Annual Financial Report Annou

RNS Number : 0761O

Midas Income & Growth Trust PLC

23 June 2010

 



MIDAS INCOME AND GROWTH TRUST PLC

AUDITED ANNUAL FINANCIAL REPORT

for the year ended 30 April 2010

1.      CHAIRMAN'S STATEMENT

Highlights

-        Recovery in value across the range of assets held

-        Net asset value total return of 30.7% (diluted)

-        Share price total return of 42.4%

-        Share price discount to net asset value narrowed to 4.6%

-        Quarterly dividends maintained at 1.63p totalling 6.52p

Financial markets have made significant progress over the year as investors have moved back into risk assets. Equities, corporate bonds and property assets have all benefited as confidence increased that economic recovery was under way. The remarkable stimulus measures announced by governments and central banks have certainly helped to underpin the financial sector and promote growth, although this process has effectively meant a huge transfer of debt from the corporate sector to the public sector.

I am pleased to report that the Company's fully diluted net asset value total return for the period (including dividends) was 30.7%, which compares with the benchmark return of 8%. The share price total return (with dividends reinvested) gave a total return of 42.4%. This compares favourably to the total return from the FTSE All Share Index of 36.7% over the period. The significant outperformance of the shares was helped by a closing of the discount to net asset value at which the shares traded over the course of the year from 11.9% to 4.6%. Your Board remains committed to supporting the level of discount at which the Company's shares trade and will be seeking a renewal of the share buyback facility at the Annual General Meeting in September 2010.

Gearing

The Company's short term rolling debt facility was successfully renegotiated for a further two year period in early August 2009 and the size of the facility was reduced to £7 million from £8 million. The drawn borrowings have remained at £7 million throughout the year, with gearing (pre cash) at the end of the period being 15% of net assets, having reduced during the year as the portfolio value increased. This level of gearing remains comfortably within the Board's stated maximum of 25% of net assets.

Exercise of Warrants

No warrants were exercised during the year with 1,934,411 remaining in issue. I would like to take this opportunity to remind warrantholders that the final date for their exercise is 31 August 2010. A further reminder together with details of the exercise process will be sent to holders prior to the final exercise date with the Annual Report.

Dividends

Three interim dividends of 1.63p were declared during the year, which together with the 4th interim dividend of 1.63p announced on 19 May 2010 (paid on 18 June 2010), give total dividends of 6.52p, the same level as paid last year. With the Company's investment portfolio continuing to recover from the cuts to income experienced in the market downturn it has been necessary to use part of the Company's revenue reserves to maintain dividend payments this year. Your Board remains fully aware of the importance of the quarterly payments to many of the Company's shareholders and will continue to closely monitor the revenue position.

VAT Statement

The Manager and former manager have refunded £437,000 to the Company for VAT charged on management fees for the periods from 1 January 2001 to 30 September 2007. The reclaims for previous periods and for interest on the whole amount are not expected to be material and, as these amounts remain uncertain, the Company has taken no account in the financial statements of any such sums.

Continuation Vote

The Company's Articles of Association require the Directors to liquidate the Company in April 2011 unless otherwise released from this obligation by the passing of an ordinary resolution at the Annual General Meeting in 2010. Your Board has reviewed the appointment of the Manager and believes that the on-going management of the Company's assets on the terms agreed is in the interests of shareholders as a whole. Accordingly, the Directors urge all shareholders to support Resolution 9 that the Company continues as an investment trust for a further five year period as they intend to do with their own holdings.

Annual General Meeting

This year's AGM will be held at Martins Building, Water Street, Liverpool at 12.30pm on 7 September 2010. I would again be delighted if shareholders were to take this opportunity to meet with Board members and investment managers over a post AGM buffet lunch.

Outlook

The new found investor confidence in economic recovery has been challenged towards the end of the period. Sovereign debt problems, particularly within Europe, policy tightening in China and growing political instability in Asia, have again increased market volatility and reminded investors that the path to a sustained economic recovery may yet be derailed. Whilst, on balance, economic progress still appears probable, it is likely to be tempered for many western developed economies due to austerity measures being implemented to reduce ballooning public deficits.

Hubert Reid

Chairman

22 June 2010

2.      MANAGER'S REVIEW

Performance

The strong rally in markets over the course of the year, together with a reduction of the liquidity driven stresses experienced by the closed ended investment market in 2008 and early 2009, have led to a significant improvement in value across the wide range of assets held within the Company's investment portfolio. As the year progressed a more defensive stance has been adopted with the recovery in equity and bond valuations and markets being used as an opportunity to rotate into assets still to benefit from the improving economic environment. Whilst the more defensive approach has reduced returns in the current financial year, we feel exposure to assets with less reliance on strong economic growth may be beneficial in the current year.

The Company's net asset value total return of 30.7% was generated from across the range of assets held. The share price total return was significantly more positive at 42.4% due to a narrowing of the discount from 11.9% to 4.6% over the period. This was particularly gratifying given the high level of support given to the Company's shares through buybacks, particularly in the previous financial year.

The revenue account has begun to recover from the stresses of 2008, but did not fully cover the Company's dividends this year. The revenue account position is likely to improve further in the current year and we remain hopeful that a fully covered position will be achieved over the next two years. It is important we feel that this position is achieved without sacrificing the potential for further capital returns.

Asset Allocation

The Company's exposure to equities, which had been increased in the first half of the period, was reduced over the latter part of the year. At the same time, investment in cyclical and industrial companies was reduced, as valuations moved to levels which appeared to be discounting stronger economic growth than we felt was likely to be achieved. UK equity holdings have moved more towards defensive sectors such as pharmaceuticals and utilities, whilst we have continued to favour international equity managers with a strong emphasis on quality companies. Over the full year equity exposure has risen by less than 1%.

Fixed interest exposure remained fairly stable over the year, although profits were taken on directly held investment grade corporate bonds. We have continued to support specialist managers able to invest in sub investment grade markets which still appeared to offer value following the narrowing in spreads seen in 2009. We have avoided any exposure to Gilts, where yields look unattractive given the high levels of issuance likely over the next 5 years.

Alternative asset holdings were increased, as we sought out areas of capital markets still to recover and where the stresses of the recession have created ongoing opportunities. In particular, investment in private equity and distressed credit markets were added to over the course of the year. Structured Product exposure fell following the successful maturity of a short dated product early in the period.

