SECURITIES AND EXCHANGE COMMISSION

Form N-2

REGISTRATION STATEMENT

þ        Pre-Effective Amendment No. 1

MVC Capital, Inc.

287 Bowman Avenue

Michael T. Tokarz, Chairman

Copies of information to:

George M. Silfen, Esq.

     Approximate date of proposed public offering: From time to time after the effective date of the 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.      þ

      The registrant hereby amends this registration statement 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, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We 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.

(SUBJECT TO COMPLETION)

PROSPECTUS

MVC Capital, Inc.

      We are granting at no cost to the holders of shares of our common stock subscription rights to purchase 6,146,521 shares of our common stock. The rights are non-transferable and will not be admitted for trading on the New York Stock Exchange (“NYSE”). You will receive one right for every share of our common stock that you own as of the record date, which is December 3, 2004. For every two rights held, you will be able to purchase one share of our common stock at the subscription price. Fractional shares will not be issued upon exercise of rights. As more fully described in this prospectus, you can also purchase shares of our common stock not acquired by other stockholders in this rights offering.

      The subscription price per share will be 95% of the Fund’s net asset value (“NAV”) per share on January 3, 2005, which we refer to as the pricing date. Since the close of the rights offering on the expiration date will coincide with the pricing date, stockholders who choose to exercise their rights will not know the subscription price per share at the time they exercise such rights. The offer will dilute the ownership interest and voting power of the common stock owned by stockholders who do not fully exercise their basic subscription rights. Further, because the subscription price per share will be at a discount to the Fund’s NAV per share, the offering will dilute ( i.e., reduce) the Fund’s NAV per share. Stockholders who do not fully exercise their basic subscription rights should expect, upon completion of the rights offering, to own a smaller proportional interest in the Fund than before the rights offering.

      The rights will expire if they are not exercised by 5:00 p.m., New York time, on January 3, 2005, the expiration date of the rights offering unless extended. We, in our sole discretion, may extend the period for exercising the rights. You will have no right to rescind your subscriptions after receipt of your payment of the estimated subscription price except as described in this prospectus.

      Please read this prospectus before investing, and keep it for future reference. It contains important information about us. The Securities and Exchange Commission (“SEC”) maintains an Internet website (http://www.sec.gov) that contains other information about us.

      We are an internally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to seek to maximize total return from capital appreciation and/or income. We seek to achieve our investment objective primarily by providing equity and debt financing to small and middle-market companies that are, for the most part, privately owned. No assurances can be given that we will achieve our objective. Our common stock is traded on the NYSE under the symbol “MVC.” As of December 2, 2004, the last reported sale price on the NYSE for our common stock was $[        l        ] and the Fund’s NAV per share was $[        l        ]. To view the Fund’s latest NAV per share, visit the Fund’s Internet website address at www.mvccapital.com.

(1)	Estimated, using 95% of the Fund’s NAV per share on December 2, 2004.
(2)	Before deduction of expenses incurred by us related to this rights offering estimated to be $413,899.00.
(3)	The proceeds that we will receive in this rights offering assumes that all 6,146,521 shares are purchased at this estimated subscription price. If the Fund increases the number of shares subject to subscription by 25%, the proceeds, after expenses, to the Fund will be $[        l        ].

      The Fund may increase the number of shares of common stock subject to subscription by up to 25%, or up to an additional 1,536,630 shares, for an aggregate total of 7,683,151.

      You should review the information set forth under “Risk Factors” on page 15 of this prospectus before investing in our common stock.

      Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representations to the contrary are a criminal offense.

December 3, 2004

      We have not authorized any dealer, salesman or other person to give any information or to make any representations other than those contained in this prospectus. You must not rely upon any information or representation not contained in this prospectus as if we had authorized it. This prospectus does not constitute an offer to sell or a solicitation of any offer to buy any security other than the registered securities to which it relates, nor does it constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The information contained in this prospectus is accurate as of the date of this prospectus.

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RISK FACTORS

      Investing in MVC Capital involves a number of significant risks relating to our business and investment objective. As a result, there can be no assurance that we will achieve our investment objective. In addition to the other information contained in this prospectus, you should consider carefully the following information before making an investment in our common stock.

      Our investment portfolio generally consists of loans to, and investments in, private companies. Investments in private businesses involve a high degree of business and financial risk, which can result in substantial losses and accordingly should be considered speculative. There is generally very little publicly available information about the companies in which we invest, and we rely significantly on the diligence of Mr. Tokarz and the members of the Fund’s investment team to obtain information in connection with our investment decisions. In addition, some smaller businesses have narrower product lines and market shares than their competition, and may be more vulnerable to customer preferences, market conditions or economic downturns, which may adversely affect the return on, or the recovery of, our investment in such businesses.

      We generally acquire our investments directly from the issuer in privately negotiated transactions. Most of the investments in our portfolio (other than cash or cash equivalents) are typically subject to restrictions on resale or otherwise have no established trading market. We may exit our investments when the portfolio company has a liquidity event, such as a sale, recapitalization or initial public offering. The illiquidity of our investments may adversely affect our ability to dispose of equity and debt securities at times when it may be otherwise advantageous for us to liquidate such investments. In addition, if we were forced to immediately liquidate some or all of the investments in the portfolio, the proceeds of such liquidation could be significantly less than the current value of such investments.

      Pursuant to the requirements of the 1940 Act, because our portfolio company investments do not have readily ascertainable market values, we record these investments at fair value in accordance with Valuation Procedures adopted by our board of directors.

      At October 31, 2004, approximately 55.87% of our total assets represented portfolio investments recorded at fair value.

      There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. We specifically value each individual investment and record unrealized depreciation for an investment that we believe has become impaired, including where collection of a loan or realization of an equity security is doubtful. Conversely, we will record unrealized appreciation if we have an indication (based on an objective development) that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value, where appropriate. Without a readily ascertainable market value and because of the inherent uncertainty of fair valuation, fair value of our investments may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

      Pursuant to our Valuation Procedures, our Valuation Committee (which is currently comprised of three independent directors) reviews, considers and determines fair valuations on a quarterly basis (or more frequently, if deemed appropriate under the circumstances). Any changes in valuation are recorded in the statements of operations as “Net unrealized gain (loss) on investments.”

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      Stockholders who do not fully exercise their basic subscription rights will, upon completion of the rights offering, own a smaller interest in us than they owned prior to the rights offering. This rights offering will dilute the ownership interest and voting power of stockholders who do not fully exercise their basic subscription rights. Further, because the subscription price per share is lower than the Fund’s NAV per share, the offering will dilute ( i.e., reduce) the Fund’s NAV per share.

      We depend on the continued services of Mr. Tokarz and certain other key management personnel. If we were to lose any of these personnel, particularly Mr. Tokarz, it could negatively impact our operations and we could lose business opportunities. Mr. Tokarz has an agreement with the Fund, dated November 1, 2003, which has an initial term of two years. However, Mr. Tokarz may terminate this agreement, and thus his relationship with the Fund, at any time, upon 30 days’ prior written notice. Accordingly, Mr. Tokarz is not contractually bound to serve the Fund for an extended period of time. Thus, there is a risk that his expertise may, at his discretion, be unavailable to the Fund, which could significantly impact the Fund’s ability to achieve its investment objective.

