UK Select Trust Limited · 12/31/2008 · Invista Foundation Pr operty T rust Limited, Hemisphere...

UK Select Trust Limited

Annual report and financial statements for the year ended 31 December 2008

ContentsIFC Trust Information1 Objectives1 Financial Highlights2 Directors and Advisors3 Chairman’s Statement4 Investment Manager’s Report6 The Portfolio8 Sector Distribution9 Directors’ Report14 Directors’ Responsibilities15 Independent Auditors’ Report16 Income Statement17 Balance Sheet18 Reconciliation of Movements in Equity Shareholders’ Funds19 Cash Flow Statement20 Notes to the Financial Statements30 Ten Year Record31 Notice of Meeting33 Financial Calendar

Trust InformationUK Select Trust Limited's shares are listed on the London Stock Exchange. They can bebought or sold by investors through a stockbroker or by asking a professional advisere.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 inthe Share Information Service in the Financial Times. In addition it is published everyMonday on the business pages of The Guernsey Press and Star and Jersey Evening Post.

Objectives – UK Select Trust Limited

UK Select Trust Limited is registered in Guernsey and is qualified as aUK Investment Trust Company. The Company invests over 80% of itsgross assets by value in the UK and the investment policy aims toprovide a total return to shareholders in excess of the net total returnon the FTSE All Share Index and a progressive dividend policy.

Financial highlightsYear ended Year ended

31 December 31 December2008 2007

Net asset value per share 106.97p 158.27pEquity shareholders’ interest (1) £22.17m £32.78mRevenue return on ordinary activities for the financial year after taxation £1.04m £0.82mCapital (loss)/return on ordinary activities for the financial year after taxation £(11.22)m £0.97mRevenue return per ordinary share 5.04p 3.96pCapital (loss)/return per ordinary share (54.25)p 4.67pDividend per ordinary share (2) 3.63p 3.40pShare Price 86.25p 128.00pNet asset value total return (30.70)% 5.70%FTSE All-Share total return (29.93)% 5.32%

(1) During the year the Company purchased 202,916 ordinary shares of10p from the market to be held in Treasury. 216,587 ordinary shares of10p each from the shares held in Treasury were reissued during theperiod. 104,742 shares remain in Treasury at 31 December 2008. Theseare held for reissue and the Company does not intend to cancel these.

(2) The dividend figures include the proposed dividend for the relevantfinancial period.

DividendsA final dividend of 2.73p per share will be recommended for 2008 (2007:2.55p). This is in addition to an interim dividend of 0.90p (2007: 0.85p)paid during the year.

Annual report & financial statements 2008 UK Select Trust Limited 1

JM Le PelleyAge 60, Non-executive Chairman. He joined the board in 1983. OtherDirectorships include AcenciA DebtStrategies Limited.

D Warr FCAAge 55, Non-executive Director. Hejoined the board in 2006. He is anExecutive Director of Fortis ReadsInternational Management Limited, aGuernsey based fiduciary servicesbusiness wholly owned by Fortis Plc. Heis a fellow of the Institute of CharteredAccountants in England and Wales andhas worked for the Fortis Reads Groupsince 1972 specialising in Trust andCorporate work. He is also Non-executive Chairman of FRM DiversifiedAlpha Limited and a Non-executiveDirector of Marwyn Materials Limited,Invista Foundation Property Trust Limited,Hemisphere Defensive HF (USD) Limitedand Unigestion (Guernsey) Limited.

DR MaltwoodAge 70, Non-executive Director. Hejoined the board in 1997 after a careerin stockbrocking in Jersey. He has held anumber of positions including theChairman and Director of a number ofquoted companies.

G Ross RussellAge 75, Non-executive Director. Hejoined the board in 1995. He is aDirector of Forsight 3 Venture CapitalTrust Plc and former Chairman of theSecurities & Investment Institute andDeputy Chairman of the London StockExchange.

JG West FCAAge 61, Non-executive Director. Hejoined the board in 1997. He is theChairman of Gartmore Fledgling TrustPlc, Jupiter Second Enhanced Trust Plc,New City High Yield Fund Limited, anda Director of a number of public andprivate companies including BritishAssets Trust Plc and JP Morgan Incomeand Capital Trust plc. He is a formerchief executive of Lazard AssetManagement Limited.

Advisers

Directors and Advisers

JM Le Pelley DR Maltwood JG West FCA

G Ross RussellD Warr FCA

Secretary and RegisteredOfficeCorporate Services(Guernsey) LimitedDorey CourtAdmiral ParkSt Peter PortGuernsey GY1 3BG01481 727111

Bankers and CustodianHSBC Bank plc8 Canada SquareLondon E14 5HQ

StockbrokerDresdner Kleinwort (resigned 30 June 2008)PO Box 56020 Fenchurch StreetLondon EC3P 3DB0207 623 8000

Intelli Corporate FinanceLimited(appointed 1 October 2008)29 Rutland SquareEdinburghEH1 2BW0131 222 9400

UK Select Trust Limited Annual report & financial statements 20082

Investment ManagerScottish Widows InvestmentPartnership LimitedEdinburgh OneMorrison StreetEdinburgh EH3 8BE0131 655 8500

AuditorsDeloitte LLPRegency CourtGlategny EsplanadeSt Peter PortGuernsey GY1 3HW01481 724011

RegistrarsCapita Registrars (Guernsey)LimitedLongue Hougue RoadSt SampsonGuernsey GY2 4JN0870 162 3100Calls cost 10p per minute plus

network charges

Review of 2008 PerformanceThis was an extraordinary year for equity markets. The bankingcrisis which unfolded through the year set the tone for globalequity markets and created some of the most volatileconditions in stock market history. The 29.9% fall in the FTSE All Share Index represented its worst annual return for 34 years.

While UK Select Trust’s total return of -30.7% in 2008 wasdisappointing, the Company remains comfortably ahead ofits benchmark over two, three and five years. The Company’sequity portfolio outperformed the FTSE All Share Index forthe fourth consecutive year driven by strong stock selection.

Share price and discountThe share price fell by 32% in 2008 and the discount atwhich your Company’s shares trade relative to their net assetvalue stood at 19% at the end of the year. Discounts acrossthe investment trust sector remained at historically highlevels reflecting the extreme levels of volatility in underlyingequity markets.

GearingThe investment manager significantly reduced the Company’sgearing level through the year under review with an averagelevel of 8% compared to 16% in 2007. However, thisreduced borrowing level was still detrimental to performance.

Earnings and dividend per shareEarnings per share for the year amounted to 5.04p (2007:3.96p) and, on behalf of the Board, I am pleased torecommend a final dividend of 2.73p (2007: 2.55p). This is inaddition to the interim dividend of 0.90p (2006: 0.85p),bringing the total dividend for the year to 3.63p (2007: 3.40p).

ProspectsThe outlook for global equity markets remains highlyuncertain. The major western economies are in the grip ofasset price deflation while growth rates in the key emergingmarkets are slowing sharply. Stability within the financialsystem will be central to any sustained recovery in equitymarkets and while de-leveraging in the banking sector is wellunderway, this will be a long corrective process.

The early months of 2009 have seen further weakness inequity markets with many companies forced to raise freshcapital to shore up balance sheets. In the region of £20 billionof equity issuance has been announced already this year andthis cash call on investors looks set to continue through thefirst half of the year, and perhaps beyond.

On a more positive note, there has been an unprecedentedresponse from both monetary and fiscal authorities around theworld. Stimulus packages combined with aggressive interestrate cuts will undoubtedly re-ignite economic growth andstoke inflationary pressures though it is difficult to predict howlong this medicine will take to work. The longer termimplications for the taxpayer are also a source of concern.

In this volatile environment, the investment manager willcontinue to manage the portfolio on a very active basis usingthe weakness in equity markets to build positions incompanies where longer term prospects are not reflected incurrent share prices.

JM Le PelleyChairman

3 April 2009

Chairman’s Statement

JM Le Pelley


The unprecedented conditions in the financial system werematched by the response from the monetary authorities.Interest rates around the world were slashed while sovereigngovernments intervened directly with massive cash injectionsto prop up the banking system.

The UK Stock MarketThe FTSE All Share Index ended a five year winning streakposting its first annual decline since 2002. There were threekey negative forces at work in equity markets during 2008.Firstly, the crisis of confidence in the banking system resultedin the banks reigning in lending practices which served toslow economic growth and prompt investors to re-appraisethe appropriate capital structure for UK Plc. Secondly, a weakening global demand environment created moredifficult trading conditions for many companies prompting a raft of profit warnings through the course of the year.Thirdly, the deteriorating economic outlook triggered arotation out of risk assets including equities into lower riskinvestments such as cash and sovereign debt.

The dramatic change in mood was reflected in share priceperformance at the industry level. The sectors with the mostdefensive earnings characteristics including pharmaceuticals,beverages and tobacco generated the best equity returns in2008 while the more economically exposed business modelswere hit the hardest with banks, mining and transportationstocks propping up the performance tables.

The largest positive contributor to the Company’sperformance during the year was pharmaceutical giant,Astrazeneca. The shares benefited from both a string ofpositive announcements from its drug portfolio as well as itsfinancial strength and ability to grow earnings in the face ofan economic slowdown. The portfolio’s exposure to thestructural growth opportunity in emerging market poweralso benefited investment performance with the holdings inGreat Eastern Energy, KSK Power and Aggreko all deliveringstrong returns.

