Trustees’ Report and Accounts 2010

Capability Scotland

Trustees’ Report and Accounts 2010

Company number SC036524Scottish Charity SC011330

1

Trustees’ Annual Report for the year ended 31 March 2010

Reference and Administration Information

Charity number SC011330Company number SC036524Registered Office 11 Ellersly Road

EdinburghEH12 6HY

AuditorsHenderson Loggie, 34 Melville Street, Edinburgh, EH3 7HA

BankersThe Royal Bank of Scotland, 36 St Andrew Square, Edinburgh, EH2 2YB

SolicitorsBrodies LLP Solicitors, 2 Blythswood Square, Glasgow, G2 4AD

Shepherd and Wedderburn LLP, 1 Exchange Crescent, Conference SquareEdinburgh, EH3 8UL

Maclay Murray & Spens LLP, 15 Lauriston Place, Edinburgh, EH3 9EP

Investment ManagersBrewin Dolphin, 7 Drumsheugh Gardens, Edinburgh, EH3 7QH

Committee Members and Officials

PatronHis Royal Highness The Duke of Edinburgh K.G.,K.T.,GBE

PresidentMr G D Holmes CB FRSE FICFor

Honorary Life MembersMiss J M Errington MBE MSAOTMr A A Graham CAMr K E Guest FRCSE

2

Main Board of Trustees

Chair Mr R E F Fox MA

Vice Chair Mr R Hogan Ms K JoyceMr T B Moar (resigned 7 October 2009)Dr A WallerMrs M Meiklejohn Mr M Rice (resigned 23 June 2010)Mr A D J Dickson Ms S Duffield Mr P Edwardson Ms L Stephenson Mr D Currie Mr J Willens (resigned 19 April 2010)Mr J d’Aguilar (appointed 7 October 2009)

None of the above had any interest in any group company at any time in the year.

For the purposes of the Companies Act 2006 the Trustees of the charity are thedirectors of the company.

OfficialsChief Executive Alan D J Dickson

Chief Operating Officer and Company SecretaryGeorge Finnigan

Director of External AffairsRichard Hamer

3

Structure, Governance and Management

• Governing documentCapability Scotland is a company limited by guarantee, governed by itsMemorandum and Articles of Association dated 5 June 1961 and alteredby special resolutions passed on 8 October 1997, 11 October 2006 and8 October 2008.

It is registered as a charity with the Office of the Scottish Charity Regulator andrecognised as a charity by the Inland Revenue. The membership of CapabilityScotland shall not exceed 300 and the power to admit new members isexercisable only by the Main Board.

There are currently 98 members who are required to contribute an amount notexceeding £1 in the event of the charity winding up.

• Appointment of TrusteesAs set out in the Articles of Association, the Chair of the Main Board isnominated by members of the Main Board. The Main Board consists of notless than 5 members. One third of the membership of the Main Board will retirefrom office each year but are eligible for reappointment at the Annual GeneralMeeting. The Main Board has the power to co-opt additional members of theMain Board.

The members are circulated with invitations to nominate Trustees prior to theAnnual General Meeting advising them of the retiring Trustees and requestingnominations for the Annual General Meeting.

• Trustees’ Induction and TrainingNew Trustees are appointed to fill Main Board vacancies and are recruited onthe basis that their skills and expertise will be utilised in the furtherance of thecharity’s objectives. The new Trustees undergo an induction period to advisethem of their legal obligations under Charity and Company law, the contents ofthe Memorandum and Articles of Association, the Committee and decisionmaking process, the Business Plan and recent financial performance of thecharity. During this induction period they meet key employees and other MainBoard members. Trustees, supported by the charity officials, maintain anddevelop their skills and knowledge on an ongoing basis.

• OrganisationThe Main Board administers the charity on behalf of its members. The MainBoard meets not less than 4 times in each calendar year and there aresubsidiary committees covering Finance and Remuneration which meet asrequired. The Main Board will establish new committees as and whenappropriate to provide advice and assistance to the Main Board and the ChiefExecutive. The Chief Executive is appointed by the Main Board to manage theday to day operation of the charity.

4

To facilitate effective operation, the Chief Executive has delegated authority,within terms of delegation approved by the Main Board, for operational mattersincluding finance, employment, service delivery, fundraising, campaigning anddevelopment.

• Related PartiesThe charity has a wholly owned subsidiary, Capability Scotland Trading Ltd.,which sells bought goods, with the income generated being made available tothe charity for the furtherance of its charitable objectives. The charity’ssubsidiary Trading Company did not trade during the year.

• Risk ManagementThe Main Board has reviewed the Register of Risks, looking into specific riskareas and sought assurance that awareness of risk is embedded in ourplanning and operations. The Main Board has received reports and is satisfiedthat systems are in place to mitigate our exposure to the major risks.

Achievements and Performance

We continued to provide a wide and varied range of services to around 1000disabled people. In the year the number of children and adults supported through ourservices and projects were in line with the previous year. Of particular satisfaction isthe increase in the number of adult clients supported to move into independent living.We also continue to help disabled people into employment and in the year supportedover 200 individuals to enjoy meaningful employment. We continue to provideservices in 29 out of 32 Local Authority areas in Scotland.

We are inspected by the Care Commission in Scotland and in the year we had 28inspections resulting in 21 requirements and 60 recommendations. The Trusteeshave ensured that systems are in place to close out actions in line with agreedtimescales. The Trustees have also noted the favourable comments included in theinspection reports regarding involvement of users of our services and the positivecomments regarding our staff.

We continued to develop and improve our equality awareness training business andin the year our Equality Unit provided disability equality training to over 830 delegatesfrom 16 different organisations. We have also extended our service portfolio and in theyear carried out 6 User Access Consultations and provided consultancy services to13 organisations. Our advice service handled over 2,900 enquiries on a wide range ofdisability issues including Cerebral Palsy, where we have a dedicated member of staff.

Capability Scotland continued to drive the disability equality agenda and campaignedon a number of major issues that affect the everyday lives of disabled people. Weengaged in the development of government policy through a wide range ofconsultations and in the legislative process at Westminster and Holyrood,contributing to 16 consultations. We increased the number of visits to CapabilityScotland’s website by 8% and maintained our external newsletter subscriber levels.

5

As part of our drive to have a capable, confident and valued workforce we haveinvested resources in the employment of four full time SVQ Assessors. These staffwill help ensure that we meet our target for SVQ trained personnel in line with theScottish Government’s National Strategy for the Development of the Social ServiceWorkforce in Scotland and to meet the registration requirements laid down by SSSC.In the year a further 65 staff completed SVQ level 2 or 3, four Team Leaders achievedtheir level 4 and another five achieved the A1 Assessor Award. One managercompleted their Registered Managers Award. At the end of March 2010 95 staffwere undertaking SVQ levels 2, 3 and 4. We also invested in a further two trainersto ensure our staff are developed in line with the changing needs of our business.

In our continuing goal of improving organisational effectiveness we have fullyimplemented a Quality Management System. All policies and procedures areavailable to staff on the intranet. In the year we carried out 51 internal audits with thedata collected allowing us to improve our performance. The external verification ofour Quality Management System, accredited to ISO 9001:2008 standard by theexternal certification body the British Standards Institute, was maintained with twosurveillance visits carried out during the year. This demonstrates the organisation’scommitment to quality and ensures the users of our services are fully involved in theplanning and delivery of their service.

Plans for the future

Due to the changing environment and the continuing challenging financial situation theTrustees have reviewed the Business Plan for the period 2009 to 2012. While muchhas been achieved against the plans drawn up in 2009 it is clear that new strategicdirections are required to ensure that the organisation continues to develop and grow.The Trustees have therefore agreed new strategic directions and a new BusinessPlan for 2010 to 2015 has been prepared. The three key strategic directions are:

• Ensure economically viable services• Growth through intensity and complexity• Exert effective influence around core activity

A target focused Business Plan has been developed and the Trustees will receiveregular updates and review progress, making the necessary corrections to the planas required.

Financial Review

This has been another challenging year with total funds reducing by £1,274,000 inthe past twelve months. Of this, £1,560,000 is attributable to the operations of thecharity, an actuarial gain of £373,000 on the final salary pension scheme and a losson disposal of investments of £87,000.

