TIDMUKT
RNS Number : 5260R
UK Select Trust Limited
30 April 2009
UK Select Trust Limited
Annual Report for the year ended 31 December 2008
UK Select Trust Limited
Trust information
UK Select Trust Limited's shares are listed on the London Stock Exchange. They
can be bought or sold by investors through a stockbroker or by asking a
professional adviser e.g. lawyer, accountant or bank manager to do so on their
behalf.
UK Select Trust Limited's share price is published daily under Investment
Companies in the Share Information Service in the Financial Times. In addition
it is published every Monday on the business pages of The Guernsey Press and
Star and Jersey Evening Post.
Objectives UK Select Trust Limited
UK Select Trust Limited is registered in Guernsey and is qualified as a UK
Investment Trust Company. The Company invests over 80% of its gross assets by
value in the UK and the investment policy aims to provide a total return to
shareholders in excess of the net total return on the FTSE All Share Index and a
progressive dividend policy.
Financial Highlights
+---------+-----------------+------+---------------+--+--+-------------+--+------------+
| | | | | | | | | |
+---------+-----------------+------+---------------+--+--+-------------+--+------------+
| | | | | | | 31 | | 31 |
| | | | | | | December | | December |
| | | | | | | 2008 | | 2007 |
+---------+-----------------+------+---------------+--+--+-------------+--+------------+
| | | | | | | | | |
+---------+-----------------+------+---------------+--+--+-------------+--+------------+
| Net asset value per share | | | | | 106.97p | | 158.27p |
+---------------------------+------+---------------+--+--+-------------+--+------------+
| Equity shareholders' | | | | | GBP22.17m | | GBP32.78m |
| interest (1) | | | | | | | |
+---------------------------+------+---------------+--+--+-------------+--+------------+
| Revenue return on ordinary activities for the | | | GBP1.04m | | GBP0.82m |
| financial year after taxation | | | | | |
+--------------------------------------------------+--+--+-------------+--+------------+
| Capital (loss)/return on ordinary activities for | | | GBP(11.22)m | | GBP0.97m |
| the financial year after taxation | | | | | |
+--------------------------------------------------+--+--+-------------+--+------------+
| Revenue return per ordinary | | | | 5.04p | | 3.96p |
| share | | | | | | |
+----------------------------------+---------------+--+--+-------------+--+------------+
| Capital (loss)/return per | | | | (54.25)p | | 4.67p |
| ordinary share | | | | | | |
+----------------------------------+---------------+--+--+-------------+--+------------+
| Dividend per ordinary | | | | | 3.63p | | 3.40p |
| share (2) | | | | | | | |
+---------------------------+------+---------------+--+--+-------------+--+------------+
| Share Price | | | | | 86.25p | | 128.00p |
+---------------------------+------+---------------+--+--+-------------+--+------------+
| Net asset value total | | | | | (30.70)% | | 5.70% |
| return | | | | | | | |
+---------------------------+------+---------------+--+--+-------------+--+------------+
| FTSE All-Share total | | | | | (29.93)% | | 5.32% |
| return | | | | | | | |
+---------------------------+------+---------------+--+--+-------------+--+------------+
| | | | | | | | | |
+---------+-----------------+------+---------------+--+--+-------------+--+------------+
(1) During the year the Company purchased 202,916 ordinary shares of 10p from
the market to be held in Treasury. 216,587 ordinary shares of 10p each from the
shares held in Treasury were reissued during the period. 104,742 shares remain
in Treasury at 31 December 2008. These are held for reissue and the Company does
not intend to cancel these.
(2) The dividend figures include the proposed dividend for the relevant
financial period.
Dividends
A final dividend of 2.73p per share will be recommended for 2008 (2007: 2.55p).
This is in addition to an interim dividend of 0.90p (2007: 0.85p) paid during
the year.
Directors and Advisors
JM Le Pelley, Age 60, Non-executive Chairman. He joined the board in 1983. Other
Directorships include AcenciA Debt Strategies Limited.
DR Maltwood, Age 70, Non-executive Director. He joined the board in 1997 after a
career in stockbrocking in Jersey. He has held a number of positions including
the Chairman and Director of a number of quoted companies.
G Ross Russell, Age 75, Non-executive Director. He joined the board in 1995. He
is a Director of Forsight 3 Venture Capital Trust Plc and former Chairman of the
Securities & Investment Institute and Deputy Chairman of the London Stock
Exchange.
JG West FCA, Age 61, Non-executive Director. He joined the board
in 1997. He is the Chairman of Gartmore Fledgling Trust Plc, Jupiter Second
Enhanced Trust Plc, New City High Yield Fund Limited, and a Director of a number
of public and private companies including British Assets Trust Plc and JP Morgan
Income and Capital Trust plc. He is a former chief executive of Lazard Asset
Management Limited.
D Warr, Age 55, Non-executive Director. He joined the board in 2006. He is an
Executive Director of Fortis Reads International Management Limited, a Guernsey
based fiduciary services business wholly owned by Fortis Plc. He is a fellow of
the Institute of Chartered Accountants in England and Wales and has worked for
the Fortis Reads Group since 1972 specialising in Trust and Corporate work. He
is also Non-executive Chairman of FRM Diversified Alpha Limited and a
Non-executive Director of Marwyn Materials Limited, Invista Foundation Property
Trust Limited, Hemisphere Defensive HF (USD) Limited and Unigestion (Guernsey)
Limited.
Advisors
Secretary and Registered OfficeRegistrars
Corporate Services (Guernsey) Limited Capita Registrars
(Guernsey) Limited
Dorey Court Longue Hougue Road
Admiral Park St Sampson
St Peter Port Guernsey GY2 4JN
Guernsey GY1 3BG 0870 162 3100
01481 727111 Calls cost 10p per minute plus network charges
Investment Manager Stockbrokers
Scottish Widows Investment Partnership LimitedDresdner Kleinwort (resigned 30
June 2008)
Edinburgh One PO Box 560
Morrison Street 20 Fenchurch
Street
Edinburgh EH3 8BE London EC3P 3DB
0131 655 8500 0207 623 8000
Auditors Intelli Corporate Finance Limited
Deloitte LLP (appointed 1
October 2008)
Regency Court 29 Rutland Square
Glatengy Esplanade Edinburgh
St Peter Port EH1 2BW
Guernsey GY1 3HW 0131 222 9400
01484 724011
Bankers and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Chairman's Statement
Review of 2008 Performance
This was an extraordinary year for equity markets. The banking crisis which
unfolded through the year set the tone for global equity markets and created
some of the most volatile conditions in stock market history. The 29.9% fall in
the FTSE All Share Index represented its worst annual return for 34 years.
While UK Select Trust's total return of -30.7% in 2008 was disappointing, the
Company remains comfortably ahead of its benchmark over two, three and five
years. The Company's equity portfolio outperformed the FTSE All Share Index for
the fourth consecutive year driven by strong stock selection.
Share Price and discount
The share price fell by 32% in 2008 and the discount at which your Company's
shares trade relative to their net asset value stood at 19% at the end of the
year. Discounts across the investment trust sector remained at historically high
levels reflecting the extreme levels of volatility in underlying equity markets.
Gearing
The investment manager significantly reduced the Company's gearing level through
the year under review with an average level of 8% compared to 16% in 2007.
However, this reduced borrowing level was still detrimental to performance.
Earnings and dividend per share
Earnings per share for the year amounted to 5.04p (2007: 3.96p) and, on behalf
of the Board, I am pleased to recommend a final dividend of 2.73p (2007: 2.55p).
This is in addition to the interim dividend of 0.90p (2006: 0.85p), bringing the
total dividend for the year to 3.63p (2007: 3.40p).
Prospects
The outlook for global equity markets remains highly uncertain. The major
western economies are in the grip of asset price deflation while growth rates in
the key emerging markets are slowing sharply. Stability within the financial
system will be central to any sustained recovery in equity markets and while
de-leveraging in the banking sector is well underway, this will be a long
corrective process.
The early months of 2009 has seen further weakness in equity markets with many
companies forced to raise fresh capital to shore up balance sheets. In the
region of GBP20 billion of equity issuance has been announced already this year
and this cash call on investors looks set to continue through the first half of
the year, and perhaps beyond.
On a more positive note, there has been an unprecedented response from both
monetary and fiscal authorities around the world. Stimulus packages combined
with aggressive interest rate cuts will undoubtedly re-ignite economic growth
and stoke inflationary pressures though it is difficult to predict how long this
medicine will take to work. The longer term implications for the taxpayer are
also a source of concern.
In this volatile environment, the investment manager will continue to manage the
portfolio on a very active basis using the weakness in equity markets to build
positions in companies where longer term prospects are not reflected in current
share prices.
JM Le Pelley
Chairman
3 April 2009
Investment Manager's Report
Introduction
UK equities recorded their worst calendar year performance since 1974 with the
FTSE All Share Index tumbling by 29.9% in 2008. Investor sentiment during the
year was dominated by the unfolding global financial crisis which triggered a
series of high profile corporate collapses.
The Company's net asset value underperformed the benchmark FTSE All-Share
Index during the period, falling by 30.7% on a total return basis as a result of
the Company's gearing and total expense ratio. Stock selection was positive,
however, with the Trust's underlying equity portfolio outperforming the FTSE All
Share Index by 2.8% during the year.
Global Background
The global economic environment deteriorated markedly through 2008. The downturn
in the major European and US housing markets continued to gather pace fuelled by
sharply rising unemployment rates in those economies. The economic contraction
in the western world also started to take its toll on Asian growth rates as
exports started to slow through the latter stages of the year.
The worsening global growth outlook was reflected in dramatic falls in commodity
prices through the second half of the year. The oil price peaked at $145 per
barrel in July and then proceeded to fall by over 60% to close the year at $54.
Slowing demand also prompted precipitous falls in metals markets with inflation
concerns replaced by the spectre of asset price deflation.
The US economic agenda continued to be dominated by the domestic housing market
and the escalating banking crisis. The demise of Wall Street stalwart, Bear
Stearns, sent shock waves through global stock markets with JP Morgan stepping
in to rescue the situation with an agreed take-over. However, the failure of
Lehman Brothers in September marked the beginning of an unprecedented period of
volatility across equity markets sending share prices sharply lower. The
systemic fall out from the bankruptcy of Lehman left the global financial system
teetering on the brink of collapse.
The unprecedented conditions in the financial system were matched by the
response from the monetary authorities. Interest rates around the world were
slashed while sovereign governments intervened directly with massive cash
injections to prop up the banking system.
The UK Stock Market
The FTSE All Share Index ended a five year winning streak posting its first
annual decline since 2002. There were three key negative forces at work in
equity markets during 2008. Firstly, the crisis of confidence in the banking
system resulted in the banks reigning in lending practices which served to slow
economic growth and prompt investors to re-appraise the appropriate capital
structure for UK Plc. Secondly, a weakening global demand environment created
more difficult trading conditions for many companies prompting a raft of profit
warnings through the course of the year. Thirdly, the deteriorating economic
outlook triggered a rotation out of risk assets including equities into lower
risk investments such as cash and sovereign debt.
Investment Manager's Report (continued)
The dramatic change in mood was reflected in share price performance at the
industry level. The sectors with the most defensive earnings characteristics
including pharmaceuticals, beverages and tobacco generated the best equity
returns in 2008 while the more economically exposed business models were hit the
hardest with banks, mining and transportation stocks propping up the performance
tables.
The largest positive contributor to the Company's performance during the year
was pharmaceutical giant, Astrazeneca. The shares benefited from both a string
of positive announcements from its drug portfolio as well as its financial
strength and ability to grow earnings in the face of an economic slowdown. The
portfolio's exposure to the structural growth opportunity in emerging market
power also benefited investment performance with the holdings in Great Eastern
Energy, KSK Power and Aggreko all delivering strong returns.
The position in Royal Bank of Scotland was the most detrimental to performance
during the year. The position was established at the start of the fourth quarter
following the completion of the company's GBP12 billion rescue rights issue and
a series of meetings with the company's management. However, the company's
confidence over its funding position proved to be misplaced as the shares
tumbled on growing liquidity concerns culminating in the government's decision
to step in and part-nationalise the bank. The holdings in Dolphin Capital and
Cadogan Petroleum were also a drag on performance.
Portfolio activity
The Company continues to be managed on a very active basis with portfolio
construction shaped by rigorous fundamental analysis at the stock-specific
level. At present this translates into overweight positions relative to the
Company's benchmark in pharmaceuticals, support services and the oil & gas
sectors. The major underweight positions include banks, food & drug retailers
and beverages.
Balance sheet strength remains a particular focus at present with a raft of
companies currently being forced to raise fresh equity as a result of both
adverse trading conditions and the de-leveraging process underway within the
banking sector.
Since the end of the year under review the Company has established several
holdings of investment grade corporate bonds on the basis of very attractive
yield levels and capital protection.
Outlook
Global stock markets have continued to weaken in the first two months of 2009
with the FTSE All-Share Index shedding a further 12% of its value. The Company
currently has no borrowings and the equity portfolio has made a good start to
the year relative to its benchmark.
