fund at the then current net asset value ("NAV") and/or by acquisition by the Fund of its shares of Common Stock that are selling at a discount to NAV. Reinvested dividends and distributions will be used by the Fund for general investment and operating purposes, including additional investments in portfolio companies. Shares of Common Stock acquired by the Fund in accordance with the Plan will be held in the name of the Fund in unissued form by the Fund's Registrar and Transfer Agent. Each stockholder will receive a quarterly statement from the Fund setting forth the number of shares of Common Stock such stockholder owns in the Plan. These shares can be issued to the individual stockholder, or can be liquidated upon delivery of written instructions to State Street Bank and Trust Company (the "Agent"). If you wish to not participate in the Plan and to have dividends and distributions sent to you instead of held for reinvestment, please complete and execute the following section. ELECTION TO RECEIVE DIVIDENDS AND NOT PARTICIPATE IN THE PLAN The undersigned elects not to participate in all the Dividend Reinvestment Plan of meVC Draper Fisher Jurvetson Fund I, Inc. and requests that all dividends and distributions be deposited to the following account or forwarded to the following address: Name of Stockholder:____________________________________________________________ Account Number for Deposit:_____________________________________________________ Bank or Custodial Name:_________________________________________________________ Address for Dividend Mailing:___________________________________________________ ________________________________________________________________________________ Telephone:_________________________________ Fax:________________________________ Date:________________________ ________________________ Signature of Registered Holder Return this election to: State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 (617) 786-3000
+ - -------------------------------------------------------------------------------- Until , 2000, all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of the dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- MEVC DRAPER FISHER JURVETSON FUND I, INC. AN INFORMATION TECHNOLOGY VENTURE CAPITAL FUND PRUDENTIAL VOLPE TECHNOLOGY A UNIT OF PRUDENTIAL SECURITIES THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. THE FUND MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION HAS BEEN DECLARED EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION-- , 2000 STATEMENT OF ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- Shares MEVC DRAPER FISHER JURVETSON FUND I, INC. AN INFORMATION TECHNOLOGY VENTURE CAPITAL FUND Common Stock - ---------------------------------------------------------------------- This SAI is not a prospectus. This SAI relates to and should be read in conjunction with the prospectus of meVC Draper Fisher Jurvetson Fund I, Inc., dated , 2000. A copy of the prospectus may be obtained by contacting us at the address and telephone number set forth below. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- MEVC DRAPER FISHER JURVETSON FUND I, INC. 991 FOLSOM STREET, SUITE 301 SAN FRANCISCO, CALIFORNIA 94107 TELEPHONE: (800) 830-1822 FACSIMILE: (415) 977-6160 HTTP://WWW.MEVC.COM/MEVCDRAPERFUND.ASP , 2000 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE -------- Investment Policies......................................... 2 Management.................................................. 4 Investment Company Act Regulation........................... 6 Potential Conflicts of Interest............................. 8 Federal Income Tax Matters.................................. 9 ERISA Matters............................................... 12 Transfer Agent and Registrar................................ 13 Dividend Disbursing Agent................................... 13 Custodian................................................... 13 Sub-Administrator........................................... 13
- -------------------------------------------------------------------------------- YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THE PROSPECTUS AND IN THIS SAI. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THE PROSPECTUS OR IN THE STATEMENT OF ADDITIONAL INFORMATION IS ACCURATE ON ANY DATE OTHER THAN THE DATE SET FORTH ON THE FRONT COVER OF THE PROSPECTUS OR OF THIS SAI. - -------------------------------------------------------------------------------- THE PROSPECTUS AND THIS SAI CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES," "PLANS," "EXPECTS," "FUTURE," "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS ATTRIBUTED TO THIRD PARTY SOURCES RELATING TO ESTIMATES REGARDING VENTURE CAPITAL INVESTING AND THE GROWTH OF THE INTERNET, E-COMMERCE, TELECOMMUNICATIONS, NETWORKING, SOFTWARE AND INTRANET INFRASTRUCTURE INDUSTRIES. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING THE RISKS FACED BY US DESCRIBED IN "RISK FACTORS" AND ELSEWHERE IN THE PROSPECTUS AND IN THIS SAI. - -------------------------------------------------------------------------------- INVESTMENT POLICIES Our venture capital investments will typically be negotiated directly with the issuer in private transactions. Our investments in portfolio companies will generally be in the form of preferred stock that is convertible to common stock under certain circumstances, including the sale by the company of shares of its common stock in an initial public offering. Preferred stock offers many advantages over common stock, including: - In the event the company is liquidated or sold, the holders of preferred stock receive payment prior to and in preference to the holders of common stock. - Preferred stockholders typically have protective provisions that can have the effect of prohibiting certain transactions, including a sale of the company, unless the holders of a majority of the preferred stock approve such transaction. - Holders of preferred shares are often granted the right to elect one or more members of the company's board of directors. We are not limited to investing in preferred stock, however, and retain the right to invest in other assets if such alternative investments are in your best interests. Such other assets might include common stock, debt securities (which may or may not be convertible into equity securities) and warrants or options to purchase equity securities. TEMPORARY INVESTMENTS Pending investments in the types of securities described above, we will invest our cash in: - U. S. Government securities, - Repurchase agreements with federally-insured banks with a maturity date of seven days or less, the underlying instruments of which are securities issued or guaranteed by the federal government, - Certificates of deposit in a federally insured bank with a maturity date of one year or less and in a maximum amount equal to the limit on federal deposit insurance, - Deposit accounts maintained in a federally insured bank subject to withdrawal restrictions of one year or less, up to the limit of federal deposit insurance, - Certificates of deposit or deposit accounts in federally insured banks in excess of the maximum amount of deposit insurance if the insured bank is deemed to be well-capitalized by the Federal Deposit Insurance Corporation, and - We may also invest up to 10% of our net assets in an index of publicly-traded information technology companies seeking to enhance the yield on our longer-term reserves for follow-on investments in portfolio companies. FOLLOW-ON INVESTMENTS After our initial investment, we anticipate that we will often provide additional or follow-on financing to the portfolio companies. Follow-on investments may be made pursuant to rights to acquire additional securities or otherwise increase our ownership position in a successful or promising company. We may choose to provide follow-on investments for a number of other reasons, including providing necessary financing for a company to implement its business plan, or develop a new line of business or product. 2 INDEBTEDNESS We may use leverage to raise all or a portion of the funds required to make follow-on investments and to meet operating expenses. Such borrowing would normally occur in the later years of our operations when our investment portfolio may have significant value but limited liquidity. AVERAGE INVESTMENT Our investment in any one of our portfolio companies will vary depending on the stage of the company's growth, the quality and completeness of its management team, the perceived business opportunity, the size of the investment sought by the issuing company and the expected return from our investment. MARGIN We will not: - Purchase any securities on margin, except for use of short-term credit necessary for the clearance of transactions, - Engage in short sales of securities, unless assets are sufficiently segregated or we otherwise own the securities, or - Purchase or sell commodities or commodity contracts, other than financial futures contracts, except as permitted by the Investment Company Act or in accordance with the terms of exemptive relief granted by the SEC. 3 MANAGEMENT
(2) (3) (1) POSITION(S) HELD PRINCIPAL OCCUPATION(S) NAME, ADDRESS AND AGE WITH REGISTRANT DURING PAST FIVE YEARS - ----------------------------- ------------------------------------- ----------------------------- John M. Grillos* 47 Chairman of the Board, Chief Managing Member, Draper Executive Officer and Director Fisher Jurvetson MeVC Management Co., LLC, Redwood City, California; Founder and Managing General Partner, Itech Partners, L.P.; Executive Vice President, Chief Operating Officer and Director, SmartForce; Managing Director, SoundView Venture Partners, L.P.; Managing Director, Robertson, Stephens & Co., San Francisco, California. Peter S. Freudenthal* 36 Vice Chairman and Director Chairman of the Board, President and Director, meVC.com, Inc., San Francisco, California; Vice President and Senior Equity Research Analyst, Robertson Stephens & Company, San Francisco, California. Andrew E. Singer 29 President Chief Executive Officer and Director, meVC.com, Inc., San Francisco, California; Senior Associate, Robertson Stephens & Company, San Francisco, California; Director of New Business, The Shansby Group, San Francisco, California. Paul Wozniak 35 Vice President, Chief Financial Chief Operating Officer, Officer and Treasurer meVC.com, Inc., San Francisco, California; Vice President and Director, Mutual Fund Operations, GT Global, Inc. / AIM Funds, San Francisco, California. Kenneth Priore 30 Secretary Internal Counsel and Director of Policy and Compliance, meVC.com, Inc., San Francisco, California; Managing Attorney: Third Party Actions, Arbitration and Litigation, Office of Corporate Counsel, Charles Schwab & Co., San Francisco, California.
- ------------------------ * Interested person as defined in Section 2(a)(19) of the Investment Company Act. 4 Our independent directors will receive payment of certain fees and reimbursement of their expenses as follows: - Compensation of , payable in quarterly installments. - Compensation of for each meeting of our board of directors, or a committee of the board of directors, in which each such independent director participates, either in person or by telephone, up to a maximum of per year for attendance at meetings of the full board of directors and up to a maximum of for attendance at meetings of any committee of the board of directors. In the event a committee meeting is held on the same day as a meeting of the full board of directors, we will pay each independent director in attendance only one attendance fee equal to . - Reimbursement for out-of-pocket expenditures relating to attendance at meetings of the full board of directors or a committee of the board of directors and for other expenses. meVC Advisers will bear all fees and expenses associated with our independent directors. Pursuant to the investment advisory agreement with meVC Advisers, and subject to the supervision and oversight of our board of directors, meVC Advisers will be responsible for our day-to-day operations, administration and regulatory compliance, including the following: - Setting and maintaining our strategic direction; - Maintaining our financial records; - Preparing financial and accounting reports for presentation to our board of directors and stockholders and for filing with governmental agencies; - Calculating and publishing our net asset value; - Overseeing the preparation and filing of our tax returns; - Preparing and providing reports to our board of directors and stockholders; and - Overseeing generally the payment of our expenses and the performance of administrative and professional services rendered to us by others. meVC Advisers will also have responsibility, subject to oversight by our board of directors, of evaluating, investigating and selecting investments for our portfolio, including follow-on and temporary investments and borrowing. meVC Advisers will pay its own costs and expenses, including any costs and expenses incurred by it when acting on our behalf, and has also agreed to pay certain of our costs and expenses, including the following: - Operating expenses incurred in the ordinary conduct of our business, including expenses associated with our office facilities and clerical, bookkeeping and record keeping services, - All expenses related to calculating and publishing our net asset value, - All of the fees and expenses payable to our independent directors, - All fees and expenses of our legal counsel, independent accountants, outside consultants, custodian and transfer agent and registrar, - All expenses related to printing and mailing share certificates, reports and notices to stockholders and proxy statements, - All expenses related to meetings of our directors and stockholders, and - All federal and state registration fees. Subject to the oversight and supervision of our board of directors, Draper Advisers will be responsible for: - Negotiating and structuring investments and implementing our investment objective, including analyzing and selecting our portfolio investments, and 5 - Providing managerial assistance and guidance to the companies in which we invest by serving on the boards of directors, assisting in the selection of management personnel, performing market and product analysis, and the formulating marketing and financing strategies. Draper Advisers will pay all of its own costs and expenses, including any costs and expenses incurred by it when acting on our behalf for meVC Advisers. INVESTMENT COMPANY ACT REGULATION As described in the prospectus, the Investment Company Act places certain restrictions on the types of assets we may hold to maintain our qualification as a business development company, and requires us to provide or make available significant managerial assistance to the companies in which we invest. In addition, we are prohibited from investing in certain types of companies, including brokerage firms, insurance companies and investment banking firms. As a business development company, we are permitted, under certain specified conditions, to issue multiple classes of senior debt and a single class of interests senior to the shares of our common stock offered for sale pursuant to the prospectus. We can do so, however, only if our asset coverage, as defined in the Investment Company Act, is at least 200% after the issuance of the debt or the senior interests, and we do not make any distribution to our stockholders or repurchase any shares of our common stock at any time when our asset coverage ratio has fallen below 200%. As a business development company, we may not alter or change our investment objective and policies in any manner whatsoever without the approval of our stockholders, nor can we change our non-diversification status without stockholder approval. We may, in the future, seek to become exempt from regulation by the Investment Company Act. We are also prohibited under the Investment Company Act from knowingly participating in a joint transaction with an affiliate of any of our directors, meVC Advisers, Draper Advisers or any other entity managed by either of them. We believe it will be beneficial to you if we are allowed to co-invest with meVC Advisers, Draper Advisers, any affiliated entity of either of them and any other entity managed by either of them or their members or principals, provided that such co-investment is consistent with our investment objective. We believe co-investment with such entities will offer us the ability to achieve greater diversification and, together with the affiliated entity or entities with which we co-invest, to exercise greater influence on the companies in which we co-invest. To allow co-investments and follow-on investments with our affiliated entities, we have applied to the SEC for exemptive relief to permit such co-investment on certain specified terms and condition, including the approval of the terms of our investment by at least a majority of our independent directors. We believe the SEC will grant exemptive relief to allow co-investment with affiliated entities only upon certain conditions, including the following: - Prior to entering into a co-investment transaction, the managing member of Draper Advisers will make a written investment presentation to our independent directors outlining the terms of the proposed co-investment; and - After a thorough review of the terms of the transaction, at least a majority of our independent directors conclude that: - The terms of the proposed co-investment are reasonable and fair to us and our stockholders and do not involve overreaching on the part of any person concerned, - The transaction is consistent with our investment objective and policies and the interests of our stockholders, - The co-investment with an affiliated entity will not disadvantage us in making our investment, in maintaining our investment position, or in disposing of our investment, and - Our participation is on terms that are the same as those on which our affiliate invests or, if our terms are different than those of our affiliate, that our terms are not less advantageous to us as compared to the terms granted to our affiliate. 6 In addition to the restrictions described above, the following persons are required to obtain the approval of a majority of our independent directors or, in some situations, the SEC before engaging in transactions involving us or the companies in which we invest: - Any person who owns, controls, or holds the power to vote more than 5% of our outstanding shares of voting stock, - Each director, executive officer and general partner of any such person, and - Each person who directly or indirectly controls, is controlled by, or is under common control with, such person. 7 POTENTIAL CONFLICTS OF INTEREST OTHER ACTIVITIES OF THE INVESTMENT ADVISERS We do not anticipate having independent management or employees and will rely upon our directors, meVC Advisers and Draper Advisers for management and administration of the fund, as well as the selection of our investments. The directors, officers and members of meVC Advisers and Draper Advisers may have conflicts of interest in allocating their time performing services for us and for other funds in which they are involved. Nevertheless, we believe that both meVC Advisers and Draper Advisers have sufficient personnel to satisfy all of their responsibilities. The members of Draper Advisers have legal and financial obligations with respect to their other funds that are similar to their obligations to us. TIMING OF DISPOSITION OF FUND INVESTMENTS meVC Advisers and Draper Advisers each have an interest in our profits and losses. Their interests may, in some cases, be inconsistent with your interests with respect to the timing of disposition of our investments in portfolio companies. Our directors will, however, exercise supervisory and oversight authority over their actions. Our directors have a fiduciary duty imposed by applicable law to act in our best interests. LEGAL REPRESENTATION Our legal counsel may also provide services to meVC Advisers. If a conflict in representation arises and cannot be resolved, or if the consent of the respective parties cannot be obtained to the continuance of such dual representation after full disclosure of such conflict, such counsel will withdraw from the representation of one or both of the parties with conflicting interests with respect to the matter involved. Our legal counsel has not acted and will not act on the behalf of any purchaser of shares of our common stock in connection with this offering. Each prospective purchaser of our shares should consult with its own counsel prior to purchasing our shares. CONFLICTS WITH PORTFOLIO COMPANIES The interests of a company in which we invest may, from time to time, conflict with your best interests. If meVC Advisers or Draper Advisers becomes actively involved in the management of any of our portfolio companies, they will resolve such conflicts of interest in what they consider to be your best interests. 