The operational deficit reported of £1,560,000 includes one off costs totalling£559,000. The underlying operational deficit of £1,001,000 continues to be the resultof funders having insufficient resources available to meet the cost of providing qualityperson centred services to disabled people. The Trustees highlighted in the previous

6

year’s report that plans were in place to seek additional funding to ensure theoperating costs of service provision were fully met, to work with funders to realiseservice provision in line with funds available or to withdraw from service provisionwhen it is clear that services with operational deficits could not be improved. Thisstrategy has now been fully implemented and the Trustees are pleased to report thatin three service areas, working with local authority funders, substantial increases infunding were achieved. These improved their financial position by a combined totalof £535,000. This demonstrates that where a service is providing for the needs of theindividual, additional resources can and are being secured. The Trustees are alsopleased to report that in a number of areas we have worked with funders to alignservice delivery to meet funding available. This has resulted in a reduced servicebeing delivered and in some areas job losses have had to be made.

However, it is clear to the Trustees that there are areas of our service delivery that willnot reach a satisfactory financial position. Therefore, in 2009/10 the Trustees begana process of withdrawing from services where funding remains insufficient. In theyear costs associated with staff reductions and withdrawal from services totalled£459,000. This process has continued into 2010/11 with a number of servicesidentified as being at risk of closure. Whilst this work will significantly improve theorganisation’s financial position, it is still expected that an overall deficit will be madein 2010/11.

The potential for cuts in funding to the services that we provide has increasedsignificantly since last year. These face us as a result of the prevailing economicconditions and the measures likely to be deemed necessary by government toaddress the public finances. We are taking the necessary steps to prepare theorganisation for such challenges and, in particular, are working with the unions werecognise to change staff terms and conditions of employment to better reflect themarket we operate in. Further cuts in funding will, in the view of the Trustees, impactdirectly on the quality of services that we are able to provide.

In the year unrestricted net outgoing reserves before transfers reduced by£1,237,000. This significant reduction, which results in a deficit position onunrestricted funds, is mainly due to deficits made on contracted services which couldnot be met from restricted funds.

Total incoming resources for the year were £29,161,000. This is a decrease of 0.6%over the previous year. Voluntary income is 12.4% lower than the previous year,income from trading fell by 1.2% with grants and fees for services being 0.2% higherthan those for 2008/09.

Income from donations and gifts at £839,000 was £23,000 lower than 2008/09.Legacy income was £200,000 lower than the previous year. Looking at voluntaryincome over a longer period, donations and gifts are slightly higher than the five yearaverage while legacy income at £730,000 is £88,000 higher than the five yearaverage. The Trustees acknowledge the reduction in voluntary income compared tothe previous year and are pleased to note that individual giving is only 2.6% belowthat seen in 2008/09. Given the extremely challenging financial situation this

7

performance is pleasing and confirms that investment made in donor developmentin recent years has enabled the organisation to maintain strong results in this area.The Trustees recognise the volatility in legacy income from year to year and after avery strong year in 2008/09 the amount received in 2009/10 is similar to thatexperienced in recent years.

The organisation continues to operate shops which generate income from donatedgoods. In the year income fell by £16,000. These sales are from 19 shops trading forthe full year, the same as in 2008/09. In the year costs reduced by £92,000, areduction of 6%. This resulted in the charity shops reporting a loss of £153,000 forthe year. Sales have fallen by 1.3% which is considered to be acceptable giventrading conditions throughout 2009/10. The reduction in costs against the figures for2008/09 is partly due to rebranding and refurbishment costs being incurred in2008/09 and partly as a result of cost controls being exercised. Further cost savingswere realised at the end of the financial year with a reduction in staff numbers thatincurred severance costs of £23,000. The full benefit of these cost saving measureswill be seen in 2010/11.

As previously reported, the majority of our high street shops were inherited in 2000from Scope, a charity registered in England and Wales. For the majority of theseshops we are committed to long term leases. The Trustees remain concerned aboutthe financial performance of the charity shops and are putting in place a new strategyto improve financial performance at these very challenging times. As stated in lastyear’s report the Trustees have evidence to support the assertion that charity shops,as part of the high street, have been negatively impacted by the recessionaryconditions that prevailed throughout 2008 and 2009. This economic environmenthas clearly negatively affected the quality and volume of donations to charity shops.Market conditions have also meant that early surrender of leases through negotiationwith landlords has not been possible. Given this position, the Trustees recognise thattrading will remain difficult for the foreseeable future.

Income from grants and fees was £60,000, 0.2% higher than those generated in2008/09. This income at £25,283,000 is analysed by funding source and activity inNote 2 to the Accounts. Income increased by 6.9% in Adult Residential Services asa result of negotiated increases in funding while the increase in Community SupportServices of 10% is due to the continued expansion of our Wishaw Supported LivingService. Income recognised in the SOFA for the Big Lottery Fund totalled £1,000(2008/09 £129,000).

Total charitable expenditure increased by 0.6% with costs increasing by £166,000over the previous year. Employment costs increased by £952,000 compared to2008/09. This was as a result of cost of living being awarded to staff in line withnational agreements for all staff groupings and a decision to award increments toqualifying staff. This model of remuneration and progression is not sustainable in thefuture and we are now working with our staff and unions to address this with a viewto freezing pay for a twelve month period and the introduction of amended terms andconditions of employment. These measures are required to bring the organisationinto a sustainable financial position. However, should cuts in funding be enforced bylocal authorities and other funders further cost saving measures will be required.

8

Included in charitable expenditure are support costs of £1,635,000. This has reducedby £11,000 compared to 2008/09. This demonstrates some of the cost savingmeasures undertaken during the year. The Trustees recognise the need to retainsufficient infrastructure to provide quality services, improve operational efficiency andto position the organisation for the future as their key challenge.

Expenditure on campaigns, advice provision, information and influencing reduced by21% compared to 2008/09. In the Trustees opinion this remains a very important partof the charity’s work. However, given the financial position of the organisation and themarket in which we operate the Trustees acknowledge the challenges of balancingthis work with making sufficient funds available to do so in a meaningful way.

Reserves Policy

The Trustees recognise the need to hold reserves in order to provide the necessaryworking capital to carry out our activities and to provide protection against adversefinancial circumstances in the future. Our policy is to move towards the sum of netcurrent assets attributable to unrestricted funds being equivalent to three months’expenditure.

At 31 March 2010 net current assets and investments totalled £1.4m, which issignificantly below the target level of £7.7m. The Trustees recognise that this will notbe achieved within the next twelve month period but will look to increase reservestowards target on an annual basis. At 31 March 2010 free unrestricted funds werein deficit by £331,000. As outlined in the Financial Review the Trustees are takingaction to improve the financial position of the organisation and improve the freereserves position in line with their stated policy.

Designated Funds

At the year end date the Trustees undertook a thorough review of funds previouslydesignated and considered areas where funds are required to be designated forfuture expenditure. In light of the current financial position the Trustees did notdesignate any funds for further use. The Trustees can confirm that plans are in placeto spend the balance of the remaining previously designated funds.

Investment Policy

Investments are held as a modest strategic reserve for the long term. All investmentsheld, in the form of short dated gilts, were sold during the year.

Employees

We have an Equal Opportunities policy and procedures to ensure that no jobapplicant, employee on a paid or voluntary basis receives less favourable treatmentthan others on the grounds of disability, HIV status, race, nationality, religion, sex,age, marital status, sexuality or responsibility for dependants. This coversrecruitment, training, career development and promotion. All employees have accessto the same opportunities.

9

The organisation continues to meet the requirements of the “Positive about disabledpeople” symbol awarded by the Employment Service in recognition that mechanismsare in place to positively encourage the recruitment, retention and development ofemployees with disabilities.

In order to meet the requirements of the Regulation of Care (Scotland) Act 2001, theCare Commission (Scotland) and the Scottish Social Services Council, we arecontinuing to support our care and support staff to enable them to become SVQ(Scottish Vocational Qualification) qualified.

Information

Staff are issued with an in-house magazine every 4 months. This includes informationon developments affecting the organisation and its staff. Staff are informed of currentdevelopments via the organisation’s intranet. Staff induction programmes and managertraining include information on financial and economic factors affecting our work.

Staff Involvement

We have several fora which involve staff representation. These include the JointNegotiating Consultative Committee and the Health and Safety Committee wherestaff are involved in the development of policies and procedures and consulted withon any restructuring of service provision. Staff are also actively encouraged to raise anyissues of concern with senior management through our Investigation Request System.