Property exposure has been maintained, whilst there has been evidence that net asset values have now begun to stabilise and, in some cases, recover. Closed-end positions across the portfolio have seen a recovery in the discounts at which they traded in late 2008, but in many cases we believe there may be more potential for performance from further normalisation of discounts.

The asset allocation across the portfolio at 30 April 2010 is shown in the table below.

Portfolio Weight		Core Allocation	Range
Asset Class	%	%	%
UK Equities	31.9	35	20-55
Overseas Equities	19.7	15	10-25
Total Equities	51.6	50	30-80
Fixed Interest (inc Cash)	22.8	25	15-45
Alternative Assets	17.7	15	10-25
Property	7.9	10	0-25

(All figures expressed as a percentage of the total investments plus cash)

UK Equities

Exposure to the UK equity market increased over the period, although this was very much a tale of two periods. Money invested in the first 3 months of the year was withdrawn again as the market rallied to what appeared to be fully valued levels in early 2010. Within the equity positions held, profits were taken on cyclical and industrial companies including BP, Billiton and Unilever, which were being chased by investors and a more defensive position was adopted by the addition of AstraZeneca and Scottish & Southern, which we felt had been left behind in the market's advance. Both companies we believe offer strong and dependable dividends and solid longer term value. Performance of the UK portfolio has lagged the market rise, but we believe a more cautious approach is still warranted.

Dividend growth was generally strong over the period and we are hopeful that further growth can be expected in the coming year.

Overseas Equities

Exposure to overseas equity markets reduced over the course of the period, as profits were taken in European and Japanese equity holdings. Some profit was also taken on Asian equities as the Aberdeen Asian Income Fund holding was reduced following strong performance and with the shares trading at a premium to net asset value. The Company's holding in the Schroder Oriental Income Fund performed extremely well, with a total return of 66% in the year.

The Blackrock Commodities Income Fund performed well over the period, with the shares moving to a premium to net asset value. The performance of some overseas positions has been affected by the hedging of currencies, with the fully hedged position in the US equity positions detracting from returns. The Company has considerable exposure to the US currency in other parts of the portfolio.

Fixed Interest

Investment in fixed interest markets was reduced over the period, with direct holdings in Next and Ladbroke Group bonds being sold, as yields fell to less attractive levels. Meanwhile advantage was taken of the changes to the Lloyds Banking Group capital structure with an investment being made in one of their preference shares, which was being converted to a new hybrid bond. This conversion led to an immediate uplift in value. The Company's holdings in City Merchants High Yield Trust and Royal London Sterling Extra Yield Bond Fund produced excellent contributions to returns over the period, with exposure to the latter being reduced as the shares traded at a healthy premium to net asset value. Less spectacular, although equally welcome, was the recovery in the M&G European Loans Fund, as that market returned to more normal trading conditions. A new holding in Invesco Leveraged High Yield Fund was introduced to the portfolio towards the end of the period, with the shares trading at a discount and offering a yield in excess of 9%.

Another new holding introduced to the portfolio was the Canyon Resources Participation Bond, which offers not only an attractive 10% yield but also direct exposure to the gold price, backed by the gold production of the parent company Atna Resources.

Alternative Assets

A further allocation was made to alternative assets over the period. Returns from this part of the portfolio made a very positive contribution to the overall outturn over the course of the year. A significant increase in exposure to private equity was made around the turn of the year, as we felt that valuations were not reflecting the improvements in both quoted markets and operating environments for underlying companies. An investment in Partners Group Global Opportunities Trust was made at a discount of over 40% to net asset value, and just prior to the company moving to an open-ended structure. We felt it prudent to continue to carry this holding at a 30% discount to net asset value as there are restrictions on dealings until spring of 2011. A further commitment in this area was made through an investment in Standard Life European Private Equity Trust, again on a discount of over 40%. We felt that the high quality portfolio of private equity partnerships was likely to begin to see increases in carried valuations. In both cases the holdings have already seen positive movements in asset values over the early part of 2010.

Hedge fund holdings within the portfolio have also been increased over the year, with particular emphasis on funds investing into the debt markets. The Company's position in Acencia Debt Strategies was increased (although some profit was taken later in the period following strong price performance), whilst a new position in Signet Global Fixed Income Strategies was introduced to the portfolio. These companies have performed well in 2009 and have made allocations to distressed credit managers and debt work out specialists which are both areas we feel should be capable of generating strong returns over the next three years. There also remains potential in both companies for a re-rating in their shares to nearer underlying net asset values.

Another new addition to the hedge fund holdings was through the Liontrust European Absolute Return Fund, which follows a long/short equity strategy based on Liontrust's cash-flow driven investment process. Whilst early returns from this fund have been disappointing we would expect better in 2010 as investors focus more on company fundamentals.

The portfolio benefited from a further uplift in the value of its position in the unquoted A J Bell Holdings, which produced excellent trading results in 2009. Third party transactions in the shares during August 2009 at 275p and then again at 400p in March 2010 were used as opportunities to reduce the Trust's position. However, A J Bell remains the largest holding in the portfolio and we are confident that further significant value will be gained from this investment.

Soft commodity exposure was reduced during the year with the sale of the holding in Ceres Agriculture Fund following a period of very disappointing performance. However, the position in Phaunos Timber Fund, which produced little return over the year despite a good performance from its underlying assets, has been retained as the company has made solid progress and reached a position where it is now fully invested in a portfolio of forestry related assets. With a commencement of dividends expected this year, we believe that the share prices do not currently reflect the prospects for the company.

Structured Products

The pricing of new structured products has become increasingly unattractive as the year progressed due to a combination of falling corporate bond yields and much reduced market volatility. For this reason no new investment was made into this area. The successful maturity of the Societe Generale 6.1% FTSE short strangle product has been the only significant event over the course of the year. There has, however, been a very encouraging recovery in the value of the Symphony structured product, which still offers potential for double digit future returns, even in a falling equity market environment. The sharply increased market volatility seen towards the end of the period has improved pricing and potential low risk opportunities are being actively reviewed once again.

