CORPORATE BOND UNIT TRUST

Transcription

1 CORPORATE BOND UNIT TRUST REPORT FOR THE YEAR ENDED 31ST MARCH 2007

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3 St. James's Place Corporate Bond Unit Trust 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 M. S. Wilson (Chairman) A. H. Batchelor D. C. Bellamy R. Chatterton A. M. Croft I. S. Gascoigne H. J. Gladman M. R. Gravestock S. Harris D. J. Lamb M. J. Lund (Resigned 4 January 2007) W. P. Tonks S. P. Williams Secretary of the Manager St. James's Place Administration Limited Investment Adviser Wellington Management Company, LLP 75 State Street Boston Massachusetts, United States of America (Authorised by the Securities and Exchange Commission) Trustee The Bank of New York Trust and Depositary Company Limited One Canada Square London, E14 5AL 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) Auditors KPMG Audit Plc Saltire Court 20 Castle Terrace Edinburgh, EH1 2EG United Kingdom 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 of St. James's Place Corporate Bond Unit Trust During the year under review, 1 April 2006 to 31 March 2007, the St. James's Place Corporate Bond Unit Trust Income unit offer price fell by 3.7% from 122.0p to 117.5p and the Accumulation offer price (in which income is reflected in the price rather than distributed) fell by 1.1% from 187.6p to 185.5p. On the 17 May 2007, the latest available date before the printing of this report, the Income unit offer price was 115.5p and the Accumulation unit offer price was 184.2p. The estimated yield was 3.34%. The Trust's Performance The performance of the Trust since its launch in September 1995, over the five year period since March 2002 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. 01/09/95 to 31/03/02 to 31/03/06 to 31/03/07 31/03/07 31/03/07 % change % change % change St. James's Place Corporate Bond Unit Trust Income units (offer to offer) Accumulation units (offer to offer) Indices - actual FTSE UK Gilts (net income reinvested) Merrill Lynch UK Non Gilt (net income reinvested) REMEMBER THAT THE PRICE OF UNITS AND INCOME FROM THEM MAY GO DOWN AS WELL AS UP. Investment Adviser's Comments Positive economic growth, strong corporate earnings, and lower commodity prices all contributed to a favourable environment for Sterling corporate bonds over the last 12-month period. Market volatility was at an all time low until the last week in February when a sharp drop in Chinese equities, coupled with concerns over the US sub-prime housing lending practices, resulted in a flight to quality across all risk assets. Although high yield assets performed poorly, investment grade corporate bonds held in well. Important to note is the tremendous growth of the credit derivatives market that has allowed a whole new class of investors entrance to the corporate bond market. These derivatives allow investors to insure themselves against the risk of default or, alternatively, to speculate that a default will occur. Credit derivatives have led to strong demand and support of the overall credit market. The allocation to US and emerging market investment grade debt was the primary contributor to returns for the portfolio. We like the diversification benefits from the US and European corporate bond markets as the UK market is heavily weighted towards the Financials sector. We also find good value in emerging market countries that are reducing their external debt. We are wary of increased shareholder friendly activity and the rising risk of mergers and acquisitions, as they can be negative for corporate bondholders. Therefore, we favour larger companies with strong capital structures that are likely to be immune to this activity, and we avoid the industrial and retail sectors, which are more likely acquisition targets. Finally, we are overweight asset-backed securities which are AAA-rated, backed by collateral, and offer attractive yields relative to similar rated corporate bonds. Whilst corporate bond fundamentals show no signs of widespread deterioration, their valuations are fair to expensive. This is an environment where our research analyst team is critically important. We find value in short-dated issues that offer attractive yields but have less volatility than longer-dated issues. Finally we continue to favour the diversity benefits of owning and attractive valuations for US corporate bonds. Wellington Management Company, LLP 20 April

5 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 per unit is shown below: Income Accumulation Net income distributed Net income distributed per 1,000 per 1,000 Invested Invested per unit at 02/01/02 per unit at 02/01/02 Calendar year p p * Net Asset Value and Total Expense Ratio Year Units in Issue Units in Issue Market NAV per Unit NAV per Unit ended Income Accumulation NAV of Trust Income Accumulation TER** March '000 p p (%) ,671,107 68,713, , ,755,066 74,046, , ,731,419 72,326, , * To 31 March 2007 **The Total Expense Ratio (TER) is the total expenses paid by the Trust in the year against its average net asset value. The Net Asset Value (NAV) of the Trust was calculated on a mid price valuation basis to the 31 March 2006; with effect from 1 April 2006 it is calculated on a bid valuation basis in accordance with the Statement of Recommended Practice for Authorised Funds issued by the Investment Management Association in December

6 Statement of the Manager's Responsibilities in relation to the Financial Statements of the Trust The rules in the Financial Services Authority's New 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 income and the net losses 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 New Collective Investment Schemes Sourcebook. Directors H. J. Gladman London A. M. Croft 21 May

7 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 New Collective Investment Scheme provisions of the Sourcebook. For and on behalf of: The Bank of New York Trust and Depositary Company Limited London 21 May