Health and Safety

Our commitment to a positive health and safety culture continues. Our Health andSafety policies and procedures have continually been reviewed and added to, toensure a safe working environment for service users and staff and to meet therequirements of current legislation.

Statement of Trustees’ Responsibilities

Law applicable to incorporated charities in Scotland requires the Main Board toprepare a Trustees’ Report and Accounts for each financial year which give a trueand fair view of the state of affairs of the charity and of the group at the end of theyear and of its financial activities including its income and expenditure during the yearthen ended. In preparing those financial statements, the Main Board are required to:

• Select suitable accounting policies and then apply them consistently;

• Make judgements and estimates that are reasonable and prudent;

• State whether applicable accounting standards have been followed, subjectto any material departures disclosed and explained in the accounts;

10

• Prepare the financial statements on a going concern basis unless it isinappropriate to presume that the charity and the group will continue in operation.

• In determining how amounts are presented within items in the profit and lossaccount and balance sheet, the Trustees must have regard to the substanceof the reported transactions or arrangement, in accordance with generallyaccepted accounting principles or practice.

The Main Board are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of the charityand which enable them to ensure that the financial statements comply with theCompanies Act 2006. They have general responsibility for taking such steps as arereasonably open to them to safeguard the assets of the group and to prevent anddetect fraud and other irregularities.

At the time of approving this report, the Trustees are aware of no relevant auditinformation of which the company’s auditors are unaware and have taken all stepsthat they ought to have taken as a Trustee in order to make themselves aware of anyrelevant audit information and to establish that the company’s auditors are aware ofthat information.

By order of the Main BoardA D J DicksonTrustee of the Main Board and Chief Executive

23 June 2010

Registered Office: Capability Scotland, 11 Ellersly Road, Edinburgh, EH12 6HYTelephone 0131 337 9876Fax 0131 346 7864E-mail capability@capability-scotland.org.uk

Capability Scotland is a company limited by guarantee, registered in Scotland,number SC036524. It is registered with the Office of the Scottish Charity Regulatoras a Scottish Charity, number SC011330.

11

Independent Auditor’s Report to the Trustees and Members ofCapability Scotland

We have audited the group and parent company financial statements (“the financialstatements”) of Capability Scotland for the year ended 31 March 2010 whichcomprise the group and company Statement of Financial Activities, the group andcompany Balance Sheet, the group Cash Flow Statement and the related notes.These financial statements have been prepared under the accounting policies setout therein.

This report is made exclusively to the members, as a body, in accordance withchapter 3 of part 16 of the Companies Act 2006, and to the charity’s trustees, as abody, in accordance with section 44 (1)(c) of the Charities and Trustee Investment(Scotland) Act 2005 and regulation 10 of the Charities Accounts (Scotland)Regulations 2006. Our audit work has been undertaken so that we might state to themembers and the charity’s trustees those matters we are required to state to themin an auditor’s report and for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyone other than the charity, itsmembers as a body and its trustees as a body, for our audit work, for this report, orfor the opinions we have formed.

Respective responsibilities of trustees and auditors

The trustees’ (who are also the directors of the company for the purposes of companylaw) responsibilities for preparing the Trustees’ Annual Report and the financialstatements in accordance with applicable law and United Kingdom AccountingStandards (United Kingdom Generally Accepted Accounting Practice) are set out inthe Statement of Trustees’ Responsibilities.

We have been appointed auditors under section 44(1)(c) of the Charities and TrusteeInvestment (Scotland) Act 2005 and under Companies Act 2006 and report to you inaccordance with those Acts.

Our responsibility is to audit the financial statements in accordance with relevant legaland regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true andfair view and are properly prepared in accordance with United Kingdom GenerallyAccepted Accounting Practice and have been prepared in accordance with theCompanies Act 2006, the Charities and Trustee Investment (Scotland) Act 2005 andRegulation 8 of the Charities Accounts (Scotland) Regulations 2006. We also reportto you whether, in our opinion, the information given in the Trustees’ Annual Reportis consistent with those financial statements.

We also report to you if, in our opinion, the charity has not kept proper accountingrecords, if the charity’s financial statements are not in agreement with theseaccounting records, if we have not received all the information and explanations werequire for our audit, or if certain disclosures of directors’ remuneration specified bylaw are not made.

12

We read the Trustees’ Annual Report and consider the implications for our report ifwe become aware of any apparent misstatements within it.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UKand Ireland) issued by the Auditing Practices Board. An audit includes examination,on a test basis, of evidence relevant to the amounts and disclosures in the financialstatements. It also includes an assessment of the significant estimates andjudgments made by the directors in the preparation of the financial statements andof whether the accounting policies are appropriate to the group and charity’scircumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us with sufficientevidence to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or other irregularity or error. Informing our opinion we also evaluated the overall adequacy of the presentation ofinformation in the financial statements.

Opinion

In our opinion:

• the financial statements give a true and fair view of the state of the group andcharity’s affairs as at 31 March 2010 and of its incoming resources andapplication of resources, including its income and expenditure, for the year thenended;

• the financial statements have been properly prepared in accordance withUnited Kingdom Generally Accepted Accounting Practice;

• the financial statements have been prepared in accordance with theCompanies Act 2006, the Charities and Trustee Investment (Scotland) Act 2005and regulation 8 of the Charities Accounts (Scotland) Regulations 2006; and

• the information given in the Trustees’ Annual Report is consistent with thefinancial statements.

Janet StevensonSenior Statutory AuditorFor and on behalf of Henderson Loggie, Statutory AuditorsHenderson Loggie is eligible to act as an auditor in terms of section 1212 of theCompanies Act 2006Edinburgh

23 June 2010

13

14

Group Statement of Financial Activities(incorporating an Income and Expenditure Account)

For the year ended 31 March 2010 Restated2010 2009

Unrestricted Funds Restricted Total TotalOrdinary Designated Funds Funds Funds

Notes £’000 £’000 £’000 £’000 £’000INCOMING RESOURCESIncoming resources fromgenerated funds:Voluntary Income:Donations and Gifts 571 0 268 839 862Legacies 730 0 0 730 930

Activities for generating funds:Commercial Trading Operations 1,287 0 0 1,287 1,303Investment income 4 109 0 0 109 139Incoming resources fromcharitable activities:Grants and fees receivable 2 1,212 0 24,071 25,283 25,223Sale of goods and services 515 0 302 817 792Other incoming resources 23 0 73 96 78

––––––––––––––––– –––––––– –––––––– ––––––––

Total incoming resources 4,447 0 24,714 29,161 29,327

––––––––––––––––– –––––––– –––––––– ––––––––

RESOURCES EXPENDEDCosts of generating funds:Fundraising 3 512 0 0 512 635Commercial Trading Operations 3 1,439 0 0 1,439 1,531

––––––––––––––––– –––––––– –––––––– ––––––––

1,951 0 0 1,951 2,166

––––––––––––––––– –––––––– –––––––– ––––––––

Charitable Expenditure:Operations 3 3,217 114 24,923 28,254 27,984Campaigning, Policy,Information and Influencing 3 383 0 0 383 484Governance costs 3 133 0 0 133 136

––––––––––––––––– –––––––– –––––––– ––––––––

3,733 114 24,923 28,770 28,604

––––––––––––––––– –––––––– –––––––– ––––––––

Total resources expended 5,684 114 24,923 30,721 30,770

––––––––––––––––– –––––––– –––––––– ––––––––

15

Net (Outgoing) Resources Notesbefore Transfers (1,237) (114) (209) (1,560) (1,443)

Gross Transfers between funds:Amortisation of capital funds 199 (199) 0 0 0

––––––––––––––––– –––––––– –––––––– ––––––––

Total Gross Transfers between funds 199 (199) 0 0 0

––––––––––––––––– –––––––– –––––––– ––––––––

Net (Outgoing) Resourcesbefore revaluations andinvestment asset disposals (1,038) (313) (209) (1,560) (1,443)

(Losses)/gains on revaluationand disposal ofinvestment assetsRealised/unrealised 6 (87) 0 0 (87) 46Gain/(loss) on defined benefitPension Scheme 13 373 0 0 373 (1,900)

––––––––––––––––– –––––––– –––––––– ––––––––

Net movement in funds (752) (313) (209) (1,274) (3,297)

Fund balances brought forwardat 1 April 2009 421 8,209 2,112 10,742 14,039

––––––––––––––––– –––––––– –––––––– ––––––––

Fund balances carried forwardat 31 March 2010 (331) 7,896 1,903 9,468 10,742

––––––––––––––––– –––––––– –––––––– ––––––––

All of the above results are derived from continuing activities.