      Many of the companies in which we have made or will make investments may be susceptible to economic slowdowns or recessions. An economic slowdown may affect the ability of a company to engage in a liquidity event. These conditions could lead to financial losses in our portfolio and a decrease in our revenues, net income and assets.

      Our overall business of making private equity investments may be affected by current and future market conditions. The absence of an active mezzanine lending or private equity environment may slow the amount of private equity investment activity generally. As a result, the pace of our investment activity may slow, which could impact our ability to achieve our investment objective. In addition, significant changes in the capital markets could have an effect on the valuations of private companies and on the potential for liquidity events involving such companies. This could affect the amount and timing of any gains realized on our investments.

      We may make long-term unsecured, subordinated loans, which may involve a higher degree of repayment risk than conventional secured loans. We primarily invest in companies that may have limited financial resources and that may be unable to obtain financing from traditional sources. In addition, numerous factors may adversely affect a portfolio company’s ability to repay a loan we make to it, including the failure to meet a business plan, a downturn in its industry or operating results, or negative economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in any related collateral.

      Our investment strategy contemplates investments in mezzanine and other debt securities of privately held companies. “Mezzanine” investments typically are structured as subordinated loans (with or without warrants) that carry a fixed rate of interest. We may also make senior secured and other types of loans or debt investments. Our debt investments are typically not rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade quality (rated lower than “Baa3” by Moody’s or lower than “BBB-” by Standard & Poor’s, commonly referred to as “junk bonds”). Loans of below investment grade quality have predominantly speculative characteristics with respect to the borrower’s capacity to pay interest and repay principal. Our debt investments in portfolio companies may thus result in a high level of risk and volatility and/or loss of principal.

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      Some of our loans to our portfolio companies may be structured to include customary business and financial covenants placing affirmative and negative obligations on the operation of each company’s business and its financial condition. However, from time to time, we may elect to waive breaches of these covenants, including our right to payment, or waive or defer enforcement of remedies, such as acceleration of obligations or foreclosure on collateral, depending upon the financial condition and prospects of the particular portfolio company. These actions may reduce the likelihood of our receiving the full amount of future payments of interest or principal and be accompanied by a deterioration in the value of the underlying collateral as many of these companies may have limited financial resources, may be unable to meet future obligations and may go bankrupt. This could negatively impact our ability to pay you dividends and cause you to lose all or part of your investment.

      Our portfolio companies may have other obligations that rank equally with, or senior to, the securities in which we invest. By their terms, such other securities may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in the relevant portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying investors that are more senior than us, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of other securities ranking equally with securities in which we invest, we would have to share on an equal basis any distributions with other investors holding such securities in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. As a result, we may be prevented from obtaining the full value of our investment in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

      We anticipate making minority investments; therefore, we will be subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of such company may take risks or otherwise act in ways that do not serve our interests. Due to the lack of liquidity in the markets for our investments in privately held companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

      Most of our investments are structured as debt securities with a relatively high fixed rate of interest and with equity features such as conversion rights, warrants or options. As a result, debt investments are generally structured to generate interest income from the time they are made, and may also produce a realized gain from an accompanying equity feature. However, we cannot assure that our portfolio will generate capital gains.

      When we invest in mezzanine and senior debt securities, we may acquire warrants or other equity securities as well. We may also invest directly in various equity securities. Our goal is ultimately to dispose of

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      Investments in small and middle-market privately-held companies are subject to a number of significant risks including the following:

	•	Small and middle-market companies may have limited financial resources and may not be able to repay the loans we make to them. Our strategy includes providing financing to companies that typically do not have capital sources readily available to them. While we believe that this provides an attractive opportunity for us to generate profits, this may make it difficult for the borrowers to repay their loans to us upon maturity.
	•	Small and middle-market companies typically have narrower product lines and smaller market shares than large companies. Because our target companies are smaller businesses, they may be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. In addition, smaller companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing and other capabilities, and a larger number of qualified managerial and technical personnel.
	•	There is generally little or no publicly available information about these privately-held companies. Because we seek to make investments in privately-held companies, there is generally little or no publicly available operating and financial information about them. As a result, we rely on our investment professionals to perform due diligence investigations of these privately-held companies, their operations and their prospects. We may not learn all of the material information we need to know regarding these companies through our investigations.
	•	Small and middle-market companies generally have less predictable operating results. We expect that our portfolio companies may have significant variations in their operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, may require substantial additional capital to support their operations, finance expansion or maintain their competitive position, may otherwise have a weak financial position or may be adversely affected by changes in the business cycle. Our portfolio companies may not meet net income, cash flow and other coverage tests typically imposed by their senior lenders.
	•	Small and middle-market businesses are more likely to be dependent on one or two persons. Typically, the success of a small or middle-market company also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us.
	•	Small and middle-market companies are likely to have greater exposure to economic downturns than larger companies. We expect that our portfolio companies will have fewer resources than larger businesses and an economic downturn may thus more likely have a material adverse effect on them.
	•	Small and middle-market companies may have limited operating histories. We may make debt or equity investments in new companies that meet our investment criteria. Portfolio companies with limited operating histories are exposed to the operating risks that new businesses face and may be particularly susceptible to, among other risks, market downturns, competitive pressures and the departure of key executive officers.

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      Our investment strategy may result in some investments in debt or equity of foreign companies (subject to applicable limits prescribed by the 1940 Act). Investing in foreign companies can expose us to additional risks not typically associated with investing in U.S. companies. These risks include exchange rates, changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

      Past performance of the private equity 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 private equity industry as a whole. Additionally, our overall returns are impacted 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
	•	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.

      We face competition in our investing activities from private equity funds, other business development companies, investment banks, 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 the 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 equity fund not subject to the same regulations. Furthermore, some of our competitors have greater resources than we do. Increased competition would make it more difficult for us to purchase or originate investments at attractive prices. As a result of this competition, sometimes we may be precluded from making otherwise attractive investments.

      We have operated so as to qualify as a “regulated investment company” (“RIC”) under Subchapter M of the Code. If we meet source of income, diversification and distribution requirements, we will qualify for effective pass-through tax treatment. We would cease to qualify for such pass-through tax treatment if we were unable to comply with these requirements. In addition, we may have difficulty meeting the requirement to make distributions to our stockholders because in certain cases we may recognize income before or without receiving cash representing such income. If we fail to qualify as a RIC, we will have to pay corporate-level taxes on all of our income whether or not we distribute it, which would substantially reduce the amount of income available for distribution to our stockholders. Even if we qualify as a RIC, we generally will be subject to a corporate-level income tax on the income we do not distribute. Moreover, if we do not distribute at least 98% of our income, we generally will be subject to a 4% excise tax.

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      We are regulated by the SEC. Changes in the laws or regulations that govern business development companies and RICs may significantly affect our business.