8 Independent Auditors' Report to the Unitholders of St. James's Place Corporate Bond Unit Trust (The "Trust") We have audited the financial statements of the Trust for the period ended 31 March 2007 which comprise the Statement of Total Return, the Statement of Change in Unitholders' Net Assets, the Balance Sheet together with the related notes, the Portfolio Statement, the Summary of Material Portfolio Changes and the Distribution Table. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Trust's unitholders, as a body, in accordance with Rule of the New Collective Investment Schemes Sourcebook issued by the Financial Services Authority under section 247 of the Financial Services and Markets Act Our audit work has been undertaken so that we might state to the Trust's unitholders those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trust and the Trust's unitholders as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Manager, (St. James's Place Unit Trust Group Limited) and Auditors The Manager's responsibility for preparing the Annual Report and the financial statements in accordance with applicable law, UK financial services rules and regulations and UK Accounting Standards (UK Generally Accepted Accounting Practice) is set out in the Statement of Manager's Responsibilities on page 4. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Trust Deed, the Statement of Recommended Practice relating to Authorised Funds and the rules in the New Collective Investment Schemes Sourcebook published by the Financial Services Authority. We also report to you whether in our opinion the information given in the Manager's Report is consistent with the financial statements and whether we have received all the information and explanations necessary for the purposes of our audit. In addition we report to you if, in our opinion, proper accounting records for the Trust have not been kept or if the financial statements are not in agreement with those records. We read the other information contained in the Annual Report and consider whether it is consistent with the Audited Financial Statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Manager in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Trust's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: the financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the financial position of the Trust as at 31 March 2007 and of the net income and the net gains on the property of the Trust for the period then ended; the financial statements have been properly prepared in accordance with the Trust Deed, the Statement of Recommended Practice relating to Authorised Funds and the rules in the New Collective Investment Schemes Sourcebook published by the Financial Services Authority; the information given in the Manager's Report is consistent with the financial statements. We have received all the information and explanations which we consider necessary for the purposes of the audit. KPMG Audit Plc Saltire Court, 20 Castle Terrace, Chartered Accountants Edinburgh. 21 May

9 Statement of Total Return for the year ended 31 March 2007 Net (losses)/gains on investments Currency (losses)/gains Income Expenses Finance costs: Interest Net income before taxation Taxation Net income after taxation 01/04/06 to 31/03/07 01/04/05 to 31/03/06 Notes 2 (7,745,995) 2,852,079 (219,872) 1,227, ,862,921 9,861,920 4 (2,733,405) (2,665,443) 6 (19,170) (1,006,200) 7,110,346 6,190, (3,270) 7,110,346 6,187,007 Total return before distributions (855,521) 10,266,907 Finance costs: Distributions 6 (8,262,495) (6,185,524) Change in net assets attributable to unitholders (9,118,016) 4,081,383 Statement of Change in Unitholders' Net Assets for the year ended 31 March /04/06 to 31/03/07 01/04/05 to 31/03/06 Net assets at the start of the year 184,902, ,282,728 Movement due to creation and cancellation of units: Amounts receivable on creation of units 28,028,175 30,540,336 Amounts payable on cancellation of units (28,716,258) (19,595,202) Change in net assets attributable to unitholders Retained distribution on accumulation units Net assets at the end of the year (688,083) 10,945,134 (9,118,016) 4,081,383 4,879,106 3,593, ,975, ,902,687 The prices per unit as at 31 March 2007 were: Bid Offer p p Income units Accumulation units

