(AVC) Aberdeen Development Captl

ABERDEEN DEVELOPMENT CAPITAL PLC

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 NOVEMBER 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 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 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 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

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

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Cash Flow Statement

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:-

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

6.          Dividends

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.

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

Aberdeen Development Capital PLC (the "Company")

Director's other publicly quoted directorships

As required by Listing Rule 9.6.14, the Company advises the following change to the information disclosed in respect of Mr Martin Gilbert, a non-executive director of the Company:

Directorships held in publicly quoted companies pursuant to Listing Rule 9.6.13(1)

Current Directorships:

Mr Gilbert was appointed a non-executive Director of The India Fund, Inc and The Asia Tigers Fund, Inc on 11 January 2012.