RECOVERY UNIT TRUST FOR THE YEAR ENDED 30 SEPTEMBER 2012

Transcription

1 RECOVERY UNIT TRUST FOR THE YEAR ENDED 30 SEPTEMBER 2012

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3 Manager St. James's Place Unit Trust Group Limited P.O. Box 9034, Chelmsford, CM99 2XA United Kingdom Freephone: (Authorised and regulated by the Financial Services Authority) Directors of the Manager D. C. Bellamy A. M. Croft I. S. Gascoigne H. J. Gladman resigned 31/12/11 D. J. Lamb W. P. Tonks resigned 31/12/11 Secretary of the Manager St. James's Place Administration Limited Investment Adviser GAM London Limited 12 St. James's Place London, SW1A 1NX United Kingdom (Authorised and regulated by the Financial Services Authority) Trustee BNY Mellon Trust & Depositary (UK) Limited 160 Queen Victoria Street London, EC4V 4LA United Kingdom (Authorised and regulated by the Financial Services Authority) Registrar International Financial Data Services (UK) Limited IFDS House St. Nicholas Lane Basildon, SS15 5FS United Kingdom (Authorised and regulated by the Financial Services Authority) Auditor PricewaterhouseCoopers LLP Erskine House Queen Street Edinburgh, EH2 4NH United Kingdom (From 31 January 2012, PricewaterhouseCoopers LLP replaced KPMG Audit Plc as Auditor to the Trust) Prospectus and Manager's Reports Copies of the up to date Prospectus (Scheme Particulars) and latest Manager's Report and Financial Statements for the range of St. James's Place Unit Trusts can be requested from a member of the St. James's Place Partnership or, at any time during normal business hours, from the Administration Centre at P.O. Box 9034, Chelmsford CM99 2XA. Freephone:

4 Report of the Manager During the year under review, 1 October 2011 to 30 September 2012, the St. James's Place Recovery Unit Trust Income unit offer price rose by 10.1% from 321.7p to 354.3p and the Accumulation unit offer price (in which revenue is reflected in the price rather than distributed) rose by 10.3% from 352.8p to 389.1p. On the 15 November 2012, the latest available date before the printing of this report, the Income unit offer price was 348.6p and the Accumulation unit offer price was 384.3p. The estimated yield was 0.40%. The Trust's Performance The performance of the Trust since its launch in February 1997, over the five year period since September 2007 and over the year under review is shown below, together with figures for the most commonly quoted indices in comparable markets where the major proportion of the Trust has been invested. Income units (offer to offer) Accumulation units (offer to offer) Indices - actual MSCI World MSCI World NDR Source: Lipper for Fund returns 03/02/97 to 30/09/07 to 30/09/11 to 30/09/12 30/09/12 30/09/12 % change % change % change REMEMBER THAT THE PRICE OF UNITS AND REVENUE FROM THEM MAY GO DOWN AS WELL AS UP. PLEASE BE AWARE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. Investment Adviser's Comments Macroeconomic concerns continued to dominate the investment landscape for the period under review. Following volatile markets in the final quarter of 2011, risk appetite recovered sharply in early 2012 with improved US economic data and the European Central Bank's provision of liquidity support to European banks. The early optimism did not last, however. The return of serious Euro Zone tensions and weaker data from both the US and China prompted investors to return to the perceived safety of assets with low earnings and cash flow volatility. However, by September 2012 co-ordinated policy action by the world's major central banks had triggered another 'risk-on' phase in markets. Over the reporting period, the US market performed strongly along with defensive sectors such as consumer staples and healthcare. Financials recovered some of their earlier losses as the risk of bank failures receded. Mining was a notable underperformer, impacted mainly by slower Chinese demand. The fund's underperformance versus the MSCI World Index over the period stems from the final quarter of last year, while it slightly outperformed in the first nine months of In retrospect, we underestimated the extent to which investors would seek safety and were willing to forego future returns, finding the US market particularly expensive in context of extremely elevated profit margins. The portfolio's overweighting of Japan was another detractor. We have been searching for a catalyst to unlock the deep value embedded in the market and believe that the Bank of Japan's more aggressive action to support exporters, alongside evidence of shareholder-friendly policies such as share buybacks, may act as such triggers. 2

5 Report of the Manager (continued) The natural process of deleveraging has caused growth to slow, the effects of which have been most keenly felt in Europe where the political structure has been inadequate for dealing with the problem. Although corporate earnings have remained strong, they are challenged by the fiscal contraction required in all major developed markets. It is therefore understandable that investors have hidden in areas offering stability. Finding these situations fully valued we are drawn to less crowded segments of the market that look attractive on fundamental analysis. In particular, we continue to favour situations offering strong internal dynamics or where resilient growth looks undervalued, while maintaining a healthy cash balance. GAM London Limited 15 October

