Half-yearly report

Jupiter European Opportunities Trust PLC Announcement of Unaudited Interim Results for the half year to 30th November 2010 Financial Highlights for the six months to 30 November 2010 Capital Performance   30-Nov 31-May   2010 2010 % Change Total Assets less Current Liabilities (£'000) 216,769 185,504 +16.9 FTSE World Europe ex UK Total Return Index* 671.79 633.12 +6.1 Ordinary Share Performance   30-Nov 31-May   2010 2010 % Change Net Asset Value (pence) 271.57 232.4 +16.9 Mid Market Price (pence) 243 193.25 +25.7 Discount to Net Asset Value (%) 10.5 16.8 Performance since launch     Net Asset   Total Assets Value   less per   Current Ordinary   Liabilities Share Year ended 31 May £'000 p 20 November 2000 (launch) 93,969 94.66 2001 83,600 89.29 2002 91,028 91.12 2003 84,592 83.82 2004 97,915 109.25 2005 (restated)* 117,679 133.54 2006 154,927 167.47 2007 182,278 224.58 2008 188,519 230.56 2009 131,457 162.35 2010 185,504 232.4 30-Nov-10 216,769 271.57 *Prior to 2005, financial information was prepared under UK GAAP. From 2006 all information is prepared under IFRS. CHAIRMAN'S STATEMENT and Interim Management Report A few months ago we debated as to how markets might react when central bankers began to reduce, or even reverse, the monetary stimulus commonly referred to as "quantitative easing", or QE. As things turned out, the US authorities initiated a further tranche of QE (popularly described as "QE2") and the European Central Bank, which had given notice of its planned "exit strategy", was compelled to join with the International Monetary Fund and bail out the Irish economy to the tune of Euro 85 billion and even to increase its own programme of buying bonds of peripheral Euro-zone members. Shortly after, President Obama struck an agreement with congressional Republicans to extend the Bush-era tax cuts. The latest round of Irish austerity measures may, or may not, be agreed by their own parliament (elections are due next year) and the US tax concessions still have to pass Congress.  Nonetheless, stock markets have derived encouragement from these events. As a result even European equity markets have made further progress during the period under review, albeit at a more modest pace than some other areas of the world. Thanks to judicious stock selection the Net Asset Value ('NAV') of your Company has risen by 16.9 per cent. in the six months to end-November, well over twice that of our benchmark, the FTSE World Europe ex-UK Total Return Index. We are not declaring an interim dividend, but we may once again be compelled to pay a final, as we may not (under the Listing Rules) retain more than 15 per cent. of our net distributable earnings. We are sometimes asked why we do not benchmark ourselves against a European Index which includes the UK, given that over 20 per cent. of the portfolio is comprised of companies whose main listing is in London. One reason is that the most relevant index (the Morgan Stanley Capital International, or MSCI index) has a far greater UK weighting than your Company has. More generally we have never operated on a benchmark-oriented basis. Our fund manager, Alexander Darwall, selects companies with outstanding growth prospects, often on a global scale, which just happen to have their principal listing on a European stock exchange or in London. Discount Management Policy Over the period the discount between the share price has narrowed from 16.8 per cent. to 10.5 per cent., as we have let it be known that we will buy shares, for treasury or for cancellation, far more actively than hitherto. Gearing We have maintained our gearing at a relatively constant absolute level, but as the portfolio has appreciated in value, so the gearing ratio has fallen. Our borrowings are wholly denominated in Sterling. Outlook After a period of strong outperformance there is a risk of reversion to the mean - in other words, that the indices outperform your Company's NAV rather than the other way round. Your manager is fully aware of this possibility, and none of us can afford to be complacent. But given the current economic and monetary background there should still be upside for equities, even in markets as unloved and under owned as those of mainstream Europe. H M Priestley Chairman 25 January 2011 MANAGER'S REVIEW The Net Asset Value of the Company's Ordinary shares rose by 18.7 per cent. during the six months to 30 November 2010. This compares with a 6.1 per cent. increase, Sterling adjusted, of the FTSE World Europe ex-UK Index. At the start of the period under review the Company's borrowings were £27 million. This figure