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meVC Draper Fisher Jurvetson Fund I, Inc.
(Name of Registrant as Specified In Its Charter)
Millenco, L.P.
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MILLENCO, L.P.
666 FIFTH AVENUE TELEPHONE 212.841.4100
NEW YORK, NY 10103-0899 TELEFAX 212.841.4141
January 31, 2003
Dear Fellow MVC Shareholder,
Millenco L.P. is the largest shareholder of meVC ("MVC" or the "Fund") and is
seeking your support for the election to the MVC board of our seven
nominees--individuals unanimously dedicated to achieving superior long-term
returns.
The enclosed proxy statement contains important information about our candidates
and their qualifications. It is an outstanding group which includes a former SEC
branch chief, a seasoned venture capitalist, a retired partner of an esteemed
international law firm, a veteran of crisis management and corporate
restructuring, and representatives of Millenco and Karpus Asset Management,
shareholders who between them have invested over $16 million in MVC,
representing nearly 11% of the Fund's outstanding shares.
WE URGE YOU TO CONSIDER THE ENCLOSED PROXY STATEMENT CAREFULLY, AND THEN
SIGN, DATE AND RETURN THE ENCLOSED GREEN PROXY CARD TODAY.
Ten months ago, on March 27, 2002 the shareholders of MVC overwhelmingly voted
to reject the continuation of the investment advisory relationship between Chief
Executive Officer John Grillos and the Fund. But our vote was ignored, and Mr.
Grillos and other members of the former investment advisor remain in charge. In
response, Millenco took its grievances to the courtroom, culminating in a
judgment by the Delaware Chancery Court on December 19, 2002. THE COURT HELD
THAT THE ENTIRE BOARD OF DIRECTORS OF MVC HAD VIOLATED ITS FIDUCIARY DUTIES TO
MVC SHAREHOLDERS, AND ORDERED THIS ELECTION, WHICH WILL BE HELD ON FEBRUARY 28,
2003.
THE DECISION IS YOURS
You, the shareholders, now have the opportunity to decide the future of MVC.
Over the past ten months Mr. Grillos and the Board of MVC have written to you,
and Millenco has written to you as well. Your decision should not be a difficult
one. The Fund was launched at $20 per share and recently traded below $8 per
share, a 60% fall that destroyed nearly $200 million in shareholder value.
Management, since inception, has burned through nearly $36 million of your money
in fees and expenses. The Chairman and CEO breached his fiduciary duty to
shareholders. After the Court announced its decision, the entire board of
directors except for the CEO resigned. Now this same CEO and a new slate of
directors, who are wholly unfamiliar with MVC, ask for your support.
From our perspective, we cannot imagine why any shareholder would vote in favor
of current management.
However, we recognize that some of you may be asking, "who should I believe?"
and "how should I decide?" If you are such a shareholder, allow me to outline
again the main reasons you should vote in support of Millenco's nominees. I
believe there are three main points: MVC's abysmal investment performance, MVC's
deplorable corporate governance, and Millenco's superior plan for long term
growth.
MVC'S ABYSMAL INVESTMENT PERFORMANCE
In MVC's October 31, 2000 Annual Report, covering the first six months of the
Fund's existence, Chairman and CEO John Grillos wrote to shareholders:
"As the NASDAQ technology index began to fall, the valuation of many
private companies in which the Fund was considering investing began to
decline accordingly. We are pleased to report that these reduced
valuations, combined with the fact that many pre-IPO companies returned
to the venture capital community for funding in this volatile market,
enable us to make what we believe are lower-priced, long term
investments with exciting growth prospects."
DURING THAT PERIOD MR. GRILLOS INVESTED A TOTAL OF $112.85 MILLION IN 16
COMPANIES. TWO YEARS LATER, INVESTMENTS IN 7 OF THESE COMPANIES HAD BEEN WRITTEN
TO $0 AND THE 16 COMPANIES IN TOTAL HAVE PRODUCED A RETURN OF -78.4%.
It is true that 2000 was a difficult year for venture capital investors. Many
investors suffered significant losses. It is reasonable to ask, how did MVC's
later investments perform? To answer this question, you should consider
DataPlay, a company MVC invested in during 2001 and 2002. DataPlay is an optical
disc and storage company. The details of MVC's investment in DataPlay are
provided in the table below.
June 2001: $7,500,000 Equity
May 2002: $2,000,000 Convertible Note
June 2002: $ 500,000 Convertible Note
June 2002: $1,000,000 Convertible Note
August 2002: $ 200,000 Convertible Note
August 2002 $ 400,000 Convertible Note
August 2002 $ 200,000 Convertible Note
Sept 2002 $ 200,000 Convertible Note
-----------
TOTAL $12,000,000
CEO John Grillos wrote to MVC shareholders on August 26, 2002, "this month I
would like to talk about DataPlay, a Boulder, Colorado-based portfolio company
that I am particularly excited about". What Mr. Grillos did not disclose is that
on July 31, 2002 the valuation committee of MVC had written the value of the
Equity investment down by 66% to $2.5 million. And despite the fact that Mr.