6 Performance Record Unit Price History Calendar year * Income Accumulation Highest Lowest Highest Lowest Offer Bid Offer Bid p p p p Distributions The record of net distributions paid/payable per unit is shown below: Income Accumulation Net revenue distributed Net revenue distributed per 1,000 per 1,000 Invested Invested per unit 02/01/07 per unit at 02/01/07 Calendar year p p * Net Asset Values Year ended September Units in Issue Units in Issue Market NAV per Unit NAV per Unit Income Accumulation NAV of Trust Income Accumulation '000 p p 4,636,244 90,194, , ,557,488 92,179, , ,248,521 85,252, , Ongoing Charges Figure The Ongoing Charges Figure for the year ended 30 September 2012 was 2.19%. From July 2012, following the implementation of the UCITS IV Directive, the Total Expense Ratio (TER) has been replaced by an Ongoing Charges Figure (OCF). Both figures aim to provide an indication of the annual operating expenses of the unit trust, the main difference between them is that the OCF additionally includes certain portfolio transaction based fees charged by the custodian. Risk and Reward Profile The synthetic risk and reward indicator for the St. James s Place Recovery Unit Trust, as disclosed in its most recent Key Investor Information Document (KIID), is a 6. It was calculated using performance data up to 31 May The risk category is recalculated weekly and in the period from 31 May 2012 to 30 September 2012, the risk category did not change. * To 30 September

7 Investment Assets as at 30 September 2012 Security Holdings Market Value 000 % of Net Assets AUSTRALIA (1.59%) - - FINLAND (0.00%) Nokia 510, FRANCE (3.53%) 10, Alcatel-Lucent 2,680,292 1, Euro Disney 132, Groupe Eurotunnel 701,372 3, Havas 1,135,699 3, Veolia Environnement 191,265 1, GERMANY (1.33%) 7, Allianz 24,780 1, Arcandor 1,068, Commerzbank 1,882,831 2, Deutsche Telekom 454,264 3, GREECE (0.02%) Piraeus Bank 347, ITALY (0.71%) 8, Assicurazioni Generali 41, Finmeccanica 843,802 2, Italy Certificati di Credito del Tesoro 0% 31/12/2012 EUR50, Parmalat 1,044,020 1, Telecom Italia 2,258,446 1, UniCredit 903,378 2, JAPAN (27.85%) 76, Autobacs Seven 46,360 1, Daiei 606, Daiichi Sankyo 214,700 2, Daiwa Securities 421, East Japan Railway 23, FamilyMart 95,200 2, Fuji Media 3,822 3, Fujitsu 659,300 1, Hoshizaki Electric 46, Inpex 974 3, Jafco 107,700 1, Kansai Electric Power 268,200 1, Kao 133,800 2, Mabuchi Motor 17, Marui 382,300 1, Mazda Motor 4,866,000 3, Misawa Homes 339,200 3, Mitsubishi UFJ Financial 2,204,200 6, MS&AD Insurance 111,500 1, NEC 2,394,000 2, Nexon 43, Nintendo 20,600 1, Nippon Sheet Glass 577, Nippon Telegraph & Telephone 219,600 6, Nomura 2,732,300 6, Pola Orbis 69,100 1, Resona 912,400 2, Secom 65,100 2, Seven & I 108,300 2,

8 Investment Assets (continued) as at 30 September 2012 Security Holdings Market Value 000 % of Net Assets Sony 141,200 1, Sumitomo Mitsui Financial 476,700 9, Suzuki Motor 55, TSI 81, NETHERLANDS (0.00%) 4, DE Master Blenders 560,398 4, NEW ZEALAND (0.53%) 1, Air New Zealand 3,296,589 1, SWITZERLAND (0.87%) 2, STMicroelectronics 713,843 2, THAILAND (1.15%) 4, TMB Bank 125,001,541 4, UNITED KINGDOM (39.90%) 156, AEA Technology 13,778, Anite 1,053,209 1, Aviva 3,915,961 12, BP 2,917,748 12, BT 5,752,923 13, Cable & Wireless Communications 6,760,411 2, CSR 559,182 1, GlaxoSmithKline 709,731 10, Innovation 11,443,161 2, International Consolidated Airlines 2,296,138 3, Invensys 2,192,885 5, ITV 8,709,097 7, Lloyds Banking Group 25,651,182 9, Monitise 7,837,595 2, Pearson 699,100 8, QinetiQ 1,300,303 2, Rentokil Initial 3,515,499 2, Royal Bank of Scotland 3,991,470 10, RSA Insurance 5,527,881 6, Sainsbury (J) 2,625,285 9, Segro # 837,406 1, St. James's Place Money Market Unit Trust (Acc) 15,746,833 16, Unilever 331,109 7, Vectura 3,157,755 2, Vernalis 11,823,723 2, UNITED STATES (21.05%) 52, Alcoa 1,008,066 5, Boston Scientific 1,633,375 5, Citigroup 52,266 1, DuPont 116,663 3, Eastman Kodak 83, ebay 137,729 4, First Solar 81,408 1, General Electric 560,714 7, Hewlett-Packard 221,264 2, Hillshire Brands 98,143 1, Pfizer 913,794 14, SuperValu 174, Walgreen 211,609 4,

