Half Yearly Financial Report

RNS Number : 4277D

Jupiter European Opps. Trust PLC

28 January 2015

 



Jupiter European Opportunities Trust PLC

Half Yearly Financial Report for the six months to 30 November 2014 (unaudited)

Financial Highlights

Capital Performance

	30 November 2014	31 May 2014	% Change
Total Assets less Current Liabilities (£'000)	434,080	409,191	+6.1

Ordinary Share Performance

	30 November 2014	31 May 2014	% Change
Net Asset Value (pence)	466.41	451.26	+3.4*
Mid Market Price (pence)	462.0	460.0	+0.4
FTSE World Europe ex-UK Total Return Index**	964.65	969.03	-0.45
(Discount)/Premium to Net Asset Value (%)	(0.9)	1.9

*  Ongoing Charges figure for the period was 1.14% (31.05.14: 1.09%).

** This document contains information based on the FTSE World Europe ex UK Total Return Index. 'FTSE®' is a trade mark jointly owned by the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited ('FTSE') under licence. The FTSE World Europe ex UK Total Return Index is calculated by FTSE. FTSE does not sponsor, endorse or promote the product referred to in this document and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyright and database rights in the index values and constituent list vest in FTSE.

Performance since launch

			Year-
			on-year
		Net Asset	change in	Year-
	Total Assets	Value	Net Asset	on-year
	less	per	Value per	change in
	Current	Ordinary	Ordinary	Benchmark
	Liabilities	Share	Share	Index
Year ended 31 May	£'000	p	%	%
20 November 2000 (launch)	93,969	94.66	-	-
2001	83,600	89.29	-5.7	-8.0
2002	91,028	91.12	+2.0	-10.7
2003	84,592	83.82	-8.0	-19.0
2004	97,915	109.25	+30.3	+15.7
2005 (restated)***	117,679	133.54	+22.2	+19.3
2006	154,927	167.47	+25.4	+26.2
2007	182,278	224.58	+34.1	+30.0
2008	188,519	230.56	+2.7	-0.1
2009	131,457	162.35	-29.6	-25.3
2010	185,504	232.40	+43.1	+14.4
2011	252,813	316.73	+36.3	+24.2
2012	231,584	291.05	-8.1	-24.2
2013	340,801	403.58	+38.7	+43.3
2014	409,191	451.26	+11.8	+13.4
30 November 2014	434,080	466.41	+3.4	-0.45

***Prior to 2005, financial information was prepared under UK GAAP. From 2006 all information is prepared under IFRS.

Chairman's Statement

Net asset value per share (NAV) appreciated by 3.4 per cent., from 451.26p to 466.41p, during the six months under review. This compares with a marginal fall in our benchmark, the FTSE World Europe ex-UK Total Return Index, in the same period. Over the twelve months to 30 November 2014, NAV rose by just under 12 per cent., compared with a 5.7 per cent. increase in the benchmark, thus more than erasing the underperformance on which I reported to you a year ago. The reasons for this outperformance are cogently summarised in Alexander Darwall's Investment Adviser's Review, so there is no need to repeat them here. It has, nonetheless, been heartening to see how well your Company's investments have been performing, especially in the most recent period, against the background of weakening economic growth in the eurozone (although patently not in the US or UK) and underlines the importance of identifying potentially rewarding investment opportunities at an early stage of their development, and before the majority of investors have woken up to their especial merits.

Growing Your Company

We faced some criticism from shareholders at the recent Annual General Meeting of your Company regarding our continuing emphasis on the desirability of increasing the size of your Company, specifically by issuing new shares to meet demand when such demand cannot be satisfied by purchasing those shares which are available on a day-to-day basis - the so-called "free float". It was pointed out that such issues represent good news for your Company's brokers, who charge a commission on share transactions, and for your Company's Managers, whose fees increase as your Company grows in size. Both allegations are valid, however, all new shares were issued at a premium to NAV, resulting in added value for existing shareholders.

