Global Equity Income UNIT TRUST FOR THE YEAR ENDED 31 MARCH 2017
Manager St. James's Place Unit Trust Group Limited PO Box 9034, Chelmsford, CM99 2XA United Kingdom Freephone: 0800 027 1031 (Authorised and regulated by the Financial Conduct Authority) Directors of the Manager D. C. Bellamy A. M. Croft I. S. Gascoigne D. J. Lamb Investment Adviser Manulife Asset Management (US) LLC 197 Clarendon Street Boston, MA 02117 United States of America (Authorised and regulated by the Securities and Exchange Commission) Trustee BNY Mellon Trust & Depositary (UK) Limited 160 Queen Victoria Street London, EC4V 4LA United Kingdom (Authorised and regulated by the Financial Conduct Authority) Registrar International Financial Data Services (UK) Limited IFDS House St. Nicholas Lane Basildon, SS15 5FS United Kingdom (Authorised and regulated by the Financial Conduct Authority) Independent Auditors PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh, EH3 8EX 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 PO Box 9034, Chelmsford CM99 2XA. Freephone: 0800 027 1031 1
Report of the Manager The Report of the Manager consists of The Trust, Investment Objectives & Policy, The Trust's Performance, Risk and Reward Profile, Investment Adviser's Comments and Portfolio Statement. The Trust St. James's Place Global Equity Income 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 12 March 2012. The Unit Trust is subject to the rules of the Financial Conduct Authority's Collective Investment Scheme Sourcebook and is classified as a UCITS Scheme. Investment Objectives & Policy The investment objective of the Scheme is to provide income, together with the potential for longterm capital appreciation, through investing primarily in global equities. The Scheme is also permitted to invest in other types of transferable securities, units and/or shares in collective investment schemes, money market instruments, cash and near cash, and deposits. The Scheme is permitted to invest in derivatives and forward transactions for the purposes of efficient portfolio management (including hedging). It is the Manager s intention that the level of income generated by the investments of the Scheme will enable it to qualify for inclusion in the Investment Management Association s Global Equity Income Sector. 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. The Trust's Performance The performance of the Trust since its launch in April 2012 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. St. James's Place Global Equity Income Unit Trust L Income units (offer to offer) L Accumulation units (offer to offer) H Accumulation units (offer to offer)* Y Accumulation units (offer to offer)* Indices - actual MSCI World (Total Return) Source: Lipper for Fund returns 10/04/12 to 31/03/16 to 31/03/17 31/03/17 % change % change +71.3 +23.2 +95.3 +26.9 - +10.6 - +5.9 +112.3 +32.7 * Class H Accumulation and Y Accumulation units were made available on 1 December 2016 and the performance shown is from that date. 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. 2
Report of the Manager Risk and Reward Profile The synthetic risk and reward indicator for the St. James s Place Global Equity Income Unit Trust, as disclosed in its most recent Key Investor Information Document (KIID), is a 5. It was calculated using indicative performance data for the type of investments held, as the Scheme itself was only launched on 10 April 2012. Investment Adviser's Comments During the 12 months to 31 March 2017, global equities were strong across the board, as investors shrugged off periods of volatility to push indices higher. The UK s vote to leave the European Union increased volatility, as did elections in the US and in Europe, but investors remained optimistic, encouraged by stronger-than-expected economic data. Financials sector stocks rallied following the US elections, owing to optimism about potentially supportive policy under the Donald Trump administration. Asia and emerging markets performed well, as Europe lagged. Central bank policy was in focus throughout the period, as the US Federal Reserve (Fed) held off on raising interest rates until December and March, while other global central banks maintained an accommodative policy. The strategy s stock selections in the financial and healthcare sectors contributed to performance. Individual contributors included The PNC Financial Services Group, Huntington Bancshares and HSBC all rose as the broader financial sector responded favorably to the US election results and the Fed s interest rate increases. The strategy s stock selection in the consumer discretionary sector detracted from performance, as did its overweight position in the consumer staples sector. Individual detractors included Japan Tobacco, SES and Macy s. Japan Tobacco reported earnings that reflected weaker sales momentum and a stronger Japanese yen, which hurt overseas earnings. SES declined after announcing