TIDMFUS
RNS Number : 6479K
F&C UK Select Trust PLC
22 April 2010
To: RNS
Date: 22 April 2010
From: F&C UK Select Trust plc
Results for the year ended 31 December 2009
The Chairman, Mr Geoffrey Maddrell said:
Introduction
I write to you this year with very mixed feelings. Your Company enjoyed an
excellent 2009, delivering the best absolute and relative performance of its
seventeen-year life. Unfortunately this was not quite good enough to overcome
the underperformance of 2008 and, as I explain below, the Board is therefore
proposing that the Company be wound up.
Investment Performance
Before providing for the costs associated with this winding up, the Company's
net asset value total return per share for 2009 was 52.5 per cent. This
compared with a total return on the benchmark FTSE All-Share Index of 30.1 per
cent.
The Company's portfolio was well positioned to take advantage of any strength in
the emerging economies relative to the OECD at the start of 2009, and that
strength became apparent as the year wore on; we enjoyed particular success in
the resource sector.
Earnings per share were 0.61 pence after the accrual of GBP470,000 in relation
to the costs of the Company winding up, and a dividend of 0.50 pence per share
has been declared and will be paid on 7 May 2010 to shareholders on the register
on 30 April 2010.
Reconstruction and Winding Up
In 2007 the Board gave a commitment that, if the net asset value total return
per share did not outperform the FTSE All-Share Index on a total return basis
over a two year period to 31 December 2009, the Board would propose a
reconstruction of the Company which would allow shareholders to elect for a full
cash exit this year. The net asset value total return per share over that
period, before accruing any costs in respect of the proposed liquidation of the
Company, was -12.3 per cent, some 3.5 percentage points below the total return
on the FTSE All-Share Index over those two years. Accordingly, the Board is
today announcing proposals for the reconstruction and winding up of the Company.
The proposals will involve a members' voluntary liquidation of the Company
under which shareholders will be able to choose either to receive cash in
respect of their investment in the Company or rollover their investment in the
Company into shares in F&C UK Opportunities Fund, or a combination of those
options. The F&C UK Opportunities Fund is an authorised, open-ended fund which
is managed by Phil Doel, the Company's fund manager, in substantially the same
manner as he manages the Company. Its portfolio closely resembles that of the
Company, with 22 out of 25 stocks, including Caithness Petroleum, held in
common.
The proposals are subject to, among other things, the approval of shareholders.
The necessary resolutions will be proposed at this year's Annual General Meeting
2010, and at a subsequent General Meeting, which will be held on 27 May 2010.
Full details of the proposals will be set out in a separate circular which is
expected to be posted to shareholders during the week commencing 26 April. That
circular will also include the notices of both the Annual General Meeting and
the subsequent General Meeting.
1993 to 2010
I have been Chairman of the Company since it commenced business on 15 June 1993
as Ivory & Sime ISIS Trust plc. The Company was launched with an innovative
structure based around retail shareholders, a structure renewed and refined in
October 2000. Maintaining a high level of retail ownership has always been one
of the Directors' objectives, and retail scheme holders still own more than 60
per cent of the Company's shares.
A shareholder who had invested GBP5,000 in June 1993 would receive GBP12,478
back in capital if the scheme were to be implemented today. After taking
dividends into account he would have received a total of GBP13,061. By way of
comparison, GBP5,000 left on deposit for the same period would now be worth
GBP6,260.
There have been many ups and downs, but taken as a whole this is a creditable
record over a period of nearly 17 years.
Outlook
Given the Company's impending demise I would like to express a few parting
words. The philosophy that underpinned the setting up of this Company in 1993
was informed by a belief in the value for retail investors of investing in
equities. Your Board continues to believe that this is the best way for the
retail investor to build investment value over the long term.
The economic future appears even more uncertain than usual, with the world in
general, and the mature economies in particular, still fearful of continuing
recession. Meanwhile the UK is threatened by both deflation and inflation,
depending upon to whom you speak. Equity investment provides a healthy measure
of long term protection against all of this.
It remains for me to thank you for your support over the years, and to wish you
well with your future investments.
