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Jupiter US Smllr Co. (JUS)

  Print          Annual reports

Friday 12 March, 2021

Jupiter US Smllr Co.

Half Year Results to 31 December 2020

RNS Number : 0128S
Jupiter US Smaller Companies PLC
12 March 2021
 

Jupiter US Smaller Companies PLC ('the Company')

Legal Entity Identifier: 549300HKKL9K1NY4TW55

 

Half Yearly Financial Report for the six months to 31 December 2020 (unaudited)

 

 

Financial Highlights for the six months to 31 December 2020

 

Ordinary Share Performance

 

 

 

 

31 December

30 June

 

 

2020

2020

% Change

Net asset value (pence)*

1,314.95

1,116.35

+17.8

Middle market price (pence)

1,192.5

942.00

+26.6

Russell 2000 Total Return Index (sterling adjusted)*

7,415.3

  5,942.78

+24.8

Discount to net asset value (%)*

(9.3)

(15.6)

-

Ongoing charges ratio (%)*

1.06

0.98

-

 

* Alternative performance measure

 

 

Chairman's Statement

 

Dear Shareholders

 

Performance

I am pleased to report that in the six months to 31 December 2020 the Net Asset Value ('NAV') per share of the Company rose 17.8%. This was, however, less than the 24.8% gain of the Company's benchmark, the sterling-adjusted Russell 2000 Total Return ("TR") Index.

 

The underperformance of the benchmark of 7.0% is discussed in the Investment Adviser's Review and is not altogether surprising given the Fund Manager's conservative investment style and the very strong rally in the US smaller companies market since November. Performance compared to the benchmark was better in December.

 

Performance over the last three years compares favourably to the benchmark: NAV per share rose 34.5% compared to 32.6% for the benchmark. The three-year comparison includes the period since October 2017 when the Fund Manager increased stock specific risk in the portfolio with the aim that it should benefit more from good stock selection. This favourable performance was despite the Fund Manager's conservative style of investing suffering in a period that has been largely dominated by growth stocks.

 

The US stock market advanced over the six months led by the Russell 2000 TR Index which rose 37.9% in dollar terms. It beat both the 22.8% return of the Standard & Poor's Composite Index and the 28.7% return of the technology-oriented NASDAQ Index.

 

Appointment of non-executive director

Following an extensive recruitment process to aid the Board with succession planning, I am pleased to welcome Stephen White who was appointed as a non-executive director of the Company and member of the Audit & Management Engagement Committee with effect from 1 October 2020.

 

Stephen has over 35 years of experience investing in equity markets. He headed European equities at F&C Asset Management, and European and US equities at British Steel Pension Fund. Prior to this he qualified as a Chartered Accountant at PwC.

 

He is also a non-executive director of four other investment trusts: Aberdeen New India Trust plc, Blackrock Frontier Investment Trust plc, JP Morgan European Smaller Companies Trust plc and Polar Capital Technology Trust plc.

 

Appointment of new investment manager

In December, following a competitive search, the Board announced the appointment of Brown Advisory as the Company's new investment manager.

 

The appointment follows the previously announced retirement of the current Fund Manager Robert Siddles. The Board would like to express their gratitude for Robert's contribution to the strong long-term performance of the Company over the past 20 years. On behalf of the Company, I would like to wish Robert a long and happy retirement.

 

Brown Advisory will manage the Company using its US Small-Cap Growth strategy, which invests primarily in the shares of quoted US smaller companies that provide opportunities for above- average capital growth. It is currently anticipated that the appointment of Brown Advisory will become effective on or before 1 April 2021.

 

Brown Advisory is an independent, global investment management firm with client assets of over $100 billion and offices in the US, London and Singapore. The Brown US Small-Cap Growth strategy has an impressive and long track record with annualised returns of 14.6% in US dollars over 10 years (to 31 December 2020). We believe that the appointment of Brown Advisory should lead to stronger performance, a narrower discount and enable the Company to grow over time.

 

Share price and discount

The Board remains committed to its stated policy of using share buybacks with the intention of ensuring that, in normal market conditions and over a period, the market price of the Company's shares reflects a discount of less than 10% of NAV per share.

