Company Number: 00110663

ASSOCIATED BRITISH ENGINEERING PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 MARCH 2011

REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2011

CONTENTS	Page
Financial highlights	1
Chairman's statement	2
Directors' report	3
Report of the independent auditor - Group	7
Group accounting policies	8
Group income statement	14
Group statement of comprehensive income	14
Group balance sheet	15
Group statement of changes in equity	16
Group cash flow statement	17
Notes to the group financial statements	18
Report of the independent auditor – Company	33
Principal accounting policies - Company	34
Company balance sheet	36
Notes to the company financial statements	37
Statement of Directors' responsibilities	42
Corporate Governance report	43
Directors' Remuneration report	46
Directors, Registered Office and Advisers	48

The Directors' report on pages 3 to 6 and the Directors' Remuneration report on pages 46 and 47 have each been drawn up in accordance with the requirements of English law and liability in respect thereof is also governed by English law. In particular, the responsibility of the directors for these reports is owed solely to Associated British Engineering plc.

The directors submit to the members their Report and Accounts for the group for the year ended 31 March 2011. Pages 1 to 6 and 42 to 48, including the Financial Highlights, Chairman's Statement, Directors' Report, Corporate Governance report, Directors' Remuneration report and the Directors, Registered Office and Advisers page form parts of the Report of the Directors.

FINANCIAL HIGHLIGHTS

	2011 £'000	2010 £'000
REVENUE	4,102	3,366
PROFIT BEFORE TAXATION	226	471
NET ASSETS	2,769	2,356

BASIC EARNINGS PER £2 ORDINARY SHARE		38p
EQUITY SHAREHOLDERS' FUNDS PER £2 ORDINARY SHARE	£2.11	£1.79

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011

At the operating level the group had another successful year with operating profit rising from Ç649,000 to Ç842,000. This increase was entirely due to the very creditable performance by the group's only operating subsidiary British Polar Engines Ltd (BPE) that produced increased sales from Ç3.37m to Ç4.10m in the financial period to 31st March 2011. I would however continue to caution shareholders that the BPE business is by its nature volatile and subject to the vagaries' of the offshore oil drilling market and world demand generally.

The continued good performance of BPE and taking cognizance of the improvement in the Group's overall results, the Board considered it was time to address the anomaly in the accounts with regard to the company's capital structure and in particular the two classes of preference shares in issue.

Your Board is currently considering how best to deal with the preference shares in order to provide the Company with a capital structure which enables future corporate transactions to be considered.

The improvement in operating profit has been counteracted by the charge recognised in respect of the preference shares. The continued improvement in the Group's results has led to a re-measurement of the preference shares and dividend arrears, in accordance with IFRS.

These liabilities have been measured by applying an appropriate discount rate to the contractual amount resulting in a carrying value of Ç467,000. This amount has been recognised as a finance expense in the income statement.

However, this value does not reflect the actual contractual liability to the preference shareholders of Ç1,280,000. This is shown in the proforma statement of net assets at note 24, which in the Board's view is the true value of the preference shares and dividends due.

The IAS 19 Pension Valuation has resulted in a significant decrease in the pension deficit for BPE, which is also a positive outcome.

As commented above, the BPE Pension Fund shows an actuarial deficit of Ç1,852,000 at 31 March 2011 (Ç2,227,000 at 31 March 2010).

The Board continues to keep central costs at a low level and maintains the quest to identify a suitable corporate transaction to take the Group forward.

D A H Brown Chairman

29 June 2011

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 MARCH 2011

The directors submit their report and audited accounts for the year ended 31 March 2011.

PRINCIPAL ACTIVITIES

During the year the Company has acted as a parent undertaking for a subsidiary engaged in diesel and related engineering activities. Details of the trading subsidiary are set out in note 23.

BUSINESS REVIEW AND PRINCIPAL RISKS FACING THE BUSINESS

A review of the business and of events during the year is contained in the Chairman's Statement.

The Group's only operating business is through its subsidiary British Polar Engines Limited ("BPE"). Business activity in the sector in which BPE operates has in recent years been buoyed by sales to the oil services business as a result of high demand in the oil services support industry.

The outlook for BPE continues to be uncertain and the company is exposed to both volatile pricing and periodic cyclical downturns. A glance at the record of the trading results over the last decade demonstrates both revenue and operating profit increasing and declining according to the cycle of the oil sector. The Group's stream of income fluctuates from period to period as the Group's principal activity is in connection with the purchase and manufacture of spare engine parts and associated services. Therefore ongoing custom cannot be measured reliably and is cyclical by nature.

The economic downturn generally, and in our area of operation specifically, will impact almost immediately on the income and performance of the Group. In response to this the Directors aim to keep abreast of the economic climate and business strategy will be continually reviewed and updated to deal with changes. At worst, a sharp decline in the oil service sector could result in the Group making a loss though early identification of the trend will mitigate the quantum.

Further consideration of risks and uncertainties that face the Group and Company is contained in note 19 to the Group financial statements.

KEY PERFORMANCE INDICATORS

The Group uses various indicators to monitor its progress. Sales, service and production are continually monitored against set monthly budgets to compare and improve upon gross profit and operating profit margins. Budgets are set on a monthly and annual basis but the directors have not enhanced the disclosures in this regard as one key transaction stalling could have a significant impact on the feasibility of the budget meaning that such disclosures are not considered useful to users of the accounts.

The Group reviews the Pension Fund liability, the key assumptions underpinning the actuarial valuation and the minimum funding requirement on a continual basis. The key assumptions underpinning the actuarial valuation are reviewed and compared with industry norms; there were no notable variances from the prior year.

There is nothing to report on environmental, employee, social and community matters or essential contractual or other arrangements.

RESULTS AND DIVIDENDS

The Group profit after tax and excluding the impact of revaluing its preference shares and dividend arrears amounted to Ç467,000 (2010: Ç494,000). The directors do not recommend a dividend on the ordinary shares for the year (2010: nil per ordinary share).

CORPORATE GOVERNANCE

Details of corporate governance which is part of this report for the year to 31 March 2011 are disclosed in the corporate governance report.

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2011

DIRECTORS

The names of the directors who served during any part of the period from 1 April 2010 to 31 March 2011 are:

Mr D A H Brown	Chairman
Mr S J Cockburn	Non-Executive Director
Mr C Weinberg	Non-Executive Director

Biographical details of the directors are set out on page 48.

All the directors served throughout the year.

In accordance with the articles of association Mr S J Cockburn retires by rotation and, being eligible, offers himself for re-election.

SUBSTANTIAL HOLDINGS

As at 23 June 2011 the Company had been notified of the following substantial interests, in excess of 3%, in the issued ordinary share capital of the Company:

Pershing Keen Nominees Limited (BFCLT) non discretionary	16.5%
R A Pearce Gould	9.2%
Fiske Nominees Limited (FISKPOOL) non discretionary	6.4%
L R Nominees Limited	5.9%
W B Nominees Limited	5.7%
Forest Nominees Limited	3.1%

BENEFICIAL INTERESTS IN SIGNIFICANT CONTRACTS

None of the directors had a material interest in any contract of significance to which the Company or any of its subsidiaries was party during the year.

BENEFICIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY

The beneficial interests of the directors, their spouses and children (if any), in the share capital of the Company according to the register kept by the Company as at 1 April 2010 and 31 March 2011 were as follows:

	Ordinary shares of Ä2 each		7 per cent cumulative preference shares of Ä1 each		8 per cent cumulative redeemable preference shares of Ä1 each
	2011	2010	2011	2010	2011	2010
	No.	No.	No.	No.	No.	No.
Mr D A H Brown	2,146	2,146	-	-	-	-
Mr S J Cockburn	1,250	1,250	55,314	55,314	2,000	2,000
Mr C Weinberg	19,991	19,991	-	-	-	-

At the relevant dates Mr S J Cockburn had a non-beneficial interest in 46,296 ordinary shares and 32,000 7 per cent cumulative preference shares.

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2011

No director had any interest in the shares of any subsidiary. No share options were held by any of the directors at 31 March 2011 or 31 March 2010.

Since 31 March 2011 and up to and including 23 June 2011 there have been no changes in the directors' interests in the share capital of the Company.

CREDITOR PAYMENT POLICY

The Company's current policy concerning the payment of the majority of its trade creditors is to follow the Better Payment Practice Code co-ordinated by the Better Payment Practice Group. For other suppliers the Company's policy is to:

(a) Settle the terms of payment with those suppliers when agreeing the terms of each transaction;
(b) Ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
(c) Pay in accordance with its contractual and other legal obligations.

Wherever possible the subsidiary follows the same policy. The average number of days which the Company took to pay creditors was 30 days (2010: 30 days).

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group uses various financial instruments and these include cash, equity investments, preference shares and various others, such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations.

The structure of the group and company's capital, at nominal value, is as follows:

	No. in issue	Nominal Value Ä	Total Value Ä	% of Capital %
Ordinary shares	1,313,427	2	2,626,854	78.7
Preference shares – 7%	550,000	1	555,000	16.6
Preference shares – redeemable and 8%	157,395	1	157,395	4.7
	=========	======	=========	======

The Group's preference shares have been valued at amortised cost using the effective interest rate method, reflecting conditions existing at the balance sheet date. This valuation has resulted in the preference shares being recognised at the following values:

	Total Value Ä
Preference shares – 7%	206,574
Preference shares – redeemable and 8%	58,583
	=========

Further details of the policies adopted by the Group in respect of the financial risk management are included within note 19 to the Group financial statements.

CHARITABLE AND POLITICAL DONATIONS

The Group made no political or charitable donations during the year (2010: Çnil).