10 Portfolio Statement as at 31 March 2007 Market Value % of Net Assets Security Holdings STERLING DENOMINATED BONDS (71.44%) 149,263, UK Government UK Treasury 8.5% 16/07/2007 3,590,000 3,620, UK Treasury 4% 07/09/ , , UK Treasury 4.25% 07/12/2027 8,085,000 7,671, Sovereign/Supranational European Investment Bank 6% 07/12/2028 1,410,000 1,604, European Loan Conduit FRN % 01/11/ , , Kreditanstalt fuer Wiederaufbau 5.55% 07/06/2021 2,800,000 2,905, Kreditanstalt fuer Wiederaufbau 6% 07/12/ ,000 1,079, Spain Government International Bond 5.25% 695, , /04/2029 Other Allstate Life Funding 6.375% 17/01/ , , American Express Credit 5.625% 18/08/2009 3,600,000 3,578, American International 5% 26/04/2023 4,050,000 3,827, Anglian Water Services Financing 6.293% 1,060,000 1,172, /07/2030 Annington Finance 8% 02/10/2021 1,340,000 1,606, Arran Corporate Loans FRN % 20/06/2025 1,840,000 1,840, Arran Residential Mortgages Funding % 1,309,000 1,308, /04/2036 Arran Residential Mortgages Funding % 2,500,000 2,500, /04/2056 AXA 7.125% 15/12/2020 1,025,000 1,134, BAC Capital Trust VII 5.25% 10/08/2035 1,850,000 1,758, Bank of Greece 10.75% 06/09/2010 3,670,000 4,208, Bank of Scotland 6.375% 16/08/2019 1,950,000 2,068, Barclays Bank FRN 6.875% Perpetual 3,200,000 3,378, BAT International Finance 6.5% 13/11/2008 1,850,000 1,863, Bayer 5.625% 23/05/2018 3,700,000 3,607, British Telecommunications 8% 07/12/2016 1,120,000 1,299, Centrica 5.5% 24/10/2016 2,350,000 2,287, Chester Asset Receivables Dealings 6.625% 2,300,000 2,314, /05/2010 Chester Asset Receivables Dealings 6% 15/01/2013 3,390,000 3,407, Citigroup 4.5% 03/03/2031 1,955,000 1,716, Coca-Cola Enterprises 6.5% 07/06/2021 1,600,000 1,700, Credit Suisse Group Finance 7% 05/10/2020 1,525,000 1,701, DaimlerChrysler UK Finance 5.625% 27/02/2009 1,850,000 1,837, Deutsche Telekom International Finance 7.125% 1,600,000 1,678, /09/2012 Electricite de France 5.875% 18/07/2031 1,000,000 1,063, Friends Provident FRN 6.292% Perpetual 1,000, , Gallaher 5.75% 06/02/2013 1,305,000 1,300, GE Capital UK Funding FRN % 04/05/2007 2,810,000 2,810, GE Capital UK Funding 5.125% 24/05/2023 3,715,000 3,573, Hartford Life Institutional Funding 5.375% 1,300,000 1,271, /01/2012 HSBC Bank 5.375% 22/08/2033 1,740,000 1,740, Imperial Tobacco Finance 5.5% 22/11/2016 2,000,000 1,915, Imperial Tobacco Finance 6.25% 04/12/2018 1,255,000 1,270, Koninklijke (Royal) 8.25% 11/04/2008 1,525,000 1,557, Lloyds TSB 6% Perpetual 3,330,000 3,495, Longstone Finance 4.791% ,327,814 4,127, Mellon Funding 6.375% 08/11/2011 1,000,000 1,020,

11 Portfolio Statement (continued) as at 31 March 2007 Security Holdings Market Value % of Net Assets Merrill Lynch 7.375% 17/12/2007 3,000,000 3,028, Metlife 5.25% 29/06/2020 2,330,000 2,220, Metropolitan Life Global Funding 5.875% 1,000, , /06/2009 Mitchells & Butlers Finance 5.574% 15/12/2030 1,944,762 1,977, Northern Trust 5.375% 11/03/2015 2,850,000 2,759, Northumbrian Water Finance 5.625% 29/04/2033 1,210,000 1,255, Pacific Life Funding 6% 16/08/ , , Paragon Mortgages % 15/05/2034 1,696,520 1,697, Pemex Project Funding Master Trust 7.5% 1,250,000 1,333, /12/2013 Principal Financial 5.625% 24/09/2013 2,260,000 2,236, RCI Banque 5.125% 16/05/2009 2,750,000 2,701, Residential Mortgage Securities % 2,399,760 2,399, /11/2031 RMAC % 12/06/2035 1,500,000 1,506, RMAC Securities % 12/06/ , , Royal Bank of Scotland FRN % 27/03/2009 2,000,000 1,999, Royal Bank of Scotland FRN 5.125% Perpetual 3,690,000 3,474, RWE Finance 6.25% 03/06/2030 2,300,000 2,504, Scotland Gas Networks 4.875% 21/12/2034 1,470,000 1,426, SLM Student Loan Trust 5.45% 15/03/2038 2,000,000 1,977, Spirit Issuer 5.472% 28/12/2034 1,780,000 1,874, Tesco 5% 24/03/2023 2,150,000 2,010, Tesco 5.2% 05/03/2057 1,800,000 1,736, Thames Water Utilities Finance 6.75% 16/11/2028 1,310,000 1,535, Travelers Insurance Co Institutional Funding 5.75% 1,300,000 1,292, /12/2011 Tyco International 6.5% 21/11/ , , Wachovia Bank 5.25% 01/08/2023 1,800,000 1,727, Wal-Mart Stores 4.875% 19/01/2039 2,815,000 2,627, Zurich Finance 6.625% Perpetual 1,720,000 1,768, EURO DENOMINATED BONDS (3.91%) 2,984, Belgium Treasury Bill 0% 14/06/2007 2,745,000 1,848, France Telecom 4.75% 21/02/2017 1,680,000 1,135, US DOLLAR DENOMINATED BONDS (21.16%) 20,932, Banco Mercantil del Norte SA 6.135% 13/10/2016 1,800, , Cia Brasileira de Bebidas 10.5% 15/12/ , , Comcast Cable Communications 6.875% 15/06/2009 2,750,000 1,452, DaimlerChrysler 5.77% 13/03/2009 1,815, , DaimlerChrysler 7.75% 18/01/ , , Holmes Financing 5.63% 15/07/2040 2,730,000 1,391, International Lease Finance 5.4% 15/02/2012 2,370,000 1,224, Kinder Morgan Energy Partners 6.5% 01/02/2037 1,125, , Mexico Government International Bond 6.06% 2,650,000 1,362, /01/2009 Midamerican Energy 6.125% 01/04/ , , Potash Corp of Saskatchewan 7.125% 15/06/2007 3,000,000 1,534, Prudential Financial 5.1% 14/12/2011 1,145, , Russian Agricultural Bank FRN 6.97% 21/09/2016 1,730, , Russia Government International Bond 10% 1,005, , /06/2007 SB Capital SA for Sberbank 5.93% 14/11/2011 3,545,000 1,828, Sprint Nextel 6% 01/12/ , , Telefonica Emisiones 6.421% 20/06/ , , Telefonos de Mexico 4.5% 19/11/2008 1,660, , Vale Overseas 6.25% 23/01/ , ,