 

The Company's share price rose 26.6% to 1192.5p over the period. The discount to NAV was 9.3% at the end of the period, which compared to a discount of 15.6% at 30 June 2020. As at 9 March 2021, the discount was 9.9%.

 

During the period under review, the Company bought back 721,322 shares at an average discount of 13.4%. These are included in the 5,954,936 shares that were held in Treasury at 31 December 2020.

 

Outlook

It is unclear whether the battle against COVID will be won quickly given the potential for further mutations of the virus. The unprecedented economic stimulus following the Democratic party's clean sweep of the executive and legislature should, however, benefit the more domestically focused smaller companies.

 

The US smaller company sector is still an attractive and interesting one for long term investors. Generally, it is under-researched and offers areas of undiscovered value. Shareholders should continue to benefit from the Company's investment approach that focuses on buying good companies at attractive valuations.

 

In conclusion

The Board would like to thank Jupiter for their efforts over the years and are particularly grateful for their full co-operation in helping to transfer the Management Contract to Brown Advisory.

 

 

Gordon Grender

Chairman

11 March 2021

 

 

Investment Adviser's Review

 

Performance

NAV per share increased 17.8% in the six months to 31 December 2020 compared to a 24.8% rise in the benchmark, the Russell 2000 Index Total Return ('TR') Index in sterling terms.

 

Although gains in absolute terms were good, the portfolio lagged the benchmark. This was for three main reasons. Firstly, the portfolio has been run with a conservative style that means it will often lag the market when it rises rapidly, as happened in this period; the relative performance lost can often be recovered subsequently after the market settles. Secondly, the portfolio's largest holding at the end of June, Palomar, was hit hard by profit taking - this is discussed further below. Finally, when the market rallied strongly in November it was led by stocks that had been perceived as "COVID losers"; the portfolio does not hold these as the Fund Manager takes the view that COVID has changed many business models for good.

 

Market review

US equities initially made steady progress continuing the recovery begun in March, but once news broke in early November of the success of a COVID vaccine, the market took off. The Russell 2000 Index rose to new highs on 13 November and continued to do so for the rest of the year, rising above the 2000 level the day before Christmas Eve.

 

A feature of the rally was that smaller companies led large ones by a wide margin, reversing the trend of recent years. The domestic economy showed signs of strengthening with the normally reliable ISM Manufacturing (PMI) Index recovering to levels indicating a good rate of expansion.

 

All sectors of the Russell 2000 TR Index gained in the period. The leaders were energy (+71%), basic materials (+51%) and consumer discretionary (+48%), whilst the laggards were utilities (+15%), real estate (+21%) and telecom (+24%).

 

Portfolio review

The best contribution to performance came from The Pennant Group (home care, hospice and assisted   living). Since its spin-out from The Ensign Group in late 2019, Pennant has delivered much better than expected results from its local clustering strategy. B Riley Financial (niche West Coast investment bank) benefited from the recovery in the stock market. TechTarget (marketing services for technology companies) was a beneficiary of COVID, getting a boost as traditional marketing via industry conferences was restricted.

 

Palomar Holdings (earthquake insurance) was the biggest detractor from performance, costing almost 2% alone. Previously the largest holding, its third quarter results disappointed investors: the surprise was the scale of weather-related losses from all-risk policies, which had been sold to aid distribution of its earthquake policies. The position was retained because it has put the worse weather risks into run- off and underlying earthquake premium growth is very strong. ATN International (niche telecom holding company) had rallied during the COVID crisis because of its strong balance sheet but fell subsequently after management expressed caution about its international telecom segment, which is mainly Caribbean and susceptible to a weakening in tourism. The company has a good record of redeploying capital in attractive underserved markets and the position was held. Exelixis (a profitable biotechnology company with successful products for difficult to treat cancers) suffered from the impact of COVID on physician visits. However, its lead product "CABO" is on the verge of expansion of its use from second line renal cancer to first line as well as other cancers.

 

In the period, some stocks in the portfolio that were viewed by the market as "COVID winners" became very expensive and were sold. Examples were Chegg, the online education provider and TechTarget, mentioned above. Other sales reflected companies that had run into difficulties which undermined prospects: Vectrus (defence facility outsourcing) revealed losses on contracts that had been mis-priced and Univar (chemical distributor) lost a key member of management.