8 FEDERAL INCOME TAX MATTERS You should consult your own tax adviser with respect to the tax considerations applicable to a purchase of shares of our common stock. This discussion does not address all aspects of federal income taxation relevant to holders of our Common Stock in light of their personal circumstances, or to certain types of holders subject to special treatment under federal income tax laws, including foreign taxpayers. This discussion does not address any aspects of foreign, state or local tax laws. We intend to qualify for treatment as a "regulated investment company" under Subchapter M of the Internal Revenue Code. To qualify for such treatment, we must distribute to our stockholders for each taxable year at least 90% of our investment company taxable income (consisting generally of net investment income from interest and dividends and net short term capital gains). We must also meet several additional requirements, including: - At least 90% of our gross income for each taxable year must be from dividends, interest, payments with respect to securities loans, and gains from sales or other disposition of securities, or other income derived with respect to our business of investing in securities, - As diversification requirements, as of the close of each quarter of our taxable year: - at least 50% of the value of our assets must consist of cash, cash items, U.S. government securities, the securities of other regulated investment companies and other securities to the extent that (1) we do not hold more than 10% of the voting securities of an issuer of such other securities and (2) such other securities of any one issuer do not represent more than 5% of our total assets, and - no more than 25% of the value of our total assets may be invested in the securities of one issuer (other than U.S. government securities or the securities of other regulated investment companies), or of two or more issuers that are controlled by us and are engaged in the same or similar or related trades or businesses. If we were unable to qualify for treatment as a regulated investment company, we would be subject to tax on our ordinary income and capital gains (including gains realized on the distribution of appreciated property) at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Distributions would be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends received deduction. Distributions in excess of current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder's tax basis, and any remaining distributions would be treated as a gain realized from the sale or exchange of property. If the Company fails to meet the requirements of Subchapter M in its first taxable year or, with respect to later years, for more than two consecutive years and then seeks to requalify under Subchapter M, it would be required to recognize gain to the extent of any unrealized appreciation on its assets. In that case, any gain recognized by the Company likely would be distributed to shareholders as a taxable distribution. If we qualify as a regulated investment company and distribute to stockholders each year in a timely manner at least 90% of our "investment company taxable income" as defined in the Code, we will not be subject to federal income tax on the portion of our taxable income and gains we distribute to stockholders. In addition, if we distribute in a timely manner the sum of (i) 98% of our ordinary income for each calendar year, (ii) 98% of our capital gain net income for the one-year period ending October 31 in that calendar year and (iii) any income not distributed in prior years, we will not be subject to the 4% nondeductible federal excise tax on certain undistributed income of regulated investment companies. We will be subject to regular corporate income tax (currently at rates up to 35%) on any undistributed net investment income and any undistributed net capital gain. We will also be subject to alternative minimum tax, but any tax preference items would be apportioned between us and our stockholders in the same proportion that dividends (other than capital gain dividends) paid to each stockholder bear to our taxable income determined without regard to the dividends paid deduction. However, the diversification requirements outlined above are liberalized in the case of certain investment companies. In particular, if we, as a Business Development Company, meet certain requirements described below, the 50% diversification requirement is modified so that we may include in our 9 50% pool of investments, the value of the securities of any corporate issuer (even if we hold more than 10% of the corporate issuer's voting securities) so long as at the time of the latest investment in the applicable corporate issuer's securities the tax basis which we have in all securities issued by the corporate issuer does not exceed 5% of the total value of all of our assets. This exception does not apply if we have continuously held any securities of the applicable corporate issuer for a period of 10 years. In order for the modified diversification rule to apply, the SEC must determine and certify to the Internal Revenue Service, or the IRS, no more than 60 days prior to the close of a tax year that we are principally engaged in furnishing capital to corporations which corporations are themselves principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously available. For purposes of these determinations, a corporation shall be considered principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously available for at least 10 years after the first acquisition of any security in such corporation by us if, at the date of the original acquisition, the issuer corporation was principally so engaged. In addition, we shall be considered at any date to be furnishing capital to any corporation whose securities we hold, if within 10 years before such date, we have acquired securities in the applicable corporate issuer. The modified diversification rule does not apply to any quarter if, at the close of such quarter, more than 25% of our total assets are comprised of securities of corporate issuers, with respect to each of which (i) we hold more than 10% of the outstanding voting securities of such issuer and (ii) we have continuously held a security of such issuer (or a predecesor) for ten or more years. If we acquire debt obligations that were originally issued at a discount, or that bear interest at rates that are not fixed (or certain "qualified variable rates") or that is not payable, or payable at regular intervals over the life of the obligation, we will be required to include in taxable income each year a portion of the "original issue discount" that accrues over the life of the obligation, regardless of whether the income is received by us, and 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, we may be required to sell temporary investments or other assets to meet the distribution requirements. For any period during which we qualify for treatment as a regulated investment company for federal income tax purposes, distributions to stockholders attributable to our ordinary income (including dividends, interest and original issue discount) and net short-term capital gains generally will be taxable as ordinary income to stockholders to the extent of our current or accumulated earnings and profits. Distributions in excess of our earnings and profits will first be treated as a return of capital which reduces the stockholder's adjusted basis in his or her shares of common stock and then as gain from the sale of shares of our common stock. Distributions of our net long-term capital gains (designated by us as capital gain dividends) will be taxable to stockholders as long-term capital gains regardless of the stockholder's holding period in his or her common stock. 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 us does not exceed the dividends received by us from domestic corporations. Any dividend declared by us 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 us and received by the stockholders on December 31 of the previous year. In addition, we may elect to relate a dividend back to the prior taxable year if we (i) declare such dividend prior to the due date for filing our return for that taxable year, (ii) make the election in that return, and (iii) distribute the amount in the 12-month period following the close of the taxable year but not later than the first regular dividend payment following the declaration. Any such election will not alter the general rule that a stockholder will be treated as receiving a dividend in the taxable year in which the distribution is made (subject to the October, November, December rule described above). To the extent that we retain any capital gains, we may designate them as "deemed distributions" and pay a tax thereon for the benefit of our stockholders. In that event, the stockholders report their share of retained realized long-term capital gains on their individual tax returns as if the share had been received, and report a credit for the tax paid thereon by us. The amount of the deemed distribution net of such tax is then added to the stockholder's cost basis for his or her common stock. Since we expect to pay tax on capital gains at regular corporate tax rates and the rate payable by individuals on such gains can currently 10 be as low as 20%, the amount of credit that individual stockholders may report is expected to exceed the amount of tax that they would be required to pay on long-term capital gains. Stockholders who are not subject to federal income tax or tax on long-term capital gains should be able to file a return on the appropriate form or a claim for refund that allows them to recover the taxes paid on their behalf. Section 1202 of the Code permits the exclusion, for federal income tax purposes, of 50% of any gain (subject to certain limitations) realized upon the sale or exchange of "qualified small business stock" held for more than five years. Generally, qualified small business stock is stock of a small business corporation acquired directly from the issuing corporation, which must (i) at the time of issuance and immediately thereafter have assets of not more than $50 million and (ii) throughout substantially all of the holder's holding period for the stock be actively engaged in the conduct of a trade or business not excluded by law. If we acquire qualified small business stock, hold such stock for five years and dispose of such stock at a profit, a stockholder who held shares of our Common Stock at the time we purchased the qualified small business stock and at all times thereafter until we disposed of the stock would be entitled to exclude from such stockholder's taxable income 50% of such stockholder's share of such gain. 42% (28% for stock the holding period for which begins after December 31, 2000) of any amount so excluded would be treated as a preference item for alternative minimum tax purposes. Comparable rules apply under the qualified small business stock "rollover" provisions of section 1045 of the Code, under which gain otherwise reportable by individuals with respect to sales by us of qualified small business stock held for more than six months can be deferred if we reinvest the sales proceeds within 60 days in other qualified small business stock. A stockholder may recognize taxable gain or loss if the stockholder sells or exchanges such stockholder's shares of Common Stock. Any gain arising from the sale or exchange of Common Stock generally will be treated as capital gain or loss if the Common Stock is held as a capital asset, and will be treated as long-term capital gain or loss if the stockholder has held his or her shares of Common Stock for more than one year. However any capital loss arising from a sale or exchange of shares of Common Stock held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends (or undistributed capital gain) received with respect to such shares of Common Stock. We 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 us with their correct taxpayer identification number or a certificate that the stockholder is exempt from backup withholding, or if the IRS notifies us that the stockholder is subject to backup withholding. Any amounts withheld may be credited against a stockholder's U.S. federal income tax liability. Federal withholding taxes at a 30% rate (or a lesser treaty rate) may apply to distributions to stockholders that are nonresident aliens or foreign partnerships, trusts or corporations. Foreign stockholders should consult their tax advisers with respect to the possible U.S. federal, state and local and foreign tax consequences of an investment in us. Unless an exception applies, we 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 includible in such stockholder's taxable income for such year as net investment income, as net realized capital gains (if applicable) and as "deemed" distributions of capital gains, including taxes paid by us with respect thereto. In addition, absent an exemption, the federal tax status of each year's distributions will be reported to the IRS. Distributions may also be subject to additional state, local and foreign taxes depending on each stockholder's particular situation. Stockholders should consult their own tax advisers with respect to the particular tax consequences to them of an investment in us. Under our Dividend Reinvestment Plan, all cash distributions to stockholders will be automatically reinvested in additional whole and fractional shares of our common stock unless you elect to receive cash. For federal income tax purposes, however, you will be deemed to have constructively received cash and such amounts should be included in your income to the extent such constructive distribution otherwise represents a taxable dividend for the year in which such distribution is credited to your account. The amount of the distribution is the value of the shares of Common Stock acquired through the Plan. 11 ERISA MATTERS The provisions of the Employee Retirement Income Security Act of 1974, as amended, are complex. Consequently, if you are subject to ERISA, you should consult with your own financial and legal Advisers prior to investing in our shares of common stock. A fiduciary of a pension, profit-sharing or other employee benefit plan which is subject to ERISA, and those purchasing our shares on behalf of an Individual Retirement Account, may wish to consider the requirements of ERISA and/or the Internal Revenue Code, as applicable, in the context of your particular circumstances before purchasing our shares of common stock. Among other factors, you may wish to consider: - Whether an investment in our shares satisfies the prudence requirements of Section 404(a)(1)(B) of ERISA; - Whether an investment in our shares satisfies the diversification requirements of Section 404(a)(1)(C) of ERISA; - Whether an investment in our shares is in accordance with your governing documents as required by Section 404(a)(1)(D) of ERISA; - Whether an investment in our shares will trigger a prohibited transaction in violation of Section 406 of ERISA or Section 408(e)(2) or 4975 of the Internal Revenue Code; and - To what extent the definition of "plan assets" under ERISA and Department of Labor regulations may affect an investment in our shares. Neither ERISA nor the Internal Revenue Code defines "plan assets." However, pursuant to Department of Labor regulations, the assets of certain pooled investment vehicles, including certain partnerships, may be treated as "plan assets." If our assets are deemed to be "plan assets" of an employee plan or an IRA that purchases our shares of common stock: - The prudence standards and other ERISA provisions will be deemed applicable to our investments in portfolio companies; - Those who have investment discretion over your assets will be liable under ERISA for our investments in portfolio companies that do not conform to the ERISA standards; and - Certain transactions that we may enter into in the future in the ordinary course of our business might constitute prohibited transactions under ERISA and/or the Internal Revenue Code. A prohibited transaction, in addition to imposing potential personal liability upon fiduciaries of plans subject to ERISA and IRA's, may also result in the imposition of an excise tax under the Internal Revenue Code upon the disqualified person participating in the prohibited transaction. Such an event could also result in disqualification of the IRA. Our assets would not be considered "plan assets" under ERISA and Department of Labor regulations as long as our shares of common stock are "publicly-offered securities". Under the regulations, a share will be considered a "publicly-offered security" if it is widely held, freely transferable, and sold to an ERISA plan or IRA pursuant to an effective registration statement under the Securities Act of 1933, as amended, provided that our shares are registered under the Securities Exchange Act of 1934 within a specified time period. Whether a security is considered "freely transferable" depends on the facts and circumstances of each case. Generally, if the security is part of an offering in which the minimum investment is $10,000 or less, certain restrictions, by themselves, will not prevent the security from being considered freely transferable. The minimum investment permitted in our shares is $ and we have imposed no restrictions on transfer or assignment of the shares, other than the limitations set forth under "Suitability requirements." A class of securities is considered "widely-held" if, immediately after the initial offering, it is owned by 100 or more investors independent of the issuer and of one another. We believe that our shares of common stock will be considered "publicly-offered securities" and that our assets will not be considered "plans assets" of the ERISA plans and IRAs that buy our shares. 12 TRANSFER AGENT AND REGISTRAR State Street Bank and Trust Company will act as our Transfer Agent and Registrar. DIVIDEND DISBURSING AGENT State Street Bank and Trust Company will act as our Dividend Disbursing Agent. CUSTODIAN State Street Bank and Trust Company will act as our Custodian with responsibility for the safekeeping of our assets covered under the Custodian Agreement. SUB-ADMINISTRATOR State Street Bank and Trust Company will act as our Sub-Administrator. 13 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS The following financial statements and exhibits are filed as part of the Registration Statement. 1. Financial Statements. + Statement of Assets and Liabilities of Registrant, dated as of December 8, 1999. 2. Exhibits: **99.a Certificate of Incorporation of Registrant. **99.b Bylaws of Registrant. 99.c Not applicable. *99.d Form of share certificate. +99.e Form of Dividend Reinvestment Plan. 99.f Not applicable. **99.g(1) Form of Investment Advisory Agreement between Registrant and meVC Advisers, Inc. **99.g(2) Form of Investment Sub-Advisory Agreement between meVC Advisers, Inc. and Draper Fisher Jurvetson MeVC Management Co., LLC. *99.h Form of Underwriting Agreement. 99.i Not applicable. +99.j Form of Custodian Agreement between Registrant and State Street Bank and Trust Company. +99.k(1) Form of Registrar, Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Company. +99.k(2) Form of Sub-Administration Agreement between State Street Bank and Trust Company and meVC Advisers, Inc. on behalf of Registrant. **99.k(3) Form of Indemnification Agreement for Registrant's directors and officers. *99.l Opinion and Consent of Pillsbury Madison & Sutro LLP, San Francisco, California. 99.m Not applicable. +99.n Consent of PricewaterhouseCoopers LLP, San Francisco, California. 99.o Not applicable. 99.p Not applicable. 99.q Not applicable.
