TIDMUKT
RNS Number : 6199B
UK Select Trust Limited
18 April 2012
UK Select Trust Limited (the "Company")
Registered No: 475
Announcement of Annual Results
The information set out in this announcement is the full
unedited Annual Financial Report for the year ended 31 December
2011 (the "AFR") of the Company as approved by the Board of
Directors on 12 April 2012. The AFR is expected to be sent to all
shareholders during April 2012.
Enquiries:
Kleinwort Benson (Channel Islands) Fund Services Limited
Secretary
Tel: + 44 (0) 1481 710607
Canaccord Genuity Limited
Broker and Adviser
Robbie Robertson / Andrew Zychowski / Lucy Lewis
Tel: +44 (0) 20 7523 8000
UK Select Trust Limited
Annual Financial Report for the year ended 31 December 2011
UK Select Trust Limited
Contents
Company Information 2
Objectives 2
Financial Highlights 3
Dividends 3
Directors and Advisers 4
Chairman's Statement 5
Investment Manager's Report 6
The Portfolio 8
Sector Distribution 10
Directors' Report 12
Directors' Responsibilities 21
Independent Auditor's Report 22
Statement of Comprehensive Income 24
Statement of Financial Position 25
Statement of Changes in Net Assets Attributable to Shareholders
26
Statement of Cash Flows 27
Notes to the Financial Statements 28
Ten Year Record - Unaudited 45
Financial Calendar 46
Company Information
UK Select Trust Limited's ordinary 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 (the "Company") is registered in
Guernsey and complies with the definition of a UK Investment Trust
Company. The Company invests over 80% of its gross assets by value
in companies listed or quoted on the London Stock Exchange 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 December 31 December
2011 2010
Net asset value per share 142.08p 161.75p
Equity shareholders' interest
(1) GBP29.47m GBP33.46m
Revenue return on ordinary activities
for the financial year after taxation GBP0.91m GBP0.69m
Capital (deficit)/return on ordinary
activities for the financial year after
taxation (GBP4.17m) GBP2.57m
Revenue return per ordinary
share 4.38p 3.36p
Capital (deficit)/return per
ordinary share (20.15p) 12.47p
Dividend per ordinary share
(2) 4.10p 3.90p
Share Price 120.00p 136.75p
Net asset value total return
(3) (11.68%)(3) 11.26%(3)
FTSE All-Share total return (3.46%) 14.51%
((1) During the year the Company purchased 214,000 ordinary
shares of 10p from the market to be held in Treasury. 269,766
ordinary shares of 10p each from the shares held in Treasury were
reissued during the year. 87,878 shares remain in Treasury at 31
December 2011. 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.
(3) Source: Datastream. Basis: Income reinvested and net of
expenses.
Dividends
A second interim dividend of 3.15p per share has been declared
for 2011 (2010: second interim dividend 3.00p). This is in addition
to the first interim dividend of 0.95p (2010: first interim
dividend 0.90p) paid during the year.
Directors
JM Le Pelley, (Born 1949) resident in Guernsey,Non-executive
Chairman. He joined the board in 1983. Other Directorships include
AcenciA Debt Strategies Limited.
DR Maltwood, (Born 1938) resident in Jersey,Non-executive
Director. He joined the board in 1997 after a career in stock
broking in Jersey. He has held a number of positions including the
Chairman and Director of a number of quoted companies.
G Ross Russell, (Born 1933) resident in the UK,Non-executive
Director. He joined the board in 1995. He is the Chairman of
Foresight 3 VCT Plc and former Chairman of the Chartered Institute
of Securities and Investment and Deputy Chairman of the London
Stock Exchange.
JG West FCA, (Born 1947) resident in the UK, Non-executive
Director. He joined the board in 1997. He is Deputy Chairman of
Canaccord Genuity Limited. He is the Chairman of New City High
Yield Fund Limited, and a Director of British Assets Trust Plc,
Aberdeen Smaller Companies High Income Trust Plc and JP Morgan
Income and Capital Trust Plc. He was the Chairman of Canaccord
Genuity Limited. He is a former chief executive of Lazard Asset
Management Limited.
D Warr, (Born 1953) resident in Guernsey, Non-executive Director
and Audit Committee Chairman. He is a fellow of the Institute of
Chartered Accountants in England and Wales and joined the Board in
2006. He is also a Non-executive Director of Breedon Aggregates
Limited, Invista Foundation Property Trust Limited and Unigestion
(Guernsey) Limited.
Advisers
Secretary and Registered Office Registrars
Kleinwort Benson (Channel Islands) Fund Services 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 extras,
lines are open 8.30am - 5.30pm Monday - Friday)
Investment Manager Recognised Auditor
Scottish Widows Investment Partnership Limited Deloitte LLP
Edinburgh One Regency Court
Morrison Street Glategny Esplanade
Edinburgh EH3 8BE St Peter Port
0131 655 8500 Guernsey GY1 3HW
01481 724011
Bankers and Custodian Stockbrokers
HSBC Bank Plc Canaccord Genuity Limited
8 Canada Square 88 Wood Street
London E14 5HQ London EC2V 7QR
0207 050 6500
Chairman's Statement
Review of 2011 Performance
Last year was a very difficult year for equity investing, and
the benchmark FTSE All-Share Index fell by 3.46%. Unfortunately the
Company net asset value fell by 11.68%. Stock and sector selection
were the principal reasons for this underperformance and this is
explored in detail within the Investment Manager's Report. The
Board, although not content with the performance, understands that
volatility, relative to the benchmark, is to be anticipated due to
the Investment Manager's active investment style.
Share price and discount
The share price broadly tracked the net asset value performance
decreasing by 12.2% during the year. The discount at which the
Company's shares trade relative to their net asset value closed the
year at 15.5%. This compared with a discount of 16.1% at the start
of 2011.
Gearing
The Company remained debt free during the year.
Earnings and dividend per share
Earnings per share for the year amounted to 4.38p (2010: 3.36p).
The Board is recommending a final dividend of 3.15p (2010: 3.00p).
This is in addition to the interim dividend of 0.95p (2010:
0.90p).
Prospects
Global equity markets have continued to recover strongly in the
early months of 2012 following the violent correction in share
prices witnessed last summer. This revival has occurred in the face
of some severe macroeconomic and geopolitical headwinds.
The European sovereign debt crisis continues to unfold while
leading indicators in Asia are pointing to a faster economic
slowdown than many commentators are currently forecasting. The
escalating crisis in the Middle East is another major concern for
equity markets with the spectre of military conflict likely to
sustain oil prices at levels which are damaging to the global
economic growth outlook.
The Company's portfolio is currently positioned to reflect these
concerns with an emphasis on both companies which can fund an
attractive and sustainable dividend yield and those companies which
can deliver earnings growth through these uncertain economic times.
While the Company suffered a very disappointing second half of last
year, the Board remains confident that the Investment Manager's
rigorous stock research process will deliver superior investment
returns over the medium and longer term.
JM Le Pelley
Chairman
12 April 2012
Investment Manager's Report
Introduction
The UK stock market endured a difficult second half of the year
with deteriorating economic data and the escalating sovereign debt
crisis in Europe depressing investor sentiment. The FTSE All-Share
Index reversed the 2.96% gain recorded in the first half to close
the full year 3.46% lower on a total return basis.
The Company's net asset value fell by 11.68% in the period under
review on a total return basis. This disappointing performance was
attributable primarily to poor stock selection in the second half
of the year with the underlying equity portfolio falling by 5.38%
over the full year. This is discussed in more detail below.
Economic and Market Backdrop
2011 was most notable for a series of extraordinary
macroeconomic issues and geopolitical events. European sovereign
states in financial distress, the Standard & Poor's downgrade
of the US's credit rating and revolutions across North Africa were
several of these remarkable headlines.