Geoffrey Maddrell
Chairman
For further information, please contact:
Martin Cassels
F&C Investment Business Limited Tel: 0207 628 8000
The income statement, balance sheet, reconciliation of movement in shareholders'
funds, cash flow statement and notes follow:
Income Statement
+------------------------------------+-------+----------+-----------+-----------+
| | Year ended 31 December 2009 |
+------------------------------------+------------------------------------------+
| | Notes | | | |
| | | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+-------+----------+-----------+-----------+
| | | Revenue | Capital | Total |
+------------------------------------+-------+----------+-----------+-----------+
| | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| Gains on investments at fair value | | - | 14,937 | 14,937 |
| through profit or loss | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| Income | | 1,260 | - | 1,260 |
+------------------------------------+-------+----------+-----------+-----------+
| Investment management fee | 6 | (67) | (706) | (773) |
+------------------------------------+-------+----------+-----------+-----------+
| Other expenses | 7 | (855) | - | (855) |
+------------------------------------+-------+----------+-----------+-----------+
| | | -------- | --------- | --------- |
+------------------------------------+-------+----------+-----------+-----------+
| Net return before finance costs | | 338 | 14,231 | 14,569 |
| and taxation | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| Finance costs:- | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| · Term | | (32) | (97) | (129) |
| loan | | | | |
| interest | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| | | -------- | --------- | --------- |
+------------------------------------+-------+----------+-----------+-----------+
| Return on ordinary activities | | 306 | 14,134 | 14,440 |
| before tax | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| | | -------- | --------- | --------- |
+------------------------------------+-------+----------+-----------+-----------+
| Tax on ordinary activities | | - | - | - |
+------------------------------------+-------+----------+-----------+-----------+
| | | -------- | --------- | --------- |
+------------------------------------+-------+----------+-----------+-----------+
| Return attributable to ordinary | | 306 | 14,134 | 14,440 |
| shareholders | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| | | -------- | --------- | --------- |
+------------------------------------+-------+----------+-----------+-----------+
| | | | | |
+------------------------------------+-------+----------+-----------+-----------+
| Return per ordinary share | 3 | 0.61p | 28.10p | 28.71p |
+------------------------------------+-------+----------+-----------+-----------+
Income Statement
+------------------------------------+-------+---------+----------+----------+
| | Year ended 31 December 2008 |
+------------------------------------+---------------------------------------+
| | Notes | | | |
| | | GBP | GBP'000 | GBP'000 |
| | | '000 | | |
+------------------------------------+-------+---------+----------+----------+
| | | Revenue | Capital | Total |
+------------------------------------+-------+---------+----------+----------+
| | | | | |
+------------------------------------+-------+---------+----------+----------+
| Losses on investments at fair | | - | (27,114) | (27,114) |
| value through profit or loss | | | | |
+------------------------------------+-------+---------+----------+----------+
| Income | | 2,289 | - | 2,289 |
+------------------------------------+-------+---------+----------+----------+
| Investment management fee | 6 | 117 | 117 | 234 |
+------------------------------------+-------+---------+----------+----------+
| Other expenses | | (354) | - | (354) |
+------------------------------------+-------+---------+----------+----------+
| | | _____ | _____ | _____ |
+------------------------------------+-------+---------+----------+----------+
| Net return before finance costs | | 2,052 | (26,997) | (24,945) |
| and taxation | | | | |
+------------------------------------+-------+---------+----------+----------+
| | | | | |
+------------------------------------+-------+---------+----------+----------+
| Finance costs: | | | | |
+------------------------------------+-------+---------+----------+----------+
| · Term | | (82) | (245) | (327) |
| loan | | | | |
| interest | | | | |
+------------------------------------+-------+---------+----------+----------+
| | | _____ | _____ | _____ |
+------------------------------------+-------+---------+----------+----------+
| Return on ordinary activities | | 1,970 | (27,242) | (25,272) |
| before tax | | | | |
+------------------------------------+-------+---------+----------+----------+
| | | _____ | _____ | _____ |
+------------------------------------+-------+---------+----------+----------+
| Tax on ordinary activities | | - | - | - |
+------------------------------------+-------+---------+----------+----------+
| | | _____ | _____ | _____ |
+------------------------------------+-------+---------+----------+----------+
| | | | | |
+------------------------------------+-------+---------+----------+----------+
