Old Burlington Investments AIM Growth Fund Trusted Alternatives January 2013
Why Old Burlington Investments? Old Burlington Investments is a new alternative investment boutique Led by Brett Williams, former Chief Executive of CoFunds, Selestia and Skandia UK Old Burlington Investments aims to work with leading asset specialists to give advisers and their clients access to high quality alternative investment opportunities With total clarity and transparency of fees 2
Old Burlington Investments AIM Growth Fund The Old Burlington AIM Growth Fund offers investors the potential to generate returns from a portfolio of private equity style investments primarily quoted on the London Stock Exchange s Alternative Investments Market (AIM) Supported by the benefits of the Enterprise Investment Scheme (EIS) with no investments made without Advance Assurance from HMRC Advised by Percipient Capital which has an outstanding track record in applying private equity style techniques to smaller companies, extracting exceptional value by taking a hands-on approach 3
Fund structure Discretionary managed fund service Unapproved EIS fund NOT a UCIS Unlimited CGT exemption for gains made on disposals after three years at the same time as: Income tax or CGT relief for any losses made on the disposal of EIS shares 4
Why Old Burlington Investments AIM Growth Fund? Private equity investment approach working closely with management of potential investee companies to build value Access to new share issues that are normally only available to institutional investors Leveraging the significant experience, relationships and priority access to AIM share launches of Percipient 5
Why Old Burlington Investments AIM Growth Fund? Benefit from the potential strong growth only offered by smaller company investments Diversification against mainstream asset classes/markets with potential for superior returns 6
Why AIM? Changes to EIS rules increased the size of companies that can qualify for EIS funding and the amounts that can be raised this brings AIM centre stage AIM s capacity for EIS investments has significantly grown since the recent change in EIS rules expanded the size of companies that can qualify for EIS funding Brokers/institutional players do not have time or appetite to focus on smaller company investing AIM now offers superior EIS qualifying investments: Larger companies Greater regulatory scrutiny Greater liquidity (versus traditional private equity investments) Low valuations (47% ave. exit premium Jan- Oct 2012 in EIS qualifying trades) Institutional discounts combined with EIS benefits 7
Our investment partner - Percipient Capital Established reputable private equity manager Owned by investment team Heritage of investing solely in smaller companies for more than 15 years Over 50 million assets under management Clients include Barclays Bank, Royal Bank of Scotland, GE Commercial Finance, UK Government, European Investment Fund and Private Clients Sole focus on smaller, fast growing businesses Authorised and regulated by the Financial Services Authority 8
Percipient s management team Over 50 years combined investment expertise Long track record of hands-on active private equity style investing Invested in more that 50 smaller growth companies Broad range of investment and entrepreneurial skills Practical expertise of working with small businesses to build shareholder value Stringent assessment and review process for all investments Smaller company investment is all about the management and you can't make an informed decision over a cup of coffee in a smart meeting room in the city. Ed Farquhar, Percipient 9
Percipient track record HSBCV x2 SEGF x3 Percipient x4 Number of investments 12 12 7 Amount invested m 9.9 7.5 2.7 Total Value m 15.0 22.9 9.1 Cash Multiple 1.5x 3.1x 3.4x Source: Gross returns across both realised and unrealised investments. x2 HSBC Ventures internal review of investments made by Jason Gould as at 30th June 2002, separately reviewed by HSBC finance team; x3 South East Growth Fund portfolio review as at 31st December 2011. Includes all investments led by Jason Gould. Material items reviewed by BDO Stoy Hayward; x4 taken from a detailed review as at 30th September 2012 of the 7 investments arranged by the Percipient team for private investors. x5 Returns reviewed for each individual investment and in aggregate across each portfolio. Valuations for those investments unrealised checked against internal documents and/or external valuations. 10
Percipient deal history Isle of Wight 250,000 investment Wallingford 275,000 investment Walsall 750,000 investment Design and manufacture of high power broadband microwave amplifiers Trade sale in JAN12 to Swiss based group Teseq. 18.2x money IRR of 49% Event management agency specialising in the design of bespoke events and programmes for major businesses. Sold back to management within 3 years 2.45x money IRR 46% Distributor of packaging materials, adhesives and tapes to industry. Trade sale within 5 years 2.95x money IRR 32% Swansea 500,000 investment Value added reseller of computer systems and consumables Sold back to management within 5 years 2.56x money IRR of 33% Oxford 440,000 investment Consumer focussed market research agency Sold back to management within 4 years 2.19x money IRR of 37% Oxford 160,000 investment Contract testing services for Biopharmaceuticals Trade sale to Millipore 5.1x money IRR of 28% 11