The European sovereign debt crisis continued to intensify
through the year with Portugal the third sovereign state forced to
seek financial aid from the EU. The economic picture across Europe
continued to deteriorate at an accelerating rate through the second
half of the year as austerity measures started to bite and the
acute uncertainty surrounding the future of the eurozone dampened
both corporate and consumer spending. While the latest bailout of
Greece has staved off the imminent threat of a sovereign default
the critical issue remains the lack of economic growth in the
region. The challenge for Europe's policy makers is the achievement
of simultaneous de-leveraging whilst stimulating growth - economic
precedent is not on their side.
The sustainability of the strong economic growth rates being
generated in Asia and Latin America increasingly came under
scrutiny during the year. These economies have been key
contributors to global growth in recent years helping to offset the
sluggish growth witnessed in the developed world. Persistent fears
over spiralling inflation rates in several of these key emerging
economies such as China, India and Brazil has raised the risk of
policy error, with monetary authorities desperate to balance the
need to control inflation while still providing adequate stimulus
to maintain the momentum behind economic expansion. The short term
global growth outlook will in a large part be influenced by the
execution of appropriate monetary policy in these key developing
economies.
In addition to the economic challenges, equity markets also had
to contend with a mounting political crisis in the Middle East
which was accompanied by a surging oil price. The acute instability
in the region currently represents one of the largest risks to
equity markets with many companies starting to feel the adverse
effects of a persistently strong oil price. The Company's portfolio
remains heavily exposed to oil and gas producers and this position
is unlikely to change in the short term.
Market leadership shifted markedly during the period, with the
more economically sensitive sectors such as industrials, materials
and financials propelling the market higher through the early part
of 2011. This optimism reflected recovering corporate earnings and
the relatively attractive valuation of equities compared with other
asset classes such as bonds and cash.
The second half of the year, however, was characterised by
slowing global economic growth and renewed liquidity concerns
surrounding European funding markets. These factors weighed heavily
on investor risk appetite and triggered a violent rotation out of
the more cyclical areas of the market into sectors with perceived
'safe haven' status such as pharmaceuticals, tobacco and
telecoms.
Performance
The main detractor from performance during the year was the
holding in Essar Energy. The Indian based energy group suffered
from a series of delays to the build of its power project portfolio
resulting in a slump in its share price. These delays were the
result of a government dispute over the award of coal blocks to
Essar and several other private sector companies. The sourcing of
competitively priced domestic coal supplies is critical to the
economics of the group's power business and the recent suspension
of coal mining
Investment Manager's Report (continued)
Performance (continued)
operations in India forced Essar to import much more expensive
coal supplies from South Africa and Indonesia. The company remains
confident that the dispute which centres around environmental
issues will be resolved in the near future and we continue to hold
the position within the portfolio.
The holding in Lloyds Banking Group was the other key negative
contributor to performance during the review period. The position
was purchased following the appointment of the new management team
and the encouraging strategic review which followed. However, the
group announced worse than anticipated impairments through the
second half of the year which in large part was driven by the
inherited HBOS loan exposure to Ireland. This resulted in a
material reduction to the group's earnings guidance and the shares
were sold from the portfolio.
Key positive contributors to performance included Resolution, an
acquisition vehicle within the UK life assurance sector. During the
year, the company reassured investors that no further acquisitions
would be undertaken with management fully focused on running the
existing portfolio of businesses. The company also announced a
major capital return programme.
The Company's performance also benefitted from Berkeley Group's
announcement that it planned to return GBP13 per share in cash to
shareholders over the next ten years. This capital return
reinforces our view that the London-based house builder remains
significantly undervalued by the equity market. The holding in
Indus Gas, an India-focused energy company, also performed very
strongly following the announcement of a dramatic increase in its
gas reserves base following an independent audit.
Outlook
The Company's equity portfolio endured a very disappointing
second half to the year as a result predominantly of two major
stock selection errors - Essar Energy and Lloyds Banking Group.
2012 has started more positively in performance terms and the
portfolio is currently positioned very defensively following a
strong recovery in equity markets from the August low point.
Our short term caution reflects the view that several of the
more cyclical areas of the market now appear to be discounting a
lot of good news flow while earnings forecasts are predicated on
optimistic growth assumptions. The macroeconomic and geopolitical
backdrop also remains highly uncertain. The European sovereign debt
crisis has much further to run with the recent bail-out packages
for several member states deferring, rather than solving, the
fundamental problems of over leverage and a lack of growth.
The escalating political tension in the Middle East also
represents a potent threat to equity markets in the short term with
the continuing spike in the oil price suppressing growth potential.
The portfolio will continue to be shaped by both stock specific
fundamental analysis and the prevailing macroeconomic and
geopolitical backdrop. At present this translates into heavy
weightings within the oil and gas, pharmaceuticals and media
sectors with limited exposure to the financials and materials
industries.
Scottish Widows Investment Partnership
March 2012
Scottish Widows Investment Partnership - SWIP - is one of the
largest asset management companies in Europe. Our teams are
recognised as high fliers within the industry. Our performance is
based on their skills, backed by thorough research, and the ability
to uncover and capitalise on opportunities as soon as they
arise.
We invest across all asset classes, including equities,
property, bonds and cash. We also offer specialist expertise in
multi-manager, multi-asset solutions and socially responsible
investing.
Our goal: to provide superior risk-adjusted returns and quality
service for our clients, which include individuals, pension funds,
charities and financial institutions from around the world.
Whatever your investment requirements, our teams have the
innovation, drive and skill to deliver investment solutions that
perform.
Scottish Widows Investment Partnership is part of the Lloyds
Banking Group.
As of 31 December 2011, we manage funds worth GBP139.9
billion.
The Portfolio as at 31 December 2011
Market
Company Value Activity
GBP'000
1 BP Plc 2,556 One of the world's largest energy companies,
providing fuel for transportation,
energy for heat and light, retail services
and petrochemicals products for everyday
items.
2 GlaxoSmithKline Plc 2,525 One of the world's leading research-based
pharmaceutical and healthcare companies.
Oil and gas exploration and development
3 Indus Gas Ltd 1,975 company based in India.
4 Reed Elsevier Plc 1,922 Publisher and information provider,
publishing information for the scientific
and medical professions, legal, and
business to business sector.
Offer a broad spectrum of funds to
cater for the differing investment
5 Resolution Ltd 1,592 needs.
6 AstraZeneca Plc 1,388 One of the world's largest pharmaceutical
companies.
Berkeley Group Holdings
7 Plc 1,272 UK - based house builder and developer.
8 Smiths Group Plc 1,236 A world leader in the practical application
of advanced technologies, Smiths Group
delivers products and services for
the threat & contraband detection,
medical devices, energy, communications
and engineered components markets worldwide.
Engaged in emerging opportunities in
9 KSK Power Ventur Plc 1,117 the power development market.
10 Glencore International 924 A leading integrated producer and marketer
Plc of commodities.
Worldwide commercial insurer providing
RSA Insurance Group property, automobile, liability, and
11 Plc 916 specialty insurance products.
12 SABMiller Plc 911 One of the world's largest brewers.
Involved in oil and gas transmission
and distribution, as well as power
13 BG Group Plc 852 generation.
14 iEnergizer Ltd 788 Engaged in providing third-party integrated
business process outsourcing solutions
to clients throughout the world in
three primary sectors: banking, financial
services and insurance, and entertainment
and telecommunications.
A sustainable energy company with a
15 Nandan Cleantec Plc 635 strong foothold in the biofuel space.
16 Centrica Plc 559 An integrated energy company.
17 DS Smith Plc 499 International Group focused on packaging
and office products.
Royal Dutch Shell
18 Plc B Shares 483 UK-based energy provider.
Great Eastern Energy
19 Corporation Plc 478 Indian-based energy provider.
20 Genel Energy Plc 465 Investment vehicle aiming to purchase
emerging markets oil and gas businesses.
One of Europe's largest independent
oil and gas exploration and production
21 Cairn Energy Plc 454 companies.
Ryanair Plc - London
22 Listed 440 Irish - based budget airline.
Indian-focused energy company with
assets in the existing power and oil
23 Essar Energy Plc 409 and gas businesses.
24 LXB Retail Properties 313 Jersey based investment company investing
Plc in out-of-town and edge-of-town retail
assets.