had fallen to £22 million by the period end, less than half the level of borrowings (£48.6 million) a year earlier. With rising asset values obviously this gearing improved returns. Nevertheless, mindful of the difficulties your Company faced with much higher levels of borrowings in 2008/9, an increase in the amount of debt should not be anticipated in the near future. The FTSE World (total return) Index rose by 4.7 per cent. The Company's benchmark, the FTSE World Europe ex-UK Total Return Index rose by 6.1 per cent. The MSCI Latin America Index was up 8.7 per cent.; the MSCI AC Asia ex-Japan Index was up 11.7 per cent. In contrast to previous reporting periods there was remarkably little dispersion between the different regions in terms of equity performance, such that explaining Europe's very modest outperformance compared with the FTSE World Index is puzzling. Europe's greater exposure to emerging markets than Japan (the Nikkei 225 was up 4.2 per cent.) and the US (the S&P500 rose only 1.8 per cent.) as an explanation for its outperformance is a surmise. The correlation with equity performance and economic growth appears to have been a relatively good one in the six months under review. According to the IMF, Developing Asia (26 countries including China and India) grew by 9.4 per cent. in 2010; further growth of 8.4 per cent. is forecast in 2011. Latin America maintained its impressive growth record: the IMF estimates that the Brazilian economy grew by 7.5 per cent. in 2010 and it expects 4.1 per cent. growth in 2011. Expectations for the European Union (EU) are more modest: 1.7 per cent. growth in both 2010 and 2011. In fact, the outturn for GDP growth in the EU was better than previously forecast (1 per cent.). The main reason for this was faster growth in Germany, itself the result of stronger export demand. If buoyant demand for capital goods from China and other emerging markets was the principal driver of the German economy, it also had the effect of improving domestic consumer demand. Germany's growth in 2010 is now estimated to have been 3.3 per cent., far ahead of the 0.3 per cent. forecast made only a year ago. Faster economic growth, then, is one of the factors behind the better equity market. The credit crisis was a spur to further cost cutting which was another factor driving the estimated 25 per cent. growth in corporate profits in 2010. Notwithstanding the tribulations of the Euro and European sovereign debt, the backdrop - strong corporate earnings and low interest rates - has been positive for equities. Your Company's relatively good performance was due mainly to stock picking across a well diversified group of companies. The largest single contributor to performance was the holding in Croda, the UK listed oleochemical company. It benefitted from the general improvement in economic activity but even more importantly from successful, new, innovative products. Intertek, one of the world's leading testing and inspection companies, performed well. It is a beneficiary of increasing world trade and more rigorous testing and inspection. Other significant positive contributors included MTG, the Scandinavian-based TV company, Experian, the global credit information business, and NovoNordisk, the world's leading manufacturer of insulin for diabetics. Most of the strong performers have a broad, even global, geographic exposure which has been helpful in mitigating the generally slower economic growth in Europe. On the other hand, a number of companies detracted from performance. The worst, in terms of share price, was Inmarsat, the leading satellite company. The shares underperformed as the company announced long-term plans that require investors' patience. We believe that their plans are good and we are patient. Oriflame has produced disappointing results. The company is a leading direct seller of cosmetics operating mainly in Russia and other former CIS states. It is not yet clear whether their challenges are structural, or temporary and fixable. BioMerieux, a leader in diagnostics, reported slightly disappointing results as it felt the effects of squeezed healthcare budgets. Halfords, the specialist UK retailer, suffered a slowdown in line with the economy; management's poor execution also weighed on the company's performance. Turnover in the fund was markedly lower than in the corresponding period in 2009 as there were fewer mistakes than usual. The main sale was that of Halfords, for the reasons described above. Shares in Telefonica were sold as the economy in Spain deteriorated. The positions in Croda, Vopak, and DNB were lightened for