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2011

DISABLED PERSONS

It is the Group's policy to give sympathetic consideration to the recruitment, continuing employment, training, career development and promotion of disabled persons.

AUDITOR

Grant Thornton UK LLP have expressed willingness to continue in office. In accordance with section 489 (4) of the Companies Act 2006, a resolution to reappoint Grant Thornton UK LLP will be proposed at the Annual General Meeting.

By order of the Board

For and on behalf of haysmacintyre Company Secretaries Limited Company Secretary

29 June 2011

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ASSOCIATED BRITISH ENGINEERING PLC

We have audited the group financial statements of Associated British Engineering plc for the year ended 31 March 2011 which comprise the group accounting policies, the group income statement, the group statement of comprehensive income, the group balance sheet, the group statement of changes in equity, the group cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Statement of Directors' Responsibilities set out on page 42, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion the group financial statements:

give a true and fair view of the state of the group's affairs as at 31 March 2011 and of its result for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.

Under the Listing Rules, we are required to review:

the directors' statement, set out on page 44, in relation to going concern; and
the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the June 2008 Combined Code specified for our review; and
certain elements of the report to shareholders by the Board on directors' remuneration.

Other matter

We have reported separately on the parent company financial statements of Associated British Engineering plc for the year ended 31 March 2011 and on the information in the Directors' Remuneration Report that is described as having been audited.

Tracey James Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Oxford

GROUP ACCOUNTING POLICIES

FOR THE YEAR ENDED 31 MARCH 2011

BASIS OF PREPARATION

The company is incorporated in the United Kingdom under the Companies Act 2006.

These Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The policies set out below have been consistently applied to all the years presented.

The consolidated financial statements have been prepared using accounting policies specified by those IFRSs that are in effect at the end of the reporting period (31 March 2011) or which have been adopted early.

NEWLY ISSUED ACCOUNTING STANDARDS

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

Improvements to IFRSs (amendments effective 1 July 2010)
IFRS 9 Financial Instruments (effective from 1 January 2013).
IAS 24 (Revised 2010) Related Party Disclosures (effective 1 January 2011)
IAS 12 Income Taxes (effective 1 January 2012)
IAS 34 Interim Finance Reporting (Revised 2010) (effective 1 Januarys 2011)
IFRIC 19 Extinguishing Financial Liabilities With Equity Instruments (effective 1 July 2010)
The remaining standards in issue but not yet effective are not deemed to have a material impact on the group

The directors anticipate that the adoption of the above Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

The directors are currently assessing the impact of the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

IFRIC 14 Minimum Funding Requirements (Amendment) (effective 1 January 2011)

GOING CONCERN

The financial statements have been prepared on the going concern basis. There have been no changes to accounting policies in the year. The most notable accounting event has been the decrease in the pension scheme deficit based on this year's actuarial forecast and mentioned in the Chairman's Statement. The Directors have agreed a revised schedule of the contributions to eliminate the deficit on the ABE Pension Fund over thirteen years starting from the year ended 31 March 2010. Based on the group's budgets and cash forecasts, the board considers that the group has sufficient resources to meet all necessary outgoings and to enable it to continue in operational existence for the foreseeable future.

BASIS OF CONSOLIDATION

The Group financial statements incorporate the financial statements of Associated British Engineering plc and its subsidiary undertakings to 31 March each year. All inter-company balances and transactions have been eliminated in full. The Group financial statements include the results of subsidiaries acquired or disposed of during the year from or to the effective date of acquisition or disposal.

REVENUE RECOGNITION

Revenue is measured at the fair value of the consideration receivable by the Group for goods supplied and services provided, excluding value added tax and trade discounts. Revenue from the sale of spare parts is recognised when the goods are dispatched or, if under a bill and hold arrangement, when they are available for despatch to a specific customer. Revenue from the sale of engines is recognised in accordance with the performance of contractual terms and specifically when the engines have been satisfactorily tested in accordance with contractual terms. Revenue from servicing and repair work is recognised when the work is completed.

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

ACCOUNTING ESTIMATES AND JUDGEMENTS

Management are required, in accordance with IFRS, to exercise judgement and to make estimates and assumptions regarding the application of accounting policies and the resulting effect on reported amounts of assets, liabilities, income and expenses. These estimates and assumptions are based on historical experience and a review of current conditions prevailing at the time but actual results may differ from these estimates. Any such revision is recognised in the financial statements in the period in which the change in circumstance is detected.

Accounting Judgements

The key areas where management have exercised judgement in the year, and the thought processes undertaken, are as follows:

Pension Scheme

The Directors are in regular contact with the Trustees of the pension scheme, in connection with three keys areas where judgement is exercised; the assumptions underpinning the actuarial valuation, continued negotiations regarding the pension scheme and in relation to the payment plan. The Directors then assess the relevant estimates and assumptions made to ensure that all statutory obligations are met, where possible.

In evaluating the assumptions underpinning the actuarial valuation the Directors have sought the professional advice of a firm of actuaries who prepare the valuation according to certain industry standards and norms. During the year under review an actuarial gain of £413,000 (2010: £815,000 loss) was recognised in the group accounts.

The assumptions underpinning the actuarial valuation are disclosed further in note 17 to the Group financial statements.

Preference shares

The Group is funded by a combination of equity and debt instruments, the latter representing 555,000 7% £1 cumulative preference shares and 157,395 8% £1 cumulative redeemable preference shares, with a total nominal value £712,395.

International Financial Reporting Standards require these instruments to be carried at amortised cost using the effective interest rate method and have an amortised cost of £265,000. The Directors have made estimates in relation to the expected future profitability of the group, the effect of actuarial movements relating to the pension scheme, and receipt of dividends from subsidiary companies in arriving at amortised cost of the preference share capital. Similar estimates have been made when discounting the cash flows relating to the dividend arrears of £568,000 to £202,000.

The Directors considered the value of the preference shares and related dividends to be £nil at 31 March 2010, this was due to the lack of a track record of profitability within the group. The Directors have revised their opinion at 31 March 2011 and having considered the prospects and recent improvements in the profitability of the group consider there to be reduced uncertainty regarding the timing of the expected repayment of these instruments.

Deferred tax

Please refer to Taxation Policy below and note 20.

Accounting Estimates

The accounting estimate having an impact on carrying amounts of assets and liabilities in the reporting period is as follows:

Inventories

Inventories held by the Group consist of raw material (mainly components), work in progress (manufactured engine parts) and finished goods (both purchased and manufactured engine parts). A specific provision is made, on a 100% basis, for all stock lines that are obsolete or slow moving for periods in excess of four years. A general provision is made of 5%, 12.5%, 25% and 50% over all stock lines that have not moved for one, two, three and four years respectively.

The inventory provision at the year end amounted to £1,957,000 (2010: £1,909,000). The gross value of inventories at the year end is £3,216,000 (2010: £3,325,000).

The directors review their assumptions and accounting estimates, along with the accounting policies adopted in preparing these financial statements, on a regular basis and recognise any change in the period in which circumstances vary.

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

INVENTORIES AND IMPAIRMENT OF INVENTORIES

Inventories of raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value. Work in progress and finished goods include an appropriate allocation of overheads.

Cost is on a first in, first out basis. Net realisable value is the estimated selling price in the normal course of business, less estimated costs of completion and provision is made for obsolete, slow moving and defective inventories.

LEASED ASSETS

Leases of property and plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Assets held under finance leases are capitalised at lease inception at the lower of the asset's fair value and the present value of the minimum lease payments. Obligations related to finance leases, net of finance charges in respect of future periods, are included as appropriate within borrowings. The interest element of the finance cost is charged to the income statement over the life of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant or equipment is depreciated on the same basis as owned plant and equipment or over the life of the lease, if shorter.

Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Operating lease rentals (net of any related lease incentives) are charged against profit on a straight line basis over the period of the lease.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less depreciation and any impairment in value. Freehold land is not depreciated. Depreciation is calculated to write down the cost of all property, plant and equipment less its residual value by annual instalments over their expected useful lives on the following bases:

Freehold buildings	5 per cent
Plant and machinery	7Ö- 33⅓ per cent

These useful lives and residual values are reviewed in each financial period.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or where shorter, over the term of the relevant lease. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised as income.

The carrying values of property, plant and machinery are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists, and where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amounts.

TAXATION

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

FOREIGN CURRENCIES

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the exchange rates ruling at the balance sheet date. All exchange differences are dealt with through the income statement.

RETIREMENT BENEFIT COSTS

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

For defined benefit retirement schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside profit or loss and presented in the group statement of comprehensive income.

Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to cumulative unrecognised past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

The Group has recognised the actuarial losses and gains immediately within the Statement of Comprehensive Income in accordance with the provisions stated within IAS 19 'Employee benefits'.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with a maturity of three months or less which are subject to an insignificant risk of changes in value.

FINANCIAL INSTRUMENTS

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the income statement. Finance costs are calculated so as to produce a constant rate of charge on the outstanding liability.

Where none of the contractual terms of share capital meet the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.

Further analysis of the Group's financial instruments, and the relevant exposure to risks and uncertainties, is stated in note 19 below and the various classifications of financial assets and liabilities are identified and explained.

Trade and other receivables

Trade and other receivables are originally recognised at fair value. Subsequent measurement is at amortised cost using the effective interest rate method. A provision against trade receivables is made when there is objective evidence that the group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The total of bad and doubtful debts at the year end was Ç3,000 (2010: Ç21,000). Trade receivables and cash and cash equivalents are classified as loans and receivables.

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

FINANCIAL INSTRUMENTS (continued)

Trade and other payables

Trade and other payables are originally recognised at fair value, net of transaction costs. Subsequent measurement is at amortised cost using the effective interest rate method.

