TIDMAVC
RNS Number : 4041L
Aberdeen Development Capital PLC
29 July 2011
ABERDEEN DEVELOPMENT CAPITAL PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MAY 2011
1. CHAIRMAN'S STATEMENT
Background
In last year's statement I noted that the market conditions
facing small and medium sized unlisted businesses were expected to
continue to be challenging through the year under review and this
has proved to be the case. Although none of the larger remaining
portfolio companies were fully exited during the year, the Managers
continue to seek ways of liquidating assets at optimal prices, and
a number of partial disposals and an equity for debt swap have been
completed, with several others under discussion.
Despite the continuing difficult market conditions, returns from
investments and the repayment of VAT on management fees plus
interest thereon has allowed for one return of capital to Zero
dividend preference ("ZDP") shareholders during the year at a rate
of 10p per share. To date ZDP shareholders have received 98.6p per
share against their issue price of 100p per share and their final
entitlement stood at 31.36p as at 31 May 2011. Ordinary
shareholders have to date received 7.3p per share.
Performance
The net asset value ("NAV") per Ordinary share fell during the
year from 7.8p to 5.9p, of which 1.0p was attributable to the
annual allocation of entitlement to holders of ZDP shares, and 2.8p
due to downward revaluation of investments, both elements being
partially offset by the repayment of VAT on management fees and
interest thereon.
Given the trading environment for certain portfolio companies,
their illiquidity and also the proximity of the ZDP shares
repayment date in April 2012, the Board has written down the
carrying value of a number of investments, details of which can be
found in the Manager's Review section.
Dividend
The Board has decided not to recommend a dividend to Ordinary
shareholders in respect of the year ended 31 May 2011. The Board is
mindful of the entitlement of the Ordinary shareholders to share in
revenue surpluses generated, however it recognises the need to
conserve cash to meet its primary objective of returning capital to
ZDP shareholders as part of the winding up process of the Group.
The Board has taken professional advice to ensure that it can
continue to maintain its investment trust status, noting that
company law requires an investment company to maintain a certain
level of net assets cover over liabilities in order to be able to
make distributions, a condition which the Company cannot fulfil at
the current time.
Portfolio Activity
In accordance with the investment objective, no new investments
have been made during the year and there were no calls for
follow-on investment.
As mentioned above no full exits have been achieved during the
year, however, certain partial redemptions have occurred along with
the restructuring of certain investment terms which should help
realise shareholder value.
The most significant piece of portfolio activity has occurred
subsequent to the Balance Sheet date, with portfolio company Cash
Bases repaying in full their outstanding loan stock, amounting to
some GBP1.068 million.
Repayment of VAT on Management Fees
During the year the Company received a repayment of GBP484,000
from the Manager, representing the return of outstanding VAT
charged on management fees for the periods 1990 to 1996 and 2001 to
2003. This sum has been allocated to the revenue and capital
accounts in accordance with the accounting policy in place when the
VAT was originally charged. The Company has also received
GBP402,000 representing the simple interest due on the total
repayment of VAT. This interest payment has been allocated to the
revenue account.
As shareholders will be aware, we continue to investigate the
recovery of VAT paid during the so-called "dead period" between
1996 and 2001, but it is still too early to give an indication of
either the chances of success or the quantum that might be
recovered. The Company has also challenged the basis on which
interest has been paid, arguing with HM Revenue & Customs that
it should be under a compound interest basis rather than simple
interest basis. HM Revenue & Customs are currently resisting
this argument and a resolution to this claim is unlikely within the
foreseeable future.
Annual General Meeting
The Annual General Meeting ("AGM") has been convened for
Wednesday, 26th October 2011 at 10 Queen's Terrace, Aberdeen and
the Board looks forward to meeting any shareholders who wish to
attend. I would be grateful if you would confirm your attendance by
completing the notice that accompanies the Annual Report and
returning it together with an indication of any particular
questions that you would like to ask.
Mr Gilbert, Mr Scott and I will be retiring by rotation at the
AGM and your Board, having reviewed the proposed re-elections, and
bearing in mind the wind-up nature of the Company, recommends that
shareholders vote in favour of their reappointment.
Proposed Liquidation of ADC Zeros 2010 PLC and ADC Zeros 2012
PLC
Having received over GBP1 million from Cash Bases after the year
end, the Group is now in a position to make a further capital
return to ZDP shareholders, in accordance with the Board's policy
of using surplus cash to fund returns under the Capital Return
Scheme. However, there are currently insufficient distributable
capital reserves within ADC Zeros 2010 PLC and ADC Zeros 2012 PLC
to ensure that such a return would continue to be treated as
capital in nature. Therefore, in order to avoid any future returns
from being classed as income for tax purposes, it will be necessary
to first place ADC Zeros 2010 PLC and ADC Zeros 2012 PLC into
liquidation before any further returns of capital may be made and a
resolution proposing this course of action will be put at separate
class meetings of these companies to be convened in the coming
weeks. Notwithstanding liquidation, the entitlement of the ZDP
shares will continue to accrue at a compound daily rate of 6.5% per
annum until 30 April 2012.
The Future
Your Board and the Manager will continue in their attempts to
realise optimum value for the remainder of the Group's investments
with the primary objective being the repayment of ZDP shareholders'
full entitlement by 30 April 2012, however, we are mindful that as
the repayment date draws closer, exit prices are unlikely to match
those which could be achieved under more favourable market
conditions or under a going concern basis. Should the Group's
assets not be realised by 30 April 2012, then the Board will be
obliged to convene a general meeting of the Company on 30 April
2012 at which a special resolution will be proposed to wind up the
Company voluntarily.
John Milligan
Chairman
29 July 2011
2. MANAGER'S REVIEW
Background
The year under review proved to be another challenging one in
which to progress the orderly realisation programme sought by
shareholders in 2007. The paucity of available credit facilities in
the market place has not only curtailed merger and acquisition
activity as companies seek to position themselves for sale but also
hampered trading activity in certain businesses. Consequently, exit
opportunities have been limited and trading performance has been
mixed although the management teams of a number of holdings have
dealt well with the recessionary pressures.
Net Asset Value Performance
Audited NAV per Ordinary share as at 31
May 2011 7.8p
Major Downgrades
Tennants Consolidated (1.2)p
Pilgrim Systems (0.7)p (1.9)p
----------
Appropriation to Zero dividend preference
shares (1.0)p
VAT Repayment and Interest 2.5p
Other movements (1.5)p
Audited NAV per Ordinary share as at 31 5.9p
May 2011
-------
Investments
There were no new or follow-on investments during the year,
however the book cost of PLM Dollar Group increased by GBP244,000
due to a revaluation of the business on the event of converting
existing equity to debt, including the capitalisation of GBP130,000
of dividends arrears.