25 British Sky Broadcasting 309 Provider of a pay television broadcasting
Plc service to customers in the UK and
the Republic of Ireland.
26 Dolphin Capital Investors 306 Real estate investment company focused
Ltd on early-stage, large-scale, leisure-integrated
residential resorts primarily in southeast
Europe.
The Portfolio as at 31 December 2011 (continued)
Market
Company Value Activity
GBP'000
AIM - listed oil and gas exploration
27 Hardy Oil & Gas Plc 298 company.
Cadogan Petroleum An independent oil and gas exploration,
28 Plc 278 development and production company.
Acquires and manages companies and
Breedon Aggregates businesses in the UK and international
29 Ltd 261 building materials industry.
30 Tullett Prebon Plc 256 An intermediary in the wholesale financial
markets industry facilitating the trading
activities of its clients.
31 Invensys Plc 212 Develops and applies advanced technologies
that enable the world's manufacturing
and energy-generating facilities, mainline
and mass transit rail networks, and
appliances to operate safely and in
an energy-efficient manner.
Investment vehicle established to make
investments in small and mid-sized
32 Aurora Russia Ltd 194 Russian companies.
Petroceltic International Oil and gas exploration and production
33 Plc 161 company.
34 Arden Partners Plc 41 Institutional stockbroker specialising
in small, midcap and AIM - listed companies.
Resaca Exploitation US - based independent oil and gas
35 Inc 30 exploitation company.
Developer and operator of up-market
36 Newfound NV Plc 10 holiday resorts.
Ryanair Plc - Irish
37 Listed 1 Irish - based budget airline.
Oil and gas exploration and production
38 Leed Petroleum Plc 1 company focused on the Gulf of Mexico.
Total Valuation 27,067 These holdings represent 100% of the
total valuation.
========
Sector Distribution
Total Total
2011 2010
Sector Classification % %
--------------------------------------------------- ---------- ---------
Resources
Alternative Energy 2.2 -
Oil and gas 28.6 26.5
30.8 26.5
--------------------------------------------------- ---------- ---------
Basic industrials
Construction and building materials 6.8 5.8
Mining 3.1 9.1
9.9 14.9
--------------------------------------------------- ---------- ---------
Non-cyclical consumer goods
Tobacco - 2.3
Pharmaceuticals and biotechnology 13.3 2.7
13.3 5.0
--------------------------------------------------- ---------- ---------
Cyclical services
Support services - 1.2
Leisure, entertainment and hotels 1.5 3.8
Food and drug retailers 3.1 1.1
Media and entertainment 7.6 7.2
--------------------------------------------------- ---------- ---------
12.2 13.3
--------------------------------------------------- ---------- ---------
Non-cyclical services
Telecommunication services 3.4 1.4
3.4 1.4
--------------------------------------------------- ---------- ---------
Utilities
Utilities other 5.7 4.9
5.7 4.9
--------------------------------------------------- ---------- ---------
Household goods
House building 4.3 3.2
--------------------------------------------------- ---------- ---------
4.3 3.2
--------------------------------------------------- ---------- ---------
Financials
Banks - 2.7
Speciality and other finance 1.7 3.1
Real estate 2.1 1.5
Non-life insurance 3.1 2.8
Life assurance 5.4 6.2
12.3 16.3
--------------------------------------------------- ---------- ---------
Net current assets 8.1 14.5
--------------------------------------------------- ---------- ---------
Net assets 100.00 100.00
=================================================== ========== =========
Note: The distribution of investments is based on the valuations
at 31 December 2011 and at 31 December 2010. All of the investments
are listed or quoted on the London Stock exchange, with the
exception of Newfound NV which is an unlisted trading entity
and Ryanair Plc which is listed on the Irish Stock Exchange.
Sector Distribution (continued)
Please click on the link below.
http://www.rns-pdf.londonstockexchange.com/rns/6199B_1-2012-4-18.pdf
By sector as a percentage
Please click on the link below.
http://www.rns-pdf.londonstockexchange.com/rns/6199B_1-2012-4-18.pdf
Directors' Report
The Directors present their annual financial report for the year
ended 31 December 2011 with comparatives for the year ended 31
December 2010.
Principal activities
The principal activity of the Company is that of an investment
trust company. The Company is authorised as a fund by the Guernsey
Financial Services Commission under the Protection of Investors
(Bailiwick of Guernsey) Law, 2008 as amended, with the Company's
ordinary shares being listed on the London Stock Exchange.
Revenue
The statement of comprehensive income set out on page 24 shows a
loss for the year amounting to GBP3,266,000 (2010: profit
GBP3,262,000). The Directors have declared a second interim
dividend of 3.15p which, together with the first interim dividend
of 0.95p makes a total of 4.10p for the year (2010: 3.90p).
The second interim dividend will be paid on 25 May 2012, to
ordinary shareholders on the register on 10 April 2012 and shares
in lieu of dividend will be offered.
Assets
At the year end the net assets attributable to the ordinary
shares were GBP29,471,000 (2010: GBP33,460,000). Based on this
figure the net asset value of an ordinary share was 142.08p (2010:
161.75p).
Share capital
During the year no shares were repurchased by the Company for
cancellation (2010: nil). During the year 214,000 issued ordinary
shares of 10p each were purchased at a total cost of GBP273,191 and
held in Treasury. The authority allowing the Company to purchase
its own shares expires at the end of the 2012 annual general
meeting and allows the purchase of a maximum of 3,082,339 shares,
representing 14.9% of the number of shares in issue on 31 December
2010.
During the year 269,766 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 (2010:
260,758 new shares issued in lieu of cash dividends) thereby
resulting in a total of GBP364,725 (2010: GBP323,263) being
capitalised.
Substantial shareholdings
At 31 March 2012, the following held a notifiable interest in
the Company's voting rights:
31 March 31 March
2012 2011
State Street Nominees (held on behalf
of clients of Scottish Widows Investment
Partnership Limited) 28.42% 28.42%
JM & Mrs AE Le Pelley 9.93% 7.14%
Mr G Green 6.55% 6.47%
At 31 March 2012, there has been no other notifiable interest in
the Company's voting rights reported to the Company.
Directors' Report (continued)
Crest registration
On 3 January 2003, the Company made an application for Crest
registration. This was granted and hence shareholders have the
option to hold stock in either certificated or uncertificated
form.
Directors
The composition of the Board, including their roles and other
significant commitments, is detailed on page 4. The terms and
conditions of appointment of non-executive directors are available
for inspection by any person at the Company's registered office
during normal business hours and at the annual general meeting.
The current Directors who served on the Board during the year,
together with their beneficial interests and those of their spouses
and dependent children at 31 December 2011, were as follows:
2011 2010
Shares Shares
JM Le Pelley (Chairman) 2,064,601 1,485,870
DR Maltwood 3,570 3,542
G Ross Russell 345,938 336,071
JG West 10,000 10,000
D Warr (Audit Committee Chairman) 31,115 30,228
J M Le Pelley acquired a further 4,221 shares in February 2012.
There have been no other changes in the other Directors' interests
in the shares of the Company between 31 December 2011 and 31 March
2012
The Company has no service contracts with the Directors.
Furthermore, they are not entitled to any minimum period of notice
or to compensation in the event of their removal as a Director.
Corporate governance
Statements of compliance
The Financial Services Authority announced changes to the
Listing Rules which require all overseas companies with a "Premium
Listing" (which includes the Company) to "comply or explain"
against the UK Code of Corporate Governance ("UK Code"). All listed
companies with periods starting on or after 29 June 2010 are
required to follow the provisions of the UK Code published in June
2010.
The Association of Investment Companies (formerly Association of
Investment Trust Companies), of which the Company is a member, has
previously published its Code of Corporate Governance for
Investment Companies ("the AIC Code") which was endorsed by the
Financial Reporting Council.