- ------------------------ + filed herewith * to be filed by amendment ** previously filed ITEM 25. MARKETING ARRANGEMENTS. Not Applicable. C-1 ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Registration fees........................................... $ 132,000 Legal fees.................................................. 750,000 NASD fees................................................... 30,500 Accounting fees............................................. 6,200 Printing fees............................................... -- Miscellaneous fees.......................................... -- Total fees.................................................. $ -- ============
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. Each of the following entities may be deemed to be under common control with the Registrant:
ENTITY BASIS OF POTENTIAL COMMON CONTROL JURISDICTION - -------------------------- ------------------------------------- ------------ Draper Associates Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Associates II Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Fisher Associates Entity or its investment adviser is Fund III under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Fisher Associates Entity or its investment adviser is Fund IV under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Fisher Jurvetson Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Fisher Jurvetson Entity or its investment adviser is Fund V under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Fisher Jurvetson Entity or its investment adviser is Fund VI under common control, or is otherwise affiliated with, Registrant's investment sub-adviser
C-2
ENTITY BASIS OF POTENTIAL COMMON CONTROL JURISDICTION - -------------------------- ------------------------------------- ------------ Draper Network Affiliates, Entity or its investment adviser is LLC under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Zone Ventures Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Atlantic Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Triangle Ventures Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Wasatch Venture Fund Entity or its investment adviser is under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Draper Fisher Jurvetson Entity or its investment adviser is Gotham Ventures under common control, or is otherwise affiliated with, Registrant's investment sub-adviser Timberline Venture Entity or its investment adviser is Partners under common control, or is otherwise affiliated with, Registrant's investment sub-adviser meVC.com, Inc. Sole stockholder of Registrant's investment adviser
ITEM 28. NUMBER OF HOLDERS OF SECURITIES. As of December 8, 1999:
TITLE OF CLASS HOLDERS OF RECORD - -------------- ----------------- Common Stock, $.01 par value................................ -1 -
ITEM 29. INDEMNIFICATION. Reference is made to the provisions of Article XIII of Registrant's Certificate of Incorporation, Article 5 of Registrant's Bylaws and the form of Indemnification Agreement for directors and officers of the Registrant, each of which is filed as an exhibit to this Registration Statement. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised by the Securities and Exchange Commission that such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of C-3 any action, suit or proceeding) is asserted by any such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER. meVC Advisers, Inc., a Delaware corporation, is Registrant's investment Adviser. meVC Advisers is a wholly-owned subsidiary of meVC.com, Inc., a Delaware corporation. meVC Advisers is a newly organized corporation with no prior operating history. Other than the services provided to Registrant and described in this Registration Statement, meVC Advisers provides no investment management or advisory services to any other person or entity. The list required by this Item 30 of officers and directors of meVC Advisers, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated by reference to Schedules A and D of the Form ADV, filed by meVC Advisers with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940, as amended (SEC File No. ), on , 2000. Draper Fisher Jurvetson MeVC Management Co., LLC, a California limited liability company, is an investment sub-adviser under contract with meVC Advisers. Draper Advisers is a newly organized limited liability company with no prior operating history. Other than the services provided to meVC Advisers and described in this Registration Statement, Draper Advisers provides no investment management or advisory services to any other person or entity. The list required by this Item 30 of members, officers and directors of Draper Advisers, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by such members, officers and directors during the past two years, is incorporated by reference to Schedules C and D of the Form ADV, filed by Draper Advisers with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940, as amended (SEC File No. ), on , 2000 ITEM 31. LOCATION OF ACCOUNTS AND RECORDS. Fund: meVC Draper Fisher Jurvetson Fund I, Inc. 991 Folsom Street, Suite 301 San Francisco, California 94107 Custodian: State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 Investment meVC Advisers, Inc. Adviser: 991 Folsom Street, Suite 301 San Francisco, California 94107
ITEM 32. MANAGEMENT SERVICES. Not Applicable. ITEM 33. UNDERTAKINGS. 1. Registrant undertakes to suspend the offering of shares until the prospectus is amended if, subsequent to the effective date of its registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the registration statement. 2. Registrant undertakes: C-4 (a) To file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 3. Registrant undertakes that: (a) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (b) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 4. Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery within two business days of receipt of a written or oral request, Registrant's Statement of Additional Information. C-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Registrant has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on the 11th day of February, 2000. MEVC DRAPER FISHER JURVETSON FUND I, INC. By: /s/ JOHN M. GRILLOS ----------------------------------------- John M. Grillos CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 2 to the Registration Statement has been executed by the following persons in the capacities indicated on February 11, 2000.
NAME TITLE ---- ----- Chairman of the Board, Chief /s/ JOHN M. GRILLOS Executive Officer and ------------------------------------------- Director (principal John M. Grillos executive officer and director) /s/ PETER S. FREUDENTHAL ------------------------------------------- Vice Chairman and Director Peter S. Freudenthal Vice President, Treasurer, and /s/ PAUL WOZNIAK Chief Financial Officer ------------------------------------------- (principal financial and Paul Wozniak accounting officer)
POWER OF ATTORNEY In addition to signing this Registration Statement, the undersigned hereby constitutes and appoints John M. Grillos, Peter S. Freudenthal, Andrew E. Singer and Kenneth Priore, and each of them individually, his attorneys-in-fact and agents, with full power of substitution and resubstitution in his name and stead, and in his capacity as a director and/or officer, as the case may be, of meVC Draper Fisher Jurvetson Fund I, Inc., to sign and file such amendments to this Registration Statement, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining thereto, with full power and authority to do and perform all acts and things requisite and necessary to be done on the premises.
NAME TITLE ---- ----- /s/ JOHN M. GRILLOS Chairman of the Board, Chief ------------------------------------------- Executive Officer and John M. Grillos Director /s/ PETER S. FREUDENTHAL ------------------------------------------- Vice Chairman and Director Peter S. Freudenthal /s/ PAUL WOZNIAK ------------------------------------------- Vice President, Treasurer, and Paul Wozniak Chief Financial Officer
C-6 EXHIBIT INDEX
EXHIBIT EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- **99.a Certificate of Incorporation of Registrant **99.b Bylaws of Registrant *99.d Form of Share Certificate +99.e Form of Dividend Reinvestment Plan **99.g(1) Form of Investment Advisory Agreement between Registrant and meVC Advisers, Inc. **99.g(2) Form of Investment Sub-Advisory Agreement between meVC Advisers, Inc. and Draper Fisher Jurvetson MeVC Management Co., LLC. *99.h Form of Underwriting Agreement +99.j Form of Custodian Agreement between Registrant and State Street Bank and Trust Company. +99.k(1) Form of Registrar, Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Company. +99.k(2) Form of Sub-Administration Agreement between State Street Bank and Trust Company and meVC Advisers, Inc. on behalf of Registrant **99.k(3) Form of Indemnification Agreement for Registrant's directors and officers *99.l Opinion and Consent of Pillsbury Madison & Sutro LLP, San Francisco, California +99.n Consent of PricewaterhouseCoopers LLP, San Francisco, California
- ------------------------ + Filed herewith * To be filed by amendment ** Previously filed EX-99.E 2 EXHIBIT 99(E) EXHIBIT 99.e meVC DRAPER FISHER JURVETSON FUND I, INC. DIVIDEND REINVESTMENT PLAN meVC Draper Fisher Jurvetson Fund I, Inc. (the "Fund") has adopted a Dividend Reinvestment Plan (the "Plan"), the terms and conditions of which are as follows: 1. PARTICIPATION. Stockholders of whose shares of the Fund's common stock, $.01 par value ("Common Stock"), are registered in their own names will be included in the Plan unless they opt out of participation in the Plan. Stockholders who do not opt out will be deemed to have appointed State Street Bank and Trust Company (the "Plan Agent") as their agent and as agent for the Fund under the Plan. In the case of Common Stock held in the name of banks, brokers or other nominees on behalf of others who are the beneficial owners of such Common Stock ("Nominee Stockholders"), the Plan Agent will administer the Plan on the basis of the number of shares of Common Stock certified by such Nominee Stockholders as registered for stockholders that have not elected to opt out of participation in the Plan. 2. DIVIDEND INVESTMENT ACCOUNT. The Plan Agent or its delegate will establish a Dividend Investment Account (an "Account") for each stockholder participating in the Plan. The Plan Agent will credit to the Account of each participant funds it receives from the following sources: (a) cash dividends and capital gains distributions paid on shares of the Fund's Common Stock registered in the participant's name on the books of the Fund and (b) cash dividends and capital gains distributions paid on shares of Common Stock registered in the name of Plan Agent and credited to the participant's Account (collectively, "Distributions"). 3. INVESTMENT OF DISTRIBUTION FUNDS HELD IN EACH ACCOUNT. (a) COMMON STOCK NOT LISTED ON A NATIONAL SECURITIES EXCHANGE. If, on the record date for a Distribution (the "Record Date"), the Fund's Common Stock is not listed and trading on a national securities exchange, the Fund will issue to the Plan Agent shares of Common Stock valued at net asset value per share (according to the valuation most recently made on shares of the Fund's Common Stock) ("NAV") in the aggregate amount of the Distribution. Such shares may be newly issued by the Fund or may be issued out of treasury stock held by the Fund. (b) COMMON STOCK LISTED ON A NATIONAL SECURITIES EXCHANGE. If, on the Record Date, the Fund's Common Stock is listed on a national securities exchange and trading at a discount from NAV, funds credited to a participant's Account will be used to purchase shares of Common Stock (a "Purchase"). The Plan Agent will attempt, commencing five days prior to the last business day of the month in which a Record Date occurs (the "Payment Date") and ending at the close of business on the Payment Date, to acquire shares of Common Stock in the open market. If and to the extent that the Plan Agent is unable to acquire sufficient shares of Common Stock to satisfy the Distribution by the close of business on the Payment Date, the Fund will issue to the Plan Agent shares of Common Stock valued at NAV in the aggregate amount of the remaining value of the Distribution (which may be newly issued shares or issued out of the Fund's treasury stock). If, on the Record Date, shares of Common Stock are trading at a premium over NAV, the Fund will issue on the Payment Date shares of its Common Stock (which may be newly issued shares or issued out of the Fund's treasury stock) valued at NAV on the Record Date to the Plan Agent in the aggregate amount of the funds credited to the participants' accounts. 4. ADJUSTMENT OF PURCHASE PRICE. In connection with each Distribution, the Plan Agent will make a determination of the market value per share of Common Stock (i) if the Fund's Common Stock is not listed on a national securities exchange, by valuing such Common Stock at NAV, or (ii) if the Fund's Common Stock is listed on a national securities exchange, by taking the higher of the average of the closing sales prices at which shares of the Fund's Common Stock traded on the last five days on which trading took place on such national securities exchange prior to the Payment Date, or 95% of the opening sales price on the Payment Date, which may be up to three months after the date as of which the NAV was last determined. 5. DETERMINATION OF PURCHASE PRICE. The cost of full and fractional shares of Common Stock acquired for each participant's Account in connection with a Purchase shall be determined by the average cost per share, including brokerage commissions as described in Paragraph 4 hereof, of the shares of Common Stock acquired by the Plan Agent in connection with that Purchase. Stockholders will receive a confirmation showing the average cost and number of shares of Common Stock acquired as soon as practicable after the Plan Agent has received or the Plan Agent has purchased shares of Common Stock. The Plan Agent may commingle the cash in a participant's account with similar funds of other participants of the Fund for whom the Plan Agent acts as agent under the Plan. 6. BROKERAGE CHARGES. There will be no brokerage charges with respect to shares of Common Stock issued directly by the Company as a result of a Distribution. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of a Distribution. Brokerage charges for purchasing small amounts of shares of Common Stock for individual Accounts through the Plan can be expected to be less than the usual brokerage charges for such transactions, as the Plan Agent will be purchasing shares of Common Stock for all participants in blocks and prorating the lower commission thus attainable. 7. SERVICE CHARGES. There is currently no service charge imposed on participants in the Plan. The Fund reserves the right, however, in its sole discretion, to amend the Plan at any time to include a service charge. 8. TRANSFER OF SHARES HELD BY THE PLAN AGENT The Plan Agent will maintain each participant's Account and furnish each such participant with written confirmation of all transactions in such participant's Account. Shares of Common Stock in the Account are transferable only upon proper written instructions delivered by a stockholder of record to the Plan Agent. 9. AMENDMENT AND TERMINATION OF THE PLAN. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan, including any provisions with respect to a Distribution paid subsequent to notice thereof sent to participants in the Plan at least 90 days before the record date for such Distribution. 10. WITHDRAWAL FROM THE PLAN. Stockholders may withdraw from the Plan at any time by delivering written notice to the Plan Agent. If the proceeds of any withdrawing stockholder's Account are $25,000 or less and the proceeds are to be payable to the stockholder of record and mailed to the address of record, a signature guarantee normally will not be required for notices by individual account owners (including joint account owners). In all other cases, however, the Plan Agent will require a signature guarantee. A notice of withdrawal will be effective for the next Distribution following receipt of the notice by the Plan Agent; PROVIDED, the notice is received by the Plan Agent at least 10 days prior to the Record Date for such Distribution. When a participant withdraws from the Plan, or when the Plan is terminated in accordance with Paragraph 9 hereof, the withdrawing participant will receive a cash payment for any fractional shares of Common Stock based on NAV or the market price on the date of withdrawal or termination, whichever is applicable. -2- EX-99.(J) 3 EXHIBIT 99(J) EXHIBIT 99.j CUSTODIAN AGREEMENT This Agreement is made as of January 31, 2000 by and between meVC DRAPER FISHER JURVETSON FUND I, INC. a corporation organized and existing under the laws of Delaware (the "FUND"), and STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN"), WITNESSETH: That in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT The Fund hereby employs the Custodian as the custodian of its assets, including securities which the Fund desires to be held in places within the United States ("DOMESTIC SECURITIES") and securities it desires to be held outside the United States ("FOREIGN SECURITIES"). The Fund agrees to deliver to the Custodian all securities and cash owned by it, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by it from time to time, and the cash consideration received by it for such new or treasury shares of beneficial interest of the Fund ("SHARES") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian. Further, the Custodian shall not be responsible for any distribution-in-kind regarding an asset of the Fund to, or for the benefit of, any holder of the Fund's Shares. Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 5 hereof), the Custodian shall from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Directors of the Fund (the "BOARD"), and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign securities the foreign banking institutions and foreign securities depositories designated in Schedules A and B hereto but only in accordance with the applicable provisions of Sections 3 and 4. SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE CUSTODIAN IN THE UNITED STATES SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, to be held by it in the United States including all domestic securities owned by the Fund, other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a "U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER") which is deposited and/or maintained in the Direct Paper System of the Custodian (the "DIRECT PAPER SYSTEM") pursuant to Section 2.9. SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities owned by the Fund held by the Custodian or in a U.S. Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Fund; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; PROVIDED that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 2. 