Aberdeen Dev Cap PLC - Half Yearly Report

ABERDEEN DEVELOPMENT CAPITAL PLC

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 NOVEMBER (Stuttgart: A0Z24E - news) 2011

Interim Board Report

The investment objective of Aberdeen Development Capital PLC is to conduct an orderly realisation of the assets of the Company, to be effected in a manner which maximises value for Ordinary Shareholders.

The following is the unaudited Interim Board Report for the six months ended 30 November 2011.

Background

Set (KOSDAQ: 027040.KQ - news) against the continuing unfavourable environment for the realisation of minority interests in smaller unlisted companies, the six months to 30 November 2011 and in particular in the period after this date has seen your Company's investment manager continue to make headway with the process of liquidating the portfolio in an orderly fashion.

Performance

The net asset value per Ordinary share ("NAV") has fallen from 5.9p to 5.4p. The fall in NAV is attributable to a combination of factors; firstly the continuing accretion of entitlement to Zero Dividend Preference ("ZDP") shareholders within the Zero subsidiary companies; and secondly costs associated with the early liquidation of the aforementioned companies and an accrual in respect of expected liquidation costs for the remaining group companies.

Winding up of Zero Subsidiaries

In August 2011 proposals were announced to put subsidiaries, ADC Zeros 2010 PLC and ADC Zeros 2012 PLC into early voluntary liquidation to facilitate further returns to ZDP shareholders of these companies. The proposals did not involve any change to the capital entitlements of ZDP shareholders which continue to accrue at the same rate up the previous planned winding up date of 30 April 2012. Following shareholder approval the Zero subsidiaries were placed into voluntary liquidation on 16 September 2011 and on 23 September 2011 a payment of 8p per share was made to ZDP shareholders leaving a final entitlement due on 30 April 2012 of approximately 23.05p per share at 30 November 2011.

I am pleased to report that it is the Liquidator's intention to make a second distribution at a rate of 12p per ZDP share, which will be paid on or around 3 February 2012 to ZDP shareholders. This will leave a final entitlement due to ZDP shareholders on 30 April 2012 of approximately 10.87p per share.

Portfolio Activity

In accordance with the investment objective, no new investments have been made during the period and there have been no calls for follow-on investment. There have been a number of full and partial exits during the period to report, and two others subsequent to the balance sheet date.

During the period, partial exits have been made from two investments; Cash Bases and IFC Holdings. In the case of Cash Bases the business repaid institutional loan stock and preference shares of £1.1 million and under a share redemption agreement IFC Holdings made the second of four annual repayments of £300,000. A further two full exits were achieved during the period; firstly the exit from Nevis Range Developments, a legacy holding acquired for nil cost a number of years ago and sold for £8,000 and secondly the disposal of THL Midlands realising cash proceeds of £159,000 with the potential for a further £66,000 of deferred proceeds in June 2012 upon the expiry of a previously awarded guarantee.

The most significant disposal came after the period end, with the sale of the holding in Pilgrim Systems for £1.5 million and potentially up to a further £0.25 million of deferred proceeds payable should the company's sale to Thomson Reuters (Toronto: TRI.TO - news) be completed at a value above a pre-determined level. I can also report the sale of A Ordinary shares in Tennants Consolidated in January for £50,000 which represented the previous carrying value. Attempts to exit the larger holding of Ordinary shares will of course continue to be pursued.

Where the Board feels that illiquidity concerns have become a limiting factor in achieving an optimum exit for certain holdings, the carrying value has been reduced to levels which we feel may stimulate some interest. Accordingly, write-downs have been applied against the carrying values of investments in Tennants Consolidated and Whiteness Property Company. This policy has been followed for many of the "tail-end" of the portfolio holdings and we remain hopeful of achieving an uplift on these investments when disposal actually occurs.

Outlook

The majority of the remaining portfolio investments are illiquid in nature, and will continue to prove challenging to realise, particularly at levels which will return full value to shareholders. Given this and also bearing in mind there are legal agreements in place for two holdings, IFC Holdings and PLM Dollar Group, to mature in 2013 and 2015 respectively, it is likely that investments will not be realised in full before the target date for ZDP repayment unless agreements can be made with those companies. Accordingly, the Board has begun planning for the voluntary liquidation of the Company and its two other subsidiaries, ADC (Glasgow) Limited and ADC Fund Limited Partnership, on or shortly after the target ZDP repayment date of 30 April 2012. It is expected that the Manager will assist the Liquidator with the realisation of remaining investments, at no additional cost to the Company.