Property

The portfolios' property holdings have given very mixed returns over the period. On the positive side the Company benefited from an agreed bid for Puma Brandenburg, the German residential property company, although this was still at a significant discount to net asset value. Even more encouraging has been the recovery in the value of Macau Property Opportunities, which was one of the portfolio's best performing assets over the period. The holding nearly doubled in value as a combination of asset value growth and discount narrowing produced a very satisfactory outturn. The Macau economy is experiencing high levels of growth and the company looks well positioned to benefit as its development projects are built out over the next 18 months. There has also been solid progress in the Threadneedle UK Property Unit Trust, although this has been tempered by the strong inflows of new money being experienced by the fund. Positive returns were also made by Carpathian and Dolphin Capital.

Less positive have been the problems encountered by the Japan Opportunities Fund holding, which failed in its efforts to refinance its borrowings and was then forced into a liquidation of its residential property assets. This holding has been written down to conservative levels over the course of the year and it is expected that some recovery in value will be seen as assets have now been liquidated at slightly better than expected levels.

Outlook

The strong recovery in markets which began in March 2009 continued until late in the period and propelled asset prices in many areas to overbought levels. However, the setbacks seen in markets in the second half of April and into May have been healthy and brought equity market valuations more into line with what we expect will be a slow growth environment over the next few years. We expect the recent pick up in market volatility to continue though the summer months or indeed until such time as more clarity is achieved on the sustainability of economic growth. Whilst we still expect emerging markets to outperform their developed market brethren on a 5 to 10 year view, we are wary of valuations being driven too far on recent strong cash inflows.

Corporate bond yields, particularly investment grade bonds, look fully valued and we remain wary of Gilts and developed market Sovereign debt in general given the huge debt burden now in place. We believe that pockets of value do still exist in debt markets but that the best returns are now behind us.

Property assets are likely to continue to show some further recovery, although this is likely to be muted as rental prospects are poor in an environment where companies and individuals are deleveraging and looking to cut spending.

The portfolio has been positioned to benefit from this slow growth economic environment with emphasis on assets still lagging the initial recovery phase and where there is an element of natural catch up still to be seen. The rate of recovery seen over the past year has been remarkable and the future level of progress for markets is now largely likely to be driven by performance from individual sectors and companies. Notwithstanding the less buoyant market outlook, we believe that the wide range of assets held by the Company remain capable of achieving solid returns. These returns will come from a combination of a high level of income together with further capital appreciation, albeit the latter at much lower levels than that achieved over the past year.

Midas Capital Partners Limited

22 June 2010

3.      STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and 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 have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under company law the Directors must not approve the financial statements 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, the Directors are required to:

-        select suitable accounting policies and then apply them consistently;

-        make judgments and estimates that are reasonable and prudent;

-        state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and,

The Directors are responsible for keeping proper 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 its financial statements comply with the Companies Act 2006, where applicable. They are responsible for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations. The financial statements are published on www.midascapital.co.uk which is a website maintained by the Company's Manager. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that to the best of our knowledge:

-           the financial statements, prepared in accordance with the applicable UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

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

For Midas Income & Growth Trust PLC

Hubert Reid

Chairman

22 June 2010

4.      BUSINESS REVIEW

A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, dividends, likely future developments of the business and details of the Company's policy on share capital management. The principal risks and uncertainties associated with the Company are detailed below and in note 18 to the financial statements. The Company has exposure to financial instruments, details of which are disclosed in note 18 to the financial statements.

The Key Performance Indicators (NAV movements together with details of the share price performance and total expense ratio (TER)) for the Company are shown in the Annual Report.

Principal Activity

The business of the Company is that of an investment trust investing in a diversified portfolio principally comprising UK and overseas equities and fixed interest securities but also other asset classes. By investing in overseas equities as well as diversifying into property, bonds, alternative assets and structured products, the Company can take advantage of a wide range of investment opportunities and reduce the risk profile of the Company's portfolio.

Principal Risks and Uncertainties

Investment and Market Risks: Managing a portfolio of shares and debt security investments necessarily involves certain risks, the more important of which are set out in Note 18 to the financial statements. A significant proportion of the assets of the Company may be invested in debt security investments and overseas equities. Whilst this broader spread of investments is intended to reduce the volatility and risk profile of the Company's portfolio this cannot be assured.

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. Investment in the Company should be regarded as long term in nature. 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.

Borrowings: The Company currently utilises gearing in the form of bank borrowings (see note 11). Gearing has the effect of exacerbating market falls and market gains.

Currency: A proportion of the Company's portfolio may be invested in assets denominated in currencies other than sterling. This will increase the currency risk that the Company is exposed to as a result in fluctuations in the exchange rate between the denomination of the investments and the sterling denomination of the Company's base currency.

Dividends: The ability of the Company to pay dividends in respect of the Ordinary shares and any future dividend growth will depend on the level of income received from its investments. Accordingly, the amount of dividends paid to Shareholders may fluctuate.

Discount: While the Board intends to implement an active discount management policy, the ability to implement such a policy is dependent on a number of factors including; the ability to buy back shares in the market, the ability to fund share buybacks, the authority to buy back shares being renewed annually and the Board's discretion over the making and timing of any buybacks.

Key Individuals: The Company is substantially dependent on the services of key individuals working for its Manager, namely Simon Edwards and Alan Borrows. The loss of either or both of these individuals could have an adverse effect on the Company's performance.

Taxation: 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) or failure to satisfy the conditions of Sections 1158 - 1159 of the Corporation Tax Act 2010 (including the requirement for a listing) 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.

5.      INCOME STATEMENT

		Year ended 30 April 2010			Year ended 30 April 2009
	Notes	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Gains/(losses) on investments	9	-	9,981	9,981	-	(23,538)	(23,538)
Income	2	2,779	-	2,779	3,329	-	3,329
Investment management fee	3	(213)	(213)	(426)	(240)	(240)	(480)
Performance fee	3	-	-	-	-	-	-
VAT recoverable on investment management fees	20	40	40	80	140	217	357
Administrative expenses	4	(319)	-	(319)	(391)	-	(391)
Exchange (losses)/gains	15	-	(20)	(20)	-	9	9
		______	______	______	______	______	______
Net return on ordinary activities before finance costs and taxation		2,287	9,788	12,075	2,838	(23,552)	(20,714)
Finance costs	5	(144)	(144)	(288)	(153)	(153)	(306)
		______	______	______	______	______	______
Net return on ordinary activities before taxation		2,143	9,644	11,787	2,685	(23,705)	(21,020)
Taxation	6	2	-	2	-	-	-
		______	______	______	______	______	______
Return on ordinary activities after taxation		2,145	9,644	11,789	2,685	(23,705)	(21,020)
		______	______	______	______	______	______
Return per share (pence):	8
Basic		5.63	25.30	30.93	6.52	(57.53)	(51.01)
		______	______	______	______	______	______
Diluted		5.62	25.27	30.89	6.50	(57.37)	(50.87)
		______	______	______	______	______	______
The total column of this statement represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
The accompanying notes are an integral part of the financial statements.