The news flow surrounding the global financial system remains the key sentiment
driver for equity markets. Whilst the deleveraging process in the banking system
will last for years rather than months, equity valuations are already
discounting a severe macro economic downturn. As and when economic news shows
signs of stabilisation, the Company will shift the bias of the portfolio away
from the more defensive areas of the market in favour of economically cyclical
companies with strong business models.
Scottish Widows Investment Partnership
3 April 2009
The Portfolio as at 31 December 2008
+----+----------------------+---------+----------+--------+-------+-------------+------+-+---+
| | Company | Market | Activity | | | | |
| | | Value | | | | | |
+----+----------------------+---------+----------+--------+-------+-------------+------------+
| | | GBP'000 | | | | | |
+----+----------------------+---------+----------+--------+-------+-------------+------------+
| | | | | | | | |
+----+----------------------+---------+----------+--------+-------+-------------+------------+
| 1 | AstraZeneca Plc | 1,715 | One of the world's largest pharmaceutical companies. |
| | | | |
+----+----------------------+---------+------------------------------------------------------+
| 2 | Vodafone Group Plc | 1,611 | The largest mobile telecommunications network in the |
| | | | world. |
+----+----------------------+---------+------------------------------------------------------+
| 3 | GlaxoSmithKline Plc | 1,585 | Large Anglo-American pharmaceutical company. |
+----+----------------------+---------+------------------------------------------------------+
| 4 | British American | 1,160 | The world's most international tobacco group. |
| | Tobacco Plc | | |
+----+----------------------+---------+------------------------------------------------------+
| 5 | HSBC Plc | 1,060 | Large UK - based financial services group. |
+----+----------------------+---------+------------------------------------------------------+
| 6 | BG Group Plc | 971 | Formerly British Gas. Involved in oil and gas |
| | | | transmission and distribution, as well as power |
| | | | generation. |
+----+----------------------+---------+------------------------------------------------------+
| 7 | Great Eastern Energy | 928 | Indian based energy provider. | |
| | Corporation Plc | | | |
+----+----------------------+---------+------------------------------------------------+-----+
| 8 | Ryanair plc | 880 | Irish - based budget airline. | |
+----+----------------------+---------+------------------------------------------------+-----+
| 9 | Imperial Energy Plc | 867 | Company focused on oil exploration and production in |
| | | | the Commonwealth of Independent States. |
+----+----------------------+---------+------------------------------------------------------+
| 10 | Lloyds TSB Group Plc | 818 | Large UK - based financial services group, owner of |
| | | | Cheltenham & Gloucester and Scottish Widows. |
+----+----------------------+---------+------------------------------------------------------+
| 11 | Imperial Tobacco Plc | 742 | Tobacco company. | |
+----+----------------------+---------+------------------------------------------------+-----+
| 12 | BHP Billiton Plc | 703 | World's largest mining company. | |
+----+----------------------+---------+------------------------------------------------+-----+
| 13 | Centrica Plc | 700 | UK - based energy provider. |
+----+----------------------+---------+------------------------------------------------------+
| 14 | Friends Provident | 638 | International financial services provider. |
| | Plc | | |
+----+----------------------+---------+------------------------------------------------------+
| 15 | Berkeley Group | 612 | UK - based housebuilder and developer. | |
| | Holdings Plc | | | |
+----+----------------------+---------+------------------------------------------------+-----+
| 16 | Tesco Plc. | 528 | One of the world's leading retailers. | | |
+----+----------------------+---------+-----------------------------------------+------+-----+
| 17 | KSK Power Ventur plc | 502 | Engaged in emerging opportunities in the power |
| | | | development market |
+----+----------------------+---------+------------------------------------------------------+
| 18 | Legal and General | 490 | UK - based financial services company. |
| | Plc | | |
+----+----------------------+---------+------------------------------------------------------+
| 19 | Resolution Asset | 440 | Offer a broad spectrum of funds to cater for the |
| | Management Plc | | differing investment needs. |
+----+----------------------+---------+------------------------------------------------------+
| 20 | Dolphin Capital | 403 | Real Estate Holding & Development | |
| | Investors Ltd | | | |
+----+----------------------+---------+------------------------------------------------+-----+
| 21 | Indus Gas Plc | 371 | Oil and gas exploration and development company |
| | | | based in India |
+----+----------------------+---------+------------------------------------------------------+
| 22 | Hardy Oil & Gas Plc | 334 | AIM-listed oil and gas exploration company. |
+----+----------------------+---------+------------------------------------------------------+
| 23 | Trading Emissions | 312 | UK listed fund investing in a range of tradable |
| | Plc | | environmental permits |
+----+----------------------+---------+------------------------------------------------------+
| 24 | Healthcare Locums | 262 | Specialist healthcare recruitment company. |
| | Plc | | |
+----+----------------------+---------+------------------------------------------------------+
| 25 | Balfour Beatty Plc | 244 | Serves the international markets for rail, road and |
| | | | utility systems, buildings and complex structures. |
+----+----------------------+---------+------------------------------------------------------+
| 26 | Ingenious Media Plc | 203 | Advisory and investment firm is now Europe's largest |
| | | | private investor in the media sector. |
+----+----------------------+---------+------------------------------------------------------+
| 27 | Cadogan Petroleum | 164 | An independent oil and gas exploration, development |
| | Plc | | and production company. |
+----+----------------------+---------+------------------------------------------------------+
| 28 | Trikona Trinity | 157 | Investing in real estate and real estate related |
| | Capital Plc | | entities in India. |
+----+----------------------+---------+------------------------------------------------------+
| 29 | Leed Petroleum Plc | 100 | Oil and gas exploration and production company |
| | | | focused on the Gulf of Mexico. |
+----+----------------------+---------+------------------------------------------------------+
| 30 | American Leisure | 92 | Vacation resort company. |
| | Group Ltd | | |
+----+----------------------+---------+------------------------------------------------------+
| 31 | Persimmon Plc | 73 | UK's leading housebuilder. |
+----+----------------------+---------+------------------------------------------------------+
| 32 | Zincox Resources Plc | 69 | British based zinc mining company |
+----+----------------------+---------+------------------------------------------------------+
| 33 | Candover Investments | 56 | UK based investment firm that specialises in |
| | Plc | | corporate buyouts. |
+----+----------------------+---------+------------------------------------------------------+
| 34 | Arden Partners Plc | 54 | Institutional stockbroker specialising in small, | |
| | | | midcap and AIM companies. | |
+----+----------------------+---------+----------+--------+-------+-------------+------+-+---+
The Portfolio as at 31 December 2008 (continued)
+----+----------------------+---------+----------+--------+-------+-------------+-------+---+
| 35 | Aurora Russia Ltd | 46 | Investment vehicle established to make investments |
| | | | in small and mid-sized Russian companies. |
+----+----------------------+---------+-----------------------------------------------------+
| 36 | Resaca Exploitation | 43 | US - based independent oil and gas exploitation | |
| | Plc | | company. | |
+----+----------------------+---------+-------------------------------------------------+---+
| 37 | Innovation Group Plc | 23 | Leading provider of business support services and |
| | | | systems to the UK insurance industry |
+----+----------------------+---------+-----------------------------------------------------+
| 38 | Newfound NV Plc | 21 | Developer and operator of up-market holiday | |
| | | | resorts. | |
+----+----------------------+---------+-------------------------------------------------+---+
| 39 | Eatonfield Group Plc | 12 | Commercial and residential property developer | |
| | | | with a focus on Wales and the North of England. | |
+----+----------------------+---------+-------------------------------------------------+---+
| | | | | | | | | |
+----+----------------------+---------+----------+--------+-------+-------------+-------+---+
| | Total Valuation | 19,989 | These holdings represent 100% of the total |
| | | | valuation. |
+----+----------------------+---------+----------+--------+-------+-------------+-------+---+
Sector Distribution
+--------------------------------------+------+----------------+----------------+
| | | Total | Total |
+--------------------------------------+------+----------------+----------------+
| | | 2008 | 2007 |
+--------------------------------------+------+----------------+----------------+
| Sector Classification | | % | % |
+--------------------------------------+------+----------------+----------------+
| Resources | | | |
+--------------------------------------+------+----------------+----------------+
| Oil and Gas | | 17.1 | 17.2 |
+--------------------------------------+------+----------------+----------------+
| Oil Equipment and Services | | - | 4.0 |
+--------------------------------------+------+----------------+----------------+
| | | 17.1 | 21.2 |
+--------------------------------------+------+----------------+----------------+
| Basic industrials | | | |
+--------------------------------------+------+----------------+----------------+
| Construction and building materials | | 4.2 | 13.6 |
+--------------------------------------+------+----------------+----------------+
| Mining | | 3.5 | 9.4 |
+--------------------------------------+------+----------------+----------------+
| Chemicals | | - | 1.2 |
+--------------------------------------+------+----------------+----------------+
| Electronics and electrical equipment | | - | 4.7 |
+--------------------------------------+------+----------------+----------------+
| | | 7.7 | 28.9 |
+--------------------------------------+------+----------------+----------------+
| Non-cyclical consumer goods | | | |
+--------------------------------------+------+----------------+----------------+
| Tobacco | | 8.5 | 2.3 |
+--------------------------------------+------+----------------+----------------+
| Pharmaceuticals and biotechnology | | 14.8 | 6.8 |
+--------------------------------------+------+----------------+----------------+
| | | 23.3 | 9.1 |
+--------------------------------------+------+----------------+----------------+
| Cyclical services | | | |
+--------------------------------------+------+----------------+----------------+
| Support services | | 1.2 | 3.7 |
+--------------------------------------+------+----------------+----------------+
| Leisure, entertainment and hotels | | 4.5 | 7.1 |
+--------------------------------------+------+----------------+----------------+
| Food and Drug Retailers | | 2.4 | - |
+--------------------------------------+------+----------------+----------------+
| | | 8.1 | 10.8 |
+--------------------------------------+------+----------------+----------------+
| Non-cyclical services | | | |
+--------------------------------------+------+----------------+----------------+
| Telecommunication services | | 7.2 | 10.2 |
+--------------------------------------+------+----------------+----------------+
| | | 7.2 | 10.2 |
+--------------------------------------+------+----------------+----------------+
| Utilities | | | |
+--------------------------------------+------+----------------+----------------+
| Utilitiles other | | 5.5 | 10.0 |
+--------------------------------------+------+----------------+----------------+
| | | 5.5 | 10.0 |
+--------------------------------------+------+----------------+----------------+
| Information and technology | | | |
+--------------------------------------+------+----------------+----------------+
| Software and computer services | | 0.1 | - |
+--------------------------------------+------+----------------+----------------+
| | | 0.1 | - |
+--------------------------------------+------+----------------+----------------+
| Financials | | | |
+--------------------------------------+------+----------------+----------------+
| Banks | | 8.5 | 8.6 |
+--------------------------------------+------+----------------+----------------+
| Speciality and other finance | | 4.7 | 5.5 |
+--------------------------------------+------+----------------+----------------+
| Real Estate | | 2.6 | 4.8 |
+--------------------------------------+------+----------------+----------------+
| Investment companies | | 0.3 | 1.4 |
+--------------------------------------+------+----------------+----------------+
| Life assurance | | 5.1 | - |
+--------------------------------------+------+----------------+----------------+
| | | 21.2 | 20.3 |
+--------------------------------------+------+----------------+----------------+
| Net current assets/(liabilities) | | 9.8 | 5.3 |
+--------------------------------------+------+----------------+----------------+
| Total assets less current | | 100.0 | 115.8 |
| liabilities | | | |
+--------------------------------------+------+----------------+----------------+
| Borrowings | | - | - 15.8 |
+--------------------------------------+------+----------------+----------------+
| Net assets | | 100.0 | 100.0 |
+--------------------------------------+------+----------------+----------------+
| Note: The distribution of investments is based on the valuations at 31 |
| December 2008 and at 31 December 2007. All of the above are United Kingdom |
| Investments. |
| |
+--------------------------------------+------+----------------+----------------+
Sector Distribution (continued)
Directors' Report
The Directors have pleasure in submitting their annual report and financial
statements for the year ended 31 December 2008 with comparatives for the year
ended 31 December 2007.
Principal activities
The principal activity of the Company is that of an investment trust company.
Revenue
The income statement set out on page 24 shows a deficit on ordinary activities
for the financial year after taxation amounting to GBP10,182,000 (2007: return
GBP1,796,000). The Directors recommend a final dividend of 2.73p which, together
with the interim dividend of 0.90p makes a total of 3.63p for the year (2007:
3.40p).
Subject to the approval by members, the final dividend will be paid on 8 May
2009, to ordinary shareholders on the register on 27 March 2009 and shares in
lieu of dividend will be offered.
Assets
At the year end the net assets attributable to the ordinary shares were
GBP22,171,000 (2007: GBP32,781,000). Based on this figure the net asset value of
an ordinary share was 106.97p (2007: 158.27p).
