Jupiter Green Investment Trust PLC : Half-yearl...
Jupiter Green Investment Trust Plc
Unaudited Half Yearly Results
for the six months to 30 September 2011
Chairman's Statement
During the six months to 30 September 2011, we witnessed a return to the sorts of volatile conditions last seen during the credit crisis in 2008. Sentiment in financial markets was tested by a number of events - a worsening of the eurozone sovereign debt crisis, a downgrade of US treasury bonds and weakening economic indicators in both mature and developing market economies. The general mood turned from one of cautious optimism to grave doubt about the ability of global policy makers to rebalance economies without stifling growth. It is amid this complex investment environment that I present the Half Yearly Financial Report for the Jupiter Green Investment Trust.
During the period under review your Company's total assets, adjusted for share cancellations and Warrant conversions, fell by 19.3 per cent. to £32,715,000. This compares with a fall in the Company's benchmark index, the MSCI World Small Cap Index of 19.5 per cent. over the same period.
On 31 July 2011 the Warrants expired. 1,057,145 new Ordinary shares were issued during the period as a result of exercising Warrants, raising approximately £1 million of new money.
I recommend the Manager's Review. In this the Investment Manager discusses the impact of a broad de-rating of cyclical stocks on the portfolio. Set against this, however, he highlights the contributions made by Japanese holdings in the aftermath of the horrific earthquake earlier this year, as well as continued M&A activity which indicates a measure of confidence in the long-term potential for environmental businesses.
There a wide consensus that the global economy is in a very difficult era. There are fears of a recession in the West and of a sharp slowdown in the emerging economies. At the time of writing in late October, this fortunately has not been confirmed by economic data. Furthermore, recent indicators in the US and China have provided some cause for hope. Nevertheless, the outlook for the economy and asset markets has very much become linked with the machinations of Europe's leaders. It is believed that their success or failure in dealing with the current crisis will shape the depth of economic downturn across the world. Markets are therefore poised to respond to news from the eurozone, rather than stock level fundamentals.
Your manager is monitoring events closely. He is currently cautious about renewable energy businesses, given they are experiencing pressures from the deteriorating macroeconomic environment. He has also remained vigilant about the financial health (i.e. balance sheets and cash flows) of companies, particularly since the crisis in 2008. Nevertheless, while the outlook is distressing, it is important to remember that periods such as this can provide excellent opportunities to purchase fundamentally strong businesses at low valuations. Additionally, regardless of the short term outlook, issues such as environmental degradation, scarcity of natural resources and shifting demographics (population growth, increased urbanisation, etc.) are likely to remain as key challenges for the global economy, thereby underpinning the Trust's long term investment thesis.
P K O Crosthwaite
Chairman
24 November 2011
Manager's Review
Performance Review
For the six months ended 30 September 2011, the total return for the Trust was -19.3 per. cent.* compared to returns of -19.5 per. cent.* for the Trust's benchmark, the MSCI World Small Cap Index. (in sterling).
Market and Policy Review
In the six months to 30 September 2011 global stock markets were turbulent. The period started with some hope that the global economic recovery could be sustained beyond the end of the second round of quantitative easing in the US and despite supply disruptions that followed the devastating earthquake in Japan. However, these hopes were dashed in the summer months by a deepening of the sovereign debt crisis in the eurozone. Amid growing political and economic divisions, confidence in eurozone policymakers plummeted, Greek bonds were de-rated to junk and fears grew about the spread of the crisis to Spain and Italy. Towards the end of the period it became evident that the eurozone crisis was contributing to a global economic slowdown. Poor growth data in the US and weakness in emerging market indicators resulted in some highly volatile conditions in August and September.
Fund performance
The Trust performed in line with its benchmark, but lost ground in absolute terms with cyclical holdings succumbing to the wider market uncertainty.
