Half Yearly Report

RNS Number : 6275Y

Jupiter European Opps. Trust PLC

27 January 2014

Jupiter European Opportunities Trust PLC

Half Yearly Financial Report for the six months to 30 November 2013 (unaudited)

Financial Highlights

Capital Performance

30 November

2013

31 May

2013

% Change

Total Assets less Current Liabilities (£'000)

372,835

340,801

+9.4*

FTSE World Europe ex-UK Total Return Index

912.48

854.18

+6.8

Ordinary Share Performance

	30 November 2013	31 May 2013	% Change
Net Asset Value (pence)	416.57	403.58	+3.2
Mid Market Price (pence)	424.5	410.0	+3.5
Ordinary Share Total Return (NAV & Dividend) (pence)	420.1	405.4	+3.6
Premium to Net Asset Value (%)	1.9	1.6

* Investment performance has been adjusted for the issue of Ordinary shares during the period.

Performance since launch

Year ended 31 May		Total Assets less Current Liabilities £'000	Net Asset Value per Ordinary Share p
20 November 2000	(launch)	93,969	94.66
2001		83,600	89.29
2002		91,028	91.12
2003		84,592	83.82
2004		97,915	109.25
2005	(restated)*	117,679	133.54
2006		154,927	167.47
2007		182,278	224.58
2008		188,519	230.56
2009		131,457	162.35
2010		185,504	232.40
2011		252,813	316.73
2012		231,584	291.05
2013		340,801	403.58
30 November 2013		372,835	416.57

*Prior to 2005, financial information was prepared under UK GAAP. From 2006 all information is prepared under IFRS.

2012 figures are based on Group numbers.

Chairman's Statement

Over the period under review to 30 November 2013, the total return on the Net Asset Value (NAV) of your Company's shares (taking into account the 3.5p dividend paid in September 2013) slightly underperformed the total return on our benchmark, the FTSE World Europe ex-UK Total Return Index, inasmuch as the total return on your shares (being the NAV increased by the value of dividends paid) rose by 3.6 per cent., whereas the benchmark increased by 6.8 per cent.

As at 23 January 2014, the latest practicable date before the release of this report, the total return on the (cumulative) NAV of your Company's shares was 8.3 per cent. since the beginning of the current financial year on 1 June 2013, which compares to an increase in the total return on the benchmark of 7.6 per cent.

This was a time when investors favoured domestic stocks and recovery plays; bombed out banking shares, car manufacturers and other cyclical stocks outperformed companies with growth histories based on global outreach. In such markets your Company tends to underperform both its benchmark and peer group, given that both are characterised by a more generalised selection of investments, as opposed to the highly selective approach which has been the Company's hallmark since inception.

Growing Your Company

Your Company's shares traded consistently at a premium to NAV over the six month period under review to 30 November 2013. During this period your Company was able to issue a total of 5,056,951 new shares, raising just under £20.8 million and enhancing NAV by over £304,000. Back in October 2013 our shareholders approved the creation of up to 64 million new shares of your Company, and a block-listing facility for the issue of up to 21,449,129 new shares was granted by the London Stock Exchange. The costs of this whole operation have already been recovered through the small premium to NAV at which shares have since been issued.

Your Board and Investment Manager have other ways of increasing the size of your Company under constant review, but in the absence of any worthwhile alternative - and while your shares continue to command a premium to NAV - are happy to pursue the low-cost option.

Retail Distribution Review

As your Board and Investment Manager examine the monthly shareholder list, showing who is buying your Company's shares and who is selling them, it is clear that the proportion of shares bought by wealth managers is growing rapidly, suggesting that your Company continues to be a beneficiary of the Retail Distribution Review. The block-listing facility and the premium rating of the shares on the London Stock Exchange allow institutions to buy (and sell) shares in quantity, whereas trying to build up holdings in the absence of such a facility could be self-defeating.

Administration

A new Global Custody and Administration arrangement has been entered into with JP Morgan Chase Bank, N.A. with effect from 1 October 2013. Jupiter Asset Management Limited will remain as Company Secretary and Investment Manager.

The appointment of JP Morgan Chase Bank, N.A. should be seamless from the perspective of shareholders, but we hope that it will enable the Board and Investment Manager to receive improved management information and other useful operational tools in relation to your Company's investment portfolio. We also anticipate that an associate of JP Morgan Chase Bank, N.A. will be appointed as depositary to the Company within the context of the Alternative Investment Fund Managers Directive ("AIFMD"), to which the Company will become subject later this year.