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Fund, BUT ONLY against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund, BUT ONLY against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission ("CFTC") and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; and 14) For any other proper purpose, BUT ONLY upon receipt of Proper Instructions from the Fund specifying the securities of the Fund to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, UNLESS the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment advisor as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Agreement 3. shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; PROVIDED, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of the Fund in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of 4. the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.9; (d) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein; 2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof; 3) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 4) For the payment of any dividends on Shares declared pursuant to the governing documents of the Fund; 5) For payment of the amount of dividends received in respect of securities sold short; and 6) For any other proper corporate purpose, BUT ONLY upon receipt of Proper Instructions from the Fund specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made. SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; PROVIDED, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit and/or maintain securities owned by the Fund in a clearing agency registered with 5. the United States Securities and Exchange Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "U.S. SECURITIES SYSTEM" in accordance with applicable Federal Reserve Board and SEC rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep securities of the Fund in a U.S. Securities System provided that such securities are represented in an account of the Custodian in the U.S. Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT") which account shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Fund which are maintained in a U.S. Securities System shall identify by book-entry those securities belonging to the Fund; 3) The Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the U.S. Securities System that such securities have been transferred to the U.S. Securities System Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the U.S. Securities System that payment for such securities has been transferred to the U.S. Securities System Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the U.S. Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Fund; 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System; and 5) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian 6. may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 7. SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may deposit and/or maintain securities owned by the Fund in the Direct Paper System of the Custodian subject to the following provisions: 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions; 2) The Custodian may keep securities of the Fund in the Direct Paper System only if such securities are represented in the Direct Paper System Account, which account shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Fund which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Fund; 4) The Custodian shall pay for securities purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; 5) The Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transaction in the Direct Paper System for the account of the Fund; and 6) The Custodian shall provide the Fund with any report on its system of internal accounting control as the Fund may reasonably request from time to time. SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release 8. SEC, or interpretive opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper purposes, BUT ONLY, in the case of clause (iv), upon receipt of Proper Instructions the purpose or purposes of such segregated account and declaring such purpose(s) to be a proper corporate purpose. SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of the Fund held by it and in connection with transfers of securities. SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. SECTION 2.13 COMMUNICATIONS RELATING TO FUND SECURITIES. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE FUND SECTION 3.1 DEFINITIONS. The following capitalized terms shall have the indicated meanings: Capitalized terms in this Article 3 shall have the following meanings: "COUNTRY RISK" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment; economic and financial infrastructure (including any Mandatory Securities Depositories operating in the country); prevailing or developing custody and settlement practices; and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. 9. "ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act, except that the term does not include Mandatory Securities Depositories. "FOREIGN ASSETS" means any of the Fund's investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Fund's transactions in such investments. "FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule 17f-5. "MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or clearing agency that, either as a legal or practical matter, must be used if the Fund determines to place Foreign Assets in a country outside the United States (i) because required by law or regulation; (ii) because securities cannot be withdrawn from such foreign securities depository or clearing agency; or (iii) because maintaining or effecting trades in securities outside the foreign securities depository or clearing agency is not consistent with prevailing or developing custodial or market practices. SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Fund, by resolution adopted by the Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3 with respect to Foreign Assets held outside the United States, and the Custodian hereby accepts such delegation, as Foreign Custody Manager of the Fund SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the Fund's assets, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. Mandatory Securities Depositories are listed on Schedule B to this Contract, which Schedule B may be amended from time to time by the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedules A and B in accordance with Section 3.7 hereof. Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account, or to place or maintain Foreign Assets, in a country listed on Schedule A, and the fulfillment by the Fund of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the 10. account of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Fund with respect to that country. The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period as to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn. SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES. 3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1). 3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract (or the rules or established practices or procedures in the case of an Eligible Foreign Custodian that is a foreign securities depository or clearing agency) governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2). 3.4.3. MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules or established practices and procedures in the case of an Eligible Foreign Custodian selected by the Foreign Custody Manager which is a foreign securities depository or clearing agency that is not a Mandatory Securities Depository). In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.7 hereunder. SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for 11. which the Custodian is serving as Foreign Custody Manager of the Fund, and the Board shall be deemed to be monitoring on a continuing basis such Country Risk to the extent that the Board considers necessary or appropriate. The Fund and the Custodian each expressly acknowledge that the Foreign Custody Manager shall not be delegated any responsibilities under this Section 3 with respect to Mandatory Securities Depositories. SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE FUND. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise. SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board amended Schedules A or B at the end of the calendar quarter in which an amendment to either Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Fund described in this Section 3 after the occurrence of the material change. SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Fund. SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of the Fund shall be effective as of the date of execution of this Agreement and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.3 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Fund with respect to designated countries. SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE OF THE UNITED STATES SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have the following meanings: "FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities depository listed on Schedule A hereto or a Mandatory Securities Depository listed on Schedule B hereto. 12. "FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an Eligible Foreign Custodian. SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Fund the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Fund, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the Custodian with respect to foreign securities of the Fund which are maintained in such account shall identify those securities as belonging to the Fund and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub-Custodian in such country pursuant to the terms of this Agreement. SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 4.4.1. DELIVERY OF FOREIGN SECURITIES. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Fund held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Fund in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Fund; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; 13. (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; PROVIDED that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; (ix) for delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund; (x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (xi) in connection with the lending of foreign securities; and (xii) for any other proper purpose, BUT ONLY upon receipt of Proper Instructions specifying the foreign securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 4.4.2. PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of the Fund in the following cases only: (i) upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Fund; 14. (iii) for the payment of any expense or liability of the Fund, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vi) in connection with the borrowing or lending of foreign securities; and (vii) for any other proper purpose, BUT ONLY upon receipt of Proper Instructions specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made. 4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Fund and delivery of Foreign Assets maintained for the account of the Fund may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian, including without limitation information relating to Foreign Securities Systems, described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder. SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of the Fund under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. 15. SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts opened and maintained outside the United States on behalf of the Fund with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Fund. SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Fund shall be entitled and shall credit such income, as collected, to the Fund. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Agreement, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith) received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Fund at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. 16. SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and, to the extent possible, to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Fund's election, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund or the Custodian as custodian of the Fund by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information. SECTION 4.12 CONFLICT. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Section 3 hereof, in the event of any conflict between the provisions of Sections 3 and 4 hereof, the provisions of Section 3 shall prevail. SECTION 5. PROPER INSTRUCTIONS Proper Instructions as used throughout this Agreement means a writing signed or initialed by one or more person or persons as the Board shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Fund and the Custodian agree to security procedures, including but not limited to, the security procedures selected by the Fund in the Funds Transfer Addendum attached hereto. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.10. SECTION 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY 17. The Custodian may in its discretion, without express authority from the Fund: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, PROVIDED that all such payments shall be accounted for to the Fund; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board. 18. SECTION 7. EVIDENCE OF AUTHORITY The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a copy of a resolution of the Board of the Fund certified by the Secretary or an Assistant Secretary of the Fund (a "Certified Resolution") as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. SECTION 8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board to keep the books of account of the Fund and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per Share. If so directed, the Custodian shall also calculate weekly the net income of the Fund as described in the Fund's currently effective prospectus and statement of additional information (the "Prospectus") and shall advise the Fund and the transfer agent for the Fund (the "Transfer Agent") weekly of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per Share and the weekly income of the Fund shall be made at the time or times described from time to time in the Prospectus. SECTION 9. RECORDS The Custodian shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Fund under the 1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the SEC. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. SECTION 10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants 19. with respect to its activities hereunder in connection with the preparation of the Fund's Form N-2, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof. SECTION 11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System, relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. SECTION 12. COMPENSATION OF CUSTODIAN The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Custodian and the Fund's investment advisor (the "Investment Advisor"). In connection therewith, the Fund hereby guaranties full payment and punctual performance and fulfillment to the Custodian of all liabilities, obligations and undertakings of the Investment Advisor to the Custodian, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising or acquired, under any fee schedule regarding any service provided by the Custodian for the benefit of the Fund or any cost, expense or disbursement relative thereto, and all present or future agreements arising from, or relative to, the subject matter thereof. The guaranty contained herein shall survive the termination of this Agreement. SECTION 13. RESPONSIBILITY OF CUSTODIAN So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. The Custodian shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything which is (A) part of Country Risk (as defined in Section 3 20. hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism, or (B) part of the "prevailing country risk" of the Fund, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other similar terms are now or in the future interpreted by the SEC or by the staff of the Division of Investment Management thereof. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by the Fund or the Investment Advisor in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally in this Agreement. If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, or if either the Investment Advisor or the 21. Fund has not compensated the Custodian in accordance with Section 12 above, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay, or the Fund or the Investment Advisor fail to compensate, the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund's assets to the extent necessary to obtain reimbursement or compensation, as the case may be. In no event shall the Custodian be liable for indirect, special or consequential damages. SECTION 14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; PROVIDED, however, that the Fund shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of the Fund's Articles of Incorporation, and further provided, that the Fund may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. SECTION 15. SUCCESSOR CUSTODIAN If a successor custodian for the Fund shall be appointed by the Board, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities then held by it hereunder and shall transfer to an account of the successor custodian all of the securities held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a copy of a Certified Resolution, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution. In the event that no written order designating a successor custodian or copy of a Certified Resolution shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement, and to transfer to an account of such successor custodian all of 22. the Fund's securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the Certified Resolution to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect. SECTION 16. INTERPRETIVE AND ADDITIONAL PROVISIONS In connection with the operation of this Agreement, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, PROVIDED that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Fund's Articles of Incorporation. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. SECTION 17. MASSACHUSETTS LAW TO APPLY This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. SECTION 18. PRIOR AGREEMENTS This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between the Fund and the Custodian relating to the custody of the Fund's assets. SECTION 19. NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time. To the Fund: meVC DRAPER FISHER JURVETSON FUND I, INC. 991 Folsom Street Suite 301 San Francisco, California 94107 23. Attention: Paul Wozniak, Chief Financial Officer Telephone: 415-977-6150 ext. 14 Telecopy: 415-977-6160 To the Custodian: STATE STREET BANK AND TRUST COMPANY 150 Newport Avenue, AFB4 North Quincy, Massachusetts 02171 Attention: Scott E. Corrick, Vice President Telephone: 617-985-5683 Telecopy: 617-537-6355 Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting. SECTION 20. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, addenda, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. SECTION 21. DATA ACCESS SERVICES ADDENDUM The Custodian and the Fund agree to be bound by the terms of the Data Access Services Addendum attached hereto. SECTION 22. SHAREHOLDER COMMUNICATIONS ELECTION SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether it authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose securities the Fund owns. If the Fund tells the 24. Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below. YES / / The Custodian is authorized to release the Fund's name, address, and share positions. NO /X/ The Custodian is not authorized to release the Fund's name, address, and share positions. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 25. SIGNATURE PAGE IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative as of the day and year first above-written. meVC DRAPER FISHER JURVETSON FUND I, INC. FUND SIGNATURE ATTESTED TO BY: By: By: -------------------------- -------------------------- Name: Name: ------------------------ ------------------------ Title: President Title: Secretary STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY: By: --------------------------- ---------------------------- Ronald E. Logue, Vice Chairman Stephanie L. Poster, Vice President 26. SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Argentina Citibank, N.A. -- Australia Westpac Banking Corporation -- Austria Erste Bank der Oesterreichischen -- Sparkassen AG Bahrain HSBC Bank Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Bangladesh Standard Chartered Bank -- Belgium Fortis Bank NV/as. -- Bermuda The Bank of Bermuda Limited -- Bolivia Citibank, N.A. -- Botswana Barclays Bank of Botswana Limited -- Brazil Citibank, N.A. -- Bulgaria ING Bank N.V. -- Canada State Street Trust Company Canada -- Chile Citibank, N.A. -- People's Republic The Hongkong and Shanghai -- of China Banking Corporation Limited, Shanghai and Shenzhen branches Colombia Cititrust Colombia S.A. -- Sociedad Fiduciaria
27. SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Costa Rica Banco BCT S.A. -- Croatia Privredna Banka Zagreb d.d. -- Cyprus The Cyprus Popular Bank Ltd. -- Czech Republic Eeskoslovenska Obchodni -- Banka, A.S. Denmark Den Danske Bank -- Ecuador Citibank, N.A. -- Egypt Egyptian British Bank -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Estonia Hansabank -- Finland Merita Bank Plc. -- France Paribas, S.A. -- Germany Dresdner Bank AG -- Ghana Barclays Bank of Ghana Limited -- Greece National Bank of Greece S.A. Bank of Greece, System for Monitoring Transactions in Hong Kong Standard Chartered Bank --
28. SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Hungary Citibank Rt. -- Iceland Icebank Ltd. India Deutsche Bank A.G. -- The Hongkong and Shanghai Banking Corporation Limited Indonesia Standard Chartered Bank -- Ireland Bank of Ireland -- Israel Bank Hapoalim B.M. -- Italy Paribas, S.A. -- Ivory Coast Societe Generale de Banques -- en Cote d'Ivoire Jamaica Scotiabank Jamaica Trust and Merchant -- Bank Limited Japan The Fuji Bank, Limited Japan Securities Depository Center (JASDEC) The Sumitomo Bank, Limited Jordan HSBC Bank Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Kenya Barclays Bank of Kenya Limited -- Republic of Korea The Hongkong and Shanghai Banking Corporation Limited
29. SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Latvia A/s Hansabank -- Lebanon HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Lithuania Vilniaus Bankas AB -- Malaysia Standard Chartered Bank -- Malaysia Berhad Mauritius The Hongkong and Shanghai -- Banking Corporation Limited Mexico Citibank Mexico, S.A. -- Morocco Banque Commerciale du Maroc -- Namibia (via) Standard Bank of South Africa - The Netherlands MeesPierson N.V. -- New Zealand ANZ Banking Group -- (New Zealand) Limited Norway Christiania Bank og -- Kreditkasse ASA Oman HSBC Bank Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Pakistan Deutsche Bank A.G. -- Palestine HSBC Bank Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited)
30. SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Peru Citibank, N.A. -- Philippines Standard Chartered Bank -- Poland Citibank (Poland) S.A. -- Portugal Banco Comercial Portugues -- Qatar HSBC Bank Middle East -- Romania ING Bank N.V. -- Russia Credit Suisse First Boston AO, Moscow -- (as delegate of Credit Suisse First Boston, Zurich) Singapore The Development Bank -- of Singapore Limited Slovak Republic Ceskoslovenska Obchodni Banka, A.S. -- Slovenia Bank Austria Creditanstalt d.d. Ljubljana -- South Africa Standard Bank of South Africa Limited -- Spain Banco Santander Central Hispano, S.A. -- Sri Lanka The Hongkong and Shanghai -- Banking Corporation Limited Swaziland Standard Bank Swaziland Limited -- Sweden Skandinaviska Enskilda Banken --
31. SCHEDULE A STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Switzerland UBS AG -- Taiwan - R.O.C. Central Trust of China -- Thailand Standard Chartered Bank -- Trinidad & Tobago Republic Bank Limited -- Tunisia Banque Internationale Arabe de Tunisie -- Turkey Citibank, N.A. -- Ukraine ING Bank Ukraine -- United Kingdom State Street Bank and Trust Company, -- London Branch Uruguay BankBoston N.A. -- Venezuela Citibank, N.A. -- Vietnam The Hongkong and Shanghai -- Banking Corporation Limited Zambia Barclays Bank of Zambia Limited -- Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited Cedelbank S.A. (Cedel Bank, societe anonyme)/State Street London Limited INTERSETTLE (for EASDAQ Securities) 32. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Argentina Caja de Valores S.A. Australia Austraclear Limited Reserve Bank Information and Transfer System Austria Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division) Belgium Caisse Interprofessionnelle de Depots et de Virements de Titres S.A. Banque Nationale de Belgique Brazil Companhia Brasileira de Liquidacao e Custodia Bulgaria Central Depository AD Bulgarian National Bank Canada Canadian Depository for Securities Limited Chile Deposito Central de Valores S.A. People's Republic Shanghai Securities Central Clearing & of China Registration Corporation Shenzhen Securities Clearing Colombia Deposito Centralizado de Valores
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 33. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Costa Rica Central de Valores S.A. Croatia Ministry of Finance National Bank of Croatia Sredisnja Depozitarna Agencija Czech Republic Stredisko cennych papiru Czech National Bank Denmark Vaerdipapircentralen (Danish Securities Center) Egypt Misr Company for Clearing, Settlement, and Depository Estonia Eesti Vaartpaberite Keskdepositoorium Finland Finnish Central Securities Depository France Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres Germany Deutsche Borse Clearing AG Greece Central Securities Depository (Apothetirion Titlon AE) Hong Kong Central Clearing and Settlement System Central Moneymarkets Unit
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 34. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Hungary Kozponti Elszamolohaz es Ertektar (Budapest) Rt. (KELER) [MANDATORY FOR GOV'T BONDS AND DEMATERIALIZED EQUITIES ONLY; SSB DOES NOT USE FOR OTHER SECURITIES] India The National Securities Depository Limited Central Depository Services India Limited Reserve Bank of India Indonesia Bank Indonesia PT Kustodian Sentral Efek Indonesia Ireland Central Bank of Ireland Securities Settlement Office Israel Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearinghouse) Bank of Israel (As part of the TASE Clearinghouse system) Italy Monte Titoli S.p.A. Banca d'Italia Ivory Coast Depositaire Central - Banque de Reglement Jamaica Jamaica Central Securities Depository Japan Bank of Japan Net System Kenya Central Bank of Kenya
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 35. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Republic of Korea Korea Securities Depository Corporation Latvia Latvian Central Depository Lebanon Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (MIDCLEAR) S.A.L. The Central Bank of Lebanon Lithuania Central Securities Depository of Lithuania Malaysia Malaysian Central Depository Sdn. Bhd. Bank Negara Malaysia, Scripless Securities Trading and Safekeeping System Mauritius Central Depository & Settlement Co. Ltd. Mexico S.D. INDEVAL (Instituto para el Deposito de Valores) Morocco Maroclear The Netherlands Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF) New Zealand New Zealand Central Securities Depository Limited
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 36. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Norway Verdipapirsentralen (the Norwegian Central Registry of Securities) Oman Muscat Securities Market Depository & Securities Registration Company Pakistan Central Depository Company of Pakistan Limited State Bank of Pakistan Palestine The Palestine Stock Exchange Peru Caja de Valores y Liquidaciones CAVALI ICLV S.A. Philippines Philippines Central Depository, Inc. Registry of Scripless Securities (ROSS) of the Bureau of Treasury Poland National Depository of Securities (Krajowy Depozyt Papierow Wartosciowych SA) Central Treasury Bills Registrar Portugal Central de Valores Mobiliarios Qatar Doha Securities Market Romania National Securities Clearing, Settlement and Depository Company Bucharest Stock Exchange Registry Division National Bank of Romania
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 37. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Singapore Central Depository (Pte) Limited Monetary Authority of Singapore Slovak Republic Stredisko cennych papierov SR Bratislava, a.s. National Bank of Slovakia Slovenia Klirinsko Depotna Druzba d.d. South Africa The Central Depository Limited Strate Ltd. Spain Servicio de Compensacion y Liquidacion de Valores, S.A. Banco de Espana, Central de Anotaciones en Cuenta Sri Lanka Central Depository System (Pvt) Limited Sweden Vardepapperscentralen VPC AB (the Swedish Central Securities Depository) Switzerland SIS - SegaIntersettle Taiwan - R.O.C. Taiwan Securities Central Depository Co., Ltd. Thailand Thailand Securities Depository Company Limited
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 38. SCHEDULE B STATE STREET GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES Tunisia Societe Tunisienne Interprofessionelle pour la Compensation et de Depots de Valeurs Mobilieres Turkey Takas ve Saklama Bankasi A.S. (TAKASBANK) Central Bank of Turkey Ukraine National Bank of Ukraine United Kingdom The Bank of England, The Central Gilts Office and The Central Moneymarkets Office Venezuela Central Bank of Venezuela Zambia LuSE Central Shares Depository Limited Bank of Zambia
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 39. SCHEDULE C MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION - ------------------------------- -------------------------- (FREQUENCY) THE GUIDE TO CUSTODY IN WORLD MARKETS An overview of safekeeping and settlement practices and (annually) procedures in each market in which State Street Bank and Trust Company offers custodial services. GLOBAL CUSTODY NETWORK REVIEW Information relating to the operating history and structure of (annually) depositories and subcustodians located in the markets in which State Street Bank and Trust Company offers custodial services, including transnational depositories. GLOBAL LEGAL SURVEY With respect to each market in which State Street Bank and (annually) Trust Company offers custodial services, opinions relating to whether local law restricts (i) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) the Fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) the Fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars. SUBCUSTODIAN AGREEMENTS Copies of the subcustodian contracts State Street Bank and (annually) Trust Company has entered into with each subcustodian in the markets in which State Street Bank and Trust Company offers subcustody services to its US mutual fund clients. Network Bulletins (weekly): Developments of interest to investors in the markets in which State Street Bank and Trust Company offers custodial services. Foreign Custody Advisories (as necessary): With respect to markets in which State Street Bank and Trust Company offers custodial services which exhibit special custody risks, developments which may impact State Street's ability to deliver expected levels of service.
40. DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT THIS ADDENDUM to the Custodian Agreement (as such term is defined below) between meVC Draper Fisher Jurvetson Fund I, Inc. (the "Customer") and State Street Bank and Trust Company ("State Street"). PREAMBLE WHEREAS, State Street has been appointed as custodian of certain assets of the Customer pursuant to that certain Custodian Agreement dated as of January 31, 2000 (the "Custodian Agreement"); WHEREAS, State Street has developed and utilizes proprietary accounting and other systems, including State Street's proprietary Multicurrency HORIZON-SM- Accounting System, in its role as custodian of the Customer, and maintains certain Customer-related data ("Customer Data") in databases under the control and ownership of State Street (the "Data Access Services"); and WHEREAS, State Street makes available to the Customer certain Data Access Services solely for the benefit of the Customer, and intends to provide additional services, consistent with the terms and conditions of this Addendum. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the parties agree as follows: 1. SYSTEM AND DATA ACCESS SERVICES (a) SYSTEM. Subject to the terms and conditions of this Addendum, State Street hereby agrees to provide the Customer with access to State Street's Multicurrency HORIZON-SM- Accounting System and the other information systems (collectively, the "System") as described in Attachment A, on a remote basis for the purpose of obtaining reports and information, solely on computer hardware, system software and telecommunication links as listed in Attachment B (the "Designated Configuration") of the Customer, or certain third parties approved by State Street that serve as investment advisors or investment managers or in other service capacities to the Customer such as the Customer's independent auditors (each, an "Investment Advisor"), solely with respect to the Customer, or on any designated substitute or back-up equipment configuration with State Street's written consent, such consent not to be unreasonably withheld. (b) DATA ACCESS SERVICES. State Street agrees to make available to the Customer the Data Access Services subject to the terms and conditions of this Addendum and data access operating standards and procedures as may be issued by State Street from time to time. The ability of the Customer to originate electronic instructions to State Street on behalf of the Customer in order to (i) effect the transfer or movement of cash or securities held under custody by State Street or (ii) transmit accounting or other information (such transactions are referred to herein as "Client Originated Electronic Financial Instructions"), and (iii) access data for the purpose of reporting and analysis, shall be deemed to be Data Access Services for purposes of this Addendum. (c) ADDITIONAL SERVICES. State Street may from time to time agree to make available to the Customer additional Systems that are not described in the attachments to this Addendum. In the absence of any other written agreement concerning such additional systems, the term "System" shall include, and this Addendum shall govern, the Customer's access to and use of any additional System made available by State Street and/or accessed by the Customer. 2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE State Street and the Customer acknowledge that in connection with the Data Access Services provided under this Addendum, the Customer will have access, through the Data Access Services, to Customer Data and to functions of State Street's proprietary systems; provided, however that in no event will the Customer have direct access to any third party systems-level software that retrieves data for, stores data from, or otherwise supports the System. -1- 3. LIMITATION ON SCOPE OF USE (a) DESIGNATED EQUIPMENT; DESIGNATED LOCATION. The System and the Data Access Services shall be used and accessed solely on and through the Designated Configuration at the offices of the Customer or the Investment Advisor located in San Francisco, California ("Designated Location"). (b) DESIGNATED CONFIGURATION; TRAINED PERSONNEL. State Street shall be responsible for supplying, installing and maintaining the Designated Configuration at the Designated Location. State Street and the Customer agree that each will engage or retain the services of trained personnel to enable both parties to perform their respective obligations under this Addendum. State Street agrees to use commercially reasonable efforts to maintain the System so that it remains serviceable, provided, however, that State Street does not guarantee or assure uninterrupted remote access use of the System. (c) SCOPE OF USE. The Customer will use the System and the Data Access Services only for the processing of securities transactions, the keeping of books of account for the Customer and accessing data for purposes of reporting and analysis. The Customer shall not, and shall cause its employees and agents not to (i) permit any third party to use the System or the Data Access Services, (ii) sell, rent, license or otherwise use the System or the Data Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Data Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, (iv) allow access to the System or the Data Access Services through terminals or any other computer or telecommunications facilities located outside the Designated Locations, (v) allow or cause any information (other than portfolio holdings, valuations of portfolio holdings, and other information reasonably necessary for the management or distribution of the assets of the Customer) transmitted from State Street's databases, including data from third party sources, available through use of the System or the Data Access Services to be redistributed or retransmitted to another computer, terminal or other device for other than use for or on behalf of the Customer or (vi) modify the System in any way, including without limitation, developing any software for or attaching any devices or computer programs to any equipment, system, software or database which forms a part of or is resident on the Designated Configuration. (d) OTHER LOCATIONS. Except in the event of an emergency or of a planned System shutdown, the Customer's access to services performed by the System or to Data Access Services at the Designated Location may be transferred to a different location only upon the prior written consent of State Street. In the event of an emergency or System shutdown, the Customer may use any back-up site included in the Designated Configuration or any other back-up site agreed to by State Street, which agreement will not be unreasonably withheld. The Customer may secure from State Street the right to access the System or the Data Access Services through computer and telecommunications facilities or devices complying with the Designated Configuration at additional locations only upon the prior written consent of State Street and on terms to be mutually agreed upon by the parties. (e) TITLE. Title and all ownership and proprietary rights to the System, including any enhancements or modifications thereto, whether or not made by State Street, are and shall remain with State Street. (f) NO MODIFICATION. Without the prior written consent of State Street, the Customer shall not modify, enhance or otherwise create derivative works based upon the System, nor shall the Customer reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System. (g) SECURITY PROCEDURES. The Customer shall comply with data access operating standards and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the System on a remote basis and to access the Data Access Services. The Customer shall have access only to the Customer Data and authorized transactions agreed upon from time to time by State Street and, upon notice from State Street, the Customer shall discontinue remote use of the System and access to Data Access Services for any security reasons cited by State Street; provided, that, in such event, State Street shall, for a period not less than 180 days (or such other shorter period specified by the Customer) after such discontinuance, assume responsibility to provide accounting services under the terms of the Custodian Agreement. -2- (h) INSPECTIONS. State Street shall have the right to inspect the use of the System and the Data Access Services by the Customer and the Investment Advisor to ensure compliance with this Addendum. The on-site inspections shall be upon prior written notice to the Customer and the Investment Advisor and at reasonably convenient times and frequencies so as not to result in an unreasonable disruption of the Customer's or the Investment Advisor's business. 