Realisations
During the year there were a number of realisations from the
unlisted portfolio.
Proceeds Cost Gain/(Loss)
Company GBP'000 GBP'000 GBP'000
----------------- --------- -------- ------------
Cash Bases 195 166 29
Fispak 50 50 -
IFC Holdings 300 125 175
TLA Holdings(A) - 145 (145)
----------------- --------- -------- ------------
Total 545 486 59
----------------- --------- -------- ------------
(A) Written down to GBPnil in prior year; liquidation process
now complete.
Changes in Carrying Values
In attributing carrying values to investments the Board has
considered the illiquid nature of unlisted holdings and applied a
discount on a case by case basis to arrive at a value which
represents a best estimate of net realisable value. The Board has a
policy of not increasing the value of a holding unless the failure
to do so would result in a material understatement of the net
assets of the Group. Provisions against the value of
underperforming investments are normally applied at the year end or
half year end, however, if there is an imminent risk of the
underlying business failing then an immediate provision is
made.
At the year end the Board has written down the value of
investments in Ortak Jewellery, Tennants Consolidated and Whiteness
Property Company to reflect their lack of liquidity, THL Midlands
to reflect historically poor earnings and IFC Holdings, Pilgrim
Systems and PLM Dollar Group to reflect the proximity of the ZDP
shares repayment date compared to expected maturity.
Valuation Principles
The portfolio is valued at fair value and in the absence of the
requirement to realise assets before 30 April 2012 International
Private Equity and Venture Capital Valuation Guidelines would
normally be applied. However, the Board believes that these
Guidelines based on usual methodologies relating to earnings,
recent transactions, net assets or industry benchmarks are not
particularly relevant in the current circumstances.
Where there is no relevant methodology the Board will apply a
value based on an assessment of market value, taking into account
factors such as trading, the size of the investment and its
liquidity.
Outlook
Although some progress has been made in recent months in terms
of realising certain holdings such as Cash Bases, we expect
uncertain market conditions to persist in the short term which will
undoubtedly impact adversely on the ability to achieve exits unless
more liquidity enters capital markets. However, the Managers
believe the sectors in which some investee companies operate will
remain attractive to buyers and we will seek to realise value for
shareholders where opportunities exist.
Aberdeen Asset Managers Limited
Manager
29 July 2011
3. RESULTS
Financial Highlights
31 May 31 May
2011 2010 % change
Total assets (GBP'000) 6,540 8,378 -21.9%
Total equity
shareholders' funds
(net assets)
(GBP'000) 2,104 2,786 -24.5%
Share price (mid
market) 2.13p 1.85p 15.1%
Net asset value per
share 5.89p 7.80p -24.5%
Discount to Net asset
value 63.8% 76.3%
FTSE Small Cap Index
(ex Investment
Trusts) 2682.84 2249.0 19.3%
Actual gearing 183.4% 167.5%
Potential gearing 210.8% 200.7%
Total expense ratio 3.3% 2.9%
Earnings
Total return per share (1.4)p (1.8)p
Revenue return per
share Proposed final 1.4p 0.3p
dividend per share - 0.5p
Revenue reserves (GBP'000) 470 153
Performance (total return)
1 year 3 year 5 year
% return % return % return
Share price 48.0 -80.4 -85.3
Net asset value -19.6 -59.6 -75.0
FTSE Small Cap Index
(ex Investment
Trusts) 23.1 8.5 -6.1
4. BUSINESS REVIEW
A review of the Company's activities is given in the Chairman's
Statement in Section 1 and the Manager's Report in Section 2. This
includes a review of the business of the Company and its principal
activities, recommended dividends and likely future developments of
the business. The major risks associated with the Company are
detailed in the section on "Principal Risks and Uncertainties".
Monitoring Performance - Key Performance Indicators
An outline of the performance, market background, investment
activity and portfolio strategy during the period under review, as
well as the market outlook, is provided in the Chairman's Statement
and Manager's Report.
The Key Performance Indicators for the Company, NAV performance
(total return), discount of share price to net asset value and
share price performance, are detailed in "Results".
Principal Activity
The Company was incorporated as a public limited company on 22
April 1986 and was listed on the London Stock Exchange on 8
September 1986. The Company's registration number is SC098542.
The business of the Company is that of an investment trust
investing development capital in private companies in the UK and by
the acquisition of companies or other entities investing
development capital.
Status
The Company is an investment company as defined by Section 833
of the Companies Act 2006 and is registered as a public limited
company.
The Company has been provisionally approved by HM Revenue &
Customs as an investment trust under Section 1158 of the
Corporation Tax Act 2010 for the year ended 31 May 2010. The
Company has subsequently conducted its affairs so as to enable it
to continue to qualify for such approval.
The Company is a qualifying trust for the purposes of Individual
Savings Accounts and it is the Directors' intention that the
Company should continue to be a qualifying trust.
Investment Objective and Investment Policy
The Board's objective is to conduct an orderly realisation of
the Group's assets in a manner which maximises value for
shareholders, in accordance with proposals approved by shareholders
on 3 August 2007. It is intended that the mechanism for returning
surplus cash to shareholders over time be through a combination of
ad hoc returns of capital and buying back shares through the
market.
Principal Risks and Uncertainties
Investments in smaller unlisted companies carry substantially
greater risk, in terms of price and liquidity, than investments in
larger companies or in companies listed on the Official List. In
addition, many of the businesses in which the Company invests may
be exposed to the risk of political change, exchange controls, tax
or other regulations that may affect their value and
marketability.
As the volume of the Group's shares traded on the market is
likely to be small, the shares may trade at a significant discount
to the Net Asset Value.
The Group currently utilises gearing in the form of ZDP shares
held within its subsidiary companies. Gearing has the effect of
exacerbating market falls and market gains.
Going Concern
The Group, of which the Company is the ultimate parent
undertaking, has a split capital structure with a planned life due
to expire on 30 April 2012. The ZDP shareholders are entitled to
receive a final capital entitlement of 31.36p per share, which is
equivalent to an annual redemption yield of 6.5% based on their
issue price of 100p and adjusted for returns of capital under the
Capital Return Scheme approved by shareholders on 3 August 2007.
Ordinary shareholders are entitled to the remaining assets of the
Group following repayment of the capital entitlement to ZDP
shareholders.
Due to the illiquid nature of the remaining investments held,
the Directors cannot be certain that sufficient cash will be
generated from realisations to repay the ZDP shares in full and
will explore options of selling the portfolio to a third party or
appoint a liquidator to assist this process. These financial
statements have therefore been prepared on a basis other than that
of a going concern which includes, where appropriate, writing down
the Company's net assets to a net realisable value.