Industrial recycling companies with exposure to commodity prices (e.g. Horsehead Holdings and Schnitzer Steel Industries) were de-rated, while businesses involved in renewable energy (First Solar and Vestas Wind Systems) faced considerable headwinds. The latter was due to uncertainties over future policy support, sovereign-debt related issues and a generally benign outlook for gas prices. We continue to believe the renewable energy sector will provide an excellent investment opportunity over the long term, especially in the area of solar power where technology is advancing rapidly. However, current macroeconomic and industry-specific pressures - including the potential for oversupply - are presenting uncomfortable levels of risk, in our view. With western governments overburdened by debt, alternative energy suppliers are also being forced to become less reliant on subsidies. While a hastening of progress towards greater pricing competition with mainstream energy suppliers could be a defining period for this sector, it is also likely to compromise margins in the short term. For this reason, we currently have our lowest ever exposure to renewable energy businesses.
More positively, M&A activity was a particular benefit for the Trust. Nalco Holdings received a bid from Ecolab, a company recognising the long term potential for the water treatment sector. Meanwhile, Hansen Transmission, which provides gearboxes to the wind industry, received an offer by competitor Sumitomo Heavy Industries for its industrial gearbox division. With many companies sitting on strong balance sheets and valuations being relatively attractive, we may see further consolidation among environmental solutions businesses, especially if current macroeconomic expectations prove too pessimistic.
Amid deteriorating economic conditions, the strength of our US organic and fair trade food holdings was very encouraging. Green Mountain Coffee Roasters, which distributes fair-trade coffee in the US, had an extraordinary period. Its stock price increased by close to 50 per. cent. on the back of impressive results and a robust growth outlook. A strategic alliance with Starbucks and strong demand for Green Mountain's home brewing technology has driven strong growth at the company. Whole Foods Market made good progress with the businesses benefiting from a loyal customer base with a preference for food produced locally in the US. The fortunes of UK-focused Cranswick contrasted with its US counterparts. This high welfare pork business continued to be pressured by rising pig prices which it has struggled to pass on to consumers in a tougher economic environment.
*Source: Jupiter Asset Management.
**Source: Bloomberg.
Elsewhere, Japanese holdings Shimano, Air Water and Daiseki made solid gains on the back of the rapid recovery of the domestic economy following the earthquake in March.
We have changed the way we describe the various opportunities within the green investment universe. We no longer refer to six green investment themes, but prefer three broad categories - infrastructure, resource efficiency and demographics. Environmental issues have become embedded in mainstream economic activity in recent years, so much so that we believe that investment in this area is no longer a niche enterprise, but is rather about investment in the long-term structural growth of the global economy. This change, therefore, is to better reflect the sector's maturity.
Investment Outlook
While Europe's crisis continues to be a major threat to global economic growth, there has been some cause for hope in recent US data. Furthermore, following intense international pressure, Europe's politicians are beginning to discuss ways to recapitalise the region's banks and bolster the region's bailout fund. Nevertheless, the market is continuing to prepare for a potential recession across the West in the coming months. While these conditions pose a threat to corporate profitability, many companies have generally adapted to tougher economic conditions by cutting costs, reducing debt levels and improving business models. Additionally, we have yet to see notable shifts in longer term environmental policy making, although government spending in certain regions, notably the EU, may come under pressure in the near term. Environmental policy has also moved up the agenda in emerging markets such as Brazil, Indonesia and Vietnam, which may ultimately lead to new opportunities for green businesses. The adoption of green policies by these countries also reflects the broadly accepted view that the significant issues of environmental degradation are not improving - a view which continues to underpin our long-term investment thesis.
Charles Thomas
Jupiter Asset Management Limited
Fund Manager
24 November 2011
Statement of ComprehensiveIncome for the six months to 30 September 2011 (unaudited)
| Six months to 30 September 2011 | Six months to 30 September 2010 | |||||
| Revenue | Capital | Revenue | Capital | |||
| Return | Return | Total | Return | Return | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Loss on investments held at fair value (Note 2) | - | (7,875) | (7,875) | - | (3,092) | - |
| Foreign exchange gain | - | 10 | 10 | 7 | 325 | 332 |
| Income | 402 | - | 402 | 369 | - | 369 |
| Total income | 402 | (7,865) | (7,463) | 376 | (2,767) | (2,391) |
| Investment management fee | (16) | (143) | (159) | (17) | (157) | (174) |
| Other expenses | (172) | - | (172) | (165) | - | (165) |
| Total expenses | (188) | (143) | (331) | (182) | (157) | (339) |
| Profit before taxation | 214 | (8,008) | (7,794) | 194 | (2,924) | (2,730) |
| Taxation | (28) | - | (28) | (27) | - | (27) |
| Profit and total comprehensive income for the period | 186 | (8,008) | (7,822) | 167 | (2,924) | (2,757) |
Return per Ordinary share (Note 3) | 0.56p | (24.08p) | (23.52p) | 0.41p | (7.15)p | (6.74)p |
The Company does not have any income or expense that is not included in profit for the period, and therefore the "Profit for the period" is also the "Total comprehensive income for the period", as defined in International Accounting Standard 1 (revised).
