news//views Issue 02 2012

Building

businesses.

InsideThe big event

Partial sale of CloserStillgenerates excellent returns

Our peopleDavid Rolfe joins theNVM investment team

Having worked inthe South for 15 yearsI genuinely believe inthe market opportunityfor a regionally-basedbrand such as NVM.

Our portfolioLineup Systems will use£3m of funding to shape theiradvertising and CRM systemsVolumatic receives £6m to developits intelligent cash handling productsWear Inns uses further fundingto acquire a portfolio of pubsKerridge Commercial Systemsacquires TIS Software to createa greater global force

Our fundsTrading VCT sharesNorthern Venture Trustwins Best VCT awardFund performanceShareholder meeting dates

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Shared skills, shared ambitions andshared visions are what drive a businessand give it an energy that others may lack.We look for entrepreneurs who not onlyhave great ideas, talent and managementability, but also have an open mind andwilling attitude. Our job is to bring a freshperspective, encourage new ideas and beinvolved. We help define strategy and addresources to bring out the best in a teamso that the business achieves its goals.

Weaim to bringsuccess to our partners,returns to our investors– and to embracethe challengesalong theway.

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Strong relationships are at the core of our business – withour investors, our advisors and the people we invest in.

Four years down the line and CloserStillnow owns ten major exhibitions all ofwhich are growing strongly in terms ofthe number of visitors, exhibitors andfloor space. Over half of the events arenow turning over between £1m and £2mwith the business expected to generateoperating profit in excess of £3m this year.

In May 2012 the mid-market private equityinvestor Phoenix Equity Partners acquiredthe bulk of NVM’s stake in a transactionwhich valued CloserStill at around £25m.NVM’s funds recorded an excellent returnof 3.2 times their original investment,equivalent to an internal rate of returnof 38% per annum.

Peter Hodson of NVM has worked withAndy and his team since NVM first investedin 2005. “We have really enjoyed workingwith the CloserStill team during the lastsix years; so much so, we were keento re-invest and be part of the journey inthe next phase of the company’s growth.”

CloserStill, the business-to-business exhibitions, events and mediabusiness, was formed with NVM’s backing in 2008. Its team of industryexperts, headed by Andy Center, had a clear business strategy fromthe beginning to acquire or create mid-sized exhibitions and events,predominantly in the healthcare and technology markets.

The big event: CloserStill

David joins NVM from his role as PwCDirector in Corporate Finance responsiblefor leading deal activity in the South East.David has 15 years’ experience withPwC, spending the last 12 years in alead advisory role in Corporate Finance;advising both local private businessesand private equity houses on mid-marketcorporate transactions. In 2011 Davidwas voted Thames Valley and SolentDealmaker of the Year.

We are delighted to announce the appointment of David Rolfeto our investment team. He will be responsible for generating newinvestment opportunities for NVM across the South of England.

David Rolfe

NVM has a stronginvestment team thatis well-respected inthe market and Iam really lookingforward to workingalongside them.David Rolfe,NVM

It’s been a brilliantjourney and huge funso far with our friendsat NVM and with ateam of people hereat CloserStill that canmove mountains.Andy Center,CEO of CloserStill

The company delivers collaborativeadvertising booking, management,analytics and customer relationshipmanagement (CRM) tools specificallyfor multi-channel media companies.The software has been created andimplemented by a team drawn froma variety of international advertisingbackgrounds, representative of the print,digital and broadcast channels that arenow supported.

James Arrowsmith led the investmentfor NVM. “We recognised that themanagement team had anticipatedthe new media landscape, developingcutting-edge products to meet the needsof an ever evolving market.”Over 2,000users, across 26 countries at 96 of theworld’s leading publishers, currently useLineup’s software products.

NVM invested £3m of development capitalin Lineup to support the team’s strategyto expand its product sales globally. At thetime of the investment Ken Briddon wasappointed as chairman of Lineup. He hasthirty years’ experience in the softwareand IT industry and is currently chairmanof and investor in NVM-backed KerridgeCommercial Systems and Lanner Group– so has a long-standing relationshipwith NVM.

Lineup Systems was a spin-out fromMetro International S.A. (MISA) in 2010and has achieved revenue growth of 267% since becoming independent.

Lineup Systems

The NVM team reallyunderstands how we wantto grow the business.Michael Mendoza,CEO of Lineup

Volumatic designs, manufactures andservices a wide array of products thathelp companies to count cash, detectforged notes and store cash securely.Cash transactions remain the dominantpayment method across the UK andEurope. Its products are used globallyto count and protect over $1 billionper day.