Fund structure Investors Custodian/Nominee Fund Management Thompson Taraz 3 Fund Manager Investee Co. Investee Co. Investee Co. Investee Co. Percipient Capital Investment Adviser 1 Old Burlington Investments Investment Adviser 2 1 Percipient is the trading name of GKF Wealth Management Limited is authorised and regulated by the Financial Services Authority. 2 Old Burlington Investments is the trading name of Old Burlington Ventures LLP (OBV). OBV is an appointed representative of Sturgeon Ventures LLP which is authorised and regulated by the Financial Services Authority. 3 Thompson Taraz is authorised and regulated by the Financial Services Authority. 12
Basic Fund Model Gross Investment 1 100,000 2013 2014 2015 2016 Funding costs (3,500) Operating costs (inc. VAT) (2,130) (540) (540) (540) Funds deployment (92,750) Realisations 178,800 Net movement (98,380) (540) (540) 178,260 Opening cash balance 1,620 1,080 540 - Closing cash balance 178,800 Less Performance Fee/deferral recoupment (21,720) Net proceeds to investors 157,080 1 Excluding any commission paid by investor to Financial Adviser 13
Illustrative returns Target Gross Return 3 Target Net Return 3 (less Performance Fee) ( ) ( ) Investment Subscription 100,000 100,000 Less Income Tax Relief at 28% 1 (28,000) (28,000) Net Cost of Subscription 72,000 72,000 Target Return (before tax relief) 179,000 157,000 Target Return per 100p invested (before tax relief) 179p 157p Target Annual Rate of Return on Net Cost of Subscription 24.2% 20.3% Target Gross Equivalent Annual Rate of Return² 35.2% 30.7% 1. Based upon a single investment of 100,000 and current bank interest rates and tax rates. The illustration assumes a realisation of the investment in each Investee Company four years after investment and that income tax relief is claimed against the 2012/13 tax year. Please note that he effects of VAT and the treatment of certain fund costs are likely to mean that relief is effectively limited to approximately 28% (as illustrated in the table above) rather than 30%. 2. The Target Gross Equivalent Annual Rate of Return is the rate of return that a 45% income tax rate investor would need to achieve from an equivalent investment in order to match the return as provided by the Fund. 3. The Target Gross Return is the expected return on the asset before deduction of the Performance Fee. The Target Net Return is the return to investors after deduction of the Performance Fee and recoupment of deferred Annual Management Fees. 4. Annual Management Fees of 1.95% are wholly deferred other than in Year 1 and recouped on disposal of investee share. 5. Assumes 20% annualised rate of return on underlying investments. 6. The illustration above is furnished for illustrative purposes only and does not represent a definitive forecast. Investment subscription excludes any commission payable by investors to their Financial Advisers. 14
Who can invest? Investors looking to benefit from the growth potential offered by smaller companies Investors seeking exclusive access to new shares of companies with identified high value opportunities Investors seeking equity portfolio diversification Investors that can make full use of EIS tax reliefs available Individuals impacted by reductions in pensions allowances UK resident non doms can bring offshore funds onshore and if invest in 45 days can generate EIS tax reliefs on other UK earnings Investors seeking an investment with a holding period of three to five years 15
Value Creation Typically Percipient seeks to invest in businesses with the potential to grow significantly over a three to five year period They work hard prior to investment to get to know the business/management team properly and fully understand their plans and motivations, as well as significant issues that are likely to affect the business over the investment period both positive and negative Post-investment the team continue to actively engage with management, in order to maximise investor returns It is anticipated that investors will have an opportunity to rollover their investment 16
Fees and charges At Old Burlington Investments we are fully transparent with all charges. Initial fee 3.5% Adviser charges Subject to express instructions from investor. Please see IM for relevant arrangements. Annual Investment Adviser fee 1.95%, wholly deferred other than in Year 1 and recoverable on disposal of investee shares Annual custodian/nominee fee 0.25% Annual Fund Management fee 0.20% Performance fee No additional arrangement, service, exit or monitoring fees No investment without Advance Assurance from HMRC 25% of gains over 120p for each 100p invested per investee company. 17
The offer Minimum fund size: 2 million Maximum fund size: 10 million Launch date: 1 January 2013 Closing date: 1pm on 5 April 2013 Minimum individual investment: 5,000 18
Appendix
EIS benefits Investors in EIS qualifying companies can, depending on their individual circumstances, enjoy some or all of the following benefits: Up to 30% income tax relief, reducing the cost of investment to 70p per 1 invested please note however the effects of VAT and the treatment of certain fund costs are likely to mean that relief is effectively limited to approximately 28% Exemption from capital gain tax (CGT) on gains made from the disposal of EIS shares after three years Unlimited deferral of capital gains realised in the three years prior to, or up to 12 months after, investments made by the fund Income tax or CGT relief for a loss made on the disposal of EIS shares Inheritance tax relief if shares are held for more than two years and there is no limit on the amount of the investment qualifying for this relief 20