Outlook

For the reasons outlined above, and explained further by Alexander Darwall in his accompanying Investment Manager's Review, current market conditions have not favoured your Company's investment approach over the half year under review. A poll of investment managers a year ago indicated that their major concern was Europe. The same poll, taken recently, showed that China was now the major bugbear. This suggests that investors have increased their European weightings and that the area is no longer under-owned. As evidence mounts that Western economies are recovering, admittedly from a low base, and that central banks (in Europe especially) are more concerned with deflation than with inflation and that "tapering" money creation will be a gradual process, it could be that companies offering products or services which are scalable on a worldwide basis will prosper to a greater degree than those which are dependent on domestic demand.

H M Priestley

Chairman

27 January 2014

Investment Manager's Review

The Net Asset Value of the Company's Ordinary shares rose by 3.6 per cent. during the six months to 30 November 2013. The Company's total borrowings reduced slightly during the period under review to £47.9m at 30 November, representing gearing of 11.7 per cent. This reduction in borrowings was in line with the policy of reducing gearing into rising markets, all other things being equal. The FTSE World (total return) Index improved 2.9 per cent. Your Company's benchmark, the FTSE World Europe ex UK Total Return Index, rose by 6.8 per cent. The MSCI Latin America Index was 12 per cent. lower; the MSCI AC Asia ex-Japan Index was down 3.2 per cent.

Central banks, notably the US and Japanese, have continued to inject massive liquidity into financial markets explaining the buoyancy of equity markets. Over the course of 2013 the European Central Bank (ECB) reduced its main refinancing rate from 0.75 per cent. to 0.25 per cent., an historic low. A further important factor was the marked fall in energy costs: the cheap shale gas effect. The sterling price of WTI oil fell by 6.5 per cent. in the six month period. The benefits of cheaper energy were felt most in America where shale gas is plentiful; as a result, against a backdrop of slight reductions in world GDP estimates, American GDP expectations, according to the forecasters, were little changed. The same was true of Europe, though that region does not benefit from lower energy costs in the same way. On the contrary, Europe is pursuing a high cost energy policy; energy price differentials across the world are extraordinary. Nevertheless, Europe's equity markets outperformed. Inextricably linked with the cheap money policy of the ECB, corporate earnings have remained resilient. The latest estimates from UBS point to Europe ex UK earnings growth of 4.5 per cent. in 2013 to be followed by 17.7 per cent. in 2014.

Growth rates in the major emerging markets - China, Brazil and India - all fell markedly from earlier expectations in 2013. Thus 2013 marked the reversal of the pattern of preceding years that saw strong emerging market growth and weak performance in developed economies. This reversal explains in large part the fund's underperformance in the six month period: exposure to emerging markets, a feature of the portfolio, was not the positive driver that it had been, whereas more local 'plays', notably financials, utilities and telecommunications, performed well. Poor stock picking in oil services, specifically CGG, which manufactures equipment and collects data for seismic surveys, was a further drag on performance. Against that there were notable successes: the electronic digital payments companies Ingenico and Wirecard performed well; our decision to retain a big position in Reed Elsevier, which controls legal, scientific and personal information, was vindicated by its strong showing; likewise, the decision to keep Novozymes, the world leading industrial enzymes company, proved to be wise as it has contributed significantly to performance. Amadeus, the Spanish listed world leader in its field of air travel IT, again performed well. Like many of the 'winners' in the portfolio, it is a beneficiary of the development of digital technology, extending its reach, monetising better its services and offering new services.

There were no sales of major positions. The largest holding sold was that of Aggreko. The reason for the sale was that its prospects appeared to depend on macro factors (specifically exchange rates) to a greater extent than expected. Other sales included Schneider - again, sold because its results showed undue reliance on macro drivers - Tecan and SGS. Tecan enjoys excellent management but suffers from an increasingly competitive landscape, exacerbated by technology developments. Our decision to sell SGS was driven by the wish to consolidate the portfolio's exposure to a single testing and inspection company: we chose Intertek. Of the four largest new positions, Gemalto, Ingenico and Inmarsat are all to some extent 'digital plays'. Gemalto is a world leader in chips for security, authentication and other card based products; Ingenico designs and sells point of sale terminals throughout the world; and Inmarsat is the leading maritime satellite company. The other notable purchase was that of CGG. There were also two smaller new positions that performed well in the period under review: Leonteq and Biotest. The former is a Swiss listed provider of structured financial solutions. Biotest develops, produces and markets blood plasma products. Three of the major positions were reinforced. We increased the holding in NovoNordisk, the world leader in the treatment of diabetes, when temporary setbacks presented good buying opportunities; we bought more shares in Amadeus as strong results underpinned our confidence in the business model; and we increased the weighting in Provident Financial as its refreshed business plan was convincing.