Investments in securities

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, with all transaction costs being written off to the income statement as incurred.

Investments are classified as held for trading and are measured at subsequent reporting dates at fair value. Gains and losses arising from changes in fair value of held for trading financial assets are included in the net profit or loss for the period. At the year end an adjustment of Ç17,000 (decrease) was made to align the investments in securities with their fair value.

Cumulative preference shares

Cumulative preference shares are measured subsequent to initial recognition at amortised cost using the effective interest rate method. Where the group revises its estimates of cash payments, the carrying amount of the financial liability is adjusted to reflect actual and revised estimated cash flows. The group recalculates the carrying amount by computing the present value of the estimated future cash flows at the financial instruments' original effective interest rate. The adjustment is recognised as income or expense in the income statement. Refer to Note 15 for further details.

SHARE BASED PAYMENTS AND SHARE OPTIONS

Former employees of the Group have received remuneration in the form of share based payment transactions, whereby employees render services in exchange for rights over shares ('equity settled transactions'). The cost of these transactions is measured by reference to their fair value at the date at which the options are granted. The fair value is determined by using the Black-Scholes Option pricing model. There has been no charge recognised with respect to the share options as all those in issue fall outside the scope of IFRS 2, having been granted before November 2002.

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

At each balance sheet date the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.

SEGMENTAL REPORTING

IFRS 8 "Operating segments" was adopted in the previous year by the Group during the year ended 31 March 2010. The standard requires financial information is to be disclosed in the financial statements in the same format in which it is disclosed to the chief operating decision-maker. The chief decision-maker has been identified as the Board, at which level strategic decisions are made.

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

EQUITY AND RESERVES

Share capital represents the nominal value of shares that have been issued except for the preference shares classified as debt.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings include all current and prior period retained profits and losses.

Other reserves relate to movements not classified in any of the reserves detailed above.

All transactions with owners of the parent are recorded separately within equity.

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011

	Note	2011 Ä'000	2010 Ä'000
REVENUE	1	4,102	3,366
Operating costs	2	(3,260)	(2,717)
OPERATING PROFIT		------------- 842	------------- 649
Finance expense Finance income	7 7	(641) 25	(200) 22
PROFIT BEFORE TAXATION		------------- 226	------------- 471
Taxation	8	(226)	23
PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY		------------- - ======	------------- 494 ======
EARNINGS PER SHARE ON PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY
BASIC AND DILUTED	9	- ======	38p ======

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2011

		2011 Ä'000	2010 Ä'000
Profit for the year		- -------------	494 -------------
Other comprehensive income Actuarial gains/(losses) on retirement benefit obligation	17	413	(815)
Other comprehensive income for the year		------------- 413 -------------	------------- (815) -------------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		413 ======	(321) ======

All activities are classified as continuing.

GROUP BALANCE SHEET

31 MARCH 2011

	Note	2011 Ä'000	2010 Ç'000	2009 Ç'000
ASSETS
Non-current assets Property, plant and equipment	10	98	137	193
Current assets Inventories	12	------------- 1,259	------------- 1,416	------------- 1,387
Trade and other receivables Held for trading investments	13 14	750 97	620 129	560 67
Cash and cash equivalents		3,945 -------------	2,915 -------------	2,506 -------------
		6,051 -------------	5,080 -------------	4,520 -------------
Total assets		6,149 ======	5,217 ======	4,713 ======
EQUITY AND LIABILITIES
Called up share capital Share premium account	15	2,627 5,038	2,627 5,038	2,627 5,038
Other components of equity Retained earnings		11 (4,907)	11 (5,320)	11 (4,999)
Equity attributable to the Company's Equity shareholders		-------------- 2,769	-------------- 2,356	-------------- 2,677
LIABILITIES		-------------	-------------	-------------
Non-current liabilities Retirement benefit obligation	17b	1,852	2,227	1,417
Cumulative preference shares Obligations under finance leases	18 18	467 -	- -	- 1
		------------- 2,319	------------- 2,227	------------- 1,418
Current liabilities		-------------	-------------	-------------
Trade and other payables Obligations under finance leases	18 18	837 -	632 1	577 1
Current tax liabilities		224 -------------	1 -------------	40 -------------
		1,061 -------------	634 -------------	618 -------------
Total liabilities		3,380 -------------	2,861 -------------	2,036 -------------
Total equity and liabilities		6,149 ======	5,217 ======	4,713 ======

The financial statements were approved and authorised for issue by the Board of Directors on 29 June 2011 and were signed below on its behalf by:

C Weinberg

Director

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2011

	Share Capital Ä'000	Share Premium Ä'000	Other reserve Ä'000	Retained Earnings Ä'000	Total Ä'000
Balance at 1 April 2009	2,627	5,038	11	(4,999)	2,677
Profit for the year	-	-	-	494	494
Other comprehensive income Actuarial loss in defined benefit plan	-	-	-	(815)	(815)
Total comprehensive income for the year	-------------- - --------------	-------------- - --------------	-------------- - --------------	--------------- (321) ---------------	--------------- (321) ---------------
Balance at 31 March 2010	2,627 --------------	5,038 --------------	11 --------------	(5,320) ---------------	2,356 ---------------
Profit for the year	-	-	-	-	-
Other comprehensive income Actuarial gain in defined benefit plan	-	-	-	413	413
Total comprehensive income for the year	-------------- - --------------	-------------- - --------------	-------------- - --------------	--------------- 413 ---------------	--------------- 413 ---------------
Balance at 31 March 2011	2,627 ======	5,038 ======	11 ======	(4,907) =======	2,769 ======

GROUP CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011

	2011 Ä'000	2010 Ç'000
Cash flows from operating activities
Cash generated from operations	1,028	428
Interest received	25	22
Interest paid	(2)	(2)
Net cash from operating activities	----------------- 1,051	----------------- 448 -----------------
Cash flows from investing activities	-----------------
Purchase of property, plant and equipment	(35)	(16)
Sale proceeds from trading investments	15	11
Purchase of trading investments	-	(33) -----------------
Net cash used in investing activities	----------------- (20)	(38)
Cash flows from financing activities	-----------------	-----------------
Repayments of obligations under finance leases	(1)	(1)
Net cash used in financing activities	----------------- (1) -----------------	----------------- (1) -----------------
Net increase in cash and cash equivalents	1,030	409
Cash and cash equivalents at beginning of year	2,915	2,506
Cash and cash equivalents at end of year	----------------- 3,945	------------------- 2,915
	=========	=========
CASH FLOW FROM OPERATING ACTIVITIES	2011	2010
	Ä'000	Ç'000
Profit before taxation	226	471
Adjustments for: Depreciation		72
Interest income	73 (25)	(22)
Finance expense	469	2
Pension scheme interest expense	172	198
Cash paid in excess of current service cost	(134)	(203)
Changes in working capital:
Decrease/(increase) in inventories	157	(29)
Increase in trade and other receivables	(130)	(60)
Increase in payables	205	52
Increase / (decrease) in investments	17	(40)
Taxes paid	(2) ------------	(13) ----------
Cash generated from operations	1,028	428
	=====	=====

See note 21 for details of cash not available for use.

NOTES TO THE ACCOUNTS - GROUP

FOR THE YEAR ENDED 31 MARCH 2011

1. SEGMENTAL REPORTING

The following table shows an analysis of the Group's external sales by geographical market:

	2011	2010
	Ä'000	Ç'000
United Kingdom	1,719	1,172
Europe	1,484	1,266
Far East and Australasia	480	649
Africa	150	101
North and South America	191	78
Middle East	39	74
Russia	39	26
	------------- 4,102	------------- 3,366
	======	======

All of the above revenue arises from diesel and related engineering activities and originates in the United Kingdom.

In the year ended 31 March 2011 and 31 March 2010 all of the assets held by the group were located in the United Kingdom and all capital expenditure was incurred within the United Kingdom.

Operating segments

The following segment information has been prepared in accordance with IFRS 8, "Operating Segments", which defines requirements for the disclosure of financial information of an entity's operating segments.

The Board consider the Group on an individual company basis. Reports by individual companies are used by the chief decision-maker in the Group. Significant operating segments are Associated British Engineering Plc and British Polar Engines Limited.

The Group's operations are located in the United Kingdom. Any transactions between business units are on normal commercial terms and conditions.

British Polar Engines Limited's activities consist of the manufacture and supply of diesel engines and spare parts for diesel engines together with associated repair work.

Associated British Engineering Plc is the group holding company.

Year to 31 March 2011	Associated British Engineering Plc	British Polar Engines Limited	Consolidated
	Ä'000	Ä'000	Ä'000
External sales	- ----------	4,102 ----------	4,102 -----------
Segment result (PBIT)	(249)	1,091	842
Net finance expenses Taxation	----------	----------	(616) (226)
Profit after tax			-------- -
Other information Capital additions	-	35	===== 35
Balance sheet Segment assets	503 =====	5,646 =====	6,149 =====

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

1. SEGMENTAL REPORTING (continued)

Year to 31 March 2010	Associated British Engineering Plc £'000	British Polar Engines Limited £'000	Consolidated £'000
External sales		3,366	3,366
Segment result (PBIT)	(159)	808	649
Net finance expenses Taxation			(178) 23
Profit after tax			494
Other information Capital additions	$\overline{2}$	14	16
Balance sheet Segment assets	696	4,521	5,217

There were three customers who each contributed more than 10% of the total group revenue for the year ended 31 March 2011 (2010: one customer).