All of the profit and total comprehensive income for the period is attributable to the owners of the Company.
The total column of this statement is the Statement of Comprehensive Income 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. 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 September 2011
| 30 September 2011 | 31 March 2011 | |
| (unaudited) | (audited) | |
| £'000 | £'000 | |
| Non current assets | ||
| Investments held at fair value through profit or loss | 30,288 | 40,692 |
| Current assets | ||
| Prepayments and accrued income | 94 | 55 |
| Cash and cash equivalents | 2,539 | 683 |
| 2,633 | 738 | |
| Total assets | 32,921 | 41,430 |
| Current liabilities | ||
| Accruals | (206) | (345) |
| Total assets less current liabilities | 32,715 | 41,085 |
| Capital and reserves | ||
| Called up share capital | 37 | 37 |
| Share premium | 26,229 | 26,229 |
| Redemption reserve | 233 | 233 |
| Special reserve | 25,349 | 24,292 |
| Retained earnings (Note 5) | (19,133) | (9,706) |
| Total equity shareholders' funds | 32,715 | 41,085 |
| Net Asset Value per Ordinary share (Note 6) | 97.21p | 102.49p |
Statement of Changes in Equity for the six months to 30 September 2011
| For the six months to | Share | Share | Special | Redemption | Retained | |
| 30 September 2011 | Capital | Premium | Reserve | Reserve | Earnings | Total |
| (unaudited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 31 Mar 2011 | 37 | 26,229 | 24,292 | 233 | (9,706) | 41,085 |
| Net loss for the period | - | - | - | - | (7,822) | (7,822) |
| Ordinary shares issued | - | - | 1,057 | - | - | 1,057 |
| Ordinary shares repurchased | - | - | - | - | (1,474) | (1,474) |
| Dividend paid | - | - | - | - | (131) | (131) |
| Balance at 30 Sept 2011 | 37 | 26,229 | 25,349 | 233 | (19,133) | (32,715) |
| For the six months to | Share | Share | Special | Redemption | Retained | |
| 30 September 2010 | Capital | Premium | Reserve | Reserve | Earnings | Total |
| (unaudited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 31 Mar 2010 | 44 | 26,229 | 24,292 | 226 | (7,201) | 43,590 |
| Net loss for the period | - | - | - | - | (2,757) | (2,757) |
| Balance at 30 Sept 2010 | 44 | 26,229 | 24,292 | 226 | (9,958) | 40,833 |
Cash Flow Statement for the six months to 30 September 2011 (unaudited)
| Six months to 30 September 2011 | Six months to 30 September 2010 | |
| £'000 | £'000 | |
| Cash flows from operating activities | ||
| Investment income received | 401 | 400 |
| Deposit interest received | 2 | 6 |
| Investment management fee paid | (135) | (92) |
| Realised gain /(loss) on foreign currency | 10 | (179) |
| Other cash expenses | (351) | (154) |
| Cash generated from operations | (73) | (24) |
| Taxation | (28) | (27) |
| Net cash outflow from operating activities | (101) | (51) |
| Cash flows from investing activities | ||
| Purchases of investments | (1,251) | (5,825) |
| Sales of investments | 3,779 | 6,434 |
| Net cash inflow from investing activities | 2,528 | 609 |
| Cash flows from financing activities | ||
| Shares issued | 1,057 | - |
| Shares repurchased | (1,474) | - |
| Dividend paid | (131) | - |
| Net cash outflow from financing activities | (548) | - |
| Increase in cash | 1,879 | 558 |
| Cash and cash equivalents at start of period | 683 | 939 |
| Cash and cash equivalents at end of period | 2,652 | 1,497 |
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 April 2011 to 30 September 2011. 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) adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC).