All gains and losses recognised in the year are included above. The deficit for the year forCompanies Act purposes comprising the Net (Outgoing) Resources for the year and realised(losses) on investments was £1,647,000 (2009 £1,442,000).

The auditor’s report to the Trustees and Members of Capability Scotland is on pages 12 and 13.

The notes on pages 23 to 43 form part of these Accounts.

16

Statement of Financial Activities (incorporating an Income and Expenditure Account)

For the year ended 31 March 2010 Restated2010 2009

Unrestricted Funds Restricted Total TotalOrdinary Designated Funds Funds Funds

Notes £’000 £’000 £’000 £’000 £’000INCOMING RESOURCESIncoming resources fromgenerated funds:Voluntary Income:Donations and Gifts 571 0 268 839 862Legacies 730 0 0 730 930

Activities for generating funds:Commercial Trading Operations 1,287 0 0 1,287 1,303Investment income 4 109 0 0 109 139Incoming resources fromcharitable activities:Grants and fees receivable 2 1,212 0 24,071 25,283 25,223Sale of goods and services 515 0 302 817 792Other incoming resources 23 0 73 96 78

––––––––––––––––– –––––––– –––––––– ––––––––

Total incoming resources 4,447 0 24,714 29,161 29,327

––––––––––––––––– –––––––– –––––––– ––––––––

RESOURCES EXPENDEDCosts of generating funds:Fundraising 3 512 0 0 512 635Commercial Trading Operations 3 1,439 0 0 1,439 1,531

––––––––––––––––– –––––––– –––––––– ––––––––

1,951 0 0 1,951 2,166

––––––––––––––––– –––––––– –––––––– ––––––––

Charitable Expenditure:Operations 3 3,217 114 24,923 28,254 27,983Campaigning, Policy,Information and Influencing 3 383 0 0 383 484Governance costs 3 133 0 0 133 136

––––––––––––––––– –––––––– –––––––– ––––––––

3,733 114 24,923 28,770 28,603

––––––––––––––––– –––––––– –––––––– ––––––––

Total resources expended 5,684 114 24,923 30,721 30,769

––––––––––––––––– –––––––– –––––––– ––––––––

Net (Outgoing) Resources Notesbefore Transfers (1,237) (114) (209) (1,560) (1,442)

Gross Transfers between funds:Amortisation of capital funds 199 (199) 0 0 0

––––––––––––––––– –––––––– –––––––– ––––––––

Total Gross Transfers between funds 199 (199) 0 0 0

––––––––––––––––– –––––––– –––––––– ––––––––

Net (Outgoing) Resourcesbefore revaluations and investment asset disposals (1,038) (313) (209) (1,560) (1,442)

(Losses)/gains on revaluationand disposal ofinvestment assetsRealised/unrealised 6 (87) 0 0 (87) 46Gain/(loss) on defined benefitPension Scheme 13 373 0 0 373 (1,900)

––––––––––––––––– –––––––– –––––––– ––––––––

Net movement in funds (752) (313) (209) (1,274) (3,296)

Fund balances brought forwardat 1 April 2009 401 8,209 2,111 10,721 14,017

––––––––––––––––– –––––––– –––––––– ––––––––

Fund balances carried forwardat 31 March 2010 (351) 7,896 1,902 9,447 10,721

––––––––––––––––– –––––––– –––––––– ––––––––

All of the above results are derived from continuing activities.

All gains and losses recognised in the year are included above. The deficit for the year forCompanies Act purposes comprising the Net (Outgoing) Resources for the year and realised(losses) on investments was £1,647,000 (2009 deficit £1,442,000).

The auditor’s report to the Trustees and Members of Capability Scotland is on pages 12 and 13.

The notes on pages 23 to 43 form part of these Accounts.

17

Group Balance Sheet

As at 31 March 20102010 2009

Notes £’000 £’000 £’000 £’000FIXED ASSETSTangible Assets 6 8,809 9,610Investments 6 0 1,687

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

8,809 11,297CURRENT ASSETSStock 38 34Debtors 7 2,551 3,449Cash at bank and in hand 908 27

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

3,497 3,510Creditors:Amounts falling due within one year 8 (2,125) (2,770)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NET CURRENT ASSETS 1,372 740

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

TOTAL ASSETS LessCURRENT LIABILITIES 10,181 12,037Creditors:Amounts falling due aftermore than one year 9 (83) (224)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NET ASSETS Before Pension Liability 10,098 11,813

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Defined benefit pension scheme(liability) (630) (1,071)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NET ASSETS IncludingPension (liability) 9,468 10,742

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

18

CAPITAL AND RESERVES NotesUnrestricted funds:Ordinary 299 1,492Pension Reserve 13 (630) (1,071)Designated 10 7,896 8,209

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

7,565 8,630Restricted funds 10 1,903 2,112

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

9,468 10,742

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

The Accounts were approved by the Main Board on 23rd June 2010 and signed on their behalf by:

REF FoxMember of the Main Board

R HoganMember of the Main Board

The auditor’s report to the Trustees and Members of Capability Scotland is on pages 12 and 13.

The notes on pages 23 to 43 form part of these Accounts.

19

20

Balance Sheet

As at 31 March 20102010 2009

Notes £’000 £’000 £’000 £’000FIXED ASSETSTangible Assets 6 8,809 9,610Investments 6 0 1,687

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

8,809 11,297CURRENT ASSETSStock 39 34Debtors 7 2,556 3,455Cash at bank and in hand 881 0

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

3,476 3,489Creditors:Amounts falling due within one year 8 (2,125) (2,770)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NET CURRENT ASSETS 1,351 719

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

TOTAL ASSETS LessCURRENT LIABILITIES 10,160 12,016Creditors:Amounts falling due aftermore than one year 9 (83) (224)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NET ASSETS LessPension Liability 10,077 11,792

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Defined pension scheme(liability) (630) (1,071)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NET ASSETS IncludingPension (liability) 9,447 10,721

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

21

CAPITAL AND RESERVES NotesUnrestricted funds:Ordinary 279 1,472Pension Reserve 13 (630) (1,071)Designated 10 7,896 8,209

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

7,545 8,610 Restricted funds 10 1,902 2,111

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

9,447 10,721

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

The Accounts were approved by the Main Board 23rd June 2010 and signed on their behalf by:

REF FoxMember of the Main Board

R HoganMember of the Main Board

The auditor’s report to the Trustees and Members of Capability Scotland is on pages 12 and 13.

The notes on pages 23 to 43 form part of these Accounts.

Group Cash Flow Statement

For the year ended 31 March 2010 Restated2010 2009

£’000 £’000 £’000 £’000Net cash (outflow) from operatingactivities (Note 11(a)) (360) (1,478)

Returns on investments andservicing of financeInterest received (note 4) 17 47Investment income received (note 4) 92 92Hire purchase interest paid (note 2) (14) (30)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

95 109Investing activities and capital expenditurePayments to acquire tangible fixed assets (13) (653)Receipts from sales of tangible fixed assets 201 15Receipts from sales of investments 1,600 0

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

1,788 (638)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Net cash inflow/(outflow) before financing 1,523 (2,007)

FinancingHire purchase finance (redeemed)/initiated (194) 26Loan repaid (53) (5)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

(247) 21

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Increase/(Decrease) in cash 1,276 (1,986)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

The auditor’s report to the Trustees and Members of Capability Scotland is on pages 12 and 13.

22

23

NOTES TO THE ACCOUNTS

For the year ended 31 March 2010

ACCOUNTING POLICIESStatus of the Company

Capability Scotland is a company limited by guarantee of its members and does not have a sharecapital. Each member has undertaken to contribute an amount not exceeding one pound towardsany deficit arising in the event of the company being wound up.

Basis of accounting

The accounts have been prepared under the historical cost basis of accounting modified to includeinvestments at market value, the revaluation of certain land and buildings, and in accordance withapplicable accounting standards. The accounts are set out so as to comply with the Statement ofRecommended Practice for Charity Accounts (SORP 2005) approved by the Accounting StandardsBoard in March 2005. Accordingly the arrangement and headings have been adapted as providedfor in the Companies Act 2006.

