Recommended proposals for the continuation of t...
Jupiter European Opportunities Trust PLC
Recommended proposals for the continuation of the life of the Company
The Board of European Opportunities Trust PLC (the `Company') intends to publish
a circular to Shareholders within the next few days which will contain details
of recommended proposals for the continuation of the life of the Company beyond
its planned winding up date on Friday, 29 February 2008 and for the introduction
of a rolling continuation vote to be put to Shareholders at the annual general
meeting in 2008 and at every third Annual General Meeting (`AGM') thereafter
(the `Proposal').
The Board anticipate that an Extraordinary General Meeting (`EGM') of the
Company is expected to be convened to take place before the end of November
2006. At the EGM a special resolution will be proposed to amend the Company's
Articles of Association in order to implement the Proposal.
Background
The Company was launched in November 2000. At launch, shares in the Company were
offered as a tax efficient rollover option for shareholders in Jupiter European
Investment Trust PLC (`JEIT'), an investment trust which was founded in 1990 and
which was managed from the end of January 1999 by Alex Darwall (who has been the
portfolio manager of the Company since launch).
A Shareholder who acquired ordinary income shares in JEIT when Alex Darwall took
on the management of its investment portfolio at the end of January 1999 and who
subsequently rolled their investment over into Ordinary Shares in the Company
(`Shares') at launch would have enjoyed an estimated 306.5 per cent. return on
the net asset value of their investment as at 24 October 2006. A Shareholder who
acquired Shares in the public offer on the Company's launch in November 2000
would have enjoyed an 85.4 per cent. return on the Net Asset Value of their
investment as at the same date. (Source: Jupiter Asset Management Limited).
As the Company approaches its planned winding up date in February 2008, the
Board has been considering the alternatives available to Shareholders. At
present, the Company's Articles of Association provide for the Directors to
convene an EGM at which a resolution shall be proposed requiring the Company to
be wound up voluntarily on 29 February 2008, unless the Directors have
previously been released from this obligation by a special resolution of the
Company.
The Board is aware that a large number of Shareholders, both retail and
institutional, wishes to continue their investment beyond February 2008 with the
Company's portfolio manager, Alex Darwall, and with the Company's existing
investment objectives and policies unchanged.
One way in which this could be done would be by way of a scheme of
reconstruction into a new investment trust. However, the costs of such schemes
are relatively high. The Board believes that, given the track record of the
incumbent portfolio manager and the fact that no change is proposed to the
investment objectives or capital structure, it is appropriate at the current
time to ask Shareholders to remove the February 2008 winding up provisions in
the Articles of Association and to replace them with a commitment to hold a
continuation vote on a rolling three yearly basis.
Under the Proposal, the Company's Shareholders will be asked at the AGM in 2008,
and again at the AGM falling every three years thereafter, to approve the
continuation of the Company by way of an ordinary resolution. In the event that
such a continuation resolution is not passed by Shareholders, the Company will
proceed to put proposals to Shareholders within 90 days of the relevant meeting
whereby a full cash exit at close to the liquidation net asset value of the
Shares will be made available to all Shareholders. In these circumstances the
cash option would be made on an unlimited basis and preferential terms would not
be offered to those Shareholders who elect to roll over into a continuing
investment vehicle.
We believe that the Proposal is important since it will give both the Investment
Manager and the Board greater flexibility to manage the Company's investment
portfolio and borrowings without the prospect of a forced sale of assets to
raise cash prior to a reconstruction and/or a fixed winding up date. With the
prospect of a longer life there will be a longer period in which Shareholders
should be able to benefit from the portfolio manager's investment performance
and, it is to be hoped, build capital gains. We believe that this will also
serve to make the Company a more attractive investment opportunity for smaller
Shareholders, independent financial advisers and private client stockbrokers.
Treasury Shares and Discount Management Policy
In response to concerns raised by institutional Shareholders at the prospect of
the reissue of Shares from treasury by the Company at a discount to their net
asset value, on 3 October 2006 the Company announced that it was no longer its
policy to allow the reissue of treasury shares at a discount to their estimated
net asset value.