      Our operating results will fluctuate and, therefore, you should not rely on current or historical period results to be indicative of our performance in future reporting periods. In addition to many of the above-cited risk factors, other factors could cause operating results to fluctuate including, among others, variations in the investment origination volume and fee income earned, variation in timing of prepayments, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.

      The trading price of our common stock may fluctuate substantially. The price of the common stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include the following:

	•	price and volume fluctuations in the overall stock market from time to time;
	•	significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;
	•	volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity anticipation securities, or LEAPs, or short trading positions;
	•	changes in regulatory policies or tax guidelines with respect to business development companies or RICs;
	•	actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;
	•	general economic conditions and trends;
	•	loss of a major funding source; or
	•	departures of key personnel.

      As with any stock, the price of our shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than the original investment. Whether investors will realize gains or losses upon the sale of our shares will not depend directly upon our net asset value, but will depend upon the market price of the shares at the time of sale. Since the market price of our shares will be affected by such factors as the relative demand for and supply of the shares in the market, general market and economic conditions and other factors beyond our control, we cannot predict whether the shares will trade at, below or above our net asset value. Although our shares have recently traded at a premium to our net asset value, historically, our shares, as well as those of other closed-end investment companies, have frequently traded at a discount to their net asset value, which discount often fluctuates over time.

      We cannot assure you that we will achieve investment results that will allow us to make cash distributions or year-to-year increases in cash distributions. Our ability to make distributions is impacted by, among other things, the risk factors described in this prospectus. In addition, the asset coverage test applicable to us as a

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      Although we have incurred indebtedness only amounting to 7.83% of the Fund’s assets (as of October 31, 2004), we may borrow to a significantly greater degree (subject to the 1940 Act limits) in seeking to achieve our investment objective going forward. Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, can increase the risks associated with investing in our securities.

      Under the provisions of the 1940 Act, we are permitted, as a business development company, to borrow money or “issue senior securities” only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous.

      We may borrow from, and issue senior debt securities to, banks, insurance companies and other lenders. Lenders of these senior securities have fixed dollar claims on our assets that are superior to the claims of our common stockholders. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our consolidated assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our consolidated income in excess of consolidated interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our consolidated income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock dividend payments. Leverage is generally considered a speculative investment technique.

      Because we may borrow money to make investments, our net investment income before net realized and unrealized gains or losses, or net investment income, may be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of sharply rising interest rates, our cost of funds would increase, which could reduce our net investment income. We may use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. We may utilize our short-term credit facilities as a means to bridge to long-term financing. Our long-term fixed-rate investments are financed primarily with equity and long-term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.

      On October 28, 2004, the Fund entered into a one-year, $20 million revolving credit facility (the “Credit Facility”) with LaSalle Bank National Association. The Credit Facility contains covenants that we may not be able to meet. If we cannot meet these covenants, events of default would arise, which could result in payment of the applicable indebtedness being accelerated. In addition, if we require working capital greater than that provided by the Credit Facility, we may be required either to (i) seek to increase the availability under the Credit Facility or (ii) obtain other sources of financing.

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      While we aim to have a broad mix of investments in portfolio companies, our investments, at any time, may be concentrated in a limited number of companies. A consequence of this concentration is that the aggregate returns we seek to realize may be adversely affected if a small number of our investments perform poorly or if we need to write down the value of any one such investment. Beyond the applicable federal income tax diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. These factors could negatively impact our ability to pay you dividends and cause you to lose all or part of your investment.

      Although we commenced operations in 2000, we changed our investment objective and strategy in November 2003 from seeking 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) to an objective of seeking to maximize total return from capital appreciation and/or income. We no longer have a strategy seeking to concentrate our investments in the information technology industry and, as a result, our new investments may be in a variety of industries. Therefore, we have only a limited history of operations under our current investment objective and strategy upon which you can evaluate our business.

      As of October 31, 2004, 17.73% of the Fund’s assets is represented by investments made by the Fund’s former management team. These investments were made pursuant to the Fund’s prior investment objective of seeking long-term capital appreciation from venture capital investments in information technology companies. A cash return may generally not be received on these investments until a “liquidity event,” i.e., a sale, public offering or merger, occurs. Until then, these legacy investments remain in the Fund’s portfolio. We are managing them to try and realize maximum returns. Nevertheless, because they were not made in accordance with the Fund’s current investment strategy, their future performance may impact our ability to achieve our current objective.

      The way in which the compensation payable to our Portfolio Manager is determined may encourage our team to recommend riskier or more speculative investments and to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would adversely affect our stockholders, including investors in this offering. In addition, key criteria related to determining appropriate investments and investment strategies, including the preservation of capital, might be under-weighted if our Portfolio Manager and his team focus exclusively or disproportionately on maximizing returns. See “Employment Agreements” below for a description of our Portfolio Manager’s compensation arrangements.

      Our officers and directors may serve as officers and directors of entities that operate in the same or similar lines of business as we do. Accordingly, they may have obligations to those entities, the fulfillment of which might not be in the best interests of us or our stockholders. It is possible that new investment opportunities that meet our investment objectives may come to the attention of one of our officers or directors in his or her

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      In the future, we may attempt to increase our capital resources by making additional offerings of equity or debt securities, including medium-term notes, senior or subordinated notes and classes of preferred stock or common stock. Upon the liquidation of our Fund, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings by us may dilute the holdings of our existing stockholders or reduce the value of our common stock, or both. Any preferred stock we may issue would have a preference on distributions that could limit our ability to make distributions to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us.

      The war with Iraq, its aftermath and the continuing occupation of Iraq are likely to have a substantial impact on the U.S. and world economies and securities markets. The nature, scope and duration of the war and occupation cannot be predicted with any certainty. Furthermore, terrorist attacks may harm our results of operations and your investment. We cannot assure you that there will not be further terrorist attacks against the United States or U.S. businesses. Such attacks and armed conflicts in the United States or elsewhere may impact the businesses in which we invest directly or indirectly, by undermining economic conditions in the United States. Losses resulting from terrorist events are generally uninsurable.

      Our ability to achieve our investment objectives can depend on our ability to sustain continued growth. Accomplishing this result on a cost-effective basis is largely a function of our marketing capabilities, our management of the investment process, our ability to provide competent, attentive and efficient services and our access to financing sources on acceptable terms. As we grow, we may need to hire, train, supervise and manage new employees. Failure to effectively manage our future growth could have a material adverse effect on our business, financial condition and results of operations.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

      Information contained in this prospectus may contain “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate” or “continue” or the negative thereof or other variations or similar words or phrases. The matters described in “Risk Factors” and certain other factors noted throughout this prospectus and in any exhibits to the registration statement of which this prospectus is a part, constitute cautionary statements identifying important factors with respect to any such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those in such forward-looking statements.

      Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. Important assumptions include our ability to originate new investments, maintain certain margins and levels of profitability, access the capital markets for

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THE RIGHTS OFFERING

Terms of the Offer

      We are issuing to our stockholders of record on the record date, December 3, 2004, non-transferable rights to subscribe for the shares of our common stock. Each stockholder is being issued one non-transferable right for each share of common stock owned on the record date. For every two rights held you will be able to purchase one share of our common stock at the subscription price. Rights may be exercised at any time during the subscription period, which commences on December 3, 2004 and ends at 5:00 p.m., New York time, on January 3, 2005.

      In addition, any stockholder who fully exercises all rights initially issued is entitled to subscribe for shares which were not purchased for by other stockholders pursuant to their basic subscription rights and will have an opportunity to indicate on the subscription certificate how many shares they are willing to acquire pursuant to their over-subscription right. If enough shares are available, all stockholder requests to buy shares that were not bought by other holders will be honored in full. If the requests for shares exceed the shares available, we may, at our discretion, issue up to an additional 25% of the shares available pursuant to this rights offering in order to honor such over-subscriptions. Shares acquired pursuant to the over-subscription right are subject to proration, which is more fully discussed below under “Subscription Rights — Over-Subscription Right.”

      Rights will be evidenced by subscription certificates. The number of rights issued to each holder will be stated on the subscription certificate delivered to such holder. The method by which rights may be exercised and shares paid for is explained in the sections entitled “Method of Exercise of Rights” and “Payment for Shares.” A rights holder will have no right to rescind a purchase after the subscription agent has received the holder’s subscription certificate or notice of guaranteed delivery. Shares of common stock issued pursuant to an exercise of rights will be listed on the NYSE.

      The rights are non-transferable. Only the underlying shares of common stock, and not the rights, will be admitted for trading on the NYSE. Fractional shares will not be issued upon exercise of rights. Rights holders who receive, or who are left with, fewer than two rights will be unable to exercise such rights and will not be entitled to receive any cash in lieu of such shares.

      Participants in our dividend reinvestment plan will be issued rights for the common stock held in their accounts in the dividend reinvestment plan as of the record date. Participants wishing to exercise such rights must exercise such rights in accordance with the procedures set forth below in “Method of Exercise of Rights” and “Payment for Shares.” Such rights will not be exercised automatically by the dividend reinvestment plan. The rights must be exercised separately for each account and fractional shares may not be aggregated between accounts.

Purpose of the Offer

      Our board of directors has determined that this rights offering is in our best interest and in the best interests of our stockholders. The offering gives existing stockholders the right to purchase additional shares at a price that may be below market without incurring any commission or sales charges. The offering will increase the equity capital available for making additional investments in the equity or debt of primarily

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	•	the size of the discount to the market price and to the Fund’s NAV per share;
	•	the increased equity capital to be available upon completion of the rights offering for making additional investments consistent with MVC Capital’s investment objective;
	•	the dilution to non-exercising stockholders;
	•	the terms and expenses of the offering relative to other alternatives for raising capital;
	•	the size of the offering in relation to the number of shares outstanding;
	•	the market price of MVC Capital’s common stock, both before and after the announcement of the equity offering;
	•	the general condition of the securities markets; and
	•	any impact on operating expenses associated with an increase in capital.

      There can be no assurance of the amount of dilution that a stockholder will experience or that the rights offering will be successful.

      The purpose of setting the determination of the subscription price upon the expiration of the offer is to attract the maximum participation of stockholders in the offer, with minimum dilution to nonparticipating stockholders.

      We believe the rights offering will be a low-cost method for raising additional capital since no underwriting or sales commission will be paid in respect of the shares purchased in the rights offering. At any time, even prior to utilizing a significant portion of our capital, we may decide to raise additional equity capital and/or debt.

The Subscription Price

      The subscription price per share will be 95% of the Fund’s NAV per share on January 3, 2005, which we refer to as the pricing date. See “Price Range of Common Stock.” Since the expiration date of the rights offering coincides with the pricing date, stockholders exercising their subscription rights will not know the subscription price per share at the time they exercise their subscription rights. It may be more or less than the estimated subscription price of $[        l        ] per share. If the actual subscription price is lower, excess payments will be refunded (without interest), and if the actual subscription price is higher, stockholders exercising rights must make an additional payment by February 1, 2005. To view the Fund’s latest NAV per share, visit the Fund’s Internet website address at www.mvccapital.com.

Determination of the Subscription Price

      The subscription price has been determined by our board of directors, and will be 95% of the Fund’s NAV per share on January 3, 2005, which we refer to as the pricing date. The factors considered, among others, by our board of directors in determining the subscription price included those factors described under “Purpose of the Offer” and the following factors:

	•	the absence of underwriting fees or sales commission (which range from 3% to 7% of offering proceeds) in connection with rights offering;
	•	the pricing terms in other recently completed rights offerings; and
	•	desirability of ensuring significant stockholder participation in the rights offering.

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Distribution of Rights

      We will issue to each holder of our common stock at no cost one non-transferable right to purchase our common stock for each share of our common stock owned by that holder as of the record date, which is December 3, 2004. No fractional rights will be issued. For every two rights held you will be entitled to purchase one share of common stock at the subscription price. The subscription price per share will be 95% of the Fund’s NAV per share on January 3, 2005, which we refer to as the pricing date. Fractional shares will not be issued upon exercise of rights.

Subscription Rights

      Your rights entitle you to the basic subscription rights and the over-subscription right.

	•	Basic Subscription Rights. The basic subscription rights entitle you to purchase one share of our common stock at the subscription price for every two rights issued to you. You are entitled to subscribe for all or any portion of the shares of our common stock underlying your basic subscription rights.
	•	Over-Subscription Right. If you elect to purchase all of the shares of our common stock that you are entitled to purchase under your basic subscription rights such that you have fewer than two rights remaining after such election, you will also have an over-subscription right to subscribe for additional shares of our common stock, if any, that are not purchased by other holders of rights under their basic subscription rights as of the expiration date. Although you are not limited in the number of shares you can elect to over-subscribe for, your ability to purchase the number of shares that you wish to purchase in the exercise of your over-subscription right will depend on the availability of such shares. We cannot provide any assurance that sufficient shares will be available to satisfy your request in whole or in part. If, however, the number of shares of our common stock remaining unsold after holders have exercised their basic subscription rights is sufficient to satisfy in full all subscriptions submitted for additional shares, we will allocate the shares according to the subscriptions submitted. If sufficient additional shares are not available to honor all over-subscriptions, the additional shares will be allocated in proportion to the amount of shares each holder was entitled to and elected to purchase under his or her basic subscription rights (as discussed below) and we may, at our discretion, issue up to an additional 25% of the shares available pursuant to this rights offering in order to honor such over-subscriptions. Shares of our common stock purchased through your over-subscription right must be purchased at the subscription price.
	•	Proration of Over-Subscription Right. Each holder who subscribes for additional shares will be allocated available shares of our common stock in proportion to the amount each holder was entitled to and elected to purchase under his or her basic subscription rights. If the number of shares of our common stock remaining unsold after holders have exercised their basic subscription rights (whether or not we determine to issue additional shares to honor all over-subscriptions) is not sufficient to satisfy in full all subscriptions submitted for additional shares, we will allocate the available shares pro rata among all holders who exercise their over-subscription right based on the number of shares each subscriber for additional shares was entitled to and elected to purchase under his or her basic subscription rights; provided, however, that if this pro rata allocation results in any holder being allocated a greater number of additional shares than the holder subscribed for pursuant to the exercise of such holder’s over-subscription right, then such holder will be allocated only such number of additional shares as such holder subscribed for and the remaining additional shares will be allocated pro rata among all other holders exercising over-subscription rights. We will continue this allocation process until all subscriptions are filled or all the shares of our common stock offered in this offering have been sold. The allocation process may involve a series of allocations in order to assure the total number of shares available for over-subscription is distributed on a pro rata basis. In the case of rights exercised by a nominee for a beneficial owner, the allocation described above will be based upon the number of shares of our common stock that the beneficial owner was entitled to and elected to purchase under his or her basic subscription rights.