 

Two areas of focus for purchases were biotechnology and consumer products. An example of the former was Neurocrine Biosciences, a highly profitable developer of therapeutics for neurological and endocrine disorders that has prospects to become a large player in this area. In consumer products, we bought Clarus, an athletic equipment manufacturer, that concentrates on brands for outdoor enthusiasts. Its strategy is to acquire additional brands where there is potential to further develop marketing and distribution.

 

There was one takeover in the period, that of Parsley Energy by Pioneer Natural Resources, both exploration and development companies in the Permian Basin. The rationale for the merger is capital efficiency and the potential to generate more free cash flow. Interestingly, Parsley's CEO, Bryan Sheffield, is the son of Pioneer's founder and CEO Scott Sheffield; however, unfortunately for Mr Sheffield junior, he is excluded from management of the new combined entity. We accepted stock in Pioneer.

 

Outlook

The US economy is gathering momentum, although it may be a while before the damage wreaked by COVID is healed. Whilst COVID still remains a threat, the Fed is likely to remain wary of increasing rates. This is a good background for US equities, but, it should be emphasised that there has already been a very strong move in the US smaller companies market since November.

 

The new US administration, with a majority in both legislative houses, seems to have big political challenges ahead, but the real economic challenge for the US this decade is to bring the growth in health care costs under control. Without moderation in spending, these will ultimately bankrupt the country in the following decade.

 

 

Robert Siddles

Fund Manager

Jupiter Asset Management Limited

Investment Adviser

11 March 2021

 

 

Twenty Largest Equity Holdings at 31 December 2020

 

 

 

31 December 2020

30 June 2020

 

 

Market value

Percentage

Market value

Percentage

Company

Sector

£'000

of Portfolio

£'000

of Portfolio

The Pennant Group

Home care, hospice and assisted living.

 

 

 

Health Care

 

 

9,654

 

 

6.1

 

 

4,164

 

 

2.9

America's Car-Mart

Sells and finances used cars.

 

Consumer

Discretionary

 

8,784

 

5.6

 

7,744

 

5.4

Palomar Holdings

Earthquake insurance underwriter.

 

Financial

Services

 

7,826

 

5.0

 

8,358

 

5.8

Construction Partners

Road repairs.

 

Materials &

Processing

 

7,510

 

4.8

 

5,081

 

3.5

Addus HomeCare

Social care for the elderly poor.

 

 

Health Care

 

7,225

 

4.6

 

6,313

 

4.4

B Riley Financial

Investment bank.

 

Financial

Services

 

6,223

 

3.9

 

3,381

 

2.3

GMS

Distributor of internal building products.

 

 

Materials &

Processing

 

 

5,581

 

 

3.5

 

 

4,973

 

 

3.5

ON Semiconductor

Manufacturer of analogue semiconductors.

 

 

 

Technology

 

 

5,240

 

 

3.3

 

 

5,112

 

 

3.6

The Ensign Group

Nursing homes.

 

 

Health Care

 

4,989

 

3.2

 

3,159

 

2.2

MSC Industrial Direct

Distributor of supplies to the metal working industry.

 

 

Producer

Durables

 

 

4,930

 

 

3.1

 

 

5,295

 

 

3.7

StoneX Group

Commodity-related financial services.

 

 

 

Financials

 

 

4,783

 

 

3.0

 

 

5,010

 

 

3.5

TTEC Holdings

Consumer care services.

 

Producer

Durables

 

4,641

 

2.9

 

3,277

 

2.3

ABIOMED

Medical devices.

 

 

Health Care

 

4,615

 

2.9

 

3,803

 

2.6

Grid Dynamics Holdings

Enterprise digital transformation.

 

 

Technology

 

4,313

 

2.7

 

2,163

 

1.5

Omnicell

Automated drug dispensing systems.

 

 

 

Health Care

 

 

4,237

 

 

2.7

 

 

2,756

 

 

1.9

Upland Software

Work management software.

 

 

Technology

 

4,059

 

2.6

 

3,400

 

2.4

Home BancShares

Bank.

 

Financial

Services

 

3,964

 

2.5

 

3,462

 

2.4

American Vanguard

Producer of specialised agrichemicals.