Outlook

Our strategy remains the same: we identify companies that provide differentiated products or services and get well rewarded for so doing. Whilst it is clear that exposure to emerging markets is not, if ever it was, a panacea, we are confident that 'our' companies are well placed to succeed in many markets. Whilst there are always protectionist impulses, the drivers of globalisation, leading to productivity gains, are still in place. A good proportion of these gains accrue to owners of capital. For this reason we remain confident that there are good investment opportunities and that our process for finding them is still an appropriate one.

Alexander Darwall

Jupiter Asset Management Limited

27 January 2014

Twenty Largest Investments

Company	Country of Listing	Market Value £'000	Percentage of portfolio
Wirecard	Germany	29,750	7.2
Novo-Nordisk	Denmark	27,412	6.6
Reed Elsevier	Netherlands	27,031	6.5
Experian	UK	25,820	6.2
Provident Financial	UK	24,564	5.9
Syngenta	Switzerland	22,841	5.5
Novozymes	Denmark	22,475	5.4
Intertek Group	UK	19,279	4.6
Croda International	UK	19,272	4.6
Fresenius	Germany	19,013	4.6
Johnson Matthey	UK	17,478	4.2
Amadeus	Spain	12,399	3.0
Grenkeleasing	Germany	11,584	2.8
Edenred	France	11,046	2.7
Coloplast	Denmark	10,843	2.6
DnB NOR	Norway	10,820	2.6
Koninklijke Vopak	Netherlands	10,592	2.5
adidas AG	Germany	8,934	2.1
Tomra Systems	Norway	8,526	2.0
Dassault Systemes	France	7,721	1.9
Total of twenty largest investments		347,400	83.5

Top Ten Sector Weightings (%)

Support Services	29.86
Chemicals	16.37
Pharmaceutical & Biotechnology	14.61
Financial Services	8.46
Health Care Equipment & Services	8.44
Media	7.24
Software & Computer Services	4.56
Personal Goods	3.25
Banks	2.93
Industrial Transportation	2.84
Total	98.56

Cross Holdings in other Investment Companies

As at 30 November 2013, none of the Company's total assets were invested in the securities of other UK listed investment companies. It is the Company's stated policy that this exposure should not be permitted to exceed 15 per cent. of total assets.

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 Report and Accounts for the year ended 31 May 2013.

Principal 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. It is not the aim of the Board to eliminate entirely the risk of capital loss, rather it is its aim to seek capital growth. Other key risks faced by the Company relate to foreign currency movements, interest rates, use of derivatives, liquidity risk, gearing risk, the discount to Net Asset Value, regulatory risk, loss of key personnel, operation and financial risks.

Directors' Responsibility Statement

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm that to the best of their knowledge:

(a) the condensed set of financial statements has been prepared in accordance with applicable UK accounting standards and gives a true and fair view of the assets, liabilities, financial position and return of the Company;

(b) the Half Yearly Financial Report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

(c) the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

(d) the Half Yearly Financial Report includes details on related party transactions.

The Half Yearly Financial Report for the six months to 30 November 2013 comprises the Chairman's Statement, Investment Manager's Review, the Directors' Responsibility Statement and a condensed set of financial statements, and has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

By Order of the Board

H M Priestley

Chairman

27 January 2014

Statement of Comprehensive Income

For the six months to 30 November 2013 (unaudited)