12 Portfolio Statement (continued) as at 31 March 2007 Security Holdings Market Value % of Net Assets Verizon New England 4.75% 01/10/2013 1,950, , Vodafone 5.625% 27/02/2017 5,415,000 2,729, Vneshtorgbank 5.96% 01/08/2008 1,995,000 1,018, DERIVATIVES (0.44%) 68, UK Treasury Bond Futures June (438,901) (0.24) Germany Federal Republic 10 Years Futures Short (13) 10, June 2007 US Treasury Notes 10 Years Futures Short June 2007 (115) 48, US Treasury Notes Futures Short June 2007 (18) 8,532 - US Treasury Notes 2 Years Futures Short June 2007 (15) (6,094) - US Treasury Notes 5 Years Short Futures June 2007 (110) (16,783) (0.01) Bought 607,000 for 416,833 Settlement (2,913) - 20/06/2007 Sold 2,719,000 for 1,858,877 Settlement 4,762-20/06/2007 Sold 2,522,000 for 1,723,938 Settlement 4,159-20/06/2007 Bought $US 2,518,000 for 1,283,757 Settlement 2,740-20/06/2007 Bought $US 1,511,000 for 770, Settlement 1,369-20/06/2007 Bought $US 1,227,000 for 631,546 Settlement (4,647) - 20/06/2007 Bought $US 774,000 for 400,999 Settlement (5,547) - 20/06/2007 Bought $US 4,152,000 for 2,139,126 Settlement (17,785) (0.01) 20/06/2007 Sold $US 19,379,000 for 10,082,569 Settlement 181, /06/2007 Sold $US 15,856,000 for 8,246,393 Settlement 145, /06/2007 Sold $US 15,101,000 for 7,858,106 Settlement 142, /06/2007 Sold $US 863,000 for 446,852 Settlement 5,928-20/06/2007 Sold $US 342,000 for 177,140 Settlement 2,405-20/06/2007 Sold $US 347,000 for 179,605 Settlement 2,315-20/06/2007 Portfolio of Investments^ 173,248, Total other assets 6,727, Net assets 179,975, Comparative figures shown in brackets relate to 31 March The portfolio valuation for the current year uses bid prices in line with the requirements of FRS 26. As there is no requirement under FRS 26 to restate the prior year portfolio valuation, mid-market prices have been used in line with the accounting policy at the time. Any derivative contracts were traded on an eligible derivatives exchange. ^ Including derivative liabilities of (492,670) 10

13 Balance Sheet as at 31 March 2007 Assets Portfolio of Investments Debtors Cash and bank balances Total other assets Total assets Liabilities Derivative liabilities 31/03/07 31/03/06* Notes 173,740, ,771, ,720,641 4,333, ,731,090 3,178,488 8,451,731 7,511, ,192, ,283,162 (492,670) (495,911) Creditors 10 (729,204) (966,133) Bank overdrafts 9 (329,789) (515,447) Distribution payable on income units (665,255) (402,984) Total other liabilities (1,724,248) (1,884,564) Total liabilities (2,216,918) (2,380,475) Net assets attributable to unitholders 179,975, ,902,687 *Restated figures, see note 1(i) 11

