Half-yearly report
(Thomson Reuters ONE) - Jupiter European Opportunities Trust PLCUnaudited Results for the half year to 30 November 2009This announcement of unaudited results for the six months to 30 November 2009was approved by the Board of Directors on 28 January 2010.CHAIRMAN'S STATEMENTThe recovery in equity markets, which began last March, continued throughout theperiod under review. Thanks to your Company's exposure to mid-capitalisation andsmaller companies and to the positive impact of gearing, Net Asset Value ('NAV')per share rose from 162.35p to 210.60p or by just under 30 per cent, comparedwith an increase in our benchmark of just below 22 per cent. Over the twelvemonths to 30 November last the NAV gain of 67 per cent. was well ahead of the36.5 per cent. advance of the FTSE World Europe ex UK Total Return Index, ourbenchmark, and the comparisons are also positive over three and five years too.It was all very different both six and twelve months ago, when we had to declarethat we had fallen behind our benchmark, partly as a result of being geared intoa falling market. It was a torrid time for both your Board and for ourday-to-day Fund Manager, and we do not wish to go through that experience again,and preferably not at all. To this end your manager has been working to reduceour borrowings, such that our gearing ratio (borrowings expressed as apercentage of gross assets) has recently dropped below 20 per cent. Back inNovember 2008 it was approaching 40 per cent. You can find the details ofportfolio changes in Alex Darwall's Review below. As a result of recentdisposals the exposure to U.K. listed equities has fallen to 20 per cent, andour borrowings are now wholly denominated in sterling, so that any futuresterling weakness should largely flow through to the benefit of ourshareholders.The discount--the difference between the (lower) share price and the (higher)NAV-- has remained fairly constant over the period and currently stands ataround 13 per cent. Your Board does not have a specific target for the discountbut has in the past taken the opportunity to buy shares for cancellation if thedisparity between share price and NAV appears to be unreasonably wide. No usewas made of this facility during the period under review.Equity markets have risen 50 per cent or more from their March low points, andof late have paused for breath. There has been much comment on how shares willperform once the authorities have begun to cut back on the volume ofquantitative easing and other forms of monetary stimulus, and once interestrates have begun to rise from current exceptionally low levels. Interestingly,when rates were raised in Australia recently the market reacted positively. Asregards your Company, we believe that now is a good time to reduce both gearingand portfolio risk and concentrate on those companies whose business modelsshould ensure their relative prosperity in what may turn out to be a morechallenging environment over the balance of your Company's financial year.H.M. PriestleyChairman28 January 2010MANAGER'S REVIEWThe Net Asset Value of the Company's Ordinary shares rose by 29.7 per cent.during the six months to 30 November 2009. This compares with a 21.5 per cent.rise, in sterling, of the Company's benchmark, the FTSE World Europe ex UK TotalReturn Index.The level of the Company's borrowings decreased to £35.0 million from £48.6million over the period under review. Just as borrowings damaged performance inthe preceding period, in the period under review they improved returns.Nevertheless, the board decided to use this recent strength to reduce the levelof gearing which, at the time of writing, amounts to £27 million compared to apeak of £61.6 million in December 2008. The Company's trading subsidiary, JEOTSecurities Limited, made a positive return of £418,000.The FTSE World (total return) index rose by 18.4 per cent. in sterling,underperforming the European index. Emerging Markets have had a strong run, theMSCI Latin America index returning 31.2 per cent. in Sterling terms (87.4 percent. year on year), as against Japan's Nikkei-225 which was only up 7.1 percent.. This strong performance reflects a key development - what economistsrefer to as the 'decoupling' of emerging markets from the travails of thedeveloped markets.After the extraordinary turbulence of our previous financial year, a return tomore 'normal' trading conditions was welcome. A number of interrelated factorsexplain the significant rally in equity markets. Vital was the greaterconfidence in the banking system - it did not implode as some commentatorsfeared. Allied to that was the effect of 'quantitative easing' ('QE'). This is amodern term for an old concept: printing money. Its aim, inter alia, was toboost asset prices. Indeed this is what it did: equity values rose. The othergreat fear of commentators at the nadir of the banking crisis was protectionism.This threat did not materialise. Moreover, it became evident that some of thekey emerging economies (notably China and Brazil) could grow strongly despitethe weakness in developed economies - decoupling.Your Company's relatively good performance was due to a combination of stockpicking and gearing. Financial stocks (where the portfolio has always had abelow market average weighting) were the biggest positive contributors, mostnotably Euler Hermes, the French credit