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	•	Full Exercise of Basic Subscription Rights. You may exercise your over-subscription right only if you exercise your basic subscription rights in full by electing to purchase all of the shares of common stock which you are entitled to purchase under your basic subscription rights such that you have fewer than two rights remaining after such exercise. To determine if you have fully exercised your basic subscription rights, we will consider only the basic subscription rights held by you in the same capacity. For example, suppose that you were granted rights for shares of our common stock which you own individually and shares of our common stock which you own collectively with your spouse. If you wish to exercise your over-subscription right with respect to the rights you own individually, but not with respect to the rights you own collectively with your spouse, you only need to fully exercise your basic subscription rights with respect to your individually owned rights. You do not have to subscribe for any shares under the basic subscription rights owned collectively with your spouse to exercise your individual over-subscription right.

      When you complete the portion of your subscription certificate to exercise your over-subscription right, you will be representing that you have fully exercised your basic subscription rights as to shares of our common stock which you hold in that capacity. You must exercise your over-subscription right at the same time you exercise your basic subscription rights in full.

      If you own shares of our common stock through your bank, broker or other nominee holder who will exercise your subscription right on your behalf, the bank, broker or other nominee holder will be required to certify to us and to the subscription agent the following information:

	•	the number of shares of our common stock held on your behalf on the record date;
	•	the number of rights exercised under your basic subscription rights;
	•	that your basic subscription rights held in the same capacity have been exercised in full; and
	•	the number of shares subscribed for under your over-subscription right.

      Your bank, broker or other nominee holder may also disclose to us other information received from you.

No Fractional Rights and Shares

      We will not issue fractional rights or fractional shares. Rights holders who receive, or who are left with, fewer than two rights will be unable to exercise such rights and will not be entitled to receive any cash in lieu of such shares.

Method of Exercise of Rights

      Subscription certificate(s), which evidence the subscription rights, will be mailed to stockholders of record as of the record date. Rights may be exercised by stockholders who are record owners by filling in and signing the enclosed subscription certificate(s) and mailing it in the envelope provided or delivering the completed and signed subscription certificate(s) to the subscription agent, together with required payment for the shares as described below under “Payment for Shares.” Rights may also be exercised by a stockholder by contacting his broker, bank or other nominee, who can arrange, on the stockholder’s behalf, delivery of a properly completed and executed subscription certificate(s) and payment for the shares. A fee may be charged for this service. Unless stockholders are delivering their subscription certificates pursuant to a notice of guaranteed delivery as described below under “Notice of Guaranteed Delivery,” subscription certificate(s) must be received by the subscription agent prior to 5:00 p.m., New York time, on the expiration date at the offices of the subscription agent.

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Payment for Shares

      Stockholders who acquire shares pursuant to the basic subscription rights or the over-subscription right must send payment for the shares to be acquired pursuant to the basic subscription rights and over-subscription right, to the subscription agent based on the estimated subscription price of $[        l        ] per share. To be accepted, such payment must be made payable to “EquiServe Trust Company, N.A., as subscription agent — MVC Capital, Inc.” or “MVC Capital, Inc.” and received by the subscription agent prior to 5:00 p.m. New York time on the expiration date, unless the rights offering is extended. The subscription agent will not honor any exercise of rights received by it after the expiration date. The subscription agent will deposit all bank checks, checks, and money orders received by it prior to the final payment date into a segregated interest-bearing account (which interest will be paid to us) pending proration and issuance of shares. If this offering is terminated, we will promptly arrange for the refund, without interest, of all funds received from holders of rights. All payments by a stockholder must be made in U.S. dollars by bank check, money order or check drawn on a bank located in the United States and payable to “EquiServe Trust Company, N.A., as subscription agent — MVC Capital, Inc.” or “MVC Capital, Inc.”

      Unless you are delivering your subscription certificate pursuant to a notice of guaranteed delivery as described below under “Notice of Guaranteed Delivery,” payment of the estimated subscription price must be accompanied by a subscription certificate.

Notice of Guaranteed Delivery

      If you wish to exercise your rights, but time will not permit you to cause the subscription certificate to reach the subscription agent on or prior to the expiration date, you may nevertheless exercise your rights if you meet the following conditions:

	(a) you have caused payment in full of the estimated subscription price for each share being subscribed for pursuant to your basic subscription rights and your over-subscription right, if any, to be received by the subscription agent on or prior to the expiration date;
	(b) the subscription agent receives, on or prior to the expiration date, a guaranteed notice, from an eligible institution, stating your name, the number of rights held, the number of shares being subscribed for pursuant to the basic subscription rights and the number of shares being subscribed for pursuant to the over-subscription right, and guaranteeing the delivery to the subscription agent of the subscription certificate at or prior to 5:00 p.m., New York time, on the date three business days following the expiration date; and
	(c) the properly completed subscription certificate evidencing the rights being exercised, with any required signatures being guaranteed, are received by the subscription agent at or prior to 5:00 p.m., New York time, on the date three business days following the expiration date.

Delivery of Shares

      Unless requested otherwise, stock certificates will not be issued for shares of our common stock offered in this rights offering. Stockholders who are record owners will have the shares they acquire credited to their account with our transfer agent. All future dividends paid on such shares will be paid either in cash or reinvested into additional shares, depending on the election you made in connection with our dividend reinvestment plan. Stockholders whose common stock is held by a nominee will have the shares they acquire credited to the account of such nominee holder.

Signature Guarantee May Be Required

      Your signature on each subscription certificate must be guaranteed by an eligible institution such as a member firm of a registered national securities exchange or a member of the NASD, or from a commercial

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	•	Your subscription certificate provides that shares are to be delivered to you as record holder of those rights; or
	•	You are an eligible institution.

Confirmation of Purchase

      Within 10 business days following the expiration of the rights offering, which we refer to as the confirmation date, a confirmation will be sent by the subscription agent to each stockholder (or, if shares are held by a nominee, on the record date, to such nominee) showing: (i) the number of shares acquired through the basic subscription rights; (ii) the number of shares, if any, acquired through the over-subscription right; (iii) the per share and total subscription price for the shares; and (iv) the additional amount payable by the stockholder to us or any excess to be refunded (without interest) by us to the stockholder, in each case based on the subscription price as determined on the pricing date.