Principal Risks and Uncertainties and Related Party Transactions

Investment and Market Risks: Investments in smaller unlisted companies carry substantially greater risk, in terms of price and liquidity, than investments in larger companies or companies listed on the Official List.

Shares: The market value of the Ordinary shares, as well as being affected by the net asset value, also takes into account their supply and demand. The market value of an Ordinary share can fluctuate and may not always reflect its underlying net asset value. There can be no guarantee that appreciation in the value of the Company's investments will occur and investors may not get back the full value of their original investment.

Investment Objective: There is no guarantee that the investment policy adopted by the Company will provide the returns sought by the Company.

Gearing: The Company currently utilises gearing in the form of ZDP shares through its arrangement with ADC Zeros 2010 PLC (in Members Voluntary Liquidation) and ADC Zeros 2012 PLC (in Members Voluntary Liquidation). Gearing has the effect of exacerbating market falls and market gains.

Dividends: The ability of the Company to pay dividends in respect of the Ordinary shares and any future dividend growth depends on the level of income received from its investments. Given that the majority of the Company's income producing assets have been realised and bearing in mind winding up costs, it is unlikely that any dividends will now be made before the planned winding up date on or shortly after 30 April 2012.

Discount: In view of the Company's obligations with regard to ZDP repayment, the Company is unable to buy back shares to manage the discount on the Ordinary shares.

Return of Capital: The 2010 ZDP shares and 2012 ZDP shares are due for redemption on 30 April 2012. There is no guarantee that the final capital entitlement of the 2010 ZDP shares and 2012 ZDP shares will be paid in full (10.87p per share) on 30 April 2012. The Ordinary shares will cease to have any value and no capital will be returned to Ordinary shareholders if the Company has insufficient assets to repay the aggregate capital entitlement of the ZDP shares.

Taxation Controls: Any change in the Company's tax status or in taxation legislation (including the tax treatment of dividends or other investment income received by the Company) could affect the value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.

Related Party Transactions: The related party transactions during the period are disclosed in the notes to the accounts. There have been no related party transactions that have had a material effect on the financial position of the Company during the period.

Responsibility Statement

The Directors are responsible for preparing the half-yearly financial report in accordance with applicable law and regulations. The Directors confirm to the best of their knowledge:

a) the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports';

b) the Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR (SNP: ^DTRY - news) 4.2.7R of the UK Listing Authority Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period and any changes in the related party transactions described in the last annual report that could so do).

The half-yearly report for the six months to 30 November 2011 comprises the Interim Board Report and a condensed set of financial statements, and has not been audited or reviewed by the external auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial information.

For and on behalf of the Board of Aberdeen Development Capital PLC

John Milligan

Chairman

27 January 2012

Condensed Consolidated Statement of Comprehensive Income

	Six (SNP: ^SIXY - news) months ended			Six months ended			Year ended
	30 November 2011 (unaudited)			30 November 2010 (unaudited)			31 May 2011 (audited)
	Revenue	Capital	Total (Other OTC: TTFNF.PK - news)	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Interest income	91	-	91	61	130	191	535	130	665
Investment income	38	-	38	18	-	18	37	-	37
Other income	-	-	-	4	-	4	4	-	4
	129	-	129	83	130	213	576	130	706
Gains/(losses) on held at fair value investments	-	127	127	-	(397)	(397)	-	(1,001)	(1,001)
Expenses
Management fees	(10)	(20)	(30)	(10)	(20)	(30)	(20)	(40)	(60)
Other operating expenses	(261)	-	(261)	(99)	-	(99)	(203)	-	(203)
VAT recovered on investment management fees	-	-	-	230	254	484	230	254	484
(Loss)/profit before finance costs and taxation	(142)	107	(35)	204	(33)	171	583	(657)	(74)
Finance costs
Zero dividend preference shares	-	(128)	(128)	-	(179)	(179)	-	(342)	(342)
(Loss)/profit before Taxation	(142)	(21)	(163)	204	(212)	(8)	583	(999)	(416)
Taxation	(4)	-	(4)	(5)	-	(5)	(87)	-	(87)
(Loss)/profit after taxation	(146)	(21)	(167)	199	(212)	(13)	496	(999)	(503)
Return per Ordinary share (pence)	(0.41)	(0.06)	(0.47)	0.56	(0.59)	(0.03)	1.39	(2.80)	(1.41)

The Group does not have any income or expense that is not included in (loss)/profit for the period, and therefore the "(Loss)/profit for the period" is also the "Total comprehensive income for the period" as defined in IAS 1 (revised).