4. PROPRIETARY INFORMATION (a) PROPRIETARY INFORMATION. The Customer acknowledges and State Street represents that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Customer by State Street as part of the Data Access Services and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Customer shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Customer agrees that it will hold such Proprietary Information in the strictest confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Customer further acknowledges that State Street shall not be required to provide the Investment Advisor with access to the System unless it has first received from the Investment Advisor an undertaking with respect to State Street's Proprietary Information in the form of Attachment C to this Addendum. The Customer shall use all commercially reasonable efforts to assist State Street in identifying and preventing any unauthorized use, copying or disclosure of the Proprietary Information or any portions thereof or any of the logic, formats or designs contained therein. (b) COOPERATION. Without limitation of the foregoing, the Customer shall advise State Street immediately in the event the Customer learns or has reason to believe that any person to whom the Customer has given access to the Proprietary Information, or any portion thereof, has violated or intends to violate the terms of this Addendum, and the Customer will, at its expense, co-operate with State Street in seeking injunctive or other equitable relief in the name of the Customer or State Street against any such person. (c) INJUNCTIVE RELIEF. The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street inadequately compensable in damages at law. In addition, State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available. (d) SURVIVAL. The provisions of this Section 4 shall survive the termination of this Addendum. 5. LIMITATION ON LIABILITY (a) LIMITATION ON AMOUNT AND TIME FOR BRINGING ACTION. The Customer agrees that any liability of State Street to the Customer or any third party arising out of State Street's provision of Data Access Services or the System under this Addendum shall be limited to the amount of custody fees paid by the Customer for the preceding 24 months. In no event shall State Street be liable to the Customer or any other party for any special, indirect, punitive or consequential damages even if advised of the possibility of such damages. No action, regardless of form, arising out of this Addendum may be brought by the Customer more than two years after the Customer has knowledge that the cause of action has arisen. (b) LIMITED WARRANTIES. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET. (c) THIRD-PARTY DATA. Organizations from which State Street may obtain certain data included in the System or the Data Access Services are solely responsible for the contents of such data, and State Street shall have no liability for claims arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. -3- (d) REGULATORY REQUIREMENTS. As between State Street and the Customer, the Customer shall be solely responsible for the accuracy of any accounting statements or reports produced using the Data Access Services and the System and the conformity thereof with any requirements of law. (e) FORCE MAJEURE. Neither party shall be liable for any costs or damages due to delay or nonperformance under this Addendum arising out of any cause or event beyond such party's control, including without limitation, cessation of services hereunder or any damages resulting therefrom to the other party, or the Customer as a result of work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action, or communication disruption. 6. INDEMNIFICATION The Customer agrees to indemnify and hold State Street harmless from any loss, damage or expense including reasonable attorney's fees, (a "loss") suffered by State Street arising from (i) the negligence or willful misconduct in the use by the Customer of the Data Access Services or the System, including any loss incurred by State Street resulting from a security breach at the Designated Location or committed by the Customer's employees or agents or the Investment Advisor and (ii) any loss resulting from incorrect Client Originated Electronic Financial Instructions. State Street shall be entitled to rely on the validity and authenticity of Client Originated Electronic Financial Instructions without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by State Street from time to time. 7. FEES Fees and charges for the use of the System and the Data Access Services and related payment terms shall be as set forth in the Custody Fee Schedule in effect from time to time between the parties (the "Fee Schedule"). Any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street) shall be borne by the Customer. Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street. 8. TRAINING, IMPLEMENTATION AND CONVERSION (a) TRAINING. State Street agrees to provide training, at a designated State Street training facility or at the Designated Location, to the Customer's personnel in connection with the use of the System on the Designated Configuration. The Customer agrees that it will set aside, during regular business hours or at other times agreed upon by both parties, sufficient time to enable all operators of the System and the Data Access Services, designated by the Customer, to receive the training offered by State Street pursuant to this Addendum. (b) INSTALLATION AND CONVERSION. State Street shall be responsible for the technical installation and conversion ("Installation and Conversion") of the Designated Configuration. The Customer shall have the following responsibilities in connection with Installation and Conversion of the System: (i) The Customer shall be solely responsible for the timely acquisition and maintenance of the hardware and software that attach to the Designated Configuration in order to use the Data Access Services at the Designated Location. (ii) State Street and the Customer each agree that they will assign qualified personnel to actively participate during the Installation and Conversion phase of the System implementation to enable both parties to perform their respective obligations under this Addendum. 9. SUPPORT During the term of this Addendum, State Street agrees to provide the support services set out in Attachment D to this Addendum. -4- 10. TERM OF ADDENDUM (a) TERM OF ADDENDUM. This Addendum shall become effective on the date of its execution by State Street and shall remain in full force and effect until terminated as herein provided. (b) TERMINATION OF ADDENDUM. Either party may terminate this Addendum (i) for any reason by giving the other party at least one-hundred and eighty days' prior written notice in the case of notice of termination by State Street to the Customer or thirty days' notice in the case of notice from the Customer to State Street of termination; or (ii) immediately for failure of the other party to comply with any material term and condition of this Addendum by giving the other party written notice of termination. In the event the Customer shall cease doing business, shall become subject to proceedings under the bankruptcy laws (other than a petition for reorganization or similar proceeding) or shall be adjudicated bankrupt, this Addendum and the rights granted hereunder shall, at the option of State Street, immediately terminate with notice to the Customer. This Addendum shall in any event terminate as to any Customer within 90 days after the termination of the Custodian Agreement applicable to such Customer. (c) TERMINATION OF THE RIGHT TO USE. Upon termination of this Addendum for any reason, any right to use the System and access to the Data Access Services shall terminate and the Customer shall immediately cease use of the System and the Data Access Services. Immediately upon termination of this Addendum for any reason, the Customer shall return to State Street all copies of documentation and other Proprietary Information in its possession; provided, however, that in the event that either party terminates this Addendum or the Custodian Agreement for any reason other than the Customer's breach, State Street shall provide the Data Access Services for a period of time and at a price to be agreed upon by the parties. 11. MISCELLANEOUS (a) ASSIGNMENT; SUCCESSORS. This Addendum and the rights and obligations of the Customer and State Street hereunder shall not be assigned by either party without the prior written consent of the other party, except that State Street may assign this Addendum to a successor of all or a substantial portion of its business, or to a party controlling, controlled by, or under common control with State Street. (b) SURVIVAL. All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination of this Addendum. (c) ENTIRE AGREEMENT. This Addendum and the attachments hereto constitute the entire understanding of the parties hereto with respect to the Data Access Services and the use of the System and supersedes any and all prior or contemporaneous representations or agreements, whether oral or written, between the parties as such may relate to the Data Access Services or the System, and cannot be modified or altered except in a writing duly executed by the parties. This Addendum is not intended to supersede or modify the duties and liabilities of the parties hereto under the Custodian Agreement or any other agreement between the parties hereto except to the extent that any such agreement specifically refers to the Data Access Services or the System. No single waiver of any right hereunder shall be deemed to be a continuing waiver. (d) SEVERABILITY. If any provision or provisions of this Addendum shall be held to be invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired. (e) GOVERNING LAW. This Addendum shall be interpreted and construed in accordance with the internal laws of The Commonwealth of Massachusetts without regard to the conflict of laws provisions thereof. -5- ATTACHMENT A MULTICURRENCY HORIZON-SM- ACCOUNTING SYSTEM SYSTEM PRODUCT DESCRIPTION I. The Multicurrency HORIZON-SM- Accounting System is designed to provide lot level portfolio and general ledger accounting for SEC and ERISA type requirements and includes the following services: 1) recording of general ledger entries; 2) calculation of daily income and expense; 3) reconciliation of daily activity with the trial balance, and 4) appropriate automated feeding mechanisms to (i) domestic and international settlement systems, (ii) daily, weekly and monthly evaluation services, (iii) portfolio performance and analytic services, (iv) customer's internal computing systems and (v) various State Street provided information services products. II. GlobalQuest-Registered Trademark- is designed to provide customer access to the following information maintained on The Multicurrency HORIZON-SM- Accounting System: 1) cash transactions and balances; 2) purchases and sales; 3) income receivables; 4) tax refund receivables; 5) daily priced positions; 6) open trades; 7) settlement status; 8) foreign exchange transactions; 9) trade history, and 10) daily, weekly and monthly evaluation services. III. HORIZON-Registered Trademark- Gateway. HORIZON-Registered Trademark- Gateway provides customers with the ability to (i) generate reports using information maintained on the Multicurrency HORIZON-Registered Trademark- Accounting System which may be viewed or printed at the customer's location; (ii) extract and download data from the Multicurrency HORIZON-Registered Trademark- Accounting System; and (iii) access previous day and historical data. The following information which may be accessed for these purposes: 1) holdings; 2) holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger and 7) cash. IV. SaFiRe-SM-. SaFiRe-SM- is designed to provide the customer with the ability to prepare its own financial reports by permitting the customer to access customer information maintained on the Multicurrency HORIZON-Registered Trademark- Accounting System, to organize such information in a flexible reporting format and to have such reports printed on the customer's desktop or by its printing provider. V. STATE STREET INTERCHANGE. State Street Interchange is an open information delivery architecture wherein proprietary communication products, data formats and workstation tools are replaced by industry standards and is designed to enable the connection of State Street's network to customer networks, thereby facilitating the sharing of information. VI. In~Sight-SM-. In~Sight-SM- is designed as a 32-bit application utilizing a `three-tier' design model to facilitate data extraction and transport processes. In~Sight hosts a suite of decision support applications and allows the Customer to access underlying data elements using In~Sight's Query tool and view information as a report, graph or spreadsheet. -6- ATTACHMENT B *DESIGNATED CONFIGURATION -7- ATTACHMENT C UNDERTAKING The Undersigned understands that in the course of its employment as Investment Advisor to meVC Draper Fisher Jurvetson Fund I, Inc. (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON-SM- Accounting System and other information systems (collectively, the "System"). The Undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the Undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. meVC ADVISERS, INC. By: ------------------------------------- Title: ---------------------------------- Date: ----------------------------------- -8- ATTACHMENT C UNDERTAKING The Undersigned understands that in the course of its employment as Investment Sub-Advisor to meVC Draper Fisher Jurvetson Fund I, Inc. (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON-SM- Accounting System and other information systems (collectively, the "System"). The Undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the Undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. DRAPER FISHER JURVETSON ADVISERS, LLC By: ------------------------------------- Title: ---------------------------------- Date: ----------------------------------- -9- ATTACHMENT C UNDERTAKING The Undersigned understands that in the course of its employment as Independent Auditor to meVC Draper Fisher Jurvetson Fund I, Inc. (the "Customer") it will have access to State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON-SM- Accounting System and other information systems (collectively, the "System"). The Undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Undersigned by State Street as part of the Data Access Services provided to the Customer and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "Proprietary Information"). The Undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the Undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. PRICEWATERHOUSECOOPERS LLP By: ------------------------------------- Title: ---------------------------------- Date: ----------------------------------- -10- ATTACHMENT D SUPPORT During the term of this Addendum, State Street agrees to provide the following on-going support services: a. TELEPHONE SUPPORT. The Customer Designated Persons may contact State Street's Multicurrency HORIZON-SM- Help Desk and Customer Assistance Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining answers to questions about the use of the System, or to report apparent problems with the System. From time to time, the Customer shall provide to State Street a list of persons, not to exceed five in number, who shall be permitted to contact State Street for assistance (such persons being referred to as "the Customer Designated Persons"). b. TECHNICAL SUPPORT. State Street will provide technical support to assist the Customer in using the System and the Data Access Services. The total amount of technical support provided by State Street shall not exceed 10 resource days per year. State Street shall provide such additional technical support as is expressly set forth in the Fee Schedule. Technical support, including during installation and testing, is subject to the fees and other terms set forth in the Fee Schedule. c. MAINTENANCE SUPPORT. State Street shall use commercially reasonable efforts to correct system functions that do not work according to the System Product Description as set forth on Attachment A in priority order in the next scheduled delivery release or otherwise as soon as is practicable. d. SYSTEM ENHANCEMENTS. State Street will provide to the Customer any enhancements to the System developed by State Street and made a part of the System; provided that, sixty (60) days prior to installing any such enhancement, State Street shall notify the Customer and shall offer the Customer reasonable training on the enhancement. Charges for system enhancements shall be as provided in the Fee Schedule. State Street retains the right to charge for related systems or products that may be developed and separately made available for use other than through the System. e. CUSTOM MODIFICATIONS. In the event the Customer desires custom modifications in connection with its use of the System, the Customer shall make a written request to State Street providing specifications for the desired modification. Any custom modifications may be undertaken by State Street in its sole discretion in accordance with the Fee Schedule. f. LIMITATION ON SUPPORT. State Street shall have no obligation to support the Customer's use of the System: (i) for use on any computer equipment or telecommunication facilities which does not conform to the Designated Configuration or (ii) in the event the Customer has modified the System in breach of this Addendum. -11- [LOGO] FUNDS TRANSFER ADDENDUM OPERATING GUIDELINES 1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit Client's (as named below) account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client's instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the next business day. 2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it has designated on the Selection Form was selected by the Client from Security Procedures offered by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client's authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure. 3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern. 4. REJECTION: State Street reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street's receipt of such payment order; (b) if initiating such payment order would cause State Street, in State Street's sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to satisfy itself that the transaction has been properly authorized. 5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied. 6. ERRORS: State Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders. 7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty (30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure to execute a payment order. 8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When a Client initiates or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, State Street will act as an Originating Depository Financial Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the Client via such entry shall not be deemed to have paid the amount of the entry. 