Basis of Consolidation

The accounts of the subsidiary company, Capability Scotland Trading Ltd, are consolidated in thegroup accounts.

Funds

Funds are classified as either restricted funds or unrestricted funds, defined as follows:

Restricted funds are funds subject to specific trusts, which may be declared by the donor orwith their authority (e.g. by the restrictive wording of an appeal). Some are restricted income fundsexpendable at the discretion of the Main Board in furtherance of a particular activity, such as centraland local government grants and fees for a specific school or service, and funds raised for particularclient groups or activities.

Unrestricted funds are expendable at the discretion of the Main Board in furtherance of the objectsof Capability Scotland. If part of the unrestricted funds is earmarked at the discretion of the MainBoard for a particular project, it is designated as a separate fund. This designation has anadministrative purpose only, and does not legally restrict the Main Board’s discretion to apply the fund.

24

Statement of Financial Activities

This statement, produced to comply with the SORP 2005, is effectively an Income and ExpenditureAccount in different format, incorporating information on movements in capital resources to forma single statement of all movements between opening and closing fund balances. Incomingresources includes not only incoming revenue but also receipts of capital such as Governmentcapital grants and gains from the sale of land and buildings and gains and losses on investments,both realised and unrealised.

Legacies

A legacy is regarded as receivable if it is clear that at the accounting date the administrators of theestate had indicated the level of payment to be made.

Grants and fees receivable from statutory sources

Government grants and receipts under other funding arrangements from central and localgovernment and their agencies which are of a revenue nature are payable to Capability Scotlandat the discretion of the funding body and are included in incoming resources in the year to whichthe funding applies, provided its receipt has been approved by the funding body by the date ofissue of the accounts.

Donated Services and Gifts in Kind

Donated services and facilities are included at the value to the charity where this can be quantified.No amounts are included in the financial statements for services donated by volunteers.

Gifts in kind are not recognised in the financial statements. Gifts donated for resale are includedas income when they are sold at the price at which they were sold.

Resources expended

All expenditure is accounted for on an accruals basis and has been classified under headings thataggregate all costs related to the category. Where costs cannot be directly attributed to particularheadings they have been allocated to activities on a basis consistent with use of the resources.

Fundraising costs are those incurred in seeking voluntary contributions and do not include thecosts of disseminating information in support of the charitable activities.

Governance costs are the costs associated with the governance arrangements of the Charitywhich relate to the general running of the Charity as opposed to those costs associated withfundraising or charitable activity.

25

Support costs, which include the Head Office functions such as general management, payrolladministration, budgeting and accounting, information technology and human resources areallocated across the categories of charitable expenditure, governance costs and the costs ofgenerating funds.

The basis of the cost allocation has been explained in note 3 to the accounts.

Irrecoverable VAT is charged as a cost to the Statement of Financial Activities.

Internal transfers

Where services have been made available by one activity to another an appropriate internal chargehas been recorded in the accounts.

Local associations

Local associations affiliated to Capability Scotland are autonomous bodies. Any income receivedfrom local associations is included in incoming resources from donations and gifts.

Investment Income

Investment income is credited to the Statement of Financial Activities on the basis of actualdividends and interest received during the year.

Hire purchase commitments

Assets obtained under hire purchase contracts are recorded in the Balance Sheet as tangible fixedassets and are depreciated in accordance with the policy on depreciation. Future instalments, netof finance charges, are included within creditors. Rentals payable are apportioned between thefinance element and the capital element. The finance element is charged to the Statement ofFinancial Activities evenly over the period of each contract at the rate applicable at the date ofcommencement of the contract. A final charge or credit is made at the end of the contract toaccount for variations in the rate of interest through the contract period. The capital elementreduced the outstanding obligation for future instalments.

Leases

All leases are accounted for as operating leases. The rentals are charged to the Statement ofFinancial Activities on a straight line basis over the life of the lease.

Stocks

Stocks of materials and consumables are stated at the lower of cost and net realisable value in theordinary course of operating.

26

Fixed assets and depreciation

Material purchases of fixed assets are capitalised. Smaller amounts may be capitalised at thediscretion of the Main Board, subject to a minimum value of £1,000.

Fixed assets are included in the balance sheet at cost, or valuation in certain cases.

Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost lessestimated residual value of each asset evenly over its expected useful life as follows:

Leasehold improvements – Equal instalments up to the end of the period over which funding forthe improvements will be received.

Other Buildings – 50 yearsImprovements to buildings – equal instalments over the remaining life of the original asset.Plant and machinery – 5 yearsFurniture and fittings – 5 to 20 yearsVans and minibuses – 6 to 10 yearsMotor cars – 4 years

Investments are included in the balance sheet at market value. Gains and losses are recognisedin the Statement of Financial Activities in the year in which they arise.

Buildings purchased or improved using unrestricted funds

In certain cases, where a building has been built or improved using unrestricted funds in hand atthe time (i.e. there is no intention to recover the cost subsequently through its use) the Main Boardcreates a designated fund reflecting the book value of the asset, which is then reduced over theuseful economic life of the asset in line with its depreciation.

Dilapidations

Where leases require the reinstatement of buildings in line with a surveyors’ report, the cost ofdilapidations are expended in the year incurred.

1. STAFF NUMBERS AND COSTS

The aggregate remuneration and associated costsof Capability Scotland’s employees were: 2010 2009

£’000 £’000

Wages and salaries 20,459 19,637Social Security costs 1,644 1,603Pensions costs 1,023 795Agency Fees 1,200 1,318

––––––––––––––––––

24,326 23,353

Benefits in kind (as defined for personal taxation purposes) 3 24

––––––––––––––––––

24,329 23,377

––––––––––––––––––

Trustee emoluments 126 121

––––––––––––––––––

External Agencies are used to provide staff in Services where vacancies are not filled and, in somecircumstances to cover for staff absences. The Charity contracts with a number of Agencies toensure that staff are available to provide services to our clients.

Employees receiving salaries, plus benefits in kind, of more than £60,000 were in the following bands:

2010 2009

£110,001 – £120,000 1 1 £80,001 – £90,000 1 0 £70,001 – £80,000 0 1£60,001 – £70,000 1 1

Retirement benefits are accruing under a defined benefit scheme for one of the Trustees includedin staff members above.

A Trustee is related to a partner in the charity’s legal advisors, Shepherd and Wedderburn. In theyear Shepherd and Wedderburn raised invoices totalling £3,528 (2009 £11,240) on the charity.One of the Trustees, employed by the University of Dundee, oversees a PhD student, who wasawarded an £8,000 grant in the year for research.

No Trustees received remuneration or expenses in the year, with the exception of Mr Dickson whoreceived remuneration and expenses in his capacity as Chief Executive.

27

The average number of employees ofCapability Scotland during the year was: 2010 2009

Number Number1,229 1,250

––––––––––––––––––

2. NET (OUTGOING) RESOURCESRestated

a) Net (Outgoing) resources is stated after charging: 2010 2009£’000 £’000

Auditors’ remuneration (including fees and expenses) 26 26Depreciation of tangible fixed assets (note 6) 525 556Rental charges under operating leases 706 768Bank and Loan interest 4 2Hire purchase interest 14 30

The (deficit) is stated after charging:––––––––––––––––––

Loss on sale of tangible fixed assets 89 0

––––––––––––––––––

b) Grants and fees receivable by funding source is made up as follows:

Local Authorities 20,644 20,374Scottish Government 3,041 3,085The Employment Service and LECs 1,164 1,216Benefits Agency 353 339Health Boards 44 44Department of Transport 36 36Big Lottery Fund 1 129

––––––––––––––––––

Total 25,283 25,223

––––––––––––––––––

c) Grants and Fees Receivable by activity is made up as follows:

Schools 6,780 6,890Other Children’s Services 1,142 1,605Adult Day Services 3,591 3,857Adult Residential Services 8,310 7,776Community Support Services 4,064 3,693Employment Services 1,140 1,186Other Services and Activities 256 216

––––––––––––––––––

25,283 25,223

––––––––––––––––––

28

29

3. RESOURCES EXPENDED RestatedDirect Support 2010 2009

Activities Costs Total Totala) Total Resources Expended £’000 £’000 £’000 £’000Costs of Generating FundsFundraising 491 21 512 635Commercial Trading Operations 1,352 87 1,439 1,531

