Annual Financial Report

RNS Number : 0263O

Jupiter European Opps. Trust PLC

27 September 2019

 

Jupiter European Opportunities Trust plc (the "Company")

Legal Entity Identifier: 549300XN7RXQWHN18849

Annual Financial Report for the year ended 31 May 2019

Financial Highlights for the year ended 31 May 2019

Capital Performance	31 May 2019	31 May 2018	% change
Total assets less current liabilities (£'000)	927,482	873,195	+6.2
Ordinary Share Performance	31 May 2019	31 May 2018	% change
Net asset value (pence)	822.23	778.94	+5.6
Net asset value (with dividends paid of 6.5p added back) (pence) 1	828.73	785.44	+6.4
Middle market price (pence)	815.00	770.00	+5.8
FTSE World Europe ex UK Total Return Index	1,362.22	1,338.77	+1.8
Discount to net asset value (%)1	(0.9)	(1.1)	-
Ongoing charges figure (%)1 2	0.90	0.91	-

Performance Since Launch

				Year-
			Net	on-year
		Total	Asset	change in	Year-
		Assets	Value	Net Asset	on-year
		less	per	Value per	change in
		Current	Ordinary	Ordinary	Benchmark
		Liabilities	Share	Share	Index
Year ended 31 May		£'000	p	%	%
20 November 2000	(launch)	93,969	94.66	-	-
2001		83,600	89.29	-5.7	-8.0
2002		91,028	91.12	+2.0	-10.7
2003		84,592	83.82	-8.0	-19.0
2004		97,915	109.25	+30.3	+15.7
2005	(restated)3	117,679	133.54	+22.2	+19.3
2006		154,927	167.47	+25.4	+26.2
2007		182,278	224.58	+34.1	+30.0
2008		188,519	230.56	+2.7	-0.1
2009		131,457	162.35	-29.6	-25.3
2010		185,504	232.40	+43.1	+14.4
2011		252,813	316.73	+36.3	+24.2
2012		231,584	291.05	-8.1	-24.2
2013		340,801	403.58	+38.7	+43.3
2014		409,191	451.26	+11.8	+13.4
2015		558,389	546.27	+21.1	+4.7
2016		613,922	550.23	+0.7	-3.7
2017		795,012	712.53	+29.5	+35.7
2018		873,195	778.94	+9.3	+0.9
2019		927,482	882.23	+5.6	+1.8

1      For definitions on the above Alternate Performance Measures please refer to the Glossary of Terms in the Annual Report & Accounts.

2      Excluding finance costs (interest on the company's loan facility).

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

 

Strategic Report

Chairman's Statement

I am pleased to present the Annual Report of Jupiter European Opportunities Trust Plc for the year to 31 May 2019.

During the twelve months to 31 May 2019 the total return on the net asset value per share of your company was 6.4 per cent (with dividends added back). This compares with an increase in the company's benchmark index, the FTSE World Europe ex UK Total Return Index, of 1.8 per cent and a total return on the middle market price of the company's shares of 6.7 per cent (again with dividends added back) during the same period.

Since 31 May 2019 the return on the net asset value per share of your company was 6.2 per cent as at 13 September 2019, which compares with a total return of 8.5 per cent from the benchmark index during the same period. The market price of the company's shares had increased by 4.8 per cent to 854p as at that date.

As at 31 May 2019 the company had total assets under management of £1,002 million.

The background to the performance of your company over the course of the financial year is discussed in detail by Alexander Darwall in his Investment Adviser's Review.

Future management arrangements

It was announced on 1 July 2019 that Alexander Darwall was taking steps to launch a new investment management company, Devon Equity Management Limited ("Devon"), to be based in London. The board announced that it was investigating the possibility of appointing Devon as the company's investment adviser.

Since the announcement on 1 July, the board has undertaken a comprehensive due diligence exercise and shareholder consultation regarding the possible appointment of Devon as the company's investment adviser. At present the company contracts with Jupiter Unit Trust Managers Limited ("JUTM"), which is the company's Alternative Investment Fund Manager ("AIFM") and which delegates the provision of investment advice to Jupiter Asset Management Limited. Devon is seeking authorisation from the Financial Conduct Authority to act as investment adviser but is not seeking authorisation to act as an AIFM, although its intention is in due course to seek such authorisation. The board has also been considering the appointment of a new AIFM in place of JUTM. It is in discussions with FundRock Management Company ("FundRock"), an established AIFM with assets under management of over £75 billion. If appointed, FundRock would delegate investment advice to Devon.

Discussions are continuing with Devon, FundRock and the other service providers to the company, as well as with Jupiter regarding the termination of the JUTM management agreement. A further announcement is expected to be made in early October.

Performance fees

During the financial year to 31 May 2019 a performance fee of £7 million, equal to 0.8 per cent of the company's net assets, was earned by JUTM as a result of the company's significant net outperformance of its benchmark index. Full details of how this performance fee was calculated are set out in the notes to the Annual Report & Accounts. It should be noted that the performance fee is subject to both a 'high water mark' (meaning that a performance fee can only be paid if the net asset value at the end of the year is higher than the net asset value at the end of the year in respect of which a performance fee was last paid) and the hurdle of outperforming the total return on the benchmark index. There is also a cap on the aggregate fees that may be paid to the investment manager in any one financial year of 4.99 per cent of net assets.

If FundRock and Devon are appointed as AIFM and investment adviser respectively of the company, these appointments will be subject to new fee arrangements, to be negotiated.

Board composition

On 1 August 2019 the board announced the appointment of Sharon Brown as an additional non-executive director. Sharon is a qualified accountant and it is anticipated that she will take over from Philip Best as chair of the audit committee in 2020.

Sharon was interviewed by members of the board's nomination committee prior to her appointment as a director. The committee was seeking a suitable candidate to act as a future chair of the audit committee and it also had regard to the Hampton-Alexander Review of gender diversity on FTSE 350 company boards. In making their recommendation, the committee took into account both the overall board composition and the particular skills, diversity and intrinsic personal qualities and underlying competencies required for the role. Sharon Brown was one of a number of candidates to be considered and her particular experience in both public listed trading companies and investment companies in an audit chair capacity was identified as a particular opportunity for the future development of the board.  

