A Publicly Traded Venture Capital Company Investing in Tiny Technology





Fellow Shareholders:


On August 23, 2005, we completed our previously announced public offering of 3,050,000 shares of our common stock at $11.25 per share, for estimated net proceeds of approximately $31,913,750 after deducting underwriting discounts and commissions and estimated expenses payable by the Company. We have granted an option to the underwriters to purchase up to an additional 457,000 shares of our common stock at $11.25 per share through September 16, 2005, to cover over-allotments, if any. All of the shares of common stock were sold by us pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission. ThinkEquity Partners LLC acted as the sole book runner for the offering. Punk, Ziegel & Company acted as co-manager for the offering. This offering was essentially the balance of a 7,000,000 share shelf registration that we had filed with the Securities and Exchange Commission in February of 2004. We had previously sold 3,450,000 shares at $11.25 per share in an offering underwritten by the same two firms on June 30, 2004.


The Company has made significant progress on multiple fronts over the last 13 months since our June 30, 2004, public offering. During that period:


          Owing primarily to the successful initial public offering of NeuroMetrix, Inc., and its subsequent price appreciation, and to the anti-dilutive effect of our 3,450,000 share June 30, 2004, stock offering at $11.25 per share, our net asset value per share increased from $2.85 on June 29, 2004, to $5.07 on August 17, 2005.


          We reviewed over 300 investment opportunities.


          We completed eight new investments in tiny technology companies.


          We completed 15 follow-on investments in our tiny technology portfolio companies.


          Altogether, we invested $12,467,726 in tiny technology companies, with pre-emptive rights to make follow-on investments in future rounds of financing in these companies.


          NeuroMetrix (Nasdaq: NURO) completed a successful initial public offering.


          We hired six new employees (two investment professionals, two accounting professionals, a general counsel and chief compliance officer and an administrative assistant), for a net increase of four in our number of full-time employees, to a current total of 10.


These additional employees include Patricia N. Egan and Thomas M. McCarthy. Ms. Egan joined us as Chief Accounting Officer and Vice President during the quarter ended June 30, 2005. Prior to joining us, she was a Manager in the Financial Services Group of PricewaterhouseCoopers, LLP. She was graduated from Georgetown University. Thomas M. McCarthy joined our team following the close of the June quarter as Controller. Mr. McCarthy was a Manager in the Global Capital Markets group at PricewaterhouseCoopers, LLP. He was graduated from the University of Minnesota.


In the first half of the year, we invested a total of $5,644,076 in tiny technology. Of this total, $3,300,000 was in three new investments, and $2,344,076 was in six follow-on investments. (Please see page 26 of our Quarterly Report on Form 10-Q for the period ended June 30, 2005, for more details.)


At June 30, 2005, the value of our venture capital portfolio totaled $45,421,482. Since the close of the first half of 2005 to the date of this Letter to Shareholders, we have invested an additional $1,083,000 in two follow-on investments. Our last 24 initial investments, dating back to 2001, have been in tiny technology.


At June 30, 2005, approximately half of the value of our venture capital portfolio was in our 1,137,570 shares of NeuroMetrix, Inc. (Nasdaq: NURO), a company in which we were the seed investor that went public in July of 2004. Although our lock-up period with respect to the sale of these shares ended in January of this year, as of the date of this letter, we have chosen not to sell any of this holding. Because NeuroMetrix is the last of our significant non-tiny technology investments, once we sell our interest in it, our Company's portfolio will be essentially composed only of tiny technology companies.

As our fellow shareholders, we are appreciative of your understanding of the cyclical nature of the venture capital industry, as well as your shared vision of the commercial significance of tiny technology, particularly nanotechnology. We welcome our new shareholders and the additional capital that you have provided to us.


Charles E. Harris Douglas W. Jamison

Chairman and Chief Executive Officer President and Chief Operating Officer

Managing Director Managing Director

Daniel V. Leff Alexei A. Andreev

Executive Vice President Executive Vice President

Managing Director Managing Director



August 24, 2005


Unaudited Schedule of Investments*


(As of June 30, 2005)












AlphaSimplex Group, LLC



      Limited Liability Company Interest


$     125,000




Cambrios Technologies Corporation



      Series B Convertible Preferred






Chlorogen, Inc.



