Update from Mark Fuller

I wanted to take this opportunity to provide you with an overview of our progress, what is keeping us busy and the future.

We are on track to achieve our investment milestones and continue to work with our partners and networks to maximise the opportunities available. We share the concerns for business and in particular SMEs caused by the tight cash markets but see this as an opportunity for all of us to work hard to soften the impact. We will be investing from the current funds until 31st December 2008 and have plans in place to enable continuity of investment from 1st January 2009.

It has been a busy period for Alliance Fund Managers on the investment and realisation front. We recently concluded the Liverpool Seed Fund’s £2.5m investment into ULive, a company set up by the University of Liverpool to commercialise intellectual property generated by its research activities. The University will now transfer all existing and future IP rights to ULive for a minimum period of 15 years enabling the company to exploit the IP through the development of spin out businesses, and the licensing and sale of technology. This latest funding follows an initial investment of over £1.5m by the University. The Liverpool Seed Fund will take a 25% stake in the business and the University will retain the balance.

AFM has also invested £300k through the MSIF Mezzanine Fund to finance the MBO of Merseyside Metalworks and £400k through the same Fund to enable the partial MBO of Anaco Systems. Recent deals completed on behalf of the MSIF Small Firms Fund include the £100k investment into Nemesis Networks and £100k into Redwood Press.

We have also been fully repaid from the 2003 Mezzanine investment into Liverpool-based Printfine which has generated a good return for the Fund.

The NWDA has just issued a procurement notice in respect of the management of a North West Venture Capital and Loan Fund. This is something which has been expected and is fundamental to the creation of the Fund and the use of European Regional Development Funding (ERDF). I am sure it will not surprise you to learn that we intend to participate in the tendering process. We see this as a great opportunity to grow our business and to take to a wider platform the exceptional talent and approach that Alliance Fund Managers (AFM) has developed over the last 6 years in managing the funds for MSIF.

By 2013 the North West will be operating under a single business plan with no special geographical sub-regions that will be treated differently from others. A North West Venture Capital Loan Fund will be for the whole of the North West. It is likely that the branding of such a Fund will reflect that. This does not mean that the Liverpool city region will lose access to finance or that the talent and partnerships that have worked so well in the past will be lost. On the contrary, what is here will be built on.

Long term we are building a track record of success across the funds with investments and returning funds (exits) in companies such as Caldeira, Crystal Clear, Dolphin Music, New Mind, Sure Maintenance, Printfine, Agility Logistics, MPE and Vitaflo to name just a few.

Our performance is such that in some funds we have repaid the private sector and we are now in surplus, and so creating the ‘evergreen’ money – interest or capital from investments that go towards creating a successor fund. It is too early to say how much these funds will total once AFM has realised all the current investments, however we believe there is real quality in the portfolio and expect that further significant returns will be generated as the funds mature.

I would like to take this opportunity to thank everyone who has supported and continues to support this organisation and I look forward to working with you in the future as our great people continue to evolve the art of investing in and supporting SMEs.

Kindest regards

Mark Fuller
Managing Director
Alliance Fund Managers

*Alliance Fund Managers (AFM) is regulated by the FSA in the course of investment business

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