9 Investment Assets (continued) as at 30 September 2012 Security Holdings Market Value 000 % of Net Assets DERIVATIVES (-0.08%) Bought JPY280,000,000 for GBP2,230,098 (2) - Settlement 18/10/2012 Sold JPY261,000,000 for GBP2,084,015 Settlement 7-18/10/2012 Sold JPY315,000,000 for GBP2,510,720 Settlement 4-18/10/2012 Sold JPY8,202,000,000 for GBP65,932, Settlement 18/10/2012 Investment assets ^ 326, Total other assets (net) 3, Net assets 329, Comparative figures shown in brackets relate to 30 September All investments held are listed, unless otherwise stated. Derivative contracts were traded on an eligible derivatives exchange. During the year under review the Manager decided to place some of the sterling cash held on deposit into the St. James s Place Money Market Unit Trust in order to spread risk across a number of institutions. The St. James s Place Money Market Unit Trust is highly liquid and is rated AAA by Standard & Poors. This investment is a related party. This investment is a related party. # Real Estate Investment Trust (REIT). ^ Including investment liabilities of ( 1,732). 7

10 Material Portfolio Changes Cost Purchases 000 St. James's Place Money Market Unit Trust (Acc) 128,640 BP 8,073 US Treasury 0.875% 30/11/2016 7,059 US Treasury 0.375% 15/03/2015 7,025 Alcoa 6,858 Aviva 4,692 Lloyds Banking Group 4,206 Mazda Motor 4,104 Hewlett-Packard 3,912 Deutsche Telekom 3,260 Proceeds Sales 000 St. James's Place Money Market Unit Trust (Acc) 131,008 El Paso 15,296 US Treasury 0.875% 30/11/2016 7,319 US Treasury 0.375% 15/03/2015 7,205 Sage 6,944 St Barbara 5,669 Cable & Wireless Worldwide 5,275 US Treasury 0.75% 15/03/2013 4,203 US Treasury 0.5% 15/11/2013 4,181 US Treasury 0.5% 15/10/2013 4,152 This investment is a related party. 8

11 Statement of the Manager's Responsibilities in relation to the Financial Statements of the Trust The rules in the Financial Services Authority's Collective Investment Schemes Sourcebook ("the Rules") require the Manager to prepare Financial Statements for each annual accounting period which give a true and fair view of the financial position of the Trust as at the end of the year and of the net revenue and the net capital gains on the property of the Trust for the year then ended. In preparing the Financial Statements the Manager is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; comply with the requirements of the Statement of Recommended Practice relating to Authorised Funds and the Trust Deed; follow applicable UK Accounting Standards (UK Generally Accepted Accounting Practice); and prepare Financial Statements on the going concern basis unless it is inappropriate to presume that the Trust will continue in operation. The Manager is responsible for keeping proper accounting records and for the management of the Trust in accordance with its Trust Deed, Prospectus and the Rules. The Manager has a general responsibility for taking such steps as are reasonably open to it to prevent and detect fraud and other irregularities. Directors' Certificate This report is certified in accordance with the requirements of the rules in the Financial Services Authority's Collective Investment Schemes Sourcebook. Directors A. M. Croft London D. J. Lamb 19 November

12 Statement of Trustee's Responsibilities The Trustee is under a duty to take into custody and to hold the property of the Scheme in trust for the holders of units. It is also the duty of the Trustee to enquire into the conduct of the Manager in the management of the Scheme and to ensure that the Scheme is managed in accordance with all applicable rules and restrictions in each annual accounting period, and to report thereon to unitholders. Report of the Trustee In our opinion, the Manager has managed the scheme, in all material aspects, during the period covered by this Report in accordance with the investment and borrowing powers and the restrictions applicable to the scheme, and otherwise in accordance with the Trust Deed and the rules in the Financial Services Authority's Collective Investment Scheme provisions of the Sourcebook. For and on behalf of: BNY Mellon Trust & Depositary (UK) Limited London 19 November