The position in Royal Bank of Scotland was the mostdetrimental to performance during the year. The positionwas established at the start of the fourth quarter followingthe completion of the company’s £12 billion rescue rightsissue and a series of meetings with the company’smanagement. However, the company’s confidence over itsfunding position proved to be misplaced as the sharestumbled on growing liquidity concerns culminating in thegovernment’s decision to step in and part-nationalise thebank. The holdings in Dolphin Capital and CadoganPetroleum were also a drag on performance.

IntroductionUK equities recorded their worst calendar year performancesince 1974 with the FTSE All Share Index tumbling by 29.9%in 2008. Investor sentiment during the year was dominatedby the unfolding global financial crisis which triggered a series of high profile corporate collapses.

The Company’s net asset value underperformed thebenchmark FTSE All-Share Index during the period, fallingby 30.7% on a total return basis as a result of theCompany’s gearing and total expense ratio. Stock selectionwas positive, however, with the Trust’s underlying equityportfolio outperforming the FTSE All Share Index by 2.8%during the year.

Global BackgroundThe global economic environment deteriorated markedlythrough 2008. The downturn in the major European and UShousing markets continued to gather pace fuelled by sharplyrising unemployment rates in those economies. The economiccontraction in the western world also started to take its toll onAsian growth rates as exports started to slow through thelatter stages of the year.

The worsening global growth outlook was reflected indramatic falls in commodity prices through the second halfof the year. The oil price peaked at $145 per barrel in Julyand then proceeded to fall by over 60% to close the year at$54. Slowing demand also prompted precipitous falls inmetals markets with inflation concerns replaced by thespectre of asset price deflation.

The US economic agenda continued to be dominated by thedomestic housing market and the escalating banking crisis.The demise of Wall Street stalwart, Bear Stearns, sent shockwaves through global stock markets with JP Morgan steppingin to rescue the situation with an agreed take-over. However,the failure of Lehman Brothers in September marked thebeginning of an unprecedented period of volatility acrossequity markets sending share prices sharply lower. Thesystemic fall out from the bankruptcy of Lehman left theglobal financial system teetering on the brink of collapse.

Investment Manager’s Report

Peter Cockburn


Investment Manager’s Report continued


Portfolio ActivityThe Company continues to be managed on a very active basiswith portfolio construction shaped by rigorous fundamentalanalysis at the stock-specific level. At present this translatesinto overweight positions relative to the Company’sbenchmark in pharmaceuticals, support services and the oil &gas sectors. The major underweight positions include banks,food & drug retailers and beverages.

Balance sheet strength remains a particular focus at presentwith a raft of companies currently being forced to raise freshequity as a result of both adverse trading conditions and thede-leveraging process underway within the banking sector.

Since the end of the year under review the Company hasestablished several holdings of investment grade corporatebonds on the basis of very attractive yield levels and capital protection.

OutlookGlobal stock markets have continued to weaken in the firsttwo months of 2009 with the FTSE All-Share Index sheddinga further 12% of its value. The Company currently has noborrowings and the equity portfolio has made a good start tothe year relative to its benchmark.

The news flow surrounding the global financial systemremains the key sentiment driver for equity markets. Whilstthe deleveraging process in the banking system will last foryears rather than months, equity valuations are alreadydiscounting a severe macro economic downturn. As andwhen economic news shows signs of stabilisation, theCompany will shift the bias of the portfolio away from themore defensive areas of the market in favour of economicallycyclical companies with strong business models.

Scottish Widows Investment Partnership3 April 2009

Scottish Widows Investment Partnership (“SWIP”) is one of the largest asset management companies in the UK. They actively manage funds across a broad range of assettypes and are major investors in global and pan-Europeanequity markets, as well as property, fixed interest and cash.

SWIP manages money for a large number of investors with a wide variety of investment objectives. The investor’s needscan be met by investing in SWIP’s diverse fund range or through a bespoke portfolio.

SWIP’s flexible investment style also enables them to meettheir client objectives in all market conditions. They have a rigorous investment process, which emphasises their own independent fundamental research. This gives them a depth of information and insight that is not available to the market generally.

With £83 billion* of funds as at 31 December 2008 under management and the backing of their parentcompany, Lloyds Banking Group plc, clients can haveconfidence in their stability and position of strength. Theirsize and market leadership have also allowed them to attractand retain one of the UK’s strongest and most experiencedinvestment teams.

SWIP believes that the expertise of their investment teamsand the comprehensive research that they conduct is key to providing consistently superior returns for their clients.

*Source: SWIP

Company Market Value Activity

£000

1 AstraZeneca Plc 1,715 One of the world's largest pharmaceutical companies.

2 Vodafone Group Plc 1,611 The largest mobile telecommunications network in the world.

3 GlaxoSmithKline Plc 1,585 Large Anglo-American pharmaceutical company.

4 British American Tobacco Plc 1,160 The world’s most international tobacco group.

5 HSBC Plc 1,060 Large UK – based financial services group.

6 BG Group Plc 971 Formerly British Gas. Involved in oil and gas transmission and distribution, as well

as power generation.

7 Great Eastern Energy Corporation Plc 928 Indian based energy provider.

8 Ryanair plc 880 Irish – based budget airline.

9 Imperial Energy Plc 867 Company focused on oil exploration and production in the Commonwealth of

Independent States.

10 Lloyds TSB Group Plc 818 Large UK - based financial services group, owner of Cheltenham & Gloucester and

Scottish Widows.

11 Imperial Tobacco Plc 742 Tobacco company.

12 BHP Billiton Plc 703 World’s largest mining company.

13 Centrica Plc 700 UK - based energy provider.

14 Friends Provident Plc 638 International financial services provider.

15 Berkeley Group Holdings Plc 612 UK – based housebuilder and developer.

16 Tesco Plc. 528 One of the world’s leading retailers.

17 KSK Power Ventur plc 502 Engaged in emerging opportunities in the power development market.

18 Legal and General Plc 490 UK – based financial services company.

19 Resolution Asset Management Plc 440 Cash shell looking for acquisition opportunities in the UK life assurance sector.

20 Dolphin Capital Investors Ltd 403 Real Estate Holding & Development.

21 Indus Gas Plc 371 Oil and gas exploration and development company based in India.

22 Hardy Oil & Gas Plc 334 AIM-listed oil and gas exploration company.

23 Trading Emissions Plc 312 UK listed fund investing in a range of tradable environmental permits.

24 Healthcare Locums Plc 262 Specialist healthcare recruitment company.

25 Balfour Beatty Plc 244 Serves the international markets for rail, road and utility systems, buildings and

complex structures.

26 Ingenious Media Plc 203 Advisory and investment firm is now Europe's largest private investor in the

media sector.

27 Cadogan Petroleum Plc 164 An independent oil and gas exploration, development and production company.

28 Trikona Trinity Capital Plc 157 Investing in real estate and real estate related entities in India.

29 Leed Petroleum Plc 100 Oil and gas exploration and production company focused on the Gulf of Mexico.

30 American Leisure Group Ltd 92 Vacation resort company.

31 Persimmon Plc 73 UK’s leading housebuilder.

32 Zincox Resources Plc 69 British based zinc mining company.

33 Candover Investments Plc 56 UK based investment firm that specialises in corporate buyouts.

34 Arden Partners Plc 54 Institutional stockbroker specialising in small, midcap and AIM companies.

The Portfolio as at 31 December 2008



Company Market Value Activity

£000

35 Aurora Russia Ltd 46 Investment vehicle established to make investments in small and mid-sized

Russian companies.

36 Resaca Exploitation Plc 43 US – based independent oil and gas exploitation company.

37 Innovation Group Plc 23 Leading provider of business support services and systems to the UK

insurance industry.

38 Newfound NV Plc 21 Developer and operator of up-market holiday resorts.

39 Eatonfield Group Plc 12 Commercial and residential property developer with a focus on Wales and the

North of England.

Total Valuation 19,989 These holdings represent 100% of the total valuation.

The Portfolio as at 31 December 2008 continued

Sector distribution

United KingdomTotal Total2008 2007

Sector classification % %

ResourcesOil and gas 17.1 17.2Oil equipment and services - 4.0

17.1 21.2

Basic industrialsConstruction and building materials 4.2 13.6Mining 3.5 9.4Chemicals - 1.2 Electronics and electrical equipment - 4.7

7.7 28.9

Non-cyclical consumer goodsTobacco 8.5 2.3 Pharmaceuticals and biotechnology 14.8 6.8

23.3 9.1

Cyclical servicesSupport services 1.2 3.7 Leisure, entertainment and hotels 4.5 7.1 Food and drug retailers 2.4 -

8.1 10.8

Non-cyclical servicesTelecommunication services 7.2 10.2

7.2 10.2

UtilitiesUtilities other 5.5 10.0

5.5 10.0

Information and technologySoftware and computer services 0.1 -

0.1 -

FinancialsBanks 8.5 8.6Speciality and other finance 4.7 5.5Real estate 2.6 4.8Investment companies 0.3 1.4Life assurance 5.1 -

21.2 20.3

Net current assets/(liabilities) 9.8 5.3

Total assets less current liabilities 100 115.8

Borrowings - 15.8

Net assets 100.0 100.0

Note: The distribution of investments is based on the valuations at 31 December 2008 and at 31 December 2007. All of the above areUnited Kingdom Investments.