| Return attributable to | | 1,970 | (27,242) | (25,272) |
| shareholders | | | | |
+------------------------------------+-------+---------+----------+----------+
| | | _____ | _____ | _____ |
+------------------------------------+-------+---------+----------+----------+
| | | | | |
+------------------------------------+-------+---------+----------+----------+
| | | | | |
+------------------------------------+-------+---------+----------+----------+
| Return per ordinary share | 3 | 3.54p | (48.97)p | (45.43)p |
+------------------------------------+-------+---------+----------+----------+
| | | | | |
+------------------------------------+-------+---------+----------+----------+
Balance Sheet
+------------------------------------+-------+----------+----------+
| | | As at | As at |
+------------------------------------+-------+----------+----------+
| | | 31/12/09 | 31/12/08 |
+------------------------------------+-------+----------+----------+
| | Notes | GBP'000 | GBP'000 |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Fixed Assets | | | |
+------------------------------------+-------+----------+----------+
| Investments at fair value through | | - | 29,465 |
| profit or loss | | | |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Current assets | | | |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Investments | | 44,695 | - |
+------------------------------------+-------+----------+----------+
| Debtors | | 379 | 1,419 |
+------------------------------------+-------+----------+----------+
| Cash at bank and on deposit | | 563 | 2,281 |
+------------------------------------+-------+----------+----------+
| | | ______ | _____ |
+------------------------------------+-------+----------+----------+
| | | 45,637 | 3,700 |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Creditors: amounts falling due | | (3,350) | (3,470) |
| within one year | | | |
+------------------------------------+-------+----------+----------+
| | | ______ | _____ |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Net current assets | | 42,287 | 230 |
+------------------------------------+-------+----------+----------+
| | | ______ | _____ |
+------------------------------------+-------+----------+----------+
| Total assets less current | | 42,287 | 29,695 |
| liabilities | | | |
+------------------------------------+-------+----------+----------+
| | | ______ | _____ |
+------------------------------------+-------+----------+----------+
| Net assets | | 42,287 | 29,695 |
+------------------------------------+-------+----------+----------+
| | | _____ | _____ |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Capital and reserves | | | |
+------------------------------------+-------+----------+----------+
| Called-up share capital | | 523 | 546 |
+------------------------------------+-------+----------+----------+
| Special reserve | | 31,418 | 32,763 |
+------------------------------------+-------+----------+----------+
| Capital reserve | | 2,076 | (12,058) |
+------------------------------------+-------+----------+----------+
| Capital redemption reserve | | 256 | 233 |
+------------------------------------+-------+----------+----------+
| Revenue reserve | | 8,014 | 8,211 |
+------------------------------------+-------+----------+----------+
| | | ______ | ______ |
+------------------------------------+-------+----------+----------+
| Shareholders' funds | | 42,287 | 29,695 |
+------------------------------------+-------+----------+----------+
| | | ______ | _____ |
+------------------------------------+-------+----------+----------+
| | | | |
+------------------------------------+-------+----------+----------+
| Net asset value per share | | | |
+------------------------------------+-------+----------+----------+
| Ordinary | 5 | 85.7p | 57.6p |
+------------------------------------+-------+----------+----------+
Reconciliation of Movements in Shareholders' Funds
+--------------------+---------+---------+--------------+------------+---------+----------------+
| for the year ended 31 | | | | | |
| December 2009 | | | | | |
+------------------------------+---------+--------------+------------+---------+----------------+
| | | | | | | Total |
| | Called | | | Capital | | Share-holders' |
| | up | Special | Capital | Redemption | Revenue | Funds |
| | Share | Reserve | Reserve | Reserve | Reserve | |
| | Capital | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| | | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| Opening | 546 | 32,763 | (12,058) | 233 | 8,211 | 29,695 |
| shareholders' | | | | | | |
| funds | | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| Ordinary shares | (23) | (1,345) | - | 23 | - | (1,345) |
| purchased for | | | | | | |
| cancellation | | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| Dividends paid | - | - | - | - | (503) | (503) |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| Return | | | 14,134 | | 306 | 14,440 |
| attributable to | - | - | _____ | - | _____ | ______ |
| ordinary | ___ | ______ | | ___ | | |
| shareholders | | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| Closing | 523 | 31,418 | 2,076 | 256 | 8,014 | 42,287 |
| shareholders' | | | | | | |
| funds | | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