As noted in the annual reports of ADC Zeros 2010 PLC and ADC
Zeros 2012 PLC a special resolution shall be proposed at separate
class meetings of these companies to wind up the companies
voluntarily thus enabling them to continue making further returns
of capital. There are no plans to wind up Aberdeen Development
Capital PLC and unlisted subsidiaries ADC (Glasgow) Limited and ADC
Fund Limited Partnership before 30 April 2012.
Meanwhile, the Group and Company will continue to be managed in
the same way as present ie to realise assets to repay in full the
ZDP shareholders of ADC Zeros 2010 PLC and ADC Zeros 2012 PLC, and
to thereafter to maximise value for Ordinary shareholders.
The Directors believe that the Group and Company has adequate
resources to continue in operational existence until 30 April 2012.
In arriving at this conclusion, the Directors have considered the
fixed life and final capital entitlement of the ZDP shares in ADC
Zeros 2010 PLC and ADC Zeros 2012 PLC. The cost of appointing a
liquidator and taking associated legal advice has been estimated at
around GBP200,000 excluding VAT.
5. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS
Regulation. Under company law the Directors must not approve the
accounts unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the company for that period. In preparing these financial
statements, International Accounting Standard 1 requires that the
Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable International Financial Reporting Standards, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
-- the management report, which is incorporated into the
Directors' report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
For Aberdeen Development Capital PLC
John Milligan
Chairman
29 July 2011
6. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 May 2011
Year ended Year ended
31 May 2011 31 May 2010
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest
income 3 535 130 665 319 - 319
Dividend
income 3 37 - 37 73 - 73
Other income 3 4 - 4 4 - 4
_______ _____ _____ _______ _____ _____
576 130 706 396 - 396
Losses on held
at fair value
investments 10 - (1,001) (1,001) - (230) (230)
Expenses
Management
fees 4 (20) (40) (60) (33) (67) (100)
Other
operating
expenses 5 (203) - (203) (291) (97) (388)
VAT recovered
on investment
management
fees 4 230 254 484 95 193 288
_______ _____ _____ _______ _____ _____
Profit/(loss)
before
finance costs
and taxation 583 (657) (74) 167 (201) (34)
Finance costs
Zero dividend
preference
shares 6,13 - (342) (342) - (526) (526)
_______ _____ _____ _______ _____ _____
Profit/(loss)
before
taxation 583 (999) (416) 167 (727) (560)
Taxation 7 (87) - (87) (78) - (78)
_______ _____ _____ _______ _____ _____
Profit/(loss)
for the year
attributable
to equity
shareholders 15 496 (999) (503) 89 (727) (638)
_______ _____ _____ _______ _____ _____
Earnings per
Ordinary
share - basic
(pence) 9 1.39 (2.80) (1.41) 0.25 (2.04) (1.79)
_______ _____ _____ _______ _____ _____
The Group does not have any income or expense that is not
included in profit/(loss) for the year, and therefore the
"Profit/(loss) for the year" is also the "Total comprehensive
income for the year" as defined in IAS 1 (revised).
All of the profit/(loss) and total comprehensive income is
attributable to the equity holders of Aberdeen Development Capital
PLC. There are no minority interests.
The total column of this statement represents the Statement of
Comprehensive Income of the Group, prepared in accordance with
IFRS. The revenue and capital columns are supplementary to this and
are prepared under guidance published by the Association of
Investment Companies.
All items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of the financial
statements.
7. BALANCE SHEETS
As at 31 May 2011
Group Company Group Company
2011 2011 2010 2010
Notes GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments at fair
value through profit
or loss 10 6,104 4,154 7,590 5,390
Subsidiary undertaking 10 - - - 8
_______ _______ _______ _______
6,104 4,154 7,590 5,398
Current assets
Cash and cash equivalents 577 292 925 544
Loans and receivables 12 27 6,306 31 6,587
_______ _______ _______ _______
604 6,598 956 7,131
Current liabilities
Financial liabilities
measured at amortised
cost 13 (168) (4,009) (168) (4,023)
Zero dividend preference
shares 13 (4,436) (4,436) - -
_______ _______ _______ _______
Total current liabilities (4,604) (8,445) (168) (4,023)
_______ _______ _______ _______
Net current
(liabilities)/assets (4,000) (1,847) 788 3,108
_______ _______ _______ _______
Total assets less
current liabilities 2,104 2,307 8,378 8,506
Non-current liabilities
Zero dividend preference
shares 13 - - (5,592) -
Amounts due to subsidiary 13 - - - (5,592)
_______ _______ _______ _______
Net assets 2,104 2,307 2,786 2,914
_______ _______ _______ _______
Equity
Share capital 14 357 357 357 357
Special reserve 15 17,395 17,395 17,395 17,395
Capital redemption
reserve 15 12 12 12 12
Capital reserve
- realised 15 (13,682) (13,997) (13,926) (14,020)
Capital reserve
- unrealised 15 (2,448) (2,462) (1,205) (1,430)
Revenue reserve 15 470 1,002 153 600
_______ _______ _______ _______
Equity shareholders'
funds 2,104 2,307 2,786 2,914
_______ _______ _______ _______
Net asset value
per Ordinary share
(pence) 16 5.89 6.46 7.80 8.16
The accompanying notes are an integral part of the financial
statements.
