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Talisman First Venture Capital Trust PLC

The Directors announce the final results for the year ended 31 March 2009. 

Performance

The NAV per Ordinary Share at 31 March 2009 was 39.7p compared with 48.0p at 31 March 2008. The NAV has decreased by 17.3% over the year which compares favourably to the decrease of 56.9% in the FTSE AIM All-share Index over the same period. The change in the value of the invested portfolio is analysed in the Summary of Portfolio Performance.

Whilst the performance of the Company was closely linked to that of AIM/PLUS having had 68% by value of the NAV invested there at 31 March 2008, we are pleased to note that, despite the AIM All-share Index falling by 56.9% during the reporting period to 31 March 2009, the Company's AIM/PLUS portfolio declined by only 27.0%. In many cases, and in particularly uncertain times, the values of many AIM companies bear no relation to their underlying earnings and cash generation potential, due to a complete lack of liquidity in many shares. More recently, some stability has returned to the market and also, in some cases, a welcome return to some limited liquidity.

In line with the intended restructuring of the portfolio, the majority of our investments (by value) are now in unlisted companies that are insulated from the major movements in market value which affect quoted companies. These unlisted investments are in growing private companies, where performance remains generally encouraging and some increases in valuations have been achieved during the reporting period. 

The Net Asset Value has declined by £440,000 over the year, of which £155,000 is accounted for by the total expense of running the Company; however, the policy of investing in yielding private equity investments has resulted in an increase in income of £12,000 over the amount received in the previous year of £93,000. Income will increase further as additional private equity investments are made and, based on the average yield from such holdings, the Company will have to invest a further £500,000 in unquoted holdings to cover its running costs completely.

Despite the significant market movements which have occurred affecting many of the AIM investments, the underlying performance of the businesses in the AIM portfolio has remained sound. It is anticipated that this will be reflected in upward share price movements when market conditions improve, although the timing of any recovery remains uncertain. There are also some welcome bright spots within both portfolios that are highlighted later in the Annual Report.

Dividends

The Board is not proposing that the Company should pay a dividend. The Company does not currently have reserves from which to pay a dividend; reserves will be created by the continued realisation of investments above their cost.

The Manager 

On 9 June 2009, the senior executives of Aberdeen Asset Management's Private Equity division, which has managed the Company's portfolio and provided administrative and company secretarial services since March 2005, completed a management buy-out of that business and launched Maven Capital Partners UK LLP (Maven) as a specialist, independent private equity investment manager.

The Board has confirmed that Maven employs largely the same team, operating from a network of offices across the UK, and that there will be no significant change in the level of investment management, administrative and company secretarial services provided. Having reviewed the existing management contract and the performance of the Manager, and having made enquiries about the resources and viability of its new business, the Board has decided to novate the management contract in favour of Maven.

Continuation of the Company

The Company's Articles of Association provide that the Board shall, at the Annual General Meeting (AGM) to be held in 2009, propose an Ordinary Resolution to the effect that the Company shall continue in being as a venture capital trust. If, at that Meeting, such a Resolution is not passed, the Board shall, within 12 months, convene an Extraordinary General Meeting to propose a Special Resolution for the reorganisation or reconstruction of the Company and, if that Resolution is not passed, a Special Resolution to wind up the Company voluntarily. If the Shareholders resolve that the Company is to continue as a venture capital trust, similar Resolutions will be proposed at every third subsequent AGM, commencing with the AGM to be held in 2012.

In considering the continuation of the Company as a venture capital trust, the Directors draw Shareholders attention to the following:

• a decision to wind up the Company will crystallise any capital gains deferred by Shareholders at the point when they first invested;

• the costs of liquidation would reduce the amount available to Shareholders;

• it is unlikely that the unlisted portfolio can be realised at its book value in the short term; and

• the level of liquidity in the AIM quoted stocks may mean that, in order to realise the holdings, assets would have to be disposed of in a forced sale, possibly in a falling market, and this would further reduce the proceeds available to Shareholders.

The Board believes the continuation of the Company to be beneficial to Shareholders as it allows them to:

• participate fully in the long-term recovery prospects for the Company;

• continue to have access to the asset class at a time when there are a number of opportunities emanating from the fund management team; and 

• retain their existing capital gains tax and income tax benefits.

In addition, it should be noted that one of the key attractions of investing in a venture capital trust was the opportunity for investors to defer capital gains tax liabilities. In considering the vote to continue, Shareholders should be aware that, if the Resolution is not passed, the Company will ultimately lose its venture capital trust status. This would mean that the tax advantage of sheltering capital gains would cease and that capital gains tax liabilities may arise. Shareholders should also be aware that a decision not to continue may set in train a disposal of the portfolio and a subsequent winding up of the Company, which would expose them to the significant risk that the value achieved for their assets may not be sufficient to meet any capital gains tax liabilities due on a capital gain deferred at the point of initial investment.