Directors' Report (continued)
Statements of compliance (continued)
The Board has considered the principles and recommendations of
the AIC Code by reference to the AIC Corporate Governance Guide for
Investment Companies (the "AIC Guide"). The AIC Code, as explained
by the AIC Guide, addresses all the principles set out in the UK
Corporate Governance Code, as well as setting out additional
principles and recommendations on issues that are of specific
relevance to the Company. The Board considers that reporting
against the principles and recommendations of the AIC Code will
provide better information to shareholders.
The Directors believe that the Company has complied with the
provisions of the AIC Code where appropriate, and that it has
complied throughout the year with the provisions where the
requirements are of a continuing nature.
On 30 September 2011, the Guernsey Financial Services Commission
published its Finance Sector Code of Corporate Governance (the
"GFSC Code"), which came into effect on 1 January 2012. The GFSC
Code provides a framework which applies to all companies in the
regulated finance sector in Guernsey. The GFSC Code deals with
governance issues under several topics including the Board,
accountability, risk management, disclosure and reporting,
remuneration and shareholder relations. Companies which report
against the AIC Code are deemed to meet the requirements of the
GFSC Code.
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 AIC Code. The
appointment of Directors is considered by the Board who sit on the
Nomination Committee. During the year, the Board reviewed its
performance and composition, as well as that of its committees and
individual directors, and was content that no changes to the
composition of the Board were necessary or desirable, as it was
considered that the performance of all Directors continued to be
effective and that they had demonstrated commitment to their roles.
Biographical information on each Director is included on page
4.
All of the Directors have served on the Board for more than nine
years, save for Mr Warr, who joined the Board in 2006. Whilst the
AIC Code recommends that non-executive directors serving more than
nine years should be subject for annual re-election, the Articles
of Incorporation 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 . The Board does not
consider it to be in the best interests of the Company to require
the majority of Directors to stand for re-election annually and has
chosen therefore to adopt best practice in relation to retirement
by rotation of two Directors in accordance with the Company's
Articles of Association and as stated in the Director's Report.
Therefore, two Directors will stand for re-appointment at each
annual general meeting, so that the shareholders will have the
opportunity to consider each Director's continuing involvement with
the Company every third year.
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.
Directors' Report (continued)
The Board (continued)
In accordance with this policy Messrs Le Pelley and Ross Russell
will at the Company's forthcoming annual general meeting retire
and, being eligible, offer themselves for re-election in accordance
with Article 97 of the Articles of Association of the Company.
The Board meets regularly, normally quarterly, with additional
meetings should it be considered appropriate to discuss specific
issues.
The Directors have no service contracts.
The table below lists the number of Board and Audit Committee
meetings attended by each Director during the year ended 31
December 2011.
Scheduled Other Audit Committee Nomination Committee
Quarterly Board Board
Number of Meetings 4 5 2 -
JM Le Pelley (Chairman) 4 5 2 -
DR Maltwood 4 1 2 -
G Ross Russell 4 1 2 -
J G West 4 1 2 -
D Warr (Audit Committee Chairman) 4 5 2 -
As no changes to the Board were proposed in 2011, it was not
considered necessary for the Nomination Committee to meet.
In 2010 and 2011 the Company did not employ any personnel.
The Board has established itself as an Audit Committee which
meets at least twice annually. The Audit Committee is authorised by
the Board to investigate any activity within its terms of reference
and to consult with outside legal or other independent professional
advisers when deemed necessary in order to adequately discharge
their duties and responsibilities, which include:
-- Considering the appointment, resignation or dismissal of the
external auditor and their independence and objectivity,
particularly in circumstances where non-audit services have been
provided.
-- Reviewing the cost effectiveness of the external audit from time to time.
-- Reviewing and challenging of the half-yearly and annual
financial reports, focusing particularly on changes in accounting
policies and practice, areas of accounting judgement and
estimation, significant adjustments arising from audit or other
review and the going concern assumption.
-- Reviewing compliance with accounting standards and law and
regulations including the UKLA Listing Rules.
-- Completing regular risk management reviews of internal
controls, which includes the review of the Company's Risk
Register.
-- Reviewing the Company's system of internal controls,
including financial, operating, compliance and risk management
controls and to make and report to the Board any recommendations
that may arise.
-- Considering the major findings of internal investigations and
make recommendations to the Board on appropriate action.
-- Ensuring that arrangements exist whereby service providers
and management may raise concerns over irregularities in financial
reporting or other matters in confidence and that such concerns are
independently investigated and remediated with appropriate
action.
Directors' Report (continued)
The Board (continued)
The Board has also established itself as a Nominations
Committee, which will meet when necessary. The Terms of Reference
for both the Audit Committee and Nominations Committee are
available for inspection at the Company's registered office during
normal business hours.
Where non-audit services are provided by the auditor, these
engagements are pre-approved by the Audit Committee to ensure that
the Auditor's independence and objectivity is not breached. There
were GBP8,000 of non-audit services in the year ended 31 December
2011 (2010: GBP3,500) for which the Board pre-approved the
engagement after due consideration that the Auditor's independence
and objectivity was not impaired.
All the Board are considered independent and non-executive and
Directors fees are recommended by the full Board.
The emoluments of the Directors' for the year are as
follows:
2011 2010
Fees Fees
GBP GBP
JM Le Pelley (Chairman) 25,000 22,500
DR Maltwood 20,000 17,500
G Ross Russell 20,000 17,500
JG West 20,000 17,500
D Warr (Audit Committee Chairman) 22,500 19,250
-------- -------
107,500 94,250
-------- -------
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 broker 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 AIC Code requires notice of annual
general meetings to be dispatched at least 21 clear days notice
before the meeting. The Company will continue to comply with this
Code provision in 2012.
Directors' Report (continued)
Accountability and audit
a) Statement of going concern
In the opinion of the Directors the Company has adequate
resources to continue in operational existence for the foreseeable
future. For this reason the financial statements have been prepared
using the going concern basis.
The Directors have arrived at this opinion by considering, inter
alia, the following factors:
-- the Company has sufficient liquidity to meet all on-going
expenses (net current asset position at 31 December 2011 of
GBP2,404,000);
-- the portfolio of investments held by the Company materially
consists of listed investments which are readily realisable and
therefore the Company will have sufficient resources to meet its
liquidity requirements; and
-- as at 31 December 2011, the Company has no external
borrowings and therefore is under no obligation to repay any
borrowing facilities for the foreseeable future.
b) 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 Financial
Reporting Council. Such review procedures have been in place
throughout the full financial year and up to the date of the
approval of the financial statements.
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 Kleinwort Benson (Channel Islands) Fund Services Limited
are contracted to provide the Company's administration, secretarial
and accounting functions and Capita Registrars (Guernsey) Limited,
its registration function. The Board reviews regularly the
performance of the service provided by these companies.
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 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.
Directors' Report (continued)
Accountability and audit (continued)
b) Internal control (continued)
The Board's ongoing review process involves a review of SWIP's
internal control report, AAF 01/06.
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.
The Board is regularly taking steps to embed internal control
and risk management further into the operations of the Company and
to deal with areas of improvement which come to the Investment
Manager's and the Board's attention.
Investment manager
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.
Investment policy
The Company is permitted to invest in any security listed or
quoted 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
recognised UK exchange, for example, the Alternative Investment
Markets ("AIM") of the London Stock Exchange (and any successor
market to it) which the Investment Manager believes, 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 sectors of the Company's investment universe. Considerable
emphasis is placed 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.
Directors' Report (continued)
Investment policy (continued)
No holding in another company may exceed 15% of the value of the
Company'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 agreement with Lloyds TSB Bank
Plc and is detailed 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
(2010: GBPnil) drawn down against the facility.
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.
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 can be found in the
Chairman's Statement and Investment Manager's Report on pages 5 to
7.
The Company's portfolio consisted of 38 investments as at 31
December 2011 and is detailed further on pages 8 and 9. The sector
distribution of the portfolio is provided on pages 10 and 11. As at
31 December 2011, the portfolio held investments issued in the
United Kingdom, Ireland and Canada. The top 10 holdings comprise
56.01% of total net assets (2010: 46.05%).
The Company's gearing stood at nil% as at 31 December 2011
(2010: nil%).
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.