EIS and The Portfolio Unlimited CGT exemption for gains made on disposals of shares after three years at the same time as income tax or CGT relief for any losses made on disposal. Notional two share 100,000 initial portfolios. Losses relieved against income at 45%. Scenario A: Both shares realise a 100% return Scenario B: One share Increases by 100% and one share decreases by 100% Scenario C: Both shares decrease by 100% Non EIS Fund EIS Fund Non EIS Fund EIS Fund Non EIS Fund EIS Fund Amount invested 1 (100) (100) (100) (100) (100) (100) Tax Relief 0 28 0 28 0 28 Net investment (100) (72) (100) (72) (100) (72) Portfolio Return 200 200 100 100 0 0 Loss Relief 0 0 0 16 2 0 33 2 Capital Gains Tax at 28 % (28) 0 0 0 28 3 0 Total Returned 172 200 100 116 28 33 Gain/loss on Net Investment 72% 174% 0% 59% (72%) (55%) 1 After any adviser charges are paid 2 This can be offset against income or capital gains 3 This assumes that an investor has sufficient capital gains to offset the capital loss against. This may not be the case. 21
Jason Gould The Percipient team 15 years venture capital and private equity experience as lead investor Has led over 50 investment rounds, into 30 companies across a broad range of sectors and at every stage of business Previously Director, HSBC Ventures Fund Principal, South East Growth Fund Strong track record of managing through to exit, generating significant profits Experienced non-executive director and company chairman Ed Farquhar Shareholder and former director of Numis Securities, heading the Equity Capital Markets team 15 years of City experience specialising in SMEs; involved in numerous IPOs and secondary financings for small and mid-cap businesses Successful investment background as private investor: A founder shareholder of Numis Corp, realising a significant gain and multiple of capital Personal track record in private and public company investing Sector experience includes financial services, insurance, speciality finance, renewable energy and support services 22
Derek King The Percipient team 15 years venture capital and private equity experience as lead investor Personally involved in more than 25 transactions Raised and launched the South East Growth Fund in 2002 In 2008 also took on responsibility for managing out the North West Equity Fund Heads up institutional client relations Previously held positions in banking, insolvency and venture capital within HSBC Experienced non-executive director 23
Important information The Old Burlington AIM Growth Fund is not an unregulated collective investment scheme for the purposes of United Kingdom legislation. Such schemes may only be promoted in the United Kingdom to certain categories of persons as set out in the Financial Services and Markets Act 2000 (Collective Investment Schemes) (Exemptions) Order 2001. The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. You should not view the information relating to this fund unless you are a person to whom unregulated collective investment schemes may be promoted. You should be aware that past performance is no guarantee of future performance. The price of investments and the income from them can fall as well as rise and may be affected by exchange rate movements between currencies. An investor may not get back the amount invested, unlike savings accounts in banks or building societies where the capital is guaranteed. The price of the shares in investment trusts is determined by the supply and demand, and is not therefore necessarily the same as the value of the underlying assets. Rates of tax, tax benefits and allowances are based on current legislation and HM Revenue and Customs practice. These may change from time to time and are not guaranteed. Changes in legislation in respect of EIS funds in general, and qualifying investments and qualifying trades in particular, may restrict or adversely affect the ability of the fund to meet its objectives and/or reduce the level of returns which would otherwise have been achievable. Nothing in this presentation should be regarded as investment advice. Although reasonable care has been takes to ensure that the information set out herein is accurate, no representation or warranty, express or implied, is made as to its accuracy or completeness. In particular, no representation or warranty is given as to the accuracy or completeness of information supplied by third parties. Old Burlington Investments accepts no liability for any errors or omissions herein whether by itself or its affiliates or by any third party. Information on this presentation may be changed without prior notice. These disclaimers do not restrict or exclude any duties or liabilities which may exist under the Financial Services and Markets Act 2000 or applicable UK regulations. Old Burlington Ventures LLP [FRN 589641], trading as Old Burlington Investments, is the Appointed Representative of Sturgeon Ventures LLP, which is authorised and regulated by the Financial Services Authority 24