9. CONFIRMATION STATEMENTS: Confirmation of State Street's execution of payment orders shall ordinarily be provided within 24 hours notice which may be delivered through State Street's proprietary information systems, such as, but not limited to Horizon and GlobalQuest(R), or by facsimile or callback. The Client must report any objections to the execution of a payment order within 30 days. [LOGO] FUNDS TRANSFER ADDENDUM SECURITY PROCEDURE(S) SELECTION FORM Please select one or more of the funds transfer security procedures indicated below. / / SWIFT SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a cooperative society owned and operated by member financial institutions that provides telecommunication services for its membership. Participation is limited to securities brokers and dealers, clearing and depository institutions, recognized exchanges for securities, and investment management institutions. SWIFT provides a number of security features through encryption and authentication to protect against unauthorized access, loss or wrong delivery of messages, transmission errors, loss of confidentiality and fraudulent changes to messages. SWIFT is considered to be one of the most secure and efficient networks for the delivery of funds transfer instructions. SELECTION OF THIS SECURITY PROCEDURE WOULD BE MOST APPROPRIATE FOR EXISTING SWIFT MEMBERS. / / STANDING INSTRUCTIONS Standing Instructions may be used where funds are transferred to a broker on the Client's established list of brokers with which it engages in foreign exchange transactions. Only the date, the currency and the currency amount are variable. In order to establish this procedure, State Street will send to the Client a list of the brokers that State Street has determined are used by the Client. The Client will confirm the list in writing, and State Street will verify the written confirmation by telephone. Standing Instructions will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the Standing Instruction will be confirmed by telephone prior to execution. / / REMOTE BATCH TRANSMISSION Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data communications between the Client and State Street. Security procedures include encryption and or the use of a test key by those individuals authorized as Automated Batch Verifiers. CLIENTS SELECTING THIS OPTION SHOULD HAVE AN EXISTING FACILITY FOR COMPLETING CPU-CPU TRANSMISSIONS. THIS DELIVERY MECHANISM IS TYPICALLY USED FOR HIGH-VOLUME BUSINESS. / / GLOBAL HORIZON INTERCHANGESM FUNDS TRANSFER SERVICE Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire, CHIPS or internal book transfer instructions to State Street. THIS DELIVERY MECHANISM IS MOST APPROPRIATE FOR CLIENTS WITH A LOW-TO-MEDIUM NUMBER OF TRANSACTIONS (5-75 PER DAY), ALLOWING CLIENTS TO ENTER, BATCH, AND REVIEW WIRE TRANSFER INSTRUCTIONS ON THEIR PC PRIOR TO RELEASE TO STATE STREET. / / TELEPHONE CONFIRMATION (CALLBACK) Telephone confirmation will be used to verify all non-repetitive funds transfer instructions received via untested facsimile or phone. This procedure requires Clients to designate individuals as authorized initiators and authorized verifiers. State Street will verify that the instruction contains the signature of an authorized person and prior to execution, will contact someone other than the originator at the Client's location to authenticate the instruction. SELECTION OF THIS ALTERNATIVE IS APPROPRIATE FOR CLIENTS WHO DO NOT HAVE THE CAPABILITY TO USE OTHER SECURITY PROCEDURES. / / REPETITIVE WIRES For situations where funds are transferred periodically (minimum of one instruction per calendar quarter) from an existing authorized account to the same payee (destination bank and account number) and only the date and currency amount are variable, a repetitive wire may be implemented. Repetitive wires will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the instruction will be confirmed by telephone prior to execution. Telephone confirmation is used to establish this process. Repetitive wire instructions must be reconfirmed annually. THIS ALTERNATIVE IS RECOMMENDED WHENEVER FUNDS ARE FREQUENTLY TRANSFERRED BETWEEN THE SAME TWO ACCOUNTS. / / TRANSFERS INITIATED BY FACSIMILE The Client faxes wire transfer instructions directly to State Street Mutual Fund Services. Standard security procedure requires the use of a random number test key for all transfers. Every six months the Client receives test key logs from State Street. The test key contains alpha-numeric characters, which the Client puts on each document faxed to State Street. This procedure ensures all wire instructions received via fax are authorized by the Client. WE PROVIDE THIS OPTION FOR CLIENTS WHO WISH TO BATCH WIRE INSTRUCTIONS AND TRANSMIT THESE AS A GROUP TO STATE STREET MUTUAL FUND SERVICES ONCE OR SEVERAL TIMES A DAY. [LOGO] FUNDS TRANSFER ADDENDUM / / AUTOMATED CLEARING HOUSE (ACH) State Street receives an automated transmission or a magnetic tape from a Client for the initiation of payment (credit) or collection (debit) transactions through the ACH network. The transactions contained on each transmission or tape must be authenticated by the Client. Clients using ACH must select one or more of the following delivery options: / / GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in standard NACHA formats. / / Transmission from Client PC to State Street Mainframe with Telephone Callback / / Transmission from Client Mainframe to State Street Mainframe with Telephone Callback / / Transmission from DST Systems to State Street Mainframe with Encryption / / Magnetic Tape Delivered to State Street with Telephone Callback State Street is hereby instructed to accept funds transfer instructions only via the delivery methods and security procedures indicated. The selected delivery methods and security procedure(s) will be effective for payment orders initiated by our organization. KEY CONTACT INFORMATION Whom shall we contact to implement your selection(s)? CLIENT OPERATIONS CONTACT ALTERNATE CONTACT - -------------------------------------- -------------------------------------- Name Name - -------------------------------------- -------------------------------------- Address Address - -------------------------------------- -------------------------------------- City/State/Zip Code City/State/Zip Code - -------------------------------------- -------------------------------------- Telephone Number Telephone Number - -------------------------------------- -------------------------------------- Facsimile Number Facsimile Number - -------------------------------------- SWIFT Number - -------------------------------------- Telex Number
[LOGO] FUNDS TRANSFER ADDENDUM INSTRUCTION(S) TELEPHONE CONFIRMATION FUND meVC Draper Fisher Jurvetson Fund I, Inc. --------------------------------------------------- INVESTMENT ADVISER meVC Advisers, Inc. and Sub-Adviser, ---------------------------------------- Draper Fisher Jurvetson Advisers, LLC ---------------------------------------- AUTHORIZED INITIATORS Please Type or Print PLEASE PROVIDE A LISTING OF FUND OFFICERS OR OTHER INDIVIDUALS ARE CURRENTLY AUTHORIZED TO INITIATE WIRE TRANSFER INSTRUCTIONS TO STATE STREET:
NAME TITLE (Specify whether position SPECIMEN SIGNATURE is with Fund or Investment Adviser) - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- -------------------------
AUTHORIZED VERIFIERS Please Type or Print PLEASE PROVIDE A LISTING OF FUND OFFICERS OF OTHER INDIVIDUALS WHO WILL BE CALLED BACK TO VERIFY THE INITIATION OF REPETITIVE WIRES OF $10 MILLION OR MORE AND ALL NON REPETITIVE WIRE INSTRUCTIONS:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY) - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- ------------------------- - ----------------------------------- ------------------------------- -------------------------
EX-99.(K)(1) 4 EXHIBIT 99(K)(1) EXHIBIT 99.k(1) REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT BETWEEN meVC DRAPER FISHER JURVETSON FUND ONE AND STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK 3 ARTICLE 2 FEES AND EXPENSES 4 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK 5 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND 5 ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION 6 ARTICLE 6 INDEMNIFICATION 7 ARTICLE 7 STANDARD OF CARE 9 ARTICLE 8 COVENANTS OF THE FUND AND THE BANK 9 ARTICLE 9 TERMINATION OF AGREEMENT 10 ARTICLE 10 ASSIGNMENT 10 ARTICLE 11 AMENDMENT 11 ARTICLE 12 MASSACHUSETTS LAW TO APPLY 11 ARTICLE 13 FORCE MAJEURE 11 ARTICLE 14 CONSEQUENTIAL DAMAGES 11 ARTICLE 15 MERGER OF AGREEMENT 11 ARTICLE 16 SURVIVAL 12 ARTICLE 17 SEVERABILITY 12 ARTICLE 18 COUNTERPARTS 12 REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT made as of the th day of , 2000, by and between meVC Draper Fisher Jurvetson Fund One, having its principal office and place of business at 991 Folsom Street, Suite 301, San Francisco, CA 94107 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank"). WHEREAS, the Fund desires to appoint the Bank as its registrar, transfer agent, dividend disbursing agent and agent in connection with certain other activities and the Bank desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK 1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act as registrar, transfer agent for the Fund's authorized and issued shares of its common stock ("Shares"), dividend disbursing agent and agent in connection with any dividend reinvestment plan as set out in the prospectus of the Fund, corresponding to the date of this Agreement. 1.02 The Bank agrees that it will perform the following services: (a) In accordance with procedures established from time to time by agreement between the Fund and the Bank, the Bank shall: (i) Issue and record the appropriate number of Shares as authorized and hold such Shares in the appropriate Shareholder account (ii) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation; (iii) Prepare and transmit payments for dividends and distributions declared by the Fund; (iv) Act as agent for Shareholders pursuant to the dividend reinvestment and cash purchase plan as amended from time to time in accordance with the terms of the agreement to be entered into between the Shareholders and the Bank in substantially the form attached as Exhibit A hereto; (v) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Bank of indemnification satisfactory to the Bank and protecting the Bank and the Fund, and the Bank at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity. (b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), the Bank shall: (i) perform all of the customary services of a registrar, transfer agent, dividend disbursing agent and agent of the dividend reinvestment and cash purchase plan as described in Article 1 consistent with those requirements in effect as of the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, and mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders. (c) The Bank shall provide additional services on behalf of the Fund (i.e., escheatment services) which may be agreed upon in writing between the Fund and the Bank. ARTICLE 2 FEES AND EXPENSES 2.01 For the performance by the Bank pursuant to this Agreement, meVC.com agrees to pay the Bank an annual maintenance fee as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and the Bank. 2.02 In addition to the fee paid under Section 2.01 above, meVC.com agrees to reimburse the Bank for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Bank at the request or with the consent of the Fund, will be reimbursed by meVC.com. 2.03 meVC.com agrees to pay all fees and reimbursable expenses within five days following the receipt of the respective billing notice. Postage and the cost of materials for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Bank by the Fund at least seven (7) days prior to the mailing date of such materials. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK The Bank represents and warrants to the Fund that: 3.01 It is a trust company duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts. 3.02 It is duly qualified to carry on its business in the Commonwealth of Massachusetts. 3.03 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement. 3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to the Bank that: 4.01 It is a corporation duly organized and existing and in good standing under the laws of ____________________________. 4.02 It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement. 4.03 All corporate proceedings required by said Articles of Incorporation and By-Laws have been taken to authorize it to enter into and perform this Agreement. 4.04 It is a closed-end, non-diversified investment company registered under the Investment Company Act of 1940, as amended. 4.05 To the extent required by federal securities laws a registration statement under the Securities Act of 1933, as amended is currently effective and appropriate state securities law filings have been made with respect to all Shares of the Fund being offered for sale; information to the contrary will result in immediate notification to the Bank. 4.06 It shall make all required filings under federal and state securities laws. ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION 5.01 The Fund acknowledges that the data bases, computer programs, screen formats, report formats, interactive design techniques, and other information furnished to the Fund by the Bank are provided solely in connection with the services rendered under this Agreement and constitute copyrighted trade secrets or proprietary information of substantial value to the Bank. Such databases, programs, formats, designs, techniques and other information are collectively referred to below as "Proprietary Information." The Fund agrees that it shall treat all Proprietary Information as proprietary to the Bank and further agrees that it shall not divulge any Proprietary Information to any person or organization except as expressly permitted hereunder. The Fund agrees for itself and its employees and agents: (a) to use such programs and databases (i) solely on the Fund computers, or (ii) solely from equipment at the locations agreed to between the Fund and the Bank and (iii) in accordance with the Bank's applicable user documentation; (b) to refrain from copying or duplicating in any way (other than in the normal course of performing processing on the Funds' computers) any part of any Proprietary Information; (c) to refrain from obtaining unauthorized access to any programs, data or other information not owned by the Fund, and if such access is accidentally obtained, to respect and safeguard the same Proprietary Information; (d) to refrain from causing or allowing information transmitted from the Bank's computer to the Funds' terminal to be retransmitted to any other computer terminal or other device except as expressly permitted by the Bank, (such permission not to be unreasonably withheld); (e) that the Fund shall have access only to those authorized transactions as agreed to between the Fund and the Bank; and (f) to honor reasonable written requests made by the Bank to protect at the Bank's expense the rights of the Bank in Proprietary Information at common law and under applicable statues. 5.02 If the transactions available to the Fund include the ability to originate electronic instructions to the Bank in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event the Bank shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Bank from time to time. ARTICLE 6 INDEMNIFICATION 6.01 The Bank shall not be responsible for, and the Fund shall indemnify and hold the Bank harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to: (a) All actions of the Bank or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct. (b) The Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder. (c) The reliance on or use by the Bank or its agents or subcontractors of information, records, documents or services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent registrar. (d) The reliance on, or the carrying out by the Bank or its agents or subcontractors of any instructions or requests of the Fund. (e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. 6.02 At any time the Bank may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Bank or its agents or subcontractors by telephone, in person, machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. The Bank, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar. 6.03 In order that the indemnification provisions contained in this Article 6 shall apply, upon the assertion of a claim for which the Fund may be required to indemnify the Bank, the Bank shall promptly notify the Fund in writing of such assertion, and shall keep the Fund advised with respect to all developments concerning such claim. The Fund shall have the option to participate with the Bank in the defense of such claim or to defend against said claim in its own name or in the name of the Bank. The Bank shall in no case confess any claim or make any compromise in any case in which the Fund may be required to indemnify the Bank except with the Fund's prior written consent. ARTICLE 7 STANDARD OF CARE 7.01 The Bank shall at all times act in good faith and agrees to use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith, or willful misconduct of that of its employees. ARTICLE 8 COVENANTS OF THE FUND AND THE BANK 8.01 The Fund shall promptly furnish to the Bank the following: (a) A certified copy of the resolution of the Board of Directors of the Fund authorizing the appointment of the Bank and the execution and delivery of this Agreement. (b) A copy of the Articles of Incorporation and By-Laws of the Fund and all amendments thereto. 8.02 The Bank hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 8.03 The Bank shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request. 8.04 The Bank and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be requested by a governmental entity or as may be required by law. 8.05 In cases of any requests or demands for the inspection of the Shareholder records of the Fund, the Bank will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person. ARTICLE 9 TERMINATION OF AGREEMENT 9.01 This Agreement may be terminated by either party upon one hundred twenty (120) days written notice to the other. 9.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund. Additionally, the Bank reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) month's fees. ARTICLE 10 ASSIGNMENT 10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 10.03 The Bank may, without further consent on the part of the Fund, subcontract for the performance hereof with (i) Boston EquiServe Limited Partnership., a Massachusetts limited partnership ("Boston EquiServe"), which is duly registered as a transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934 ("Section 17A(c)(2)"), or (ii) a Boston EquiServe affiliate duly registered as a transfer agent pursuant to Section 17A(c)(2), provided, however, that the Bank shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions. ARTICLE 11 AMENDMENT 11.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors of the Fund. ARTICLE 12 MASSACHUSETTS LAW TO APPLY 12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. ARTICLE 13 FORCE MAJEURE 13.01 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. ARTICLE 14 CONSEQUENTIAL DAMAGES 14.01 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder. ARTICLE 15 MERGER OF AGREEMENT 15.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject hereof whether oral or written. ARTICLE 16 SURVIVAL 16.01 All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination of this Agreement. ARTICLE 17 SEVERABILITY 17.01 If any provision or provisions of this Agreement shall be held to be invalid, unlawful, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. ARTICLE 18 COUNTERPARTS 18.01 This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written. MeVC Draper Fisher Jurvetson Fund One BY:__________________________________________ State Street Bank and Trust Company BY:__________________________________________ EX-99.