	30 November 2013			30 November 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gain on investments at fair value through profit or loss (Note 2)	-	13,301	13,301	-	48,445	48,445
Foreign exchange gain/(loss) on loan	-	1,375	1,375	-	(515)	(515)
Currency exchange (loss)/gain	-	(143)	(143)	-	36	36
Investment income	2,173	-	2,173	2,848	-	2,848
Total income	2,173	14,533	16,706	2,848	47,966	50,814
Investment management fee	(1,457)	-	(1,457)	(1,203)	-	(1,203)
Other expenses	(544)	-	(544)	(313)	-	(313)
Total expenses	(2,001)	-	(2,001)	(1,516)	-	(1,516)
Return before finance costs and tax	172	14,533	14,705	1,332	47,966	49,298
Finance costs	(244)	-	(244)	(344)	-	(344)
Return before taxation	(72)	14,533	14,461	988	47,966	48,954
Taxation	(164)	-	(164)	(104)	-	(104)
Return after taxation	(236)	14,533	14,297	884	47,966	48,850
Return per Ordinary share (Note3)	(0.27)p	16.68p	16.41p	1.11p	60.28p	61.39p

The total column of this statement is the income statement 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 (AIC). All items in the above statement derive from continuing operations.

The Company's wholly owned subsidiary, JEOT Securities Limited was placed into members' voluntary liquidation on 24 July 2012.

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

Statement of Financial Position

As at 30 November 2013

	30 November 2013 (unaudited) £'000	31 May 2013 (audited) £'000
Non current assets
Investments held at fair value through profit or loss	415,989	381,838
Current assets
Receivables	1,909	3,268
Cash at bank	3,770	12,009
	5,679	15,277
Total assets	421,668	397,115
Current liabilities	(48,833)	(56,314)
Total net assets less current liabilities	372,835	340,801
Capital and reserves
Called up share capital	895	844
Share premium	80,320	59,589
Special reserve	33,687	33,687
Capital redemption reserve	45	45
Retained earnings (Note 6)	257,888	246,636
Total equity	372,835	340,801
Net Asset Value per Ordinary share (Note 7)	416.57p	403.58p

Statement of Changes in Equity

For the six months to 30 November 2013

For the six months to 30 November 2013	Share Capital £'000	Share Premium £'000	Special Reserve £'000	Capital Redemption Reserve £'000	Retained Earnings £'000	Total £'000
1 June 2013	844	59,589	33,687	45	246,636	340,801
Net gain for the period	-	-	-	-	14,297	14,297
Ordinary shares issue	51	20,731	-	-	-	20,782
2013 interim dividend	-	-	-	-	(3,045)	(3,045)
Balance at 30 November 2013	895	80,320	33,687	45	257,888	372,835

For the six months to 30 November 2012	Share Capital £'000	Share Premium £'000	Special Reserve £'000	Capital Redemption Reserve £'000	Retained Earnings £'000	Total £'000
1 June 2012	795	41,286	33,687	45	152,240	228,053
Net gain for the period	-	-	-	-	48,850	48,850
Ordinary shares issue	5	1,715	-	-	-	1,720
2012 interim dividend	-	-	-	-	(1,472)	(1,472)
Balance at 30 November 2012	800	43,001	33,687	45	199,618	277,151

Cash Flow Statement

For the six months to 30 November 2013 (unaudited)

Cash flows from operating activities	2013 £'000	2012 £'000
Purchases of investments	(49,920)	(21,436)
Sales of investments	30,884	23,005
Realised gains/(losses) on foreign currency	(143)	36
Payment to CFD counterparty	(244)	-
Investment income received	1,199	3,348
Interest received	17	1
Investment management fee paid	(1,420)	(1,114)
Other cash expenses	(589)	(350)
Dividend paid	(3,045)	(1,472)
Cash inflow/(outflow) from operating activities before finance costs and taxation	(23,261)	2,018
Finance costs paid	(192)	(306)
Taxation (paid)/received	(919)	(4)
Net cash inflow/(outflow) from operating activities	(24,372)	1,708
Financing activities
Ordinary shares issued	20,782	-
Short-term loans received	98,805	102,817
Short-term loans paid	(103,454)	(102,726)
Increase/(decrease) in cash	(8,239)	1,799
Cash and cash equivalents at start of period	12,009	(384)
Cash and cash equivalents at end of period	3,770	1,415

Notes to the Financial Statements

1. Accounting Policies

The accounts comprise the unaudited financial results of the Company for the six months to 30 November 2013. The accounts are presented in pounds sterling, as this is the functional currency of the Company.

JEOT Securities Limited, the Company's wholly owned subsidiary, was placed into members' voluntary liquidation on 24 July 2012.

The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union.

A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below:

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business.