By sector as a percentage

Resources

5%0% 10% 15% 20% 25% 30% 35%

08

Basic industrials

08

Information and technology

08

Non-cyclical consumer goods

08

Cyclical services

08

Non-cyclical services

08

Utilities

08

Sector distribution

1 Resources 17.1%

2 Basic industrials 7.7%

3 Non-cyclical consumer goods 23.3%

4 Cyclical services 8.1%

5 Non-cyclical services 7.2%

6 Utilities 5.5%

7 Information and technology 0.1%

8 Financials 21.2%

1

2

34

5

67

07

07

07

07

07

07

07

Financials

08

Net current assets

08

07

07


8


Directors’ ReportThe Directors have pleasure in submitting their annual report and financial statements for the year ended 31 December 2008with comparatives for the year ended 31 December 2007.

Principal activitiesThe principal activity of the Company is that of an investment trust company.

RevenueThe income statement set out on page 16 shows a deficit on ordinary activities for the financial year after taxation amountingto £10,182,000 (2007: return £1,796,000). The Directors recommend a final dividend of 2.73p which, together with theinterim dividend of 0.90p makes a total of 3.63p for the year (2007: 3.40p).

Subject to the approval by members, the final dividend will be paid on 8 May 2009, to ordinary shareholders on the register on27 March 2009 and shares in lieu of dividend will be offered.

AssetsAt the year end the net assets attributable to the ordinary shares were £22,171,000 (2007: £32,781,000). Based on this figurethe net asset value of an ordinary share was 106.97p (2007: 158.27p).

Share capitalDuring the year nil shares were repurchased by the company for cancellation (2007: nil). During the year 202,916 issuedordinary shares of 10p each were purchased and held in treasury. The authority allowing the Company to purchase its ownshares expires at the end of the 2009 AGM and allows the purchase of a maximum of 3,103,742 shares, representing 15% ofthe number of shares in issue on 31 December 2008.

During the year 216,587 ordinary shares of 10p each were issued from the treasury reserve arising from elections by ordinaryshareholders to receive shares in lieu of cash dividends (2007: 191,587 new shares issued in lieu of cash dividends therebyresulting in a total of £250,000 being capitalised).

Substantial shareholdingsAt 27 March 2009 the holders of ordinary shares in excess of 3% were as follows:

27 March 25 March2009 2008

State Street Nominees Limited (held on behalf of Clients of Scottish Widows Investment Partnership Limited) 29.28% 29.50%JM & Mrs AE Le Pelley 6.43% 6.31%Mr G Green 6.11% 6.10%

So far as the Directors are aware there is no other interest of 3% or more in the ordinary shares of the Company.

Crest registrationOn 3 January 2003, the Company made an application for Crest registration. This was granted hence shareholders have theoption to hold stock in either certificated or uncertificated form.

DirectorsThe current Directors who served on the Board during the year, together with their beneficial interests and those of theirfamilies at 31 December 2008, were as follows:

Ordinary Shares2008 2007

JM Le Pelley (Chairman) 1,339,428 1,305,438 DR Maltwood 3,309 3,226 G Ross Russell 313,113 305,860 JG West 10,000 10,000 D Warr (Audit Committee Chairman) - -

JM Le Pelley is also a Trustee of a Trust holding 546,365 (2007: 532,594) shares, of which he does not have a beneficial interest.

There have been no changes in the Directors’ interests in the shares of the Company between 31 December 2008 and 27 March 2009.

The Company has no service contracts with the Directors.

JM Le Pelley and JG West, retire from the board at the Annual General Meeting in accordance with Article 97 of the Articles ofAssociation of the Company and are eligible for re-election.


Directors’ Report continuedCorporate Governance

The UK Listing Authority requires all listed companies to disclose how they have applied the principles and complied with theprovisions of the Combined Code on Corporate Governance ("the Code") published in June 2006, which applies to all companieswith accounting periods commencing on or before 1 November 2006. The Association of Investment Companies (formerlyAssociation of Investment Trust Companies), of which the Company is a member, also published its Code of CorporateGovernance for Investment Companies ("the AIC Code") in May 2007. The Combined Code on Corporate Governance is onlyapplicable to companies incorporated in the United Kingdom and whilst this company was not incorporated in the UnitedKingdom the Board has sought to reflect the Code and AIC Code when reviewing its corporate governance arrangements. TheGuernsey Financial Services Commission (GFSC) issued guidelines for corporate governance on 10 December 2004 which theCompany complies with in full and whose underlying principles are the same as those of the Code.

The BoardThe Company is led and controlled by a Board comprising non-executive Directors, all of whom have wide experience and areconsidered to be independent. The Board believes that it is in the shareholders' best interests for the Chairman to be the point ofcontact for all matters relating to the governance of the Company.

Mr D Warr has been appointed as the senior independent non-executive Director for the purpose of the Codes. The appointmentof Directors is considered by the Board who are the Nominations Committee. The Articles of Association stipulate that one third, orthe number nearest to but not exceeding one third, of the Directors shall retire and offer themselves for re-appointment at eachannual general meeting, and the Board has chosen to adopt best practice in relation to retirement by rotation of two Directorsover the Articles of Association and as stated in the Director's Report, two Directors will stand for re-appointment so that theshareholders will have the opportunity to consider each Director's continuing involvement with the Company every third year.During the year, the Board reviewed its performance and composition, and was content.

In addition, following the evaluation of the performance of the Board, its committees and individual Directors, it is considered thatthe performance of both Directors who are to retire by rotation and offer themselves for re-appointment continues to be effectiveand that they have demonstrated commitment to their roles.

The Board meets regularly, normally quarterly, with additional meetings should it be considered appropriate to discuss specificissues.

The Directors have no service contracts. Further, they are not entitled to any minimum period of notice or to compensation in theevent of their removal as a Director.

The table below lists the number of Board and Audit Committee meetings attended by each Director.

Director Board Meetings Attended Audit Committee Meetings Attended

JM Le Pelley (Chairman) 4 1DR Maltwood 5 1G Ross Russell 5 1JG West 5 1D Warr (Audit Committee Chairman) 5 1

The Board has contractually delegated to Scottish Widows Investment Partnership Limited (SWIP) the management of theCompany's investments. The management agreement between the Company and its investment manager, sets out the mattersover which the manager has authority and the limits above which Board approval must be sought. Other matters reserved for theapproval of the Board include the report and accounts, communications with shareholders and decisions on strategy.

The safe custody of the Company's investments is managed by HSBC Plc and Corporate Services (Guernsey) Limited are contractedto provide the Company's administration, secretarial and accounting functions and Capita IRG (CI) Limited, its registrationfunction. The Board reviews regularly the performance of the service provided by these companies.

In 2007 and 2008 the Company did not employ any personnel.

The Board has established itself as an Audit Committee which meets when necessary, and at least once a year, with the auditors ofthe Company with a view to providing further assurance of the quality and reliability of the financial information used by the Boardin these financial statements.

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:

2008 2007Fees Fees

£ £

JM Le Pelley (Chairman) 20,000 18,500 DR Maltwood 15,000 13,500 G Ross Russell 15,000 13,500 JG West 15,000 13,500 D Warr (Audit Committee Chairman) 16,000 14,000

––––––––––– –––––––––––81,000 73,000

––––––––––– –––––––––––

The figures above represent emoluments earned as Directors during the relevant financial year which are paid quarterly inarrears. The Directors receive no other remuneration or benefits from the Company other than the fees stated above.


Directors’ Report continuedRelations with shareholdersIn conjunction with the Board, the investment manager keeps under review the register of members of the Company. Potentialinvestors are also contacted by the investment manager.

All shareholders are encouraged to participate in the Company's annual general meeting. All Directors normally attend theannual general meeting, at which shareholders have the opportunity to ask questions and discuss matters with the Directorsand the investment manager.

It is recognised that the Code requires notice of annual general meetings to be dispatched at least 20 working days before themeeting. The Company intends to comply with the Code provision in 2009.

Accountability and audita) Directors’ responsibilities in relation to the financial statements

The Directors are required by the Companies (Guernsey) law, 2008 to prepare financial statements for each financial yearwhich give a true and fair view of the state of affairs of the Company as at the end of the year and of the net return for theyear. The Directors consider that in preparing the financial statements on pages 16 to 29, the Company has usedappropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates,and that all accounting standards which they consider applicable have been followed.

The Directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonableaccuracy at any time the financial position of the Company and which enable them to ensure that the financial statementscomply with the Companies (Guernsey) Law, 2008. They have general responsibility for taking such steps as are reasonablyopen to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

b) Statement of going concern

The Directors have formed a judgement at the time of approving the financial statements that there is a reasonableexpectation of the Company having adequate resources to continue in operational existence for the foreseeable future. Forthis reason, they continue to adopt a going concern basis in preparing the accounts.

c) Internal control

The Directors acknowledge that they are responsible for establishing and maintaining the Company's system of internalcontrol and reviewing its effectiveness. Internal control systems are designed to manage rather than eliminate the failure toachieve business objectives and can only provide reasonable and not absolute assurance against material misstatement orloss. They have therefore established an ongoing process designed to meet the particular needs of the Company inmanaging the risks to which it is exposed, consistent with the guidance provided by the Turnbull Committee. Such reviewprocedures have been in place throughout the full financial year and up to the date of the approval of the financialstatements.