| | | | | | | |
+--------------------+---------+---------+--------------+------------+---------+----------------+
Reconciliation of Movements in Shareholders' Funds
+--------------------+---------+---------+----------+------------+---------+---------------+
| for the year ended 31 | | | | | |
| December 2008 | | | | | |
+------------------------------+---------+----------+------------+---------+---------------+
| | | | | | | |
| | Called | | | Capital | | Total |
| | up | Special | Capital | Redemption | Revenue | Shareholders' |
| | Share | Reserve | Reserve | Reserve | Reserve | Funds |
| | Capital | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+---------+---------+----------+------------+---------+---------------+
| | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| Opening | 658 | 39,376 | 15,184 | 121 | 7,829 | 63,168 |
| shareholders' | | | | | | |
| funds | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| Ordinary shares | (84) | (6,613) | - | 84 | - | (6,613) |
| purchased for | | | | | | |
| cancellation | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| Ordinary shares | (28) | - | - | 28 | - | - |
| cancelled that | | | | | | |
| were held in | | | | | | |
| Treasury | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| Dividends paid | - | - | - | - | (1,588) | (1,588) |
+--------------------+---------+---------+----------+------------+---------+---------------+
| Return | | | (27,242) | - | 1,970 | (25,272) |
| attributable to | - | - | ______ | ___ | ____ | _____ |
| ordinary | ___ | _____ | | | | |
| shareholders | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| Closing | 546 | 32,763 | (12,058) | 233 | 8,211 | 29,695 |
| shareholders' | | | | | | |
| funds | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
| | | | | | | |
+--------------------+---------+---------+----------+------------+---------+---------------+
Cash Flow Statement
+-------------------------------------------+------+----------+----------+
| | | Year | Year |
| | | Ended | Ended 31 |
| | | 31 | December |
| | | December | 2008 |
| | | 2009 | |
+-------------------------------------------+------+----------+----------+
| | | GBP'000 | GBP'000 |
| Operating Activities | | | |
+-------------------------------------------+------+----------+----------+
| Investment income received | | 970 | 1,828 |
+-------------------------------------------+------+----------+----------+
| Deposit interest received | | 13 | 182 |
+-------------------------------------------+------+----------+----------+
| Interest recovered from HMRC | | 84 | 72 |
+-------------------------------------------+------+----------+----------+
| Underwriting commission | | 58 | 70 |
+-------------------------------------------+------+----------+----------+
| Investment management fees paid | | (91) | 31 |
+-------------------------------------------+------+----------+----------+
| Other cash payments | | (401) | (365) |
+-------------------------------------------+------+----------+----------+
| | | _____ | ______ |
+-------------------------------------------+------+----------+----------+
| | | | |
+-------------------------------------------+------+----------+----------+
| Net cash inflow from operating activities | | 633 | 1,818 |
+-------------------------------------------+------+----------+----------+
| | | _____ | ______ |
+-------------------------------------------+------+----------+----------+
| Servicing of finance | | | |
+-------------------------------------------+------+----------+----------+
| Interest paid on bank loans | | (143) | (302) |
+-------------------------------------------+------+----------+----------+
| | | _____ | ______ |
+-------------------------------------------+------+----------+----------+
| Net cash outflow from servicing finance | | (143) | (302) |
+-------------------------------------------+------+----------+----------+
| | | _____ | ______ |
+-------------------------------------------+------+----------+----------+
| Capital expenditure and financial | | | |
| investment | | | |
+-------------------------------------------+------+----------+----------+
| Purchases of investments | | (32,263) | (41,285) |
+-------------------------------------------+------+----------+----------+
| Disposals of investments | | 32,903 | 51,252 |
+-------------------------------------------+------+----------+----------+
| | | _______ | ______ |
+-------------------------------------------+------+----------+----------+
| Net cash inflow from capital expenditure | | | |
| and financial investment | | 640 | 9,967 |
+-------------------------------------------+------+----------+----------+
| | | _______ | ______ |
+-------------------------------------------+------+----------+----------+
| Equity dividends paid | | (503) | (1,588) |
+-------------------------------------------+------+----------+----------+
| | | _______ | ______ |
+-------------------------------------------+------+----------+----------+
| Net cash inflow before financing | | 627 | 9,895 |
+-------------------------------------------+------+----------+----------+
| | | _______ | ______ |
+-------------------------------------------+------+----------+----------+
| Financing | | | |