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 its 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.
The Company has entered into a revolving 5-year loan facility
explained in note 12.
Directors' Report (continued)
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 facility are subject to floating rates and the loan
facility 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 facility, which is undrawn at the year end
is due to expire on 23 September 2012.
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 2011 arose from the
investment portfolio including cash and was minimal as it was
principally sterling denominated. No hedging was undertaken in
respect of this foreign currency exposure. The Company had no
significant exposure to foreign currencies as at 31 December 2011
(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.
Auditor
Deloitte LLP have expressed their willingness to continue in
office as auditor and a resolution to re-appoint them will be
proposed at the forthcoming .
Disclosure of information to the auditor
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
12 April 2012
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").
Under company law the Directors must not approve the accounts
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing these financial
statements, International Accounting Standard 1 requires that
Directors:
-- 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 adequate 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 Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in Guernsey and the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm to the best of our knowledge 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 of the Company.
By order of the Board
JM Le Pelley
D Warr
Directors
12 April 2012
Independent Auditor's Report
To the members of UK Select Trust Limited
We have audited the financial statements of UK Select Trust
Limited (the "Company") for the year ended 31 December 2011 which
comprise the statement of comprehensive income, statement of
financial position, statement of changes in net assets attributable
to shareholders, statement of cash flows and the related notes 1 to
19. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards ("IFRSs").
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 auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies, we
consider the implication for our report.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2011 and of its profit for the year then
ended;
-- have been properly prepared in accordance with IFRSs; and
-- have been prepared in accordance with the requirements of The
Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where The Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Independent Auditors' Report (continued)
Under the Listing Rules we are required to review:
-- the part of the Corporate Governance Statement relating to
the company's compliance with the nine provisions of the UK
Corporate Governance Code specified for our review.
Richard Garrard
for and on behalf of Deloitte LLP
Chartered Accountants and Recognised Auditor
St. Peter Port, Guernsey
12 April 2012
Statement of Comprehensive Income
for the year ended 31 December 2011
2011 2010
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
Dividend revenue 3 1,307 - 1,307 1,031 - 1,031
Other income 3 - - - 12 - 12
Net (losses)/gains
on financial assets
at fair value through
profit or loss 8 - (4,064) (4,064) - 2,714 2,714
Net foreign exchange
gain/(loss) - 19 19 - (20) (20)
------- -------- -------- ------- ------- -------
1,307 (4,045) (2,738) 1,043 2,694 3,737
Expenses
Investment management
fees 4 40 121 161 40 118 158
Administration
fees 99 - 99 89 - 89
Registrar's
fees 27 - 27 26 - 26
Auditor's fees 18 - 18 18 - 18
Directors' fees and
expenses 16 111 - 111 97 - 97
Other expenses 103 - 103 79 - 79
------- -------- -------- ------- ------- -------
Total operating expenses
before finance costs 398 121 519 349 118 467
------- -------- -------- ------- ------- -------
Operating profit/(loss)
before finance costs 909 (4,166) (3,257) 694 2,576 3,270
Finance costs
Interest payable 12 2 7 9 2 6 8
------- -------- -------- ------- ------- -------
Profit/(loss) for the
year 907 (4,173) (3,266) 692 2,570 3,262
======= ======== ======== ======= ======= =======
Basic return/(deficit)
per ordinary share 7 4.38p (20.15p) (15.77p) 3.36p 12.47p 15.83p
------- -------- -------- ------- ------- -------
The total column of this statement is the statement of
comprehensive income 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 44 are an integral part of these
financial statements.
Statement of Financial Position
as at 31 December 2011
Notes 2011 2010
GBP'000 GBP'000
Assets
Cash and cash equivalents 10 2,340 3,841
Due from brokers 9 - 900
Other receivables and accrued
income 9 226 229
Financial assets at fair value
through profit or loss 8 27,067 28,607
----------- -----------
Total assets 29,633 33,577
----------- -----------
Liabilities
Other payables and accrued
expenses 11 162 117
----------- -----------
Total liabilities 162 117
----------- -----------
Net assets attributable to shareholders 29,471 33,460
=========== ===========
Represented by:
Share Capital 14 2,083 2,083
Treasury Share Reserve 14 (153) (245)
Reserves 27,541 31,622
----------- -----------
Net assets attributable to shareholders 29,471 33,460
=========== ===========
Number of ordinary shares in
issue (net of Treasury shares) 14 20,742,606 20,686,840
Net asset value per share 15 142.08p 161.75p
These financial statements were approved by the Board of
Directors on 12 April 2012 and are signed on behalf of the Board
by:
JM Le Pelley D Warr
Director Director
Date: 12 April 2012
The notes on pages 28 to 44 are an integral part of these
financial statements.
Statement of Changes in Net Assets Attributable to
Shareholders
for the year ended 31 December 2011
Equity Treasury Capital Capital
share share Share redemption Capital reserve- Revenue
capital reserve premium reserve reserve-realised unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2011 2,083 (245) 5,401 4,308 14,214 3,718 3,981 33,460
Shares
repurchased
during the
year - (273) - - - - - (273)
Cash dividends:
-2010 second
interim
dividend - - - - - - (342) (342)
-2011 first
interim
dividend - - - - - - (108) (108)
Scrip dividends - 365 - - - - (365) -
Net profit - - - - (1,294) (2,879) 907 (3,266)
--------- --------- --------- ------------ ----------------- ------------ --------- --------
At 31 December
2011 2,083 (153) 5,401 4,308 12,920 839 4,073 29,471
--------- --------- --------- ------------ ----------------- ------------ --------- --------
There are no other recognised income and expenses for the year
ended 31 December 2011.
for the year ended 31 December 2010
Equity Treasury Capital Capital
share share Share redemption Capital reserve- Revenue
capital reserve premium reserve reserve-realised unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2010 2,083 (380) 5,411 4,308 10,788 4,574 4,048 30,832
Shares
repurchased
during the
year - (189) - - - - - (189)
Cash dividends:
-2008 final
dividend - - - - - - (331) (331)
-2009 first
interim
dividend - - - - - - (104) (104)
Scrip dividends - 324 *(10) - - - (324) (10)
Net profit - - - - 3,426 (856) 692 3,262
--------- --------- --------- ------------ ----------------- ------------ --------- --------
At 31 December
2010 2,083 (245) 5,401 4,308 14,214 3,718 3,981 33,460
--------- --------- --------- ------------ ----------------- ------------ --------- --------
There are no other recognised income and expenses for the year
ended 31 December 2010.
* Costs associated with the administration of the scrip
dividends.
The notes on pages 28 to 44 are an integral part of these
financial statements. Statement of Cash Flows
for the year ended 31 December 2011
Notes 2011 2010
GBP'000 GBP'000
Cash flows from operating activities
Payments for purchase of financial
investments (50,910) (61,505)
Proceeds from sale of financial
investments 49,286 63,894
Cash received from investments 1,286 1,232
Other income - 12
Investment management fee paid (129) (154)
Other cash payments (327) (53)
Net cash (outflow)/inflow from
operating activities (794) 3,426
--------- ---------
Cash flows from financing activities
Interest paid (3) (8)
Share repurchase 14 (273) (189)
Equity dividends paid 6 (450) (435)
Net cash outflow from financing
activities (726) (632)
--------- ---------
Net (decrease)/increase in cash and
cash equivalents (1,520) 2,794
Effect of exchange rate changes
on cash and cash equivalents 19 (20)
Cash and cash equivalents at
the beginning of the year 3,841 1,067
Cash and cash equivalents at
the end of the year 10 2,340 3,841
--------- ---------
The notes on pages 28 to 44 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 companies listed or quoted on the London Stock
Exchange 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 has no employees.
2. Accounting policies
a. Basis of preparation
The financial statements have been prepared in accordance with
the applicable International Financial Reporting Standards ("IFRS")
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 statements have been prepared
on a historical cost basis except for financial assets held at fair
value through profit or loss, which have been measured at fair
value.
