From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked]
Date: Sun, 3 Dec 2000 15:01:00 -0800 (PST)

Rick,

With the recent burst of the Internet and communications bubble in the public 
equity markets, I wanted to send you an email describing our position, 
exposure and ongoing strategy.  Our aggressive use of accounting management 
vehicles, and early sales of positions has significantly reduced our 
accounting volatility and economic exposure.  Hopefully, the following points 
will address the appropriate issues.

Currently we have invested $108 million in 22 companies.  Of that, 
approximately $80 million still has accounting exposure.  The other $28 
million invested has either been hedged or already written down.  Our 
disciplined use of Fair Value accounting has allowed us to minimize 
accounting risk by not writing up investments simply because of improving 
market conditions.
Specifically - Avici, Sycamore, and FastForward have generated approximately 
$180 million in earnings this year.  DEN, Salus Media, and IAM.com have 
combined for $9 million in writeoffs.
Recently, I have done a review of our portfolio and I believe our accounting 
loss exposure for 2001 is limited.  Over 80% of our portfolio companies have 
raised enough capital to sustain them through all of 2001.  So, if the 
markets (private and public) are closed, I do not believe these companies 
will risk bankruptcy during 2001.  Also, our discipline of only co-investing 
with big partners helps assure these companies will continue to get funding.

Going forward, we are making certain revisions to our strategy to take 
compensate for, and take advantage of, the weak markets.
Limiting venture investments to technology companies that we have a 
competitive advantage in assessing the technology risk.  Also, moving our 
venture effort earlier stage to take more technology risk and less market 
risk.
We are beginning to look at other types of private equity investments.  There 
are many public companies, whose stock prices are at 10% or less of their 
highs.  I still believe that the fundamentals of the industries indicate that 
the vast majority of these companies will go bankrupt.  However, there will 
be a select few that will survive and will end up with reduced competition 
and big markets.  These companies will be big winners.  We are carefully 
looking for these.  I will keep you informed as this develops.

If you have any other questions, please let me know.

Thanks,

Kevin Garland