+-------------------------------------------+------+----------+----------+
| Loan repaid | | (1,000) | (4,000) |
+-------------------------------------------+------+----------+----------+
| Ordinary shares purchased for | | (1,345) | (6,312) |
| cancellation | | | |
+-------------------------------------------+------+----------+----------+
| | | ______ | ______ |
+-------------------------------------------+------+----------+----------+
| Net cash outflow from financing | | (2,345) | (10,312) |
+-------------------------------------------+------+----------+----------+
| | | ______ | ______ |
+-------------------------------------------+------+----------+----------+
| Decrease in cash | | (1,718) | (417) |
+-------------------------------------------+------+----------+----------+
| | | ______ | ______ |
+-------------------------------------------+------+----------+----------+
| Reconciliation of net cash flow to | | | |
| movement in net debt | | | |
+-------------------------------------------+------+----------+----------+
| Decrease in cash in the year | | (1,718) | (417) |
+-------------------------------------------+------+----------+----------+
| Loan repaid | | 1,000 | 4,000 |
+-------------------------------------------+------+----------+----------+
| | | ______ | ______ |
+-------------------------------------------+------+----------+----------+
| Movement in net debt resulting from cash | | (718) | 3,583 |
| flows | | | |
+-------------------------------------------+------+----------+----------+
| Opening net debt | | (719) | (4,302) |
+-------------------------------------------+------+----------+----------+
| Change in fair valuation of interest rate | | - | - |
| swap | | | |
+-------------------------------------------+------+----------+----------+
| | | ______ | ______ |
+-------------------------------------------+------+----------+----------+
| Closing net debt | | (1,437) | (719) |
+-------------------------------------------+------+----------+----------+
| | | ______ | ______ |
+-------------------------------------------+------+----------+----------+
| | | | |
+-------------------------------------------+------+----------+----------+
+--------------------------------------------------+--------------------------------------------------+-----------+
| Reconciliation of net revenue before finance | Year | Year |
| costs and taxation to net cash inflow from | Ended | ended |
| operating activities | | |
+ +--------------------------------------------------+-----------+
| | 31 December | 31 |
| | | December |
+--------------------------------------------------+--------------------------------------------------+-----------+
| | 2009 | 2008 |
+--------------------------------------------------+--------------------------------------------------+-----------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------+--------------------------------------------------+-----------+
| | | |
+--------------------------------------------------+--------------------------------------------------+-----------+
| Net return before finance costs and taxation | 14,569 | (24,945) |
+--------------------------------------------------+--------------------------------------------------+-----------+
| (Gains)/losses on investments | (14,937) | 27,114 |
+--------------------------------------------------+--------------------------------------------------+-----------+
| Decrease/(increase) in prepayments, accrued | 2 | (221) |
| income and other debtors | | |
+--------------------------------------------------+--------------------------------------------------+-----------+
| Increase/(decrease) in other creditors | 999 | (77) |
+--------------------------------------------------+--------------------------------------------------+-----------+
| Scrip dividend | | (53) |
| | - | |
+--------------------------------------------------+--------------------------------------------------+-----------+
| | | |
+--------------------------------------------------+--------------------------------------------------+-----------+
| Net cash inflow from operating activities | 633 | 1,818 |
+--------------------------------------------------+--------------------------------------------------+-----------+
| | | |
+--------------------------------------------------+--------------------------------------------------+-----------+
Principal Risks and Risk Management
The Company's assets consist mainly of listed securities and its principal risks
are therefore market-related. More detailed explanations of these risks and the
way which they are managed are contained in note 2.
Other risks faced by the Company include the following:
· External - events such as terrorism, disease, protectionism, inflation or
deflation, economic recessions and movements in interest rates could affect
share prices.
· Investment and strategic - incorrect strategy (including use of gearing) and
stock selection could lead to poor returns for shareholders.
· Regulatory - breach of regulatory rules could lead to suspension of the
Company's Stock Exchange listing, financial penalties, or a qualified audit
report. Breach of Section 842 of the Income and Corporation Taxes Act 1988 could
lead to the Company being subject to tax on capital gains.