14 Summary of Material Portfolio Changes Cost Purchases UK Treasury 4.25% 07/03/ ,233,990 UK Treasury 4% 07/09/ ,858,681 Dutch Treasury Certificate 0% 30/06/2006 8,201,944 UK Treasury 4.25% 07/12/2027 7,881,636 Interest Rate Swap 5.176% 06/10/2014 Offset 7,000,000 Interest Rate Swap Fixed % 22/09/2014 Offset 7,000,000 Belgium Treasury Bill 0% 13/07/2006 6,937,329 United States Treasury Bill 0% 05/10/2006 6,392,896 Residential Mortgage Securities % 14/11/2031 5,750,000 Ace INA 6.7% 15/05/2036 4,704,943 Telecom Italia 5.875% 19/05/2023 4,682,234 Belgium Treasury Bill 0% 14/12/2006 4,598,954 France Government Bond 6.5% 25/10/2006 4,590,843 Bank of Greece 10.75% 06/09/2010 4,400,183 American International 5% 26/04/2023 3,999,198 Paragon Mortgages % 15/05/2034 3,866,047 McDonald's 5.875% 23/04/2032 3,715,524 GE Capital UK Funding 5.125% 24/05/2023 3,683,683 Bayer 5.625% 23/05/2018 3,643,890 UK Treasury 8.5% 16/07/2007 3,625,507 Other purchases 165,454,347 Total purchases for the year 289,221,829 Major purchases are those that constitute the largest twenty of the total purchases for the year. Proceeds Sales UK Treasury 4.25% 07/03/ ,331,109 UK Treasury 4% 07/09/ ,266,800 Dutch Treasury Certificate 0% 30/06/2006 8,248,857 France Telecom 5.625% 23/01/2034 7,152,640 Interest Rate Swap % 22/09/2014 7,105,186 Interest Rate Swap 5.176% 06/10/2014 7,039,755 Belgium Treasury Bill 0% 13/07/2006 7,034,551 United States Treasury Bill 0% 05/10/2006 6,475,727 UK Treasury 4.25% 07/12/2055 6,353,835 Rabobank Nederland 4.75% 30/09/2009 5,474,681 United States Treasury Note 5.375% 15/02/2031 5,192,408 HSBC Bank USA New York 5.875% 01/11/2034 4,976,048 Ace INA 6.7% 15/05/2036 4,763,249 Telecom Italia 5.875% 19/05/2023 4,678,662 France Government Bond 6.5% 25/10/2006 4,556,154 Enterprise Inns 6.5% 06/12/2018 4,522,929 Prudential Financial 6.125% 19/12/2031 4,484,258 Spain Government International Bond 5.25% 06/04/2029 4,219,943 McDonald's 5.875% 23/04/2032 3,751,401 Network Rail Infrastructure Finance 4.75% 22/01/2024 3,715,688 Other sales 153,186,459 Total sales for the year 281,530,340 Major sales are those that constitute the largest twenty of the total sales for the year. 12

15 7 Notes to the Financial Statements for the year ended 31 March (a) (b) (c) (d) (e) (f) (g) Accounting policies 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 Service Authority's New Collective Investment Schemes Sourcebook. They have been prepared in accordance with applicable accounting standards and in accordance with the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the IMA in December As a result of adopting the SORP issued in December 2005, which amongst other things applies FRS26 to authorised funds, the basis of valuing the portfolio of investments has changed from mid market value to bid value. The prior year comparative information has not been restated to reflect this change. The adjustments that would be required for the prior year figures to be restated for this change are as follows: The value of the portfolio of investments in the Balance Sheet would be reduced and gains on investments in the Statement of Total Return would be reduced. This would result in a reduction in the net assets attributable to unit holders at 1 April 2006 and as the amount is not significant no adjustment has been made to the opening assets at this date in the Statement of Changes in Unitholders' Net Assets. Paragraph 2.56 of the SORP recommends, inter alia, the disclosure in certain circumstances of an analysis of the investment portfolio by credit rating. The Manager does not currently have a licence with the relevant credit rating agency and is therefore unable to include this information in the Financial Statements. Recognition of income Dividends receivable from equity investments are credited to the income account when they are first quoted ex-dividend. Interest on deposits and on fixed interest securities are accounted for on an accruals basis. Income on bonds issued at a deep discount and gilt strips, taking into account the amortisation of such a discount or premium, are spread over the life of the security. Other income is accounted for on a receipts basis. Expenses All expenses of the Trust are deducted from income with the exception of dealing charges and stamp duty reserve tax which are deducted from capital. From 1 October 2006, the management expenses of the Trust are deducted from capital. Valuation of investments Listed investments have been valued at bid market value at close of business on 31 March 2007 (31/03/06: mid market value), net of any accrued interest which is included in the Balance Sheet as an income related item. Unquoted, illiquid and suspended investments are valued by the Manager on the advice of the Investment Adviser. Foreign currencies 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. Deferred tax 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 Distributions are made in respect of quarters ended 30 June, 30 September, 31 December and 31 March. At the end of the accounting period all remaining income, less expenses and taxation, will be attributable to unitholders. In the case of income unitholders this will be paid as a distribution. In the case of accumulation unitholders the distribution will be reinvested. 13

