Reasons Why: ProVen VCT ‘C’ Share The information in this document can be inserted into “reasons why” and marketing letters to your clients, the document is not intended to be distributed directly to private investors. It highlights the salient features of ProVen VCT “C” Share issue and provides generic reasons for recommending that your clients invest in a VCT whilst drawing their attention to the risk factors associated with investing into a VCT. Please note that this information has not been prepared for Financial Services Authority regulatory compliance and you should follow your usual compliance procedure before using any of the information included in this letter. What are VCTs? The UK Government first introduced Venture Capital Trusts (VCT's) in 1995 as a way of encouraging individuals to invest in a diversified portfolio of smaller, unquoted companies trading wholly or mainly in the UK. A VCT is a company whose shares are quoted on the stock exchange and that invests in a diversified portfolio of unquoted and Aim traded companies with the potential for more rapid growth than larger, quoted companies. Although individually, small companies generally have a higher risk profile than larger ones, investing in a broad portfolio of different businesses reduces the overall level of risk of a VCT. VCTs are available to UK residents aged 18 or over. Substantial tax relief for investors An investment in a VCT offers a number of attractive tax reliefs for investors: Income tax relief of 30% of the amount subscribed for shares issued in the tax years 2006/07 and 2007/08, providing that the shares are held for at least five years. The income tax relief at 30% is available to be set against any income tax liability that is due in the year of subscription, whether at the lower, basic or higher rate. Exemption from income tax on dividends from shares in VCTs. Profits made by a VCT on the disposal of investments are not subject to tax and can be paid out as tax-free dividends to shareholders in the VCT. Capital gains realised on disposals of shares in VCTs are tax-free. However, losses realised on disposals of shares in VCTs cannot be used to offset capital gains. Tax relief is available for investments up to £200,000 per tax year provided that the investor‟s entitlement to tax relief does not exceed his income tax liability in the tax year of investment and that the investment is held for five years. Risk Profile As VCTs invest predominantly in unquoted companies and those quoted on the Alternative Investment Market (AIM), there is a higher degree of risk than when compared to an investment in FTSE 100 companies. However once sufficient funds have been raised the structure and investment strategy of ProVen VCT incorporate a range of features intended to reduce the risk of an investment in the VCT. About Beringea Beringea Limited is a specialist, award winning VCT manager, which has been established for over 20 years. Beringea‟s investment team has extensive knowledge of investing in small, high growth companies and has managed VCTs for 10 years. Beringea manages ProVen Growth & Income VCT (PGI VCT) and ProVen VCT which is currently open for investment. ProVen Growth & Income VCT Track Record ProVen VCT‟s performance to 31 August 2006 is set out below. Investors are advised that the past performance of the Manager and the VCT is not necessarily a guide to their future performance. Performance to 31 August 2006 Proven VCT Ordinary Shares Net asset value per share (1) 133.9p* Cumulative dividends per share (1) 22.2p* Net asset value total return per share (1) 156.1p* Total return on initial NAV (2) 64% Return on FTSE All Share Total Return index over same period (3) 18% Performance relative to VCTs launched in same tax year (4) 1st Performance relative to VCTs with a track record of more than three years 5th out of 61 (measured by IRR) (5) * - payment of a special dividend in respect of the sale of Mergermarket Limited on 7 December 2006 of 31p will increase cumulative dividends paid to 53.2p and reduce the NAV to 96.9p and the total return per share to 150.1p ** - payment of a special dividend in respect of the sale of Mergermarket Limited on 7 December 2006 of 50p will increase cumulative dividends paid to 68.9p and reduce the NAV to 111.4p and the total return per share to 180.3p Sources: (1) Unaudited interim accounts of the Company for the six months ended 31 August 2006 (2) Beringea (3) Datastream (4) www.taxefficientreview.com based on total return (net asset value plus dividends) since launch and on Internal Rate of Return since launch (5) www.taxshelterreport.co.uk based on internal rate of return since launch Principal Reasons for investing in ProVen VCT Investors in ProVen VCT will gain access to the following: Established VCT managed by an award-winning manager. ProVen VCT was originally launched in February 2001 and currently has a broad range of investments in 18 companies. Partial offer to return 25p per share within 5½ years: The directors of ProVen VCT aim to return at least 25p (tax-free) per £1 invested to investors, within 5½ years of the offer closing, through a combination of tax-free dividends and a partial offer. Net Cost to Shareholder (£) Value of Investment (£) Initial Investment 10,000 10,000 Tax relief 3,000 Initial cost (550) Net cost / value 6,000 9,450 25p tender offer (2,500) (2,500) Cost / value after 3 yrs 4,500 6,950 Enhanced dividend yield: A key objective is to pay a regular half-yearly tax-free dividend out of the income generated from portfolio companies and from the sale of these investments. ProVen VCT has maintained a tax-free dividend of 6.5p per share per annum for the last two years (ends 28 February 2005 and 28 February 2006) although this is no guide to future rates of dividends to be paid by ProVen VCT. Risk Management: The structure and investment strategy of ProVen VCT incorporates a range of features intended to reduce the risk of an investment in the company. One of the most important of these is that ProVen VCT is able, where appropriate, to co-invest alongside other funds managed by Beringea, including ProVen Growth & Income VCT. This will enable ProVen VCT to invest in larger, more developed companies compared to VCTs, which do not have similar co-investment opportunities. Share Buy Back Policy: Beringea intends to give investors a further opportunity to realise their investment by operating a share buy-back policy under which ProVen VCT intends to buy-back "C" shares at a discount to net asset value of no more than 10%. Risk Factors Prospective investors should be aware that the value of „C‟ Shares can fluctuate and that they may not get back the amount they invest. Investment in ProVen VCT should be viewed as a longer-term investment. The past performance of the Manager or of the Company is no indication of future performance. There is no guarantee that the Tender Offer will be made or that the target cash return to investors of 25p per £1 invested, within 5½ years of the Offer closing, will be achieved. Investments will be made in unquoted companies, which can offer good investment returns but carry a higher degree of risk than quoted companies. There can be no guarantees that the Company will meet its objectives or that suitable investment opportunities will be identified. To the extent that a relatively small level of funds is raised under the Offer the Company may not be able to create a diversified portfolio. Although the Company may agree conventional venture capital rights in connection with some of its investments, as a minority investor it may not be in a position fully to protect its interests. Whilst it is the intention of the Directors that the Company will be managed so as to qualify as a VCT, there can be no guarantee that such status will be maintained. It is possible for investors to lose their tax reliefs by taking or not taking certain steps. Levels and bases of, and relief from, taxation are subject to change. Although it is anticipated that the „C‟ Shares will be admitted to the Official List and to trading on the London Stock Exchange's main market for listed securities, there is likely to be an illiquid market. In addition, the market value of the „C‟ Shares may not fully reflect the underlying net asset value of such shares. To be inserted at the bottom and to be verified by compliance consultant: The information and opinions herein were prepared by Beringea Limited (“Beringea”) for illustrative purposes only. The information herein is believed by Beringea to be reliable and has been obtained from public sources believed to be reliable. Beringea makes no representation as to the accuracy or completeness of such information. Independent advice and the appropriate compliance and regulatory measures in line with Financial Services Authority regulations should be taken in the event that the contents of this document are used for the promotion of investment activity and Beringea will not be liable for any loss arising.