      Series A Convertible Preferred






Continuum Photonics, Inc.



      Series B Convertible Preferred Stock



      Series C Convertible Preferred Stock






Crystal IS, Inc.



      Series A Convertible Preferred






CSwitch, Inc.



      Series A Convertible Preferred Stock






eLite Optoelectronics Inc.



      Series B Convertible Preferred Stock






Experion Systems, Inc.



      Series A Convertible Preferred Stock



      Series B Convertible Preferred Stock



      Series C Convertible Preferred Stock



      Series D Convertible Preferred Stock






Exponential Business Development Company



      Limited Partnership Interest






Heartware, Inc.



      Series A-2 Non-Voting Preferred Stock






Kereos, Inc.



      Series B Convertible Preferred Stock






Molecular Imprints, Inc.



      Series B Convertible Preferred Stock






NanoGram Corporation



      Series I Convertible Preferred Stock



      Series II Convertible Preferred Stock






Nanomix, Inc.



      Series C Convertible Preferred Stock






NanoOpto Corporation



      Series A-1 Convertible Preferred Stock



      Series B Convertible Preferred Stock



      Series C Convertible Preferred Stock



      Warrants at $0.4359 expiring 03/15/10






Nanopharma Corp.



      Series A Convertible Preferred Stock



      Secured Convertible Bridge Note with 25 % Warrants






Nanosys, Inc.



      Series C Convertible Preferred Stock






Nantero, Inc.



      Series A Convertible Preferred Stock



      Series B Convertible Preferred Stock



      Series C Convertible Preferred Stock






NeoPhotonics Corporation



      Common Stock



      Series 1 Convertible Preferred Stock



      Warrants at $0.15 expiring 01/26/10



      Warrants at $0.15 expiring 12/05/10






NeuroMetrix, Inc.



      Common Stock






Nextreme Thermal Solutions, Inc.



      Series A Convertible Preferred Stock






Optiva, Inc.



      Series C Convertible Preferred Stock



      Secured Convertible Bridge Note with 50% Preferred

          Stock Warrant coverage








Questech Corporation



      Common Stock



      Warrants at $1.50 expiring 11/16/05



      Warrants at $1.50 expiring 08/03/06



      Warrants at $1.50 expiring 11/21/07



      Warrants at $1.50 expiring 11/19/08



      Warrants at $1.50 expiring 11/19/09






Solazyme, Inc.



      Convertible Promissory Note






Starfire Systems, Inc.



      Common Stock



      Series A-1 Convertible Preferred Stock






Zia Laser, Inc.



      Series C Convertible Preferred Stock







*Selected quarterly financial information. The information contained herein does not include the full unaudited quarterly financial information. Please see the Company's report on Form 10-Q for the quarter ended June 30, 2005 for the unaudited financial information and notes thereto.







June 30, 2005

December 31, 2004





Cash, U.S. Government and Government Agency Securities and cash equivalents

$   55,386,507


Investments, at value



Restricted funds



Funds in escrow



Receivable from portfolio company



Interest receivable



Income tax receivable



Prepaid expenses



Other assets, net of reserve of $255,486 at 12/31/04



Total assets









Accounts payable and accrued liabilities

$    2,775,400

$  2,905,658

Broker payable



Accrued profit sharing



Deferred rent



Deferred income tax liability



Total liabilities






Net assets

$  79,513,203


$ 74,744,799



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Net assets are comprised of:



Preferred stock, $0.10 par value, 2,000,000 shares authorized; none issued

$                 0

$                0

Common stock, $0.01 par value, 30,000,000 shares authorized at 6/30/05 and 25,000,000



      shares authorized at 12/31/04; 19,077,585 issued at 6/30/05 and 12/31/04



Additional paid in capital



Accumulated net realized loss