The Directors have always believed that it is not in Shareholders' interest for
the Company's Shares to trade at a significant discount to their prevailing
estimated net asset value. Moreover, the Board believes that the most effective
and the only proven means of ensuring that the Company's Shares do not trade at
a material discount to their net asset value is for the Company consistently to
outperform both its peers and its benchmark. Under Alex Darwall's management of
the Company's investment portfolio the Board believes that it has been
successful in these objectives. The average discount at which the Shares have
traded has been 6 per cent. over the past three years and, as at 24 October
2006, the latest practicable date prior to the publication of this circular, the
discount stood at 3.1 per cent. to the estimated Net Asset Value per share as at
24 October 2006, which compares favourably with the weighted average discount
for the eleven investment trusts in the Association of Investment Company's
`European' Peer Group of 4.7 per cent. (Source: Fundamental Data Limited)
Management and Past Performance
The Company was first admitted to the London Stock Exchange on 20 November 2000
with net assets of £78.5 million. As at 24 October 2006, the latest practicable
date prior to the publication of this circular, the Company's net assets had
grown by a total of 90.5 per cent. since launch to an estimated £149.6 million
(unaudited) (Source: Jupiter Asset Management Limited).
Market Outlook and Portfolio Review
The Board continues to believe that this is an exceptionally good time to be
investing in European equities. Underpinning its enthusiasm is its view that
there are further significant productivity gains to come through. This is crucial
because improving productivity is the key to keeping inflation and interest rates
low and driving growth. Better communications (notably digital technology) form
part of this productivity story and help to promote the spread of business and
wealth creation across the world.
European companies are, in many cases, well placed to benefit from these trends.
There is a vast range of businesses in which European listed companies are world
class. The opportunities for such companies are, for the reasons described
above, excellent. The Investment Manager's investment style, which focuses on
identifying these world beating companies, is proven and is, in the Board's
view, appropriate for current market trends.
Liquidity Management
The Board believes that its policies on discount and liquidity management, which
have evolved over the past five years, are at least as effective as the original
winding up provision for the purposes of ensuring that Shareholders who wish to
buy or sell the Company's Shares can do so relatively easily and at close to
their underlying net asset value.
In particular, the Board believes that it is important for the Company to
participate in managing the liquidity (in other words, the flows in supply and
demand) of the Company's Shares on the London Stock Exchange. Increased
volatility in the supply and demand for Shares can lead to unwanted results such
as an increase in the short term discount at which the Company's Shares may
trade (due to excessive supply over demand) or, equally unattractive, the
appearance of a short term premium to net asset value (due to excessive demand
over supply) which is not then sustained into the long term.
In order to manage the liquidity in the Company's Shares, the Board will
continue to operate its existing share buy back, treasury share and new issuance
policies. The Company's new corporate brokers, Cenkos Securities Limited, will
work with the Company and Jupiter Asset Management in attempting to place the
Shares of any sellers with other long term holders in preference to the
repurchase of Shares by the Company for cancellation or treasury. However, if
Shares are offered in the market which cannot be placed with other investors at
an appropriate discount then the Company will repurchase them for cancellation
or for treasury.
Any repurchases made pursuant to the Company's liquidity management policy would
be funded through a combination of available cash reserves and the use of short
term borrowings under the Company's overdraft and/or its revolving credit
facility.
The level of discount at which the Company will repurchase Shares will be
regularly reviewed by the Board. In determining the threshold, the Board is
committed to seeking maximum value for all Shareholders, regardless of the size
of their investment, and to act always in the best interests of Shareholders as
a whole. Factors which will be taken into consideration will include the views
expressed by our Shareholders, general market conditions and the advice of the
Company's brokers and of the Investment Manager.
For the avoidance of doubt, purchases will always be at the absolute discretion
of the Board. Any purchases will be made only through the market at prices below
the prevailing estimated net asset value per Share where the Directors believe
such purchases will enhance Shareholder value.
Under the Listing Rules, the maximum price that may currently be paid by the
Company on the repurchase of any Shares is 105 per cent. of the average of the
middle market quotations for the Shares for the five business days immediately
preceding the date of repurchase or, if higher, that stipulated by Article 5(1)
of the Buy-back and Stabilisation Regulation (EC No 2273/2003).
Enquiries:
Richard Pavry
Director
Jupiter Asset Management Limited
rpavry@jupiter-group.co.uk
Tel: 020 7314 4822
Chris Lunn
Sales, Cenkos Securities plc
clunn@cenkos.com
020 7397 1912
Will Rogers
Corporate Finance, Cenkos Securities plc
wrogers@cenkos.com
020 7397 1920
Jenny Thompson
Company Secretary
jthompson@jupiter-group.co.uk
020 7314 5565
Cenkos Securities plc, which is authorised and regulated in the United
Kingdom by the Financial Services Authority for designated investment business,
is acting exclusively for Jupiter European Opportunities Trust PLC and no-one
else in connection with this announcement and will not be responsible to any
other person for providing the protections afforded to clients of Cenkos
Securities plc or for providing advice in relation to this announcement or
to any other matter referred to in this announcement.
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