2. OPERATING COSTS	2011	2010
--------------------	------	------

		£'000	£'000
	Changes in inventories	157	(28)
	Raw materials used	1,404	1,286
	Staff costs	1,211	1,080
	Depreciation and amortisation	72	72
	Other expenses	416	307
		3,260	2,717

3.	OPERATING PROFIT	2011	2010
		£'000	£'000
	Operating profit is stated after charging/(crediting)
	Depreciation on owned assets	72	71
	Depreciation on assets held under finance leases	1	1
	Fees payable to the Company's auditor for the audit of the Company's annual accounts:
	PLC audit costs	20	23
	The audit of the Company's subsidiaries pursuant to legislation	20	16
	Tax services	2	14
	Operating lease rental on plant and machinery	30	34
	Operating lease rental on land and buildings		16
	Foreign exchange gain	2	(4)

NOTES TO THE ACCOUNTS - GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

STAFF COSTS AND EMPLOYEES	2011 Ä'000	2010 Ç'000
Wages and salaries	1,026	939
Social security costs	100	85
Other pension costs	85	56
	------------- 1,211	------------- 1,080
	======	======

The average monthly number of persons employed by the Group during the year was:

	2011 Number	2010 Number
By activity
Production	11	11
Administration	16	16
	-------------	-------------
	27	27
	======	=====

5. DIRECTORS' REMUNERATION

Directors received emoluments of Ç35,000 (2010: Ç35,000). Further details can be found on page 46.

6.	KEY MANAGEMENT COMPENSATION	2011 Ä'000	2010 Ç'000
	Remuneration of group directors	35 ======	35 ======

The group made no pension contributions in respect of group directors during the year ended 31 March 2011 or 31 March 2010.

NET FINANCE EXPENSE	2011 Ä'000	2010 Ç'000
Interest on obligations under finance leases	2	2
Borrowings at amortised cost:
7% Cumulative preference dividend	159	-
7% Cumulative preference share capital	206	-
8% Cumulative redeemable preference dividend	43	-
8% Cumulative redeemable preference share capital	59	-
Interest expenses for borrowings at amortised cost	---------- 467	---------- -
Pension interest cost less expected return on scheme assets	172	198
	---------- 641	---------- 200
Interest receivable on cash and cash equivalents	(25)	(22)
	----------	----------
	616	178
	=====	=====

See note 15 for details of the preference shares and associated dividends.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

TAXATION	2011	2010 Ç'000
The tax charge/(credit) is set out below:	Ä'000
Current tax:
United Kingdom corporation tax at 28% (2010: 21%)	223	4
Adjustment to tax charge in respect of previous year	3	(27)
Total current tax and tax on profit on ordinary activities	-------- 226 ====	-------- (23) ====

The tax assessed for the period is different from the standard rate of corporation tax in the UK of 28% (2010: 21%). The differences are explained as follows:

	2011 Ä'000	2010 Ç'000
Profit on ordinary activities before tax	226	471
Profit on ordinary activities multiplied by standard rate of Corporation tax in the UK of 28% (2010: 21%)	---------------- 63	---------------- 99
Effects of:
Expenses not deductible for tax purposes	175	(7)
Tax losses and ACT relief	(19)	(71)
Adjustment to tax in respect of previous year	3	(27)
Other differences	-	(17)
Capital allowances for the period in excess of depreciation	4	-
Total tax for period	---------------- 226 =======	---------------- (23) ========

The group has trading losses of approximately Ç1.2 million (2010: Ç1.2 million), surplus ACT of approximately Ç879,000 (2010: Ç895,000) and capital losses of Ç9.2 million (2010: Ç9.2 million). These are available to set against future taxable profits, taxation liabilities and capital gains respectively. The trading losses are available to be used against future profits arising from the same trade within Associated British Engineering plc. These amounts are subject to agreement with Her Majesty's Revenue and Customs.

9. EARNINGS PER SHARE

The calculation of earnings per ordinary share is based on the profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

	Profit Ä'000	2011 Weighted Average number of Shares	Per shares amount pence	Profit Ç'000	2010 Weighted Average Number of Shares	Per shares amount Pence
Basic and diluted
earnings per share	- =========	1,313,427 =========	- =========	494 =========	1,313,427 =========	38p =========

The share options in issue are non- dilutive as the average exercise price was greater than the average price of the company's shares during the year

NOTES TO THE ACCOUNTS - GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

PROPERTY, PLANT AND EQUIPMENT	Freehold land and buildings Ä'000	Plant and machinery Ä'000	Total Ä'000
COST
At 1 April 2009	689	1,412	2,101
Additions	-	16	16
Disposals	-	(7)	(7)
At 31 March 2010	---------------- 689	------------------- 1,421	------------------- 2,110
Additions	-	35	35
Disposals	-	(50)	(50)
At 31 March 2011	---------------- 689	------------------- 1,406	------------------- 2,095
ACCUMMULATED DEPRECIATION	----------------	-------------------	-------------------
At 1 April 2009	615	1,293	1,908
Charge for year	30	42	72
Eliminated on disposals	-	(7)	(7)
At 31 March 2010	---------------- 645	------------------- 1,328	------------------- 1,973
Charge for year	31	42	73
Eliminated on disposals	-	(49)	(49)
At 31 March 2011	---------------- 676	------------------- 1,321	------------------- 1,997
CARRYING AMOUNTS	----------------	-------------------	-------------------
At 31 March 2011	13	85	98
At 31 March 2010	======== 44	========= 93	========== 137
At 31 March 2009	======== 74	======== 119	========== 193
	========	========	==========

Plant and machinery assets with a carrying amount of £Nil (2010: £4,000) are held under finance leases. The amount of depreciation in respect of such assets amounted to £1,000 (2010: £1,000) for the year.

11. CAPITAL COMMITMENTS

At 31 March 2011 the Group had capital commitments of £Nil (2010: £Nil).

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

INVENTORIES	2011 Ä'000	2010 Ç'000	2009 Ç'000
Raw materials	113	82	109
Work in progress	111	252	230
Finished goods	1,035	1,082	1,048
	------------- 1,259	------------- 1,416	------------- 1,387
	======	======	======

The closing inventory balance of Ç3,216,000 (2010: Ç3,325,000) is stated net of provisions of Ç1,957,000 (2010: Ç1,909,000). There was an increase in provision of Ç48,000 in relation to slow moving stock.

TRADE AND OTHER RECEIVABLES	2011 Ä'000	2010 Ä'000	2009 Ç'000
Trade receivables	637	545	484
Other receivables	27	29	73
Prepayments and accrued income	86	46	3
	-----------	----------	----------
	750	620	560
	=====	=====	=====

The Group has no significant concentration of credit risk, with exposure spread over a large number of customers. At the year end a provision against the trade receivables balance amounts to Ç3,000 (2010: Ç21,000 provision).

14.	HELD FOR TRADING INVESTMENTS	2011 Ä'000	2010 Ç'000	2009 Ç'000
	Listed Securities	97	129	67
		====	===	===

	Financial assets at fair value through profit or loss Ä
Opening balance Net gains/(losses) recognised Disposals	129 (17) (15)
Closing balance	---------- 97 =====

Gains or losses on held for trading investments are presented within the operating costs heading.

The fair value of the equity investments held is calculated by reference to the quoted market price at the year end.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

CALLED UP SHARE CAPITAL	2011 £2000	2010 £'000	2009 £'000
Nominal value:
Allotted and fully paid:
1,313,427 ordinary shares of £2 each	2,627	2,627	2,627
555,000 7% cumulative preference shares of £1 each	555	555	555
157,395 8% cumulative redeemable preference shares
of $£1$ each	157	157	157
	3,339	3,339	3,339

Carrying value:
Equity shares:
1,313,427 ordinary shares of £2 each	2,627	2,627	2,627

Shares classed as financial liabilities
555,000 7% Cumulative preference shares of £1 each	206
157,395 8% Cumulative redeemable preference shares of £1 each	59

There were no shares allotted during the course of the years ended 31 March 2010 or 2011. The Company has one class of ordinary share which carries no right to fixed income. The Company also has two classes of cumulative preference shares, which carry the right to fixed returns of 7% and 8% per annum respectively.

The structure of the group and company's capital, at nominal value, is as follows:

	No. in issue	Nominal Value	Total Value	$%$ of Capital
	.000	£	£'000
Ordinary shares	1,313		2,627	78.7
Preference shares $-7\%$	555		555	16.6
Preference shares – redeemable and 8%	157		157	4.7

Further to the Extraordinary General Meeting held on 1 September 1999 the ordinary shares have 200 votes per share.

The 7% cumulative preference shares and 8% cumulative redeemable preference shares, classified as debt under IAS 32, are non voting unless the dividends are six months in arrears or the resolution relates to the winding up of the Company or affects the rights attaching to them. The Company has the power to redeem the 8% Cumulative preference shares at par (together with arrears of dividends) at any time. Since the dividends are more than six months in arrears, the 8% Cumulative redeemable preference shares of Ç1 each have 50 votes per share and the 7% Cumulative preference shares of Ç1 each have 4 votes per share.

In accordance with IAS 39 the 7% cumulative preference shares and the 8% cumulative redeemable preference shares are required to be carried in the financial statements at amortised cost using the effective interest rate method, reflecting conditions existing at the balance sheet date. The 7% cumulative preference shares are accruing a dividend of Ç39,000 per annum and the 8% cumulative redeemable preference shares are accruing a dividend of Ç13,000 per annum. At 31 March 2011 total dividend arrears of Ç568,000 (2010: Ç516,000) had accrued.