6.      BALANCE SHEET

	Notes	As at 30 April 2010 £'000	As at 30 April 2009 £'000
Non-current assets
Investments at fair value through profit or loss	9	53,468	43,841
		__________	__________
Current assets
Debtors and prepayments	10	386	923
Cash and short term deposits		1,077	705
		__________	__________
		1,463	1,628
		__________	__________
Creditors: amounts falling due within one year	11
Bank loan		(7,000)	(7,000)
Other creditors		(447)	(95)
		__________	__________
		(7,447)	(7,095)
		__________	__________
Net current liabilities		(5,984)	(5,467)
		__________	__________
Net assets		47,484	38,374
		__________	__________
Capital and reserves
Called-up share capital	12	9,528	9,582
Special reserve		41,954	42,149
Warrant reserve		616	616
Capital redemption reserve		2,061	2,007
Capital reserve	13	(7,898)	(17,542)
Revenue reserve		1,223	1,562
		__________	__________
Equity Shareholders' funds		47,484	38,374
		__________	__________
Net asset value per share (pence):	17
Basic		124.59	100.12
		__________	__________
Diluted		123.40	100.12
		__________	__________

7.      RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 30 April 2010
	Share capital £'000	Share premium account £'000	Special reserve £'000	Warrant reserve £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 30 April 2009	9,582	-	42,149	616	2,007	(17,542)	1,562	38,374
Purchase of Ordinary shares for cancellation	(54)	-	(195)	-	54	-	-	(195)
Return on ordinary activities after taxation	-	-	-	-	-	9,644	2,145	11,789
Dividends paid (see note 7)	-	-	-	-	-	-	(2,484)	(2,484)
	________	______	______	______	______	______	______	______
Balance at 30 April 2010	9,528	-	41,954	616	2,061	(7,898)	1,223	47,484
	________	______	______	______	______	______	______	______
For the year ended 30 April 2009
	Share capital £'000	Share premium account £'000	Special reserve £'000	Warrant reserve £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 30 April 2008	10,910	40,993	6,641	616	679	6,163	1,612	67,614
Purchase of Ordinary shares for cancellation	(1,328)	-	(5,485)	-	1,328	-	-	(5,485)
Cancellation of share premium account	-	(40,993)	40,993	-	-	-	-	-
Return on ordinary activities after taxation	-	-	-	-	-	(23,705)	2,685	(21,020)
Dividends paid (see note 7)	-	-	-	-	-	-	(2,735)	(2,735)
	________	______	______	______	______	______	______	______
Balance at 30 April 2009	9,582	-	42,149	616	2,007	(17,542)	1,562	38,374
	________	______	______	______	______	______	______	______
The cancellation of the share premium account (as approved at the Extraordinary General Meeting held on 27 October 2008 and by the Court dated 26 November 2008) has resulted in the Company having an increased special reserve, the purpose of which is to fund market purchases of the Company's own shares.
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.

8.      CASHFLOW STATEMENT

		Year ended 30 April 2010		Year ended 30 April 2009
	Notes	£'000	£'000	£'000	£'000
Net cash inflow from operating activities	14		2,499		2,861
Servicing of finance
Bank and loan interest paid			(288)		(397)
Taxation
Tax refund on non UK income			2		-
Financial investment
Purchases of investments		(15,665)		(14,476)
Sales of investments		16,523		19,422
		_______		_______
Net cash inflow from financial investment			858		4,946
Equity dividends paid			(2,484)		(2,735)
			_______		_______
Net cash inflow before financing			587		4,675
Financing
Buyback of shares		(195)		(5,485)
Loans drawn down		-		750
		_______		_______
Net cash outflow from financing			(195)		(4,735)
			_______		_______
Increase/(decrease) in cash			392		(60)
			_______		_______
Reconciliation of net cash flow to movements in net debt
Increase/(decrease) in cash as above			392		(60)
Drawdown of loan			-		(750)
Exchange movements			(20)		9
			_______		_______
Movement in net debt in the year			372		(801)
Net debt at 1 May			(6,295)		(5,494)
			_______		_______
Net debt at 30 April	15		(5,923)		(6,295)
			_______		_______

9.      NOTES TO THE FINANCIAL STATEMENTS:

For the year ended 30 April 2010

1	Accounting policies
	(a)	Basis of preparation and going concern
		The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in January 2009). The SORP had no effect on the financial statements of the Company, other than the requirement to separately disclose capital reserves that relate to the revaluation of investments held at the reporting date. These are disclosed in note 13. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.  The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Directors' Report contained in the Annual Report.
	(b)	Investments
		Investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured as fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange. The unquoted investments held (see note 9) are valued by the Directors using primary valuation techniques, such as earnings multiples, recent transactions and net assets, which equate to their fair values. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Income Statement.
	(c)	Income
		Income from investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex dividend. Special dividends are credited to capital or revenue, according to the circumstances. The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares. Interest receivable on short term deposits is treated on an accruals basis.
	(d)	Expenses
		All expenses are accounted for on an accrual basis. Expenses are charged to revenue within the Income Statement except as follows: -    transaction costs on the acquisition or disposal of investments are charged to capital; -    expenses are charged to the capital reserve where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect the investment management fee and loan interest on the £7.0m bank loan have been allocated 50% to capital and 50% to revenue on an effective yield basis within the Income Statement; -    loan break costs and performance fees are charged 100% to the capital reserve within the Income Statement.
	(e)	Capital reserve
		Gains or losses on realisation of investments and changes in fair values of investments are transferred to the capital reserve. Also, expenses and finance costs, together with the related taxation effect, are charged to this reserve in accordance with (d) above.
	(f)	Deferred taxation
		The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred taxation is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in future against which the deferred tax asset can be offset. Due to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
	(g)	Foreign currency
		Transactions involving foreign currencies are converted to sterling, being the Company's functional currency, at the rate ruling at the date of the transaction. Translation of all other foreign currency balances including foreign assets and foreign liabilities is at the middle rates of exchange at the year end. Differences arising from translation are treated as a gain or loss to capital or revenue within the Income Statement depending upon the nature of the gain or loss.
	(h)	Cash and cash equivalents
		Cash comprises cash in hand and at bank and short-term deposits. Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