it would issue shares to purchase the remaining interest in O3b Networks, a satellite service operator of which SES was already the majority shareholder. Macy s reported weakerthan-expected sales. We believe that valuations remain elevated, so much so that the enthusiasm following the US presidential election has stretched traditional price/earnings multiples even further. Global earnings growth expectations for 2017 remain at approximately 13%. Markets have become increasingly dependent on this estimate materializing. If it does materialise, it could ensure smooth performance throughout 2017. We believe that international markets remain less expensive than the US and we plan to maintain the strategy s overweight exposure to those markets. We continue to focus on income and on identifying highquality companies trading at low multiples. Manulife Asset Management (US) LLC 18 April 2017 3
Comparative Table as at 31 March 2017 Net Asset Value and Ongoing Charges Figure 31/03/17 31/03/16 31/03/15 L Income Change in net assets per unit (p) (p) (p) Opening net asset value per unit 131.18 133.53 121.27 Return before operating charges* 37.31 2.78 17.87 Operating charges (2.50) (2.14) (2.07) Return after operating charges* 34.81 0.64 15.80 Distributions on income units (4.10) (2.99) (3.54) Closing net asset value per unit 161.89 131.18 133.53 *after direct transaction costs of: 0.12 0.12 0.23 Performance Return after charges 26.54% 0.48% 13.03% Other information Closing net asset value ( 000) 250,729 178,274 142,300 Closing number of units 154,875,489 135,897,778 106,565,260 Operating charges** 1.70% 1.70% 1.65% Direct transaction costs 0.08% 0.10% 0.19% Prices Highest unit price (p) 173.80 145.10 142.90 Lowest unit price (p) 126.50 115.30 115.70 31/03/17 31/03/16 31/03/15 L Accumulation Change in net assets per unit (p) (p) (p) Opening net asset value per unit 146.41 145.05 128.10 Return before operating charges* 42.12 3.71 19.15 Operating charges (2.83) (2.35) (2.20) Return after operating charges* 39.29 1.36 16.95 Distributions on accumulation units (4.62) (3.26) (3.76) Retained distributions on accumulation units 4.62 3.26 3.76 Closing net asset value per unit 185.70 146.41 145.05 *after direct transaction costs of: 0.14 0.14 0.25 Performance Return after charges 26.84% 0.94% 13.23% Other information Closing net asset value ( 000) 2,112,338 1,413,095 1,092,361 Closing number of units 1,137,473,504 965,149,097 753,082,378 Operating charges** 1.70% 1.70% 1.65% Direct transaction costs 0.08% 0.10% 0.19% Prices Highest unit price (p) 198.10 157.60 154.00 Lowest unit price (p) 141.20 126.30 124.20 4
Comparative Table as at 31 March 2017 Net Asset Value and Ongoing Charges Figure H Accumulation Change in net assets per unit 31/03/17 Opening net asset value per unit 167.50 Return before operating charges* 19.16 Operating charges (1.30) Return after operating charges* 17.86 Distributions on accumulation units (1.61) Retained distributions on accumulation units 1.61 Closing net asset value per unit 185.36 *after direct transaction costs of: 0.15 Performance Return after charges 10.66% Other information Closing net asset value ( 000) 10 Closing number of units 5,423 Operating charges** 2.21% Direct transaction costs 0.08% Prices Highest unit price (p) 197.80 Lowest unit price (p) 166.70 (p) 5
Comparative Table as at 31 March 2017 Net Asset Value and Ongoing Charges Figure Y Accumulation Change in net assets per unit 31/03/17 Opening net asset value per unit 167.50 Return before operating charges* 19.45 Operating charges (0.57) Return after operating charges* 18.88 Distributions on accumulation units (1.62) Retained distributions on accumulation units 1.62 Closing net asset value per unit 186.38 *after direct transaction costs of: 0.15 Performance Return after charges 11.27% Other information Closing net asset value ( 000) 31 Closing number of units 16,976 Operating charges** 0.96% Direct transaction costs 0.08% Prices Highest unit price (p) 190.20 Lowest unit price (p) 166.70 H Accumulation and Y Accumulation units were made available on 1 December 2016. **Operating charges are prepared using the same methodology as the ongoing charges appearing in the KIID, based on the information in this report. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure is calculated using the last available published price for a given unit class in the period compared to the equivalent for the prior period. The price per the financial statements values the fund on a bid-price basis. The financial statements unit class valuation is based on market prices on the last day of the period, which can differ from the intraday pricing point of the Trust. (p) 6