8. STATEMENTS OF CHANGES IN EQUITY
Group Capital Capital Capital
Share Special redemption reserve reserve Revenue
For year
ended 31 May capital reserve reserve realised unrealised reserve Total
2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net assets
at 31 May
2010 357 17,395 12 (13,926) (1,205) 153 2,786
Dividend
paid (note
8) - - - - - (179) (179)
Net
(loss)/gain
on ordinary
activities
after
taxation - - - 244 (1,243) 496 (503)
_______ _______ _______ _______ _______ _______ _______
Net assets
at 31 May
2011 357 17,395 12 (13,682) (2,448) 470 2,104
_______ _______ _______ _______ _______ _______ _______
Capital Capital Capital
Share Special redemption reserve reserve Revenue
For year
ended 31 May capital reserve reserve realised unrealised reserve Total
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net assets at
31 May 2009 357 17,502 12 (13,494) (910) 153 3,620
Return of
capital to
Ordinary
shareholders - (107) - - - - (107)
Dividend paid
(note 8) - - - - - (89) (89)
Net
(loss)/gain
on ordinary
activities
after
taxation - - - (432) (295) 89 (638)
_______ _______ _______ _______ _______ _______ _______
Net assets at
31 May 2010 357 17,395 12 (13,926) (1,205) 153 2,786
_______ _______ _______ _______ _______ _______ _______
Company Capital Capital Capital
Share Special Redemption Reserve Reserve Revenue
For year
ended 31 May Capital Reserve Reserve Realised Unrealised Reserve Total
2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net assets
at 31 May
2010 357 17,395 12 (14,020) (1,430) 600 2,914
Dividend
paid (note
8) - - - - - (179) (179)
Net
gain/(loss)
on ordinary
activities
after
taxation - - - 23 (1,032) 581 (428)
_______ _______ _______ _______ _______ _______ _______
Net assets
at 31 May (13
2011 357 17,395 12 997) (2,462) 1,002 2,307
_______ _______ _______ _______ _______ _______ _______
Capital Capital Capital
Share Special Redemption Reserve Reserve Revenue
For year
ended 31 May Capital Reserve Reserve Realised Unrealised Reserve Total
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net assets at
31 May 2009 357 17,502 12 (13,845) (866) 470 3,630
Return of
capital to
Ordinary
shareholders - (107) - - - - (107)
Dividend paid
(note 8) - - - - - (89) (89)
Net
(loss)/gain
on ordinary
activities
after
taxation - - - (175) (564) 219 (520)
_______ _______ _______ _______ _______ _______ _______
Net assets at
31 May 2010 357 17,395 12 (14,020) (1,430) 600 2,914
_______ _______ _______ _______ _______ _______ _______
9. CASH FLOW STATEMENTS
For the year ended 31 May 2011
Year ended Year ended
31 May 2011 31 May 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Operating activities
Loss before tax (416) (428) (560) (520)
Bad debt expense - - 87 12
ZDP shares finance cost 342 - 526 -
Amounts due to subsidiary
undertaking - 342 - 526
Losses on investments held
at fair value through profit
and loss 1,001 903 230 263
Purchases of investments held
at fair value through profit
and loss (244) - (49) (49)
Sales of investments held
at fair value through profit
and loss 729 615 2,878 2,868
Decrease in other receivables 4 7 291 285
Decrease in other payables (15) (14) (129) (62)
_______ _______ _______ _______
Net cash inflow from operating
activities before interest
and corporation tax 1,401 1,425 3,274 3,323
Corporation tax paid (72) - (86) -
_______ _______ _______ _______
Net cash inflow from operating
activities 1,329 1,425 3,188 3,323
Financing activities
Dividend paid on Ordinary
shares (179) (179) (89) (89)
Return of capital on Ordinary
shares - - (107) (107)
Return of capital on ZDP shares (1,498) (1,498) (3,386) (3,386)
_______ _______ _______ _______
Net cash used in financing
activities (1,677) (1,677) (3,582) (3,582)
_______ _______ _______ _______
Net decrease in cash and cash
equivalents (348) (252) (394) (259)
Cash and cash equivalents
at start of year 925 544 1,319 803
_______ _______ _______ _______
Cash and cash equivalents
at end of year 577 292 925 544
_______ _______ _______ _______
Cash and cash equivalents
at end of year
are represented by:
Cash at bank 577 292 925 544
_______ _______ _______ _______
10. NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 May 2011
1. Principal activity
The principal activity of the Company is that of an investment
trust company within the meaning of Sections 1158-1159 of the
Corporation Tax Act 2010 ("s1158-1159 CTA 2010").
2. Accounting policies
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) adopted by the
European Union. The Group therefore complies with Article 4 of the
EU IAS regulation.
(a) Basis of preparation
The financial statements have been prepared on a basis other
than that of a going concern which includes, where appropriate,
writing down the Company's net assets to a net realisable value.
The financial statements do not include any provision for the
future costs of terminating the business of the Company except to
the extent that such were committed at the Balance Sheet date.
The financial statements are prepared under the historical cost
convention, except for the measurement at fair value of investments
and in accordance with the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' (issued in January 2009).
The preparation of financial statements in conformity
with IFRS requires the use of certain critical
accounting estimates which requires management
to exercise its judgement in the process of applying
the accounting policies. Actual results may differ
from these estimates. It is in the area of valuation
in investments where management are required to
exercise judgement in the adoption of critical
estimates and judgements which can impact the carrying
values of investments.
At the date of authorisation of these financial
statements, various Standards, amendments to Standards
and Interpretations which have not been applied
to these financial statements, were in issue but
were not yet effective. These have not been applied
to these financial statements. The following are
the Standards and amendments to existing Standards
which are relevant but not yet effective. Other
Standards, Interpretations and amendments to Standards
which are not yet effective and not relevant have
not been included.
- IFRS 7 - Financial Instruments:
Disclosures (effective for accounting
periods beginning on or after 1 July
2011)
- IFRS 9 - Financial Instruments:
Classification and Measurement
(effective for accounting periods
beginning on or after 1 January 2013)
- IAS 24 - Related Party Transactions
(effective for accounting periods
beginning on or after 1 January 2011)
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Company.
(b) Group accounts
The Group accounts consolidate the accounts, on an acquisition
accounting basis, of the Company and its subsidiaries ADC Fund
Limited Partnership, ADC (Glasgow) Limited, ADC Zeros 2010 PLC and
ADC Zeros 2012 PLC. All intra-group transactions, balances, income
and expenses are eliminated on consolidation.
(c) Associated undertaking
An associate is an entity over which the Group is in a position
to exercise significant influence, but does not control or jointly
control, through participation in the financial and operating
policy decisions of the entity. The Group's associates are
accounted for in accordance with IAS 39: 'Financial Instruments:
Recognition and Measurement' ("IAS 39") as investments designated
at fair value through profit and loss, and in accordance with
paragraph 1 of IAS 28: 'Investments in Associates' ("IAS 28")
equity accounting is not required.
(d) Presentation of Consolidated Statement of Comprehensive
Income
In order to better reflect the activities of an investment trust
company, and in accordance with guidance issued by the AIC,
supplementary information which analyses the Consolidated Statement
of Comprehensive Income between items of a revenue and capital
nature has been presented alongside the Consolidated Statement of
Comprehensive Income. In accordance with the Company's status as a
UK investment company under Section 833 of the Companies Act 2006,
net capital returns may not be distributed by way of dividend.
Additionally, net revenue is the measure the Directors believe
appropriate in assessing the Group's compliance with certain
requirements set out in Sections 1158-1159 of the Corporation Tax
Act 2010.
(e) Valuation of investments
Subsidiary and main Company investments are all held at fair
value through the Consolidated Statement of Comprehensive
Income.
Listed investments are measured initially at cost, and are
recognised at trade date.