Under IAS 32 the preference dividends are disclosed as a finance expense and any arrears included within payables. IAS 39 also permits the total of accumulated arrears of dividends to be discounted and applying the same methodology as that applied to the preference shares has resulted in carrying values of Ç159,000 in respect of the 7% shares and Ç43,000 in respect of the 8% shares, as disclosed in note 18.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

16. SHARE BASED PAYMENTS

The Company operates an Executive Share Option Scheme (ESOP) under which options are granted with the guidance of the remuneration committee. Options are granted with a fixed exercise price equal to the market price of the shares under option at the date of the grant. The contractual life of an option is 10 years. Options granted under the ESOP will become exercisable on the third anniversary of the date of the grant. Share options unexercised at the end of the year:

Date of grant	Dates exercisable	Price	2010	Lapsed	2011
6 January 2001	January 2010 to January 2011	Ç2.00	7,000	(7,000)	-
			-------------- 7,000 ======	-------------- (7,000) =======	-------------- - =======

17. RETIREMENT BENEFIT SCHEMES

Previously the Group operated a defined benefit pension scheme, holding the assets in a separate trustee administered fund ("the ABE Pension Fund"). The required contributions were assessed with the advice of an independent qualified actuary using the projected unit credit method. The Group also has a designated Group personal pension plan which meets stakeholder requirements.

In the year ended 31 March 2009 the Company came to agreement with the Trustees of the scheme and a resolution was approved whereby the Group is no longer liable to its previously recognised retirement obligations for the ABE section of the fund. The elimination of the ABE section resulted in an elimination of Ç3,047,000 of the opening obligation which was reflected through the Statement of Total Recognised Income and Expense. The remaining obligation relates to the BPE section of the scheme and is summarised below:

Pension cost (recognised in Income Statement)	2011 Ä'000	2010 Ç'000	2009 Ç'000
Operating charge
Current service cost	76	60	73
Total operating charge	--------------- 76	--------------- 60	--------------- 73
Other finance charges	--------------	---------------	---------------
Interest on pension scheme liabilities	363	339	314
Expected return on pension scheme assets	(191)	(141)	(125)
Net finance charge	--------------- 172	--------------- 198	--------------- 189
Total pension cost recognised in the Income Statement	--------------- 248	--------------- 258	--------------- 262
	=======	=======	=======

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

17. RETIREMENT BENEFIT SCHEMES (Continued)

(b)	Benefit liability	2011 Ä'000	2010 Ç'000	2009 Ç'000	2008 Ç'000	2007 Ç'000
	Present value of funded obligations Fair value of plan assets	6,577 (4,725)	6,663 (4,436)	5,142 (3,725)	4,606 (3,543)	5,554 (3,523)
	Net liability	--------------- 1,852 =======	--------------- 2,227 =======	--------------- 1,417 =======	--------------- 1,063 =======	--------------- 2,031 =======
	The major categories of plan assets are as follows:			2011 Ä'000	2010 Ç'000	2009 Ç'000
	Equities Bonds Cash			730 3,915 80	697 3,702 37	464 3,216 45
				-------------- 4,725	-------------- 4,436	--------------- 3,725
(c)	Change in benefit obligation			=======	=======	=======
	Benefit obligation at beginning of the year Current service cost Interest cost Actuarial losses/(gains) Contributions by plan participants Benefits paid Benefit obligation at end of the year			6,663 76 363 (318) 14 (221) --------------- 6,577 =======	5,142 60 339 1,334 16 (228) --------------- 6,663 =======	4,606 73 314 344 19 (214) --------------- 5,142 =======
(d)	Change in plan assets
	Fair value of plan assets at beginning of the year Expected return on plan assets Actuarial gains/(losses) on plan assets Contributions made by employer Contributions by plan participants Benefits paid			4,436 191 95 210 14 (221)	3,725 141 519 263 16 (228)	3,543 125 (403) 655 19 (214)
	Fair value of plan assets at end of the year			--------------- 4,725 =======	--------------- 4,436 =======	--------------- 3,725 =======

The cumulative amount of actuarial gain recognised in the group statement of comprehensive income is Ç2,884,000 (2010: Ç2,471,000). The actuarial gain for the year recognised in the group statement of comprehensive income is Ç413,000 (2010: Loss Ç815,000).

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

17. RETIREMENT BENEFIT SCHEMES (Continued)

The expected long term return on cash is determined by reference to current and expected long-term bank base rates. The expected return on bonds is determined by reference to United Kingdom long dated gilt and bond yields at the balance sheet date. The expected rate of return on equities have been determined by setting an appropriate risk premium above gilt/bond yields having regard to market conditions at the balance sheet date. The expected rates have then all been reduced to reflect the level of anticipated future expenses.

The expected long term rates of return (net of expenses) are as follows:

2011 % per	2010 % per	2009 % per
		annum
		5.4
		3.0
	------------	1.5 -----------
4.3	3.8	3.3 =====
	annum 6.3 3.9 3.9 ------------ =======	annum 5.9 3.5 1.5 ======

The actual return on the plan assets over the year ended 31 March 2011 was Ç286,000 (2010: 660,000).

Principal actuarial assumptions	2011	2010	2009
Inflation	3.6	3.8	3.0
Rate of increase in pensionable salaries	3.6	3.8	4.0
Discount rate	5.5	5.5	6.7
Pension in payment increases	3.5	3.7	3.0
Revaluation rate for deferred pensioners	3.6	3.8	3.0
Pre retirement mortality	AM92,-5 (males)	AM92,-5 (males)	AM92,-5 (males)
	AF92,-5 (females)	AF92,-5 (females)	AF92,-5 (females)
Post retirement mortality	PMA92 (males)	PMA92 (males)	PMA92 (males)
	PFA92 (females)	PFA92 (females)	PFA92 (females)

(f) History of experience gains and losses

(i) Difference between the expected and actual return on scheme (liabilities)/assets:

	2011	2010	2009	2008	2007
(a) Amount (Ç'000) (b) Percentage of scheme assets	95 1%	519 12%	(403) (11)%	(116) (3)%	(395) (11)%
(ii) Experience (gains) and losses on scheme liabilities
(a) Amount (Ç'000)	92	(20)	10	25	(324)
(b) Percentage of present value of scheme liabilities	4%	0%	0%	1%	(6)%

The best estimate of contributions to be paid by the group to the plan for the period beginning after 31 March 2011 is Ç204,000.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

PAYABLES	2011 Ä'000	2010 Ç'000	2009 Ç'000
Current
Obligations under finance leases	-	1	1
Trade payables	339	301	245
Other taxation and social security	39	26	26
Other payables	46	50	55
Accruals and deferred income	413	256	251
	----------------- 837	----------------- 634	----------------- 578
Non-current	========	========	========
Obligations under finance leases	-	-	1
555,000 7% cumulative preference shares of Ç1 each	206	-
157,395 8% cumulative preference shares of	59	-	-
Ç1 each
Dividends payable in respect of 7%	159	-
cumulative preference shares
Dividends payable in respect of 8%	43	-	-
cumulative preference shares
	----------------- 467	----------------- -	----------------- 1
The net finance lease obligations are due:	========	========	========
In one year or less	-	1	1
Between one and two years	-	-	1
	----------------	----------------	---------------
	-	1	2
	========	========	========

All current payables are expected to mature within a period of 6 months.

19. FINANCIAL INSTRUMENTS

The Group's financial instruments comprise cash, preference shares, and various items, such as trade and other receivables, held for trading investments and trade and other payables that arise directly from its operations. The main purpose of these financial instruments is to finance the Group's operations. At 31 March 2011 the Group has cash balances of Ç3,945,000 (2010: Ç2,915,000) and no bank overdraft (2010: ÇNil). No sensitivity analysis to movements in interest rates or foreign currency exchange rates has been included as the board do not consider such information to be material.

RISKS

The main risks arising from the Group's financial instruments are market risk, liquidity risk and credit risk. Market risk includes price commodity risk, foreign exchange risk and interest rate risk. The Group has limited exposure to foreign exchange risk and also has no loans and therefore the analysis given below excludes these two items.

A significant risk that is also not considered below is that of the Group's pension funds. This is discussed in depth throughout the financial statements, and more specifically in Note 17, and has therefore not been further analysed below but is a key risk to the future of the Group. The Board meets on a regular basis to discuss the various funds and investment opportunities with each other and the Trustees.

The Board reviews and agrees policies for managing each of the above risks and they are summarised overleaf and in the accounting polices to the group financial statements. These policies have been consistently applied throughout the period.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

19. FINANCIAL INSTRUMENTS (continued)

COMMODITY PRICE RISK

The Group is dependent upon its suppliers to effectively operate a 'just in time' stock management system, which is utilised to mitigate high warehousing costs. There is the potential to leave the Group exposed to 'stock out' or shortages but the Group has not experienced stock difficulties of this nature in the current or prior year and does not envisage this going forward, due to its strong supplier relations.

When prices are advantageous a strategic decision may be taken to increase a stock level which mitigates the issue of price commodity risk. There are a number of suppliers used, each with various contractual terms, and therefore the Board do not consider this a significant risk.

LIQUIDITY RISK

The Group's liquidity is dependent on the cash balances available and it is the Group's policy to place surplus cash on deposit to ensure as high a rate of return as possible. The maturity profile of the Group's finance lease liabilities at 31 March 2011 and 31 March 2010 is set out in note 18. The preference shares in issue have no fixed redemption date and will be redeemed when the company is in a position to do so.

CREDIT RISK

The Group's principal financial assets are cash deposits and trade and other receivables. The credit risk associated with the cash is limited as the counterparties have high credit ratings assigned by international creditrating agencies. The principal credit risk arises therefore from its trade and other receivables.