· Operational - failure of the Managers' accounting systems or disruption to
the Managers' business, or that of third party service providers could lead to
an inability to provide accurate reporting and monitoring, leading to a loss of
shareholders' confidence.
· Financial - inadequate controls by the Managers or third party service
providers could lead to misappropriation of assets. Inappropriate accounting
policies or failure to comply with accounting standards could lead to
misreporting or breaches of regulations.
The Board seeks to mitigate and manage these risks through continual review,
policy setting, shareholder communication and enforcement of contractual
obligations. It also regularly monitors the investment environment and the
management of the Company's investment portfolio, and applies the principles
detailed in the internal control guidance issued by the Financial Reporting
Council.
Statement of Directors' Responsibilities in Respect of the Annual Financial
Report
In accordance with Chapter 4 of the Disclosure and Transparency Rules, we
confirm that to the best of our knowledge, in respect of the Annual Report for
the year ended 31 December 2009, of which this statement of results is an
extract:
· The financial statements have been prepared in accordance with the
applicable set of Accounting Standards, on a break-up basis, as the Directors
are proposing the Company is placed into Members' Voluntary Liquidation, and
give a true and fair view of the assets, liabilities, financial position and
profit of the Company;
· The Annual Report includes a fair review of the important events that have
occurred during the financial year and their impact on the financial statements;
· The Annual Report includes a description of the Company's principal risks
and uncertainties; and
· The Annual Report includes details of related party transactions that have
taken place during the financial year.
On behalf of the Board
G K Maddrell
Chairman
22 April 2010
Notes
1. The results for the year ended 31 December 2009, have been prepared under
UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with
guidelines set out in the Statement of Recommended Practice, for Investment
Trust Companies and Venture Capital Trusts, issued in January 2009 by the
Association of Investment Companies.
Given that the Directors are proposing that the Company is to be placed into
Member's Voluntary liquidation, the Directors do not consider the going concern
basis to be appropriate. These preliminary results have therefore been prepared
on a break-up basis. In applying this basis, assets and liabilities continue to
be stated at their fair values which materially equate to their residual values.
A provision has been made for estimated costs to be incurred in relation to the
liquidation of the Company.
2. Financial Instruments
The Company's financial instruments comprise its investment portfolio, cash
balances, bank loan, overdrafts, debtors and creditors that arise directly from
its operations such as sales and purchases awaiting settlement and accrued
income. In order to maximise returns to Ordinary Shares the Company, as at 31
December 2009, had drawn down a bank loan facility which matured on 19 March
2010 and attracted interest at a rate of 2.30 per cent above LIBOR. Further
medium and short term borrowings could be considered up to a maximum amount of
20 per cent of Ordinary Shareholders' funds at date of drawdown.
The Company's investments have been categorised as "financial assets at fair
value through profit or loss" and are recognised on a purchase date basis. At
the time of acquisition the investments are valued at cost.
Listed investments are valued at their fair value which is represented by the
bid price.
Unquoted investments are valued by the Directors at their fair value on the
basis of all the information available to them at the time of valuation.
The main risks that the Company faces arising from its financial instruments
are:
(i) interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market interest rates;
(ii) market price risk, being the risk that the value of investment
holdings will fluctuate as a result of changes in market prices caused by
factors other than interest rate or currency rate movements;
(iii) credit risk, being the risk that a counterparty to a financial
investment will fail to discharge an obligation or commitment that it has
entered into with the Company; and
(iv) liquidity risk, being the risk that the Company may not be able to
liquidate its investments quickly enough to meet its ongoing financial
commitments.
The Company's financial instruments are denominated in sterling, therefore,
currency risk arising from exchange rate fluctuations has no material direct
effect on profit or loss, or Shareholders' funds.
Interest rate risk
When the Company decides to hold cash balances, all balances are held on
variable rate bank accounts yielding rates of interest linked to bank base rate.
The Company's policy is to hold cash in variable rate bank accounts and not
usually to invest in fixed rate securities. The Company's investment portfolio
is not directly exposed to interest rate risk.
Market price risk
The Company's investment portfolio is exposed to market price fluctuations which
are monitored by the investment managers in pursuance of the investment
objective. The Managers may use derivatives to manage portfolio risk.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Company. The carrying amounts of financial assets best represents the maximum
credit risk exposure at the balance sheet date.