John Wallinger has served on your board since the launch of the company in November 2000. The board does not believe that his length of service, of itself, has any bearing on his independence or ability to fulfil his fiduciary duties towards our shareholders. However, we recognise the need to refresh the composition of the board from time to time and John has indicated that he plans to retire as a director of the company at the Annual General Meeting in 2020.

All of your current directors are putting themselves forward for re-election at the forthcoming Annual General Meeting and we would welcome your support for our resolutions.

Proposed change of name

In anticipation of the potential change of investment manager and adviser described above, at the Annual General Meeting ("AGM") a resolution will be put to shareholders that the company's name be changed to European Opportunities Trust PLC.

Dividend

A resolution to declare a final dividend of 5.5p per share will be proposed at the AGM on 14 November 2019, payable on 12 December 2019 to shareholders on the Register of Shareholders on 22 November 2019. The cost of this dividend is covered by the company's distributable revenues during the financial year under review.

The company's objective is to achieve shareholder returns through capital growth rather than income. However, in order to qualify for approval as an investment trust, the company is not permitted to retain more than 15 per cent of eligible investment income arising during any accounting period. Accordingly, the board's policy is to propose a modest annual dividend and one at least sufficient to enable the company to maintain its investment trust status.

The declaration of the dividend as a final dividend will provide shareholders with an opportunity to express their approval on the matter, in line with corporate governance guidelines. In the unlikely event that shareholders were to vote against the resolution at the AGM to pay a final dividend then the directors would pay an equivalent interim dividend, as otherwise the company would be likely to lose investment trust status, with potentially disastrous tax consequences for a large number of its shareholders.

Gearing

As at 31 May 2019 the company's net gearing level (being the ratio of the company's borrowings less cash to its total assets) was 6.3 per cent.

Your company's portfolio manager, Alexander Darwall, expects to increase gearing at times of low valuations while decreasing gearing in stronger markets and he has the board's authority to raise the level of gearing to 20 per cent should market conditions be appropriate.

Share Issuance

Shareholders will be aware that it is the board's ambition to continue to grow the company by the issuance of new shares in response to market demand. I am pleased that we were able to issue a total of 700,000 shares during the financial year at a small premium to the underlying net asset value. The company's share price has, during the financial year, fluctuated between being at a premium and at a discount to its net asset value and, as at 13 September 2019, the company's share price was at a discount of 2.1 per cent.

Change of auditor

On recommendation from the audit committee, the board is proposing the appointment of PricewaterhouseCoopers LLP as auditors of the company at this year's AGM. The board wishes to extend its thanks to Ernst & Young LLP, who have served as auditors of the company since its launch in 2000.

Annual General Meeting

The company's AGM will be held on 14 November 2019 at 11:00 a.m. at the offices of Jupiter Asset Management Limited, The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ. Notice of the AGM, containing full details of the business to be conducted at the meeting, is set out in the Annual Report & Accounts. Your attention is also drawn to the report of the directors in the Annual Report & Accounts where various resolutions relating to special business are explained.

In addition to the formal business, Alexander Darwall will provide a presentation to shareholders on the performance of the company over the past year as well as an outlook for the future. The board would welcome your attendance at the AGM as it provides shareholders with an opportunity to ask questions of both the board and the investment adviser.

Outlook

There are some worrying headwinds affecting the global economy: slower economic growth, a possible recession in Germany, US/China trade disputes, geo-political developments involving oil producing countries, Brexit and so on. The companies in the portfolio are unlikely to be immune from the consequences of these headwinds.

However, the investment adviser continues to concentrate on individual stock-picking rather than basing investment decisions on macroeconomic issues. It looks for those companies with innovative products or strategies and good management; many of these companies will prosper during cyclical economic downturns.

Your board is working hard to finalise the future management arrangements referred to above. The board believes that shareholders are looking for continuity of investment advice and they would also be supportive of the appointment of Devon. Your company has an outstanding long-term performance record and we are looking for an outcome that best ensures the opportunity to continue that performance record.

Andrew Sutch

Chairman

27 September 2019

Investment Adviser's Review

Portfolio review

The net asset value of the company's ordinary shares rose 6.4 per cent (with dividends added back) during the twelve months to 31 May 2019. This compares with a 1.8 per cent rise, in sterling, of the FTSE World Europe ex UK index. The level of the company's borrowings less cash at the financial year-end was £58.5m (£42.8m). Borrowings represented 6.3 per cent of total assets at the period end, having been 4.9 per cent twelve months earlier. Borrowing rates were slightly higher than in the previous reporting period 1.57 per cent (1.2 per cent). The FTSE World (total return) index was up 5.1 per cent in sterling during the 12 months under review.

There has been a slight deterioration in forecasts for economic growth. The IMF has reduced its world forecasts for 2019 over the last eighteen months and now expects a figure of 3.3 per cent, having earlier forecast growth of 3.9 per cent. Most regions of the world are forecast to deliver slightly lower growth rates than previously expected: The Euro Area 1.3 per cent (2.0 per cent previously); the US 2.3 per cent (2.7 per cent); and the UK 1.2 per cent (1.5 per cent previously). Forecasts for Brazil, an important market for many of our companies, point to an improving trend with growth in 2019 building on 2018 and 2020 expected to see a further acceleration in growth. The salient reason for the softness in global growth is weaker world trade, this principally the result of tensions between the US and China. The sharp fall in the oil price - the West Texas Intermediate ('WTI') was down by 20.2 per cent to $53.50 over the period under review - would normally give a strong fillip to economic activity. However, the energy market is greatly distorted by incentives to encourage the move to a low carbon economy. In Europe especially, this has the effect of increasing costs. Two other big constituents of corporate costs, labour and interest rates, are still 'positive' for corporate earnings inasmuch as new digital technologies continue to improve efficiency, and interest rates remain low. The ECB's main refinancing rate remains 0 per cent as it has been for the last three years; and 3 month Euribor was -0.32 per cent at the end of May 2019, almost exactly the same figure as a year earlier. The policy of Quantitative Easing (Q.E.) has inflated asset prices (as reflected in rising stock markets) but not had the desired effect of boosting capital expenditure. European corporate earnings have continued to improve, but at a lower rate than previously forecast. Consensus estimates for the constituents of the MSCI Europe index are that European companies' earnings increased their earnings by 6 per cent in 2018 and forecast only 4.3 per cent progress in 2019. Our companies deliver higher growth rates partly because they are engaged in higher growth businesses and partly because, typically, they have a global coverage thereby tapping into some of the more vibrant economies.