However, it is also the case that greater liquidity in your Company's shares renders them more attractive to wealth managers and other institutional investors who predominate in importance, although not in number, on your Company's share register. Such shareholders appreciate being able to buy, or sell, large blocks of shares without causing major fluctuations in the share price. The advent of the Retail Distribution Review has enhanced the attractions of your Company, thanks to its track record, and resulted in higher institutional demand for its shares.

Thus, during the period under review a total of 2,391,207 new shares were issued, raising £11,141,000 net of expenses. For a while your shares traded at a discount to NAV, but the discount was so marginal that there was no question of buying in shares for cancellation or for treasury (and thus diminishing the size of your Company).

Outlook

It is somewhat perplexing that a sharp fall in energy costs, resulting chiefly from oversupply rather than lack of demand, should have been taken - initially at least - so negatively by equity investors. Certainly this will lead to a bout of deflation; in Europe it has already happened. But there is good and bad deflation. The latter comes about when consumers (as has been the case in Japan) defer making purchases in the knowledge that such purchases will become cheaper later on. Yet there seems no logical reason why Mr. and Mrs. Average, who are paying considerably less for a litre of petrol than was the case a few months ago, should hoard such a saving rather than go out and spend a little more. In the UK, at least, it appears that wages are at last running ahead of inflation, which should lead to greater confidence on the part of consumers.

However, we also face a General Election which, according to the bookies, is likely to result in no single party winning an overall majority and could be followed by a second Election later in the year. As regards Europe, we wait to see whether the European Central Bank does enough by way of quantitative easing (viz. printing money) to satisfy the markets and whether the result of the Greek election hastens the long-predicted breakup of the eurozone with its "one size fits all" business model.

But markets, they say, climb a wall of worry; and if a company invents a mousetrap superior to all others, to paraphrase Emerson, investors will beat a path to their door. We believe our Manager has identified a number of such companies. Equally, we will do our best to avoid getting mousetrapped ourselves.

Hugh Priestley

Chairman

28 January 2015

Investment Adviser's Review

The Net Asset Value of the Company's Ordinary shares rose by 3.4 per cent. during the six months to 30 November 2014. This compares with a 0.5 per cent. decline, Sterling adjusted, of the FTSE World Europe ex-UK Index, your Company's benchmark. The Company's total borrowings rose slightly during the period under review to £51.8m at 30 November, representing gearing of 11.0 per cent. The MSCI Latin America Index was 0.8 per cent. higher; the MSCI AC Asia ex-Japan Index was up by 10.6 per cent. exactly the same increase in the Japanese Nikkei-225.

An intensification of the factors that should boost economic activity - ultra low interest rates, lower oil prices and the benefits which come with new disruptive business models - should have boosted growth rates. Yet GDP expansion in the eurozone was, according to the IMF, only 0.8 per cent. in 2014 and is expected to be 1.3 per cent. in 2015. Even though the European Central Bank (ECB) reduced its main refinancing rate from 0.25 per cent. to 0.05 per cent., a new historic low, lending growth remained subdued. Capital expenditure remained low as corporates remain unconvinced by the political agenda; and whilst consumer spending was stronger, here too a suspicion of public finances acted as a restraint. Over the six months under review the WTI oil price fell 36 per cent. yet Europe did not get the full benefit of this positive development as it pursues a high cost energy policy. The lacklustre growth rates in Europe contrast with the IMF's estimates for the US of 2.2 per cent. and 3.1 per cent. for 2014 and 2015 respectively. More flexible labour markets and significantly lower energy costs help explain why American growth rates are much higher. The same forecaster anticipates global growth of 3.3 per cent. in 2014 and 3.8 per cent. in 2015, again showing that Europe is lagging behind. Consensus estimates are for 4 per cent. earnings growth for corporate Europe in 2014.