This process involves a review by the Board of Scottish Widows Investment Partnership Limited (SWIP) internal controlreport and Corporate Services (Guernsey) Limited internal control report, FRAG 21, and a report covering specific internalcontrols operated by SWIP to ensure that the Company's requirements are met.

The Board has delegated certain aspects of the management and administration of the Company to SWIP. Further, theCompany has delegated Corporate Services (Guernsey) Limited with the secretarial and accounting functions.

SWIP maintains its own systems of internal controls, on which it has reported to the Board. The Company, in common withother investment trusts, does not have an internal audit function. The Board has considered the need for an internal auditfunction, but because of the internal control systems in place at the investment manager, has decided to place reliance onthe investment manager's systems and internal audit procedures.

The systems are designed to ensure effectiveness and efficient operations, internal control and compliance with laws andregulations. In establishing the systems of internal control regard is paid to the materiality of relevant risks; the likelihood ofcosts being incurred and costs of control. It follows therefore that the systems of internal control can only providereasonable but not absolute assurance against the risk of material misstatement or loss.

There are well established budgeting and forecasting procedures in place and reports are presented to the Board detailingvariance against budget and prior year and other performance data. The effectiveness of the internal control systems isreviewed annually by the Board and the Audit Committee. The Audit Committee has a discussion annually with the auditorto ensure that there are no issues of concern in relation to the audit opinion on the accounts and, if necessary,representatives of the investment manager would be excluded from that discussion.

Where non-audit services are provided by auditors, these engagements are pre-approved by the audit committee to ensurethat the auditors' independence and objectivity is not breached. There were no non-audit services in the year ended 31December 2008 (2007: nil).

Institutional investors

The investment manager employs highly experienced personnel and maintains a continuous training programme for fundmanagers. The fund managers are constantly monitoring the portfolio and over the past twelve months they have visitedvirtually 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 anyinvestment shall be exercised. However, the Directors may, at any time, instruct SWIP as to the exercise of the voting and otherrights 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 managerwhen making investment decisions.

Directors’ Report continuedStatements of complianceThe Directors believe that the Company has complied with the provisions of the Combined Code on Corporate Governanceand the AIC Code where appropriate, and that it has complied throughout the year with the provisions where the requirementsare of a continuing nature, except that a Remuneration Committee and Management Engagement Committee have not beenestablished. During 2009, the Board will give further consideration to setting up these Committees.

Investment policyThe Company is permitted to invest in any security listed on any recognised UK exchange in order to achieve its investmentobjective 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 thebulk of the Company's portfolio to be within the investment universe, the Company reserves the right to invest in companiestraded 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 Directors believe, because of movement in their market capitalisations or, in the caseof new listings, because of their likely market capitalisations, may be considered appropriate for investment. In addition, theCompany reserves the right to retain an investment in any company that was within the appropriate range of marketcapitalisation when the investment was made but which has subsequently moved out of the investment universe as a result ofchanges in its market capitalisation relative to the rest of the investment universe. The Investment Manager's investmentapproach favours a value bias, which is to identify undervalued companies in all sector of the Company's investment universe.Considerable emphasis is placed on identifying companies which are well managed, have high levels of cash generation andenjoy real pricing power. The investment manager considers those attributes to be the key components of a strong marketposition.

No holding in another Company may exceed 15% of the value of Investment Trust's portfolio. This test is applied when theinvestment 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£2,000,000 which is subject to an agreement with Lloyds TSB Scotland plc and is detailed further in Note 12 to the financialstatements. The interest rate on the loan is renegotiated annually and is set at a rate of LIBOR plus 0.60%. At the end of theyear the company had £nil drawn down against the facility (2007: £5,200,000).

A breakdown of the risks the Company is subject to and how they are mitigated are detailed further below and in Note 18 tothe Financial Statements.

ImplementationDuring 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 aredetailed further in the Chairman's Statement and Investment Manager's Review on pages 3 to 5.

The Company's portfolio consisted of 39 Investments as at 31 December 2008 and is detailed further on pages 6 and 7. Thesector distribution of the portfolio is provided on page 8. As at 31 December 2008, the portfolio only held investments issuedin the United Kingdom. The top 10 holdings comprise 52.30% of total net assets (2007: 53.92%).

The Company’s gearing stood at nil% as at 31 December 2008 (2007: 15.86%).

Financial risk profileThe Company’s financial instruments comprise investments, cash and various items such as debtors, creditors etc that arisedirectly from the Company’s operations. The main purpose of these instruments is the investment of shareholders’ funds.

It is, and has been throughout the period under review, the Company’s policy that no trading in other financial instrumentsshall be undertaken.

Market price riskThe 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 WidowsInvestment Partnership Limited under an agreement dated 25 April 2002. The Investment Manager operates under agreedparameters and the Board monitors their performance on a regular basis.

Liquidity riskThe Company's assets comprise securities that can be readily realised to meet obligations arising on the redemption of shares.As a result the Company is able to quickly liquidate its investments in these instruments at an amount close to its fair value inorder to meet its liquidity requirements.

The Company has entered into a revolving 5-year loan facility explained in Note 12.


Directors’ Report continuedInterest rate riskThe Company’s interest rate sensitive assets and liabilities mainly comprise of cash at bank and a bank loan. The cash at bankand bank loan are subject to floating rates and the loan is considered to be part of the investment strategy of the Company. Noother hedging is undertaken in respect of this interest rate risk. The bank loan is due to expire on 23 September 2012.

Foreign currency riskForeign currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Company’s foreign currency risk in 2008 arose from the investment portfolio and was minimal as it was principally Sterlingdenominated. No hedging was undertaken in respect of this foreign currency exposure. The Company had no exposure to majorcurrencies as at 31 December 2008 (See Note 18).

Investment ManagerScottish 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 ofthe Company. The Directors have the view that there are significant advantages to both the Company and the shareholders asa whole by having SWIP manage the assets of the Company. It is SWIP’s size, its expertise which gives the Board the confidencethat the objectives of the Company are being met. The Directors are of the opinion that the continuing appointment of SWIP asthe Company’s Investment Manager on the terms agreed under the agreement dated 25 April 2002 is in the interest ofshareholders as a whole. Details of the agreement are explained in Note 4.

New Fund RulesThe Company was granted consent to raise funds under The Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959, asamended ("Old Rules").

With effect from 29 October 2008 all but limited sections of The Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959to 2003 have been repealed and new rules have been introduced by the Guernsey Financial Services Commission with effectfrom 15 December 2008 under The Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended (the "New Rules").The Company operates in accordance with the provisions of both the Old Rules and New Rules. There is no requirement forexisting Funds to comply with The New Rules immediately, but principal documents must be amended to comply by 15December 2010 or earlier if documents are revised before that date.

With effect from 29 October 2008, the Company became regulated under the New Rules and is deemed to be an authorisedclosed ended investment scheme under the New Law rules with an option to elect to be treated as a registered collectiveinvestment scheme by writing to the Guernsey Financial Services Commission ("GFSC") on or before 15 April 2009.

The Company will not elect to be treated as a registered collective investment scheme.

AuditorsOn 1 December 2008, Deloitte & Touche LLP changed its name to Deloitte LLP. Accordingly, Deloitte LLP have expressed theirwillingness to continue in office as auditors and a resolution to re-appoint them will be proposed at the forthcoming AnnualGeneral Meeting.

At the date of approval of the financial statements, the Directors confirm that:

– so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware; and

– they have taken all steps they ought to have taken as Directors to make themselves aware of any relevant audit informationand 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 PelleyD WarrDirectors

3 April 2009


Directors’ ResponsibilitiesThe Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable lawand regulations.

The Companies (Guernsey) Law, 2008 requires the Directors to prepare financial statements for each financial year. Under thatlaw the Directors have elected to prepare the financial statements in accordance with International Financial ReportingStandards (IFRSs).

International Accounting Standard 1 requires that financial statements present fairly for each financial year the company'sfinancial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions,other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income andexpenses set out in the International Accounting Standards Board's 'Framework for the preparation and presentation offinancial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs.However, the Directors are also required to:

– properly select and apply accounting policies;

– present information, including accounting policies, in a manner that provides relevant, reliable, comparable andunderstandable information;

– provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users tounderstand the impact of particular transactions, other events and conditions on the entity's financial position and financialperformance; and

– make an assessment of the company's ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time thefinancial 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 reasonablesteps for the prevention and detection of fraud and other irregularities.

The Financial Statements have been prepared on the going concern basis. The Directors believe that this basis is appropriate asthe Company has significant net assets, is not dependant on external finance and is expected to operate for the foreseeablefuture. The Directors have reviewed the cash flow and projected income and expenses over the next twelve months anddeemed that the company has adequate financial resources to meet its obligations.