––––––––––––––––––––––––––––––––––––––

1,843 108 1,951 2,166

––––––––––––––––––––––––––––––––––––––

Charitable ExpenditureOperations:Schools 6,925 376 7,301 7,289Other Children’s Services 1,267 69 1,336 1,627Adult Day Services 3,848 209 4,057 4,203Adult Residential Services 8,274 450 8,724 8,572Community Support Services 4,259 232 4,491 3,970Employment Services 1,688 151 1,839 1,968Other Services 506 0 506 355

––––––––––––––––––––––––––––––––––––––

Total Operations 26,767 1,487 28,254 27,984Campaigning, Policy, Information and Influencing 343 40 383 484Governance Costs 133 0 133 136

––––––––––––––––––––––––––––––––––––––

27,243 1,527 28,770 28,604

––––––––––––––––––––––––––––––––––––––

Total per the Statement of Financial Activities 29,086 1,635 30,721 30,770

––––––––––––––––––––––––––––––––––––––

b) Costs of Generating FundsThe charity employs dedicated staff, based at Head Office, to undertake fundraising activities togenerate voluntary income. Activities include arranging events or supporting events arranged byother bodies on behalf of the charity, submitting funding applications to trusts and corporate bodiesand representing the organisation when meeting with such bodies, facilitating funding negotiationswith the BIG Lottery Fund and maintaining our database of committed givers. Our fundraisers alsomanage our legacy initiatives, direct mailing campaigns and collection boxes.

The charity has 19 shops, located throughout Scotland, which generate voluntary income by sellingdonated goods.

30

c) Support CostsSupport Costs of £1,635,000 (2009 £1,645,000) are included in the above. Included in SupportCosts are head office functions including general management, finance, payroll administration,human resources and information technology. Support costs have been allocated to Costs ofGenerating Funds and Campaigning, Policy, Information and Influencing on an estimated usagebasis. Support Costs allocated to Operations is on the same basis as direct expenditure incurredin undertaking an activity.

d) Governance CostsGovernance costs are made up of the external audit fee, costs associated with production of theannual accounts and AGM, company secretarial costs and a proportion of management costsbased on an estimate of time spent.

e) Designation of FundsNo funds were designated in the year.

4. INVESTMENT INCOME2010 2009£’000 £’000

Bank and other interest 17 47Investment income 92 92

––––––––––––––––––

109 139

––––––––––––––––––

5. LEGACIES

a) Legacies notifiedLegacies notified but not yet received by 31 March 2010 amounted to £7,000 (2009 £72,000).

b) Legacies ReceivedLegacies greater than £50,000 received in the year were as follows:

£Jacqueline MacKenzie 113,230

Isobel Rowbottom 71,649Ronald S Taylor 120,000

31

6. FIXED ASSETSa) Tangible Assets Group and Capability Scotland

ImprovementsLand & to Short Plant & Motor Furniture

Buildings Leaseholds Machinery Vehicles & Fittings TotalCost or Valuation £’000 £’000 £’000 £’000 £’000 £’000At beginning of year 10,206 109 659 1,792 1,629 14,395Additions 12 0 0 0 1 13Disposals (281) 0 (249) (194) (13) (737)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

At end of year 9,937 109 410 1,598 1,617 13,671

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

DepreciationAt beginning of year 1,751 60 594 1,082 1,298 4,785Provided for the year 199 4 16 225 81 525On disposals 0 0 (249) (185) (14) (448)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

At end of year 1,950 64 361 1,122 1,365 4,862

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Net book valueAt 31 March 2010 7,987 45 49 476 252 8,809

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

At 1 April 2009 8,455 49 65 710 331 9,610

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

The company has granted to the Trustees of the Capability Scotland Pension Scheme, as security,the Head Office, Westerlea building, which is included in Lands & Buildings above.

The purposes for which tangible fixed assets were held at 31 March 2010 were as follows:

Improvementsto Short Plant & Motor Furniture

Buildings Leaseholds Machinery Vehicles & Fittings Total£’000 £’000 £’000 £’000 £’000 £’000

Direct charitable purposesOperations 6,964 22 49 424 226 7,685Support functions 997 0 0 17 26 1,040Fundraising 26 0 0 0 0 26Retail shops 0 23 0 35 0 58

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

7,987 45 49 476 252 8,809

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

32

b) Contingent LiabilityIn certain circumstances grants received for refurbishment works on school buildings may becomerepayable. The total of such grants is £1,153,000 (2009 £1,143,000).

c) Assets held under hire purchase contractsThe net book value of motor vehicles includes amounts of £415,000 (2009 £564,000) in respectof assets held under hire purchase contracts. The depreciation charge for the year on these assetswas £149,000 (2009 £134,000).

d) UK Listed Investments 2010 2009Group & Capability Scotland

£’000 £’000Valuation at 1 April 2009 1,687 1,641Disposals in year (1,600) 0Plus Realised (Losses) (87) 0Unrealised Gains 0 46

––––––––––––––––––

Valuation at 31 March 2010 0 1,687

––––––––––––––––––

e) Subsidiary Undertakings: Percentage of Number of £1Capital Held Ordinary Shares

Capability Scotland Trading Limited 100% 100

Capability Scotland Trading Limited, a company incorporated in Scotland, is a wholly ownedsubsidiary and sells bought goods, predominantly christmas cards.

In the year Capability Scotland Trading Limited did not trade. This has been consolidated into theGroup SOFA on a line by line basis. Funds of £1,845 (2009 £1,845) are included in the GroupBalance Sheet and considered to be Restricted.

7. DEBTORS 2010 2009Capability Capability

Group Scotland Group Scotland£’000 £’000 £’000 £’000

Trade debtors 50 50 43 43Fees and grants due 2,212 2,212 2,970 2,970Value Added Tax recoverable 0 0 4 4Other debtors 53 58 45 51Prepayments and accrued income 236 236 387 387

––––––––––––––––––––––––––––––––––––––

2,551 2,556 3,449 3,455

––––––––––––––––––––––––––––––––––––––

8. CREDITORS:Amounts falling due within one year 2010 2009

Capability CapabilityGroup Scotland Group Scotland£’000 £’000 £’000 £’000

Trade creditors 482 482 912 912Social security costs and other taxes 517 517 482 482Other creditors and provisions 974 974 723 723Bank overdraft 0 0 395 395

––––––––––––––––––––––––––––––––––––––

1,973 1,973 2,512 2,512Current instalments due on loans 0 0 53 53Current instalments due on hire purchase 152 152 205 205

––––––––––––––––––––––––––––––––––––––

2,125 2,125 2,770 2,770

––––––––––––––––––––––––––––––––––––––

Loans include £0 (2009 £53,000) previously due to the Employment Service which were repaid inthe year.

The Royal Bank of Scotland holds a bond and floating charge over the heritable property of theorganisation.

9. CREDITORS:Amounts falling due after one year 2010 2009

Group & Capability Scotland£’000 £’000

Hire purchase instalments 83 224

––––––––––––––––––

Amounts due under hire purchase contracts are secured on certain motor vehicles.

33

10. FUNDSa) Group Statement of Funds

RestatedBalance Incoming Outgoing Gains and Balance

31 Mar 2009 Resources Resources Transfers (Losses) 31 Mar 2010£’000 £’000 £’000 £’000 £’000 £’000

Restricted Funds 2,112 24,714 (24,923) 0 0 1,903

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Unrestricted FundsDesignatedCapital Reserve 7,821 0 (45) (199) 0 7,577Other Funds 388 0 (69) 0 0 319

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

8,209 0 (114) (199) 0 7,896

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Ordinary 1,492 4,447 (5,752) 199 (87) 299Pension Reserve (1,071) 0 68 0 373 (630)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

421 4,447 (5,684) 199 286 (331)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

TOTAL UNRESTRICTED 8,630 4,447 (5,798) 0 286 7,565

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

TOTAL FUNDS 10,742 29,161 (30,721) 0 286 9,468

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

b) Restricted FundsRestricted funds as at 31 March 2010 comprise the following:

2010 2009Capability Capability

Group Scotland Group Scotland£’000 £’000 £’000 £’000

Operating income earmarked for expenditure 985 985 1,159 1,159Other restricted funds 918 917 953 952

––––––––––––––––––––––––––––––––––––––

1,903 1,902 2,112 2,111

––––––––––––––––––––––––––––––––––––––

Operating income earmarked for expenditure represents income received for specific servicesand projects. Other restricted funds are made up of 58 individual funds and represent incomereceived from funders with a specific use identified.