In order to manage credit risk the directors of the subsidiary company set limits for customers based on a combination of payment history and third party credit references. Credit limits are reviewed by the subsidiary's directors on a regular basis in conjunction with debt ageing and collection history. In 2011 and 2010 there were no concentrations of credit risk, with exposure being spread over a large number of customers, with over 200 customers at the year end.

At the year end the Group's top five customers comprised 72% of the year end trade receivables. The Board consider their strong customer relations to be strength rather than a risk as they are the preferred suppliers to these customers.

Where appropriate, the subsidiary company requests payment or part-payment in advance of shipment which generally covers the cost of the goods. In connection with the trade receivables, there is a risk of warranty claims, which the subsidiary company tries to minimise. The carrying value of the trade receivables represents the maximum credit risk exposure and therefore sensitivity analysis has not been performed.

Collection procedures in relation to receivables are initiated once the credit terms are exceeded and trade receivables both due and not yet due are reviewed on a line by line basis, with adequate provision being made against period end balances where appropriate. During the year a provision of Ç19,000 has been written back in the financial statements.

Current financial assets past due date and not impaired amount to 15% (Ç98,000) and are considered recoverable and stated at their fair value. At the year end 88% (Ç542,000) of the financial assets are not past due and 6% are aged greater than 90 days. These amounted to Ç41,000 and have not been provided for due to post period end cash receipts relating to these balances.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The directors consider that the fair values of the Group's financial instruments at 31 March 2011 and 31 March 2010 were not materially different from their book values. Refer to note 15 for details of the valuation of the two classes of preference shares in issue.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

20. DEFERRED TAXATION

There is no unprovided deferred taxation liability at 31 March 2011 or 31 March 2010.

The directors consider that there are currently no plans for the distribution of the retained reserves of the overseas subsidiary that would give rise to a UK corporation tax liability. Consequently no deferred tax provision has been made.

No provision has been made for the potential deferred tax assets on the trading losses carried forward as they are not sufficiently certain to crystallise in the foreseeable future, with future pension obligations deemed to exceed the potential future cash inflows. This assumption will be revisited on an annual basis or as and when circumstances change. The amounts not recognised (all of which have been calculated at 26% (2010: 28%)) are set out below:

	Group	2011	2010	2009
		Ä'000	Ç'000	Ç'000
	Arising from trading losses	324	349	419
	Arising from capital losses	2,392	2,569	2,470
	Arising from pension deficit	482	624	397
		-------------	-------------	-------------
		3,198	3,542	3,286
		======	======	======
21.	CONTINGENT LIABILITIES	2011	2010	2009
		Ä'000	Ç'000	Ç'000
a)	Banker's indemnities	30	30	30
		====	====	====

The indemnities relate to provision of services such as letters of credit or international guarantees by the bank.

b) There were no other contingent liabilities at 31 March 2011 or 31 March 2010.

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

22. COMMITMENTS UNDER OPERATING LEASES

At 31 March the Group had the following commitments under non-cancellable operating leases:

	Land and buildings		Other
	2011	2010	2011	2010
	Ä'000	Ç'000	Ä'000	Ç'000
Within one year	-	16	14	20
Between two and five years inclusive	-	16	21	15
After more than five years	-	-	-	-
	-------------	-------------	---------------	---------------
	-	32	35	35
	======	=======	======	======

23. SUBSIDIARIES

At 31 March 2011 and 31 March 2010 the company held 100% of the share capital of the following subsidiaries:

	Class of share capital	Proportion held by the parent company	Country of incorporation	Nature of business
British Polar Engines Limited Ordinary		100%	Great Britain	Manufacture and supply of diesel engines, associated servicing and sale of spare parts
Danway Limited	Ordinary	100%	Cayman Islands	Dormant

NOTES TO THE ACCOUNTS – GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2011

24. PRO-FORMA BALANCE SHEET

As referred to in the Chairman's Statement, this pro-forma balance sheet is included within these financial statements in order to illustrate the impact on the group net assets of including the company's preference shares at their full nominal value and preference share dividend arrears at their full value rather than amortised costs, as required by IAS 39 Financial Instruments: Recognition and measurement. Please refer to note 15 for further details of the values.

	2011
	Ä'000
ASSETS
Non-current assets
Property, plant and equipment	98
Current assets
Inventories	1,259
Trade and other receivables	750
Held for trading investments	97
Cash and cash equivalents	3,945 -------------
	6,051
Total assets	------------- 6,149
LIABILITIES	-------------
Non-current liabilities
Retirement benefit obligation	1,852
Cumulative preference shares	1,280
	------------- 3,132
Current liabilities	-------------
Trade and other payables	837
Current tax liabilities	224
	------------- 1,061
Total liabilities	------------- 4,193
NET ASSETS	------------- 1,956
	======

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ASSOCIATED BRITISH ENGINEERING PLC

We have audited the parent company financial statements of Associated British Engineering plc for the year ended 31 March 2011 which comprise the principal accounting policies, the company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of directors and auditor

As explained more fully in the Statement of Directors' Responsibilities set out on page 42, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion the parent company financial statements:

give a true and fair view of the state of the company's affairs as at 31 March 2011;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.

Other matter

We have reported separately on the group financial statements of Associated British Engineering plc for the year ended 31 March 2011.

Tracey James Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Oxford

PRINCIPAL ACCOUNTING POLICIES – COMPANY

FOR THE YEAR ENDED 31 MARCH 2011

BASIS OF PREPARATION

The Company accounts have been prepared in accordance with applicable UK accounting standards (United Kingdom Generally Accepted Accounting Practice). The summary of the principal accounting policies, which have been applied consistently, is set out below. The policies have remained unchanged from the previous year.

BASIS OF ACCOUNTING

The accounts are prepared on the historical cost basis, modified to include the revaluation of current asset investments.

GOING CONCERN

TANGIBLE FIXED ASSETS

Freehold land is not depreciated. Other fixed assets are depreciated over their estimated useful lives at the following annual rates to cost:

Freehold buildings	5 per cent
Computer equipment	20 per cent

DEFERRED TAXATION

Deferred tax is recognised on an undiscounted basis on all timing differences where the transactions or events that give the Company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date.

FOREIGN CURRENCIES

Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the year end date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Any exchange gains or losses are credited or charged to the profit and loss account in the year in which they arise.

PRINCIPAL ACCOUNTING POLICIES – COMPANY

FOR THE YEAR ENDED 31 MARCH 2011

FINANCIAL INSTRUMENTS

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of charge on the outstanding liability.

Trade and other debtors

Trade and other debtors are originally recognised at fair value. A provision against trade debtors is made when there is objective evidence that the company will not be able to collect all amounts due to it in accordance the original terms of those receivables. There is no general or specific provision for bad and doubtful debts at year end. Trade debtors and cash and cash equivalents are classified as loans and receivables.

Trade and other creditors

Trade and other creditors are recognised at fair value, net of transaction costs.

Cumulative preference shares

Cumulative preference shares are measured subsequent to initial recognition at amortised cost using the effective interest rate method. Where the company revises its estimates of cash payments, the carrying amount of the financial liability is adjusted to reflect actual and revised estimated cash flows. The company recalculates the carrying amount by computing the present value of the estimated future cash flows at the financial instruments' original effective interest rate. The adjustment is recognised as income or expense in profit or loss.

INVESTMENTS

Fixed asset investments in subsidiaries are included at cost less amounts written off.

Current asset investments are held for trading and are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are measured at market value, with all transaction costs being written off to the profit & loss account as incurred.

SHARE BASED PAYMENTS AND SHARE OPTIONS

COMPANY BALANCE SHEET

AS AT 31 MARCH 2011

FIXED ASSETS	Note	2011 Ä'000	2010 Ç'000
Tangible assets Investments	3 5	349 2,484	381 2,484 -------------
		------------- 2,833	2,865
CURRENT ASSETS		------------	------------
Investments Debtors Cash at bank and in hand	6 7	102 14 370	133 2 513
		------------- 486	------------- 648
Creditors – amounts falling due within one year	8	(959)	(899)
Net current liabilities		------------- (473) ------------	------------- (251) ------------
Total assets less current liabilities		2,360	2,614
Creditors – amounts falling due after more than one year	8	(2,759)	(2,292)
		------------- (399)	------------- 322
CAPITAL AND RESERVES		======	======
Called up share capital Share premium account	10	2,627 5,038	2,627 5,038
Other reserve Profit and loss account	12	212 (8,276)	212 (7,555)
SHAREHOLDERS' FUNDS		------------- (399) ======	------------- 322 ======

The financial statements were approved and authorised for issue by the Board of Directors on 29 June 2011

and were signed below on its behalf by:

C Weinberg Director

NOTES TO THE ACCOUNTS - COMPANY

FOR THE YEAR ENDED 31 MARCH 2011

1.	ADMINISTRATIVE EXPENSES	2011 Ä'000	2010 £'000
	Directors (note 2) and employees Depreciation of tangible fixed assets: owned	46 32 ======	45 30 ======
2.	DIRECTORS	2011 Ä'000	2010 £'000
	Remuneration in respect of directors was as follows: Remuneration	35 ======	35 ======

The average number of employees, including directors, during the year was 4 (2010: 4). More detailed information concerning directors' remuneration is shown in the Directors' Remuneration Report.

TANGIBLE FIXED ASSETS	Computer equipment Ä'000	Freehold land and buildings Ä'000	Total Ä'000
COST
At 1 April 2010 Additions	2 -	607 -	609 -
At 31 March 2011	--------- 2	-------------- 607	------------- 609
DEPRECIATION	---------	--------------	-------------
At 1 April 2010 Charge for the year	- -	228 32	228 32
At 31 March 2011	--------- - ---------	-------------- 260 --------------	------------- 260 -------------
NET BOOK VALUE
At 31 March 2011	2	347	349
At 31 March 2010	===== 2	====== 379	====== 381
	=====	======	======

4. CAPITAL COMMITMENTS

At 31 March 2011 the company had no capital commitments (2010: £Nil).