Portfolio Statement as at 31 March 2017 Security Holdings Market Value 000 % of Net Assets AUSTRALIA (2.90%) 98,461 4.17 Amcor 10,654,747 98,461 4.17 FRANCE (3.01%) 105,080 4.45 Sanofi 483,533 34,924 1.48 Total 1,745,727 70,156 2.97 GERMANY (0.26%) 50,043 2.12 Deutsche Boerse 684,084 50,043 2.12 HONG KONG (1.20%) 81,263 3.44 China Mobile 5,321,500 46,774 1.98 CK Hutchison 3,490,736 34,489 1.46 IRELAND (1.69%) - - JAPAN (6.06%) 142,449 6.03 Bridgestone 1,422,000 45,980 1.95 Canon 1,189,900 29,657 1.25 Japan Tobacco 2,572,400 66,812 2.83 LUXEMBOURG (4.49%) 63,347 2.68 Samsonite International 12,842,700 37,495 1.59 SES 1,406,173 25,852 1.09 NETHERLANDS (9.57%) 272,115 11.52 Heineken 1,036,962 70,894 3.00 Koninklijke Ahold Delhaize 4,753,437 80,399 3.40 Koninklijke Philips 2,420,986 62,045 2.63 Wolters Kluwer 1,775,341 58,777 2.49 SINGAPORE (1.06%) - - SWITZERLAND (8.70%) 298,082 12.61 Chubb 590,576 64,998 2.75 Nestle 1,324,850 81,591 3.45 Novartis 1,185,165 71,134 3.01 Roche 389,071 80,359 3.40 TAIWAN (0.00%) 48,237 2.04 Taiwan Semiconductor Manufacturing ADR 1,816,357 48,237 2.04 UNITED KINGDOM (10.15%) 181,117 7.66 British American Tobacco 1,447,869 76,578 3.24 HSBC 8,860,121 57,901 2.45 St. James's Place Money Market Unit Trust L Acc 44,656,453 46,638 1.97 7
Portfolio Statement as at 31 March 2017 Security Holdings Market Value 000 % of Net Assets UNITED STATES (48.59%) 1,001,312 42.37 Apple 574,146 66,357 2.81 Arthur J Gallagher 629,186 28,684 1.21 Exxon Mobil 972,789 65,355 2.77 Honeywell International 623,850 62,833 2.66 Huntington Bancshares 4,001,416 43,637 1.85 Johnson & Johnson 520,213 52,069 2.20 Macy's 896,936 21,220 0.90 Microsoft 1,415,670 74,692 3.16 Mondelez International 845,215 29,370 1.24 Oracle 2,761,217 99,051 4.19 Philip Morris International 578,927 52,772 2.23 PNC Financial Services 631,302 61,612 2.61 Procter & Gamble 813,883 58,947 2.50 Ralph Lauren 362,505 23,839 1.01 United Technologies 635,841 57,413 2.43 Verizon Communications 1,435,315 56,548 2.39 Wells Fargo 2,225,292 100,502 4.25 Whirlpool 339,639 46,411 1.96 Investment Assets 2,341,506 99.09 Total other assets (net) 21,602 0.91 Net assets 2,363,108 100.00 Comparative figures shown in brackets relate to 31 March 2016. All investments held are listed, unless otherwise stated. Stocks shown as ADRs represent American Depositary Receipts. 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. 8
Material Portfolio Changes Cost Purchases 000 St. James's Place Money Market Unit Trust L Acc 399,476 Oracle 88,155 Chubb 60,718 Heineken 53,954 China Mobile 47,697 Taiwan Semiconductor Manufacturing ADR 41,222 Exxon Mobil 41,097 Japan Tobacco 40,385 Amcor 39,391 Koninklijke Philips 36,835 Proceeds Sales 000 St. James's Place Money Market Unit Trust L Acc 386,918 Arthur J Gallagher 53,386 Apple 48,091 Koninklijke Philips 40,406 PNC Financial Services 36,158 Baxter International 34,558 Johnson & Johnson 32,254 Qualcomm 30,100 Eaton 26,317 Huntington Bancshares 26,116 Stocks shown as ADRs represent American Depositary Receipts. This investment is a related party. 9
Statement of the Manager's Responsibilities in relation to the Financial Statements of the Trust The rules in the Financial Conduct 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 of the Manager's Certificate This report is certified in accordance with the requirements of the rules in the Financial Conduct Authority's Collective Investment Schemes Sourcebook. A. M. Croft D. J. Lamb London May 2017 10
Statement of the Depositary's Responsibilities in Respect of the Scheme and Report of the Depositary to the Unitholders of the St. James's Place Global Equity Income Unit Trust for the year ended 31 March 2017 The Depositary in its capacity as Trustee of St. James's Place Global Equity Income Unit Trust must ensure that the Trust is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook, and, from 22 July 2014 the Investment Funds Sourcebook, the Financial Services and Markets Act 2000, as amended, (together the Regulations ), the Trust Deed and Prospectus (together the Scheme documents ) as detailed below." The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Trust and its investors. The Depositary is responsible for the safekeeping all of custodial assets and maintaining a record of all other assets of the Trust in accordance with the Regulations. the Trust s cash flows are properly monitored and that cash of the Trust is booked in cash accounts in accordance with the Regulations; the sale, issue, repurchase and cancellation of units are carried out in accordance with the Regulations; the value of units of the Trust are calculated in accordance with the Regulations; any consideration relating to transactions in the Trust s assets is remitted to the Trust within the usual time limits; the Trust s income is applied in accordance with the Regulations; and the instructions of the Authorised Fund Manager ( the AFM ), which is the UCITS Management Company, are carried out (unless they conflict with the Regulations). The Depositary also has a duty to take reasonable care to ensure that the Trust is managed in accordance with the Regulations and the Scheme documents of the Trust in relation to