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 statement of
comprehensive income between items of a revenue and capital nature
has been presented alongside the statement of comprehensive
income.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements in conformity with IFRS
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.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates arerecognised in
the period in which the estimates are revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both the current and future
periods.
The critical judgements and key sources of estimation
uncertainty are detailed within the accounting policies note
below.
Notes to the Financial Statements (continued)
2. Accounting policies (continued)
b. Going concern
In the opinion of the Directors the Company has adequate
resources to continue in operational existence for the foreseeable
future. For this reason the financial statements have been prepared
using the going concern basis.
The Directors have arrived at this opinion by considering, inter
alia, the following factors:
-- the Company has sufficient liquidity to meet all on-going
expenses (net current asset position at 31 December 2011 of
GBP2,404,000);
-- the portfolio of investments held by the Company materially
consists of listed investments which are readily realisable and
therefore the Company will have sufficient resources to meet its
liquidity requirements; and
-- as at 31 December 2011, the Company has no external
borrowings and therefore is under no obligation to repay any
borrowing facilities for the foreseeable future.
c. Adoption of new and revised standards
Standards not affecting the reported results nor the financial
position
The following new and revised Standards and Interpretations have
been adopted in the current year. Their adoption has not had any
significant impact on the amounts reported in these financial
statements.
IAS 24 (2009) Related Party Disclosures -The revised Standard
has a new, clearer definition of a related party, with
inconsistencies under the previous definition having been
removed.
Improvements to IFRSs 2010 - Aside from those items already
identified above, the amendments made to standards under the 2010
improvements to IFRSs have had no impact on the Company.
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet
effective.
IFRS 1 (amended) Severe Hyperinflation and Removal of Fixed
Dates for the First-time Adopters
IFRS 7 (amended) Disclosures - Transfers of Financial Assets
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 1 (amended) Presentation of Items of Other Comprehensive Income
IAS 12 (amended) Deferred Tax: Recovery of Underlying Assets
IAS 19 (revised) Employee Benefits
IAS 27 (revised) Separate Financial Statements
IAS 28 (revised) Investments in Associates and Joint Ventures
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
The Directors do not expect that the adoption of the other
standards listed above will have a material impact on the financial
statements of the Company in the future periods.
Notes to the Financial Statements (continued)
2. Accounting policies (continued)
d. Other receivables
Other receivables do not carry any interest, are short-term in
nature, and are accordingly stated at their nominal value as
reduced by appropriate allowances for estimated irrecoverable
amounts.
Sales of financial assets are recognised at the trade date.
Where trades have been executed but are awaiting settlement from
the broker, these are accounted for as due from brokers on the
statement of financial position.
e. Financial assets
(i) Classification
The Company classifies its financial assets as fair value
through profit or loss in accordance with IAS 39.
(ii) Recognition
Financial assets are recognised on the trade date where a
purchase is under contract whose terms require delivery within the
timeframe established by the market concerned.
(iii) Initial measurement
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 and material
transaction costs on acquisition and all transaction costs on
disposal of the financial asset are expensed as a capital item. The
Company manages and evaluates these investments on a fair value
basis in accordance with its investment strategy.
(iv) Subsequent measurement
After initial measurement, the Company measures its financial
assets, which are classified as fair value through profit or loss,
at fair value, which is either the bid price or the last traded
price, depending on the convention of the exchange on which the
financial asset is quoted.
Subsequent changes in the fair value of the Company's financial
assets are recorded in the statement of comprehensive income under
net gains/(losses) on financial assets at fair value through profit
or loss. Foreign exchange gains and losses for financial assets at
fair value through profit or loss are included within the changes
in its fair value.
(v) Derecognition
Financial assets are derecognised where:
-- a sale is under contract whose terms require delivery within
the timeframe established by the market concerned; or
-- it is evident, following an impairment review, that the
Company can no longer recover any value from the financial
asset.
Notes to the Financial Statements (continued)
2. Accounting policies (continued)
e. Financial assets (continued)
(vi) Impairment
The Company is required to evaluate the financial assets in its
portfolio to determine if any of the securities are impaired.
As a matter of accounting policy, the Company has determined
that it will have intent and ability to hold a financial asset with
unrealised loss until the cost of purchase 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 asset. These estimates are subjective in nature and
involve uncertainties and matters of significant judgement.
The Company materially invests in listed or quoted equities and
therefore at the reporting date, there were no sources of
significantjudgement or uncertainty.
f. Net gains/(losses) on financial assets at fair value through profit or loss
Net gains/(losses) on financial assets at fair value through
profit or loss includes changes in the fair value of financial
assets held at fair value through profit or loss.
Unrealised gains and losses comprise changes in the fair value
of financial assets for the year and from reversal of prior year's
unrealised gains and losses for financial assets which were
realised in the reporting period.
Realised gains and losses on disposals of financial assets
classified as fair value through profit or loss are calculated
using the average method. They represent the difference between a
financial asset's initial carrying amount and its disposal
amount.
g. 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
may be 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.
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
statement of comprehensive income 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.
Notes to the Financial Statements (continued)
2. Accounting policies (continued)
i. Other payables
Other payables are not interest-bearing and are stated at their
nominal value.
Purchases of financial assets are recognised at the trade date.
Where trades have been executed but the broker requires funds for
settlement of the trade, these have been accounted for as due to
brokers on the statement of financial position.
j. Dividend revenue, interest revenue and other revenue
Dividend revenue is brought into the statement of comprehensive
income as a revenue item 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.
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 dividend revenue in the statement of
comprehensive income.
Fixed returns on non-equity investments and on debt securities
are recognised as a revenue item in the statement of comprehensive
income 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 recognised as interest revenue and is
included in the statement of comprehensive income on an accruals
basis.
Other revenue, such as underwriting commission, is recognised on
a received basis as the timing of receipts of this nature is
uncertain and therefore the received basis is deemed the most
appropriate method to account for this revenue.
k. Functional and presentation currency
The Company's functional and presentation currency is sterling,
which is the currency of the primary economic environment in which
the company operates. The Company's performance is evaluated and
its liquidity is managed in sterling, therefore sterling is
considered as the currency that most faithfully represents the
economic effects of the underlying transactions, events and
conditions.
l. Foreign currency translations
Foreign currency monetary assets and liabilities are translated
into sterling at the rate of exchange ruling at the statement of
financial position date. Transactions during the year 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 statement of comprehensive
income.
m. Statement of cash flows
The Company is required to prepare a statement of cash flows in
accordance with IFRS and has elected to prepare the statement of
cash flows on a direct basis.
Notes to the Financial Statements (continued)
2. Accounting policies (continued)
n. Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the statement of comprehensive income as
revenue except as follows:
-- expenses which are incidental to the acquisition of an
investment are deducted from gains on investments through the
statement of comprehensive income 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 statement of comprehensive income
as capitalrealised 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.
o. 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.
p. Segment Reporting
A business segment is a distinguishable component of the Company
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 Company 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 Company isorganised in one
main business segment, namely the management of the Company'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 Company's secondary
segment reporting format is alsoorganised into one main
geographical unit as the location of all investments is materially
all within the United Kingdom.
q. Treasury shares
Where the Company purchases its own share capital, the
consideration paid, which includes any directly attributable costs,
is recognised as a deduction from net assets attributable to
shareholders through the Treasury Share reserve, which is a
distributable reserve.
When such shares are subsequently sold or reissued, any
consideration received, net of any directly attributable
incremental transaction costs, is recognised as an increase in
equity and the resulting surplus or deficit on the transaction is
transferred to/from the Treasury Share reserve.
Notes to the Financial Statements (continued)
3. Dividend and other income
2011 2010
GBP'000 GBP'000
Dividend revenue from investments
designated at fair value through
profit or loss:
Dividends 1,307 1,031
1,307 1,031
-------- --------
Other income from financial assets
not at fair value through profit
or loss:
Unclaimed dividends 2003/2004 - 12
-------- --------
- 12
-------- --------
Total income 1,307 1,043
======== ========
4. Investment management and performance fees
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% of
NAV in any year. On this basis, the maximum possible management fee
in any year will be 0.75% of NAV if the average of two years
outperformance equals or exceeds 2.5%. There was no performance fee
payable in 2011 or 2010. 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
expenses.
