$20M PREPARES KAMELIAN FOR GLOBAL GROWTH

Specialist active optical chip manufacturer to embark on major expansion drive

Scotland s reputation as a world class centre of excellence in the optical components sector was strengthened today with the news that Kamelian, a specialist Glasgow-based developer and manufacturer of high performance active chips and modules, has received $20M to finance a major expansion programme.

The funds will be used to build a dedicated manufacturing facility near Oxford, expand the Glasgow HQ and R&D facilities and recruit around 100 skilled staff across both sites.

3i, Europe s leading venture capital company, has invested about $10M in this first funding round, with Lightspeed Venture Partners (formerly Weiss, Peck & Greer), a leading US venture capital company specialising in the optical components space, providing a further $8M. In June of this year 3i invested $1.5M in a seed round to establish the company. A further $5M of debt financing is currently being arranged.

Kamelian specialises in the design and fabrication of integrated optical chips for next generation optical networks - essentially components for a smarter internet. The main development facility is based in the West of Scotland Science Park in Glasgow where the company undertakes initial product design and testing. Low volume prototype manufacturing is currently undertaken by Compound Semiconductor Technology, also based on the same site and with whom Kamelian has developed a strategic alliance. Kamelian has also licensed technology from the University of Strathclyde and plans a major research programme with the University s Institute of Photonics.

The market in which Kamelian is operating is expected to be worth at least $10bn by 2003. The company s clients are the system integrators such as Nortel, Alcatel and Lucent who are increasingly demanding higher functionality components for their networking equipment.
Kamelian is developing a range of products for the smarter optical internet based on combining the optical switching capabilities of novel active chips with the established fixed wavelength routing capabilities of passive optical chips. The first products will be released within the next year.

The business has an exceptional management team with a wealth of experience in optoelectronics and in building and managing fast growing technology businesses. The company is headed up by Chief Executive Officer Paul May, a founder and Technical Director of Cambridge Display Technology. Tim Bestwick, a former Director of Technology Strategy with Bookham, is Chief Operating Officer. Ivan Andonovic, Professor of Broadband Optical Networks at Strathclyde University, is Chief Technical Officer. David Sibbald, founder of Atlantech Technologies, which was recently bought by Cisco Sytems, is Non Executive Director.

Commenting on Kamelian s business development strategy, CEO Paul May said: "Kamelian s powerful technology platform combines its expertise in designing and manufacturing active optical components that have optical switching and amplification capabilities with key know how in the hybrid integration of these actives with passives that perform static wavelength routing functions. This combination provides us with a range of products that optically perform such dynamic functions as switching, wavelength conversion and signal regeneration. Our customers require these products to provide higher performance network solutions for the Internet."

Commenting on the prospects for the business and 3i s investment strategy, Andrew Davison, an Investment Director with 3i s Scottish Technology Division, said: "Kamelian is a very exciting business with superb technology, an outstanding management team and the potential to become the key player in a fast-growing global market. The combination of these assets and features makes Kamelian a perfect fit for our investment criteria and strategy. With businesses such as Kymata, Photonic Materials and Ilotron on our portfolio, 3i has developed considerable knowledge of, and expertise in, the opto-electronics space. We are therefore confident that, in backing Kamelian, we are backing the next major Scottish technology success story."

Issued on behalf of 3i by Shandwick International.

For further information please contact: Ian Spinney/Karen Leeson Shandwick International 0141 333 0557

Notes to Editors:

3i Group plc is Europe s leading venture capital company. The Group invests in ambitious, growing businesses in all sectors. It provides funding for growth, recovery, management buy-outs and buy-ins.

3i has a network of 39 offices across three continents. Overall, 3i has invested almost £11 billion in over 13,400 businesses (including co-investment funds). It has a portfolio of investments in almost 3,000 companies, with a combined valuation of £6 billion.

Active optical chips require electrical power for operation. They are typically made from so-called compound semiconductor materials (not silicon). In Kamelian s case the base material is Indium Phosphide from which semiconductor telecommunication lasers for operation at 1.3 and 1.5 microns are made. Kamelian s basic active device is a semiconductor optical amplifier, which is similar in construction to a laser but is instead used for amplification and switching of an existing optical signal, or for the conversion of that signal to a different wavelength.

Passive optical chips are made by such companies as Bookham and Kymata. These can perform sophisticated wavelength routing functions, for instance splitting the signal from an optical fibres into its constituent wavelength optical channels.

By manufacturing active chips and integrating them with passive chips Kamelian can build higher functionality optical modules, analogous to the combining of electronic active devices (eg transistors) with electronic passive devices (eg resistors and capacitors) to produce the functionality expected from today s electronic circuits.