portfolio management reasons. The main purchase was that of Marine Harvest. The company is the world's biggest salmon farmer, operating mainly in Norway and Chile. Steady demand growth, limited capacity increases and technological innovation combine to make this a compelling investment. Other purchases include Grenkeleasing, a company that in offering leasing services across Europe is benefiting from the weakened competitive position of the banks. A new position was taken in Qiagen, a leader in molecular diagnostics, the fastest growing segment in that area of healthcare. Outlook Periods of great change (and this is one such) present both huge challenges and opportunities. Economic power is clearly shifting from the West to other parts of the world. The problems of the Eurozone (inflexible labour markets, sovereign debt and the complications that come from the single Euro currency) remain. Indeed, these problems might yet get worse. The latest IMF forecasts indicate a slight weakening in the rate of economic growth. Corporate profitability in Europe is, in many sectors, at historically high levels, the obvious concern being that such levels are unsustainable. Nevertheless, there are reasonable grounds for optimism. Whilst some sectors such as utilities and financials (even oil companies) are subject to political pressures which might effectively cap profitability, many other companies can prosper. Technology and 'globalisation' are two key factors enabling companies to take cost and revenue opportunities more readily than in the past. Even in Europe there are some positive developments. One to highlight is that European politicians have understood better 'this time' that lower corporate tax rates represent the right policy for enterprise. As ever, the opportunities for success and failure abound: the key is identifying those companies which have sustainable advantages in delivering products and services which are properly valued by customers in Europe, and where appropriate, internationally. Alexander Darwall Jupiter Asset Management Limited 25 January 2011 Consolidated Statement of Comprehensive Income For the six months to 30 November 2010 (unaudited)   30-Nov-10 30-Nov-09   Revenue Capital Revenue Capital   Return Return Total Return Return Total   £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments at fair value through profit or loss (Note 2) - 36,010 36,010 - 39,584 39,584 Foreign exchange losses on loans - - - - (869) (869) Other exchange (loss)/gain - (133) (133) - 310 310 Investment income 2,085 - 2,085 2,237 - 2,237 Foreign exchange gain by subsidiary - - - 7 - 7 Total income 2,085 35,877 37,962 2,244 39,025 41,269 Investment management fee (861) - (861) (758) - (758) Investment performance fee - (3,519) (3,519) - - - Other expenses (196) - (196) (189) - (189) Total expenses (1,057) (3,519) (4,576) (947) - (947) Return before finance costs and tax 1,028 32,358 33,386 1,297 39,025 40,322 Finance costs (157) - (157) (350) - (350) Return before taxation 871 32,358 33,229 947 39,025 39,972 Taxation (288) - (288) (219) - (219) Return after taxation 583 32,358 32,941 728 39,025 39,753 Return per Ordinary share (Note 3) 0.73p 40.54p 41.27p 0.90p 48.20p 49.10p The total column of this statement is the income statement of the Group prepared in accordance with IFRS.  The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies ('AIC'). All items in the above statement derive from continuing operations. No operations were discontinued or acquired in the period. The financial information does not constitute 'accounts' as defined in section 434 of the Companies Act 2006. Consolidated Statement of Financial Position As at 30 November 2010   30-Nov 31-May   2010 2010   (unaudited) (audited)   £'000 £'000 Non current assets Investments held at fair value through profit or loss 245,237 210,972 Current assets Receivables 470 1,493 Cash at bank - 1,233   470 2,726 Total assets 245,707 213,698 Current liabilities (28,938) (28,194) Total assets less current liabilities 216,769 185,504 Capital and reserves Called up share capital 798 798 Share premium 41,286 41,286 Special reserve 34,376 34,376 Capital redemption reserve 42 42 Retained earnings (Note 6) 140,267 109,002 Total equity 216,769 185,504 Net Asset Value per Ordinary share (Note 7) 271.57p 232.40p Consolidated Statement of Changes in Equity For the six months to 30 November 2010         Capital   Share Share Special Redemption Retained For the six months to Capital Premium Reserve Reserve Earnings Total 30-Nov-10 £'000 £'000 £'000 £'000 £'000 £'000 31-May-10 798 41,286 34,376 42 109,002 185,504 