The modest outperformance of your Company's assets is partly due to the sector exposures: underweight in the financial and oil and gas sectors, which underperformed; overweight in consumer sectors which outperformed. Macro drivers had a clear impact on some of your investments. For instance, the impact of slower growth rates in leading emerging markets accounted for Experian's poor performance. Its second biggest market, Brazil, has suffered from falling energy prices. On the other hand, the good performance of the consumer sectors chimes with the macro data which show stronger growth in consumer spending, whereas capital expenditure fell. The more significant driver of outperformance, however, is stock selection. The standout successes were in the financial sector where Provident Financial (home credit), Leonteq (the Swiss provider of structured financial products), Grenkeleasing (a German based leasing company) and Deutsche Börse (the German stock exchange) all significantly added to returns. These companies are all to a greater or lesser extent beneficiaries of the challenges faced by the mainstream banks. Other 'winners' included Reed Elsevier, the Anglo Dutch publishing business and the healthcare companies, NovoNordisk and Fresenius. All three benefited from strong industry positions coupled with robust demand for their products globally. On the other hand, the oil services companies Fugro and CGG, and the agriculture technology business Syngenta, detracted from returns. The oil services companies have proved to be more geared to the oil price than the oil companies themselves. Yet we have retained a small investment in CGG as their strong seismic technology should be rewarded, even if not in the near term. We have retained a significant exposure to Syngenta, a world leader in technology based products in agriculture notwithstanding a poor recent record. We believe that it is singularly well positioned to profit from the continuing demand for technology in agriculture.

There were six outright sales but none was a major holding. In the case of Biotest, the German pharmaceutical company, we identified a deterioration in the prospects for the core business and decided to sell; Fugro's management seemed slow and reluctant to face the structural challenges of their oil services business; Croda's growth rates started to decline; Neopost's results disappointed; CTS Eventim's growth prospects are less visible and assured than in the past; and Barry Callebaut's management has given us cause for concern.

Most purchases reinforced existing positions. Of these the most significant was Inmarsat, the world's dominant satellite operator in the maritime market. The company holds some unique assets including valuable US wireless spectrum and an inchoate new global satellite service. The holding in Luxottica was also increased, despite management changes, because its portfolio of sunglass brands continues to generate profits growth. The company has an unusually strong industry position: pricing power, global reach and the benefits of vertical integration. There were three significant new purchases. We bought SGS, the world's leading testing and inspection company. We believe that it is a 'winner' with Chinese industry both within China and as it expands overseas. We also took a position in Grifols, one of the world's leading blood plasma companies. Its strong product range underpins our confidence in this business model. The other significant new investment was that of Marine Harvest, the world's largest salmon farming company. Whilst demand for salmon is steadily growing worldwide, capacity growth is more restricted: this should lead to a more profitable future.

Outlook

Whilst the ECB's asset-quality review (AQR) and the latest European Banking Authority stress tests ostensibly provided reassurance about the health of the banks and thereby confidence that monetary policies will drive equity markets, we remain sanguine. Indeed, our investment style is not based on any easy 'macro' improvement. Rather it is based on an unremitting adherence to key company characteristics that have served us well in a range of economic scenarios: strong products or services; pricing power; secular demand growth; and an ability to shape the company's future. Changing consumer behaviour together with technology advances creates plenty of challenges and opportunities; we believe that our process for identifying them is still an appropriate one.