5. Taxation
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 which is included within
other expenses in the statement of comprehensive income.
The Company suffered GBP20,001 (2010: GBP69,000) of withholding
tax on foreign dividends during the year and this expense has been
included in other expenses in the statement of comprehensive
income.
Notes to the Financial Statements (continued)
6. Dividends
2011 2010
GBP'000 GBP'000
Equity dividends
Ordinary shares
First interim dividend for 2011: 0.95p (gross)
on 11,387,130 shares paid in 2011 108
(2010 first interim dividend for 2010: 0.90p
(gross) on 11,561,991 shares paid in 2010) 104
Scrip dividend for 2011 paid in 2011: 74,121
shares issued at a cost of 120.42p per share 89
(Scrip dividend for 2010 paid in 2010: 69,021
shares issued at a cost of 128.75p per share) 89
Second interim dividend for 2010: 3.00p
(gross) on 11,410,621 shares paid in 2011 342
(Second interim dividend for 2009: 2.85p
(gross) on 11,614,189 shares paid in 2010) 331
Scrip dividend for 2010 paid in 2011: 195,645
shares issued at a cost of 140.80 per share 276
(Scrip dividend for 2009 paid in 2010: 191,737
shares issued at a cost of 122.25 per share) 235
-------- --------
815 759
======== ========
7. Basic return/(deficit) per ordinary share
2011 2010
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Return/(deficit) 4.38 (20.15) (15.77) 3.36 12.47 15.83
======== ======== ======== ======== ======== ======
Revenue return per ordinary share is based on the net revenue on
ordinary activities of GBP907,000 (2010: return GBP692,000) and on
20,704,828 ordinary shares, being the weighted average number of
ordinary shares in issue during the year (2010: 20,608,335).
Capital return per ordinary share is based on a net capital
deficit for the financial year of (GBP4,173,000) (2010: return
GBP2,570,000) and on 20,704,828 ordinary shares, being the weighted
average number of ordinary shares in issue during the period (2010:
20,608,335).
Notes to the Financial Statements (continued)
8. Financial assets at fair value through profit or loss
2011 2010
% of net % of net
Fair Value assets Fair Value assets
GBP'000 % GBP'000 %
Financial assets at fair
value through profit or loss
- Listed equity securities 27,057 91.82 28,597 85.47
- De-listed trading entities 10 0.03 10 0.03
27,067 91.85 28,607 85.50
----------- --------- ----------- -----------
Net (losses)/gains on financial
assets at fair value through
profit or loss
2011 2010
GBP'000 GBP'000
Realised (losses)/gains (1,185) 3,570
Unrealised losses (2,879) (856)
--------- -----------
(4,064) 2,714
--------- -----------
Fair value measurements
IFRS 7 requires the Company to classify fair value hierarchy
that reflects the significance of the inputs used in making the
measurements. IFRS 7 establishes a fair value hierarchy that
prioritises the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value
hierarchy under IFRS 7 are as follows:
-- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability either
directly (that is, as prices) or indirectly (that is, derived from
prices); or
-- Level 3 - Inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgment, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgment by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
Notes to the Financial Statements (continued)
8. Financial assets at fair value through profit or loss (continued)
Fair value measurements (continued)
The Company mainly holds equity investments for which fair value
has been determined by reference to quoted prices in active markets
for the same instrument, being level 1 of the IFRS 7 fair value
hierarchy. The Company also has one holding, Newfound NV, for which
fair value has been derived by inputs other than quoted prices due
to the investment being de-listed in 2009.
The following table presents the Company's financial assets by
level within the valuation hierarchy as of 31 December 2011.
Percentage Percentage
2011 of net assets 2010 of net assets
Level 1 fair value GBP'000 % GBP'000 %
assets
Investments valued
at fair value 27,057 91.82 28,597 85.47
Level 2 fair value
assets
Investments valued
at fair value 10 0.03 10 0.03
Total fair value financial
assets 27,067 91.85 28,607 85.50
======== =============== ======== ===============
9. Other receivables and accrued income
Other receivables 2011 2010
GBP'000 GBP'000
Due from brokers - 900
Accrued income 217 216
Prepayments 9 13
-------- --------
226 1,129
======== ========
The Directors consider that the carrying amount of receivables
approximates to their fair value.
10. Cash and cash equivalents
Cash and cash equivalents 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. Other payables and accrued expenses
Other payables 2011 2010
GBP'000 GBP'000
Management fees 74 42
Administrative fees 49 45
Audit fees 18 18
Registrars fees 8 7
Sundry expenses 13 5
-------- --------
162 117
======== ========
The Directors consider that the carrying amount of payables
approximates their fair value.
Notes to the Financial Statements (continued)
12. Loan facility
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
2011 the loan facility was not utilised. Interest is payable at a
rate of six month sterling LIBOR plus 0.6% and the borrowing is
held at amortised cost. No loan interest was paid during 2011 or
2010. A fee of 0.30% per annum is payable on the undrawn amount of
GBP2,000,000 of this facility, resulting in GBP6,000 being due for
the year ended 31 December 2011. 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 than GBP20,000,000; and
-- the Company is required to ensure that the investment
portfolio includes holdings in not less than 30 separate
businesses.
13. Business and geographical segments
As described in the accounting policies in note 2 to the
financial statements the Board of Directors is of the opinion that
the Company 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 organised into
one main geographical unit as the location of all of its
investments is materially all within the United Kingdom.
Income Net Assets
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 1,307 1,043 29,471 33,460
1,307 1,043 29,471 33,460
======== ======== ======== ========
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
2011 2010
GBP'000 GBP'000
Authorised
100,000,000 ordinary shares of 10p
each 10,000 10,000
250,000 5% cumulative preference restrictive
voting shares of GBP1 each 250 250
10,250 10,250
============= =====================
Notes to the Financial Statements (continued)
14. Share capital (continued)
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. At 31 December 2011, no five per cent
cumulative preference restrictive voting shares had been issued
(2010: none). 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.
2011 2010
GBP'000 GBP'000
Issued, called up and fully
paid:
20,830,484 ordinary shares of 10p each
(2010: 20,830,484) 2,083 2,083
================= ==================
2011
Treasury Share
reserve Shares in issue
Shares Cost Shares Cost
Nominal GBP'000 Nominal GBP'000
Balance at 1 January
2011 143,644 245 20,830,484 2,083
Shares purchased and held in
Treasury 214,000 273 - -
Shares issued in lieu of dividends
from Treasury (269,766) (365) - -
Balance at 31 December
2011 87,878 153 20,830,484 2,083
------------ -------------- ------------------- -------------
2010
Treasury Share
reserve Shares in issue
Shares Cost Shares Cost
Nominal GBP'000 Nominal GBP'000
Balance at 1 January
2010 254,402 380 20,830,484 2,083
Shares purchased and held in
Treasury 150,000 189 - -
Shares issued in lieu of dividends
from Treasury (260,758) (324) - -
Balance at 31 December 2010 143,644 245 20,830,484 2,083
------------ -------------- ------------------- -------------
During 2011 and 2010 no shares were purchased for cancellation.
On 17 January 2011, 50,000 shares were purchased for Treasury at
a total cost including expenses of GBP68,834.
On 31 January 2011, 40,000 shares were purchased for Treasury at
a total cost including expenses of GBP55,067.
On 25 August 2011, 25,000 shares were purchased for Treasury at
a total cost including expenses of GBP30,025.
On 22 September 2011, 25,000 shares were purchased for Treasury
at a total cost including expenses of GBP29,899.
Notes to the Financial Statements (continued)
14. Share capital (continued)
On 17 October 2011, 24,000 shares were purchased for Treasury at
a total cost including expenses of GBP29,304.
On 21 October 2011, 25,000 shares were purchased for Treasury at
a total cost including expenses of GBP30,275.
On 20 December 2011, 25,000 shares were purchased for Treasury
at a total cost including expenses of GBP29,787.