the investment and borrowing powers applicable to the Trust. Having carried out such procedures as we considered necessary to discharge our responsibilities as Depositary of the Trust, it is our opinion, based on the information available to us and the explanations provided, that, in all material respects the Trust, acting through the AFM: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Trust s units and the application of the Trust s income in accordance with the Regulations and the Scheme documents of the Trust; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Trust in accordance with the Regulations and the Scheme documents of the Trust. For and on behalf of BNY Mellon Trust & Depositary (UK) Limited 160 Queen Victoria Street London EC4V 4LA Manager Date May 2017 11
Independent Auditors' Report to the Unitholders of St. James's Place Global Equity Income Unit Trust Our opinion In our opinion, St. James's Place Global Equity Income Unit Trust's financial statements, (the "financial statements"): give a true and fair view of the financial position of the Trust as at 31 March 2017 and of the net revenue and the net capital gains of its scheme property for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. What we have audited The financial statements, included within the Long Report, which are prepared by St. James s Place Unit Trust Group Limited (the Authorised Fund Manager ), comprise: the balance sheet as at 31 March 2017; the statement of total return for the year then ended; the statement of change in net assets attributable to unitholders for the year then ended; the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information; and the distribution tables. The financial reporting framework that has been applied in their preparation is United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and applicable law), the Statement of Recommended Practice Financial Statements of UK Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for UK Authorised Funds ), the Collective Investment Schemes sourcebook and the Trust Deed. In applying the financial reporting framework, the Authorised Fund Manager has made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. Opinions on 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. Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. 12
Independent Auditors' Report to the Unitholders of St. James's Place Global Equity Income Unit Trust Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Statement of the Manager's Responsibilities set out on page 10, 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 ISAs (UK & 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 4.5.12 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. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). 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. We primarily focus our work in these areas by assessing the Authorised Fund Manager's judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Long Report (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh May 2017 The maintenance and integrity of the St. James s Place 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. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 13
Statement of Total Return for the year ended 31 March 2017 01/04/16 to 31/03/17 01/04/15 to 31/03/16 Note 000 000 000 000 Income Net capital gains 2 446,999 16,285 Revenue 3 60,878 40,773 Expenses 4 (33,619) (22,704) Interest payable and similar charges (7) (2) Net revenue before taxation 27,252 18,067 Taxation 5 (6,150) (3,821) Net revenue after taxation 21,102 14,246 Total return before distributions 468,101 30,531 Distributions 6 (54,729) (36,290) Change in net assets attributable to unitholders from investment activities 413,372 (5,759) Statement of Change in Net Assets Attributable to Unitholders for the year ended 31 March 2017 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 000 000 Opening net assets attributable to unitholders 1,591,369 1,234,661 Movement due to creation and cancellation of units: Amounts receivable on creation of units* 331,499 335,573 Amounts payable on cancellation of units* (22,839) (6,362) 308,660 329,211 Change in net assets attributable to unitholders from investment activities (see above) 413,372 (5,759) Retained distribution on accumulation units 49,707 33,256 Closing net assets attributable to unitholders 2,363,108 1,591,369 * Prior year creations and cancellations have been reclassified due to reallocations from income to accumulation units to make these comparable to current year. 14
Balance Sheet as at 31 March 2017 Assets Investments Current assets Debtors Cash and bank balances Total assets Liabilities Creditors Bank overdrafts Distribution payable Other creditors 10 Total liabilities Net assets attributable to unitholders 31/03/17 31/03/16 Note 000 000 2,341,506 1,554,419 8 13,807 36,704 9 16,703 12,230 2,372,016 1,603,353 (642) - (2,791) (2,256) (5,475) (9,728) (8,908) (11,984) 2,363,108 1,591,369 15