NOTES TO THE ACCOUNTS - COMPANY

FOR THE YEAR ENDED 31 MARCH 2011

5.	FIXED ASSET INVESTMENTS	Subsidiary
	COST	Undertakings £2000
	At 1 April 2010 and 31 March 2011	3,406
	Amounts written off
	At 1 April 2010 and 31 March 2011	922
	Net book amount at 1 April 2010 and 31 March 2011	2,484

The subsidiary undertakings, both of which are wholly owned, are:

Company	Activity	Country of incorporation
British Polar Engines Limited	Engineering	Great Britain
Danway Limited	Non-trading	Cayman Islands

The investment in British Polar Engines Limited was fully provided at 31 March 2011 and 31 March 2010.

6	CURRENT ASSET INVESTMENTS	2011 £'000	2010 £'000
	Equities	97	129
	Cash on deposit	5	$\overline{4}$
		102	133
7.	DEBTORS	2011 £'000	2010 £'000
	Prepayments and accrued income	14	2
		14	2

NOTES TO THE ACCOUNTS - COMPANY

FOR THE YEAR ENDED 31 MARCH 2011

CREDITORS	2011	2010 Ç'000
Amounts falling due within one year	Ä'000
Amounts due to group undertakings	815	815
Other creditors	18	24
Accruals and deferred income	124	58
Corporation tax	2	2
	------------- 959	------------- 899
	======	======
Amounts falling due after one year	2011	2010
	Ä'000	Ç'000
Amounts due to group undertakings	2,292	2,292
Financial liabilities (see note 10)	467	-
	------------- 2,759	------------- 2,292

9. DEFERRED TAXATION

There is no unprovided deferred taxation liability at 31 March 2011 or 31 March 2010.

	2011 Ä'000	2010 Ç'000
Arising from trading losses Arising from capital losses	324 2,319	349 2,499
	------------- 2,643 ======	------------- 2,848 ======

NOTES TO THE ACCOUNTS – COMPANY (Continued)

FOR THE YEAR ENDED 31 MARCH 2011

CALLED UP SHARE CAPITAL	2011 Ä'000	2010 £'000
Company
Authorised:
1,699,078 ordinary shares of £2 each	3,398	3,398
750,000 7% cumulative preference shares of £1 each	750	750
1,681,443 8% Cumulative redeemable preference shares of £1 each	1,681	1,681
	------------- 5,829	------------- 5,829
Nominal value:	======	======
Allotted, called up and fully paid:
1,313,427 ordinary shares of £2 each	2,627	2,627
555,000 7% Cumulative preference shares of £1 each	555	555
157,395 8% Cumulative redeemable preference shares of £1 each	157	157
	------------- 3,339	------------- 3,339
Carrying value:
Equity shares:
1,313,427 ordinary shares of £2 each	2,627	2,627
Shares classified as financial liabilities:	======	======
555,000 7% Cumulative preference shares of £1 each	206	-
157,395 8% Cumulative redeemable preference shares of £1 each	59	-
	------------- 265	------------- -

The Company has one class of ordinary share which carries no right to fixed income. Further to the Extraordinary General Meeting held on 1 September 1999 the ordinary shares have 200 votes per share.

The Company also has two classes of cumulative preference shares, which carry the right to fixed returns of 7% and 8% per annum respectively. The 7% cumulative preference shares and 8% cumulative redeemable preference shares, classified as debt under FRS 25, are non-voting unless the dividends are six months in arrears or on implementation of the resolution relating to the winding-up of the Company, both of which affect the rights attached to both these classes of share. The Company has the power to redeem the 8% cumulative preference showing at par (together with arrears of dividends) at any time. Since the dividends are more than six months in arrears, the 8% cumulative redeemable preference shares of £1 each have 50 votes per share and the 7% cumulative preference shares of £1 each have 4 votes per share.

In accordance with FRS 26 the 7% cumulative preference shares and the 8% cumulative redeemable preference shares are required to be carried in the financial statements at amortised cost using the effective interest rate method, reflecting conditions existing at the balance sheet date. The 7% cumulative preference shares are accruing a dividend of £39,000 per annum and the 8% cumulative redeemable preference shares are accruing a dividend of £13,000 per annum. At 31 March 2011 total dividend arrears of £568,000 (2010: £516,000) had accrued.

Under FRS 25 the preference dividends are disclosed as a finance expense and any arrears included within payables. FRS 26 permits the total accumulated accruals of dividends to be discounted and applying the same methodology as that applied to the preference shares has resulted in carrying values of £159,000 in respect of the 7% shares and £43,000 in respect of the 8% shares. The carrying value of preference shares and preference dividend arrears is £467,000 as disclosed in note 8.

NOTES TO THE ACCOUNTS – COMPANY (Continued)

FOR THE YEAR ENDED 31 MARCH 2011

11. SHARE BASED PAYMENTS

Share options unexercised at the end of the year:

	Date of grant	Dates exercisable	Price	At 31 March 2010	Lapsed	At 31 March 2011
	6 January 2001	January 2010 to January 2011	Ç2.00	7,000	(7,000)	-
				-------------- 7,000 =======	-------------- (7,000) =======	-------------- - =======
12.		PROFIT AND LOSS ACCOUNT				Ä'000
	At 1 April 2010 Loss for the year					(7,555) (721)
	At 31 March 2011					------------- (8,276)

As permitted by the Companies Act 2006, the company's profit and loss account has not been included in these accounts. The Company's loss for the financial year was Ç721,000 (2010: loss Ç84,000)

======

13. CONTINGENT LIABILITIES

There were no contingent liabilities at 31 March 2011 or 31 March 2010.

14. RELATED PARTY TRANSACTIONS

The company has taken advantage of the exemption conferred by FRS 8 with regard to disclosing transactions with wholly-owned subsidiaries on the grounds that the results of the subsidiaries are included in the publicly available consolidated financial statements of Associated British Engineering plc.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare group financial statements in accordance with International Financial Reporting Standards, as adopted by the European Union (IFRSs), and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). 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 and profit or loss of the company and group for that period. In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently
make judgements and accounting estimates that are reasonable and prudent
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and group and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as each of the directors is aware:

there is no relevant audit information of which the company's auditor is unaware; and
the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

To the best of my knowledge:

the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
the management report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

C Weinberg Director

CORPORATE GOVERNANCE REPORT

(AS REFERRED TO IN THE DIRECTORS' REPORT)

In accordance with the requirements of the Listing Rules of the Financial Services Authority, set out below are details of the Company's corporate governance arrangements, including a statement as to how the Company applies the principles of Section 1 of the Revised Code (2008), together with a statement regarding its compliance with specific provisions. Whilst welcoming the principles contained within the Code, the Board considers that it should be recognised that what may be appropriate for a large company may not necessarily be so appropriate for a smaller company and the Company's current circumstances. As a result, the Company has been in compliance throughout the year with the provisions set out in the Combined Code for Corporate Governance with the following exceptions:-

The division of responsibilities between the roles of chairman and chief executive have not been clearly established, set out in writing and agreed by the Board. This is contrary to provision A.2.1;
There is no formally appointed senior independent director. This is contrary to provision A.3.3;
The Board has not undertaken a formal and rigorous annual evaluation of its own performance and the individual Directors. This is contrary to provision A.6.1;
There is no formal training programme for new Directors on joining the Board. This is contrary to provision A.5.1;
The non–executive directors of the Company have not been appointed for specific terms as required by provision A.7.2;
There is no formal performance evaluation or election process for the appointment of non-executive directors. This is contrary to provision A.7.2
No non-executive directors are considered to be independent. This is contrary to provision A.3.2.
The Board considers that it is unable to state that it has conducted a review of the effectiveness of the Group's system of internal controls. This is contrary to provision C.2.1
The Company does not have a Remuneration Committee, this is contrary to provisions B.2.1 B.2.2
The Company does not have a Nomination Committee, this is contrary to provisions A.4.1 A.4.3
The Company does not have an Audit Committee; this is contrary to provisions C.3.1 C.3.6.

In view of the size and circumstances of the Group, the Board do not consider Remuneration, Nomination and Audit Committees appropriate. The Board as a whole carries out the functions and responsibilities that would be performed by these Committees.

Board of Directors

The Board comprises three Non-Executive Directors, as detailed in the Directors' report.

In common with other organisations of a similar size, the Directors review all the transactions and activities of the business. The Board of Directors is responsible for formulating strategy and monitoring financial performance. The Directors are in frequent contact throughout the year in connection with the Group's business, meet as required and also attend one formal Board meeting. The strategies proposed by management of the subsidiary are fully discussed, critically examined against the best and long term interests of not only the shareholders, but also employees, customers, suppliers and various communities within which the Group operates. During the year, all three serving Directors were in attendance at the Board meeting.

The Board retains full responsibility for the direction and control of the Group and has a formal schedule of matters in respect of which decisions are reserved to it, covering key areas including strategy formulation, acquisitions or disposals, approval of the budget for the subsidiary, financial results, board appointments and proposals for dividend payments.

The Board has full and timely access to relevant information throughout the Group.

CORPORATE GOVERNANCE REPORT

Non-Executive Directors

The biographies of the Directors appear on page 48 and show considerable and varied experience in the business world and the City. The Board believes it is an effective independent body and therefore has not appointed a senior independent non-executive director. There have been no changes in the other significant commitments of the Chairman.