34

c) Designated FundsNo new funds were designated in the year. Designated funds comprise £7,577,000 of capital reservewhich reflects the book value of certain buildings and is reduced over the life of the asset in line withits depreciation, £144,000 for development of education services, £71,000 for the development ofother services, £98,000 for certain pension liabilities and £6,000 for Phonicstic research.

d) Big Lottery FundIncluded in Note 10a) are the following Restricted Funds in respect of services funded/partly fundedby the Big Lottery Fund:

Balance Incoming Outgoing Balance31 Mar 2009 Resources Resources 31 Mar 2010

£’000 £’000 £’000 £’000Childcare 4 All 25 1 (26) 0Play 4 All 13 0 (13) 0Edinburgh Childcare 4 All 7 0 (7) 0Active Futures 26 0 (26) 0

––––––––––––––––––––––––––––––––––––––

Total 71 1 (72) 0

––––––––––––––––––––––––––––––––––––––

e) Analysis of Group Net Assets Between Funds

Unrestricted Restricted Total£’000 £’000 £’000

Fixed Assets 8,809 0 8,809Current Assets 1,594 1,903 3,497Current Liabilities (2,125) 0 (2,125)Long Term Liabilities (83) 0 (83)Pension Liability (630) 0 (630)

–––––––––––––––––––––––––––––––

7,565 1,903 9,468

–––––––––––––––––––––––––––––––

35

11. NOTES TO THE CASH FLOW STATEMENT2010 2009

£’000 £’000 £’000(a) Reconciliation of net (outgoing) resourcesto net cash (outflow)/inflow from operating activities

Net (Outgoing) Resources before transfers (1,560) (1,442)

Adjustment for items not involving cash flowDepreciation charges 525 556Pension Fund adjustment (68) (155)Loss on sale of tangible fixed assets 89 0

–––––––– ––––––––

546 401

––––––––

Adjustment for items not regarded as operatingactivities for cash flow statementInterest received (17) (47)Investment income (92) (92)Hire purchase interest 14 29

–––––––– ––––––––

(95) (110)

––––––––

Increase in stocks (4) (10)Decrease/(Increase) in debtors 898 (391)(Decrease)/Increase in creditors (145) 74

–––––––– ––––––––

749 (327)

––––––––––––––––––

Net cash (outflow) from operating activities (360) (1,478)

––––––––––––––––––

36

(b) Reconciliation of net cash (outflow) tomovement in net funds 2010 2009

£’000 £’000 £’000Increase/(Decrease) in cash in the year 1,276 (1,986)Redemption/(Inception) of hire purchase contracts 193 (26)Loans written off by conversion to grants 53 5

–––––––– ––––––––

246 (21)

––––––––––––––––––

1,522 (2,007)Net funds at start of year (849) 1,158

––––––––––––––––––

Net funds at end of year 673 (849)

––––––––––––––––––

Net funds comprise:Cash at bank and in hand 908 (368)Loans 0 (52)Hire purchase contracts (235) (429)

––––––––––––––––––

673 (849)

––––––––––––––––––

12. COMMITMENTS

(a) Capital commitments 2010 2009£’000 £’000

Contracted 246 0

––––––––––––––––––

(b) Operating lease commitments 2010 2009£’000 £’000

Annual lease rentals on land and buildings:

Expiring within one year 34 120Expiring between one and five years 124 56Expiring after 5 years 441 430

––––––––––––––––––

599 606

––––––––––––––––––

37

13. PENSION SCHEMES

(a) The Charity operates one defined benefit scheme in the UK which offers both pensions inretirement and death benefits to members. Pension benefits are related to the members’ final salaryat retirement and their length of service. The scheme is closed to new members. Contributions tothe scheme for the year beginning 01 April 2010 are expected to be £325,000. The deficit on thedefined benefit scheme may result in an increase in contributions payable. The last full schemevaluation was carried out on 31 March 2009.

AssumptionsAs at As at

31 March 31 March 2010 2009

% p.a. % p.a.Discount rate 5.50 6.60Inflation 3.80 3.10Salary Growth 4.10 4.10Deferred Pension Revaluation 3.80 3.10LPI Pension Increases 3.80 3.10Mortality Table (1) 120% PNMA00 for Males Not Disclosed

120% PNFA00 for FemalesDependency Ratio 1% p.a. minimum improvement

85% for Males Not Disclosed75% for Females

Age difference (M-F) 3 years Not DisclosedCommutation of Pension (2) Yes Not DisclosedWithdrawals No Not DisclosedRetirement Males: 62 Females: 60 Not Disclosed

The 120% PNMA00 / PNFA00 year of birth tables together with a medium cohort projection and aminimum 1% p.a. mortality improvement produce the following expectations of life at age 65 (notethat improvements in mortality are assumed to continue in the future):

Year Male Future Female FutureLifetime (Years) Lifetime (Years)

2010 20.90 23.302030 22.70 25.102050 24.50 26.90

Commutation is assumed at all future times to take place on the current prevailing terms.

38

AssetsAt 31 March 2010, the Scheme’s assets were invested in insurance policies with companiesbelonging to the AEGON UK Group and funds held with the St James’ Place Partnership. Ananalysis of the underlying assets, together with the assumed rate of return (ROR) for each class ofinvestment, is shown below:

31 March 2010 31 March 2009Asset Value Assumed Asset Value Assumed

£’000 ROR £’000 ROREquities 7,249 8.4% p.a. 5,472 7.2% p.a.Corporate Bonds 8,225 5.5% p.a. 6,794 6.6% p.a.Gilts 1,705 4.5% p.a. 1,524 4.2% p.a.Cash / Other 0 0.5% p.a. 46 0.5% p.a.Insured Pensioners 186 5.5% p.a. 159 6.6% p.a.

–––––––– ––––––––

Total 17,365 13,995

–––––––– ––––––––

The value of Additional Voluntary Contribution policies is not included in the above asset valuations.The Scheme investments do not compromise any financial instruments issued by the charity.

39

Defined Benefit CostYear Year

ending ending31 March 31 March

2010 2009£’000 £’000

Operating CostsCurrent service cost * 242 325Less employee contributions (73) (77)

–––––––– ––––––––

Current service cost to employer 169 248Past service cost 0 0Any previously recognised surplusdeducted from past service cost 0 0Gains/losses on settlements or curtailments 0 0Any previously unrecognised surplusdeducted from settlement or curtailment costs 0 0

–––––––– ––––––––

169 248

–––––––– ––––––––

Finance (Cost) Income Interest cost (980) (997)Expected Return on Assets 897 1,067

–––––––– ––––––––

Net Finance (Cost) Income (83) 70

–––––––– –––––––

Recognised Gains and LossesDifference between actual and assumedreturn on assets 3,048 2,831Actuarial Gains and Losses (2,675) (931)

–––––––– ––––––––

373 1,900

–––––––– ––––––––

* The Current Service Cost is the cost of benefits accruing during the year and is financed bycontribution from the charity and active members of the Scheme. All Scheme expenses; levies dueto the Pensions Regulator and Pensions Protection Fund and the cost of insuring death-in-servicebenefits for active members are assumed to be paid by the charity in addition.