For financial assets acquired, the cost is the fair value of the
consideration. Subsequent to initial recognition, all listed
investments are measured at their quoted bid prices without
deduction for the estimated future selling costs.
Unlisted investments are valued by Directors at fair value
having regard to International Private Equity and Venture Capital
Valuation Guidelines as far as it is prudent to do so in light of
the investment objective. They are valued at cost unless subsequent
financings or other circumstances indicate a different valuation is
appropriate. When a valuation is undertaken consideration is given
to the most recent information available, including the latest
trading figures, performance against forecast, management's view of
prospects and the price of transactions in the security.
Realisable value in the short term could differ materially from
the amount which these investments are included in the
accounts.
(f) Movements in fair value
Changes in the fair value of all held at fair value assets are
taken to the Consolidated Statement of Comprehensive Income.
On disposal, realised gains and losses are also recognised in
the Consolidated Statement of Comprehensive Income.
(g) Income
Dividends receivable on equity shares are brought
into account on the ex-dividend date. Dividends
receivable on equity shares where no ex-dividend
date is quoted are brought into account when
the Company's right to receive payment is established.
Fixed returns on non-equity shares are recognised
when it is reasonably certain that they will
be receivable. Other returns on non-equity shares
are recognised when the right to the return is
established.
The fixed return on a debt security is recognised
when it is reasonably certain that they will
be receivable. Where the Company has elected
to receive its dividends in the form of additional
shares rather than in cash, the amount of cash
dividend is recognised as income. Any excess
in the value of shares received over the amounts
of the cash is recognised in capital reserves.
(h) Expenses and interest payable
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 of an
investment are charged to capital; and
- where a connection with the maintenance or enhancement of the
value of the investments can be demonstrated certain expenses are
reported in the capital column of the Consolidated Statement of
Comprehensive Income. These are investment management fee,
performance fee and overdraft interest and have been allocated 67%
to capital and 33% to revenue in line with the Board's expected
long term split of returns, in the form of capital gains and income
respectively, from the investment portfolio of the Company.
(i) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and that are subject
to insignificant risk of changes in value.
(j) Taxation
The charge for taxation is based on the taxable profits for the
period. Deferred taxation is accounted for using the balance sheet
liability method based on the percentage which was substantially
enacted at the Balance Sheet date. Deferred tax liabilities are
recognised for all taxable temporary differences. Deferred tax
assets are recognised to the extent it is probable that taxable
profits will be available against which temporary differences can
be utilised. In line with the recommendations of the SORP, the
allocation method used to calculate tax relief on expenses
presented against capital returns in the supplementary information
in the Consolidated Statement of Comprehensive Income is the
"marginal basis".
(k) Dividends payable
Dividends are recognised on the date on which they are paid.
2011 2010
3. Income GBP'000 GBP'000
Income from investments
Franked investment income 37 73
UK unfranked investment income 254 314
__________ __________
291 387
Other income __________ __________
Deposit interest 9 5
Interest on VAT receovered 402 -
Other income 4 4
__________ __________
415 9
Total income comprises: __________ __________
Dividends 37 73
Interest 665 319
Other income 4 4
__________ __________
706 396
Income from investments __________ __________
Unlisted UK 291 387
__________ __________
291 387
__________ __________
2011 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
4. Investment
management fee 20 40 60 33 67 100
The Company has an agreement with Aberdeen Asset Managers
Limited ("AAM") for the provision of management services. This
contract may be terminated subject to twelve months prior notice of
termination by either party. Management fees are payable monthly in
arrears, and are based on a fixed annual amount of GBP60,000
(GBP100,000 per annum for the year ended 31 May 2010). The basic
fee shall be reduced by the amount of any management fees or
priority profit share payable to the Manager by ADC Zeros 2010, ADC
Zeros 2012 and ADC Fund Limited Partnership. The balance due to AAM
at the year end was GBP3,000 (2010 - GBP6,000). ADC Fund Limited
Partnership has a priority profit share agreement with Aberdeen GP
Limited, a subsidiary of AAM. The fee is payable quarterly in
arrears and is based on an annual amount of 1.47% of the gross
asset value of the Limited Partnership. The balance due to Aberdeen
GP Limited at the year end was GBP7,000 (2010 - GBP8,000).
An incentive fee of 20 per cent. is payable to the Manager (i)
the amount by which the aggregate returns of capital per Ordinary
share of the Company paid on or before 31 December 2012 exceed 35
pence multiplied by the number of Ordinary shares in issue at the
time of the relevant return of capital; and (ii) the amount by
which the repurchase price of an Ordinary share under the Buy Back
Programme exceeds the targeted return, being 35 pence less any
returns of capital paid in respect of the Capital Return Scheme up
to a maximum of 35 pence, multiplied by the number of Ordinary
shares bought back on the relevant occasion.
On 5 November 2007, the European Court of Justice
ruled that management fees on investment trusts should
be exempt from VAT.
The VAT charged on the investment management fees
has been refunded in stages. An amount of GBP271,000
relating to the period 1 January 2004 to 31 August
2007 was recognised in the financial statements for
the year ended 31 May 2009 and an amount of GBP288,000
relating to the period 1 January 2001 to 31 December
2003 was recognised in the financial statements for
the year ended 31 May 2010. Further amounts of GBP386,000
representing all VAT charged on investment management
fees for the period 1 January 1990 to 4 December
1996 and GBP98,000 for the period 1 January 2001
to 31 December 2003 have been received and reflected
in the current year's financial statements. The refunds
have been allocated to revenue and capital in line
with the accounting policy of the Company for the
periods in which the VAT was charged.
The Company has not been charged VAT on its investment
management fees from 1 September 2007.
2011 2010
Revenue Capital Total Revenue Capital Total
5. Other expenses GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' fees 41 - 41 41 - 41
Auditor's
remuneration:
- audit
(including
GBP14,000 (2010
GBP14,000)
relating to the
parent
undertaking) 25 - 25 25 - 25
- tax compliance 8 - 8 6 - 6
- tax advisory 8 - 8 - - -
Other 121 - 121 219 97 316
_______ _______ ______ _______ _______ ______
203 - 203 291 97 388
_______ _______ ______ _______ _______ ______
During the year ended 31 May 2010 other expenses allocated to
revenue included a write off of GBP75,000 in respect of income
previously recognised, which was not anticipated to be recovered.
In addition, other expenses allocated to capital in the year ended
31 May 2010 include a write-off of GBP12,000 in respect of a debtor
previously recognised, which was not anticipated to be recovered
and an adjustment of GBP85,000 in respect of the discharge of a
guarantee provided to a former investment.
