Jupiter Dividend & Growth Trust PLC : Half-yearly report
Jupiter DIVIDEND & GROWTH Trust Plc
Half Yearly Financial Report for the six months to 30 June 2012
The total assets less current liabilities of your Company rose by 2.3 per cent during the six months to 30 June 2012. By comparison, the Company's benchmark index, the FTSE All-Share Index, rose by 1.2 per cent. (in capital terms) during the same period.
Share Price Performance
The Net Asset Value of the Common shares increased by 2.3 per cent. during the period under review from 86.82p to 88.82p (including income and expenses). The Zero Dividend Preference ('ZDP') shares Net Asset Value increased by 2.2 per cent. during the same period from 86.01p to 87.90p*.
The ZDP and Common shares have continued to trade at a discount to net asset value and this has widened during the period under review from 17.7 per cent. to 24.6 per cent. for the ZDP shares and from 16.9 per cent. to 19.5 per cent. for the Common shares. The discount reflects the rating of the Company's ZDP and Common shares in the secondary market which in turn is dependent on a comparison of hurdle rate, or redemption yield, and cover to similar shares. The hurdle rate measures the amount by which the total assets are required to grow in order to return the final capital entitlement of 150p on 30 November 2017. As at 30 June 2012 this is approximately 9.8 per cent., an increase from 9.3 per cent. at the end of December 2011. Cover is the amount by which the final capital entitlement of 150p for each the ZDPs and Common shares is covered by the total assets. As at 30 June 2012 this was approximately 0.6 times.
Due to the Company's geared capital structure, any fall in the Company's total assets is borne first by the Ordinary Income shares. The effect of gearing is that in rising markets the asset value of the Ordinary Income shares benefits from any outperformance of the Company's investment portfolio over and above the cost of the fixed entitlements of the Company's ZDP shares and Common shares. Conversely, when the Company's total assets fall, the Ordinary Income shares suffer to the extent of any shortfall between the return on the Company's investment portfolio and the cost of the fixed entitlements of the Company's ZDP shares and Common shares. Furthermore, when the value of the assets falls severely, the fixed entitlements of the Company's ZDP shares and Common shares may not be entirely covered.
There is currently a small capital value of 0.33p per share accrued to the Company's Ordinary Income shares as at 30 June 2012 due to the revenue reserves attributable to the Company which are available for distribution as future dividends.
Revenue and Dividends
The Company's revenues after tax for the period amounted to £523,000. The revenue return per Ordinary Income share and Common share was 0.46p and 1.27p respectively.
During the period under review the following quarterly dividends were declared in respect of the year ending 31 December 2012:
* The notional accrued entitlement of the ZDP shares at 30 June 2012 was 103.89p
|Shares||Date ann |
|Rate (net)||Record date|
|Pay date |
|Common shares||12 April||0.18p ||20 April||18 May |
|Ordinary Income shares||12 April||0.50p ||20 April||18 May |
|Common shares||1 August||0.18p ||10 August||31 August |
|Ordinary Income shares||1 August||0.50p ||10 August||31 August |
The Board anticipates that future dividends will continue to reflect the reduced size of the Company and may vary over time with the distributable revenues generated from the Company's investment portfolio. Dividends on the Ordinary Income and Common shares are paid in Sterling, quarterly in arrears. From time to time, subject to the requirements of the Corporation Tax Act 2010, the Directors may retain income in the revenue reserves of the Company with a view to producing a consistent level of dividend for Ordinary Income and Common shareholders in subsequent accounting periods.
Financial markets have continued to be dominated by events in the eurozone over the last six months. The period began and ended with equity market rallies resulting from measures taken by policy-makers to tackle the crisis, in the form of the ECB's LTRO scheme and the bailout of Spanish banks agreed at the June summit of EU leaders. The FTSE All-Share Index recorded a small gain, but this should not disguise the significant uncertainties that hampered global markets over the period, and persist as we move into the second half of the year.
Political instability in Europe has grown with the Dutch coalition collapsing in April under the weight of anti-austerity pressure and the crisis dominating the agenda as France and Greece held elections. Fragile investor confidence has transferred to equity market volatility as concerns regarding the economic growth rates of China and the United States added to the travails surrounding the sovereign debt crisis. Although central banks in key emerging markets such as India and China are now relaxing monetary policy, the inflation-fighting measures taken in 2011 have led to evidence of a slowdown, with fears of a 'hard landing' for the Chinese economy becoming increasingly prominent.