Alexander Darwall

Fund Manager

Jupiter Asset Management Limited

Investment Adviser

28 January 2015

Investment Portfolio as at 30 November 2014

		30 November 2014		31 May 2014
		Market	Percentage	Market	Percentage
		value	of	value	of
Company	Country of Listing	£'000	portfolio	£'000	portfolio
Wirecard	Germany	38,017	7.9	33,898	7.6
Provident Financial	UK	37,355	7.7	34,230	7.6
Novo Nordisk	Denmark	35,801	7.4	32,247	7.2
Reed Elsevier	Netherlands	34,262	7.1	28,203	6.3
Syngenta	Switzerland	29,196	6.0	29,491	6.6
Novozymes	Denmark	28,126	5.8	27,711	6.2
Fresenius	Germany	24,065	5.0	21,811	4.9
Experian	UK	23,209	4.8	23,736	5.3
Johnson Matthey	UK	18,338	3.8	17,710	3.9
Inmarsat	UK	18,334	3.8	13,916	3.1
Amadeus	Spain	18,013	3.7	16,645	3.7
Leonteq	Switzerland	16,861	3.5	7,768	1.7
Coloplast	Denmark	15,794	3.3	13,891	3.1
Intertek Group	UK	14,823	3.1	18,517	4.1
Grenkeleasing	Germany	13,690	2.8	12,032	2.7
Ingenico	France	13,636	2.8	10,617	2.4
DnB NOR	Norway	12,211	2.5	11,208	2.5
Edenred	France	9,440	2.0	9,383	2.1
Zodiac Aerospace	France	8,524	1.8	7,990	1.8
Ryanair	Ireland	7,138	1.5	5,253	1.2
Gemalto	Netherlands	7,112	1.5	8,475	1.9
Luxottica Group	Italy	6,985	1.4	995	0.2
Deutsche Börse	Germany	6,808	1.4	5,483	1.2
Hexagon	Sweden	6,403	1.3	5,912	1.3
Borregaard	Norway	6,093	1.3	2,131	0.5
UPM-Kymmene	Finland	4,513	0.9	1,575	0.4
SGS	Switzerland	3,461	0.7	-	-
Dassault Systemes	France	3,347	0.7	3,027	0.7
KWS Saat	Germany	3,089	0.6	3,004	0.7
Elementis	UK	3,062	0.6	1,859	0.4
Tomra Systems	Norway	2,913	0.6	7,969	1.8
Svenska Cellulosa	Sweden	2,640	0.5	2,908	0.6
Grifols	Spain	2,454	0.5	-	-
Marine Harvest	Norway	2,376	0.5	-	-
Bayer	Germany	1,920	0.4	-	-
CGG	France	1,864	0.4	2,794	0.6
Ossur	Iceland	1,373	0.3	-	-
Statoil	Norway	602	0.1	-	-
Total		483,848	100.0

Cross Holdings in other Investment Companies

As at 30 November 2014 and 31 May 2014, none of the Company's assets were invested in the securities of other listed closed-ended investment funds. It is the Company's stated policy that it will not invest in other listed closed-ended investment funds.

Interim Management Report

Related Party Transactions

During the first six months of the current financial year no transactions with related parties have taken place which have materially affected the financial position or performance of the Company. Details of related party transactions are contained in the Annual Report and Accounts of the Company for the year ended 31 May 2014.

Principal Risks and Uncertainties

The Company is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on Shareholders' funds. It is not the aim of the Board to eliminate entirely the risk of capital loss, rather it is its aim to seek capital growth. Other key risks faced by the Company relate to foreign currency movements, interest rates, liquidity risk, gearing risk, the discount to Net Asset Value, regulatory risk, loss of key personnel, operational and financial risks.

Going Concern

The Half Yearly Financial Report has been prepared on a going concern basis. The Directors consider that this is the appropriate basis as they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In considering this, the Directors took into account the Company's investment objective, risk management policies and capital management policies, the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments and the ability of the Company to meet all of its liabilities and ongoing expenses. Thus the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Directors' Responsibility Statement

We, the Directors of Jupiter European Opportunities Trust PLC, confirm to the best of our knowledge that:

(a) The condensed set of financial statements have been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports' and give a true and fair view of the assets, liabilities, financial position and profit of the Company for the period ended 30 November 2014;

(b) The Chairman's Statement, the Investment Adviser's Review and the Interim Management Report include a fair review of the information required by Disclosure and Transparency Rule 4.2.7R; and

(c) The Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R on related party transactions.

The Half Yearly Financial Report has not been audited or reviewed by the Company's auditors.