The emoluments of the Chairman, who was also the highest paid
Director, were GBP21,000 (2010 - GBP21,000). No pension
contributions were made in respect of any of the Directors. The
Company does not have any employees.
2011 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6. Finance
costs
attributable
to ZDP
shares - 342 342 - 526 526
_______ _______ ______ _______ _______ ______
- 342 342 - 526 526
_______ _______ ______ _______ _______ ______
2011 2010
Revenue Capital Total Revenue Capital Total
7. Tax on ordinary
activities GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
a) Analysis
of charge
for the
year
UK
corporation
tax on
profits for
the period 87 - 87 78 - 78
_______ _______ ______ _______ _______ ______
Corporation
tax charge 87 - 87 78 - 78
_______ _______ ______ _______ _______ ______
2011 2010
b) Factors affecting tax charge for the
year GBP'000 GBP'000
Loss on ordinary activities before tax (416) (560)
_______ _______
Loss on ordinary activities multiplied
by the standard rate of corporation tax
in the UK of 27.67% (2010 - 28%) (115) (157)
Effects of:
Franked investment income (10) (20)
Non-taxable gains and losses on investments 277 64
Excess management expenses utilised (112) -
Other non-taxable income and expenses 50 195
Prior year adjustment (3) (4)
_______ _______
Current tax charge for the period (note
7(a)) 87 78
_______ _______
Provision for deferred taxation
No provision for deferred taxation has been made due to the fact
that the Group has approximately GBP4,239,000 (2010 - GBP4,659,000)
of excess management expenses. This is because the Group is not
expected to generate taxable income in the future in excess of the
deductible expenses of that future period, and, accordingly, it is
unlikely that the Group will be able to reduce future tax
liabilities through the use of existing surplus expenses.
A company qualifying as an investment trust company under
Sections 1158-1159 of the Corporation Tax Act 2010 is exempt from
taxation on capital gains. In the opinion of the Directors, the
Company has conducted and intends to continue to conduct its
affairs so as to enable it to retain investment trust approval.
Given the Company's status as an investment trust no provision has
been made for the deferred tax on any capital gains and losses
arising on the revaluation and disposal of investments.
2011 2010
8. Dividends and other appropriations
to shareholders GBP'000 GBP'000
Ordinary dividends on equity shares deducted
from reserves are analysed below:
Fourth interim dividend 2009 of 0.25p - 89
Final dividend 2010 of 0.50p 179 -
_______ _______
179 89
_______ _______
No final dividend will be proposed for the year ended 31 May
2011 as Section 832(3)(a) of the Companies Act 2006 prevents an
investment company from paying a dividend when its assets are less
than 1.5 times its liabilities.
9. Return per Ordinary share
The earnings per Ordinary share is based on the net loss after
taxation of GBP503,000 (2010 - GBP638,000) and on 35,719,225 (31
May 2010 - 35,719,225) Ordinary shares, being the weighted average
number of Ordinary shares in issue during the year.
The return per Ordinary share detailed above can be further
analysed between revenue and capital as follows:
2011 2010
Revenue Capital Total Revenue Capital Total
Net
profit/(loss)
GBP'000 496 (999) (503) 89 (727) (638)
Return per
Ordinary
share
(pence) 1.39 (2.80) (1.41) 0.25 (2.04) (1.79)
10. Investments held at fair value through
profit and loss
a) Group 31 May 31 May
2011 2010
Unlisted Total Unlisted Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 8,795 8,795 11,559 11,559
Opening unrealised
depreciation (1,205) (1,205) (910) (910)
_______ _______ _______ _______
Opening valuation 7,590 7,590 10,649 10,649
Movements in the year:
Purchases at cost 244 244 49 49
Sales - proceeds (729) (729) (2,878) (2,878)
- realised gains on
sales 242 242 65 65
Increase in unrealised
depreciation (1,243) (1,243) (295) (295)
_______ _______ _______ _______
Closing valuation 6,104 6,104 7,590 7,590
_______ _______ _______ _______
Closing book cost 8,552 8,552 8,795 8,795
Closing unrealised
depreciation (2,448) (2,448) (1,205) (1,205)
_______ _______ _______ _______
6,104 6,104 7,590 7,590
_______ _______ _______ _______
Losses on held at fair
value investments
Realised gains on sales
of investments 242 242 65 65
Increase in unrealised
depreciation (1,243) (1,243) (295) (295)
_______ _______ _______ _______
(1,001) (1,001) (230) (230)
_______ _______ _______ _______
b) Company Subsidiary Subsidiary
Unlisted Undertaking Total Unlisted Undertaking Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book
cost 6,595 233 6,828 9,113 233 9,346
Opening unrealised
(depreciation)/
appreciation (1,205) (225) (1,430) (914) 48 (866)
_______ _______ _______ ______ _______ _______
Opening valuation 5,390 8 5,398 8,199 281 8,480
Movements in
the year:
Purchases at
cost - - - 49 - 49
Sales - proceeds (615) - (615) (2,868) - (2,868)
- realised gains on sales
129 - 129 301 - 301
Increase in
unrealised
depreciation (750) (8) (758) (291) (273) (564)
_______ _______ _______ ______ _______ _______
Closing valuation 4,154 - 4,154 5,390 8 5,398
_______ _______ _______ ______ _______ _______
Subsidiary Subsidiary
Unlisted Undertaking Total Unlisted Undertaking Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Closing book
cost 6,109 233 6,342 6,595 233 6,828
Closing unrealised
depreciation (1,955) (233) (2,188) (1,205) (225) (1,430)
_______ _______ _______ _______ _______ _______
4,154 - 4,154 5,390 8 5,398
_______ _______ _______ _______ _______ _______
Subsidiary Subsidiary
Unlisted Undertaking Total Unlisted Undertaking Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on
held at fair
value
investments
Realised
gains on
sales of
investments 129 - 129 301 - 301
Increase in
unrealised
depreciation (750) (8) (758) (291) (273) (564)
_______ _______ _______ _______ _______ _______
(621) (8) (629) 10 (273) (263)
_______ _______ _______ _______ _______ _______
c) Transaction costs Year ended 31 Year ended 31
May 2011 May 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Sales - - - -
Purchases - - - -
_________ _________ _________ _________
- - - -
_________ _________ _________ _________
d) Subsidiaries
The details of the Group's subsidiaries are as follows:
Percentage
of ordinary
Country
Subsidiary of Principal shares held
Name incorporation activity by the Group
Investment
ADC (Glasgow) Limited Scotland company 100%(A)
ADC Fund Limited Investment
Partnership Scotland company 100%
Investment
ADC Zeros 2010 PLC Scotland company 100%
Investment
ADC Zeros 2012 PLC Scotland company 100%
()
(A) held indirectly through ADC Fund Limited Partnership
11. Significant holdings
Information about investments required by Section 409 of the
Companies Act 2006, all of which are incorporated and operate in
England and Scotland.
