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Beringea treads proven path

Venture capital specialist Beringea is aiming to raise up to £15m for the Proven venture capital trust through a C share issue.

This generalist VCT was launched in February 2000 and currently invests in 18 companies, of which 16 are qualifying investments. The money raised through this share issue will form a separate pool from the existing portfolio, but they will be merged in five years and six months.

The VCT invests in a broad range of sectors to ensure there is sufficient diversification, but media companies will play a large part in the portfolio because Beringea specialises in this sector.

Approximately 75 per cent of the money raised will be invested in at least 10 small and medium sized unquoted companies over the next three years. The remaining 25 per cent, and money awaiting investment in the early years, will be invested in cash, liquidity funds and fixed income securities with a rating of at least A.

This VCT will focus on later and mature stage companies involved in management buy-outs or in need of expansion capital. It will not invest in start-ups as these are deemed tool risky.

The directors are aiming to return at least 25p for every £1 invested within five years and six months through a combination of tax-free dividends and a partial offer. Under the partial offer the directors will offer to buy a number of shares back from the C shareholders that would give them a return of at least 20p for every £1 invested. If no dividends have been paid or they have been paid at less than 5p for every share, the partial offer will be increased.

With the reduction in the size of qualifying investments to those with gross assets of not more than £7m at the point of investment, the type of opportunities VCTs can invest in are potentially riskier than under the previous limit of £15m. However, Beringea has taken measures to minimise the risks, so that as well as avoiding start ups and co-investing with other Beringea funds, it will have an active involved in the companies in which it invests, ideally by having a position on the board. Structuring the investment to include secured loans may also reduce risk and enhance returns.

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