Despite the gloomy economic outlook, we can take some comfort from the robust financial shape which many companies find themselves in. Large cap companies, with global operations and defensive earnings profiles are available on what we consider to be undemanding share valuations.
1 August 2012
The UK equity market was strong in January and February as defensively-positioned investors responded in Pavlovian fashion to the European Central Bank's long-term refinancing operation. The willingness to lend unlimited three-year money to eurozone banks at 1 per cent. averted an imminent banking collapse and helped to strengthen balance sheets. It also provided a politically acceptable way for the imminently maturing government debts of Italy, Spain and others to be rolled over at interest rates that would not further destabilise sovereign debt markets.
Equities consolidated in March as sovereign debt concerns resurfaced. Spanish government bond yields rose sharply. Weak economic data from China rekindled concerns about a sharp slowdown in the world's second largest economy. Markets fell sharply in May, erasing gains for the year after an inconclusive election in Greece favoured anti-bailout parties. However, the result of Greece's second election proved to be a sideshow as Spain became the fourth member of the eurozone to ask for a bailout, swiftly followed by Cyprus.
Equities rallied sharply at the end of June after an EU summit agreed to sever the pernicious link between weak banks and heavily-indebted governments by channelling capital directly to banks. Nevertheless, considerable uncertainty remained about the conditionality and timing of these bank recapitalisations.
In a volatile market, the net assets (i.e. total assets less current liabilities) of the Company grew by 2.3 per cent. in the first half of the year. For comparison, the FTSE All Share Index returned 1.2 per cent. and 3.3 per cent. for its capital and total return respectively.
Key positive contributions to performance came from HSBC, bookmakers William Hill and Ladbrokes, Majestic Wine and Babcock a leading support services company which recently joined the FTSE 100 Index. Both Shell and BP shares declined over the period reflecting the reversal in the Brent Crude oil price, which peaked at U$126 per barrel in March and troughed in mid-June at U$89 per barrel.
At the start of the period under review we cut our position in Carnival immediately following the loss of the Costa Concordia. We took some profits from Ricardo, the technical consulting group and from Vodafone. We reduced our exposure to Lloyds Banking Group.
We opened two new positions in the period under review. Marston's, the pub company and brewer, is a reliable business whose shares offered an attractive dividend yield. N. Brown is a catalogue and internet retailer whose shares have been trading at an attractive valuation. The company should benefit from the migration of shoppers online, while the recent squeeze in consumer's disposable income could relax later this year. We added to our holding in Centrica ahead of its full year results. The shares offered good value and an attractive dividend yield.
In the outlook written here four years ago, we said that debt-ridden consumers were about to face a period of austerity. The world is now five years on from the onset of the financial crisis, yet the global economy remains unbalanced and is seemingly becoming more so as interrelated weaknesses continue to exacerbate each other. Balanced economic policies and a reliable financial system remain a distant goal.
There are growing signs of a global economic slowdown. In the US, there is continued weakness in consumer spending and the labour market. Among the BRICs, India's economic growth is at its weakest in a decade, while recent monetary easing in Brazil and China was interpreted as evidence of economic weakness. In Europe, the central bank lowered its policy rate by 0.25 per cent. to a euro-era low of 0.75 per cent. A weaker euro may stimulate export-oriented Germany but will do nothing to address the deep-rooted problems faced by Europe's grim south.
After the collapse of Lehman Brothers, the Bank of England cut interest rates to 0.5 per cent. and began the largest quantitative easing programme in history. The Bank increased the monetary base by about 40 per cent. a year for nearly four years but the money supply has only expanded at an annual rate of around 1.3 per cent., while the economy has ground to a halt. If low interest rates were going to work they would have worked by now.
The reason why monetary policy has failed is simple. Instead of borrowing to spend, companies and households are paying down debt. Rather than being channelled into economically productive areas, savings are being taken off the table or as economists say, the money multiplier has turned negative. This would be the ideal time for the government to step in with some sensible infrastructure projects. Instead, the decision by the governments of the UK, Germany, US and Japan to reject fiscal stimulus has placed an intolerable burden on central banks.