Share capital
During the year nil shares were repurchased by the company for cancellation
(2007: nil). During the year 202,916 issued ordinary shares of 10p each were
purchased and held in treasury. The authority allowing the Company to purchase
its own shares expires at the end of the 2009 AGM and allows the purchase of a
maximum of 3,103,742 shares, representing 15% of the number of shares in issue
on 31 December 2008.
During the year 216,587 ordinary shares of 10p each were issued from the
treasury reserve arising from elections by ordinary shareholders to receive
shares in lieu of cash dividends (2007: 191,587 new shares issued in lieu of
cash dividends thereby resulting in a total of GBP250,000 being capitalised).
Substantial shareholdings
At 27 March 2009 the holders of ordinary shares in excess of 3% were as follows:
+------------------------------------------+--+--------------+---+-------------+
| | | 27 March | | 25 March |
+------------------------------------------+--+--------------+---+-------------+
| | | 2009 | | 2008 |
+------------------------------------------+--+--------------+---+-------------+
| | | | | |
+------------------------------------------+--+--------------+---+-------------+
| State Street Nominees (held on behalf of | | 29.28% | | 29.50% |
| clients of Scottish Widows Investment | | | | |
| Partnership Limited) | | | | |
+------------------------------------------+--+--------------+---+-------------+
| JM & Mrs AE Le Pelley | | 6.43% | | 6.31% |
+------------------------------------------+--+--------------+---+-------------+
| Mr G Green | | 6.11% | | 6.10% |
+------------------------------------------+--+--------------+---+-------------+
So far as the Directors are aware there is no other interest of 3% or more in
the ordinary shares of the Company.
Directors' Report (continued)
Crest registration
On 3 January 2003, the Company made an application for Crest registration. This
was granted hence shareholders have the option to hold stock in either
certificated or uncertificated form.
Directors
The current Directors who served on the Board during the year, together with
their beneficial interests and those of their families at 31 December 2008, were
as follows:
+------------------------------------------+--+--------------+--+-------------+
| | | 2008 | | 2007 |
+------------------------------------------+--+--------------+--+-------------+
| | | Shares | | Shares |
+------------------------------------------+--+--------------+--+-------------+
| JM Le Pelley (Chairman) | | 1,339,428 | | 1,305,438 |
+------------------------------------------+--+--------------+--+-------------+
| DR Maltwood | | 3,309 | | 3,226 |
+------------------------------------------+--+--------------+--+-------------+
| G Ross Russell | | 313,113 | | 305,860 |
+------------------------------------------+--+--------------+--+-------------+
| JG West | | 10,000 | | 10,000 |
+------------------------------------------+--+--------------+--+-------------+
| D Warr (Audit Committee Chairman) | | - | | - |
+------------------------------------------+--+--------------+--+-------------+
JM Le Pelley is also a Trustee of a Trust holding 546,365 (2007: 532,594)
shares, of which he does not have a beneficial interest.
There have been
no changes in the Directors' interests in the shares of the Company between 31
December 2008 and 27 March 2009.
The Company has no service contracts
with the Directors.
JM Le Pelley and JG West, retire from the board at
the Annual General Meeting in accordance with Article 97 of the Articles of
Association of the Company and are eligible for re-election.
Corporate Governance
The UK Listing Authority requires all listed companies to disclose how they have
applied the principles and complied with the provisions of the Combined Code on
Corporate Governance ("the Code") published in June 2006, which applies to all
companies with accounting periods commencing on or before 1 November 2006. The
Association of Investment Companies (formerly Association of Investment Trust
Companies), of which the Company is a member, also published its Code of
Corporate Governance for Investment Companies ("the AIC Code") in May 2007. The
Combined Code on Corporate Governance is only applicable to companies
incorporated in the United Kingdom and whilst this company was not incorporated
in the United Kingdom the Board has sought to reflect the Code and AIC Code when
reviewing its corporate governance arrangements. The Guernsey Financial Services
Commission (GFSC) issued guidelines for corporate governance on 10 December 2004
which the Company complies with in full and whose underlying principles are the
same as those of the Code.
Directors' Report (continued)
The Board
The Company is led and controlled by a Board comprising non-executive Directors,
all of whom have wide experience and are considered to be independent. The Board
believes that it is in the shareholders' best interests for the Chairman to be
the point of contact for all matters relating to the governance of the Company.
Mr D Warr has been appointed as the senior independent non-executive Director
for the purpose of the Codes. The appointment of Directors is considered by the
Board who are the Nominations Committee. The Articles of Association stipulate
that one third, or the number nearest to but not exceeding one third, of the
Directors shall retire and offer themselves for re-appointment at each annual
general meeting, and the Board has chosen to adopt best practice in relation to
retirement by rotation of two Directors over the Articles of Association and as
stated in the Director's Report, two Directors will stand for re-appointment so
that the shareholders will have the opportunity to consider each Director's
continuing involvement with the Company every third year. During the year, the
Board reviewed its performance and composition, and was content.
In addition, following the evaluation of the performance of the Board, its
committees and individual Directors, it is considered that the performance of
both Directors who are to retire by rotation and offer themselves for
re-appointment continues to be effective and that they have demonstrated
commitment to their roles.
The Board meets regularly, normally quarterly, with additional meetings should
it be considered appropriate to discuss specific issues.
The Directors have no service contracts. Further, they are not entitled to any
minimum period of notice or to compensation in the event of their removal as a
Director.
The table below lists the number of Board and Audit Committee meetings attended
by each Director.
+-----------------------------+--+------------------+--------------------------+
| Director | | Board Meetings | Audit Committee Meetings |
| | | Attended | Attended |
+-----------------------------+--+------------------+--------------------------+
| JM Le Pelley (Chairman) | | 4 | 1 |
+-----------------------------+--+------------------+--------------------------+
| DR Maltwood | | 5 | 1 |
+-----------------------------+--+------------------+--------------------------+
| G Ross Russell | | 5 | 1 |
+-----------------------------+--+------------------+--------------------------+
| JG West | | 5 | 1 |
+-----------------------------+--+------------------+--------------------------+
| D Warr (Audit Committee | | 5 | 1 |
| Chairman) | | | |
+-----------------------------+--+------------------+--------------------------+
The Board has contractually delegated to Scottish Widows Investment Partnership
Limited (SWIP) the management of the Company's investments. The management
agreement between the Company and its investment manager, sets out the matters
over which the manager has authority and the limits above which Board approval
must be sought. Other matters reserved for the approval of the Board include the
report and accounts, communications with shareholders and decisions on strategy.
The safe custody of the Company's investments is managed by HSBC Plc and
Corporate Services (Guernsey) Limited are contracted to provide the Company's
administration, secretarial and accounting functions and Capita IRG (CI)
Limited, its registration function. The Board reviews regularly the performance
of the service provided by these companies.
In 2007 and 2008 the Company did not employ any personnel.
The Board has established itself as an Audit Committee which meets when
necessary, and at least once a year, with the auditors of the Company with a
view to providing further assurance of the quality and reliability of the
financial information used by the Board in these financial statements. The Board
has also established itself as a Nominations Committee, which will meet when
necessary.
Directors' Report (continued)
The Board (continued)
All the Board are considered independent and non-executive and Director's fees
are recommended by the full Board.
The emoluments of the Directors for the year are as follows:
+--------------------------------------+----------------+---+----------------+
| | 2008 | | 2007 |
+--------------------------------------+----------------+---+----------------+
| | Fees | | Fees |
+--------------------------------------+----------------+---+----------------+
| | GBP | | GBP |
+--------------------------------------+----------------+---+----------------+
| JM Le Pelley (Chairman) | 20,000 | | 18,500 |
+--------------------------------------+----------------+---+----------------+
| DR Maltwood | 15,000 | | 13,500 |
+--------------------------------------+----------------+---+----------------+
| G Ross Russell | 15,000 | | 13,500 |
+--------------------------------------+----------------+---+----------------+
| JG West | 15,000 | | 13,500 |
+--------------------------------------+----------------+---+----------------+
| D Warr | 16,000 | | 14,000 |
+--------------------------------------+----------------+---+----------------+
| | 81,000 | | 73,000 |
+--------------------------------------+----------------+---+----------------+
The figures above represent emoluments earned as Directors during the relevant
financial year which are paid quarterly in arrears. The Directors receive no
other remuneration or benefits from the Company other than the fees stated
above.
Relations with shareholders
In conjunction with the Board, the investment manager keeps under review the
register of members of the Company. Potential investors are also contacted by
the investment manager.
All shareholders are encouraged to participate in the Company's annual general
meeting. All Directors normally attend the annual general meeting, at which
shareholders have the opportunity to ask questions and discuss matters with the
Directors and the investment manager.
It is recognised that the Code requires notice of annual general meetings to be
dispatched at least 20 working days before the meeting. The Company intends to
comply with the Code provision in 2009.
Accountability and audit
a) Directors' responsibilities in relation to the financial statements
The Directors are required by the Companies (Guernsey) law, 2008 to prepare
financial statements for each financial year which give a true and fair view of
the state of affairs of the Company as at the end of the year and of the net
return for the year. The Directors consider that in preparing the financial
statements on pages 24 to 43, the Company has used appropriate accounting
policies, consistently applied and supported by reasonable and prudent
judgements and estimates, and that all accounting standards which they consider
applicable have been followed.
The Directors have responsibility for ensuring that the Company keeps accounting
records which disclose with reasonable accuracy at any time the financial
position of the Company and which enable them to ensure that the financial
statements comply with the Companies (Guernsey) Law, 2008. They have general
responsibility for taking such steps as are reasonably open to them to safeguard
the assets of the Company and to prevent and detect fraud and other
irregularities.
b) Statement of going concern
The Directors have formed a judgement at the time of approving the financial
statements that there is a reasonable expectation of the Company having adequate
resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt a going concern basis in preparing the
accounts.
Directors' Report (continued)
Accountability and audit (continued)
c) Internal control
The Directors acknowledge that they are responsible for establishing and
maintaining the Company's system of internal control and reviewing its
effectiveness. Internal control systems are designed to manage rather than
eliminate the failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement or loss.
They have therefore established an ongoing process designed to meet the
particular needs of the Company in managing the risks to which it is exposed,
consistent with the guidance provided by the Turnbull Committee. Such review
procedures have been in place throughout the full financial year and up to the
date of the approval of the financial statements.
This process involves a review by the Board of Scottish Widows Investment
Partnership Limited (SWIP) internal control report and Corporate Services
(Guernsey) Limited internal control report, FRAG 21, and a report covering
specific internal controls operated by SWIP to ensure that the Company's
requirements are met.
The Board has delegated certain aspects of the management and administration of
the Company to SWIP. Further, the Company has delegated Corporate Services
(Guernsey) Limited with the secretarial and accounting functions.
SWIP maintains its own systems of internal controls, on which it has reported to
the Board. The Company, in common with other investment trusts, does not have an
internal audit function. The Board has considered the need for an internal audit
function, but because of the internal control systems in place at the investment
manager, has decided to place reliance on the investment manager's systems and
internal audit procedures.
The systems are designed to ensure effectiveness and efficient operations,
internal control and compliance with laws and regulations. In establishing the
systems of internal control regard is paid to the materiality of relevant risks;
the likelihood of costs being incurred and costs of control. It follows
therefore that the systems of internal control can only provide reasonable but
not absolute assurance against the risk of material misstatement or loss.
There are well established budgeting and forecasting procedures in place and
reports are presented to the Board detailing variance against budget and prior
year and other performance data. The effectiveness of the internal control
systems is reviewed annually by the Board and the Audit Committee. The Audit
Committee has a discussion annually with the auditor to ensure that there are no
issues of concern in relation to the audit opinion on the accounts and, if
necessary, representatives of the investment manager would be excluded from that
discussion.
Where non-audit services are provided by auditors, these engagements are
pre-approved by the audit committee to ensure that the auditors' independence
and objectivity is not breached. There were no non-audit services in the year
ended 31 December 2008 (2007: nil).
Directors' Report (continued)
Institutional investors
The investment manager employs highly experienced personnel and maintains a
continuous training programme for fund managers. The fund managers
are constantly monitoring the portfolio and over the past twelve months they
have visited virtually all the companies in which the Company has invested.
Under the terms of the management agreement, SWIP decides whether and in what
manner all rights conferred by any investment shall be exercised. However, the
Directors may, at any time, instruct SWIP as to the exercise of the voting and
other rights attached to the Company's investments, and they review regularly
the voting decisions taken by the investment manager.
The corporate governance of companies is one of the several elements taken into
consideration by the investment manager when making investment decisions.
Statements of compliance
The Directors believe that the Company has complied with the provisions of the
Combined Code on Corporate Governance and the AIC Code where appropriate, and
that it has complied throughout the year with the provisions where the
requirements are of a continuing nature, except that a Remuneration Committee
and Management Engagement Committee have not been established. During 2009, the
Board will give further consideration to setting up these Committees.
Investment Policy
The Company is permitted to invest in any security listed on any recognised UK
exchange in order to achieve its investment objective of outperforming the FTSE
All-Share Index.