The relative success of the portfolio was due to a coincidence of good performance from an eclectic group of stocks. The same can be said when the outcome is bad: individual stock performance is the key to understanding the portfolio's progress. Yet it is instructive to compare the lists of our winners and losers. Although both lists have diverse business activities there is a key difference between the two which might be described as 'capacity discipline'. The 'winners' have not made any significant acquisitions; the industries in which they operate enjoy structures which are conducive to pricing discipline; they are 'capital light' business models and have not raised fresh capital. In terms of attribution, the best performers, Experian (the credit bureau and data analytics company), RELX (the leading provider of information and analytics for professionals and businesses) and Edenred (prepaid vouchers for benefits, rewards and expense management) are good examples of companies which have these characteristics. Further, these companies are beneficiaries of two other developments.

The first is the exploitation of digital technologies which can reduce cost, increase flexibility and further the reach of the services offered by Experian, RELX and Edenred. The second is ever tougher regulatory requirements which is in turn driving greater demand for these services. Other successful investments include adidas which has continued to deliver good results. Its success owes much to the hugely improved management performance, successfully addressing marketing, strategic and logistical challenges. Intermediate Capital Group was another good performer. This London listed company specialises in private debt, equity and credit mainly for European smaller companies. Other notable performers include Mowi, the world's leading salmon farming and processing company; ALK-Abello, the Danish immunotherapy company, and Wolters Kluwer, the Dutch provider of tax, accounting, legal and healthcare information services. Our largest investment is Wirecard, the German listed internet payment and processing company. It has reported remarkably strong profits growth, yet the shares have been exceptionally volatile whilst making modest progress over the reporting period. We retain great confidence in the management of the company to capitalise on the considerable opportunities that present themselves.

Whereas the 'winners' all demonstrated good 'capacity discipline', the same cannot be said of the 'losers'. In some instances, this is a lack of industry discipline. Ryanair, for example, operates in an industry where short haul airline capacity has increased. This has caused pressure on ticket prices, squeezing revenues. Likewise, Carnival, which controls the world's largest fleet of cruise ships, operates in an industry where growing capacity has hurt pricing. Both Ryanair and Carnival have played a part in building excess supply. This is also true of Umicore, the Belgian precious metals refining and recycling company and Infineon (power semiconductors); their own capacity overreach has played a part in the deterioration of pricing conditions. This problem is compounded by companies where new capital has been raised to pay for big acquisitions. The most notable of these is Bayer, the German pharmaceutical, healthcare and agriculture technology company, which completed the $63 billion acquisition of Monsanto in June 2018. Another large German company, Infineon, is in the process of acquiring its rival, Cypress Semiconductor, for EUR 9 billion. Both stocks have been significant detractors to performance. Finally, we note the poor performance of shares in Arrow Global, the London listed leading European credit management services provider. However, the disappointing share price belies the strong operating performance of the company. We remain confident about the company and its prospects.

Although portfolio turnover is lower than usual there was the usual run of mistakes. Investments in Bayer and Infineon have proved to be costly errors. However, we have decided to retain these investments. Bayer's share price has suffered unduly in the face of litigation in the U.S. involving one of the company's crop protection chemicals. Infineon's shares have suffered for cyclical demand reasons and because of the risks associated with their major acquisition. Notwithstanding these understandable concerns, we believe that the company's undoubted strengths should assert themselves and be recognised in due course. There were two significant disposals, those of Inmarsat and Ryanair. Inmarsat, the British satellite telecommunications company, was sold following a takeover approach. This has been a very disappointing investment. We misjudged the competitive environment and concomitant adverse pricing implications. When an offer was made for the company, we took the opportunity to sell the position. Ryanair, on the other hand, has been a good investment. It is Europe's leading short haul, low cost airline. However, we decided to sell our holding as revenues are under pressure and costs, following the company's decision to recognise unions, have increased markedly. We also disposed of Umicore. Its strategy is predicated on a swift and solid uptake of electric vehicles. However, demand for electric vehicles has stalled leaving Umicore with overcapacity and pricing pressure.

There were only three new purchases of any note, the London Stock Exchange (LSE), Ubisoft and Barry Callebaut. The LSE continues to benefit from the regulatory driven trend to 'on exchange' trading; and it is also well placed to exploit the increasing use of data intense index businesses by customers. French based Ubisoft is a leading video gaming company. New technology, notably 'cloud' based technology, enables innovations which should improve user experiences. We believe that these better experiences will drive new demand. The other significant new investment was that of Barry Callebaut, the world's largest chocolate manufacturer. Its expertise is reflected in its growing market share and manifest in innovations such as ruby chocolate, the new 'fourth' chocolate.

Outlook

We identify a few elements in the economic backdrop which give cause for concern: anaemic economic growth rates, high debt levels and protectionism. Moreover, quoted companies are assailed by wider 'stakeholder' interests that challenge business orthodoxy and explain the continuing shift in capital from public to private equity. The value of Initial Public Offerings declined in 2018 whereas Private equity fund raising increased. Notwithstanding these multifarious concerns, it is undoubtedly the case that some businesses will prosper. We attempt to find companies which are secular, as opposed to cyclical, winners. Typically, these companies have successful digital strategies, have products and services that are well adapted to demand trends, and have business models that escape the attention of protectionist minded politicians. Capital light enterprises which can succeed without recourse to major acquisitions fit our ideal investment criteria. Such businesses exist and are flourishing. We remain confident that our investment process is an appropriate one to find these winning companies.