insurance company and DnB NOR, theNorwegian bank. Other significant positive contributors to performance includedHalfords, the UK retailer, and Vopak, the international oil and chemicalsstorage business. The former surprised positively displaying counter-cyclicalcharacteristics. The latter also delivered good earnings surprises despite thelower oil price. Demand for their storage services was strong even though oildemand worldwide weakened. With the decision to reduce the Company's borrowingsinevitably sales outweighed purchases. Outright sales included two UK basedretailers: Halfords and Carphone Warehouse. Management teams in both cases aresuperb. But valuation considerations and the UK-centric focus of theirbusinesses caused us to sell. Other important sales included Saft which we soldon valuation grounds and Euler Hermes, where we believe business developmentsare unlikely to live up to market expectations. We also reduced our exposure tosome of the bigger positions: CGG Veritas, Ingenico, ITS and DnB NOR. In allcases the decision to reduce the Company's borrowings was a factor in lighteningpositions.Investment OutlookSome of the threats and opportunities are easily identified: growth, the impactof withdrawing stimulus packages, further banking emergencies and the politicalresponse, sovereign debt crises, the threat of protectionism and the Greenmovement. Economic growth is a major imponderable. The IMF forecasts globaleconomic growth of 3.1 per cent. in 2010 after a contraction of 1.1 per cent. in2009. A key aspect is whether emerging economies continue to expand rapidly. TheIMF estimates that emerging and developing economies will grow 5.1 per cent. in2010. The same forecaster expects 0.3 per cent. growth in the Euro economies in2010, though this plays a limited part in our investment process. But there aremany other macro factors. Our focus, however, is not on macro forecasting.Rather it is on picking companies that are well placed to weather these macrovicissitudes. Thus we remain committed to companies that, typically, have strongbalance sheets, a global spread of businesses, flexible cost structures and'special' products. We continue to believe that such an approach justifies areasonable degree of confidence.Alex DarwallJupiter Asset Management Limited28 January 2010INTERIM MANAGEMENT REPORTRelated Party TransactionsMr. Darwall is a director of Jupiter Asset Management Limited and JupiterInvestment Management Group Limited whose subsidiaries, Jupiter Asset ManagementLimited and Jupiter Administration Services Limited, receive investmentmanagement and administration fees as set out below.Jupiter Asset Management Limited is contracted to provide investment managementservices to the Company (subject to termination by not less than 1 years' noticeby either party) for a quarterly fee of 0.1875 per cent. of the net assets ofthe Group excluding the value of any Jupiter managed investments payable inarrears on 31 May, 31 August, 30 November and the last calendar day of February.The total fees payable under this agreement are shown in the ConsolidatedStatement of Comprehensive Income.Jupiter Asset Management Limited is also entitled to a performance fee which isbased on the out-performance of the lower of the price of an Ordinary share orthe Net Asset Value per Ordinary share over the total return on the BenchmarkIndex, the FTSE World Europe ex UK Total Return Index in an accounting period.Any performance fee payable will equal 15 per cent. of the amount by which theincrease in the lower of the price of an Ordinary share (plus any dividends perOrdinary share paid during the period) or the Net Asset Value per Ordinary share(plus any dividends per Ordinary share paid or payable and any accrual forunpaid performance fees for the period) exceeds the higher of (a) the closingprice of an Ordinary share or the Net Asset Value per Ordinary share on the lastbusiness day of the previous accounting period (whichever is the lower); (b) thelower of the price of an Ordinary share or the Net Asset Value per Ordinaryshare (as the case may be) on the last day of a period in respect of which aperformance fee was last paid: and (c) 100p. In each case the values of (a), (b)and (c) are increased by the percentage by which the total return of theBenchmark Index increases or decreases during the calculation period. The totalamount of any performance fee payable in respect of one accounting period islimited to 7.5 per cent. of the Total Assets of the Company. The total feespayable under this agreement are shown in the Consolidated Statement ofComprehensive Income.Jupiter Administration Services Limited is contracted to provide secretarial,accounting and administrative services to the Company for an annual fee of£62,977 adjusted each year in line with the Retail Price Index payable quarterly(2008: £60,381).The Company has invested from time to time in funds managed by JupiterInvestment Management Group Limited or its subsidiaries. The only such holdingas at 30 November 2009 was East European Food Fund representing 0.2 per cent. oftotal investments.Risks and UncertaintiesThe risks to the Company are foreign currency movements, market price movements,interest rates, use of derivatives, liquidity risk, credit risk, the discount toNet Asset Value and loss of investment trust status. A detailed explanation ofthe Risks and