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prescription drug costs during the temporary “gap” from Medicare coverage until their prescription drug costs reach the threshold for catastrophic coverage by Medicare), (iii) an approval process for generic biologics and granting exclusive marketing rights to original manufacturers for 12 years, (iv) increased drug rebates to the Medicaid program, and (v) disclosure requirements for financial relationships between various healthcare entities.

Within the U.S., the pharmaceutical industry has been a particular focus of both state and federal governments’ reform efforts. Other than reform measures adopted in the Act, proposed reforms include, but are not limited to, the following:

• increasing regulation of pharmaceutical sales representatives;
• restricting direct to consumer advertising and off-label uses;
• limiting manufacturers’ access to marketing data;
• authorizing the importation of drugs from Canada and other foreign countries to lower pharmaceutical costs to U.S. consumers;
• price discounts, formularies or rebates to government healthcare programs; and
• allowing government healthcare programs to negotiate prescription drug prices directly with manufacturers.

While the Fund cannot predict which legislative or regulatory proposals will be adopted or what affect the adopted proposals, including the Act, may have on the biopharmaceutical companies in which the Fund invests, the pendency, approval or implementation of such proposals could decrease the Fund’s anticipated returns or adversely affect its investment opportunities.

Availability of Investment Capital
Many portfolio companies will require several rounds of capital infusions before reaching maturity. The Fund and its co-investors may not provide all necessary follow-on capital to portfolio companies. Accordingly, third-party sources of financing may be required. There is no assurance that such additional sources of financing will be available, or, if available, will be on terms beneficial to the Fund. Furthermore, the Fund’s capital is limited and may not be adequate to protect the Fund from dilution resulting from multiple rounds of portfolio company financings. If the Fund does not have capital available to participate in subsequent rounds of financing, failure to participate may have a significant negative impact on the portfolio company as well as the value of the Fund’s investment.

Economic and Market Risk
Companies in which the Fund invests may be sensitive to general downward swings in the overall economy or in the healthcare technology sector. Changes in economic conditions, including, for example, inflation rates, industry conditions, competition, technological developments, political and diplomatic events and trends, tax laws and innumerable other factors, none of which will be within the control of the General Partner, can affect substantially and adversely the business and prospects of the Fund. A major recession or adverse developments in the securities market might have an impact on some or all of the Fund’s investments. In addition, factors specific to a portfolio company may have an adverse effect on the Fund’s investment in such company. The General Partner may rely upon its own or a portfolio company’s projections concerning the portfolio company’s future performance in making investment decisions. Such projections are inherently subject to uncertainty and to

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