At the end of June, Mervyn King told a Treasury Select Committee that the health of the economy had deteriorated so severely that policymakers had torn up their forecasts made six weeks earlier. Governor King warned that we were not even halfway through the financial crisis. It might therefore follow that we can expect low interest rates for several more years. Assuming the government can avoid a sterling crisis, it looks like the real returns on cash deposits and gilts may remain negative for quite a while.
With so many asset classes looking unattractive, company dividends are one of the few areas that offer the possibility of a rising income stream, while the worldwide nature of the businesses we hold means that defensive growth continues while equity valuations are not stretched.
Jupiter Asset Management
1 August 2012
for the six months to 30June 2012 (unaudited)
|Six months to|
30 June 2012
|Six months to|
30 June 2011
|Gains on investments held at fair value through profit or loss ||-||763||763||-||208||208|
|Investment management fee||(136)||-||(136)||(144)||-||(144)|
|Net return on ordinary activities before finance costs and taxation||520||763||1,283||451||208||659|
|Net return on ordinary activities before taxation||520||-||520||451||385||66|
|Tax on ordinary activities||3||-||3||-||-||-|
|Net return on ordinary activities after tax||523||-||523||451||(385)||66|
|Net return per Ordinary Income share||0.46p|
|Net return per Common share||1.27p|
The total column of this statement is the profit and loss account of the Company prepared in accordance with UK Generally Accepted Accounting Practice ('UK GAAP').
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.
The financial information does not constitute 'accounts' as defined in section 434 of the Companies Act 2006.
As at 30 June 2012
|Fixed asset investments|
|Investments at fair value through profit or loss||32,794||33,340|
|Cash at bank||2,479||1,617|
|Creditors: amounts falling due within one year||(230)||(197)|
|Net current assets||2,999||1,654|
|Total assets less current liabilities||35,793||34,994|
|Creditors: amounts falling due after more than one year|
|Zero Dividend Preference shares and Common shares||(35,489)||(34,726)|
|Total net assets||304||268|
|Capital and reserves|
Called up share capital
|Total shareholders' funds||304||268|
|Net Asset Value per Ordinary Income share||0.33p||0.29p|
RECONCILIATION OF MOVEMENTS IN
for the six months to 30 June 2012 (unaudited)
|For the six months to |
30 June 2012
|Balance at 1 January 2012||8,235||21,864||62,062||(91,161)||268||268|
|Net return for the period||-||-||-||-||523||523|
|Revenue attributable to Common shares||-||-||-||-||(102)||(102)|
|Equity dividends paid and declared||-||-||-||-||(385)||(385)|
|Balance at 30 June 2012||8,235||21,864||62,062||(92,161)||304||304|
|For the six months to 30 June 2011 (restated)|
|Balance at 1 January 2011||8,235||21,864||62,062||(91,776)||293||678|
|Net return for the period||-||-||-||(385)||451||66|
|Revenue attributable to Common shares||-||-||-||-||(123)||(123)|
|Equity dividends paid and declared||-||-||-||-||(330)||(330)|
|Balance at 30 June 2011||8,235||21,864||62,062||(91,161)||291||291|
CASH FLOW STATEMENT
for the six months to 30 June 2012 (unaudited)
|Six months to|
|Six months to|
|Operating activities |
|Net cash inflow from operating activities ||460||255|
|Net tax received||3||-|
|Net cash flows from investing activities |
|Purchase of investments ||1,611||(10,856)|
|Sale of investments ||2,488||9,213|
|Net cash inflow/(outflow) from investing activities ||878||(1,643)|
|Net cash flow before financing||1,340||(1,388)|
|Equity dividends paid||(385)||(330)|
|Finance costs (dividends) on Common shares||(93)||(77)|
|Increase/(decrease) in cash||862||(1,795)|
Notes to the Condensed Financial statements
A summary of the principal accounting policies all of which have been applied consistently throughout the period are set out below.
(a) Basis of Preparation
The Financial Statements for the six months to 30 June 2012 have been prepared in accordance with UK Generally Accepted Accounting Principles ('UK GAAP') and with the Statement of Recommended Practice ('SORP') for Investment Trust Companies issued by the Association of Investment Companies ('AIC') in January 2009. The Company continues to adopt the going concern basis in the preparation of the financial statements.