All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with. There is also a formal agreed procedure for Directors in the furtherance of their duties to take independent professional advice as necessary at the Company's expense.

Under the Company's Articles of Association, at least one third of the Directors retire from office each year. The retiring Director is eligible for re-election.

The role of Non-Executive Directors is a vital element of corporate accountability. Due to the small size of the Board and because there are no full time Executive Directors, the Non-Executive Directors do carry out certain limited specific executive responsibilities.

Remuneration and Nomination

The Board meets at least once a year to decide remuneration. Details of remuneration, policy and practices, together with the remuneration of the directors are given in the Directors' Remuneration Report on page 45. The level of remuneration for the Non-Executive Directors reflects the time commitment and responsibilities of the role. Remuneration for the Non-Executive Directors does not include share options.

Appointment to Executive Director would be fully discussed by the Chairman and the two Non-Executive Directors. Potential new Non-Executive Directors are proposed by all the members of the Board in the light of the Company's business requirements and the need to have a balanced Board. Possible candidates are discussed amongst all Directors before any approach is made to them.

Communication with Shareholders

The Board believes it is important to respond adequately to the queries of both private and institutional shareholders. The Group responds throughout the year to correspondence from shareholders on a wide variety of issues.

The Chairman's Statement in the Annual Report contains a business review. An interim business review is also provided with the half yearly announcement. The Chairman is available to shareholders at any time to discuss strategy and governance matters.

The Board seeks to ensure that its report and accounts and other financial statements provide a clear assessment of the Group's business. All shareholders have the opportunity to ask questions and express their views at the Company's Annual General Meeting, at which all Directors are available to take questions.

CORPORATE GOVERNANCE REPORT

AUDIT AND INTERNAL CONTROL

The directors are responsible for the Group's system of internal control. These controls can only ever provide reasonable but not absolute assurance that assets are safeguarded against material loss or unauthorised use, that proper accounting records are maintained, and that the information used internally, or for publication, is accurate and reliable. The key procedures, which exist to provide external control, are as follows -

clearly defined organisation structures with segregation of duties wherever practicable. Operating and financial responsibilities for the subsidiary company are delegated to the subsidiary's Board and there are limits which apply to capital expenditure and significant contracts
a regular review is undertaken to assess the risks facing the trading subsidiary and to enhance the systems which manage the risk identified. Local management establishes control procedures for each of the risks identified and reports whether the key controls have operated effectively
agreement of Group short term financial objectives and business plans
review by the Board of monthly Group Financial Statements and monitoring of results against budget. The Board attends regular Board meetings of the subsidiary
Board control over treasury, taxation, legal, insurance and personnel issues
The acquisition or disposal of a business may not be completed without the approval of the Board.

Through these mechanisms, Group performance is continually monitored, risks identified in a timely manner, their financial implication assessed, control procedure re-evaluated and corrective actions agreed and implemented.

Nevertheless , the Board considers that it is unable to state that it has fully complied during the year with the Code. The principal reasons for this are:

There was no formal review of the effectiveness of internal control during the period up to 31 March 2011
There was no receipt and review of formal reports on internal control.

The Board believes that it is not currently appropriate for the Company to maintain an internal audit function due to the size of the Group.

The Board consider the independence and objectivity of the external auditor on an annual basis, with particular regard to non-audit services. The split between audit and non-audit fees for the year and information on the nature of the non-audit fees appear in note 3 to the financial statements. The non-audit fees are considered by the Board not to affect the independence or objectivity of the auditor. The Board also receive an annual confirmation of independence from the auditors.

GOING CONCERN

C Weinberg Director

DIRECTORS' REMUNERATION REPORT

This Report contains the information required by the Companies Act 2006 and the relevant parts of the Listing Rules of the UK Listing Authority and Schedule B to the Combined Code on Corporate Governance.

The following report is not audited except where specified.

The Board is satisfied that the Company has complied throughout the period with the Combined Code concerning its remuneration policy except as noted above that the members of the Board comprise the remuneration committee are not independent non-executives as required by the Code.

In setting the policy for the Group's senior management it considers a number of factors including:

(a) the basic salaries and benefits available in comparable companies;
(b) the need to attract and retain personnel of an appropriate calibre; and
(c) the need to ensure individuals' commitment to the continued success of the Group by means of incentive schemes.

Total Shareholder Return (TSR)

Source: Yahoo UK finance

The graph above shows ABE's TSR performance compared to the FTSE All Share index over the past five years. TSR is defined as share price growth plus reinvested dividends. This provides a basis for comparison with a relevant equity index.

DIRECTORS' REMUNERATION REPORT

REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS

The non-executive directors each receive a fee for their services, which is agreed by the Board after reviewing comparable organisations and appointments. None of the non-executive directors receive a pension or other benefits from the Company, nor do they participate in any bonus or incentive schemes or share option schemes.

The non-executive directors do not have service contracts with the Company. In accordance with the Articles of Association, each retires from office at the third annual general meeting after the annual general meeting at which he was last elected. A retiring director is eligible for re-election.

REMUNERATION POLICY FOR THE EXECUTIVE DIRECTORS

The Company has no executive directors.

AUDITED INFORMATION

DIRECTORS' REMUNERATION

	2011	2010
	Total	Total
	Ä'000	Ç'000
Mr D A H Brown	15	19
Mr S J Cockburn	10	8
Mr C Weinberg	10	8
	--------	--------
	35	35
	====	====

Directors' remuneration relates to fees. No current director received any pension entitlements from the Group in respect of the years ended 31 March 2011 and 2010. No director waived emoluments in respect of the years ended 31 March 2011 and 2010.

The Statement of Directors' responsibilities, Corporate Governance report and the Directors' Remuneration report on pages 42 to 47 form part of the Directors' report to the parent company only financial statements,

On behalf of the Board

C Weinberg Director

29 June 2011

DIRECTORS AND ADVISERS

DAVID BROWN (58) became a non-executive director on 22 March 2000 and became Chairman on 11 November 2002. He is managing director of the Sabre Development Group, carrying out real estate development and financing focused on Russia. He has previously been a company secretary and director of two fully listed companies and general counsel on the Canary Wharf Development. He is a non-practising qualified solicitor.

STEPHEN COCKBURN (71) has been a non-executive director since 1979. He is a non-executive director of Fiske plc and managing director of The Investment Company plc.

COLIN WEINBERG (62) became a non-executive director on 10 November 2003. He was a member of the London Stock Exchange from 1980 to 1987 and was admitted to fellowship of the Securities Institute in 1995. He was previously a non-executive director of Peckham Building Society.

SECRETARY & REGISTERED OFFICE BANKERS

haysmacintyre Company Secretaries Limited The Royal Bank of Scotland plc Fairfax House 5th Floor 15 Fulwood Place Tay House London 300 Bath Street WC1V 6AY Glasgow Registered No. 110663 G2 4RS Tel No: 020 7969 5500

Grant Thornton UK LLP Fladgate LLP 3140 Rowan Place John Smith Drive Oxford W1K 6DJ OX4 2WB

Computershare Investor Services plc Heald The Pavilions Ashton House Bridgwater Road 495 Silbury Boulevard Bristol Milton Keynes BS13 8AE MK9 2AH

AUDITOR CORPORATE ADVISERS

25 North Row London

AI assistant

ASSOCIATED BRITISH ENGINEERING PLC — Annual Report 2011

4589_10-k_2011-03-31_a0a0d689-e8a6-4ad5-9494-ad6aa1199c53.pdf

ASSOCIATED BRITISH ENGINEERING PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2011

FINANCIAL HIGHLIGHTS

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 MARCH 2011

PRINCIPAL ACTIVITIES

BUSINESS REVIEW AND PRINCIPAL RISKS FACING THE BUSINESS

KEY PERFORMANCE INDICATORS

RESULTS AND DIVIDENDS

CORPORATE GOVERNANCE

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2011

DIRECTORS

SUBSTANTIAL HOLDINGS

BENEFICIAL INTERESTS IN SIGNIFICANT CONTRACTS

BENEFICIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2011

CREDITOR PAYMENT POLICY

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

CHARITABLE AND POLITICAL DONATIONS

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2011

DISABLED PERSONS

AUDITOR

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ASSOCIATED BRITISH ENGINEERING PLC

Respective responsibilities of directors and auditor

Scope of the audit of the financial statements

Opinion on financial statements

Opinion on other matter prescribed by the Companies Act 2006

Matters on which we are required to report by exception

Other matter

GROUP ACCOUNTING POLICIES

FOR THE YEAR ENDED 31 MARCH 2011

BASIS OF PREPARATION

NEWLY ISSUED ACCOUNTING STANDARDS

GOING CONCERN

BASIS OF CONSOLIDATION

REVENUE RECOGNITION

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

ACCOUNTING ESTIMATES AND JUDGEMENTS

Accounting Judgements

Pension Scheme

Preference shares

Deferred tax

Accounting Estimates

Inventories

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

INVENTORIES AND IMPAIRMENT OF INVENTORIES

LEASED ASSETS

PROPERTY, PLANT AND EQUIPMENT

TAXATION

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

FOREIGN CURRENCIES

RETIREMENT BENEFIT COSTS

CASH AND CASH EQUIVALENTS

FINANCIAL INSTRUMENTS

Trade and other receivables

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

FINANCIAL INSTRUMENTS (continued)

Trade and other payables

Investments in securities

Cumulative preference shares

SHARE BASED PAYMENTS AND SHARE OPTIONS

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

SEGMENTAL REPORTING

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2011

ASSOCIATED BRITISH ENGINEERING PLC Annual Report 2011