Alexander Darwall

Fund Manager

Jupiter Asset Management Limited

Investment Adviser

27 September 2019

   Investments Portfolio as at 31 May 2019

				31 May 2019		31 May 2019			31 May 2018	31 May 2018
		Country of		Market value		Percentage			Market value	Percentage
Company		Listing		£'000		of Portfolio			£'000	of Portfolio
Wirecard	Germany			142,113			14.3	138,414		14.8
RELX	United Kingdom			88,686			8.9	77,624		8.4
Experian	United Kingdom			81,611			8.2	43,098		4.7
Novo Nordisk 'B'	Denmark			74,065			7.4	67,667		7.2
Deutsche Boerse	Germany			69,831			7.0	59,086		6.4
Carnival	United Kingdom			55,114			5.6	67,096		7.1
Amadeus IT Group	Spain			54,297			5.5	62,486		6.8
GRENKE	Germany			53,980			5.4	59,061		6.4
Dassault Systemes	France			49,900			5.0	35,065		3.8
adidas	Germany			48,823			4.9	23,657		2.6
Intermediate Capital Group	United Kingdom			47,970			4.8	20,934		2.3
BioMerieux	France			43,962			4.4	44,482		4.8
Grifols	Spain			33,407			3.3	36,365		3.9
Edenred	France			26,615			2.7	12,953		1.4
Genus	United Kingdom			19,261			1.9	11,677		1.3
Arrow Global Group	United Kingdom			15,460			1.6	19,422		2.1
Ubisoft Entertainment	France			15,217			1.6	-		-
London Stock Exchange Group	United Kingdom			15,022			1.5	-		-
Bayer	Germany			10,483			1.1	10,503		1.1
Barry Callebaut	Switzerland			9,064			0.9	-		-
Mowi*	Norway			6,924			0.7	16,394		1.8
doBank	Italy			6,511			0.7	5,940		0.6
Chr Hansen Holding	Denmark			4,785			0.5	2,359		0.3
KWS Saat	Germany			3,555			0.4	4,779		0.5
Infineon Technologies	Germany			3,406			0.3	1,030		0.1
Ossur HF	Iceland			3,204			0.3	2,322		0.3
Hexagon	Sweden			2,567			0.3	-		-
Wolters Kluwer	Netherlands			1,935			0.2	-		-
ALK-Abello	Denmark			1,811			0.2	2,381		0.3
CGG	France			1,766			0.2	-		-
Tecan Group		Switzerland		1,034			0.1	-		-
Knorr-Bremse			Germany	867			0.1	-		-
Total				993,246	100.0

Cross Holdings in other Investment Companies

As at 31 May 2019 none of the company's assets were invested in the securities of other listed closed-ended investment companies. It is the company's stated policy that it will not invest in other closed-ended investment companies.

Strategic Review

The Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

The Strategic Report seeks to provide shareholders with the relevant information to enable them to assess the performance of the directors and the company during the period under review.

Business and Status

During the year the company carried on business as an investment trust with its principal activity being portfolio investment. The company has been approved by HM Revenue & Customs as an investment trust subject to the company continuing to meet the eligibility conditions of sections 1158 and 1159 of the Corporation Tax Act 2010 and the ongoing requirements for approved companies as detailed in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011. In the opinion of the directors, the company has conducted its affairs in the appropriate manner to retain its status as an investment trust.

The company is an investment company within the meaning of section 833 of the Companies Act 2006.

The company is not a close company within the meaning of the provisions of the Corporation Tax Act 2010 and has no employees.

The company was incorporated in England & Wales on 28 September 1999 and started trading on 20 November 2000.

Reviews of the company's activities are included in the Chairman's Statement and Investment Adviser's Review above.

There has been no significant change in the activities of the company during the year to 31 May 2019 and the Directors anticipate that the Company will continue to operate in the same manner during the current financial year.

Planned Life of the Company

The Articles of Association of the company provide that at every third Annual General Meeting ('AGM') an ordinary resolution shall be proposed that the company shall continue in existence as an investment trust. If any such resolution is not passed at any of those meetings, the directors shall, within 90 days of the date of the resolution, put forward to shareholders proposals (which may include proposals to wind up or reconstruct the company) whereby shareholders are entitled to receive cash in respect of their shares equal as near as practicable to that to which they would be entitled on a liquidation of the company at that time (and whether or not shareholders are offered other options under the proposals).

As a resolution to that effect was passed at the 2017 AGM, the next scheduled continuation vote will be at the 2020 AGM.

Shareholders should note that the valuations used to produce the financial statements on a going concern basis might not be appropriate if the company were to be liquidated.

Investment Strategy

In order to achieve the objective of investing in securities of European companies and geographical sectors or areas which offer good prospects for capital growth, the investment adviser adopts a stock picking approach, in the belief that a thorough analysis and understanding of a company is the best way to identify long-term superior growth prospects.

Investment Policy

The investment policy of the company is set out in full in the Annual Report & Accounts.

Future Developments

It is the board's ambition to grow the asset base of the company through a combination of organic growth and new issuance of shares with a view to achieving the critical mass necessary to attract broader demand from wealth managers, IFAs and other institutional buyers of investment trust shares. The investment adviser continues to be encouraged to use the particular advantages of an investment trust structure to enhance potential returns to shareholders, including the use of gearing and the freedom to hold high conviction positions through periods of sharp market fluctuations.

Benchmark Index

The company's benchmark index is the FTSE World Europe ex UK Total Return Index.

Dividend Policy

The company's objective to achieve shareholder returns through capital growth rather than income. However, in order to qualify got approval as an investment trust the company is not permitted to retain any more than 15 per cent or eligible investment income arising during any accounting period. Accordingly, the board's policy is to propose a modest annual dividend and one at least sufficient to enable the company to maintain its investment trust status.

Management

The company has no employees and most of its day-to-day responsibilities are delegated to the company's investment adviser and company secretary.

On 1 July 2019, the board announced that it had been informed that Alexander Darwall had taken preparatory steps to launch a new investment management company, Devon Equity Management Limited ("Devon"), to be based in London, subject to authorisation from the Financial Conduct Authority. The board announced that it had decided to investigate the possibility of appointing Devon to advise on its investment portfolio and had instructed its professional advisers to assist in a due diligence exercise and to consult with its shareholders. 

Since the announcement, the board has undertaken a comprehensive due diligence exercise and shareholder consultation regarding the possible appointment of Devon as the company's investment adviser. The board has also been considering the appointment of a new alternative investment fund manager ('AIFM') and is in discussions with FundRock Management Company ('FundRock'), an established AIFM with assets under management of over £75 billion. If appointed, FundRock would delegate investment advice to Devon.

Discussions are ongoing with Devon, FundRock and other service providers to the company, as well as with Jupiter Asset Management Limited and Jupiter Unit Trust Managers Limited, the existing investment adviser and AIFM to the company.