Directors’ Responsibility StatementWe confirm to the best of our knowledge:

1. the financial statements prepared in accordance with International Reporting Standards give a true and fair view of theassets, liabilities, financial position and profit or loss of the Company;

and

2. the Investment Managers Report includes a fair review of the development and performance of the business and theposition of the Company, together with a description of the principal risks and uncertainties faced by the Company.

By order to the Board.


3 April 2009



Independent Auditors’ ReportTo the members of UK Select Trust LimitedWe have audited the financial statements of UK Select Trust Limited for the year ended 31 December 2008 which comprise theIncome Statement, the Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement and the related notes 1to 19. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with Section 262 of The Companies (Guernsey)Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we arerequired to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our auditwork, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorsAs described in the statement of Directors’ responsibilities, the Company’s Directors are responsible for the preparationof the financial statements in accordance with applicable Guernsey law and International Financial Reporting Standards (IFRSs).Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements andInternational Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared inaccordance with The Companies (Guernsey) Law, 2008. We also report if, in our opinion, the Company has not kept properaccounting records or, if we have not received all the information and explanations we require for our audit.

We read the Directors’ report and the other information contained in the Annual Report for the above year as described in thecontents section and consider the implications for our report if we become aware of any apparent misstatements or materialinconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of OpinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the AuditingPractices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in thepreparation of the financial statements, and of whether the accounting policies are appropriate to the Company’scircumstances, consistently applied and adequately disclosed. We are not required to review any Corporate Governancedisclosures required by the Listing Rules of the Financial Services Authority as the Company is an overseas company.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary inorder to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from materialmisstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view, in accordance with IFRSs of the state of the Company’s affairs as at 31 December 2008 and of its loss for the year then ended and have been properly prepared in accordance withThe Companies (Guernsey) Law, 2008.

Deloitte LLPChartered Accountants

St Peter PortGuernsey

3 April 2009


Income Statement

for the year ended 31 December 2008

2008 2007Revenue Capital Total Revenue Capital Total

Notes £’000 £’000 £’000 £’000 £’000 £’000

(Losses/gains on investmentsNet realised (losses)/gains on financial assets and liabilities held at fair value through profit or loss 8 - (5,526) (5,526) - 3,515 3,515

Net changes in unrealised depreciation on financial assetsand liabilities held at fair value through profit or loss 8 - (5,409) (5,409) - (2,088) (2,088)

Net foreign exchange gain - - - - 1 1 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

- (10,935) (10,935) - 1,428 1,428 Income Other income 3 1,449 - 1,449 1,241 - 1,241

Expenses Investment management fees 4 38 115 153 47 143 190 Performance fee 4 - - - 20 62 82 Administration fees 84 - 84 80 - 80 Registrar’s fees 19 - 19 12 - 12 Auditors’ fees 21 - 21 11 - 11 Directors’ fees and expenses 16 82 - 82 73 - 73 Other expenses 105 - 105 91 - 91

––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Total operating expenses before finance costs 349 115 464 334 205 539

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

Operating profit/(loss) before finance costs and tax 1,100 (11,050) (9,950) 907 1,223 2,130

Finance costsInterest payable 12 58 174 232 83 251 334

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

Profit/(loss) before tax 1,042 (11,224) (10,182) 824 972 1,796Taxation 5 - - - - - -

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

Net profit/(loss) 1,042 (11,224) (10,182) 824 972 1,176––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

Basic & diluted return/(deficit) per ordinary share 7 5.04p (54.25)p (49.21)p 3.96p 4.67p 8.63p

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

The total column of this statement is the Income Statement of the Company, with the revenue and capital columns representingsupplementary information.

All revenue and capital items in the above statement derive from continuing operations. All income is attributable to theordinary shareholders of the Company.

The notes on pages 20 to 29 are an integral part of these financial statements.


Balance Sheet

2008 2007Notes £’000 £’000

AssetsNon-current assetsFinancial assets at fair value through profit or loss 8 19,989 36,289

––––––––––– –––––––––––Total non-current assets 19,989 36,289

––––––––––– –––––––––––Current assetsReceivable from brokers 1,153 1,466 Receivables 9 76 233 Cash at bank 1,298 336

––––––––––– –––––––––––Total current assets 2,527 2,035

––––––––––– –––––––––––Total assets 22,171 38,324

––––––––––– –––––––––––LiabilitiesCurrent liabilitiesPayable to brokers 224 -Payables 11 121 343

––––––––––– –––––––––––Total current liability 345 343

––––––––––– –––––––––––Non-current liabilitiesBorrowings 12 - 5,200

––––––––––– –––––––––––Total non-current liabilities - 5,200

––––––––––– –––––––––––Total liabilities 345 5,543

––––––––––– –––––––––––

Net assets attributable to holders of equity shares 22,171 32,781––––––––––– –––––––––––

Equity shareholders’ fundsShare capital 14 2,083 2,083 Own shares held in treasury 14 (168) (176)Reserves 20,256 30,874

––––––––––– –––––––––––22,171 32,781

––––––––––– –––––––––––

Number of ordinary shares in issue (net of treasury shares) 14 20,725,742 20,712,071

Net asset value per share 15 106.97p 158.27p––––––––––– –––––––––––

These financial statements were approved by the Board of Directors on 3 April 2009 and are signed on behalf of the Board by:


3 April 2009


at 31 December 2008


Reconciliation of Movements in Equity Shareholders’ Funds

For the year ended 31 December 2008

Equity Own shares Share Capital Capital Capital Revenue Totalshare held in premium redemption reserve - reserve - reserve

capital treasury reserve realised unrealised£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 1 January 2008 2,083 (176) 5,422 4,308 14,139 3,281 3,724 32,781

Shares repurchased during the period - (280) - - - (7) - (287)

Premium arising on share elections:- 2007 final dividend - - - - - - (316) (316) - 2008 interim dividend - - - - - - (109) (109) Dividends and scrips - 288 - - - 288 (288) 288

Net profit - - - - (5,819) (5,409) 1,042 (10,186) ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

At 31 December 2008 2,083 (168) 5,422 4,308 8,320 (1,847) 4,053 22,171––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

There are no other recognised Income and Expenses for the year ended 31 December 2008.

For the year ended 31 December 2007

Equity Own shares Share Capital Capital Capital Revenue Totalshare held in premium redemption reserve - reserve - reserve

capital treasury reserve realised unrealised£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 1 January 2007 2,083 - 5,422 4,308 11,079 5,369 3,578 31,839

Shares repurchased during the year - (426) - - - - - (426)

Premium arising on share elections:- 2006 final dividend - 189 - - - - - 189 - 2007 interim dividend - 61 - - - - (1) 60 Dividends and scrips - - - - - - (677) (677)

Net profit - - - - 3,060 (2,088) 824 1,796 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

At 31 December 2007 2,083 (176) 5,422 4,308 14,139 3,281 3,724 32,781––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

There are no other recognised Income and Expenses for the year ended 31 December 2007.



Cash Flow Statement

2008 2007£’000 £’000

Cash flows from operating activitiesPayment on purchase of investments (125,206) (120,860)Proceeds from sale of investments 131,182 121,390 Cash received from investments 1,524 1,081 Other income 76 43 Investment management fee paid (94) (190)Other cash payments (279) (395)

––––––––––– –––––––––––Net cash inflow from operating activities 7,203 1,069

––––––––––– –––––––––––

Cash flows from financing activitiesInterest paid (336) (301)Share repurchase (280) (426)Equity dividends paid (425) (428)Repayment of long term loan (5,200) -

––––––––––– –––––––––––Net cash outflow from financing activities (6,241) (1,155)

––––––––––– –––––––––––

Net increase/(decrease) in cash and cash equivalents 962 (86)

Cash and cash equivalents at the beginning of the period 336 422––––––––––– –––––––––––

Cash and cash equivalents at the end of the period 1,298 336––––––––––– –––––––––––


for the year ended 31 December 2008


Notes to the Financial Statements1 General Information

UK Select Trust Limited is a UK Investment Trust Company incorporated under The Companies (Guernsey) Law, 2008, with itsregistered office at Dorey Court, Admiral Park, St Peter Port, Guernsey. UK Select Trust Limited's shares are listed on the LondonStock exchange.

The objective of the Company is to invest over 80% of its gross assets by value in the UK and the investment policy aims to providea total return to shareholders in excess of the net total return on the FTSE All Share Index and a progressive dividend policy.

2 Accounting Policies

a. Basis of presentation

The financial statements have been prepared in accordance with the applicable International Reporting Standards andinterpretations adopted by the International Accounting Standards Board (IASB) and in accordance with the guidelinesincluded in the AIC Statement of Recommended Practice for Financial Statements of Investment Trust Companies issued inJanuary 2003 and revised in January 2009 (“AIC SORP”) to the extent that it is not in conflict with IFRS. The financialinformation is prepared under the historical cost basis except for the revaluation of financial instruments.

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC,supplementary information which analyses the Income Statement between items of a revenue and capital nature has beenpresented alongside the Income Statement.

