Date:   May 1, 2008
To:      Friends of the Millennium funds
From:  Sam Schwerin and Dan Burstein
Re:      IPOs, recent market developments, and updates on our investment strategy

In markets notable for challenges, complexity, and generalized pessimism, we are pleased to share some modest good news with you about our Millennium Technology Value Partners fund. Our portfolio company, ArcSight, conducted a successful Initial Public Offering in February (Nasdaq: ARST). ArcSight was the first successful venture-backed IPO of 2008. Despite the difficult IPO market conditions, investors recognized and rewarded ArcSight's high quality solutions for enterprise security management, its outstanding leadership team, its high-growth characteristics (65% year-over-year revenue growth), and its strong private investor group (including Kleiner Perkins).

Our investment in ArcSight was a product of one of our many value-centric investment strategies. In this case, the strategy we used was a program to target promising pre-IPO companies and offer early liquidity to founders and executives who hold significant illiquid private company shares and options. Through three separate transactions, we were able to acquire our position in ArcSight at a discount to the ultimate IPO price within 12 months of the IPO. Our sellers were pleased because they received a measure of liquidity with certainty in an uncertain market. And we were pleased, because we were able to become investors in a great company on the IPO track at an attractive price.

The Fund's success with ArcSight follows a similar experience in 2007 with Airvana (Nasdaq: AIRV), where we were also able to acquire pre-IPO shares from early employees at a discount to the eventual IPO price. Millennium Technology Value Partners has now achieved liquidity on 8 of 16 portfolio company investments made in the two years since the final closing of the Fund.

Over the last year, we have also achieved realizations on some of our older investments from our 2000 vintage venture capital fund. These include the sales of Aventail to SonicWALL (Nasdaq: SNWL) and World Wide Packets to Ciena (Nasdaq: CIEN).

Having focused on value-centric investing since 2002, and having completed more than 100 transactions in the value-centric strategy (including direct secondaries, restructurings, recapitalizations, bankruptcies, spinoffs, portfolio purchases, venture loans to individuals and companies, PIPEs, and a variety of equity and debt derivatives), we believe we are well-positioned and well prepared for the current period of challenge and complexity in the equity and credit markets.

One of our signature themes is to provide liquidity on venture capital assets to those who need it. We have helped major institutions achieve their liquidity goals, including Dell, Scientific-Atlanta, Goldman Sachs, Alliance Capital Management, Oppenheimer, UBS, and Bowman Capital. We have also provided liquidity to dozens of entrepreneurs, founders, and executives of venture-backed companies.

We are currently working on some large and innovative investments, each one drawing on different formats and unique aspects of our value-centric strategy. While our focus remains on technology companies, we are also exploring a broad diversity of public and private company opportunities in a range of sectors, transaction formats, and geographies.
2008 will undoubtedly be a year of complexity and challenge. We believe we have developed a set of structural tools, as well as the requisite capital and human resources, to create win-win liquidity strategies and to help turn challenging situations into successful investment outcomes.