 

 

Materials &

Processing

 

 

3,893

 

 

2.5

 

 

3,816

 

 

2.7

Bottomline Technologies (DE)

Fintech: B2B payables.

 

 

Technology

 

3,815

 

2.4

 

4,054

 

2.8

Proofpoint

Enterprise security software.

 

 

Technology

 

3,792

 

2.4

 

-

 

-

 

The value of the twenty largest equity holdings represents £110.1 million (30 June 2020: £95.7 million) and 69.7% (30 June 2020: 66.6%) of the Company's total investments.

 

As at 30 June 2020 and 31 December 2020, none of the Company's assets were invested in the securities of other listed closed-ended investment companies .

 

 

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 & Accounts for the year ended 30 June 2020.

 

Principal and Emerging 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. The aim of the Board is to seek capital growth, but it cannot eliminate entirely the risk of capital loss. The Company may have significant exposure to portfolio companies from certain sectors from time to time. Greater concentration of investments in any one sector may result in greater volatility in the value of the Company's investments and may materially and adversely affect the performance of the Company. Other key risks faced by the Company relate to liquidity risk, the discount to Net Asset Value, regulatory risk, credit and counterparty risk, loss of key personnel, and operational and financial risks.

 

COVID-19

The outbreak of the COVID-19 pandemic poses additional risks to the Company beyond the risks described above. They include liquidity risks to markets and business continuity risks for the Investment Adviser. Each of these risks is being assessed on a day to day basis by the Investment Adviser.

 

Further detail of the principal and emerging risks and uncertainties associated with the Company's business are set out on pages 20 and 21 of the Annual Report & Accounts for the year ended 30 June 2020.

 

In the view of the Board these principal and emerging risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the six months under review.

 

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

The Directors of Jupiter US Smaller Companies PLC confirm to the best of their knowledge that:

 

(a)  the condensed set of financial statements, prepared in accordance with the applicable set of accounting standards gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company at, or, as applicable, for the period ended 31 December 2020.

 

(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 Guidance and Transparency Rule 4.2.7R; and

 

(c)  the Interim Management Report includes a fair review of the information required by Disclosure Guidance 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.

 

For and on behalf of the Board

 

Gordon Grender

Chairman

11 March 2021

 

 

Income Statement

 

For the six months to 31 December 2020 (unaudited)

 

 

Six months to

Six months to

 

31 December 2020

31 December 2019

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Gains from investments held at fair value through profit or loss

-

23,802

23,802

-

10,203

10,203

Foreign exchange gain on loan

-

156

156

-

463

463

Currency exchangeloss

-

(252)

(252)

-

(111)

   (111)

Income

774

-

774

790

-

790

Gross return

774

23,706

24,480

790

10,555

11,345

Investment management fee

(579)

-

(579)

(625)

-

(625)

Other expenses

(206)

(1)

(207)

(204)

(1)

(205)

Net (loss)/return before finance costs and taxation

(11)

23,705

23,694

(39)

10,554

  10,515

Finance costs

(20)

-

(20)

(188)

-

(188)

Net (loss)/return before taxation

(31)

23,705

23,674

(227)

10,554

10,327

Taxation

(113)

-

(113)

(117)

-

(117)

Net (loss)/return after taxation 

(144)

23,705

23,561

  (344)

10,554

10,210

Net (loss)/return per ordinary share

  (1.15)p

188.73p

187.58p

(2.53)p

77.65p

75.12p

 

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 period.

 

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

 

 

Statement of Financial Position

 

 

 

 

 

As at 31 December 2020

 

 

 

31.12.20

30.06.20

 

(unaudited)

(audited)

 

£'000

£'000

Fixed asset investments

 

 

Investments at fair value through profit or loss

158,094

143,420

Current assets

 

 

Debtors

42

29

Cash at bank

3,638

6,129

 

3,680

6,158

Creditors: amounts falling due within one year

(450)

(4,567)

Net current assets

3,230

1,591

Net assets

161,324

145,011

Capital and reserves

 

 

Called up share capital

4,555

4,555

Share premium

19,550

19,550

Non-distributable reserve

841

841

Capital redemption reserve

9,628

9,628

Retained earnings*

126,750

110,437

Total shareholders' funds

161,324

145,011

Net asset value per ordinary share

1,314.95p

1,116.35p

 

* Under the Company's Articles of Association any dividends must be distributed only from the revenue element of retained earnings.