Notes to the Financial Statements for the year ended 31 March 2017 1. 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 Conduct Authority's Collective Investment Schemes Sourcebook. They have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland FRS 102) and in accordance with the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the Investment Management Association May 2014 (IMA SORP 2014). The financial statements are prepared on the going concern basis. (b) Revenue Dividends receivable from equity investments are credited to the income account when the investments are first quoted ex-dividend. 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 which are deducted from capital. The manager has agreed that 100% of the annual management charge and all other expenses are to be transferred to capital for the purpose of calculating the distribution, as permitted by the Collective Investment Schemes Sourcebook. (d) (e) Foreign exchange Assets and liabilities have been translated into sterling at the exchange rates prevailing at the Balance Sheet date. (f) Valuation of investments Listed investments have been valued at bid market value at 12.00 midday on 31 March 2017 (31/03/16: bid market value at 12.00 midday), net of any accrued interest which is included in the Balance Sheet as a revenue related item. Authorised unit trusts are valued at cancellation price for funds managed by the manager and a bid price for all other funds. Suspended, delisted, unquoted or manually priced securities are valued by the manager taking into account, where appropriate, latest dealing prices, financial performance and other relevant factors. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. 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. 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. 16
Notes to the Financial Statements for the year ended 31 March 2017 (g) Distribution policy (h) (i) (j) (k) 2. Distributions are made in respect of quarters ended 31 March, 30 June, 30 September and 31 December. At the end of the accounting period all remaining revenue, less revenue 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. Equalisation on distributions received is deducted from the cost of the investment. 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. 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. 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, and the circumstances support this, the returns are included within net revenue in the Statement of Total Return. Where the transactions are used to protect or enhance investments, and the circumstances support this, 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. Net capital gains Non-derivative securities Currency losses Handling charges Net capital gains 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 447,968 16,606 (964) (313) (5) (8) 446,999 16,285 17
Notes to the Financial Statements for the year ended 31 March 2017 3. Revenue 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 UK dividends 7,771 5,734 Overseas dividends 52,517 34,563 Distributions from Regulated Collective Investment Schemes Interest distributions 12 17 Bank interest 3 40 Management charge rebate on underlying holdings 148 52 Scrip dividends 427 367 Total revenue 60,878 40,773 4. Expenses 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 Payable to the Manager Management charge 26,837 17,408 Payable to the Trustee Trustee's fee - 69 Other expenses Audit fee - 5 Investment administration fee - 39 Professional fee - 4 Registrar's fee - 493 Safe custody fee - 49 Investment adviser's fees 6,782 4,637 6,782 5,227 Total expenses 33,619 22,704 With effect from 26 October 2015 all expenses are now paid by the Manager out of the Annual Management Charge with exception of the Investment Adviser fees. This includes current year Audit Fee of 9,360 (31.03.16: 9,360). For presentation purposes in the table above, all expenses other than Investment Adviser fees have been shown as part of the Annual Management Charges for the full year from 1 April 2016. 18
Notes to the Financial Statements for the year ended 31 March 2017 5. (a) (b) 7. Taxation Analysis of charge in year: Irrecoverable overseas tax Factors affecting total tax charge for the year: 01/04/16 to 01/04/15 to 31/03/17 31/03/16 000 000 6,150 3,821 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% (2016: 20%). The differences are explained below: Net revenue before taxation 27,252 18,067 Corporation Tax at 20% (2016: 20%) Add: Revenue deducted on cancellation of units Deduct: Revenue received on creation of units Net distributions for the year 5,450 3,613 Effects of: UK dividends not subject to corporation tax (1,554) (1,147) Non taxable scrip dividends (85) (73) Non taxable foreign dividends (10,503) (6,912) Movement in excess management expenses 6,692 4,519 Irrecoverable overseas tax 6,150 3,821 Total tax charge for year (note 5a) 6,150 3,821 Authorised Unit Trusts are exempt from tax on capital gains, therefore any capital return is not included in the above reconciliation. (c) Deferred taxation: There is no provision required for deferred taxation at the balance sheet date. (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 16,746,225 (31/03/16: 10,053,765) relating to surplus management expenses. No deferred tax asset was recognised in the current or prior year as it was considered unlikely the Trust would generate sufficient taxable profits in the future to utilise these amounts. 