J.P. Morgan Europe Limited acts as the company's depositary and the company has entered into an outsourcing arrangement with J.P. Morgan Chase Bank N.A. for the provision of accounting and administration services.

Although Jupiter Asset Management Limited is named as the company secretary, J.P. Morgan Europe Limited provides administrative support to the company secretary as part of its formal mandate to provide broader fund administration services to the company. In the event of Devon's appointment, it is intended that Devon will be named as the company secretary.

Internal Controls and Risk Management Systems

The board has established an ongoing process for identifying, evaluating and managing significant risks faced by the company. This is described in more detail in the Annual Report & Accounts.

Viability Statement

In accordance with provision C.2.2 of the UK Corporate Governance Code as issued by the Financial Reporting Council ('FRC') in April 2016, the board has assessed the viability of the company over a rolling three years, as they consider this to be an appropriate period over which they do not expect there to be any significant change in the current principal risks or adequacy of mitigating controls in place. The company's investment objective is to achieve long-term capital growth and the board regards the company's shares as a long-term investment.  Three years is considered a reasonable period for investment in equities and is appropriate for the composition of the company's portfolio and as part of its assessment, the board has noted that the shareholders are required to vote on the continuation of the company at three-year intervals, the next vote being at the 2020 AGM. The board has received feedback from shareholders which is supportive of the potential change in management and the board is therefore confident that the continuation vote will be passed. The board has considered the company's business model including its investment objective and investment policy as well as the principal risks and uncertainties that may affect the company as detailed below.

The board has noted that:

·      The company holds a liquid portfolio invested predominantly in listed equities;

·      The company maintains a relatively low level of gearing;

·     The company's ongoing charges and operational expenses are well covered by the expected levels of return and revenue;

·      The company has maintained a consistent performance and share price discount to NAV;

•    European equities remain an attractive opportunity for investors; and

·      No significant increase to ongoing charges or operational expenses is anticipated.

The board has also considered the company's prospects over the rolling three years, its principal risks, its level of gearing, the predicted demand for the company's shares as well as market outlook, both for equity shares and investment trusts.

The board has therefore concluded that there is a reasonable expectation that the company will be able to continue in operation as its assets are liquid and it will be able to meet its liabilities as they fall due over the rolling three years.

Gearing

'Gearing' may be defined as the ratio of a company's borrowings, less cash, compared to its total assets, expressed as a percentage. The effect of gearing is that where the value of the investment portfolio increases, all the increase accrues to the shareholders whereas when the value falls, the shareholders suffer the whole of the reduction. Holders of the company's debt are not affected by such increases or reductions, provided that the portfolio value remains sufficient to cover the debt.

Loan Facility

In order to improve the potential for capital returns to shareholders the company has access to a flexible loan facility with Scotiabank Europe PLC for amounts up to £100 million. This loan facility was approved on 14 September 2018 and replaced a loan facility in place with Scotiabank (Ireland) Designated Activity Company for amounts up to £135m. The board approved the renewal of the company's loan facility with Scotiabank Europe PLC for amounts up to £100m with effect from 13 September 2019.

The directors consider it a priority that the company's level of gearing should be maintained at appropriate levels with sufficient flexibility to enable the company to adapt at short notice to changes in market conditions.

The board has not set any additional limits or restrictions on the company's £100 million loan facility with Scotiabank Europe PLC. The board regularly reviews the company's level of gearing.

Key Performance Indicators

At the quarterly board meetings the directors consider a number of performance indicators to help assess the company's success in achieving its objectives. The key performance indicators used to measure the performance of the company over time are as follows:

•     Net asset value changes over time

•     Ordinary share price movement

•     A comparison of the absolute and relative performance of the ordinary share price to net asset value and the company's Benchmark Index

•     Discount over varying periods

•     Peer Group comparative performance.

A history of the net asset value ('NAV') and benchmark is shown in the Annual Report & Accounts under the heading 'Performance Since Launch' and in the monthly factsheets which can be viewed on the company's section of the investment adviser's website www.jupiteram.com/JEO and which are available on request from the company secretary.

Peer Group Performance

There were 8 investment trusts in the Europe sector as at 31 May 2019. The board monitors the company's performance in relation to both the sector as a whole and the companies within the sector which the board considers to be its peer group.

As at 31 May 2019, of those companies within the Europe sector, the Company was ranked 2nd over one year, 1st over three and 1st over five years respectively by NAV performance.  

Capital Gains Tax Information

The closing middle market price of Ordinary shares on the first date of dealing (20 November 2000) for Capital Gains Tax purposes was 101.5p.

Premium/Discount to Net Asset Value

The board implements a discount and premium policy under which it uses share buybacks and new issues of shares with the intention of ensuring that, in normal market conditions, the market price of the company's shares will track their underlying NAV. The board believes that this commitment to the active removal of discount and premium risk will improve liquidity for both buyers and sellers of the company's shares.

During the year under review the company has issued a total of 700,000 ordinary shares at a small premium to their attributable NAV. No ordinary shares were bought back during the year.

Under the Listing Rules, the maximum price that may currently be paid by the company on the repurchase of any ordinary shares is 105 per cent. of the average of the middle market quotations for the ordinary shares for the five business days immediately preceding the date of repurchase. The minimum price will be the nominal value of the ordinary shares.

The board is proposing that its authority to repurchase up to approximately 14.99 per cent. of its issued share capital should be renewed at the Annual General Meeting. The new authority to repurchase will last until the conclusion of the Annual General Meeting of the company in 2020 (unless renewed earlier). Any repurchase made will be at the discretion of the board in light of prevailing market conditions and within guidelines set from time to time by the board, the Companies Act, the Listing Rules and Model Code.

Treasury Shares

In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the 'Regulations') which came into force on 1 December 2003 any ordinary shares repurchased,  pursuant to the above authority, may be held in treasury. These ordinary shares may subsequently be cancelled or sold for cash. This would give the company the ability to reissue shares quickly and cost effectively and provide the company with additional flexibility in the management of its capital. The company may hold in treasury any of its ordinary shares that it purchases pursuant to the share buyback authority granted by shareholders. At present there are no shares held in treasury.