13 (the "Trust") Independent Auditors' Report to the Unitholders We have audited the financial statements of the Trust for the year ended 30 September 2012 which comprise the statement of total return, the statement of change in net assets attributable to unitholders, the balance sheet, the related notes and the distribution table. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and the Statement of Recommended Practice Financial Statements of Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for Authorised Funds ). Respective responsibilities of Authorised Fund Manager and auditors As explained more fully in the Authorised Fund Manager s Responsibilities Statement the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Trust s unitholders as a body in accordance with paragraph of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trust s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements In our opinion the financial statements: give a true and fair view of the financial position of the Trust at 30 September 2012 and of the net revenue and the net capital gains of the scheme property of the Trust for the year then ended; and have been properly prepared in accordance with the Statement of Recommended Practice for Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. Opinion on other matters prescribed by the Collective Investment Schemes sourcebook In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Fund Manager's Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Collective Investment Schemes sourcebook requires us to report to you if, in our opinion: proper accounting records for the Trust have not been kept; or the financial statements are not in agreement with the accounting records and returns. PricewaterhouseCoopers LLP Chartered Accountants & Statutory Auditors Edinburgh 19 November 2012 The Financial Statements are published on www sjp.co.uk which is a website maintained by St. James s Unit Trust Group Limited. The maintenance and integrity of the website is the responsibility of the Authorised Fund Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the presentation and dissemination of the Financial Statements may differ from legislation in their jurisdictions. 11

14 Statement of Total Return for the year ended 30 September 2012 Income Net capital gains/(losses) Revenue Expenses Finance costs: Interest Net revenue before taxation Taxation Net revenue after taxation 01/10/11 to 30/09/12 01/10/10 to 30/09/11 Notes ,251 (22,854) 3 8,971 8,931 4 (7,261) (7,946) 6 (2) (2) 1, (421) (456) 1, Total return before distribution 33,538 (22,327) Finance costs: Distribution 6 (1,290) (527) Change in net assets attributable to unitholders from investment activities 32,248 (22,854) Statement of Change in Net Assets Attributable to Unitholders for the year ended 30 September /10/11 to 30/09/12 01/10/10 to 30/09/ Opening net assets attributable to unitholders 322, ,059 Movement due to creation and cancellation of units: Amounts receivable on creation of units 3,425 21,107 Amounts payable on cancellation of units (29,019) (13,719) Stamp duty reserve tax Change in net assets attributable to unitholders from investment activities (see above) Retained distribution on accumulation units Class actions Closing net assets attributable to unitholders (25,594) 7,388 (73) (92) 32,248 (22,854) 1, , ,006 The presentation of the financial statements has been changed from 's to 000's, the comparatives have been restated accordingly. The prices per unit as at 28 September 2012 (unaudited) were: Income units units Accumulation units units Bid Offer p p

15 Balance Sheet as at 30 September 2012 Assets Investment assets Debtors Cash and bank balances Total other assets Total assets 30/09/12 30/09/11 Notes , , ,652 3, ,310 3,339 4,962 6, , ,239 Liabilities Investment liabilities (2) (242) Creditors 10 (1,509) (1,968) Distribution payable on income units (55) (23) Total other liabilities (1,564) (1,991) Total liabilities (1,566) (2,233) Net assets attributable to unitholders 329, ,006 The presentation of the financial statements has been changed from 's to 000's, the comparatives have been restated accordingly. 13

16 7 Notes to the Financial Statements for the year ended 30 September Accounting and Distribution policies (a) Basis of accounting The Financial Statements have been prepared under the historical cost basis, as modified by the revaluation of investments, in compliance with the Financial Services Authority's Collective Investment Schemes Sourcebook. They have been prepared in accordance with applicable UK accounting standards and in accordance with the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the IMA in October 2010 (IMA SORP 2010). (b) Revenue Dividends receivable from equity investments are credited to the revenue account when the investments are first quoted ex-dividend. Interest on deposits is accounted for on an accruals basis. Revenue on interest bearing assets is recognised on an effective interest basis. Revenue from other authorised collective investment schemes is recognised when the investments are quoted ex-dividend. Management fee rebates from underlying funds will be taken to revenue or capital depending on the treatment adopted in the underlying funds. Management fee rebates received from the St. James's Place Money Market Unit Trust are recognised as revenue on an accruals basis and form part of the distribution. (c) Expenses All expenses of the Trust are deducted from revenue with the exception of handling charges and stamp duty reserve tax which are deducted from capital. (d) Valuation of investments Listed investments have been valued at bid market value at midday on 28 September 2012 (30/09/11: bid market value at midday), net of any accrued interest which is included in the Balance Sheet as a revenue related item. (e) Foreign exchange Assets and liabilities have been translated into sterling at the exchange rates prevailing at the Balance Sheet date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. (f) Taxation Provision is made for corporation tax at the current rate on the excess of taxable revenue over allowable expenses. UK dividend revenue is disclosed net of any related tax credit. Overseas dividends continue to be disclosed gross of any foreign tax suffered, the tax element being separately disclosed in the tax note. (g) (h) (i) Deferred tax is provided for on the liability method on all timing differences. A deferred tax asset is only recognised to the extent that a timing difference will be of future benefit. Distribution policy The manager has chosen to pay all revenue less revenue expenses and taxation as a final distribution at the end of the accounting period. In the case of income unitholders this will be paid as a distribution. In the case of accumulation unitholders the distribution will be reinvested. Equalisation Equalisation applies only to units purchased during the distribution period. It is the accrued revenue element of the purchase price of all such units and is refunded to holders of these units as a return of capital. Being capital it is not liable to income tax, but must be deducted from the cost of units for capital gains tax purposes. Special dividends Special dividends are treated as revenue or a repayment of capital reflecting the facts of each particular case. 14