Net profit for the period - - - - 32,941 32,941 2010 interim dividend - - - - (1,676) (1,676) Balance at 30 November 2010 798 41,286 34,376 42 140,267 216,769         Capital   Share Share Special Redemption Retained For the six months to Capital Premium Reserve Reserve Earnings Total 30-Nov-09 £'000 £'000 £'000 £'000 £'000 £'000 31-May-09 810 41,286 36,676 30 52,655 131,457 Net profit for the period - - - - 39,753 39,753 2009 Special interim dividend - - - - (688) (688) Balance at 30 November 2009 810 41,286 36,676 30 91,720 170,522 Consolidated Cash Flow Statement For the six months to 30 November 2010 (unaudited)   2010 2009   £'000 £'000 Cash flows from operating activities Purchases of investments (22,684) (31,007) Sales of investments 24,332 40,146 Realised (losses)/gains on foreign currency (133) 317 Investment income received 2,386 2,075 Interest received - 14 Other cash receipts - 111 Investment management fee paid (801) (709) Other cash expenses (238) (206) Dividend paid (1,676) (688) Cash inflow from operating activities before finance costs and taxation 1,186 10,053 Finance costs paid (163) (448) Taxation (paid)/received (124) 405 Net cash inflow from operating activities 899 10,010 Financing activities Short-term loans received 44,000 88,197 Short-term loans repaid (49,000) (102,754) Decrease in cash (4,101) (4,547) Cash and cash equivalents at start of period 1,233 6,280 Cash and cash equivalents at end of period (2,868) 1,733 Notes to the Financial Statements for the six months to 30 November 2010 1.  Accounting Policies The consolidated accounts comprise the unaudited financial results of the Company and its subsidiary JEOT  Securities Limited for the  six  months  to 30 November 2010. The accounts are presented in pounds sterling, as this is the functional currency of the Group. The consolidated 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. A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below: Revenue recognition Revenue is measured at  the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business. Revenue includes dividends from investments quoted ex-dividend on or before the balance sheet date. Deposit and other interest receivable is accounted for on an accruals basis. Presentation of Statement of Comprehensive Income In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's status as a UK investment company under section 404 of the Companies Act 2006, net capital returns may not be distributed by way of dividend. An analysis  of  retained  earnings  broken  down into revenue items, which may be distributed as dividends and capital items is given in Note 6. The Company's Articles prevent the distribution of capital profits. In arriving at this breakdown, expenses have been presented as revenue items except for that part of any Investment performance fee which is deemed by the Directors to relate to the capital outperformance of the Company's investments. Any such amount is charged to capital. Investments All investments are classified as held at fair value through profit or loss. Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the statement of comprehensive income as 'Gains on investments at fair value through profit or loss'. The fair value of listed investments is based on their quoted bid market price at the balance sheet date without any deduction for estimated future selling costs. All purchases and sales are accounted for on a trade date basis. 2.  Gains on investments   Six months to Six months to   30-Nov-10 30-Nov-09   £'000 £'000 Net gains realised on sale of investments 7,574 7,866 Movement in investment holding gains 28,436 31,718 Gains on investments 36,010 39,584 3.  Return per Ordinary Share The return per Ordinary share figure is based on the net gain for the six months of £32,941,000 (six months to 30 November 2009: Gain £39,753,000) and on 79,819,523 (six months to 30 November 2009: 80,969,523) 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-Nov-10 30-Nov-09   £'000 £'000 Net revenue profit 583 728 Net capital profit 32,358 39,025 Net total profit 32,941 39,753 Weighted average number of Ordinary shares in issue during the period 79,819,523 80,969,523 Revenue return per Ordinary share 0.73p 0.90p Capital return per Ordinary share 40.54p 48.20p Total return per Ordinary share 41.27p 49.10p 4.  Transaction costs During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Statement of Comprehensive Income. The total costs were as follows:   Six months to Six months to   30-Nov-10 30-Nov-09   £'000 £'000 Purchases 52 74 Sales 39 55   91 129 5.  