40

History of amounts recognised in the Statement of Recognised Gains and Losses

31 March 31 MarchAmount Percent Amount Percent

2010 2009£’000 £’000

a) Difference between actual and 3,048 18% of the value 2,831 20% of the valueassumed return on assets of assets at of assets at

31 March 2010 31 March 2009

b) Actuarial gains and losses 2,675 15% of the (931) 6% of theliabilities at liabilities at

31 March 2010 31 March 2009

Liability BreakdownAs at As at

31 March 31 March2010 2009£’000 £’000

Active members 5,427 –Deferred members 5,320 –Uninsured pensioners 7,062 –Insured pensioners 186 –

–––––––– ––––––––

Total liabilities 17,995 15,066

–––––––– ––––––––

Surplus/(Deficit)As at As at

31 March 31 March2010 2009£’000 £’000

Value of Assets 17,365 13,995Total Liabilities (17,995) (15,066)

–––––––– ––––––––

(630) (1,071)

–––––––– ––––––––

41

Changes in the Present Value of the Obligation and in the Fair Value of the Assets

As at As at31 March 31 March

2010 2009£’000 £’000

Present Value of Obligation atbeginning of year 15,066 15,666Interest Cost 980 997

Current Service Cost Employer 169 248Member 73 77

–––––––– ––––––––

Total 242 325

–––––––– ––––––––

Benefits Paid (968) (991)Actuarial Gain/(Loss) 2,675 (931)

–––––––– ––––––––

Present Value of Obligation at end of year 17,995 15,066

–––––––– ––––––––

As at As at31 March 31 March

2010 2009£’000 £’000

Fair value of Scheme Assets atbeginning of year 13,995 16,340Expected Return on Scheme Assets 897 1,067Charity Contributions 320 333Employee Contributions 73 77Benefits Paid (968) (991)Actuarial Gain/(Loss) on Scheme Assets 3,048 (2,831)

–––––––– ––––––––

17,365 13,995

–––––––– ––––––––

42

Sensitivity Analysis

The FRS17 results are sensitive to changes in financial conditions. The impact on the balance sheetposition of a plus/minus 1% p.a. change in the discount rate and a plus/minus 20% change in thetotal value of the Scheme’s assets are illustrated in the table below. These results make noallowance for deferred taxation or limitation on the surplus that may be recognised.

Discount RateAsset Value Unchanged 1% decrease 1% increase

5% p.a. 4.5% p.a. 6.5% p.a.£’000 £’000 £’000

Unchanged (630) (3,525) 1,66520% Decrease (4,102) (6,998) (1,808)20% Increase 2,844 (52) 5,138

Benefit Structure

Normal Retiring ageMales 65Females 65

Pension Accrual Rate1/60th of Final Pensionable Salary multiplied by Pensionable Service

Death After Retirement PensionMale members – 50% of member’s pensionFemale members – GMP accrued in respect of service between 6 April 1988 and 16 May 1990plus 50% of member’s pension from 16 May 1990.

Escalation RatesPre 6 April 1997: 0% p.a. on the pension in excess of the

Guaranteed Minimum Pension (GMP)0% p.a. on the GMP accrued before 6 April 19883% p.a. or RPI if less on the GMP accrued after 5 April 1988

Post 5 April 1997: 5% p.a. or RPI if less

No allowance has been made for payment of discretionary benefits or discretionary increases tobenefits.

43

44

We’d like to give specialacknowledgement to the125 people who participatedin events this year, especiallythose who took the trouble toorganise their own event andraised a total of £21,410!We’d like to thank all thosewho made donations inmemory of a loved one, or tomark a special occasion; andeveryone who responded toour Direct Mail appeals orgave regularly through HomeMoney Boxes, Direct Debit,Standing Orders or PayrollGiving. There are too many ofyou to list individually, butthank you all for your supportand if you would like to findout more about the manydifferent ways you cansupport us, please visitwww.capability-scotland.org.uk

CompaniesAegon UK CorporateServices Ltd

Aviagen LimitedBarclays Commercial BankBarclays Financial PlanningBarclays StockbrokersBarclays WealthClyde ImportersCreative Colour BureauCrerar Hotelsd3 Audio & Visual LtdFerrier PumpsHarry’s BarHeart of Midlothian PlcHenderson LoggieHSBCJ Smart & Co.(Contractors) plc

Keytec RecyclingKing SturgeLloyds TSB CommercialFinance

Lothian & Borders PoliceMarsh LtdOcean TerminalPeter Graham & PartnersRoyal Bank of ScotlandScottish EnterpriseScottish Motor AuctionGroup

Sher Brothers(Cash & Carries) Ltd

Simpson & MarwickThom Micro SystemsWilliam Grant & Sons Limited

Community Groupsand SchoolsBarshare Primary SchoolBroughty Ferry Round Table Dalry Nursery SchoolDunrossness Primary SchoolEdinburgh HebrewCongregation

Glenisla Primary SchoolNapier Students’ AssociationOrphir Primary SchoolOxgangs NurseryRotary Club of Buckie Scottish UniversitiesEnvironmental ResearchCentre

Singles Connection St. Madoes Primary SchoolStirling County Women’sBowling Association West

The Crown Bar Bo’ness The Edinburgh Masonic ClubWestruther Primary School

IndividualsMr Jim AllanMr Graeme Baillie

Miss Elaine BoyceMr Richard BurnsMr John CameronMrs Carolyn CasebowMrs Maria ClarkeMr Richard De’AthMr Andrew DickieMiss Joan FergusonMr Stuart FraserDeborah and Kevin GundleMr and Mrs D HatherlyMr David InnesMr & Mrs B MacphersonMr Jack McGowan SmythMr and Mrs Robert McIntoshMr Angus McKeeMr Colin McKellarMr Michael McNaught-DavisMrs D MersonMiss Alison MortonMr George ReidMr Jonathan RossMr Douglas ShawJames and Elizabeth SimMr John SmartMr and Mrs Andrew SmartMr Leslie ThomasMr Bill Wright

LegaciesDr Hilda AitkenMiss Agnes BairdDr J B BorthwickMrs Janet BurnettMiss Agnes BurnsMr William CarrieMrs Margarita CowanMr William DougalMrs Helen DunbarMrs Margaret DuncanMr James DunnMrs Jean ElliotMr Thomas GibbMrs Margaret GilmourMiss Isabella Hackney

Thank you for your help and support

45

Miss Christina HarperMiss Edith JohnstonMr Edwin KellockMr George KerrMr James LyleMiss Myrtle LynnMrs Rita MacDonaldMrs Jacqueline MackenzieMrs Marion MaclachlanMrs Evelyn MacPhailMiss Margaret MaxwellMrs Freda McBeanMrs Marion McCreadieMiss J L McKinnellMerchants of BalnacraigTrust

Mrs Elizabeth NobleMrs Margaret PearsonMr Richard PooleMrs Isobel RowbottomMs Margaret RoyMs Margaret ScottMrs Annie SillarsMr James SneddonMr Ronald TaylorRev Alexander TaylorMs Agnes WattMrs Margaret Wood

Trusts and FoundationsA M Pilkington CharitableTrust

Aberbrothock Skea TrustAlexander Moncur TrustBBC Children in NeedCallendar Charitable TrustGardening for the DisabledMiss E C Hendry CharitableTrust

Miss G M Pattullo’s Trust forHandicapped Girls

Miss I F Harvey’s CharitableTrust

Miss Marion Broughton’sCharitable Trust

Miss P M Ireland CharitableTrust

Miss R E Duncan’s Charitable Trust

Mrs K M F Maxwell-Stuart’sCharitable Trust

Netherton Charitable TrustStichting Teuntje Anna(TA Fund)

Tayside Police BenevolentFund

Templeton Goodwill TrustThe Appletree TrustThe Baily Thomas CharitableFund

The Brownlie Charitable TrustThe Gannochy TrustThe Good Neighbours TrustThe Guildry Incorporation ofPerth

The Harold Merton AdamsTrust

The Hugh Fraser FoundationThe I.B.B. TrustThe Ian Fleming CharitableTrust

The J K Young EndowmentFund

The James Wood BequestFund

The JTH Charitable TrustThe Leng Charitable TrustThe Low and BonarCharitable Fund

The Lynn FoundationThe Margaret MurdochCharitable Trust

The Martin ConnellCharitable Trust

The Mickel FundThe Miss Agnes H Hunter’sTrust

The Morrison FoundationThe R S Hayward TrustThe R S MacdonaldCharitable Trust

The Ralph Slater FoundationThe Robertson TrustThe Rozelle TrustThe RTR FoundationThe Sir Jules ThornCharitable Trust

The St. Katharine’s Fund

The Strathclyde PoliceBenevolent Fund

The Sylvia Aitken CharitableTrust

The W A Cargill FundThe W M Sword CharitableTrust

Thomson Charitable Trust

46

Capability Scotland Telephone: 0131 337 9876Head Office, Westerlea Textphone: 0131 346 252911 Ellersly Road Fax: 0131 346 7864Edinburgh Email: capability@capability-scotland.org.ukEH12 6HY Website: www.capability-scotland.org.uk

Company number SC036524Scottish Charity SC011330