Uncertainties facing the Company can be found in Note 14 on pages37 to 41 of the Company's published report and accounts for the year to 31 May2009.Directors' Responsibility StatementWe the directors of Jupiter European Opportunities Trust PLC confirm to the bestof our knowledge:(a)The condensed set of financial statements contained within the half-yearlyfinancial report has been prepared in accordance with the Accounting StandardsBoard's statement 'Half-Yearly Financial Reports'; and(b)The Chairman's Statement, Manager's Review and the Half Year ManagementReport include a fair review of the information required by the Disclosure andTransparency Rules 4.2.7R and 4.2.8R.By Order of the BoardH.M. PriestleyChairman28 January 2010Consolidated Statement of Comprehensive Income for the six months to 30 November 2009 (unaudited) 30 November 2009 30 November 2008 Revenue Capital Revenue Capital Return Return Total Return Return Total £'000 £'000 £'000 £'000 £'000 £'000 Gains / (losses) on investments at fair value through profit or - 39,584 39,584 - (81,866) (81,866) loss (Note 2) Foreign exchange losses on - (869) (869) - (2,579) (2,579) loans Other exchange gain / - 310 310 - (692) (692) (loss) Investment income 2,237 - 2,237 2,563 - 2,563 Dealing losses of - - - (952) - (952) subsidiary Foreign exchange gain by 7 - 7 3 - 3 subsidiary Total income 2,244 39,025 41,269 1,614 (85,137) (83,523) Investment management fee (758) - (758) (722) - (722) Investment management fee VAT - - - 837 - 837 recovery Performance fee VAT - - - - 280 280 recovery Other expenses (189) - (189) (166) - (166) Total expenses (947) - (947) (51) 280 229 Return before finance costs 1,297 39,025 40,322 1,563 (84,857) (83,294) and tax Finance costs (350) - (350) (1,564) - (1,564) Return before taxation 947 39,025 39,972 (1) (84,857) (84,858) Taxation (219) - (219) (190) - (190) Return after taxation 728 39,025 39,753 (191) (84,857) (85,048) Return per Ordinary share 0.90p 48.20p 49.10p (0.23)p (103.93)p (104.16)p (Note 3)The total column of this statement is the income statement of the Group preparedin accordance with IFRS. The supplementary revenue return and capital returncolumns are both prepared under guidance published by the Association ofInvestment Companies ('AIC'). All items in the above statement derive fromcontinuing operations.No operations were discontinued or acquired in the period.The financial information does not constitute 'accounts' as defined in section434 of the Companies Act 2006.Consolidated Statement of Financial Position 30 November 2009 31 May 2009 (unaudited) (audited) £'000 £'000 Non current assets Investments held at fair value through profit 203,310 174,492 or loss Current assets Receivables 986 1,107 Cash at bank 1,733 6,280 2,719 7,387 Total assets 206,029 181,879 Current liabilities (35,507) (50,422) Total assets less current liabilities 170,522 131,457 Capital and reserves Called up share capital 810 810 Share premium 41,286 41,286 Special reserve 36,676 37,597 Capital redemption reserve 30 30 Retained earnings (Note 6) 91,720 51,734 Total equity 170,522 131,457 Net Asset Value per Ordinary share (Note 7) 210.60p 162.35pConsolidated Statement of Changes in Equity Capital Share Share Special Redemption Retained For the six months to 30 Capital Premium Reserve Reserve Earnings Total November 2009 £'000 £'000 £'000 £'000 £'000 £'000 31 May 2009 810 41,286 36,676 30 52,655 131,457 Net profit for the period - - - - 39,753 39,753 2009 Special interim - - - - (688) (688) dividend Balance at 30 November 810 41,286 36,676 30 91,720 170,522 2009 Capital Share Share Special Redemption Retained For the six months to 30 Capital Premium Reserve Reserve Earnings Total November 2008 £'000 £'000 £'000 £'000 £'000 £'000 31 May 2008 818 41,286 37,597 22 108,796 188,519 Ordinary share (7) - (816) 7 - (816) cancellation Net loss for the period - - - - (85,048) (85,048) Balance at 30 November 811 41,286 36,781 29 23,748 102,655 2008Consolidated Cash Flow Statement for the six months to 30 November 2009(unaudited) 2009 2008 £'000 £'000 Cash flows from operating activities Purchases of investments (31,007) (48,182) Sales of investments 40,146 46,739 Realised gains/ (losses) on foreign currency 317 (689) Investment income received 2,075 2,076 Interest received 14 121 Other cash receipts 111 - Investment management fee paid (709) (890) VAT recovery on investment management fee - 837 VAT recovery on investment performance fee - 280 Sales less purchases of dealing subsidiary - 10,747 Other cash expenses (206) (182) Dividend paid (688) - Cash inflow from operating activities before finance 10,053 10,857 costs and taxation Finance costs (448) (1,577) Taxation 405 (132) Net cash inflow from operating activities 10,010 9,148 Financing activities Ordinary shares cancelled - (816) Short term loans received 88,197 107,932 Short term loans repaid (102,754) (114,998) (Decrease) / increase in cash (4,547) 1,266 (Decrease) / increase in cash and cash equivalents (4,547) 1,266 Cash and cash equivalents at start of period 6,280 2,149 Cash and cash equivalents at end of period 1,733 3,415Notes to the Financial Statements1.Accounting policiesThe consolidated accounts comprise the unaudited financial results of theCompany and its subsidiary JEOT Securities Limited for the six months to 30November 2009. The accounts are presented in pounds