6. Distributions The distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units and comprises: 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 First interim distribution 19,341 10,605 Second interim distribution 10,325 7,112 Third interim distribution 10,093 7,028 Final distribution 15,983 12,833 Movement between net revenue and net distributions 55,742 37,578 45 13 (1,058) (1,301) 54,729 36,290 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 Net revenue after taxation 21,102 14,246 Management charge 26,845 17,408 Other expenses paid out of capital 6,782 4,637 Add: brought forward from previous year Less: carried forward to next year Net distributions for the year 19 1 - (1) (1) 54,729 36,290
Notes to the Financial Statements for the year ended 31 March 2017 8. 9. Debtors Sales awaiting settlement Amounts receivable for creation of units Accrued revenue Rebate receivable on underlying holdings Overseas tax recoverable Corporation tax recoverable Total debtors Cash and bank balances Cash and bank balances: Sterling Cash and bank balances: Overseas Total cash and bank balances 10. Other creditors Purchases awaiting settlement Amounts payable for cancellation of units Accrued expenses Total other creditors 11. Units in issue Reconciliation of the unit movement in the year: 31/03/17 31/03/16 000 000-23,345 5,325 7,179 5,444 4,259 11 9 3,023 1,908 4 4 13,807 36,704 31/03/17 31/03/16 000 000 15,779 10,547 924 1,683 16,703 12,230 31/03/17 31/03/16 000 000-7,264 11-5,464 2,464 5,475 9,728 Opening units in issue Units converted Creations Cancellations Closing units in issue L Income 135,897,778-20,431,666 (1,453,955) 154,875,489 L Accumulation 965,149,097-184,570,454 (12,246,047) 1,137,473,504 H Accumulation - - 5,971 (548) 5,423 Y Accumulation - - 22,770 (5,794) 16,976 20
Notes to the Financial Statements for the year ended 31 March 2017 12. Related party transactions St. James's Place Unit Trust Group Limited together with the subsidiaries including 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 2,607,497 (31/03/16: 5,391,698). 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 International plc and St. James's Place UK plc, invest some of their life and pension policyholders' funds into the St. James's Place Global Equity Income Unit Trust. The value of these investments at the year end was 1,439,461,070 (31/03/16: 987,449,230). Included in the investment portfolio is a holding of 44,656,453 shares (31/03/16: 32,644,767) in St. James's Place Money Market Unit Trust (St. James's Place Unit Trust Group Limited fund) with a market value of 46,637,726 (31/03/16: 34,079,080). Revenue and management charge rebates from this holding are shown in note 3 as interest distributions and management charge rebates on the underlying holdings. As at 31/03/16 total revenue earned amounts to 160,186 (31/03/16: 68,210). Any transactions with related parties (connected persons) have been entered into in the ordinary course of business and on normal commercial terms. 13. Capital commitments and contingent liabilities On 31 March 2017, the Trust had no capital commitments (31/03/16: nil) and no contingent liabilities (31/03/16: nil). 14. Derivatives and other financial instruments In accordance with the investment objectives, as stated on page 2, the Trust held certain financial instruments. These comprise: Equity shares and units in collective investment schemes. Cash (including overdrafts) and short-term debtors and creditors that arise directly from its operations; and Derivatives which the Trust may enter into (principally futures contracts, options and contracts for difference) for 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. 21
Notes to the Financial Statements for the year ended 31 March 2017 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 FCA 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, interest rate risk, credit 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 (same for 2016). (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 and reward profile is maintained. The sensitivity of the fund to market risk is calculated using the Value-at-Risk (VaR) approach. VaR is a mathematical-statistical concept and is commonly used as a standard measure of risk in the financial sector. The maximum potential loss that a fund could suffer under normal market conditions within a given time horizon and a certain degree of confidence is estimated. An absolute VaR is calculated using the historic return series of each fund. Using the Historical VaR approach, a 1% 20-day VaR using 10 years of historical daily data is calculated. An annualised VaR limit of 20% is considered for the fund. The actual VaR is summarised in the table below: Lowest monthly VaR Highest monthly VaR Average monthly VaR 01/04/16 to 31/03/17 01/04/15 to 31/03/16 % % 13.46 13.44 13.46 13.46 13.46 13.45 22
