BES rates of return not expected to be bettered: Innovative investments as business expansion schemes near their end

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THE SILLY season has become serious in the Business Expansion Scheme world. Some of the rates of return being offered are unlikely to be bettered before the BES regime bites the dust in December, according to the Allenbridge Group, the BES advisers.

Accumulus Hallam, a pounds 16m contracted exit scheme for Sheffield Hallam University, offers an annualised return of 14.1 per cent to higher rate taxpayers - or pounds 1.22 back after five years for every net 60 pence invested. Another university scheme, Oriel Cash Backed, is offering a fractionally lower return of pounds 1.21. 'These are probably going to represent a high point for the year,' said Anthony Yadgaroff of the Allenbridge Group.

The supply of BES offers has been fuelled this summer by the large number of universities that want to raise money through assured tenancy schemes. To qualify under the BES rules, the halls of residence on which most of the university schemes are based have to be empty for a short period. The best time to do this is during the summer holidays - hence the current flurry.

Some believe the returns offered on BES schemes will be driven down over the remaining part of the year as investors become less demanding as they pile into last chance BES investments before the scheme ends.

The BES industry is nothing if not innovative. Close Brothers is next week expected to launch an arranged exit scheme that will link the returns available to the growth of the stock market.

Johnson Fry has introduced a new frill to its Oxford Colleges BES. It is asking investors to send in their cheques now but will defer lodging them until 20 August. This is particularly aimed at BT3 investors. The minimum investment is pounds 3,000 and the annualised return over five years is 13.61 per cent.

Eye-catching - but strictly for the adventurous - is the Enlightened Tobacco Company whose main product, Death cigarettes, the directors describe as 'a dead cert'. The cigarettes have a warning on the skull and cross bones-decorated packet - 'Cigarettes are addictive and debilitating. If you don't smoke, don't start. If you smoke, quit.'

At the other end of the spectrum is the Green Catalogue share issue. A plain and simple share issue, it does not offer the tax advantages or even the five-year returns of a BES scheme. The owners of the company are hoping to persuade some of their subscribers and customers to make a long-term investment in the company. Profits are forecast to grow six-fold to nearly pounds 400,000 in 1996 when the directors expect to start paying dividends. The catalogue lists dozens of green goods, ranging from clothes and toiletries to the solar-heated outdoor shower. William Pryor, managing director, says: 'The demand is huge. We think it is unstoppable - once one has got over certain prejudices.'

Details from the Allenbridge Group 071-409 1111, Accumulus Hallam's sponsors Terrace Hill Capital on 071-734 4440, Oriel's sponsors Downing Corporate Finance on 071-411 4700, Oxford Colleges' sponsors Johnson Fry on 071- 321 0220, Enlightened Tobacco Company on 081-694 8236 and the Green Catalogue on 0934- 732469.

After 15 months, the Inland Revenue has finally approved two BES schemes with investments in University College London.

The Revenue questioned whether letting the college rooms during the summer on a short-term basis during the period between offer and completion of the property sale invalidated the BES status, which requires all letting on an assured tenancy basis.

But the BES certificates for 2,000 investors with money in the Oxford Colleges Cash Backed Scheme, which invested pounds 10m of the pounds 32.15m raised in UCL, and The Election Protection Scheme, which put all pounds 10.5m raised into UCL have come through. The sponsor of both schemes was Johnson Fry.

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