17 7 Notes to the Financial Statements (j) (continued) (k) Derivatives The Trust may enter into permitted transactions such as derivative contracts or forward foreign currency transactions. Where these transactions are used to protect or enhance revenue, the returns are included within net revenue in the Statement of Total Return. Where the transactions are used to protect or enhance investments, the returns are treated as capital and included within gains/losses on investments in the Statement of Total Return. Any open positions in these type of transactions at the year end are included in the Balance Sheet at their mark to market value. (l) Underwriting commission Scrip dividends The ordinary element of stocks received in lieu of cash dividends is recognised as revenue and where applicable, is included in the distribution. In the case of enhanced scrip dividends, the value of the enhancement is treated as capital. Underwriting commission is recognised when the issue takes place. Where the Trust is required to take up some or all of the shares underwritten, an appropriate proportion of the commission earned is deducted from the cost of those shares. Net capital gains/(losses) Non-derivative securities Forward currency contracts Currency losses Handling charges Net capital gains/(losses) Revenue 01/10/11 to 30/09/12 01/10/10 to 30/09/ ,499 (15,386) 5,748 (7,087) (989) (374) (7) (7) 32,251 (22,854) 01/10/11 to 30/09/12 01/10/10 to 30/09/ UK dividends 3,305 4,193 Overseas dividends 4,009 3,835 Distributions from Regulated Collective Investment Schemes Interest distributions Revenue from UK REITs 55 - Bank interest Interest on debt securities Management charge rebate on underlying holdings Scrip dividends 1, Underwriting commission - 8 Total revenue 8,971 8,931 15

18 7 Notes to the Financial Statements (continued) 4. Expenses 01/10/11 to 01/10/10 to 30/09/12 30/09/ Payable to the Manager Management charge 6,190 7,024 Payable to the Trustee Trustee's fees Other expenses Audit fee 7 6 Other professional fees 2 - Registrar's fees* 1, Safe custody fees Tax & compliance fee - 2 Total expenses 1, ,261 7, (a) (b) (c) *From 1 August 2012 the basis on which registration fees are charged to the schemes was changed by the Manager, with the agreement of the Trustee. As detailed in the Prospectuses, registration fees are now based on a combination of the total number of St. James s Place Unit Trust Group clients (unitholders) as well as the total number of investments held (unitholdings); and are allocated to the individual unit trusts based on the relative overall values of clients investments. Copies of the Prospectuses are available free of charge on request to the Manager. Taxation 01/10/11 to 30/09/12 01/10/10 to 30/09/ Analysis of charge in year: Irrecoverable overseas tax Factors affecting current tax charge for the year: The tax assessed for the year is higher than the standard rate of corporation tax in the UK for an authorised unit trust of 20% (2011: 20%). The differences are explained below: Net revenue before taxation 1, Corporation Tax at 20% (2011: 20%) Effects of: UK dividends not subject to corporation tax Non taxable scrip dividends Non taxable foreign dividends Movement in excess management expenses Irrecoverable overseas tax Current tax charge for year (note 5a) (671) (839) (282) (146) (802) (767) 1,413 1, Authorised Unit Trusts are exempt from tax on capital gains, therefore any capital return is not included in the above reconciliation. Deferred taxation: There is no provision required for deferred taxation at the balance sheet date. 16

19 7 Notes to the Financial Statements (continued) (d) Factors that may affect future tax charges At the year end, after offset against revenue taxable on receipt, there is a potential deferred tax asset of 8,130,218 (30/09/11: 6,717,455) relating to surplus management expenses. No deferred tax asset was recognised in the current or prior year as it was considered unlikely the Fund would generate sufficient taxable profits in the future to utilise these amounts Finance costs Distribution and interest The distribution takes account of revenue received on the creation of units and revenue deducted on the cancellation of units and comprises: 01/10/11 to 30/09/12 01/10/10 to 30/09/ Final distribution 1, Add: Revenue deducted on cancellation of units 18 - Deduct: Revenue received on creation of units - (1) Net distribution for the year Interest Total finance costs Movement between net revenue and net distribution 1, , /10/11 to 30/09/12 01/10/10 to 30/09/ Net revenue after taxation 1, Expenses paid out of capital 2 - Add: brought forward from previous year Less: carried forward to next year Net distribution for the year Debtors Sales awaiting settlement Accrued revenue Income tax recoverable Overseas tax recoverable Total debtors Cash and bank balances Cash and bank balances: Sterling Cash and bank balances: Overseas Total cash and bank balances Creditors Purchases awaiting settlement Amounts payable for cancellation of units Accrued expenses Total creditors (1) 1, /09/12 30/09/ ,877 1,602 1, ,652 3,645 30/09/12 30/09/ ,305 3, ,310 3,339 30/09/12 30/09/ , ,509 1,968 17

