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Perspective: MVC Insight from John Grillos
08/26/2002

Welcome to this month's Perspective, a section of the MVC website where I offer my view on recent news about MVC and its portfolio companies. This page is updated periodically, so be sure and check back to get my take on the latest Fund news. You can also click here to view previous Perspective pages.

The Fund's board of directors recently stated that they expect to appoint a permanent Fund manager by September 30, 2002. I have accepted the board's request to serve as interim CEO while the board conducts a thorough review of candidates for a permanent Fund manager. I am also a candidate for the permanent position.

The Fund also recently announced that a U.S. District Court in Delaware dismissed MVC from a lawsuit by Millenco L.P., an arbitrage hedge fund.

We did not make any new investments since our last update as I continue to believe that private company valuations may not have reached bottom yet. We are providing continued financial support, however, to worthy current portfolio companies. The need to provide financing to current companies is a key reason venture capital firms maintain a strong cash position. Without that cash the value of the portfolio would be severely damaged.

We were encouraged to learn recently that technology revenues grew in the second quarter from the first quarter of this year. It appears that tech spending may be turning the corner.

A Closer Look - DataPlay

"So what are the benefits of DataPlay over MP3s, CDs, and Minidiscs? The discs are smaller and can hold far more information than Minidiscs or audio CDs. And unlike with MP3 players, songs can be easily shared without a computer." "The sound quality is impressive, virtually identical to a prerecorded compact disc. And try as I may, I couldn't get the device to skip." - Christopher Muther, The Boston Globe - August 2002

This month I would like to talk about DataPlay, a Boulder, Colorado-based portfolio company that I am particularly excited about. DataPlay just recently launched their quarter-sized digital media that hold 500 mega bytes of information - that's the equivalent of about 11 hours of MP3 quality music, over a hundred high-resolution photographs, or several digital games. Blank DataPlay digital media are now available for purchase at the DataPlay Store and pre-recorded discs will go on sale later this year. iRiver has also developed the first audio player to operate DataPlay digital media, and the players are now available online and at Best Buy, CompUSA and J&R Electronics stores. Beginning this week the Classic DataPlay-enabled music player will be available at CircuitCity.

DataPlay's technology is compelling not only because of its size, but also for the additional capabilities it offers. ContentKey™ allows consumers to purchase additional content that is contained on pre-recorded DataPlay albums. Once the first album has been purchased, users will have the option to unlock, via the web, additional albums, videos, and photos already stored on the disc. This makes obtaining extra content for consumers convenient while providing another revenue stream for content providers.

Having signed agreements with three of the top five music companies: BMG, EMI, and Universal, the DataPlay format has already gained considerable traction in the music industry. As a result, a solid lineup of top-selling recording artists like Santana, Whitney Houston, and Britney Spears are scheduled to appear on DataPlay discs.

In addition, several original equipment makers (OEMs) are on board with the DataPlay format. iRiver and EMI Global/Classic are currently selling their players, and Toshiba and Samsung have plans to manufacture players in the future. I believe that these endorsements from large record labels and OEMs will greatly help DataPlay in the critical market adoption phase of their product cycle.

DataPlay, developer of the new portable music format, and Arista Records announced that multi-platinum selling artists Santana and Whitney Houston and popular newcomer Avril Lavigne are planning to make albums available on pre-recorded DataPlay digital media.

DataPlay and RCA Label Group - Nashville, announced plans to make releases from some of the industry's top-selling artists available on pre-recorded DataPlay digital media. As a result of the deal, BMG's RCA Label Group - Nashville will release albums this fall from best-selling artists such as Brooks & Dunn and Kenny Chesney on DataPlay digital media.

SafeStone Technologies, a global leader in secure system and user management, announced that it has signed a partnership agreement with Grantham Sutch Associates (GSA), a specialist iSeries solutions provider and consultancy. Under the terms of the agreement, GSA will be integrating SafeStone's DetectIT security management system into its iSeries solutions.

SafeStone Technologies also announced that it has agreed to a strategic business partnership with DVV Solutions. DVV Solutions is acknowledged as one of the foremost providers of networking and internetworking security solutions in the UK.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities. Any representation to the contrary is a criminal offense. This article is not a solicitation, offer or recommendation to acquire or dispose of shares of the Fund. For more information, please contact us toll free at 1-877-474-meVC (6382).

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