James Arrowsmith of NVM worked withthe company to complete their managementbuy-out. “Volumatic is a highly innovativebusiness where the management teamhave a deep understanding of theirmarket and customer requirements.”

New and existing product developmentis a key driver of Volumatic’s future growth.NVM’s investment of £6m will help the teamto develop their international footprint andbe at the forefront of their market.

Volumatic was established in 1972 to pioneer retail security products. 40 yearslater the business is a leading force in its market; with a widely recognisedbrand and long-established, blue-chip client base covering some of thebest-known UK retailers, supermarket chains, leisure operators and banks.

Volumatic

The buy-out will allowus to take advantageof significant growthopportunities.Colin Amos,Managing Director of Volumatic

Both businesses design EnterpriseResource Planning (ERP) softwaresolutions specifically for distributivetrades, so complement each otherperfectly. After completing the managementbuy-out in 2010 with NVM’s backing, theTIS acquisition was the next logical stepin Kerridge’s strategic development.

Clive Austin led the original investment forNVM and sits on the board of KCS. “Thecompany has bedded-in the original dealextremely well and created a strong platformwhich can handle acquisitions. The purchaseof TIS will create a leading player withinthe international ERP solutions market.”

Kerridge Commercial Systems (KCS) has acquired TIS Software ina strategic move to create a greater global force within the industry.

Kerridge

In 2006 NVM backed long-standing pub entrepreneurs, John Weir andJohn Sands, to set up Wear Inns – a company focused on acquiring andmanaging a chain of community pubs across the North East and Yorkshire.

Wear Inns

NVM originally invested £4.2m to help theteam to successfully build up an estate of15 pubs from well-known chains such asMitchells and Butler, Punch, TCG Inns andBarracuda Pubs and Bars. NVM recentlyjoined forces with the Business GrowthFund to pump a further £10m of acquisitionfunding into the business. The Wear teamhas used the funding to acquire a furthernine pubs from TCG, bringing their totalportfolio to 24 premises. More acquisitionsare planned in early 2013.

Mauro Biagioni manages Wear Inns forNVM and believes that “the managementteam have stuck to their business strategysince 2006, using their extensive experienceof the industry to create an estate of uniquecommunity pubs that meet the desires ofthe regulars, as well as passing visitors.”

Since starting thebusiness six years ago,we have worked withNVM’s support to buildup an estate of greatcommunity pubs offeringgood value and goodquality across theNorth of England.John Weir,Managing Director of Wear Inns

NVM have deliveredexactly what theypromised the firsttime I met them.Ian Bendelow,CEO of Kerridge Commercial Systems

The judges noted that Northern VentureTrust had “yet another great year…its consistent returns rank it well aheadof its rivals over the medium term”.

Tim Levett, chairman of NVM said:“We are delighted that the efforts ofthe board and managers have beenrecognised in this very prominent way –the current economic climate presentsmany challenges to VCT managers butwe are confident that NVM’s tried andtested investment process will continueto deliver good returns to investors.”

Northern Venture Trust, which was one of the first VCTs ever launchedback in 1995, has regained theWhat Investment Best Venture CapitalTrust award which it last won in 2010. The magazine’s annual awardscover a range of investment company categories, the key criteria beingconsistency and total return.

Trading VCT sharesThemarket for buying and selling Venture Capital Trust (VCT) shares onthe market just isn’t active enough. Tim Levett, chairman of NVM, firmlybelieves that investors can benefit from the excellent dividend yields andtax-free returns that come with this type of share trading.

Imagine an investor bought £10,000 ofshares in Northern Venture Trust in July2009 at the mid-market price of 56.5pper share. Over the past three years, thedividend income has been £3,717 – withoutany tax liability. And in July 2012, the sharesare worth £12,567 at mid-market price.

How to buy VCT sharesTo deal in VCT shares you can gothrough a stockbroker (online or via thetelephone) or your bank’s dealing serviceto arrange for the trade to be executed.Most transactions settle on a T+3 daybasis – i.e. three days after the trade hasbeen executed (however most brokersrequire cleared funds on deposit beforethey will trade for you).

How to research VCTfund performance“You have to do your own research,”says Rupert Dearden, who’s in EquitySales at VCT market-maker Singer CapitalMarkets. “But there are plenty of generalistVCTs with a strong track record that areclearly not seeking out excessively riskyinvestments – they back cash-generativebusinesses with growth prospects.”