The Company's investment universe comprises the constituents of the FTSE All-
Share Index. While the Directors expect the bulk of the Company's portfolio to
be within the investment universe, the Company reserves the right to invest in
companies traded on any recogonised UK exchange, for example, the Alternative
Investment Markets (AIM) of the London Stock exchange (and any successor market
to it) which the Directors believe, because of movement in their market
capitalisations or, in the case of new listings, because of their likely market
capitalisations, may be considered appropriate for investment. In addition, the
Company reserves the right to retain an investment in any company that was
within the appropriate range of market capitalisation when the investment was
made but which has subsequently moved out of the investment universe as a result
of changes in its market capitalisation relative to the rest of the investment
universe. The Investment Manager's investment approach favours a value bias,
which is to identify undervalued companies in all sector of the Company's
investment universe. Considerable emphasis is palced on identifying companies
which are well managed, have high levels of cash generation and enjoy real
pricing power. The investment manager considers those attributes to be the key
components of a strong market position.
No holding in another Company may exceed 15% of the value of Investment Trust's
portfolio. This test is applied when the investment is first acquired and
subsequently, when additions are made to the holding.
In addition to the original shareholders' capital, the Company has at its
disposal a Revolving Loan Facility for the amount of GBP2,000,000 which is
subject to an agreemnt with Lloyds Banking Group and is detailed further in Note
12 to the financial statements. The interest rate on the loan is renegotiated
annually and was set at a rate of LIBOR plus 0.60%. At the year end, the Company
had GBPnil drawn down against the facility (2007: GBP5,200,000).
A breakdown of the risks the Company is subject to and how they are mitigated
are detailed further below and in Note 17 to the Financial Statements.
Directors' Report (continued)
Implementation
During the year under review, the assets of the Company were invested in
accordance with the Company's investment policy. Further details of the
performance of the Company and the extent to which the Company's objectives were
achieved are detailed further in the Chairman's Statement and Investment
Manager's Review on pages 6 to 7.
The Company's portfolio consisted of 39 Investments as at 31 December 2008 and
is detailed further on pages 8 and 9. The sector distribution of the portfolio
is provided on page 10. As at 31 December 2008, the portfolio only held
investments issued in the United Kingdom. The top 10 holdings comprise 52.30% of
total net assets (2007: 53.92%).
The Company's gearing stood at nil% as at 31 December 2008 (2007: 15.86%).
Financial risk profile
The Company's financial instruments comprise investments, cash and various items
such as debtors, creditors etc that arise directly from the Company's
operations. The main purpose of these instruments is the investment of
shareholders' funds.
It is, and has been throughout the period under review, the Company's policy
that no trading in other financial instruments shall be undertaken
Market price risk
The main risk arising from the Company's financial instruments is market price
risk.
In accordance with the Company's investment objectives, the Company does
not hedge against its exposure to market price risk.
The investment strategy of the Company has been delegated to the Company's
Investment Manager, Scottish Widows Investment Partnership Limited under an
agreement dated 25 April 2002. The Investment Manager operates under agreed
parameters and the Board monitors their performance on a regular basis.
Liquidity risk
The Company's assets comprise securities that can be readily realised to meet
obligations arising on the redemption of shares. As a result the Company is able
to quickly liquidate its investments in these instruments at an amount close to
its fair value in order to meet its liquidity requirements.
The Company has entered into a revolving 5-year loan facility explained in Note
12.
Interest rate risk
The Company's interest rate sensitive assets and liabilities mainly comprise of
cash at bank and a bank loan. The cash at bank and bank loan are subject to
floating rates and the loan is considered to be part of the investment strategy
of the Company. No other hedging is undertaken in respect of this interest rate
risk. The bank loan is due to expire on 23 September 2012.
Directors' Report (continued)
Financial risk profile (continued)
Foreign currency risk
Foreign currency risk is the risk that the value of a financial instrument will
fluctuate because of changes in foreign exchange rates.
The Company's foreign currency risk in 2008 arose from the investment
portfolio and was minimal as it was principally Sterling denominated. No hedging
was undertaken in respect of this foreign currency exposure. The Company had no
exposure to major currencies as at 31 December 2008 (See Note 17).
Investment Manager
Scottish Widows Investment Partnership Limited (SWIP) provides investment
management services to the Company.
The Board believes that in the light of the performance of the portfolio, SWIP
should continue as the Investment Manager of the Company. The Directors have the
view that there are significant advantages to both the Company and the
shareholders as a whole by having SWIP manage the assets of the Company. It is
SWIP's size and its expertise which gives the Board the confidence that the
objectives of the Company are being met. The Directors are of the opinion that
the continuing appointment of SWIP as the Company's Investment Manager on the
terms agreed under the agreement dated 25 April 2002 is in the interest of
shareholders as a whole. Details of the agreement are explained in Note 4.
New Fund Rules
The Company was granted consent to raise funds under The Control of Borrowing
(Bailiwick of Guernsey) Ordinances 1959, as amended ("Old Rules").
With effect from 29 October 2008 all but limited sections of The Control of
Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 2003 have been repealed and
new rules have been introduced by the Guernsey Financial Services Commission
with effect from 15 December 2008 under The Protection of Investors (Bailiwick
of Guernsey) Law 1987, as amended (the "New Rules"). The Company operates in
accordance with the provisions of both the Old Rules and New Rules. There is no
requirement for existing Funds to comply with The New Rules immediately, but
principal documents must be amended to comply by 15 December 2010 or earlier if
documents are revised before that date.
With effect from 29 October 2008, the Company became regulated under the New
Rules and is deemed to be an authorised closed ended investment scheme under the
New Law rules with an option to elect to be treated as a registered collective
investment scheme by writing to the Guernsey Financial Services Commission
("GFSC") on or before 15 April 2009.
The Company will not elect to be treated as a registered collective investment
scheme.
Directors' Report (continued)
Auditors
On 1 December 2008, Deloitte & Touche LLP changed its name to Deloitte LLP.
Accordingly, Deloitte LLP have expressed their willingness to continue in office
as auditors and a resolution to re-appoint them will be proposed at the
forthcoming Annual General Meeting.
At the date of approval of the financial statements, the Directors confirm that:
* so far as they are aware, there is no relevant audit information of which the
Company's auditor is unaware; and
* they have taken all steps they ought to have taken as Directors to make
themselves aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of section 249 of The Companies (Guernsey) Law, 2008.
By order of the Board
JM Le Pelley
D Warr
Directors
31 March 2009
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
The Companies (Guernsey) Law, 2008 requires the Directors to prepare financial
statements for each financial year. Under that law the Directors have elected to
prepare the financial statements in accordance with International Financial
Reporting Standards (IFRSs).
International Accounting Standard 1 requires that financial statements present
fairly for each financial year the company's financial position, financial
performance and cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework
for the preparation and presentation of financial statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable IFRSs. However, the Directors are also required to:
* properly select and apply accounting policies;
* present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
* provide additional disclosures when compliance with the specific requirements in
IFRSs are insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial position and
financial performance; and
* make an assessment of the company's ability to continue as a going concern.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with The
Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The financial statements have been prepared on the going concern basis. The
Directors believe that this basis is appropriate as the Company has significant
net assets, is not dependant on external finance and is expected to operate for
the foreseeable future. The Directors have reviewed the cash flow and projected
income and expenses over the next twelve months and deemed that the Company has
adequate financial resources to meet its obligations.
Directors' responsibility statement
We confirm to the best of our knowledge:
+----------------------------------------+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| 1. | the financial statements prepared in accordance with International Financial Reporting Standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and |
+----------------------------------------+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | |
+----------------------------------------+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| 2. | the Investment Managers Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties faced by the Company. |
+----------------------------------------+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
By order of the Board
JM Le Pelley
D Warr
Directors
3 April 2009
Independent Auditors' Report
To the members of UK Select Trust Limited
We have audited the financial statements of UK Select Trust Limited for the year
ended 31 December 2008 which comprise the Income Statement, the Balance Sheet,
the Statement of Changes in Equity, the Cash Flow Statement and the related
notes 1 to 19. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of The Companies (Guernsey) Law, 2008. 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 auditors' 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 Auditors
As described in the statement of Directors' responsibilities, the Company's
Directors are responsible for the preparation of the financial statements in
accordance with applicable Guernsey law and International Financial Reporting
Standards (IFRSs). Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with The Companies
(Guernsey) Law, 2008. We also report if, in our opinion the Company has not kept
proper accounting records, or if we have not received all the information and
explanations we require for our audit.
We read the Directors' report and the other information contained in the Annual
Report for the above year as described in the contents section and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do
not extend to any other information.
Basis of Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Company's circumstances, consistently applied and adequately disclosed.
We are not required to review any Corporate Governance disclosures required by
the Listing Rules of the Financial Services Authority as the Company is an
overseas company.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Independent Auditors' Report (continued)
Opinion
In our opinion the financial statements give a true and fair view, in accordance
with IFRSs of the state of the Company's affairs as at 31 December 2008 and of
its loss for the year then ended and have been properly prepared in accordance
with The Companies (Guernsey) Law, 2008.
Deloitte LLP
Chartered Accountants
St Peter Port
Guernsey
3 April 2009
Income Statement
for the year ended 31 December 2008
+-----------+-------+-+-+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | 2008 | | 2007 |
+-----------+-------+---+-------+--+-------------------------------------+--+-----------------------------------+
| | | |Notes | | Revenue | | Capital | | Total | | Revenue | | Capital | | Total |
+-----------+-------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+-----------+-------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| (Losses)/gains on | | | | | | | | | | | | | |
| investments | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Net realised | | - | | (5,526) | | (5,526) | | - | | 3,515 | | 3,515 |
| (losses)/gains on | | | | | | | | | | | | |
| financial | | | | | | | | | | | | |
| assets and liabilities | | | | | | | | | | | | |
| held at fair | | | | | | | | | | | | |
| value through profit or | | | | | | | | | | | | |
| loss 8 | | | | | | | | | | | | |
+-------------------------------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Net changes in | 8 | | - | | (5,409) | | (5,409) | | - | | (2,088) | | (2,088) |
| unrealised | | | | | | | | | | | | | |
| depreciation on | | | | | | | | | | | | | |
| financial assets | | | | | | | | | | | | | |
| and liabilities | | | | | | | | | | | | | |
| held at fair value | | | | | | | | | | | | | |
| through profit or | | | | | | | | | | | | | |
| loss | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Net foreign | | | - | | - | | - | | - | | 1 | | 1 |
| exchange gain | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | - | | (10,935) | | (10,935) | | - | | 1,428 | | 1,428 |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Income | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Other income | | 3 | | 1,449 | | - | | 1,449 | | 1,241 | | - | | 1,241 |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | | | |
+-----------+-------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Expenses | | | | | | | | | | | | | | | |
+-----------+-------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Investment | 4 | | 38 | | 115 | | 153 | | 47 | | 143 | | 190 |
| management fees | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Performance | | 4 | | - | | - | | - | | 20 | | 62 | | 82 |
| fee | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Administration | | | | 84 | | - | | 84 | | 80 | | - | | 80 |
| fees | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Registrars' | | | | 19 | | - | | 19 | | 12 | | - | | 12 |
| fees | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Auditors' | | | | | 21 | | - | | 21 | | 11 | | - | | 11 |
| fees | | | | | | | | | | | | | | | |
+-----------+-------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Directors' | | 16 | | 82 | | - | | 82 | | 73 | | - | | 73 |
| fees and | | | | | | | | | | | | | | |
| expenses | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Other expenses | | 105 | | - | | 105 | | 91 | | - | | 91 |
+-------------------------------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Total operating | | | 349 | | 115 | | 464 | | 334 | | 205 | | 539 |
| expenses before | | | | | | | | | | | | | |
| finance costs | | | | | | | | | | | | | |
+---------------------+---------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | |
+-------------------------------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Operating | | | 1,100 | | (11,050) | | (9,950) | | 907 | | 1,223 | | 2,130 |
| profit/(loss) | | | | | | | | | | | | | |
| before finance | | | | | | | | | | | | | |
| costs and tax | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | | | |
+-----------+-------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Finance costs | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Interest | | 12 | | 58 | | 174 | | 232 | | 83 | | 251 | | 334 |
| payable | | | | | | | | | | | | | | |
+-------------------+---+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | |
+-------------------------------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Profit/(loss) | | | 1,042 | | (11,224) | | (10,182) | | 824 | | 972 | | 1,796 |
| before tax | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Taxation | 5 | | - | | - | | - | | - | | - | | - |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Net Profit/(loss) | | | 1,042 | | (11,224) | | (10,182) | | 824 | | 972 | | 1,796 |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| | | | | | | | | | | | | | |
+-----------------------+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
| Basic and diluted | 7 | | 5.04p | | (54.25)p | | (49.21)p | | 3.96p | | 4.67p | | 8.63p |
| return/(deficit) | | | | | | | | | | | | | |
| per Ordinary Share | | | | | | | | | | | | | |
+-----------+-------+-+-+-------+--+---------+--+----------+--+----------+--+---------+--+---------+--+---------+
The total column of this statement is the Income Statement of the Company, with
the revenue and capital columns representing supplementary information.
