Largest Shareholder of UK Select Sends Letter Recommending Vote against Board Resolutions.

To download high-resolution, print-ready JPEG images, click on the thumbnail image above.

WARNING: these images are

very large (800K+)

Click here for caption

Business Editors

MULTIMEDIA AVAILABLE:

http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4657797

NEW YORK--(BUSINESS WIRE)--June 8, 2004

Millennium Partners' Letter Outlines Alternatives to Address Problems

of Liquidity, Discount and Expense

Millennium Partners, LP ("Millennium") today announced that it sent the following letter to the shareholders of UK Select (London: UKT.L), outlining numerous reasons to vote against the Board of Directors' resolutions.

The text of the letter follows:

                                                           7 June 2004

To: All Shareholders in UK Select Trust Limited

Dear Shareholder

        UK Select Trust Limited ("UK Select" or the "Company")

Millennium Partners LP ("Millennium") is the beneficial owner of 11,952,948 shares in UK Select representing 28.6 per cent. of UK Select's issued share capital. Millennium has been a Shareholder for over two years, since early 2002.

The board of directors of UK Select ("the Board") has convened an Extraordinary General Meeting ("EGM") to be held on 14th June 2004. At this EGM Shareholders are being asked to vote on three resolutions. The first asks Shareholders to approve the continuation of the Company and the other two ask Shareholders to elect two former directors to the Board.

We are writing to you to share our views on the future of UK Select, and to explain why Millennium will vote against each of these resolutions. We will focus on the following issues:

-- the lack of liquidity and persistent discount to net asset

value ("NAV") at which the shares trade;

-- the change in manager from that described in the tender offer

circular ("the Tender Circular") sent to shareholders in March

2002; and

-- the poor corporate governance and, in our opinion, poor

judgment displayed by seeking to appoint individuals to the

Board who were not re-elected at the Annual General Meeting

("AGM") held on 23rd April 2004.

We conclude by suggesting alternatives available to UK Select that, we believe, could provide Shareholders with better liquidity, a reduced or eliminated discount, lower operating expenses and enhanced performance.

Poor Liquidity and Persistent Discount

The market capitalisation of UK Select as of 30 April, 2004 was approximately GBP 35.4 million. Millennium's holding of 28.6 per cent., and the holding of the manager, Scottish Widows Investment Partnership ("SWIP") of 19.7 per cent., combine to make the available tradable float of the Company less than 52 per cent. of the shares in issue, or in terms of market capitalisation, less than GBP 19 million. This concentration of share ownership coupled with the comparatively small size of the Company results in little tradable liquidity. To date in 2004, through to 1 June, according to Bloomberg, shares in UK Select have traded on only 27 days, which is less than 6 days per month.

The shares in UK Select are generally quoted by market makers with a 2 or even 3 penny wide spread. In percentage terms this represents an effective 2 to 3 per cent. fee on purchases or sales, even before commissions are considered. In combination, the lack of liquidity and implicit dealing costs make investing in UK Select prohibitively expensive.

When the discount is considered, the implicit cost of investing in UK Select increases further. During the past year the discount has averaged 8.5 per cent., and although the discount has narrowed somewhat, it has remained persistent (see figure 1). An individual Shareholder wishing to realise his investment is forced to forego 85 pence for every GBP 10 worth of shares due to the discount, then another 3 per cent. or so of cost due to the trading spread, all before brokerage commissions.

In Millennium's opinion, these factors combine to argue clearly that Shareholders would be better served if they were invested in a larger, more liquid and more economical vehicle.

Investment Performance and Change in Management from 2002 Tender Offer Proposals

In February Millennium wrote to the Board expressing its desire to realise its investment in UK Select at or near NAV. In the Board's response, the former Chairman made the observation that although the opportunity was available to Millennium we chose not to tender our shares in 2002.

The former Chairman of UK Select failed to recognise, however, that the management of UK Select has changed materially from that outlined in the 2002 Tender Circular. In that document, the former Chairman discusses the change of manager from 3i Investments plc to SWIP. The Tender Circular states that UK Select's portfolio will be managed by Graham Campbell and David Erskine, "who have 35 years of investment management experience between them". Further, the document states that each of the ten funds in the UK All Companies Sector managed by Mr. Campbell and Mr. Erskine during the previous nine months were in the top quartile.

Approximately a year after the tender offer was completed, Mr. Campbell and Mr. Erskine left SWIP. Since that time UK Select has been "team managed". In the year following the departure of these individuals from SWIP, the total return of the UK Select NAV from April 30, 2003 to April 30, 2004, according to Bloomberg, was 19.7 per cent. In contrast, during the same exact period, according to Bloomberg, the total return of the FTSE All Share was 22.7 per cent.

