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TLYH.OB > SEC Filings for TLYH.OB > Form 10KSB on 31-Mar-2006All Recent SEC Filings

Show all filings for TALLY HO VENTURES INC | Request a Trial to NEW EDGAR Online Pro

Form 10KSB for TALLY HO VENTURES INC


31-Mar-2006

Annual Report


ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS

1. CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this annual filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions; demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

The Company is focused on building a revenue stream from acquisition of existing companies operating profitably or acquisition of existing companies operating at a loss, but with ample business opportunities to run them profitably.

2. FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company's future financial performance. The Company intends the forward-looking statements throughout this quarterly report and the information incorporated by reference to be covered by the safe harbor provisions for forward-looking statements. All projections and statements regarding the Company's expected financial position and operating results, its business strategy, its financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by the use of forward-looking words such as may, believe, plan, will, anticipate, estimate, expect, intend, and other words and phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on information available as of the date of this report on Form 10-KSB and on numerous assumptions and developments that are not within our control. Although the Company believes these forward-looking statements are reasonable, the Company cannot assure you they will turn out to be correct.

3. DESCRIPTION OF THE BUSINESS

On May 12, 2005, Tally-Ho exchanged 4,563,490 shares of Tally-Ho common stock for 100% of the ownership interest in Belgravia Intervest Group Limited, (Belgravia) a British Virgin Islands company. As a result of this reverse merger, Belgravia has become the operating company and the business plan associated with the Company prior to the transaction has been abandoned.

Belgravia is a wealth management organization focused on serving the needs of families and high net worth individual throughout the world, with over $450 million under management and more than 17,000 families looking to Belgravia to provide a broad range of sophisticated services, including financial counseling, estate planning, asset allocation, investment management and corporate services.

Belgravia was formed by the September 2002 merger of Belgravia Group International and The Intervest Group. Belgravia Group International had been formed by our President, Mr. Peter Smith, in 1994 as he moved from the London Stock Exchange into offshore financial services. The Intervest Group was formed in 19995 by the combination of Lazard Holdings (Bahamas) and Arabian Brokers International (Saudi Arabia), resulting in a multinational business group with operations in 15 countries across Europe, Asia and Africa. Initially, The Intervest Group limited its operations to providing taxation and investment advice to expatriates in the Middle East. Although the geographical scope and the scope of services provided by the combined Belgravia Intervest Group Limited have greatly expanded, the focus on providing services to expatriates has remained.

There are currently estimated to be 25 million expatriate workers and this figure is projected to grow by 15% per year. More couples are retiring overseas at an earlier age. Overseas positions are well paid; but few companies offer the benefits of a decade ago. Many workers are required to take care of themselves when it comes to financial planning and health care. (Source: Merrill Lynch, Cap Gemini and Ernst & Young). This represents a significant market, growing market for the wealth management industry and Belgravia is well placed to service this growing market.

Belgravia recognized some years ago that the international Independent Financial Advisor (IFA) market was in the process of change and that the opportunity was arising for a new business model. Belgravia was, and continues to be, determined to seize that opportunity - to be the first, and best, of a new breed of international IFAs that will emerge in a compliance and regulation driven international marketplace; and, to become a market leader in terms of advice and service led financial services. To achieve this, it recognized that it would have to raise the bar in terms of international IFA standards of management, advice and service. At the same time, it acknowledged the need for business scale and critical mass. Belgravia has already emerged as a structured, disciplined, focused and profitable distribution organization operating to, and consistently achieving, high standards of productivity and profitability through the delivery of quality advice, service and products to the Companies clients.

This focus has enabled the Company to more clearly identify priorities, targets and measures when developing distribution capability and the business infrastructure. The following characteristics have been identified as key to hitting our targets:

o A track record of growing revenues and profits, and clearly identifiable brand.

o A Business Proposition that is visionary but pragmatic, and supported by a clear, well-articulated business plan, and financial forecasts;

o A business that has a compelling and believable story, with the people, systems and processes to back up that story;

o An infrastructure that has the right people in the right roles; working to common systems, processes and controls; with internal procedures that are robust and consistent; and strong financial and compliance controls;

o A company culture that has clarity and consistency as to who does what around here; and how things work around here, along with a shared belief in the overall client proposition and management standards and values.