 

 

Statement of Changes in Equity

 

For the six months to 31 December 2020 (unaudited)  

 

 

Called up

 

Non-

Capital

 

 

 

Share

Share

distributable

Redemption

Retained

 

For the six months

Capital

Premium

Reserve

Reserve

Earnings

Total

to 31 December 2020

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2020

4,555

19,550

841

9,628

110,437

145,011

Repurchase of ordinary shares to be held in Treasury

-

-

-

-

(7,248)

(7,248)

Net return for the period

-

-

-

-

23,561

23,561

Balance at 31 December 2020

4,555

19,550

841

9,628

126,750

161,324

 

 

 

 

 

 

 

 

Called up

 

Non-

Capital

 

 

 

Share

Share

distributable

Redemption

Retained

 

 For the six months

Capital

Premium

Reserve

Reserve

Earnings

Total

 to 31 December 2019 (unaudited)

£'000

£'000

£'000

£'000

£'000

£'000

 Balance at 1 July 2019

4,555

19,550

841

9,628

126,946

161,520

Repurchase of ordinary shares to be held in Treasury

-

-

-

-

(7,407)

(7,407)

Net return for the period

-

-

-

-

10,210

10,210

 Balance at 31 December 2019

4,555

19,550

841

9,628

129,749

164,323

 

 

Called up

 

Non-

Capital

 

 

 

Share

Share

distributable

Redemption

Retained

 

 For the year ended

Capital

Premium

Reserve

Reserve

Earnings

Total

 30 June 2020 (audited)

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2019

4,555

19,550

841

9,628

126,946

161,520

Repurchase of ordinary shares to be held in Treasury

-

-

-

-

(10,853)

(10,853)

Net loss for the year

-

-

-

-

(5,656)

(5,656)

Balance at 30 June 2020

4,555

19,550

841

9,628

110,437

145,011

 

 

 

Notes to the Accounts

 

1.  Accounting policies

The significant accounting policies, which have not been changed and have been applied consistently during the period ended 31 December 2020 are stated below.

 

FRS 104, 'Interim Financial Reporting', issued by the FRC in March 2015 has been applied in preparing the financial statements included in this half yearly report.

 

(a)  Basis of accounting

The accounts of the Company are prepared on a going concern basis under the historical cost convention, modified to include fixed asset investments at fair value through profit or loss and in accordance with the Companies Act 2006, UK GAAP and with the Statement of Recommended Practice ('SORP') for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies ('AIC') in November 2014 and updated in October 2019.

 

The functional and reporting currency of the Company is pounds sterling because that is the currency of the primary economic environment in which the Company operates.

 

In accordance with the SORP, the Income Statement has been analysed between a revenue account (dealing with items of a revenue nature) and a capital account (relating to items of a capital nature). Revenue returns include, but are not limited to, dividend income, operating expenses and tax. Net revenue returns are allocated via the revenue account to the retained earnings, out of which dividend payments may be made. Capital returns include, but are not limited to, profits and losses on the disposal and revaluation of fixed asset investments and currency profits and losses on cash and borrowings. Net capital returns may not be distributed by way of dividend and are allocated via the capital account to the retained earnings.

 

(b)  Principal accounting policies

 

(i)  Financial instruments

Financial instruments include fixed asset investments, derivative assets and liabilities and long-term debt instruments. Accounting standards recognise a hierarchy of fair value measurements for financial instruments which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The classification of financial instruments depends on the lowest significant applicable input, as follows:

 

Level 1 - Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities. Included within this category are investments listed on any recognised stock exchange.

 

Level 2 - Quoted prices for similar assets or liabilities, or other directly or indirectly observable inputs which exist for the duration of the period of investment. Examples of such instruments would be those for which the quoted price has been recently suspended, forward exchange contracts and certain other derivative instruments.

 

Level 3 - External inputs are unobservable. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instruments. Included within this category are unquoted investments.