All revenue and capital items in the above statement derive from continuing
operations. All income is attributable to the ordinary shareholders of the
Company.
The notes on pages 28 to 43 are an integral part of these financial statements.
Balance Sheet
As at 31 December 2008
+----------------------------+----------+--------+----+------------+----+------------+
| | | Notes | | 2008 | | 2007 |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | GBP'000 | | GBP'000 |
+----------------------------+----------+--------+----+------------+----+------------+
| Non-current assets | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| Financial assets at fair value | 8 | | 19,989 | | 36,289 |
| through profit or loss | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| Total non-current assets | | | | 19,989 | | 36,289 |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Current assets | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Receivable from brokers | | | | 1,153 | | 1,466 |
+----------------------------+----------+--------+----+------------+----+------------+
| Receivables | 9 | | 76 | | 233 |
+---------------------------------------+--------+----+------------+----+------------+
| Cash at bank | | | 1,298 | | 336 |
+---------------------------------------+--------+----+------------+----+------------+
| Total current assets | | | | 2,527 | | 2,035 |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Total assets | | | | 22,171 | | 38,324 |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Liabilities | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Current Liabilities | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Payable to brokers | | | | 224 | | - |
+----------------------------+----------+--------+----+------------+----+------------+
| Payables | | 11 | | 121 | | 343 |
+----------------------------+----------+--------+----+------------+----+------------+
| Total current liabilities | | | | 345 | | 343 |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| Non-current liabilities | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Borrowings | 12 | | - | | 5,200 |
+---------------------------------------+--------+----+------------+----+------------+
| Total non-current | | | | - | | 5,200 |
| liabilities | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| Total liabilities | | | | 345 | | 5,543 |
+----------------------------+----------+--------+----+------------+----+------------+
| | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Net assets attributable to holders of | | | 22,171 | | 32,781 |
| equity shares | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Equity shareholders' funds | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Share Capital | | 14 | | 2,083 | | 2,083 |
+----------------------------+----------+--------+----+------------+----+------------+
| Own shares held in | | 14 | | (168) | | (176) |
| treasury | | | | | | |
+----------------------------+----------+--------+----+------------+----+------------+
| Reserves | | | 20,256 | | 30,874 |
+---------------------------------------+--------+----+------------+----+------------+
| | | | 22,171 | | 32,781 |
+---------------------------------------+--------+----+------------+----+------------+
| | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| Number of ordinary shares in issue | 14 | | 20,725,742 | | 20,712,071 |
| (net of treasury shares) | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| | | | | | |
+---------------------------------------+--------+----+------------+----+------------+
| Net asset value per share | 15 | | 106.97p | | 158.27p |
+----------------------------+----------+--------+----+------------+----+------------+
These financial statements were approved by the Board of Directors on 3 April
2009 and are signed on behalf of the Board by:
JM Le Pelley D Warr
DirectorDirector
Date: 3 April 2009
The notes on pages 28 to 43 are an integral part of these financial statements.
Reconciliation of Movements in Equity Shareholders' Funds
For the year ended 31 December 2008
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| | Equity | Own | Share | Capital | Capital | Capital | Revenue | Total |
| | share | shares | premium | redemption | reserve-realised | reserve- | reserve | |
| | capital | held | | reserve | | unrealised | | |
| | | in | | | | | | |
| | | treasury | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| At 1 | 2,083 | (176) | 5,422 | 4,308 | 14,139 | 3,281 | 3,724 | 32,781 |
| January | | | | | | | | |
| 2008 | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Shares | - | (280) | - | - | - | (7) | - | (287) |
| repurchased | | | | | | | | |
| during the | | | | | | | | |
| period | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Premiums | | | | | | | | |
| arising on | | | | | | | | |
| share | | | | | | | | |
| elections: | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| -2007 final | - | - | - | - | - | - | (316) | (316) |
| dividend | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| -2008 | - | - | - | - | - | - | (109) | (109) |
| interim | | | | | | | | |
| dividend | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Dividend | - | 288 | - | - | - | 288 | (288) | 288 |
| and scrips | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Net profit | - | - | - | - | (5,819) | (5,409) | 1,042 | (10,186) |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| At 31 | 2,083 | (168) | 5,422 | 4,308 | 8,320 | (1,847) | 4,053 | 22,171 |
| December | | | | | | | | |
| 2008 | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
There are no other recognised Income and Expenses for the year ended 31 December
2008
For the year ended 31 December 2007
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| | Equity | Own | Share | Capital | Capital | Capital | Revenue | Total |
| | share | shares | premium | redemption | reserve-realised | reserve- | reserve | |
| | capital | held | | reserve | | unrealised | | |
| | | in | | | | | | |
| | | treasury | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| At 1 | 2,083 | - | 5,422 | 4,308 | 11,079 | 5,369 | 3,578 | 31,839 |
| January | | | | | | | | |
| 2007 | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Shares | - | (426) | - | - | - | - | - | (426) |
| repurchased | | | | | | | | |
| during the | | | | | | | | |
| year | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Premiums | | | | | | | | |
| arising on | | | | | | | | |
| share | | | | | | | | |
| elections: | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| -2006 final | - | 189 | - | - | - | - | - | 189 |
| dividend | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| -2007 | - | 61 | - | - | - | - | (1) | 60 |
| interim | | | | | | | | |
| dividend | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Dividend | - | - | - | - | - | - | (677) | (677) |
| and scrips | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| Net profit | - | - | - | - | 3,060 | (2,088) | 824 | 1,796 |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
| At 31 | 2,083 | (176) | 5,422 | 4,308 | 14,139 | 3,281 | 3,724 | 32,781 |
| December | | | | | | | | |
| 2007 | | | | | | | | |
+-------------+---------+----------+---------+------------+------------------+------------+---------+----------+
There are no other recognised Income and Expenses for the year ended 31 December
2007
The notes on pages 28 to 43 are an integral part of these financial
statements. Statement of Cash Flows
For the year ended 31 December 2008
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| | | 2008 | | 2007 |
+--------------------------------------+--------+--------------+----+---------------+
| | | GBP'000 | | GBP'000 |
+--------------------------------------+--------+--------------+----+---------------+
| Cash flows from operating activities | | | |
+-----------------------------------------------+--------------+----+---------------+
| Payment on purchase of investments | | (125,206) | | (120,860) |
+--------------------------------------+--------+--------------+----+---------------+
| Proceeds from sale of investments | | 131,182 | | 121,390 |
+--------------------------------------+--------+--------------+----+---------------+
| Cash received from investments | | 1,524 | | 1,081 |
+--------------------------------------+--------+--------------+----+---------------+
| Other income | | 76 | | 43 |
+--------------------------------------+--------+--------------+----+---------------+
| Investment management fee paid | | (94) | | (190) |
+--------------------------------------+--------+--------------+----+---------------+
| Other cash payments | | (279) | | (395) |
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Net cash inflow from operating | | 7,203 | | 1,069 |
| activities | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Cash flows from financing activities | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Interest paid | | (336) | | (301) |
+--------------------------------------+--------+--------------+----+---------------+
| Share repurchase | | (280) | | (426) |
+--------------------------------------+--------+--------------+----+---------------+
| Equity dividends paid | | (425) | | (428) |
+--------------------------------------+--------+--------------+----+---------------+
| Repayment of long term loan | | (5200) | | - |
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Net cash outflow from financing | | (6,241) | | (1,155) |
| activities | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Net increase/(decrease) in cash and cash | 962 | | (86) |
| equivalents | | | |
+-----------------------------------------------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Cash and cash equivalents at the | | 336 | | 422 |
| beginning of the period | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| | | | | |
+--------------------------------------+--------+--------------+----+---------------+
| Cash and cash equivalents at the end | | 1,298 | | 336 |
| of the period | | | | |
+--------------------------------------+--------+--------------+----+---------------+
The notes on pages 28 to 43 are an integral part of these financial statements.
Notes to the Financial Statements
1. General information
UK Select Trust Limited is a UK Investment Trust Company incorporated under The
Companies (Guernsey) Law, 2008, with its registered office at Dorey Court,
Admiral Park, St Peter Port, Guernsey. UK Select Trust Limited's shares are
listed on the London Stock exchange.
The objective of the Company is to invest over 80% of its gross assets by value
in the UK and the investment policy aims to provide a total return to
shareholders in excess of the net total return on the FTSE All Share Index and a
progressive dividend policy.
2. Accounting Policies
a. Basis of presentation
The financial statements have been prepared in accordance with the applicable
International Reporting Standards and interpretations adopted by the
International Accounting Standards Board (IASB) and in accordance with the
guidelines included in the AIC Statement of Recommended Practice for Financial
Statements of Investment Trust Companies issued in January 2003 and revised in
January 2009 ("AIC SORP") to the extent that it is not in conflict with IFRS.
The financial information is prepared under the historical cost basis except for
the revaluation of financial instruments.
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of a revenue and capital nature has
been presented alongside the Income Statement.
The preparation of financial statements in conformity with International
Financial Reporting Standards requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
b. Going concern
The financial statements have been prepared on the going concern basis. The
Directors believe that this basis is appropriate as the Company has significant
net assets, is not dependant on external finance and is expected to operate for
the foreseeable future. The Directors have reviewed the cash flow and projected
income and expenses over the next twelve months and deemed that the Company has
adequate financial resources to meet its obligations.
Notes to the Financial Statements (continued)
2. Accounting Policies (continued)
c. Standards and interpretations
In the current financial year, the Company has adopted IFRIC 11 & IFRS 2 (Group
and Treasury Share Transactions) which came into force for periods commencing on
or after 1 March 2007. The Directors believe that the adoption of this standard
and interpretation will not have a material impact on the financial statements
of the Company.
At the date of authorisation of these statements, the following standards and
interpretations were in issue but not yet effective:
IFRS 8 'Operating Segments' (Effective for annual periods beginning on or after
1 January 2009); and
Amendments to IAS 1: 'Presentation of financial statements - A revised
presentation' (Effective for annual periods beginning on or after 1 January
2009).
The Directors believe that other pronouncements, which are in issue but not yet
operative or adopted by the Company, will not have a material impact on the
financial statements of the Company.
d. Other receivables
Other receivables do not carry any interest and are short-term in nature and are
accordingly stated at their nominal value as reduced by appropriate allowances
for estimated irrecoverable amounts.
e. Investments
Investments are recognised and derecognised on the trade date where a purchase
or sale is under a contract whose terms require delivery within the timeframe
established by the market concerned, and are initially measured at fair value.
Investments are classified as fair value through profit or loss. As the
Company's business is investing in financial assets with a view to profiting
from their total return in the form of interest, dividends or increases in fair
value and are managed on a portfolio basis to meet the objectives of the
Company, listed equities and fixed income securities are designated as fair
value through profit or loss on initial recognition. The Company manages and
evaluates these investments on a fair value basis in accordance with an
investment strategy.
Financial assets designated as fair value through profit or loss are measured at
fair value, which is either bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted.
Where securities are designated upon initial recognition as fair value through
profit or loss, gains and losses arising from changes in fair value are included
in the income statement for the period as a capital item and transaction costs
on acquisition or disposal of the security are expensed as a capital item.
Foreign exchange gains and losses for fair value through profit or loss
investments are included within the changes in its fair value.
Notes to the Financial Statements (continued)
2. Accounting Policies (continued)
f. Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. A financial liability is
any liability that contractually obligates the Company to deliver cash or
another financial asset or exchange financial assets or financial liabilities
that are potentially unfavourable to the Company, or a contract that will or
maybe settled in the Company's own equity instruments. An equity instrument is
any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. As the Ordinary shares have no fixed
rights to redemption or income they are classified as equity.
g. Financial instruments
Financial assets and financial liabilities are recognised on the Company's
balance sheet when the company becomes party to the contractual provisions of
the instrument. The Company shall offset financial assets and financial
liabilities if the Company has a legally enforceable right to set off the
recognised amounts and interests and intends to settle on a net basis.
h. Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs, finance charges, including premiums payable
on settlement or redemption and direct issue costs. They are accounted for on an
accruals basis in the income statement using the effective interest method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
i. Other payables
Other payables are not interest-bearing and are stated at their nominal value.
j. Income
Dividends are brought into the Income Statement as revenue items on the
ex-dividend date or, where no ex-dividend date is quoted, when the Company's
right to receive payment is established. All dividends are shown gross of
withholding tax and received net of imputed tax credits as the Company is exempt
from Guernsey Income Tax.
Fixed returns on non-equity investments and on debt securities are recognised
as revenue items in the income statement on a time apportionment basis so as to
reflect the effective yield on the investment. Other returns on non-equity
shares are recognised when the right to the return is established. Deposit
interest is included on an accruals basis.
Where the Company has elected to receive its dividends in the form of
additional shares rather than in cash, the amount of the cash dividend is
recognised as revenue in the Income Statement.
k. Foreign exchange
The presentational and functional currency of the Company is sterling, which is
the currency of the primary economic environment in which the company operates.