By early 2005, Belgravia Intervest Group Limited had made good to excellent progress against the first three of these measures. In particular, it built the distribution capability and can demonstrate a clear track record of growth in revenues and profits. The initial business plan targets have been met despite the business facing some very challenging decisions and difficult trading conditions, such as the Gulf War and weak equity markets. Belgravia has begun to target recurring income on funds under management.

Belgravia's channel now holds financial advisory licenses in Belgium, Holland, Kuwait, Oman, Azerbaijan, China, Japan, Luxembourg, (Cyprus, Bahrain, Malaysia, Singapore, Kenya and Uganda to follow). The Company has compliance structures (including compliance managers) in place in each territory, although these standards are being constantly raised. Compliance will soon be centered in one location adding further value and streamlining to an already effective business:

A key part of the operational focus has been the design and implementation of financial templates for each distribution channel against which the business units within each channel can be measured. Belgravia is now focusing on the alignment of systems and controls, while also building towards a commonality of culture across various distributions channels. Its efforts here are geared around client proposition which ensures that all IFAs follow the same advice process, using the same documentation, and applying the same service standards. Belgravia has planned for this process to be fully operational and effective by the end of 2005. Having successfully installed the financial software system, Belgravia has made significant progress in centralizing its finance and accounts function. Since the early part of 2005, the Company has had a centralized commissions function also.

Belgravia now intends to further develop the distribution capacity by rolling out a Franchise style operation to attract experienced IFAs who want to operate under the Belgravia brand and licenses, but retain a degree of commercial independence.

Master Finance

On September 27, 2005, Tally-Ho entered in to a Sales Purchase Agreement for acquisition of 100% of the ownership interest in Master Finance Europe S A, a Luxembourg based company.

The Master Finance Europe group is a private wealth management organization focused on serving the needs of mid wealth families and individuals in Luxembourg, Belgium and France. The Company only markets products through its proprietary sales force of 20 people and its network of 200 Insurance Brokers. The products which are marketed by MFE are done so on an exclusive basis in the regions in which they operate, i.e. there are no other providers of the same products in these regions.

The original model for the company was developed in 1980 selling American mutual funds and American Canadian real estate investments. The business grew successfully over this period and was incorporated in its current model by the purchase of Merchant Capital S.A. After various capital restructures it became Master Finance.

In 1991 the Company diversified its products base into offering with profit investment funds from high profile providers and sales peaked in the year 2001 at (euro)231M in total sales.

Sales were further impacted with the closure of a Clerical and Medical fund and a foray into leverage fund products. These leverage funds were susceptible, in the market downturn, to frequent margin calls which had a negative effect on credibility with clients. In order to avoid further problems the Company renegotiated with the provider who changed the bonus structure on the product to a fixed return over a period of time and further new sales into this product were suspended At this time the Company negotiated with the Prudential to offer a with profits based fund on an exclusive basis and, with the upturn in the stock market, sales began to recover and since 2003 sales have improved by 20% year on year.

The Company operates on an "initial commission" basis because of the nature of the products that are sold. No monthly payment products exist, although there is a development in the pensions and the mortgage area being developed presently. With initial commission the Company is not susceptible to any claw back commissions. There are a small amount of renewal commissions amounting to
(euro)150,000 per annum.

The Company had a geographically diverse shareholding which, the management felt, was over complicated and required restructuring prior to a sale. This has be achieved by a new vehicle being formed called Master Finance Europe. This vehicle has purchased all the outstanding shares and the business of Master Finance S.A, leaving behind a certain amount of cash and ring fencing the ongoing situation with the leverage funds.