All of the (loss)/profit 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.

Condensed Consolidated Balance Sheet

	At 30 November 2011 (unaudited)	At 30 November 2010 (unaudited)	At 31 May 2011 (audited)
	£'000	£'000	£'000
Non-current assets
Held at fair value investments	4,601	6,761	6,104
Current assets
Cash and cash equivalents	908	1,728	577
Other receivables	38	31	27
	946	1,759	604
Current liabilities
Financial liabilities measured at amortised cost	(245)	(156)	(168)
Zero dividend preference shares	(3,365)	-	(4,436)
Total current liabilities	(3,610)	(156)	(4,604)
Net (Frankfurt: A0Z22E - news) current (liabilities)/assets	(2,664)	1,603	(4,000)
Total assets less current liabilities	1,937	8,364	2,104
Non-current liabilities
Zero dividend preference shares	-	(5,770)	-
Total net assets	1,937	2,594	2,104
Equity
Share capital	357	357	357
Special reserve	17,395	17,395	17,395
Capital redemption reserve	12	12	12
Capital reserve - realised	(14,631)	(13,531)	(13,682)
Capital reserve - unrealised	(1,520)	(1,812)	(2,448)
Revenue reserve	324	173	470
Equity shareholders' funds	1,937	2,594	2,104
Net asset value per Ordinary share (pence)	5.42	7.26	5.89

Condensed Consolidated Statement of Changes in Equity

			Capital	Capital	Capital
For the six months ended	Share	Special	Redemption	Reserve	Reserve	Revenue
30 November 2011	Capital	Reserve	Reserve	Realised	Unrealised	Reserve	Total
(unaudited) Net assets at 31 May 2011	£'000 357	£'000 17,395	£'000 12	£'000 (13,682)	£'000 (2,448)	£'000 470	£'000 2,104
Net (loss)/gain on ordinary activities after taxation	-	-	-	(949)	928	(146)	(167)
Net assets at 30 November 2011	357	17,395	12	(14,631)	(1,520)	324	1,937
			Capital	Capital	Capital
For the six months ended	Share	Special	Redemption	Reserve	Reserve	Revenue
30 November 2010	Capital	Reserve	Reserve	Realised	Unrealised	Reserve	Total
(unaudited) Net assets at 31 May 2010	£'000 357	£'000 17,395	£'000 12	£'000 (13,926)	£'000 (1,205)	£'000 153	£'000 2,786
Dividends paid and declared (note 6)	-	-	-	-	-	(179)	(179)
Net gain/(loss) on ordinary activities after taxation	-	-	-	395	(607)	199	(13)
Net assets at 30 November 2010	357	17,395	12	(13,531)	(1,812)	173	2,594

			Capital	Capital	Capital
	Share	Special	Redemption	Reserve	Reserve	Revenue
For the year ended	Capital	Reserve	Reserve	Realised	Unrealised	Reserve	Total
31 May 2011 (audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Net assets at 31 May 2010	357	17,395	12	(13,926)	(1,205)	153	2,786
Dividends paid and declared (note 6)	-	-	-	-	-	(179)	(179)
Net gain/(loss) 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

Condensed Consolidated Cash Flow Statement

	Six months ended	Six months ended	Year ended
	30 November 2011	30 November 2010	31 May 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Operating activities
Loss before tax	(163)	(8)	(416)
Zero dividend preference shares finance cost	128	179	342
(Gains)/losses on investments held at fair value through profit and loss	(127)	397	1,001
Purchases of investments held at fair value through profit and loss	-	(130)	(244)
Sales of investments held at fair value through profit and loss	1,631	562	729
(Increase)/decrease in other receivables	(11)	-	4
Increase/(decrease) in other payables	72	(18)	(15)
Net cash inflow from operating activities before
interest and tax	1,530	982	1,401
Tax paid	-	-	(72)
Net cash inflow from operating activities	1,530	982	1,329
Financing activities
Dividends paid on Ordinary shares	-	(179)	(179)
Return of capital to Zero dividend preference shareholders	(1,199)	-	(1,498)
Net cash outflow from financing activities	(1,199)	(179)	(1,677)
Net increase/(decrease) in cash and cash equivalents	331	803	(348)
Cash and cash equivalents at start of period	577	925	925
Cash and cash equivalents at end of period	908	1,728	577

Notes to the Financial Statements

1.