The Board believes that the long term continuation of the Company as a venture capital trust is in the best interests of the Shareholders as a whole and recommends to Shareholders that they vote in favour of the Resolution at the AGM.

Outlook and future strategy

The Board believes that, notwithstanding the decline in NAV suffered in the reporting period, Shareholders interests are best served by continuing the reconstruction process which had delivered an increase in NAV from March 2005 until more recent years when, despite terrible market conditions, a significant outperformance has been achieved.

The Manager has continued to invest in unlisted companies and this strategy will continue with each unlisted investment contributing to a reduction in the deficit on the revenue account through the income generated from the loan stock holdings. The number of new AIM investments declined substantially during the year and this is likely to remain the case in the short term as opportunities to participate in IPOs remain few and far between.

The Board remains supportive of the active management style adopted by the Manager, whose performance given the prevailing market conditions has continued to be encouraging.

 

Talisman First Venture Capital Trust PLC  Income Statement  For the year ended 31 March 2009
	Year ended 31 March 2009			Year ended  31 March 2008
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(Losses) on investments	-	(390)	(390)	-	(207)	(207)
Income	105	-	105	93	-	93
Investment management fees	(21)	(84)	(105)	(22)	(91)	(113)
Performance fees	-	-	-	(2)	(9)	(11)
Finance costs	(2)	(6)	(8)	(2)	(8)	(10)
Other expenses	(42)	-	(42)	(34)	-	(34)
Return/(loss) on ordinary activities before taxation	40	(480)	(440)	33	(315)	(282)
Tax on ordinary activities	(1)	1	-	(2)	2	-
Return/(loss) on ordinary activities after taxation	39	(479)	(440)	31	(313)	(282)
Earnings per share (pence)	0.7p	(9.0p)	(8.3p)	0.6	(5.9)	(5.3)

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

The total column of this statement is the Profit and Loss Account of the Company.

Talisman First Venture Capital Trust PLC  Reconciliation Of Movements In Shareholders' Funds For the year ended 31 March 2009
	Year ended  31 March 2009	Year ended  31 March 2008
	£'000	£'000
Opening Shareholders' funds	2,547	2,829
Return attributable to Equity Shareholders	(440)	(282)
Closing Shareholders' funds	2,107	2,547

 

Talisman First Venture Capital Trust PLC  Balance Sheet As at 31 March 2009
	31 March 2009		31 March 2008
	£'000	£'000	£'000	£'000
Fixed assets
Investments		2,081		2,777
Current assets
Debtors	68		51
Cash and overnight deposits	14		96
	82		147
Creditors
Amounts falling due within one year	20		43
Bank overdraft	36		334
	56		377
Net current (liabilities)/assets		26		(230)
Net assets		2,107		2,547
Capital and reserves
Called up share capital		2,655		2,655
Share premium account		2,389		2,389
Capital reserve - realised		(857)		(445)
Capital reserve - unrealised		(1,129)		(1,062)
Revenue reserve		(951)		(990)
Net assets attributable to Ordinary Shareholders		2,107		2,547
Net Asset Value per Ordinary Share (pence)		39.7		48.0

 

Talisman First Venture Capital Trust PLC  Cash Flow Statement  For the Year ended 31 March 2009
	Year ended  31 March 2009		Year ended  31 March 2008
	£'000	£'000	£'000	£'000
Operating activities
Investment income received	89		51
Deposit interest received	2		4
Investment management fees paid	(133)		(113)
Performance fees paid	-		(40)
Other cash payments	(36)		(39)
Net cash (outflow)/inflow from operating activities		(78)		(137)
Taxation
Corporation tax		-		-
Financial investment
Purchase of investments	(202)		(942)
Sale of investments	504		551
Net cash outflow from financial investment		302		(391)
Equity dividends paid		-		-
Net cash outflow before financing		224		(528)
Financing
Bank overdraft interest paid	(8)		(10)
Net cash outflow from financing		(8)		(10)
Decrease in cash		216		(538)

Accounting Policies

(a) Basis of preparation 

The Financial Statements have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (the SORP) issued in December 2005. The disclosures on going concern in the Directors' Report form part of the Financial Statements.

(b) Income 

Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any fixed income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year.

(c) Expenses 

All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as follows:

• expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

• expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee, performance fee and finance costs have been allocated 20% to revenue and 80% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.