20 7 Notes to the Financial Statements Units in issue (continued) At the year end there were Income units of 4,248,521 (30/09/11: 4,557,488) and Accumulation units of 85,252,985 (30/09/11: 92,179,797) resulting in equivalent Income units of 98,239,937 (30/09/11: 105,798,559). Related party transactions St. James's Place Unit Trust Group Limited and BNY Mellon Trust & Depositary (UK) Limited together with their associates are related parties and regarded as controlling parties by virtue of having the ability to act in respect of operations of the Trust. The Manager's service charge paid to St. James's Place Unit Trust Group Limited is shown in note 4 and details of the value of units created and cancelled by St. James's Place Unit Trust Group Limited are shown in the Statement of Change in Net Assets Attributable to Unitholders. The net balances due from St. James's Place Unit Trust Group Limited at the year end in respect of these transactions was 687,766 (30/09/11: due to 365,735). Trustee's fees and interest payable to the BNY Mellon Trust & Depositary (UK) Limited and their associates are shown in notes 4 and 6 respectively. The net balances due from BNY Mellon Trust & Depositary (UK) Limited and their associates at the year end in respect of these transactions was nil (30/09/11: nil). The Manager, St. James's Place Unit Trust Group Limited, is a subsidiary of St. James's Place Wealth Management Group plc ('SJPWMG'). A fellow subsidiary of SJPWMG, St. James's Place International plc, invests some of its life and pension policyholders' funds into the St. James's Place Recovery Unit Trust. The value of these investments at the year end was 378,285 (30/09/11: 365,735). Included in the investment portfolio is a holding of 15,746,833 units (30/09/11: 18,036,639) in St. James's Place Money Market Unit Trust (a St. James's Place Unit Trust Group Limited fund) with a market value of 16,389,807 (30/09/11: 18,716,963). Revenue and management charge rebates from this holding are shown in note 3 as interest distributions and management charge rebates on the underlying holdings. The Manager is a member of the St. James's Place plc group of companies whose ultimate holding company is Lloyds Banking Group plc. On advice of the investment adviser the scheme holds investments in Lloyds Banking Group plc. The investment adviser has been appointed to act as discretionary investment adviser to the scheme by St. James s Place Unit Trust Group. St. James s Place Unit Trust Group has given the investment adviser complete discretion in the investment of the property of the scheme in accordance with the Regulations, the Trust Deed and the Prospectus. The value of these investments at the year end was 9,960,354 (30/0911: 4,735,195). 13. Capital commitments and contingent liabilities On 30 September 2012, the Trust had no capital commitments (30/09/11: nil) and no contingent liabilities (30/09/11: nil). 14. Financial instruments In accordance with the investment objectives, as stated on page 23, the Trust holds certain financial instruments. These comprise: Equity shares; interest bearing assets and units in collective investment schemes; Cash (including overdrafts) and short-term debtors and creditors that arise directly from its operations; and Derivative transactions which the Trust may enter into (principally futures contracts, forward foreign currency contacts, swaps and options) the purpose of which is to manage the market risk arising from the Trust's investment activities (and related financing). The rules in the Scheme Documents set out the financial instruments in which the Trust may invest. The Trust's use of financial instruments during the year satisfies these requirements. 18