 

(ii)  Fixed asset investments

As an investment trust, the Company measures its fixed asset investments at "fair value through profit or loss" and treats all transactions on the realisation and revaluation of investments as transactions on the capital account. Purchases are recognised on the relevant trade date, inclusive of expenses which are incidental to their acquisition. Sales are also recognised on the trade date, after deducting expenses incidental to the sales. Quoted investments are valued at bid value at the close of business on the relevant date on the exchange on which the investment is quoted.

 

(iii) Foreign currency

Monetary assets, monetary liabilities and equity investments denominated in a foreign currency are expressed in sterling at rates of exchange ruling at the balance sheet date. Purchases and sales of investment securities, dividend income, interest income and expenses are translated at the rates of exchange prevailing at the respective dates of such transactions. Foreign exchange profits and losses on fixed asset investments are included within the changes in fair value in the capital account. Foreign exchange profits and losses on other currency balances are separately credited or charged to the capital account except where they relate to revenue items when they are credited or charged to the revenue account.

 

(iv) Income

Income from equity shares is brought into the revenue account (except where, in the opinion of the Directors, its nature indicates it should be recognised within the capital account) on the ex-dividend date or, where no ex-dividend date is quoted, when the Company's right to receive payment is established.

 

Dividends are accounted for in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' on the basis of income actually receivable, without adjustment for the tax credit attaching to the dividends. Dividends from overseas companies are shown gross of withholding tax.

 

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash (scrip dividends), the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised in the capital account.

 

(v) Expenses, including finance charges

Expenses are charged to the revenue account of the Income Statement, except expenses incidental to the acquisition or disposal of fixed asset investments which are processed through the capital account;

 

All expenses are recorded on an accruals basis. Finance charges are accrued using the effective interest rate method.

 

(vi)Taxation

Withholding tax deducted at source from income received is treated as part of the taxation charge in the income account, in instances where it cannot be recovered.

 

Deferred tax is provided in accordance with FRS 102, on an undiscounted basis, on all timing differences that have been originated but not reversed by the balance sheet date, based on the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with the recommendations of the SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the "marginal" basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

 

(vii)Capital redemption reserve

The nominal value of ordinary share capital purchased and cancelled is transferred out of called-up share capital and into the capital redemption reserve.

 

(viii) Retained earnings

 

Capital reserve - arising on investments sold. The following are included in this reserve:

 

· gains and losses on the realisation of fixed asset investments;

· realised foreign exchange differences of a capital nature;

· costs of professional advice, including related irrecoverable VAT, relating to the capital structure of the Company;

· other capital charges and credits charged or credited to this account in accordance with the above policies; and

· the costs of purchasing ordinary share capital.

 

Capital reserve - arising on investments held. The following are included in this reserve:

 

· increases and decreases in the valuation of fixed asset investments held at the period end;

· unrealised foreign exchange differences of a capital nature; and

· the revenue loss for the period is taken to the revenue element of this reserve.

 

Significant accounting judgements, estimates and assumptions

The preparation of the Company's financial statements on occasion requires management to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance. Management do not believe that any significant accounting judgements have been applied to this set of financial statements.

 

2.  Gains on investments held at fair value through profit or loss

 

 

Six months to

Six months to

 

31.12.20

31.12.19

 

£'000

£'000

Net gains/(losses) realised on sale of investments

6,020

(717)

Movement in investment holdings gains

17,782

10,920

Gains on investments held at fair value through profit or loss

23,802

10,203

 

3.   Return per ordinary share

 

 

Six months to

Six months to

 

31.12.20

31.12.19

 

£'000

£'000

Net revenue loss

(144)

(344)

Net capital return

23,705

10,554

Net total return

23,561

10,210

Weighted average number of ordinary shares in issue during the period

12,560,529

13,591,803

Net loss per ordinary share

(1.15)p

(2.53)p

Net capital return per ordinary share

188.73p

77.65p

Net return per ordinary share

187.58p

75.12p

 

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 on investments in the Income Statement. The total costs were as follows:

 

 

Six months to

Six months to

 

31.12.20

31.12.19

 

£'000

£'000

Purchases

12

13

Sales

18

16

Total

30

29

 

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 31 December 2020 and 31 December 2019 has not been audited.