Revenue includes dividends from investments quoted ex-dividend on or before the balance sheet date.

Deposit and other interest receivable is accounted for on an accruals basis.

Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.

An analysis of retained earnings broken down into revenue items and capital items is given in Note 6. The Company's Articles prevent the distribution of capital profits. In arriving at this breakdown, expenses have been presented as revenue items except for that part of any Investment performance fee which is deemed by the Directors to relate to the capital outperformance of the Company's investments. Any such amount is charged to capital.

Investments

All 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 or loss and gains and losses on disposal are recognised in the statement of comprehensive income as 'Gains on investments at fair value through profit or loss'. The fair value of listed investments is based on their quoted bid market price at the balance sheet date without any deduction for estimated future selling costs. All purchases and sales are accounted for on a trade date basis.

2. Gains on investments

	Six months to 30 November 2013 £'000	Six months to 30 November 2012 £'000
Net gain realised on sale of investments	6,193	5,843
Movement in investment holding gains	7,108	42,602
Gains on investments	13,301	48,445

3. Return per Ordinary share

The return per Ordinary share figure is based on the net gain for the six months of £14,297,000 (six months to 30 November 2012: gain £48,850,000) and on 87,112,081 (six months to 30 November 2012: 79,573,348) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.

The return per Ordinary share figure detailed above can be further analysed between revenue and capital, as below.

	Six months to 30 November 2013 £'000	Six months to 30 November 2012 £'000
Net revenue (loss)/profit	(236)	884
Net capital profit	14,533	47,966
Net total profit	14,297	48,850
Weighted average number of Ordinary shares in issue during the period	87,112,081	79,573,348
Revenue return per Ordinary share	(0.27)p	1.11p
Capital return per Ordinary share	16.68p	60.28p
Total return per Ordinary share	16.41p	61.39p

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/(losses) on investments in the Statement of Comprehensive Income. The total costs were as follows:

	Six months to 30 November 2013 £'000	Six months to 30 November 2012 £'000
Purchases	114	53
Sales	29	23
Total	143	76

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 30 November 2013 and 30 November 2012 has not been audited.

The information for the year ended 31 May 2013 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 May 2013 have been filed with the Register of Companies. The report of the auditors on those accounts contained no qualification or statement under section 498(2) of the Companies Act 2006.

6. Retained earnings

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

	Revenue £'000	Capital £'000	Total £'000
At 1 June 2013	6,963	239,673	246,636
Net return for the period	(236)	14,533	14,297
Dividends paid	(3,045)	-	(3,045)
At 30 November 2013	3,682	254,206	257,888

7. 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 £372,835,000 (31 May 2013: £340,801,000) and on 89,501,474 (31 May 2013: 84,444,523) Ordinary shares, being the number of Ordinary shares in issue at the period end.

8. Related Parties

Alexander Darwall is an employee of Jupiter Asset Management Limited. Jupiter Asset Management Limited and Jupiter Administration Services Limited, a company within the same group as Jupiter Asset Management Limited, receive investment management and administration fees as set out below.

Jupiter Asset Management Limited is contracted to provide investment management services to the Company (subject to termination by not less than one years notice by either party) for a quarterly fee of 0.1875 per cent. of the net assets of the Company excluding the value of any Jupiter managed investments payable in arrears on 31 May, 31 August, 30 November and the last calendar day of February.

Jupiter Asset Management Limited is also entitled to an investment performance fee which is based on the out-performance of the Net Asset Value per Ordinary share over the total return on the Benchmark Index, 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 the increase in the Net Asset Value per Ordinary share (plus any dividends per Ordinary share paid or payable and any accrual for unpaid performance fees for the period) exceeds the higher of (a) the Net Asset Value per Ordinary share on the last business day of the previous accounting period; (b) the Net Asset Value per Ordinary share on the last day of a period in respect of which a performance 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 the Benchmark Index increases or decreases during the calculation period. The total amount of any performance fee payable in respect of one accounting period is limited to 4.99 per cent. of the Total Assets of the Company.

The contract to provide accounting and administration services to the company by Jupiter Administration Services Ltd. ended on 30 September 2013 following an outsourcing arrangement with JP Morgan effective 1 October 2013.

The Company has invested from time to time in funds managed by Jupiter Investment Management Group Limited or its subsidiaries. The only such holding as at 30 November 2013 was East European Food Fund representing 0.01 per cent. of total investments.