21 7 Notes to the Financial Statements (continued) 15. Risk management The Manager s objectives in managing investment risk are to ensure that the investment profile of the Trust is consistent with its stated investment objectives and risk profile, and to ensure appropriate liquidity. Day to day responsibility for managing investment risk is delegated to the Investment Adviser, who is required to manage the Trust in accordance with FSA regulations, the Prospectus and the terms of their Investment Management Agreement with the Manager. The Manager monitors the activities of the Investment Adviser, through a variety of mechanisms including the following: Initial and ongoing due diligence of Investment Adviser investment and risk management procedures including on site reviews; Periodic reviews of the investments held by the Trust and their compliance with investment objectives and liquidity requirements; and Ongoing review of the investment performance of the Trust against appropriate benchmarks. The main risks arising from the Trust's financial instruments are market price risk, foreign currency risk, credit risk and liquidity risk. The Manager's policies for managing risks are summarised below. These policies have remained unchanged since the beginning of the year to which these financial statements relate. (a) Market price risk Market price risk represents the potential loss the Trust might suffer through holding market positions in the face of price movements. The Manager has delegated the investment management of the portfolio to an external Investment Adviser who determines the asset allocation and minimises the risk associated with particular countries or industry sectors, whilst continuing to follow the Trust s investment objectives. The Manager has the responsibility for monitoring the portfolio to ensure compliance with the investment objectives and that an acceptable risk reward profile is maintained. (b) Foreign currency risk The revenue and capital value of the Trust s investments can be significantly affected by currency translation movements as a proportion of the Trust s assets and revenue are denominated in currencies other than sterling, which is the Trust s functional currency. The Manager has identified three principal areas where foreign currency risk could impact the Trust: Movements in exchange rates affect the value of investments; Movements in exchange rates affect short term timing differences; and Movements in exchange rates affect revenue received. The Trust may be subject to short term exposure to exchange rate movements, for instance where there is a difference between the date an investment purchase or sale is entered into and the date when settlement of the proceeds occurs. When the Trust enters into such a transaction which will involve the buying or selling of foreign currency in order to complete, a foreign exchange contract is entered into as soon as possible after the initial transaction in order to minimise the exchange rate risk. The Trust receives revenue in currencies other than sterling and movements in exchange rates can affect the sterling values of this revenue. The Trust converts all receipts of revenue into sterling on or near the date of receipt, it does not however hedge or otherwise seek to avoid exchange rate risk on revenue accrued but not received. 19

22 7 Notes to the Financial Statements (continued) An analysis of monetary assets and liabilities for all currencies at the year end is shown below: Net foreign currency assets Net foreign currency assets 30/09/12 30/09/11 Nonmonetary Non- Monetary Monetary monetary Currency exposures exposures Total exposures exposures Total GBP AUD EUR JPY NZD THB USD , , ,243 76, , , ,112 5, ,462 33, ,809 20,811 (67,550) 76,684 9,134 (72,714) 89,686 16, ,947 1, ,705 1,717-4,566 4,566-3,688 3, ,350 52, ,775 68,342 4, , ,817 4, , ,006 (c) Interest rate risk Interest receivable on bank deposits or payable on bank overdraft positions will be affected by fluctuations in interest rates. (d) Credit risk (e) Liquidity risk Liquidity risk arises where liabilities cannot be met when they fall due or can only be met at an uneconomic price. For instance, this could arise if the Trust faces significant redemptions in a short period of time. In order to manage this risk the manager monitors the Trust with the aim of ensuring that it contains diversified liquid assets, that the Trust possesses sufficient liquidity for the purpose of meeting the redemption of units, and that the Trust has sources of borrowing available to it. (f) The Trust s investments and cash are held on its behalf by State Street Bank and Trust Company (acting as agent), the custodian to the Trust, and its appointed sub custodians. Bankruptcy or insolvency of the custodian or its sub custodians may cause the Trust s rights with respect to securities to be delayed. This risk is managed through ongoing monitoring of the custodian and periodic reviews of its procedures for selecting and monitoring sub custodians, together with ad hoc reviews of custodian and sub custodian credit ratings. Certain transactions in securities that the Trust enters into expose it to the risk that the counterparty will not deliver the investment (purchase) or cash (sale) after the fund has fulfilled its responsibilities. The external Investment Adviser selects acceptable counterparties through which investments are bought and sold. The Manager has responsibility for monitoring the process by which these counterparties are selected to minimise risk. Derivative risk The Manager may use derivative instruments to hedge the value of the investment portfolio against market, currency and stock specific risk through investment in warrants, options forwards and futures. The purpose of the financial instruments is efficient portfolio management. In particular futures may be used to implement the investment policy in a timely manner and to manage market risk arising from the time lag between funds being receivable or payable by the Trust and investment and disinvestment in underlying securities. Forwards have been used to manage currency risk. As the trust is not considered a sophisticated fund, the manager uses the commitment approach to measure the global exposure to derivatives. 20

23 7 Notes to the Financial Statements (continued) (g) Maturity profile of financial liabilities All financial liabilities of the Trust at the year end are due to settle in one year or less, or on demand. (h) Fair value of financial assets and liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the Balance Sheet, and their fair values. 16. Portfolio transaction costs Analysis of total trade costs. Purchases Sales 01/10/11 to 01/10/10 to 01/10/11 to 01/10/10 to 30/09/12 30/09/11 30/09/12 30/09/ Non-derivative securities 250, , , ,079 Commissions (141) (170) Taxes (1) (1) Total costs (142) (171) Total trades in the year after transaction costs 250, , , ,908 21