Comparative information The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the six months to 30 November 2010 and 30 November 2009 has not been audited. The information for the year ended 31 May 2010 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 May 2010 have been filed with the Register of Companies. The report of the auditors on those accounts contained no qualification or statement under section 498(2) of the Companies Act 2006. 6.  Retained earnings The table below shows the movement in the retained earnings analysed between revenue and capital items.   Revenue Capital Total   £'000 £'000 £'000 At 31 May 2010 5,989 103,013 109,002 Net return for the period 583 32,358 32,941 Dividend paid (1,676) - (1,676) At 30 November 2010 4,896 135,371 140,267 7.  Net Asset Value per Ordinary share The Net Asset Value per Ordinary share is based on the net assets attributable to the equity shareholders of £216,769,000 (31 May 2010: £185,504,000) and on 79,819,523 (31 May 2010: 79,819,523) Ordinary shares, being the number of Ordinary shares in issue at the period end. Directors' Responsibility Statement Related Party Transactions Mr. Darwall is a director of Jupiter Asset Management Limited which receives investment management fees as set out below.  Jupiter Administration Services Limited is a sister company of Jupiter Asset Management Limited.  Jupiter Administration Services Limited receives administration fees as set out below. Jupiter Asset Management Limited is contracted to provide investment management services to the Company (subject to termination by not less than 1 years' notice by either party) for a quarterly fee of 0.1875 per cent. of the net assets of the Group 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 total fees payable under this agreement are shown in the Consolidated Statement of Comprehensive Income. Jupiter Asset Management Limited is also entitled to a 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 to be adjusted 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. The total fees payable under this agreement are shown in the Consolidated Statement of Comprehensive Income. Jupiter Administration Services Limited is contracted to provide secretarial, accounting and administrative services to the Company for an annual fee of £65,460 adjusted each year in line with the Retail Price Index payable quarterly. The Company has invested from time to time in funds managed by Jupiter Investment Management Group Limited or its subsidiaries. The only such holding as at 30 November 2010 was East European Food Fund representing 0.1 per cent. of total investments. 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, use of derivatives, liquidity risk, gearing risk, the discount to Net Asset Value, regulatory risk, loss of key personnel, operation and financial risks. A detailed explanation of the Risks and Uncertainties facing the Company can be found on page 13 under the heading 'Risks and Uncertainties' in the Company's report and accounts for the year to 31 May 2010. Directors' Responsibility Statement In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm that to the best of their knowledge: (a) the condensed set of financial statements has  been prepared in accordance with applicable UK accounting standards and gives a true and fair view of the assets, liabilities, financial position and return of the Company; (b) the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements; (c) the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and (d) the half-yearly report includes details on related party transactions. The half-yearly financial report for the six months to 30 November 2010 comprises the Chairman's Statement, Manager's Review, the Directors' Responsibility Statement and a condensed set of financial statements, and has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. By Order of the Board H M Priestley Chairman 25 January 2011 The foregoing represents the full text of the Half-Yearly Report for the six months to 30 November 2010, which will be posted to shareholders shortly.  The Report will also be available for download from the Company's website (www.jupiteronline.co.uk) or on request from the Company Secretary. The interim report for the 6 months ended 30 November 2010 has not been reviewed by the Company's auditors. By order of the Board Jupiter Asset Management Limited Secretaries Enquiries: Richard Pavry Jupiter Asset Management Limited 020 7412 0703 This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Jupiter European Opportunities Trust PLC via Thomson Reuters ONE [HUG#1482179]
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