16 7 Notes to the Financial Statements (h) Equalisation (continued) Equalisation applies only to units purchased during the distribution period. It is the accrued income 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. (i) Presentation of the Financial Statements The presentation of these Financial Statements has been amended from the previous year to comply with the requirements of FRS 25: Presentation and Disclosure. FRS 25 requires unitholders interests to be treated as debt rather than equity and this has meant a change to the way the Balance Sheet is presented and a change in terminology used in the primary Financial Statements. Distributions of the Trust are disclosed as finance costs and the distribution note has been renamed accordingly. Interest payable is now also disclosed as a finance cost and is now presented as part of note 6 rather than note 4 (expenses). FRS25 also requires derivative liabilities to be shown separately on the Balance Sheet. The above changes have had the effect of changing the presentation in the Financial Statements. There is no impact on the return or the total net assets of the Trust for the current year or prior year. The comparative figures have been restated in line with the new presentation requirements. Net (losses)/gains on investments The net (losses)/gains on investments during the year comprise: Non-derivative securities Futures and swap contracts Forward currency contracts Net (losses)/gains on investments Income Bank interest Interest on debt securities Interest on short term deposits Interest rate swaps Total income Expenses Payable to the Manager Management charge Payable to the Trustee Trustee's fees Other expenses Audit fee FSA fee Professional fees Registrar's fees Safe custody fees Total expenses 01/04/06 to 31/03/07 01/04/05 to 31/03/06 (10,695,816) 4,714,561 (931,293) (533,994) 3,881,114 (1,328,488) (7,745,995) 2,852,079 Included in note 2 for the current year is a loss of 274,608 relating to the restatement of the value of the Portfolio of Investments from mid to bid. 01/04/06 to 31/03/07 01/04/05 to 31/03/06 176, ,908 9,608,255 8,820,848 70,850-7, ,164 9,862,921 9,861,920 01/04/06 to 01/04/05 to 31/03/07 31/03/06 2,308,864 2,287,288 21,682 21,500 6,815 7, ,037 6, , ,387 15,362 15, , ,655 2,733,405 2,665,443 14

17 7 Notes to the Financial Statements 5. (a) (b) Taxation Analysis of charge in year: Irrecoverable overseas tax Factors affecting current tax charge for the year: (continued) 01/04/06 to 01/04/05 to 31/03/07 31/03/06-3,270 The tax assessed for the year is lower than the standard rate of corporation tax in the UK for an authorised unit trust 20% (2006: 20%). The differences are explained below: Net income before taxation 7,110,346 6,190,277 (c) (d) 6. Corporation Tax of 20% (2006: 20%) Effects of: Expense relief for overseas tax Tax payable to Pep and ISA unit holders Movement in excess management expenses Irrecoverable overseas tax Tax deductible interest distributions Current tax charge for year (note 5a) Deferred taxation: There is no provision required for deferred taxation at the balance sheet date. Distributions and interest 1,422,069 1,238,055 - (651) (484,192) - 230, ,270 (1,168,188) (1,237,404) - 3,270 Authorised Unit Trusts are exempt from tax on capital gains. Therefore, any capital return is not included in the above reconciliation. Factors that may affect future tax charges At 31 March 2007 the fund had net surplus management expenses of 1,454,154 (31 March 2006: 304,084) in respect of which a deferred tax asset has not been recognised. This is because the fund is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and accordingly, it is unlikely that the fund will be able to reduce future tax liabilities through the use of existing surplus expenses. Finance costs The distributions take account of income received on the creation of units and income deducted on the cancellation of units and comprises: First interim distribution 30/06/2006 Second interim distribution 30/09/2006 Third interim distribution 31/12/2006 Final distribution Income tax withheld Add: Income deducted on cancellation of units Deduct: Income received on creation of units Net distributions for the year Interest Total finance costs 01/04/06 to 31/03/07 01/04/05 to 31/03/06 1,269, ,319 1,468,625 1,373,352 2,186,098 1,257,791 2,181,643 1,444,758 1,168,188 1,237,404 8,274,504 6,240, ,710 48,099 (112,719) (103,199) 8,262,495 6,185,524 19,170 1,006,200 8,281,665 7,191,724 15

18 7 Notes to the Financial Statements (continued) Movement between net income and net distributions 01/04/06 to 31/03/07 01/04/05 to 31/03/06 Net income after taxation 7,110,346 6,187,007 Management charge paid from capital 1,151,554 - Add: brought forward from previous year 2, Less: carried forward to next year (1,774) (2,369) Net distributions for the year Debtors Sales awaiting settlement Amounts receivable for creation of units Accrued income Total debtors Cash and bank balances Cash and bank balances: sterling Cash and bank balances: overseas Amounts held at futures clearing houses and brokers Total cash and bank balances Bank overdraft: overseas Amounts due to futures clearing houses and brokers Total bank overdrafts 10. Creditors Amounts payable for cancellation of units Accrued expenses Income tax payable Interest payable on swaps Total creditors Units in issue 8,262,495 6,185,524 31/03/07 31/03/06 771, , ,993 3,712,911 3,625,367 4,720,641 4,333,360 31/03/07 31/03/06 3,542,651 3,176,633-1, ,439-3,731,090 3,178, , , , ,447 31/03/07 31/03/06 197,969 75,929 44,521 39, , , , , ,133 At the year end there were Income units of 45,731,419 (31/03/06: 43,755,066) and Accumulation units of 72,326,892 (31/03/06: 74,046,422) resulting in equivalent Income units of 161,128,974 (31/03/06: 157,749,533). 16