 

The information for the year ended 30 June 2020 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 30 June 2020 have been filed with Companies House. The report of the auditors on those accounts contained no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

 

6.  Net asset value per ordinary share

The net asset value per ordinary share as at 31 December 2020, calculated in accordance with the Articles of Association, was as follows:

 

 

31.12.20

30.06.20

 

Net

 

Net

 

 

Asset Value

 

Asset Value

 

 

per share

Net assets

per share

Net assets

 

attributable

Attributable

attributable

attributable

 

(p)

£'000

(p)

£'000

Ordinary shares

1,314.95

161,324

1,116.35

145,011

 

Net asset value per ordinary share on the balance sheet is based on net assets of £161,324,000 (30 June 2020: £145,011,000) and on 12,268,477 (30 June 2020: 12,989,799) ordinary shares, being the number of ordinary shares in issue at the end of the period.

 

7.  Fair valuation of investments

The fair value hierarchy analysis for investments held at fair value at the period end is as follows:

 

 

31.12.20

30.06.20

 

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Investments

158,094

-

-

158,094

143,420

-

-

143,420

 

8.  Retained earnings

The table below shows the movement in the retained earnings analysed between revenue and capital items:

 

 

Revenue

Capital

 

 

Return

Return

Total

 

£'000

£'000

£'000

Balance at 1 July 2020

(6,979)

117,416

110,437

Net (loss)/return for the period

(144)

23,705

23,561

Ordinary shares repurchased into Treasury

-

(7,248)

(7,248)

Balance at 31 December 2020

(7,123)

133,873

126,750

 

9.  Related parties

Jupiter Unit Trust Managers Limited ('JUTM'), the Alternative Investment Fund Manager ('AIFM'), is a company within the same group as Jupiter Asset Management Limited ('JAM'), the Investment Adviser. JUTM receives an investment management fee as set out below.

 

JUTM is contracted to provide investment management services to the Company subject to termination by not less than six months' notice by either party. The investment management fee is 0.75% of net assets up to £150 million; plus 0.65% of net assets in excess of £150 million but less than or equal to £200 million; plus 0.55% of net assets in excess of £200 million. The investment management fee is paid on a quarterly basis.

 

The investment management fee payable to JUTM for the period 1 July to 31 December 2020 was £579,000 (year to 30 June 2020: £1,108,000) with £303,000 outstanding as at 31 December 2020 (30 June 2020: £266,000).

 

No investment management fee is payable by the Company to JUTM in respect of the Company's holdings in investment trusts, open-ended funds and investment companies in respect of which Jupiter Investment Management Group Limited, or any subsidiary undertaking of Jupiter Investment Management Group Limited, receives fees as investment manager or investment adviser.

 

There are no transactions with the directors other than the remuneration paid to the directors as disclosed in the Directors' Remuneration Report on page 41 of the 2020 Annual Report & Accounts and as set out in Note 5 to the Accounts on page 59 and the beneficial interests of the directors in the ordinary shares of the Company as disclosed on page 42.

 

9.  Post balance sheet event

Not later than 1 April 2021, JUTM will resign as AIFM, and JAM as Investment Adviser and Company Secretary to the Company. From the same date, FundRock Partners Limited ('FundRock') will be appointed as AIFM and Company Secretary, and Brown Advisory as Investment Manager to the Company.

 

Under the terms of the AIFM Agreement and Portfolio Management Agreement, Brown Advisory and FundRock will be paid fees equal to 0.70 per cent. per annum of the Company's net assets on the first £200 million, reducing to 0.60 per cent. per annum on the next £300 million of net assets and 0.50 per cent. per annum on net assets above £500 million. Brown Advisory's appointment will be for an initial term of 12 months and may thereafter be terminated by either party giving 6 months' notice.

 

 

Availability of Half Yearly Financial Report

The Half Yearly Financial Report will shortly be available on the Company's website www.jupiteram.com/JUS

 

A copy of the Half Yearly Financial Report will also be submitted to the National Storage Mechanism and will soon be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

 

 

For further information, please contact:

Magus Spence

Head of Investment Trusts and Alternatives

Jupiter Asset Management Limited, Company Secretary

[email protected]

020 3817 1000

 

 

[END]

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