2	Income	2010 £'000	2009 £'000
	Income from investments
	UK franked income	1,537	1,467
	UK unfranked dividend income	232	119
	UK unfranked interest income	255	559
	Overseas dividends	728	1,123
	Stock dividends	-	16
		________	________
		2,752	3,284
		________	________
	Other income
	Deposit interest	25	40
	Other commission	2	5
		________	________
		27	45
		________	________
	Total income	2,779	3,329
		________	________
	Income from investments	2010 £'000	2009 £'000
	Listed UK	1,929	2,359
	Listed overseas	287	361
	Unlisted	536	548
	Stock dividends	-	16
		________	________
		2,752	3,284
		________	________

		2010			2009
3	Investment management and performance fees	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
	Investment management fee	213	213	426	240	240	480
		______	______	______	______	______	_____
	Midas Capital Partners Limited ('Midas') were appointed the Investment Manager on 19 August 2005 (formerly Aberdeen Asset Managers Limited) and the management fee payable to Midas during the year was 1% of net assets along with a performance fee (see below). The fee is chargeable 50% to capital and 50% to revenue within the Income Statement.  The agreement is terminable by either party on twelve months notice.  The balance due to Midas at the year end was £40,000 (2009 - £32,000).
		2010			2009
		Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
	Performance fee	-	-	-	-	-	-
		______	______	_____	______	______	_____
	The performance fee is calculated based on a comparison of the net asset value at the start of the calculation period and the net asset value at the period end. Where there has been an increase of greater than 8% per annum from a base date of 14 February 2006 then a performance fee of 10% of the excess is applicable. The performance fee is calculated on an annual basis and is subject to a high-watermark based on the higher of the total return above 8% per annum and the previous highest NAV on which a performance fee was paid. The balance due to Midas at the year end in respect of the performance fee was £nil (2009 - £nil).

4	Administrative expenses	2010			2009
		Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
	Administration fees	110	-	110	129	-	129
	Directors' fees	60	-	60	57	-	57
	Printing and stationery	10	-	10	20	-	20
	Auditors' remuneration:
	- audit	25	-	25	25	-	25
	- for review of Half Yearly Report	6	-	6	6	-	6
	Other	108	-	108	154	-	154
		______	______	_____	______	______	_____
		319	-	319	391	-	391
		______	______	_____	______	______	_____
	The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") which is delegated to Aberdeen Asset Management PLC for the provision of administration services with fees based on the following basis:
	- £90,000 per annum plus VAT where the Company's net asset value is less than £50 million;
	- £110,000 per annum plus VAT where the Company's net asset value exceeds £50 million;
	The net asset position is assessed at 1 August for each year the agreement is in place. At this date the fee will also be increased, but not decreased, by the movement in RPI over the twelve month period.
	The agreement is terminable by either party on three months' notice.  No sum was due to AAM at the year end (2009 - £nil).

5	Finance costs	2010			2009
		Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
	On bank loans and overdrafts	144	144	288	153	153	306
		______	______	_____	______	______	_____

Finance costs relate to interest charged on the revolving loan facility, details of which are disclosed in note 11.

6	Taxation			2010						2009
				Revenue £'000		Capital £'000		Total £'000		Revenue £'000		Capital £'000		Total £'000
	(a)	Analysis of charge for the year
		Tax recovered		(2)		-		(2)		-		-		-
				______		______		_____		______		______		_____
	(b)	Factors affecting the tax charge for the year
		The tax assessed for the year is lower than the standard rate of corporation tax in the UK.
			2010 Revenue £'000		2010 Capital £'000		Total £'000		2009 Revenue £'000		2009 Capital £'000		Total £'000
		Net profit on ordinary activities before taxation	2,143		9,644		11,787		2,685		(23,705)		(21,020)
			______		______		_____		______		______		_____
		Corporation tax at 28% (2009: 28%)	600		2,700		3,300		752		(6,638)		(5,886)
		Effects of:
		Non-taxable UK dividends	(430)		-		(430)		(411)		-		(411)
		Non taxable overseas dividends	(272)				(272)		-				-
		Movement in unutilised/(utilised) management expenses	74		89		163		(344)		50		(294)
		Income taxable in different years	26		-		26		(8)		-		(8)
		Expenses not deductible for tax purposes	-		-		-		11		-		11
		Gains on investments not taxable	-		(2,789)		(2,789)		-		6,588		6,588
			______		______		_____		______		______		_____
		Current tax recovered	(2)		-		(2)		-		-		-
			______		______		_____		______		______		_____

(c)

Factors that may affect future tax charges

There was no provision for deferred taxation made for either this year or the previous year. The Company has not recognised a deferred tax asset of £1,320,000 (2009 - £1,157,000) arising as a result of non-trading deficits and eligible unrelieved foreign tax. These deficits will only be utilised if the Company has profits chargeable to corporation tax in future accounting periods. It is considered too uncertain that the Company will generate such profits and therefore no deferred tax asset has been recognised.

7	Dividends	2010 £'000	2009 £'000
	Amounts recognised as distributions to equity holders in the period:
	Fourth interim dividend for 2009 - 1.63p (2008 - 1.68p)	621	733
	First interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	677
	Second interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	677
	Third interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	648
		_______	_______
		2,484	2,735
		_______	_______
	A fourth dividend for the year of £621,000 (2009 - £621,000) was paid on 18 June 2010.  There is no final dividend proposed for the year (2009 - nil).
	The total dividends paid and proposed in respect of the financial year are set out below, and this is the basis on which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £2,145,000 (2009 - £2,685,000).
		2010 £'000	2009 £'000
	First interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	677
	Second interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	677
	Third interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	648
	Fourth interim dividend for 2010 - 1.63p (2009 - 1.63p)	621	621
		_______	_______
		2,484	2,623
		_______	_______