The preparation of financial statements in conformity with International Financial Reporting Standards requires the Company tomake estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statementsand the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

b. Going concern

The Financial Statements have been prepared on the going concern basis. The Directors believe that this basis is appropriate asthe Company has significant net assets, is not dependant on external finance and is expected to operate for the foreseeablefuture. The Directors have reviewed the cash flow and projected income and expenses over the next twelve months anddeemed that the company has adequate financial resources to meet its obligations.

c. Standards and interpretations

In the current financial year, the Company has adopted IFRIC 11 & IFRS 2 (Group and Treasury Share Transactions) which cameinto force for periods commencing on or after 1 March 2007. The Directors believe that the adoption of this standard andinterpretation will not have a material impact on the financial statements of the Company.

At the date of authorisation of these statements, the following standards and interpretations were in issue but not yet effective:

IFRS 8 ‘Operating Segments’ (Effective for annual periods beginning on or after 1 January 2009); and

Amendments to IAS 1: ‘Presentation of financial statements - A revised presentation’ (Effective for annual periodsbeginning on or after 1 January 2009).

The Directors believe that other pronouncements, which are in issue but not yet operative or adopted by the Company, will nothave a material impact on the financial statements of the Company.

d. Other receivables

Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

e. Investments

Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose termsrequire delivery within the timeframe established by the market concerned, and are initially measured at fair value.

Investments are classified as fair value through profit or loss. As the Company’s business is investing in financial assets with aview to profiting from their total return in the form of interest, dividends or increases in fair value and are managed on aportfolio basis to meet the objectives of the Company, listed equities and fixed income securities are designated as fair valuethrough profit or loss on initial recognition. The Company manages and evaluates these investments on a fair value basis inaccordance with an investment strategy.

Financial assets designated as fair value through profit or loss are measured at fair value, which is either bid price or the lasttraded price, depending on the convention of the exchange on which the investment is quoted.


Notes to the Financial Statements continuede. Investments (continued)

Where securities are designated upon initial recognition as fair value through profit or loss, gains and losses arising fromchanges in fair value are included in the income statement for the period as a capital item and transaction costs on acquisitionor disposal of the security are expensed as a capital item.

Foreign exchange gains and losses for fair value through profit or loss investments are included within the changes in its fair value.

f. Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements enteredinto. A financial liability is any liability that contractually obligates the Company to deliver cash or another financial asset orexchange financial assets or financial liabilities that are potentially unfavourable to the Company, or a contract that will ormaybe settled in the Company’s own equity instruments. An equity instrument is any contract that evidences a residual interestin the assets of the Company after deducting all of its liabilities. As the Ordinary shares have no fixed rights to redemption orincome they are classified as equity.

g. Financial instruments

Financial assets and financial liabilities are recognised on the Company's balance sheet when the company becomes party tothe contractual provisions of the instrument. The Company shall offset financial assets and financial liabilities if the Companyhas a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

h. Bank borrowings

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs, finance charges,including premiums payable on settlement or redemption and direct issue costs. They are accounted for on an accruals basis inthe income statement using the effective interest method and are added to the carrying amount of the instrument to theextent that they are not settled in the period in which they arise.

i. Other payables

Other payables are not interest-bearing and are stated at their nominal value.

j. Income

Dividends are brought into the Income Statement as revenue items on the ex-dividend date or, where no ex-dividend date isquoted, when the Company’s right to receive payment is established. All dividends are shown gross of withholding tax andreceived net of imputed tax credits as the Company is exempt from Guernsey Income Tax.

Fixed returns on non-equity investments and on debt securities are recognised as revenue items in the income statement on atime apportionment basis so as to reflect the effective yield on the investment. Other returns on non-equity shares arerecognised when the right to the return is established. Deposit interest is included on an accruals basis.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of thecash dividend is recognised as revenue in the Income Statement.

k. Foreign exchange

The presentational and functional currency of the Company is sterling, which is the currency of the primary economicenvironment in which the company operates. Foreign currency monetary assets and liabilities are translated into sterling at therate of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rateruling at the date of the transaction. Realised and unrealised foreign exchange gains and losses are recognised in the incomestatement as capital realised, and capital reserve - unrealised, respectively.

l. Expenses

All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as revenue except asfollows:

– expenses which are incidental to the acquisition of an investment are deducted from gains on investments through theIncome Statement as capital;

– expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment;and

– expenses are charged to the Income Statement as capital realised where a connection with the maintenance orenhancement of the value of the investments can be demonstrated. In this respect the investment manager’s fee andperformance fee have been allocated 75% to the capital reserve - realised and 25% to the revenue reserve in line with theBoard’s expected long-term split of returns in the form of capital gains and income respectively from the investmentportfolio of the Company.

The Company has no employees


Notes to the Financial Statements continuedm. Finance costs

Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of theCompany’s investments, 75% to capital reserve - realised and 25% to revenue account, in line with the Board’s expected long-term split of returns, as outlined in the expenses note above.

n. Segment Reporting

A business segment is a distinguishable component of the Fund that is engaged in providing products and services and that issubject to risks and returns that are different from those of other business segments. A geographical segment is adistinguishable component of the Fund that is engaged in providing products and services and that is subject to risks andreturns that are different from those of other economic environments. The Board of Directors is of the opinion that the Fund isorganised in one main business segment, namely the management of the Fund’s investments in order to achieve the Fund’sinvestment objectives as described in Note 1 to the financial statements. The Board of Directors is further of the opinion thatthe Fund’s secondary segment reporting format is also organised into one main geographical unit as the location of allinvestments is materially all within the United Kingdom.

o. Capital reserves

Capital reserve – realised

The following are accounted for in the Income Statement and then in this reserve:

– gains and losses on the realisation of investments;

– charged to this reserve in accordance with the above policies;

– realised foreign exchange gains and losses; and

– consideration paid on repurchase of own shares.

Capital reserve – unrealised

The following are accounted for in the Income Statement and then in this reserve:

– difference between cost and valuation of investments held at the year end; and

– unrealised foreign exchange gains and losses.

p. Fair values of financial instruments

Many of the Company's financial instruments are measured at fair value on the balance sheet and it is usually possible todetermine fair values within a reasonable range of estimates.

For all the Company's investments there is an active market and quoted market prices available.

q. Impairment

The Company is required to evaluate the securities in its portfolio to determine if any of the securities are impaired.

As a matter of accounting policy, UK Select Trust Limited has determined that it will have intent and ability to hold a securitywith unrealised loss until the cost of purchases has been recovered.

Fair value and impairment estimates are made at a specific point in time based on market conditions and information aboutthe financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significantjudgement.

The Company has invested in listed UK equities and therefore at the balance sheet date there are no sources of significantjudgement or uncertainty.


Notes to the Financial Statements continued3 Other income

2008 2007£’000 £’000

Dividend income from investments designated at fair value through profit or loss:Listed UK 1,373 1,160 Listed overseas – 36

––––––––––– –––––––––––1,373 1,196

––––––––––– –––––––––––

Dividend income from financial assets not at fair value through profit or loss:Deposit interest arising on cash and cash equivalents 54 45Underwriting commission 22 -

––––––––––– –––––––––––76 45

––––––––––– –––––––––––Total income 1,449 1,241

––––––––––– –––––––––––

Total income comprises:Dividends 1,373 1,196Interest 54 45Other income 22 -

––––––––––– –––––––––––Total income 1,449 1,241

––––––––––– –––––––––––

4 Investment management and performance fee2008 2007

Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

Investment management fee 38 115 153 47 143 190––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

Performance fee - - - 20 62 82––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

The investment manager was appointed under an agreement with the Company dated 25 April 2002. The agreement may beterminated by either side giving 6 months notice. The basic remuneration of the investment manager is 0.125% quarterly inarrears, based on the value of the portfolio at 31 March, 30 June, 30 September and 31 December. The investment manager isentitled to receive a performance fee payable in arrears linked to the excess total return of the Company’s net assets comparedto the total return of the FTSE All Share Index. The performance fee is capped at 0.25% in any year. On this basis the maximumpossible management fee in any year will be 0.75% if the average of two years outperformance equals or exceeds 2.5%. Aperformance fee of £nil (2007: £82,275) is due for the current year.

Where the investment manager is also manager of funds in which the Company has an investment, an arrangement is in placeto avoid double charging of fees and expense.

5 Taxation2008 2007£’000 £’000

Taxation - -––––––––––– –––––––––––

This represents withholding tax suffered on the dividends received during the year.

The Company is exempt from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989 to 1997and is charged an annual exemption fee of £600 (2007: £600).

6 Dividends2008 2007£’000 £’000

Equity dividendsOrdinary shares Interim of 0.90p on 12,111,111 shares for 2008 paid in 2008(2007 paid in 2007: 0.85p (gross) on 20,806,410 shares). 109 177

Final dividend for 2007: 2.55p (gross) on 12,392,157 shares paid in 2008(2006 paid in 2007: 2.40p (gross) on 20,825,333 shares paid in 2007. 316 500

––––––––––– –––––––––––425 677

––––––––––– –––––––––––


Notes to the Financial Statements continued7 Basic and diluted return per ordinary share

2008 2007Revenue Capital Total Revenue Capital Total

Return/(loss) 5.04p (54.25)p (49.21)p 3.96p 4.67p 8.63p––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––

Revenue return per ordinary share is based on the net revenue on ordinary activities of £1,042,000 (2007: return £824,000) andon 20,689,850 ordinary shares, being the weighted average number of ordinary shares in issue during the year (2007:20,803,667).