VCT fund manager websites contain reportsand accounts which can provide detailsof investments, share price and dividendspaid. Then there are investor websitesthat review and rank the performance ofVCTs – such as Trustnet, Morningstar andCitywire. The AIC website offers a rangeof performance data within its statisticssection, as well as the latest accounts andoften a factsheet for each fund. Also, theMotley Fool website has a section devotedto VCTs and a forum for investors to sharetheir investment knowledge and opinions.

How to sell VCT sharesIt’s relatively simple to sell. Approach yourbroker or bank and get the market makersto find a price. Distressed selling is obviouslynot ideal – in an illiquid market, being ableto hold on for buyers at the right price isthe best way of securing a decent exit.And with wide spreads, sellers are likelyto take a discount into account. But ifyou time it right, can be patient and putthe right limit on the price, exiting a VCTholding is quite straightforward.

Simply the best

Fund performanceNorthern Venture Trust PLC

Launch date 1995Share price 71.00pLatest NAV per share 89.4p (31 March 2012)Number of shares in issue 71,658,647Market capitalisation £50.9mDividend yield 8.5%

1 year 3 years 5 years 10 yearsNAV total return – company 108.4 152.6 165.4 231.7

– sector average 102.7 117.8 110.2 170.7Share price total return

– company 103.0 171.9 171.8 268.0– sector average 106.5 138.9 116.2 188.9

Northern 2 VCT PLC

Launch date 1999Share price 65.50pLatest NAV per share 80.3p (31 March 2012)Number of shares in issue 69,950,091Market capitalisation £45.8mDividend yield 8.4%

1 year 3 years 5 years 10 yearsNAV total return – company 105.4 129.1 128.8 165.2

– sector average 102.7 117.8 110.2 170.7Share price total return

– company 103.8 193.7 137.5 191.3– sector average 106.5 138.9 116.2 188.9

Northern 3 VCT PLC

Launch date 2001Share price 78.25pLatest NAV per share 96.7p (31 March 2012)Number of shares in issue 49,145,591Market capitalisation £38.5mDividend yield 6.4%

1 year 3 years 5 years 10 yearsNAV total return – company 110.7 133.2 125.6 149.4

– sector average 102.7 117.8 110.2 170.7Share price total return

– company 112.3 197.7 126.8 134.6– sector average 106.5 138.9 116.2 188.9

Northern Investors Company PLC

Launch date 1984 (listed since 1990)Share price 238.50pLatest NAV per share 325.5p (31 March 2012)Number of shares in issue 15,128,440Market capitalisation £36.1mDividend yield 3.8%

1 year 3 years 5 years 10 yearsNAV total return – company 110.5 146.0 134.2 183.4

– sector average 97.8 124.7 78.4 127.4Share price total return

– company 104.1 185.6 135.2 171.3– sector average 91.6 162.0 57.8 116.6

‘Share price’ is mid-market price as at 29 June 2012. ‘Dividend yield’ is based on dividends paid and proposed in respect of latest full financial year, expressed as a percentageof share price. Total return statistics are for periods to 29 June 2012, return shown is on £100 invested, based on mid to mid share price/latest published NAV, assuming netincome re-invested (source: Morningstar). In accordance with AIC methodology, figures shown over three years are based on NAVs excluding current period revenue; and figuresshown for three years and under are based on NAVs including current period revenue. ‘Sector average’ refers to the following sectors:

VCT Generalist Northern Venture Trust PLCNorthern 2 VCT PLCNorthern 3 VCT PLC

Private Equity Northern Investors Company PLC

Shareholdermeeting dates:Northern Venture Trust PLC, AGMFriday 14 December 2012, 11.30amEdinburgh

VCT Shareholder SeminarFriday 18 January 2013, 11.00amLondon

If you have a shareholder query,please contact:

Wendy ArkleT 0191 244 6024E wendy.arkle@nvm.co.uk

Newcastle Office:Northumberland HousePrincess SquareNewcastle upon TyneNE1 8ERT 0191 244 6000F 0191 244 6001E newcastle@nvm.co.uk

Reading Office:Forbury Court12 Forbury RoadReadingRG1 1SBT 0118 951 7000F 0118 951 7001E reading@nvm.co.uk

Manchester Office:3111 Beetham Tower301 DeansgateManchesterM3 4LQT 0845 272 7023E manchester@nvm.co.uk ww

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.uk

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