24 Distribution Tables Distribution in pence per unit Group 1 Group 2 Income Net revenue Equalisation Distribution payable 30/11/12 Distribution paid 30/11/11 Group 1 (p) (p) (p) (p) Final Group 2 (p) (p) (p) (p) Final Accumulation Final Units purchased on or after 1 October 2011 to 30 September 2012 Net revenue Equalisation Distribution payable 30/11/12 Distribution paid 30/11/11 Group 1 (p) (p) (p) (p) Final Group 2 (p) (p) (p) (p) Final Corporate Tax Final Units purchased prior to 1 October 2011 A unitholder liable to corporation tax receives this distribution, excluding equalisation, as follows: Final % of the dividend, together with the tax credit, is received as franked investment income. Final % of the dividend is received as an annual payment (non-foreign element) received after deduction of income tax at the lower rate and is liable to corporate tax. The tax deemed to have been deducted is treated as income tax. Final % of the dividend is received as an annual payment (foreign element) received after deduction of income tax at the lower rate and is liable to corporate tax. It is treated as foreign income in the hands of the corporate investor and is liable to corporation tax. The associated deemed tax is treated as foreign tax in the hands of the investor, who may be able to claim double tax relief. Investors cannot reclaim any of this deemed tax on the foreign element from HM Revenue and Customs. 22

25 General Information The Trust is an authorised Unit Trust scheme under section 243 of the Financial Services and Markets Act (2000) and is constituted by a Trust Deed dated 21 January The Unit Trust is subject to the rules of the Financial Services Authority's Collective Investment Scheme Sourcebook and is classified as a UCITS Scheme. The Trust Manager The Manager of the Trust is St. James's Place Unit Trust Group Limited which is a member of the IMA and is authorised and regulated by the Financial Services Authority. Investment Objectives The objective is to achieve capital growth and income. It is intended that the Scheme will invest principally but not exclusively in UK and European equities. The Scheme will also invest in international equities. The Scheme will be managed with a view to investing in the shares of companies which are considered as having good long term recovery potential. There are no specific restrictions on the investment of the Scheme including as to economic sector or geographical area except as set out in the Scheme Prospectus and as provided in COLL. It is the Manager's intention that the assets of the Unit Trust will be invested so that the Unit Trust will be eligible for inclusion in an ISA. European Savings Directive It is the Manager's intention that the Trust will not normally hold 15% or more of its value in money debt instruments. Unit Dealings Dealings on the Trust take place on a daily basis. Purchase or sale instructions can be made by telephone or in writing to St. James's Place Unit Trust Group Limited, P.O. Box 9034, Chelmsford, CM99 2XA, United Kingdom, freephone: The Manager adopts a policy of forward pricing, i.e. the order will be transacted on the dealing day following receipt of the client's instructions, or if received before noon on the dealing day, on that dealing day. In the case of telephone purchases of units from the Manager, settlement must be by return of post after receipt of the contract note. In the case of telephone redemptions, the proceeds will not become payable until the receipt at the Administration Centre of a written request. Telephone instructions are not accepted for ISA wrapped investments or the Unit Trust Investment Plan (Regular Premium Unit Trust). A contract note confirming the subscription or redemption price and the number of units involved will be forwarded, together with a cancellation notice, where appropriate, on the next business day. The most recent issue and redemption prices will be published in the Daily Telegraph and on the Manager's website: Minimum Investment The minimum lump sum investment is 1,500, thereafter the minimum additional investment is 1,000. The minimum monthly investment to the Unit Trust Investment Plan is 150 and the minimum monthly increment is 50. The minimum annual investment to the Unit Trust Investment Plan is 1,500 and the minimum annual increment is 500. Management Charges The Trust Deed permits the following management charges which are receivable by the Manager: (a) A Preliminary Charge of 5 per cent which is included in the offer price of the Units. (b) An Annual Management Charge at a rate of 1.9 per cent of the value of the Trust. 23

26 General Information (continued) Income Distributions Income distributions are made annually on or before 30 November each year. Accumulation Distributions Revenue due to accumulation unitholders is reflected in the price of their units. Tax Vouchers Income unitholders that receive income distributions by direct credit and accumulation unitholders (where the distribution income is reinvested) receive an annual consolidated tax voucher in May with all the relevant payment and tax information required to complete a tax return. Tax vouchers will be enclosed if income unitholders receive payment by cheque. Report A report is sent semi-annually to all unitholders on or before 30 November and 31 March each year. Capital Gains Tax The Trust is not liable to tax on capital gains and an individual holding units will not be liable to capital gains tax unless the total chargeable gains for the tax year 2012/2013 exceed 10,600 (2011/ ,600). To calculate capital gains on accumulation units, the total amount of reinvested net revenue (shown on the annual tax credit vouchers) should be added to the base cost of the units purchased. Unitholders should consult their professional advisers for any advice regarding their tax position. 24

27

28 UK members of the St. James s Place Wealth Management Group are authorised and regulated by the Financial Services Authority. St. James s Place Unit Trust Group Limited: Registered Office St. James s Place House, 1 Tetbury Road, Cirencester, Gloucestershire GL7 1FP United Kingdom. Registered in England Number Perivan Financial Print Recovery (11/12)