Notes to the Financial Statements for the year ended 31 March 2017 (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 overall currency exposure for this fund is reduced by the open forwards exposure. 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. An analysis for all currencies at the year end is shown below: Net foreign currency assets 31/03/17 31/03/16 Currency Total Total 000 000 GBP 197,080 175,904 AUD 98,460 46,229 CHF 236,001 140,138 EUR 454,444 255,409 HKD 118,758 42,441 JPY 143,038 96,754 SGD - 16,912 USD 1,115,327 817,582 Total 2,363,108 1,591,369 23
Notes to the Financial Statements for the year ended 31 March 2017 (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 Credit risk occurs where there is a risk associated with the uncertainty of a counterparty s ability to meet its obligations. This risk is managed by reviewing the counterparty s credit rating, at the time of purchase and on an ongoing basis, and ensuring that the portfolio is sufficiently diversified. The impact of movements in credit rating and spread, and their effect on market prices, is considered to be part of market price risk, which is discussed above. 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. (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) Derivative risk (g) (h) 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. No such derivatives were held by the Trust in the year to 31/03/2017. 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. 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. 24
Notes to the Financial Statements for the year ended 31 March 2017 16. Portfolio transaction costs Analysis of total trade costs. Purchases Sales 01/04/16 to 31/03/17 01/04/15 to 31/03/16 01/04/16 to 31/03/17 01/04/15 to 31/03/16 000 000 000 000 Collective Investment Schemes 399,476 238,730 386,917 204,670 Equities 1,007,673 702,818 679,477 393,763 Trades in the year before transaction costs 1,407,149 941,548 1,066,394 598,433 Commissions Collective Investment Schemes Equities Total commissions Taxes Collective Investment Schemes Equities Total taxes Total costs Trades in the year after transaction costs - - - - 812 582 (525) (332) 812 582 (525) (332) - - - - 308 362 (24) (30) 308 362 (24) (30) 1,120 944 (549) (362) 1,408,269 942,492 1,065,845 598,071 Total transaction cost expressed as a percentage of asset type cost. Purchases Sales Commissions Collective Investment Schemes Equities Taxes Collective Investment Schemes Equities 01/04/16 to 01/04/15 to 01/04/16 to 01/04/15 to 31/03/17 31/03/16 31/03/17 31/03/16 % % % % - - - - 0.08 0.08 0.08 0.08 - - - - 0.03 0.05 0.00 0.01 Total transaction cost expressed as a percentage of net asset value. 01/04/16 to 31/03/17 01/04/15 to 31/03/16 % % Commissions Taxes Total costs 0.07 0.02 0.09 0.07 0.03 0.10 Average portfolio dealing spread The average portfolio dealing spread at the balance sheet date was 0.04% (31/03/16: 0.06%). There have been no soft commission arrangements relating to dealings in the property of the scheme during the year (31/03/16: nil). 25
Notes to the Financial Statements for the year ended 31 March 2017 17. Fair value The intention of a fair value measurement is to estimate the price at which an asset or a liability could be exchanged in the market conditions prevailing at the measurement date. The measurement assumes the exchange is an orderly transaction (that is, it is not a forced transaction, involuntary liquidation or distress sale) between knowledgeable, willing participants on an independent basis. The purpose of the fair value hierarchy is to prioritise the inputs that should be used to measure the fair value of assets and liabilities. The highest priority is given to quoted prices at which a transaction can be entered into and the lowest priority to unobservable inputs. The fund has early adopted the March 2016 amendment to section 34 of FRS102 (Fair Value Hierarchy disclosures that simplify preparation of financial instrument disclosure), which is applicable to accounting periods beginning on or after 1 January 2017 with earlier application permitted. 31/03/17 31/03/16 Assets Liabilities Assets Liabilities Valuation technique 000 000 000 000 Level 1 2,294,868-1,520,340 - Level 2 46,638-34,079 - Level 3 - - - - Total fair value 2,341,506-1,554,419 - Level 1: The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly. Level 3: Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability. 26