      In the case of any stockholder who exercises a right to acquire shares through the over-subscription right, any excess payment which would otherwise be refunded to the stockholder will be applied by us toward payment for shares acquired through exercise of the over-subscription right. Any additional payment required from a stockholder must be received by the subscription agent within 10 business days after the confirmation date, and any excess payment to be refunded (without interest) by us to a stockholder will be mailed by the subscription agent to such stockholder as soon as practicable. All payments by a stockholder must be in U.S. dollars by bank check, money order or check drawn on a bank located in the United States and payable to “EquiServe Trust Company, N.A., as subscription agent — MVC Capital, Inc.” or “MVC Capital, Inc.”

      Crediting of shares acquired in this rights offering to any account is subject to collection of checks.

      If a stockholder who acquires shares through the basic subscription rights or over-subscription right does not make payment of all amounts due, we reserve the right to (i) apply any payment actually received by us toward the purchase of the greatest number of whole shares which could be acquired by such stockholder upon exercise of the basic subscription rights or over-subscription right; (ii) exercise any and all other rights or remedies to which we may be entitled; or (iii) find other purchasers for such subscribed-for shares.

      Stockholders will have no right to rescind their subscription after receipt of their payment for shares by the subscription agent.

Instructions for Completing Your Subscription Certificate

      You should read and follow the instructions accompanying the subscription certificates carefully. If you want to exercise your rights, you should send your subscription certificate(s) with your estimated subscription price payment to the subscription agent. Do not send your subscription certificate(s) and estimated subscription price payment to us.

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Information Agent

      Any questions or requests for assistance may be directed to the information agent at its telephone number and address listed below:

	The information agent for the rights offering is:

EquiServe Trust Company, N.A.

Banks and Brokers Call

All Others Call Toll-Free

      Stockholders may also contact their brokers, banks or other nominees for information with respect to the rights offering.

      The information agent will receive a fee estimated to be approximately $35,000, which excludes reimbursement for all out-of-pocket expenses related to the rights offering, and have also agreed to indemnify the information agent against certain liabilities which it may incur in connection with this offering.

Subscription Agent

      EquiServe will act as our subscription agent to accept exercises of subscription rights for this offering. You must send the completed and signed certificate, along with payment in full of the exercise price for all shares that you wish to purchase pursuant to the basic subscription rights and over-subscription right, to EquiServe.

      We suggest, for your protection, that you deliver your subscription certificate to the subscription agent by an insured, overnight or express mail courier. If you mail your subscription certificate, we suggest that you use registered mail. If you wish to exercise your rights, you should mail or deliver your subscription certificate and payment for the estimated subscription price to the subscription agent as follows:

By Mail, Hand or Overnight Courier

BY FIRST CLASS MAIL:

BY OVERNIGHT COURIER:

BY HAND:

      The notice of guaranteed delivery may also be sent by facsimile to (781) 380-3388 with the originals to be sent promptly thereafter by the methods described above. Facsimiles should be confirmed by telephone to (877) 437-8901.

      Delivery to an address other than as listed above, or transmission via a facsimile number other than as listed above, will not constitute valid delivery.

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      Any questions or requests for assistance concerning the method of subscribing for shares of our common stock or for additional copies of this prospectus or the instructions as to use of the subscription certificates can be directed to the information or subscription agent at the addresses or at the telephone numbers specified above.

      We will pay the subscription agent fees and expenses of up to $35,000 and have also agreed to indemnify the subscription agent against certain liabilities which it may incur in connection with this offering.

Expiration of the Rights Offering

      You may exercise your subscription rights at any time before 5:00 p.m., New York time, on January 3, 2005, the expiration date for this offering. We may, in our sole discretion, extend the time for exercising your rights. If you do not exercise your rights before the expiration date, your unexercised rights will be null and void. We may extend the expiration date by giving oral or written notice to the subscription agent on or before the scheduled expiration date and making a public announcement thereof no later than 9:00 a.m., New York time, on the next business day after the previously scheduled expiration date. We will not be obligated to honor your exercise of rights if the subscription agent receives the documents relating to your exercise after the rights offering expires, regardless of when you transmitted the documents.

Calculation of Rights Exercised

      If you do not indicate the number of rights being exercised, or do not forward full payment of the total estimated subscription price payment for the number of rights that you indicate are being exercised, then you will be deemed to have exercised your basic subscription rights with respect to the maximum number of rights that may be exercised with the aggregate estimated subscription price payment you delivered to the subscription agent. If your aggregate estimated subscription price payment is greater than the amount you owe for your basic subscription and you do not indicate the number of rights being exercised, you will be deemed to have exercised your over-subscription right to purchase the maximum number of shares with your overpayment. If we do not apply your full subscription price payment to your purchase of shares of our common stock, we will return the excess amount to you by mail without interest or deduction as soon as practicable after the expiration of rights offering.

Nominee Holders

      If you are a broker, bank or other nominee who holds shares of our common stock for the account of others on December 3, 2004, the record date for this offering, you should notify the respective beneficial owners of such shares of the rights offering as soon as possible to find out their intentions with respect to exercising their rights. You should obtain instructions from the beneficial owner with respect to the rights, as set forth in the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you should complete the appropriate documents and submit them to the subscription agent with the proper payment. If you hold shares of our common stock for the account (s) of more than one beneficial owner, you may exercise the number of rights to which all such beneficial owners in the aggregate otherwise would have been entitled had they been direct record holders of our common stock on the record date for this rights offering, provided that you, as a nominee record holder, make a proper showing to the subscription agent.

Beneficial Owners

      If you are a beneficial owner of shares of our common stock or will receive your rights through a broker, bank or other nominee, we will ask your broker, bank or other nominee to notify you of this rights offering. To indicate your decision, you should complete and return to your bank, broker or other nominee the form entitled “Beneficial Owner Election Form,” together with full payment of the estimated subscription price for each share subscribed for under your subscription rights (including shares subscribed for through the exercise of your over-subscription right). You should receive this form from your broker, bank or other nominee with the other offering materials.

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Amendments and Waivers; Termination

      We reserve the right to amend the terms and conditions of this offering, whether the amended terms are more or less favorable to you. We will comply with all applicable laws, including the federal securities laws, in connection with any such amendment.

      We will decide all questions as to the validity, form and eligibility (including times of receipt, beneficial ownership and compliance with other procedural matters) in our sole discretion, and our determination shall be final and binding. The acceptance of subscription certificates and the subscription price also will be determined by us. Alternative, conditional or contingent subscriptions will not be accepted. We reserve the right to reject any exercise if such exercise is not in accordance with the terms of this rights offering or not in proper form or if the acceptance thereof or the issuance of shares of our common stock thereto could be deemed unlawful. We reserve the right to waive any deficiency or irregularity with respect to any subscription certificate. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as we determine in our sole discretion. We will not be under any duty to give notification of any defect or irregularity in connection with the submission of subscription certificates or incur any liability for failure to give such notification.