Foreign currency monetary assets and liabilities are translated into sterling at
the rate of exchange ruling at the balance sheet date. Transactions in foreign
currencies are translated into sterling at the rate ruling at the date of the
transaction. Realised and unrealised foreign exchange gains and losses are
recognised in the income statement as capital realised, and capital reserve -
unrealised, respectively.
Notes to the Financial Statements (continued)
2. Accounting Policies (continued)
l. Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the Income Statement as revenue except as follows:
* expenses which are incidental to the acquisition of an investment are deducted
from gains on investments through the Income Statement as capital;
* expenses which are incidental to the disposal of an investment are deducted from
the disposal proceeds of the investment; and
* expenses are charged to the Income Statement as capital realised where a
connection with the maintenance or enhancement of the value of the investments
can be demonstrated. In this respect the investment manager's fee
and performance fee have been allocated 75% to the capital reserve - realised
and 25% to the revenue reserve in line with the Board's expected long-term split
of returns in the form of capital gains and income respectively from the
investment portfolio of the Company.
The Company has no employees
m. Finance costs
Finance costs are accounted for on an accruals basis. Finance costs are
allocated, insofar as they relate to the financing of the Company's investments,
75% to capital reserve - realised and 25% to revenue account, in line with the
Board's expected long-term split of returns, as outlined in the expenses note
above.
n. Segment Reporting
A business segment is a distinguishable component of the Fund that is engaged in
providing products and services and that is subject to risks and returns that
are different from those of other business segments. A geographical segment is a
distinguishable component of the Fund that is engaged in providing products and
services and that is subject to risks and returns that are different from those
of other economic environments. The Board of Directors is of the opinion that
the Fund is organised in one main business segment, namely the management of the
Fund's investments in order to achieve the Fund's investment objectives as
described in Note 1 to the financial statements. The Board of Directors is
further of the opinion that the Fund's secondary segment reporting format is
also organised into one main geographical unit as the location of all
investments is materially all within the United Kingdom.
Notes to the Financial Statements (continued)
2. Accounting Policies (continued)
o. Capital reserves
Capital reserve - realised
The following are accounted for in the Income Statement and then in this
reserve:
* gains and losses on the realisation of investments;
* charged to this reserve in accordance with the above policies;
* realised foreign exchange gains and losses; and
* consideration paid on repurchase of own shares.
Capital reserve - unrealised
The following are accounted for in the Income Statement and then in this
reserve:
* difference between cost and valuation of investments held at the year end; and
* unrealised foreign exchange gains and losses.
p. Fair values of financial instruments
Many of the Company's financial instruments are measured at fair value on the
balance sheet and it is usually possible to determine fair values within a
reasonable range of estimates.
For all the Company's investments there is an active market and quoted market
prices available.
q. Impairment
The Company is required to evaluate the securities in its portfolio to determine
if any of the securities are impaired.
As a matter of accounting policy, UK Select Trust Limited has determined that it
will have intent and ability to hold a security with unrealised loss until the
cost of purchases has been recovered.
Fair value and impairment estimates are made at a specific point in time based
on market conditions and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgement.
The Company invests in Listed UK equities and therefore at the balance sheet
date there were no sources of significant judgement or uncertainty.
Notes to the Financial Statements (continued)
3. Other income
+----------------------------------------------+--------------+---+--------------+
| | 2008 | | 2007 |
+----------------------------------------------+--------------+---+--------------+
| | GBP'000 | | GBP'000 |
+----------------------------------------------+--------------+---+--------------+
| Dividend income from investments designated | | | |
| at fair value through profit or loss: | | | |
+----------------------------------------------+--------------+---+--------------+
| Listed UK | 1,373 | | 1,160 |
+----------------------------------------------+--------------+---+--------------+
| Listed overseas | - | | 36 |
+----------------------------------------------+--------------+---+--------------+
| | 1,373 | | 1,196 |
+----------------------------------------------+--------------+---+--------------+
| Dividend income from financial assets not at | | | |
| fair value through profit or loss: | | | |
+----------------------------------------------+--------------+---+--------------+
| Deposit interest arising on cash and cash | 54 | | 45 |
| equivalents | | | |
+----------------------------------------------+--------------+---+--------------+
| Underwriting commission | 22 | | - |
+----------------------------------------------+--------------+---+--------------+
| | 76 | | 45 |
+----------------------------------------------+--------------+---+--------------+
| Total income | 1,449 | | 1,241 |
+----------------------------------------------+--------------+---+--------------+
| | | | |
+----------------------------------------------+--------------+---+--------------+
| Total income comprises: | | | |
+----------------------------------------------+--------------+---+--------------+
| Dividends | 1,373 | | 1,196 |
+----------------------------------------------+--------------+---+--------------+
| Interest | 54 | | 45 |
+----------------------------------------------+--------------+---+--------------+
| Other income | 22 | | - |
+----------------------------------------------+--------------+---+--------------+
| Total income | 1,449 | | 1,241 |
+----------------------------------------------+--------------+---+--------------+
4. Investment management and performance fee
+----------------------+--+---------+---------+---------+---------+---------+---------+
| | | 2008 | 2007 |
+----------------------+--+-----------------------------+-----------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
+----------------------+--+---------+---------+---------+---------+---------+---------+
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--+---------+---------+---------+---------+---------+---------+
| Investment | | 38 | 115 | 153 | 47 | 143 | 190 |
| management fee | | | | | | | |
+----------------------+--+---------+---------+---------+---------+---------+---------+
| Performance fee | | - | - | - | 20 | 62 | 82 |
+----------------------+--+---------+---------+---------+---------+---------+---------+
| | | | | | | | |
+----------------------+--+---------+---------+---------+---------+---------+---------+
The investment manager was appointed under an agreement with the Company dated
25 April 2002. The agreement may be terminated by either side giving 6 months
notice. The basic remuneration of the investment manager is 0.125% quarterly in
arrears, based on the value of the portfolio at 31 March, 30 June, 30 September
and 31 December. The investment manager is entitled to receive a performance fee
payable in arrears linked to the excess total return of the Company's net assets
compared to the total return of the FTSE All Share Index. The performance fee is
capped at 0.25% in any year. On this basis the maximum possible management fee
in any year will be 0.75% if the average of two years outperformance equals or
exceeds 2.5%. A performance fee of GBPnil (2007: GBP82,275) is due for the
current year.
Where the investment manager is also manager of funds in which the Company has
an investment, an arrangement is in place to avoid double charging of fees and
expense.
Notes to the Financial Statements (continued)
5.Taxation
+----------------------------------------------+--------------+--+---------------+
| | 2008 | | 2007 |
+----------------------------------------------+--------------+--+---------------+
| | GBP'000 | | GBP'000 |
+----------------------------------------------+--------------+--+---------------+
| Taxation | - | | - |
+----------------------------------------------+--------------+--+---------------+
| | | | |
+----------------------------------------------+--------------+--+---------------+
This represents withholding tax suffered on the dividends received during the
year.
The Company is exempt from Guernsey Income Tax under the Income Tax (Exempt
Bodies) (Guernsey) Ordinances 1989 to 1997 and is charged an annual exemption
fee of GBP600. (2007: GBP600).
6. Dividends
+----------------------------------------------------+---+----------+--+----------+
| | | 2008 | | 2007 |
+----------------------------------------------------+---+----------+--+----------+
| | | GBP'000 | | GBP'000 |
+----------------------------------------------------+---+----------+--+----------+
| Equity dividends | | | | |
+----------------------------------------------------+---+----------+--+----------+
| Ordinary shares | | | | |
+----------------------------------------------------+---+----------+--+----------+
| Interim of 0.90p on 12,111,111 shares for 2008 | | | | |
| paid in 2008 | | | | |
+----------------------------------------------------+---+----------+--+----------+
| (2007 paid in 2007: 0.85p (gross) on 20,806,410 | | 109 | | 177 |
| shares) | | | | |
+----------------------------------------------------+---+----------+--+----------+
| | | | | |
+----------------------------------------------------+---+----------+--+----------+
| Final dividend for 2007: 2.55p (gross) on | | | | |
| 12,392,157 shares paid in 2008 | | | | |
+----------------------------------------------------+---+----------+--+----------+
| (2006 paid in 2007: 2.40p (gross) on 20,825,333 | | 316 | | 500 |
| shares paid in 2007 | | | | |
+----------------------------------------------------+---+----------+--+----------+
| | | 425 | | 677 |
+----------------------------------------------------+---+----------+--+----------+
| | | | | |
+----------------------------------------------------+---+----------+--+----------+
7. Basic and diluted return per ordinary share
+---------------+----------+----------+----------+------------+----------+--------+----------+
| | | | | |
+---------------+--------------------------------+------------+----------+-------------------+
| | 2008 | 2007 |
+---------------+--------------------------------+-------------------------------------------+
| | Revenue | Capital | Total | Revenue | Capital | Total |
+---------------+----------+----------+----------+------------+-------------------+----------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------+----------+----------+----------+------------+-------------------+----------+
| | | | | | | |
+---------------+----------+----------+----------+------------+-------------------+----------+
| Return/(loss) | 5.04p | (54.25)p | (49.21)p | 3.96p | 4.67p | 8.63p |
+---------------+----------+----------+----------+------------+----------+--------+----------+
Revenue return per ordinary share is based on the net revenue on ordinary
activities of GBP1,042,000 (2007: return GBP824,000) and on 20,689,850 ordinary
shares, being the weighted average number of ordinary shares in issue during the
year (2007: 20,803,667).
Capital loss per ordinary share is based on a net capital loss for the financial
year of GBP11,228,000 (2007: return GBP972,000) and on 20,689,850 ordinary
shares, being the weighted average number of ordinary shares in issue during the
period (2007: 20,803,667).
Notes to the Financial Statements (continued)
8. Investments
+-------+------------+------------+----+-+---+------------+------------+-+----------+------------+-+
| | | | | | 2008 | 2007 |
+-------+------------+------------+------+---+-------------------------+---------------------------+
| | | | | |Fair Value | % of net |Fair Value | % of net |
| | | | | | | assets | | assets |
+-------+------------+------------+------+---+------------+------------+------------+--------------+
| Financial assets at fair value through | | GBP'000 | | GBP'000 | |
| profit or loss | | | | | |
+ +---+------------+------------+------------+--------------+
| | | | | | |
+----------------------------------------+-------+------------+------------+------+----------------+
| | | | | | | | | |
+-------+------------+------------+------+---+------------+------------+------------+--------------+
| Designated at fair value through profit or | | | | |
| loss | | | | |
+--------------------------------------------+------------+------------+------------+--------------+
| - Listed equity securities | | 19,989 | 90.16 | 36,289 | 110.65 |
+----------------------------------------+---+------------+------------+------------+--------------+
| | | | | | 19,989 | 90.16 | 36,289 | 110.65 |
+-------+------------+------------+------+---+------------+------------+------------+--------------+
| | | | | | | | | |
+-------+------------+------------+------+---+------------+--------------+----------+------------+
| | | | | | | | | |
+-------+------------+------------+------+---+------------+--------------+----------+--------------+
| | | | | | | 2008 | | 2007 |
+-------+------------+------------+------+---+------------+--------------+----------+--------------+
| | | | | | | GBP'000 | | GBP'000 |
+-------+------------+------------+------+---+------------+--------------+----------+--------------+
| | | | | | | | | |
+-------+------------+------------+------+---+------------+--------------+----------+--------------+
| Opening book cost | | | | 33,008 | | 31,125 |
+---------------------------------+------+---+------------+--------------+----------+--------------+
| Opening unrealised appreciation | | | 3,281 | | 5,369 |
+----------------------------------------+---+------------+--------------+----------+--------------+
| | | | | | | | | |
+-------+------------+------------+------+---+------------+--------------+----------+--------------+
| Opening valuation | | | | 36,289 | | 36,494 |
+---------------------------------+------+---+------------+--------------+----------+--------------+
| | | | | | | | | |
+-------+------------+------------+------+---+------------+--------------+----------+--------------+
| Movements in the period/year: | | | | | |
+----------------------------------------+---+------------+--------------+----------+--------------+
| Purchases at cost | | | | 125,431 | | 121,906 |
+---------------------------------+------+---+------------+--------------+----------+--------------+
| Sales - proceeds | | | | (130,796) | | (123,538) |
+---------------------------------+------+---+------------+--------------+----------+--------------+
| - realised (losses)/gains on sales | | | (5,526) | | 3,515 |
+----------------------------------------+---+------------+--------------+----------+--------------+
| Decrease in unrealised appreciation | (5,409) | | (2,088) |
+---------------------------------------------------------+--------------+----------+--------------+
| | | | | | | | | |
+-------+------------+------------+----+-----+------------+--------------+----------+--------------+
| Closing valuation | | | | 19,989 | | 36,289 |
+---------------------------------+----+-----+------------+--------------+----------+--------------+
| | | | | | | | | |
+-------+------------+------------+----+-----+------------+--------------+----------+--------------+
| Comprising: | | | | | | | |
+--------------------+------------+----+-----+------------+--------------+----------+--------------+
| Closing book cost | | | | 22,116 | | 33,008 |
+---------------------------------+----+-----+------------+--------------+----------+--------------+
| Closing unrealised | | (2,127) | | 3,281 |
| (depreciation)/appreciation | | | | |
+--------------------------------------------+------------+--------------+----------+--------------+
| | | | | | | | | |
+-------+------------+------------+----+-----+------------+--------------+----------+--------------+
| Closing valuation | | | | 19,989 | | 36,289 |
+-------+------------+------------+----+-+---+------------+------------+-+----------+------------+-+
Notes to the Financial Statements (continued)
9. Receivables
+--------------------------------------------------+--------------+---+--------------+
| | 2008 | | 2007 |
+--------------------------------------------------+--------------+---+--------------+
| | GBP'000 | | GBP'000 |
+--------------------------------------------------+--------------+---+--------------+
| Accrued income | 71 | | 223 |
+--------------------------------------------------+--------------+---+--------------+
| Prepayments | 5 | | 10 |
+--------------------------------------------------+--------------+---+--------------+
| | 76 | | 233 |
+--------------------------------------------------+--------------+---+--------------+
| | | | |
+--------------------------------------------------+--------------+---+--------------+
The Directors consider that the carrying amount of receivables approximates
their fair value.