19 7 Notes to the Financial Statements 12. (continued) Related party transactions 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 Unitholders' Net Assets. The net balances due from St. James's Place Unit Trust Group Limited at the year end in respect of these transactions was 38,283 (31/03/06: 632,064). Trustee's fees and interest payable to the The Bank of New York Trust and Depositary Company Limited and their associates are shown in notes 4 and 6 respectively. The net balances due from The Bank of New York Trust and Depositary Company Limited and their associates at the year end in respect of these transactions was nil (31/03/06: nil). The Manager, St. James's Place Unit Trust Group Limited, is a subsidiary of St. James's Place Wealth Management Group plc ("SJPWMG"). Two fellow subsidiaries of SJPWMG, St. James's Place UK plc and St. James's Place International plc, invest some of their life and pension policyholders' funds into the St. James's Place Corporate Bond Unit Trust. The value of these investments at the year end was 64,121,279 (31/03/06: 69,334,855). 13. Capital commitments and contingent liabilities On 31 March 2007, the Trust had no capital commitments (31/03/06: nil) and no contingent liabilities (31/03/06: nil). The Trust has a contingent asset at the balance sheet date relating to VAT recoverable. The contingent asset has arisen as a result of changes to the policy of HM Revenue and Customs (HMRC) concerning VAT exemption for the management of authorised collective investment schemes (UK law, items 9 and 10 of group 5, schedule 9, to the VAT Act 1994). These changes are in accordance with the Business Brief 07/06 (item 3) from HMRC in light of the European Court of Justice judgment case C-196/04, Abbey National and Inscape Investment Trust, and have effect from 1st October To qualify for the VAT exemption, certain criteria must satisfy the legislative requirements and this is currently under review. Should the criteria for exemption be satisfied, the trust will be in a position to recover VAT incurred in respect of registration fees and investment administration fees, backdated over three years. It is not possible at this time to calculate an accurate monetary estimate of the amount recoverable. 14. Financial instruments In accordance with the investment objectives, as stated on page 21, the Trust may hold certain financial instruments. These comprise: Fixed income securities and floating rate securities; Cash (including overdrafts) and short-term debtors and creditors that arise directly from its operations; Borrowings used to finance investment activity; and Derivatives, the purpose of which is to manage the market risk arising from the Trust's investment activities (and related financing). In accordance with the requirements of the rules in the Scheme Documents, the Trust is not permitted to trade in any other financial instruments. The Trust's use of financial instruments during the year satisfies these regulatory requirements. The main risks arising from the Trust's financial instruments are market price risk, foreign currency risk, interest rate risk and liquidity risk. The Manager's policies for managing these risks are summarised below. These policies have remained unchanged since the beginning of the year to which these financial statements relate. 17

20 7 Notes to the Financial Statements (continued) (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 responsibility for monitoring the portfolio to ensure compliance with the investment objectives and that an acceptable risk reward profile is maintained. The Manager may use derivative instruments to hedge the value of the investment portfolio against market and stock specific risk. (b) Foreign currency risk The income 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 income 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 the income received. The Trust may hedge the sterling value of investments that are denominated in other currencies. 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 income in currencies other than sterling and movements in exchange rates can affect the sterling values of this income. The Trust converts all receipts of income into sterling on or near the date of receipt, it does not however hedge or otherwise seek to avoid exchange rate risk on income accrued but not received. Currency An analysis of monetary assets and liabilities for the significant currencies at the year end is shown below: Net foreign currency assets Net foreign currency assets/ (liabilities) 31/03/07 Nonmonetary exposures 31/03/06 Nonmonetary exposures Monetary exposures Total Monetary exposures Total 3,680, ,076, ,757,408 2,824, ,942, ,766,206 (3,749) 3,006,446 3,002,697 (17,410) (27,073,622) (27,091,032) (275,578) 22,491,167 22,215,589 (143,582) (27,628,905) (27,772,487) GBP EUR USD 3,401, ,574, ,975,694 2,663, ,239, ,902,687 (c) Interest rate risk The Trust invests in fixed rate securities. Any change to the interest rates relevant for particular securities may result in either income increasing or decreasing, or the Manager being unable to secure similar returns on the expiry of contracts or the sale of securities. In addition changes to prevailing rates or changes in expectations of future rates may result in an increase or decrease in the value of the securities held. In general if interest rates rise the income potential of the Trust also rises but the value of fixed rate securities will decline (along with certain expenses calculated by reference to the assets of the Trust). A decline in interest rates will in general have the opposite effect. Interest receivable on bank deposits or payable on bank overdraft positions will be affected by fluctuations in interest rates. 18