By Order of the Board

H M Priestley

Chairman

28 January 2015

Statement of Comprehensive Income

For the six months to 30 November 2014 (unaudited)

	30 November 2014			30 November 2013
Revenue		Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gain on investments at fair
value through profit or loss	-	20,696	20,696	-	13,301	13,301
Foreign exchange gain/(loss) on loan	-	902	902	-	1,375	1,375
Currency exchange gain/(loss)	-	4	4	-	(143)	(143)
Investment income	2,171	-	2,171	2,173	-	2,173
Total income	2,171	21,602	23,773	2,173	14,533	16,706
Investment management fee	(1,939)	-	(1,939)	(1,457)	-	(1,457)
Performance fee	-	(3,303)	(3,303)	-	-	-
Other expenses	(303)	-	(303)	(544)	-	(544)
Total expenses	(2,242)	(3,303)	(5,545)	(2,001)	-	(2,001)
Return before finance costs
and tax	(71)	18,299	18,228	172	14,533	14,705
Finance costs	(262)	-	(262)	(244)	-	(244)
Return before taxation	(333)	18,299	17,966	(72)	14,533	14,461
Taxation	(125)	-	(125)	(164)	-	(164)
Return after taxation	(458)	18,299	17,841	(236)	14,533	14,297
Return per Ordinary share	(0.50)p	20.07p	19.57p	(0.27)p	16.68p	16.41p

The total column of this statement is the income statement of the Company prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance produced by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations.

The financial information does not constitute 'accounts' as defined in section 434 of the Companies Act 2006.

Statement of Financial Position

As at 30 November 2014

	30 November	31 May
	2014	2014
	(unaudited)	(audited)
	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	483,848	448,497
Current assets
Receivables	1,331	3,748
Cash at bank	5,138	5,056
	6,469	8,804
Total assets	490,317	457,301
Current liabilities	(56,237)	(48,110)
Total net assets less current liabilities	434,080	409,191
Capital and reserves
Called up share capital	931	907
Share premium	95,685	85,486
Special reserve	33,687	33,687
Capital redemption reserve	45	45
Retained earnings	303,732	289,066
Total equity	434,080	409,191
Net Asset Value per Ordinary share	466.41p	451.26p

Statement of Changes in Equity

For the six months to 30 November 2014

				Capital
	Share	Share	Special	Redemption	Retained
For the six months to	Capital	Premium	Reserve	Reserve	Earnings	Total
30 November 2014	£'000	£'000	£'000	£'000	£'000	£'000
1 June 2014	907	85,486	33,687	45	289,066	409,191
Net gain for the period	-	-	-	-	17,841	17,841
Ordinary shares issue	24	10,199	-	-	-	10,223
2014 interim dividend	-	-	-	-	(3,175)	(3,175)
Balance at 30 November 2014	931	95,685	33,687	45	303,732	434,080
				Capital
	Share	Share	Special	Redemption	Retained
For the six months to	Capital	Premium	Reserve	Reserve	Earnings	Total
30 November 2013	£'000	£'000	£'000	£'000	£'000	£'000
1 June 2013	844	59,589	33,687	45	246,636	340,801
Net gain for the period	-	-	-	-	14,297	14,297
Ordinary shares issue	51	20,731	-	-	-	20,782
2013 interim dividend	-	-	-	-	(3,045)	(3,045)
Balance at 30 November 2013	895	80,320	33,687	45	257,888	372,835

Cash Flow Statement

For the six months to 30 November 2014 (unaudited)

	2014	2013
	£'000	£'000
Cash flows from operating activities
Purchases of investments	(50,062)	(49,920)
Sales of investments	35,411	30,884
Realised gains/(losses) on foreign currency	4	(143)
Payment to CFD counterparty	-	(244)
Investment income received	3,597	1,199
Interest (paid)/received	(16)	17
Investment management fee paid	(1,877)	(1,420)
Other cash expenses	(369)	(589)
Dividend paid	(3,175)	(3,045)
Cash outflow from operating activities
before finance costs and taxation	(16,487)	(23,261)
Finance costs paid	(258)	(192)
Taxation paid	(41)	(919)
Net cash outflow from operating activities	(16,786)	(24,372)
Financing activities
Ordinary shares issued	11,141	20,782
Short-term loans received	12,000	98,805
Short-term loans paid	(6,273)	(103,454)
Increase/(decrease) in cash	82	(8,239)
Cash and cash equivalents at start of period	5,056	12,009
Cash and cash equivalents at end of period	5,138	3,770

Notes to the Financial Statements

1.   Accounting Policies

The accounts comprise the unaudited financial results of the Company for the six month period from 1 June 2014 to 30 November 2014. The accounts are presented in pounds sterling, as this is the functional currency of the Company.