Credit risk arising on transactions with brokers relates to transactions
awaiting settlement. Risk relating to unsettled transactions is considered to
be small due to the short settlement period involved and the diversity of
counterparties used.
All the assets of the Company which are traded on a recognised exchange are held
by JPMorgan Chase Bank, the Company's custodian. Bankruptcy or insolvency of
the custodian may cause the Company's rights with respect to securities held by
the custodian to be delayed or limited. The Board monitors the Company's risk
by reviewing the custodian's internal control reports. The Managers have in
place a monitoring procedure in respect of counterparty risk which is reviewed
on an ongoing basis.
The credit risk on liquid funds and derivative financial instruments is
controlled because the counterparties are banks with high credit ratings, rated
AA or higher, assigned by international credit rating agencies. Bankruptcy or
insolvency of such financial institutions may cause the Company's ability to
access cash placed on deposit to be delayed or limited or lost.
Liquidity Risk
The Company's financial instruments include an investment in an unlisted
investment which is not traded on an organised public market and which generally
may be illiquid. As a result the Company may not be able to liquidate this
investment at an amount close to its fair value.
The Company's listed securities are considered to be readily realisable in
normal market conditions.
The Company's liquidity risk is managed on an ongoing basis by the Managers.
The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and expenses. Short term flexibility is
achieved, where necessary, through the use of overdraft facilities.
3. Return per Ordinary Share is based on a weighted average of 50,292,701
(2008: 55,629,811) Ordinary Shares in issue.
4. The interim dividend of 0.50 pence per Ordinary Share will be paid on 7 May
2010 to ordinary shareholders on the register as at close of business on 30
April 2010.
5. The net asset value per share and the net asset value attributable to the
Ordinary Shares is based on net assets of GBP42,287,000 (31 December 2008:
GBP29,695,000), and on 49,344,961 (31 December 2008: 51,594,961) Ordinary
Shares, being the number of Ordinary Shares in issue (excluding shares held in
Treasury).
6. Investment management fee
+------------------------+---------+---------+---------+---------+---------+---------+
| | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 |
| | Revenue | Capital | Total | Revenue | Capital | Total |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+---------+---------+---------+---------+---------+---------+
| Investment management | | | | | | |
| fee: | | | | | | |
+------------------------+---------+---------+---------+---------+---------+---------+
| - basic | 67 | 186 | 253 | 87 | 259 | 346 |
+------------------------+---------+---------+---------+---------+---------+---------+
| - performance fee | - | 520 | 520 | - | - | - |
+------------------------+---------+---------+---------+---------+---------+---------+
| - recovered VAT | - | - | - | (204) | (376) | (580) |
+------------------------+---------+---------+---------+---------+---------+---------+
| | | | | | | |
+------------------------+---------+---------+---------+---------+---------+---------+
| | 67 | 706 | 773 | (117) | (117) | (234) |
+------------------------+---------+---------+---------+---------+---------+---------+
As a result of the European Court of Justice decision that investment management
fee payable by investment trusts are not, and should never have been, liable to
value added tax ('VAT'), the Company recovered during the year ended 31 December
2008, VAT of GBP443,000 in respect of investment management fees paid to FCIB in
the period beginning on 1 January 2001 until 30 September 2007 and GBP137,000 in
respect of the period since the launch of the Company in June 1993 to 4 December
1996. The amounts recovered have been recognised in the Income Statement and
allocated between revenue and capital in the same ratio as the VAT originally
suffered.
7. Other expenses include estimated costs of GBP470,000 to be incurred in
respect of the proposed liquidation of the Company.
8. During the year ended 31 December 2009 the Company bought in for
cancellation 2,250,000 Ordinary Shares at a cost of GBP1,345,000.
9. This announcement is not the Company's statutory accounts. The statutory
accounts for the year ended 31 December 2008 have been delivered to the
Registrar of Companies and have received an audit report which was unqualified
but did contain an emphasis of matter on going concern and no statements under
s237(2) and (3) of the Companies Act 1985.
The Annual Report for the year ended 31 December 2009 will be sent to
shareholders during April 2010 and will be available for inspection at 80 George
Street, Edinburgh EH2 3BU, the registered office of the Company. The full
Annual Report and Accounts will be available on the Company's website,
www.fcukselect.trust.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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