Welcome to our first electronic newsletter that will replace our quarterly mailing which you have received in the past. With this new format, we will be communicating more frequently with a goal of keeping you updated on NCIC activities, our investments and staff. We hope you find this new format informative and useful.

NCIC CapitalFund Background

For those receiving this newsletter for the first time, a little background on NCIC CapitalFund may be helpful.

NCIC CapitalFund is a private, non-profit, early stage investment company whose initial funding was provided by the federal government, through WPAFB and the State of Ohio-Department of Development. The Fund seeks to invest in emerging, growth-oriented, technology-based businesses.

Since June of 1995, NCIC CapitalFund has made 37 rounds of investments in 26 companies totaling $12 million. Investments ranged from $50,000 to $1 million with an average amount of $460,000 per company. The majority of funds invested were in the form of equity. More importantly, NCIC's investments have been leveraged with an additional $35 million in co-investments.

NCIC portfolio companies are in varying stages of development, with the majority being start-ups just beginning commercialization. These portfolio companies are primarily in the following industries: manufacturing, software/hardware, advanced materials and processes, instrumentation testing, and internet software/applications.

NCIC Revolves Fund

NCIC CapitalFund has successfully concluded its funding agreements with WPAFB, and the Ohio Department of Development, and is now operating as a revolving fund. The company is planning to raise additional capital in the near future. In the meantime, the company continues investing in new opportunities, and pursuing exit strategies with portfolio companies.

PORTFOLIO UPDATE

NCIC Closes on Second Round Funding

NCIC recently took the lead and closed on a $1 million round of equity funding, in Privatizer Systems, Inc. a Dayton-based producer of office automation products. Also participating in this round were Blue Chip Venture Company and Miami Valley Venture Fund. Privatizer has developed a proprietary technology that enables the company to produce a series of automated mailing devices. Based on their core technology, the company plans to develop additional products to sell both domestically and internationally.

NCIC initially funded Privitizer Systems, Inc. in 1998 as part of a $1 million round that included participation from CityWide Development Corporation and Gem City Engineering, one of Privatizer's strategic partners.

NCIC'S Investment Raises Third Funding Round

Dayton-based Cohesia Corporation, formerly Renaissance Engineering, has successfully raised its third round of funding totaling $16 million. Through a combination of equity and debt, NCIC has invested over $1.2 million in the company starting with its initial $200,000 investment in 1996. Cohesia represents NCIC CapitalFund's single largest investment. New participants in the latest round of funding included GE Capital and Arbor Venture Partners. Previous rounds included CityWide Development Corporation, Alpha Capital Partners, Blue Chip Venture Company, the Ohio Innovation Fund and the Miami Valley Venture Fund.

Frank Winslow, President and CEO of NCIC CapitalFund points out that Cohesia is typical of the type of company NCIC has targeted. "Cohesia is an early-stage company with vast potential in a number of markets. The CEO is a visionary with sound management skills and the resilience necessary to grow the company, jump the hurdles and respond to market conditions. We are happy with the investment, our co-investors and the potential we see down the road."

NCIC OUT IN THE COMMUNITY

Bowman Speaks at MVVA

NCIC CapitalFund Vice President, Bob Bowman recently participated in a panel discussion entitled "How Companies are Valued Prior to Sale or IPO" for the Miami Valley Venture Association. Bowman, who partnered with Duane Kruer of the local accounting firm Goldshot, Bragg and Associates, discussed perspectives on valuations, realistic projections and exit strategies. MVVA is an organization that promotes entrepreneurship and private investment throughout the Greater Dayton area.

Hammond Judges MBA Contest

Brian Hammond, Manager of Business Development, recently judged the Ohio MBA Business Plan competition in Columbus. The contest, which is sponsored by the Ohio Society of Certified Public Accountants and Kent State University, is an annual event. Teams of MBA candidates work with an existing business, observe and evaluate its operation, then create a business plan that addresses shortcomings and enhances the company's growth. This year's winning team was from the University of Dayton.

NEW PARTNERSHIP

NCIC CapitalFund Working With the US Air Force and Delphi Automotive Systems To Advance "Brake By Wire" Technology

NCIC CapitalFund, the US Air Force Research Laboratory at Wright-Patterson Air Force Base and Delphi Automotive Systems entered into a Technology Investment Agreement. The two-year project will develop a commercially viable Brake-by-Wire system for use in the automotive and aerospace industries. The objective is to design, build and demonstrate an electronic system on a driveable vehicle, incorporating the current state-of-the-art electric technologies pioneered by the Air Force Research Laboratory. Ron Wine, president of the Miami Valley Economic Development Coalition, said that this effort is a result of the Coalition's Automotive Initiative, a collaboration among many local organizations to keep the area's automotive industry healthy by developing new technology. George Schmitt of the Air Force said, "the project will validate aerospace technology while building an industrial base to support defense needs."

BOARD UPDATE

NCIC Board Meets at The Entrepreneurs Center

The July meeting of the NCIC Board of Trustees was held at The Entrepreneurs Center, an incubator for emerging business with a mission to "graduate" successful tenants who will continue to contribute to the economic health of the region through the creation of jobs. Board members heard a presentation by the Center's president, Barbara Hayde and had an opportunity to meet with some of the tenants to discuss their future funding needs. Frank Winslow serves on the Board of The Entrepreneurs Center and is the current treasurer. NCIC was one of the original funders of the incubator and continues to support its activities.

At the July meeting, four retiring Board members were recognized for their long service and contribution to the formation and governance of NCIC. They are Mike Adler, Chairman and CEO, MotoPhoto, Inc.; Mike Grauwelman, President, Miamisburg Mound CIC; Larry Shpiner, Vice President, TransWave International, Inc.; and Ron Underwood, President and CEO, Circuit Center, Inc.

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