10. Cash at Bank
Cash at bank comprises bank balances and cash held by the Company including
short-term deposits with an original maturity of three months or less. The
carrying amount of these assets approximates to their fair value.
11. Payables
+--------------------------------------------------+--------------+---+--------------+
| | 2008 | | 2007 |
+--------------------------------------------------+--------------+---+--------------+
| | GBP'000 | | GBP'000 |
+--------------------------------------------------+--------------+---+--------------+
| Interest payable | - | | 106 |
+--------------------------------------------------+--------------+---+--------------+
| Other payables | 121 | | 237 |
+--------------------------------------------------+--------------+---+--------------+
| | 121 | | 343 |
+--------------------------------------------------+--------------+---+--------------+
| | | | |
+--------------------------------------------------+--------------+---+--------------+
The Directors consider that the carrying amount of payables approximates their
fair value.
12. Borrowings
The Company has a revolving 5 year loan facility, secured on the assets of the
Company, which is due to expire on 23 September 2012 with an aggregate principal
amount of GBP2,000,000, for the purposes of future investment. During the year
ended 31 December 2008, the previous loan facility of GBP5,200,000, which was
fully drawn down, was repaid in full. Interest is payable at a rate of six month
sterling LIBOR plus 0.6% and the borrowing is held at amortised cost. During the
year, interest of GBP231,502 (2007: GBP334,634) was paid. A fee of 0.30% per
annum is payable on the undrawn amount of GBP2,000,000 of this facility (1).
Further, the Company is required to comply with the following financial
covenants imposed by the bank:
* the Company is required to ensure that the borrowing does not at any time exceed
45% of the Adjusted Gross Asset Value;
* the Company is required to maintain the Net Worth at not less that
GBP20,000,000; and
* the Company is required to ensure that the investment portfolio includes
holdings in not less that 30 separate businesses.
(1) The loan is secured on the assets of the Company.
Notes to the Financial Statements (continued)
13. Business and geographical segments
As described in the summary of significant accounting policies in note 2 to the
financial statements the Board of Directors is of the opinion that the Comapny
is organised in one main business segment, namely the management of the
Company's investments in order to achieve the Company's investment objectives as
described in note 1 to the financial statements, and considers this to be the
primary reporting format for segment information and no further business segment
information not already included in other parts of the financial statements is
required.
The Board of Directors is further of the opinion that the Company's secondary
segment reporting format is also organsised into one main geographical unit as
the location of all of its investments is materially all within the United
Kingdom.
+--------------------------------+----------+--+----------+--+----------+--+----------+
| | Income | | Net Assets |
+--------------------------------+------------------------+--+------------------------+
| | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------+----------+--+----------+--+----------+--+----------+
| | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+--------------------------------+----------+--+----------+--+----------+--+----------+
| United Kingdom | 1,449 | | 1,241 | | 22,171 | | 32,796 |
+--------------------------------+----------+--+----------+--+----------+--+----------+
| | 1,449 | | 1,241 | | 22,171 | | 32,796 |
+--------------------------------+----------+--+----------+--+----------+--+----------+
| | | | | | | | |
+--------------------------------+----------+--+----------+--+----------+--+----------+
Geographical locations are determined by the Company based on the country of
primary listing for listed instruments and the country of incorporation for
unlisted instruments.
14. Share capital
+-----+------+-------+------+--+-----------------------+-------------+--+--------------+
| | | | | | | 2008 | | 2007 |
+-----+------+-------+------+--+-----------------------+-------------+--+--------------+
| | | | | | | GBP'000 | | GBP'000 |
+-----+------+-------+------+--+-----------------------+-------------+--+--------------+
| | | | | | | | | |
+-----+------+-------+------+--+-----------------------+-------------+--+--------------+
| Authorised | | | | | | | |
+------------+-------+------+--+-----------------------+-------------+--+--------------+
| 100,000,000 ordinary shares of 10p each | 10,000 | | 10,000 |
+------------------------------------------------------+-------------+--+--------------+
| | | | |
+------------------------------------------------------+-------------+--+--------------+
| 250,000 5% cumulative preference restrictive voting | 250 | | 250 |
| shares of GBP1 each | | | |
+------------------------------------------------------+-------------+--+--------------+
| | | | | | | | | |
+-----+------+-------+------+--+-----------------------+-------------+--+--------------+
| | | | | | | 10,250 | | 10,250 |
+-----+------+-------+------+--+-----------------------+-------------+--+--------------+
The holders of the five per cent cumulative preference restrictive voting shares
shall be entitled, out of profits for dividend, to a fixed cumulative
preferential dividend at the rate of five per cent per annum and in a winding-up
or on a return of capital shall be entitled to repayment of capital in priority
to the ordinary shareholders. The ordinary shareholders carry the right to
receive any surplus income and in winding-up any surplus assets, after repayment
of the preference capital and dividends as above.
Notes to the Financial Statements (continued)
14. Share capital (continued)
+-----+------+----------------+------+--+---+------+-----+---------+--------+-----+----------+
| | | | | | | 2008 | | 2007 |
+-----+------+----------------+------+--+----------+---------------+--------+----------------+
| | | | | | | GBP'000 | | GBP'000 |
+-----+------+----------------+------+--+----------+---------------+--------+----------------+
| Issued, called up and fully paid: | | | | | |
+------------------------------------+--+----------+---------------+--------+----------------+
| 20,830,484 ordinary shares of 10p each | | | |
+--------------------------------------------------+---------------+--------+----------------+
| (2007: 20,830,484) | | | | 2,083 | | 2,083 |
+-----------------------------+------+--+----------+---------------+--------+----------------+
| | | | | | | | | |
+-----+------+----------------+------+--+----------+---------------+--------+----------------+
| | | | | | | |
+-----+------+----------------+------+--+--------------------------+-------------------------+
| | | | | | | 2008 |
+-----+------+----------------+------+--+---+------------------------------------------------+
| | | | | | | Own Shares held in | Shares in issue |
| | | | | | | treasury | |
+-----+------+----------------+------+--+---+----------------------+-------------------------+
| | | | | | | Shares |GBP'000 | Shares | GBP'000 |
+-----+------+----------------+------+--+---+------------+---------+--------------+----------+
| Balance at 1 January 2008 | | | | 118,413 | 176 | 20,830,484 | 2,083 |
+-----------------------------+------+--+---+------------+---------+--------------+----------+
| Shares purchased for cancellation | | | - | - | - | - |
+------------------------------------+--+---+------------+---------+--------------+----------+
| Shares issued in lieu of dividends | | | - | - | - | - |
+------------------------------------+--+---+------------+---------+--------------+----------+
| Shares purchased and held in treasury | 202,916 | 280 | - | - |
+-------------------------------------------+------------+---------+--------------+----------+
| Shares issued in lieu of dividends from | (216,587) | (288) | - | - |
| treasury | | | | |
+-------------------------------------------+------------+---------+--------------+----------+
| Balance at 31 December 2008 | | | | 104,742 | 168 | 20,830,484 | 2,083 |
+-----------------------------+------+--+---+------------+---------+--------------+----------+
| | | | | | | | | | |
+-----+------+----------------+------+--+---+------------+---------+--------------+----------+
| | | | | | | 31 December 2007 |
+-----+------+----------------+------+--+---+------------------------------------------------+
| | | | | | | Own shares held in | Shares in issue |
| | | | | | | treasury | |
+-----+------+----------------+------+--+---+----------------------+-------------------------+
| | | | | | | Shares |GBP'000 | Shares | GBP'000 |
+-----+------+----------------+------+--+---+------------+---------+--------------+----------+
| Balance at 1 January 2007 | | | | - | - | 20,830,484 | 2,083 |
+-----------------------------+------+--+---+------------+---------+--------------+----------+
| Shares purchased for cancellation | | | - | - | - | - |
+------------------------------------+--+---+------------+---------+--------------+----------+
| Shares issued in lieu of dividends | | | - | - | - | - |
+------------------------------------+--+---+------------+---------+--------------+----------+
| Shares purchased and held in treasury | 310,000 | 426 | - | - |
+-------------------------------------------+------------+---------+--------------+----------+
| Shares issued in lieu of dividends from | (191,587) | (250) | - | - |
| treasury | | | | |
+-------------------------------------------+------------+---------+--------------+----------+
| Balance at 31 December 2007 | | | 118,413 | 176 | 20,830,484 | 2,083 |
+------------------------------------+--+---+------------+---------+--------------+----------+
| | | | | | | | | | |
+-----+------+----------------+------+--+---+------------+---------+--------------+----------+
| During the period no shares were purchased for cancellation (2007: nil). |
+-----+------+----------------+------+--+---+------+-----+---------+--------+-----+----------+
On 13 March 2008, 39,500 shares were purchased for Treasury at a total cost
including expenses of GBP55,862.
On 14 May 2008, 140,000 shares were purchased for Treasury at a total cost
including expenses of GBP191,673.
On 12 June 2008, 23,416 shares were purchased for Treasury at a total cost
including expenses of GBP30,884.
On 2 May 2008, 152,117 shares were issued to shareholders who elected to receive
them in lieu of a final cash dividend for 2007. On 6 November 2008 64,470 shares
were issued to shareholders who elected to receive them in lieu of an interim
dividend for 2008. Ordinary shares of 10p each, fully paid were issued to
shareholders from the Treasury reserves account held by the Company.
Notes to the Financial Statements (continued)
15. Net asset value per share
Net asset value per ordinary share is based on net assets attributable to the
ordinary shareholders of GBP22,171,000 (2007: GBP32,781,000) and on 20,725,742
(2007: 20,712,071) ordinary shares, being the number of ordinary shares in issue
at the end of the year.
16. Related party transactions
The members of the Board of Directors are listed on page 3 of the annual report.
Fees earned by the Directors of the Company during the year were GBP81,000
(2007: GBP73,000) of which GBP20,250 (2007: GBP20,250) was outstanding at the
year end.
The investment manager, Scottish Widows Investment Partnership Limited has a
29.28% (2007: 29.50%) shareholding in the Company and earned investment
management fees of GBP153,587 (2007: GBP190,408) during the year of which
GBP27,958 (2007: GBP47,827) was outstanding at the year end and a performance
fee of GBPnil (2007: GBP82,275). The basis of calculation of these fees is
detailed in note 4 of the annual financial statements.
The Company has appointed Corporate Services (Guernsey) Limited to provide
administrative and accounting services. Administrative fees (including the
accounting fee) for the year ended 31 December 2008 totalled GBP84,000 (2007:
GBP80,172) of which GBP38,333 (2007: GBP36,672) was outstanding at the year end.
Notes to the Financial Statements (continued)
17.Financial assets and liabilities interest rate disclosure and other financial
risks
A description of the financial risk profile can be seen in the Directors' report
on page 18.
Capital risk management
The capital structure of the Company consists of the cash and cash equivalents
and equity attributable to ordinary shareholders, comprising issued share
capital, own shares held in treasury, share premium, capital redemption reserve,
capital reserves and revenue reserve as disclosed in the Statement of changes in
equity. The Company does not have any externally imposed capital requirements.
At 31 December 2008 the Company had capital of GBP22.171 million (2007:
GBP32.781 million).
The investment objective of UK Select Trust Limited is to invest over 80% of its
gross assets by value in the UK and the investment policy aims to provide a
total return to shareholders in excess of the net total return on the FTSE All
Share Index and a progressive dividend policy.
The Company aims to deliver its objective by investing available cash and using
leverage whilst maintaining sufficient liquidity to meet on-going expenses and
dividend payments.