(K)(2) 5 EXHIBIT 99(K)(2) EXHIBIT 99.k(2) SUB-ADMINISTRATION AGREEMENT Agreement dated as of ________, 2000 by and between State Street Bank and Trust Company, a Massachusetts trust company (the "Sub-Administrator"), and meVC Advisers, Inc. (the "Adviser") on behalf of meVC Draper Jurvetson Fund I, Inc. (the "Company"). WHEREAS, the Company is registered as an closed-end, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, the Company has retained the Adviser to furnish advisory and administrative services to the Company; and WHEREAS, the Adviser desires to retain the Sub-Administrator to furnish certain administrative services to the Company, and the Sub-Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT OF ADMINISTRATOR The Adviser hereby appoints the Sub-Administrator to act as sub-administrator with respect to the Company for purposes of providing certain sub-administrative services for the period and on the terms set forth in this Agreement. The Sub-Administrator accepts such appointment and agrees to render the services stated herein. The Company will initially consist of the portfolio(s) and/or class(es) of shares (each an "Investment Fund") listed in Schedule A to this Agreement. In the event that the Company establishes one or more additional Investment Funds with respect to which the Adviser wishes to retain the Sub-Administrator to act as sub-administrator hereunder, the Adviser shall notify the Sub-Administrator in writing. Upon written acceptance by the Administrator, such Investment Fund shall become subject to the provisions of this Agreement to the same extent as the existing Investment Funds, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Adviser) may be modified with respect to each additional Investment Fund in writing by the Adviser and the Sub-Administrator at the time of the addition of the Investment Fund. 2. DELIVERY OF DOCUMENTS The Adviser will promptly deliver to the Sub-Administrator copies of each of the following documents and all future amendments and supplements, if any: a. The Company's Articles of Incorporation and by-laws; b. The Company's currently effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the Company's Prospectus(es) and Statement(s) of Additional Information relating to all Investment Funds and all amendments and supplements thereto as in effect from time to time; c. Certified copies of the resolutions of the Board of Directors of the Adviser (the "Board") authorizing (1) the Adviser to enter into this Agreement and (2) certain individuals on behalf of the Company to (a) give instructions to the Sub-Administrator pursuant to this Agreement and (b) sign checks and pay expenses; d. A copy of the investment advisory agreement between the Adviser and the Company authorizing the Adviser to enter this Agreement; and e. Such other certificates, documents or opinions which the Sub-Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties. 3. REPRESENTATIONS AND WARRANTIES OF THE SUB-ADMINISTRATOR The Sub-Administrator represents and warrants to the Adviser that: a. It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts; b. It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts; c. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; d. No legal or administrative proceedings have been instituted or threatened which would impair the Sub-Administrator's ability to perform its duties and obligations under this Agreement; and e. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Sub-Administrator or any law or regulation applicable to it. 4. REPRESENTATIONS AND WARRANTIES OF THE ADVISER The Adviser represents and warrants to the Administrator that: a. It is a corporation, duly organized, existing and in good standing under the Laws of the State of _________________; 2 b. The Company is a business development company, duly organized, existing and in good standing under the laws of the State of Delaware; c. It has the corporate power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement; d. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement; e. The Company is an investment company properly registered under the 1940 Act; f. A registration statement under the 1933 Act and the 1940 Act has been filed by the Company and will be effective and remain effective during the term of this Agreement. The Adviser also warrants to the Administrator that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Company offers or sells its shares have been made; f. No legal or administrative proceedings have been instituted or threatened which would impair the Adviser's ability to perform its duties and obligations under this Agreement; g. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Adviser or any law or regulation applicable to it; and h. As of the close of business on the date of this Agreement, the Company is authorized to issue shares of capital stock, and it will initially offer shares, in the authorized amounts as set forth in Schedule A to this Agreement. 5. SUB-ADMINISTRATION SERVICES The Sub-Administrator shall provide the following services, in each case, subject to the control, supervision and direction of the Adviser and the Company and the review and comment by the Company's auditors and legal counsel and in accordance with procedures which may be established from time to time between the Adviser and the Sub-Administrator: a. Oversee the determination and publication of the Company's net asset value in accordance with the Company's policy as adopted from time to time by the Board; b. Oversee the maintenance by the Company's custodian of certain books and records of the Company as required under Rule 31a-1(b) of the 1940 Act; c. Prepare the Company's federal, state and local income tax returns for review by the Company's independent accountants and filing by the Company's treasurer; 3 d. Review calculation, submit for approval by officers of the Company and arrange for payment of the Company's expenses; e. Prepare for review and approval by officers of the Company financial information for the Company's semi-annual and annual reports, proxy statements and other communications required or otherwise to be sent to Company shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders; f. Prepare for review by an officer of and legal counsel for the Company the Company's periodic financial reports required to be filed with the Securities and Exchange Commission ("SEC") as parts of Form 10K and 10Q. Other than the financial statements, the Adviser is responsible for preparing Forms 10K and 10Q. g. Prepare reports relating to the business and affairs of the Company as may be mutually agreed upon and not otherwise prepared by the Company's investment adviser, custodian, legal counsel or independent accountants; h. Make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request; i. Make such reports and recommendations to the Board concerning the performance and fees of the Company's custodian and transfer and dividend disbursing agent ("Transfer Agent") as the Board may reasonably request or deems appropriate; j. Oversee and review calculations of fees paid to the Company's investment adviser, custodian and Transfer Agent; k. Consult with the Company's officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing the accounting policies of the Company; l. Respond to, or refer to the Company's officers or Transfer Agent, shareholder inquiries relating to the Company; m. Provide periodic testing of portfolios to assist the Company's investment adviser in complying with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and Company prospectus limitations as may be mutually agreed upon; n. Review and provide assistance on shareholder communications; o. Maintain general corporate calendar; 4 p. Maintain copies of the Company's charter and by-laws; q. File annual and semi-annual shareholder reports with the appropriate regulatory agencies; review text of "President's letters" to shareholders and "Management's Discussion of Company Performance" (which shall also be subject to review by the Company's legal counsel); r. Organize, attend and prepare minutes of shareholder meetings; s. Provide consultation on regulatory matters relating to portfolio management, Company operations and any potential changes in the Company's investment policies, operations or structure; act as liaison to legal counsel to the Company and, where applicable, to legal counsel to the Company's independent Board members; t. Maintain continuing awareness of significant emerging regulatory and legislative developments which may affect the Company, update the Board and the investment adviser on those developments and provide related planning assistance where requested or appropriate; u. Develop or assist in developing guidelines and procedures to improve overall compliance by the Company and its various agents; v. Counsel and assist the Company in the handling of routine regulatory examinations and work closely with the Company's legal counsel in response to any non-routine regulatory matters; w. Review implementation of any dividend reinvestment program authorized by the Board; Subject to review and comment by the Company's legal counsel: x. Prepare and file with the SEC amendments to the Company's registration statement, including updating the Prospectus and Statement of Additional Information, where applicable; y. Prepare and file with the SEC proxy statements; provide consultation on proxy solicitation matters; z. Prepare agenda and background materials for Board meetings, make presentations where appropriate, prepare minutes and follow-up on matters raised at Board meetings; and aa. Prepare and file with the SEC Rule 24f-2 notices. The Sub-Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein. 5 6. FEES; EXPENSES; EXPENSE REIMBURSEMENT The Sub-Administrator shall receive from the Adviser such compensation for the Sub-Administrator's services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and initially set forth in the Fee Schedule to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Adviser shall reimburse the Sub-Administrator for its out-of-pocket costs incurred in connection with this Agreement. The Adviser agrees promptly to reimburse the Sub-Administrator for any equipment and supplies specially ordered by or for the Company through the Sub-Administrator and for any other expenses not contemplated by this Agreement that the Sub-Administrator may incur on the Company's behalf at the Company's request or with the Company's consent. In connection herewith, the Company hereby guaranties full payment and punctual performance and fulfillment to the Sub-Administrator of all liabilities, obligations and undertakings of the Adviser to the Sub-Administrator, whether direct or indirect, absolute or contingent, due or to become due, now existing of hereafter arising or acquired, under any fee schedule regarding any service provided by the Sub-Administrator for the benefit of the Company or any cost, expense disbursement relative thereto, and all present or future agreements arising from, or relative to, the subject matter thereof. The guaranty contained herein shall survive the termination of this Agreement. The Company will bear all expenses that are incurred in its operation and not specifically assumed by the Sub-Administrator. Expenses to be borne by the Company, include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsel's review of the Company's registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Company directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Company; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or employee of the Company; costs incidental to the preparation, printing and distribution of the Company's registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of preparation and filing of the Company's tax returns, Form N-2 and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; fidelity bond and directors' and officers' liability insurance; and cost of independent pricing services used in computing the Company's net asset value. 6 The Sub-Administrator is authorized to and may employ or associate with such person or persons as the Sub-Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Sub-Administrator and that the Sub-Administrator shall be as fully responsible to the Adviser for the acts and omissions of any such person or persons as it is for its own acts and omissions. 7. INSTRUCTIONS AND ADVICE At any time, the Sub-Administrator may apply to any officer of the Company for instructions and may consult with its own legal counsel or outside counsel for the Company or the independent accountants for the Company at the expense of the Adviser, with respect to any matter arising in connection with the services to be performed by the Sub-Administrator under this Agreement. The Sub-Administrator shall not be liable, and shall be indemnified by the Adviser, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons. The Sub-Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Adviser. Nothing in this paragraph shall be construed as imposing upon the Sub-Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received. 8. LIMITATION OF LIABILITY AND INDEMNIFICATION The Sub-Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Sub-Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless solely caused by or resulting from the gross negligence or willful misconduct of the Sub-Administrator, its officers or employees. The Sub-Administrator shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys' fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder. In any event, the Sub-Administrator's liability under this Agreement shall be limited to its total annual compensation earned and fees paid hereunder during the preceding twelve months for any liability or loss suffered by the Company including, but not limited to, any liability relating to qualification of the Company as a regulated investment company or any liability relating to the Company's compliance with any federal or state tax or securities statute, regulation or ruling. The Sub-Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption. The Adviser and the Company shall indemnify and hold the Sub-Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Sub-Administrator resulting from any claim, demand, action or suit in connection with the Sub-Administrator's acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly 7 authorized by the Company, provided that this indemnification shall not apply to actions or omissions of the Sub-Administrator, its officers or employees in cases of its or their own gross negligence or willful misconduct. The indemnification contained herein shall survive the termination of this Agreement. 9. CONFIDENTIALITY The Sub-Administrator agrees that, except as otherwise required by law or in connection with any required disclosure to a banking or other regulatory authority, it will keep confidential all records and information in its possession relating to the Company or its shareholders or shareholder accounts and will not disclose the same to any person except at the request or with the written consent of the Company. 10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS The Company assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Administrator agrees that all records which it maintains for the Company shall at all times remain the property of the Company, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Sub-Administrator further agrees that all records which it maintains for the Company pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form. 11. SERVICES NOT EXCLUSIVE The services of the Sub-Administrator to the Company are not to be deemed exclusive, and the Sub-Administrator shall be free to render similar services to others. The Sub-Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Company from time to time, have no authority to act or represent the Company in any way or otherwise be deemed an agent of the Company. 12. TERM, TERMINATION AND AMENDMENT This Agreement shall become effective on the date of its execution and shall remain in full force and effect for a period of two years from the effective date and shall automatically continue in full force and effect after such initial term unless either party terminates this Agreement by written notice to the other party at least sixty (60) days prior to the expiration of the initial term. Either party may terminate this Agreement at any time after the initial term upon at least sixty (60) days' prior written notice to the other party. Termination of this Agreement with respect to any given Investment Fund shall in no way affect the continued validity of this Agreement with respect to any other Investment Fund. Upon termination of this Agreement, the Adviser shall pay to the Sub-Administrator such compensation and any reimbursable expenses as may be due under the terms hereof as of the date of such termination, 8 including reasonable out-of-pocket expenses associated with such termination. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto. 13. NOTICES Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Company:___________ meVC Draper Fisher Jurvetson Fund I, Inc., 991 Folsom St., Suite 301, San Francisco, CA 94107; Attn:__________ , fax:__________ ; if to the Adviser: meVC Advisers, Inc., Attn:__________ , fax:__________ ; if to the Administrator: State Street Bank and Trust Company, 2 Avenue de Lafayette, Boston, Massachusetts 02111, Attn: Fund Administration Legal Department, fax: 617-662-3805. 14. NON-ASSIGNABILITY This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Sub-Administrator may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Sub-Administrator. 15. SUCCESSORS This Agreement shall be binding on and shall inure to the benefit of the Company and the Sub-Administrator and their respective successors and permitted assigns. 16. ENTIRE AGREEMENT This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing. 17. WAIVER The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party. 18. SEVERABILITY If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances. 19. GOVERNING LAW 9 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. 20. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above. meVC ADVISERS, INC. By: __________________________________ Name: __________________________________ Title: __________________________________ meVC DRAPER FISHER JURVETSON FUND I, INC. By: __________________________________ Name: __________________________________ Title: __________________________________ STATE STREET BANK AND TRUST COMPANY By: __________________________________ Name: Kathleen C. Cuocolo ---------------------------------- Title: Senior Vice President ---------------------------------- 10 SUB-ADMINISTRATION AGREEMENT SCHEDULE A LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES Investment Fund Authorized Shares 11 EX-99.N 6 EXHIBIT 99.(N) EXHIBIT 99.n CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form N-2 of our report dated December 13, 1999, relating to the Statement of Assets and Liabilities of meVC Draper Fisher Jurvetson Fund I, Inc., which appears in such Registration Statement. We also consent to the reference to us under the headings "Experts", "Independent Accountants" and "Financial Statements" in such Registration Statement. PricewaterhouseCoopers LLP San Francisco, California February 10, 2000 -----END PRIVACY-ENHANCED MESSAGE-----