On 27 May 2011, 195,645 shares were issued to shareholders who
elected to receive them in lieu of a second interim cash dividend
for 2010. On 4 November 2011, 74,121 shares were issued to
shareholders who elected to receive them in lieu of a first interim
dividend for 2011. Ordinary shares of 10p each, fully paid were
issued to shareholders from the Treasury Share reserve held by the
Company.
15. Net asset value per share
Net asset value per ordinary share is based on net assets
attributable to the ordinary shareholders of GBP29,471,000 (2010:
GBP33,460,000) and on 20,742,606 (2010: 20,686,840) 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 4 of
the annual financial report. Fees earned by the Directors of the
Company during the year were GBP107,500 (2010: GBP94,250) of which
nil (2010: GBPnil) was outstanding at the year end. Allowable
expenses claimed by the Directors in the course of their duties
amounted to GBP3,417 for the year ended 31 December 2011 (2010:
GBP2,344).
D Warr is a Non-Executive Director of Breedon Aggregates Limited
of which the Company holds 1,583,270 shares as at 31 December
2011.
The Investment Manager, Scottish Widows Investment Partnership
Limited exercises discretion over 28.42% (2010: 28.42%) of the
shares in the Company, on behalf of their clients, and earned
investment management fees of GBP161,204 (2010: GBP157,732) during
the year of which GBP73,977 (2010: GBP42,090) was outstanding at
the reporting date. No performance fees were paid in 2011 or 2010.
The basis of calculation of these fees is detailed in note 4.
The Company has appointed Kleinwort Benson (Channel Islands)
Fund Services Limited to provide administrative and accounting
services. Administrative fees (including the accounting fee) for
the year ended 31 December 2011 amounted to GBP99,011 (2010:
GBP89,000) of which GBP49,330 (2010: GBP45,000) was outstanding at
the year end.
17. Financial risk management
Introduction
The Company's objective in managing risk is the creation and
protection of shareholder value. Risk is inherent in the Company's
activities, but is managed through a process of ongoing
identification, measurement and monitoring, subject to risk limits
and other controls. The process of risk management is critical to
the Company's continuing profitability. The Company is exposed to
market risk (which includes currency risk, interest rate risk, and
price risk), credit risk and liquidity risk arising from the
financial assets it holds.
Notes to the Financial Statements (continued)
17. Financial risk management (continued)
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, treasury share reserve, share
premium, capital redemption reserve, capital reserves and revenue
reserve as disclosed in the statement of changes in net assets
attributable to shareholders. The Company does not have any
externally imposed capital requirements.
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 ongoing expenses and dividend payments.
The Company's policy is to provide net income for distribution
from the dividend income earned from a portfolio of mainly UK
equity securities which are listed on the London Stock Exchange.
Further, the Company has allocated to capital 75% of its investment
management fee, performance fee and finance costs in respect of the
non-utilisation fee from 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 has the ability to use leverage to
enhance the returns to shareholders and for this purpose has
entered into a 5 year revolving 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.
Concentration risk
Concentration risk is the risk that the Company's portfolio is
not suitably diversified and therefore the Company could become
materially exposed to sector specific price fluctuations.
As at 31 December 2011, the Company's portfolio consisted of 38
investments spread over 8 sectors. Further, the portfolio only held
investments issued in the United Kingdom, Ireland and Canada.
The Board has also adopted investment restrictions to manage the
risk profile, which are:
-- no holding in another company may exceed 15% of the value of
the Company's portfolio. This test is applied when the investment
is first acquired and subsequently, when additions are made to the
holding; and
-- futures positions may be entered into so long as the
positions that are taken are long only and do not exceed 5% of the
Net Asset Value of the Company when the deal is struck.
The Board monitors investment restrictions by utilising the
Investment Manager's compliance functions. Investment strategy and
allocation is monitored by the Board through the use of an
Investment Manager.
Notes to the Financial Statements (continued)
17. Financial risk management (continued)
Credit risk
Credit risk is the risk that an issuer or counterparty 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 statement
of financial position which represents the Company's maximum
exposure to credit risk in relation to the financial assets.
The credit risk on bank balances is limited because the
counterparties 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
Liquidity risk is the risk that the Company will not be able to
meet its liabilities as they fall due.
The Company's assets comprise securities that can be readily
realised to meet obligations. As a result, the Company is able to
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. No amounts have been drawn down on this facility
subsequent to the reporting date.
No liquidity analysis for the Company's financial assets and
liabilities has been provided for the current or prior year as
liquidity risk is not considered material.
Country risk
On 17 January 2012 the Financial Reporting Council ("FRC")
released "Responding to the increased country and currency risk in
financial reports".
The FRC released on 17 January 2012 an update for directors of
listed companies which includes guidance on responding to the
increased country and currency risk as a result of funding
pressures on certain European countries, the curtailment of capital
spending programmes (austerity measures) and regime changes in the
Middle East.
The Board has reviewed the disclosures contained within the
annual financial report and believes that no additional disclosures
are required since the Company is primarily invested in UK listed
equities.
Notes to the Financial Statements (continued)
17. Financial risk management (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 10%
increase and decrease in the market prices while all other
variables were held constant. 10% 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 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.
Net Assets Net Assets
10% increase in 10% decrease in
price price
Impact on financial Impact on financial
assets at fair assets at fair
value through value through profit
profit or loss or loss
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
Increase/(decrease)
in net assets attributable
to shareholders
-Designated as at fair
value through profit
or loss 2,707 2,861 (2,707) (2,861)
----------- --------- ----------- -------------
2,707 2,861 (2,707) (2,861)
=========== ========= =========== =============
In practice the actual trading results may differ from the
sensitivity analysis above and the difference could be
material.
Notes to the Financial Statements (continued)
17. Financial risk management (continued)
b) Interest rate risk
Interest rate risk is the risk that future cash flows of a
financial instrument will fluctuate because of changes in interest
rates associated with that financial instrument.
The Company's interest rate sensitive assets and liabilities
mainly comprise of cash and cash equivalents. The cash and cash
equivalents are subject to floating rates and are 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.
c) Currency risk
Foreign currency risk is the risk that a financial instrument
will fluctuate because of changes in foreign exchange rates.
As at 31 December 2011 and 31 December 2010 the Company's net
currency exposure was as follows:
2011 2010
GBP'000 % of Net Assets GBP'000 % of Net
Assets
Euro 162 0.55 1,038 3.10
Sterling 28,386 96.32 31,776 94.97
Swiss Franc - - 592 1.77
United States
Dollar 923 3.13 54 0.16
-------- ---------------- -------- ---------
29,471 100.00 33,460 100.00
======== ================ ======== =========
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 reporting date
On 30 March 2012, the Board declared a second interim dividend
of 3.15p per share. In accordance with the requirements of IFRS, as
this was not declared until after the statement of financial
position date, no accrual has been reflected in these financial
statements for this amount.
Ten Year Record
The Ten Year Record set out below has been prepared from the
accounting records of the Company. While it does not form part of
the financial statements, it should be read in conjunction with
them and the Auditor's report thereon.
Ordinary
Revenue Gross share Net asset
Net revenue return dividends capital value
after per ordinary per ordinary eligible of ordinary
Gross revenue taxation share share for dividends shares
(Ex-div)
Year ended GBP'000
31 December (1&2) GBP'000 p p(3) GBP'000 p
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 2.93 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 1,042 5.04 3.63 2,073 106.9
2009 1,075 746 3.61 3.75 2,058 149.8
2010 1,043 692 3.36 3.90 2,069 161.7
2011 1,307 907 4.38 4.10 2,074 142.1
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.
Financial Calendar
Announcements, ordinary share dividend payments, and the issue
of the annual and interim reports may normally be expected in the
months shown below:
March - Preliminary figures and second interim dividend for the
year announced
April - Annual Financial Report published
May - Second interim dividend paid
August - Annual General Meeting
August - Half yearly figures and interim dividend announced
August/September - Half yearly report for half year published
November - Interim dividend paid
This information is provided by RNS
The company news service from the London Stock Exchange
END
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