The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union (EU).

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in January 2009 and replaced in November 2014 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The Company continues to adopt the going concern basis in the preparation of the financial statements.

2.  Gains on investments

	Six months to	Six months to
	30 November 2014	30 November 2013
	£'000	£'000
Net gain realised on sale of investments	13,018	6,193
Movement in investment holding gains	7,678	7,108
Gains on investments	20,696	13,301

3.   Return per Ordinary share

The earnings per Ordinary share figure is based on the net profit for the six months of £17,841,000 (six months to 30 November 2013: profit £14,297,000) and on 91,183,487 (six months to 30 November 2013: 87,112,081) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.

The return per Ordinary share figure detailed above can be further analysed between revenue and capital, as below.

	Six months to	Six months to
	30 November 2014	30 November 2013
	£'000	£'000
Net revenue loss	(458)	(236)
Net capital profit	18,299	14,533
Net total profit	17,841	14,297
Weighted average number of Ordinary
shares in issue during the period	91,183,487	87,112,081
Revenue earnings per Ordinary share	(0.50)p	(0.27)p
Capital earnings per Ordinary share	20.07p	16.68p
Total return per Ordinary share	19.57p	16.41p

4.   Net Asset Value per Ordinary share

The Net Asset Value per Ordinary share is based on the net assets attributable to the Ordinary shareholders of £434,080,000 (31 May 2014: £409,191,000) and on 93,067,681 (31 May 2014: 90,676,474) Ordinary shares, being the number of Ordinary shares in issue at the period end.

5.   Related Parties

Alexander Darwall, the fund manager is an employee of the Investment Adviser, Jupiter Asset Management Limited ('JAM'), a company within the same group as the Alternative Investment Fund Manager, Jupiter Unit Trust Managers Limited ('JUTM'). These companies received investment management fees as set out below.

Jupiter Unit Trust Managers Limited is contracted to provide investment management services to the Company (subject to termination by not less than one year's notice by either party) for a quarterly fee of 0.1875 per cent. of the net assets of the Company excluding the value of any Jupiter managed investments payable in arrears on 31 May, 31 August, 30 November and the last calendar day of February.

The Management fee paid to Jupiter Asset Management Limited (JAM) for the period 1 June 2014 to 21 July 2014 was £467,189.00 and to Jupiter Unit Trust Managers Limited (JUTM) for the period 22 July 2014 to 30 November 2014 was £1,292,873.00 respectively.

Jupiter Unit Trust Managers Limited is also entitled to an investment performance fee which is based on the out-performance of the Net Asset Value per Ordinary share over the total return on the Benchmark Index, the FTSE World Europe ex-UK total return index in an accounting period. Any performance fee payable will equal 15 per cent. of the amount by which the increase in the Net Asset Value per Ordinary share (plus any dividends per Ordinary share paid or payable and any accrual for unpaid performance fees for the period) exceeds the higher of (a) the Net Asset Value per Ordinary share on the last business day of the previous accounting period; (b) the Net Asset Value per Ordinary share on the last day of a period in respect of which a performance fee was last paid; and (c) 100p. In each case the values of (a), (b) and (c) are increased by the percentage by which the total return of the Benchmark Index increases or decreases during the calculation period. The total amount of any performance fee payable in respect of one accounting period is limited to 4.99 per cent. of the Total Assets of the Company.

A copy of the Half-Yearly Financial Report will shortly be available for download from the Company's website www.jupiteram.com/JEO

For further information, please contact:

Richard Pavry

Head of Investment Trusts

Jupiter Asset Management Limited, Company Secretary

[e-mail]

020 3817 1496

28 January 2015

 

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