      We reserve the right, in our sole discretion, at any time prior to delivery of the shares of our common stock offered hereby, to terminate the rights offering by giving oral or written notice thereof to the subscription agent and making a public announcement thereof. If this offering is terminated, we will promptly arrange for the refund, without interest, of all funds received from holders of rights. All monies received by the subscription agent in connection with this offering will be held by the subscription agent, on our behalf, in a segregated interest-bearing account. All such interest shall be payable to us even if we determine to terminate the offering and return your subscription payment.

No Revocation

      Once you have exercised your subscription rights, you may not revoke the exercise.

No Transfer of Rights

      All rights received by you in this offering are non-transferable and may only be exercised by a subscribing holder for his or her own account. The rights will not be admitted for trading on the NYSE. However, the shares of our common stock issued through this rights offering will be listed and admitted for trading on the NYSE.

Dilutive Effects

      Any stockholder who chooses not to participate in this rights offering, should expect to own a smaller interest in us upon completion of this rights offering. This rights offering will dilute the ownership interest and voting power of stockholders who do not fully exercise their basic subscription rights. Further, because the subscription price per share will be lower than the Fund’s NAV per share, the offering will dilute ( i.e., reduce) the Fund’s NAV per share.

Foreign Restrictions

      Stockholders whose record addresses are outside the United States (for these purposes, the United States includes its territories and possessions and the District of Columbia) will receive written notice of the rights offering; however, subscription certificates will not be mailed to such stockholders. The rights to which those subscription certificates relate will be held by the subscription agent for such foreign stockholder’s accounts until instructions are received to exercise the rights. If no such instructions are received by the expiration date, such rights will expire.

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ERISA Considerations

      Fiduciaries of an employee benefit plan or other arrangement subject to the Employee Retirement Income Security Act of 1974, as amended (an “ERISA Plan”), and persons who are fiduciaries with respect to an IRA or Keogh Plan, which is not subject to ERISA but is subject to the prohibited transaction provisions of Section 4975 of the Code (together with ERISA Plans, “Benefit Plans”) should consider, among other things, the following before purchasing shares.

      ERISA imposes certain responsibilities on persons who are fiduciaries with respect to an ERISA Plan, including prudence, diversification, an obligation not to engage in prohibited transactions and other standards. In determining whether a particular investment is appropriate for an ERISA Plan, Department of Labor (“DOL”) regulations provide that an ERISA Plan fiduciary must give appropriate consideration to, among other things, the role the investment plays in the ERISA Plan’s portfolio, taking into consideration whether the investment is designed reasonably to further the ERISA Plan’s purposes, an examination of the risk and return factors, the portfolio’s composition with regard to diversification, the liquidity and current return of the total portfolio relative to the anticipated cash flow needs of the ERISA Plan, the tax consequences and the projected return of the total portfolio relative to the ERISA Plan’s funding objectives. Before purchasing shares, a fiduciary should determine whether such investment is consistent with its fiduciary responsibilities and the DOL’s regulations. For example, a fiduciary should consider whether an investment in the Fund may be too illiquid or too speculative for a particular ERISA Plan. If a fiduciary breaches its responsibilities in selecting an investment or an investment course of action, the fiduciary may be held liable for losses incurred by the ERISA Plan resulting from such breach.

      Because it is anticipated that shares will constitute “publicly offered securities” within the meaning of the DOL plan asset regulations, the underlying assets of the Fund should not be considered to be “plan assets” of investing ERISA Plans for purposes of the fiduciary responsibility provisions of ERISA and prohibited transaction rules of ERISA and the Code. Thus, the Fund’s management team will not be an ERISA fiduciary by reason of its authority with respect to the Fund.

      A Benefit Plan proposing to invest in the Fund will be deemed to represent that it and any fiduciary responsible for such plan’s investments are aware of and understand the Fund’s investment objective, policies and strategies, that the decision to purchase shares was made with appropriate consideration of the relevant investment factors and is consistent with the duties and responsibilities imposed upon fiduciaries with regard to their investment decisions under ERISA and/or the Code.

      Certain prospective Benefit Plan investors may currently maintain relationships with the Fund’s management team and/or its affiliates. Each of such persons may be deemed to be a party in interest to and/or a fiduciary of any Benefit Plan to which it provides investment management, investment advisory or other services. ERISA prohibits the use of plan assets for the benefit of a party in interest and prohibits a fiduciary from using its position to cause such Plan to make an investment from which it or certain third parties in which such fiduciary has an interest would receive a fee or other consideration. The Code also penalizes such actions. ERISA and Benefit Plan investors should consult with counsel to determine if the purchase and holding of shares is a prohibited transaction. Fiduciaries of ERISA or Benefit Plan investors will be deemed to represent that the decision to invest in the shares was made by them as fiduciaries independent of the Fund’s management team or its affiliates, that they are duly authorized to make such decision and that they have not relied on any individualized advice or recommendation of the Fund’s management team or its affiliates, as a primary basis for the decision to invest in the Fund.

      The provisions discussed herein are subject to continuing administrative and judicial interpretation and review. This discussion is general and may be affected by future publication of regulations and rulings. Potential Benefit Plan investors should consult their advisers regarding the consequences under ERISA and the Code relevant to purchasing and holding the shares.

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Federal Income Tax Consequences to Stockholders

      For U.S. federal income tax purposes, neither the receipt nor the exercise of the rights will result in taxable income to you. Moreover, you will not realize a loss if you do not exercise the rights. The holding period for a share acquired upon exercise of a right begins with the date of exercise.

      In general, except as provided in the following sentence, your basis in the rights received by you in this rights offering as a distribution with respect to your common stock will be zero. If, however, either (i) the aggregate fair market value of the rights as of the date they are distributed to you is equal to or greater than 15% of the aggregate fair market value on the date of distribution of the common stock in existence when the rights are received, or (ii) you irrevocably elect, in a statement attached to your federal income tax return for the year in which the rights are received, to allocate a portion of the basis in such common stock to the rights, then, upon exercise of the rights, your basis in such common stock will be allocated between such common stock and the rights in proportion to the relative fair market values of each as of the date of distribution of the rights. If you do not exercise the rights, you will not be permitted to allocate any portion of your basis in your common stock to the rights and, therefore, you will not realize a loss on the expiration of an unexercised right.

      Your basis in common stock acquired upon the exercise of a right will be equal to the sum of (i) the subscription price per share, (ii) any servicing fee charged to you by your broker, bank or trust company, and (iii) the basis, if any, in the rights that you exercised. The holding period for any common stock acquired upon exercise of a right will begin with the date of exercise. For a discussion of the consequences of holding and selling shares of our common stock, including any shares of common stock acquired upon the exercise of a right, see “Federal Income Tax Matters” below.