Capital loss per ordinary share is based on a net capital loss for the financial year of £11,224,000 (2007: return £972,000) and on 20,689,850 ordinary shares, being the weighted average number of ordinary shares in issue during the period (2007: 20,803,667).

8 Investments2008 2007

Fair Value % of net assets Fair Value % of net assets£’000 £’000 £’000 £’000

Financial assets at fair value through profit or loss

Designated at fair value through profit or loss

- Listed equity securities 19,989 90.16 36,289 110.65––––––––––– ––––––––––– ––––––––––– –––––––––––

19,989 90.16 36,289 110.65––––––––––– ––––––––––– ––––––––––– –––––––––––

2008 2007£’000 £’000

Opening book cost 33,008 31,125Opening unrealised appreciation 3,281 5,369

––––––––––– –––––––––––Opening valuation 36,289 36,494

Movements in the period/year:

Purchases at cost 125,431 121,906 Sales - proceeds (130,796) (123,538)

- realised (losses)/gains on sales (5,526) 3,515 Decrease in unrealised appreciation (5,409) (2,088)

––––––––––– –––––––––––Closing valuation 19,989 36,289

––––––––––– –––––––––––Comprising:Closing book cost 22,116 33,008Closing unrealised (depreciation)/appreciation (2,127) 3,281

––––––––––– –––––––––––Closing valuation 19,989 36,289

––––––––––– –––––––––––


Notes to the Financial Statements continued9 Receivables

2008 2007£’000 £’000

Accrued Income 71 223 Prepayments 5 10

––––––––––– –––––––––––76 233

––––––––––– –––––––––––The directors consider that the carrying amount of receivables approximates their fair value.

10 Cash at bank

Cash at bank comprises bank balances and cash held by the Company including short-term deposits with an original maturityof three months or less. The carrying amount of these assets approximates to their fair value.

11 Payables2008 2007£’000 £’000

Interest payable - 106 Other payables 121 237

––––––––––– –––––––––––121 343

––––––––––– –––––––––––The directors consider that the carrying amount of receivables approximates their fair value.

12 Borrowings

The Company has a revolving 5 year loan facility, secured on the assets of the Company, which is due to expire on 23 September 2012 with an aggregate principal amount of £2,000,000, for the purposes of future investment. During theyear ended 31 December 2008, the previous loan facility of £5,200,000, which was fully drawn down, was repaid in full.Interest is payable at a rate of six month sterling LIBOR plus 0.6% and the borrowing is held at amortised cost. During the year,interest of £231,502 (2007: £334,634) was paid. A fee of 0.30% per annum is payable on the undrawn amount of thisfacility1. Further, the Company is required to comply with the following financial covenants imposed by the bank:

– the Company is required to ensure that the borrowing does not at any time exceed 45% of the Adjusted Gross Asset Value;

– the Company is required to maintain the Net Worth at not less that £20,000,000; and

– the Company is required to ensure that the investment portfolio includes holdings in not less that 30 separate businesses.1 The loan is secured on the assets of the Company.

13 Business and geographical segments

As described in the summary of significant accounting policies in note 2 to the financial statements the Board of Directors is ofthe opinion that the Company is organised in one main business segment, namely the management of the Company'sinvestments in order to achieve the Company's investment objectives as described in note 1 to the financial statements, andconsiders this to be the primary reporting format for segment information and no further business segment information notalready 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 intoone main geographical unit as the location of all of its investments is materially all within the United Kingdom.

Income Net Assets

2008 2007 2008 2007£’000 £’000 £’000 £’000

United Kingdom 1,449 1,241 22,171 32,796––––––––––– ––––––––––– ––––––––––– –––––––––––

1,449 1,241 22,171 32,796––––––––––– ––––––––––– ––––––––––– –––––––––––

Geographical locations are determined by the Company based on the country of primary listing for listed instruments and thecountry of incorporation for unlisted instruments.


Notes to the Financial Statements continued14 Share capital

2008 2007£’000 £’000

Authorised:100,000,000 ordinary shares of 10p each 10,000 10,000 250,000 5% cumulative preferencerestrictive voting shares of £1 each 250 250

––––––––––– –––––––––––10,250 10,250

––––––––––– –––––––––––

The holders of the five per cent cumulative preference restrictive voting shares shall be entitled, out of profits for dividend, to afixed cumulative preferential dividend at the rate of five per cent per annum and in a winding-up or on a return of capital shallbe entitled to repayment of capital in priority to the ordinary shareholders. The ordinary shareholders carry the right to receiveany surplus income and in winding-up any surplus assets, after repayment of the preference capital and dividends as above.

2008 2007£’000 £’000

Issued, called up and fully paid:20,830,484 ordinary shares of 10p each(2007: 20,830,484) 2,083 2,083

––––––––––– –––––––––––

2008Own shares held Ordinary shares held

in treasury in issue

Shares £’000 Shares £’000

Balance at 1 January 2008 118,413 176 20,830,484 2,083Shares purchased for cancellation - - - -Shares issued in lieu of dividends - - - -Shares purchased and held in treasury 202,916 280 - -Shares issued in lieu of dividends from treasury (216,587) (288) - -

––––––––––– ––––––––––– ––––––––––– –––––––––––Balance at 31 December 2008 104,742 168 20,830,484 2,083

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

2007Own shares held Ordinary shares held

in treasury in issue

Shares £’000 Shares £’000

Balance at 1 January 2007 - - 20,830,484 2,083Shares purchased for cancellation - - - -Shares issued in lieu of dividends - - - -Shares purchased and held in treasury 310,000 426 - -Shares issued in lieu of dividends from treasury (191,587) (250) - -

––––––––––– ––––––––––– ––––––––––– –––––––––––Balance at 31 December 2007 118,413 176 20,830,484 2,083

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

During the period no shares were purchased for cancellation (2007: nil).

On 13 March 2008, 39,500 shares were purchased for Treasury at a total cost including expenses of £55,862.On 14 May 2008, 140,000 shares were purchased for Treasury at a total cost including expenses of £191,673.On 12 June 2008, 23,416 shares were purchased for Treasury at a total cost including expenses of £30,884.

On 2 May 2008, 152,117 shares were issued to shareholders who elected to receive them in lieu of a final cash dividend for2007. On 6 November 2008 64,470 shares were issued in issued to shareholders who elected to receive them in lieu of aninterim dividend for 2008. Ordinary shares of 10p each, fully paid were issued to shareholders from the Treasury reservesaccount 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 £22,171,000 (2007:£32,781,000) and on 20,725,742 (2007: 20,712,071) ordinary shares, being the number of ordinary shares in issue at the endof the year.


Notes to the Financial Statements continued16 Related party transactions

The members of the Board of Directors are listed on page 3 of the annual report. Fees earned by the Directors of the Companyduring the year were £81,000 (2007: £73,000) of which £20,250 (2007: £20,250) was outstanding at the year end.

The investment manager, Scottish Widows Investment Partnership Limited has a 29.28% (2007: 29.50%) shareholding in theCompany and earned investment management fees of £153,587 (2007: £190,408) during the year of which £27,958 (2007:£47,827) was outstanding at the year end and a performance fee of £nil (2007: £82,275). The basis of calculation of thesefees is detailed in note 4 of the annual financial statements.

The Company has appointed Corporate Services (Guernsey) Limited to provide administrative and accounting services.Administrative fees (including the accounting fee) for the year ended 31 December 2008 totalled £84,000 (2007: £80,172) ofwhich £38,333 (2007: £36,672) was outstanding at the year end.

17 Financial assets and liabilities interest rate disclosure and other financial risks

A description of the financial risk profile can be seen in the Directors' report on page 12.

Capital risk managementThe capital structure of the Company consists of the cash and cash equivalents and equity attributable to ordinaryshareholders, comprising issued share capital, own shares held in treasury, share premium, capital redemption reserve, capitalreserves and revenue reserve as disclosed in the Statement of changes in equity. The Company does not have any externallyimposed capital requirements. At 31 December 2008 the Company had capital of £22.171 million (2007: £32.781 million).

The investment objective of UK Select Trust Limited is to invest over 80% of its gross assets by value in the UK and theinvestment policy aims to provide a total return to shareholders in excess of the net total return on the FTSE All Share Index anda progressive dividend policy.

The Company aims to deliver its objective by investing available cash and using leverage whilst maintaining sufficient liquidityto meet on-going expenses and dividend payments.

The Company’s policy is to provide net income for distribution from the dividend income earned from a portfolio of UK equitysecurities, all of which are listed on the London Stock Exchange. Further, the Company has capitalised 75% of its investmentmanagement fee, performance fee and finance costs in respect of the loan facility in line with the Board’s expectation of long-term returns in the form of capital gains from the investment portfolio of the Company.

UK Select Trust Limited uses leverage to enhance the returns to shareholders and for this purpose had entered into a long-termloan facility amounting to £2 million for future investments. The interest payable on borrowing is six month sterling LIBOR plus0.6%, 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 InvestmentManager’s strategy. The Company invests in various sectors and businesses to mitigate the primary risk of the company, pricerisk. In addition, price-volatility levels are reviewed and monitored daily.

