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Seven in one from Albion

RAM Capital Partners and Albion Ventures are raising up to £15m through a linked venture capital trust top-up offer that divides investors’ capital between all seven Albion VCTs.

The firm has been investing in small unquoted companies since 1996,when it was formed as the venture capital arm of Close Brothers. It became independent in January 2009, when it was bought by its management team and renamed Albion Ventures.

The firm is looking to raise more money across its VCTs to invest in new opportunities it is seeing at attractive valuations, especially in the healthcare and environmental sectors.

Through this linked offer, investors will gain immediate access to a portfolio of around 55 small unquoted UK firms. Many will be asset backed and these lower-risk investments will be combined with a smaller number of higher-risk investments with higher growth potential. As at 30 September 2010, across the seven VCTs, asset-backed investments accounted for around 57 per cent of the portfolio. Around 17 per cent was held in cash, while higher growth companies comprises 26 per cent.

Albion Ventures says that in the past 15 years, it has invested in around 100 unquoted companies, with 41 exits and negative returns from seven investments.

The linked offer should provide a tax-free dividend yield of around 5 per cent a year, but this is a target, not a guarantee. Albion Ventures points out that after up-front income tax relief of 30 per cent, the dividend yield is equivalent to 7 per cent on the net cost of investment. Investors can also choose to reinvest their dividends.

VCT tax advantages and the diversity of investing across a portfolio of seven from as little as £10,000 could make this offer attractive. It could also have appeal for high earners as an alternative to a pension because some high earners may get only 20 per cent income tax relief on new or additional pension contributions, while pension income could be subject to 50 per cent tax.

However, small unquoted companies can be illiquid, which may put some investors off VCTs.

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