      The foregoing is a general summary of the material U.S. federal income tax consequences of the receipt and exercise of the rights. The discussion is based upon applicable provisions of the Code, Treasury regulations thereunder and administrative and judicial interpretations, each as of the date of this prospectus and all of which are subject to change, and does not cover state, local or foreign taxes. This summary does not discuss all aspects of federal income taxation relevant to the receipt, exercise and lapse of rights, in light of particular circumstances, or to certain types of holders subject to special treatment under federal income tax laws, including dealers in securities, pension plans and trusts and financial institutions. The Code and Treasury regulations thereunder are subject to change by legislative or administrative action, possibly with retroactive effect. You should consult your tax advisors regarding specific questions as to federal, state, local or foreign taxes. You should also review the discussion of certain tax considerations affecting yourself and MVC Capital set forth under “Federal Income Tax Matters.”

USE OF PROCEEDS

      Assuming full exercise of the rights, the cash proceeds from the sale of our common stock will be approximately $[        l        ] before deducting the offering fees and expenses. If we, in our sole discretion, increase the number of shares subject to this rights offering by 25% in order to satisfy over-subscriptions, our proceeds will be approximately [        l        ]. However, there can be no assurance that all the rights will be exercised in full, and the subscription price will not be determined until the close of business on the expiration date.

      We intend to use the net proceeds from the rights offering to provide equity and debt financing to portfolio companies and for other general corporate purposes.

      We intend to invest in common and preferred stock and warrants or rights to acquire equity interests, senior and subordinated loans, and convertible securities. In addition to such investments, we may invest up to 30% of the portfolio in other investments, including high-yield bonds, equity and debt securities in collateralized debt obligation vehicles, equity securities or distressed debt of public companies at the discretion of the Portfolio Manager. As part of this 30%, we may also invest in equity or debt of small and middle-market companies located outside of the United States.

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      We anticipate that substantially all of the net proceeds from this rights offering will be used, as described above, within twelve months, but in no event longer than two years. Pending investment in new portfolio companies, we intend to invest the net proceeds from this rights offering in time deposits, income-producing securities with maturities of three months or less that are issued or guaranteed by the federal government or an agency of the federal government, high quality debt securities maturing in one year or less from the time of investment or other money market instruments. Our ability to achieve our investment objective may be limited to the extent that the net proceeds of any offering, pending full investment, are held in short-term instruments.

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

      Our common stock is traded on the NYSE under the symbol “MVC.” The following table lists the high and low closing sales prices for our common stock, the closing sales price as a percentage of NAV. On December 2, 2004, the last reported sale price on the NYSE for our common stock was $[        l        ] and the Fund’s NAV per share was $[        l        ]. To view the Fund’s latest NAV per share, visit the Fund’s Internet website address at www.mvccapital.com.

      At times, our common stock price per share has traded in excess of our net asset value per share. We cannot predict whether our shares of common stock will trade at a premium to net asset value.

      Currently, the Fund does not have a set policy of paying dividends. The amount and/or frequency of any dividend and distribution is determined by our board of directors. On October 14, 2004, our board of directors declared a nonrecurring dividend of $.12 per share payable to stockholders of record on October 22, 2004 and payable on October 29, 2004. We cannot assure that we will achieve investment results that will permit us to make any dividend payment.

      We maintain a dividend reinvestment plan for our stockholders. As a result, if our board of directors declares a dividend or distribution, stockholders can have any cash dividends and distributions automatically reinvested in additional shares of our common stock. See “Dividend Reinvestment Plan.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Overview

      The Fund is a non-diversified investment company that is regulated as a business development company under the 1940 Act. The Fund’s investment objective, as amended by shareholder vote on September 16, 2003, is to seek to maximize total return from capital appreciation and/or income.

      On November 6, 2003, Mr. Tokarz assumed his new position as Portfolio Manager of the Fund. He and his team are seeking to implement our investment objective ( i.e. , to maximize total return from capital appreciation and/or income) through making a broad range of private investments in a variety of industries. The investments can include senior or subordinated loans, convertible debt and convertible preferred securities, common or preferred stock, warrants or rights to acquire equity interests, and other private equity transactions. In the nine months ended July 31, 2004, we made five new investments, totaling $30,210,000, pursuant to our new investment objective.

      Prior to the adoption of our current investment objective, the Fund’s investment objective had been to achieve long-term capital appreciation from venture capital investments in information technology companies. The Fund’s investments had thus previously focused on investments in equity and debt securities of information technology companies. As of July 31, 2004, 21.92% of our assets consisted of portfolio investments made by the Fund’s former management team pursuant to the prior investment objective. We are, however, seeking to manage these legacy investments to try and realize maximum returns. We generally seek to capitalize on opportunities to realize cash returns on these investments when presented with a potential “liquidity event,” i.e. , a sale, public offering, merger or other reorganization.

      Our new portfolio investments are made pursuant to our new objective and strategy. We are concentrating our investment efforts on small and middle-market companies that, in our view, provide opportunities to maximize total return from capital appreciation and/or income. Under our investment approach, we have the authority to invest, without limit, in any one portfolio company, subject to any diversification limits that may be required in order for us to continue to qualify as a RIC under Subchapter M of the Code.

      We participate in the private equity business generally by providing privately negotiated long-term equity and/or debt investment capital to small and middle-market companies. Our financing is generally used to fund growth, buyouts, acquisitions, recapitalizations, note purchases, and/or bridge financings. We generally invest in private companies, though, from time to time, we may invest in small public companies that may lack adequate access to public capital.

Investment Income

      For the nine months ended July 31, 2004 and 2003. Interest, fee and other income for the nine months ended July 31, 2004 and 2003 was $2,175,011 and $2,153,798, respectively, an increase of approximately $21,000. The increase in interest and fee income during the nine months ended July 31, 2004 was the result of a combination of factors: the Fund’s investment in new portfolio companies paying different rates of interest and the Fund’s receipt of closing and monitoring fees from certain portfolio companies by the Fund and MVC Financial Services, Inc. a wholly owned subsidiary of the Fund.

      For the Years Ended October 31, 2003 and 2002. Dividend and interest income was $2.9 million in 2003 and $3.7 million in 2002, a decrease of $0.8 million or 21.6%. The reduction in dividend and interest income during the year ended October 31, 2003 was primarily the result of lower interest rates on a reduced cash balance. Interest and dividend income was primarily related to the Fund’s investment in short-term investments and not from portfolio companies.

      For the Years Ended October 31, 2002 and 2001. Dividend and interest income was $3.7 million in 2002 and $9.0 million in 2001, a decrease of $5.3 million or 58.9%. The reduction in dividend and interest income

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Operating Expenses

      For the nine months ended July 31, 2004 and 2003. Operating expenses for the nine months ended July 31, 2004 and 2003 were $2.82 million and $9.80 million, respectively, a decrease of $6.98 million.

      The significant components of operating expenses for the nine months ended July 31, 2004 and the major factors contributing to the decrease over the nine month period ended July 31, 2003 are outlined below.

      During the nine month period ended July 31, 2003, proxy and litigation expenses were $4 million. The expenses in 2003 were non-recurring and were associated specifically with the costs of replacing the board of directors in February 2003 and the repayment of legal expenses of the two major Fund shareholders, Millenco, L.P. and Karpus Investment Management after judgment was obtained in the Delaware Chancery Court against the Fund.