sterling, as this is thefunctional currency of the Group.The consolidated accounts have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS), which comprise standards andinterpretations approved by the International Accounting Standards Board (IASB)and International Accounting Standards Committee (IASC), as adopted by theEuropean Union.A summary of the principal accounting policies, all of which have been appliedconsistently throughout the period, is set out below:Revenue recognitionRevenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for goods and services provided inthe normal course of business.Revenue includes dividends from investments quoted ex-dividend on or before thebalance sheet date.Deposit and other interest receivable is accounted for on an accruals basis.Presentation of Statement of Comprehensive IncomeIn order to better reflect the activities of an investment trust company and inaccordance with guidance issued by the AIC, supplementary information whichanalyses the Statement of Comprehensive Income between items of a revenue andcapital nature has been presented alongside the Statement of ComprehensiveIncome. In accordance with the Company's status as a UK investment company undersection 833 of the Companies Act 2006, net capital returns may not bedistributed by way of dividend.An analysis of retained earnings broken down into revenue items, which may bedistributed as dividends and capital items is given in note 6. The Company'sArticles prevent the distribution of capital profits. In arriving at thisbreakdown, expenses have been presented as revenue items except for that part ofany Investment performance fee which is deemed by the Directors to relate to thecapital outperformance of the Company's investments. Any such amount is chargedto capital.InvestmentsAll investments are classified as held at fair value through profit or loss.Changes in the fair value of investments held at fair value through profit orloss and gains and losses on disposal are recognised in the statement ofcomprehensive income as 'Gains on investments at fair value through profit orloss'. The fair value of listed investments is based on their quoted bid marketprice at the balance sheet date without any deduction for estimated futureselling costs. All purchases and sales are accounted for on a trade date basis. 2. Gains / (losses) on investments Six months to Six months to 30 November 2009 30 November 2008 £'000 £'000 Net gains realised on sale of investments 7,866 1,462 Movement in investment holding gains 31,718 (83,328) Gains / (losses) on investments 39,584 (81,866) 3. Return per Ordinary shareThe return per Ordinary share figure is based on the net gain for the six monthsof £39,753,000 (six months to 30 November 2008: Loss £85,048,000) and on80,969,523 (six months to 30 November 2008: 81,644,504) Ordinary shares, beingthe weighted average number of Ordinary shares in issue during the period.The return per Ordinary share figure detailed above can be further analysedbetween revenue and capital, as below. Six months to Six months to 30 November 2009 30 November 2008 £'000 £'000 Net revenue profit 728 (191) Net capital profit 39,025 (84,857) Net total profit 39,753 (85,048) Weighted average number of Ordinary shares 80,969,523 81,644,504 in issue during the period Revenue return per Ordinary share 0.90p (0.23)p Capital return per Ordinary share 48.20p (103.93)p Total return per Ordinary share 49.10p (104.16)p 4. Transaction costsDuring the period expenses were incurred in acquiring or disposing ofinvestments classified as fair value through profit or loss. These have beenexpensed through capital and are included within gains / (losses) on investmentsin the Statement of Comprehensive Income. The total costs were as follows: Six months to Six months to 30 November 2009 30 November 2008 £'000 £,000 Purchases 74 141 Sales 55 83 129 2245.Comparative informationThe financial information contained in this interim report does not constitutestatutory accounts as defined in section 434 of the Companies Act 2006. Thefinancial information for the six months to 30 November 2009 and 30 November2008 has not been audited.The information for the year ended 31 May 2009 has been extracted from thelatest published audited financial statements. The audited financial statementsfor the year ended 31 May 2009 have been filed with the Register of Companies.The report of the auditors on those accounts contained no qualification orstatement under section 498(2) or (3) of the Companies Act 2006.6. Retained earningsThe table below shows the movement in the retained earnings analysed betweenrevenue and capital items. Revenue Capital Total £'000 £'000 £,000 At 31 May 2009 3,839 48,816 52,655 Net return for the period 728 39,025 39,753 Dividend paid (688) - (688) At 30 November 2009 3,879 87,841 91,7207. Net Asset Value per Ordinary shareThe Net Asset Value per Ordinary share is based on the net assets attributableto the equity shareholders of £170,522,000 (31 May 2009: £131,457,000) and on80,969,523 (31 May 2009: 80,969,523) Ordinary shares, being the number ofOrdinary shares in issue at the period end.The interim report will be sent to all shareholders and copies may be obtainedfrom the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJBY ORDER OF THE BOARDJUPITER ASSET[HUG#1378394]
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