(b) Revenue Recognition
Dividends on investments are included in revenue when the investment is quoted ex-dividend. UK dividends are shown net of tax credits. Interest on deposits is accounted for on an accruals basis. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves.
Expenses are accounted for on an accruals basis. Management fees, administration and other expenses are charged fully to the revenue column of the income statement. That part of any Investment performance fee which is deemed by the Directors to relate to the capital outperformance of the Company's investments will be charged to capital and that part relating to revenue outperformance will be charged to revenue. Expenses which are incidental to the purchase or sale of an investment are charged to capital.
(d) Finance Costs
Finance costs are accounted for on an accruals basis, and in accordance with the provisions of Financial Reporting Standard 25 'Financial Instruments' and are charged in full to the revenue column of the Income Statement. In accordance with the provisions of Financial Reporting Standard 25 'Financial Instruments' the Zero Dividend Preference shares and Common shares are classified as a liability in the accounts and are charged to the capital column of the Income Statement.
- Withholding tax deducted at source from income received is treated as part of the taxation charge in the income account, in instances where it can not be recovered.
- Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or right to pay less, tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods.
(f) Foreign Currency
- Assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.
- Foreign currency transactions are translated at the rates of exchange applicable at the transaction date.
- Foreign currency differences are dealt with in the capital reserve.
(g) Capital Reserve
The following are accounted for in this reserve:
- gains and losses on the realisation of investments
- changes in fair value of investments held at the period end
- performance fee relating to capital outperformance
- finance costs of ZDP and Common shares
- transaction costs
The capital reserve is not available for the payment of dividends.
Investments are recognised and derecognised on the trade date where a purchase and sale of an investment is under contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, being the consideration given.
All investments are classified as held at fair value through profit or loss. Changes in the fair value of investments listed at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as 'Gains/(losses) 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.
Foreign exchange gains and losses on fair value through profit or loss investments are included within the changes in the fair value of the investment.
Mr Hogg is a director of Jupiter Investment Management Group Limited whose subsidiaries Jupiter Asset Management Limited and Jupiter Administration Services Limited, of which he is also a director, receive investment management and 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 one year's notice by either party) for an annual fee of 0.75 per cent. of total assets less current liabilities payable quarterly in arrears. Management fees of £66,835 were outstanding as at 30 June 2012 (30 June 2011: £Nil).
Jupiter Asset Management Limited is also entitled to receive a performance fee of 15 per cent. of the amount by which audited total assets less current liabilities on the last day of each accounting period exceed the higher of (a) 110 per cent. of the total assets less current liabilities at the end of the immediately preceding accounting period and (b) the total assets less current liabilities at the end of the last accounting period for which a performance fee was paid ('the high water mark').
Jupiter Administration Services Limited is contracted to provide secretarial, accounting and administrative services to the Company for an annual fee of £107,452 (2011: £102,531) adjusted each year in line with the Retail Price Index payable quarterly.
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 during the period. Details of related party transactions are contained in the 2011 Annual Report and Accounts and in this announcement.
Principal Risks and Uncertainties
The principal risks and uncertainties associated with the Company's business can be divided into the following areas:
- investment policy and process
- market movements
- legal and regulatory compliance
- operational, and
- financial, such as market price risk, interest rate risk, liability risk and credit risk.
Information on these risks is set out in the 2011 Annual Report and Accounts.
In the view of the Board these principal risks and uncertainties are applicable to the remaining six months of the year as they were to the six months under review.
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 (see below), 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 Dividend and Growth 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 June 2012;
b) the Chairman's Statement, Manager's Review and 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
1 August 2012
The objective of the Company is to provide Ordinary Income and Common shareholders with a high and rising income together with the possibility of capital appreciation and to provide Zero Dividend Preference and Common shareholders with a predetermined level of capital.
Full details of the Company's investment policy can be found in the 2012 Half-Yearly Financial Report.
The Half-Yearly Financial Report will be available on the Company's website at www.jupiteronline.co.uk Copies may also be obtained from the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJ.
BY ORDER OF THE BOARD
JUPITER ASSET MANAGEMENT LIMITED
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Source: Jupiter Dividend & Growth Trust PLC via Thomson Reuters ONE