Principal Risks and Uncertainties

The principal risk factors that may affect the Company and its business can be divided into the following areas:

Investment Strategy and Share Price Movements - 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 favour capital growth wherever possible, but it is inevitable that from time to time losses may be incurred. The board reviews the company's investment strategy and the risk of adverse share price movements at its quarterly board meetings taking into account the economic climate, market conditions and other factors that may have an effect on the sectors in which the company invests.

Foreign Currency Movements - The Company has exposure to foreign currency through its investments. The board considers carefully factors which may affect the foreign currency in which the company has an exposure at its quarterly board meetings taking into account the economic and political climate of various regions and the prospects for sterling.

Interest Rates - The Company has exposure to cash which generates interest through interest bearing accounts. The board is mindful of interest rates when setting limits on the company's exposure to cash.

Liquidity Risk - This risk can be viewed both as the liquidity of the securities in which the company invests and the liquidity of the company's shares. The company may invest in securities that have a very limited market which will affect the ability of the company's investment adviser to dispose of securities when he no longer feels they offer the potential for future returns. Likewise the company's shares may experience liquidity problems when shareholders are unable to realise their investment in the company because there is a lack of demand for the company's shares. The board is mindful of the liquidity in the company's shares. In addition, the board seeks the advice of the company's brokers, Cenkos, who give advice on ways in which the board can influence the liquidity in the company's shares.

Gearing Risk - The Company's gearing can impact the company's performance by accelerating the decline in value of the company's net assets at a time when the company's portfolio is declining. Conversely gearing can have the effect of accelerating the increase in the value of the company's net assets at a time when the company's portfolio is rising. The company's level of gearing is under constant review by the board who take into account the economic environment and market conditions when reviewing the level.

Discount to Net Asset Value - A discount in the price at which the company's shares trade to net asset value would mean that shareholders would be unable to realise the true underlying value of their investment. As a means of controlling the discount to net asset value the board has established a discount control policy which is under constant review as market conditions change. Further details of the buyback programme can be found in the Annual Financial Report under the heading 'Premium/Discount to Net Asset Value'.

Regulatory Risk - The Company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of section 1158 of the Corporation Tax Act 2010 could result in the company being subject to tax on capital gains in the portfolio. Breaches of other regulations, such as the UKLA Listing Rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers could also lead to reputational damage or loss. The board relies on the services of its company secretary, Jupiter Asset Management Limited, and its professional advisers to ensure compliance with, amongst other regulations, the Companies Act 2006, the UKLA Listing Rules and the Alternative Investment Fund Managers' Directive.

Loss of Key Personnel - The day-to-day management of the company has been delegated to the investment adviser. Loss of the investment adviser's key staff members could affect investment return. The board takes into consideration information provided by the investment adviser regarding its approach to attract and retain staff and its approach to succession planning. The board also takes into consideration the availability of suitably experienced personnel to manage the company's portfolio in the event of an emergency.

Operational - Failure of the investment adviser's core accounting systems, or a disastrous disruption to its business, or that of the administration provider J.P. Morgan Chase Bank N.A., could lead to an inability to provide accurate reporting and monitoring. The investment adviser is contractually obliged to ensure that its conduct of business conforms to applicable laws and regulations. Details of how the board monitored the services provided by Jupiter Asset Management Limited and its associates during the year are included within the Internal Controls section of the Report of the Directors in the Annual Financial Report.

Custody - The board receives quarterly reports from the depositary confirming safe custody of the company's assets and cash and holdings are reconciled to the custodian's records. The depositary's internal controls reports are reviewed by the investment adviser and the company's directors and concerns are discussed as and when they may occur.

The depositary is specifically liable for loss of any of the company's securities or cash held in custody.

Financial - Inadequate financial controls could result in misappropriation of assets, loss of income and debtor receipts and inaccurate reporting of net asset value per share. The board annually reviews the investment adviser's statements on its internal controls and procedures in addition to any financial reporting by the company.

Derivatives - The Company invests in derivatives from time to time. Derivatives may be a riskier investment than equities as they can exaggerate the return that can be achieved compared to investing directly in equities. The board has set limits on the amount of exposure the company has to derivatives and it reviews these limits at its quarterly board meetings. The company did not invest in derivatives during the year.

In accordance with the Association of Investment Companies (AIC) and the UK Corporate Governance Code, the directors have carried out a review of the effectiveness of the system of internal control as it has operated over the year and up to the date of approval of the report and accounts.

Social and Environmental Matters

The investment adviser considers various factors when evaluating potential investments. While an investee company's policy towards the environment and social responsibility, including with regard to human rights, is considered as part of the overall assessment of risk and suitability for the portfolio, the investment adviser does not necessarily decide to, or not to, make an investment on environmental and social grounds alone.

Global Greenhouse Gas Emissions

The company has no greenhouse gas emissions to report from its operations as its day-to-day management and administration functions have been outsourced to third parties and it neither owns physical assets, property nor has employees of its own. It therefore does not have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

Board Diversity

It is seen as a prerequisite that each member of the board must have the skills, experience and character that will enable each director to contribute individually, and as part of the board team, to the effectiveness of the board and the success of the company. Subject to that overriding principle, diversity of experience and approach, including gender diversity, amongst board members is of great value, and it is the board's policy to give careful consideration to issues of overall board balance and diversity in appointing new directors.

The Board currently comprises four male directors and two female directors.

For and on behalf of the Board

Andrew Sutch

Chairman

27 September 2019

Statement of Comprehensive Income for the year ended 31 May 2019

		31 May 2019			31 May 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gain on investments at fair value through profit or loss	-	56,572	56,572	-	89,236	89,236
Foreign exchange loss on loan	-	-	-	-	(509)	(509)
Other exchange loss	-	(6)	(6)	-	(685)	(685)
Income	16,265	-	16,265	16,106	-	16,106
Other income	11	-	11	122	-	122
Total income	16,276	56,566	72,842	16,228	88,042	104,270
Investment management fee	(7,162)	-	(7,162)	(6,705)	-	(6,705)
Investment performance fee	-	(7,185)	(7,185)	-	(13,084)	(13,084)
Other expenses	(768)	-	(768)	(701)	-	(701)
Total expenses	(7,930)	(7,185)	(15,115)	(7,406)	(13,084)	(20,490)
Net return before finance costs and taxation	8,346	49,381	57,727	8,822	74,958	83,780
Finance costs	(1,176)	-	(1,176)	(933)	-	(933)
Return on ordinary activities before taxation	7,170	49,381	56,551	7,889	74,958	82,847
Taxation	(918)	-	(918)	(1,362)	-	(1,362)
Net return after taxation*	6,252	49,381	55,633	6,527	74,958	81,485
Return per ordinary share	5.55p	43.86p	49.41p	5.84p	67.13p	72.97p

* There is no other comprehensive income and therefore the 'Net return after taxation' is the total comprehensive income for the period.