Grillos was "excited" about DataPlay, the value of the equity was written to $0
on October 10, 2002 and the Convertible Note investment was written down by 50%
on October 30, 2002. ON NOVEMBER 20, 2002
DATAPLAY FILED FOR BANKRUPTCY PROTECTION UNDER CHAPTER 11 OF THE US CODE WITH
$35 MILLION IN DEBT. In December, Boulder newspapers reported that the
bankruptcy court had received a bid for DataPlay's assets in the amount of $1.3
million. Ask yourself, how could CEO John Grillos have written to shareholders
in August expressing "excitement" about the "growth prospects" of a company so
obviously in trouble? Is this the kind of investment record that shareholders
should continue to support?
MVC'S DEPLORABLE CORPORATE GOVERNANCE
The Delaware Chancery Court overturned MVC's 2001 and 2002 proxy votes and
ordered new elections, finding that "the election of directors...was procured by
the use of materially false and misleading proxy materials..." MVC claimed that
the omitted disclosures were not material. We believe you should know the facts
underlying the Court's decision.
o Mr. Grillos, as Chairman and CEO of MVC, was also the chairman of
another private company called eVineyard.
o Two of eVineyard's other directors and officers were supposedly
"independent" directors of MVC.
o Mr. Grillos never disclosed, neither in the IPO documents of MVC nor in
any subsequent proxy materials, that he was chairman of eVineyard.
o Mr. Grillos also never disclosed that he invested over $1.75 million
personally and indirectly in eVineyard.
In November of 2001, as eVineyard neared the brink of insolvency, CEO Grillos
attempted to transfer money from MVC to eVineyard! The Fund's CFO objected,
describing the transaction as one in which:
"[T]HE FUND WOULD WIND UP OWNING EVINEYARD STOCK IN A DEAL THAT
ESSENTIALLY BOILS DOWN TO A STRAIGHT PURCHASE OF EVINEYARD STOCK [FOR
$1 MILLION] DESPITE THE MACHINATIONS CREATED TO MAKE IT LOOK
OTHERWISE...EVEN IF THIS TRANSACTION PROVES TECHNICALLY LEGAL (WHICH IS
QUESTIONABLE AT THIS JUNCTURE), THE APPEARANCE OF CONFLICT IS SO GREAT
THAT WE AT MEVC ADVISORS DO NOT WISH FOR THIS DEAL TO GO FORWARD."
Two months later, eVineyard was recapitalized and its equity investors suffered
a virtually complete loss of their capital. Ask yourself, should you continue to
entrust your investment to a management team led by a CEO who has sought to use
MVC's shareholders' funds to support his own failing private investments?
MILLENCO: A SUPERIOR PLAN FOR LONG TERM SUCCESS
Millenco believes that MVC's prospects are bright if we change management. By
our estimate MVC has tax losses of approximately $115 million. If a high quality
management team could assume leadership at MVC, this could shelter future
capital gains and represent a valuable hidden asset. MILLENCO DOES NOT ADVOCATE
LIQUIDATION, BECAUSE LIQUIDATION WOULD ELIMINATE THIS POTENTIAL. However, we are
convinced that Mr. Grillos, the current CEO, does not have the skills nor the
strategy necessary to
succeed. MVC needs to diversify its portfolio outside of Internet and
information technology companies. MVC needs to invest in mezzanine and
other-income producing securities of more mature, cash-flow positive companies.
In short, MVC must be run as a more traditional investment company. Today there
are companies trading on the NYSE and Nasdaq that have the same corporate
structure as MVC and offer venture capital to the private investor. These
companies offer dividend yields in excess of 10% and trade at a PREMIUM to their
net asset value. MVC, in contrast, has a dividend yield of less than 1% and
trades at an average 35% discount to net asset value. Once elected, the new
directors will hire a proven investment advisor with the goal of turning MVC
into a premier, dividend paying, premium-rated investment company. It will
continue to offer individual investors the opportunity to invest in private
companies and venture capital. It will continue to have technology investments
in its portfolio. But it will be run based on the best principles of corporate
governance and investment analysis.
With sound new management, we are confident that MVC can deliver healthy returns
like other successful business development companies. If on the other hand,
Millenco's nominees are not elected, shareholders will be unable to gain control
of the Board until at least 2005, because Mr. Grillos has made clear his
intention to hide behind the staggered board structure.
PROTECT YOUR INVESTMENT
The future of our mutual investment in MVC is at stake. I urge you to act today
to protect your investment by signing, dating, and returning the enclosed GREEN
proxy card today.
Thank you for your support.
Sincerely,
Robert Knapp