8	Return per Ordinary share
	The return per Ordinary share is based on the following figures:
		2010			2009
		Revenue P	Capital P	Total P	Revenue P	Capital P	Total P
	Basic	5.63	25.30	30.93	6.52	(57.53)	(51.01)
	Diluted	5.62	25.27	30.89	6.50	(57.37)	(50.87)
	The basic revenue return per Ordinary share is calculated on net revenue on ordinary activities after taxation for the year of £2,145,000 (2009 - £2,685,000) and on 38,120,197 (2009 - 41,204,120) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
	The basic capital return per Ordinary share is calculated on net capital returns for the year of £9,644,000 (2009 - (£23,705,000)) and on 38,120,197 (2009 - 41,204,120) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
	The basic total return per Ordinary share is calculated on the total return for the year of £11,789,000 (2009 - returns of (£21,020,000)) and on 38,120,197 (2009 - 41,204,120) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
	Diluted returns have been calculated on the basis set out in Financial Reporting Standard 22 'Earnings per share' ('FRS 22').
	The diluted revenue return per Ordinary share is calculated on net revenue on ordinary activities for the year of £2,145,000 (2009 -£2,685,000) and on 38,163,688 (2009 - 41,439,817) Ordinary shares, being the weighted average number of Ordinary shares outstanding during the year plus the weighted average number of Ordinary shares that would be issued on the conversion of all dilutive potential Ordinary shares into Ordinary shares.
	The diluted capital return per Ordinary share is calculated on net revenue on ordinary activities for the year of £9,644,000 (2009 - (£23,705,000)) and on 38,163,688 (2009 - 41,439,817) Ordinary shares, being the weighted average number of Ordinary shares outstanding during the year plus the weighted average number of Ordinary shares that would be issued on the conversion of all dilutive potential Ordinary shares into Ordinary shares.
	The diluted total return per Ordinary share is calculated on net revenue on ordinary activities for the year of £11,789,000 (2009 - (£21,020,000)) and on 38,163,688 (2009 - 41,439,817) Ordinary shares, being the weighted average number of Ordinary shares outstanding during the year plus the weighted average number of Ordinary shares that would be issued on the conversion of all dilutive potential Ordinary shares into Ordinary shares.

9	Investments	Listed in UK £'000	Unquoted (incl. Unit Trusts & OEICS) £'000	Total £'000
	Opening book cost	47,640	15,382	63,022
	Opening fair value losses on investments held	(15,628)	(3,553)	(19,181)
	Opening valuation	32,012	11,829	43,841
	Movements in year:
	Purchases at cost	11,386	4,634	16,020
	Sales - proceeds	(13,982)	(2,392)	(16,374)
	- (losses)/gains on sales	(3,666)	691	(2,975)
	Movement in fair value of investments held	11,412	1,544	12,956
		_________	_________	_________
	Closing fair value of investments held	37,162	16,306	53,468
		_________	_________	_________
	Closing book cost	41,378	18,315	59,693
	Closing fair value losses on investments held	(4,216)	(2,009)	(6,225)
		_________	_________	_________
		37,162	16,306	53,468
		_________	_________	_________
			2010 £'000	2009 £'000
	Losses on sales		(2,975)	(9,231)
	Increase in fair value losses on investments held		12,956	(14,307)
			_________	_________
			9,981	(23,538)
			_________	_________
	Transaction costs
	During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within losses on investments in the Income Statement. The total costs were as follows:
			2010 £'000	2009 £'000
	Purchases		58	42
	Sales		23	22
			_________	_________
			81	64
			_________	_________

10	Debtors: amounts falling due within one year	2010 £'000	2009 £'000
	Dividends and interest receivable	335	352
	Prepayments and other debtors	12	383
	Amounts due from brokers	39	188
		_________	_________
		386	923
		_________	_________

11	Creditors: amounts falling due within one year	2010 £'000	2009 £'000
	Bank loan	7,000	7,000
	Amounts due to brokers	355	-
	Interest payable	3	3
	Other creditors	89	92
		_________	_________
		7,447	7,095
		_________	_________
	The Company has a £7,000,000 revolving loan facility in place with Royal Bank of Scotland plc, of which at 30 April 2010 £7,000,000 had been drawn down at an all in rate of 3.35413%. Subsequent to the year end on 26 May 2010 the loan was rolled over until 26 July 2010 at an all-in-rate of 3.3936%. The facility agreement with the Royal Bank of Scotland plc includes a covenant that requires the total borrowings to adjusted gross asset value not to exceed 25%.  In calculating the adjusted gross asset value, deductions are made for that part of the value of any single investment that exceeds 4% and the value of the ten largest investments that in excess of 25% together with any unlisted securities.
	The termination date of the facility is 31 July 2011.  The Company anticipates refinancing the facility through a similar arrangement.

12	Called up share capital	2010 £'000	2009 £'000
	Authorised
	390,000,000 (2009 - 390,000,000) Ordinary shares of 25p	97,500	97,500
		_________	_________
	Called-up, allotted and fully paid
	38,111,950 (2009 - 38,326,950) Ordinary shares of 25p	9,528	9,582
		_________	_________
	At 30 April 2010 there were in issue 1,934,411 (2009 - 1,934,411) Warrants to subscribe for one Ordinary share at 100p on 31 August 2010 or, if later, the date in any such year 30 days after the date on which copies of the audited financial statements of the Company for its then immediately preceding financial year are dispatched to Shareholders.   During the year to 30 April 2010 the Company purchased 215,000 (2009 - 5,313,000) Ordinary shares in the market for immediate cancellation at a cost of £195,000 (2009 - £5,485,000).

13	Capital reserve	2010 £'000	2009 £'000
	Year ended 30 April
	At 30 April 2009	(17,542)	6,163
	Movement in fair value gains/(losses)	9,981	(23,538)
	Foreign exchange movement	(20)	9
	VAT recoverable on capitalised investment management fees	40	217
	Capitalised expenses	(357)	(393)
		_________	_________
	At 30 April	(7,898)	(17,542)
		_________	_________
	The capital reserve includes investment holding losses amounting to £6,225,000 (2009 - £19,181,000), as disclosed in note 9.

14	Reconciliation of net revenue before finance costs and taxation to net cash inflow from operating activities	2010 £'000	2009 £'000
	Net return before finance costs and taxation	12,075	(20,714)
	Adjustments for:
	(Gains)/losses on investments	(9,981)	23,538
	Exchange losses/(gains)	20	(9)
	Decrease in accrued income	17	417
	Decrease/(increase) in other debtors	371	(361)
	Decrease in other creditors	(3)	(10)
		_________	_________
	Net cash inflow from operating activities	2,499	2,861
		_________	_________

15	Analysis of changes in net debt	1 May 2009 £'000	Cash flow £'000	Exchange movements £'000	30 April 2010 £'000
	Cash and short term deposits	705	392	(20)	1,077
	Debt due in less than one year	(7,000)	-	-	(7,000)
		(6,295)	392	(20)	(5,923)
		_________	_________	_________	_________

16	Commitments and contingencies
	As at 30 April 2010 there were no contingent liabilities (2009 - nil.)
	As at 30 April 2010 there was no commitment fee payable to RBS plc as the bank loan was fully drawn down (2009 - £3,000).