Accounting policies

(a) Basis of accounting

The financial statements have been prepared in accordance with International Accounting Standard ('IAS') 34 - 'Interim Financial Reporting' as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC).

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 half-yearly financial statements have also been prepared using the same accounting policies applied for the year ended 31 May 2011 financial statements, which were prepared in accordance with International Financial Reporting Standards and which received an unqualified audit report.

(b) Dividends payable

Dividends are recognised on the date on which they are paid.

2.

Income

The breakdown of income was as follows:-

	30 November 2011	30 November 2010	31 May 2011
Income from investments	£'000	£'000	£'000
Franked investment income	38	18	37
UK unfranked investment income	84	59	254
	122	77	291
Other income
Deposit income	7	2	9
Interest on VAT recovered	-	-	402
Other income	-	4	4
Total income	129	83	706

3.

The taxation expense reflected in the Condensed Consolidated Statement of Comprehensive Income is based on management's best estimate of the weighted average annual corporation tax rate expected for the full financial year. The estimated annual tax rate used for the period to 31 May 2012 is 26%.

4.

Other operating expenses

During the period other operating expenses of £152,000 (30 November 2010 - £nil and 31 May 2011 - £nil) were allocated to revenue including expenses relating to the ongoing winding up of subsidiary companies ADC Zeros 2010 PLC and ADC Zeros 2012 PLC and a provision for the costs of the proposed winding up of the remaining group companies.

5.

Return and net asset value per Ordinary share

	30 November 2011	30 November 2010	31 May 2011
Net revenue attributable to Ordinary shareholders (£'000)	(146)	199	496
Net capital losses attributable to Ordinary shareholders (£'000)	(21)	(212)	(999)
Equity shareholders' funds (£'000)	1,937	2,594	2,104
The weighted number of Ordinary shares in issue at the end of the period on which the return was calculated, was:	35,719,225	35,719,225	35,719,225
The number of Ordinary shares in issue at the end of the period on which the net asset value was calculated, was:	35,719,225	35,719,225	35,719,225
Revenue return per Ordinary share (p)	(0.41)	0.56	1.39
Capital return per Ordinary share (p)	(0.06)	(0.59)	(2.80)
Total earnings per Ordinary share (p)	(0.47)	(0.03)	(1.41)
Net asset value per Ordinary share (p)	5.42	7.26	5.89

6.

Dividends

	Six months to	Six months to	Year ended
Ordinary dividends on equity shares deducted from reserves are analysed below:	30 November 2011 £'000	30 November 2010 £'000	31 May 2011 £'000
Final dividend for the year ended 31 May 2011 - nil (2010 - 0.50p)	-	179	179
	-	179	179

7.

Transaction costs

During the period transaction costs of £nil were incurred on purchases and sales of investments (30 November 2010 - £nil; 31 May 2011 - £nil).

8.

Contingencies, guarantees and deferred considerations

On 19 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 is £66,000 and has a termination date of 30 June 2012. During the period, the Company sold its holding in THL Midlands to management for the sum of £225,000; payable £159,000 on completion of the transaction and £66,000 payable on 30 June 2012 should the aforementioned guarantee not be called up.

There are a number of deferred considerations from previous sales transactions where the amount and timing of receipt remain uncertain and the Company has taken no account of any such receipt in the financial statements.

9.

Related party disclosure

Mr Gilbert is a director of Aberdeen Asset Managers Limited, ('AAM'), which acts as the Company's Investment Manager and is also a director of Aberdeen Asset Management PLC, the Secretary of the Company and the holding company of AAM.

The management fee is payable monthly in arrears based on a fixed annual amount of £60,000. During the period £30,000 (2010 - £30,000) of management fees were paid and payable, with a balance of £15,000 (2010 - £13,000) being payable to AAM at the period end.

The management fees are charged 33% to revenue and 67% to capital.

10.

The financial information in this Half-Yearly Financial Report comprises non-statutory accounts as defined in Sections 434-436 of the Companies Act 2006. The financial information for the six months ended 30 November 2011 and 30 November 2010 has not been audited.

The information for the year ended 31 May 2011 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

This report has not been reviewed or audited by the Company's auditor.

11.

This Half-Yearly Financial Report was approved by the Board on 27 January 2012.

The Half-Yearly Report will shortly be available from the Company's website (www.developmentcap.co.uk) and will be posted to shareholders in February 2012.

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, Secretary