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 AIC. All items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

Statement of Financial Position as at 31 May 2019

		2019	2018
		£'000	£'000
Non current assets
Investments held at fair value through profit or loss		993,346	926,757
Current assets Other receivables		5,384	4,427
Cash and cash equivalents		16.526	17,255
		21,910	21,682
Total assets		1,015,156	948,439
Current liabilities Other payables		(87,674)	(75,244)
Total assets less current liabilities		927,482	873,195
Capital and reserves
Called up share capital		1,128	1,121
Share premium		203,485	197,506
Special reserve		33,687	33,687
Capital redemption reserve		45	45
Retained earnings		689,137	640,836
Total equity shareholders' funds		927,482	873,195
Net asset value per ordinary share		822.23p	778.94p

Approved by the board of directors and authorised for issue on 27 September 2019.

Andrew Sutch

Chairman

Statement of Changes in Equity for the year ended 31 May 2019

For the year ended	Share Capital	Share Premium	Special Reserve	Capital Redemption Reserve	Retained Earnings	Total
31 May 2019	£'000	£'000	£'000	£'000	£'000	£'000
1 June 2018	1,121	197,506	33,687	45	640,836	873,195
Net return after taxation	-	-	-	-	55,633	55,633
Ordinary share issue	7	5,979	-	-	-	5,986
Dividends declared and paid*	-	-	-	-	(7,332)	(7,332)
Balance at 31 May 2019	1,128	203,485	33,687	45	689,137	927,482

For the year ended	Share Capital	Share Premium	Special Reserve	Capital Redemption Reserve	Retained Earnings	Total
31 May 2018	£'000	£'000	£'000	£'000	£'000	£'000
1 June 2017	1,116	193,561	33,687	45	566,603	795,012
Net return after taxation	-	-	-	-	81,485	81,485
Ordinary share issue	5	3,945	-	-	-	3,950
Dividends declared and paid*	-	-	-	-	(7,252)	(7,252)
Balance at 31 May 2018	1,121	197,506	33,687	45	640,836	873,195

*Dividends paid during the period were paid out of revenue reserves.

Cash Flow Statement for the year ended 31 May 2019

	2019	2018
	£'000	£'000
Cash flows from operating activities
Investment income received (gross)	15,394	17,394
Deposit interest received	10	122
Investment management fee paid	(7,153)	(6,642)
Investment performance fee paid*	(13,084)	-
Other cash expenses	(821)	(654)
Net cash (outflow)/inflow from operating activities before taxation and interest	(5,654)	10,220
Interest paid	(1,101)	(936)
Overseas tax incurred	(1,019)	(1,498)
Net cash (outflow)/ inflow from operating activities	(7,774)	7,786
Cash flows from investing activities
Purchases of investments	(170,661)	(135,755)
Sales of investments	164,058	152,275
Net cash (outflow)/inflow from investing activities	(6,603)	16,520
Cash flows from financing activities
Ordinary shares issued	5,986	3,950
Equity dividends paid	(7,332)	(7,252)
Repayment of loan	-	(58,407)
Drawdown of loan	15,000	-
Net cash inflow/(outflow) from financing activities	13,654	(61,709)
Decrease in cash	(723)	(37,403)
Change in cash and cash equivalents
Cash and cash equivalents at start of year	17,255	55,343
Realised loss on foreign currency	(6)	(685)
Cash and cash equivalents at end of year	16,526	17,255

*Performance fee paid this period in relation to previous financial year.

Notes to the Accounts for the year ended 31 May 2019

1.     Accounting policies

The Accounts comprise the financial results of the company for the year to 31 May 2019. The functional and reporting currency of the company is pounds sterling because that is the currency of the prime economic environment in which the company operates. The accounts were authorised for issue in accordance with a resolution of the directors on 27 September 2019. All values are rounded to the nearest thousand pounds (£'000) except where indicated.

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 (EU).

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for Investment Trusts issued by the Association of Investment Companies (AIC) in November 2014 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The board continues to adopt the going concern basis in the preparation of the financial statements.

(a)    Income recognition

Dividends from investments are recognised when the investment is quoted ex-dividend on or before the date of the Statement of Financial Position.

Dividends receivable from equity shares are taken to the revenue return column of the Statement of Comprehensive Income.

Deposit and other interest receivable are accounted for on an accruals basis. These are classified within operating activities in the cash flow statement.

Special dividends are reviewed on a case by case basis to determine if the dividend is to be treated as revenue or capital.

(b)    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 Association of Investment Companies (AIC), supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the statement. In accordance with the company's Articles of Association, net capital returns may not be distributed by way of dividend.

An analysis of retained earnings broken down into revenue (distributable) items, and capital items (non-distributable) is given in the notes to the Annual Report & Accounts.

(c)    Basis of valuation of investments

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at the fair value, being the consideration given.

The investments are classified at fair value through profit or loss on initial recognition as this is consistent with the company's documented investment strategy.

All investments are classified as held at fair value through profit or loss. All investments are measured at fair value with changes in their fair value recognised in the Statement of Comprehensive Income in the period in which they arise. The fair value of listed investments is based on their quoted bid price at the reporting date without any deduction for estimated future selling costs.

Foreign exchange gains and losses on fair value through profit or loss investments are included within the changes in the fair value of the investment.

For investments that are not actively traded and/or where active stock exchange quoted bid prices are not available, fair value is determined by reference to a variety of valuation techniques. These techniques may draw, without limitation, on one or more of: the latest arm's length traded prices for the instrument concerned; financial modelling based on other observable market data; independent broker research; or the published accounts relating to the issuer of the investment concerned.

(d)    Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risks of changes in value.

(e)    Foreign currencies

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At the date of each Statement of Financial Position, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the Statement of Comprehensive Income within the revenue or capital column depending on the nature of the underlying item.