In Millennium's opinion, UK Select's performance has been disappointing when compared to the calibre of manager described in the Tender Circular. Although UK Select was leveraged by 14 per cent. at the end of 2003, and although markets rose across all sectors, the NAV managed to under perform the FTSE All Share. The fact that the original managers described in the Tender Circular have departed, in itself argues strongly for the Board to offer a means for Shareholders to realise their investment.

Poor Corporate Governance in Calling for Second Election

At the 2004 AGM, Shareholders voted against the re-election to the Board of Mr. JM Le Pelley, the former Chairman, and Mr. JG West, a former director. Millennium voted against the re-election of these directors. The remaining directors of UK Select, in their letter to Shareholders dated 25 May 2004, state that in their opinion it is necessary to have additional directors on the Board, as a quorum for a meeting is three Directors. Millennium asks, why therefore did the Board re-nominate Mr. Le Pelley and Mr. West? UK Select invests in large capitalization UK equities. There exist numerous qualified individuals who could have served as directors. Indeed, as Mr. Le Pelly and Mr. West have, combined, served over 28 years on the board of UK Select, new directors may have had a more open mind with regards to the future of the Company and may have considered the wishes of Shareholders such as Millennium with more objectivity.

Mr. Le Pelley's nomination is particularly puzzling to Millennium. He joined the board of UK Select in 1983. He is therefore considered not independent according to current corporate governance guidelines, and his position as a non-independent Chairman of UK Select therefore not consistent with the recommendations of both the Association of Investment Trusts and that of Hermes, (see for example the Association of Investment Trust Companies' "Corporate Governance Guidelines" or Hermes' "Statement on Corporate Governance").

More importantly to Millennium, the idea of spending Shareholder funds on corporate advisers and legal counsel to convene an EGM to attempt to re-elect these two former directors after a lawfully convened AGM failed to elect them strikes us as nonsensical and a waste of Shareholders money. These former directors have complained that Millennium did not give prior notice that it intended to vote against the re-election of Mr. Le Pelly and Mr. West. But there is no obligation whatsoever to give any such notice. The Board is comprised of sophisticated individuals with years of boardroom experience, and the advisers, Dresdner Kleinwort Wasserstein Limited are professionals. Shareholders have voted and these gentlemen are no longer directors. Millennium asks, if Mr. Le Pelley and Mr. West are not successful in this, their second try, will the Board convene another Shareholder meeting so that they may have a third try?

Future of Company

In Millennium's opinion several options are available to UK Select. One obvious option is to convert the Company into an open-ended Guernsey based investment fund. Such a structure could allow daily dealing at NAV, the issuance of scrip dividends and continued management by SWIP if Shareholders so desired. Another option is to merge UK Select into a better performing, more liquid, premium rated investment trust. Several candidates exist, including Fidelity Special Values plc and Glasgow Income Trust plc. Yet another possibility is to merge the assets of UK Select into an existing, larger open ended investment fund. It could well be possible to find a new manager willing to contribute to the costs and expense of executing the reconstruction. After all, they stand to gain from acquiring the mandate to manage the ongoing assets of the Company.

These are straightforward options, and they, in our opinion, resolve the issues of liquidity, discount, performance, and expense that we believe are real problems for UK Select. Millennium urges Shareholders to think through these issues carefully, and answer this question: are Shareholders best served with the existing corporate structure? In Millennium's opinion it is disingenuous to claim, as does the Board, that the Company must be "wound-up" in order to achieve Millennium's request to realise its investment. Technically the existing corporate entity would be wound-up, but the available options outlined above would provide continuity for ongoing Shareholders without liquidation of the attributable portfolio assets.

Conflict of Interest of Manager

In our opinion SWIP has an obvious conflict of interest in casting its votes at the forthcoming EGM. If they vote against resolution 1, they will likely lose assets under management and may indeed lose the entire management contract. Likewise, if they vote against resolution 2 and resolution 3, they might well irritate the existing directors who have clearly stated their preference for the re-election of the former directors. Under such circumstance, SWIP would further threaten their position as manager. Millennium views this conflict as material and impossible to evade. Millennium urges SWIP to abstain from voting altogether.

Recommendation

Millennium owns nearly 12 million shares in UK Select, more than 1 share for every 4 outstanding, and has done so for over two years. We wish to realise our investment. The status quo is untenable, yet when Millennium made an attempt to enter into a constructive dialogue with the Board, we were rebuffed. Numerous options are available to solve the Company's problems of liquidity, discount, and expense. Properly executed, these options could also address the issue of performance. The existing Board and the nominated directors all stated they will vote in favor of the proposals at the EGM. In other words, the Board of UK Select is recommending the status quo. In our view this stance is destructive to Shareholder value and benefits only the directors and Manager. UK Select must change and evolve. Millennium urges Shareholders to support a reconstruction of the Company into a better vehicle and vote AGAINST all three resolutions being proposed at the EGM.

Sincerely,

Robert Knapp
On Behalf of Millennium Partners LP

7 June 2004

MULTIMEDIA AVAILABLE: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4657797