a) As at 31 May 2011, Aberdeen Development Capital PLC held in
excess of 20% in any class of the following investee companies
share capital (capital and reserves and profit/(loss) figures
derived from investee companies' latest audited financial
statements):
Class Capital Post
of % of % of & tax
Class Equity
share held held reserves Profit/(loss)
Name GBP'000 GBP'000
'B'
Ords 63
Prefs 63
Cash Bases Limited SLS 63 19 2,524 705
'A'
Ords 2
Enpure Holdings Limited SLS 45 2 4,648 (40)
Fispak Limited SLS 100 - n/a n/a
IFC Holdings Limited Ord 21 21 4,898 546
Pilgrim Systems Limited CCPPO 100 20 1,567 443
PLM Dollar Group
Limited SLS 56 - 4,308 505
THL Midlands Limited B Ords 19 14 (954) (561)
Prefs 19
SLS 26
b) Other interests of 10% or more of any class of the following
investee company's share capital:
Class
of % of
class
Name share held
Ortak Jewellery Limited 'A' Ords 12
PSCA International Limited SLS 12
Unique Communications Limited 'B' Ords 13
'A' Prefs 13
'B' Prefs 13
Prefs 13
SLS 13
SLS Secured Loan Stock
CCPPO Cumulative Convertible Participating
Preferred Ordinary
Group Company Group Company
2011 2011 2010 2010
12. Loans and receivables GBP'000 GBP'000 GBP'000 GBP'000
Prepayments and accrued
income 6 6 13 13
Tax recoverable 21 4 18 4
Amounts due from
subsidiary
undertakings - 6296 - 6,570
_________ _________ ________ _________
27 6,306 31 6,587
_________ _________ ________ _________
Included within amounts due from subsidiary undertakings is an
impairment of GBP274,000 relating to the carrying value of the
investment held in ADC Fund Limited Partnership. The impairment
recognised represents the difference between the carrying amount of
this receivable and the value of net assets held with ADC Fund
Limited Partnership.
Group Company Group Company
2011 2011 2010 2010
13. Current liabilities GBP'000 GBP'000 GBP'000 GBP'000
Amounts due from
subsidiary
undertakings - 8,387 - 3,951
Other creditors 65 58 80 72
Tax creditor 103 - 88 -
Zero dividend preference
shares 4,436 - - -
_________ _________ ________ _________
4,604 8,445 168 4,023
_________ _________ ________ _________
Zero dividend preference shares
The ZDP shares of ADC Zeros 2010 PLC and ADC Zeros 2012 PLC were
issued on 30 June 2005 at 100 pence per share and are due to redeem
on 30 April 2012 at 31.36 pence each, following five returns of
capital totalling 98.6 pence per share; an effective rate of 6.5%
per annum. In April 2010, shareholders approved a proposal to
postpone the scheduled redemption date of the 2010 ZDP shares until
30 April 2012 to coincide with the redemption of the 2012 ZDP
shares. On 11 March 2011 a return of 10 pence per share was made to
ZDP shareholders of both ADC Zeros 2010 PLC and ADC Zeros 2012 PLC.
There were 7,491,110 Zero dividend preference shares in issue at 31
May 2011 for each of ADC Zeros 2010 PLC and ADC Zeros 2012 PLC
(2010 - 7,491,110). The entitlement due in respect of the ZDP
shares at the year end was GBP4,436,000 (2010 - GBP5,592,000).
Amount due
Number of ZDP to ZDP shareholders
shares (GBP'000)
2011 2010 2011 2010
At 31 May 2010 14,982,220 14,982,220 5,592 4,226
Return of capital
to ZDP shares - - (1,498) (3,386)
ZDP shares finance
cost - - 342 526
Transfer from current
liabilities - - - 4,226
_________ _________ ________ ________
At 31 May 2011 14,982,220 14,982,220 4,436 5,592
_________ _________ ________ ________
14. Called-up share capital 2011 2010
Issued Issued
and and
fully Fully
Authorised paid Authorised paid
GBP'000 GBP'000 GBP'000 GBP'000
Ordinary shares of 1p 825 357 825 357
Voting rights
In accordance with the Articles of Association of the Company,
on a show of hands, every member (or duly appointed proxy) present
at a general meeting of the Company has one vote; and, on a poll,
every member present in person or by proxy shall have on vote for
every GBP4 nominal amount of Ordinary shares held.
Capital Realised Unrealised
Share Special redemption capital capital Revenue
15. Share capital
and reserves capital reserve reserve reserve reserve reserve
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 May
2010 357 17,395 12 (13,926) (1,205) 153
Net gain on
realisation
of
investments - - - 242 - -
Increase in
unrealised
depreciation - - - - (1,243) -
ZDP finance
costs - - - (342) - -
Costs charged
to capital - - - (40) - -
VAT recovered - - - 254 - -
Dividends
paid - - - 130 - (179)
Retained
earnings - - - - - 496
_______ ______ _______ _______ _______ _____
At 31 May 2011 357 17,395 12 (13,682) (2,448) 470
_______ ______ _______ _______ _______ _____
Capital Realised Unrealised
Share Special Redemption Capital Capital Revenue
Capital Reserve Reserve Reserve Reserve Reserve
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 May
2010 357 17,395 12 (14,020) (1,430) 600
Net gain on
realisation
of
investments - - - 129 - -
Increase in
unrealised
depreciation - - - - (1,032) -
ZDP finance
costs - - - (342) - -
Costs charged
to capital - - - (18) - -
VAT recovered - - - 254 - -
Dividends
paid - - - - - (179)
Retained
earnings - - - - - 581
_______ ______ _______ _______ _______ _____
At 31 May
2011 357 17,395 12 (13,997) (2,462) 1,002
_______ ______ _______ _______ _______ _____
Company revenue reserve
As permitted by Section 408 of the Companies Act 2006, the
Company has not presented its own Statement of Comprehensive
Income. The amount of Company revenue before appropriation dealt
with in the accounts of the Group is GBP581,000 (2010 -
GBP219,000).
16. Net asset value per share
The net asset value per Ordinary share is based on a net asset
value of GBP2,104,000 (2010 - GBP2,786,000) and on 35,719,225 (2010
- 35,719,225) Ordinary shares, being the number of Ordinary shares
in issue at the year end.
17. Contingent assets and guarantees
There are a number of deferred considerations from previous
sales transactions where the amount and timing of receipt remain
uncertain and the Group has no account of any such receipt in the
financial statements.