The Company's policy is to provide net income for distribution from the dividend
income earned from a portfolio of UK equity securities, all of which are listed
on the London Stock Exchange. Further, the Company has capitalised 75% of its
investment management fee, performance fee and finance costs in respect of the
loan facility in line with the Board's expectation of long-term returns in the
form of capital gains from the investment portfolio of the Company.
UK Select Trust Limited uses leverage to enhance the returns to shareholders and
for this purpose hadsentered into a long-term loan facility amounting to GBP2
million for future investments. The interest payable on borrowing is six month
sterling LIBOR plus 0.6%, therefore limiting the Company's interest rate risk.
The company has pledged its assets to secure such borrowings.
During the year under review, the assets of the Company were invested in
accordance with the Company's Investment Manager's strategy. The Company invests
in various sectors and businesses to mitigate the primary risk of the company,
price risk. In addition, price-volatility levels are reviewed and monitored
daily.
As at 31 December 2008, the Company's portfolio consisted of 39 investments
spread over 8 sectors. Further, the portfolio only held investments issued in
the United Kingdom.
The Board has also adopted an investment restriction to manage the risk profile,
that is;
* No holding in another Company may exceed 15% of the value of the Investment
Trust's portfolio. This test is applied when the investment is first acquired
and subsequently, when additions are made to the holding.
Notes to the Financial Statements (continued)
17. Financial assets and liabilities interest rate disclosure and other
financial risks (continued)
Credit risk
Credit risk is the risk that an issuer or counter-party may be unable or
unwilling to meet a commitment that it has entered into with the Company.
The Company's principal financial assets are bank balances and cash, other
receivables and investments as set out in the balance sheet which represent the
Company's maximum exposure to credit risk in relation to the financial assets.
The credit risk on bank balances is limited because the counter-parties are
banks with high credit ratings of A-1+ assigned by international credit-rating
agencies.
All transactions in listed securities are settled upon delivery using approved
brokers. The risk of default is considered minimal as delivery of securities
sold is only made once the broker has received payment. Payment is made on a
purchase once the securities have been received by the broker. The trade will
fail if either party fails to meet its obligations.
Liquidity risk
The Company's assets comprise securities that can be readily realised to meet
obligations. As a result the Company is able to quickly liquidate its
investments in these instruments at an amount close to its fair value in order
to meet its liquidity requirements. Dividend income is also expected to be
sufficient to cover short-term liquidity requirements.
The Company has entered into a revolving 5-year loan facility explained in Note
12, to provide leverage and enhance returns to shareholders.
The following table details the Company's liquidity analysis for its financial
liabilities. The table has been drawn up based on the undiscounted gross cash
flows on those financial liabilities that require gross settlement.
+----------------------------------------------------+------------+--+------------+
| | 1-3 months | | 1-5 years |
+----------------------------------------------------+------------+--+------------+
| | GBP'000 | | GBP'000 |
+----------------------------------------------------+------------+--+------------+
| 2008 | | | |
+----------------------------------------------------+------------+--+------------+
| Gross settled: | | | |
+----------------------------------------------------+------------+--+------------+
| Other payables | 345 | | - |
+----------------------------------------------------+------------+--+------------+
| Bank loan | - | | - |
+----------------------------------------------------+------------+--+------------+
| | 345 | | - |
+----------------------------------------------------+------------+--+------------+
| | | | |
+----------------------------------------------------+------------+--+------------+
| 2007 | | | |
+----------------------------------------------------+------------+--+------------+
| Gross settled: | | | |
+----------------------------------------------------+------------+--+------------+
| Other payables | 357 | | - |
+----------------------------------------------------+------------+--+------------+
| Bank loan | - | | 5,200 |
+----------------------------------------------------+------------+--+------------+
| | 357 | | 5,200 |
+----------------------------------------------------+------------+--+------------+
| | | | |
+----------------------------------------------------+------------+--+------------+
Notes to the Financial Statements (continued)
17. Financial assets and liabilities interest rate disclosure and other
financial risks (continued)
Market risk
Market risk is the possibility that future changes in market prices may make a
financial instrument less valuable or more onerous. The Company's market risk is
managed by the investment manager through diversification of the investment
portfolio in accordance with the Company's investment policy.
a) Price risk
Price risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices whether those
changes are caused by factors specific to the individual financial instrument or
its issuers, or factors affecting similar financial instruments traded in the
market.
In accordance with the Company's investment objectives, the Company does not
hedge against its exposure to market price risk.
The investment strategy of the Company has been delegated to the Company's
Investment Manager, Scottish Widows Investment Partnership Limited under an
agreement dated 25 April 2002. The Investment Manager operates under agreed
parameters and the Board monitors their performance on a regular basis.
Price sensitivity
The following table details the Company's sensitivity to a 30% increase and
decrease in the market prices while all other variables were held constant. 30%
is the sensitivity rate used when reporting price risk internally to key
management personnel and represents management's assessment of the possible
change in market prices. A positive number indicates an increase in net assets
attributable to holders of redeemable shares where the market price of the
relevant financial instrument increases and a negative number indicates a
decrease where the market price of the relevant financial instrument decreases.
+----------------------------+----------+---+----------+----------+--------+-----+---+----------+
| | Income | | Net Assets |
+----------------------------+-------------------------+----------+-----------------------------+
| | 30% increase in price | | 30% decrease in price |
+----------------------------+-------------------------+----------+-----------------------------+
| | | | | | | | |
+----------------------------+----------+---+----------+----------+--------+---------+----------+
| | Impact on financial | | Impact on financial assets |
| | assets at fair value | | at fair value through |
| | through profit or loss | | profit or loss |
+----------------------------+ +----------+ +
| | | | |
+----------------------------+-------------------------+----------+-----------------------------+
| | 2008 | | 2007 | | 2008 | | 2007 |
+----------------------------+----------+---+----------+----------+--------------+---+----------+
| | GBP'000 | | GBP'000 | | GBP'000 | | GBP'000 |
+----------------------------+----------+---+----------+----------+--------------+---+----------+
| | | | | | | | |
+----------------------------+----------+---+----------+----------+--------------+---+----------+
| Increase/(decrease) in net | | | | | | | |
| assets attributable | | | | | | | |
+----------------------------+----------+---+----------+----------+--------------+---+----------+
| -Designated as at fair | 5,997 | | 10,887 | | (5,997) | | (10,887) |
| value through profit or | | | | | | | |
| loss | | | | | | | |
+----------------------------+----------+---+----------+----------+--------------+---+----------+
| | 5,997 | | 10,887 | | (5,997) | | (10,887) |
+----------------------------+----------+---+----------+----------+--------+-----+---+----------+
b) Interest rate risk
The Company's interest rate sensitive assets and liabilities mainly comprise of
cash at bank and a bank loan. The cash at bank and loan are subject to floating
rates and the loan is considered to be part of the investment strategy of the
Company. No other hedging is undertaken in respect of this interest rate risk.
As such the Board does not believe the Company suffers any material interest
rate risk.
Notes to the Financial Statements (continued)
17. Financial assets and liabilities interest rate disclosure and other
financial risks (continued)
c) Currency risk
Foreign currency risk is the risk that a financial instrument will fluctuate
because of changes in foreign exchange rates.
The Company's foreign
currency risk in 2007 and 2008 is minimal as all of the Company's material
assets and liabilities are Sterling denominated.
18. Parent and ultimate controlling party
The Board is of the opinion that there is no immediate parent or ultimate
controlling party of the Company.
19. Events after the balance sheet date
On 27 March 2009, the Board declared a final dividend of 2.73p per share. In
accordance with the requirements of IFRS, as this was not approved until after
the balance sheet date, no accrual has been reflected in these financial
statements for this amount
Due to significant global turmoil in the financial markets, the Company's NAV
has fallen by 10% since the end of the annual reporting period (correct as at 30
March 2009).
Ten Year Record
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| | Gross | | Net | | Revenue | | Gross | | Ordinary | | Net |
| | revenue | | revenue | | return | | dividends | | share | | asset |
| | | | after | | per | | per | | capital | | value |
| | | | taxation | | ordinary | | ordinary | | eligible | | of |
| | | | | | share | | share | | for | | ordinary |
| | | | | | | | | | dividends | | shares |
| | | | | | | | | | | | (Ex-div) |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| Year ended | GBP'000 | | GBP'000 | | p | | p(3) | | GBP'000 | | p |
| 31 December | (1+2) | | | | | | | | | | |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| | | | | | | | | | | | |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 1999 | 2,528 | | 2,053 | | 3.56 | | 3.06* | | 5,763 | | 146.9 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2000 | 2,216 | | 1,733 | | 3.04 | | 2.77 | | 5,663 | | 134.2 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2001 | 2,168 | | 1,735 | | 3.05 | | 2.79 | | 5,717 | | 104.4 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2002 | 1,735 | | 1,276 | | 2.72 | | 2.80 | | 4,186 | | 76.1 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2003 | 1,500 | | 1,130 | | 2.69 | | 2.83 | | 4,203 | | 90.7 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2004 | 1,536 | | 1,117 | | 2.77 | | 0.83 | | 3,858 | | 97.9 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2005 | 1,517 | | 880 | | 2.48 | | 2.95 | | 2,073 | | 125.5 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2006 | 1,041 | | 648 | | 3.12 | | 3.10 | | 2,083 | | 152.9 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2007 | 1,241 | | 824 | | 3.96 | | 3.25 | | 2,071 | | 158.3 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
| 2008 | 1,449 | | 1,046 | | 5.04 | | 3.63 | | 2,073 | | 106.9 |
+-------------+----------+--+----------+--+----------+--+-----------+--+-----------+--+----------+
Notes:
1. The information provided prior to 2006 in the above statement is prepared in
accordance with UK GAAP and not IFRS.
2. Following the introduction of FRS16 (IAS 12) all dividends receivable from 1999
have been shown gross of withholding tax whereas previously they were shown net.
3. Following the introduction of FRS 21 (IAS 10) all dividends paid by the company
from 2004 are accounted for in the period in which the Company is liable to pay
them. Such treatment is also consistent with International Financial Reporting
Standards. In previous years, the Company accrued dividends in the period in
which the net revenue, to which those dividends related, were accounted for.
*The 1999 gross dividends for ordinary shares include special dividends of
0.35p.
Notice of Meeting
Notice is hereby given that the Fiftieth Ordinary Annual General Meeting of UK
Select Trust Limited (the "Company") will be held at La Trelade Hotel, Forest,
Guernsey, on Wednesday 29 April 2009 at 11:30am., for the following purposes:
1. To consider the Directors' report and financial statements for the year ended 31
December 2008.
2. To authorise the implementation by the Directors of the provisions of Article
133 of the Company's Articles of Association in respect of any dividend (or part
thereof) declared or proposed to be declared by way of final dividend in respect
of the financial year of the Company ending 31 December 2008, or by way of an
interim dividend in respect of the financial year of the Company ending 31
December 2009.
3. To declare a final dividend of 2.73p gross per ordinary share of the Company
payable on 8 May 2009 to ordinary shareholders registered at the close of
business on 27 March 2009 in respect of all ordinary shares then registered in
their respective names, provided that, if the foregoing Resolution 2 shall have
been duly passed, such dividend shall not be paid in respect of which elections
to receive additional ordinary shares shall have been duly lodged pursuant to
the terms of the Company's circular letter dated 6 April 2009.
4. To re-elect JM Le Pelley as Director in accordance with Article 97 of the
Company's Articles of Association.
5. To re-elect Mr JG West as Director in accordance with Article 97 of the
Company's Articles of Association.
6. To re-appoint Deloitte LLP as Auditors.
7. To consider, and if thought fit, approve the renewal of the unconditional and
general authorisation of the Company authorised by the forty-ninth Annual
General Meeting held on 25 April 2008, so that the Company is generally and
unconditionally authorised in accordance with the Companies (Purchase of Own
Shares) Ordinance 1998 to make market purchases (within the meaning of Section 5
of the said Ordinance) of its own ordinary shares out of distributable profits
subject as follows:
* the maximum number of shares hereby authorised to be purchased is 3,103,742
(representing 14.9% of the number of shares of the Company in issue on 31
December 2008) ;
* the maximum price which may be paid for such shares is, as for a share which the
Company contracts to purchase on any day, a sum equivalent to 105% of the
average of the middle market quotation for the ordinary shares of the Company in
the daily official list of the London Stock Exchange or the 5 business days
immediately proceeding the day;
* any purchase of shares will be made in the market for cash at prices below the
prevailing asset value per share;
* the minimum price which may be paid for such shares is 10p; and
* the authority conferred by this resolution shall expire at the conculsion of the
fifty first Annual General Meeting of the Company or 30th September 2010,
whichever is earlier.
By order of the Board
Corporate Services (Guernsey) Limited
Secretary
Dorey Court
St Peter Port
Guernsey
Note: A member entitled to be present and vote at the meeting may appoint a
proxy to attend and, on a poll, to vote in his stead. Appointment of a proxy
will not preclude a member from attending the meeting and voting in person. A
proxy need not be a member of the Company. The Directors have no contracts with
the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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