17	Net asset value per equity share	2010	2009
	Basic
	Net assets attributable	£47,484,000	£38,374,000
	Number of Ordinary shares in issue	38,111,950	38,326,950
	Net asset value per Ordinary share	124.59p	100.12p
	Diluted
	Net assets attributable	£49,418,000	£40,308,000
	Number of Ordinary shares if Warrants converted	40,046,361	40,261,361
	Net asset value per Ordinary share	123.40p	100.12p
	The diluted net asset values per Ordinary share as at 30 April 2010 and 30 April 2009 have been calculated by reference to the total number of Ordinary shares in issue at each year end and on the assumption that those Warrants which are not exercised at the period end, amounting to 1,934,411 Warrants as at 30 April 2010 (30 April 2009 - 1,934,411), were fully exercised on the first day of the financial year at 100p per share, giving a total of 40,046,361 Ordinary shares (30 April 2009 - 40,261,361).

18	Risk management, financial assets and liabilities
	The Company's financial instruments comprise:
	-    Equities and debt security investments that are held in accordance with the Company's investment objectives, which are set out in the Annual Report;
	-    Term loans and bank overdrafts, the main purpose of which are to raise finance for the Company's operations; and
	-    Cash and liquid resources that arise directly from the Company's operations.
	The main risks arising from the Company's financial instruments are market price risk, interest rate risk and foreign currency risk. The Board regularly reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained unchanged since the inception of the Company.
	Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company's assets comprise of mainly readily realisable securities, which can be sold to meet funding commitments if necessary.
	Market price risk Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements.
	To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy.
	A list of the investments held by the Company at 30 April 2010 is shown in the 'Investment Portfolio' table contained in the Annual Report. All investments are stated at fair value.
	Interest rate risk
	Financial assets
	Bonds, Open Ended Investment Companies, floating rate notes and preference share yields, and as a consequence their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.
	Returns from bonds, floating rate notes and preference shares are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.
	Financial liabilities
	The Company finances its operations through the use of a loan facility. The Board sets borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis.
	The interest rate profile of the Company (excluding short term debtors and creditors) at 30 April 2010 and 30 April 2009 was as follows:

		Total (as per Balance Sheet) £'000		Floating rate £'000		Fixed rate £'000		Financial assets on which no interest is paid † £'000		Weighted average interest rate %		Weighted average period for which rate is fixedA years
	Type	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
	Assets
	Equities	31,440	23,817	-	-	-	-	31,440	23,817	-	-	-	-
	Property	975	1,073	-	-	-	-	975	1,073	-	-	-	-
	OEIC's	11,480	7,236	-	-	-	-	11,480	7,236	-	-	-	-
	Corporate Bond	2,232	4,036	-	-	2,232	4,036	-	-	7.06	3.04	6.95	2.05
	Floating Rate Notes	565	1,897	565	1,897	-	-	-	-	-	16.95	-	-
	Preference shares	3,913	3,268	-	-	3,913	3,268	-	-	8.03	9.26	3.94	4.94
	Convertible Bond	217	264	-	-	217	264	-	-	29.41	24.19	1.08	2.08
	Unquoted	2,646	2,250	-	-	-	-	2,646	2,250	-	-	-	-
	Cash at bank - Sterling	1,077	705	1,077	705	-	-	-	-	0.27	3.26	-	-
		_______	______	______	______	______	______	______	______	______	_____	______	_____
		54,545	44,546	1,642	2,602	6,362	7,568	46,541	34,376	n/a	n/a	n/a	n/a
		_______	______	______	______	______	______	______	______	______	_____	______	_____
	Liabilities
	Bank loan - Sterling	(7,000)	(7,000)	-	-	(7,000)	(7,000)	-	-	3.35	1.50	-	-
		_______	______	______	______	______	______	______	______	______	_____	______	_____
	Total	47,545	37,546	1,642	2,602	(638)	568	46,541	34,376	n/a	n/a	n/a	n/a
		_______	______	______	______	______	______	______	______	______	_____	______	_____
	† The 'weighted average interest rate' is based on the current yield of each asset, weighted by their market value. This excludes all equities and stocks where payments have been suspended.
	A The 'weighted average period for which rate is fixed' excludes stocks with no maturity date.

	Maturity profile
	The maturity profile of the Company's financial assets and liabilities at 30 April 2010 and 30 April 2009 was as follows:
	At 30 April 2010	Within 1 year £'000	Within 1-5 years £'000	More than 5 years £'000	Total £'000
	Fixed rate
	Corporate Bond	-	927	692	1,619
	Convertible Bond	-	217	-	217
	Preference shares	-	961	1,952	2,913
	Bank loan	-	(7,000)	-	(7,000)
		_________	_________	_________	_________
		-	(4,895)	2,644	(2,251)
		_________	_________	_________	_________
	Floating rate
	Cash	1,077	-	-	1,077
		_________	_________	_________	_________
	Details of the Company's loans are shown in note 11. All the other financial assets (including Preference shares of £1,000,000 (2009 - £2,440,000)) and liabilities do not have a maturity date.
	At 30 April 2009	Within 1 year £'000	Within 1-5 years £'000	More than 5 years £'000	Total £'000
	Fixed rate
	Corporate Bond	2,078	-	1,958	4,036
	Convertible Bond	264	-	-	264
	Preference shares	-	-	828	828
	Bank loan	(7,000)	-	-	(7,000)
		_________	_________	_________	_________
		(4,658)	-	2,786	(1,872)
		_________	_________	_________	_________
	Floating rate
	Cash	705	-	-	705
		_________	_________	_________	_________
	Interest rate sensitivity
	The sensitivity analyses below have been determined based on the exposure to interest rates for floating and fixed interest investments at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of investments that have floating rates. If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's profit before tax for the year ended 30 April 2010 would increase/ decrease by £11,000 (2009- £7,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end.  Profit before tax for the year ended 30 April 2010 would increase/ decrease by £2,774,000 (2009- £523,000). This is also mainly attributable to the Company's exposure to interest rates on its fixed interest securities. This is based on a Value at Risk ("VaR") calculated at a 99% confidence level. In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will fluctuate depending on the current market perception.
	Foreign currency risk
	The income and capital value of the Company's investments are mainly denominated in Sterling; therefore, the Company is not subject to any material risk of currency movements. At the year end the Company held the following investments:

		2010		2009
		Currency '000	Sterling equivalent £'000	Currency '000	Sterling equivalent £'000
	Euro	2,239	1,945	540	482
	Japanese Yen	174,003	1,209	197,382	1,354
	US Dollar	2,176	1,421	1,957	1,320
	At the year end the Company held Sterling cash balances only.
Other price risk Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process, as detailed in the Annual Report, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy.  The investments held by the Company are listed on various stock exchanges worldwide. Other price risk sensitivity If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 30 April 2010 would have increased/decreased by £4,654,000 (2009 : increase/decrease of £3,438,000 ) and equity reserves would have increased/decreased by the same amount. Credit risk This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. The risk is not significant, and is managed as follows: -     where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default; -     investments in quoted bonds are made across a variety of industry sectors and geographic markets so as to avoid concentrations of credit risk; -     transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Company of default; -     investment transactions are carried out with a large number of brokers, the credit rating of which is taken into account so as to minimise the risk to the Company of default; -     investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker; -     the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the Custodian carries out a stock reconciliation to third party administrators' records on a monthly basis to ensure discrepancies are picked up on a timely basis. Aberdeen's compliance department carries out periodic reviews of the Custodian's operations and reports its findings to the Company; -     cash is held only with reputable banks with high quality external credit enhancements. -     assets are ring fenced and protected in the event of custodian default. None of the Company's financial assets are secured by collateral or other credit enhancements.

19	Capital management policies and procedures
	The Company's capital management objectives are: -    to ensure that the Company will be able to continue as a going concern, and -    to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt.  The Board normally seeks to limit gearing to 25% of net assets. The Board monitors and reviews the structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market and the extent to which revenue in excess of that which is required to be distributed should be retained.
	Capital management policies and procedures					2010 £'000	2009 £'000
	Debt
	Bank loan					7,000	7,000
						__________	__________
	Equity
	Equity Share Capital					9,528	9,582
	Retained Earnings and other reserves					37,956	28,792
						__________	__________
						47,484	38,374
						__________	__________
	Debt as a % of net assets					14.74	18.24
						__________	__________
20	Contingent assets
	On 5 November 2007, the European Court of Justice ruled that management fees should be exempt from VAT.  HMRC has announced its intention not to appeal against this case to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company have been processed. The Manager and former Manager have refunded £447,000 to the Company for VAT charged on investment management fees for the period 1 January 2001 to 30 September 2007.  The sum of £357,000 was reflected in the previous financial statements for the period from 1 January 2004 to 30 September 2007, which was for the sum of £367,000 less charges of £10,000, and the sum of £80,000 has been reflected in these financial statements for the period from 1 January 2001 to 31 December 2003. These repayments have been allocated to capital and revenue in line with the accounting policy of the Company for the periods in which the VAT was charged.  The reclaim for previous periods and the timescale for receipt are at present uncertain and the Company has taken no account in these financial statements of any such repayment.
21	Related party disclosure
	During the year the Company retained Intelli Corporate Finance Limited ("Intelli"), a subsidiary company of Midas Capital PLC, to act as its Stockbroker and Financial Advisor. On 1 October 2009 Midas Capital PLC sold Intelli Corporate Finance Limited to Canaccord Adams Limited which subsequently changed its name to Canaccord Genuity. The aggregate remuneration paid by the Company to Intelli in the period to 30 September 2009 was £13,000 (2009 - £29,000) in respect of their services as brokers. Group subsidiaries of Midas Capital PLC, on occasions, earn broking commissions on share transactions on behalf of the Company. During the period to 30 September 2009 Midas Capital PLC received commission fees totalling £1,000 (2009 - £11,000).
22	Fair Value hierarchy
	The Company adopted the amendments to FRS 29 '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 their significance. -     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 financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy at 30 April 2010 as follows:
		Note	Level 1 £'000	Level 2 £'000		Level 3 £'000	Total £'000
	Financial assets at fair value through profit or loss
	Quoted Equities	a)	31,403	-		-	31,403
	Property	a)	975	-		-	975
	OEIC's	a)	6,655	4,825		-	11,480
	Corporate Bond	a)	1,620	612		-	2,232
	Floating Rate Notes	a)	565	-		-	565
	Preference shares	a)	3,913	-		-	3,913
	Convertible Bond	a)	217	-		-	217
	Alternatives	a)	37	-		-	37
	Unquoted Equities	b)	-	-		2,646	2,646
			_________	__________		__________	_________
	Net fair value		45,385	5,437		2,646	53,468
			_________	__________		__________	_________
	a) Quoted Equities The fair value of the Company's investments in Quoted Equities have been determined by reference to their quoted bid prices at the reporting date. Quoted Equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b) Unquoted Equities The fair value of the Company's investments in unquoted and unlisted stocks have been determined by reference to primary valuation techniques described in note 1 (b). A reconciliation of fair value measurements in Level 3 is set out in the following table.
					Equity investments £'000		Total £'000
	Opening Balance				3,347		3,347
	Purchases				-		-
	Sales				(1,082)		(1,082)
	Total gains or losses included in Gains on investments in the income statement:
	on assets sold				720		720
	on assets held at the end of the year				(339)		(339)
					__________		_________
	Closing Balance				2,646		2,646
					__________		_________

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 and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 April 2010 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 2009 and 2010 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 s.498(2) or 498(3) of the Companies Act 2006.  The financial information for 2009 is derived from the statutory accounts for 2009 which have been delivered to the Registrar of Companies. The 2010 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 p.m. on 7 September 2010 at 12.30 p.m. in Liverpool.

The audited Annual Report and Accounts will be posted to shareholders shortly. Copies may be obtained during normal business hours from the Company's Registered Office, Bow Bells House, 1 Bread Street, London EC4M 9HH or from the Manager's website, www.midascapital.co.uk

By order of the Board

Aberdeen Asset Management PLC - Secretary

22 June 2010

 

END

 

 

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