Management of Master Finance:

Emmanuel Wolf - Founder, Director
Mr. Wolf has been involved in the financial services advisory industry since the beginning of the seventies. He is responsible for the direction, planning and strategy of the Company.

Sabrine Wolf, Director
The daughter of Mr. Wolf, Sabrine has a Degree in Marketing. Following working with Master Finance over a number of years for experience, she joined the Company full time in 1999 as the person in charge of the marketing department and CRM (Customer Relationship Management).

Andre Geskens, Sales Manager
Mr. Geskens is responsible for the Belgian market. Mr. Geskens has over 30 years experience in the sales field. He joined Master Finance in 1996. He is responsible for the sales performance of the Belgian Consultants and for developing business from the outsourced Insurance Brokers.

David Martin, Product Manager
Mr. Martin is responsible for the technical management of the products in the Company. He has extensive knowledge of the products of the Company having provided technical product support for 12 years.

Staff
There is 7 fully employed staff within the Company, 5 administrations and 2 marketing. The sales force consists of 20 consultants who are remunerated on a commission only basis. The average age of the consultants is 45 and the average tenure is 10 years. This represents a stable sales force. As the sales staff has become older, some have recruited sons or daughters in order to continue with the client base and business that has been built by the parent. Although a small recruitment process underway, the recruitment situation is more organic then organised as the need for further recruitment is minimal.

The Company has a mature client base of 4000 developed since inception from both direct sales and through Insurance Brokers. The average investment from direct sales clients is (euro)150,000; the average from Insurance Brokers clients is
(euro)80,000. Current funds introduced into products are (euro)500 M. New business is generated by 50% re-investment from clients, 17% referrals and 33% new business. Although new business is, of course, important the high level of referrals and re-investment indicate a stable client base. The client base of each Consultant belongs to the Company and not the consultant. There is no arrangement in place, as other companies' do, to purchase the client base upon a consultant leaving the Company.

The Company is regulated directly in Luxembourg (Commissariat aux Assurances) and Belgium (Commission Bancaire, Financier et des Assurances. License No. 62099) and operates a passport arrangement as a representative office in France.

ProTrust

On November 29 2005, Tally-Ho entered in to a Sales Purchase Agreement for acquisition of 100% of the ownership interest of Protrust Private Clients S.A. Pro Trust was Originally established in 1992, the company transformed itself into an authorized Fiduciary (Trust) in August 1996 as Protrust Switzerland SA, the name changed to Protrust Private Clients SA in February 2001, as part of a group re-branding exercise. Pro Trust was set up specifically to manage leveraged With-Profits investments for high net worth investors, under the terms of a Discretionary Management Agreement. Over the last nine years, PTPC has built up a significant portfolio of funds under management, which generates a substantial ongoing revenue stream. Pro Trust is a fully authorized Fiduciary company, subject to the regulatory control of the Swiss Cantonal Government. As such PTPC is able to offer the full range of services to clients including: full discretionary management, holding clients assets in the company's name, and trading for clients over a wide range of assets including investments and real estate

Pro Trust has been subject to regular regulatory inspections by KPMG on behalf of the OAD - FCT and no regulatory issues have been raised.

Pro Trust has successfully acted as an interface between UK and Offshore life offices and independent intermediaries in Italy, Switzerland and the Far East and is regarded as one of the founders of leveraged With-Profits business. PTPC has managed this type of business successfully for over a decade. Success has come through specialization and concentration on a niche product and by providing services for investors and distributors.

Management of Protrust:

Managing Director, Chris Mathew has over 30 years experience in the banking and financial services industry. He was Sales and Marketing Director for Clerical and Medical and was a main board director of Protrust Financial Services Group SA, prior to being appointed as Managing Director of Pro Trust.

Luigi Piffaretti, Director - Fiduciary, Luigi Piffaretti is an authorized fiduciary and has been with Pro Trust since 2001 and has over 30 years banking, investment and fiduciary experience in Switzerland.

Maurizio Cattaneo, Director - Fiduciary Maurizio Cattaneo is an authorized fiduciary and has been with PTPC since 2003 and prior to that worked at Raiffaisen and UBS. He has over 20 years experience in banking and financial services.