21 7 Notes to the Financial Statements (continued) The interest rate risk profile of the Trust's financial assets and liabilities at 31 March 2007 was: This is consistent with the exposure during both the current and prior year. Fixed rate Floating rate financial Fixed rate Fixed rate weighted weighted average period for Financial assets/ (liabilities) assets/ financial average which rate is not carrying Currency (liabilities) assets interest rate fixed interest Total % Years 31/03/07 GBP 27,687, ,257, ,812, ,757,408 EUR (3,749) 2,984, ,416 3,002,697 USD 628,007 20,028, ,559,065 22,215,589 Total 28,311, ,269,748 3,394, ,975,694 31/03/06 GBP 5,744, ,865, ,156, ,766,206 EUR 3,452,395 3,775, (34,319,009) (27,091,032) USD 10,455,674 28,721, (66,949,703) (27,772,487) Total 19,652, ,362,803 2,887, ,902,687 (d) Liquidity risk The Trust's assets mainly comprise securities that can be readily sold. The main liability of the Trust is the redemption of any units that the investors wish to sell. (e) Derivatives risk The Manager may use derivative instruments to hedge the value of the investment portfolio against market and stock specific risk through investment in warrants, options 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. Holding these derivatives does not materially impact the risk or performance of the Fund and accordingly no sensitivity analysis has been presented. (f) Other risks 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 Trust 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. (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) Other short-term debtors and creditors Other short-term debtors and creditors have been excluded from disclosures of financial instruments. (i) Fair value of financial assets and liabilities Securities held by the Trust are valued at bid-price (see Note 1(d)). The difference between this value and the fair value of the securities is immaterial. Other financial assets and liabilities of the Trust are included in the Balance Sheet at fair value. 15. Portfolio transaction costs There were no transactions costs incurred during the year to 31 March 2007 as no commission is payable on the buying and selling of bonds. 19

22 Distribution Tables Distributions in pence per unit Group 1 First interim Units purchased prior to 1 April 2006 Second interim Units purchased prior to 1 July 2006 Third interim Units purchased prior to 1 October 2006 Final Units purchased prior to 1 January 2007 Group 2 First interim Units purchased on or after 1 April 2006 to 30 June 2006 Second interim Units purchased on or after 1 July 2006 to 30 September 2006 Third interim Units purchased on or after 1 October 2006 to 31 December 2006 Final Units purchased on or after 1 January 2007 to 31 March 2007 Income Gross income Income tax Net income Equalisation Distributions paid/payable 31/05/07 Distributions paid to 15/05/06 Group 1 (p) (p) (p) (p) (p) (p) First interim Second interim Third interim Final Group 2 (p) (p) (p) (p) (p) (p) First interim Second interim Third interim Final Accumulation Gross income Income tax Net income Equalisation Distributions paid/payable 31/05/07 Distributions paid to 15/05/06 Group 1 (p) (p) (p) (p) (p) (p) First interim Second interim Third interim Final Group 2 (p) (p) (p) (p) (p) (p) First interim Second interim Third interim Final All distributions are interest distributions and consist of 100% unfranked income. 20

23 General Information The Trust St. James's Place Corporate Bond Unit 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 23 August The Unit Trust became subject to the rules of the Financial Services Authority's New Collective Investment Scheme Sourcebook with effect from 1st August 2006, and is now 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 maximise the long term return in sterling from capital and net income combined by investment in a portfolio consisting mainly of bonds issued by EC companies, including UK companies. The aim of the Scheme is to give the optimum balance between security and total return. The Trust Deed for the Scheme requires that not less than 20% of the Scheme's property must be invested in United Kingdom securities. 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 and a PEP. Non-Resident Unitholders - European Union Savings Directive Unitholders resident in most European Union countries (not UK) should be aware that the Trust is covered by the European Union Savings Directive, which came into force on 1 July The Manager is required to identify and report your distribution and repurchase transactions to the UK tax authorities, who are in turn required to pass this information to most other European Union national tax authorities. 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 Financial Times. Minimum Investment The minimum lump sum investment is 1,500, thereafter the minimum additional investment is 500 per Trust. The minimum monthly investment to the Unit Trust Investment Plan is 100 ( 100 minimum per Trust) and the minimum monthly increment is 30 per Trust. The minimum annual investment to the Unit Trust Investment Plan is 1,500 per Trust and the Minimum annual increment is 500 per Trust. Management Charges The Trust Deed permits the following management charges which are receivable by the Manager: (a) A Preliminary Charge of 3.75 per cent which is included in the offer price of the Units. (b) An Annual Management Charge at a rate 1.25 per cent of the value of the Trust. 21

24 General Information (continued) Income Distributions Income distributions are made quarterly on or before 31 May, 31 August, 30 November and 28 February each year. Certificates for unitholders' tax credits are sent on the 31 May, 31 August, 30 November and 28 February each year. Accumulation Distributions Income due to accumulation unitholders is reflected in the price of their units but a tax certificate for tax purposes will be sent on or before 31 May, 31 August, 30 November and 28 February each year. Report A report is sent semi-annually to all unitholders on or before 30 November and 31 May 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 2007/2008 exceed 9,200 (2006/2007 8,800). To calculate capital gains on accumulation units, the total amount of reinvested net income (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. 22

25

26 SJP Stock Item 719 Perivan Financial Print

27

28 The St. James s Place Group provides investment management, risk management and banking products and services. Members of the St. James s Place Group are authorised and regulated by the Financial Services Authority. The St. James s Place Partnership and the title Partner are the marketing terms used to describe the representatives of the St. James s Place Group. St. James s Place Unit Trust Group Limited: Registered Office St. James s Place House, Dollar Street, Cirencester, Gloucestershire GL7 2AQ United Kingdom Registered in England Number