A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below:
Revenue, Expenses and Interest Payable
Revenue includes dividends from investments quoted ex-dividend on or before the date of the Statement of Financial Position. Income on fixed income securities is recognised on a time apportionment basis according to the period for which these investments are held. Deposit and other interest receivable, expenses and interest payable are accounted for on an accruals basis. An analysis of retained earnings broken down into revenue (distributable) items and capital (non-distributable) items is given in Note 5. In arriving at this breakdown, expenses have been presented as revenue items except as follows:
expenses which are incidental to the purchase or sale of an investment are included in the cost or deducted from the proceeds of the investment (see Note 4).
any performance fees payable are allocated wholly to capital, reflecting the fact that, although they are calculated on a total return basis, they are expected to be attributable largely, if not wholly, to capital performance.
90 per cent. of the investment management fee is charged to capital.
Investments
All investments are classified as held at fair value through profit or loss. All investments are measured at fair value with changes in their fair value recognised in the income statement. The fair value of listed investments is based on their quoted bid market price at the date of the Statement of Financial Position without any deduction for estimated future selling costs.
2. Gains on Investments
| Six months to 30 September 2011 | Six months to 30 September 2010 | |
| £'000 | £'000 | |
| Net gain / (loss) realised on sale of investments | 639 | (1,105) |
| Movement in unrealised gains | (8,514) | (1,987) |
| Loss on investments | (7,875) | (3,092) |
3. Earnings per Ordinary share
The earnings per Ordinary share figure is based on the net loss for the six months of £7,822,000 (six months to 30 September 2010: loss £2,757,000) and on 33,255,408 (six months to 30 September 2010: 40,869,929) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.
The earnings per Ordinary share figure detailed above can be further analysed between revenue and capital, as below.
| Six months to 30 September 2011 | Six months to 30 September 2010 | |
| £'000 | £'000 | |
| Net revenue profit | 186 | 167 |
| Net capital loss | (8,008) | (2,924) |
| Net total loss | (7,822) | (2,757) |
| Weighted average number of Ordinary shares in issue during the period | 33,255,408 | 40,869,929 |
| Revenue earnings per Ordinary share (p) | 0.56 | 0.41 |
| Capital earnings per Ordinary share (p) | (24.08) | (7.15) |
| Total earnings per Ordinary share (p) | (23.52) | (6.74) |
Transaction Costs
The following transaction costs were incurred during the period:
| Six months to 30 September 2011 | Six months to 30 September 2010 | |
| £'000 | £'000 | |
| Purchases | 3 | 17 |
| Sales | 4 | 15 |
| 7 | 32 |
5. 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 March 2011 | 165 | (9,871) | (9,706) |
| Movement during the period: | |||
| Net profit for the period | 186 | (8,008) | (7,822) |
| Shares repurchased | - | (1,474) | (1,474) |
| Dividends paid | (131) | - | (131) |
| At 30 September 2011 | 220 | (19,353) | (19,133) |
6. 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 £32,715,000 (31 March 2011: £41,085,000) and on 33,655,306 (31 March 2011: 34,097,910) Ordinary shares, being the number of Ordinary shares in issue at the period end.
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 Annual Report and Accounts 2011 and in this Half Yearly Financial Report.
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
- accounting, legal and regulatory
- operational, and
- financial, such as market price risk and foreign currency risk.
Information on these risks is set out in the Annual Report and Accounts 2011.
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.
Directors' Responsibility Statement
We the Directors of Jupiter Green Investment Trust PLC confirm to the best of our knowledge:
the condensed set of financial statements have been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';
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
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
P K O Crosthwaite
Chairman
24 November 2011
Investment Objective
The Company's investment policy is to generate long-term capital growth through a diverse portfolio of companies providing environmental solutions.
Full details of the Company's investment policy can be found in the 2011 Interim Report.
The Interim Report will be available on the Company's website at http://www.jupiteronline.co.uk/PI/Our_Products/Investment_Companies/Green/ for download. Copies may also be obtained from the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJ on request.
BY ORDER OF THE BOARD
JUPITER ASSET MANAGEMENT LIMITED
Secretaries
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 Green Investment Trust PLC via Thomson Reuters ONE
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