(f)     Borrowing and finance costs

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs and subsequently measured at amortised cost.

Interest on the loan facility is accrued at the rate specified by the lender on renewal date.

Bank interest is recognised in the Statement of Comprehensive Income in the period in which they are incurred.

All finance costs are directly charged to the revenue column of Statement of Comprehensive Income.

(g)    Expenses

Expenses are accounted for on an accruals basis. Management fees, administration and other expenses are charged fully to the revenue column of the Statement of Comprehensive Income. That part of any investment performance fee which is deemed by the directors to relate to the capital outperformance of the company's investments will be charged to capital and that part relating to revenue outperformance will be charged to revenue. Expenses which are incidental to the purchase or sale of an investment are charged to capital, along with any foreign exchange gains and losses.

(h)  Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the date of the Statement of Financial Position.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised.

Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation of capital gains.

Irrecoverable VAT is included in the expense on which it has been suffered. Recoverable VAT is calculated using the partial exemption method based on the proportion of zero rated supplies to total supplies.

(i)   Accounting developments

The following standards, amendments and interpretations are applicable to the company.

IFRS 9 Financial Instruments

In the current period the company has adopted IFRS 9 Financial Instruments which became effective for accounting periods commencing on or after 1 April 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement and introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is not applicable to items that have already been derecognised at 1 April 2018, the date of initial application.

Receivables that were previously measured at amortised cost under IAS 39 and are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. Therefore, such instruments continue to be measured at amortised cost under IFRS 9.

The classification of financial liabilities under IFRS 9 remains broadly the same as under IAS 39. The main impact on measurement from the classification of liabilities under IFRS 9 relates to the element of gains or losses for financial liabilities designated at fair value through profit or loss attributable to changes in credit risk. The company has not designated any financial liabilities at fair value through profit or loss therefore this requirement has not had an impact on the company.

IFRS 9 requires the company to record expected credit losses on all of its receivables, either on a 12 month or lifetime basis. As the company has limited exposure to credit risk, this amendment has not had a material impact on the financial statements as the company only holds receivables with no financing component that have maturities of 12 months or less. This requirement has not significantly changed the carrying amounts of the company's financial assets under IFRS 9.

Comparative figures for the year ended 31 May 2018 have not been restated and are still accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 15 Revenue from Contracts with Customers

The company adopted IFRS 15 Revenue from Contracts with Customers which became effective for accounting periods commencing on or after 1 April 2018. IFRS 15 replaces IAS 18 Revenue and establishes a five-step model to account for revenue arising from contracts with customers. In addition, guidance on interest and dividend income have been moved from IAS 18 to IFRS 9 without significant changes to the requirements. Therefore, there was no impact of adopting IFRS 15 for the company.

Standards issued but not yet effective

There are no standards or amendments to standards not yet effective that are relevant to the company and should be disclosed.

2.   Income

			Year ended	Year ended
			31 May	31 May
			2019	2018
			£'000	£'000
Income from investments
Dividends from United Kingdom companies			5,384	4,932
Dividends from overseas companies			10,881	11,174
			16,265	16,106
Other income
Deposit interest			11	122
			16,276	16,228

3.   Earnings per Ordinary share

The earnings per ordinary share figure is based on the net return for the year of £55,633,000 (2018: Return £81,485,000), and on 112,598,345 (2018: 111,660,399) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

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

	Year ended 31 May 2019	Year ended 31 May 2018
	£'000	£'000
Net revenue return	6,252	6,527
Net capital return	49,381	74,958
Net total return	55,633	81,485
Weighted average number of ordinary shares in issue during the year	112,598,345	111,660,399
Revenue return per ordinary share	5.55p	5.84p
Capital return per ordinary share	43.86p	67.13p
Total return per ordinary share	49.41p	72.97p

4.  Net Asset Value per ordinary share

The net asset value per ordinary share is based on the net assets attributable to the equity shareholders of £927,482,000 (2018: £873,195,000) and on 112,800,331 (2018: 112,100,331) ordinary shares, being the number of ordinary shares in issue at the year end.

5.  Related parties

Jupiter Unit Trust Managers Limited ('JUTM'), the Alternative Investment Fund Manager, is a company within the same group as Jupiter Asset Management Limited, the investment adviser.

JUTM is contracted to provide investment management services to the company (subject to termination by not less than twelve months' notice by either party) for a quarterly investment management fee of 0.1875 per cent, payable quarterly in arrears, of the total assets of the company including drawn down borrowings, less current liabilities and after deduction of the value of any funds managed by Jupiter Fund Management PLC or its subsidiaries.

The investment management fee payable to JUTM for the period 1 June 2018 to 31 May 2019 was £7,162,000 (2018: £6,705,000) with £1,784,000 outstanding at year end (31 May 2018: £1,775,000).

JUTM is also entitled to an investment performance fee which is based on the out-performance of the adjusted NAV 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 NAV 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 NAV per ordinary share on the last business day of the previous accounting period; (b) the NAV 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 or decreased by the percentage by which the total return of the benchmark index increases or decreases during the calculation period. The aggregate of the investment management fee together with any performance fee payable in respect of one accounting period is limited to 4.99 per cent of the net assets of the company.

The investment performance fee payable to JUTM for the period 1 June 2018 to 31 May 2019 was £7,184,800 (2018: £13,084,031) with both amounts being paid within 30 days of their respective year ends.

Fees payable to the directors for the year ended 31 May 2019 were £133,000 (2018: £148,000) with £23,000 outstanding at year end (31 May 2018: £29,000). Fees paid to directors and their interests in shares of the company are disclosed within the Directors' Remuneration Report in the Annual Report & Accounts.

6.  Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments outstanding as at 31 May 2019 (2018: nil).

7.  Post balance sheet event

Since the year end 75,000 additional ordinary shares have been issued.

Availability of Annual Report

The Annual Report & Accounts will be posted to shareholders shortly. Copies will also be available from the Company's registered office at The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ. An electronic version of the Annual Report & Accounts will also be available for download from the Company's section of Jupiter Asset Management's website www.jupiteram.com/JEO.

For further information, please contact:

Richard Pavry

Head of Investment Trusts

Jupiter Asset Management Limited, Company Secretary

[e-mail] 

020 3817 1496

27 September 2019

 

END

 

 

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