(d) Taxation 

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods. 

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or subsequently enacted at the balance sheet date. 

The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period.

(e) Investments 

In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines for the valuation of private equity and venture capital investments. Investments are recognised at their trade date and are valued at fair value, which represent the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future. 

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

1. For investments completed within the 12 months prior to the reporting date and those at an early stage in their development, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market.

2. Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted price.

3. Mature companies are valued by applying a multiple to their fully taxed prospective earnings to determine the enterprise value of the company.

3.1 To obtain a valuation of the total ordinary share capital held by management and the institutional investors, the value of third party debt, institutional loan stock, debentures and preference share capital is deducted from the enterprise value. The effect of any performance related mechanisms is taken into account when determining the value of the ordinary share capital.

3.2 Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/earnings basis, both described above.

4. Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment. 

5. In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous balance sheet date. 

6. All unlisted investments are valued individually by the Manager's Portfolio Management Team. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

7. In accordance with normal market practice, investments listed on the Alternative Investment Market or a recognised stock exchange are valued at their bid market price.

Movements in reserves

	Share premium account	Capital reserve - realised	Capital reserve - unrealised	Revenue reserve
	£'000	£'000	£'000	£'000
At 31 March 2008	2,389	(445)	(1,062)	(990)
Net return on ordinary activities	-	(412)	(67)	39
At 31 March 2009	2,389	(857)	(1,129)	951

Returns per Ordinary Share

The returns per Ordinary Share are based on the following figures:

	Year ended	Year ended
	31 March 2009	31 March 2008
Weighted average number of Ordinary Shares in issue	5,309,102	5,309,102
Revenue return	£39,000	£31,000
Capital return	(£479,000)	(£313,000)
Total return	(£440,000)	(£282,000)

Net Asset Value per Ordinary Share

Net Asset Value per Ordinary Share as at 31 March 2009 has been calculated using the number of Ordinary Shares in issue at that date of 5,309,102 (2008: 5,309,102). 

Principal risks and uncertainties

The principal risks and uncertainties facing the Company relate to its investment activities and include market price, interest rate and liquidity risk. 

Additional risks faced by the Company, and the mitigation approach adopted by the Board, are as follows:

• investment objective: the Board's aim is to maximise returns to Shareholders while managing risk by ensuring an appropriate diversification of investments;

• investment policy: inappropriate stock selection leading to underperformance in absolute and relative terms is a risk which the Manager mitigates by operating within investment guidelines and regularly monitoring performance against the peer group. The regulations affecting Venture Capital Trusts are central to the Company's investment policy;

• discount volatility: due to lack of liquidity in the secondary market, venture capital trust shares tend to trade at discounts to their net asset values; and 

• regulatory risk: the Company operates in a complex regulatory environment and faces a number of related risks. A breach of Section 274 of the Income Tax Act 2007 could result in the Company being subject to capital gains tax on the sale of its investments. A breach of the VCT Regulations could result in the loss of VCT status and a consequent loss of tax reliefs currently available to Shareholders. A serious breach of other regulations, such as the UKLA Listing Rules or the Companies Act, could lead to suspension of trading in the Company's shares at the Stock Exchange and reputational damage. The Board receives quarterly reports from the Manager in order to monitor compliance with regulations. 

At least twice each year the Board considers all of the above risks and the measures in place to manage them. 

Other information

The Annual General Meeting of the Company will be held on 3 September 2009, commencing at 11.00 a.m.

This Announcement has been prepared on the same basis as the Annual Report and Financial Statements for the year ended 31 March 2008. The Annual Report and Financial Statements for the year ended 31 March 2009 will be printed and issued to Shareholders in due course.

The financial information contained within this Announcement does not constitute the Company's statutory Financial Statements as defined in Section 240 of the Companies Act 1985. The statutory Financial Statements for the year ended 31 March 2008 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under Sections 237(2) or (3) of the Companies Act 1985.

 

Copies of this announcement will be available to the public at the office of Maven Capital Partners UK LLP, 149 St Vincent Street, Glasgow; at the registered office of the Company, One Bow Churchyard, Cheapside, London; and on the Company's website at: www.mavenco.com/talismanfirst

Directors' responsibility statement

The Directors believe that, to the best of their knowledge:

• the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities and financial position and profit or loss of the Company as at 31 March 2009 and for the year to that date; and

• the Directors' Report includes a fair review of the development and performance of the Company, together with a description of the principal risks and uncertainties that it faces.

By Order of the Board

Maven Capital Partners UK LLP

Secretary

31 July 2009

ENDFR UAVVRKNRBOAR