As at 31 December 2008, the Company’s portfolio consisted of 39 investments spread over 8 sectors. Further, the portfolioonly held investments issued in the United Kingdom.

The Board has also adopted an investment restriction to manage the risk profile, that is;

– No holding in another Company may exceed 15% of the value of the Investment Trust’s portfolio. This test is applied whenthe investment is first acquired and subsequently, when additions are made to the holding.


17 Financial assets and liabilities interest rate disclosure and other financial risks (continued)

Credit riskCredit risk is the risk that an issuer or counter-party may be unable or unwilling to meet a commitment that it has entered intowith the Company.

The Company's principal financial assets are bank balances and cash, other receivables and investments as set out in thebalance sheet which represent the Company's maximum exposure to credit risk in relation to the financial assets.

The credit risk on bank balances is limited because the counter-parties are banks with high credit ratings of A-1+ assigned byinternational credit-rating agencies.

All transactions in listed securities are settled upon delivery using approved brokers. The risk of default is considered minimal asdelivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once thesecurities have been received by the broker. The trade will fail if either party fails to meet its obligations.

Liquidity riskThe Company's assets comprise securities that can be readily realised to meet obligations. As a result the Company is able toquickly liquidate its investments in these instruments at an amount close to its fair value in order to meet its liquidityrequirements. 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 toshareholders.

The following table details the Company’s liquidity analysis for its financial liabilities. The table has been drawn up based onthe undiscounted gross cash flows on those financial liabilities that require gross settlement.

1-3 months 1-5 years£’000 £’000

2008Gross Settled:Other payables 345 - Bank Loan - -

––––––––––– –––––––––––345 -

––––––––––– –––––––––––2007Gross Settled:Other payables 357 - Bank Loan - 5,200

––––––––––– –––––––––––357 5,200

––––––––––– –––––––––––Market riskMarket risk is the possibility that future changes in market prices may make a financial instrument less valuable or moreonerous. The Company’s market risk is managed by the investment manager through diversification of the investmentportfolio in accordance with the Company's investment policy.

a) Price riskPrice risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in marketprices whether those changes are caused by factors specific to the individual financial instrument or its issuers, or factorsaffecting 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 WidowsInvestment Partnership Limited under an agreement dated 25 April 2002. The Investment Manager operates under agreedparameters and the Board monitors their performance on a regular basis.

Notes to the Financial Statements continued


Notes to the Financial Statements continued17 Financial assets and liabilities interest rate disclosure and other financial risks (continued)

Price sensitivityThe following table details the Company's sensitivity to a 30% increase and decrease in the market prices while all othervariables were held constant. 30% is the sensitivity rate used when reporting price risk internally to key managementpersonnel and represents management’s assessment of the possible change in market prices. A positive number indicates anincrease in net assets attributable to holders of redeemable shares where the market price of the relevant financial instrumentincreases and a negative number indicates a decrease where the market price of the relevant financial instrument decreases.

Income Net Assets30% Increase in Price 30% Decrease in Price

Impact on Financial assets at Impact on Financial assets at fair value through profit or loss fair value through profit or loss

2008 2007 2008 2007£’000 £’000 £’000 £’000

Increase / (decrease) in net assets attributable - Designated as at fair value through profit or loss 5,997 10,887 (5,997) (10,887)

––––––––––– ––––––––––– ––––––––––– –––––––––––5,997 10,887 (5,997) (10,887)

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

b) Interest rate Risk

The Company’s interest rate sensitive assets and liabilities mainly comprise of cash at bank and a bank loan. The cash at bankand loan are subject to floating rates and the loan is considered to be part of the investment strategy of the Company. Noother hedging is undertaken in respect of this interest rate risk. As such the Board does not believe the Company suffers anymaterial 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.

The Company’s foreign currency risk in 2007 and 2008 is minimal as all of the Company's material assets and liabilities areSterling denominated.

18 Parent and ultimate controlling party

The Board is of the opinion that there is no immediate parent or ultimate controlling party of the Company.

19 Events after balance sheet date

On 19 March 2009 the Board declared a final dividend of 2.73p per share. In accordance with the requirements of IFRS,as this was not approved until after the balance sheet date, no accrual has been reflected in these financial statements forthis amount.

Due to significant global turmoil in the financial markets, the Company’s NAV has fallen by 10% since the end of the annualreporting period (correct as at 30 March 2009).


Ten Year RecordRevenue Gross Ordinary share Net asset value

Gross Net revenue return per dividends per capital eligible of ordinaryrevenue after taxation ordinary share ordinary share for dividends shares (Ex-div)

Year ended 31 December £’000(1+2) £’000 p p(3) £’000 p

1999 2,528 2,053 3.56 3.06* 5,763 146.92000 2,216 1,733 3.04 2.77 5,663 134.22001 2,168 1,735 3.05 2.79 5,717 104.42002 1,735 1,276 2.72 2.80 4,186 76.12003 1,500 1,130 2.69 2.83 4,203 90.72004 1,536 1,117 2.77 0.83 3,858 97.92005 1,517 880 2.48 2.95 2,073 125.52006 1,041 648 3.12 3.10 2,083 152.92007 1,241 824 3.96 3.25 2,071 158.32008 1,449 1,046 5.04 3.63 2,073 106.9

Notes:(1) The information provided prior to 2006 in the above statement is prepared in accordance with UK GAAP and not IFRS.(2) Following the introduction of FRS16 (IAS 12) all dividends receivable from 1999 have been shown gross of withholding tax whereas previously they

were shown net.(3) Following the introduction of FRS 21 (IAS 10) all dividends paid by the company from 2004 are accounted for in the period in which the Company is

liable to pay them. Such treatment is also consistent with International Financial Reporting Standards. In previous years, the Company accrueddividends in the period in which the net revenue, to which those dividends related, were accounted for.

* The 1999 gross dividends for ordinary shares include special dividends of 0.35p.

Notice is hereby given that the Fiftieth Ordinary Annual General Meeting of UK Select Trust Limited (the "Company") willbe held at La Trelade Hotel, Forest, Guernsey, on Wednesday 29 April 2009 at 11:30am., for the following purposes:

1. To consider the Directors' report and financial statements for the year ended 31 December 2008.

2. To authorise the implementation by the Directors of the provisions of Article 133 of the Company's Articles of Association inrespect of any dividend (or part thereof) declared or proposed to be declared by way of final dividend in respect of thefinancial year of the Company ending 31 December 2008, or by way of an interim dividend in respect of the financial yearof the Company ending 31 December 2009.

3. To declare a final dividend of 2.73p gross per ordinary share of the Company payable on 8 May 2009 to ordinaryshareholders registered at the close of business on 27 March 2009 in respect of all ordinary shares then registered in theirrespective names, provided that, if the foregoing Resolution 2 shall have been duly passed, such dividend shall not be paidin respect of which elections to receive additional ordinary shares shall have been duly lodged pursuant to the terms of theCompany’s circular letter dated 6 April 2009.

4. To re-elect Mr JM Le Pelley as Director in accordance with Article 97 of the Company's Articles of Association.

5. To re-elect Mr JG West as Director in accordance with Article 97 of the Company's Articles of Association.

6. To re-appoint Deloitte LLP as Auditors.

7. To consider, and if thought fit, approve the renewal of the unconditional and general authorisation of the Companyauthorised by the forty-ninth Annual General Meeting held on 25 April 2008, so that the Company is generally andunconditionally authorised in accordance with the Companies (Purchase of Own Shares) Ordinance 1998 to make marketpurchases (within the meaning of Section 5 of the said Ordinance) of its own ordinary shares out of distributable profitssubject as follows:

(a) the maximum number of shares hereby authorised to be purchased is 3,103,742 (representing 14.9% of the number ofshares of the Company in issue on 31 December 2008) ;

(b) the maximum price which may be paid for such shares is, as for a share which the Company contracts to purchase onany day, a sum equivalent to 105% of the average of the middle market quotation for the ordinary shares of theCompany in the daily official list of the London Stock Exchange or the 5 business days immediately proceeding the day;

(c) any purchase of shares will be made in the market for cash at prices below the prevailing asset value per share;

(d) the minimum price which may be paid for such shares is 10p; and

(e) the authority conferred by this resolution shall expire at the conclusion of the fifty first Annual General Meeting of theCompany or 30th September 2010, whichever is earlier.

By order of the board

Corporate Services (Guernsey) LimitedSecretary

Dorey CourtSt Peter PortGuernsey

Note: A member entitled to be present and vote at the meeting may appoint a proxy to attend and, on a poll, to vote in his stead. Appointment of a proxy will not preclude a member from attending the meeting and voting in person. A proxy need not be a member of the Company. The Directors have no contracts with the Company.

Notice of Meeting


Financial calendar

Announcements, ordinary share dividend payment and the issue of the annual and interim reports may normally be expectedin the months shown below:

March – Preliminary figures and final dividend for year announcedApril – Annual report and accounts publishedApril / May – Annual General MeetingApril / May – Final dividend paidAugust – Interim figures and interim dividend announcedAugust/September – Interim report for half year publishedNovember – Interim dividend paid


UK Select Trust LimitedDorey CourtAdmiral ParkSt Peter PortGuernseyChannel Islands GY1 3BGTelephone +44 (0)1481 727111

43912 03/09

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