Having been established for some years in the market the management and support team is extremely competent and very experienced. PTPC is very cost effective, as it is able to manage a large portfolio without the need for large numbers of staff. Under the terms of the letter of intent, the operations of Pro Trust are expected to become an operating subsidiary of Tally-Ho Ventures, with key members of the Pro Trust management team entering into long-term employment contracts. Completion of the transaction is subject to final negotiation of a share purchase agreement, completion of due diligence and satisfaction of customary conditions to closing.

o Key Next Steps:

o Develop distribution channel - business model/financial template;

o Develop all business units to critical mass, financial stability and to `franchise model' capability;

o Continually look at opportunities to acquire or link with other international IFAs;

o Grow manpower and turnover in each distribution channel to critical mass in line with the defined financial templates;

o Develop professional alliances with banks, accountants and solicitors in all territories;

o Develop and grow recurring income streams.

o Market Opportunities; The management see two key areas of market opportunities within the current market that provide them with the potential to become the dominant brand:

o Distribution Opportunity

o Client Proposition Opportunity

The international IFA market displays a number of unique characteristics, which can be summarized as follows:

o The market is fragmented, ill disciplined and dominated by one/two man IFAs.

o The market is still largely commission driven although this situation is evolving.

o Most of these small IFAs are focused on cash flow. They lack the financial resources and expertise to develop their businesses beyond break-even.

o Following the closure of Towry Law International in 2004, no IFA group dominates the market, most IFA groups disintegrate after a few years usually because of the short term `lifestyle-management' approach adopted by the principals of the businesses concerned.

o Although regulation is poor and inadequate in many territories, the situation is evolving rapidly (see `Client Proposition' below). The UK compliance model is being introduced in many jurisdictions and international IFAs are concerned by, and are largely unprepared for, the consequences and the costs of regulation.

o Few international IFAs have made significant investment into IT support systems and personnel. This will hamper their ability to survive healthily in the more regulated markets.

o Without adequate funding, marketing support and operating in unregulated environments, many IFAs lack the credibility that the group status carries.

o There is growing awareness among product and service providers of the need to align themselves only with the good quality, productive IFAs who will emerge as winners in this environment.

RISKS AND UNCERTAINTIES:

If The Company Does Not Continue To Create,  Attract And Retain Viable  Products
In  The  Wealth  Management  Industry,  Our  Profitability  Could  Be  Adversely
Affected.

The wealth management industry has experienced considerable growth in the past decade. Changing demographics and concern about financial security in retirement, compounded by a continuing low-interest rate environment, are expected to result in a continued increase in assets available for investment. In recent years, investors have endeavored to increase their knowledge of available investment products and services, and wealth management firms have responded by increasing the availability of and access to information in respect of these wealth management products and services. Simultaneously, there has been an increase in the number, type and sophistication of products and services offered by financial institutions. The Company believes that these changing factors will result in an increased number of investors seeking some level of professional financial and investment advice in managing their investments. Belgravia Intervest Group is well positioned to meet this challenge as it continues to establish itself as a fully integrated wealth management business, combining professional investment management products, solutions and services with knowledgeable financial advisory professionals.

However, the profitability of the Company is directly related to its ability to create, attract and retain specific products. These products are subject to a fee, generally calculated as a percentage of their net asset value. Should a sizable number of clients seek to terminate their arrangements with the Company, its profitability would be adversely affected.

The Company May Not Be Able To Successfully Integrate Acquisitions

The Company's growth strategy has relied in part on acquisitions and the associated realization of operating synergies. A successful acquisition requires the Company to identify suitable candidates for purchase on acceptable terms, and the acquired business to be successfully integrated in a timely and non-disruptive manner designed to minimize the risk of loss of client business. Even with the investment of management and financial resources, an acquisition may not produce the anticipated revenue, earnings or business synergies. In addition, acquisitions can involve non-recurring charges and, if not successful,

the write-off of amounts of goodwill and other intangible assets that could have an adverse effect on the Company's financial results. Management performs an extensive review of the value of goodwill and other intangible assets on an ongoing basis, which review has not identified any required adjustments.