On November 2010 the Company entered into a guarantee with
London South Eastern Railways ("LSER") on behalf of portfolio
company, THL Midlands to ensure they can fulfil any liabilities
falling under the terms of a contract with LSER to supply certain
products and services. The maximum exposure to the Company of the
guarantee is GBP66,000 and has a termination date of 30 June
2012.
18. Related party disclosure
The transactions with Aberdeen Asset Managers Limited and the
year end balances disclosed in note 4 of the financial
statements.
19. Financial instruments
The Group's financial instruments comprise securities and other
investments, cash balances and debtors and creditors that arise
directly from its operations; for example, in respect of sales and
purchases awaiting settlement, and debtors for accrued income. The
Company may not enter into derivative transactions in the form of
forward foreign currency contracts, futures and options without the
written permission of Directors. No derivative transactions were
entered into during the period.
The main risks arising from the Group's financial instruments
are (i) market price risk, being the risk that the value of
investment holdings will fluctuate as a result of changes in market
prices caused by factors other than interest rate or currency
movement; (ii) interest rate risk; and (iii) liquidity risk. In
line with the Company's investment objective, the portfolio
comprises UK securities and, therefore, has no exposure to foreign
currency risk.
The Manager's policies for managing these risks are summarised
below and have been applied throughout the year. The numerical
disclosures below exclude short-term debtors and creditors, which
are included in the Balance Sheet at fair value.
(i) Market price risk
The Company's investment portfolio is exposed to market price
fluctuations, which are monitored by the Manager in pursuance of
the investment objective. Adherence to investment guidelines and to
investment and borrowing powers set out in the management agreement
mitigates the risk of excessive exposure to any particular type of
security or issuer. Further information on the investment portfolio
(including sector concentration and deal type analysis) is set out
in the Manager's Report and the Largest Investments table.
(ii) Interest rate risk
The interest rate risk profile of financial assets at the
Balance Sheet date was as follows:
Floating Non-interest
Fixed interest rate bearing
31 May 2011 GBP'000 GBP'000 GBP'000
Sterling
Unlisted 2,365 - 3,739
Cash - 577 -
__________ __________ __________
2,365 577 3,739
__________ __________ __________
Floating Non-interest
Fixed interest rate bearing
31 May 2010 GBP'000 GBP'000 GBP'000
Sterling
Unlisted 2,055 200 5,335
Cash - 925 -
__________ __________ __________
2,055 1,125 5,335
__________ __________ __________
The unlisted fixed interest assets have a weighted average life
of 3.47 years (2010 - 1.53 years) and a weighted average interest
rate of 5.93% (2010 - 7.38%). The floating rate interest assets are
linked to base rates set by the Bank of England.
It is the Directors' opinion that the carrying amounts of these
financial assets represent the maximum credit exposure at the
Balance Sheet date
Maturity profile
The maturity rate profile of the Company's financial assets at
the Balance Sheet date was as follows:
More
Within Within Within Within Within than
1-2 2-3 3-4 4-5
1 year years years years year 5 years Total
At 31 May
2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed
interest
Unlisted 1,515 150 - - 700 - 2,365
_______ _______ _______ _______ _______ _______ _______
1,515 150 - - 700 - 2,365
_______ _______ _______ _______ _______ _______ _______
More
Within Within Within Within Within than
1-2 2-3 3-4 4-5
1 year years years years year 5 years Total
At 31 May
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed
interest
Unlisted 100 1,677 278 - - - 2,055
_______ _______ _______ _______ _______ _______ _______
100 1,677 278 - - - 2,055
_______ _______ _______ _______ _______ _______ _______
(iii) Liquidity risk
Due to their nature, unlisted investments may not be readily
realisable; cash is held to mitigate this liquidity risk.
Credit risk and interest rate risk is minimised by acquiring
high quality treasury stocks or other bonds which have a relatively
short time to maturity, when sufficient funds are available.
The Company, generally, does not hold significant cash balances
as this is returned to shareholders via either the capital
repayment scheme or share buyback programme. Any cash held is with
reputable banks with high external credit ratings.
(iv) Price risk sensitivity
As the Company's does not hold any listed investments, the Board
does not believe the Company is at risk of possible changes in
market prices.
20. Fair value hierarchy
The Company adopted the amendments to IFRS 7
'Financial Instruments: Disclosures' effective
from 1 January 2009. These amendments require
an entity to classify fair value measurements
using a fair value hierarchy that reflects the
significance of the inputs used in making measurements.
The fair value hierarchy shall have the following
levels:
- Level 1: quoted prices (unadjusted) in
active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices
included within Level 1 that are observable
for the assets or liability, either directly
(ie as prices) or indirectly (ie derived
from prices); and
- Level 3: inputs for the asset or liability
that are not based on observable market data
(unobservable inputs).
The following table summarises by level within
the fair value hierarchy the Group's financial
assets and liabilities at fair value:
Level Level Level
1 2 3 Total
As at 31 May 2011 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- -------- --------
Financial assets at fair value
through profit or loss - - 6,104 6,104
-------------------------------- --------- --------- -------- --------
Level Level Level
1 2 3 Total
As at 31 May 2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- -------- --------
Financial assets at fair value
through profit or loss - - 7,590 7,590
-------------------------------- --------- --------- -------- --------
21. Subsequent events
Subsequent to the year end over GBP1 million was received from
investee company Cash Bases Limited relating to the redemption of
loan stock. The proceeds will be used to fund further returns of
capital.
Additional notes for Annual Financial Report:
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended 31 May
2011 have been agreed with the auditors and are an abridged version
of the Company's full accounts, which have been approved and
audited with an unqualified report. The 2010 and 2011 statutory
accounts received unqualified reports from the Company's auditors
and did not include any reference to matters to which the auditors
drew attention by way of emphasis without qualifying the reports,
and did not contain a statement under Section 498(2) or 498(3) of
the Companies Act 2006. The financial information for 2010 is
derived from the statutory accounts for 2010 which have been
delivered to the Registrar of Companies. The 2011 accounts will be
filed with the Registrar of Companies in due course.
The Annual General Meeting of the Company will be held at 12.30
pm on 26 October 2011 at 10 Queen's Terrace, Aberdeen AB10 1YG.
The Annual Report and Accounts will be posted to shareholders at
the end of August 2011 and copies will be available from the
registered office of the investment manager or from the Company's
website www.developmentcap.co.uk
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise. Investors may not get back the
amount they originally invested.
For Aberdeen Development Capital PLC
Aberdeen Asset Management PLC, Secretaries
29 July 2011
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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