Market influences beyond the control of the company could affect our overall profitability.

Negativity in domestic and international capital markets may challenge the Company. The movement of capital markets is beyond the control of the Company but, to a significant degree, may impact on the Company's overall profitability. Revenues from the Company's investment management arm are primarily based on market values, generally determined using trading values of underlying securities in global markets. The unpredictability of the global economy may also affect retail and institutional clients' willingness to actively trade in capital markets, impacting the Company's commission revenues as well as trading and corporate finance activities.

The Wealth Management Industry Is Highly Competitive, With Some Companies Having Greater Financial Or Other Resources

The Company operates in a highly competitive environment that includes other providers of wealth management products such as mutual funds and private client investment managers, financial advisors, investment dealers, banks and insurance companies, some of which have greater financial or other resources than the Company. In order to remain competitive, the Company will continue to be innovative in the development of financial products and solutions for its clients, to monitor its investment performance and to provide the highest level of service to its clients.

There may be competitive pressures from time to time to lower the fees that the Company charges on its products and services which may impact the ability to retain clients in the future. While changes to management fee rates, commission rates and trailer fee rates will affect the operating results of the Company, management believes that its current fee structure is competitive with its industry peers.

Changing Regulatory Requirements May Affect The Profitability Of Our Business Or Limit Our Ability To Conduct Business

The regulatory operating environment for wealth management and financial services continues to expand, becoming more regimented and complex. The Company supports regulatory changes that enhance the integrity and reputation of our industry and that protect the interests of our client base. The Company's compliance personnel actively participate in the development of new legislation and regulation. However, new regulatory requirements may involve changes to the way we currently conduct our business or may increase the cost and associated profitability of our business. The Company believes that its ability to comply with all applicable laws and regulations including these emerging changes is dependent upon the establishment, implementation and maintenance of extensive compliance policies and procedures. The Company has a team of experienced compliance personnel that works full time on these efforts. When the Company completes an acquisition, it is possible that the acquired company's compliance standards may have been insufficient or not as developed as those of the Company. The Company attempts to resolve compliance issues through its due diligence review; however, it is possible that its review will not identify all possible problems.

Regardless of the Company's effectiveness in monitoring and administering established compliance policies and procedures, the Company, and any of its directors, officers, employees or agents, may be subject to liability or fines which may limit the ability to conduct business.

The Capital Requirements of the Company may Require Additional Equity Funding, Which Would Dilute the Ownership of Our Current Stockholders.

Belgravia Intervest Group may be required to raise additional funds through public or private financing, strategic relationships or other arrangements for a variety of purposes, including business acquisitions, to capitalize on unanticipated opportunities, as well as to respond to competitive pressures. Additional equity funding will reduce the percentage ownership of the existing shareholders of the Company and may dilute net book value per share. It is also possible that any such equity funding may involve securities which have rights or privileges senior to those of holders of common shares or that any debt financing, if available, may involve restrictive covenants. There can be no assurance that such additional funding, if needed, will be available on economic terms, or at all.

The Company Has Assumed Certain Credit Risks

The Company is exposed to the risk that third parties that owe the Company cash, securities or other assets may not fulfill their obligations, due to lack of liquidity, bankruptcy, operational failure or other cause. These parties include trading counterparties, customers, clearing agents, exchanges, clearing houses, other financial intermediaries, and issuers whose securities are held by us.

4. REPORT OF INDEPENDENT AUDITORS

Our independent accountant has qualified his report, stating that the audited financial statements of Tally-Ho Ventures Inc for the annual period ending December 2005 have been prepared assuming Belgravia Intervest Group Limited, a subsidiary of the company as a going concern. They note that Belgravia Intervest Group Limited has been sold to third parties and the nature of revenue for the . . .

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